Contracts, Document Review, Litigators, Plaintiffs Firms, Technology, Trials

Prominent Plaintiffs’ Attorneys Ordered to Pay Up After Losing Breach of Contract Trial

Last week, more than a dozen high-profile mass torts attorneys lost a San Francisco jury trial against a small technology company. The jury decided the attorneys had illegally breached a document review contract during the high-profile Chinese drywall class-action litigation.

On September 19, the 14 defendants in Cataphora Inc. v Parker were ordered to pay $317,113 to the technology company in lost profits, plus attorneys’ fees.

“These guys are the worst of hypocrites that you can possibly find,” said Roger Chadderdon, technology counsel at Cataphora. “They claim to be trying to help the little guy, but what they’re doing is trying to put more money in their own pockets. Everybody knows that, but this is a case that illustrates it beyond what I have ever seen.”

Clearly, tempers are still running hot. We’ve got more from both sides of the dispute, and a quick refresher on Chinese drywall, after the jump….

Problems with Chinese drywall began around 2006. Many homes in the Southeast, especially Florida, were built with it because of a shortage of normal American drywall. The defective stuff ended up causing a lot of problems. It often smells terrible, like sulfur or rotting eggs. The fumes ruin metal appliances, such as air-conditioning evaporator coils, pipes, and copper wiring. It is also believed by some to cause health problems.

In the midst of all this, Cataphora began negotiating with the plaintiffs’ attorneys — together known as the Plaintiff Steering Committee, or “PSC” — who had been appointed by the court to handle the drywall cases. The technology vendor was to be involved mainly in pretrial document review. It would comb through the electronic documents of potential defendants, looking for the smoking gun that would tie them into the class-action litigation.

In September 2009, Cataphora and Jerrold Seth Parker, the authorized representative from the PSC, signed a contract that involved a large upfront fixed fee in exchange for a lower rate throughout the rest of the 24-month work period. In October, Cataphora sent its first invoice for $366,000. But the group of Chinese drywall attorneys balked and canceled the contract. They also refused to pay the initial sum. (Cataphora never did the work.) That’s where the problems began.

The attorneys in the PSC have advocated for plaintiffs in a wide variety of multimillion dollar class-action lawsuits. Their résumés range from Vioxx to the BP oil spill to the Toyota acceleration defect to the Bridgestone / Firestone tire cases. [FN1]

“We got screwed,” Chadderdon says. “Their strategy from day one was to drag this out as long as possible to make it go away.”

He says the PSC told Cataphora, “Sue us if you dare.”

Chadderdon, who served as the company’s representative in court, says Cataphora is “a small tech company,” without the resources of their high-powered opponents. He says the company would have settled quickly if they had received any kind of offer. ln the time since the case was initiated, the company’s legal division was sold to Ernst and Young.

In court, the defendants argued that they shouldn’t have to pay because the contract was never valid to begin with. Among other things, they argued that it included a success fee for Cataphora, which is illegal for non-attorneys to receive. They also claimed the clause stating that the original fee was nonrefundable had been added at the last minute without proper notification. Frank Pitre of Cotchett, Pitre & McCarthy, counsel for the defendants, says Cataphora committed fraud by adding the clause so late in the game.

“The lawyers representing those victims acted properly and ethically in terminating this agreement,” Pitre says.

Chadderdon, who was involved in the original deal, says his company had wanted to find a way to reward itself if the case was successful, but everyone realized it was not possible to do that. He says success fees were intentionally not included in the contract for that reason. Also, the “nonrefundable” issue had been part of contract negotiations from the beginning, he says.

In any case, Magistrate Judge Bernard Zimmerman, of the United States District Court for the Northern District of California, ruled that the contract was indeed enforceable. Pitre says that decision improperly framed the case when the jury heard it.

“Because of a certain pretrial ruling that we take issue with, we believe this jury got an unfair presentation of the case,” Pitre says. “This is one round in a ten-round case.”

Chadderdon says the PSC tried to paint Cataphora as shysters who slipped something under their noses, but he says the jury didn’t buy this theory. “The jury saw through it almost immediately,” he says. “They were bored to tears with this.”

No one is happy to have spent two years on this case, he says. But the verdict is a beacon of light, despite the impending appeal.

“We kicked their ass,” he says.

[FN1] Here is the full list of defendants:

Dawn M. Barrios, of Barrios, Kingsdorf & Casteix
Daniel E. Becnel, Jr. (His website seems to be down at the moment.)
Victor Manuel Diaz
Ervin Amanda Gonzalez
Ben Gordon, of Levin Papantonio Thomas Mitchell Rafferty & Proctor
Russ M. Herman, of Herman Herman Katz & Cotlar
Hugh P. Lambert, of Lambert & Nelson
– Arnold Levine
Gerald E. Meunier, of Gainsburgh, Benjamin, David, Meunier & Warshauer
Jerrold Seth Parker, of Parker Waichman Alonso
James Robert Reeves, of Lumpkin Reeves & Mestayer
Christopher Seeger, of Seeger Weiss
Bruce William Steckler, of Baron & Budd
Scott Weinstein of Morgan & Morgan

Leonard Davis, also of Herman Herman Katz & Cotlar, was originally a defendant, but he was dropped from the suit.

Disclosure: Ernst & Young, which acquired Cataphora Legal earlier this year, has advertised in the past on Above the Law.


Christopher Danzig is a writer in Oakland, California. He previously covered legal technology for InsideCounsel magazine. Follow Chris on Twitter @chrisdanzig or email him at cdanzig@gmail.com. You can read more of his work at chrisdanzig.com..

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