Saturday, July 8, 2023

What One Has Earned

The Massachusetts Supreme Judicial Court affirmed the disposition of law firm breakup litigation

The plaintiff is a Boston law firm that specializes in personal injury cases. The defendant headed up a law practice that specializes in federal workers' compensation cases (OWCP practice). Effective March 1, 2016, the plaintiff and the defendant entered into an employment and purchase of practice agreement (agreement) under which they agreed to work together through at least March 30, 2019, and possibly March 30, 2020, with respect to the defendant's law practice. Under the parties' agreement, for the year beginning on April 1, 2019, and continuing through March 30, 2020, the defendant held the option either to continue working or to retire, with differing compensation depending on which option he chose. Upon the defendant's retirement, the plaintiff was to have control of the entire OWCP practice. From and after the defendant's retirement, however, the agreement provided for compensation to the defendant for seven additional years, in the form of a portion of revenues from the OWCP practice.

During the first year of the agreement, the plaintiff was to provide space for the defendant in its office, as well as "experienced attorney work" to support the OWCP practice. The agreement "contemplated that sometime prior to the expiration of [y]ear [one], [the plaintiff] will designate an attorney to devote [one hundred percent] of his/her professional time to the OWCP [p]ractice with other attorneys and support staff continuing to provide sufficient resources to continue to maintain a high level and quality of service to federal compensation clients; the designation of such personnel is subject to the acceptance and approval of [the defendant]." In return, the defendant was responsible for the salaries of certain then-current employees and for case and practice expenses, and had to pay the plaintiff a monthly amount as "a nominal fee" for office space and services provided by the plaintiff. The defendant was entitled to all profits generated from the OWCP practice that first year. Beginning in the agreement's second year, while the plaintiff was to continue providing space and attorney work to the OWCP practice, all income from the OWCP practice was to be deposited in an OWCP practice operating account, from which the plaintiff and the defendant were to be compensated pursuant to formulas set forth in the agreement.

The agreement included a provision regulating the termination of the parties' arrangement, and the allocation  of accrued expenses, if they decided at any time before March 30, 2017 (i.e., within thirteen months after inception), not to continue working together. In the event of such a termination, and after the allocation of accrued expenses, the defendant was to retain the OWCP practice, as well as "all practice and case expenses going forward." The agreement was otherwise silent on any termination following March 30, 2017. Perhaps predictably enough (if not so predictably as to have been addressed in the agreement), at some point after March 30, 2017, the parties developed irreconcilable differences and, in a telephone conversation between the defendant's attorney and the plaintiff's managing partner on November 29, 2017, the defendant's attorney advised the plaintiff that the defendant wished to "unwind" the parties' relationship, taking his former staff and clients with him. Soon thereafter, on or about December 6, 2017, the defendant left the plaintiff's office with all the cases from the OWCP practice. Importantly for present purposes, the cases the defendant took with him included more than eight thousand hours of unbilled work by the plaintiff's attorneys and paralegals over the approximately twenty months since the parties had commenced their collaborative arrangement.

The law firm sued

The plaintiff brought claims for breach of contract and the duty of loyalty, and for quantum meruit, and the defendant counterclaimed for breach of contract and fiduciary duty. The jury found no breach of contract or breach of the duty of loyalty or fiduciary duty by either party, but awarded the plaintiff $350,316.75 on its quantum meruit claim.

The lawyer-drafted agreement had a notable gap

the agreement was glaringly silent concerning the allocation of accrued revenues and expenses in the event of any dissolution of the parties' arrangement after the completion of the first year but before the defendant's retirement during or after the third year. Though the parties acknowledged that the agreement was an integrated contract "pertaining to the subject matter contained herein,"  that summary statement does not supply contractual regulation of the circumstances giving rise to the parties' current dispute.

Thus creating issues for the jury to resolve.


Assuming (without deciding) that the defendant is correct in his contention that the agreement required the plaintiff to designate an attorney to devote one hundred percent of the attorney's professional time to the OWCP practice,  the evidence at trial was sufficient to establish that three different attorneys were designated to support the defendant's OWCP practice at various times and were prepared to devote one hundred percent of their time to the practice. Though the defendant approved each designation, he thereafter refused to work with each of the three. The evidence was sufficient to support the jury's conclusion that the plaintiff did not commit a breach of the agreement by failing to designate an attorney to devote one hundred percent of their time to the OWCP practice, and we discern no abuse of discretion by the trial judge in denying the defendant's motion to set aside the verdict.

(Mike Frisch)

Billable Hours, Law Firms | Permalink


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