Attorney asks Supreme Court to rehear coal lease case

By Steve Korris | May 9, 2007

CHARLESTON - It takes nerve to bring up new evidence after Justices of the Supreme Court of Appeals have decided a case, and attorney Christopher Riley of Wheeling has nerve.

He also may have a point.

On May 7, Riley petitioned the Justices for rehearing of an April 5 decision approving a law firm's 30 percent fee on a coal lease.

Riley delicately argued that the attorney he replaced on the case, John Preston Bailey, overlooked a couple of facts.

According to Riley, Bailey failed to put on the record important evidence about the original agreement between the sisters and the law firm.

Riley's petition also included an estimate of how much coal the family owns, a statistic the Justices suggested Bailey should have provided.

Bailey dropped the case in March, upon his appointment as a federal judge.

Bailey unsuccessfully represented Josephine Luther and seven children of her late sister, Mary Marks, in contesting a fee of their former attorneys at Schrader Byrd and Companion, of Wheeling.

Ohio Circuit Judge Martin Gaughan found the fee reasonable, and three of five Justices agreed.

Riley wants them to change their minds.

"At the heart of the instant case is the public's confidence and trust in the legal profession and its ability to regulate itself," he wrote.

The sisters retained the Wheeling firm in 1988, after discovering that coal companies had paid their two brothers under a lease on property that all four of them owned.

The sisters and the firm agreed that the firm would collect 30 percent of any settlement.

Schrader Byrd and Companion negotiated a settlement of $3,500,000. The firm collected 30 percent, or $1,050,000.

Schrader Byrd and Companion also negotiated a lease for the sisters.

The firm collected 30 percent of the royalties the sisters received.

After paying 30 percent on the lease for a few years, the sisters retained Bailey to contest the fee.

Bailey argued that the firm failed to disclose that the fee would run as long as the lease, that the amount could be astronomical, and that the children and grandchildren of the sisters would pay it.

He argued that the fee made Schrader Byrd and Companion a partner in the family business.

These arguments failed.

The majority relied on a letter that attorney Ray Byrd wrote after the settlement, stating that the 30 percent fee would apply to lease royalties.

The majority held that in order to show that the fee was excessive, Bailey should have estimated coal reserves remaining on the property.

Although three Justices found the fee reasonable, Justice Spike Maynard wrote in dissent that the decision would encourage attorneys to entangle themselves in businesses of their clients.

Meanwhile, Riley found a surprise in records Bailey left behind.

Before the sisters agreed to a 30 percent fee on their original claim, they had paid fees on an hourly rate.

They and their attorneys agreed that if they switched to a contingency fee, they would receive credit for payments at the hourly rate.

According to Riley, the sisters paid $13,000 at the hourly rate but never received credit.

Riley did not blame Bailey for failing to put this in the record. He blamed Schrader Byrd and Companion.

"... opposing counsel's duty of candor towards this Court should have obligated SBC to disclose that it was originally retained on an hourly rate basis," he wrote. "... the foregoing suggests that SBC investigated the Marks and Luther claim on the clients' nickel and when SBC learned enough about the claim, they decided it was worth their while to take the case on a contingent fee basis."

Riley wrote that the majority should not have relied on the letter Byrd sent to the sisters about the fee on royalties.

"Marks and Luther did not employ SBC on a commission basis to act as their coal broker," he wrote, adding that the sisters never bargained for or agreed to an assignment of royalties as payment for attorney fees.

He wrote that if the sisters truly understood that they assigned future royalties, the firm could have included that in the lease. He also wrote that a coal reserve study was not necessary but that the family provided one anyway.

"There are a little over 4,559,411 tons of coal to be mined," Riley wrote.

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