Quarrel Over Fees in $3 Billion Cobell Case

     WASHINGTON (CN) - A family-owned foundation sued the lead counsel in the $3.4 billion Cobell v Salazar Indian Trust Fund litigation, claiming Dennis Gingold and Kilpatrick Townsend & Stockton owe it $4.5 million from the giant settlement.
     The Lannan Foundation sued Gingold, of Rockville, Md., and Kilpatrick Townsend & Stockton, of Washington, D.C., in Federal Court.
     The complaint calls the defendants' refusal to repay the Lannan Foundation "a shameful breach of not only defendants' contractual obligations, but also the trust placed in them by the foundation and the fiduciary duties defendants owe their clients".
     Founded in 1960, the Lannan Foundation provides financial assistance to tribes and nonprofits that serve Native American communities, and supports contemporary artists and writers.
     From 1998 to 2009, Lannan gave more than $7 million in grants to the Blackfeet Reservation Development Fund, a nonprofit created to bring claims against the United States for mismanaging lands held in trust for Native Americans, according to the complaint.
     Lead plaintiff Elouise Cobell was a member of the Blackfoot Nation and a great-granddaughter of legendary Blackfoot leader Mountain Chief.
     As treasurer of the Blackfoot Nation, Cobell discovered that the federal government had mismanaged Individual Indian Money accounts used to collect and disburse money derived from the sale or lease of land the government held in trust for Native Americans.
     The General Allotment Act of 1887 authorized the president to divide tribal lands into parcels and allocate them to individual members, who could not sell or lease them without government approval. The allotment practice was later abolished, but the federal government continued to hold the lands in trust and manage them for the benefit of Native Americans.
     Cobell concluded that the exact number of IIM accounts and their value or balance was unknown due to inadequate recordkeeping and reconciliation procedures, according to the complaint.
     After petitioning the federal government for nearly 20 years to reform the IIM account system, Cobell sued the United States in 1996 on behalf of an estimated 300,000 IIM account holders.
     Cobell enlisted the help of the Lannan Foundation, which contributed millions for accounting and expert witness fees, and funded a public education campaign for the benefit of the plaintiffs, according to the complaint.
     The foundation claims that Gingold, who acted as lead counsel from 1996 until 2012, agreed that up to half of any attorneys' fees and costs recovered by judgment or settlement would be used to repay the foundation's grants in full.
     Kilpatrick Townsend, an international firm whose attorneys have been representing the plaintiffs since 1996, also agreed to the repayment terms, according to the complaint.
     The foundation claims that since the lawsuit was settled after almost 14 years of litigation, plaintiffs' attorneys have received $85.4 million out of a $99 million attorneys' fees award, but have refused to repay the foundation's grants in full.
     The government agreed to a $3.4 billion settlement in 2009, with $1.4 billion going to class members and attorneys' fees, and $2 billion allotted for purchase and consolidation of lands for Native American tribes.
     "Despite receiving millions of dollars from the attorneys' fees award issued in the Indian Trust Fund Litigation, defendants have refused to repay the grants as set forth in the grant agreements," the complaint states. "Instead, defendants have taken the position that, contrary to the clear terms of the agreements, the foundation has no right to be repaid from the $99 million attorneys' fees award, and instead may pursue repayment only from the personal assets of the class representatives (or, in the case of Ms. Cobell, who passed away in October 2011, her estate)." (Parentheses in complaint).
     The foundation claims the plaintiffs' attorneys repaid $1.8 million toward the grants, but refused to pay the remaining $4.5 million.
     It claims Gingold denied any obligation to repay the grants from attorneys' fees, and withdrew as counsel for the plaintiffs in December 2012, without notifying the foundation.
     Kilpatrick Townsend also claimed the foundation has no right to any portion of its attorneys' fees, according to the complaint.
     The foundation says the lawyers argued that the attorneys' fees were paid from a trust administration fund, and thus did not come from a settlement or judgment.
     But the foundation claims the money came directly from the U.S. Treasury, and is a result of the settlement between the federal government and the Cobell plaintiffs.
     "The position defendants apparently wish to take - that the foundation would be required to seek recovery from the class representatives of their incentive awards rather than defendants' repaying the foundation a sum totaling less than 5 percent of the $99 million awarded to class counsel - is a shameful breach of not only defendants' contractual obligations, but also the trust placed in them by the foundation and the fiduciary duties defendants owe their clients, including the late Ms. Cobell," the complaint states. "The foundation made this litigation and the resulting settlement possible. Defendants themselves admit that the foundation 'generously and loyally backstopped Ms. Cobell in this case when no one else would,' and provided continued funding 'for what appeared to be an infinite or indeterminate duration.'"
     The foundation seeks compensatory and punitive damages for breach of contract, intentional interference with contractual relations, breach of fiduciary duty, and unjust enrichment.
     It is represented by Reginald Goeke with Mayer Brown.