A federal judge in the Western District of North Carolina denied a legal firm's attempt to collect a 25% fee from Zeek Rewards victims' payouts. The ruling, issued by Judge Graham C. Mullen, blocked Patrick Miller LLC's "Notice of Attorney's Charging Liens" that sought a quarter of the funds recovered for 739 claimants in the massive Ponzi scheme.
Patrick Miller LLC established the website "zeekrewardsclassaction.com" to solicit claims from former Zeek Rewards affiliates. The firm offered to file claims on behalf of victims and "fight with the Receiver to get you as much money as we possibly can." They advised potential clients to avoid submitting claims directly to the Zeek Rewards Receivership.
The firm's intention was to insert its own address on the submitted claims, ensuring that payout checks from the Receivership would be sent to Patrick Miller LLC first. This arrangement would allow them to deduct their anticipated 25% contingency fee before forwarding the remaining funds to the individual victims. Some 739 Zeek investors filed their claims through Patrick Miller LLC under this system.
But the Zeek Rewards Receivership refused to cooperate with this plan. Instead, the Receiver demanded that Patrick Miller LLC provide the direct contact information for all their represented clients. This would allow the claim checks to be sent immediately to the individual victims, bypassing the law firm's intended fee collection process.
Patrick Miller LLC, with plaintiff Jonny Belsome, responded by filing a "Notice of Attorney's Charging Liens" (Doc. No. 258) with the court. This legal maneuver aimed to secure their financial claim to the victims' payouts despite the Receivership's objections. The firm sought to enforce their fee agreements through the court.
Judge Mullen ultimately sustained the Receiver's Objection to Counsel's Notice of Attorney's Charging Lien and Request for Order in Aid of Distribution. The court granted the Receiver's request, simultaneously denying and striking Patrick Miller LLC's notice from the docket.
When the Receivership began distributing the first round of claim checks to victims, those represented by Patrick Miller LLC did not receive their funds. The Receivership had set aside funds for these specific claims, awaiting the resolution of the dispute with the law firm.
Following Judge Mullen's ruling, an appeal was filed by Belsome's lawyers. On January 7, 2015, the Fourth Circuit Court of Appeals denied this appeal. The appellate court found that the order being appealed was "neither a final order nor an appealable interlocutory or collateral order."
With the firm's attempts to secure a percentage of victim payouts now definitively blocked, the 739 claimants can expect to receive their full claim amounts. The court ordered Marc R. Michaud to "immediately and without further delay provide the Receiver with all actual addresses of those Claimants whose Claims currently list the address of Patrick Miller LLC or any other address not related to such claimant."