By Nate Raymond

NEW YORK, Feb 1 (Reuters) - Willie Gary, the splashy Florida plaintiffs' lawyer, is facing another financial setback after years of winning big verdicts.

A federal magistrate on Thursday recommended that Gary and his law firm, Gary Williams Lewis & Watson, be ordered to pay $3.7 million to an arm of General Electric Co after they defaulted on loans for a Boeing 737. The lawyer has called the jet the Wings of Justice II.

The decision, if adopted by U.S. District Judge Andrew Carter, would add another court-ordered burden for Gary.

His law firm has seen a number of partners leave over the last two years. A federal judge in Albany in October ordered Gary's firm to pay $12.5 million to a litigation finance company that had issued the firm loans to finance contingency-fee cases.

Gary, in a brief telephone interview on Friday, said he was nearing a settlement on both cases.

"We have the money, we have just been fighting over how much it would be," he said.

Ned Reynolds, a spokesman for GE, declined comment. Scott Balber, a lawyer for LawFinance affiliate LFG National Capital at Cooley, did not respond to a request for comment.

The judgments will be paid out of fees the firm was set to earn on two class action settlements, a $45 million discrimination settlement with the state of New York and a $55 million accord with a unit of Amway Corp, Gary said.

More than $5 million is in escrow already, he said, and he expected another $1.7 million to be added in a couple of weeks. Other money would come out of fees to still be paid out from the Amway deal, he said.

"Within the next 30 days, we feel that we'll have it all worked out," Gary said.

In the case against New York, though, a third creditor to Gary's firm, Northern Trust, came forward in November to lay claim on the escrowed funds as well after a $2.5 million loan matured.

Sean Sheely, a lawyer for Northern Trust at Holland & Knight, did not respond to requests for comment.

GARY'S CASES

Gary, of Stuart, Florida, has won numerous big court awards over the years, such as a $500 million verdict against The Loewen Group funeral chain in 1996 and a $240 million verdict against The Walt Disney Co in 2000.

More recently, he has been among the plaintiffs' lawyers bringing lawsuits against the National Football League over its alleged failure to tell players about the risks of head trauma.

Gary is also known for a flamboyant lifestyle. The Wings of Justice II is depicted on his website as having a bedroom, kitchen, leather seats and an 18-karat-gold sink.

Through a company set up to own the aircraft, Gary borrowed $9.36 million to buy the plane in 2000, according to Thursday's decision.

Gary has acknowledged his firm hit tough economic times amid the recession after getting heavily in debt during better years.

During the lawsuits by GE and LFG, partners began leaving Gary's law firm.

The firm has gone from 11 partners at the start of 2011 to four today. Before the departures, which included three name partners, the firm was called Gary Williams Finney Lewis Watson & Lewis.

According to Thursday's decision, Gary and his law firm sought to restructure the loans for the airplane in 2009 due to economic difficulties. The loans were restructured twice, yet Gary and his firm later defaulted.

While the plane was owned by the company set up to buy it, Gary personally guaranteed the loans. As part of the restructurings, the law firm had also pledged future attorneys' fees as collateral.

In the GE lawsuit, Gary didn't dispute that he defaulted on the loan, which by April 2012 had $3.07 million outstanding. But he argued that the court should reduce the amount he owed on the basis that GE had refused to allow him to lease out the plane.

U.S. Magistrate Judge Michael Dolinger said the contract didn't allow for leasing; even if it did, GE was within its rights to reject two possible leasing arrangements Gary proposed.

"Since defendants do not allege legal or factual basis for the loan agreement, they are bound by the terms of their contract and are not entitled to set-off of damages," Dolinger wrote.

The case is General Electric Capital Corporation v. Gary, U.S. District Court, Southern District of New York, No. 11-03671.

For General Electric: David Kochman, Reed Smith.

For Gary: Michael Sussman, Sussman & Watkins.

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