Pa. Atty Says Former Firm Hid Revenue To Withhold Pay

By James Boyle
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Law360 (December 21, 2020, 10:45 PM EST) -- A Pittsburgh lawyer has accused his former law firm of hiding revenue from a whistleblower case he worked on to avoid paying the compensation he was contractually owed.

Darth Newman says Pollock Cohen LLP refused to pay him more than $50,000 of contingency fees when the firm settled a major whistleblower case in May. His employment contract with Pollock Cohen gives him a percentage of revenue from whistleblower and qui tam cases the firm settles or wins, including active cases when he left the firm in March, according to a suit filed Friday with the U.S. District Court of the Western District of Pennsylvania.

Newman learned about the settlement about a month after the whistleblower case was voluntarily dismissed from court. After weeks of emails asking the partners about the case and the collection of contingency fees, Newman was told he would not receive any contingency payments.

"Defendants did not provide any notice to Newman that the [case] had resolved," the complaint says. "Instead, Defendants tried to obfuscate their sudden influx of cash and refused to acknowledge that the [case] resolved at all."

Adam Pollock said in an emailed comment after the article's publication that Newman's lawsuit is "baseless," and he expects it will be dismissed. Newman was fired because of issues with his performance and should not receive further payment.

"We terminated Darth for cause -- for significant performance, interpersonal, and teamwork issues," Pollock writes. "Not wanting to make his firing more painful or difficult, we allowed him to say it was downsizing due to Covid-19. But no good deed goes unpunished, and Darth thought he was entitled to a bonus -- forever. ... We are sorry that Darth has resorted to litigation."

Newman joined the firm as an independent contractor in April 2018 and agreed to a full employment contract in April 2019, according to the complaint. Adam Pollock and Steve Cohen started the firm in 2018 primarily to focus on filing whistleblower and qui tam suits. The suits had the potential for large windfalls, but the downside is the amount of time it takes to litigate or settle.

The partners approached Newman to join the firm as general counsel and handle business litigation cases that could generate revenue from billable hours while the partners worked on the whistleblower cases, the complaint says.

Newman's compensation agreement comprised $10,000 a month salary, but the partners would pay Newman 33.33 percent interest until cash flow became more steady, then complete the full back payments once the firm could afford it, the complaint says.

To sweeten the deal, the firm also offered Newman a revenue share from the contingency fees generated by the firm's core practice. According to the complaint, Newman was to receive 10 percent of the first $2 million of fees accumulated per year, then 5 percent of the remaining fees collected.

The arrangement worked for nearly a year, as Newman managed cases even though there were months when he did not receive his full salary, only the interest payments, the complaint says. He received his contractual portions of the contingency revenues when they came in.

But economic struggles from the COVID-19 pandemic hit the firm in early spring, the complaint says, and Pollock Cohen was forced to part ways with Newman. The split was initially amicable, according to the complaint, and emails between Newman and the partners confirmed that he would receive the remaining $25,000 of back pay from his monthly salary and portions of contingency fees from cases still active when he left.

The relationship turned sour weeks later when some Pollock Cohen clients started to follow Newman out the door, the complaint says. Newman learned that the firm had completed settlement for its biggest qui tam case — which Newman spent a significant time working on — at the end of May. The complaint accuses the firm of hiding the news of the settlement from Newman in an attempt to avoid paying the contracted fees.

Newman's attorney declined to comment on the suit. Attorneys representing Pollock Cohen did not return a request for comment.

The complaint does not specify which case was settled, but it was projected to generate between $560,000 to $640,000 of contingency fees. Newman should have received between $56,000 and $64,000 from the case, but the firm denied he was owed payments for any outstanding cases since he left.

Newman's suit, filed at the Allegheny Court of Common Pleas and moved to federal court, seeks declaratory judgment stating the firm and its three partners, Pollock, Cohen and Christopher Leung, owe Newman payment as directed in the contract, plus damages for breach of contract, unjust enrichment, breach of fiduciary duty and violations of Pennsylvania's Wage Payment Collection Law.

Newman is represented by Rachel McElroy of McElroy Law Firm LLC in Pittsburgh.

Pollock Cohen and its partners are represented by Marla N. Presley and Joanna M. Rodriguez of Jackson Lewis PC of Pittsburgh.

The case is Newman v. Pollock Cohen LLP et al., case number 2:05-mc-02025, filed with the U.S. District Court for the Western District of Pennsylvania.

Update: This article has been updated to include a comment from Adam Pollock.

--Editing by Michael Watanabe.

For a reprint of this article, please contact reprints@law360.com.

Attached Documents

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Case Information

Case Title

PLAINTIFF v. DEFENDANT


Case Number

2:05-mc-02025

Court

Pennsylvania Western

Nature of Suit

Date Filed

January 04, 2021

Law Firms

Government Agencies

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