A litigation funding company that claims mass tort lawyers owe it $32 million has decided its claim belongs in a California state court.
RD Legal Funding had its lawsuit against Los Angeles attorneys Mel Powell and Jeffrey Bogert dismissed without prejudice on Jan. 22, two weeks after Judge Faith Hochberg, of the U.S. District Court for the District of New Jersey, told it to prove why the case should be heard in federal court.
Instead, attorneys for RD Legal Funding admitted to the court that there is not a complete diversity of citizenship between it and the two defendants.
That’s because the company said it recently discovered some of its limited partners are domiciled in California, as are the defendants.
The dismissal will allow RD Legal Funding to refile the case in California state court.
Left pending was Powell’s motion to dismiss, which, in addition to making the jurisdictional claim, argued RD Legal Funding did not sufficiently state a cause of action against him as an individual.
The lawsuit was originally filed Dec. 23. It alleged Powell and Bogert have not repaid the company for financing lawsuits over the drugs Aredia, Zometa, Fosamax and Actonel.
RD Legal Funding says it gave the attorneys more than $12 million in funding.
RD Legal Funding was founded by former plaintiffs attorney Roni Dersovitz, while Powell is of the Powell Law Firm in Beverly Hills, Calif., and Bogert apparently joined the Sizemore Law Firm in 2012. He practiced at the Law Offices of Jeffrey C. Bogert for the 15 years prior.
It was in 2005 that Bogert, Powell and non-defendant Daniel A. Osborn became co-counsel in pursuing personal injury claims over a class of drugs known as bisphosphonates.
Ultimately, the claims were separated into three actions in federal courts. The three arranged for a fee-splitting agreement that was changed in 2008 when Osborn started Osborn Law PC.
Powell referred hundreds of cases to Bogert and Osborn, the complaint says. In both fee-splitting agreements, Powell was to earn 40 percent, the complaint said.
Osborn asked Powell for help funding the claims, but Powell declined, the complaint said. In 2007, RD Legal Funding and Osborn’s former firm entered into an agreement that provided funding on an as-needed basis in exchange for the firm’s sale and assignment of its right to attorneys fees and expenses arising from the litigation.
The interest rate in the agreement was the lesser of 24 percent or the maximum allowable by applicable law.
RD Legal Funding says the two defendants were aware Osborn was seeking outside funding.
When Osborn founded the new firm, he retained 95 percent of the bisphosphonate cases, the complaint said. In 2009, RD Legal Funding and Osborn updated the agreement and subordination agreements with Bogert and Powell.
According to the complaint, those subordination agreements established a joint deposit account for attorneys fees.
In 2010, Powell terminated his agreement and asked for Osborn to return approximately 30 cases to him, the complaint said.
“In the wake of the termination letter, the Powell Defendants continued to dispute their obligations…” the complaint said.
“For example, by email 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 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.”
That firm apparently turned out to be the Florida firm Aylstock, Witkin, Kreis & Overholtz, which received 30 percent of fees received from Actonel cases, the complaint said.
“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,” the complaint said.
“At each stage, Aylstock, the Powell Defendants and the Bogert Defendants kept their share of the legal fees.”
RD Legal Funding says that because the Osborn/Bogert subordination agreement contained no limitations, the two are jointly and severally liable for $26,689,011, as of Nov. 30.
Powell’s obligation, the complaint alleged, is another $5,859,757.