Attorneys Must Wait on Contingency Fee Award

(CN) - A $36 million dollar contingency fee won by three attorneys for their work on behalf of victims of a 1986 Berlin nightclub bombing will remain in trust until all claims on the money are resolved, a federal judge ruled.

Libya paid victims of the LaBelle discotheque bombing $111 million in 2008 to settle a lawsuit over its responsibility for the attack.

The victims' lawyers - Steven Perles, Thomas Fay, and Paul Schwarz - received nearly $36 million for their work in the case, known as the Beecham case.

But "as the D.C. Circuit observed in another case involving the defendant [Perles] in this matter, 'a large contingency fee in a successful lawsuit sometimes leads to nasty controversy over who gets what,'" U.S. District Judge Christopher Cooper said.

Anticipating such a dispute, the three attorneys established a trust account to satisfy any claims against the proceeds of their contingency fee.

Their fears were confirmed when Michael Bregman, a retired federal agent who allegedly provided investigative services to the lawyers, sued them, claiming that Perles promised him $100,000 for his services, plus a $1 million bonus if the case was successful.

A federal judge partially dismissed Bregman's claims in April as untimely, and dismissed Fay and Schwarz as defendants, prompting Fay to force a distribution of one-third of the trust.

But Cooper agreed with Perles that the funds must remain in the account until all three lawyers agree on a distribution.

"Because the plain language of the trust agreement and the surrounding circumstances clearly establish that the parties intended for the trust to remain in place until the full resolution of the underlying suit," Cooper said.

Bregman's contract claims remain pending in federal court, even if his unjust enrichment allegations were dismissed.

"Because the purpose of the trust was to set aside $1,100,000 if any of the trustees became party to a suit, there remains a purpose for the trust - satisfaction of any judgment against Perles - that can be fulfilled by keeping the money segregated," the judge concluded.

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