Tobacco fee battle between Florida attorneys ends up in Texas court, enforcement of agreement with lawsuit lender sought

By David Yates | Apr 4, 2019

Howard  

HOUSTON – A battle over fees between two Florida attorneys has found its way into a Texas Court.

Seeking declaratory relief, Phillip Howard filed suit against Jonathan Harris on March 29 in Harris County District Court.

In January 2017, Howard and Harris entered into a joint prosecution and fee sharing agreement, agreeing to divvy up fees generated by several lawsuits against tobacco companies, according to the lawsuit.

The JPA divided cases into three categories with a different division of fees: a 50/50 division of Harris’ net fees; a 60/40 division of Harris’ net fees in favor of Howard; and an 80/20 division of gross fees in favor of Howard.

Most of the cases under the JPA fell under the 80/20 split, the suit states.

On April 6, 2018, Howard, Harris and Virage Capital (a lawsuit lender) entered into a settlement agreement. In exchange for releasing Howard of his obligation to advance case expenses, Harris received a greater share of Engle tobacco cases under the JPA – a 60/40 division of gross fees in favor of Harris.

Howard also agreed to pay Harris $302,000, divided into an initial payment and 12 monthly disbursements. Contemporaneously, Howard entered into a loan agreement with Virage to cover the $302,000 and also for expenses in unrelated cases.

While Virage, with the consent of all parties, sends Harris each disbursement, Howard remains ultimately responsible for the money, according to the suit.

To secure the $302,000 loaned by Virage for Harris, both Howard and Harris agreed to execute a security agreement for the lender to prefect a lien on related cases, the suit states.

To date, Virage has only placed a lien on Howard’s 40 percent interest in the gross fees generated by the Engle tobacco cases.

The settlement agreement protects Howard’s and Virage’s interests in Howard’s portion of the fees and requires Harris to use his “best efforts” to prosecute the released cases, the suit states.

A month after signing the settlement agreement, Harris emailed Howard and Virage, asserting that he would need his 60 percent interest to be increased to 95 percent in order to bring on additional lawyers with capital to prosecute the cases.

In September 2018, Harris then asserted the use of “gross fees” was “obviously inadvertent,” which Howard “succinctly dismissed,” the suit states.

According to the suit, Howard and Virage had become “more concerned” with Harris’ lack of progress.   

However, on Feb. 26, one the cases subject to the fee split in the settlement agreement resulted in a multimillion-dollar verdict.

“With the Engle Tobacco Cases headed towards producing fees, Harris yet again concocted a bizarre interpretation of the Settlement Agreement to justify his latest demand,” the suit states.

According to the suit, Harris told Virage that its and Howard’s rights to his cases expired after the final disbursement. He also “incorrectly” asserted that Virage would remove its UCC-1 from his case list, which was filed without his knowledge or consent.

“In fact, neither Howard nor Virage has put a lien on Harris’ 60% interest in the gross fees of the Engle Tobacco Cases,” the suit states.

“It has become clear that Harris does not intend to abide by the plain language of the Settlement Agreement he struck, trying instead to re-trade the deal through contract constructions entirely divorced from reality.”

Howard is asking the court to declare that:

- The Settlement Agreement’s division of fees applies to all Engle Tobacco Cases referenced in the JPA;

- The Settlement Agreement allocates 60 percent of the Engle Tobacco Cases’ gross fees to Harris and 40 percent to Howard;

- Howard’s interests in the Engle Tobacco Cases do not “expire” upon the completion of all cash disbursements to Harris; and

- The Settlement Agreement itself does not “expire” upon the completion of all cash disbursements to Harris.

Howard is also suing for attorney’s fees.

Houston attorney Ashish Mahendru represents him.  

Case No. 2019-22971

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