This is a further report on a case we discussed this summer:

"$10,800,000 VERDICT AND RECOVERY – PROFESSIONAL NEGLIGENCE – LEGAL MALPRACTICE – BREACH OF DUTY OF LOYALTY OWED BY LAW FIRM TO CLIENTS PARTICIPATING IN NEGOTIATION OF SETTLEMENT AGREEMENT – DEFENDANT ALLEGEDLY CEASED REPRESENTING PLAINTIFFS IN CLASS ACTION LAWSUITS RESULTING IN BREAKDOWN OF MULTI-MILLION DOLLAR SETTLEMENT AGREEMENT BETWEEN PLAINTIFFS AND WELL-KNOWN WATER BOTTLING COMPANY.

County
U.S. District Court, District of Maine

In this legal malpractice matter, the plaintiffs, a group of small spring water bottlers, were represented by the defendant law firm in their claims against Nestle’ doing business as Poland Springs. The plaintiffs alleged that the underlying defendant Nestle’ was not using spring water, but rather, was using well water, consequently mislabeling its product. The defendant law firm was in the process of finalizing a multi-million dollar settlement negotiation when it chose to file class actions on behalf of other similarly situated clients in five states. This second-class action litigation caused Nestle to withdraw consent to the settlement with the initial plaintiffs. The plaintiffs brought suit alleging that the defendant law firm breached its duty of loyalty to the plaintiffs by representing other similar clients and filing suit on behalf of those clients’ on the eve of settling for the plaintiffs.

The evidence revealed that in May 2002, the plaintiffs, independent spring water bottlers approached the defendant law firm and another attorney with claims that the bottling company, Poland Spring, owned by Nestle’ was using well water instead of spring water and was mislabeling its products for the general public. After investigating the plaintiff’s allegations, the defendant law firm and the other attorney entered into a Representation Agreement with the plaintiffs. The plaintiffs agreed, at the defendant’s suggestion, that their claims should be resolved through mediation. Nestle’ had no desire for publicity regarding the case and there was a mediation agreement in place that prevented either party from filing suit or going public with their respective positions until five days after the mediation had ended.

The parties engaged in several mediations sessions commencing February 28, 2003. Following a mediation session on June 10, 2003, the other attorney representing the plaintiffs was able to negotiate the essential terms of a settlement agreement between the plaintiffs and Nestle. The plaintiffs gave the other attorney full authority to enter into a settlement agreement on their behalf. Nestle’ agreed to the settlement proposed. The plaintiffs, Glenwood and Carrabassett were each to receive a ten- year contract to supply Nestle’ with up to 65 million gallons of spring water in exchange for payments to each company of $450,000 annually. Nestle agreed to make a charitable donation of $500,000 per year for five years and supply home and office customers with $2,500,000 worth of free Poland Spring Water. The plaintiffs’ goal of resourcing Poland Spring Water was accomplished to the satisfaction of the plaintiffs under this ten-year plan. It was agreed that final judicial approval of the class action settlement was not required as a condition to settlement of the competitors’ claims. Rather, it was agreed that Nestle’ and representatives of the class would have 90 days in which to make a good faith effort toward achieving judicial approval of the class action settlement.

On June 18, 2003, the defendant law firm solicited new clients and filed multiple Poland Spring-related class actions against Nestle’ with a great deal of publicity in direct contradiction to the plaintiffs’ and Nestle’s agreement to keep the matter confidential. The plaintiffs alleged that these subsequently filed suits and the publicity generated by them were as a direct result of the information provided confidentially to the defendant law firm by the plaintiffs. As a result of the institution of the multiple suits against it in multiple states, Nestle’ refused to honor its settlement agreement with the plaintiffs.

The plaintiffs brought suit against the defendant law firm maintaining that it breached its fiduciary duty to the plaintiffs as clients and used confidential information provided by the plaintiffs in initiating its subsequent class action suits against Nestle.

The defendant denied the allegations of leg malpractice.

At the conclusion of the trial, the jury found in favor of the plaintiffs and against the defendant. The jury awarded the sum of $10,800,000 in damages allocating the damages as follows: $3,900,000 to Glenwood Farms and $3,900,000 to Carrabassett Spring, and $3,000,000 to the third plaintiff, Tears of the Clouds."