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A Texas law firm engaged in a fee dispute stemming from a $44 million settlement last year should be allowed to proceed on counterclaims of misrepresentation and constructive fraud against the Philadelphia law firm leader who hammered out the multimillion-dollar accord, a federal judge has ruled.

U.S. District Judge Joshua Wolson of the Eastern District of Pennsylvania denied efforts by Thomas Sheridan and his law firm Sheridan & Murray to dismiss Tyler, Texas-based Roberts & Roberts' counterclaims in the case Sheridan v. The Roberts Law Firm. The ruling allows claims to go forward against both the Sheridan & Murray law firm and Sheridan, a principal in the firm, who is currently president of the Philadelphia Trial Lawyers Association.

The ruling comes as the two firms are fighting over how to split the fee award from a settlement secured for a Texas oilfield worker who was paralyzed after an improperly attached light fixture on an oil derrick fell more than 100 feet onto his head. The case, which stemmed from conduct in Pennsylvania, had been filed in Philadelphia, with Sheridan taking the lead in the settlement talks.

After the case resolved in late 2018, a dispute arose, with Sheridan contending that attorneys at Roberts & Roberts were attempting to breach the agreement they entered into that capped the Texas firm's referral fee. Roberts & Roberts, however, filed counterclaims, alleging that Sheridan misled the firm into thinking the case was only financially viable if the referral fee was capped, only to have the case settle for tens of millions of dollars months later.

Although Sheridan and his firm argued it had no duty that could establish a misrepresentation claim, Wolson said the Texas firm's claims were sufficient to proceed.

"In particular, Roberts & Roberts pleads that Mr. Sheridan gave Mr. Roberts a pessimistic status report about the clients' case in February 2018 in order to induce Roberts & Roberts to reduce its referral fee," Wolson said. "That is, Mr. Sheridan provided Mr. Roberts information in the course of Sheridan & Murray's business, in a transaction in which Sheridan & Murray and Roberts & Roberts had a pecuniary interest, for Roberts & Roberts' guidance."

Attorney Clifford Haines, who is representing Roberts & Roberts, said he was pleased with the decision and felt "gratified that the judge had a firm understanding of our case."

In his motion to dismiss, Sheridan and his firm argued that there were no allegations that he made any false statements to Randell Roberts, and that contracting parties are expected to form their own opinions before entering into any deals.

"Contracting parties are not required to suggest how a deal might be modified to give the other party a greater share of the pie," Sheridan said in the filing.

Sheridan and his firm are being represented by Feldman Shepherd Wohlgelernter Tanner Weinstock Dodig attorney Mark Tanner. Tanner cited the prior pleadings, and said the parties have a clear agreement.

"We have a written agreement confirming the amount of the referral fee, and we stand by it," Tanner said.

According to Wolson, the plaintiffs in the underlying case, who live in Texas, retained Roberts & Roberts in 2013, and that firm entered into a referral fee agreement with Sheridan's firm in 2014, allotting 40% of the fee to the Texas firm and 60% to Sheridan & Murray.

Then in February 2018, Sheridan called Roberts with a gloomy outlook on the case, telling him that the firm would need to cap its referral fee at $320,000 in order make sure the case was still economically viable for Sheridan & Murray to pursue, Wolson said. According to Wolson, Roberts agreed to the proposed revision, but then, in November, the case settled for $44 million.

After Roberts & Roberts learned of the settlement amount, the firm disputed the referral fee, arguing that it had been misled. Sheridan eventually filed a lawsuit, and Roberts & Roberts filed counterclaims alleging intentional and negligent misrepresentation, intentional nondisclosure, breach of fiduciary duty, constructive fraud, conversion, breach of contract, promissory estoppel and unjust enrichment.

Following an unsuccessful effort to move the fee dispute to Texas federal court, the Sheridan firm filed motions to dismiss, arguing the plaintiff failed to plead sufficient facts, was improperly seeking recovery for tort claims under breach of contract theories, and that it would be improper to allow the claims to proceed against Sheridan individually.

Wolson dismissed the fiduciary duty and conversion counterclaims, but rejected the Philadelphia firm's other arguments, finding that the alleged misrepresentations were distinct acts that allegedly tricked Roberts & Roberts into altering the original contract.

Wolson also said that, at such an early stage in the litigation, the court could not dismiss Sheridan from the case.

"Notably, Mr. Sheridan appears to draw a parallel between his request to be dismissed from the case and the court's decision to dismiss Mr. Roberts. The difference, however, is that the court held that Mr. Roberts was not subject to personal jurisdiction here," Wolson said. "Mr. Sheridan certainly is, given that he voluntarily joined the case as a plaintiff."