Pryor Cashman has been awarded $2.46 million in legal fees after a New York state judge in Manhattan found the firm's ex-client, a coal company that raised overbilling complaints, did not timely object to the fees and did not prove damages from alleged conflicts of interest.
"U.S. Coal does not allege that it was damaged in any way by the alleged conflicts of interest, which is fatal to the claim," wrote Justice Melvin Schweitzer in Pryor Cashman v. U.S. Coal Corp., 651908/2011.
Ronald Shechtman, managing partner of Pryor Cashman, said the total award will be more than $2.8 million with interest since August 2011. The case "is the largest collection proceeding we've ever brought" on the firm's own behalf, he said.
Pryor Cashman represented U.S. Coal Corp., based in Lexington, Ky., in its effort to acquire other coal companies from July 2006 through June 2011.
The firm sued U.S. Coal in 2011 alleging the company failed to pay an outstanding $2.46 million in legal fees. U.S. Coal filed counterclaims, alleging Pryor Cashman violated New York's legal ethics rules on conflicts of interest by acquiring non-public stock in the company and then failing to advise the company of real or potential conflicts. U.S. Coal also said it was entitled to the return of any fees paid to Pryor Cashman because of the firm's alleged breach of duty of loyalty.
In particular, the company said in court papers that Pryor Cashman and Eric Hellige, lead partner for the company and head of the firm's corporate and securities practice, engaged in business transactions with U.S. Coal, acquiring some of its non-public common stock. Hellige also received promissory notes, becoming a creditor of the company, U.S. Coal said.
U.S. Coal, represented by Nixon Peabody, retained Bruce Green, director of Fordham Law School's Louis Stein Center for Law and Ethics. In a 2012 affirmation, Green said he was asked whether it is likely the firm engaged in professional misconduct subjecting it to fee forfeiture.
"My opinion is that Pryor Cashman apparently engaged in such misconduct: the law firm and its lead counsel had a conflict of interest arising out of their financial and business interests in the company and they did not obtain U.S. Coal's consent after full disclosure of the risks created by this conflict," Green wrote in the affirmation.
Another witness retained by U.S. Coal, Michael Brychel, a legal auditor of Stuart Maue Mitchell & James, reviewed the firm's bills and said he found "questionable billing practices," such as regular instances of 14-hour-plus days and entries that repeat word for word. He noted the bills "are consistent with the likelihood that Pryor Cashman has overbilled" U.S. Coal.
But in court papers Pryor Cashman said it was "shocking" that U.S. Coal was claiming a conflict because the company's board of directors voluntarily gave the firm 375,000 shares of common stock in the company in appreciation for the firm's "agreement to defer payment of its attorneys' fees for virtually the entire first year of its representation."
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