i. The Engagement
10. On March 18, 2015, Miles, on behalf of K&S, and Plaintiff entered into an engagement agreement (the "Fee Agreement") for Defendants to represent Plaintiff in a claim in arbitration styled Trinh Vinh Binh and Binh Chau Joint Stock Company v. The Socialist Republic of Vietnam, noticed on June 24, 2014 (the "Arbitration"). The Fee Agreement required Defendants to holdback 30% of billings for fees and defer payment of such amount until the conclusion of their representation.
ii. The Funding Agreement
11. Contemporaneously with the execution of the Fee Agreement, Plaintiff executed a Forward Purchase Funding Agreement to fund the arbitration (the "FPFA") with Burford Capital LLC (f/k/a Gerchen Keller Capital, LLC and/or Van Buren FundingCo, LLC). The FPFA contained a cap on spending for the Arbitration of $4,678,000.00. After initial deployments (distributions) were made off the cap amount for various initial costs/expenses, there remained a $3,690,000.00 cap available for legal expenses. Despite the boilerplate language of the Fee Agreement regarding costs, Defendants represented to Plaintiff and Burford that they could complete the Arbitration within that cap and, in consideration thereof, remained engaged as arbitration counsel by Plaintiff for the duration of the Arbitration. In exchange for fronting expenses for the Arbitration, Burford was supposed to receive their "Purchase Price" (consisting of the total amount of "Deployments" up to the Commitment Amount at the conclusion of the Arbitration).
12. The FPFA also contained complicated and confusing provisions for payment of a "Success Return" to be paid to Burford and Defendants in the event Plaintiff was successful in the Arbitration. Under the FPFA, the Success Return was defined as the greater of (a) the sum of (i) two (2) times the Purchase Price and (ii) two (2) times the Contingency Fee. See Forward Purchase Funding Agreement at 4. A contingency fee is not referenced in the Fee Agreement, however, the FPFA defined "Contingency Fee" as: "the amount of holdback of or discounts on Arbitration Counsel's fees pursuant to the [Fee] Agreement." Id. at 2.
13. The Success Return was to be split between Defendants and Burford pro rata "based on the relative portion of [Burford's] and [Defendants'] investments in the Arbitration (i.e.
the Purchase Price and the Contingency Fee)." Id. at 6-7. Thus, the more Defendants billed against the cap amount in legal spending or beyond that toward Burford's maximum Commitment Amount, the more Plaintiff was at risk of paying in "Success Return", whether to Defendants or Burford.
iii. Defendants' Collusion
14. By May 2016, Defendants had already billed and been paid (at 100% of rates as opposed to the agreed upon 70%) approximately $1,900,000.00, leaving about $1,800,000.00 left on their agreed upon budgeted spending cap. At this point, Defendants, motivated by securing continued, guaranteed immediate payment of their fees, colluded with Burford to contrive a scheme to increase Plaintiff's potential liability in Success Return by seeking to increase the cap on expenditure for Defendants' legal fees and, thus, Burford's potential entitlement to an increased multiple of Success Return. In recognition of the need for Plaintiff's approval to increase the cap on legal spending, Defendants approached Plaintiff and sought his signature on an amendment to the FPFA. Plaintiff declined to sign the amendment due to the lack of immediate need; Defendants' representation of the $3,690,000.00 cap; based upon remaining funds available under the existing FPFA cap and his ability to, when/if necessary, at a later date, arrange alternative funding for the Arbitration.
15. Despite Plaintiff's express declination to sign the proposed amendment, Defendants and Burford executed an agreement amongst themselves (the "Side Agreement") whereby Burford agreed to increase their cap on legal spending during the pendency of the arbitration in exchange for Defendants' agreements to waive entitlement to fees under the Fee Agreement and limit their fee entitled to a "maximum fee of US $4,460,000.00." See May 16, 2016, Agreement Between Craig Miles and Van Buren FundingCo, LLC.
iv. The PCA Case No 2015-23 Arbitration
16. On August 21, 2017, Plaintiff's seven-day arbitration evidentiary hearing against the Socialist Republic of Vietnam commenced. At issue in the arbitration was Plaintiff's claim that the Vietnamese government had illegally dispossessed him of valuable real properties and other personal property in the Socialist Republic of Vietnam (the "Property"). Aside from establishing Plaintiff's rightful ownership of the Property at the time the Vietnamese government took them, the success of Plaintiff's claim hinged on his ability to establish the true present day value of the Property. Toward that end, Defendants identified expert witnesses, Savills Vietnam Co., Ltd, that were tasked by Defendants with offering their expert opinions as to the proper value of the real estate properties taken from Plaintiff. Defendants instructed, worked closely with, and engaged Savills directly providing advice, information, data, and guidance as to the real estate properties to be included in the valuation and legally cognizable methodologies experts should employ in order to complete their work. Defendants' efforts resulted in an expert report opining that the Vietnamese government had taken property from Plaintiff valued at USD 213,990,000.00 by employing both the "comparable" and "discounted cash flow" valuation methodologies. On or around June 2015 and February 2017, Defendants offered the expert reports of Savills Vietnam Co., Ltd, as evidence in the arbitration and the testimony of a Savills Vietnam Co., Ltd Deputy Managing Director at the evidentiary hearing in August 2017. The Defendants failed to offer expert evidence or corroborating evidence to the Tribunal to assess the fact or quantum of the loss suffered in respect of the personal property. The Vietnamese government did not offer an alternative valuation, but did offer expert opinions criticizing Plaintiff's expert's opinions and/or methodology on the real estate properties and the lack of expert evidence or corroborating evidence supporting in support of the fact or quantum of the loss suffered in respect of the personal property.
After the hearing, Defendants attempted to supplement the evidentiary record with "a chart of citations to documents containing references to the real estate properties making up part of the Property. Defendants' attempt was denied by the tribunal as untimely.
v. Award Allocation
17. On April 10, 2019, Plaintiff prevailed in the Arbitration. The total amount of the award was approximately $45,416,439.65. This represented a drastic departure from Plaintiff's entitlement and Plaintiff's evidence of valuation because: (i) for the personal property Plaintiff's evidence was the only evidence before the Tribunal and Defendants provided no expert evidence or corroborating evidence for the Tribunal to assess the fact or quantum of the loss suffered for example no valuation evidence was provided for the vintage cars or antique artwork therefore there was no way for the Tribunal to make a finding as to the existence or value of this personal property; (ii) the arbitral panel rejected the valuation approaches advanced by the Defendants on the real estate properties finding such methodologies unreliable as they did not use a legally cognizable/supportable methodology and/or did not adequately employ / support such methodologies. Therefore, in the absence of any other opinions on valuation, but finding that the Vietnamese government had indeed damaged Plaintiff, the arbitral panel utilized a default valuation method that produced a damage figure grossly at odds with the true amount of Plaintiff's damage. Plaintiff's efforts to appeal, modify, and/or correct this mistake in the award ended on or around July 29, 2019, when all possible avenues of appeal had been exhausted.
18. The Republic of Vietnam made payment under the Award in October 2019. In November 2019, Defendants relied on Burford to calculate the allocation between themselves, Defendants, and Plaintiff. Burford's allocation was based upon calculation of a Purchase Price and Success Return that factored in amounts well beyond the cap Plaintiff agreed to in the FPFA.
Plaintiff expressly instructed Defendants not to distribute funds from their trust account based upon this erroneous allocation. Instead, Plaintiff instructed Defendants to distribute the undisputed portion of the funds to the parties while they continued to work through any issues/disputes relating to the remainder. However, Defendants ignored Plaintiff's express instructions to maintain the safekeeping of property and distributed all funds from their trust account in the exact manner instructed by Burford, which, represented a gross overpayment to both Burford and Defendants.
19. Defendants' active representation of Plaintiff in litigation, which included other claims in arbitration between Plaintiff and The Socialist Republic of Vietnam, ended and Plaintiff retained new counsel. In February 2021, Plaintiff's new counsel requested that Defendants forward all client file materials to them in order for new counsel to continue with all related matters in arbitration. Defendants provided some electronically stored information in a series of electronic transfer tranches, but represented to new counsel that there remained a significant number of boxes of physical file materials that Defendants possessed. Despite repeated attempts by Plaintiff to secure possession of all these client file materials, Defendants have expressly refused to make them all available to Plaintiff and/or his new counsel, thus putting Plaintiff's interests and existing related claims in arbitration at unreasonable and unnecessary risk.