The Insider

Pipe Dreams
You've got to hand it to Houston lawyer George Fleming: He's nothing if not persistent in pursuing the $107 million payday he and his associates claim they're entitled to for representing approximately 38,000 clients in a decade-long lawsuit against the producers of leaky polybutylene pipe. Never mind that Fleming's request for fees and reimbursement of expenses -- nearly two-thirds of the total $170 million cash settlement -- was disallowed nine months ago by state District Judge Russell Lloyd, who called it "almost scandalous."

Now Fleming has come up with a new ploy to free up the polybutylene bounty. He's written many of his clients offering them a nominal payment from his firm, Fleming Hovenkamp & Grayson, if they'll sign away their rights to additional compensation from the disputed portion of the settlement.

Fleming contends his firm and 48 others represented their clients well and deserve the $107 million (he also calculates the settlement total to be $350 million, when the value of replacement plumbing for clients is included). Lloyd's order, he argues, violates Texas law governing contracts between responsible adults.

According to Fleming, the clients signed a contract at the start of the case agreeing to a 40 percent fee for the lawyers, "and most of them have agreed to honor the contract. They don't understand why Judge Lloyd would throw out their contracts when they are not incompetent and they are not minors."

But in view of Lloyd's ruling that cut the lawyers' share of the settlement to $40 million, Fleming says, "I thought I'd give [clients] the chance, at least the ones who want to take it, to resolve this litigation."

The clients already have received settlement checks, based on Fleming's original request for payment. If Lloyd's ruling is not overturned, the dollars shaved off the lawyers' fees -- which have been impounded by Lloyd pending an appeal of his order by Fleming -- would be disbursed to the clients.

In the letters he sent out last month, Fleming advises his clients that he expects to successfully appeal Lloyd's order. But the appeal could take years, the lawyer warns, so his firm is willing to provide a payment of approximately 14 percent to clients willing to forgo future claims to the undistributed portion of the settlement.

One such letter obtained by The Insider went to a client who was awarded a gross cash settlement of $3,611 but whose actual check came to only $1,444 after the deduction of Fleming's expenses and fees and a percentage of the discounted replumbing of the client's home. The client is now being offered an extra $213 by Fleming to sign away rights to the rest of the settlement.

"If you choose to reject this settlement offer," writes Fleming, "you may have the chance to ultimately get more, but you also risk getting nothing when the appeal is finally over. FH&G intends to pursue the appeal as to all who do not accept this offer, until the last appeals court ruling which could be years from now. We expect to be as successful in fighting for our own interests as we were in fighting for your interests against Shell, Celanese and Dupont."

Fleming goes on to advise clients that he and his partners "believe [Lloyd's] interference is wrong" and that the ruling "has placed our law firm and you in a conflict of interest."

Alan Morrison, the director of litigation for consumer advocate Ralph Nader's D.C.-based Public Citizen, contends that Fleming has charged his group of clients retail fees while actually processing their cases as a class action, with resultant savings in actual legal costs. Several other class-action suits were filed against the polybutylene producers, but Fleming has always maintained his clients were dealt with individually and never constituted a class of litigants. In a brief filed in Lloyd's court, Morrison argued that Fleming deserved only $20 million for his firm's work in reaching the settlement.

Morrison's reaction to Fleming's latest gambit is equally critical. "That letter is substantially misleading and not fairly evaluative in informing the clients of the relative likelihood of success [of his appeal]," says the consumer rights attorney. "And given the relationship of lawyer to client, I think it's highly unlikely that any agreements that he claims to reach as a result would be enforceable."

Fleming counters that Public Citizen has no standing in the case and says Morrison doesn't know what he's talking about. "He's trying to put himself in the role of representing 38,000 clients that I've represented for ten years? So he's going to tell the clients [who agree to the fees] that they can't do that? Baloney!"

Lloyd, meanwhile, acknowledges he has seen Fleming's letter to clients, but refuses to comment on a pending matter in his court.

Attorney Jim Moriarty, a former partner of Fleming in the polybutylene litigation, calls Fleming's letter "outrageous."

"George doesn't seem to understand the basics," says Moriarty. "The basics are that the judge has awarded him his fee, and all this dickering around and making offers to the clients flies in the face of the judge's order."

Moriarty and Fleming do have a history. Moriarty says that after he interviewed the first potential polybutylene plaintiff in February 1987, he quickly realized the enormous size of the undertaking and recruited Fleming to finance the litigation. But the two parted ways in the early nineties because, says Moriarty, "I just couldn't stand his greed anymore."

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