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Case 2:14-cv-07983-FSH-MAH Document 1 Filed 12/23/14 Page 1 of 139 PageID: 1
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
, RD LEGAL FUNDING PARTNERS, LP,
Plaintiff,
vs.
MEL POWELL, ESQ.; POWELL LAW FIRM, LLC; JEFFREY C. BOGERT, ESQ.; LAW OFFICE OF JEFFREY C. BOGERT, ESQ., Defendants.
Civil Action No.
VERIFIED COMPLAINT FOR INJUNCTIVE and OTHER RELIEF
Plaintiff, RD Legal Funding Partners, LP (“Plaintiff”), as and for its complaint against
defendants Mel Powell, Esq., individually (“Powell”), Powell Law Firm, LLC (“Powell Firm”),
Law Office of Jeffrey C. Bogert, Esq. (“Bogert Firm”), and Jeffrey C. Bogert, Esq., individually
(“Bogert”) (hereinafter, collectively “Defendants”), alleges as follows:
PRELIMINARY STATEMENT
1. For years, Defendants and their co-counsel received the benefit of millions of
dollars in funding from Plaintiff to support their pursuit of high stakes mass tort litigation against
big pharmaceutical companies. Before advancing this funding, Plaintiff insisted that Defendants
execute subordination agreements whereby Defendants (i) subordinated their rights to legal fees
earned from these litigations to Plaintiff’s right to be repaid, and (ii) agreed that, upon receipt,
those fees would be either paid directly to Plaintiff, or held in trust in a joint deposit account
unless and until all of their obligations have been completely satisfied. In dereliction of the
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agreements, Defendants have failed to turn over or deposit into a joint deposit account any of the
counsel fees that they have received from the litigations to date -- in fact, at least one defendant,
Powell, has stated unequivocally that he does not intend to abide by the agreements -- and the
recovery of substantially more fees is imminent. It is for these reasons that Plaintiff seeks
immediate and specific performance of the agreements and other related relief.
JURISDICTION and VENUE
2. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §
1332 because the amount in controversy exceeds $75,000 and there is complete diversity
between Plaintiff and Defendants.
3. This Court has personal jurisdiction over Defendants because they consented to
this Court’s jurisdiction in the agreements that are at issue in this action.
4. Venue is proper pursuant to 28 U.S.C. § 1391(a) because Plaintiff is
headquartered in this District, and the operative agreements between the parties giving rise to
this action provide that New Jersey is the exclusive forum and that New Jersey law shall apply to
all claims.
PARTIES
5. Plaintiff is a Delaware limited partnership with its principal offices at 45 Legion
Drive, Second Floor, Cresskill, New Jersey 07626.
6. Upon information and belief, defendant Powell Firm is a limited liability
company organized and existing under the laws of California with its principal place of business
at 269 South Beverly Drive, Suite 1156, Beverly Hills, California 90212.
7. Upon information and belief, defendant Powell is a citizen of the State of
California and the sole owner and/or member of the Powell Firm. For the purpose of this
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pleading, the Powell Firm and Powell may be collectively referred to as the “Powell
Defendants.”
8. Upon information and belief, defendant Bogert Firm is a sole proprietorship
organized and existing under the laws of California with its principal place of business at 501
Colorado Avenue, Suite 208, Santa Monica, California 90401.
9. Upon information and belief, defendant Bogert is a citizen of the State of
California and the sole owner of the Bogert Firm. For the purpose of this pleading, Bogert and
the Bogert Firm may be collectively referred to as the “Bogert Defendants.”
NON-PARTIES
10. The following are affiliated non-parties that are central to the facts giving rise to
this litigation:
(a) Daniel A. Osborn, Esq. (“Osborn”) is an attorney with his principal office at 295
Madison Avenue, 39th Floor, New York, New York 10017.
(b) Until December 2008, Osborn was a partner in the law firm of Beatie and Osborn
(“B&O”), also which was located at the Madison Avenue address.
(c) In December 2008, Osborn left B&O to form his current firm of Osborn Law, PC
(the “Osborn Firm”). Osborn is the President and/or sole and/or majority shareholder of the
Osborn Firm, which continues to operate from the Madison Avenue address. For the purpose of
this pleading, Osborn, B&O, and the Osborn Firm may be collectively referred to as “Osborn.”
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ALLEGATIONS OF FACT COMMON TO ALL COUNTS
A. Defendants and Osborn Collectively Pursue Mass Tort Claims
11. Defendants and Osborn are plaintiffs’ attorneys who specialize in class action
litigation and, more particularly, the prosecution of mass tort claims against pharmaceutical
companies.
12. Since 2005, Defendants and Osborn have worked as co-counsel in pursuing
personal injury claims involving a class of drugs generically known as bisphosphonates, which
were manufactured and sold under the brand names “Aredia” and “Zometa” by Novartis,
“Fosamax” by Merck, and “Actonel” by Procter & Gamble/Sanofi-Aventis (“P&G”). (See
Declaration of Daniel A. Osborn, Esq. (“Osborn Dec.”), ¶ 2).
13. These claims were pursued through three separate actions and/or Multi-District
Litigations (“MDLs”): (1) the In Re Actonel Products Liability Litigation, which was filed
against P&G in United States District Court for the Southern District of New York (the “Actonel
Litigation”); (2) the In Re Fosamax Products Liability Litigation, which was filed against Merck
in the United States District Court for the Middle District of Tennessee and bears MDL No. 1789
(the “Fosamax Litigation”); and (3) the In Re Aredia/Zometa Products Liability Litigation,
which was filed against Novartis in the United States District Court for the Southern District of
New York and bears MDL No. 1760 (the “Aredia/Zometa Litigation”). The Actonel Litigation,
the Fosamax Litigation, and the Aredia/Zometa Litigation are collectively referred to as the
“Litigations.” (See id.).
14. Upon information and belief, the co-counsel relationship between and among
Defendants and Osborn is such that, although all are counsel of record, the Powell Defendants
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primarily collected cases and referred them to Defendant Bogert and Osborn for handling. (See
id., ¶ 3).
15. Through this arrangement, the Powell Defendants referred hundreds of
bisphosphonate cases to the Bogert Defendants and Osborn, of which a small number were filed
in the Actonel Litigation, a larger amount were filed in the Fosamax Litigation, and several
hundred were filed in the Aredia/Zometa Litigation. (See id.).
16. The co-counsel fee arrangement between and among Defendants and Osborn has
essentially been the same since 2005, but it underwent some minor, nominal changes in
December 2008 when Osborn left B&O to start the Osborn Firm. For the sake of clarity, the co-
counsel arrangement shall be divided into two phases. The first phase, which encompasses 2005
through December 2008, shall be referred to as the “B&O Phase.” The second phase, which
encompasses the departure of Osborn from B&O in December 2008 to the present, shall be
referred to as the “Osborn Phase.”
17. The terms and conditions of the co-counsel arrangement during the B&O Phase
were governed by two separate agreements: (1) a Fee Agreement between B&O and the Powell
Firm, dated December 2005, pursuant to which the legal fees generated by the Litigations were
to be distributed sixty percent (60%) to B&O and forty percent (40%) to the Powell Firm, (see
Ex. A); and (2) a Fee Agreement between B&O and the Bogert Firm, dated December 21, 2005,
pursuant to which the legal fees generated by the Litigations were to be distributed by mutual
agreement of the parties, taking into account the relative contributions of each firm. (See Ex. B).
These fee agreements shall be collectively referred to as the “B&O Phase Fee Agreements.”
18. When Osborn left B&O to start the Osborn Firm in December 2008, the Powell
Firm terminated B&O as co-counsel by letter dated December 11, 2008. Defendants and Osborn
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then entered into two separate agreements that replaced and, in virtually all material respects,
mirrored the arrangement in, the B&O Phase Fee Agreements: (1) the Powell Firm, the Osborn
Firm, and Bogert entered a Fee Agreement, dated December 29, 2008, that became effective on
January 1, 2009, pursuant to which the legal fees generated by the Litigations were to be
distributed sixty percent (60%) to the Osborn Firm and Bogert in the aggregate and forty percent
(40%) to the Powell Firm, (see Ex. C); and (2) the Osborn Firm and Bogert entered a Fee
Agreement, dated January 24, 2009, pursuant to which their sixty percent (60%) share of the
legal fees earned under the global agreement above were split with sixty-five percent (65%) to
the Osborn Firm and thirty-five percent (35%) to Bogert. (See Ex. D). These fee agreements
shall collectively be referred to as the “Osborn Phase Fee Agreements.”
19. In other words, the only material difference between the fee sharing arrangements
for the B&O and Osborn Phases was the apportionment of the sixty percent (60%) belonging to
Osborn and Bogert as set forth below:
PHASE FEE SPLIT B&O Phase Osborn/Bogert Powell
60% (split based on contributions)
40%
Osborn Phase Osborn/Bogert Powell 60% 40%
Osborn Bogert 65% 35%
20. Both the B&O and Osborn Phase Fee Agreements provide that all settlements,
checks, and other payments shall be made payable to the Powell Defendants and deposited into
their trust account. (See Exs. A and C, ¶ 4).
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B. Defendants and Osborn Obtain Funding from Plaintiff 21. From the outset, Osborn inquired as to whether the Powell Defendants were
willing and able to contribute any monies to fund the Litigations, but the Powell Defendants
declined to do so. As a result, Osborn covered virtually all of the costs and expenses incurred in
connection with the Litigations. (See Osborn Dec., ¶ 5).
22. As the Litigations progressed, Defendants and Osborn ultimately sought funding
from Plaintiff to support their substantial litigation costs and expenses. (See id., ¶ 6).
23. While the legal funding arrangement between Plaintiff and its clients involved
various, lengthy agreements, the structure of the arrangements is straightforward. That is,
Plaintiff advances monies to its clients in exchange for an assignment and sale of the lawyer’s
right to legal fees and reimbursement of expenses in the underlying litigation. This assignment
of fees and expense receivables then serves as security for the repayment of the outstanding
obligations.
1. Funding During the B&O Phase
24. On or about October 25, 2007, Plaintiff and B&O entered into a Master
Assignment and Sale Agreement, pursuant to which Plaintiff agreed to provide funding to B&O
on an as needed basis in exchange for B&O’s sale and assignment of its right to legal fee
receivables, including attorneys’ fees and expense receivables, arising from the Litigations (the
“Legal Fees”). (See Ex. E). The assignment of the Legal Fees secured repayment of the
principal amount of the funding plus interest at the lesser of twenty-four percent (24%) per
annum or the maximum rate allowable by applicable law. (See id., ¶ 1). For the purpose of this
pleading, the Master Assignment and Sale Agreement shall be referred to as the “B&O Phase
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Assignment Agreement.” The Powell and Bogert Defendants were aware B&O was seeking
outside funding for the Litigations in or around this time. (See Osborn Dec., ¶ 7).
25. Under the B&O Phase Assignment Agreement, each advance by Plaintiff was
considered to be a separate “sale” or transaction, the terms and conditions of which were
memorialized in a separately executed schedule (the “Schedule”). The “purchase price” for
each sale is the amount of funding provided by Plaintiff to B&O. The “fee purchased” is the
amount of the Legal Fees being sold and assigned by B&O to Plaintiff. In other words, the “fee
purchased” represents the amount that B&O was obligated to pay to Plaintiff at the expiration of
each Schedule. If payment was made by certain pre-determined dates, or before the expiration of
the Schedule, the “fee purchased” would be reduced such that the obligations would be lower the
sooner they were paid.
26. The Schedule memorializing each “sale” or transaction set forth both the
“purchase price” and the “fee purchased.” (See id., ¶ 2).
27. The B&O Phase Assignment Agreement contained no restrictions or limitations
on the use of monies by B&O and/or the Osborn Firm. (See id.).
28. To secure its obligations under the B&O Phase Assignment Agreement, Plaintiff
obtained a security interest in and to the Legal Fees purchased by Plaintiff from B&O and in all
of B&O’s “present and future assets and properties, including without limitation, all accounts,
chattel, paper, equipment, instruments, investment property, documents, letter of credit rights,
personal property and general intangibles” (collectively, the “Collateral”). (Id., ¶ 5).
29. Plaintiff duly perfected its security interest in the Collateral on or about July 13,
2007, by filing with the appropriate filing office a UCC-1 Statement. (See Ex. F).
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30. Because the cases were still in their early stages during the B&O Phase, the
assignments issued during this period were significantly less than the Osborn Phase.
Specifically, there were four outstanding Schedules (A-1 through A-4) entered between the
parties reflecting a total original assignment of approximately $1,987,442.
31. From time to time, the assignments set forth in Schedules A-1 through A-4
reached the end of their respective contractual terms without the assigned Legal Fees being paid
by B&O, however. Plaintiff and B&O therefore entered into amendments to these Schedules
that affirmed B&O’s obligation and extended the due date in exchange for the accrual of interest.
As a result of these amendments and the accrual of interest through November 30, 2014, B&O’s
total obligation under the B&O Phase Assignment Agreement as of that date was approximately
$4,877,866. This obligation shall hereinafter be referred to as the “B&O Phase Obligation.”
2. Funding During the Osborn Phase
32. In order to properly account for Osborn’s transition from the B&O Phase to the
Osborn Phase and his retention of roughly ninety-five percent (95%) of the bisphosphonate cases
originally referred to B&O, Plaintiff and the Osborn Firm replaced the B&O Phase Assignment
Agreement with a new Master Assignment and Sale Agreement, dated January 29, 2009 (the
“Osborn Phase Assignment Agreement”). (See Ex. G). The Osborn Phase Assignment
Agreement mirrors the material and operative terms of the B&O Phase Assignment Agreement.
It too provides for periodic funding evidenced by Schedules and establishes a security interest in
the Legal Fees and the Collateral, which also was perfected by the filing of a UCC-1 Statement.
(See id., ¶¶ 1 and 5).
33. As previously stated, the assignments issued during the Osborn Phase were
significantly higher than those issued during the B&O Phase. These assignments were
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memorialized in Schedules A-1 through A-4, A-6, A-8 through A-13, A-15 through A-33, A-36
through A-51, and originally totaled approximately $16,319,302.
34. In addition, in late January through early February 2009, certain obligations
totaling less than $500,000 were transferred from the B&O Phase Assignment Agreement to the
Osborn Phase Assignment Agreement to account for the transition of the Litigations from B&O
to the Osborn Firm occurring at that time. These transfers occurred before the parties entered
into the subordination agreements at issue.
35. As was the case during the B&O Phase, however, the Schedules issued in the
Osborn Phase reached the end of their contractual term without payment of the assigned fees.
Thus, Plaintiff and the Osborn Firm also entered into a series of amendments to the Schedules
that affirmed the Osborn Firm’s obligation and extended the due date in exchange for the accrual
of interest. As a result of these amendments and the accrual of interest through November 30,
2014, the Osborn Firm’s total obligation under the Osborn Phase Assignment Agreement as of
that date, inclusive of the transferred B&O Obligations, was approximately $21,820,125. This
obligation shall hereinafter be referred to as the “Osborn Phase Obligation.”
36. On or about August 11, 2009, Osborn, on his own behalf, and on behalf of the
Osborn Firm, entered into an Assumption Agreement with Plaintiff, pursuant to which Osborn
and the Osborn Firm assumed the B&O Phase Obligation and agreed to perform all of B&O’s
duties and obligations under the B&O Phase Assignment Agreement. (See Ex. H).
37. The B&O Phase Assignment Agreement, the Osborn Phase Assignment
Agreement, and the Assumption Agreement each provide that they shall be governed and
construed in accordance with the laws of the State of New Jersey, and that all parties consent to
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the state or federal courts of New Jersey as the exclusive jurisdiction for any dispute arising
therefrom. (See Exs. F and G, ¶ 16; Ex. H at 11).
C. The Subordination Agreements
38. Although the total obligation under the B&O Phase and the Osborn Phase
Assignment Agreements had already grown to over $4.5 million by mid-2009, the Powell
Defendants, the Bogert Defendants, and Osborn still anticipated the need for substantial
additional funding as neither the Powell nor the Bogert Defendants demonstrated a willingness
or ability to finance the Litigations. (See Osborn Dec., ¶ 9).
39. However, given the significance of the then-outstanding balance, as well as the
continuing need to extend the payment deadlines and the absence of any imminent prospect of
repayment, Plaintiff insisted on additional security for both the B&O Phase and Osborn Phase
Obligations before advancing any more monies. Specifically, Plaintiff demanded that
Defendants execute subordination agreements in which Defendants individually and collectively
agreed to subordinate to Plaintiff their respective interests in the Legal Fees that would
eventually be due and owing to them in the Litigations.
40. There were two subordination agreements that Plaintiff presented, negotiated, and
executed with Defendants: (1) a subordination agreement with the Osborn Firm and the Powell
Firm, dated July 6, 2009 (the “Osborn/Powell Subordination Agreement”) (see Ex. I); and (2) a
subordination agreement with the Osborn Firm and Bogert, dated September 30, 2009 (the
“Osborn/Bogert Subordination Agreement”) (see Ex. J). These agreements shall be collectively
referred to as the “Subordination Agreements.”
41. The operative terms of the Subordination Agreements are materially similar in
that both Bogert and Powell “assign[ed], transfer[red] and convey[ed]” to Plaintiff their portion
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of the Legal Fees from the Litigations due and payable to them under the aforementioned fee
agreements “as additional collateral” to secure the B&O Phase and the Osborn Phase
Obligations. (Exs. I and J, ¶¶ 1.1.1). The Subordination Agreements also provide that Bogert
and Powell “subordinate[d] in favor of [Plaintiff] any right, title, interest or lien” that they may
have in their portion of the Legal Fees from the Litigations. (Id., ¶ 1.1.2).
42. However, there were two distinct differences between the Osborn/Powell and the
Osborn/Bogert Subordination Agreements with respect to the terms of subordination. First, the
Osborn/Bogert Subordination Agreement assigns and subordinates without any limitation
Bogert’s right to all Legal Fees from the Litigations in satisfaction of both the B&O Phase
Obligation and the Osborn Phase Obligation, whereas the Osborn/Powell Subordination
Agreement limits the Powell Defendants’ share of the B&O Phase Obligation to $1 million.
(Compare Exs. I and J, ¶¶ 1.1.1 and 1.1.2).
43. Specifically, Paragraphs 1.1.1 and 1.1.2 of the Osborn/Powell Subordination
Agreement respectively provide that Powell assigns and subordinates only the first $1 million in
Legal Fees from the Litigations to be held in satisfaction of the B&O Phase Obligation. (See
id.).
44. The Osborn/Powell Subordination Agreement, however, does not limit the Powell
Defendants’ share of the Osborn Phase Obligation. In fact, Paragraph 1.1.1 expressly provides
that their share of Legal Fees from the Litigations shall serve “as additional collateral securing
Beatie and Osborn and Osborn Law’s present and future obligations” to Plaintiff. (Ex. J, ¶ 1.1.1)
(emphasis added).
45. Second, Paragraph 1.1.1 of the Osborn/Powell Agreement grants Powell the right
to terminate the Agreement upon thirty days’ written notice on or after May 1, 2010. The
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Agreement makes clear, however, that Powell’s right of termination applies “solely as to future
advances to Osborn Law.” (Id.) (emphasis added).
46. Aside from these differences, both Subordination Agreements established a very
strict protocol for the collection, deposit, and distribution of Legal Fees from the Litigations to
ensure that Plaintiff’s priority and security interest remained protected. Specifically, they
provide that Defendants and Osborn shall open a joint deposit account (the “Joint Deposit
Account”) under their respective federal tax identification numbers and that, upon the receipt of
Legal Fees, Defendants and Osborn shall either (i) promptly deposit the Legal Fees into the Joint
Deposit Account or (ii) remit the Legal Fees directly to Plaintiff, until Osborn’s obligations to
Plaintiff were paid in full or otherwise satisfied. (See Exs. I and J, ¶ 2).
47. The Subordination Agreements also provide that: (a) Defendants and Osborn shall
not remove any monies from the Joint Deposit Account “for any reason until (i) the Litigation is
settled or otherwise concluded, and (ii) [Defendants and Osborn] receive written notification
from [Plaintiff] setting forth the aggregate dollar amount of the Obligations, at which time
[Defendants and Osborn] shall remit such dollar amount in good funds to [Plaintiff] within forty-
eight (48) hours of having received said notification”; and (b) “[u]pon [Plaintiff’s] request
[Defendants and Osborn] shall each promptly provide [Plaintiff] with copies of all information,
statements and reports pertaining to the Joint Deposit Account . . . .” (Id.).
48. In addition, Paragraph 1.6 of the Subordination Agreements expressly
acknowledges that Plaintiff may extend to B&O and the Osborn Firm additional funding or
“financial accommodations” without any limitations whatsoever, and makes clear that the Powell
and Bogert Defendants had a continuing obligation to assign and subordinate their right to Legal
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Fees as security for and in satisfaction of the future obligations incurred by Osborn. (Exs. I and
J, ¶ 1.6).
49. As for relief, the Subordination Agreements specifically provide that, in the event
of a breach by either Defendant or Osborn, Plaintiff may, in addition to all other remedies
available at law and equity, demand specific performance. The Subordination Agreements also
state that, in such an event, Defendants or Osborn “waive any defense based on the adequacy of
a remedy at law that might be asserted as a bar to such remedy of specific performance” and
shall be “jointly and severally liable.” (Id., ¶ 5.1).
50. Like all of the other aforementioned agreements, the Subordination Agreements
direct that they are to be governed and construed in accordance with the laws of New Jersey, and
that the parties consented to the exclusive jurisdiction of the state or federal courts of New Jersey
for any disputes arising from the Agreements. (See id., ¶ 9).
51. Lastly, the Subordination Agreements provide that counsel fees shall be
awardable to the prevailing party in any action brought to enforce their provisions. (See id., ¶ 8).
52. Following the execution of the Subordination Agreements, and given their
continuing obligations with respect to any funding issued to Osborn thereafter, Plaintiff provided
written notice to both the Bogert and Powell Defendants each time that there was an
advancement of additional funds by Plaintiff and a corresponding assignment and subordination
of Legal Fees by Defendants. (See, e.g., Ex. K).
D. The Powell Defendants Terminate the Osborn/Powell Subordination Agreement and Dispute the Monies Owed to Plaintiff Thereunder
53. Following the execution of the Osborn/Powell Subordination Agreement, the
Powell Defendants took specific action to avoid and/or minimize their obligations thereunder.
First, in or about May 2010, the Powell Defendants instructed Osborn to return approximately
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thirty (30) bisphosphonate cases that they had originally referred to Osborn, but which Osborn
had not yet filed, so that the Powell Defendants could refer them to another law firm involved in
the Litigations. In so doing, the Powell Defendants made clear to Osborn that their purpose in
redirecting those cases, as well as any future cases, was to avoid making them subject to the
Osborn/Powell Subordination Agreement. (See Osborn Dec., ¶ 11).
54. In addition, by letter dated May 7, 2010, the Powell Defendants terminated the
Osborn/Powell Subordination Agreement effective thirty (30) days thereafter. In that
termination letter, the Powell Defendants took the position that the letter was merely a formality
because the Osborn/Powell Subordination Agreement capped his obligation in the aggregate at
$2 million: “Technically this termination takes effect thirty days from today, but as Osborn Law
has already received at least Two Million Dollars ($2,000,000) from RD Legal since January 1,
2009, the ceiling has already been reached and my terminating the agreement is just a mere
formality.” (Ex. L). Contrary to the Powell Defendants’ assertion, there is no reference to a $2
million ceiling in the Osborn/Powell Subordination Agreement.
55. By late June 2010, the Powell Defendants abandoned their position as to a $2
million aggregate cap, conceding instead that they could be liable to Plaintiff for more than $3.2
million. (See Ex. M). According to his letter, Powell arrived at this amount by adding the
amount he believed was provided to Osborn during the “Subordination Agreement” together
with the “agreed-upon $1,000,000.00 (one million dollars) of funding of the former law firm
Beatie & Osborn by RD Legal.” (Id.).
56. Even then, however, the position taken by the Powell Defendants did not comport
with the plain terms of the Osborn/Powell Subordination Agreement. The Agreement does not
provide for any aggregate limit nor does it in any way limit Plaintiff’s right to receive the Legal
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Fees due to the Powell Defendants to satisfy the Osborn Phase Obligations. Rather, it only limits
the Powell Defendants’ share of the B&O Phase Obligations to $1 million and provides that they
are not liable for funding made to Osborn after June 7, 2010, the effective date of termination of
the Osborn/Powell Subordination Agreement.
57. At best, the true and full effect of the termination letter sent pursuant to Paragraph
1.1.1 of the Osborn/Powell Subordination Agreement is that it ensured that the Powell
Defendants would not bear any responsibility or obligation with respect to “future advances”
made by Plaintiff to the Osborn Defendants after the effective date of termination.
58. Thus, by the date of termination of the Osborn/Powell Subordination Agreement,
the Powell Defendants’ obligation to Plaintiff neared $6 million. Specifically, the Powell
Defendants’ $1 million share of the B&O Phase Obligations, plus the $4,859,757 that accrued as
a result of assignments issued from the beginning of the Osborn Phase through the effective date
of termination of the Osborn/Powell Subordination Agreement, brought the Powell Defendants’
total obligation to $5,859,757.
59. And given that the Osborn/Bogert Subordination Agreement contained no
limitations, the Bogert Defendants and Osborn are jointly and severally liable for both the B&O
Phase Obligations and the Osborn Phase Obligations, which total $26,689,011 as of November
30, 2014 and continue to accrue interest.
60. In the wake of the termination letter, the Powell Defendants continued to dispute
their obligations under the Osborn/Powell Subordination Agreement. For example, by e-mail
dated July 2, 2010, the Powell Defendants made clear that, if the parties could not come to an
agreement as to his obligation, they would undertake efforts to ensure that Plaintiff was never
repaid, stating: “I expect that we’ll have a firm total established by the end of next week, or I
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expect that I will begin the process of referring the cases to someone else, taking whatever
smaller percentage we can get, and no one will likely ever see any money on any of these cases.”
(Ex. N).
E. Defendants and Osborn Receive Legal Fees from the Litigations, but Defendants Fail to Satisfy their Obligations to Establish a Joint Deposit Account, Provide an Accounting of the Fees Received, or Make Direct Payment to Plaintiff
61. Upon information and belief, the Actonel Litigation has been settled, and Legal
Fees have been disbursed in approximately seventy-five percent (75%) of the Actonel cases
brought by Defendants and Osborn with the remaining approximately twenty-five percent (25%)
still outstanding. (See Osborn Dec., ¶ 12).
62. The Powell and Bogert Defendants agreed to pay the Florida firm of Aylstock,
Witkin, Kreis & Overholtz (“Aylstock”) thirty percent (30%) of the Legal Fees received from the
Actonel cases to negotiate and effectuate the settlement. (See id.).
63. Because the Powell Defendants, the Bogert Defendants, and Osborn had involved
the Aylstock law firm, the payment of Legal Fees received to date first went to Aylstock, then to
the Powell Defendants, then to the Bogert Defendants, and then to Osborn. At each stage,
Aylstock, the Powell Defendants, and the Bogert Defendants kept their share of the Legal Fees.
(See id.).
64. Upon information and belief, the total fees received to date from the Actonel
Litigation are approximately $593,200, with the Aylstock firm receiving approximately
$197,535, the Powell Defendants receiving approximately $158,265, and the Bogert Defendants
and Osborn together receiving approximately $237,398, of which the Bogert Defendants
received approximately $59,349 and Osborn received $178,048. All fees received from the
Actonel cases by Aylstock, Defendants, and Osborn rightfully should have been remitted to
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Plaintiff pursuant to the Subordination Agreements and the agreements between Plaintiff and
Osborn. (See id.).
65. Upon information and belief, since that time, Osborn has transferred to Plaintiff
the funds he received thus far as required by the Assignment Agreements. (See id.).
66. Prior to receiving any of the Legal Fees from the Actonel Litigation, Osborn
spoke with the Powell and Bogert Defendants regarding the Subordination Agreements. At that
time, Powell advised Osborn that he did not believe that he was required to turn over any of the
Actonel fees. Osborn also later urged the Powell Defendants to establish the Joint Deposit
Account required by the Subordination Agreements. (See id., ¶ 13). The Powell Defendants,
however, have refused to turn over to Plaintiff their share of the Actonel Legal Fees or place
those Fees in a Joint Deposit Account.
67. Instead, through a letter from counsel dated October 17, 2014, the Powell
Defendants made clear their intent to now challenge the validity of the Osborn/Powell
Subordination Agreement. (See Ex. O).
68. As of this date, a Joint Deposit Account has not been established nor have the
Powell or Bogert Defendants paid any of their Legal Fees from the Actonel Litigation to
Plaintiff. It is anticipated that the Powell Defendants will be receiving in excess of $50,000 and
the Bogert Defendants will be receiving in excess of $20,000 from the settlement of the
remaining Actonel cases. (See Osborn Dec., ¶ 14).
69. Upon information and belief, the Fosamax Litigation has also been settled for
more than $27 million, but no monies have been paid. It is anticipated that the settlement monies
and Legal Fees from the Fosamax Litigation will be paid out in the first quarter of 2015. (See
id., ¶ 15).
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FIRST COUNT (Breach of Contract)
70. Plaintiff repeats and realleges each and every allegation in the foregoing
paragraphs as if fully set forth herein.
71. Under the Subordination Agreements, Defendants (i) “assign[ed], transferr[ed],
and convey[ed]” to Plaintiff their portion of the Legal Fees from the Litigations as “additional
collateral” to secure the B&O Phase and Osborn Phase Obligations (inclusive of those
obligations transferred from B&O); (ii) “subordinate[d] in favor of [Plaintiff] any right, title,
interest, or lien” that they may have in their portion of Legal Fees due and payable from the
Litigations; (iii) agreed to establish a Joint Deposit Account for the deposit of all Legal Fees
earned from the Litigations and to provide Plaintiff with an accounting for the Joint Deposit
Account; and (iv) agreed that, upon receipt of any Legal Fees, Defendants would either deposit
the Legal Fees into the Joint Deposit Account where such fees would remain unless and until
Plaintiff issued written authorization for their release, or pay all Legal Fees directly to Plaintiff.
72. The Subordination Agreements also expressly provide that, in the event of a
breach by any Defendant, Plaintiff is entitled to an award of specific performance and
Defendants “waive any defense based on the adequacy of a remedy at law that might be asserted
as a bar to such remedy of specific performance . . . .”
73. Defendants breached these agreements by, among other things, failing to establish
or provide an accounting for a Joint Deposit Account, and failing to deposit into the Joint
Deposit Account and/or pay directly to Plaintiff all Legal Fees received to date, including the
more than $200,000 collectively received to date by Defendants in the Actonel Litigation.
74. Defendants also breached the Subordination Agreements by unilaterally sharing
with Aylstock Legal Fees that rightfully belonged to Plaintiff.
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75. These breaches were intentional and willful.
76. By virtue of Defendants’ breaches, Plaintiffs have suffered, and will continue to
suffer, significant and irreparable damages.
WHEREFORE, Plaintiff prays for judgment against Defendants, jointly and severally,
as follows:
(a) Directing Defendants to immediately pay to Plaintiff all monies due and owing
under the Subordination Agreements;
(b) Mandating specific performance of the Subordination Agreements between the
parties and striking any defenses to such relief;
(c) Awarding Plaintiff actual, compensatory, and consequential damages in an
amount to be determined at trial, together with interest thereon;
(d) Awarding Plaintiff punitive damages;
(e) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this
action; and
(f) Granting Plaintiff such other and further relief that this Court may deem just and
proper.
SECOND COUNT (Conversion)
77. Plaintiff repeats and realleges each and every allegation of the foregoing
paragraphs as if fully set forth herein.
78. Pursuant to the Subordination Agreements, Plaintiff has an immediate right to be
paid the Legal Fees received by Defendants from the Litigations or have those Legal Fees held in
trust solely for Plaintiff’s benefit.
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79. Upon information and belief, Defendants wrongfully interfered with Plaintiff’s
right to be paid the Legal Fees and to have those Legal Fees held in trust for Plaintiff’s benefit by
exercising dominion and control over the Legal Fees received to date, including the Legal Fees
received from the Actonel Litigation, in a manner inconsistent with that right and, more
particularly, by failing to deposit the more than $200,000 of Legal Fees collectively received
from the Actonel Litigation into a Joint Deposit Account or pay them directly to Plaintiff, and by
sharing with Aylstock nearly $200,000 of Legal Fees from the Actonel Litigation that rightfully
belong to Plaintiff.
WHEREFORE, Plaintiff prays for judgment against Defendants, jointly and severally,
as follows:
(a) Directing Defendants to immediately pay to Plaintiff all monies due and owing
under the Subordination Agreements;
(b) Mandating specific performance of the Subordination Agreements between the
parties and striking any defenses to such relief;
(c) Awarding Plaintiff actual, compensatory, and consequential damages in an
amount to be determined at trial, together with interest thereon;
(d) Awarding Plaintiff punitive damages;
(e) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this
action; and
(f) Granting Plaintiffs such other and further relief that this Court may deem just and
proper.
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THIRD COUNT (Breach of Implied Covenant of Good Faith and Fair Dealing)
80. Plaintiff repeats and realleges each and every allegation in the foregoing
paragraphs as if fully set forth herein.
81. The Subordination Agreements between the parties contain the implied covenant
of good faith and fair dealing.
82. Defendants breached the implied covenant of good faith and fair dealing by,
among other things, (i) failing to establish a Joint Deposit Account, (ii) failing to deposit into the
Joint Deposit Account or pay directly to Plaintiff all Legal Fees received to date, including the
more than $200,000 collectively received from the Actonel Litigation, and (iii) sharing with
Aylstock the Legal Fees received in the Actonel Litigation that rightfully belong to Plaintiff
without Plaintiff’s knowledge or consent.
83. The Powell Defendants further breached the implied covenant of good faith and
fair dealing by taking specific action to avoid their obligations under the Osborn/Powell
Subordination Agreement and intentionally depriving Plaintiff of the benefit of its bargain.
Among other things, the Powell Defendants (i) admittedly re-directed cases that were originally
referred to Osborn to other attorneys to avoid having them subject to the Osborn/Powell
Subordination Agreement, (ii) took the unsupportable position that the Osborn/Powell
Subordination Agreement contains an aggregate limit of $2 million, (iii) threatened to sabotage
Plaintiff’s right of repayment by referring future cases to other attorneys “so that no one will
likely ever see any money on any of these cases,” and (iv) after receiving the benefit of more
than $12 million in funding and holding in hand significant Legal Fees from the Actonel
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Litigation, threatened to challenge the validity of the Osborn/Powell Subordination Agreement in
its entirety.
84. By virtue of these breaches of the implied covenant of good faith and fair dealing,
Plaintiff has already suffered, and will continue to suffer, significant and irreparable damages.
Among other things, Plaintiff has already been deprived of (i) more than $200,000 in Legal Fees
collectively received by Defendants in the Actonel Litigation, (ii) nearly $200,000 in Legal Fees
unilaterally paid to Aylstock without Plaintiff’s knowledge or consent, (iii) roughly thirty (30)
bisphosphonate cases that were originally referred to Osborn and would have served as
additional collateral for Plaintiff’s right of repayment under the Subordination Agreements, and
(iv) the protections afforded by the Subordination Agreements with respect to the collection and
preservation of Legal Fees received in the Litigations, including, but not limited to, the
establishment of a Joint Deposit Account.
WHEREFORE, Plaintiff prays for judgment against Defendants, jointly and severally,
as follows:
(a) Directing Defendants to immediately pay to Plaintiff all monies due and owing
under the Subordination Agreements;
(b) Mandating specific performance of the Subordination Agreements between the
parties and striking any defenses to such relief;
(c) Awarding Plaintiff actual, compensatory, and consequential damages in an
amount to be determined at trial, together with interest thereon;
(d) Awarding Plaintiff punitive damages;
(e) Awarding Plaintiff their attorneys’ fees, costs, and disbursements incurred in this
action; and
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(f) Granting Plaintiff such other and further relief that this Court may deem just and
proper.
FOURTH COUNT (Breach of Fiduciary Duty)
85. Plaintiff repeats and realleges each and every allegation in the foregoing
paragraphs as if fully set forth herein.
86. Defendants owed Plaintiff a fiduciary duty under the terms and conditions of the
Subordination Agreements, including the duties of care and loyalty.
87. Upon information and belief, Defendants breached their fiduciary duty by, among
other things, receiving Legal Fees subject to the Subordination Agreements, including more than
$200,000 from the Actonel Litigation, and failing to pay those fees directly to Plaintiff or deposit
them into the Joint Deposit Account and/or otherwise hold them in safekeeping and trust for
Plaintiff. Defendants also breached their fiduciary duty by sharing with Aylstock Legal nearly
$200,000 in Legal Fees that rightfully belong to Plaintiff without Plaintiff’s knowledge or
consent.
88. The Powell Defendants have also breached their fiduciary duties by, among other
things, (i) reclaiming and redirecting to other firms bisphosphonate cases originally referred to
Osborn so as to avoid making them subject to the Osborn/Powell Subordination Agreement, and
(ii) after receiving the benefit of more than $12 million in funding from Plaintiff and collecting
significant fees from the Actonel Litigation, threatening to challenge the validity of the
Osborn/Powell Subordination Agreement in its entirety.
89. As a direct and proximate result of these breaches, Plaintiff has suffered, and will
continue to suffer, significant and irreparable harm.
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WHEREFORE, Plaintiff prays for judgment against Defendants, jointly and severally,
as follows:
(a) Directing Defendants to immediately pay to Plaintiff all monies due and owing
under the Subordination Agreements;
(b) Mandating specific performance of the Subordination Agreements between the
parties and striking any defenses to such relief;
(c) Awarding Plaintiff actual, compensatory, and consequential damages in an
amount to be determined at trial, together with interest thereon;
(d) Awarding Plaintiff punitive damages;
(e) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this
action; and
(f) Granting Plaintiff such other and further relief that this Court may deem just and
proper.
FIFTH COUNT (Unjust Enrichment)
90. Plaintiff repeats and realleges each and every allegation of the foregoing
paragraphs as if fully set forth herein.
91. The Subordination Agreements are valid and enforceable contracts.
92. Nevertheless, by letter dated October 17, 2014, the Powell Defendants threatened
to challenge the validity of the Subordination Agreements in their entirety and have them
declared void.
93. Given this threatened challenge, and without waiving any claim as to the validity
of the Subordination Agreements and/or any claims arising thereunder, Plaintiff alternatively
alleges that Defendants have been unjustly enriched by receiving the benefit of more than $12
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million in funding from Plaintiff that they in turn used to recover and collect Legal Fees from the
Litigations, including more than $200,000 from the Actonel Litigation.
94. By virtue of retaining the Legal Fees at issue in the Subordination Agreements,
Defendants will be unjustly enriched beyond their rights under the Subordination Agreements.
95. Permitting Defendants to retain the Legal Fees received or to be received by them
from the Litigations in the future would unfairly give Defendants the benefit of Plaintiff’s
property.
96. Equity and good conscience require that the Court establish an account to hold
any Legal Fees that Defendants receive from the Litigations or pay Plaintiff all of the Legal Fees
due and owing under the Subordination Agreements and other benefits to which Plaintiff is
entitled.
WHEREFORE, Plaintiff prays for judgment against Defendants, jointly and severally,
as follows:
(a) Directing Defendants to immediately pay to Plaintiff all Legal Fees they have
received from the Litigations;
(b) Establishing a Joint Deposit Account in accordance with the terms of the
Subordination Agreements and directing that, upon the receipt of Legal Fees, Defendants shall
either (i) promptly deposit the Legal Fees into the Joint Deposit Account, or (ii) remit the Legal
Fees directly to Plaintiff, until Osborn’s obligations to Plaintiff were paid in full or otherwise
satisfied;
(c) Awarding Plaintiff actual, compensatory, and consequential damages in an
amount to be determined at trial, together with interest thereon;
(d) Awarding Plaintiff punitive damages;
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(e) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this
action; and
(f) Granting Plaintiff such other and further relief that this Court may deem just and
proper
SIXTH COUNT (Accounting)
97. Plaintiff repeats and realleges each and every allegation in the foregoing
paragraphs as if fully set forth herein.
98. The Subordination Agreements are premised upon the status of the Litigations
and, more particularly, the Legal Fees received and/or expected to be received by Defendants in
the Litigations.
99. Furthermore, the Subordination Agreements expressly provide for the
establishment of a Joint Deposit Account and a full accounting of all Legal Fees received and/or
expected to be received by Defendants.
100. Despite repeated demands, Defendants have never provided an accounting as to
the status of the Litigations or the Legal Fees received and/or expected to be received.
101. Equity, fairness, and the express terms and conditions of the Subordination
Agreements between the parties demand an immediate and full accounting.
WHEREFORE, Plaintiff prays for judgment against Defendants in the form of a court
order:
(a) Directing Defendants to provide Plaintiff with a full accounting as to the status of
the Litigations, and any and all Legal Fees received and expected to be received from the
Litigations, or alternatively, an independent fiscal agent shall be appointed, at Defendants’ sole
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expense, to investigate and provide a full accounting as to the status of the Litigations and any
and all Legal Fees received and to be received from the Litigations;
(b) Directing immediate and expedited discovery to ascertain all information relevant
to the Litigations and the payment, or anticipated payment, of Legal Fees from the Litigations;
(c) Awarding Plaintiff its attorneys’ fees, costs, and disbursements incurred in this
action; and
(d) Granting Plaintiff such other and further relief that this Court may deem just and
proper.
SEVENTH COUNT (Preliminary Injunction)
102. Plaintiff repeats and realleges each and every allegation in the foregoing
paragraphs as if fully set forth herein.
103. Through the Subordination Agreements, Defendants (i) “assign[ed], transferr[ed],
and convey[ed]” to Plaintiff their portion of the Legal Fees from the Litigations as “additional
collateral” to secure the B&O Phase and Osborn Phase Obligations (inclusive of those
obligations transferred from B&O); (ii) “subordinate[d] in favor of [Plaintiff] any right, title,
interest, or lien” that they may have in their portion of Legal Fees from the Litigations; (iii)
agreed to establish a Joint Deposit Account for the deposit of all Legal Fees from the Litigations
and to provide Plaintiff with an accounting for the Joint Deposit Account; and (iv) agreed that,
upon receipt of any Legal Fees, Defendants would either deposit the Legal Fees into the Joint
Deposit Account where such fees would remain unless and until Plaintiff issued written
authorization for their release, or pay all Legal Fees directly to Plaintiff until the B&O Phase and
Osborn Phase Obligations have been satisfied.
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104. Upon information and belief, the Actonel Litigation has been settled (in whole or
in part) and Defendants have collectively received more than $200,000 in Legal Fees resulting
therefrom. Defendants have also shared with Aylstock nearly $200,000 in Legal Fees from the
Actonel Litigation that belong to Plaintiff.
105. As of this date, Defendants have failed to establish a Joint Deposit Account or
deposit the Legal Fees received from the Actonel Litigation into the Joint Deposit Account.
106. Defendants have also failed to pay directly to Plaintiff any and/or all Legal Fees
received from the Actonel Litigation, including those fees shared with Aylstock without
Plaintiff’s knowledge or consent.
107. Upon information and belief, the Fosamax Litigation has been settled and Legal
Fees earned by Defendants are expected to be disbursed in early 2015.
108. By virtue of Defendants’ failure to abide by these agreements and pay to Plaintiff
and/or deposit into the Joint Deposit Account all Legal Fees received, Defendants have
wrongfully exercised dominion and control over property to which Plaintiff is clearly entitled
and intentionally deprived Plaintiff of its legal and/or contractual rights, thereby inflicting upon
Plaintiff irreparable harm.
109. Absent a preliminary injunction restraining Defendants from taking, transferring,
or otherwise dissipating the Legal Fees received, and mandating that Defendants immediately (i)
provide Plaintiff with a full accounting of all Legal Fees received and/or to be received from the
Litigations, (ii) establish a Joint Deposit Account, and (iii) deposit into the Joint Deposit Account
and/or pay directly to Plaintiff all Legal Fees received, Plaintiff will continue to suffer
irreparable harm.
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WHEREFORE, Plaintiff prays for judgment against Defendants in the form of a court
order granting a preliminary and permanent injunction:
(a) Directing Defendants to immediately pay to Plaintiff all monies due and owing
under the Subordination Agreements;
(b) Restraining and enjoining Defendants from transferring, disbursing, secreting,
dissipating, and/or otherwise disposing any and all Legal Fees that Defendants have received
and/or will receive from the Litigations;
(c) Mandating specific performance of the Subordination Agreements and, more
specifically that: (i) Defendants shall immediately establish the Joint Deposit Account for the
purpose of depositing all Legal Fees received and/or to be received from the Litigations pending
the disposition of this matter or, alternatively, an escrow account (the “Escrow Account”) to be
held in the name of, and monitored by, an independent fiscal agent, at Defendants’ sole expense,
for the purpose of depositing all Legal Fees received and/or to be received from the Litigations
pending the disposition of this matter; (ii) Defendants shall immediately provide Plaintiff with a
full accounting as to the status of the Litigations, and any and all Legal Fees received and
expected to be received from the Litigations, or alternatively, an independent fiscal agent shall be
appointed, at Defendants’ sole expense, to investigate and provide a full accounting as to the
status of the Litigations and any and all Legal Fees received and to be received from the
Litigations; and (iii) Defendants shall immediately pay to Plaintiff or deposit into the Joint
Deposit Account or the Escrow Account all Legal Fees received from the Litigations, including
those Legal Fees received from the Actonel Litigation;
(d) Directing immediate and expedited discovery to ascertain all information relevant
to the Litigations and the payment, or anticipated payment, of Legal Fees from the Litigations;
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EXHIBIT A
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EXHIBIT B
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EXHIBIT C
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EXHIBIT D
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EXHIBIT E
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EXHIBIT F
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EXHIBIT G
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EXHIBIT H
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EXHIBIT I
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EXHIBIT K
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