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created by petitioner’s counsel, then Lurie & Hertzberg, and
later Lurie & Zepeda (collectively, Lurie & Zepeda).
In late 1992, Lurie & Zepeda received total settlement
proceeds of $794,905.55 from United Ready Mixed, and deposited
the funds in a client trust account pending resolution of the fee
dispute between Lurie & Zepeda and petitioner, described below.
United Ready Mixed reported the settlement payment as a payment
to petitioner on a 1992 Form 1099-MISC.
Fee Agreement and Dispute Between Petitioner and Lurie & Zepeda
In the 1980s and early 1990s, Lurie & Zepeda represented
petitioner in numerous litigation matters, including the United
Ready Mixed litigation, various lawsuits initiated by the FDIC
against petitioner and others for default on a construction loan,
a joint action by petitioner and others against another law firm
for legal malpractice, lawsuits arising out of a real estate
investment, a divorce proceeding against petitioner’s former
wife, and litigation involving petitioner’s family members.
In 1987, petitioner entered into an hourly written fee
agreement with Lurie & Zepeda. In August 1988, petitioner and
Lurie & Zepeda modified the agreement (as modified, the fee
agreement). In the fee agreement, petitioner agreed to pay Lurie
& Zepeda an amount to cover legal fees and expenses incurred
through June 30, 1988, and Lurie & Zepeda agreed to bill all fees
incurred thereafter at one-half the firm’s normal hourly rate.
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