Wednesday, February 1, 2017
An interesting decision yesterday in a notable case by Magistrate Judge G. Michael Harvey of the United States District Court for the District of Columbia
Herein the Court will close what may be the final major dispute in two decades of hard-fought litigation. Plaintiffs, Native Americans whose lands were held in trust by the Department of the Interior, sought to remedy a century of wasteful trust mismanagement. They obtained a stunning victory which brought about trust reform and a significant recovery for the plaintiff class. Helping them in their quest was a team of attorneys whose dedication and tenacity deserve high commendation. One of those attorneys was Mark Brown. After this case settled in 2009, Plaintiffs’ counsel moved for an award of attorney’s fees and costs. Brown was omitted from the motion, as were the hours he spent litigating this matter. He now petitions this Court for his share of the fee award.
The opinion paints a picture of co-counsel working relationships in the Cobell litigation that ran the gamut from strained to toxic.
Brown also had a strained relationship with the Special Master appointed by Judge Royce Lamberth that was not helped by his asking the Special Master whether he suffered from "early onset Alzheimer's."
Then there was the "crying fish" footnote.
In another instance, Brown assisted in drafting a brief in support of a motion for attorney’s fees made to the Special Master. In one of the brief’s footnotes, Brown included a picture of a crying fish. This image was intended to lampoon the government for its complaints that class counsel’s fees were excessive. [Co-counsel] Gingold told Brown to remove the picture before filing the brief, but Brown insisted that it be included. Brown counters that Gingold “specifically asked it to be left in.” The image was left in. Gingold testified that the Special Master became quite upset upon seeing the image. In his decision on the motion for fees, the Special Master noted the presence of a “fish shedding a tear” in Plaintiffs’ brief. He ultimately deducted 75% of all the time spent preparing the brief. (record citations omitted)
Eventually, the plaintiff's team concluded that life was better without Brown.
The circumstances and cause of his departure were the focus of this fee dispute.
Plaintiffs argue that, if Brown withdrew from the litigation, it was unjustified, and if he did not withdraw, he was terminated for cause. Cobell F&C at 46 ¶ 10, 49 ¶ 17. As discussed above, either finding would eliminate Brown’s recovery entirely under District of Columbia law. Brown responds that he did not withdraw, but rather was terminated without cause, and therefore is entitled to recovery of his fees. Brown Reply at 77 ¶ 7.
The Court ultimately sides with Brown and finds that he is entitled to an award of reasonable fees for his work on this case, although the undersigned does not adopt his reasoning to reach this conclusion. Despite Brown’s belief to the contrary, the Court finds that he withdrew from the Cobell litigation in January 2006. Further, although the terms of Brown’s engagement letter with the Plaintiffs do not make a withdrawing attorney’s compensation contingent on his or her departure being for good cause, the Court in any event finds that Brown was justified in leaving the Cobell team when he did. His withdrawal also did not result in any prejudice to his clients who were ably represented by a veritable army of attorneys at the time of his departure. Nor, under the unique facts of this case, did it represent a clear and serious violation of any ethical duty he owed to Plaintiffs. He is therefore entitled to an award of reasonable fees.
On that score, however, Brown’s petition for more than $5 million in fees is lacking. The billing rate he seeks is in excess of that stipulated in his engagement letters with Plaintiffs. Further, significant cuts are in order to the hours he presents, given that his time records are larded with many hours that were either previously compensated or deemed unreasonable by a judicial officer, or reflect unnecessary work or clerical tasks not reasonably billed at an attorney’s rate. Most importantly, an overall reduction of his time is in order because he did not exercise billing judgment when he reviewed his records prior to submitting them to the Court. After all deductions are applied, the Court concludes that Brown should be awarded $2,878,612.52 for his work representing the plaintiff class prior to his withdrawal.
As to good cause to withdraw
The Court finds that Brown’s withdrawal met this standard. While the conduct of all parties leading up to Brown’s departure in January 2006 is deserving of some reproach, on balance the evidence shows that Brown’s withdrawal was not unjustified. By that time, the relationship between Brown and his co-counsel was irretrievably broken. Further, following Brown’s May 2005 suspension, the record supports Brown’s contention that he was "frozen out" of work on the case. Brown Ex. 14; Brown Reply at 33 ¶ 59. For the next six months, Brown had little or nothing to do. 4/20 P.M. Tr. 145:5–9; 4/21 Tr. 33:11–34:19. He sought assignments from those few individuals with whom Gingold allowed him to work, but, after a few projects, that work dried up as well. 4/21 Tr. 31:25–32:19. Plaintiffs claim that Brown may have received more work had he repeatedly requested it. 4/22 Tr. 211:20–212:2. It is undisputed, however, that he asked for work, and received little to none. This is not surprising; it is a fair inference from the record that, fol-lowing lead class counsel Gingold’s suspending him from working with anyone but a few attorneys, Brown was effectively persona non grata on the Cobell team. There was clearly much work to be done during that period on behalf of the Plaintiffs, and Brown was willing to do it—indeed, it was never Plaintiffs’ complaint that Brown was not hard working on their behalf. Nevertheless, no assignments were forthcoming.
The court further concluded that Brown's withdrawal sufficiently complied with his ethical obligations under Rule 1.16.
There is no evidence in the record that Brown’s absence had any material adverse effect on Plaintiffs or their claims.
Indeed, Brown was a divisive figure on the Cobell team. Far from prejudicial, his departure was viewed as advantageous by Plaintiffs’ other counsel, and thus it indirectly benefited the plaintiff class. Gingold testified that suspending Brown “eliminated the risk of harm” to the trial team since he was perceived as source of friction on the Cobell team. Certainly, Brown’s co-counsel were not unhappy to see him go. However long after January 2006 it took them to realize that he was not returning from California, none of them felt inclined to question the change in his status. The litigation proceeded to its successful conclusion undisturbed by his absence. (citations to record omitted)
These facts distinguish the cases cited by Plaintiffs in which the withdrawing attorneys were found to be in violation of their professional obligations. In each of those cases, the attorneys knowingly left their clients in the lurch without other representation...
Indeed, on this point, the zeal with which Plaintiffs’ counsel seeks to expose Brown’s purported ethical lapses would be more persuasive if the end result served something other than their own financial gain. Again, under the unique facts of this case, every dollar not awarded to Brown will pass not to Brown’s clients but to his former colleagues at Kilpatrick Stockton...
Rule 1.16 was designed as a shield to protect an unwary client when an attorney withdrawals, not as a sword to financially benefit the client’s other counsel.
While the Court does not condone the failure of a withdrawing attorney to put either his client or the Court on proper notice prior to his withdrawal, nevertheless, based on the peculiar facts of this case, the Court finds that any such lapse here is not a sufficient basis to deny Brown the compensation he earned in the six years prior.
Thanks to a reader for sending this to us. (Mike Frisch)
Tuesday, January 3, 2017
The Delaware Supreme Court has ruled in favor of the Katten Muchin law firm in a case involving application of the law of charging liens.
The case was a complex fight over the client's ouster from a family business
Martha reacted to her ouster by, among other things, litigating. She first retained plaintiff Katten Muchin Rosenman LLP to represent her in a § 220 books and records request of the Sutherland Lumber Companies. Although Martha and Katten disagree over whether they entered into a written fee agreement, the parties agree that Katten was not providing its services on a contingency fee basis and was instead entitled to fees on an hourly rate basis and to reimbursement of its expenses. Indeed, Katten sent Martha monthly invoices based on hourly billing, which Martha paid for several years.
In 2006, Martha, with Katten as her counsel, filed a derivative and double derivative action against Perry, Todd, and Mark alleging, among other things, that Perry‘s and Todd‘s employment agreements with the Sutherland Lumber Companies were a result of self dealing...
Some benefits were realized with respect to the employment agreements at issue but
By 2011, [client] Martha accrued $766,166.75 in unpaid attorney‘s fees for services that Katten provided in this litigation between 2009 and 2011. In the spring of 2011, Katten withdrew as counsel. One of Martha‘s attorneys from Katten, Stewart Kusper, left the firm and continued to represent her.
After Martha‘s litigation concluded in 2012—without her securing any additional relief on behalf of the Sutherland Lumber Companies—she sought an award of attorney‘s fees from the Sutherland Lumber Companies for all of her fees arising from the § 220 action and from overcoming the special litigation committee‘s investigation and recommendation to terminate the litigation, plus $25,000 in fees for defending against the summary judgment argument aimed at the employment agreement claim. In total, Martha asked for $1.4 million in attorney‘s fees and, in doing so, she used Katten‘s invoices that detailed the services it provided to her and its expenses incurred on her behalf while it represented her as a reasonable basis for the fees she should be awarded. Indeed, in Martha‘s petition for an award of attorney‘s fees, she argued that the $1.4 million in attorney‘s fees she incurred from Katten were "fair and reasonable."
...Relying on Katten‘s invoices, the Court of Chancery awarded Martha $275,000 in fees for the minor benefits that she obtained on behalf of the Sutherland Lumber Companies in 2007 when, as a result of Martha‘s and Katten‘s efforts, the Sutherland Lumber Companies amended Perry‘s and Todd‘s employment agreements.
The firm intervened and asserted a lien on the fee award.
The court here reversed the Court of Chancery
Although Delaware does not have a statute governing charging liens, Delaware has a long lineage of cases recognizing charging liens as a matter of common law. Two recent Delaware cases address charging liens. In Doroshow, this Court confirmed that Delaware recognizes the long-standing common law right of charging liens. In Zutrau, the Court of Chancery adopted the definition provided by Corpis Juris Secundum that a charging lien is "an equitable right to have costs advanced and attorney‘s fees secured by the judgment entered in the suit wherein the costs were advanced and the fee earned." Today, we also endorse that definition of a charging lien.
Here, the modifications to Perry‘s and Todd‘s employment agreements— which are the basis for Court of Chancery‘s fee award—were adopted as a result of Martha‘s and Katten‘s efforts in the derivative and double-derivative action. Furthermore, Katten‘s unpaid fees arose from the same litigation that produced the benefits for the Sutherland Lumber Companies and which led to the Court of Chancery‘s award of attorney‘s fees. Therefore, based on our definition of a charging lien, Katten is entitled to a lien on the entire fee award of $275,000. The historical rationale for a charging lien—to promote justice and equity by compensating the attorney for her efforts and thus encouraging attorneys to provide legal services to clients—also supports this conclusion.
In its decision, the Court of Chancery seemed to read Doroshow as standing for a rule that an attorney may only seek a charging lien for fees the attorney incurred that were directly connected to her client‘s recovery. The Court of Chancery cited Doroshow‘s finding that, because the law firm in that case represented its client on a contingent fee basis, it was entitled to a charging lien because "the law firm had not been compensated before its work produced the funds." The Court of Chancery reasoned that because Katten had already been paid for the services that led to the benefits for the Sutherland Lumber Companies, it was not entitled to a charging lien. But, Doroshow dealt with a charging lien based on a contingency fee, and we held that the law firm was entitled to its agreed 40% contingent fee. Our decision in Doroshow did not limit the scope of charging liens in general. Rather, Doroshow demonstrates the application of this equitable right to a particular type of fee arrangement, and one fundamentally different than the one between Martha and Katten.
Here, Katten billed Martha regularly for its services based on the amount of time Katten‘s attorneys spent on the case and the attorneys‘ hourly rates. Katten billed Martha for approximately $3.5 million, of which Martha paid roughly $2.7 million. That Katten‘s services underlying the unpaid fees did not result in any benefit to the Sutherland Lumber Companies does not matter. In the case of hourly billing, unlike with a contingency fee, the total amount that the client is required to pay her lawyer is not based on the client‘s recovery. In Zutrau, the Court of Chancery considered the scope of a charging lien in the context of hourly billing and explained that "[i]t is no secret that litigation is expensive and that the costs of prosecution easily can exceed the recovery." The Court of Chancery found, "that the cost of prosecution conceivably could exceed the recovery does not excuse Zutrau from paying those fees." If, as here, an attorney has unpaid fees that are greater than the client‘s recovery, the attorney is entitled to a charging lien on the entire recovery. Moreover, the client remains obligated to pay her attorney any remaining unpaid fees. Martha was required to pay Katten its reasonable fees in accordance with their agreement whether she won or lost. Because Martha did not pay Katten for all of its services stemming from the litigation in which Katten produced the only benefits, Katten is entitled to the equitable right of a charging lien on the entire $275,000 fee award. Finding otherwise would lead to an inequitable result where attorneys with a claim for unpaid fees from litigation— where work had been billed on an hourly basis—could use the equitable right of a charging lien only to recover fees relating to the services that were directly connected to the litigation‘s beneficial results.
Like other contracts, contracts for the provision of legal services create incentives for parties, including clients. When a party, such as Martha, agrees to pay hourly fees to prosecute a complex case, she is assuring her counsel that it will not suffer the commercial damage of uncompensated services if it presses her claims as aggressively as she demands and as the law permits. To permit a client who is a party to such an agreement to escape a charging lien as if she made a strict contingency fee agreement limiting fees to a percentage of recovery is to judicially rewrite the contract at the expense of the attorney and to undermine the traditional purpose of a charging lien.
Tuesday, December 13, 2016
A law firm is entitled to prejudgment interest on its judgment against a former client, according to a decision of the New York Appellate Division for the First Judicial Department
The addition of prejudgment interest to plaintiff's award for unpaid legal fees under quantum meruit was mandatory (see CPLR 5001; Ash & Miller v Freedman , 114 AD2d 823 [1st Dept 1985]). Moreover, where plaintiff was required to seek permission to withdraw, it was required to continue to zealously represent defendants until the court granted its motion to withdraw (Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.16[d], [e]). Therefore, it was incorrect for the JHO to refuse to consider any value for plaintiff's work from the time it moved by order to show cause to withdraw. This is particularly true where plaintiff sought, but was denied, an adjournment of the trial date, and the court took six months to grant the application.
Friday, July 29, 2016
Correction: I erroneously reported that the subject of this order was a Florida attorney. I am advised that she is not licensed to practice law.
A Florida resident engaged in unauthorized practice in Ohio and has been fined and enjoined for the misconduct by the Ohio Supreme Court.
The three-count complaint alleged that Catalfina, who is not licensed to practice law in Ohio, engaged in the unauthorized practice of law by holding herself out to three individuals as an Ohio attorney. Catalfina initially sought and was granted leave to retain counsel and file an answer. However, to date she has not filed an answer or retained counsel. Following numerous attempts to engage Catalfina, relator filed a motion for default judgment on July 1, 2014, but Catalfina again failed to respond...
Catalfina has never been licensed to practice law in Ohio. We have previously held that “one who purports to negotiate legal claims on behalf of another and advises persons of their legal rights * * * engages in the practice of law.” Cleveland Bar Assn. v. Henley, 95 Ohio St.3d 91, 92, 766 N.E.2d 130 (2002). Also, representing that one is authorized to practice law in Ohio without such authorization, by directly or indirectly creating the misimpression of that authority through manipulation of credentials and strategic silence, constitutes the unauthorized practice of law. Casey at ¶ 11, citing Cleveland Bar Assn. v. Misch, 82 Ohio St.3d 256, 261, 695 N.E.2d 244 (1998). Thus, by purporting to negotiate Social Security disability claims on behalf of Lisa Kellett, accepting money to do so, and holding herself out as an attorney to Kellett, Catalfina engaged in the unauthorized practice of law. And by holding herself out as an attorney to Jason Gall, indicating that she would represent him in his divorce and collecting $150 from him purportedly for filing fees, Catalfina engaged in the unauthorized practice of law.
Kelly Catalfina is enjoined from engaging in the unauthorized practice of law, including performing legal services or directly or indirectly holding herself out to be authorized to perform legal services in the state of Ohio. We also impose a civil penalty against Catalfina in the amount of $6,000—$3,000 for each of the Kellett and Gall matters. Costs are taxed to Catalfina.
Thursday, July 28, 2016
The District of Columbia Court of Appeals rejected an attack on its rule compelling arbitration of attorney-client fee disputes.
It is well established that this court has statutory and inherent authority to regulate all aspects of the District of Columbia Bar. See Sitcov, supra, 885 A.2d at 295, 297. [Attorney] Ms. Stuart attempts to challenge this court’s inherent authority to regulate the Bar by highlighting D.C. Code § 11-1322 of the Court Reform Act — a section that discusses arbitration, but is unrelated to the subject of managing the District of Columbia Bar. However, what is more relevant to this court’s power to promulgate Rule XIII, is the language in the Court Reform Act that gives this court the express authority to “make such rules as it deems proper respecting the examination, qualification, and admission of persons to membership in its bar, and their censure, suspension, and expulsion.” D.C. Code § 11-2501 (a) (2012 Repl.) (emphasis added); see also D.C. Code § 11-2502 (2012 Repl.).
The reasonableness of an attorney’s fee is a disciplinary matter subject to censure, suspension, and expulsion, and thus a matter to be regulated by this court. See, e.g., In re Martin, 67 A.3d 1032, 1035 (D.C. 2013) (issuing an eighteen month suspension for, inter alia, charging a grossly unreasonable fee); see also D.C. R. Prof. Cond. 1.5 (a) (“A lawyer’s fee shall be reasonable”). It follows that the method of disputing attorney’s fees is also subject to regulation by this court given that a dispute over attorney’s fees may lead to censure, suspension, or expulsion should an attorney’s fee be deemed unreasonable...
Moreover, “clients are at a significant disadvantage in litigating” attorneyclient fee disputes, and Rule XIII “protects their ability to present meritorious claims and defenses, and . . . thereby fosters public confidence in the bar.” BiotechPharma, supra, 98 A.3d at 997. Accordingly, the language “make such rules as it deems proper” in the Court Reform Act establishes the inherent authority to regulate attorney-client fee agreements, and this court created Rule XIII because it deemed it proper to mandate arbitration in order to ensure a fair process for resolving disputes over attorney’s fees.
The mandatory arbitration provision is Constitutional
Ms. Stuart argues that by preventing lawyers from accessing the judicial system for fee disputes, Rule XIII denies them the First Amendment right of “access to the courts” and equal protection under the Constitution. However, lawyers are not a protected class under the Constitution, and as we stated in BiotechPharma, it is a privilege, not a right, to practice law and that privilege must be regulated for the protection of clients. Id. at 997. This critical goal would be defeated if arbitration of fee disputes was voluntary for attorneys, as Ms. Stuart argues it should be. Our holding, with respect to Ms. Stuart’s First Amendment equal access to the courts argument, is consistent with the court’s holding in BiotechPharma that Rule XIII does not violate an attorney’s Seventh Amendment right to a jury trial for fee disputes with clients. Id. at 995.
The order denying the attorney's motion to vacate the arbitration award was affirmed. (Mike Frisch)
Wednesday, July 13, 2016
The Rhode Island Supreme Court has affirmed the award of attorney's fees in a bitter and ongoing domestic case.
This case marks the second round of a bitter and protracted divorce dispute between the plaintiff, John J. Tworog (John), and his now-former wife, the defendant, Dolores M. Tworog (Dolores). Before this Court once again, John, who appears pro se, appeals from an order awarding Dolores attorneys’ fees, which were assessed in connection with a contempt finding that was affirmed by this Court in Tworog v. Tworog, 45 A.3d 1194, 1200 (R.I. 2012) (Tworog I); a judgment awarding Dolores $69,000, plus statutory interest and costs; and the denial of his motion for a new trial.
Before this Court, John—a former member of the Rhode Island bar—cites multiple grievances with respect to the handling of his case in the Family Court and to the opinion of this Court in Tworog I. The papers John filed with this Court consisted primarily of an aggressive, rambling, and colorfully-worded assault on the character of one of the Family Court justices who presided over his case, as well as on Dolores, her adult son, and her attorney. The assignments of error were muddled and difficult to untangle, and the papers contained multiple passing references to purported error that were not developed in any meaningful way.
It is not the function of the Supreme Court to decipher arguments that a party has failed to develop lucidly on its own...
Our careful review of the record reveals that the trial justice based the award of attorneys’ fees on the finding of contempt that was affirmed by this Court in Tworog I. Dolores presented expert testimony regarding the reasonableness of her attorney’s billing rate and the hours he spent on the case, and, in John’s own motion for attorneys’ fees, John “adopt[ed] the hours proposed by [Dolores’s attorney]” as the number of hours he expended representing himself on the matter. In light of the ample evidence that existed in support of the reasonableness of the award, the Family Court justice did not abuse his discretion.
This earlier opinion in the litigation notes that the plaintiff filed for divorce on Valentine's Day. (Mike Frisch)
Monday, July 11, 2016
The Connecticut Appellate Court upheld judgment against a law firm LLC but not an individual attorney in an action brought by a court reporting services for non-payment of its bill for three depositions in a federal court action.
The court expressed concern over the defendant attorney's reliance on purported New York law
Perhaps more troubling than the lack of legal analysis is the apparent mischaracterization of New York law. According to the defendants, in all judicial departments of the Appellate Division of the New York Supreme Court, with the exception of the First Department, the law is that the client is responsible for court reporting costs unless those costs are specifically acknowledged and assumed by the attorney. In the First Department, the defendants state that the responsibility for payment lies with the attorney unless disclaimed. The case relied on by the defendants, however, in support of their proposition that, in all but the First Department, an attorney’s client generally is responsible for paying for court reporting services, Sullivan v. Greene & Zinner, P.C., 283 App. Div. 2d 420, 723 N.Y.S.2d 869 (2001), is no longer good law. Its holding has been superseded by New York General Business Law § 399-cc (McKinney 2012), which is now the applicable law in all New York jurisdictions. Section 399-cc provides in relevant part: ‘‘Notwithstanding any other provision of law to the contrary, when an attorney of record orders or requests either orally or in writing that a stenographic record be made of any judicial proceeding, deposition, statement or interview of a party in a proceeding or of a witness related to such proceeding, it shall be the responsibility of such attorney to pay for the services and the costs of such record except where . . . the attorney expressly disclaims responsibility for payment of the stenographic service or record in writing at the time the attorney orders or requests that the record be made.’’ (Emphasis added.) As previously discussed, the court found that the defendants failed expressly to disclaim responsibility for payment at the time services were requested. Accordingly, even if the court had applied New York law as the defendants requested, it is unlikely to have altered the court’s decision in this case.
But only the firm is liable
Our review of the record and the findings of the trial court reveals no evidence indicating that [attorney] Lovejoy acted in his individual capacity rather than as a member of the law firm. Although each of the deposition notices was signed by Lovejoy, his signature appears after the name of the law firm, which is identified as the entity representing Ensign Yachts and, therefore, the law firm noticing the deposition. Accordingly, to the extent that the deposition notice represents an offer to enter into a contractual agreement, the evidence tended to show that offer was extended to the plaintiff by the law firm, not by Lovejoy individually. The court in its decision makes no factual findings on which it could have imposed individual liability. The court’s decision is completely silent as to whether the court believed that Lovejoy had acted in such a way as to suggest he was contracting in his individual capacity or that it was appropriate under the facts of this case to somehow ‘‘pierce the corporate veil.’’ The plaintiff states that Lovejoy is a sole practitioner and that he and the law firm are ‘‘one and the same.’’ That fact alone, however, simply cannot support the imposition of individual liability in contravention of § 34-133. Because there appears to be insufficient evidence to support the court’s decision to hold Lovejoy personally liable for acts taken on behalf of his law firm, that decision cannot stand.
Wednesday, July 6, 2016
Experience teaches us that a typical response when a lawyer sues a former client for an unpaid fee is a counterclaim for legal malpractice.
That counterclaim effort failed in a case before the the New York Appellate Division for the First Judicial Department.
The representation was of a client married to Celeste Holm, recounted in this New York Times story.
The court here
Plaintiff law firm Gallet Dreyer & Berkey represented defendant Basile in connection with the December 21, 2009 settlement of a Surrogate's Court action brought in 2004 by his spouse, Celeste Holm, to revoke an irrevocable trust that she created in 2002. In this action brought by the law firm against Basile to recover outstanding legal fees, Basile has counterclaimed for attorney malpractice, taking the position that due to poor advice, factual omissions, and misinformation, he was persuaded to sign the stipulation in Holm's action to revoke her trust, which stipulation caused him (and Holm) to forfeit valuable assets and the right to pursue valuable claims without their receiving any corresponding benefit.
To sustain a cause of action alleging legal malpractice, a plaintiff must establish not only that the defendant "failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession," but also that "the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages" (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft LLP, 26 NY3d 40, 49 [internal quotation marks omitted]). "An attorney's conduct or inaction is the proximate cause of a plaintiff's damages if but for the attorney's negligence the plaintiff would have succeeded on the merits of the underlying action, or would not have sustained actual and ascertainable damages" (id. at 50 [*2][internal quotation marks and citation omitted]). "[M]ere speculation of a loss resulting from an attorney's alleged omissions . . . is insufficient to sustain a claim for legal malpractice" (Markard v Bloom, 4 AD3d 128, 129 [1st Dept 2004], lv denied 2 NY3d 706 ).
As a signatory to the settlement, Basile certainly had the right to be fully informed of the facts and provided with appropriate advice by his attorney before agreeing to its terms, and we cannot conclude as a matter of law on this record that the law firm's advice to Basile was complete and free of incorrect information. However, nothing in Basile's submissions shows that but for that claimed negligence, he "would not have sustained actual and ascertainable damages" (Nomura, 26 NY3d at 50 [internal quotation marks omitted]).
The irrevocable trust was created and funded with Holm's assets before Basile's marriage to Holm. Basile had no current interest in the trust's assets at the time of the settlement; he had, at best, a potential interest in those assets if the trust were to be set aside and the assets became part of Holm's estate, entitling Basile to an elective share. Similarly, the claims addressed in the stipulation regarding other, non-trust assets also concerned property that belonged to Holm alone, and Basile had no present possessory right to them. Notwithstanding Basile's residuary interest in Holm's eventual estate, and the possibility that if Holm reacquired property that was previously transferred she would gift him a present interest, he had no established right to make any disposition of that property, or to claim ownership of any portion of that property, while she was alive. His lack of a present possessory interest in the property at issue severely restricts any rights to claim that the law firm's alleged failures proximately caused him to experience a financial loss in relation to those properties.
More importantly, Basile has not presented an evidentiary showing supporting a claim to "actual and ascertainable damages," as Nomura requires (26 NY3d at 50 [internal quotation marks omitted]). In cases presenting a valid claim of legal malpractice, the claimed "actual and ascertainable damages" have been clearly calculable (see e.g. Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438 ). In contrast, summary judgment dismissing the legal malpractice claim has been granted where the asserted damages are vague, unclear, or speculative (see Bellinson Law, LLC v Iannucci, 102 AD3d 563, 563 [1st Dept 2013]). Here, Basile essentially speculates that the information he lacked would have provided him with better leverage in negotiations, but he fails to show exactly how, if counsel had properly informed and advised him, the outcome of the litigation would have been more favorable to him. This is particularly so since the settlement netted him a distribution in excess of $2,000,000, as compared to the $25,000 he would have received under the trust alone, in the absence of the stipulation. The submissions simply do not justify a conclusion that Basile would have achieved a more favorable result in the absence of counsel's claimed mistakes.
Plaintiff's motion for summary judgment dismissing the counterclaim and third-party complaint brought against it by defendant Frank Basile was therefore properly granted.
Vanity Fair published this story after Ms. Holm's passing. (Mike Frisch)
Friday, July 1, 2016
The breakup of a two-person law firm well before the turn of the century is still working its way through the District of Columbia courts.
And its not over yet as reflected by a remand ordered yesterday by the Court of Appeals.
After the second trial held in this matter, a jury sided with appellant Sarah Landise and against appellee Thomas Mauro, finding that the two had entered into a partnership to practice law in the District of Columbia, that Ms. Landise was entitled to fifty percent of the partnership’s profits and losses, and that Mr. Mauro breached his fiduciary duties by converting partnership funds. Because the trial court decided that the case was sufficiently complex to merit bifurcation, the court limited the jury to the question of liability and ordered an accounting to determine the damages. Even though the court appointed a special master to conduct a final accounting of the partnership funds in June 2003, that accounting never happened. A string of conflicts and misunderstandings between the parties got in the way of the accounting, and each party blames the other for this failure. The case languished for over a decade before the trial court granted Mr. Mauro’s Motion To Dismiss for Failure To Prosecute in August 2013.
Ms. Landise prevailed here.
This case began in 1992, when Sarah Landise brought suit against Thomas Mauro, alleging breach of an oral partnership agreement, conversion of partnership funds, and breach of fiduciary duty. The complaint alleged that Ms. Landise and Mr. Mauro had formed a law partnership in the District of Columbia, and the complaint requested an accounting of the partnership’s assets. A jury trial was held, at which Mr. Mauro argued that there was no such partnership, and that there could be no partnership because Ms. Landise was not licensed to practice law in the District. See Landise v. Mauro (Landise I), 725 A.2d 445, 445–47 (D.C. 1998). The jury at the first trial sided with Mr. Mauro, finding that Ms. Landise and Mr. Mauro had not entered into an oral partnership agreement, and that Ms. Landise had engaged in the unauthorized practice of law in the District of Columbia. Id. at 446.
A division of this court reversed and remanded for a new trial. Id. at 446– 47. The Landise I court clarified that Ms. Landise’s lack of a license to practice law in the District (Ms. Landise was licensed only in Virginia) did not preclude her claim for breach of partnership against Mr. Mauro, and the court held that— because the evidence of partnership was “overwhelming”—the jury’s confusion about the legal consequences of Ms. Landise’s unauthorized practice might have infected the jury’s verdict...
At trial two
A second jury trial was held, before Judge William M. Jackson, in July 2000. This time it was Mr. Mauro who requested an accounting, while Ms. Landise took the position that the amount of damages was not overly complicated and could be determined by the jury. While Ms. Landise identified eight payments totaling $444,190.33 by Mauro & Landise clients that, she claimed, Mr. Mauro deposited into his personal bank account, Mr. Mauro argued that the alleged partnership actually had more than eighty open cases, and so any calculation of damages would be sufficiently complex to require an accounting.
The matter languished for many years but dismissal was not appropriate
We are mindful, of course, that the partnership in this case dissolved many years ago, and that the difficulty of rendering an accurate accounting in light of this fact informed the trial judge’s decision to “bite the bullet” and dismiss the case. But any questions concerning the feasibility of an accurate accounting—including whether the surviving partnership documents provide the necessary information—are properly left to the special master in the course of performing her duties on remand.
Details of the partnership and its breakup can be found in the court's 1998 decision. (Mike Frisch)
Wednesday, June 1, 2016
The Utah Court of Appeals held that a law firm failed to perfect a lien on settlement proceeds after a partner and the case departed
Thomas D. Boyle represented Dawn Woodson in a wrongful death action while he was employed by the law firm Clyde Snow & Sessions PC (Clyde Snow) and then later by Prince Yeates & Geldzahler (Prince Yeates). After six years of litigation the parties reached a settlement. Clyde Snow asserted a lien on a portion of the settlement funds for attorney fees. Prince Yeates interpleaded a portion of the settlement, and the district court awarded those funds to Clyde Snow. Boyle appeals the district court’s order awarding the money to Clyde Snow. Because we determine Clyde Snow did not properly intervene, we conclude the district court lacked jurisdiction to award it attorney fees. We therefore reverse.
In 2007, fifteen-year-old Caleb Jensen died while participating in a wilderness therapy program. His mother, Dawn Woodson, retained Clyde Snow to represent her in a wrongful death action. Boyle was lead counsel on the case. Woodson signed a contingency-fee agreement specifying that Clyde Snow would retain forty percent of any recovery...
In June 2010, three years after the case began, Boyle left Clyde Snow and joined Prince Yeates, and Woodson opted to have her case follow him there. Clyde Snow then filed a notice of its attorney lien. While he was with Prince Yeates, Boyle continued to represent Woodson until the case settled.
Settlement was reached in 2013.
On the merits
An attorney seeking to enforce an attorney lien must do so either "by filing a separate legal action‛ or ‚by moving to intervene in a pending legal action." Utah Code Ann. § 38-2-7(4)(a) (LexisNexis 2014). This section does not confer an unconditional right to intervene. See Bishop v. Quintana, 2005 UT App 509U, para. 5. Instead, a person desiring to intervene must submit a "timely application" and "shall serve a motion to intervene upon the parties as provided in Rule 5."
...Here, Clyde Snow did not file a timely motion to intervene. First, the only filing on behalf of Clyde Snow submitted before the parties’ settlement was a notice of Clyde Snow’s lien. After the parties’ settlement but before the court dismissed Woodson’s claims, Clyde Snow filed a restated notice of its attorney lien and an objection to the parties’ motion to dismiss the case, which stated that "Clyde Snow reserved its statutory right to intervene." But Clyde Snow never actually moved to intervene in the pending action.
Second, even if we construed Clyde Snow’s objection as a deficient attempt to intervene, it was not filed in a timely fashion.
The court also expressed concern about the danger presented to the client's interests
After the defendants expressed their concerns and objections to Clyde Snow’s participation, the court asked if anybody had ‚a strong objection‛ to keeping the case open, and no one replied. The court then decided to keep the case open for the sole purpose of resolving Clyde Snow’s attorney lien issue.
In doing so, the court inappropriately allowed Clyde Snow to derail resolution of the case by objecting to the parties’ stipulated agreement to dismiss Woodson’s claims. The court continuously referenced Clyde Snow and Boyle as parties even though neither had intervened as a party in this case. Although the actual parties did not reply when the court asked if anyone strongly objected to Clyde Snow’s participation, any further objections from the defendants would have been futile. Further, the court’s decision put the actual parties in an untenable situation: they either had to object to Clyde Snow’s presence at the risk of transforming Clyde Snow from non-party status to that of a party or refrain from objecting at the risk of having the court rule in a manner contrary to their interests.
Tuesday, May 17, 2016
Dan Trevas reports a case decided today by the Ohio Supreme Court
When attorney-fee billing statements with detailed information about the tasks undertaken by a law firm representing a city are intertwined with summaries of the legal work performed, the detailed information is not a public record, the Ohio Supreme Court ruled today.
The Supreme Court voted 5-2 to affirm a Ninth District Court of Appeals decision to release redacted copies of invoices from a law firm representing Avon Lake to James E. Pietrangelo II. The records are connected to pending litigation between Avon Lake and Pietrangelo. In a per curiam decision, the Court majority reasoned that Pietrangelo may acquire information useful in his litigation strategy against the city if provided more details than what the Ninth District permitted to be released.
In a dissenting opinion, Justice Sharon L. Kennedy wrote that only the narrative summary portion of the bills describing the work the firm did can be withheld and that Pietrangelo is entitled to more information as well as damages from Avon Lake.
Detailed Information Sought
Pietrangelo requested from the city and its law director the invoices from a law firm for services it rendered concerning his lawsuit. The city provided copies of invoices with the name of the firm, the general matter for which services were provided, the date of the invoice, the total fees billed for the period, and itemized expenses.
The city redacted the remaining information on the invoices citing exemptions for attorney-client privilege and attorney-work product. The information that was redacted included narrative descriptions of the particular legal services rendered, the name of each attorney in the firm providing services along with the service provided, the time spent, the billing rate, the total number hours billed, and the total fee attributed to each attorney.
Pietrangelo filed a writ of mandamus with the Ninth District to compel the city to provide unredacted invoices and requested statutory damages and attorney fees. Pietrangelo and Avon Lake both filed for summary judgment, but the Ninth District determined it could not side with a party without more information and ordered the city to file unredacted copies of the billing statements for the judges to review under seal.
After review, in March 2015 the Ninth District concluded the city disclosed all the records not exempt from disclosure by the Ohio Public Records Act, which is R.C. 143.43, except for one portion. The Ninth District found the part of the invoice titled “professional fee summary,” that described the hours, rates, and money charged for services was not exempt. It ordered the city to provide Pietrangelo with copies of the billing statements that included the professional fee summary.
The Ninth District denied Pietrangelo’s request for the fully unredacted records plus damages and attorney fees. He appealed to the Supreme Court, which agreed to hear the case.
Extent of Attorney-Client Privilege at Issue
Citing its 2011 State ex rel. Dawson v. Bloom-Carroll Local School Dist. decision, the Court’s opinion explains that narrative portions of itemized attorney billing statements containing descriptions of legal services are protected by attorney-client privilege and are not public records.
Pietrangelo argued that based on the Court’s 2012 State ex rel. Anderson v. Vermillion decision he is entitled to all the dates legal services were performed along with the hours and rates of services, which is more than what is provided in the professional fee summary. The Court in Anderson stated that “the general title of the matter being handled, the dates services were performed, and the hours, rates and money charged for the services,” on an attorney billing statement need to be disclosed.
The Court explained that Anderson was the former mayor of Vermillion and was seeking the billing statements regarding the legal services provided to the new mayor. His entire request was denied. The Court ordered Vermillion to turn over all of the billing statements, ruling only the narrative portions were exempt from the public records act by attorney-client privilege.
Avon Lake argued the situation with Pietrangelo is similar to the Dawson case where a parent sought billing statements for legal services provided to the school district regarding pending litigation between the district, the parent and her children. The district provided summaries with the attorney’s name, invoice total, and the matter involved, but withheld the actual invoices because they contained confidential information.
The Court allowed the district to withhold the invoices because the information in the invoices was “either covered by attorney-client privilege or so inextricably intertwined with privileged materials as to also be exempt from disclosure.”
“Like Dawson, the records that Pietrangelo seeks relate to the pending litigation between the parties. If disclosed, Pietrangelo may acquire information that would be useful in his litigation strategy against the city, whereas in Anderson, any harm from disclosure of attorney-client communication was remote and speculative,” the Court stated. “To the extent that Pietrangelo requests the dates, hours, and rates not identified in the professional-fee summary, they are inextricably intertwined with the narratives of services that are privileged materials. Such information is exempt from disclosure.”
Pietrangelo also sought $1,000 in statutory damages and attorney fees because the Ninth District found the city did not fully comply with the public records law. The Court affirmed the Ninth District’s denial of Pietrangelo’s request because Avon Lake reasonably believed it was entitled to withhold the information it did.
Chief Justice Maureen O’Connor and Justices Paul E. Pfeifer, Terrence O’Donnell, Judith Ann Lanzinger, and William M. O’Neill joined the opinion.
More Disclosure Required, Dissent Maintains
In her dissent, Justice Kennedy stated she would order the redaction of only the narrative services information and release all the other information on the billing statements to Pietrangelo in accordance with the Ohio Public Records Act.
She further disagreed with the majority’s conclusion that the relevant distinction between Dawson and Anderson regarding what information is subject to disclosure is whether litigation is pending between the record requestor and the government entity. Instead, Justice Kennedy wrote that the fact the records requestor is involved in litigation against the government body should have no bearing on whether the records are public.
“Whether a public-records requestor and a government entity are engaged in litigation is irrelevant to the question of whether the information in an itemized attorney-fee billing statement is privileged and exempt from disclosure. Instead, our case law mandates the proper focus is on the information sought and whether that information is privileged,” she wrote.
The relevant distinction between the two cases was that the school board in Dawson reduced the nonexempt information to a summary and released it, whereas the city in Anderson denied the request and failed to provide an alternative record.
Justice Kennedy recognized that the narrative portions of a billing statement containing descriptions of legal service are protected by the attorney-client privilege and not subject to disclosure. She explained that the billing statements at issue contain summary information on the first two pages, and that all subsequent pages contain four independent columns divided into the categories of date, name, services, and hours. Each billing statement concluded with the total number of hours invoiced, a professional fee summary, disbursements and expenses, and a total invoice amount.
She wrote the majority’s reliance upon Dawson to conclude that the date, name, and hours information was inextricably intertwined with the narrative of the services was disingenuous. She noted that Dawson offered little discussion of how the billing statements were constituted, whereas the format used in the statements to Avon Lake separated the information about the attorneys providing the services and the hours billed so that they “are not intertwined with the narrative services column.”
Justice Kennedy reasoned that the ability to redact the narrative services column mandated all remaining portions of the billing statements be released. By affirming the appellate court's decision not to release the remaining non-exempt portions of the billing statements the majority created a new “redundancy” exemption not authorized by the General Assembly she concluded.
Justice Kennedy would have also granted Pietrangelo damages because after Anderson decision it should have been clear to Avon Lake what information in a billing statement was privileged and what must be disclosed.
“Subsequently, no well-informed public office could reasonably believe that any portion of an attorney-fee billing statement, other than the narrative description of the legal services performed, is subject to redaction,” she wrote.
Justice Judith L. French joined the dissent.
Thursday, May 12, 2016
An attorney may be compensated for legal work done to secure fees in a guardianship matter, according to a decision issued today by the District of Columbia Court of Appeals.
Appellant, Bruce E. Gardner, Esq., asserts in this appeal that he is "entitled to compensation from the Guardianship Fund for the time he spent protecting his rights to compensation in appeals to this Court that are related to his appointment as guardian and the guardianship duties he performed." He seeks a remand to the Superior Court for that court to reconsider his fee petition and "to determine the reasonableness of the compensation" he requested for his appellate work. For the reasons discussed below, we agree that the Superior Court is authorized to approve compensation to Mr. Gardner for his fee-related appellate litigation work relating to his service as guardian — and, if the ward‟s assets are depleted, to approve payment to Mr. Gardner from the Guardianship Fund — even if (as appellee District of Columbia contends) "the fee-related litigation was of no benefit to the [particular] ward." We remand to the Superior Court the issue of Mr. Gardner‟s entitlement to compensation for his appellate work.
Associate Judge Thompson authored the unanimous opinion. (Mike Frisch)
The Washington State Court of Appeals has held that a trial court exceeded its authority in reducing an award of wages to a former in-house counsel
Following a month-long jury trial, attorney Geoffrey Chism was awarded $750,000 for breach of two compensation contracts by his former employer, Tri-State Construction, Inc., and exemplary damages for unlawful wage withholding. The trial court then dramatically reduced Chism's recovery, premised on findings that Chism violated Washington's Rules of Professional Conduct (RPCs) during his time as Tri-State's in-house general counsel. By ordering disgorgement of Chism's wages based on novel interpretations of several RPCs, the trial court exceeded the disciplinary authority delegated to it by our Supreme Court. Moreover, the trial court disregarded the strong legislative policy preference in favor of payment of earned wages by failing to even acknowledge that, unsupported by precedent, it was ordering disgorgement of an attorney's wages, as opposed to an attorney's fee. Accordingly, we reverse the trial court's challenged rulings and remand the cause for entry of judgment consistent with the jury's verdict.
The question presented arises at the intersection of judicial power over the practice of law and legislative power over the conditions of employment. Our Supreme Court has offered some guidance about resolving such situations, stating, "While we should jealously protect our prerogatives, if the legislative power is not limited by the constitution, it should be unrestrained." Demopolis, 103 Wn.2d at 65. As previously stated, in the area of attorney wages, the Supreme Court has taken no action, but the legislature has enacted a broad policy in favor of the payment of employee wages. Given this stark contrast, we defer to the strong legislative policy in this area.
This conclusion is consequential for how we view the application of the disgorgement sanction to attorney wages. As has been described, disgorgement does not require proof of either causation or damage, only misconduct. This is unlike other, related claims, including breach of fiduciary duty and restitution, both of which require such proof. Because there is no standard measure for a disgorgement order, nor a requirement that it be imposed as a compensatory measure, it poses a significant threat to the legislative policy in favor of the consistent payment of employee wages.
This threat is illustrated by the trial court's order in this case. Herein, Tri-State chose to pursue only disgorgement from Chism, not a separate claim for damages or restitution. Accordingly, Tri-State was never required to prove that it suffered any injury as a result of Chism's alleged misconduct. Nevertheless, the trial court ordered Chism to disgorge $550,000 in wages (plus another $550,000 in exemplary damages for wage withholding).
The trial court exceeded its disciplinary authority by ordering Chism to disgorge a significant portion of the wages otherwise owed to him without either acknowledging that itwas disgorging wages, not fees, or accounting for the strong legislative preference in favor of employers paying earned employee wages. Therefore, the trial court's order was improper as a matter of law.
Thanks to Alan Kabat for sending this opinion to us. (Mike Frisch)
Wednesday, May 11, 2016
A divorcing spouse was properly granted summary judgment in claims brought against her by her deceased husband's attorney, according to a decision of the New York Appellate Division for the First Judicial Department.
Beginning in September 2008, the plaintiff represented Daniel Sitomer (hereinafter the husband) in a matrimonial action commenced by his wife, Sheila Sitomer (hereinafter the defendant), pursuant to a retainer agreement dated September 15, 2008. The retainer agreement stated that the plaintiff would provide the husband with an itemized statement of charges every 60 days, and in the event that he discharged the plaintiff, or the plaintiff was relieved, the plaintiff reserved the right to seek to have a charging lien fixed "on the proceeds realized by you from the litigation."
In January 2009, the plaintiff moved pursuant to CPLR 1201 and 1202 to have a guardian ad litem appointed for the husband on the ground that "he had proven to be incapable to assist us so as to adequately defend his rights in [the] matter." The husband hired another attorney to oppose that application and paid that attorney over $32,000 in legal fees, and sought to discharge the plaintiff as his attorney. On June 5, 2009, the court relieved the plaintiff as counsel for the husband, at the husband's request.
The plaintiff moved to fix its attorneys' fees, and the husband opposed the motion on the ground that the plaintiff never provided him with periodic invoices every 60 days pursuant to their retainer agreement. Nevertheless, on August 24, 2010, the plaintiff and the husband entered into a so-ordered stipulation, fixing the husband's obligation for legal fees at the sum of $100,000, to be satisfied by a charging lien on "any and all equitable distribution proceeds" following satisfaction of the first $50,000 of a charging lien in favor of the husband's former attorney. The stipulation provided that in the event that the plaintiff provided no further services to the husband, the "charging lien shall serve in full satisfaction for all the [plaintiff's] claims for fees and services."
In September 2010, the husband died, and the divorce action abated. Therefore, there were no equitable distribution proceeds to satisfy the plaintiff's charging lien. In May 2011, the plaintiff commenced the instant action against the defendant, seeking to recover $100,000 in legal fees under a theory of common-law necessaries.
The court below properly ordered summary judgment
Under the common-law doctrine of necessaries, a spouse who receives necessary goods or services is primarily liable for payment. A creditor seeking to recover a debt against the nondebtor spouse must demonstrate that the primary debtor was unable to satisfy the debt out of his or her own resources, that necessaries were furnished on the nondebtor spouse's credit, and that the nondebtor spouse has the ability to satisfy the debt (see Gilberg v Lennon, 212 AD2d 662, 663; Medical Bus. Assoc. v Steiner, 183 AD2d 86). Legal services provided to a spouse in a matrimonial action have been considered necessaries (see Jordan v Jordan, 226 AD2d 349, 349; D'Agostino v Genovese, 190 AD2d 773, 774; Fernandes v Rucker, 186 AD2d 171, 172).
Here, the defendant established that the plaintiff's services were not furnished on her credit. Rather, the services were furnished in the expectation of "the proceeds" of the litigation, specifically articulated in the charging lien. Since the action abated, there were no proceeds of the litigation. Further, it is clear from this record that, although the husband may have had sufficient resources to pay the plaintiff, which included marital assets appropriated by him and court-ordered spousal support, he was unwilling to voluntarily pay the plaintiff, owing to their adversarial relationship.
In opposition, the plaintiff failed to raise a triable issue of fact.
Thursday, February 25, 2016
When a client receives and does not object to an invoice for described services at a stated hourly rate, the attorney suing to collect on the bill is entitled to summary judgment if the services were performed.
The New York Appellate Division for the Second Judicial Department holds
The plaintiff [lawyer] established its prima facie entitlement to judgment as a matter of law against the defendant on the cause of action alleging breach of contract by submitting evidence of the existence of a contract, the plaintiff's performance under the contract, the defendant's breach of the contract, and resulting damages.
The plaintiff also established its prima facie entitlement to judgment as a matter of law on the cause of action to recover on an account stated for legal fees by submitting copies of its invoices for professional services setting forth the billable hours expended and identifying the services rendered, and demonstrating that the defendant received and retained the invoices without objecting to them within a reasonable time, and made partial payment on the invoices. (citations omitted)
the defendant's unsupported and conclusory allegations were insufficient to raise a triable issue of fact in light of, inter alia, the evidence that he made partial payments on the account.
Tuesday, November 17, 2015
A decision issued today by the North Carolina Court of Appeals
This case presents as an issue of first impression the question of whether an attorney who enters into a business transaction with a client as compensation for a legal representation can be barred from enforcing the terms of their agreement based on the attorney’s failure to comply with the explicit requirements of Rule 1.8(a) of the North Carolina Rules of Professional Conduct.
The attorney represented the client in a patent matter. After a period of time, he took an interest in the client's patent.
On 19 March 2010, shortly after the Notice of Allowance was issued, Priest and Coch met to discuss entering into an agreement (“the Agreement”) regarding how to generate revenue through licensing the patent. Given Coch’s concerns that he and IP were financially unable to pay the same rate Priest had charged to file the patent application, the two men also discussed how best to compensate [attorney] Priest for the work his firm had already performed without pay since 2009. Eventually, they agreed in principle that going forward, Priest and his law firm would continue to prosecute and maintain IP’s patent and pay 25% of the actual costs of doing so, with the remainder split evenly between Coch, Knight, and Smith, in return for Priest receiving 25% of the proceeds Priest helped to generate from the patent. Coch’s contemporaneous emails to Knight and Smith demonstrate that Coch believed the Agreement’s terms would make Priest “an equal partner in pushing the Patent forward” based on the rationale that “there is still work to be done, of which I don’t know anything and [Priest] is willing to do it for his equity portion.” At the end of the meeting, Priest agreed to draft the Agreement and send it to Coch for his input and signature.
The attorney sued to enforce the eventual agreement.
we agree with the trial court’s observation that the Rule itself reflects the special obligation the attorneys of this State have when dealing with their clients, and we share the trial court’s conclusion that, for the sake of maintaining the public’s trust, attorneys should be held to abide by Rule 1.8(a)’s explicit requirements as a condition of their own recovery when that recovery is based on business transactions with their clients. While this may be an issue of first impression in our State, we note that courts in other jurisdictions have reached the same conclusion as we reach here.
The court affirmed the lower court judgment refusing to enforce the agreement due to the ethical violation. The attorney also failed to recover on a quantum meruit theory. (Mike Frisch)
Wednesday, October 28, 2015
An opinion from the Minnesota Supreme Court
Appellant Stowman Law Firm, P.A. (Stowman), which represented a client pursuant to a contingent-fee agreement, voluntarily withdrew from the representation of the client when efforts to settle the case failed. The client retained substitute counsel who then successfully settled the case. Stowman brought an action to recover in quantum meruit the value of the services provided prior to the withdrawal. Following a bench trial, the district court found that Stowman failed to establish good cause for withdrawal and, therefore, was not entitled to recover in quantum meruit. The court of appeals affirmed. We conclude that an attorney may withdraw from a contingent-fee agreement with or without cause, provided that the withdrawal satisfies the rules of professional responsibility. But the attorney must establish that the withdrawal is for good cause in order to recover in quantum meruit the reasonable value of the services rendered prior to withdrawal. Because Stowman failed to establish good cause, we affirm.
We conclude that an attorney who withdraws for good cause from representation under a contingent-fee agreement may recover in quantum meruit the reasonable value of services rendered prior to withdrawal, provided that the attorney’s recovery in the event of withdrawal for good cause is not otherwise addressed in the contract and the attorney satisfies the ethical obligations governing withdrawal from representation.
Saturday, October 24, 2015
An opinion authored by Judge Janice Rogers Brown of the United States Court of Appeals for the District of Columbia Circuit
“Hell hath no fury like a lawyer scorned.” Tom Gordon, Hell Hath No Fury Like a Lawyer Scorned, WALL ST. J., (Jan. 28, 2015), http://www.wsj.com/articles/tom-gordon-hell-hath-no-furylike-a-lawyer-scorned-1422489433. The problem with scorning a lawyer is that lawyers tend to sue. So it is here. A law firm based in the District of Columbia, Bode & Grenier, LLP, provided legal services to three Michigan-based companies owned and managed by Carroll Knight (“appellants”). More than ten years into the relationship, appellants stopped paying the bill. The predictable result? Litigation. The law firm prevailed in the district court, winning a judgment for $70,000 in overdue legal fees—plus $269,585.19 in legal fees for having to litigate over $70,000 in legal fees. We affirm the district court.
The law firm represented the client from 1994 to 2008
advising on taxation, gasoline contracts, petroleum futures and various regulatory enforcement and litigation matters. Throughout most of the relationship, no written agreement governed the terms of legal representation or manner of payment. Appellants paid the law firm monthly based on oral agreements...
On November 25, 2005, catastrophe struck. Approximately 100,000 gallons of petroleum spilled out of holding tanks owned by appellants in Toledo, Ohio. Appellants stopped the leak, but were powerless to stop the flood of regulatory actions that followed in its wake. A month after the spill, Knight called Bode & Grenier’s managing partner, William Bode, to request the firm’s services. The firm soon tackled regulatory enforcement proceedings in Ohio, a lawsuit in federal court in Ohio, and counseled the company on other regulatory issues. As before, the firm billed appellants monthly.
The suit came when the fees went unpaid.
The court applied D.C. law
Here, the factors weigh in favor of applying D.C. law, not Michigan law. The first two factors—the place of contracting and place of negotiation—are inconclusive. Mr. Knight negotiated from Michigan, and Bode & Grenier from D.C. Likewise, the fifth factor—domicil—weighs evenly on both ends. In a dispute over a service contract, no factor matters more than the place of performance.
Nearly all of the legal services at issue were performed in D.C. by attorneys licensed to practice in D.C. See Appellee Br. 28–30. While the representation required occasional travel outside D.C. (mainly to Ohio), we find no evidence suggesting the firm’s attorneys routinely practiced in Michigan. The firm managed the representation from its sole office, located in D.C. The fourth factor—the location of the subject matter of the contract— supports applying D.C. law for the same reasons. This contract called for legal services managed and performed in D.C.
As a result, the law firm was able to recover fees for representing itself in this litigation. (Mike Frisch)
Wednesday, October 14, 2015
An attorney must return $95,000 in fees paid by an estate, according to a recent decision of the North Dakota Supreme Court.
In August 2013, the beneficiaries of the Estate petitioned for court determination of reasonableness of fees and for settlement and distribution of estate. The petition objected to the fees charged by Magers and [attorney] Widdel for their services to the Estate and Trust. In September 2014, the district court found Magers had breached her fiduciary duty in several ways, which included paying Widdel large fees without question. The court also found administration of the Estate and Trust was not complicated and Widdel's fees were unreasonable in light of the nature of the work performed. The court ordered Widdel to return attorney's fees in the amount of $95,000.
The district court found that the estate was not complicated and that Widdel did not handle the litigation.
The attorney's "corporate veil" had been properly pierced
When a client engages the services of a lawyer, whether that lawyer is acting through the form of a professional organization or otherwise, the client has the right to expect preservation of a highly confidential relationship rooted in confidence, integrity, and professionalism. Such are the requirements expected of an officer of the court. Under the circumstances of this case, it would be inappropriate for Widdel to be allowed to hide behind the corporate veil and thus escape the professional and ethical requirements demanded by his profession.
And the district court properly found the fees unreasonable
In this case the district court considered the evidence and testimony before it and determined the fees collected by Widdel in his service to the Estate, as an attorney, were unreasonable. The district court did not abuse its discretion in determining the fees were unreasonable. The district court did not misinterpret or misapply the law in holding Widdel personally responsible for the unreasonable fees he charged.
Friday, August 21, 2015
An attorney prevailed in both a suit for legal fees and in dismissal of counterclaims of the former client in an opinion of the New York Appellate Division for the Second Judicial Department.
Here, the plaintiffs established, prima facie, their entitlement to judgment as a matter of law on the cause of action alleging breach of contract by submitting certain email exchanges between the parties, which demonstrated, "[b]y the plain language employed," that the plaintiffs made an offer to represent Landmark in each matter for a certain fee, and that Landmark accepted that offer (Kasowitz, Benson, Torres & Friedman, LLP v Duane Reade, 98 AD3d at 405). In one matter, the parties agreed that the plaintiffs would represent Landmark at a rate of $350 per hour. The invoices documenting the number of hours worked and the amount of disbursements paid out demonstrated, prima facie, the plaintiffs' entitlement to legal fees in the sum of $4,760 in connection with the services rendered for that matter. In the second matter, the agreement was for an initial retainer fee of $5,000, plus a 25% contingency fee with respect to any sums that Landmark ultimately recovered in that matter. Since it is undisputed that, shortly after the commencement of an action in connection with the second matter, Landmark entered into a stipulation of settlement whereby Landmark recovered $40,000, the plaintiffs established, prima facie, entitlement to their full fee of $5,000 plus a contingency fee of 25% of $40,000.
In opposition, Landmark failed to raise a triable issue of fact.
Landmark's counterclaim, which alleged tortious interference with contract and tortious interference with prospective business relations, was premised upon the plaintiffs' alleged contact with the third party with whom Landmark had entered into the stipulation of settlement in connection with the second matter. Specifically, Landmark alleged that, contrary to the terms of the stipulation, the plaintiffs requested that certain of the agreed-upon payments be made directly to them as Landmark's counsel, rather than to Landmark. The ostensible purpose of this communication was to ensure that the plaintiffs would be able to deduct their legal fees from the settlement funds.
The Supreme Court properly granted that branch of the plaintiffs' motion which was pursuant to CPLR 3211(a)(7) to dismiss so much of the counterclaim as alleged tortious interference with contract. A necessary element of such cause of action is the intentional and improper procurement of a breach and damages (see White Plains Coat & Apron Co., Inc. v Cintas Corp., 8 NY3d 422, 426). Here, Landmark failed to adequately plead facts that would establish that the plaintiffs, in communicating with the third party to secure their attorney's fees, intentionally procured that party's breach of the stipulation of settlement (see Dune Deck Owners Corp. v Liggett, 85 AD3d 1093, 1095).
To the extent that the counterclaim sought recovery based on a theory of tortious interference with prospective business relations, the Supreme Court properly granted that branch of the plaintiffs' motion which was pursuant to CPLR 3211(a)(7) to dismiss that portion of the counterclaim. A claim for tortious interference with prospective business relations does not require a breach of an existing contract, but the party asserting the claim must meet a "more culpable conduct" standard (NBT Bancorp. v Fleet/Norstar Fin. Group, 87 NY2d 614, 621). This standard is met where the interference with prospective business relations was accomplished by wrongful means or where the offending party acted for the sole purpose of harming the other party (see Carvel Corp. v Noonan, 3 NY3d 182, 190; Caprer v Nussbaum, 36 AD3d 176, 204). " Wrongful means' include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure" (Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, 191, quoting Restatement [Second] of Torts §§ 768, Comment e and 767, Comment c). As a general rule, the offending party's conduct must amount to a crime or an independent tort, as conduct that is neither criminal nor tortious will generally be "lawful" and thus insufficiently "culpable" to create liability for interference with prospective business relations (Carvel Corp. v Noonan, 3 NY3d at 190 [internal quotation marks omitted]). The mere violation of an attorney disciplinary rule will only create liability if actual damages are incurred as a result of the violating conduct (see Tabner v Drake, 9 AD3d 606, 610). In addition, where the offending party's actions are motivated by economic self-interest, they cannot be characterized as solely malicious (see Out of Box Promotions, LLC v Koschitzki, 55 AD3d 575, 577). Here, contrary to the conclusion of our dissenting colleague, the allegations in the counterclaim do not establish the elements of tortious interference with prospective business relations. The allegations that the plaintiffs contacted a settling party to protect [*2]their attorney's fees after having been discharged as Landmark's counsel, while arguably alleging a violation of a disciplinary rule, do not, without more, allege that the plaintiffs' acts constituted a crime, or an independent tort, or that the plaintiffs acted solely for the purpose of harming Landmark (see Worldcare Intl., Inc. v Kay, 119 AD3d 554, 556-557; Adler v 20/20 Cos., 82 AD3d 915, 918).
A dissent by Justice Duffy on the tortious interference with business relations count
Although I agree with the majority's position that the plaintiff attorney was motivated by his desire to ensure that he received the fees he contended that Landmark owed him and that, with such motives, the plaintiff attorney's actions cannot be considered "solely malicious," the majority appears to require that, absent facts alleging that the plaintiffs engaged in conduct with the sole purpose of harming Landmark, Landmark failed to state a cause of action for tortious interference with prospective business relations. To the extent that the majority requires that, in order to avoid dismissal of this claim, Landmark had to set forth facts alleging that the plaintiffs engaged in conduct with the sole purpose of harming Landmark and that they did so by means that were unlawful or improper, I disagree. Such an analysis is more rigorous than that applied by the Court of Appeals (citations omitted) in evaluating the sufficiency of a cause of action alleging tortious interference with prospective business relations. To make out a claim for tortious interference with business relations where, as here, the alleged interference was with prospective contractual relationships, rather than existing contracts, the proponent must show that the other party interfered with the proponent's business relationships either with the sole purpose of harming the movant or by means that were unlawful or improper...I submit that Landmark's allegation that the plaintiff attorney interfered with Landmark's business relationships by means that were unlawful or improper—to wit, that he held himself out as counsel for Landmark when he no longer represented it—was sufficient to withstand that branch of the motion which was to dismiss the counterclaim...
The Court of Appeals has enunciated a general rule that, to be sufficiently "culpable" to create liability for tortious interference with prospective business relations, the alleged conduct must amount to a crime or an independent tort (Carvel Corp. v Noonan, 3 NY3d at 190). However, the Court of Appeals did not preclude "other instances of conduct which, though not a crime or tort in itself," are so culpable that they could be the basis of such a claim (id.). Here, the facts alleged by Landmark, that the plaintiff attorney held himself out to be Landmark's counsel when he no longer represented Landmark, in order to obtain money the plaintiffs contend was owed to him by Landmark, if true, would constitute a breach of fiduciary duty as well as a violation of the ethical rules that govern the conduct of attorneys (see Rules of Professional Conduct [22 NYCRR 1200.0] rule 1.8[f] ["A lawyer shall not accept compensation for representing a client, or anything of value related to the lawyer's representation of the client, from one other than the client unless: (1) the client gives informed consent"]; see generally Matter of Cooperman, 83 NY2d 465, 472).
I also disagree with the majority's assertion that, without a concomitant allegation of actual damages, an allegation that, if true, may constitute a violation of an attorney disciplinary rule cannot meet the culpable conduct element required to plead tortious interference with prospective business relations sufficient to defeat the motion to dismiss in this matter. The analysis adopted by the majority is one applied in the context of determining whether a cause of action for legal malpractice has been established (see Tabner v Drake, 9 AD3d at 610), but is not the analysis this Court already has applied in determining the culpable conduct necessary to establish a claim of tortious interference with prospective business relations. In Lyons v Menoudakos & Menoudakos, P.C. (63 AD3d at 802), this Court held that an attorney's violation of a disciplinary rule and his professional obligations was sufficient to demonstrate the culpable conduct required for a claim of tortious interference with prospective business relations so as to withstand a motion for summary judgment. In that case, this Court noted that, to constitute "culpable conduct," the conduct must amount to a crime or an independent tort, and may include " [w]rongful means'" defined as " physical violence, fraud or misrepresentations, civil suits and criminal prosecutions, and some degrees of economic pressure'" (id. at 802, quoting Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d at 191, and citing Carvel Corp. v Noonan, 3 NY3d at 190-193, and Smith v Meridian Tech., Inc., 52 AD3d 685, 687). In Lyons, this Court took note of the various ethical obligations of the defendant in that matter, who had been the attorney for the seller in a real estate transaction and allegedly wished to purchase the property for himself (see Lyons v Menoudakos & Menoudakos, P.C., 63 AD3d at 802). This Court held that "[e]vidence of a violation of a [*4]disciplinary rule is relevant to the question of tort liability," and concluded that the defendant had failed to eliminate all triable issues of fact as to whether his judgment was affected by his personal interest in the transaction and whether he furthered that interest by making misrepresentations to the seller about the creditworthiness of the plaintiff, thereby wrongfully interfering with the prospective transaction (id.). Here, as in Lyons, the allegations of the plaintiff attorney's violations of his ethical obligations, if true, would meet the culpable conduct element necessary to state a cause of action for tortious interference with prospective business relations.