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Pillsbury Loses Appeal for Fee Reimbursement in ?Bitter Feud? with Former Client

By Zoe Tillman

In the latest round of litigation between Pillsbury Winthrop Shaw Pittman and a former client, Capitol Hill Group, U.S. District Chief Judge Royce Lamberth upheld a bankruptcy court judge's ruling that Pillsbury was not entitled to fees as reimbursement for litigating a malpractice claim Capitol Hill Group (CHG) unsuccessfully brought against the firm.

Lamberth wrote in an opinion (PDF) yesterday that Pillsbury could not rely on an earlier fee agreement that came under dispute in previous litigation to argue that CHG was barred from bringing any claims in the future.

Characterizing the dispute as a long-running ?bitter feud? between the legal equivalents of the Hatfields and McCoys, Lamberth called on both parties to see his latest ruling as final closure in the case and to end the fighting.

The dispute stems from Chapter 11 bankruptcy proceedings CHG began almost a decade ago. The company hired Pillsbury, at the time called Shaw Pittman, in 2002 to serve as legal counsel. According to Lamberth?s opinion, a fee agreement was hammered out in which CHG was allowed to delay full payment of fees in exchange for agreeing not to challenge Pillsbury?s fee applications.

The conflict arose, Lamberth wrote, when CHG objected to the firm?s fee application ? despite the earlier agreement ? and Pillsbury in turn ?sought an unnecessary and overbroad declaratory judgment.? Pillsbury was ultimately awarded fees for its work on the bankruptcy proceedings.

CHG then brought a $50 million legal malpractice claim against Pillsbury in 2007 relating to other litigation the firm had handled on CHS?s behalf, which was dismissed by Lamberth on the grounds that CHG had already had an opportunity to litigate claims against Pillsbury. The dismissal was affirmed by the U.S. Court of Appeals for the D.C. Circuit.

Pillsbury filed an adversary claim (PDF) against CHG in U.S. Bankruptcy Court for the District of Columbia in March 2010, claiming that the original fee agreement at issue in the bankruptcy proceedings also precluded CHG from bringing the malpractice suit. Pillsbury sued CHG for fees incurred in defending against CHG?s 2007 malpractice claim.

Bankruptcy Judge S. Martin Teel ruled against Pillsbury, finding that while the fee agreement may have barred CHG from challenging Pillsbury?s request for fees, it did not address whether CHG could bring a malpractice suit against the firm on issues other than fees.

The law firm appealed Teel?s decision (PDF) in January, which landed before Lamberth.

In affirming Teel?s decision to grant CHG summary judgment, Lamberth wrote that Pillsbury was incorrect in interpreting the original fee agreement to say that CHG was barred from pursuing any claims against Pillsbury.

?Nothing in the text of the Fee Agreement, however, purports to waive any substantive rights of CHG beyond its right to dispute Shaw Pittman?s fee applications,? Lamberth wrote.

At the end of the opinion, Lamberth issued a plea for both parties to resolve their issues once and for all.

?Though I would like to believe that today?s opinion might lead to final resolution of this long-running feud, the Court holds no illusion that it possesses the power to pacify these parties,? Lamberth wrote. ?In this case ... circumstances have intermingled to form a volatile mix in which embittered parties, now entrenched in their own views, continue to attack each other long after the costs of doing so have exceeded the benefit to be gained.?

Pillsbury attorneys represented the firm in the appeal, but could not immediately be reached for comment. Capitol Hill Group was represented by Daniel Litt of Washington?s Dickstein Shapiro, who also could not immediately be reached for comment.

Full post as published by The BLT: The Blog of Legal Times on April 20, 2011 (boomark / email).