Kugel Mess

The Rhode Island Supreme Court has entered an order in a dispute over legal fees staying the proceeding 

This case stems from a dispute between attorneys who together represented numerous claimants in personal-injury lawsuits against the makers of a hernia repair patch. The defendants, Steven M. Johnson and the Law Offices of Steven M. Johnson, P.C., d/b/a The Johnson Law Firm (collectively, Johnson), appeal from an order of the Superior Court denying their motion to stay proceedings pending the resolutions of two arbitrations in the State of Texas. At issue in the Superior Court proceedings is another motion, filed by the plaintiff, John Deaton, to disburse legal fees arising from the lawsuits to which he claims he is entitled.

We briefly recount the complex travel of this case, which spans over ten years and has involved at least seven courts. The defendants, a Texas-based attorney and law firm, represented hundreds of clients in personal-injury lawsuits against the Rhode Island-based manufacturer of a surgically implanted hernia repair product known as the Kugel Patch or Kugel Mesh. Each of defendants’ clients signed an Attorney Representation Agreement (ARA), which providesin part that “any dispute arising from the interpretation, performance, or breach of [the agreement], including any claim of legal malpractice, * * * shall be resolved by final and binding arbitration conducted in” Texas. The ARAs further provide that clients shall pay their attorneys on a contingency basis and be represented by “associate counsel” at defendants’ discretion and expense.

Deaton was not a party to the ARA

Nearly six years after the parties entered into their first agreement, in 2014, a global settlement was reached in the Superior Court that resolved the universe of Kugel Mesh claims brought by Johnson’s clients, including those in which Deaton was local counsel. The resulting settlement agreement provided not only that all disputes “arising under” or “relating to the subject matter” of the agreement “shall be filed only in the Superior Court of Rhode Island,” but also that defendants and their “[c]o-[c]ounsel” would submit to the personal jurisdiction of that court and that the agreement would be governed by the laws of Rhode Island. The agreement further provided that defendants would file a motion in the Superior Court to establish a Qualified Settlement Fund (QSF), which would serve as a repository for settlement awards and associated attorneys’ fees. The agreement was signed by Steven M. Johnson on behalf of the Johnson Law Firm, but it was not signed by Deaton.

Fire hazard

The 2014 global settlement appears to have suppressed one fire and ignited several others, including the dispute at the heart of this case. According to Deaton, Johnson negotiated the settlement without his knowledge; indeed, Deaton avers that he was unaware of the settlement until he contacted one of the clients for whom he served as local counsel. In October 2015, after what Deaton characterized as Johnson’s “repeated failure” to respond to his inquiries about the settlement, plaintiff sent counsel for the Kugel Mesh defendants notice of a lien for $1 million in attorneys’ fees related to his service as local counsel in the Kugel Mesh litigation. Weeks later, in November 2015, Johnson sent Deaton a letter discharging him, with cause, from the representation of their clients.

The court recounts to various proceedings

It is clear to us that the circumstances in this case are far different now than on October 22, 2020, when the Superior Court issued its decision on Johnson’s motion to stay. The two arbitrations in Texas have both concluded, final awards have been issued, and judgments have entered confirming both awards in their entirety. Deaton has appealed from one such judgment, however, which appeal remains pending in the Court of Appeals for the Eleventh District of Texas.

In the motion to stay proceedings, which is the only matter under review by this Court, defendants prayed the Superior Court to “stay all proceedings relating to Attorney Deaton’s Motion to Disburse, pending resolution of the [Texas] [a]rbitrations.” Thus, it is clear that the appeal before us will become moot when the pending Texas appeal is resolved and any further appeals are exhausted.

In light of the current posture of these various proceedings, we deem it prudent to stay any further action on Deaton’s motion to disburse until the remaining arbitration in Texas is finally resolved.

(Mike Frisch)