HOUSTON – A Netherlands man is suing the King & Spalding law firm, alleging a gross overpayment in fees in a case funded by a lawsuit lender.
Seeking more than $1 million in damages, Trinh Vinh Binh filed suit against the Houston firm, along with attorneys Reginald Smith and , on June 11 in Harris County District Court.
“This case illustrates what happens when attorneys, retained by a client to represent that client in arbitration, decide instead to represent their own pecuniary interests and those of a third-party funder and to make a mockery of the fiduciary obligations an attorney owes to their clients,” the suit states.
According to the petition, on March 18, 2015, Miles, on behalf of K&S, and Binh entered into a fee agreement for the firm to represent Binh in an arbitration claim against The Socialist Republic of Vietnam. The fee agreement required the firm and attorneys to holdback 30 percent of billings for fees and defer payment until the conclusion of their representation.
Following the execution of the fee agreement, Binh executed a funding agreement with Burford Capital – a litigation funder. The agreement contained a cap of $4.678 million for the arbitration. After distributions were made off the cap for costs and expenses, there remained a $3.690 million cap for legal expenses.
By May 2016, the defendants had already been paid $1.9 million, leaving around $1.8 million left on the spending cap.
“At this point, Defendants, motivated by securing continued, guaranteed immediate payment of their fees, colluded with Burford to contrive a scheme to increase Plaintiff’s potential liability in Success Return by seeking to increase the cap on expenditure for Defendants’ legal fees and, thus, Burford’s potential entitlement to an increased multiple of Success Return,” the suit states.
Binh declined to sign an amendment. However, the defendants and Burford executed an agreement amongst themselves, whereby Burford agreed to increase their cap on legal spending in exchange for them waiving entitlement to fees under the fee agreement and limit their fee entitled to a “maximum fee of US $4,460,000,” the suit states.
On April 10, 2019, Binh prevailed in the arbitration and was awarded $46 million. In November 2019, the defendants relied on Burford to calculate the allocation between themselves and Binh. Burford’s allocation was based upon a purchase price and success return, which factored in amounts well beyond the cap Binh agreed to in the fee agreement.
“Plaintiff expressly instructed Defendants not to distribute funds from their trust account based upon this erroneous allocation,” the suit states. “Instead, Plaintiff instructed Defendants to distribute the undisputed portion of the funds to the parties while they continued to work through any issues/disputes relating to the matter.
“However, Defendants ignored Plaintiff’s express instructions to maintain the safekeeping of property and distributed all funds from their trust account in the exact manner instructed by Burford, which, represented a gross overpayment to both Burford and Defendants.”
Binh is accusing the defendants of breaches of fiduciary duty, negligence and fraud.
He is suing for punitive damages.
Houston attorneys Brett Wagner and Ryan Smith of Doherty Wagner represent him.
Case No. 2021-35240