Florida's Fourth District Court of Appeal has blocked an attempt by New York law firm Parker Waichman to collect a $4.2 million contingency fee from a tobacco verdict, after an attorney left partway through the case and took the client with him.

The case made it clear: A firm is entitled to the full contingency fee for general partners who leave and take clients with them, but not if the departing attorneys are limited partners or associates. And the ruling created important case law for attorneys leaving their employers.

Parker Waichman had hoped to trade its $93,203 slice for the full contingency fee in the Florida case, reasoning that because Naples lawyer Jordan Chaikin was a partner, he owed the firm a financial duty after setting up his own practice.

But the appellate court found Chaikin wasn't really a partner, because the firm never treated him like one. It found Chaikin didn't have access to financial information or capital of the partnership, and could not have voted on partnership matters. The court also found the attorney didn't have a share of the firm's profits, and received only discretionary bonuses as managing partners determined his salary.

The appellate panel also noted Parker Waichman promoted Chaikin after a 2010 Florida Bar investigation into the firm for having a Florida office without a licensed partner in the state, a violation of bar rules.

Chaikin was the firm's only Florida lawyer at the time, responsible for screening Engle progeny cases, according to the opinion, which said managing partner Jerrold Waichman agreed to change the firm's practices to comply with the Florida Bar. Waichman did not respond to a request for comment by deadline.

Parker Waichman then named Chaikin a "profit partner" and "supervisory partner," according to the appellate panel, which found no evidence he ever had equity in the firm.

"While Chaikin's title may have changed, his duties, responsibilities and compensation did not," the opinion said. "Calling Chaikin a 'partner' may have satisfied the firm's obligations under Florida Bar rules, but mere labels do not control the outcome here."

When Chaikin left, tobacco plaintiff Linda Purdo followed, striking up an agreement with Chaikin and co-counsel Alex Alvarez of the Alvarez Law Firm in Coral Gables. Just one month before trial, Palm Beach Circuit Judge Cymonie Rowe entered an order substituting them for Parker Waichman, which responded with a charging lien.

Jurors awarded plaintiff Purdo $33.5 million in the underlying litigation in April 2016, the largest verdict in Palm Beach County at the time. Parker Waichman then sought Chaikin's full $4.2 million contingency fee, arguing it had spent 116 hours on the case and paid $17,803 in costs.

Rowe dismissed the charging lien with prejudice, instead awarding the firm its costs plus $75,000, based on Chaikin's $650 an hour rate.

Separation case law

Fort Lauderdale attorneys Bruce Rogow and Tara Campion, who represented Parker Waichman, said they were disappointed with the ruling and its implications.

"The decision creates an unfortunate opportunity for disloyalty and duplicity in law firms," Rogow said. "Perhaps I am 'old school' in thinking that lawyers should not be so motivated by financial gain. We are considering [a] rehearing."

J. Chris Bristow of Critton, Luttier & Coleman in West Palm Beach represented tobacco plaintiff Purdo. He said the ruling could become a seminal opinion for attorneys leaving law firms, because existing case law was sparse, consisting of only a 2013 Eleventh Circuit decision and a 1964 Third DCA ruling.

J. Chris Bristow. Photo: J. Albert Diaz/ALM. J. Chris Bristow. Photo: J. Albert Diaz/ALM.

"It's important because these law firms that handle cases on contingency, like plaintiffs firms, can't simply call their attorneys partners and then try to be entitled to the full fee when they leave," Bristow said.

Bristow also found it noteworthy that Parker Waichman presented evidence of spending 116 hours on the case, but sought the whole fee.

"They didn't participate in the trial, they didn't attend any days of trial, yet they wanted the entire fee," he said. "If you do the hourly rate at $4 million, they wanted about $35,000 an hour for the work that they did."

Fourth District Court of Appeal Judge Mark Klingensmith wrote the opinion, with Judges Burton Conner and Jeffrey Kuntz concurring.

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