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A Manhattan appellate court has thrown out a lawsuit by a plaintiff's firm that claimed it was shortchanged by another firm to which it had referred clients for a massive lawsuit against the maker of withdrawn diet drug fen-phen.

Parker & Waichman, a Great Neck, N.Y., personal injury firm, sued Manhattan's Napoli Kaiser & Bern, now known as Napoli Bern, in 2001 over the latter firm's allocation of funds paid by American Home Products, now known as Wyeth, to settle a suit on behalf of more than 5,000 former fen-phen (dexfenfluramine) users. The Food and Drug Administration ordered a recall of the drug in 1997 after studies linked it to heart valve damage.

Parker & Waichman, which says it believes the confidential settlement was over $1 billion, claims Napoli Bern broke an agreement on client referral fees by allocating much more of the settlement to its direct clients than to the roughly 400 clients referred to it by Parker & Waichman. The 13-lawyer Long Island firm, which received $5.3 million in referral fees, says both it and the clients it referred should have received millions more.

But in Parker & Waichman v. Napoli, 605388/01, the Appellate Division, 1st Department, said Parker & Waichman's suit amounted to an "improper collateral attack" on a settlement to which it was not a party.

The unanimous panel of Justices John Buckley, George Marlow, Betty Ellerin and Milton Williams reversed a December 2004 decision by Manhattan Supreme Court Justice Charles Ramos, who ruled that Parker & Waichman had third-party standing to sue on behalf of the clients it referred to Napoli Bern.

"Plaintiff has not alleged that it is a third-party beneficiary to any contracts entered into between defendants and the referred clients," the appeals panel wrote. "Indeed, the complaint is devoid of any reference to or description of any contracts between defendants and the referred clients. In the absence of such a claim, only the parties to a contract have standing to sue for its breach."

The appellate court said Parker & Waichman's claims concerning its referral agreement with Napoli Bern were also mostly an attack on the settlement, noting the fee agreements were "only an incidental aspect of the overall global settlement agreement."

"The real issue is whether there was fraud behind the global settlement," the appellate court said, "a settlement which was agreed to by plaintiff's referred clients in the underlying action, approved by an ethics professor, overseen and approved by a special master, and ultimately confirmed by the Supreme Court."

Bruce Green of Fordham University School of Law was the ethics professor who approved the settlement, while former Manhattan Supreme Court Justice Michael Dontzin was the special master.

Marc J. Bern of Napoli Bern said the panel's decision "exonerated" his 17-lawyer firm. He said Parker & Waichman's suit had from the beginning been "made up out of whole cloth by a bunch of greedy lawyers" who were "looking only for the golden goose and not trying to do any work."

Bern said his firm is also suing Parker & Waichman for disgorgement of the $5.3 million in referral fees on the grounds that the Long Island firm failed to raise any of its concerns about the distribution of settlement funds until after the award was confirmed, even though a disgruntled Napoli Bern associate had made similar allegations earlier.

Ted E. Trief of Trief & Olk, which has been representing Parker & Waichman, said his client was "troubled" by the decision but added that the fight was "far from over." He said his client would definitely seek relief from the Court of Appeals.

Trief said Parker & Waichman would also appeal the November 2003 order by Manhattan Supreme Court Justice Helen Freedman denying its motion to intervene in the underlying case and challenge the settlement. He said the firm had never received notice of the entry of that order and did not consider the time to appeal it to the 1st Department to have lapsed.