Friday, June 24, 2022

Under The Banner Of Hope

The Iowa Supreme Court has affirmed  and reversed in part and remanded a fee fight among attorneys but split 4-3 on whether the firm that received the funds had converted them by violating the ethical rule on safekeeping disputed funds

The Hope Law Firm agreed to represent a client in a contingent-fee case. Lawyer James Larew had an of-counsel arrangement with the Hope Law Firm and agreed to work on the client’s case in exchange for a portion of the firm’s fee. But during the course of the case, Larew’s relationship with Andrew Hope (the Hope Law Firm’s owner) soured, and Larew and the firm ended the of-counsel arrangement. Larew nonetheless continued to work on the case, ultimately winning a large judgment at trial. Litigation ensued over the disposition of the fee. In this appeal, we address a bevy of claims in “the lawsuit after the lawsuit” between dueling lawyers.

The complicated history of the fee situation is set forth at length

We recognize, as an initial matter, that this appeal presents a civil action and not an attorney disciplinary case, and for that reason our analysis concentrates on the legal issues that the parties have brought before us. But we would be remiss in failing to note—indeed, to underscore—that Iowa Rule of Professional Conduct 32:1.4(b) imposes an unequivocal duty on lawyers to explain matters to their clients “to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” Both Larew and Hope failed to inform Anderson of Larew’s separation from the Hope Law Firm, either when it happened or in the many months after and through the trial. Had Larew or Hope actually fulfilled this ethical duty, the client would have been permitted to decide with whom and on what terms it would continue the representation—consistent with the client’s role and right. The clarification in responsibilities and compensation that likely would have flowed from that required disclosure (lawyer ethics rules operating, as they often do, to the benefit of both lawyer and client) almost certainly would have avoided many of the disputed issues over which they’ve battled in this case.

The court upheld the lower court's fee calculation but reversed the finding that the Hope firm successor is not liable

We...reverse the district court’s ruling and hold that Hope Law Firm & Associates, P.C., is a successor entity to Hope Law Firm, P.L.C., and liable for the judgment entered in this case.

Larew claimed conversion, relying on Rule 1.15, a contention the court majority rejected

Assuming (without deciding) that an argument creating a property interest based on rule 32:1.15 has been preserved, consideration of a different ethics rule, rule 32:1.5, supports the district court’s rejection of Larew’s conversion claim. That rule restricts lawyers’ ability to divide fees on a case when they are not in the same firm. Iowa R. Prof’l Conduct 32:1.5(e). Fees divided among lawyers in different firms must be split “in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation,” and the client must “agree[] to the arrangement, including the share each lawyer will receive” with that agreement “confirmed in writing.” Id. Larew unquestionably operated as of-counsel within the Hope Law Firm while the of-counsel agreement remained in effect, thus making a separate fee agreement between Larew and the client unnecessary under the rule. Larew and Hope, in other words, were not serving under the banners of separate firms but were working on the case as members of one firm: the Hope Law Firm. Plenty of evidence in the record supports this, including the of-counsel agreement itself, Larew’s inclusion on the Hope Law Firm’s letterhead and website, and the agreement to split fees untied to the actual amount of work that each lawyer would actually perform on the case (e.g., Larew would be doing the lion’s share but receiving less than half (40%) of any recovery).

When Larew and Hope ended the of-counsel arrangement, neither one contacted the client to set up a new arrangement that would split their fee between two different firms. We must construe an attorney’s conduct as consistent (not inconsistent) with the requirements of our ethics rules unless proved otherwise.

Dissent in part by Justice Waterman

I join the majority opinion except as to part IV and on the issue of the availability of punitive damages. In my view, Iowa Rule of Professional Conduct 32:1.15 required Andrew Hope and his law firm not to take into income—but instead to disburse—funds that were indisputably owed to a separate law firm, James Larew’s firm. The breach of that duty could support a conversion claim for which punitive damages are allowed. The district court erred by failing to apply that rule. I would reverse the district court ruling on Larew’s conversion and punitive damages claims and remand the case to apply the proper standard.

Application of Rule 1.15

Every court to reach the issue has held this rule applies to fee disputes between co-counsel in separate firms.

...Hope can’t avoid rule 32:1.15 by arguing Larew was like an associate in the Hope Law Firm. For one thing, by the time the funds were paid to Hope, the parties had already terminated the of-counsel agreement and clearly were in separate firms. Even while the of-counsel agreement was in effect, Larew was never an employee of Hope Law Firm, and his compensation was specific to each case on which the parties worked together and based only on the receipts for that case. Moreover, the majority can’t consistently say that Hope and Larew had an ethical duty to inform the client of their fee-splitting arrangement and then maintain elsewhere in the opinion that Hope and Larew were part of the same firm.

Hope offered no valid reason for failing to keep the disputed funds separate as required by the rule. Hope admitted Larew was entitled to $130,000 to $150,000. Instead of promptly paying Larew what he owed as required by rule 32:1.15(d), or escrowing the disputed funds until the dispute was resolved as required under rule 32:1.15(e), Hope wrongfully diverted and then retained Larew’s share in the firm’s general account.

Rule 32:1.15 effectively provides Larew with a security interest in his share of the funds recovered in the lawsuit. Hope can’t avoid conversion liability by commingling the lawsuit proceeds in his general account to argue the money is no longer identifiable. We can follow the money to which Larew’s interest attached under rule 32:1.15.

Chief Justice Christensen and Justice Mansfield  joined the concurrence in part and dissent in part. (Mike Frisch)

June 24, 2022 in Billable Hours | Permalink | Comments (0)

Thursday, June 2, 2022

"Scant Heed To Reality"

The Delaware Supreme Court has held that Skadden's billings as a court-appointed custodian in a bitter corporate deadlock that has been the subject of extensive litigation were properly paid.

Broadly speaking, these authorities allow Pincus and his advisers to request reasonable reimbursements related to the custodianship, but the parties disagree bitterly about the operation and reach of each provision.

The litigation

In 2014, Elizabeth Elting, a co-founder of TransPerfect Global, Inc. (“TPG” or “the Company”), asked the Court of Chancery to appoint a custodian to sell the Company because of a hopeless deadlock between Elting and fellow co-founder, Philip R. Shawe. More than eight years later, Elting has sold her shares to Shawe, who won a court-ordered auction supervised by Robert B. Pincus, a custodian duly appointed by the Court of Chancery under 8 Del. C. § 226. The parties executed the sale agreement (the “SPA”) in November 2017. Although this might have ended the stalemate between Elting and Shawe, it sparked a new series of conflicts that we are asked to resolve here.

With Elting cashed out, the contentious relationship between Shawe and Pincus took center stage. Aside from a brief détente when he won the auction, Shawe has been—to be charitable—unsupportive of Pincus’s court-mandated role with TPG. The result has been seemingly endless litigation in Delaware, New York, and Nevada, millions in contested legal fees, and an inability to agree on any material aspect of Pincus’s tenure as Custodian, up to and including his discharge. All of this occurred while Pincus was finishing a small number of post-closing tasks and attempting to wind-down his custodianship.

This case consolidates three challenges brought by Shawe and TPG to orders of the Court of Chancery. Each of the issues raised on appeal implicates Pincus’s right to petition the trial court for reimbursement of fees and expenses under the SPA and various court orders, including its August 13, 2015 Order appointing Pincus as Custodian (the “Appointment Order”) and its February 15, 2018 Order approving the sale of Elting’s shares to Shawe (the “Final Order”).

The bills

We turn next to the claim that “Skadden’s attorneys billed at outrageous rates[.]” In determining the appropriate amount of fees to award, the trial court found that Skadden’s rates were reasonable. We review this for an abuse of discretion. As an initial matter, the evidence discussed above regarding the rates charged by comparable firms in other cases runs contrary to the claim that Skadden’s rates in this matter were “outrageous.” Moreover, although Shawe and TPG retained an expert to challenge Skadden’s fees, the trial court observed that the expert focused primarily on only one of the eight non-exhaustive factors articulated by Rule 1.5(a), “the fee customarily charged in the locality for similar legal services[.]” Consistent with our guidance, the court considered other Rule 1.5(a) factors, including “the amount involved and the results obtained” and “the novelty and difficulty of the questions involved[.]” The court concluded that Pincus and Skadden faced a complex task and navigated significant obstacles, further justifying the hourly rates charged.  In our view, the court’s reasonableness determination was adequately supported.

Shawe and TPG also assert that Skadden should have discounted its rates. As above, this claim is undercut by the trial court’s finding that Skadden’s rates were similar to what it and peer firms charged in other matters. In any case, Shawe and TPG cite no controlling authority that requires a “reasonable client” discount. In fact, in In re RegO, Chancellor Allen awarded fees to a court-appointed guardian ad litem and explained that the “position that work of this sort is a quasi-public service that deserves to be paid at a discount is without authority.” We agree and conclude that none of Shawe’s and TPG’s challenges to Skadden’s hourly rates has merit.

Another rejected claim

Next, Shawe and TPG allege that Skadden billed improperly by producing vague entries and charging in full for overstaffed matters and simple research tasks. The trial court considered and rejected these challenges in calculating the overall fee award. Thus, once again, we review for an abuse of discretion. We reject these objections.

...Our own review of the record confirms that the Court of Chancery correctly dismissed this objection. For example, in the Omnibus Objection, Shawe and TPG attacked Skadden “for researching ‘indemnity rights’” for seven hours. Of course, Pincus’s right to indemnification was a hotly contested issue in this case, so the suggestion that Skadden’s research into the matter constituted an overreach pays scant heed to reality. We conclude that Shawe’s and TPG’s challenges to Skadden’s billing practices lack merit. 

Bottom line

we affirm the April 30, 2021 Fee Order awarding Pincus $3,242,251 in fees, subject to the qualification that TransPerfect Global, Inc. is the only party liable for the $1,148,291 Contempt Sanction.

(Mike Frisch)

June 2, 2022 in Billable Hours | Permalink | Comments (0)

Tuesday, March 8, 2022

Get It In Writing

An attorney who had represented a now-deceased client in divorce and return of seized property matters failed to prove that he had a contingent fee agreement with the client.

On November 11, 2013, Patsy Glover Bonifield (“Decedent”) hired Appellant David W. Camp to represent her in a divorce action against her husband, Glenn R. Bonifield (“Husband”). Decedent filed for divorce on November 25, 2013. In April 2016, while the divorce action was pending, agents with the drug task force raided Husband’s pharmacy. As a result of the raid, on May 4, 2016, the State of Tennessee (the “State”) seized several of Decedent and Husband’s marital assets, including: (1) a coin collection; (2) silver bars; (3) $13,280.74 in currency; and (4) the full value of Husband’s VOYA retirement account. Thereafter, Decedent allegedly asked Appellant to represent her in challenging the State’s seizure of these marital assets.

His claim for legal fees against the client's estate based on the alleged agreement failed as a result, according to a decision of the Tennessee Court of Appeals in affirming a trial court decision

The May 6, 2016 letter bears Appellant’s signature only. On review, there is no document signed by Decedent that could form the basis of a contingency fee agreement between Appellant and Decedent. See Tenn. Sup. Ct. R. 8, RPC 1.5(c). As such, we affirm the trial court’s finding that Appellant and Decedent never entered into a contingency fee agreement. Because Appellant and Decedent never entered into such agreement, there is no basis for Appellant to recover a 1/3 contingency fee from the Estate under Claim 1.

The attorney also sought review of a modest fee award 

In determining the reasonable value of Appellant’s services, it appears the trial court turned to the only proof in the record of Appellant’s legal fees, i.e., the invoice for $3,847.51 that was attached to Claim 2. The invoice is for legal services rendered from May 2017 through July 2018 and shows that Appellant billed 13.2 hours during this time period. The invoice also shows expenses (filing fees and postage) of $383.49 and appears to carry forward balances owed for previous invoices totaling $2,643.55. Although Claim 2 and the attached invoice may relate to Appellant’s representation as Decedent’s divorce attorney, it is the only proof of Appellant’s legal fees that he presented to the trial court. Accordingly, the record demonstrates that Appellant is entitled to no more than $3,847.51 for his services. Although Appellant argues that this amount is insufficient for the work performed, Appellant was provided the opportunity to prove the value of his services in the seizure challenge and, for the reasons outlined above, he failed to do so.

March 8, 2022 in Billable Hours | Permalink | Comments (0)

Friday, November 12, 2021

A Persuasive Professor

A Florida attorney who sued his clients for alleged unpaid fees ended up with a decision disgorging payments he had already received from the Tennessee Court of Appeals.

It is undisputed that the McMichaels paid Mr. Harris a total of $41,500 and that Mr. Harris demanded an additional $30,000 under the Third Agreement. Prior to the hearing in the instant case, Mr. Harris tendered a statement alleging that the McMichaels owed a balance of $40,027.50, comprised of 50.2 hours of work by Mr. Harris and 33.3 hours of work by a paralegal from August 7, 2014, though October 24, 2014.

The attorney was found to have breached fiduciary duties to the clients with respect to billing and a series of retainer agreements

The McMichaels called University of Tennessee College of Law Professor Paula Schaefer, whom the trial court qualified as an expert in the area of legal ethics. Professor Schaefer testified that: (1) an attorney has the ethical obligation to “make sure that their fee agreements are fair, fully explained, and easily understandable”; (2) “liens must be fair and explained to the client, and there is a presumption that they are voidable”; and (3) “[n]on-refundable retainers still must be earned and are therefore problematic.” Professor Schaefer opined that Mr. Harris breached his fiduciary duty to his clients. The trial court found “this witness to be the most credible of all of the witnesses as she had no financial interest in the outcome of case as well as [due to] her credential[s].”

The breach

Contrary to Mr. Harris’ assertion, the trial court did not hold that Mr. Harris breached his fiduciary duty due to his failure to abide by any Florida rule that required contemporaneous billing; rather, the court held “that [Mr. Harris’] failure to comply with the provisions of his fee agreement was a breach of his duty under the rules of professional conduct.” (Emphasis added). We agree. All three fee agreements provide, “Time billed shall be in increments of one quarter of an hour.”

As to the second and third retainer agreements, the trial court observed

[Mr. Harris] waited for deadlines to be close, at which time he demanded additional funds and promised, but never fully delivered, the representation that he convinced [the McMichaels] that [he] could perform. This created a situation for [the McMichaels] that put them in an unmanageable position after already having been put in a problematic position by [their previous counsel].

The attorney did not keep contemporaneous records

Mr. Harris testified that he: (1) prepared these [detailed billing] statements just prior to the hearing; (2) had not submitted them when he sent the “skinny bills” to the McMichaels; and (3) submitted the detailed bills to the McMichaels shortly before the hearing. This belated and ad hoc compliance with the billing provisions of the parties’ agreements simply does not reflect the promptness, diligence or appropriate communication required of a Florida attorney, or any other attorney. We conclude that the trial court did not err in holding that Mr. Harris’ failure to comply with the terms of his fee agreement constitute a breach of the fiduciary duty he owed to the McMichaels.

Disgorgement

The trial court’s equitable solution was to allow Mr. Harris $5,000, the amount contemplated in the First Agreement, and to disgorge him of the remainder of the fees paid him. Under the specific facts of this case, the trial court’s decision constitutes an acceptable resolution, see Lee Med., Inc., 312 S.W.3d at 524; as such, we conclude that the trial court did not abuse its discretion or otherwise err in allowing Mr. Harris to retain only $5,000.00.

(Mike Frisch)

November 12, 2021 in Billable Hours | Permalink | Comments (0)

Wednesday, October 6, 2021

"A Disturbing Confluence"

A recent recommendation for disbarment from the Massachusetts Board of Bar Overseers

By fraudulently inflating case expenses, the respondent intentionally deprived several clients of their money from personal injury settlements. A hearing committee has recommended the respondent’s disbarment. Finding no error of fact or law (with one minor exception, see footnote 8), we agree with the recommendation.

Admitted to the bar in 1991, the respondent, Abby R. Williams, focused her practice on plaintiffs’ personal injury cases, in particular medical malpractice. Since 1996 or 1997, she has owned her own practice, employing other lawyers and paraprofessionals. In 2007, the respondent hired Ross Annenberg as an associate; he remained employed until 2013 when he was allowed to resign in lieu of being fired. In 2015, the Supreme Judicial Court disbarred Annenberg for misuse of client funds while employed by the respondent. In 2018, Annenberg pleaded guilty to criminal charges arising out of the same conduct. Bar counsel’s investigation into Annenberg found no basis to file a petition for discipline against the respondent, since she had no involvement in Annenberg’s theft of funds. In a disturbing confluence of misconduct, the respondent and Annenberg independently stole money from different clients. In this case, the hearing committee rejected the respondent’s attempts to blame Annenberg for her defalcations (as well as her related argument that Annenberg altered the firm’s computer records to conceal his theft). Among other facts, the committee noted: Annenberg had no access to the firm’s accounting software (Quickbooks); the respondent signed all of the relevant checks; and the respondent offered no evidence that the stolen funds ended up in Annenberg’s possession. The committee found that the respondent was responsible for allocating costs in medical malpractice cases, while Annenberg was responsible for allocating costs in non-medical personal injury cases. (Hearing Report, para. 48). It also rejected as not credible the respondent’s defenses that the clients’ losses resulted from her inattention to the details of case finances (rather than intentional conduct) as well as her attempt to pin the blame on the law firm’s computer system (claiming that the system inexplicably lost backup records that would have substantiated the higher costs charged to clients). The committee found that the respondent’s law firm suffered financial challenges during the time in question, furnishing an unambiguous motive for her thefts. The hearing committee traced some of the stolen funds to the law firm’s operating accounts for the payment of salaries. The committee also traced client funds to the respondent’s personal accounts.

The board sustained the hearing committee's finding as supported by the evidence.

An aggravating factor

Lastly, the committee found that the respondent was untruthful in her hearing testimony. We see no reason to disturb these findings. With regard to the latter two factors, we generally are reticent to penalize a lawyer for defending herself at trial. However, our indulgence is limited. Where, as here, the record is replete with blatant lies, obfuscations, and evasions, we will not hesitate to consider this in aggravation.

Proposed sanction

The presumptive sanction for intentional misuse of client funds with deprivation is indefinite suspension or disbarment. Matter of Schoepfer, 426 Mass. 183,187, 13 Mass. Att’y 13 Disc. R. 6769, 685 (1997); Matter of Discipline of an Attorney, 392 Mass.827, 836, 4 Mass. Att’y Disc. R. 155, 166 (1984). Because the respondent has not made restitution, we recommend her disbarment.

It appears that the board's web page now posts their reports prior to final court action.

Bravo transparency. (Mike Frisch)

October 6, 2021 in Bar Discipline & Process, Billable Hours | Permalink | Comments (0)

Friday, September 24, 2021

Pre-Approval Required

The Mississippi Supreme Court affirmed a reduced award of attorneys fees sought in an estate matter

To collect attorney’s fees from an estate, court approval is required.  So if an attorney is paid from an estate without court approval, he “takes the fee subject to the peril of having it disapproved later by the chancellor.”  That is what happened here. Obert Law Group collected more than $180,000 in attorney’s fees from Dr. Edwin Holt’s estate. But it did so without first seeking court approval. After a two-day hearing, the chancellor determined only $96,951 of the attorney’s fees in the estate matter were reasonable. So he ordered Obert Law Group reimburse the estate $84,945.

The story

At the time of his death, Dr. Holt was finalizing a divorce in Texas and seeking to have his dental license reinstated in Mississippi. Dr. Holt had hired first-year attorney Joshua Stretch to represent him in the dental-licensure matter. Due to his inexperience, Stretch associated more seasoned attorneys at Obert Law Group, Keith Obert and William Brown. When Dr. Holt died, Stretch still held $73,000 as a yet-to-be-earned retainer on the licensure issue.

Dr. Holt died tragically by his own hand at age forty-five. He left five minor children. Stretch drove Dr. Holt’s mother, Janet Holt, to the funeral. According to Janet, on the way back from the funeral, Stretch approached her “about the estate.” Two days later, Stretch emailed Janet, who became the estate’s executrix. He told her he wanted to handle the matter but he would need to bring in Obert for his expertise in estate matters. Stretch, Obert, and occasionally Brown began working immediately on estate matters. Their efforts included locating and protecting estate assets and dealing with Dr. Holt’s ex-wife, who strenuously asserted the divorce was never finalized so she was Dr. Holt’s heir and not her five minor children.

Stretch did not return the remainder of the prior dental-licensure retainer to Dr. Holt’s estate. Instead, he submitted this money to Obert Law Group, which in turn used this money to pay its first $73,000 in bills to the estate. After exhausting this money, Obert Law Group billed the executrix. The attorneys did not seek prior court approval of their attorney’s fees. Nor did they advise the executrix the bills should be court-approved before she paid them. Instead, because Janet believed she had no reason to question the invoices, she simply wrote checks from the estate to pay the invoices submitted to her—totaling $110,800. In seventeen months of representing the estate, Obert Law Group collected $181,896 in attorney’s fees.

Their representation of the estate ended when Janet petitioned the court to replace Stretch, Obert, and Brown with new counsel. At this point, their motion for final accounting and attorney’s fees had yet to be approved by the court. And before approval, the trustee of the revocable trust established by Dr. Holt, to which he had bequeathed the residuary of his estate for the benefit of his family, petitioned the court for the return of all the fees they had collected. The trustee asserted Obert Law Group had never sought preapproval of its attorney’s fees and had never advised Janet of her duty to first seek court approval before paying Obert Law Group with estate assets. The trustee also alleged Obert Law Group padded its bills and mismanaged the estate.

The court found that the trial court had fairly evaluated the reasonableness of the fees under Rule 1.5.

The chancellor entered a detailed order in which he considered the factors set forth in Mississippi Rule of Professional Conduct 1.5 for reasonable attorney’s fees.

Advice

Had Obert Law Group’s bills been submitted to the court for prior approval, this fight would have without question been largely tempered. The lawyers would have discovered quickly that the chancellor took a much more frugal view as to the time and labor required and the reasonableness of the charged fees than the attorneys did.

Dissent

Because I find the chancellor has not made this award with clarity and consistency with the lodestar method, I respectfully dissent. The chancellor’s order should clearly set forth and allow this Court to discern the chancellor’s rationale that $96,951 was a reasonable amount for attorneys’ fees and that $84,945 was unreasonable. It did not.

(Mike Frisch)

September 24, 2021 in Billable Hours | Permalink | Comments (0)

Friday, September 10, 2021

Fee Flee Leaves Law Firm Stuck

The South Carolina Court of Appeals affirmed the dismissal of a suit brought by a law firm alleging that the Workers Compensation Commission had failed to protect its fee interest

In its complaint, KCC alleged the following set of facts. On July 31, 2007, Bruce Nadolny retained KCC to represent him in a worker's compensation claim against AVX Corporation and Liberty Mutual Insurance Company. KCC, on behalf of Nadolny, entered into mediation on his claim. From that mediation, Nadolny agreed to accept a $120,000 settlement. The day after mediation, Nadolny informed KCC he no longer needed its representation, and KCC was relieved as counsel. KCC informed Nadolny that it had expended multiple hours and expenses working on his case and would file a claim for attorney's fees.

The law firm alleged that it notified the workers compensation commission of its claim but nonetheless

On November 3, 2016, the Commission approved the settlement to Nadolny's widow without notifying KCC of the hearing. KCC alleged Nadolny's widow moved out of South Carolina after receiving the settlement. 

KCC asserts the Commission was negligent, reckless, and willful...

In response the Commission asserted governmental immunity.

The circuit court agreed and here

KCC argues the circuit court erred in finding the Commission was immune under the Act. KCC asserts the Commission's failure to notify KCC of the hearing was a ministerial act and therefore neither the Act nor judicial immunity immunized the Commission. We find the issue of whether the Commission's alleged action or inaction was ministerial is not preserved for appellate review.

In its response to the Commission's motion to dismiss, KCC asserted the Commission was not immune because the Commission's act was not a judicial or quasi-judicial act because it was simple negligence. KCC did not raise the issue of whether the Commission's act was a ministerial act—and thus an exception to the Act's immunity—until its Rule 59(e), SCRCP, motion.

Thus waiving that issue on appeal.

The court further rejected the law firm's claimed due process violations. (Mike Frisch)

September 10, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Thursday, September 2, 2021

Utah On Flat Fees And Safe Harbors

A significant opinion of the Utah Supreme Court confirmed and reversed in part the district court's denial of summary judgment to an attorney who had accepted flat fees treated as earned on receipt.

The court found the attorney had violated Rule 1.15(c) in two instances but that a third such arrangement was protected by a Safe Harbor provision in Utah's disciplinary  rules.

The Safe Harbor against disciplinary prosecution is a provision that protects an attorney whose conduct complies with an in-force ethics advisory opinion.

The case - which does not seem amenable  to cut-and-paste - extensively interprets prior Utah disciplinary and ethics opinions on the subject of flat/advanced fees and will be required reading for every lawyer practicing in the Beehive State.

To better understand [the attorney's] arguments. it helps to consider how the law surrounding flat fee agreements has developed. This requires us to examine two rules, two ethics opinions and one Utah Supreme Court case.

 Ethics Opinion 136 addressed the circumstances under which a retainer could be earned on receipt.

The court decision in the Jardine case considered that opinion

But while one hand giveth, the other taketh away. Although we acknowledged that Opinion 136 could be read to support Jardine's argument, we rejected that reading.

The second ethics opinion came in the wake of the Jardine decision.

There are two concurring and dissenting opinions.

Chief Justice Durrant would apply the rule of lenity and give safe harbor here with notice to the Bar going forward.

Associate Chief Justice Lee would find the violation in all three instances. (Mike Frisch)

September 2, 2021 in Bar Discipline & Process, Billable Hours, Clients, Current Affairs | Permalink | Comments (0)

Monday, July 26, 2021

Fee Dispute May Proceed

A convicted defendant cannot pursue a malpractice claim against his post-conviction attorney so long as the underlying conviction remains in force and effect.

Absent reversal, such claims are unripe, according to a decision of the Connecticut Appellate Court.

However, the defendant may pursue a claim involving fees

We are persuaded that the policy and practical considerations behind the requirement that an action that necessarily implies the invalidity of a conviction must be dismissed if the underlying conviction has not been invalidated do not apply to the fee dispute allegations in the present case. As the court in Bird noted, in a fee dispute, the criminally convicted plaintiff is not seeking to shift the responsibility for and consequences of his criminal acts to his former counsel, nor is the client’s own criminal act the ultimate source of his predicament. Id., 428. Moreover, a judgment for a criminally convicted plaintiff in a fee dispute is not inconsistent with the judgment of his criminal conviction. Id. If a criminally convicted plaintiff could challenge defense counsel’s excessive or unlawful fees only if he or she is able to prove the invalidity of the underlying conviction, then ‘‘guilty clients could never seek redress against even the most unscrupulous attorneys.’’ (Internal quotation marks omitted.) Id., 431. We agree with the court in Bird that there is ‘‘no rational basis for affording criminal defense attorneys a virtually impregnable shield against suits to recover excessive or unlawful fees. Nor can we find any rational basis for affording civil litigants, no matter how morally blameworthy they may be, a remedy for exactly the same unlawful conduct, double-billing, inflating hours, etc., for which most criminal litigants are denied a remedy.’’ Id. Accordingly, we conclude that the allegations that the plaintiff makes in support of his fraud claim that merely constitute a fee dispute and that do not implicate the validity of his underlying conviction are not controlled by Taylor, and that dismissal of his fraud claim was unwarranted.

(Mike Frisch)

July 26, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, July 7, 2021

Irreconcilable Differences

A law firm that withdrew from representation due to irreconcilable differences with the client nonetheless retained its right to a lien on the subsequent settlement, as held by the New York Appellate Division for the Second Judicial Department

In May 2013, the plaintiffs in these related actions retained nonparty Greenberg & Wilner, LLP (hereinafter Greenberg), to represent them, inter alia, to recover damages for breach of contract against their former employer. The plaintiffs each entered into a separate retainer agreement pursuant to which they each agreed to pay Greenberg a contingency fee of 35% of the sum recovered, plus disbursements. In January 2018, after the matters were scheduled for trial, Greenberg moved for leave to withdraw as the plaintiffs’ counsel based upon undisclosed “irreconcilable differences.” The motion was granted unopposed. Greenberg requested that the matter be adjourned to allow the plaintiffs an opportunity to obtain new counsel. In March 2018, the plaintiffs retained the services of new counsel for an hourly fee. After one day of trial, the actions were settled for an undisclosed amount.

Crucial to the holding

Here, the plaintiffs’ contention that Greenberg withdrew without sufficient cause is not supported by the record. The evidence at the hearing demonstrated that Greenberg’s request to withdraw was based on irreconcilable differences regarding the appropriate course to be taken in the actions and a breakdown in the attorney-client relationship (see Robinson v Friedman Mgt. Corp., 49 AD3d 436, 437; Winters v Rise Steel Erection Corp., 231 AD2d 626, 626-627; Generale Bank, New York Branch v Wassel, 1992 WL 42168, 1992 US Dist LEXIS 2001 [SD NY, 91 Civ 176 (PKL)]). Therefore, Greenberg maintained its right to enforce its statutory lien.

The lien consists of 95% of the fee. (Mike Frisch)

July 7, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Tuesday, July 6, 2021

Strong Medicine: Pay The Shekles

The Massachusetts Supreme Judicial Court upheld the ability of an Israeli law firm to enforce a judgment secured in Israel for unpaid legal fees

After the defendant, Amy Diamond, failed to pay the plaintiff, the Israeli law firm Cassouto-Noff & Co., its agreed-upon fees, an Israeli court held her liable for the debt. The plaintiff then initiated the current action in the Superior Court to recognize the Israeli judgment under the Massachusetts Uniform Foreign Money-Judgments Recognition Act, G. L. c. 235, § 23A (recognition act), a statute governing the enforcement of foreign money-judgments. Following a bench trial, the judge recognized the judgment, allowing it to be enforced. The defendant appealed, and we transferred the case to this court sua sponte. Although the defendant argues otherwise, we hold that the recognition act does not require compliance with Mass. R. Civ. P. 4 (d), as amended, 370 Mass. 918 (1976), and the  Israeli judgment does not offend public policy. We thus affirm.

The representation

In 2012 and 2013, the defendant held executive-level positions in business organizations collectively called the Bandel Group. After a venture launched by the Bandel Group in Israel encountered legal issues, the defendant contacted the plaintiff. Acting on behalf of the Bandel Group, the defendant entered into a written fee agreement for legal services with the plaintiff. The final provision specified that the agreement was
governed exclusively by Israeli law and that Israeli courts would have sole jurisdiction over disputes arising from the agreement. In addition to signing the agreement, the defendant repeatedly declared that "She was Bandel," and agreed, albeit orally, to be personally responsible for paying the fees.

The courts found that the defendant had evaded service and that "repugnancy" did not prevent enforcement

Repugnancy is strong medicine, best administered sparingly. A judgment will offend public policy when "the original claim is repugnant to fundamental notions of what is decent and just in the State where enforcement is sought." Restatement (Second) of Conflict of Laws § 117 comment c (1971).

...The Israeli judgment is not repugnant. This judgment was premised on the plaintiff asking the Israeli court to pierce the Bandel Group's corporate veil and hold the defendant personally liable.  As both the Superior Court judge and other courts have noted, Israeli courts take corporate veil piercing seriously.

Thus

The defendant should have argued in Israel against holding her personally liable, not in Massachusetts. See Ohno v. Yasuma, 723 F.3d 984, 1003 (9th Cir. 2013) ("Foreign judgments are not to be 'tried afresh' in [United States] courts, applying domestic concepts")

(Mike Frisch)

July 6, 2021 in Billable Hours | Permalink | Comments (1)

Friday, June 11, 2021

Unpaid Fee Lost

The Rhode Island Supreme Court affirmed the denial of relief to an attorney seeking post-mortem payment of the bills to a client

The trial testimony reveals that in 1991, plaintiff, a practicing attorney, met David F. LaRoche (David F.), who had been referred to plaintiff by another attorney for representation connected to an involuntary bankruptcy case. The plaintiff represented David F. for the entirety of that bankruptcy action and, later, another bankruptcy action. The plaintiff received some compensation for this representation; however, he did not receive all that he had billed. As a result, David F. owed plaintiff approximately $160,000 for his representation. No payments were ever made as to that amount.

In the summer of 2001, plaintiff and David F. entered into an agreement, memorialized in a promissory note, wherein the sum due to plaintiff was reduced to $140,000, and terms were established for that sum to be paid. The promissory note was due on October 10, 2006. According to plaintiff, he never received any payments from David F. on this note.

At some point, David F. informed plaintiff that he was gravely ill. Upon receiving this information, plaintiff determined that he would not take action against David F. while he was dealing with his illness. David F. died on February 26, 2009.

After his informal efforts to collect failed, the attorney filed suit in June 2010. The matter was tried in September 2014.

The trial court issued its decision in July 2019, rejecting unjust enrichment claims against a slew of individual and business defendants associated with the deceased.

The record contains no explanation for the seemingly unreasonable nearly five-year delay between the filing of posttrial memoranda and the issuance of the trial justice’s decision. We remind all judicial officers of their obligation to dispose of court business promptly and diligently.

Here, he appealed the failure to order a constructive trust

As no claims survived under the trial justice’s decision—and, on appeal, the plaintiff did not contest the trial justice’s decisions as to those claims—there is no surviving claim for which a constructive-trust remedy might be imposed.

(Mike Frisch)

June 11, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Thursday, May 20, 2021

Upson Downs: D.C. Approves Attorney's Fee Awards To Self-Representing Law Firms

A law firm may recover attorney's fees for self-representation in enforcing an arbitration award for unpaid fees, according to a decision of the District of Columbia Court of Appeals

Relying on the Supreme Court’s reasoning in Kay, a number of courts have held, under various statutes, that law firms can recover attorney’s fees when they are represented by a member or employee of the firm. See, e.g., Treasurer, Trs. of Drury Indus., Inc. Health Care Plan & Tr. v. Goding, 692 F.3d 888, 898 (8th Cir. 2012) (noting that there is attorney-client relationship between self-represented law firm and particular firm attorney who is representing firm; citing cases); Baker & Hostetler LLP v. U.S. Dep’t of Com., 473 F.3d 312, 325 (D.C. Cir. 2006) (although law-firm member may be “interested in the affairs of the entity, [the member] would not be so emotionally involved in the issues of the case so as to distort the rationality and competence that comes from independent representation”) (internal quotation marks omitted). We are persuaded by those decisions, and we reach the same conclusion in the context of the fee provision in D.C. Code § 16-4425(c).

The facts

Quinn Emanuel represented Dr. Nwaneri in a lawsuit but later withdrew from that representation. A dispute arose about the payment of attorney’s fees to Quinn Emanuel for the representation, and the matter went to arbitration.

On January 12, 2018, after a hearing, a panel of arbitrators from JAMS (an organization that provides arbitration services) issued an award of approximately $90,000 in favor of Quinn Emanuel.

The former client fought a Superior Court action to enforce the award and had sought to remove the case to federal court.

In April 2019, Dr. Nwaneri removed the case to federal court. The District Court for the District of Columbia promptly remanded the case to Superior Court, concluding that the removal was “patently improper.” The District Court also ordered Dr. Nwaneri to pay Quinn Emanuel’s costs and expenses, including attorney’s fees. The district court left calculation of the amount of attorney’s fees to the Superior Court.

Following the remand from the district court, the Superior Court ordered Dr. Nwaneri to pay approximately $23,000 in attorney’s fees arising from the removal proceedings. In calculating that amount, the Superior Court reduced the hourly rate claimed by Quinn Emanuel, instead applying the so-called Laffey matrix to determine the hourly rate.

The court's prior Upson decision had denied attorneys fees to a pro se lawyer in a domestic relations case.

Responding to the dissent

We agree with a number of points in the concurring and dissenting opinion. We respectfully differ, however, on several points. First, our holding in this case does not result in a “special rule just for law firms.” Post at 17. Rather, our holding would logically apply to other organizational litigants as well. Second, we disagree that the Supreme Court’s statement in Kay about the differences between individual and organizational litigants was “tailored to the particular statute at issue.” Id. at 20. The Supreme Court’s statement about those differences is worded in general terms. As we have noted, federal courts have relied on that statement in a number of different statutory contexts. Supra at 9. Third, the concurring and dissenting opinion appears to take the view that Upson should be read broadly to apply without regard to the factual distinction between Upson and this case, whereas Kay and Saxon should be read narrowly as limited to the specific context of those cases. Our decision in Saxon has already declined to read Upson as being broadly applicable to cases presenting materially different circumstances. Saxon, 97 A.3d at 577. We take the same approach in this case.

Associate Judge Easterly

I cannot critique my colleagues for wanting to limit the reach of Upson. Its holding that attorneys who represent themselves are ineligible to receive attorney’s fee awards is hardly intuitive. The court reasoned in Upson that the language of Superior Court Domestic Relations Rule 11 “presupposes a paying attorney-client relationship,” 3 A.3d at 1167, but all the rule (like the statute in this case) said was that the fees must be “incurred.” Id. at 1165 n.33. An individual who chooses not to pay another to do work they are educated and licensed to do themselves nonetheless incurs her own fees in the form of the lost opportunity cost to represent other clients. See McReady, 618 A.2d at 624 (Ferren, J., dissenting). The court also suggested that the pro se attorney and the pro se layperson were indistinguishable. 3 A.3d at 1167–68. But it makes sense that the latter group would not be included in a provision that authorizes “attorney’s fees” since they, being neither educated nor licensed in the law, are not “attorneys.”

Further, the court’s reliance in Upson—a case where a defendant was seeking attorney’s fees—on Kay and McReady—cases where a pro se civil rights plaintiff and a FOIA plaintiff, respectively, were seeking fees—is questionable. As the Supreme Court in Kay explained, the “specific purpose” of the attorney’s fee statute in that case “was to enable potential plaintiffs to obtain the assistance of competent counsel in vindicating their rights.” 499 U.S. at 436; see also supra note 2. But that is clearly not the objective of a sanctions provision like Domestic Relations Rule 11, especially not when the sanctions are sought, as in Upson, by the defendant.

Law firms representing themselves pro se should be eligible for attorney’s fee awards under D.C. Code § 16-4425(c). Individual pro se attorneys should also be eligible for fee awards under this provision. But Upson is an obstacle to both of these propositions. Because I disagree that there is sufficient justification for carving out a special rule for pro se law firms, and creating an asymmetry between individual and institutional litigants, en banc review is the only solution.

Associate Judge McLeese authored the opinion, joined by Associate Judge Deahl. (Mike Frisch)

May 20, 2021 in Billable Hours | Permalink | Comments (0)

Thursday, April 29, 2021

No Privity, No Recovery, When Law Firm Seeks Payment From Client's Insurer

A law firm may not recover its legal fees from its client's insurer according to a decision of the New York Appellate Division for the First Judicial Department 

Plaintiff law firm lacks standing to recover its legal fees under the insurance policy, to which it is not a named party (Miller & Wrubel, P.C. v Todtman, Nachamie, Spizz & Johns, P.C., 106 AD3d 446 [1st Dept 2013]). Plaintiff was merely an "incidental beneficiary to its client's malpractice insurance policy" (id.). Thus, the motion court properly found that plaintiff's sole recourse was against the insured, its client, and not its client's insurance provider.

Plaintiff's argument that it had a direct contract with defendant on account of the various correspondence between itself and one of defendant's employees also fails. Indeed, these letters merely confirm, consistent with the policy's requirement that the insurer's consent of the insured's choice of counsel not be "unreasonably withheld," that defendant consented to the insured's continued retention of plaintiff.

The motion court also properly dismissed plaintiff's claim for unjust enrichment, which required a showing, among other things, that defendant was enriched (Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011]). It is undisputed that defendant will pay the full limit of the policy to reimburse the insured for its defense and settlement costs of the covered claims, regardless of whether those costs were incurred by plaintiff or the other lawyers that the insured retained. Further, the retainer agreements between plaintiff and the insured govern this dispute, which provides a further basis for affirming the order (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]).

(Mike Frisch)

April 29, 2021 in Billable Hours | Permalink | Comments (0)

Thursday, April 15, 2021

Remand In Fee Dispute Between Attorneys

The Washington State Court of Appeals Division One remanded a fee dispute between two attorneys

Two attorneys, Harish Bharti and Stephen Teller, associated to represent Ruhul Kayshel on a discrimination case and a wage and contract class action case against Kayshel’s employer. Bharti and Teller entered into a one-page, handwritten fee division agreement. Teller withdrew prior to the class case reaching settlement. After the class case settled, Bharti and Teller disputed how to share their portion of the court-approved contingency fees in the class case. The trial court disagreed with Bharti that Teller should receive nothing and awarded Teller a percentage of the fees based on the fee division agreement and Bharti’s promises to Teller that Bharti would honor that agreement. Because the fee division agreement fails to satisfy the requirements of the Rules of Professional Conduct (RPC) 1.5(e)(1)(ii), we reverse and remand.

The court

As the Preamble to the RPCs states, one of the purposes of the RPCs is to regulate attorney conduct in order to protect public interest. And, the purpose of RPC 1.5(e)(1)(ii)’s requirement that the client confirm the agreement in writing is to ensure “the client received a reasonable and fair disclosure of material elements of the fee agreement.” RPC 1.5(11). Nothing in the record supports a finding that Kayshel agreed in writing to the Bharti/Teller Agreement despite Bharti’s assurances that he would obtain Kayshel’s agreement in writing. Thus, the Bharti/Teller Agreement violates public policy, is unenforceable as a matter of law, and cannot be the trial court’s basis for determining what fees to award Teller.

However, unlike in Belli where Tonkoff, Goldstein, and the client entered into a new contingency fee agreement completely excluding Belli, here, Kayshel approved in writing the Bharti/Friedman Rubin Agreement that would award Teller fees out of Bharti’s 35 percent of the contingency award. 98 Wn.2d at 571- 72. It is for the trial court to determine what that provision of the Bharti/Friedman Rubin Agreement allows.

We reverse and remand to the trial court to consider the parties’ legal theories and evidence in determining an equitable resolution in light of our ruling.

(Mike Frisch)

April 15, 2021 in Billable Hours | Permalink | Comments (0)

Friday, March 26, 2021

Cause Matters

A law firm's claim for quantum meruit recovery against a contingency fee client who had terminated representation depends on whether the discharge was or was not "for cause," according to a decision of the New York Appellate Division for the First Judicial Department

Defendant made a prima facie showing that she discharged plaintiff for cause after plaintiff settled her claim, allegedly without her authorization. Plaintiff merely raises an issue of fact as to defendant's credibility and motive. The fact that defendant's implied legal malpractice claim failed on causation or damages did not dispose of the issue of whether plaintiff was discharged for cause (e.g. Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 12-13 [1st Dept 2008]). The issue of whether plaintiff was discharged for cause prior to the completion of legal services cannot be determined on this record and a hearing is required (id. at 13; see Hee Jun Cheon Lee v Garcia, 80 AD3d 541, 541 [1st Dept 2011]). Should it be determined that defendant discharged plaintiff without cause, then plaintiff's remedy would be the fair and reasonable value of its services as computed on a quantum meruit basis (see Nabi v Sells, 70 AD3d 252, 253-254 [1st Dept 2009])

(Mike Frisch)

March 26, 2021 in Billable Hours | Permalink | Comments (0)

Friday, March 5, 2021

Second Remand In Billing Litigation

The Tennessee Court of Appeals affirmed and reversed in part a judgment in favor of an attorney in a suit brought by a former client

This appeal involves a fraud claim filed against an attorney by his former client. The attorney conceded that the client had been double-billed for some charges and repaid the client for those matters prior to trial. However, the client, now pro se, continued to pursue his claim for fraudulent billing, insisting that fraud extended to the entire invoice. He also claimed that the attorney had charged a higher hourly rate than agreed. After a bench trial, the trial court found that the client failed to demonstrate that the attorney intentionally misrepresented the amounts owed by the client and failed to present sufficient evidence of fraud. As such, the trial court dismissed the claim and granted the attorney’s request for discretionary costs. The client appeals. We affirm in part, reverse in part, and remand for further proceedings.

The attorney had represented the client in a divorce.

The client filed a bar complaint, which was dismissed.

The court had earlier remanded the case after the attorney was granted judgment based on res judicata of the dismissed bar complaint

We held that it did not, for two reasons. First, the Board was not a court of competent jurisdiction within the meaning of the res judicata analysis. Id. Secondly, the same claim was not asserted in both suits because the Board proceeding did not consider whether Vazeen should be awarded damages on his fraudulent billing claim...As such, this Court vacated the entry of summary judgment on the fraudulent billing claim and remanded for further proceedings. 

Trial was held at which only the client and the attorney testified.

The trial court found the attorney credible and granted judgment in his favor.

Here, the court found that fraud had not been proven but as to allegation that the retainer agreement had been forged

Finally, Vazeen maintains that one of the ways he was defrauded was by Sir’s “scheme” to charge $100 more per hour than Vazeen had agreed to pay. As proof of this alleged scheme, Vazeen points to his own testimony about his understanding of the fee agreement, his handwritten note evidencing that he spoke with other attorneys who were charging $250 per hour, and the invoices showing that he was charged $250 per hour for the first two months. The trial court found that “[t]he contract between [Vazeen] and [Sir] set [Sir’s] compensation rate at $375 per hour and his associate’s compensation rate at $350 per hour.” The trial court noted Vazeen’s allegation of forgery but found that he had “no proof thereof.”

The court

In our view, however, this case does not involve a simple allegation of forgery. It involves an allegation of fraud in connection with an attorney-client fee agreement. As a result, additional considerations come into play. “‘An attorney-client agreement [] is subject to a higher level of scrutiny by the courts.’” 

And so another remand

In light of the lack of findings and the lack of evidence regarding the relevant factors, we deem it necessary to remand this limited issue regarding the hourly rate to the trial court for further proceedings to include consideration of the Alexander criteria.

The Alexander criteria

In order to prove such good faith and fairness, an attorney seeking to enforce a contract for attorney’s fees must show:
(1) the client fully understood the contract’s meaning and effect,
(2) the attorney and client shared the same understanding of the contract, and
(3) the terms of the contract are just and reasonable

The court concluded that the factors must be considered even though the litigation did not involve a suit for legal fees. (Mike Frisch)

March 5, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Monday, December 21, 2020

Duty To Explain Arbitration Provision In Retainer Agreement

A significant decision of the New Jersey Supreme Court on retainer provisions that mandate arbitration of fee disputes and legal malpractice claims.

For an arbitration provision in a retainer agreement to be enforceable, an attorney must generally explain to a client the benefits and disadvantages of arbitrating a prospective dispute between the attorney and client. Such an explanation is necessary because, to make an informed decision, the client must have a basic understanding of the fundamental differences between an arbitral forum and a judicial forum in resolving a future fee dispute or malpractice action. See RPC 1.4(c). That information can be conveyed in an oral dialogue or in writing, or by both, depending on how the attorney chooses best to communicate it. The Court refers the issues raised in this opinion to the Advisory Committee on Professional Ethics, which may propose further guidance on the scope of an attorney’s disclosure requirements. The new mandate will apply prospectively, except as to [former client] Delaney, who must be allowed to proceed with his malpractice action in the Law Division.

The court's opinion notes that the lawyer-client relationship is fiduciary.

The client is a sophisticated businessman who was presented with a four-page retainer agreement.

The retainer agreement stated that any dispute about the firm’s legal services or fees would be determined by arbitration and that, by agreeing to arbitration, Delaney waived his right to trial by jury. The agreement also advised Delaney that the arbitral result would be final and non-appealable. The one-page attachment indicated that the arbitration proceeding would remain confidential and would be conducted through a private arbitration and mediation organization called JAMS pursuant to its rules and procedures. The attachment, moreover, contained a hyperlink to thirty-three pages of JAMS rules governing the arbitral forum.

When the relationship terminated, the firm invoked the arbitration process to collect unpaid fees. 

As so often happens, the client then sued for malpractice.

The Chancery Court upheld the arbitration provision; the Appellate Division reversed. 

Here   

We now hold that, for an arbitration provision in a retainer agreement to be enforceable, an attorney must generally explain to a client the benefits and disadvantages of arbitrating a prospective dispute between the attorney and client. Such an explanation is necessary because, to make an informed decision, the client must have a basic understanding of the fundamental differences between an arbitral forum and a judicial forum in resolving a future fee dispute or malpractice action. See RPC 1.4(c).

An arbitration provision in a retainer agreement is an acknowledgement that the lawyer and client may be future adversaries. That the retainer agreement envisions a potential future adverse relationship between the attorney and client -- and seeks to control the dispute-resolution forum and its procedures -- raises the specter of conflicting interests. An arbitral forum and judicial forum, and their accompanying procedures, are significantly different.

Oral argument (quite interesting if you have 2+ hours to spare) linked here. (Mike Frisch)

December 21, 2020 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, December 9, 2020

Lien Gives Way

The New Jersey Appellate Division has held that an attorney's lien acknowledged when the law firm withdrew from representation of a divorce client gave way to the interests of the opposing client

To be sure, as [law firm] Donahue emphasizes, the judge recognized [former client] Tobia's theoretical entitlement to half the marital assets in making his equitable distribution findings, but, because of Tobia's failure to comply with his support obligations and other directives, the judge concluded Lisa was entitled to all assets, including the fund in question.

The court took away $20,000 that the trial court had awarded to the firm.

we must also reverse that part of the order that allowed Donahue to receive $20,000 from the fund. The judge provided a brief explanation for that ruling  that seems untethered to his analysis of the equities and linked only to a feeling of sympathy for Tobia's former attorney that should have played no role in his considerations.

As Willy Wonka might say, you get nothing!

The law firm's former client had behaved badly

Even assuming Tobia obtained an actual award or judgment – not just a momentary acknowledgement of his potential right to half a marital asset ultimately awarded to Lisa – Donahue's assertion of a lien gave it no greater rights than Lisa, only an opportunity to argue that it should have a priority over Lisa to the fund. The judge correctly viewed the undertaking in this way and reached the appropriate conclusion that Lisa clearly possessed a higher priority than her adversary or his attorney, much like the plaintiff in B.B. v. Mell, __ N.J. Super. __, __ (App. Div.Nov. 23, 2020) (slip op. at 7-10). As the victim of Tobia's contumacious conduct, coupled with his continuing unwillingness to voluntarily pay his support obligations despite his significant earning capacity, Lisa stands on much higher equitable ground than Tobia's former attorneys. Indeed, to rule otherwise would inequitably shift a portion of Tobia's fees to Lisa's side of the ledger – a ruling wholly inconsistent with the disposition of this matrimonial action.

(Mike Frisch)

December 9, 2020 in Billable Hours | Permalink | Comments (0)

Monday, November 23, 2020

No Rights Superior To Victim

The New Jersey Appellate Division has held that attached funds should not be released to finance the defense of subject of the attachment 

In this interlocutory appeal, we consider whether or to what extent defense counsel in a civil action is entitled to be paid from funds that were the subject of a prejudgment attachment. Concluding that the statutes and rules governing attachments and equitable principles do not support the payment of fees from the attached funds, we reverse the orders under review.

In putting this issue in perspective, we note that there is no dispute that, over the course of five months from July to December 2017, defendant S. Bradley Mell engaged in sexual relations with plaintiff B.B., who was then fifteen-years old. That illicit and unlawful relationship was eventually discovered and led to Mell's arrest in May 2018; a year later, Mell pleaded guilty to state and federal crimes arising from his victimization of B.B., and he is presently serving a seven-year federal prison term in Pennsylvania.

B.B. commenced this civil action for damages in October 2019 and quickly sought a prejudgment writ of attachment of Mell's assets.

The trial court's order was reversed

And, so, we decline the invitation to find for Mell a legal or equitable right to the payment of his counsel fees – incurred in a civil action brought by his victim – from funds that have been attached for his victim's benefit. In reversing, we conclude that B.B. has a higher priority to the attached funds than Mell or [attorney] Lomurro, that nothing in the statutes or rules governing attachment actions creates an exception from attachment for a defendant's counsel fees, and that neither Mell nor Lomurro has demonstrated an equitable right to the attached funds greater than B.B.'s right to the security provided by the attachment.

 My Central Jersey reported on the case.  (Mike Frisch)

November 23, 2020 in Billable Hours | Permalink | Comments (0)