A Nashville company that finances contingency-fee litigation for plaintiffs' attorneys has ended up going to court against one of its clients, a prominent Houston lawyer who has been at embroiled in controversy over his campaign contributions to attorneys general across the country.
Augusta Capital LLC filed suit July 12 in Nashville's U.S. District Court against Ken Bailey, co-founder of Houston's Bailey Perrin Bailey law firm. Appended to the complaint is a promissory note dated March 4 of this year in which Bailey commits to pay Augusta $3.82 million in the next three months. The document states that "the loan represents a settlement figure arrived at by the parties to repay the outstanding advances and settle the outstanding fees."
The lawsuit says Bailey made no payments on the note, before or after Augusta issued a final demand on June 15. Augusta claims the loan balance now stands at more than $4 million, with interest still accruing.
Nashville entrepreneur Charles Agee founded Augusta in 1998. The company provides capital for lawyers who bring large-scale class-action lawsuits over claims of mass harm, such as asbestos-related illness or conditions caused by pharmaceutical medications, on a contingency basis. Its business model involves fronting the money to cover multi-state lawsuit proceedings and taking the risk that the litigation will fail to generate a judgment or other recovery. The company's filings in the Bailey case do not explain how the lawyer came to owe what he is alleged to owe.
Bailey came under fire last year from The Wall Street Journal for allegedly "running a nationwide ‘pay-to-sue' operation with Democratic state attorneys general." In return for campaign contributions, the newspaper claimed, the AGs — or other officials, such as Pennsylvania Governor Ed Rendell — would hire Bailey's firm on a contingency basis to file lawsuits.
In a pair  of 2009 editorials , the Journal cited a total of more than $1.2 million in campaign contributions that Bailey, or those thought to be affiliated with him, made for the benefit of AG candidates in Arkansas, Louisiana, New Mexico, Pennsylvania during 2006 and 2007. Bailey and others accused the editorial writers of having their facts wrong in some instances, but it is clear that he has given large sums to attorney general candidates in various states.
"It's some racket," the newspaper asserted. "The plaintiffs attorneys come up with novel legal theories under which to sue companies or entire industries. They then solicit state AGs (or cash-hungry governors like Mr. Rendell) to retain them to bring cases on behalf of the government on a contingency-fee basis." The lawyers have gone after drug companies as well as makers of cigarettes, paint and guns, the Journal said.
Lauren Paxton Roberts and John Tate of Stites & Harbison brought suit on behalf of Augusta. Efforts to reach Bailey for comment last week were unsuccessful.
Other legal news of late:
AmSurg Corp. v. Frank D. Principati. U.S. District Court, July 13. Ambulatory surgery center operator AmSurg is suing Principati, a former division president, alleging he violated multiple contracts with the Nashville firm by hiring away a former subordinate.
In exchange for a $142,200 severance payment from AmSurg, Principati had signed a separation agreement barring him from contacting any "employee, partner or physician associated with any ambulatory surgery center, physician practice or vendor in any way affiliated with the company."
After leaving the company in April, he took a chief operating officer role with Pennsylvania-based competitor Physician's Endoscopy. And shortly thereafter one of Principati's former subordinates resigned from AmSurg to become his direct report at Physician's Endoscopy.
The complaint alleges Principati breached his contracts by contacting that worker and, in effect, hiring her away. AmSurg is seeking to recover Principati's severance payment and bar him from contacting soliciting or hiring any AmSurg employees for a period of two years.
In addition, it's asking the court to place a two-year limit on his ability to solicit any AmSurg-affiliated centers, physicians or physician partnerships and bar him from using or disclosing any of AmSurg's confidential information.
Principati did not return phone calls seeking comment.
Plaintiff's attorneys: Mike Dagley, Bob Horton and Justin Page of Bass, Berry & Sims.
From the Courts
Downtown: Where danger is part of the fun. "This is yet another complaint for personal injuries sustained by a patron of Tootsie's at the hands of out-of-control employees," announces a lawsuit filed last week by a California man who says bouncers roughed him up at the iconic Lower Broad watering hole. At least a half-dozen lawsuits are pending against bars in the area, including one filed July 2 by a patron who said staff at Cadillac Ranch beat him "to the point his body was limp and lifeless."