JENSEN BAIRD GARDNER AND HENRY v. WIRTH et al
Filing
88
FINDINGS OF FACT AND CONCLUSIONS OF LAW By MAGISTRATE JUDGE JOHN H. RICH III. (nrg)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JERZY WIRTH,
Cross-claim Plaintiff,
v.
STEPHEN WADE, et al.,
Cross-claim Defendants
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No. 2:12-cv-296-JHR
FINDINGS OF FACT AND CONCLUSIONS OF LAW1
The remaining parties in this interpleader action, Jerzy Wirth and Stephen Wade and his
law firm, Skelton Taintor & Abbott, each claim the entire amount of $205,233.27 that has been
deposited with the court.
Trial was held before me on August 23, 2013, and the parties
submitted proposed findings of fact and conclusions of law simultaneously on September 20,
2013. ECF Nos. 86 & 87. A joint stipulation of facts was filed on August 9, 2013, in advance of
trial. ECF No. 78. I now make the following findings of fact and conclusions of law.
I. Findings of Fact
1. Stephen B. Wade, Esq., and the law firm of Skelton Taintor & Abbott represented Geoff
Hasler and MyFreeMedicine.com, on a contingency fee basis, in a lawsuit seeking damages of
up to $25,000,000.00, involving claims under civil RICO and breach of contract, filed in this
court on October 23, 2008, and assigned the docket number 2:08-cv-362-JAW (the “MFM
case”). Joint Stipulation of Facts (“Joint Stipulation”) (ECF No. 78) ¶ 1.
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Pursuant to 28 U.S.C. § 636(c), the parties have consented to have me conduct all proceedings in this case,
including trial, and to order the entry of judgment. ECF No. 64.
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2. The written fee agreement between Geoff Hasler and Skelton Taintor & Abbott, which was
signed on or around January 30, 2008, included the following language:
Skelton, Taintor & Abbott will be entitled to part of proceeds of any
settlement o[f] action to pay the lawyer’s fees and expenses and has an
attorney’s lien to enforce this agreement.
Exhibit 64 ¶ 3.
3.
Geoff Hasler sought funding in connection with this litigation and contracted with
Airborn/Jerzy Wirth for such funding. Joint Stipulation ¶ 2.
4.
Jerzy Wirth and Airborn LLC recorded in Maine, on January 16, 2013, a UCC-1 filing
against the $205,233.27 deposited in this court in this interpleader action based on a promissory
note and agreement dated August 28, 2009. Id. ¶ 3.
5. During the term of Stephen B. Wade’s representation of Geoff Hasler, Jerzy Wirth advanced
Geoff Hasler approximately $93,000.00. Id. ¶ 4.
6. With the permission of Geoff Hasler, Stephen B. Wade participated in a telephone conference
for approximately 45 minutes with Jerzy Wirth and Mr. Wirth’s associate, Joseph Funk, before
Jerzy Wirth and Geoff Hasler entered into the funding agreement. Id. ¶ 6.
7. On or about August 13, 2010, in the MFM case, this court dismissed the RICO counts,
leaving active only the breach of contract claim. Id. ¶ 7.
8. In January 2011, Stephen Wade determined that the Maine Rules of Professional Conduct
required that he and his law firm withdraw from representing Geoff Hasler and
MyFreeMedicine.com. Testimony of Stephen B. Wade. On January 25, 2011, Stephen B. Wade
and Skelton Taintor & Abbott filed an ex parte motion to withdraw as counsel for Geoff Hasler
and MyFreeMedicine.com in the MFM case, which was granted on January 26, 2011, following
a telephone conference, Joint Stipulation ¶ 8, and over Geoff Hasler’s objection. Testimony of
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Stephen B. Wade. Jerzy Wirth did not ask Geoff Hasler to waive the attorney-client privilege to
allow Wirth to discuss with Stephen Wade the reasons for his withdrawal. Testimony of Jerzy
Wirth.
9. Geoff Hasler and Stephen Wade entered into an agreement, confirmed by letter dated January
14, 2011, that stated, in relevant part, that new prospective counsel Joseph Groff would agree to
honor the attorney fee lien of Stephen Wade and his law firm, in an amount based on the fair
value of the services that they had already provided. Exhibit 32.
10. Geoff Hasler and MyFreeMedicine.com then retained Joseph Groff, Esq., of Jensen Baird
Gardner & Henry. Joint Stipulation ¶ 9.
11. Joseph Groff, Esq., began representing Geoff Hasler and MyFreeMedicine.com, on an
hourly basis, in January of 2011, and entered an appearance in the MFM case on February 23,
2011. Id. ¶¶ 10-11. Joseph Groff signed an “Acknowledgment and Agreement” related to the
funding agreement between Geoff Hasler and Jerzy Wirth which included Joseph Groff’s
agreement to “pay Airborn all due monies from any settlement or verdict of the above-referenced
Case according to the terms of this same Agreement, subject to a lien by Stephen P. [sic] Wade,
prior Attorney for this case representing Geoff H. Hasler and MyFreeMedicine.com LLC.”
Exhibit 12.
12. Over a period of approximately one year, Jerzy Wirth paid invoices issued by Joseph Groff
and his law firm in the amount of approximately $157,000.00. Joint Stipulations ¶ 12.
13. Geoff Hasler and Jerzy Wirth maintained their funding agreement through amendments. Id.
The promissory note between Jerzy Wirth and Geoff Hasler provided that the loan would be
repaid “after first paying a previously agreed upon 35% (Thirty Five per cent) of said settlement
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to Plaintiff’s Attorney, together with any other contracted miscellaneous fees to the
Attorney(s)[.]” Exhibit 1 at 1.
14. An amendment to the funding agreement dated November 13, 2010, states, in relevant part:
“[I]f the Plaintiffs pay their attorney, currently Steve Wade and his Law Firm, the existing 35%
commission” certain other steps will take place. Exhibit 10.
15. In December 2011, the MFM case was settled for $430,000.00. Joint Stipulation ¶ 13. The
stipulation of dismissal was filed on January 17, 2012. Id. Settlement negotiations in the MFM
case were going on during the time Stephen Wade moved to withdraw. Testimony of Jerzy
Wirth.
16. Attorney Groff escrowed $205,233.27 of the settlement, based on the claim of Stephen
Wade and his law firm for attorney fees. Joint Stipulation ¶ 14. At the time of Joseph Groff’s
entry into the MFM case, he and Stephen Wade discussed the possibility that the value of the
services that Stephen Wade had provided would diminish the longer the case remained
unresolved. Testimony of Joseph Groff.
17.
In February 2012, Jerzy Wirth authorized Jensen Baird Gardner & Henry to release
$180,000.00 from the settlement monies to Geoff Hasler, who represented that he would use the
money to purchase certain stock options. Testimony of Jerzy Wirth; Exhibit 28. Geoff Hasler
signed a promissory note in favor of Jerzy Wirth for $180.000.00. Exhibits 27 & 28.
18. In the spring of 2012, Geoff Hasler and MyFreeMedicine.com demanded fee arbitration with
the Fee Arbitration Commission of the Maine Board of Bar Overseers. Exhibit 35. The matter
was heard on July 19, 2012, in Augusta, Maine. Id.
19. On August 15, 2012, the panel of the Fee Arbitration Commission that had held the hearing
issued an award in favor of Stephen Wade against Geoff Hasler in the amount of $205,233.27.
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Joint Stipulation ¶ 15. The Maine Superior Court (Kennebec County), upon petition by Skelton
Taintor & Abbott, entered a judgment in favor of Stephen Wade against Geoff Hasler in the
amount of $205, 233.27, on December 26, 2012. Id.
20. The Maine Superior Court also entered an order of attachment and attachment on trustee
process on September 10, 2012, in the amount of the award, and trustee process was served on
Jensen Baird Gardner & Henry on September 12, 2012. Exhibits 36 & 38.
21. Pursuant to a written agreement dated September 18, 2012, Jensen Baird Gardner & Henry
released to Jerzy Wirth and Airborn all of the remaining settlement proceeds, $54,890.73.
Testimony of Jerzy Wirth and Joseph Groff; Exhibit 31.
22. Skelton Taintor & Abbott filed a UCC financing statement in connection with the state-court
judgment on June 4, 2013. Joint Stipulation ¶ 16.
23. On November 9, 2012, the Superior Court of the State of Delaware in and for New Castle
County entered judgment in favor of Jerzy Wirth against Geoff Hasler in the amount of
$428,750.00. Id ¶ 18. This judgment was recorded in Maine on January 14, 2013. Id. ¶ 19.
24. On September 12, 2012, Geoff Hasler executed a release disclaiming and waiving any rights
to the $205,233.27 from the MFM settlement then in escrow. Id. ¶ 20.
25. Jerzy Wirth also provided Geoff Hasler with money for his personal expenses during the
MFM litigation. Testimony of Jerzy Wirth. He advanced a total of approximately $301,676.00
to Geoff Hasler. Joint Stipulation ¶ 21.
26. Jensen Baird Gardner & Henry, by complaint for interpleader, initiated the current litigation.
Id. ¶ 22. The $205,233.27 has been deposited with the court. Id.
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II. Conclusions of Law
A. Standing
The cross-claim defendants first contend that Wirth lacks standing to make a claim on the
interpleader funds because he cannot attack the contract between Hasler and the defendants, to
which he was not a party.
Skelton, Taintor & Abbott’s Proposed Findings of Fact and
Conclusions of Law (“Defendants’ Brief”) (ECF No. 86) at 13-14. I do not understand Wirth to
be suing for breach of the contract between the defendants and Hasler. It is true that he asserts
repeatedly that Wade “abandoned” that contract, but he does not contend in his post-trial brief
that the act of “abandoning” is a breach for which he, a non-party to the contract, can recover.
Devine v. Roche Biomedical Labs., 659 A.2d 868 (Me. 1995), the only case cited by the
defendants in this regard, does not require or even support a finding that Wirth lacks standing in
this case. That case merely addresses the viability of a third-party-beneficiary claim, which
Wirth has not made here. It is not necessary that Wirth establish a breach of the contract
between Hasler and the defendants in order to recover the deposited funds. He has standing to
pursue those funds.
B. Waiver
The defendants next argue that Wirth waived any claim to the remaining monies in the
escrow that is now in the possession of the court when he entered into the agreement allowing
Hasler access to $180,000.00 of the settlement monies and by signing a release in return for the
payment to him by Jensen Baird Gardner & Henry of $54,890.73 from the settlement funds.
Defendants’ Brief at 14-16.
Taking the latter argument first, Wirth’s release to Jensen Baird Gardner & Henry
admittedly does not contain any reference to Wirth’s rights in any funds remaining in the escrow
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after the release of the $54,890.73 from those funds to Wirth, but it also by its express terms
releases only Jensen Baird Gardner & Henry from
any and all actions, claims, causes of action, suits, contracts, liabilities,
administrative complaints, covenants, agreements and damages
whatsoever now existing or which may result from the existing state of
things which Wirth has or ever had against Jensen Baird, its attorneys,
officers, employees, directors, agents, representatives, principals,
successors and assigns.
Exhibit 31 ¶ 3. Contrary to the defendants’ assertion, Defendants’ Brief at 16, there is nothing
in this release or Wirth’s acceptance of the $54,890.73 that is necessarily inconsistent with his
claim against the fund itself for further sums.
I reject the defendants’ contention that the rejection by the Maine Superior Court of
Wirth’s effort to intervene in the action that transformed their arbitration award into a court
judgment bars him, under principles of res judicata, from seeking to recover any money from the
escrowed settlement funds. That judgment did not purport to address the settlement funds, nor
could it. See Exhibits 37 & 38.
The agreed release to Hasler of $180,000.00 from the fund is another matter, however.
Wirth accepted a promissory note from Hasler in that amount. Exhibit 27. He also entered into a
“Confidential Agreement” with Hasler specifying the uses to which the $180,000.00 would be
put, including an unrestricted release to Hasler of $55,000.00 and investment of $125,000.00 in
Groupon stock options. Exhibit 28 at 1. Any “additional settlement monies” were to be paid to
Wirth in conformance with the existing “civil litigation funding agreement” between Hasler and
Wirth, and the proceeds of the investment were to be distributed pursuant to the funding
agreement, and, once those terms were satisfied, equally between Hasler and Wirth. Id. Wirth
also signed Hasler’s direction to Jensen Baird Gardner & Henry to release $180,000.00 from the
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settlement proceeds to Hasler. Exhibit 29. Neither Wade nor his law firm was a party to these
agreements.
Under these circumstances, Wirth cannot continue to claim entitlement to the full amount
of his judgment against Hasler. He has received $54,890.73 outright and agreed to the release of
an additional $180,000.00 to which he might have otherwise been entitled, in the apparent hope
of obtaining more than $180,000.00 from Hasler’s proposed investment.
However, contrary to the defendants’ argument, made without citation to authority,
Defendants’ Brief at 15-16, the fact that Wirth agreed to the release of $180,000.00 from the
settlement fund does not necessarily mean that he waived any claim to the monies thereafter
remaining in the fund. Nothing in the release documents may reasonably be read to effect such a
waiver. Nor does Wirth’s conduct suggest such a waiver.
Accordingly, Wirth’s claim must be reduced either to $66,785.27 ($301,676.00 funding
of MFM case (Joint Stipulation ¶ 21) minus $180,000.00 minus $54,890.73) or $193,859.27
($428,750.00 Delaware court judgment (Joint Stipulation ¶ 18) minus $180,000.00 minus
$54,890.73).
C. Equity
Wirth bases his argument on the assertion that an interpleader action is an action in
equity. Defendant Jerzy Wirth’s Post Trial Brief (“Plaintiff’s Brief”) (ECF No. 87) at [3]-[10].
He states that he seeks all of the interpleaded funds2 on two bases: (1) his litigation funding
contract with Hasler takes precedence over the defendants’ contingent fee contract with Hasler
“because of the unilateral withdrawal[] and . . . abandonment of the contingency contract,” id. at
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I have already decided, for the reasons stated above, that Wirth is entitled, at most, to no more than $193,859.27 of
the interpleaded $205,233.27. I discuss Wirth’s claims for separate, additional damages later in this opinion.
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6, and (2) his Delaware court judgment against Hasler “precedes Wade’s judgment against
Hasler, both in the date of court execution[] and in the date of recording.” Id. at [6].
This court has jurisdiction over this interpleader action because the adverse claimants to
the deposited funds are citizens of different states. 28 U.S.C. § 1335. The relief available is
equitable in nature, see, e.g., A & E Television Networks, LLC v. Pivot Point Entertainment,
LLC, 771 F.Supp.2d 296, 303 (S.D.N.Y. 2011), but that does not mean, as Wirth would have it,
that, accordingly, he is entitled to all of the deposited funds. For example, as I have described
above, it would be inequitable for Wirth to recover for a second time the $54,890.73 that he has
already been paid from the settlement proceeds, and the same is true of the $180,000.00 released
to Hasler with Wirth’s consent and receipt of a promissory note for the full amount from Hasler.
Both of Wirth’s substantive arguments fail. Beginning with the second argument, Wirth
contends, without citation to authority, that he is entitled to the interpleaded monies because he
obtained a court judgment against Hasler before the defendants did so, and because he made a
UCC filing of his judgment before the defendants did so with their judgment. Plaintiff’s Brief at
[6]. The defendants obtained a decision from the Fee Arbitration Commission of the Maine
Board of Bar Overseers on August 15, 2012. Joint Stipulation ¶ 15. On November 9, 2012, the
Superior Court of Delaware entered judgment in favor of Wirth against Hasler in the amount of
$428,750.00. Id. ¶ 18. This judgment was recorded in Maine on January 14, 2013. Id. ¶ 19.
The Maine Superior Court entered judgment on the defendant’s arbitration award on December
26, 2012. Id. ¶ 15. The associated UCC statement was filed on June 4, 2013. Id. ¶ 16.
While Hasler’s judgment and UCC filings preceded those of the defendants, under Maine
law an arbitrator’s determination of damages, even when not yet judicially confirmed, has the
effect of collateral estoppel. Beal v. Allstate Ins. Co., 2010 ME 20, ¶ 14, 989 A.2d 733, 738-39.
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That is, the arbitration award has the same status under the rules of res judicata as a court
judgment. Id. Thus, to the extent that Wirth’s “first in time” argument correctly states the law
applicable to this interpleader action, the defendants were in fact first under Maine law.
Wirth’s first substantive argument, that the funding contract takes precedence over the
contingent fee agreement, misapprehends the circumstances surrounding a lawyer’s withdrawal
from representing a client, when that withdrawal is approved by a court under the Maine Bar
Rules. Wade and his law firm were granted leave to withdraw from the MFM case by Chief
Judge Woodcock of this court. Joint Stipulation ¶ 8. Such a withdrawal is not “unilateral,”
Plaintiff’s Brief at [3]; the lawyer could not withdraw without court approval.
Wirth also suggests that Wade withdrew because “he did not wish to undertake litigation
which might be unsuccessful.” Id. The only evidence to support this assertion is Wirth’s
testimony that Hasler told him so. Wade’s own testimony is clearly to the contrary, and I find it
more credible than Wirth’s proffer of what was told to him by Hasler about what Wade allegedly
said to Hasler, who Wirth himself characterized as a “con man.” For this reason, the only
authority cited by Wirth on this point, Hardison v. Weinshel, 450 F. Supp. 721 (E.D. Wisc.
1978), is readily distinguishable. In that case, the judge had rejected the first request to withdraw
filed by the plaintiff’s attorney, granted his second request about two months before the case was
scheduled to go to trial, and found after the case settled that the attorney “did not wish to
undertake litigation which might be unsuccessful,” based on a letter the attorney had written to
the plaintiff. Id. at 722. He also found that the settlement resulted solely from the efforts of the
plaintiff’s second lawyer. Id. at 723. Neither such finding has been made in this case, and the
available evidence would not justify either such finding.
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Wirth faults Wade for failing to appeal the dismissal of the RICO counts in the MFM
case “[f]or approximately a five month period after the dismissal of RICO until he withdrew[.]”
Plaintiff’s Brief at [4]. Because a breach of contract count remained active in the MFM case
after the dismissal of the RICO counts, it is unlikely that any attempt to pursue an interlocutory
appeal of the dismissal would be accepted by the First Circuit Court of Appeals. See, e.g.,
United States Fidelity & Guar. Co. v. Arch Ins. Co., 578 F.3d 45, 54-55 (1st Cir. 2009) (appeal
generally possible only when judgment or decision terminates litigation between parties;
interlocutory appeal available only when an order involves controlling question of law as to
which there is substantial ground for difference of opinion and immediate appeal may materially
advance ultimate termination of litigation).
Failing to file an appeal of the interlocutory
dismissal of some of the counts in the MFM complaint was not an error on the part of Wade or
his firm.
Wirth argues at some length that Wade “contributed very little of merit to the MFM
case,” Plaintiff’s Brief at [3]-[5], but that argument is foreclosed by the finding of the Fee
Arbitration Commission, after hearing, that the services of Wade and his firm to Hasler with
respect to the MFM litigation were in fact worth $205,233.27. Joint Stipulation ¶ 15. This fact
also forecloses Wirth’s contention that “Wade seeks to unjustly enrich himself.” Plaintiff’s Brief
at [7]. Wirth bemoans the facts that Wade “did not initially inform [the] Superior Court of
Wirth’s interest,” id., presumably in the action in which Wade and his law firm sought a
judgment based on the decision of the Fee Arbitration Commission, but Wirth had no standing to
be involved in that action.3 Funding the MFM litigation gave Wirth no involvement in Hasler’s
3
Wirth asserts that the defendants filed “[p]leadings stating that Skelton, Taintor, & Abbott [had] no knowledge of
Wirth’s claim,” Plaintiff’s Brief at [8], but the very language that he quotes as evidence of this “deceit” does not so
state. Rather, they state that there was no information “from which Skelton, Taintor, & Abbott or the court can
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relationship with Wade and his law firm. Contrary to Wirth’s suggestion, id. at [7], there is no
evidence that any of his initial “incremental” payment to Hasler of $93,000 went to Wade or his
law firm, and, thus, there could be no requirement that Wade inform the Superior Court that
Wirth had made payments to Hasler, which Wirth understood to be litigation funding.
The important fact remains that Hasler and Wade entered into an agreement, confirmed
on January 14, 2011, that provided, inter alia, that Groff would honor a lien of Wade’s law firm
for attorney fees on any proceeds of a judgment or settlement. Exhibit 32. Wirth cites the
following statement in this agreement as evidence of inequitable action by Wade barring him
from collecting the attorney fee award: “In consideration for and in reliance upon this protection
agreement, we will not institute any lawsuit to establish our claim.” Id. Wirth characterizes this
statement, and Wade’s testimony that he would have sued Hasler “in the middle of the MFM
case” for the value of his services had Hasler not entered into this agreement, as “inequitable
action[s].” Plaintiff’s Brief at [7], [8].
Contrary to Wirth’s assertions, the existence of this agreement does not prove that Wade
“threatened” to sue Hasler, nor does it demonstrate that “Wade’s actions placed Hasler under
duress” that forced him to sign the agreement. Id. at [8]-[9]. The timing of the agreement likely
was driven more by the granting of Wade’s motion for leave to withdraw than it was by the fact
that the MFM litigation had not yet concluded. Wade’s testimony in response to Wirth’s
question does not establish that Wade conveyed any threat to Hasler.4
make an assessment as to Mr. Wirth’s claim of ownership, if any.” Id. at [7]. There is a significant difference
between knowledge of a claim and having sufficient evidence to evaluate that claim.
4
Wade testified that he discussed arbitration and possible litigation based on his claim for fees for services rendered
with Hasler and told Hasler that Wade expected to be paid for the work that he had done. He testified that he told
Hasler that, if he and Wade did not come to an agreement and if Hasler did not seek fee arbitration, Wade would file
suit seeking to recover those fees because waiting until the MFM case ended to resolve the claim would have
harmed Wade. He knew that he had very little prospect of getting those fees directly from Hasler.
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Wirth has not established any inequitable or unethical conduct by the defendants with
respect to their claim against the interpleader funds.
D. Other Claims
Wirth asserts that the defendants should be held liable to him for the damages that their
inequitable or unethical actions have caused him. Plaintiff’s Brief at [6]. Having concluded that
Wirth has not established that the defendants acted inequitably or unethically toward him, I reject
his demands for damages based on those claims.5
The cross-claim filed by Wirth alleges, in three counts, breach of the contingency fee
agreement between Hasler and the defendants6 and of the funding contract among Hasler, the
defendants, and Wirth; interference with the funding contract; and intentional and negligent
misrepresentation. Answer to Complaint for Interpleader (ECF No. 16) at [7]-[9] ¶¶ 25-27. To
the extent that Wirth intends his post-trial brief to include these claims, I have concluded, for the
reasons stated above, that the defendants are entitled to judgment on each claim. If he did not
mean to include one or more of these claims in his post-trial brief, then his failure to submit any
argument directed to a specific claim constitutes a waiver of that claim. E.g., Bowman v. Colvin,
No. 1:12-CV-246-GZS, 2013 WL 1907454, at *6 (D. Me. Mar. 31, 2013).
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Wirth’s assertion that the defendants are “seeking profit” in this action, Plaintiff’s Brief at [9], is incorrect. The
award of the Fee Arbitration Commission is for the value of the services provided by the defendants, which does not
constitute profit.
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I note that Wirth is not a party to the contingent fee agreement between Hasler and the defendants and has not
submitted any evidence that could support a claim that he is a third-party beneficiary of that contract. See, e.g.,
DiMillo v. Travelers Property Caas. Co. of Am., 789 F.Supp.2d 194, 207-08 (D. Me. 2011). Under these
circumstances, Wirth cannot recover for a breach of that contract.
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III. Conclusion
For the foregoing reasons, judgment shall enter in favor of the defendants, awarding them
the full deposited amount. Judgment for the defendants shall also enter on the plaintiff’s crossclaim.
Dated this 28th day of October, 2013.
/s/ John H. Rich III
John H. Rich III
United States Magistrate Judge
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