(L to R) Barry Flynn and Brett Wagner

A Houston businessman and his companies have sued Gordon Rees Scully Mansukhani and Houston partner Barry Flynn, alleging they mishandled a lawsuit that ended in a $44.5 million adverse judgment that forced them to settle for substantially more than the $3 million limits set by their two insurance policies.

Jerry Stoller, and his companies—Stoller Group, Stoller Enterprises, and Stoller USA—allege that after a judge in Michigan entered the judgment against them in the underlying suit, their insurance company, AIG, sought a declaratory judgment that it owed no duty to indemnify them under two policies. As a result, the plaintiffs allege they were “forced” to settle the suit at their own cost with no contribution from AIG. They also allege they lost business because of the “negative publicity” resulting from the adverse jury verdict and final judgment.

“This case illustrates what happens when an attorney, retained and paid by an insurance company to represent insureds in a lawsuit, decided instead to represent his own interests and to make a mockery of the fiduciary obligations an attorney owes to his clients, the insureds,” the Stoller plaintiffs allege in the petition.

In an email, Flynn denied the allegations. Dion Cominos, Gordon Rees' San Francisco-based managing partner, did not immediately respond to the allegations.

Stoller and his companies bring negligence, breaches of fiduciary duty and misrepresentation causes of action against Flynn and the firm, and seek unspecified actual, consequential and punitive damages, interest and costs.

Stoller Group v. Gordon Rees Scully Mansukhani was filed on Dec. 28 in the 269th District Court in Harris County. The plaintiffs are represented by Brett Wagner, a partner at Doherty Wagner in Houston.

In the petition, the plaintiffs allege that AIG retained and paid Gordon Rees to defend them in LidoChem v. Stoller Enterprises, which was filed in 2009 and tried in the U.S. District Court for the Western District of Michigan.

They allege that after a judge entered the $44.5 million judgment in January 2016, they settled for an amount in excess of the combined $3 million limits of their two AIG policies. They allege they paid the money on Feb. 1, 2016, and thereafter the final judgment was vacated and the suit dismissed with prejudice.

Immediately after the judgment was entered, the Stoller plaintiffs filed counterclaims against AIG, seeking a declaration that it owed a duty to indemnify them from any portion of the final judgment. Those claims were settled in September 2017, according to the petition, under confidential terms that exceeded the policy limits but did not fully reimburse the plaintiffs for the amount it paid to LidoChem in the settlement.

The plaintiffs allege that Flynn and Gordon Rees, among many instances of “wrongful conduct,” gave bad advice on liability and damages exposure, made errors and omissions on expert testimony on damages, actively worked to dissuade AIG to accept numerous settlement demands by LidoChem that were within policy limits, engaged in other deliberate, negligent or reckless misconduct to “effectively sabotage” efforts to settle the underlying suit, and made post-verdict misrepresentations.

In the petition, the plaintiffs allege that Flynn induced AIG to reject settlement demands within policy limits “because he did not want to settle the case based on his own selfish interests, including his desire to curry favor with AIG, to earn more fees from his continued defense of the Lidochem lawsuit, and to generate publicity for himself.”