Deaton v. Johnson

JOHN DEATON, ESQ., Plaintiff, v. STEVEN JOHNSON and LAW OFFICESOF STEVEN JOHNSON, P.C., Defendants.

C.A. No. 20-78WES

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

August 4, 2020

REDACTED MEMORANDUM AND ORDER¹

PATRICIA A. SULLIVAN, United States Magistrate Judge.

Now pending before the Court is a motion to remand a removed motion for disbursal of $ [Redacted] for attorneys' fees² originally filed in the Providence County Superior Court by Rhode Island Attorney John Deaton ("Deaton"). Deaton's motion for attorneys' fees arises in an ongoing state court proceeding captioned In re All Individual Kugel Mesh Cases, Master Docket No. P.C.-2008-9999. Invoking federal diversity jurisdiction and disputing that Deaton is entitled to the fees he seeks, Deaton's co-counsel in the Superior Court proceeding, a Texas attorney, Steven Johnson, and his law firm, the Johnson Law Firm, (collectively, "JLF") removed Deaton's motion for attorneys' fees to this Court. Pursuant to 28 U.S.C. § 1447, Deaton asks the Court to remand the matter back to the Superior Court. ECF No. 7.

The pertinent background may be briefly sketched. JLF represents claimants alleging injury caused by defective Kugel Mesh implants manufactured by Davol, Inc., a Rhode Island entity that is a subsidiary of C.R. Bard, Inc. (collectively, "Bard/Davol"). Beginning in 2008, JLF chose Rhode Island's Superior Court as the venue to file 176 Kugel Mesh cases. JLF engaged Deaton as local counsel for these cases. JLF also filed Kugel Mesh cases in Illinois and other jurisdictions, some of which were transferred to this Court. JLF engaged Deaton to be trial counsel for one of these cases (Patton v. Davol, Inc., C.A. No. 08-2316ML ("Patton v. Davol")). In total, JLF was handling over three hundred Kugel Mesh cases and claims (collectively, "JLF Kugel Mesh cases").³ For the 176 Superior Court JLF Kugel Mesh clients and for Patton v. Davol, JLF agreed to pay Deaton a percentage of any attorneys' fee JLF might recover based on its contingency fee agreements. As the settlement of all of the JLF Kugel Mesh cases neared culmination through the creation by the Superior Court of a "Qualified Settlement Fund" ("QSF"), established pursuant to Internal Revenue Code ("IRS") § 468B, the working relationship between Deaton and JLF unraveled. Since, it has descended into open hostility, spawning multiple lawsuits and arbitration proceedings, principally in Texas. The gravamen of this multi-front chess match is Deaton's contractual claim of entitlement to share in the attorneys' fees generated by the JLF Kugel Mesh cases, JLF's opposition to paying him anything, as well as Deaton's and JLF's attacks on the quality of their respective work.⁴

Deaton filed his subsequently removed motion for attorneys' fees (hereinafter, "QSF Disbursal Motion") on January 24, 2020, in the Superior Court. The QSF Disbursal Motion asks the Superior Court to order that $ [Redacted] - the entirety of a segregated portion of the QSF created for the benefit of JLF Kugel Mesh clients to settle their claims against Bard/Davol (including to pay their attorneys' fees) - be disbursed to him. According to the Motion, Deaton seeks disbursal not only for his share of the contingency fees earned by JLF in connection with the 176 Superior Court JLF Kugel Mesh cases and Patton v. Davol, but also to reimburse him for the monies he has expended to maintain a post-settlement suit by Rickie Patton against JLF.⁵

JLF removed just the QSF Disbursal Motion (and nothing else pertinent to the ongoing administration of the QSF in In re All Individual Kugel Mesh Cases, Master Docket No. P.C.-2008-9999) to this Court on February 13, 2020. Deaton promptly responded with a motion toremand, which has been referred to me pursuant to 28 U.S.C. § 636.⁶ ECF Nos. 1 & 7. For the reasons that follow, the motion to remand is granted.

I. BACKGROUND - ONGOING SUPERIOR COURT PROCEEDINGS

In June 2014, Bard/Davol and the JLF Kugel Mesh clients entered into a confidential Master Compromise Settlement, Release and Indemnity Agreement ("MSA"), resolving all of the JLF Kugel Mesh cases, including those in which Deaton is local counsel, as well as Patton v. Davol. The MSA followed a mediation of the cases presided over by an eminent Rhode Island Superior Court Justice, the Honorable Alice B. Gibney, who is also the judicial officer in charge of the Superior Court docket of Kugel Mesh cases. The resulting MSA called for the creation by the Superior Court of a QSF, with the money to be deposited with a specified bank and administered by a claims administrator. The claims administrator would calculate the amounts owed and would ensure that all common benefit fund expenses, medical liens, other appropriate expenses, legal fees and costs were paid, and that net proceeds would be distributed to Kugel Mesh claimants who chose to participate in the settlement. The purpose of the QSF is strictly cabined - it is for the benefit of JLF Kugel Mesh clients for claims "arising out of, relating to, resulting from, or in any way connected with the Actions,⁷ and/or past or present hernia repair product(s) implanted in each claimant . . . that were manufactured . . . by Bard and/or Davol." ECF No. 25-1 at 5, 7. The MSA provides that the venue for all disputes is the "Superior Court of Rhode Island" and that all "Counsel and/or Co-Counsel hereby submit himself, herself, itself orthemselves to the personal jurisdiction of the Superior Court of Rhode Island." ECF No. 25-1 at 25.

Between June 2014 and March 2016, the record does not reveal why there seemed to be a delay except for the burgeoning dispute between Deaton and JLF over Deaton's share of the JLF Kugel Mesh attorneys' fees. The dispute bubbled over with the filing by Deaton's law firm in the Superior Court on March 7, 2016, of a motion to compel JLF to disclose "settlement monies and allocations," as well as a "Motion to Enforce Attorneys' Lien," which Deaton claimed was $ [Redacted] . ECF No. 12-2 at 2, 23. A hearing on Deaton's motion was held on March 11, 2016, before Justice Gibney. At the hearing, Deaton threatened to move to vacate the settlement on behalf of Rickie Patton unless Deaton's right to make a claim to a portion of the attorneys' fees to be paid pursuant to the MSA was protected. Overruling JLF's ham handed attempts to force Deaton's withdrawal from the cases,⁸ Justice Gibney ruled that, "[Deaton] is the attorney of record before me. He has not withdrawn." ECF No. 15-1 at 23; see also ECF No. 15-1 at 12 ("As far as this Court is concerned, Mr. Deaton is a part of this case."). Noting her familiarity with the work performed by Deaton and JLF in connection with the mediation of the JLF Kugel Mesh cases that she conducted, Justice Gibney stated that she would not be inclined to foreclose Deaton from earning his share of JLF's attorneys' fees based on her observation of his contribution to the settlement; she ruled that "some amount needs to be put in escrow," not only to allow the fee calculation to be completed, but also, potentially, to await the outcome of a "civil action" in which "[Deaton and JLF] need to square off against each other." ECF No. 15-1 at 21-23, 26.

Following an off-the-record chambers conference with Justice Gibney, id. at 27, JLF, its "co-counsel," the JLF Kugel Mesh clients, and Bard/Davol filed a Stipulation in the Superior Court. The Stipulation recites that the QSF will be established by order of the Superior Court and "shall remain subject to the continuing jurisdiction of [the Superior] Court," pursuant to the applicable IRS regulations. ECF No. 12-1 at 3. The Stipulation provides that the claims administrator "shall only make payments [out of the QSF] to the Claimants and any entities asserting a claim of subrogation, as specified in [the Stipulation] and according to the terms set forth in the [MSA]," including that it shall pay attorneys' fees only "to the extent that attorneys' fees are to be paid as part of the Claimants' obligation under existing contingency fee agreements." ECF No. 12-1 at 4. All such payments are to be made "upon Court approval upon the joint motion of Claimants' Counsel and [Bard/Davol]." ECF No. 12-1 at 8. The Stipulation requires the claims administrator to send monthly QSF statements to JLF and to Bard/Davol. ECF No. 12-1 at 9.

In reliance on the Stipulation and her prior rulings, on March 14, 2016, Justice Gibney issued an Order ("the QSF Order") establishing the QSF pursuant to the MSA, but providing that the claims administrator must segregate $ [Redacted] of the QSF, which may be distributed only "upon further order of [the Superior Court]," as well as requiring that Deaton must receive the previously requested (and withheld) information regarding the JLF Kugel Mesh case settlements on which his fee calculation would be based. ECF No. 7-2 at 8-10. For reasons not elucidated on the record, Justice Gibney's QSF Order contains no finding or determination that the segregated portion of the QSF is subject to an "attorneys' lien."

As far as the record before me reveals, the QSF, including the segregated $ [Redacted] portion, was administered without incident for almost four years. Then, on January 24, 2020,with the Deaton/JLF battle over attorneys' fees raging in Texas, Deaton filed his QSF Disbursal Motion in the Superior Court. He captioned it as "Motion to Order Epiq Global, as Successor to Garretson Resolution Group to Disburse the March 11, 2016, Lien of [Redacted] Dollars." ECF No. 7-2 at 12. In the QSF Disbursal Motion, Deaton argued that he still lacks complete information about the disposition of a few of the 176 JLF Kugel Mesh cases for which he acted as local counsel but believes that his share of the JLF attorneys' fees for the Rhode Island Superior Court cases should be $ [Redacted] , or more depending on what the missing information reveals. Deaton also asserted that he is entitled to two-thirds of the Rickie Patton...