Attorneys Ordered to Pay Vendor for Breach of a Document Review Contract
On January 5, 2012, Magistrate Judge Bernard Zimmerman signed an Amended Order ordering defendants to pay plaintiff $317,113.00, including costs and post judgment interest. That Order followed a September 19, 2011 jury verdict against 15 defendants, who were a group of mass tort attorneys, that were sued by the technology vendor Cataphora for breach of a document review contract.
The underlying facts of this case center upon the problems with Chinese drywall that occurred around 2006. Homes throughout the Southeast were built with the Chinese drywall because there was a shortage of American drywall. The drywall was defective and caused several problems. For example, the drywall emitted fumes that smelled like sulfur or rotting eggs. The fumes ruined metal appliances such as air-conditioning evaporator coils, pipes and copper wiring.
Multi-district litigation arose as a result of the defects. A Plaintiff Steering Committee (“PSC”) consisting of the defendats was appointed by the court to handle the drywall cases. In 2009, the PSC and Cataphora finalized negotiations for document review services. Cataphora and Jerrold Seth Parker, the authorized representative for PSC, signed the contract.
The contract involved a large upfront fixed fee in exchange for a lower rate throughout the rest of the 24-month work period. Pursuant to that contract, Cataphora sent its first invoice for the upfront fixed fee of $366,000. PSC refused to pay the initial sum. Then, PSC canceled the contract with Cataphora. After repeated attempts to collect the money due from PSC, Cataphora filed an action for breach of contract .
In court, the defendants argued that they should not have to pay Cataphora because the contract was never valid. PSC argued that Cataphora included a success fee in the contract, which was illegal for non-attorneys to receive. They also claimed that the clause stating that the original fee was nonrefundable had been added at the last-minute without proper notification. Frank Pitre of Cotchett, Pitre & McCarthy, counsel for the defendants PSC, said Cataphora committed fraud by adding that particular clause so late in the game.
The four day trial for this matter began on September 12th, 2011. Ultimately, the jurors were not persuaded by PSC’s arguments. They ruled in favor of the plaintiff’s Cataphora. PSC filed several post trial motions. After all the motions had been presented, the Magistrate Judge signed the amended order which echoed the jury’s verdict - the contract was indeed enforceable.
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