Thursday, June 6, 2024

Not Kosher

A claim for legal fees was rejected on appeal to the New York Appellate Division for the First Judicial Department

We affirm dismissal of the breach of contract claim, but on different grounds; namely, that the claim is barred by the statute of frauds. The unpaid legal fees at issue –for which plaintiff claims Katz agreed to be personally liable – were incurred in connection with plaintiff’s representation of defendant Kosher Sports, Inc. (KSI) in the Queens Ballpark Company, LLC (QBC) action. On appeal, even plaintiff characterizes this case as an effort to enforce an agreement “to pay for legal services provided to another,” namely, KSI. General Obligations Law § 5-701 (a)(2) requires that any “promise to answer for the debt . . . of another” be in writing and signed by the party to be charged therewith; however, plaintiff never produced a retainer agreement signed by Katz (see Parma Tile Mosaic & Marble Co. v Estate of Short, 87 NY2d 524, 527 [1996]; Rosenheck v Calcam Assoc., 233 AD2d 553, 554 [3d Dept 1996]). While plaintiff claims that this case does not involve an agreement to answer for the debt of another, and instead concerns an “original and primary” obligation owed to him by Katz, but the cases he cites in support are inapposite, either because they involved express acknowledgements by defendants that their obligations were “joint and several,” a factor absent from this case.

No basis to enforce fee agreement

Even if Katz had signed the retainer agreement, or whether upon application of the missing witness rule, it could be inferred that he did (e.g. Matter of Nassau Co. Dept. of Social Servs. v Denise J., 87 NY2d 73, 79 [1995]), we would still affirm, as the retainer agreement, which included a single signature line for Katz, is inadequate for purposes of imposing personal liability upon him.

(Mike Frisch)

June 6, 2024 in Billable Hours | Permalink | Comments (0)

Friday, March 8, 2024

Jarndyce V. Jarndyce In Rhode Island

The Rhode Island Supreme Court has affirmed the closing of a probate estate and - to put it mildly - presumably has ended a longstanding dispute

This appeal arises from more than a decade of litigation concerning the administration of Mr. Mendes’s father’s estate and his longstanding dispute with defendant, Kirshenbaum & Kirshenbaum Attorneys at Law, Inc. (defendant). The factual background of this matter can be found in our prior decision, Mendes v. Factor, 41 A.3d 994 (R.I. 2012); we limit our factual recitation in this matter accordingly. See Mendes, 41 A.3d at 996-1000. Mr. Mendes also named Alfred Factor as a defendant in this matter, but Mr. Factor died following remand of this case and is therefore no longer a party. We emphasize the length of time since the inception of this matter, as well as the emotional toll that this dispute has taken on the individuals involved: The decedent died on September 30, 1976, and Mr. Mendes continues to contest matters that the Providence Probate Court addressed in a March 3, 2009 consent order. Id. at 997, 998.

After a remand and agreement to settle

Notwithstanding the on-the-record agreement and the entry of an order accepting the two accountings and closing the decedent’s estate the following day, Mr. Mendes changed his mind. Specifically, Mr. Mendes asserts that the day after the parties settled in court before the trial justice, he reconsidered his decision, refused to sign any further documentation memorializing the settlement agreement, and instead filed a notice of appeal on February 3, 2023. However, the trial justice subsequently dismissed the notice of appeal, on defendant’s motion to strike, based on Mr. Mendes’s failure to comply with Article I, Rule 10 of the Supreme Court Rules of Appellate Procedure.

The court held that agreement to settle was enforceable but

It is clear from the procedural history of this matter that the trial justice improperly heard and granted defendant’s motion for attorneys’ fees. We therefore vacate the award of attorneys’ fees.

(Mike Frisch)

March 8, 2024 in Billable Hours | Permalink | Comments (0)

Thursday, February 15, 2024

Fee Fight Remanded

The District of Columbia Court of Appeals remanded a fight among law firms over an arbitration of fees

After the law firm Quinn, Racusin & Gazzola Chartered (“QRGC”) moved to vacate an arbitration award arising from a dispute with several other law firms, the other firms opposed the motion and sought confirmation of the arbitration award. The trial court dismissed the vacatur motion on the grounds that it had been both filed and served out of time, and it subsequently confirmed the arbitration award. QRGC now appeals that decision, but in an effort to invalidate the entire proceeding, claims for the first time in its reply brief that the Superior Court lacked subject-matter jurisdiction to entertain the original vacatur motion because the arbitration award at issue was a non-final interim award. We conclude that the trial court had statutory authority to review the interim award. Additionally, although we hold that QRGC timely filed its vacatur motion, we agree with the Superior Court that service was untimely and affirm the court’s dismissal on this basis. Finally, we hold that the trial court erred by confirming the arbitration award under D.C. Code § 16-4423(e) based solely on its dismissal of QRGC’s motion, and we remand for the trial court to consider whether the arbitration award should be confirmed on the merits.

The underlying suit

In 2009, Wye Oak Technology, Inc., sued the Republic of Iraq in the United States District Court for the District of Columbia over a contractual dispute relating to the refurbishing of Iraqi military equipment. The litigation continued for roughly ten years until Wye Oak obtained a substantial monetary judgment in 2019. The Republic of Iraq successfully appealed that decision, and litigation has continued.

QRGC served as Wye Oak’s counsel leading up to the litigation and was heavily involved in its initial stages. Wye Oak later retained Pavich Law Group to assist, and QRGC’s role gradually diminished as the litigation progressed. Wye Oak retained two more firms (Whiteford, Taylor & Preston and Kalbian Hagerty), and, in December 2019, all four firms drafted an “Agreement Concerning Attorneys’ Fees” to resolve disputes over compensation. The agreement established a collective 46% contingency fee for all four firms and further provided that “[a]ny claim or dispute between any of the aforementioned parties arising out of or relating to this Agreement . . . including any fee owed to any party, w[ould] be resolved by arbitration in the District of Columbia.”

Pavich Law invoked arbitration

On August 12, 2021, the arbitrator resolved various questions of liability in favor of the Pavich Law Group and the other appellees. As a result, it issued an interim award allocating the agreement’s 46% contingency fee as follows: 27.5% to Whiteford, Taylor & Preston; 18% to Pavich Law Group; 0.5% to Kalbian Hagerty; and 0% to QRGC. The interim award did not give any attorneys’ fees to QRGC because the arbitrator concluded that QRGC had “tortiously interfered with [Pavich Law Group]’s contractual relationships with Wye Oak Technology.” The arbitrator additionally stated that “[i]t is not intended that this Interim Award be subject to judicial review.”

Bottom line

Because we hold that that trial court “dismissed” rather than “denied” QRGC’s vacatur motion, the trial court was not required to confirm the arbitration award. We therefore remand for the trial court to consider whether, on the merits, the award should be confirmed.

(Mike Frisch)

February 15, 2024 in Billable Hours | Permalink | Comments (0)

Wednesday, February 14, 2024

Failure To Pay

The New York Appellate Division for the Second Judicial Department affirmed an order declining to dismiss an action brought by a former law firm attorney

The plaintiff, an attorney, was employed by the defendant Curan & Ahlers, LLP (hereinafter the firm), for approximately 18 years. On June 30, 2021, the plaintiff commenced this action against the firm and its managing partner, the defendant Keith J. Ahlers, asserting causes of action sounding in breach of contract and violation of Labor Law § 193 based on allegations that the defendants failed to pay him certain amounts constituting salary and nondiscretionary bonuses for work that he performed. As alleged in the complaint, pursuant to an agreement negotiated between the plaintiff and Ahlers in 2004, the plaintiff would be paid an annual salary of $70,000 and an
incentive bonus of 5% of any attorneys’ fees recovered on cases that he litigated. Prior to January 2008, the plaintiff was paid pursuant to this arrangement.

However, as alleged in the complaint, in 2008, Ahlers began withholding the plaintiff’s biweekly paychecks and some of his bonus checks, advising that the firm had insufficient funds to pay him. Throughout this time, the plaintiff kept a spreadsheet of the bonus money that he was owed and periodically showed the spreadsheet to Ahlers, who repeatedlyacknowledged that the plaintiff would “eventually be paid the full 5% bonus on each case that he litigated.” On July 17, 2015, the plaintiff received his last bonus payment from the firm, but Ahlers continued to make assurances that the plaintiff would be paid the outstanding bonus money that he was owed. In August 2020, Ahlers changed course and informed the plaintiff that he would not receive any of the outstanding bonus money. At this point, the plaintiff resigned.

No dismissal

Here, contrary to the defendants’ contention, the plaintiff stated a cause of action to recover damages for violations of Labor Law § 193 based on the allegations that the firm failed to pay a portion of his salary and nondiscretionary bonuses (see Gertler v Davidoff Hutcher & Citron LLP, 186 AD3d 801, 808; Ackerman v New York Hosp. Med. Ctr. of Queens, 127 AD3d at 795). Further, as alleged, Ahlers and the firm are each “employers” that may be held liable for violations of Labor Law § 193 (see id. § 190[3]; Lomeli v Falkirk Mgt. Corp., 179 AD3d 660, 663; Cohen v Finz & Finz, P.C., 131 AD3d 666, 667).

Contrary to the defendants’ contention, the plaintiff can maintain a cause of action alleging breach of contract against Ahlers individually. Although the Partnership Law provides Ahlers, a partner in a limited liability partnership, with certain protections from liability (see id. § 26; Salazar v Sacco & Fillas, LLP, 114 AD3d 745, 747), there is an exception in the event that the partnership becomes insolvent

A related order is linked here.

Here, the plaintiff alleged that, over a course of years, the defendants made repeated assurances that they would pay him salary and bonus money that he was owed pursuant to his employment arrangement. Further, he alleged that the defendants made a partial payment of outstanding bonus money to the plaintiff on July 17, 2015, within the statute of limitations. Under these circumstances, the plaintiff raised a question of fact as to whether the statute of limitations was tolled or revived (see Lew Morris Demolition Co. v Board of Educ. of City of N.Y., 40 NY2d at 521; RTT Holdings, LLC v Nacht, 206 AD3d at 836; Matter of McDonald, 79 AD2d 754, 755).

The Supreme Court erroneously concluded that the plaintiff was required to show a writing in order to meet his burden of raising a question of fact as to whether the statute of limitations was tolled or revived by virtue of partial payment. Unlike General Obligations Law § 17-101, which is applicable when a party seeks to show that a statute of limitations is tolled by a written acknowledgment, there need not be a writing in order for a plaintiff to demonstrate that the statute of limitations is tolled or revived by reason of partial payment (see generally Lew Morris Demolition Co. v Board of Educ. of City of N.Y., 40 NY2d at 521).

(Mike Frisch)

February 14, 2024 in Billable Hours, Law Firms | Permalink | Comments (0)

Friday, January 12, 2024

At Her Own Peril

The North Dakota Supreme Court affirmed and remanded in an appeal of an award of legal fees

Michelle Vetter appeals from a district court judgment entered after a bench trial on a claim for unpaid legal fees and counterclaim. She argues Larson Latham Huettl breached the terms of the fee agreement, unilaterally altered its terms, and committed fraud or deceit. We affirm the judgment, and remand for consideration of Larson Latham Huettl’s attorney’s fees for this appeal.

Facts

Michelle Vetter retained Larson Latham Huettl for legal services relating to her divorce. She paid a $6,000 retainer under a fee agreement that specified a rate of $180 per hour for legal services. Vetter later terminated the firm and retained other counsel. Her final bill exceeded the retainer by $552.

After Vetter failed to pay, Larson Latham Huettl filed a small claims affidavit seeking $848. Michelle Vetter answered, denying she owed any part of the claim because the legal services were not completed and the firm was terminated. Vetter also filed a counterclaim, alleging she did not receive an itemized billing from Larson Latham Huettl, disputing the amount owed, and requesting $195,000 for the additional money, time, and emotional trauma. Vetter removed the action from small claims court to district court. Larson Latham Huettl denied the allegations in the counterclaim and asserted affirmative defenses.

The firm showed up for the trial and claimed a $200 per hour fee; the client did not appear

The district court ordered $4,242 in attorney’s fees. Judgment was entered in the amount of $5,488 against Vetter and in favor of Larson Latham Huettl.

On appeal

Vetter argues billing at $200 per hour instead of the $180 per hour resulted in an “overcharge” of $655, increasing the total bill of $5,895 to $6,052, resulting in the small claims action and accumulation of interest. She argues the withholding of this final bill accounting was purposeful fraud or deceit by Larson Latham Huettl. She also argues the firm unilaterally changed the terms of the agreement by charging her $200 per hour instead of $180 hour.

The court recounted the district court's conclusions

The district court found the fee agreement is valid and enforceable, and clear and unambiguous, and included a provision that the “applicable hourly rate may increase during the course of the Firm’s representation.” The court further found the firm performed its obligations under the agreement and the amounts charged by the firm for performed legal services were reasonable. The court found Vetter breached her duties under the agreement and ordered judgment for the unpaid fees, prejudgment interest, costs, and attorney’s fees. Finding Vetter did not appear at trial and did not provide evidence in support of her answer and counterclaim, the court dismissed her claims.

The court

Vetter removed the matter to district court. Section 27-08.1-04, N.D.C.C., allows a defendant to remove an action filed by the plaintiff in small claims court to district court. “If the defendant elects to remove the action from small claims court to district court, the district court shall award attorney’s fees to a prevailing plaintiff.” N.D.C.C. § 27-08.1-04. A party removes a small claims matter to district court at her own peril.

Remand

We affirm the judgment. We remand for findings on a reasonable amount of attorney’s fees for this appeal.

Oral argument is linked here.

Here is an interesting unrelated matter where the firm was granted summary judgment when it sued a former associate for return of salary based on billing less than a quota set in the employment contract.

From the employment agreement

In the event that Associate bills out less than the base quota for a three month period, the Associate’s salary will be reduced appropriately at the discretion of LLH in order to make up for any discrepancy. Any discrepancy where the actual hours billed is less than the base hours required will be considered to be a debt owed by Associate to LLH at the end of the calendar year or at the termination of employment.

The North Dakota Supreme Court affirmed the summary judgment

[Former associate] Iversen argues the employment agreement was unconscionable because LLH had sole control over his performance under the employment agreement and how many hours to credit him, and it had primary control over his work, which prevented him from being able to comply with the employment agreement. The district court assumed there was “some level of procedural unconscionability” because LLH drafted the document and asked Iversen to sign it after he had already begun his employment. Regarding substantive unconscionability, there are no terms in the employment agreement that support the contention that LLH had sole control over Iversen’s performance under the employment agreement...

We conclude the court did not err in concluding the employment agreement was not substantively unconscionable.

And

The district court did not err in concluding the employment agreement imposed no obligation on LLH to provide Iversen with sufficient work or a sufficient number of clients. See Burckhard, 2022 ND 230, ¶¶ 16-17. The court did not err in concluding there were no genuine issues of fact regarding Iversen’s impossibility defense.

Another decision upholding the clawback of salary arrangement is linked here. (Mike Frisch)

January 12, 2024 in Billable Hours | Permalink | Comments (0)

Friday, January 5, 2024

Fee Arbitration Award Upheld

The New York Appellate Division for the First Judicial Department rejected an appeal of a fee arbitration award

Respondent failed to establish any grounds for vacating the arbitration award (see CPLR 7511[b]; Matter of Brown & Williamson Tobacco Corp. v Chesley, 7 AD3d 368, 372 [1st Dept 2004]). Respondent contends that the arbitration panel exceeded its power by determining the parties' fee dispute because it was "inextricably intertwined" with her allegations of malpractice, which could not properly have been considered by the arbitrators under the Rules of the Chief Administrator of the Courts (22 NYCRR) part 137. However, respondent did not assert any "claim" of malpractice in arbitration. Indeed, the fee dispute was the only claim that was heard and resolved by the arbitration panel, which did not address respondent's conclusory malpractice allegations. Further, neither the plain terms of 22 NYCRR part 137 (e.g. 22 NYCRR 137.1[b][3]) nor the parties' engagement letter precluded the arbitration panel from hearing or determining petitioner's claim for unpaid fees.

Respondent's reliance on Filemyr v Hall (186 AD3d 117 [1st Dept 2020]) is misplaced, because in Filemyr we addressed whether a lawyer's service on a client of an untimely notice to arbitrate barred the lawyer's contract action for unpaid fees, an issue not raised in this action.

(Mike Frisch)

January 5, 2024 in Billable Hours | Permalink | Comments (0)

Thursday, December 14, 2023

Fee Reduction Affirmed

A guardian appointed in 1998 and 2000 for a ward who died in 2013 was largely unsucessful in his fee appeal to the District of Columbia Court of Appeals.

The conservatorship was established by the U.S. District Court in 1958 (prior to court reorganization); the ward resided in a psychiatric facility for veterans located in New York. 

The court rejected the guardian's jurisdictional challenge to the fee reduction

we do not believe that court-appointed guardians and conservators have reasonable grounds to insist on limiting the appellate scrutiny of their fee awards on appeal merely because there is no party opposing them. They are fiduciaries, and are held to the standards of a fiduciary; it is a violation of the trust reposed in them to take advantage of the absence of opposition. The trial court has plenary authority to examine every aspect of their requests for compensation from the ward’s estate or the Guardianship Fund, even in the absence of objection by an opposing party. When the fiduciaries ask this court on appeal to review a reduction of their requested compensation, we think it unreasonable for them to insist that we conduct that review with blinders on. The cross-appeal rule was not meant to apply in this sort of situation, where there is no adversary to protect the interests at stake and it is the court itself that bears the onus of doing so.

But here we had the functional equivalent of a cross-appeal by an opposing party with an interest at stake. That sufficed. We conclude that this court did not exceed its jurisdiction when it remanded in Smith III for the Superior Court to address the deficiencies in its compensation order. The Superior Court therefore did not violate Mr. Gardner’s rights by doing so.

Fees reduced by trial court

Mr. Gardner contends that Judge Fisher abused his discretion in cutting his fee requests for appellate work in Smith I and Smith II, time spent traveling to and from New York in connection with four visits in nine months to Mr. Smith at the nursing home, and time spent in connection with the preparation and explanation of his billing. With one qualification that will require clarification of the fee award for appellate work on remand, we disagree with Mr. Gardner and conclude that there was no abuse of discretion here.

Fee petition work

In his March 2016 fee petition, Mr. Gardner asked for 28.7 hours in fees for preparing prior billing statements and an additional 7.7 hours in fees spent preparing for a half-hour hearing held in November 2015 on the fee petitions that had been at issue in Smith I. This was 36.4 hours in total, all billed by Mr. Gardner at the $90 per hour rate; thus, Mr. Gardner was seeking over $3,200 in fees just for his prior fee-petition work. As noted above, some of this work was performed to correct defects and errors that Mr. Gardner himself had made in his earlier billing statements. It is unreasonable for a fiduciary to expect payment for such self-generated work. Moreover, some of this work was clerical in nature; for instance, Mr. Gardner sought to be compensated at $90 per hour for mailing and electronically filing his petitions for compensation. And why Mr. Gardner found it necessary to expend some 28 hours on the preparation of his fee petitions (which should be a routinized and automated administrative task), plus several more hours in preparation for the post-Smith I hearing, was and is unexplained. Judge Fisher reasonably found the entire request exorbitant. We conclude that Mr. Gardner has not made the strong showing necessary to establish that Judge Fisher abused his discretion by awarding Mr. Gardner compensation (at the full $90 per hour rate) for half of the time.

Travel time

Finally, Mr. Gardner sought compensation for around 50 hours of round-trip travel by car in four visits that he made in a period of nine months to visit Mr. Smith at his nursing home. Finding that this travel time was disproportionately expensive, involved the most minimal contact by Mr. Gardner with Mr. Smith and his care givers, did not benefit Mr. Smith, and should have been avoided because Mr. Gardner should have taken the steps necessary to transfer Mr. Smith’s conservatorship or guardianship to New York, Judge Fisher awarded Mr. Gardner only half the travel-time compensation he requested. The judge’s determinations were all supported by the evidence and the record of the conservatorship.

(Mike Frisch)

December 14, 2023 in Billable Hours | Permalink | Comments (0)

Tuesday, December 12, 2023

Liens On Me

The New York Appellate Division for the First Judicial Department declined to disturb charging liens in place between former law partners

The operating agreement of the parties' former partnership explicitly states that only the originating law partner is entitled to fees after dissolution (with one exception not relevant to this appeal) and that all prior work "will inure to the file and the partner who is entitled to retain it" (Operating Agreement § 3.04). The operating agreement states that the originating partner in disputed cases is to be determined by arbitration. The operating agreement also states, however, that a schedule to be revised yearly identifies who would retain files in the event of dissolution. This schedule was never revised. Therefore, neither party established its entitlement to the relief it sought, as the contested language is ambiguous as to the circumstances under which cases would revert to the originating partner upon the firm's dissolution (see Impala Partners v Borom, 133 AD3d 498, 499 [1st Dept 2015]; Patrolmen's Benevolent Assn. of City of N.Y., Inc. v City of New York, 46 AD3d 378, 381-382 [1st Dept 2007]). Although the requested arbitration has been held, consistent with our prior decision (Law Off. of J Bacher, PLLC v Saftler, 198 AD3d 570 [1st Dept 2021]), the arbitrator resolved only the factual issue of case origination and not the legal issue of entitlement to fees. Thus, Supreme Court properly concluded that a trial on these issues, among others, was needed to determine the parties' intent in drafting or negotiating the disputed terms.

We decline to disturb the charging liens already in place in Bacher's favor. Bacher contests Saftler's right to certain unfinished cases as the originating partner, and there is no genuine dispute that Bacher performed work on some contingency matters to which Saftler claims an entitlement (see Decolator, Cohen & DiPriscoLLP v Lysaght, Lysaght & Kramer, P.C., 304 AD2d 86, 90-91 [1st Dept 2003]).

Supreme Court properly rejected Bacher's request for an accounting and the appointment of a special referee "until the issue of which cases revert to which partner (or to the firm) is resolved." Bacher has not shown that he made a demand for an accounting and that Saftler had rejected such a demand, two elements also necessary to maintain the cause of action (see McMahan & Co. v Bass, 250 AD2d 460, 463 [1st Dept 1998], lv denied 92 NY2d 1013 [1998]).

We have considered the parties remaining contentions and find them unavailing.

(Mike Frisch)

December 12, 2023 in Billable Hours, Partners | Permalink | Comments (0)

Wednesday, November 29, 2023

Praise But No Recompense

The New Jersey Appellate Court affirmed the denial of fees in a guardianship matter

In this guardianship action, which was initiated by the Office of Adult Protective Services (APS), court-appointed attorney Steven J. Kossup, Esq., and court-appointed temporary guardian Brian C. Lundquist, Esq., appeal from an order denying their respective applications for fees and costs. Having consolidated their appeals, we now affirm.

Can't put this in the bank

Although pursuant to Rules 4:42-9(a)(3) and 4:86-4(e), the judge may have had the authority to grant a fee application "in such other manner as the court shall direct," the judge did not have the authority to grant appellants' fee applications in the manner – payment by APS – appellants had requested. Accordingly, we perceive no misapplication of law or abuse of discretion in the judge's decision, and we affirm the order denying appellants' fee applications.

In reaching that conclusion, we are mindful of the temporal and financial sacrifices appellants and their firms made in their laudable efforts on behalf of Hank, the court, and the legal profession in this case. We acknowledge in particular Lundquist's firm's payment of Dr. Williams's fee. We join the judge in her praise and expressions of gratitude, but given the applicable statutes and court rules, we can do no more. Like our Supreme Court, we "have no license to amend" statutes, and, unlike our Supreme Court, we have no constitutional authority to create court rules "to make our civil justice system more fair." DiFiore, 254 N.J. at 228.

(Mike Frisch)

November 29, 2023 in Billable Hours | Permalink | Comments (0)

Monday, October 30, 2023

Law Firm Prevails Over Departing Attorney

The Maryland Supreme Court affirmed a ruling in favor of a law firm against a departing attorney but reversed the Appellate Court's failure to award the firm prejudgment interest

Maryland Rule 19-305.6(a) prohibits an attorney from making “a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of an attorney to practice after termination of the relationship, except an agreement concerning benefits upon retirement.” The rule is based on ABA Model Rule of Professional Conduct 5.6(a).

The policy underlying the rule is enunciated in Comment 1: “An agreement restricting the right of attorneys to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose an attorney.” The rule prohibits agreements not to practice within a particular geographic or substantive area, agreements not to represent any of the firm’s clients, and restrictions on client contact or use of client information. Financial disincentives for representing certain clients may violate Rule 5.6(a) if they are disguised attempts to penalize competition.

An agreement “in clear and flagrant violation” of the rules of professional conduct may be “unenforceable,” because “it would be anomalous to allow a lawyer to invoke the court’s aid in enforcing an unethical agreement when that very enforcement, or perhaps even the existence of the agreement sought to be enforced, would render the lawyer subject todiscipline.” Post v. Bregman, 349 Md. 142, 168 (1998).

An agreement between a law firm and one of its attorneys concerning the division of a contingent fee that is earned after the attorney leaves the firm does not violate Maryland Rule 19-305.6(a), provided that the agreement endeavors to make a reasonable forecast of what a likely quantum meruit division of fees would have been. In the absence of such an agreement, the parties’ respective shares would be determined by principles of quantum meruit. But to determine its quantum meruit share, the firm would have to sue the client and the departing lawyer to establish the reasonable value of the services that it provided to the client. Lawyers should be encouraged to enter into agreements to resolve these kinds of potential disputes in advance and to avoid unseemly bickering over fees.

In this case, a law firm and one of its attorneys entered into an agreement concerning the division of a contingent fee that was generated after the attorney left the firm and was engaged by a client whom she had represented while she was at the firm. The agreement calls for the division of fees based on a sliding scale. The agreement compares the amount of time in which the firm was responsible for the client and the amount of time in which the attorney was responsible for the client. Then it uses those factors as a surrogate for the parties’ respective contributions to the outcome. The agreement does not purport to restrict the right of the attorney to practice law or prohibit the attorney from representing the firm’s clients. Nor does it limit the freedom of clients to choose to use the attorney’s services. And it does not penalize the attorney by requiring the forfeiture of a right that has already been earned. The Appellate Court of Maryland held that this agreement did not violate Maryland Rule 19-305.6(a) on its face or as applied to the facts of this case. The circuit court did not err upholding the enforceability of the agreement in this case.

Pre-judgment interest

Pre-judgment interest compensates judgment creditors for their inability to use the funds that should have been in their hands before the entry of judgment. Pre-judgment interest is available as a matter of right when the obligation to pay and the amount due is certain, definite, and liquidated by a specific date prior to judgment such that the effect of the debtor’s withholding payment was to deprive the creditor the use of a fixed amount as of a known date.

In this case, a lawyer received certain, definite, and liquidated settlement payments on discrete dates. She was contractually obligated to remit a certain, definite, and liquidated percentage of those payments to her former firm, but failed to do so. Hence, the firm was entitled to pre-judgment interest, as a matter of right, on each payment that she failed to make. The pre-judgment interest ran from the date on which each payment became due until the date of the judgment. The circuit court erred in denying the firm’s request for pre-judgment interest.

The attorney joined the firm in 2011 after a career as an Assistant United States Attorney. The parties had entered into a "prenuptial" agreement governing departure.

At issue

The Barker cases settled in principle on April 3, 2015. Less than two months later, on May 29, 2015, Ms. Bennett gave Ashcraft four weeks’ notice that she was resigning from the firm. She left on June 26, 2015. When she left, Mr. Barker chose to terminate his relationship with Ashcraft and to retain Ms. Bennett.

On September 2, 2015, the parties to the Barker cases, including Mr. Barker, entered into a written settlement agreement. The agreement obligated the defendants to pay between $25 million and $35 million to the United States and the State of Georgia, on a quarterly basis, over five years. At the time of the settlement, Ashcraft had advanced over $700,000.00 in legal fees and over $300,000.00 in costs.

Pursuant to the settlement agreement in the Barker cases, Mr. Barker would receive over $5,000,000.00, which was subject to a contingent fee of over $2,000,000.00. The settlement agreement also awarded Mr. Barker $675,000.00 in statutory attorneys’ fees. Ms. Bennett asserts that, as a result of her efforts after she left the firm, Mr. Barker’s share of the recovery increased from $3,750,000.00 to over $5,000,000.00. Ms. Bennett received the first installment of the settlement payments on September 3, 2015, the day after the settlement agreement was signed, and less than three months after she left the firm.

And

Before Ms. Bennett joined Ashcraft in 2011, the firm had entered into a joint venture with another firm to represent Robert Whipple in a case under the False Claims Act: United States ex rel. Whipple v. Chattanooga-Hamilton Cnty. Hosp. Auth., No. 3-11- 0206 (M.D. Tenn.). After Ms. Bennett joined the firm, she worked on the Whipple case. Following her departure from Ashcraft, Ms. Bennett continued to represent Mr. Whipple until his case settled in the summer of 2016. The settlement generated about $160,000.00 in fees.

Enforceability

we conclude that the Prenuptial Agreement is not unenforceable on its face—i.e., that it is not facially invalid. We are persuaded by the 1989 MSBA ethics opinion, which approved an agreement with a sliding-scale formula, much like Ashcraft’s—one in which the division of fees is “based upon a combination of the length of time that the case was in the law firm prior to the attorney’s termination and the period of time in which the fee is realized after the attorney has left the firm.” MSBA Ethics Comm., Formal Op. 1989-29. We are also persuaded by the 1991 District of Columbia ethics opinion, which approved an agreement that seems almost identical to Ashcraft’s—one in which the “[f]ees ultimately realized are divided on a percentage basis which varies according to the length of time the case was handled by the firm and the length of time it was handled separately by the departing lawyer.” D.C. Ethics Comm., Formal Op. 221. We are persuaded as well by the Michigan Court of Appeals’ decision in McCroskey, which upheld an agreement under which the departing attorney received “a ratable proportion of a given fee on the basis of the stage of the litigation at the time of departure.” McCroskey, Feldman, Cochrane & Brock, P.C. v. Waters, 494 N.W.2d at 828-29.

The unanimous opinion was authored by Judge Arthur. (Mike Frisch)

October 30, 2023 in Billable Hours, Law Firms | Permalink | Comments (0)

Wednesday, October 25, 2023

It's Not Over Till It's Over

The Arkansas Court of Appeals has remanded a fee dispute among lawyers that dates back to litigation initiated in 2006

This appeal from Cleburne County Circuit Court arises from a breach-of-contract action involving an attorney-fee dispute brought by appellant David A. Couch, PLLC (hereinafter “Couch, PLLC”), against appellee Grayson & Grayson, P.A. (hereinafter “Grayson”), in 2009. Significant to this appeal, a separate but related attorney-fee dispute between the parties was previously initiated by Grayson in 2006 in Pulaski County Circuit Court, wherein Grayson sued both David A. Couch, individually (hereinafter “Couch”) and Couch, PLLC for an alleged breach of contract of a global fee-sharing agreement and unjust enrichment for the alleged failure to split fees collected in settling numerous nursing-home cases. In the Pulaski County proceeding, Couch, PLLC filed a counterclaim alleging breach of contract of a specific attorney/client employment agreement as a result of Grayson’s alleged failure to equally divide the attorney’s fees Grayson had received in a separate nursing-home case—Leister Dewey v. Beverly Enterprises—which the parties had jointly referred to another attorney (this claim is referred to herein as the “Dewey claim”). For reasons not disclosed in either record, Grayson failed to serve process on Couch, PLLC. On April 9, 2009, the Pulaski County Circuit Court dismissed Grayson’s complaint against Couch, PLLC for want of service. Because Couch, PLLC was no longer a party to the litigation, the trial court also dismissed Couch, PLLC’s counterclaim against Grayson without prejudice as well as a third-party complaint Couch, PLLC had filed against Keith Grayson, individually, and Melanie Grayson, individually.  The dismissal of Couch, PLLC as a party from the Pulaski County litigation paved the way for the present litigation. Twelve days after its dismissal from the Pulaski County litigation, Couch, PLLC, on April 21, 2009, filed a complaint in Cleburne County Circuit Court. Couch, PLLC’s complaint against Grayson alleged a breach of contract of the specific attorney/client employment agreement in the Dewey matter as a result of Grayson’s alleged failure to equally divide the attorney’s fees in that case.

The Pulaski County litigation involving Grayson’s claims against Couch individually was resolved by a final judgment entered by the Pulaski County Circuit Court on December 10, 2019, wherein the court rejected both of Grayson’s claims against Couch, individually. Thereafter, in the Cleburne County litigation, Grayson and Couch, PLLC filed crossmotions for summary judgment, with each alleging that the Pulaski County order acted as res judicata and that each was entitled to judgment as a matter of law on Couch, PLLC’s breach-of-contract claim. The Cleburne County Circuit Court entered an order granting Grayson’s summary-judgment motion on the basis that the ruling in the Pulaski County case acted as res judicata and barred further litigation of the breach-of-contract action brought by Couch, PLLC in the instant matter. The Cleburne County Circuit Court denied Couch, PLLC’s motion for summary judgment.

Couch, PLLC now appeals, arguing that the Cleburne County Circuit Court erred in granting Grayson’s motion for summary judgment and further erred in denying Couch, PLLC’s motion for summary judgment. We conclude that the Cleburne County Circuit Court erred in finding that res judicata barred litigation of Couch, PLLC’s breach-of-contract claim in the Cleburne County proceedings and in entering summary judgment for Grayson on that basis. However, we find no error in the Cleburne County Circuit Court’s denial of Couch, PLLC’s motion for summary judgment. Essentially, we find that there are genuine issues of material fact relative to both parties’ allegations of fact and conclusions of law. Therefore, we reverse the summary judgment entered in favor of Grayson, and we remand for further proceedings.

(Mike Frisch)

October 25, 2023 in Billable Hours | Permalink | Comments (0)

Tuesday, October 24, 2023

The Breakdown Of A Thirty Year Law Firm - Client Relationship

The Wyoming Supreme Court affirmed and reversed in part the trial court in litigation brought by the Northern Arapaho Tribe against its longtime lawyers.

The plaintiff

The Tribe is a federally recognized Indian Tribe located on the Wind River Reservation. The Wind River Hotel & Casino is an economic arm of the Tribe, and it is wholly owned by the Tribe. The Tribe has approximately 10,650 enrolled members. The Tribe has two main governing bodies: the Northern Arapaho Business Council (NABC) and the Northern Arapaho General Council (General Council). The NABC is the executive branch of the Tribe, and it handles the Tribe’s day-to-day affairs.

Defendants

BCR and its partners, Andrew Baldwin, Berthenia Crocker, and Kelly Rudd, acted as counsel for the Tribe in various capacities from 1988–2019. The Tribe asked BCR to perform a wide variety of work. BCR became involved in housing matters, gaming issues, water projects, revision or creation of tribal law, custody cases, an eagle permit case, and many other legal matters. The Tribe has 60–70 different programs that provide services to tribal members. With the permission of the NABC, many of these program directors reached out to BCR for legal assistance. Eventually, ninety percent (90%) of BCR’s practice consisted of work for the Tribe.

BCR achieved many successes on behalf of the Tribe. BCR helped the Tribe achieve its dream of making the Wind River Casino a Class III casino, which generates millions of dollars in revenue every year for the Tribe. BCR also achieved a $6.75 million settlement with Marathon Oil and a $1.2 million settlement with Verizon on behalf of the Tribe.

The court recounts the changing billing arrangements and eventual breakdown of the relationship when the Tribe consulted with a D.C. law firm 

The Tribe filed this suit on July 29, 2019, seeking the return of tribal funds and documents. On July 30, 2019, the Tribe posted the agenda for the August 10, 2019, General Council meeting, which included resolutions to ban either BCR or  [the District of Columbia law firm Kilpatrick, Townsend and Stockton, LLP (KTS)] from representing the Tribe. Five days before the scheduled vote, a public meeting was held where people accused BCR of stealing money from the Tribe. At least some of these allegations were made by KTS lawyer, Keith Harper. This meeting was publicly broadcasted on YouTube. At the General Council meeting five days later, a majority of the General Council voted in favor of banning BCR from working for the Tribe in perpetuity. After the General Council vote, BCR returned numerous boxes of paper files and a portable hard drive containing tribal documents to the Tribe.

After BCR secured summary judgment on several claims, trial was held on alleged billing misconduct

After five days of testimony, the jury ultimately determined BCR did not convert any tribal funds, and it returned a verdict in favor of BCR. This appeal timely followed.

Rule 11 sanctions reversed

The district court should not have imposed sanctions because BCR failed to comply with the procedural requirements of Rule 11. The district court’s order granting BCR’s Rule 11 motion and its award of sanctions must be reversed.

But the defense verdict was sustained notwithstanding assertions that race prejudice was inserted into the case by the defense

We agree with BCR that the Tribe failed to meet its burden. Although certain NABC members expressed dissatisfaction with the format of BCR’s bills, none of these witnesses offered any evidence BCR was paid for work it did not perform. While the Tribe’s expert took issue with the format of BCR’s bills, he refused to opine about whether the work had actually been performed. Councilman Spoonhunter testified the Tribe needed two full-time in-house lawyers and outside counsel who provided services of up to $50,000 a month to cover all of the work BCR had been performing.

Race references included

The first reference to race occurred during BCR’s opening statement when counsel stated:

The KTS lawyers from Washington, D.C., one of their big calling cards was, hey, we’re Native American. We’re from different tribes around the country, and you should only trust Native American lawyers. So there was a subtle hint that you can’t trust BCR lawyers because they’re not Native Americans, which is a tragedy given . . . what my clients did.

The Tribe did not object to this statement.

In closing

The final reference to race occurred in BCR’s closing argument where counsel reminded the jury about Mr. Clark’s concerns that KTS was disparaging BCR, had ulterior motives, and was “just getting rid of all the white guys[.]” Counsel went on to argue the trust BCR established over 30 years was quickly undone by KTS’s disparaging and untrue allegations of theft and its claims tribal members could not trust white lawyers. The Tribe did not object to this argument.

(Mike Frisch)

October 24, 2023 in Billable Hours | Permalink | Comments (0)

Thursday, October 19, 2023

"Rampant Overbilling"

The District of Columbia Court of Appeals agreed in the main with findings of the trial court that a court-appointed guardian had overbilled for services to his ward

Finally, we note our serious misgivings about Gardner’s practices in this case, as admirably detailed in Judge Pittman’s July 23, 2020, order. Over the course of five years, Gardner sought to collect nearly $500,000 of Pearl Robinson’s once considerable, and now depleted, assets. He did so through thousands upon thousands of 0.1 hour (or 6 minute) entries submitted to the court for approval at a rate of $300 per hour for everyday tasks requiring no specialization whatsoever. Only once his blizzard of charges is totaled does one see the hundreds of thousands of dollars that Gardner sought for rudimentary and largely automatable tasks such as check writing, delivery services, checking blood pressure readings, and other chores that could have been assigned to a home health aide paid closer to $25 an hour than the $300 Gardner sought to charge. He also billed Robinson for other questionable tasks like an hour of “listening to CNBC” for information on stocks, at a rate of $300. The trial court’s conclusion that “Gardner is guilty of rampant overbilling” is substantiated by the record.

To highlight just a few more specifics of Gardner’s practices in this case that concerned Judge Pittman: Gardner sought $16,000 from Robinson for writing checks over the course of a single year. He charged Robinson $420 for a single trip to CVS to pick-up her prescriptions. Gardner billed Robinson for five times as many hours as the guardian for Robinson’s daughter Karen over the same period of time, even though Robinson and Karen were—in the trial court’s words—“similarly situated” in terms of the care they needed. And after moving Robinson into a nursing home, Gardner petitioned the court to sell her home, valued at $650,000, at least in part to pay his mounting fees. The court denied his petition because Robinson’s daughter Karen was a co-owner and joint tenant of that home and retained a right of survivorship in it, a fact that Gardner failed to disclose in his petition to sell the home. While the trial court found that omission “inexplicabl[e],” one possible explanation is that it was a deliberate omission: Gardner wanted to tap into Robinson’s home equity and disclosing Karen’s ownership interest in the shared home likely would have prevented him from doing that, so he wanted to conceal Karen’s interests in the home.

We have previously detailed similar concerns about Gardner’s billing practices over the course of several published opinions.

Held

we affirm the trial court’s orders as to all but the third guardianship petition and remand for further proceedings. The trial court on remand should provide additional reasons for its award as to that petition, consistent with the reasoning above. It is within the court’s discretion to decrease Gardner’s compensation if there is a sufficient factual basis for doing so.

(Mike Frisch)

October 19, 2023 in Billable Hours | Permalink | Comments (0)

Saturday, October 7, 2023

An Extra Night In Boston

A Vermont Hearing Panel sustained some and rejected other allegations of misconduct brought against an attorney and ordered a suspension of one year in connection with representation in two employment discrimination matters.

The decision may be appealed as set forth in the applicable rules.

All final decisions of the hearing panel which fully dispose of an entire proceeding may be appealed as of right to the Court by respondent or disciplinary counsel pursuant to the Vermont Rules of Appellate Procedure, which rules shall govern the proceedings on appeal except where these rules establish a different procedure.

Charges to a client

Respondent charged J.H. for staying three nights, August 11, 12, and 13, 2015, at a $452.08/night (including tax) hotel in Boston, Massachusetts, to take depositions on August 12 and 13, 2015. The deposition on August 13, 2015, concluded no later than 5:30 p.m. Respondent traveled to Boston on the Dartmouth Coach bus. A return Dartmouth Coach bus left Boston as late as 9:30 p.m. that day. J.H.’s billing file does not include documentation showing it was necessary or reasonable for Respondent to stay in Boston the night of August 13, 2015, for purposes of representing J.H. Respondent charged J.H. for staying one night at a $259.00/night hotel in Rochester, New York, to take a deposition on August 4, 2015. He charged her $311.16 for one night’s stay plus meals at a hotel in Amherst, Massachusetts, to take a deposition on September 18, 2015.

Respondent charged J.H. $100.00/day for three days of meals in Boston, for a total charge of $300.00. J.H.’s billing file only includes documentation showing that Respondent spent $179.25 on August 11, 2015, for dinner at the Taj Boston, $4.38 on August 12, 2015, for a food item from the honor bar at the Taj Boston, and $19.05 on August 13, 2015, for an alcoholic beverage from the bar at the Taj Boston. J.H. did not agree to pay Respondent $100.00/day for meals. J.H.’s billing file does not include documentation showing these expenses were necessary or reasonable for his representation of J.H.

Findings

Special Disciplinary Counsel has not established by clear and convincing evidence that Respondent stayed at unreasonably expensive hotels when he traveled for depositions. The fact that Respondent paid more for the hotels than the federal government would is immaterial, as Respondent was not traveling for the federal government. The record is devoid of the  comparator evidence.

It was unreasonable for Respondent to charge J.H. $452.08 to stay at a hotel in Boston on August 13, 2015, when the last deposition in Boston ended hours before the last return bus departed that evening. It was also unreasonable for Respondent to charge $300.00 for meals in Boston, when there was no documentation in J.H.’s billing file that Respondent actually incurred $300.00 in meal expenses, and there was no communication to J.H. that she would be responsible for paying Respondent $100.00/day of travel for meals.

The Hearing Panel concludes that Special Disciplinary Counsel has proven by clear and convincing evidence that Respondent violated V.R.Pr.C. 1.5.

As to meals and hotel

The evidence in the record is insufficient to show that Respondent knew the expenses were unreasonable when he charged J.H.; rather, the evidence tends to show that Respondent was sloppy.

Respondent’s sloppiness created a substantial risk of overcharging clients. In fact, his sloppiness cause J.H. actual injury. She suffered a financial loss of $2,652.08.

And

Special Disciplinary Counsel charged that Respondent knowingly made two false statements to her in connection with this disciplinary matter – He falsely stated that G.A.’s retainer was in his IOLTA account until he transferred a portion to his operating account in 2019 after the conclusion of representation, and he falsely stated that he issued G.A. a check for his portion of the retainer shortly before July 24, 2020. Respondent conceded the statements he made were false but argued that he did not know they were false when he made them because he relied solely on his faulty memory in making the statements.

Respondent’s argument that he falsely told Special Disciplinary Counsel that he kept G.A.’s entire retainer in his trust account until he transferred earned fees and expenses to his law firm operating account after the conclusion of representation because of a faulty memory is plausible. He made the false representation in July 2020; G.A. gave him the retainer in August 2017; the representation concluded in March 2019. He admitted that he did not review records before making the representation to Special Disciplinary Counsel. Respondent’s decision to give her information based solely on his memory was negligent under the circumstances, but V.R.Pr.C. 8.1 requires knowledge.

On the other hand, Respondent’s argument that he falsely told Special Disciplinary Counsel that he returned G.A.’s retainer because of a faulty memory is not credible. On July 24, 2020, Respondent told Special Disciplinary Counsel that he returned G.A.’s retainer after she reminded him to do so on July 14, 2020. Respondent provided no explanation for this false statement other than a faulty memory; it is simply not plausible that Respondent recalled issuing a check he did not, in fact, issue during those 10 days. Given that Special Disciplinary Counsel was specifically investigating Respondent’s handling of G.A.’s retainer, whether or not he returned the retainer was clearly material. The evidence shows that Respondent knowingly made a false statement of material fact in connection with a disciplinary matter.

The Hearing Panel concludes that Special Disciplinary Counsel has proven by clear and convincing evidence that Respondent violated V.R.Pr.C. 8.1.

Sanction

Respondent has demonstrated a disregard for meeting his duties to clients, the public, the legal system, and the attorney disciplinary process. He “poses a serious risk to potential future clients and public trust in the legal profession.” See In re Manby, 2023 VT 45, ¶ 65. “The appropriate sanction must be weighty enough to counter this serious risk.” In re Bowen, 2021 VT 7, ¶ 50. The Hearing Panel concludes that, in order to protect client interests and maintain public confidence in the legal profession, Respondent is suspended for one (1) year.

(Mike Frisch)

October 7, 2023 in Bar Discipline & Process, Billable Hours | Permalink | Comments (0)

Tuesday, October 3, 2023

Fee Not Simple

The United States District Court for the District of Columbia substantially reduced a request for prevailing party attorneys' fees in an unpaid wage action

Here, plaintiff’s counsel has turned a simple, straightforward unpaid wages claim thatwas resolved in weeks into a major fee generator, with the amount requested just for fees-on-fees equal to almost twenty times that of the wages initially in dispute. Indeed, absent plaintiff’s counsel’s excessive requests for attorneys’ fees in this otherwise simple case, with a completely uncontested underlying claim, this suit would have been settled in December 2021, nearly two years ago. Plaintiff’s counsel insists that defendants are to blame for this delay, due to their purported unwillingness to negotiate fees, but this placement of blame is wholly unwarranted when plaintiff’s counsel’s own unreasonable opening demand for attorneys’ fees is the obstacle that necessitated litigation of this issue. Plaintiff’s counsel first demanded $25,000 in fees, at a point when the only meaningful work they had completed to advance their client’s interests was filing the complaint, calculating plaintiff’s unpaid wages, and communicating the settlement demand with defense counsel, who had already made clear that defendants planned to settle plaintiff’s claim as quickly as possible by paying the full amount to which plaintiff claimed entitlement. Defs.’ Response at 4–5.

Awarding fees to plaintiff’s counsel anywhere close to their demand would put this Court in the position of approving their conduct in drawing this litigation out more than an additional year in pursuit of only their own pecuniary gain. Indeed, Judge Henderson on the D.C. Circuit has noted that she would impose sanctions on counsel who request excessive fees, particularly when counsel “spent more time working on fee matters than on tasks essential to [the client’s] claim.” Baylor I, 857 F.3d at 959 (Henderson, J., concurring). In that case, the “district court said of the fee request that ‘the tail [is] wagging the dog,” and counsel had “lost sight of the real party in interest.” Id. at 959–60 (alteration in original). Plaintiff’s counsel in this case has certainly lost sight of the real party in interest, namely, plaintiff. The parties agreed in December 2021 that defendants would pay plaintiff $4,379, and yet he has waited two years since then for resolution of this case, due in large part to the demands of his own counsel. Indeed, plaintiff’s counsel rejected defendants’ second settlement offer—offering plaintiff the full amount of overtime wages and liquidated damages he claimed—before even communicating that offer to their client, solely because they were dissatisfied with defendants’ offer on fees. See Burton Aff. ¶¶ 4–5. The $23,781.20 in fees and $124.17 in costs accumulated solely in the pursuit of advancing what was already an unreasonable request for attorneys’ fees will thus not be included in the fee award, under this Court’s broad discretion.

Once the attorneys’ fees claimed for work on the instant fee motion are subtracted from plaintiff’s fee request, $26,352.30 in requested fees remain. This amount is also unreasonable to award for several reasons, described below, so a multiplier should apply. For the following reasons, plaintiff will be awarded $9,000 in attorneys’ fees, corresponding to approximately one third of the fees requested in this case, and $500 in costs.

(Mike Frisch)

October 3, 2023 in Billable Hours | Permalink | Comments (0)

Friday, September 29, 2023

Jackpot

A big hit on a Deepwater Horizon claim led to an attorney's departure from his law firm, post-departure litigation and a remand of a decision favoring the law firm by the Mississippi Supreme Court

The Circuit Court of Washington County granted law firm Campbell DeLong, LLP, a declaratory judgment against a former partner of the firm, Britt Virden, who had alleged breach of contract, among other claims. Virden appealed, and the Court of Appeals affirmed. Virden v. Campbell DeLong, LLP, No. 2021-CA-00478-COA, 2022 WL 4478393, at *11(Miss. Ct. App. Sept. 27, 2022). On certiorari review, we find that Virden’s pre-withdrawal claims are not precluded by a signed agreement, which only comes into operation in the event of death, termination, withdrawal, or retirement of a partner.

                                            FACTS AND PROCEDURAL HISTORY

Britt Virden practiced law in Greenville, Mississippi, with Campbell DeLong, LLP, since 2001. Although Campbell DeLong, LLP, has operated as a law firm for nearly twenty-five years, it has never had a written partnership agreement that controlled the compensation paid to its partners. The only document signed among the partners was a Restated and Amended Memorandum Agreement, which governed the “withdrawal, termination, or retirement of any of the partners from the firm.”

According to Virden, Campbell DeLong never compensated its partners as a traditional partnership in which the partners share equally in all expenses as well as profits. Rather, Campbell DeLong practiced a partner compensation strategy of “eat what you kill,” meaning after an individual partner contributes from his revenue an equal share of the operating expenses of the law firm for calendar year, he or she keeps the remainder as his own personal income.

In 2018, Virden worked on a case for the Deepwater Horizon oil spill that settled for $12.3 million. Attorneys’ fees were $3.1 million. Virden emailed his partners about the settlement’s result, making his recommendation for distribution. The partners did not immediately respond to Virden’s request. When Virden asked the firm’s bookkeeper for a distribution of a special draw of his claimed portion to the fee, however, he was denied.

The partners then called for a meeting at which the allocation was discussed. The firm asserts that there is an implied contract between the partners that the firm’s compensation committee would decide how to split any profits. The firm allocated Virden $1.9 million and each of the five other partners $277,000. Virden immediately sent a written objection to the distribution and demanded the amounts be reconsidered and recalculated to allocate the fee pursuant to the normal and customary method.

A month later, Virden gave notice he was withdrawing from the firm. Virden then sued the firm for breach of contract, unjust enrichment, conversion, breach of fiduciary duties, violation of the Mississippi Partnership Act, and other claims. Virden alleged that the firm breached an implied contract among the partners by allocating to themselves a share of a significant fee that Virden generated.

The firm and its partners filed their answer and affirmative defenses, which included a motion for declaratory relief, a request to stay discovery, and a counterclaim. In the firm’s motion for declaratory judgment, it sought a ruling that all of Virden’s claims were encompassed by the Agreement Virden had signed in 2001.

After a hearing, the circuit court granted the motion for declaratory judgment, stating “that paragraphs 7, 12, 13 and 14 of the Agreement” controlled the outcome of the case.

The firm prepared an order, but the parties could not agree on the language. As a result, both Virden and the firm submitted proposed orders.

The order Virden drafted was brief, holding that the circuit court had jurisdiction over the parties, that the motion for declaratory judgment was granted, and that all discovery was stayed.

The firm’s order was lengthier and explained that the Agreement sets forth “[t]he payment obligations in paragraphs 7, 12, and 13 and are the only payment obligations that the [law firm] owed to Virden upon Virden’s voluntary withdrawal from the Firm on March 7, 2019.”

The firm’s order declared the Agreement was enforceable and said, “Virden is estopped from claiming entitlement to any monetary amount from the [law firm] for acts and/or events which occurred when Virden was a Partner in the Firm except to Virden’s entitlement to the amount of Virden’s Working Capital Account at the time of his withdrawal.”

Lastly, “Virden has a legal and binding contractual obligation to convey his entire interest in the Firm and in Campbell DeLong Properties, LLC, and in their respective assets to the Firm and Campbell DeLong Properties, LLC . . . .” 

The circuit court signed both orders, and both were then stamped filed by the circuit court clerk. Virden moved for reconsideration. The circuit court denied the motion, and Virden appealed. The Court of Appeals affirmed, and we granted certiorari review. Virden, 2022 WL 447893, at *11.

Majority holding

We reverse the judgments of the Court of Appeals and of the Washington County Circuit Court, and we remand the case to the circuit court to allow Virden an opportunity to maintain an action against his former firm for breach of an implied contract regarding partner compensation.

Difference of opinion

RANDOLPH, C.J., KITCHENS, P.J., CHAMBERLIN AND ISHEE, JJ., CONCUR. GRIFFIS, J., CONCURS IN RESULT ONLY WITH SEPARATE WRITTEN OPINION JOINED BY COLEMAN, J. MAXWELL, J., DISSENTS WITH SEPARATE WRITTEN OPINION. KING, P.J., NOT PARTICIPATING.

Concurring in result only

I have read the pleadings, motions and responses, the transcript of the argument of counsel, the circuit court judgments, and the record. As a result, I tend to agree that Campbell DeLong, LLP, and the individual defendants may be entitled to a declaratory judgment that the agreement governs the compensation or amount owed to Britt Virden as a withdrawing partner. The circuit court, the Court of Appeals, and now this Court’s majority reach a similar conclusion.

There is a fundamental error with this type of cursory review. There is a fundamental error with the decisions of the circuit court, the Court of Appeals, and now this Court’s majority. This Court should not affirm a circuit court’s judgment on the merits based only on unsworn pleadings, documents attached to unsworn pleadings, and argument of counsel. This review is not based on procedure authorized by the Mississippi Rules of Civil Procedure. Therefore, I am of the opinion the circuit court judgment and the decision of the Court of Appeals should be reversed. I would remand this case for further proceedings consistent with the Mississippi Rules of Civil Procedure.

Dissent

I disagree that this case should be reversed and remanded. Instead, for the reasons set forth by the Court of Appeals in its opinion affirming the trial court’s judgment, I would affirm.

(Mike Frisch)

September 29, 2023 in Billable Hours, Law Firms | Permalink | Comments (0)

Faithless Servant

A law firm is entitled to the referral fee paid to an employee, per a decision of the New York Appellate Division for the First Judicial Department

Plaintiff was entitled to summary judgment as a matter of law. The duty of loyalty, grounded in the faithless servant doctrine, is breached where the employee, "acting as the agent of the employer, unfairly competes with his employer, [and] diverts business opportunities to himself or others to the financial detriment of the employer" (Sullivan & Cromwell LLP v Charney, 15 Misc 3d 1128[A], 2007 NY Slip Op 50889[U], *7 [Sup Ct, NY County 2007]; see also Western Elec. Co. v Brenner, 41 NY2d 291, 295 [1977]). Defendant does not dispute that he referred a matter to another law firm without plaintiff's knowledge or consent and collected more than $140,000 in referral fees. A for-profit referral, without plaintiff's knowledge or consent, violates defendant's duty of loyalty and, at a minimum, entitles plaintiff to the referral fee (see Chun Ho Chung v Williams Schwitzer & Assoc., P.C., 200 AD3d 514, 515 [1st Dept 2021]).

The court's denial of the motion to reargue is not appealable.

(Mike Frisch)

September 29, 2023 in Billable Hours, Law & Business, Law Firms | Permalink | Comments (0)

Thursday, September 21, 2023

Better Late Than Never

The Mississippi Supreme Court has reversed an order and directed that an $86,000 fee for legal services be paid out of the estate of the deceased client

The story

When Herbert died, he and Rebecca were entangled in divorce proceedings. Malouf was representing Herbert and had provided more than $86,000 in unpaid services. But Herbert’s Estate did not pay Malouf following the chancellor’s order accepting Rebecca’s offer “to pay the debts of the estate as submitted by [Rebecca]” in exchange for the assets. Instead, the estate matter dragged on. The chancellor retired. A special judge was appointed. And a substitute executor was agreed to.

The substitute executor at some point moved to declare certain unsecured claims against the Estate extinguished and time-barred. Malouf’s claim was included in this request. According to the substitute executor, by statute, Malouf had four years and ninety days from issuance of letters testamentary to file an action against the Estate for payment of its claim. Malouf countered that such an action was unnecessary because, during those four years, the original chancellor had entered the order directing the sale of assets. And in this order, the court accepted Rebecca’s offer “pursuant to its terms and conditions”—one such condition being that Malouf’s probated claim would be paid. The special judge sided with the substitute executor and denied Malouf’s probated claim as untimely.

In error

After review, we find the chancellor erred by ruling Malouf’s timely probated claim was barred by statute. Suggesting Malouf had to take further action against the Estate to protect its claim after the court had already ordered all timely probated claims be paid by the asset-sale proceeds defies logic. While the substitute executor now argues the parties never intended all probated claims be paid, that argument conflicts with the plain language of Rebecca’s offer, which was incorporated into the chancellor’s original order. Rebecca offered to buy the assets of the Estate for $8 million so that the Estate could pay the $8 million in probated claims. And this amount expressly included Malouf’s claim. So Malouf had no reason to pursue additional legal action to secure payment of this claim.

Therefore, we reverse the order denying Malouf’s claim. And we remand the case to the chancery court with instructions that Malouf’s probated claim be paid from proceeds of the purchase of the Estate’s assets.

Thus

We reverse the judgment denying Malouf’s claim, and we remand this matter to the chancery court with instructions to direct the Estate to pay Malouf’s claim with the proceeds from the asset purchase sale, just as the Estate was already ordered to do more than six years ago.

(Mike Frisch)

September 21, 2023 in Billable Hours | Permalink | Comments (0)

Friday, September 1, 2023

A Lawyer Prenup Passes Ethical Muster

The Maryland Appellate Court has upheld the post-departure provisions of an employment agreement between a law firm and an attorney 

This case principally involves a dispute between a law firm and an attorney who was formerly employed by the firm. At the outset of her employment, the attorney and the firm entered into an agreement about how they would divide a contingent fee if she left the firm, was engaged by a client of the firm, and earned the fee after leaving the firm.

The attorney contends that the agreement violates the Maryland Attorneys’ Rules of Professional Conduct and, thus, is unenforceable. On that premise, she withheld over $700,000.00 in fees that were due to the firm under the agreement. For the reasons stated below, we shall hold that the agreement is not unenforceable on its face or as applied in the circumstances of this particular case. Consequently, we shall largely affirm the judgment of the Circuit Court for Prince George’s County, which upheld the agreement and ordered the attorney to pay the fees that she had withheld in violation of it. We shall, however, vacate the judgment insofar as the circuit court failed to award pre-judgment interest to the firm. We shall remand the case with instructions to amend the judgment to include the undisputed amount of $81,212.10 in pre-judgment interest.

The parties and the agreement

In 2011, after approximately 20 years as an Assistant United States Attorney, appellant and cross-appellee Jamie Bennett joined the law firm of Ashcraft & Gerel, LLP (“Ashcraft”). Ashcraft, the appellee and cross-appellant, is a regional law firm that primarily represents plaintiffs on a contingent-fee basis. Ashcraft hired Ms. Bennett to take over its False Claims Act practice.

Ms. Bennett began her employment with Ashcraft on April 1, 2011. On April 5, 2011, Ms. Bennett signed an agreement, to which the parties refer as the “Prenuptial Agreement.” Ashcraft requires its attorneys to sign the Prenuptial Agreement as a condition of their employment.

The Prenuptial Agreement is not an employment agreement; it is a departure agreement. It governs the division of fees between Ashcraft and an attorney if the attorney leaves the firm, is retained by any of the firm’s former clients, and settles the clients’ cases after leaving the firm.

In the absence of an agreement like the Prenuptial Agreement, the parties’ share of a contingent fee would be governed by principles of quantum meruit, under which the firm would have to show the extent to which it contributed to the client’s success.

The agreement set up a sliding scale formula for fee division if and when the attorney departs

The Prenuptial Agreement uses a sliding-scale formula to apportion the division of fees. The formula considers two factors: (1) the amount of time between when the client retained the firm and when the attorney departed, and (2) the amount of time between when the attorney departed and when a fee was generated.

Specifically

In summary, if the client retained the firm more than two years before the attorney left, the firm’s share of the fee ranges from 75 percent to 65 percent, depending on whether the fee was generated within one year, two years, or three years of when the attorney left. If the client retained the firm between one and two years before the attorney left, the firm’s share of the fee ranges from 70 percent to 60 percent, depending, 4 again, on whether the fee was generated within one year, two years, or three years of when the attorney left. And if the client retained the firm less than a year before the attorney left, the firm’s share of the fee ranges from 65 percent to 55 percent, depending on whether the fee was generated within one year, two years, or three years of when the attorney left. The Prenuptial Agreement goes on to say that, when fees are generated more than three years after the attorney leaves the firm, Ashcraft receives 55 percent if the clients had been with the firm as long as they had been with the attorney; Ashcraft receives 50 percent if the clients had been with the attorney longer than they had been with the firm.

The attorney and law firm signed off

Ms. Bennett signed the Prenuptial Agreement, but about six months later she formed the opinion that the agreement was unethical and that it violated the Maryland Attorneys’ Rules of Professional Conduct. She expressed her opinion to Ashcraft’s managing partner.

She had initiated the litigation; the trial court upheld the agreement.

The court here agreed

we conclude that the Prenuptial Agreement is not unenforceable on its face—i.e., that it is not facially invalid. We are persuaded by the 1989 MSBA ethics opinion, which approved an agreement with a sliding-scale formula, much like Ashcraft’s—one in which the division of fees is “based upon a combination of the length of time that the case was in the law firm prior to the attorney’s termination and the period of time in which the fee is realized after the attorney has left the firm.” MSBA Ethics Comm., Formal Op. 1989-29. We are also persuaded by the 1991 District of Columbia ethics opinion, which approved an agreement that seems almost identical to Ashcraft’s—one in which the “[f]ees ultimately realized are divided on a percentage basis which varies according to the length of time the case was handled by the firm and the length of time it was handled separately by the departing lawyer.” D.C. Ethics Comm., Formal Op. 221. We are persuaded as well by the Michigan Court of Appeals’ decision in McCroskey, which upheld an agreement under which the attorney received “a ratable proportion of a given fee on the basis of the stage of the litigation at the time of departure.” McCroskey, Feldman, Cochrane & Brock, P.C. v. Waters, 494 N.W.2d at 828-29.

Consequences

It is undisputed that for three years thereafter Ms. Bennett adhered to that agreement and paid the percentage of the fee dictated by the Prenuptial Agreement. It is also undisputed that Ms. Bennett ceased making payments in October of 2018, when she commenced this action (by filing a complaint that made no mention of the Barker cases). Finally, it is undisputed that, between October of 2018 and the entry of judgment, Ms. Bennett failed to remit $706,164.83 in fees, not including pre-judgment interest. It would seem, therefore, that Ashcraft has indisputably established all of the elements of its breach of contract claim.

Ms. Bennett had sought sanctions

In this case, the court made no findings, but findings were unnecessary because it is abundantly clear from the record that the motions for sanctions were patently groundless. The motions were based on Ms. Bennett’s disagreement with Ashcraft’s interpretation of the law and the facts. Ms. Bennett contended that Ashcraft had falsely represented that Ms. Bennett had waived the right to challenge the enforceability of the Prenuptial Agreement. Ashcraft denied that it had agreed never, under any circumstances, to assert that Ms. Bennett had waived that right. In dismissing most of Ms. Bennett’s second amended complaint, including all of the counts relating to the Barker settlement, the court concluded that her allegations failed to state a claim upon which relief could be granted. In these circumstances, Ashcraft could not have acted in bad faith or without substantial justification.

The court awarded the firm pre-judgment interest. (Mike Frisch)

September 1, 2023 in Billable Hours, Law Firms | Permalink | Comments (0)

Wednesday, August 9, 2023

No Personal Jurisdiction

A law firm that sued for unpaid fees failed to establish personal jurisdiction over the defendant former clients, according to a decision of the New York Appellate Division for the Second Judicial Department.

The plaintiff Cary Scott Goldinger, an attorney licensed to practice law in New York, and his law office, the plaintiff Law Office of Cary Scott Goldinger, P.C., with its principal place of business in New York, commenced this action against the defendants alleging, inter alia, that the defendants owed them legal fees. The plaintiffs alleged that they represented the defendants Sloan Fine Art, LLC (hereinafter Sloan), SFA Investing, Inc. (hereinafter SFA), and Barbara Marburger, an art dealer who was the sole and managing member of Sloan and SFA (hereinafter collectively the Marburger defendants), as well as the defendants Luba Deluca, Moisonzhnick Fine Art, LLC, and MFA, LLC (hereinafter collectively the MFA defendants), in an action commenced by a third party against the Marburger defendants and the MFA defendants in New Mexico, and allegedly represented the MFA defendants in a related action against the same third party in New York.

In response

The Marburger defendants moved pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against them for lack of personal jurisdiction, contending, among other things, that the plaintiffs only represented the Marburger defendants in connection with the action commenced in New Mexico, that Barbara Marburger never traveled to New York to meet with the plaintiffs in connection with their alleged representation of the Marburger defendants, and that she never signed an engagement letter with the plaintiffs. In opposing the Marburger defendants’ motion, the plaintiffs submitted only an unsworn memorandum of law. The Supreme Court granted the Marburger defendants’ motion. The plaintiffs appealled.

And lost

The complaint alleged only that the plaintiffs represented the Marburger defendants in the New Mexico action, not in the New York action (see Bloomgarden v Lanza, 143 AD3d at 852). Further, the plaintiffs failed to allege that the Marburger defendants solicited the plaintiffs’ legal services (see Paterno v Laser Spine Inst., 24 NY3d at 377; Fanelli v Latman, 202 AD3d at 760; cf. Fischbarg v Doucet, 9 NY3d at 385). Thus, the plaintiffs failed to sufficiently allege that the Marburger defendants projected themselves into New York and purposefully availed themselves of the benefits and protections of New York’s laws governing lawyers (cf. Fischbarg v Doucet, 9 NY3d at 385). Moreover, the statement in Barbara Marburger’s affidavit that she occasionally traveled to New York to attend art fairs and to visit New Mexico clients who have homes in New York City did not support a prima facie showing of personal jurisdiction, as there was no showing of an articulable nexus or substantial relationship between those activities and the causes of action asserted by the plaintiffs against the Marburger defendants.

Dan's Papers has an interesting profile of the plaintiff. (Mike Frisch)

August 9, 2023 in Billable Hours, Clients | Permalink | Comments (0)