“That’s good,” Clay said, somewhat callously. A longer list meant more clients for him, more damages to be paid by the Hanna company. Clay represented almost 90 percent of the class, with a few scattered lawyers hanging around the fringes. His Team Hanna had done a superb job of convincing the homeowners to stick with his firm. They had been assured that they would get more money because Mr. Carter was an expert at mass litigation. Every potential client had received a professionally done packet touting the exploits of the newest King of Torts. It was shameless advertising and solicitation, but those were simply the rules of the game now.
During the last meeting, Clay had reduced his demands from $25,000 per claim to $22,500, a settlement that would net him fees in the neighborhood of $7.5 million. The Hanna company had countered with $17,000, which would stretch its borrowing capacity to the breaking point.
At $17,000 per home, Mr. JCC would earn about $4.8 million in fees, if he clung to his 30 percent contingency. If, however, he cut his share to a more reasonable 20 percent, each of his clients would net $13,600. Such a reduction would reduce his fees by roughly $1.5 million. Marcus Hanna had found a reputable contractor who would agree to repair every home for $13,500.
It had become apparent during the last meeting that the issue of attorneys’ fees was at least as important as the issue of compensating the homeowners. However, since the last meeting there had been several stories about Mr. JCC in the press, none of them good. A reduction in fees was not something his firm was prepared to discuss.
“Any movement on your side?” Clay asked, rather bluntly.
Instead of just saying “No,” Joel went through a short exercise in discussing the steps the company had taken to reevaluate its financial situation, its insurance coverage, and its ability to borrow at least $8 million to add to a compensation pool. But, sadly, nothing had really changed. The business was on the downslope of a nasty cycle. Orders were flat. New home construction was even flatter, at least in their market.
If things looked grim for the Hanna Portland Cement Company, they were certainly no better on the other side of the table. Clay had abruptly stopped all advertising for new Maxatil clients, a move that greatly relieved the rest of his firm. Rex Crittle was working overtime to cut costs, though the culture of JCC had yet to adapt to such radical notions. He had actually broached the subject of layoffs, and in doing so provoked a nasty response from his boss. No significant fees were being generated. The Skinny Ben fiasco had cost them millions, instead of generating another fortune. And with ex-Dyloft clients finding their way to Helen Warshaw, the firm was reeling.
“So there’s no movement?” Clay asked when Joel finished.
“No. Seventeen thousand is a stretch for us. Any movement on your side?”
“Twenty-two thousand five hundred is a fair settlement,” Clay said without flinching or blinking. “If you’re not moving, then neither are we.” His voice was hard as steel. His staff was impressed by his toughness, but also anxious for some compromise. But Clay was thinking of Patton French in New York, in the room full of big shots from Ackerman Labs, barking and bullying, very much in control. He was convinced that if he kept pushing, Hanna would buckle under.
The only vocal doubter on Clay’s side was a young lawyer named Ed Wyatt, the head of Team Hanna. Before the meeting, he had explained to Clay that, in his opinion, Hanna would benefit greatly from protection and reorganization under Chapter 11 of the bankruptcy code. Any settlement with the homeowners would be delayed until a trustee could sort out their claims and decide what compensation was reasonable. Wyatt thought the plaintiffs would be lucky to get $10,000 through Chapter 11. The company had not threatened bankruptcy, a normal ploy in these situations. Clay had studied Hanna’s books and felt that it had too many assets and too much pride to consider such a drastic move. He rolled the dice. The firm needed all the fees it could squeeze.
Marcus Hanna abruptly said, “Well, then it’s time to go.” He and his first cousin threw their papers together and stormed out of the conference room. Clay tried a dramatic exit too, as if to show his troops that nothing fazed him.
Two hours later, in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania, the Hanna Portland Cement Company filed a Chapter 11 petition, seeking protection from its creditors, the largest of whom were those collected in a class action filed by J. Clay Carter II of Washington, D.C.
Apparently, one of the Hannas understood the importance of leaks as well. The Baltimore Press ran a long story about the bankruptcy and the immediate reaction by the homeowners. Its details were deadly accurate and evidence that someone very close to the settlement negotiations was whispering to the reporter. The company had offered $17,000 per plaintiff; a liberal estimate to repair each home was $15,000. The lawsuit could’ve have been fairly settled but for the issue of attorneys’ fees. Hanna admitted liability from the very beginning. It had been willing to borrow heavily to correct its mistakes. And so on.
The plaintiffs were extremely unhappy. The reporter ventured out into the suburbs and found an impromptu meeting in a garage. He was given a tour of a few of the homes to survey the damages. He collected numerous comments: “We should’ve dealt directly with Hanna.”
“The company was out here before that lawyer got involved.”
“A bricklayer I talked to said he could take off the old and put on the new for eleven thousand dollars. And we turned down seventeen? I just don’t understand it.”
“I never met that lawyer.”
“I didn’t realize I was in the class action until after it was filed.”
“We didn’t want the company to go bankrupt.”
“No, they were nice guys. They were trying to help us.”
“Can we sue the lawyer?”
“I tried calling him, but the lines are busy.”
The reporter was then obliged to provide some background on Clay Carter, and of course he began with the Dyloft fees. Things got worse from there. Three photographs helped tell the story; the first was a homeowner pointing to her crumbling bricks; the second was the group meeting in the garage; and the third was Clay in a tuxedo and Ridley in a beautiful dress as they posed in the White House before the state dinner. She was stunning; he was quite handsome himself, though taken in context, it was difficult to appreciate what an attractive couple they were. A real cheap shot.
“Mr. Carter, seen above at a White House dinner, could not be reached for comment.”
Damned right they’re not reaching me, Clay thought.
And so began another day at the offices of JCC. Phones ringing nonstop as irate clients wanted someone to yell at. A security guard in the lobby just in case. Associates gossiping in small groups about the survival of the place. Second-guessing by every employee. The boss locked in his office. No real cases to work on because all the firm had now was a trainload of Maxatil files, and there was little do with them because Goffman wasn’t returning calls either.
Fun and games had been happening all over the District at Clay’s expense, though he didn’t know it until the story ran in the Press. It had started with the Dyloft stories in The Wall Street Journal; a few faxes here and there around the city to make sure that those who knew Clay, either from college, law school, his father, or at OPD, got the current news. It picked up steam when American Attorney ranked him number eight in earnings—more faxes, more e-mails, a few jokes added in for spice. It became even more popular when Helen Warshaw filed her heinous lawsuit. Some lawyer somewhere in the city, one with too much time on his hands, titled it “The King of Shorts,” gave it a rough and quick format, and started the faxes. Someone with a slight artistic bent added a crude cartoon of Clay naked with his boxer shorts around his ankles, looking quite perplexed. Any news about him would provoke another edition. The publisher, or publishers, would pick stories off the Internet, print them in a newsletter format, and share them. The criminal investigation was big news. There was the photo from the White House, some gossip about his airplane, one story about his father.