Case 2:14-cv-07983-FSH-MAH Document 1 Filed 12/23/14 Page 1 of 139 PageID:...

Case 2:14-cv-07983-FSH-MAH Document 1 Filed 12/23/14 Page 1 of 139 PageID: 1


IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

, RD LEGAL FUNDING PARTNERS, LP,

Plaintiff,

vs.

MEL POWELL, ESQ.; POWELL LAW FIRM, LLC; JEFFREY C. BOGERT, ESQ.; LAW OFFICE OF JEFFREY C. BOGERT, ESQ., Defendants.

Civil Action No.

VERIFIED COMPLAINT FOR INJUNCTIVE and OTHER RELIEF

Plaintiff, RD Legal Funding Partners, LP (“Plaintiff”), as and for its complaint against

defendants Mel Powell, Esq., individually (“Powell”), Powell Law Firm, LLC (“Powell Firm”),

Law Office of Jeffrey C. Bogert, Esq. (“Bogert Firm”), and Jeffrey C. Bogert, Esq., individually

(“Bogert”) (hereinafter, collectively “Defendants”), alleges as follows:

PRELIMINARY STATEMENT

1. For years, Defendants and their co-counsel received the benefit of millions of

dollars in funding from Plaintiff to support their pursuit of high stakes mass tort litigation against

big pharmaceutical companies. Before advancing this funding, Plaintiff insisted that Defendants

execute subordination agreements whereby Defendants (i) subordinated their rights to legal fees

earned from these litigations to Plaintiff’s right to be repaid, and (ii) agreed that, upon receipt,

those fees would be either paid directly to Plaintiff, or held in trust in a joint deposit account

unless and until all of their obligations have been completely satisfied. In dereliction of the


2

agreements, Defendants have failed to turn over or deposit into a joint deposit account any of the

counsel fees that they have received from the litigations to date -- in fact, at least one defendant,

Powell, has stated unequivocally that he does not intend to abide by the agreements -- and the

recovery of substantially more fees is imminent. It is for these reasons that Plaintiff seeks

immediate and specific performance of the agreements and other related relief.

JURISDICTION and VENUE

2. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §

1332 because the amount in controversy exceeds $75,000 and there is complete diversity

between Plaintiff and Defendants.

3. This Court has personal jurisdiction over Defendants because they consented to

this Court’s jurisdiction in the agreements that are at issue in this action.

4. Venue is proper pursuant to 28 U.S.C. § 1391(a) because Plaintiff is

headquartered in this District, and the operative agreements between the parties giving rise to

this action provide that New Jersey is the exclusive forum and that New Jersey law shall apply to

all claims.

PARTIES

5. Plaintiff is a Delaware limited partnership with its principal offices at 45 Legion

Drive, Second Floor, Cresskill, New Jersey 07626.

6. Upon information and belief, defendant Powell Firm is a limited liability

company organized and existing under the laws of California with its principal place of business

at 269 South Beverly Drive, Suite 1156, Beverly Hills, California 90212.

7. Upon information and belief, defendant Powell is a citizen of the State of

California and the sole owner and/or member of the Powell Firm. For the purpose of this


3

pleading, the Powell Firm and Powell may be collectively referred to as the “Powell

Defendants.”

8. Upon information and belief, defendant Bogert Firm is a sole proprietorship

organized and existing under the laws of California with its principal place of business at 501

Colorado Avenue, Suite 208, Santa Monica, California 90401.

9. Upon information and belief, defendant Bogert is a citizen of the State of

California and the sole owner of the Bogert Firm. For the purpose of this pleading, Bogert and

the Bogert Firm may be collectively referred to as the “Bogert Defendants.”

NON-PARTIES

10. The following are affiliated non-parties that are central to the facts giving rise to

this litigation:

(a) Daniel A. Osborn, Esq. (“Osborn”) is an attorney with his principal office at 295

Madison Avenue, 39th Floor, New York, New York 10017.

(b) Until December 2008, Osborn was a partner in the law firm of Beatie and Osborn

(“B&O”), also which was located at the Madison Avenue address.

(c) In December 2008, Osborn left B&O to form his current firm of Osborn Law, PC

(the “Osborn Firm”). Osborn is the President and/or sole and/or majority shareholder of the

Osborn Firm, which continues to operate from the Madison Avenue address. For the purpose of

this pleading, Osborn, B&O, and the Osborn Firm may be collectively referred to as “Osborn.”


4

ALLEGATIONS OF FACT COMMON TO ALL COUNTS

A. Defendants and Osborn Collectively Pursue Mass Tort Claims

11. Defendants and Osborn are plaintiffs’ attorneys who specialize in class action

litigation and, more particularly, the prosecution of mass tort claims against pharmaceutical

companies.

12. Since 2005, Defendants and Osborn have worked as co-counsel in pursuing

personal injury claims involving a class of drugs generically known as bisphosphonates, which

were manufactured and sold under the brand names “Aredia” and “Zometa” by Novartis,

“Fosamax” by Merck, and “Actonel” by Procter & Gamble/Sanofi-Aventis (“P&G”). (See

Declaration of Daniel A. Osborn, Esq. (“Osborn Dec.”), ¶ 2).

13. These claims were pursued through three separate actions and/or Multi-District

Litigations (“MDLs”): (1) the In Re Actonel Products Liability Litigation, which was filed

against P&G in United States District Court for the Southern District of New York (the “Actonel

Litigation”); (2) the In Re Fosamax Products Liability Litigation, which was filed against Merck

in the United States District Court for the Middle District of Tennessee and bears MDL No. 1789

(the “Fosamax Litigation”); and (3) the In Re Aredia/Zometa Products Liability Litigation,

which was filed against Novartis in the United States District Court for the Southern District of

New York and bears MDL No. 1760 (the “Aredia/Zometa Litigation”). The Actonel Litigation,

the Fosamax Litigation, and the Aredia/Zometa Litigation are collectively referred to as the

“Litigations.” (See id.).

14. Upon information and belief, the co-counsel relationship between and among

Defendants and Osborn is such that, although all are counsel of record, the Powell Defendants


5

primarily collected cases and referred them to Defendant Bogert and Osborn for handling. (See

id., ¶ 3).

15. Through this arrangement, the Powell Defendants referred hundreds of

bisphosphonate cases to the Bogert Defendants and Osborn, of which a small number were filed

in the Actonel Litigation, a larger amount were filed in the Fosamax Litigation, and several

hundred were filed in the Aredia/Zometa Litigation. (See id.).

16. The co-counsel fee arrangement between and among Defendants and Osborn has

essentially been the same since 2005, but it underwent some minor, nominal changes in

December 2008 when Osborn left B&O to start the Osborn Firm. For the sake of clarity, the co-

counsel arrangement shall be divided into two phases. The first phase, which encompasses 2005

through December 2008, shall be referred to as the “B&O Phase.” The second phase, which

encompasses the departure of Osborn from B&O in December 2008 to the present, shall be

referred to as the “Osborn Phase.”

17. The terms and conditions of the co-counsel arrangement during the B&O Phase

were governed by two separate agreements: (1) a Fee Agreement between B&O and the Powell

Firm, dated December 2005, pursuant to which the legal fees generated by the Litigations were

to be distributed sixty percent (60%) to B&O and forty percent (40%) to the Powell Firm, (see

Ex. A); and (2) a Fee Agreement between B&O and the Bogert Firm, dated December 21, 2005,

pursuant to which the legal fees generated by the Litigations were to be distributed by mutual

agreement of the parties, taking into account the relative contributions of each firm. (See Ex. B).

These fee agreements shall be collectively referred to as the “B&O Phase Fee Agreements.”

18. When Osborn left B&O to start the Osborn Firm in December 2008, the Powell

Firm terminated B&O as co-counsel by letter dated December 11, 2008. Defendants and Osborn


6

then entered into two separate agreements that replaced and, in virtually all material respects,

mirrored the arrangement in, the B&O Phase Fee Agreements: (1) the Powell Firm, the Osborn

Firm, and Bogert entered a Fee Agreement, dated December 29, 2008, that became effective on

January 1, 2009, pursuant to which the legal fees generated by the Litigations were to be

distributed sixty percent (60%) to the Osborn Firm and Bogert in the aggregate and forty percent

(40%) to the Powell Firm, (see Ex. C); and (2) the Osborn Firm and Bogert entered a Fee

Agreement, dated January 24, 2009, pursuant to which their sixty percent (60%) share of the

legal fees earned under the global agreement above were split with sixty-five percent (65%) to

the Osborn Firm and thirty-five percent (35%) to Bogert. (See Ex. D). These fee agreements

shall collectively be referred to as the “Osborn Phase Fee Agreements.”

19. In other words, the only material difference between the fee sharing arrangements

for the B&O and Osborn Phases was the apportionment of the sixty percent (60%) belonging to

Osborn and Bogert as set forth below:

PHASE FEE SPLIT B&O Phase Osborn/Bogert Powell

60% (split based on contributions)

40%

Osborn Phase Osborn/Bogert Powell 60% 40%

Osborn Bogert 65% 35%

20. Both the B&O and Osborn Phase Fee Agreements provide that all settlements,

checks, and other payments shall be made payable to the Powell Defendants and deposited into

their trust account. (See Exs. A and C, ¶ 4).


7

B. Defendants and Osborn Obtain Funding from Plaintiff 21. From the outset, Osborn inquired as to whether the Powell Defendants were

willing and able to contribute any monies to fund the Litigations, but the Powell Defendants

declined to do so. As a result, Osborn covered virtually all of the costs and expenses incurred in

connection with the Litigations. (See Osborn Dec., ¶ 5).

22. As the Litigations progressed, Defendants and Osborn ultimately sought funding

from Plaintiff to support their substantial litigation costs and expenses. (See id., ¶ 6).

23. While the legal funding arrangement between Plaintiff and its clients involved

various, lengthy agreements, the structure of the arrangements is straightforward. That is,

Plaintiff advances monies to its clients in exchange for an assignment and sale of the lawyer’s

right to legal fees and reimbursement of expenses in the underlying litigation. This assignment

of fees and expense receivables then serves as security for the repayment of the outstanding

obligations.

1. Funding During the B&O Phase

24. On or about October 25, 2007, Plaintiff and B&O entered into a Master

Assignment and Sale Agreement, pursuant to which Plaintiff agreed to provide funding to B&O

on an as needed basis in exchange for B&O’s sale and assignment of its right to legal fee

receivables, including attorneys’ fees and expense receivables, arising from the Litigations (the

“Legal Fees”). (See Ex. E). The assignment of the Legal Fees secured repayment of the

principal amount of the funding plus interest at the lesser of twenty-four percent (24%) per

annum or the maximum rate allowable by applicable law. (See id., ¶ 1). For the purpose of this

pleading, the Master Assignment and Sale Agreement shall be referred to as the “B&O Phase


8

Assignment Agreement.” The Powell and Bogert Defendants were aware B&O was seeking

outside funding for the Litigations in or around this time. (See Osborn Dec., ¶ 7).

25. Under the B&O Phase Assignment Agreement, each advance by Plaintiff was

considered to be a separate “sale” or transaction, the terms and conditions of which were

memorialized in a separately executed schedule (the “Schedule”). The “purchase price” for

each sale is the amount of funding provided by Plaintiff to B&O. The “fee purchased” is the

amount of the Legal Fees being sold and assigned by B&O to Plaintiff. In other words, the “fee

purchased” represents the amount that B&O was obligated to pay to Plaintiff at the expiration of

each Schedule. If payment was made by certain pre-determined dates, or before the expiration of

the Schedule, the “fee purchased” would be reduced such that the obligations would be lower the

sooner they were paid.

26. The Schedule memorializing each “sale” or transaction set forth both the

“purchase price” and the “fee purchased.” (See id., ¶ 2).

27. The B&O Phase Assignment Agreement contained no restrictions or limitations

on the use of monies by B&O and/or the Osborn Firm. (See id.).

28. To secure its obligations under the B&O Phase Assignment Agreement, Plaintiff

obtained a security interest in and to the Legal Fees purchased by Plaintiff from B&O and in all

of B&O’s “present and future assets and properties, including without limitation, all accounts,

chattel, paper, equipment, instruments, investment property, documents, letter of credit rights,

personal property and general intangibles” (collectively, the “Collateral”). (Id., ¶ 5).

29. Plaintiff duly perfected its security interest in the Collateral on or about July 13,

2007, by filing with the appropriate filing office a UCC-1 Statement. (See Ex. F).


9

30. Because the cases were still in their early stages during the B&O Phase, the

assignments issued during this period were significantly less than the Osborn Phase.

Specifically, there were four outstanding Schedules (A-1 through A-4) entered between the

parties reflecting a total original assignment of approximately $1,987,442.

31. From time to time, the assignments set forth in Schedules A-1 through A-4

reached the end of their respective contractual terms without the assigned Legal Fees being paid

by B&O, however. Plaintiff and B&O therefore entered into amendments to these Schedules

that affirmed B&O’s obligation and extended the due date in exchange for the accrual of interest.

As a result of these amendments and the accrual of interest through November 30, 2014, B&O’s

total obligation under the B&O Phase Assignment Agreement as of that date was approximately

$4,877,866. This obligation shall hereinafter be referred to as the “B&O Phase Obligation.”

2. Funding During the Osborn Phase

32. In order to properly account for Osborn’s transition from the B&O Phase to the

Osborn Phase and his retention of roughly ninety-five percent (95%) of the bisphosphonate cases

originally referred to B&O, Plaintiff and the Osborn Firm replaced the B&O Phase Assignment

Agreement with a new Master Assignment and Sale Agreement, dated January 29, 2009 (the

“Osborn Phase Assignment Agreement”). (See Ex. G). The Osborn Phase Assignment

Agreement mirrors the material and operative terms of the B&O Phase Assignment Agreement.

It too provides for periodic funding evidenced by Schedules and establishes a security interest in

the Legal Fees and the Collateral, which also was perfected by the filing of a UCC-1 Statement.

(See id., ¶¶ 1 and 5).

33. As previously stated, the assignments issued during the Osborn Phase were

significantly higher than those issued during the B&O Phase. These assignments were


10

memorialized in Schedules A-1 through A-4, A-6, A-8 through A-13, A-15 through A-33, A-36

through A-51, and originally totaled approximately $16,319,302.

34. In addition, in late January through early February 2009, certain obligations

totaling less than $500,000 were transferred from the B&O Phase Assignment Agreement to the

Osborn Phase Assignment Agreement to account for the transition of the Litigations from B&O

to the Osborn Firm occurring at that time. These transfers occurred before the parties entered

into the subordination agreements at issue.

35. As was the case during the B&O Phase, however, the Schedules issued in the

Osborn Phase reached the end of their contractual term without payment of the assigned fees.

Thus, Plaintiff and the Osborn Firm also entered into a series of amendments to the Schedules

that affirmed the Osborn Firm’s obligation and extended the due date in exchange for the accrual

of interest. As a result of these amendments and the accrual of interest through November 30,

2014, the Osborn Firm’s total obligation under the Osborn Phase Assignment Agreement as of

that date, inclusive of the transferred B&O Obligations, was approximately $21,820,125. This

obligation shall hereinafter be referred to as the “Osborn Phase Obligation.”

36. On or about August 11, 2009, Osborn, on his own behalf, and on behalf of the

Osborn Firm, entered into an Assumption Agreement with Plaintiff, pursuant to which Osborn

and the Osborn Firm assumed the B&O Phase Obligation and agreed to perform all of B&O’s

duties and obligations under the B&O Phase Assignment Agreement. (See Ex. H).

37. The B&O Phase Assignment Agreement, the Osborn Phase Assignment

Agreement, and the Assumption Agreement each provide that they shall be governed and

construed in accordance with the laws of the State of New Jersey, and that all parties consent to


11

the state or federal courts of New Jersey as the exclusive jurisdiction for any dispute arising

therefrom. (See Exs. F and G, ¶ 16; Ex. H at 11).

C. The Subordination Agreements

38. Although the total obligation under the B&O Phase and the Osborn Phase

Assignment Agreements had already grown to over $4.5 million by mid-2009, the Powell

Defendants, the Bogert Defendants, and Osborn still anticipated the need for substantial

additional funding as neither the Powell nor the Bogert Defendants demonstrated a willingness

or ability to finance the Litigations. (See Osborn Dec., ¶ 9).

39. However, given the significance of the then-outstanding balance, as well as the

continuing need to extend the payment deadlines and the absence of any imminent prospect of

repayment, Plaintiff insisted on additional security for both the B&O Phase and Osborn Phase

Obligations before advancing any more monies. Specifically, Plaintiff demanded that

Defendants execute subordination agreements in which Defendants individually and collectively

agreed to subordinate to Plaintiff their respective interests in the Legal Fees that would

eventually be due and owing to them in the Litigations.

40. There were two subordination agreements that Plaintiff presented, negotiated, and

executed with Defendants: (1) a subordination agreement with the Osborn Firm and the Powell

Firm, dated July 6, 2009 (the “Osborn/Powell Subordination Agreement”) (see Ex. I); and (2) a

subordination agreement with the Osborn Firm and Bogert, dated September 30, 2009 (the

“Osborn/Bogert Subordination Agreement”) (see Ex. J). These agreements shall be collectively

referred to as the “Subordination Agreements.”

41. The operative terms of the Subordination Agreements are materially similar in

that both Bogert and Powell “assign[ed], transfer[red] and convey[ed]” to Plaintiff their portion


12

of the Legal Fees from the Litigations due and payable to them under the aforementioned fee

agreements “as additional collateral” to secure the B&O Phase and the Osborn Phase

Obligations. (Exs. I and J, ¶¶ 1.1.1). The Subordination Agreements also provide that Bogert

and Powell “subordinate[d] in favor of [Plaintiff] any right, title, interest or lien” that they may

have in their portion of the Legal Fees from the Litigations. (Id., ¶ 1.1.2).

42. However, there were two distinct differences between the Osborn/Powell and the

Osborn/Bogert Subordination Agreements with respect to the terms of subordination. First, the

Osborn/Bogert Subordination Agreement assigns and subordinates without any limitation

Bogert’s right to all Legal Fees from the Litigations in satisfaction of both the B&O Phase

Obligation and the Osborn Phase Obligation, whereas the Osborn/Powell Subordination

Agreement limits the Powell Defendants’ share of the B&O Phase Obligation to $1 million.

(Compare Exs. I and J, ¶¶ 1.1.1 and 1.1.2).

43. Specifically, Paragraphs 1.1.1 and 1.1.2 of the Osborn/Powell Subordination

Agreement respectively provide that Powell assigns and subordinates only the first $1 million in

Legal Fees from the Litigations to be held in satisfaction of the B&O Phase Obligation. (See

id.).

44. The Osborn/Powell Subordination Agreement, however, does not limit the Powell

Defendants’ share of the Osborn Phase Obligation. In fact, Paragraph 1.1.1 expressly provides

that their share of Legal Fees from the Litigations shall serve “as additional collateral securing

Beatie and Osborn and Osborn Law’s present and future obligations” to Plaintiff. (Ex. J, ¶ 1.1.1)

(emphasis added).

45. Second, Paragraph 1.1.1 of the Osborn/Powell Agreement grants Powell the right

to terminate the Agreement upon thirty days’ written notice on or after May 1, 2010. The


13

Agreement makes clear, however, that Powell’s right of termination applies “solely as to future

advances to Osborn Law.” (Id.) (emphasis added).

46. Aside from these differences, both Subordination Agreements established a very

strict protocol for the collection, deposit, and distribution of Legal Fees from the Litigations to

ensure that Plaintiff’s priority and security interest remained protected. Specifically, they

provide that Defendants and Osborn shall open a joint deposit account (the “Joint Deposit

Account”) under their respective federal tax identification numbers and that, upon the receipt of

Legal Fees, Defendants and Osborn shall either (i) promptly deposit the Legal Fees into the Joint

Deposit Account or (ii) remit the Legal Fees directly to Plaintiff, until Osborn’s obligations to

Plaintiff were paid in full or otherwise satisfied. (See Exs. I and J, ¶ 2).

47. The Subordination Agreements also provide that: (a) Defendants and Osborn shall

not remove any monies from the Joint Deposit Account “for any reason until (i) the Litigation is

settled or otherwise concluded, and (ii) [Defendants and Osborn] receive written notification

from [Plaintiff] setting forth the aggregate dollar amount of the Obligations, at which time

[Defendants and Osborn] shall remit such dollar amount in good funds to [Plaintiff] within forty-

eight (48) hours of having received said notification”; and (b) “[u]pon [Plaintiff’s] request

[Defendants and Osborn] shall each promptly provide [Plaintiff] with copies of all information,

statements and reports pertaining to the Joint Deposit Account . . . .” (Id.).

48. In addition, Paragraph 1.6 of the Subordination Agreements expressly

acknowledges that Plaintiff may extend to B&O and the Osborn Firm additional funding or

“financial accommodations” without any limitations whatsoever, and makes clear that the Powell

and Bogert Defendants had a continuing obligation to assign and subordinate their right to Legal


14

Fees as security for and in satisfaction of the future obligations incurred by Osborn. (Exs. I and

J, ¶ 1.6).

49. As for relief, the Subordination Agreements specifically provide that, in the event

of a breach by either Defendant or Osborn, Plaintiff may, in addition to all other remedies

available at law and equity, demand specific performance. The Subordination Agreements also

state that, in such an event, Defendants or Osborn “waive any defense based on the adequacy of

a remedy at law that might be asserted as a bar to such remedy of specific performance” and

shall be “jointly and severally liable.” (Id., ¶ 5.1).

50. Like all of the other aforementioned agreements, the Subordination Agreements

direct that they are to be governed and construed in accordance with the laws of New Jersey, and

that the parties consented to the exclusive jurisdiction of the state or federal courts of New Jersey

for any disputes arising from the Agreements. (See id., ¶ 9).

51. Lastly, the Subordination Agreements provide that counsel fees shall be

awardable to the prevailing party in any action brought to enforce their provisions. (See id., ¶ 8).

52. Following the execution of the Subordination Agreements, and given their

continuing obligations with respect to any funding issued to Osborn thereafter, Plaintiff provided

written notice to both the Bogert and Powell Defendants each time that there was an

advancement of additional funds by Plaintiff and a corresponding assignment and subordination

of Legal Fees by Defendants. (See, e.g., Ex. K).

D. The Powell Defendants Terminate the Osborn/Powell Subordination Agreement and Dispute the Monies Owed to Plaintiff Thereunder

53. Following the execution of the Osborn/Powell Subordination Agreement, the

Powell Defendants took specific action to avoid and/or minimize their obligations thereunder.

First, in or about May 2010, the Powell Defendants instructed Osborn to return approximately


15

thirty (30) bisphosphonate cases that they had originally referred to Osborn, but which Osborn

had not yet filed, so that the Powell Defendants could refer them to another law firm involved in

the Litigations. In so doing, the Powell Defendants made clear to Osborn that their purpose in

redirecting those cases, as well as any future cases, was to avoid making them subject to the

Osborn/Powell Subordination Agreement. (See Osborn Dec., ¶ 11).

54. In addition, by letter dated May 7, 2010, the Powell Defendants terminated the

Osborn/Powell Subordination Agreement effective thirty (30) days thereafter. In that

termination letter, the Powell Defendants took the position that the letter was merely a formality

because the Osborn/Powell Subordination Agreement capped his obligation in the aggregate at

$2 million: “Technically this termination takes effect thirty days from today, but as Osborn Law

has already received at least Two Million Dollars ($2,000,000) from RD Legal since January 1,

2009, the ceiling has already been reached and my terminating the agreement is just a mere

formality.” (Ex. L). Contrary to the Powell Defendants’ assertion, there is no reference to a $2

million ceiling in the Osborn/Powell Subordination Agreement.

55. By late June 2010, the Powell Defendants abandoned their position as to a $2

million aggregate cap, conceding instead that they could be liable to Plaintiff for more than $3.2

million. (See Ex. M). According to his letter, Powell arrived at this amount by adding the

amount he believed was provided to Osborn during the “Subordination Agreement” together

with the “agreed-upon $1,000,000.00 (one million dollars) of funding of the former law firm

Beatie & Osborn by RD Legal.” (Id.).

56. Even then, however, the position taken by the Powell Defendants did not comport

with the plain terms of the Osborn/Powell Subordination Agreement. The Agreement does not

provide for any aggregate limit nor does it in any way limit Plaintiff’s right to receive the Legal


16

Fees due to the Powell Defendants to satisfy the Osborn Phase Obligations. Rather, it only limits

the Powell Defendants’ share of the B&O Phase Obligations to $1 million and provides that they

are not liable for funding made to Osborn after June 7, 2010, the effective date of termination of

the Osborn/Powell Subordination Agreement.

57. At best, the true and full effect of the termination letter sent pursuant to Paragraph

1.1.1 of the Osborn/Powell Subordination Agreement is that it ensured that the Powell

Defendants would not bear any responsibility or obligation with respect to “future advances”

made by Plaintiff to the Osborn Defendants after the effective date of termination.

58. Thus, by the date of termination of the Osborn/Powell Subordination Agreement,

the Powell Defendants’ obligation to Plaintiff neared $6 million. Specifically, the Powell

Defendants’ $1 million share of the B&O Phase Obligations, plus the $4,859,757 that accrued as

a result of assignments issued from the beginning of the Osborn Phase through the effective date

of termination of the Osborn/Powell Subordination Agreement, brought the Powell Defendants’

total obligation to $5,859,757.

59. And given that the Osborn/Bogert Subordination Agreement contained no

limitations, the Bogert Defendants and Osborn are jointly and severally liable for both the B&O

Phase Obligations and the Osborn Phase Obligations, which total $26,689,011 as of November

30, 2014 and continue to accrue interest.

60. In the wake of the termination letter, the Powell Defendants continued to dispute

their obligations under the Osborn/Powell Subordination Agreement. For example, by e-mail

dated July 2, 2010, the Powell Defendants made clear that, if the parties could not come to an

agreement as to his obligation, they would undertake efforts to ensure that Plaintiff was never

repaid, stating: “I expect that we’ll have a firm total established by the end of next week, or I


17

expect that I will begin the process of referring the cases to someone else, taking whatever

smaller percentage we can get, and no one will likely ever see any money on any of these cases.”

(Ex. N).

E. Defendants and Osborn Receive Legal Fees from the Litigations, but Defendants Fail to Satisfy their Obligations to Establish a Joint Deposit Account, Provide an Accounting of the Fees Received, or Make Direct Payment to Plaintiff

61. Upon information and belief, the Actonel Litigation has been settled, and Legal

Fees have been disbursed in approximately seventy-five percent (75%) of the Actonel cases

brought by Defendants and Osborn with the remaining approximately twenty-five percent (25%)

still outstanding. (See Osborn Dec., ¶ 12).

62. The Powell and Bogert Defendants agreed to pay the Florida firm of Aylstock,

Witkin, Kreis & Overholtz (“Aylstock”) thirty percent (30%) of the Legal Fees received from the

Actonel cases to negotiate and effectuate the settlement. (See id.).

63. Because the Powell Defendants, the Bogert Defendants, and Osborn had involved

the Aylstock law firm, the payment of Legal Fees received to date first went to Aylstock, then to

the Powell Defendants, then to the Bogert Defendants, and then to Osborn. At each stage,

Aylstock, the Powell Defendants, and the Bogert Defendants kept their share of the Legal Fees.

(See id.).

64. Upon information and belief, the total fees received to date from the Actonel

Litigation are approximately $593,200, with the Aylstock firm receiving approximately

$197,535, the Powell Defendants receiving approximately $158,265, and the Bogert Defendants

and Osborn together receiving approximately $237,398, of which the Bogert Defendants

received approximately $59,349 and Osborn received $178,048. All fees received from the

Actonel cases by Aylstock, Defendants, and Osborn rightfully should have been remitted to


18

Plaintiff pursuant to the Subordination Agreements and the agreements between Plaintiff and

Osborn. (See id.).

65. Upon information and belief, since that time, Osborn has transferred to Plaintiff

the funds he received thus far as required by the Assignment Agreements. (See id.).

66. Prior to receiving any of the Legal Fees from the Actonel Litigation, Osborn

spoke with the Powell and Bogert Defendants regarding the Subordination Agreements. At that

time, Powell advised Osborn that he did not believe that he was required to turn over any of the

Actonel fees. Osborn also later urged the Powell Defendants to establish the Joint Deposit

Account required by the Subordination Agreements. (See id., ¶ 13). The Powell Defendants,

however, have refused to turn over to Plaintiff their share of the Actonel Legal Fees or place

those Fees in a Joint Deposit Account.

67. Instead, through a letter from counsel dated October 17, 2014, the Powell

Defendants made clear their intent to now challenge the validity of the Osborn/Powell

Subordination Agreement. (See Ex. O).

68. As of this date, a Joint Deposit Account has not been established nor have the

Powell or Bogert Defendants paid any of their Legal Fees from the Actonel Litigation to

Plaintiff. It is anticipated that the Powell Defendants will be receiving in excess of $50,000 and

the Bogert Defendants will be receiving in excess of $20,000 from the settlement of the

remaining Actonel cases. (See Osborn Dec., ¶ 14).

69. Upon information and belief, the Fosamax Litigation has also been settled for

more than $27 million, but no monies have been paid. It is anticipated that the settlement monies

and Legal Fees from the Fosamax Litigation will be paid out in the first quarter of 2015. (See

id., ¶ 15).


19

FIRST COUNT (Breach of Contract)

70. Plaintiff repeats and realleges each and every allegation in the foregoing

paragraphs as if fully set forth herein.

71. Under the Subordination Agreements, Defendants (i) “assign[ed], transferr[ed],

and convey[ed]” to Plaintiff their portion of the Legal Fees from the Litigations as “additional

collateral” to secure the B&O Phase and Osborn Phase Obligations (inclusive of those

obligations transferred from B&O); (ii) “subordinate[d] in favor of [Plaintiff] any right, title,

interest, or lien” that they may have in their portion of Legal Fees due and payable from the

Litigations; (iii) agreed to establish a Joint Deposit Account for the deposit of all Legal Fees

earned from the Litigations and to provide Plaintiff with an accounting for the Joint Deposit

Account; and (iv) agreed that, upon receipt of any Legal Fees, Defendants would either deposit

the Legal Fees into the Joint Deposit Account where such fees would remain unless and until

Plaintiff issued written authorization for their release, or pay all Legal Fees directly to Plaintiff.

72. The Subordination Agreements also expressly provide that, in the event of a

breach by any Defendant, Plaintiff is entitled to an award of specific performance and

Defendants “waive any defense based on the adequacy of a remedy at law that might be asserted

as a bar to such remedy of specific performance . . . .”

73. Defendants breached these agreements by, among other things, failing to establish

or provide an accounting for a Joint Deposit Account, and failing to deposit into the Joint

Deposit Account and/or pay directly to Plaintiff all Legal Fees received to date, including the

more than $200,000 collectively received to date by Defendants in the Actonel Litigation.

74. Defendants also breached the Subordination Agreements by unilaterally sharing

with Aylstock Legal Fees that rightfully belonged to Plaintiff.


20

75. These breaches were intentional and willful.

76. By virtue of Defendants’ breaches, Plaintiffs have suffered, and will continue to

suffer, significant and irreparable damages.

WHEREFORE, Plaintiff prays for judgment against Defendants, jointly and severally,

as follows:

(a) Directing Defendants to immediately pay to Plaintiff all monies due and owing

under the Subordination Agreements;

(b) Mandating specific performance of the Subordination Agreements between the

parties and striking any defenses to such relief;

(c) Awarding Plaintiff actual, compensatory, and consequential damages in an

amount to be determined at trial, together with interest thereon;

(d) Awarding Plaintiff punitive damages;

(e) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this

action; and

(f) Granting Plaintiff such other and further relief that this Court may deem just and

proper.

SECOND COUNT (Conversion)

77. Plaintiff repeats and realleges each and every allegation of the foregoing


78. Pursuant to the Subordination Agreements, Plaintiff has an immediate right to be

paid the Legal Fees received by Defendants from the Litigations or have those Legal Fees held in

trust solely for Plaintiff’s benefit.


21

79. Upon information and belief, Defendants wrongfully interfered with Plaintiff’s

right to be paid the Legal Fees and to have those Legal Fees held in trust for Plaintiff’s benefit by

exercising dominion and control over the Legal Fees received to date, including the Legal Fees

received from the Actonel Litigation, in a manner inconsistent with that right and, more

particularly, by failing to deposit the more than $200,000 of Legal Fees collectively received

from the Actonel Litigation into a Joint Deposit Account or pay them directly to Plaintiff, and by

sharing with Aylstock nearly $200,000 of Legal Fees from the Actonel Litigation that rightfully

belong to Plaintiff.


as follows:









action; and

(f) Granting Plaintiffs such other and further relief that this Court may deem just and

proper.


22

THIRD COUNT (Breach of Implied Covenant of Good Faith and Fair Dealing)



81. The Subordination Agreements between the parties contain the implied covenant

of good faith and fair dealing.

82. Defendants breached the implied covenant of good faith and fair dealing by,

among other things, (i) failing to establish a Joint Deposit Account, (ii) failing to deposit into the

Joint Deposit Account or pay directly to Plaintiff all Legal Fees received to date, including the

more than $200,000 collectively received from the Actonel Litigation, and (iii) sharing with

Aylstock the Legal Fees received in the Actonel Litigation that rightfully belong to Plaintiff

without Plaintiff’s knowledge or consent.

83. The Powell Defendants further breached the implied covenant of good faith and

fair dealing by taking specific action to avoid their obligations under the Osborn/Powell

Subordination Agreement and intentionally depriving Plaintiff of the benefit of its bargain.

Among other things, the Powell Defendants (i) admittedly re-directed cases that were originally

referred to Osborn to other attorneys to avoid having them subject to the Osborn/Powell

Subordination Agreement, (ii) took the unsupportable position that the Osborn/Powell

Subordination Agreement contains an aggregate limit of $2 million, (iii) threatened to sabotage

Plaintiff’s right of repayment by referring future cases to other attorneys “so that no one will

likely ever see any money on any of these cases,” and (iv) after receiving the benefit of more

than $12 million in funding and holding in hand significant Legal Fees from the Actonel


23

Litigation, threatened to challenge the validity of the Osborn/Powell Subordination Agreement in

its entirety.

84. By virtue of these breaches of the implied covenant of good faith and fair dealing,

Plaintiff has already suffered, and will continue to suffer, significant and irreparable damages.

Among other things, Plaintiff has already been deprived of (i) more than $200,000 in Legal Fees

collectively received by Defendants in the Actonel Litigation, (ii) nearly $200,000 in Legal Fees

unilaterally paid to Aylstock without Plaintiff’s knowledge or consent, (iii) roughly thirty (30)

bisphosphonate cases that were originally referred to Osborn and would have served as

additional collateral for Plaintiff’s right of repayment under the Subordination Agreements, and

(iv) the protections afforded by the Subordination Agreements with respect to the collection and

preservation of Legal Fees received in the Litigations, including, but not limited to, the

establishment of a Joint Deposit Account.


as follows:








(e) Awarding Plaintiff their attorneys’ fees, costs, and disbursements incurred in this

action; and


24


proper.

FOURTH COUNT (Breach of Fiduciary Duty)



86. Defendants owed Plaintiff a fiduciary duty under the terms and conditions of the

Subordination Agreements, including the duties of care and loyalty.

87. Upon information and belief, Defendants breached their fiduciary duty by, among

other things, receiving Legal Fees subject to the Subordination Agreements, including more than

$200,000 from the Actonel Litigation, and failing to pay those fees directly to Plaintiff or deposit

them into the Joint Deposit Account and/or otherwise hold them in safekeeping and trust for

Plaintiff. Defendants also breached their fiduciary duty by sharing with Aylstock Legal nearly

$200,000 in Legal Fees that rightfully belong to Plaintiff without Plaintiff’s knowledge or

consent.

88. The Powell Defendants have also breached their fiduciary duties by, among other

things, (i) reclaiming and redirecting to other firms bisphosphonate cases originally referred to

Osborn so as to avoid making them subject to the Osborn/Powell Subordination Agreement, and

(ii) after receiving the benefit of more than $12 million in funding from Plaintiff and collecting

significant fees from the Actonel Litigation, threatening to challenge the validity of the

Osborn/Powell Subordination Agreement in its entirety.

89. As a direct and proximate result of these breaches, Plaintiff has suffered, and will

continue to suffer, significant and irreparable harm.


25


as follows:









action; and


proper.

FIFTH COUNT (Unjust Enrichment)

90. Plaintiff repeats and realleges each and every allegation of the foregoing


91. The Subordination Agreements are valid and enforceable contracts.

92. Nevertheless, by letter dated October 17, 2014, the Powell Defendants threatened

to challenge the validity of the Subordination Agreements in their entirety and have them

declared void.

93. Given this threatened challenge, and without waiving any claim as to the validity

of the Subordination Agreements and/or any claims arising thereunder, Plaintiff alternatively

alleges that Defendants have been unjustly enriched by receiving the benefit of more than $12


26

million in funding from Plaintiff that they in turn used to recover and collect Legal Fees from the

Litigations, including more than $200,000 from the Actonel Litigation.

94. By virtue of retaining the Legal Fees at issue in the Subordination Agreements,

Defendants will be unjustly enriched beyond their rights under the Subordination Agreements.

95. Permitting Defendants to retain the Legal Fees received or to be received by them

from the Litigations in the future would unfairly give Defendants the benefit of Plaintiff’s

property.

96. Equity and good conscience require that the Court establish an account to hold

any Legal Fees that Defendants receive from the Litigations or pay Plaintiff all of the Legal Fees

due and owing under the Subordination Agreements and other benefits to which Plaintiff is

entitled.


as follows:

(a) Directing Defendants to immediately pay to Plaintiff all Legal Fees they have

received from the Litigations;

(b) Establishing a Joint Deposit Account in accordance with the terms of the

Subordination Agreements and directing that, upon the receipt of Legal Fees, Defendants shall

either (i) promptly deposit the Legal Fees into the Joint Deposit Account, or (ii) remit the Legal

Fees directly to Plaintiff, until Osborn’s obligations to Plaintiff were paid in full or otherwise

satisfied;





27


action; and


proper

SIXTH COUNT (Accounting)



98. The Subordination Agreements are premised upon the status of the Litigations

and, more particularly, the Legal Fees received and/or expected to be received by Defendants in

the Litigations.

99. Furthermore, the Subordination Agreements expressly provide for the

establishment of a Joint Deposit Account and a full accounting of all Legal Fees received and/or

expected to be received by Defendants.

100. Despite repeated demands, Defendants have never provided an accounting as to

the status of the Litigations or the Legal Fees received and/or expected to be received.

101. Equity, fairness, and the express terms and conditions of the Subordination

Agreements between the parties demand an immediate and full accounting.

WHEREFORE, Plaintiff prays for judgment against Defendants in the form of a court

order:

(a) Directing Defendants to provide Plaintiff with a full accounting as to the status of

the Litigations, and any and all Legal Fees received and expected to be received from the

Litigations, or alternatively, an independent fiscal agent shall be appointed, at Defendants’ sole


28

expense, to investigate and provide a full accounting as to the status of the Litigations and any

and all Legal Fees received and to be received from the Litigations;

(b) Directing immediate and expedited discovery to ascertain all information relevant

to the Litigations and the payment, or anticipated payment, of Legal Fees from the Litigations;

(c) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this

action; and

(d) Granting Plaintiff such other and further relief that this Court may deem just and

proper.

SEVENTH COUNT (Preliminary Injunction)



103. Through the Subordination Agreements, Defendants (i) “assign[ed], transferr[ed],

and convey[ed]” to Plaintiff their portion of the Legal Fees from the Litigations as “additional

collateral” to secure the B&O Phase and Osborn Phase Obligations (inclusive of those

obligations transferred from B&O); (ii) “subordinate[d] in favor of [Plaintiff] any right, title,

interest, or lien” that they may have in their portion of Legal Fees from the Litigations; (iii)

agreed to establish a Joint Deposit Account for the deposit of all Legal Fees from the Litigations

and to provide Plaintiff with an accounting for the Joint Deposit Account; and (iv) agreed that,

upon receipt of any Legal Fees, Defendants would either deposit the Legal Fees into the Joint

Deposit Account where such fees would remain unless and until Plaintiff issued written

authorization for their release, or pay all Legal Fees directly to Plaintiff until the B&O Phase and

Osborn Phase Obligations have been satisfied.


29

104. Upon information and belief, the Actonel Litigation has been settled (in whole or

in part) and Defendants have collectively received more than $200,000 in Legal Fees resulting

therefrom. Defendants have also shared with Aylstock nearly $200,000 in Legal Fees from the

Actonel Litigation that belong to Plaintiff.

105. As of this date, Defendants have failed to establish a Joint Deposit Account or

deposit the Legal Fees received from the Actonel Litigation into the Joint Deposit Account.

106. Defendants have also failed to pay directly to Plaintiff any and/or all Legal Fees

received from the Actonel Litigation, including those fees shared with Aylstock without

Plaintiff’s knowledge or consent.

107. Upon information and belief, the Fosamax Litigation has been settled and Legal

Fees earned by Defendants are expected to be disbursed in early 2015.

108. By virtue of Defendants’ failure to abide by these agreements and pay to Plaintiff

and/or deposit into the Joint Deposit Account all Legal Fees received, Defendants have

wrongfully exercised dominion and control over property to which Plaintiff is clearly entitled

and intentionally deprived Plaintiff of its legal and/or contractual rights, thereby inflicting upon

Plaintiff irreparable harm.

109. Absent a preliminary injunction restraining Defendants from taking, transferring,

or otherwise dissipating the Legal Fees received, and mandating that Defendants immediately (i)

provide Plaintiff with a full accounting of all Legal Fees received and/or to be received from the

Litigations, (ii) establish a Joint Deposit Account, and (iii) deposit into the Joint Deposit Account

and/or pay directly to Plaintiff all Legal Fees received, Plaintiff will continue to suffer

irreparable harm.


30

WHEREFORE, Plaintiff prays for judgment against Defendants in the form of a court

order granting a preliminary and permanent injunction:



(b) Restraining and enjoining Defendants from transferring, disbursing, secreting,

dissipating, and/or otherwise disposing any and all Legal Fees that Defendants have received

and/or will receive from the Litigations;

(c) Mandating specific performance of the Subordination Agreements and, more

specifically that: (i) Defendants shall immediately establish the Joint Deposit Account for the

purpose of depositing all Legal Fees received and/or to be received from the Litigations pending

the disposition of this matter or, alternatively, an escrow account (the “Escrow Account”) to be

held in the name of, and monitored by, an independent fiscal agent, at Defendants’ sole expense,

for the purpose of depositing all Legal Fees received and/or to be received from the Litigations

pending the disposition of this matter; (ii) Defendants shall immediately provide Plaintiff with a

full accounting as to the status of the Litigations, and any and all Legal Fees received and

expected to be received from the Litigations, or alternatively, an independent fiscal agent shall be

appointed, at Defendants’ sole expense, to investigate and provide a full accounting as to the

status of the Litigations and any and all Legal Fees received and to be received from the

Litigations; and (iii) Defendants shall immediately pay to Plaintiff or deposit into the Joint

Deposit Account or the Escrow Account all Legal Fees received from the Litigations, including

those Legal Fees received from the Actonel Litigation;

(d) Directing immediate and expedited discovery to ascertain all information relevant

to the Litigations and the payment, or anticipated payment, of Legal Fees from the Litigations;




EXHIBIT A





EXHIBIT B



EXHIBIT C






EXHIBIT D



EXHIBIT E














EXHIBIT F









EXHIBIT G

















EXHIBIT H














EXHIBIT I












EXHIBIT J













EXHIBIT K










EXHIBIT L



EXHIBIT M



EXHIBIT N




EXHIBIT O




Date post:	25-May-2020
Category:	Documents
Upload:	others
View:	2 times
Download:	0 times

Case 2:14-cv-07983-FSH-MAH Document 1 Filed 12/23/14 Page 1 of 139 PageID:...

Documents