May 06, 2013
Contingent Fee Sharing
In a lawsuit involving a dispute between lawyers over the legal fees in a complex medical malpractice case, the Maryland Court of Special Appeals has held that
...we will apply the general rule that the termination of a contingency fee agreement terminates the fee-sharing agreement predicated on it. Because PGA [the law firm of Orioles owner Peter Angelos] is not entitled to a contingency fee, there is no contingency fee for Mr. Brault to share. Accordingly, to the extent the circuit court factored in the fee-sharing agreement, the circuit court's ruling must be vacated and remanded for further proceedings.
We stress that our decision in this case does not mean that Mr. Brault is not entitled to compensation for his work while the contingency arrangement was in effect. Like PGA, howver, his claim would be for the reasonable value of his services.
The case involved an attorney (Mr. Gately) who while with PGA undertook the representation of the client with assistance from other firm attorneys. Mr. Brault was brought in as co-counsel and a favorable verdict was obtained. The verdict was overturned on appeal.
Mr. Gately was then discharged from PGA. The client followed him and Mr. Brault. The case later settled for an undisclosed amount. PGA sued to enforce its lien. The disputed funds remained in escrow.
Mr. Gately acknowledged that no post-verdict effort had contributed to the settlement, which he attributed to an act of God.
The court here held that PGA had behaved ethically and was not deprived of it entitlement to fees.
The court also held that the discharged attorneys may properly sue successor counsel. (Mike Frisch)
May 01, 2013
Suit Against Former Law Partner May Be Subject To Arbitration
From the web page of the Tennessee Supreme Court:
The Tennessee Supreme Court has sent a dispute between a Memphis law firm and a former partner and paralegal back to the trial court to determine whether arbitration is appropriate.
The law firm of Glassman, Edwards, Wyatt, Tuttle & Cox, P.C. filed a lawsuit against B.J. Wade, a former partner, and Shannon Crowe, a former paralegal, alleging fraud and breach of their duties to the firm. Mr. Wade and Ms. Crowe both asked the trial court to send their cases to arbitration, as required by agreements they maintain govern resolution of each case. The firm, however, asserts that none of the agreements require arbitration.
The trial court consolidated the cases and initially ordered the parties to proceed with limited discovery to determine whether the cases were subject to arbitration. When disagreement arose, however, the trial court expanded the scope of discovery to include “all necessary documents to conduct a meaningful attempt at resolution of this matter.” The trial court also ordered the parties to mediation in an attempt to resolve all of their disputes. The Tennessee Supreme Court granted the request of Mr. Wade and Ms. Crowe for an immediate appeal.
In a unanimous opinion issued today, the Supreme Court concluded that the trial court erred in ordering discovery without limiting the scope of discovery to the issue of the enforceability of the arbitration provisions and erred in ordering the parties to mediation in an effort to resolve all aspects of their disputes.
The Supreme Court ordered that the case be returned to the trial court to determine whether arbitration was required of any dispute between the parties under any of the agreements at issue. The Court also held that discovery must be limited to the issue of whether the arbitration clauses contained in the agreements are enforceable.
The court's opinion is linked here.
April 24, 2013
Multiple Firm Practice Blessed By Ohio Ethics Opinion
From the web page of the Ohio Supreme Court:
The Ohio Supreme Court Board of Commissioners on Grievances & Discipline no longer advises that a lawyer may not practice with more than one firm in Ohio at the same time, according to an advisory opinion.
Finding “substantial justification for a new perspective on practice in multiple firms” and considering “the context of current rules and modern practice,” the board concluded in Opinion 2013-1 that practice in multiple firms can occur in compliance with the Rules of Professional Conduct.
The board withdrew three previous advisory opinions on the issue. The reasoning behind the update includes, among other things, the fact that other jurisdictions have ruled that the practice is permissible, an expanded definition of “firm,” and financial considerations for lawyers in smaller communities who work more than one part-time job.
The opinion’s syllabus gives the following guidance.
“A lawyer who engages in simultaneous practice in multiple firms must recognize the potential ethical issues connected with such practice. The lawyer has to be diligent in avoiding conflicts of interest, and the imputation of conflicts will apply across all associated ‘firms.’ The lawyer is also required to scrupulously maintain client confidentiality and professional independence. As part of the lawyer’s duty to refrain from false, misleading, or nonverifiable communications about the lawyer or the lawyer’s services, the lawyer must inform his or her clients of all multiple firm associations."
February 27, 2013
An attorney represented an organization in defense of several employment matters from 2002-2004. The relationship ended when the client sued the attorney for malpractice.
The organization moved for disqualification in a pending case in which the attorney represented a plaintiff suing it in an employment matter. The trial court denied a motion to disqualify.
The South Carolina Supreme Court held that interlocutory appeal of the denial is not an available remedy. The issue can be addressed on appeal of the judgment. (Mike Frisch)
February 21, 2013
Client May Discharge Attorney But Contingent Fee Remains Earned
The Rhode Island Supreme Court affirmed the grant of summary judgment to an attorney in a suit for fees against a former client.
The attorney had represented the client in actions against her late father's estate for a 15% contingency fee.
After the claim was reduced to settlement, the attorney collected his fees as payments were recovered. The client later discharged the attorney and claimed no obligation to continue to pay.
The court found that the attorney's rights under the contingent fee agreement had fully vested when the underlying claim was settled. Although the client was free to discharge the attorney, such action "does not alter his entitlement to fees already earned." (Mike Frisch)
February 02, 2013
Fee In Land Not Simple Or Proper
An Alaskan Native corporation entered into a fee agreement with a law firm in connection with litigation over "its certification of and title to certain lands" under the Native Claims Settlement Act.
The contingent fee agreement gave the law firm an interest in the lands at issue.
After the client had prevailed, a bar arbitration panel found that the firm could not take the land, but was entitled to a fee payment equal to the land's value. A 1995 court judgment enforced the arbitration award. The client paid the law firm for several years.
The client eventually was unable to continue the payments and litigation ensued.
The Alaska Supreme Court held that the contingency agreement violated provisions of the Act and that the arbitration award was improper. The court noted tht the case presented "complex" issues as to whether the 1995 judgment was void or voidable.
The court ordered the law firm to return $643,760 in paid fees.
The firm may now establish its entitlement for fees under quantum meruit. (Mike Frisch)
December 11, 2012
Loyalty Trumps Mobility In New Mexico Decision
In a case of first impression, the New Mexico Supreme Court has held that disqualification is mandatory when an associate who played a 'substantial role" in litigation and possesses confidential information moves to a firm involved in the litigation against her former client.
Both the moving associate and her new firm are barred from further representation.
The court noted that it had adopted a more restricted version of Rule 1.11than the ABA Model Rule, and that its rule does not permit screening to prevent imputed disqualification.
While the rule may have a chilling consequence for lawyer mobility, the court emphasized that the public policy considerations that underpin the loyalty to clients justifies the result:
In the practice of law, there is no higher duty than one's loyalty to a client.
September 28, 2012
The Innocent Insured Attorney
The New Hampshire Supreme Court has reversed and remanded a decision to rescind a law firm's professional liability insurance for an allegedly false statement on the policy application.
The matter involved the misappropriation of estate funds by a law firm partner.The other partner was not aware of the thefts, although his conduct facilitated the theiving partner's access to the entrusted funds. The two lawyers had been partners for over 45 years.
The court held that the knowledge of the bad partner could not be imputed to the innocent one under its interpretation of the "innocent insured" provision of the policy.
Our earlier coverage of a suit by the disbarred attorney's spouse against a Nixon Peabody attorney is linked here. (Mike Frisch)
September 25, 2012
A Lien Not A Judgment
In a matter involving a law firm's efforts as a third party to secure payment of fees, the New York Appellate Division for the First Judicial Department held that the firm had not established a basis to award a money judgment:
The law firm was not entitled to entry of a money judgment. Although the amount of a charging lien may be determined and fixed before the outcome of the case, the charging lien does not provide for an immediately enforceable judgment against all assets of the former clients. Rather, the lien is security against a single asset of the client - a judgment or settlement reached in favor of the former client in the underlying matter. Since the record here does not show that there has been a final judgment in this action, the law firm's request for a money judgment was properly denied. Should the law firm wish to obtain a judgment enforceable against plaintiff's other assets, it can bring a separate plenary action. (citations omitted)
August 07, 2012
No Success Fee
The New York Appellate Division for the First Judicial Department affirmed the dismissal of a suit for legal fees:
This is a dispute over whether plaintiff Kasowitz law firm is entitled to a success fee in addition to the flat $1 million fee it has already received in connection with its representation of defendant Duane Reade. The issues are whether the parties' e-mails established a binding fee agreement, and whether the fee was to be limited to the moneys Duane Reade received in settlement of the underlying Cardtronics litigation, or was to encompass all of the benefits Duane Reade received from the termination of its ATM placement contract with Cardtronics, including increased revenues from Duane Reade's new ATM contract with JP Morgan Chase (Chase)...
...three e-mails constitute an integrated fee agreement (see Nolfi Masonry Corp. v Lasker-Goldman Corp., 160 AD2d 186, 187  ["a binding agreement may be assembled from more than one writing"]). By the plain language employed, they demonstrate that Kasowitz made an offer to represent Duane Reade in the Cardtronics case for a flat $1 million, plus a success fee equal to 20% of the amounts recovered above $4 million in that litigation, and that Duane Reade accepted that offer. Kasowitz is not entitled to a success fee under the terms of the fee agreement, since Duane Reade received total compensation of approximately $1.75 million — well below the $4 million threshold — as a result of the settlement of the Cardtronics action.
The dissent believes that the fee agreement is ambiguous as to the scope of the fee. The dissent reasons that the term "recover," as used in the September 8, 2006 e-mail, may reasonably be interpreted to encompass noncash resolutions, i.e. any value received as a result of the settlement of the Cardtronics action. However, in adopting this position, the dissent fails to consider the term "recovered" or "recovery" in the context of the e-mail as a whole, and improperly relies on extrinsic evidence, including Bergman's affidavits, in order to find ambiguity where none exists.
July 07, 2012
No Law Firm Liability For Seizure Of Electronic Files From Opposing Party
The Utah Supreme Court has held that the judicial proceedings privilege applies to an attorney's course of conduct as well as to statements made in the course of litgation.
The law firm represented an employer who had sued a former employee for misappropriation of trade secrets and violation of a non-compete agreement. The firm sought and was granted a civil discovery court order authorizing its entry into the employee's home to seize electronic files from his computer and other electronic devices.
A firm attorney attended the execution of the order. The employee's fiancee (the employee was not there) objected. A second, ex parte order was obtained and she relented.
The employer-employee litigation settled. The employee did not raise the issue of the seizures in the litigation.
The employee then sued the law firm for on a variety of theories for the violation of his Fourth Amendment rights.
A lower court had applied res judicata principles based on the settled case and found the claims were barred.
Here, the court found res judicata inapplicable but nonetheless affirmed on the judicial proceedings privilege. The law firm had acted pursuant to a court order that had not been obtained by fraud or other improper means. (Mike Frisch)
June 25, 2012
Start Spreading The News...
The New Jersey Appellate Division has held that, under the "most significant relationship" test, the New York statute of limitations applies to a tort action brought by an attorney against his former firm. Accordingly, the litigation was dismissed.
Plaintiff was a partner in a New York firm with a Newark satellite office. He was terminated as a result of charges that he had sexually harassed female employees. He sued the firm in New York for defamation. The firm sued him, also in New York, based on allegations of improper conduct as a firm partner. The New York Supreme Court dismissed both actions. The Appellate Division affirmed the dismissals.
After a second action filed by the plaintiff in New York was dismissed, he sued the firm in New Jersey for malicious prosecution. The action was time barred in New York but not in New Jersey.
Here, the court applied the New York limitations rule, concluding that the Empire State was "the locus of all the claims and counterclaims between the parties." (Mike Frisch)
June 14, 2012
Screen Test In Nevada
The Nevada Supreme Court has remanded a matter for an evidentiary hearing on the sufficiency of screening measures. The disqualified attorney served as a settlement judge in an appeal. A partner of the settlement judge entered an appearance for one of the parties after settlement talks failed. The other party objected.
The court sets forth the facts:
Although the Nevada Rules of Professional Conduct (RPC) permit the screening of disqualified attorneys to prevent an associated law firm’s imputed disqualification in some cases, RPC 1.10(e); 1.11(b); 1.12(c), we have never considered whether screening is appropriate with regard to a settlement judge acting under this court’s settlement conference program or how to determine the sufficiency of any screening measures utilized. We take this opportunity to consider the practice of attorney screening to cure imputed disqualification.
The parties agree that supreme court settlement judge Nicholas Frey is disqualified from representing respondent Amador Stage Lines, Inc., in the present matter. Pursuant to RPC 1.12(c), Frey’s disqualification is imputed to the remaining members of his law firm, Woodburn and Wedge, but the parties disagree on whether screening may be utilized to cure the imputed disqualification. In order to resolve appellant Ryan’s Express Transportation Services, Inc.’s pending motion to disqualify Woodburn and Wedge from representing Amador in this appeal, we must consider whether screening may be used to cure imputed disqualification in this situation and whether the screening measures taken by Woodburn and Wedge are sufficient.
However, because we conclude that more facts are necessary for us to consider the sufficiency of Woodburn and Wedge’s screening measures, we defer ruling on the motion to disqualify and remand this matter to the district court for the limited purpose of conducting an evidentiary hearing and entering written findings of fact and conclusions of law regarding the adequacy of the screening.
When presented with a dispute over whether a lawyer has been properly screened, Nevada courts should conduct an evidentiary hearing to determine the adequacy and timeliness of the screening measures on a case-by-case basis. The burden of proof is upon the party seeking to cure an imputed disqualification with screening to demonstrate that the use of screening is appropriate for the situation and that the disqualified attorney is timely and properly screened.
When considering whether the screening measures implemented are adequate, courts are to be guided by the following nonexhaustive list of factors:
(1) instructions given to ban the exchange of information between the disqualified attorney and other members of the firm;
(2) restricted access to files and other information about the case;
(3) the size of the law firm and its structural divisions;
(4) the likelihood of contact between the quarantined lawyer and other members of the firm; and
(5) the timing of the screening.
As with motions to disqualify, the consideration of the adequacy of screening is within the sound discretion of the district court, LaSalle, 703 F.2d at 256; however, the district court must justify its determination as to the adequacy of the screening in a written order with specific findings of fact and conclusions of law.
The hearing on remand will address the adequacy of the screening measures. (Mike Frisch)
June 11, 2012
OK To Sue Mentor
The New York Appellate Division for the First Judicial Department held that a plaintiff stated a valid cause of action under the following circumstances:
The following facts are undisputed: In 2002, plaintiff, a newly admitted
attorney, placed an advertisement in the New York Law Journal seeking a
mentorship opportunity with an experienced solo practitioner in order to gain
trial experience. Defendant responded to the advertisement and the parties met.
Subsequently, plaintiff saw an advertisement in the Journal placed by a Bronx
solo practitioner looking to refer cases out to other experienced attorneys.
Defendant met with the Bronx practitioner and agreed to act as trial counsel for
the Bronx attorney's clients with a 40% referral fee payable to the Bronx
attorney. It is further undisputed that plaintiff referred at least two cases to
defendant's law office, and that he conducted some depositions for cases on
which defendant was working, and drafted some bills of particulars — even though
plaintiff had not litigated any personal injury cases prior to meeting
defendant. Plaintiff received some payments from defendant which defendant
characterized as mostly for per diem work. Eventually, however, according to
plaintiff, the payments ceased.
In August 2006, plaintiff filed a summons and complaint alleging 10 causes of
action as follows: (1) breach of an oral partnership agreement; (2) breach of an
oral agreement; (3) fraud; (4) an accounting; (5) unjust enrichment; (6) fraud
in the inducement; (7) breach of fiduciary duty; (8) estoppel; (9) contract
implied in the law based on past performance; and (10) quantum meruit.
Plaintiff alleged, inter alia, that defendant had proposed that they should work
together as partners in a personal injury law practice with each having an equal
share of the profits gained from the cases they worked on jointly. Plaintiff
further alleged that between 2002 and 2005 he worked on more than 100 personal
injury cases for defendant, expended approximately 500 hours in connection with
these cases, and contributed $5,000 in capital to the partnership
The quantum meruit claim survives:
In the absence of a valid contract, plaintiff, however, does set forth a
prima facie case for recovery in quantum meruit. It is hornbook law that in
order to establish a claim in quantum meruit, a claimant must establish "(1) the
performance of services in good faith; (2) the acceptance of the services by the
person to whom they are rendered; (3) an expectation of compensation therefor;
and (4) the reasonable value of the services" (Soumayah v Minnelli, 41 AD3d 390, 391 ; see 22A NY Jur2d Contracts § 610;). Defendant agreed that plaintiff
worked for him in some capacity on a certain number of cases. Further, plaintiff
points to two e-mails purportedly sent by defendant to plaintiff in August 2005
acknowledging that defendant owes plaintiff certain fees on cases after they
"come to trial." Thus, plaintiff may recover based on quantum meruit for work he
performed without compensation on behalf of defendant.
June 05, 2012
Until Death Do Us Dissolve
In a lawsuit brought by the estate of a deceased attorney against her law partner, the New York Appellate Division for the First Judicial Department affirmed the denial of a motion to dismiss a count of the complaint:
Under New York law, partners owe each other a fiduciary duty. Defendants also owed a fiduciary duty to Yee's estate, as Yee's successor in interest. Plaintiff has sufficiently pled a claim for breach of fiduciary duty; paragraphs 18 and 19 of the complaint allege that defendant Donovan continues to operate the partnership in violation of the Partnership Agreement and failed to distribute Yee's interest to Yee's estate in accordance with the Partnership Agreement. Contrary to defendants' contention, plaintiff has alleged more than a mere accounting, and if defendants did not understand the separate causes of action, the appropriate remedy was to file a motion for a more definite statement under CPLR 3024(a). (citations omitted)
Ms. Yee died from injuries sustained in a small plane crash in California, reported here. (Mike Frisch)
May 24, 2012
Law Firm Can't Keep $14.2 Million Dollar Fee
WorldCom settled a claim brought by the State of Mississippi with respect to delinquent tax liability for 100 million dollars. The company also paid 4.2 million to a private charity and 42.2 million to the private law firm that had represented the State. On request from the State Auditor, the private charity turned the money over to the State; the law firm refused to do so.
The Mississippi Supreme Court reversed the grant of summary judgment to the firm firm, holding that, when the Attorney General pays special assistants, they must be paid from the AG's contingency fund or from other funds approved by the AG's office. Further, public funds (such as the court holds these payments were) must be paid into the state reasury.
Neither requirement was met in the case. (Mike Frisch)
May 16, 2012
Car Service Misconduct Justifies Termination
The New York Appellate Division for the First Judicial Department has affirmed the grant of summary judgment to a law firm sued for discrimination by a terminated attorney:
In this discrimination action, plaintiff alleges that the defendant law firm terminated her because of her age and gender. The motion court properly determined that plaintiff failed to meet her burden of showing that she was discharged under circumstances giving rise to an inference of discrimination. Even assuming arguendo that plaintiff had met that burden, defendant law firm offered legitimate, non-discriminatory reasons for plaintiff's termination since she had engaged in misconduct by, over a period of several years, using a car service hundreds of times in violation of defendant's policy. Plaintiff would commute to and from her home, and to her personal appointments and the office, and then charge those trips to various clients. Plaintiff failed to show that defendants' stated reasons for her termination were false or pretextual or that defendants were motivated by discrimination. (citations omitted)
The motion court did not abuse its discretion in denying plaintiff's motion to amend the complaint to add a claim under New York Judiciary Law § 487 and to add a partner at the law firm as a party. Plaintiff failed to allege facts demonstrating that the law firm or its partners intended to commit deception in a letter to the Departmental Disciplinary Committee reporting plaintiff's misconduct.
May 07, 2012
The New Jersey Supreme Court has reversed and remanded a determination not to disqualify an attorney retained in connection with delays in a construction dispute. The Appellate Division had affirmed the trial court's denial of the motion to disqualify.
The unanimous court held that the law firm's representation would violate Rule 1.9(a). The court found that the firm had provided advice and an opinion letter to a party and billed for approximately 20 hours of work. The firm thereafter entered an appearance on behalf of an opposing party.
The court found that the two representations were substantially related as it involved the "same discrete phase of the overall construction project, the same parties and the same dispute." In order to undertake the adverse matter, the law firm was required to have the former client's written permission. (Mike Frisch)
April 27, 2012
No Arbitration in Law Firm Employment Dispute
The New York Appellate Division for the First Judicial Department has held that a law firm employee is not bound by an earlier agreement to arbitrate:
The record shows that the parties entered into an employment agreement that contained a broad arbitration clause. The agreement also provided that it could not be extended except by a writing signed by both parties. At the time of plaintiff's termination, the employment agreement had expired by its own terms, and no written agreement signed by both parties had extended it. Although plaintiff continued to work for defendant law firm after the expiration of the agreement, evincing an agreement to extend some of the provisions of the contract, that was insufficient to extend the arbitration provision without a clearly expressed intention to do so. Accordingly, since no agreement to arbitrate existed at the time of plaintiff's termination, the court improperly stayed the proceedings and directed arbitration. (citation omitted)
April 17, 2012
The Tennessee Court of Appeals has reversed and remanded an order dismissing a case against a law firm that had defended a personal injury claim against a commercial driver.
The plaintiffs settled for insurance policy limits of $500,000. As part of the seetlement, they signed a release of all claims against the law firm and insurance company as well as the defendants. The plaintiffs later discovered that defendants also had a substantial general insurance liability policy of a million dollars.
Plaintiffs then sued the attorneys for the defendants for fraud in the inducement of the settlement agreement. The trial court granted summary judgment based on the language of the release.
The court here held that the trial court erred in refusing to hear extrinsic evidence of fraud. (Mike Frisch)