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U. City residents file suit against ‘excessive’ fees for city at
(by Jenny Fisher - October 14, 2009)
A succession of lawsuits against cell phone companies has raked in millions of dollars in back taxes for Missouri municipalities, including dozens in the St. Louis area. But those settlements also mean big paychecks for the lawyers — and in one recent case, some University City citizens say $5 million in fees to one attorney for a single lawsuit is unfair.
University City residents Matthew Funke and Michael Boland have filed suit to intervene in the most recent class action settlement with AT&T, claiming that University City attorney John Mulligan breached his duties to the city and broke Missouri rules on ethical conduct by advising the city to contract him as counsel on the case.
Along with the firm of Korein Tillery and attorney Howard Paperner, Mulligan was lead counsel for more than 300 municipalities in a lawsuit that won $65 million from AT&T’s landline and local exchange arms. University City will receive a little more than $1 million, and a preliminary approval order would give 25 percent of the settlement, or $16.25 million, to the plaintiff’s lawyers. Mulligan said he would get about 30 percent, or nearly $5 million.
But Funke and Boland say that sum is excessive. Represented by attorney Ted Luby, the two filed a motion Sept. 30 to intervene in the settlement. As residents of a city with a deficit greater than $1 million, they say they have an economic interest in how the settlement is distributed, particularly in how much of the $65 million goes to Mulligan.
“He’s double-dipping, essentially,” Luby said. “He’s already the city attorney. He’s already representing the city, and he advised the city himself about his own fees.”
In 2004, Mulligan signed a retainer agreement with University City, stipulating that the city would pay him a 25 percent contingency fee to represent it as “lead special counsel” in the settlement. According to Mulligan, about 75 cities signed a similar agreement, and U. City was not the first. The contracts ensured that their claims would be prosecuted even if the class action, with all 300-plus cities, were to fail, Mulligan said. The agreements also meant the attorneys stood to gain an increasingly larger sum.
In University City’s case, Luby and his clients say the contract is invalid. They say Mulligan’s contract was not publicly voted on by the city council, and that as city attorney, Mulligan had a conflict of interest in advising the city on a contract from which he stood to gain financially. They cite a July 20 council meeting at which citizens Jan Adams and David Damick said the council should hire an outside lawyer to contest the attorney’s fees.
“I’m not aware of any objections to this particular settlement fee,” Mulligan said at the meeting. He stated that the 25 percent fee would not be levied on taxes the city gained after the settlement, only back taxes.
Council member Lynn Ricci, also a lawyer, moved to hire an independent attorney to look over the agreement. Retired Judge Stephen N. Limbaugh advised that the contract was valid, and the council voted six to one to approve the settlement, including the attorney’s fees, with Ricci voting no.
“I struggle with Mr. Mulligan advising us on litigation when he stands to gain more than the city,” Ricci said. “I think Mr. Mulligan is trying to do the best he can, don’t get me wrong, ” she added, saying that 25 percent seemed reasonable in this case. But, she emphasized, there is no such thing as standard attorney’s fees.
“Judge [Edward] Sweeney [who will hear and rule on Luby’s motion] and the city might conclude that this is a fair number, but if I am to do my job as a council member, it is my responsibility not to just go along,” Ricci said. “Every dollar that goes to Mr. Mulligan does not go to the municipality, which is $1.3 million in deficit.” Questioning the fees, Ricci added, would not change the underlying settlement or delay back taxes going to cities.
“Even assuming there had been a conflict, which I disagree with, wasn’t that addressed by Judge Limbaugh?” Mulligan said. “Is this simply a situation where these two residents and their attorney disagree with the council’s opinion?”
In a class-action lawsuit, attorney’s fees are based on the time put in, the degree of risk, the skill required, and the complexity of the case, among other things. Mulligan has worked on the phone company lawsuits since 2001, doing most of the labor with some help from Paperner until the two joined forces with Korein Tillery in 2004. Had Mulligan lost the suit, he would have received no compensation at all.
The AT&T case is one of several lawsuits Mulligan, Paperner and Korein Tillery have settled in the past two years with Verizon Wireless, Sprint-Nextel, US Cellular and AT&T Wireless, winning $148 million in back taxes that will go to Missouri municipalities.
Luby’s motion will be heard Oct. 23 and Sweeney is set to rule on Mulligan’s fees Nov. 2.
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