Payments Raise Questions Over Lawyers’ Fees : Courts: Woman sues her attorneys after they get $4.2 million while she gets $1.8 million in silicone breast implant case. Law firms say they used the ‘highest professional integrity.’
For settling a lawsuit that alleged her many medical difficulties were due to leaking silicone gel breast implants, Kali Korn has received $1.8 million.
Her lawyers, meanwhile, have taken in $4.2 million, more than twice as much.
The attorneys say they “exercised the highest professional integrity.” Korn contends otherwise--and recently filed a new suit, alleging that her lawyers pressed ahead of her in line to collect from Dow Corning Inc., the Michigan-based maker of the implants, shortly before it declared bankruptcy.
Korn was owed millions more, but because Dow went bankrupt, she may never receive another penny. In a move that has raised questions, her lawyers made sure that they got a sizable check ahead of the last two installments she was due.
The new suit, filed Oct. 3 in Los Angeles Superior Court, seems sure to spotlight the issue of attorneys’ ethical, legal and moral obligations to their clients.
The suit also may allow the rare opportunity to scrutinize the back-room deal-making that drives high-powered litigation.
“I don’t know the facts of all the work the lawyers did to secure this recovery,” said Erwin Chemerinsky, a law professor at USC and an expert in legal ethics. “But I’m hard-pressed to see why the lawyers should be getting twice as much as the client.”
If all $4.2 million had been for lawyer fees, experts said, it clearly would be so out of proportion that it would be “unconscionable,” and therefore prohibited. A fee of 40%, which is what Korn’s attorneys had bargained for, is on the upper end of the scale, experts said.
Of the $4.2 million, according to court documents obtained by The Times, $3 million arrived last winter in a check intended, among other things, to reimburse the lawyers for money they had advanced over the years on behalf of Korn and other women in breast-implant lawsuits.
“This isn’t about fees,” said attorney Bruce A. Finzen, adding, “the client always does come first.”
Korn’s suit against Dow has been closely watched as a precedent-setter. It was the first of about 3,700 breast-implant cases filed in California’s state courts to go to trial.
Korn, 45, a costume designer and onetime hand model who lives on the Westside, was found in January, 1991, to have a variety of severe illnesses that she blamed on the silicone implants--among them scleroderma, a disfiguring skin disease. She declined requests for an interview.
In 1991, Korn hired one of the state’s leading personal injury lawyers, San Jose attorney Salvador A. Liccardo, and his firm, Liccardo, Rossi, Sturges & McNeil.
A couple of months later, upon Liccardo’s recommendation, Korn also hired Finzen, a partner based in Minneapolis at a firm--Robins, Kaplan, Miller & Ciresi--known for its expertise in implant litigation. The Robins, Kaplan firm employs 250 lawyers in nine cities, including Los Angeles. It was this firm that ultimately received the $3-million check. Liccardo said he and his firm have received none of that money, which he thinks rightly belongs to Korn.
According to court documents, Korn was to receive 60% of any judgment or settlement. The lawyers were to get 40%.
In July, 1994, Korn’s case went to trial in Downtown Los Angeles before Superior Court Judge Robert J. O’Neill, a San Diego judge appointed to preside over all breast implant cases in the state.
After 10 weeks of trial, just as it was about to swing into final arguments, the case was settled.
At a Sept. 14, 1994, hearing in O’Neill’s chambers, Finzen outlined the deal for the record, telling the judge it was for $7.8 million to be paid in three installments--$3 million by Oct. 15, 1994, $3 million by June 1, 1995, and $1.8 million by Jan. 2, 1996.
“That’s it,” Finzen told the judge, according to a transcript obtained by The Times.
O’Neill responded: “That’s not it.” The judge said he was concerned because of “some reasonably well-publicized problems with respect to [Dow’s] financial wherewithal to continue to fund” settlements, not just in Korn’s case but in the thousands of implant suits brought by women nationwide.
Because of that concern, O’Neill insisted on an “entry of judgment,” meaning a note in the court files formalizing the $7.8-million settlement. “The purpose in that is to protect the plaintiff in the event that Dow Corning has financial difficulties,” O’Neill said. The judge declined requests for an interview.
Lawsuits frequently are settled without a judge’s oversight or approval. By recording the deal, O’Neill apparently hoped to bolster Korn’s position in future suits--or in a bankruptcy proceeding--by making it clear that a settlement had in fact been reached, and that it was for $7.8 million. In theory, having such a judgment could help Korn collect the money before many other creditors.
On Oct. 31, 1994, Korn went to sign the settlement agreement. But according to court records, the document she was presented set forth a deal for $10.8 million.
In a provision not discussed before O’Neill, the agreement included an additional payment of $3 million to Liccardo’s and Finzen’s firms, due by Feb. 1, 1995--that is, ahead of the last two payments to Korn.
The agreement also set forth several other complicated but essential provisions relating to the added $3-million payment:
* It was for the costs the two firms had incurred in the course of lawsuits for Korn and several other women. “That’s an extremely important distinction,” Finzen said. “This was not money paid to us as fees or income.” One of his partners, Los Angeles-based attorney Roman Silberfeld, said costs in Korn’s case amounted to a significant chunk of the $3 million.
* It also served as an “advance payment and credit” toward future settlements of other cases. As part of the settlement in Korn’s case, the two firms and Dow agreed to undertake talks to settle other implant cases.
* In exchange for the $3 million, the two firms agreed to ask O’Neill to continue the handful of implant cases that already had hard-to-get trial dates until after June 30, 1995. He did, in fact, agree to continue the cases after being assured that other women would “not have their rights compromised by virtue of any delay that might result from this agreement.”
The deal also set forth one final detail. Even if the negotiations produced no settlements with other cases, the lawyers got to keep the $3 million. It was “not refundable,” according to the agreement.
Korn signed the agreement. She contends in court documents that she felt “compelled” by Finzen to sign it, saying he told her: “That’s the way it is and you can’t change it.”
Finzen called that “revisionist history.” He said he sent her a copy of the document by Federal Express on Oct. 20 and the next day he and she “went over the agreement line by line, word by word.”
In October, 1994, Dow made the first $3 million payment. Korn got 60% of that, or $1.8 million; the lawyers got the remaining $1.2 million.
In February, 1995, Dow made the added $3 million payment to the attorneys, wiring it to Minneapolis.
On May 15, 1995, Dow declared bankruptcy. Those cases that were continued until after June 30 are, of course, no longer set for trial. And Korn is waiting for $2.88 million.
In August, Liccardo wrote Finzen a letter that appealed to “professionalism, ethics and morality,” asserting that Korn ought to get the first two installments and added, “As her attorneys, we should wait for the last two installments.”
In that letter, Liccardo also complained that he was cut out of talks between Finzen and Korn over details of the settlement. And he wrote that while the deal was being negotiated, Finzen actually wanted the very first installment to go to the attorneys.
Liccardo wrote that he “vigorously objected” to that “as being contrary to Kali Korn’s interest.”
“Not true, not true,” Finzen said. “Not what happened.”
The two firms have since had a falling-out, in part because of “differences” over the payment, Liccardo said.
He also said that the added payment has “never been in my hands.”
Liccardo and his firm are named as defendants in the suit that Korn filed Oct. 3, but he said he bears her no ill will. “I’m on Kali’s side,” he said. “The client comes first.”
The other defendants are Finzen and the Robins, Kaplan firm. In the suit, Korn seeks the $2.88 million she claims plus punitive damages. Her new attorney, Earl E. Boyd, declined to comment.
Finzen and Silberfeld emphasized that they said he could not discuss any figures because the $7.8-million settlement is supposed to be confidential--and, in fact, the Robins, Kaplan firm persuaded Los Angeles Superior Court Judge Ronald E. Cappai to temporarily seal the files in Korn’s new lawsuit Oct. 12, nine days after it was brought.
But Silberfeld insisted that the Robins, Kaplan firm has nothing to hide. “We thought about just saying no comment,” he said. “That’s not the law firm’s style.”
He said that Robins, Kaplan attorneys did, in fact, enter into “high-level negotiations” with Dow. But despite those contacts, he said, the firm’s lawyers never had even a hint that Dow would go bankrupt, calling that notion “simply preposterous.”
Law professor Chemerinsky said the assertion was to be expected: “Their argument could be, ‘It’s not [our] fault Dow went bankrupt.’ On the other hand, there were rumblings about that in advance and [the attorneys] made sure to take theirs first. It definitely looks like the lawyers put the lawyers’ recovery ahead of the client and the client’s recovery.”
Silberfeld countered: “Given the history of the law firm--57 years of representing injured people, being there for the little guy--it’s offensive to suggest that the firm put its interests ahead of those of one client. And we’ll prove it, at the appropriate time.”
