Powell Law losing millions from Avoca settlement to another third-party claim

By Jennifer Learn-Andes - jandes@timesleader.com | September 9th, 2016 6:39 pm

A Philadelphia law firm has been awarded a portion of $3.49 million in legal fees from an Avoca environmental contamination lawsuit that had been earmarked for the Powell Law Group, according to a recent judicial ruling.

Montgomery, McCracken, Walker & Rhoades LLP argued the payment was warranted for its work on the Avoca case after Powell Law founder and Hazleton area native Robert Powell got in trouble as part of a federal corruption probe into Luzerne County’s court system.

Waiting for Powell Law to honor the payment would be like playing “Russian roulette,” the firm’s lawyer had argued. Lawyers for Powell Law disputed that characterization and challenged the legality of forcing payment through judicial intervention.

The case played out in a Cincinnati court more than 500 miles from the Wyoming Valley because the bankruptcy trust fund, established to compensate the Avoca victims and cover Powell Law’s legal fees, is based in Ohio. The 4,400 victims claimed harm from exposure to creosote oil at the former Kerr-McGee Corp.’s railroad tie manufacturing facility in Avoca.

Hamilton County Judge Robert C. Winkler recently concluded the Montgomery firm is entitled to $2.95 million plus $540,200 in interest, for a grand total of $3.49 million.

According to Winkler’s ruling:

Under its 2009 contingency fee agreement with Powell Law, the Montgomery firm was to be paid 1 percent of the gross amount recovered by Powell Law’s clients or a multiplied formula of time billed — whichever was more money.

The 1-percent calculation was the highest because Powell Law’s clients received or will receive a cumulative gross recovery from the trust totaling $314.2 million before reduction for attorney fees and costs.

The Montgomery firm’s payment was supposed to come from Powell Law’s “own contingent fee paid to it by its own said clients, and from no other source,” the agreement said.

The judge said Powell Law had received a $3 million advance from the trust in February 2011 to pay fees and expenses, including $1.48 million of the Montgomery firm’s legal fees incurred to that date. Powell Law “declined” to direct trust overseer Garretson Resolution Group Inc. to release any of the advance to the Montgomery firm.

Winkler described the contingent fee agreement terms as “unambiguous” and directed Garretson to issue payment to Montgomery from $5.5 million of the trust he froze pending a judicial decision.

The judge’s Aug. 26 declaratory judgement was subject to appeal, but no challenges had been filed as of Friday, court officials said.

Lawyers for both sides declined comment or could not be reached for comment.

Another claim

Ohio court records show Powell Law recently voluntarily entered into a settlement with another party seeking a share of its Avoca legal fees — Philadelphia attorney Richard A. Sprague, of Sprague and Sprague.

Sprague had maintained Powell Law should be on the hook for $169,400 that Robert Powell and his wife owed Sprague for past legal representation.

Powell Law had argued Sprague has no legal entitlement to Powell Law’s Avoca receipts because his claim involved legal work for Powell and his wife, not the law firm. Lawyers also said Powell was “displeased” with Sprague’s representation and disputed the billing amount.

Sprague countered that there was an “abundance of evidence that Robert Powell and Powell Law Group are one and the same.”

Powell, who was disbarred by consent, has filed court paperwork saying the firm is now solely run by Jill Moran, who was not charged in the corruption probe but resigned as county prothonotary in March 2009 as part of an agreement with federal prosecutors.

Sprague will receive $266,158 from the Avoca trust under the settlement he negotiated with Powell Law, court filings show.

Court records valued Powell Law’s Avoca legal fees at an estimated $125.7 million, before the recent deductions for Sprague and the Montgomery firm.

It’s unclear how much of this money will end up in Robert Powell’s pocket because the agreements he has with Moran and others are confidential.

Powell’s net worth is of interest in a local lawsuit filed by juveniles and their parents and guardians alleging harm over the so-called “Kids for Cash” juvenile corruption scheme.

Now a Palm Beach Gardens resident, Powell served a prison sentence for failing to report a $2.8 million kickback scheme involving former county judges Michael Conahan and Mark Ciavarella and two juvenile detention centers Powell had co-owned, court records show. The two former judges are still serving federal prison sentences.

Under a settlement agreement, Powell and Powell Law paid the plaintiffs in that lawsuit $4.7 million, and may be required to pay up to $2.5 million more based on Powell’s net worth calculated by the end of this year. Powell’s company Vision Holdings LLC also is part of that settlement.

Powell Law was entitled to 40 percent of the Avoca recovery, plus reimbursement for other expenses, according to its agreement with the Avoca victims.

However, Powell Law has pointed out its contingency fee will be split three ways among Powell Law and two other firms, not naming them, court records say.

Powell Law retained Weitz & Luxenberg, a New York City firm known for asbestos-related litigation, to handle the Avoca claims in 2012, including an attempt to reactivate a suit in Luzerne County court seeking additional compensation for the Avoca victims.


By Jennifer Learn-Andes


Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.