MANHATTAN (CN) - A former body-armor executive convicted of securities fraud and insider trading must pay the quarter of a million dollars in outstanding legal fees that he owes the lawyer who represented him, the 2nd Circuit ruled.
Richard Ware Levitt with Levitt & Kaizer says former client David H. Brooks stopped paying the legal bills sometime prior to the September 2010 close of the eight-month trial in which Brooks was convicted of securities fraud, insider trading and other criminal charges.
In a motion to release assets that the government had frozen for a possible forfeiture, Brooks said he owed $1.5 million in "outstanding bills," not accounting for the "significant costs" associated with the anticipated post-trial forfeiture. He also acknowledged a $265,000 debt to Levitt in an attached schedule of outstanding invoices.
Despite this admission, Levitt said in an affidavit that Brooks became "belligerent" with him when he threatened to withdraw as counsel unless he got paid. Brooks allegedly "hissed or spit" at Levitt, and screamed a "vulgar" remark, according to the affidavit.
A federal judge would not let Brooks release of the restrained assets, and Brooks never paid the Levitt bills. When Brooks hired two other attorneys to assist in his post-trial defense, Levitt moved to withdraw as counsel and asked the court to satisfy the $224,956 in unpaid fees with bail funds that Brooks forfeited.
Still not contesting that amount, Brooks argued that the motion to compel payment was premature and prejudicial to his interests. Brooks further asserted that he was not trying to evade payment, and had attempted to satisfy it.
He said that Levitt should not be able to "jump the line" over Brooks' other legal creditors. Further, Brooks claimed that Levitt had violated New York professional conduct rules concerning confidentiality by revealing the vulgar remark.
A federal judge sided with Levitt, and the 2nd Circuit affirmed last week.
"We hold that ancillary jurisdiction existed over the fee dispute and that the District Court did not abuse its discretion in exercising that jurisdiction," the unsigned decision states.
"A federal court may exercise ancillary jurisdiction to hear fee disputes between litigants and their attorneys when the dispute relates to the main action," the three-judge panel added.
Many of Brooks' arguments fail also because he did not raise them earlier, according to the court.
Brooks is the founder and former chief executive of DHB Industries, which was the leading supplier of body armor to the U.S. military before it changed its name and filed for bankruptcy. Prosecutors charged Brooks and then-COO Sandra Hatfield with conspiring to fraudulently misappropriate nearly $200 million in corporate funds.
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