Already under fire, lawyers for 9/11 workers are ordered to justify some fees

The lawyers representing most of the ground zero workers who sued the city over health issues will be appearing in court in a new role: defending themselves.

The federal judge overseeing the cases has summoned the law partnership of two firms, Worby Groner Edelman and Napoli Bern Ripka, to a hearing on Friday to justify $6.1 million in legal expenses that they are charging their clients.

Next week, the lawyers are due back in federal court to respond to accusations of overcharging made by the other leading law firm representing workers. That firm, Sullivan Papain Block McGrath & Cannavo, alleges that its co-counsel is trying to inflate its fees by inappropriately charging clients more than $400,000 for publicists, lobbyists and legal and medical experts as case-related costs.

The Napoli firm, as the partnership is called in court papers, which represents about 9,400 of the more than 10,000 plaintiffs, already faced criticism from clients for a settlement that many plaintiffs said did not give them enough money and compensated less for some illnesses like cancer.

Several dozen workers have also discovered that they were taken on as clients even though they were never eligible for the settlement because they had taken money from a federal victims compensation fund that prohibited pursuing lawsuits.

"It seems like everyone is profiting off of the sick 9/11 workers except the sick who need it," said Ernest Vallebuona, 45, a retired New York police detective whose settlement offer of $313,200 to $382,000 for lymphoma would be reduced by $12,750 for legal expenses and by tens of thousands more for a 25 percent contingency fee for the lawyers.

"We want this to be over, but we want a fair settlement," Mr. Vallebuona said.

Maneuvering over who pays for what is common at the end of protracted litigation, but in the case of the rescue and recovery workers it comes in the emotionally charged atmosphere in which plaintiffs are still deciding whether to accept the settlement.

It offers them as a group $625 million to $712.5 million, depending on how many plaintiffs beyond the 95 percent required to approve it accept the proposal. Over all, lawyers in the case stand to receive 25 percent of the final settlement after expenses.

On Wednesday, the city’s insurer, the WTC Captive Insurance Company, cited the pending court hearings, which could result in adjustments to individual settlement amounts, as one reason for extending by two months, to Nov. 8, the deadline for plaintiffs to make their decisions.

Judge Alvin K. Hellerstein of the United States District Court in Manhattan, who is overseeing the litigation, has ordered the lawyers to justify a category of expenses labeled "interest on funds borrowed by law firm" that amounts to $6.1 million. The expense comes from loans at interest rates of 14 to 18 percent that the lawyers say they took out to help finance more than $30 million in expenses over seven years of litigation.

Paul J. Napoli, one of the lead plaintiffs' lawyers, argued in court papers filed this week that it was common and appropriate to charge loan interest to clients and that "no unethical conduct by the law firm has occurred in connection with these expenses."

But while legal experts say borrowing is relatively common in mass tort cases like this, there is some criticism of the practice because it may add to the economic pressures on lawyers to settle cases.

"At best, this is ethically dubious and raises a lot of questions about the law firm's ability to handle this case," said Stephen French, managing partner of Legalbill, a consulting firm based in Nashville that helps corporate legal departments and others analyze and track their legal costs. "If the law firm can’t carry the upfront costs, then they need not to agree to a contingency fee."

The interest charges also figure in the dispute between the Napoli firm and lawyers from Sullivan Papain, who represent 689 clients, most of them firefighters. Sullivan Papain argues that the expenses should not be passed on to clients because the retainer agreements did not ask them to accept such charges.

In court papers filed this week, Sullivan Papain also questioned other expenses being charged to clients by the Napoli firm, including $220,000 for medical and legal experts, $93,000 for public relations and $35,000 for lobbying in Washington for the health care bill for those with 9/11-related injuries.

The experts hired by the Napoli firm include Steven Wilkins, a doctor whose license was revoked for "gross negligence" in 2000 and who is identified on the firm’s Web site as a consulting attorney. He received $13,000.

In an interview, Mr. Napoli said that his firm bore a very large share of expenses given its number of clients and that Sullivan Papain "could sit back and ride our coattails." He said his firm therefore intended to lay claim to half of Sullivan Papain's attorneys' fees in the cases.

Mr. Napoli said the high profile of the litigation demanded significant spending for news conferences, lobbying and other needs to keep up with the lawyers defending the city and its contractors. Those lawyers, who are paid from the federally financed $1.1 billion Captive Insurance fund, had incurred about $210 million in legal fees and expenses, officials with the insurance company said.

The squabbling over money by the lawyers is infuriating already angry clients.

"What started out as an intention to help the Sept. 11 community has now become a feeding frenzy with the lawyers," said Kenny Specht, a plaintiff who leads a firefighters group.

Mr. Specht said he had already rejected his settlement offer of $127,000 to $158,000 before legal fees and expenses are taken out as "less than what I would have made in one year as a New York City firefighter."

About 60 workers who sued despite having taken money from the federal September 11th Victim Compensation Fund before it closed in 2003 are coming out empty-handed from the settlement. Some of the plaintiffs say they feel misled and used by the Napoli lawyers to increase their client numbers. But Mr. Napoli said his firm took the cases in the belief that the workers were eligible because the lawsuits involved injuries that developed later and had not been compensated.

He said he was now advising the clients to opt out of the settlement and continue to pursue their cases.

"I can't for the life of me understand why would we have been only told at the 11th hour that we in fact would be disqualified from this settlement," said Vincent Forras, a volunteer firefighter who came to ground zero from Westchester County and is now among the ineligible plaintiffs. "I feel very let down."

(Published by The New York Times - August 27, 2010)

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