Wednesday, March 13, 2019

Sum Uncertain Dooms Confessed Judgment For Legal Fees

The New York Appellate Division for the Third Judicial Department vacated a confessed judgment for legal fees

In early February 2013, the defendant executed a blank affidavit of confession of judgment in favor of the plaintiff for “unpaid attorney’s fees and expenses due on cases plaintiff referred to the defendant for continued prosecution as co-counsel to plaintiff’s law firm and in accordance with the terms of the letter agreement entered into between plaintiff and defendant dated January 24, 2013.” It is undisputed that at the time the affidavit was executed, neither the plaintiff nor the defendant knew the exact amount owed by the defendant to the plaintiff under the January 24, 2013, letter agreement.

Approximately one year later, still unable to secure the defendant’s cooperation in calculating the exact amount owed, the plaintiff unilaterally estimated the amount to be $207,474.92 filled in the previously executed affidavit of confession of judgment accordingly, and used that affidavit, as so modified, as the basis for obtaining a judgment by confession against the defendant in that amount, which was filed in the Nassau County Clerk’s Office on April 8, 2014.

In September 2016, nonparty Elena M. Perez, a junior judgment creditor of the defendant, moved to vacate the judgment by confession on the ground that the affidavit of confession of judgment failed to comply with the strict requirements of CPLR 3218. In an affidavit filed in support of the motion, the defendant averred that the affidavit of confession of judgment was executed in blank, and the sum confessed was inserted at a later time without his knowledge or consent. The plaintiff opposed the motion. The Supreme Court denied the motion, and Perez appeals.

The law

Here, it is undisputed that the affidavit of confession of judgment, at the time it was executed by the defendant, failed to state the sum for which judgment could be entered. It is also undisputed that the sum was unilaterally filled in months later by the plaintiff, based on calculations that are neither fully explained nor ascertainable from the evidence contained in the record. Under the circumstances, the affidavit did not meet the requirements of CPLR 3218(a)

(Mike Frisch)

March 13, 2019 in Billable Hours | Permalink | Comments (0)

Fee (Sharing) Dispute

The New York Appellate Division for the First Judicial Department dismissed an appeal

Under the Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.5(g)(1), a lawyer may not divide a fee for legal services with another lawyer who is not associated with the same firm unless, inter alia, the division is in proportion to the services performed by each, and by writing given to the client, each lawyer assumes joint responsibility for the representation (Samuel v Druckman & Sinel, LLP, 12 NY3d 205, 210 [2009]). Here, the record does not permit resolution of the claim for breach of contract regarding fee-sharing as a matter of law, given plaintiff's partner's affidavit regarding his firm's participation in the contested Workers' Compensation cases, through staff translations, arranging appointments, and performing various other tasks associated with those cases.

We grant plaintiff's motion to compel defendants to provide access to the Workers' Compensation Board's eCase system with respect to the cases referred to defendants by plaintiff because the information sought is material and necessary.

(Mike Frisch)

March 13, 2019 in Billable Hours | Permalink | Comments (0)

Monday, February 18, 2019

Filed Too Late

The Massachusetts Supreme Judicial Court has affirmed the dismissal of a suit for legal fees on statute of limitations grounds. 

An attorney had left the plaintiff law firm and taken the case with him

Grace, then an employee of HLO, performed most, if not all, of the legal work on the case, but neither he nor HLO recorded Grace's hours contemporaneously.

HLO terminated Grace on June 25, 2010, while Hicks's medical malpractice case was pending. Hicks, notified of Grace's departure, elected to have Grace continue to represent
him in the medical malpractice action. Grace and HLO were notified of Hicks's election in writing on July 1, 2010. On July 2, HLO transferred Hicks's file to Grace at his new firm, Denner Pellegrino, LLP (Pellegrino), and shortly thereafter Hicks entered into a second contingent fee agreement regarding his medical malpractice action with Pellegrino.

The retainer agreement with HLO allowed an hourly fee if discharged.

The pertinent discharge provision unmistakably provides that if the client discharges HLO, then the client will be liable to HLO for work performed by HLO at a prescribed rate. Therefore, whether we apply the usual rule restated in Jenney, 402 Mass. at 154, or confine our analysis to the plain language of HLO's fee agreement makes no meaningful difference -- HLO's cause of action against Hicks for legal services accrued no later than July 1, 2010, the date that HLO was notified that Hicks had elected to terminate HLO's services.

HLO's argument to extend the statute because Grace had not provided his hours failed. 

Grace's refusal to cooperate with HLO has no bearing on when HLO's cause of action for legal fees against [client] Hicks accrued.

...If HLO had conditioned its entitlement to fees on Hicks's recovery in the underlying medical malpractice suit, then Halstrom's argument that the statute of limitations began to run when Hicks received his settlement check might be persuasive; but HLO did not do that. It is to the terms of that provision that HLO is now bound.

In short, in accordance G. L. c. 260, § 2, Halstrom had until July 1, 2016, to bring his contract action against Hicks. That Halstrom missed the deadline "by a few days" is inconsequential -- his claim is time barred nevertheless.

Equitable claims also failed. (Mike Frisch)

February 18, 2019 in Billable Hours | Permalink | Comments (0)

Monday, February 4, 2019

An Ordinary Arrangement

A newly-released opinion of the District of Columbia Bar Legal Ethics Committee

Ethics Opinion 376

Mandatory Arbitration Provisions in Fee Agreements

Fee agreements containing mandatory arbitration provisions are "ordinary fee arrangements," and the requirements of Rule 1.8 which addresses business transactions between lawyers and clients do not apply. The standard for obtaining client consent to fee agreements containing mandatory arbitration provisions is set forth in Comment [13] to Rule 1.8, and Legal Ethics Opinions 211 and 218 are superseded by Comment [13] and this opinion.  
 
If it is explained
 
For a client to appreciate the "scope and effect" of a mandatory arbitration provision, the lawyer must provide a client with sufficient information about the differences between litigation in the courts and arbitration proceedings. As a general matter, a discussion regarding at least the following differences between the two methods of dispute resolution is prudent: (1) the fees incurred;(2) the available discovery;(3) the right to a jury; and (4) the right to an appeal. As with the application of the informed consent standard, the scope of this discussion depends on the level of sophistication of the client.
 
(Mike Frisch)

February 4, 2019 in Billable Hours, Clients | Permalink | Comments (0)

Saturday, January 26, 2019

ALL CAPS

The South Carolina Court of Appeals has enforced a fee arbitration provision of a retainer agreement

This is an appeal from a circuit court order compelling Lisa Moore (Client) to resolve a fee dispute through the Resolution of Fee Disputes Board of the South Carolina Bar (the Board). Client argues (1) Jean Derrick (Attorney) waived the right to compel her appearance before the Board by first filing an action in the circuit court, (2) the circuit court lacked authority to compel Client's appearance before the Board, and (3) Attorney's fee agreement is unenforceable under the South Carolina Uniform Arbitration Act. We affirm.

The client retained the attorney in a family law matter. The agreement

Client retained Attorney in April 2011 to represent her in a family court matter in Kershaw County. At the onset of the representation, Client and Attorney signed a fee agreement, which provided: "ANY DISPUTE CONCERNING THE FEE DUE PURSUANT TO THIS AGREEMENT SHALL BE SUBMITTED BY THE DISSATISFIED PARTY FOR A FULL, FINAL RESOLUTION TO [THE BOARD], PURSUANT TO RULE 416 OF THE SOUTH CAROLINA APPELLATE COURT RULES."

The dispute

Client's last payment to Attorney was in May 2014; however, there still remained an outstanding balance of $10,484.40. Client did not object to the amount of the bill and repeatedly assured Attorney she would pay, although this evidently never happened. On October 6, 2014, Attorney commenced an action against Client in the circuit court to recover the unpaid fees. 

Client answered, and by way of an affirmative defense, asserted Attorney had failed to comply with the provision of the fee agreement that required all fee disputes to be resolved by the Board. Client also submitted counterclaims for breach of contract accompanied by a fraudulent act, violation of the South Carolina Unfair Trade Practices Act, abuse of process, and conversion. Attorney answered and moved for an order compelling Client to submit the fee dispute to the Board pursuant to the fee agreement and Rule 416, SCACR.

The court

We find Client consented to the jurisdiction of the Board as required under Rule 9 of Rule 416, SCACR, by signing the fee agreement. The rule does not draw a distinction between a client who consents to jurisdiction prior to the representation and one who gives consent after a fee dispute arises...By signing the contract and agreeing to be bound by the terms of the fee agreement, the parties conferred exclusive jurisdiction to the Board over fee disputes. See Bailey v. Bailey, 312 S.C. 454, 459, 441 S.E.2d 325, 327 (1997) (noting exclusive jurisdiction over a fee dispute vests in the Board upon a client's consent to be bound). Accordingly, we find the circuit court was within its authority to enforce the contractual provision and send the fee dispute to the Board.

Thus

we find no error in the circuit court order compelling Client and Attorney to resolve their fee dispute before the Board. We further find the Uniform Arbitration Act is inapplicable to fee agreements entered into between an attorney and client.

January 26, 2019 in Billable Hours | Permalink | Comments (0)

Monday, January 14, 2019

Anti Trust

The United States Court of Appeals for the Fourth Circuit affirmed the district court in a law firm dispute

The dispute here is between two firms that represented plaintiffs in a large antitrust class action. The appellant, Criden & Love, seeks from the Saveri Law Firm a larger share of the award of attorneys’ fees in the action, asserting contentions sounding in contract, tort, and unjust enrichment. The district court rejected all of appellant’s claims. For the reasons that follow, we affirm.

The relationship between the two firms in this case is a product of the antitrust laws. The Supreme Court held decades ago that the only consumers who can challenge anticompetitive conduct are those who purchase goods or services directly from the supplier. See Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977). Since many buyers may be unwilling to rock the boat with their business partners, the universe of potential antitrust plaintiffs is therefore relatively small. Firms like Criden & Love, the appellant here, step into the void, finding plaintiffs willing to sue and pairing them up with large antitrust specialists who can pursue their claim. They work for a fee, which can be substantial. In the case of Criden & Love, the typical referral fee is 12.5% of the larger firm’s total fee.

In February of 2010, Criden & Love identified a plaintiff who was willing to challenge anticompetitive conduct in the titanium dioxide market. It referred this client, Isaac Industries, to two law firms, Berger Montague and Lieff Cabraser, at the usual 12.5% rate. Isaac Industries then brought its antitrust claim, alleging price-fixing for titanium dioxide. This case was consolidated with a similar case brought by Haley Paint.

In April of 2011, Lieff Cabraser became co-lead counsel over the consolidated action, known as the “TiO2 Litigation.” A third firm, East Coast Colorants d/b/a/ Breen Color Concentrates (“Breen”), joined the case as a plaintiff a few months later. Breen had no connection with Criden & Love.

The trouble began in May of 2012, when an antitrust partner at Lieff Cabraser, Joseph Saveri, left to start his own enterprise, the Joseph Saveri Law Firm. Prior to starting his own firm, while still working at Lieff Cabraser, Saveri had filed a notice to appear on behalf of Isaac Industries. Saveri’s new firm soon took on Breen, Isaac Industries’ co plaintiff, as a client in the TiO2 litigation, entering an appearance on its behalf on June 1, 2012. Saveri’s firm never had an agreement with Isaac Industries, which was still represented by Lieff Cabraser.

Saveri thereafter sought the lucrative lead counsel role, which he obtained in August of 2012. No firms in the case objected to his motion to become lead. Ultimately, the class action was settled for a considerable sum of money. The attorneys’ fees in the case totaled more than $54 million. As co-lead counsel, the Saveri Law Firm was awarded approximately $10 million, based entirely on work performed after Saveri left Lieff Cabraser. The other firms representing the plaintiffs, including Lieff Cabraser, Berger Montague, and Criden & Love, were also compensated for their work on the case. In addition, Criden & Love was paid referral fees from Lieff Cabraser and Berger Montague, pursuant to the referral agreements for Isaac Industries. All told, Criden & Love was awarded $ 2.8 million for its role in the case, including more than $900,000 for its referral agreements.

The dispute in this case centers around what happened after Saveri left Lieff Cabraser to start his own firm. Saveri called Kevin Love, a Criden & Love partner, to notify him of his impending departure. On the call, Mr. Love alleges that he told Saveri he would still expect payment of the referral fee that Criden & Love entered into with Lieff Cabraser. Both parties acknowledge that at no point during the call did Saveri accept the request for a referral fee. After Saveri’s firm was added as co-lead counsel, Criden & Love sent two emails to Saveri attempting to confirm the referral agreement, but Saveri did not respond to either message. Once the case settled and the fees were distributed, Saveri communicated to Criden & Love that they had no agreement and no referral fee would be paid.

Saveri sued in Maryland federal court

the court held for Saveri on all counts. Joseph Saveri Law Firm, Inc. v. Michael E. Criden, PA, 2017 WL 3917003 (D. Md. Sept. 7, 2017). On Criden & Love’s contract theories, the court noted inter alia that the parties had never formed an express or implied contract. On the equitable claims, the court held that the “equity does not favor Criden & Love.” Id. Saveri was only compensated for work after leaving Lieff Cabraser, while Criden & Love was paid both for its own work on the case and for its referral of Isaac Industries. Finally, the court rejected Criden & Love’s fraud claim, finding the argument that Saveri’s failure to strike an appearance on behalf of Isaac Industries constituted fraud to be “unavailing.” Id. This appeal followed.

And led to affirmance

Both parties here are sophisticated actors and repeat players in the market for antitrust litigation. Both could have done more to clarify the terms of the relationship between them, and both failed to do so. It is not the job of the court to do this for them. In the absence of any sign that Saveri accepted the terms offered by Criden & Love, we must leave the negotiation where we found it. As such, we see nothing more than an offer that was never accepted. Since there are no disputed facts that would lead to a different conclusion, the district court was correct to resolve this question as a matter of law.

The curt also rejected equitable claims and quantum meruit as a basis to overturn the trial court. (Mike Frisch)

January 14, 2019 in Billable Hours, Economics | Permalink | Comments (0)

Monday, December 31, 2018

"Directly Related" Fees And Costs Recovery Allowed In Florida

The Florida Supreme Court answered a question of the interpretation of its pre-2014 version of Rule 3.4(b)

This case involves a dispute over the recoverable amount of prevailing party fees and costs. The issue presented is whether the pre-2014 version of Rule Regulating the Florida Bar 4-3.4(b), which addresses witness payments and the prohibition against offering inducements to witnesses, prevents the prevailing party in this case from taxing as costs certain payments made to fact witnesses for their “assistance with case and discovery preparation.” This Court has for review Trial Practices, Inc. v. Hahn Loeser & Parks, LLP, 228 So. 3d 1184, 1191 (Fla. 2d DCA 2017), in which the Second District Court of Appeal concluded that the witness payments were permitted under rule 4-3.4(b) and were thus recoverable. The Second District then certified the following as a question of great public importance...

Based on our analysis of the issue presented by this case and consistent with the text of the rule, we rephrase the certified question as follows:

 Does the pre-2014 version of rule 4-3.4(b) of the Rules Regulating the Florida Bar permit a party to pay a fact witness for the witness’s assistance with case and discovery preparation that is not directly related to the witness preparing for, attending, or testifying at proceedings?

We answer the rephrased question in the negative and remand for further proceedings consistent with this opinion.

The case

The relevant events began in August 2005 when Petitioner, Trial Practices, Inc. (“TPI”), entered into an agreement with Jack J. Antaramian to provide litigation consulting services to Antaramian concerning a multi-million-dollar dispute with his business partner, David E. Nassif, about commercial real estate holdings (the “Nassif suit”). The consulting agreement provided that TPI would receive 5% of Antaramian’s “gross recovery” in the Nassif suit. After the Nassif suit ended in a mistrial, Antaramian and Nassif resolved their dispute by entering into a complex settlement agreement involving various entities. The principal architects and drafters of the settlement agreement were Antaramian’s longtime tax and business attorneys with the Boston-based firm Burns & Levinson LLP.

In the wake of the settlement agreement, TPI claimed the 5% fee based on the value of certain transferred property and the settlement of related litigation involving Antaramian and Nassif. Antaramian denied owing TPI the 5% fee, asserting that the settlement agreement with Nassif was a “walk away” agreement with no “gross recovery” to either side. In June 2006, TPI sued Antaramian for breach of the consulting agreement. Extensive discovery ensued regarding Antaramian’s finances and his dealings with Nassif.

At trial in 2011, TPI presented several expert witnesses who testified that the settlement agreement in the Nassif suit resulted in a gross recovery to Antaramian of up to $100 million based on certain economic benefits including cancellation of indebtedness. Antaramian presented his own expert witness as well as ten fact witnesses, seven of whom testified in some manner to the issue of “gross recovery.” Those seven witnesses—all licensed professionals involved in the Nassif suit and the resulting settlement agreement—included: (1) two of Antaramian’s attorneys in the Nassif suit;  (2) one of Nassif’s attorneys in the Nassif suit; (3) three lawyers from Burns & Levinson LLP; and (4) Antaramian’s longtime accountant who prepared Antaramian’s federal income tax returns. The gist of their testimony was that the settlement agreement was designed to provide no recovery to either Antaramian or Nassif, and that there was no tax fraud or cancellation of debt income.

Antaramian won at trial and sought costs and fees.

We are asked to determine whether rule 4-3.4(b) of the Rules Regulating the Florida Bar permits a party to make certain payments to fact witnesses. This issue presents a pure question of law that is subject to de novo review...

We think the more appropriate inquiry is whether the witness’s “assistance with case and discovery preparation” is directly related to the witness “preparing  for, attending, or testifying at proceedings.” Although less than perfectly precise, viewing the payments through that narrower lens is consistent with the language of the rule and avoids prejudicing parties in highly complex cases such as this where they are dependent upon professionals. Indeed, not only was Antaramian required to defend himself, including against accusations of tax fraud, but it appears the professionals upon whom he was dependent also had to defend themselves against accusations of wrongdoing. One of Antaramian’s former trial attorneys testified at the fee hearing regarding the “very adversarial” nature of the litigation, the “[t]ons  of documents,” and TPI’s “theory of the case . . . that everybody on Mr. Antaramian’s side of the transaction was a crook, was actually a thief and a liar.” That testimony was consistent with that of others, including Antaramian’s longtime accountant as well as the Burns & Levinson attorney who was the principal architect of the settlement agreement. That Burns & Levinson attorney also testified regarding “a host of complicating factors” in the case.

It would be unfair and prejudicial to conclude that, beginning the moment TPI filed suit, Antaramian’s longtime professionals who had the necessary knowledge for him to begin to defend the suit, who were involved in the transaction that was the very subject of the suit, and whose own actions and character were seemingly in question, could not be reasonably compensated for any “assistance” regarding complex matters about which they would later be called to testify. We conclude that the rule does not require such a result. But we reiterate that a fact witness’s “assistance” must be directly related to the witness “preparing for, attending, or testifying at proceedings.”

The court has a spiffy new website design. (Mike Frisch)

December 31, 2018 in Billable Hours | Permalink | Comments (0)

Monday, December 17, 2018

Howrey Dissolution Certified Questions To Be Argued Today

An oral argument before the District of Columbia Court of Appeals this morning

Monday, December 17, 2018 10:00 AM

SPECIAL SITTING - REGULAR

No. 18-SP-0218 ALLAN B. DIAMOND, CHAPTER TRUSTEE OF HOWREY,
LLP V. HOGAN LOVELLS US, LLP, ET AL *public interest

Christopher R. Murray, Esquire
Christopher Sullivan, Esquire
Shay Dvoretzky, Esquire
Michael Ryan Pinkston, Esquire
Robert Radasevich, Esquire
Jack Mckay, Esquire
Robert Novick, Esquire
Gregory G. Garre, Esquire
Brian R. Matsui, Esquire
Logan G. Haine-Roberts, Esquire

In a February 2018 opinion, the United States Court of Appeals for the Ninth Circuit had sought guidance on governing District of Columbia law

Pursuant to D.C. Code § 11-723 we respectfully ask the District of Columbia Court of Appeals to resolve three questions of District of Columbia law that “may be
determinative” of this bankruptcy appeal. D.C. Code § 11- 723(a):

(1) Under District of Columbia law does a dissociated partner owe a duty to his or her former law firm to account for profits earned post-departure on legal matters that were in progress but not completed at the time of the partner’s departure, where the partner’s former law firm had been hired to handle those matters on an hourly basis and where those matters were completed at another firm that hired the partner?

(2) If the answer to question (1) is “yes,” then does District of Columbia law allow a partner’s former law firm to recover those profits from the partner’s new law firm under an unjust enrichment theory?

(3) Under District of Columbia law what interest, if any, does a dissolved law firm have in profits earned on legal matters that were in progress but not completed at the time the law firm was dissolved, where the dissolved law firm had been retained to handle the matters on an hourly basis, and where those matters were completed at different pre-existing firms that hired partners of the dissolved firm post-dissolution?

Our phrasing of the questions should not restrict the Court’s consideration of the issues. The Court may rephrase a question as it sees fit in order to best address the contentions of the parties or the specifics of D.C. law.

The argument can be heard in real time on the court's web page. (Mike Frisch)

December 17, 2018 in Billable Hours, Current Affairs, Economics | Permalink | Comments (1)

Friday, December 7, 2018

Sitting Shiva: Mourning Has Broken

A case that began with an altercation at a shiva has been remanded by the United States Court of Appeals for the District of Columbia to resolve the obligations of an insurer to pay legal fees

Appellant Kenneth Feld (“Feld”) retained the law firm of Fulbright & Jaworski, LLP (“Fulbright”) in 2008 to defend him in an action brought by his sister, Karen Feld (“Karen”). After a jury trial, Feld prevailed in that action. This case is a follow-up to the action between Feld and his sister. It involves a claim by Feld against appellee, Fireman’s Fund Insurance Company (“FFIC”), for reimbursement of expenses, largely attorney fees, that he incurred in the action brought by his sister. According to Feld, FFIC has refused to reimburse him for the full amount of reasonable defense costs associated with the successful representation provided by Fulbright. FFIC, in turn, acknowledges that it agreed to cover Feld’s defense costs and that it paid Fulbright over $2.1 million for its representation of Feld. However, FFIC contends that the additional $2.4 million in attorney’s fees and costs sought by Feld are based on rates substantially higher than the rates agreed to by the parties...

The record in this case indicates that the parties never reduced any purported rate agreement to writing. Instead, FFIC relies on genuinely disputed communications between the parties’ representatives to support its position. And the disputed communications to which FFIC points do not unambiguously show that the parties entered a rate agreement as asserted by FFIC. Summary judgment cannot be granted on these terms. We therefore reverse this portion of the District Court’s judgment and remand the case for trial. However, we affirm the District Court’s denial of Feld’s Motion to Compel certain communications between FFIC and its attorneys.

The litigation

Feld’s aunt passed away in September 2007. At the time of her death, the aunt resided in a condo owned by Feld in Washington, D.C. Feld hosted a Shiva – a Jewish mourning ritual – for his aunt in the condo. His sister, Karen, attended the Shiva, but she was eventually removed from the condo building by security guards who had been hired by Feld. In September 2008, Karen filed suit against Feld for injuries allegedly sustained during her removal from the building, raising claims of assault, battery, false imprisonment, intentional infliction of emotional distress, and negligent infliction of emotional distress.

The Washington Post reported on the  underlying dispute

When prayerful mourners gathered that first evening to sit shiva for 92-year-old Shirley Feld, an arts patron and prominent member of Washington's Jewish community, everything went fine. But something unseemly happened during the next night of mourning at the dowager's penthouse. It's led to yet another Feld family drama -- this time a multimillion-dollar lawsuit pitting sister against brother.

In a complaint filed in U.S. District Court, former gossip columnist Karen Feld alleges that her businessman brother, Kenneth Feld -- whose family-entertainment conglomerate includes the Ringling Bros. and Barnum & Bailey Circus -- authorized her forceful removal from their aunt Shirley's shiva service. Karen Feld claims that a trio of "large, aggressive" bodyguards working for Kenneth beat her and threw her into an elevator, along with her ever-present toy poodle, Campari.

Feld v. Feld is the latest chapter in a family saga already rife with bitter feuds and whispered secrets. Karen and Kenneth, the only children of the late circus impresario Irvin Feld -- and the niece and nephew of Shirley Feld -- have been estranged for decades. Their last major court skirmish was 25 years ago over Irvin Feld's will, which cut Karen out of the family business.

Kenneth Feld declined to comment, but his attorneys filed court papers earlier this month to dismiss elements of his sister's complaint, which she brought against him last September, a year after their aunt's death. Karen Feld also would not comment, although one of her lawyers, Steven Gremminger, said, "Karen will litigate her claims as long as it takes for her to get justice."

Her suit alleges that the beating aggravated a brain tumor that later had to be removed, and caused her emotional distress, "symptoms of Tourette Syndrome" and "seizure-like episodes." For those and other alleged injuries, Karen Feld wants $110 million in damages from her younger brother.

Determining what really happened on the evening of Sept. 26, 2007, at the Colonnade building on New Mexico Avenue NW is a matter of billable hours -- and there are likely to be plenty, given the litigious parties. But clearly something went awry: Attendees recall hearing Karen Feld screaming and cursing outside of Shirley Feld's spacious penthouse not long after a rabbi commenced the service in the dining room.

"She was there one minute, everything was cool, calm and collected . . . then boom, suddenly she's on the outside," said an attendee who, like others aware of the incident, declined to be identified in the newspaper because of the case's sensitivity. "Everyone was startled. It was shocking."

The suit says that the alleged beating caused Karen Feld to "utter obscenities" while pinned down in the hallway after being ejected. She also alleges that her brother came into the hallway, tossed her purse to one of the burly men and said: "This is hers. Get rid of her. Her name is F-I-E-L-D. She is not family. She doesn't belong here."

Shirley Feld's death initially occasioned an opportunity for reconciliation between her niece and nephew, observers say. Decades ago, Karen, now 61, and Kenneth, now 60, lived in the penthouse and were raised by their aunt Shirley and uncle Israel (Irvin Feld's brother). Their mother committed suicide in 1958, when Kenneth was 9 and his sister was 10, and their entrepreneur father, who first prospered locally as a rock-and-roll promoter, traveled frequently on business.

In his eulogy at the funeral, the suit says, Kenneth joined the officiating rabbi, M. Bruce Lustig of the Washington Hebrew Congregation, in describing Karen Feld as "the apple of Shirley's eye." (Lustig declined to discuss the case. "It's not newsworthy," he said. "I don't think I serve any of my congregants well by sharing any of this.")

Irvin Feld, a man given to flamboyant suits and grand PR gestures, bought the Ringling Bros. circus in 1967, staging a contract signing ceremony at the Colosseum in Rome. Kenny, as he is known to family and friends, went to work with his father and rose to the top. Karen also did a stint in the promotions end of the business but has said that her father groomed Kenny while discouraging her. "There was nowhere to go in the organization because my father just made sure there was nowhere for me to go," she told the now-defunct local magazine Regardie's in 1990.

Irvin's death in 1984 only heightened tensions between the siblings. "The bottom line was, I got nothing. I did not inherit one penny according to my brother's interpretation of the will," Karen told The Washington Post in a 1990 profile. Kenny was executor of the will; she sued him for $10 million, about half of the estate at that time. The Post reported that she settled out of court for less than $1 million in property, which included a house in Georgetown.

The Regardie's magazine article, which included several derogatory statements by Karen, later became crucial to one of the longest-running Superior Court cases in recent memory. The piece infuriated Kenny. It exhumed some Feld family skeletons, saying that Irvin Feld was a closeted homosexual and that Adele Feld killed herself at 31 because she could not change his sexual orientation.

Kenneth Feld would later call the allegation of homosexuality "an absolute lie," adding, "My mother's condition predated her marriage to my father."

But he didn't seek a retraction or sue the magazine; instead, he authorized an extensive spying operation against the article's author, Jan Pottker of Potomac.

The operation lasted seven years and cost Feld millions, according to court filings. It prompted Pottker to bring a $60 million lawsuit against Feld and others, including Clair George, the CIA's former head of worldwide covert operations, whom the circus had brought on as a consultant. The case lasted nine years. Feld finally settled with Pottker last fall on undisclosed terms.

Kenneth Feld is chairman and chief executive of the privately held, Vienna-based Feld Entertainment, which produces ice shows for Disney ("High School Musical," among them). In a 2003 Forbes magazine article, Kenneth Feld's fortune was estimated at $775 million.

Karen Feld, who once wrote columns for Roll Call, the Washington Times and the Examiner, now freelances and maintains a Web site. She has long been a fixture on the party circuit, carrying her five-pound poodle wherever she goes. (Campari even has his own business cards.)

She also receives proceeds from a trust established by Israel Feld for the benefit of Shirley Feld and their niece and nephew. Kenneth and Karen are now its sole beneficiaries.

In a separate case, filed last month in Superior Court here after being dismissed in Virginia, Karen is suing to remove her brother from trusteeship. She also wants an accounting of the trust's worth, which her court papers estimate at $5 million, and an amount equal to the trust's value for Kenneth's alleged "breach of his fiduciary duties."

In her complaint that alleges the beating, Karen says she had not spoken with her brother "for many years" or visited with her aunt, who still lived in the Colonnade building where Karen was reared. But as Shirley neared death, Kenny phoned his sister to tell her about funeral and shiva arrangements, the suit says. The first shiva proceeded "without incident," it says, and Karen "spoke affably with the three adult children of [Kenneth's], two of whom she had not seen since 1984, when they were babies."

Karen says that on the second night, her brother and his children hugged her, but her feelings of grief brought on "signs of an impending seizure-like episode." Karen headed to a nearby bathroom with Campari, whom she describes as a "service animal" able to sense when a seizure is imminent. (When previously barred from public spaces with the dog, she has produced papers saying the pooch qualifies as a service animal.)

One of the large men grabbed her when she approached the bathroom, she says. (The suit doesn't say why.) Karen Feld, whom the suit describes as 5-foot-3 and 108 pounds, alleges that the man threw her and the dog out a service entrance and that two other guards dragged her out of the building.

In the Colonnade's driveway, Karen says she dialed 911 to report her injuries, but no police or ambulance came. So she drove herself the mile to Sibley Hospital's ER for treatment. She claims that as a result of the beating, a benign brain tumor had "shifted," aggravating her symptoms, and in January 2008 she had surgery to remove the golf-ball-size tumor.

Some who knew Shirley Feld, a longtime, generous supporter of the Washington Ballet, say the incident tarnished her memory. "What a sad thing, what a shame, to have it end up like this," says one person with knowledge of the shiva incident. "Maybe it would have brought the brother and sister together, but instead it broadened the gap between them."

It wasn't the kind of legacy Irvin Feld wanted for the family name. "I would like to be remembered for having made a contribution to the continuance of the circus," he once said. "It's practically all we have left of good, wholesome, clean entertainment that the whole family can enjoy."

(Mike Frisch)

December 7, 2018 in Billable Hours | Permalink | Comments (0)

Thursday, December 6, 2018

Litigation Advance Not Usurious Loan

The New York Appellate Division for the First Judicial Department rejected an effort to avoid repayment of an advance against litigation proceeds

Pursuant to an "Agreement for Purchase of Claim," plaintiff, as purchaser of an interest in defendant's pending personal injury litigation, agreed to "advance" to defendant, as seller, $76,930 at a "Compounded Monthly Carrying Charge" of 3.2% and an "Annual Percentage Rate" of 45.93%, in exchange for defendant's agreement that repayment would be made from the proceeds of the personal injury action. The agreement provided that repayment was contingent on defendant's "successful recovery of proceeds" from the action. Pursuant to the agreement, $60,000 of the advance was used to purchase and pay off an advance previously made to defendant by an entity called Fast Trak Legal.

After receiving settlement proceeds, defendant refused to pay plaintiff the amount called for in the agreement. He argues that, given the excessive interest rate, the agreement is usurious and unconscionable. We conclude that the agreement is neither usurious nor unconscionable.

This was not a "loan" to which usury laws applies

Assignment agreements such as the agreement at issue here are not loans, because the repayment of principal is entirely contingent on the success of the underlying lawsuit.

Bottom line

Contrary to defendant's argument, there are no issues of fact as to the amount that plaintiff overpaid to Fast Trak. Based on the clear terms of the Fast Trak agreement, the court correctly found that the overpayment was only $100, not $5,600, as defendant claimed, and adjusted the amount awarded to plaintiff accordingly. This insubstantial discrepancy does not render the agreement void based on mutual mistake.

(Mike Frisch)

December 6, 2018 in Billable Hours | Permalink | Comments (0)

Thursday, November 29, 2018

Exoneration Required To Sue Defense Attorney

A decision issued today by the Mississippi Supreme Court

Dalton Trigg and his father, Dr. Stephen Trigg, sued Dalton’s former criminal-defense attorney, Steven Farese Sr., alleging professional malpractice. The Lafayette County Circuit Court held that the claims were premature because Dalton had not yet secured postconviction relief from the underlying conviction, and it dismissed the complaint without prejudice.

This case presents the question of whether a convicted criminal may sue his former defense attorney for negligently causing him to be convicted while that conviction still stands. We join the substantial majority of courts in holding that, because these allegations would entitle the plaintiff to relief from his underlying conviction, he must first pursue them through the criminal-justice process. In other words, a convict must “exonerate” himself by obtaining relief from his conviction or sentence before he may pursue a claim against his defense attorney for causing him to be convicted or sentenced more harshly than he should have been. To the extent prior decisions of this Court or the Court of Appeals suggest otherwise, they are overruled.

But this holding extends only to claims that stem from allegations of professional malpractice. The Triggs’ claim for an accounting of the substantial retainer paid to Dalton’s attorney, to the extent it is just a fee dispute and does not depend on the quality of legal services rendered, should not have been dismissed. Finally, Dr. Trigg had standing to pursue the accounting claim because he claims he paid the retainer and is entitled to a refund of the unearned portion.

(Mike Frisch)

November 29, 2018 in Billable Hours | Permalink | Comments (0)

Tuesday, November 27, 2018

Crowdfunding Ethics

A new opinion of the District of Columbia Bar Legal Ethics Committee

Ethics Opinion 375

Ethical Considerations of Crowdfunding

Lawyers are generally free to represent clients who pay for legal services through crowdfunding. The ethical implications of crowdfunding a legal representation vary depending on the lawyer's level of involvement in the crowdfunding. When the client directs the crowdfunding and the lawyer is merely aware of it, the lawyer incurs no specific ethical obligations although the lawyer should consider potential risks associated with receipt of such funds and may counsel the client on the wisdom of publicly sharing confidential information. When the lawyer directs the crowdfunding, the lawyer must comply with the Rules governing a lawyer's receipt of money from third parties. Further, a lawyer who directs the crowdfunding should be cognizant of ethical obligations regarding fee agreements, communications with donors, and the management of the funds raised. 
 
(Mike Frisch)

November 27, 2018 in Billable Hours | Permalink | Comments (0)

Monday, November 5, 2018

No Rule 8.5 In Nevada

A lawsuit to collect unpaid legal fees was governed by Nevada rather than California law, according to a recent decision of the Nevada Supreme Court.

 The client relied on a conflict to deny his obligation to pay

Edward Stolz owns several radio stations and other business interests. In 2012, Stolz approached Robert Schumacher, an attorney in Gordon Rees Scully Mansukhani LLP's (Gordon & Rees) Las Vegas office, about potentially representing him and some of his entities in pending litigation in Nevada. One of the matters they discussed was a lawsuit in California alleging Stolz's stations had not paid for the rights to the music it broadcasted. They additionally discussed whether Stolz could be indemnified by his insurance company. Stolz said that his insurer was The Hartford (Hartford), but that he did not have a policy that would indemnify him. Schumacher advised Stolz that Hartford was a Gordon & Rees client, and that the firm could not represent Stolz in any litigation against Hartford; however, Gordon & Rees could write Hartford a letter requesting that it assume Stolz's defense in that lawsuit. Gordon & Rees advised Stolz that if it wrote Hartford a letter, and Hartford denied the request, Stolz would have to seek other counsel if he wished to pursue Hartford further. When Hartford denied the request, Stolz hired an insurance coverage attorney recommended by Gordon & Rees, but never pursued litigation.

The client counterclaimed alleging malpractice but that claim was dismissed on statute of limitations grounds. The law firm prevailed in a jury trial.

On choice of law

We conclude that the district court correctly applied Nevada law. The incident in question—whether Gordon & Rees should have disclosed the Hartford conflict in writing before representing Stolz— occurred in Nevada. The fee agreement, in fact, was signed by the managing partner in Gordon & Rees's Las Vegas office. Additionally, Nevada has an interest in regulating Nevada attorneys and adjudicating disputes for Nevada businesses. Nevada and California have the same public policy interest here because the guidelines for the ethical conduct at issue are virtually the same in both states.

Moreover, Nevada did not adopt the ABA model rules choice of law provision, which would have required that conduct in connection with a matter pending before a tribunal be governed by the rules of the jurisdiction in which the tribunal sits, even though Nevada did adopt the ABA jurisdictional rule. Compare RPC 8.5, with Model Rules of Profl Conduct r. 8.5 (Am. Bar Ass'n 2017). The district court was correct in noting this when determining not to use the California Rules of Professional Conduct as jury instructions. Accordingly, we conclude the district court was correct in applying Nevada law.

The case is ROYCE INT'L BROAD. CORP. VS. GORDON & REES, LLP C/W 72148. (Mike Frisch)

November 5, 2018 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, October 17, 2018

Brown Out

A decision of the United States Court of Appeals for the District of Columbia Circuit in the seemingly endless Cobell litigation

In this unusual case, although the original plaintiffs are designated as appellants, the actual controversy on appeal is between attorneys for the plaintiffs and an attorney who is a former member of the litigation team. Hereinafter, “Appellants” will refer to the attorneys who constitute the final litigation team. Appellants appeal the district court’s decision to award attorney’s fees and prejudgment interest. They also assert that this Court lacks jurisdiction to hear an appeal on the fees awarded. The Appellee-Cross Appellant, attorney Mark Kester Brown (“Brown”), a former member of plaintiffs’ legal team, appeals the district court’s decision not to award the full amount of attorney’s fees sought by him. See Cobell v. Jewell, 234 F. Supp. 3d 126 (D.D.C. 2017); Cobell by & through Cobell v. Zinke, No. 96-cv-1285, 2017 WL   (D.D.C. May 9, 2017).

Brown worked on the Cobell litigation for a number of years. Interpersonal issues arose among the lawyers, leading to a decrease in work assigned to Brown and to his eventual move to California. Appellants filed a motion for fees without including Brown’s fee information. Brown intervened, filing his own petition for $5.5 million using the Laffey rate as his calculation. The Laffey rate is derived from a matrix created to calculate appropriate hourly rates for attorneys in fee-shifting cases. Laffey v. Nw. Airlines, Inc., 572 F. Supp. 354, 371 (D.D.C. 1983), affd in part, revd in part on other grounds, 746 F.2d 4 (D.C. Cir. 1984). The district court placed $5.5 million of the fees awarded by the court into an escrow account pending resolution of Brown’s action. Instead of using a Laffey rate, the district court used the $350/hour rate from Brown’s engagement letter and awarded Brown $2.88 million of the funds in escrow. Brown introduced no evidence to support his actual hourly rate other than the $350/hour rate specified in his engagement letter. The rate never changed despite various amendments to the engagement letters. Furthermore, the rate was his customary hourly rate in private practice at the time he joined the team. Brown filed a motion seeking prejudgment interest, which the district court awarded. The parties each filed notice of appeal.

The court

Appellants argue that the district court erred in awarding attorney’s fees to Brown, arguing that he violated his ethical duties by withdrawing from the case without informing his clients or the district court. Brown argues the district court should have used Laffey rates to calculate his fees.

Appellants further argue that the district court erred in awarding prejudgment interest under D.C. Code § 15-109. Section 15-109 of the Code allows a party to recover interest on a judgment for damages in contract actions in order to “fully compensate the plaintiff.” D.C. Code § 15-109. Appellants argue that awarding prejudgment interest under § 15-109 was an abuse of discretion because the plain text of the Code applies only in breach of contract actions, and because awarding prejudgment interest is not appropriate when the disputed funds were held in an escrow account under terms set by the court.

We conclude that there was no abuse of discretion by the district court. Trial courts have broad discretion in determining attorney’s fees, Salazar ex rel. Salazar v. District of Columbia, 809 F.3d 58, 63 (D.C. Cir. 2015), and in “awarding . . . prejudgment interest under § 15-109,”  District of Columbia v. Pierce Assocs., Inc., 527 A.2d 306, 310 (D.C. 1987). The district court did not exceed that discretion in awarding attorney’s fees, nor in declining to award Laffey rates. Accord Salazar, 809 F.3d at 63. It also was not an abuse of discretion for the district court to award prejudgment interest because the award originated from a claim based on contract, that is, his engagement letter. Accord Pierce Assocs., Inc., 527 A.2d at 310.

 The panel consisted of TATEL and PILLARD, Circuit Judges, and SENTELLE, Senior Circuit Judge. (Mike Frisch)

October 17, 2018 in Billable Hours | Permalink | Comments (0)

Friday, August 31, 2018

New Jersey Has "No Dearth Of Competent, Civic-Minded Attorneys"

A case summary of the New Jersey Appellate Division

The court holds that if an attorney charges clients in LAD and other fee-shifting cases a fee based in whole or in part on an hourly rate, the attorney is ethically obligated to: disclose that the hourly rate-based fee could approach or exceed the client's recovery; provide examples of hourly rate-based fees in similar types of cases; and inform the client that other competent counsel represent clients in similar cases solely on a contingent fee basis.

Similarly, counsel who require clients to advance costs are ethically obligated to provide information about litigation costs such as deposition and expert fees, and provide examples of what costs have totaled in similar types of cases. An attorney is also ethically obligated to inform the client that other competent counsel who represent clients in similar cases advance litigation costs.

Details from the decision

Defendant, Brian M. Cige, an attorney, appeals from two Law Division orders. The orders declared unenforceable and void his retainer agreement (the "Agreement") with plaintiff, Lisa Balducci, a client he represented in a claim seeking damages under the New Jersey Law Against Discrimination ("LAD"), N.J.S.A. 10:5-1 to -49. The orders also dismissed his counterclaim for fees and costs. The trial court permitted defendant to recover for his services based on the doctrine of quantum meruit.

The trial court found defendant violated his professional responsibility to explain the Agreement's material terms to plaintiff so that she could make an informed decision about retaining him. The trial court's factual and credibility findings have ample support on the plenary hearing record. Defendant did not explain the effect his "greater three fee agreement" would have on any recovery, inform plaintiff of alternatives to such an agreement, or give plaintiff any indication of the tens of thousands of dollars in expenses she would have to pay as the case progressed. Hence we affirm.

The court quoted the lengthy agreement in full

The parties disputed the circumstances under which plaintiff signed the Agreement. According to plaintiff, defendant did not explain the terms of the Agreement. Rather, he told her, "[t]his is a standard agreement for a case like [this]." Plaintiff, who had worked for attorneys and who now operated her own business, "quickly glanced at it and . . . had a concern." She said to defendant, "Brian, this says that I am going to be responsible at the end if we lose the case." He said she would not. He told her the language concerning his hourly rate was standard for a LAD case like this. He said: "We are friends. I was at your wedding. I would never do this to you. Ignore that. Don't worry about it. It is standard information." Plaintiff signed it, because she trusted him, he was a friend, and she believed him.

The attorney recalled the circumstances quite differently while the client's child corroborated her testimony.

After the client discharged him, he asserted a lien that impaired a consent resolution of the underlying matter.

The court

There is no dearth of competent, civic-minded attorneys willing to litigate LAD and other statutory fee-shifting cases under fee agreements that do not include an hourly component. The number of such cases litigated in our trial courts and reported in the case law evidence this, as does — at least as to numbers — advertising on television and radio, in telephone books and newspapers, and on billboards and other media. Indeed, the firm currently representing plaintiff in the LAD action has a fee agreement without an hourly component.

Ethically then, must an attorney whose fee for undertaking a LAD case that includes an hourly rate component explain both the consequences on a recovery and the availability of other competent counsel likely willing to undertake the same representation based on a fee without an hourly component? We conclude the answer is yes.

...We do not find the Agreement in this case unenforceable because of the problematic nature of the three fee provisions. We do find the Agreement unenforceable because, as the trial court found, defendant did not adequately inform plaintiff about the ramifications. 

Holding

In summary, we conclude that if an attorney's fee in a LAD or statutory fee-shifting case is based in whole or in part on an hourly rate, then the attorney is ethically obligated to inform the client of the ramifications. The attorney must inform the client that if the case becomes complex and protracted, the hourly rate-based fee the client is responsible to pay can approach or even exceed his or her recovery. Further, the attorney must inform the client other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component, and might also advance costs. The attorney should provide examples of how much hourly fees have totaled in similar cases, or if the attorney has no such experience with similar cases — in which case consideration should be given to referring the case to a certified civil trial attorney — how much hourly fees have totaled in the same types of cases found in case law.

Similarly, if the client is required to advance costs, the  attorney must provide the client with approximate costs resulting from things such as depositions and expert fees, and must give examples of such costs in similar cases. The attorney must disclose other competent counsel who represent clients in similar cases advance litigation costs...

The fee agreement in this case is ambiguous and to some extent illusory. Defendant failed to discharge his ethical obligation to explain the terms of the agreement, their implications, and alternatives to the agreement, so the client could make an informed decision regarding his representation. The trial court did not err by so finding.

(Mike Frisch)

August 31, 2018 in Billable Hours | Permalink | Comments (0)

Sunday, July 8, 2018

No Thanks For Not Sharing

The New York Appellate Division for the Second Judicial Department affirmed the dismissal of a breach of contract claim

With respect to the merits of the appeal, Judiciary Law § 491 prohibits any person, partnership, or corporation from sharing any fee or compensation charged or received by an attorney-at-law, in consideration of having placed in the hands of such attorney-at-law a claim or demand of any kind (see Judiciary Law § 491[1]; Matter of Ungar v Matarazzo Blumberg & Assoc., 260 AD2d 485, 486). Violation of this section is punishable as a misdemeanor (see Judiciary Law § 491[2];  Matter of D’Emic, 111 AD3d 158).

Under the purported fee-sharing agreement, the plaintiffs would provide the defendant attorneys with proprietary information regarding potential clients, investigate claims, interview potential plaintiffs, and otherwise assist with litigation. In exchange, the defendant attorneys would pay the plaintiffs 20% of their fee for each case. This purported fee-sharing agreement whereby the plaintiffs attempt to recover from the defendant attorneys is illegal, and the plaintiffs are proscribed from seeking the assistance of the courts in enforcing it (see Bonilla v Rotter, 36 AD3d 534, 535; Prins v Itkowitz & Gottlieb, 279 AD2d 274; Matter of Ungar v Matarazzo Blumberg & Assoc., 260 AD2d at 486). The plaintiffs’ contention that they are entitled to equitable relief is without merit, since the contract was criminal in nature and not merely prohibited by statute (cf. Katz v Zuckermann, 119 AD2d 732, 733).

The Supreme Court order explains the claim. 

Defendant Sirota & Sirota, LP, a law firm located at 125 Beach 128th Street, Belle Harbor, New York, engages in litigation. Defendant Howard Sirota, acting on behalf of himself and the other defendants, entered into an agreement with plaintiff Corporate Surveys whereby the latter provided the defendants with proprietary information pertaining to potential clients, investigated claims, interviewed potential plaintiffs, and otherwise provided the defendants with assistance in securities litigation.

In exchange for the services of Corporate Surveys, the defendants promised to pay twenty (20%) percent of the law firm's fee on a case. Corporate Surveys provided services to the defendants on hundreds of cases during the course of their business relationship. Without the specialized knowledge and efforts of Corporate Surveys, the defendants would not have been able to begin many of the lawsuits that they prosecuted over twenty-three years.

The defendants utilized the services of Corporate Surveys in connection with a lawsuit filed in the federal court for the Southern District of New York, entitled Richard Hirsch v. Priceline.com, Inc., which was subsequently consolidated with other cases and recaptioned In Re: Priceline.com Initial Public Offering Securities Litigation.

The services provided by Corporate Surveys resulted in the federal court's appointment of defendant Sirota & Sirota as one of the lead counsel in the class action litigation. The federal court ultimately awarded defendant Sirota & Sirota attorney's fees in the amount of $12,067,377.96. However, the defendants refused to pay Corporate Surveys its twenty (20) per cent share of the fees.

The plaintiffs brought this action seeking to recover twenty (20%) percent of the $12,067,377.96 fee awarded by the federal court. According to the plaintiffs: "It was not until Defendants' continued refusal to make payment to Plaintiffs upon the final resolution of the Priceline Litigation that Plaintiffs were made aware the long-standing agreement between Plaintiffs and Defendants was prohibited by both the New York and Florida Bar Rules." (Complaint, ¶74.)

There are courts that decline to permit lawyers to argue against enforcing illegal contracts that they have entered into on public policy grounds. (Mike Frisch)

July 8, 2018 in Billable Hours | Permalink | Comments (0)

Thursday, June 7, 2018

Law Firm's Suit Against Former Client For Fraud Revived

The District of Columbia Court of Appeals has held that a law firm's fraud claim against a former client for alleged misrepresentations  regarding fee payments survives the resolution of the unpaid fees awarded by the Bar's Attorney Client Arbitration Board ("ACAB").

 Appellant Ludwig & Robinson PLLC ("L&R" or "the law firm") appeals from the Superior Court‘s dismissal of its claims alleging fraud and conspiracy by defendants/appellees BiotechPharma, LLC ("BTP"), BTP‘s wholly-owned subsidiary Converting Biophile Laboratories, Inc ('CBL"), BTP‘s principal Raouf Guirguis (together, the "BTP defendants"), and Martin Kalin (alleged to be a BTP lender "who has held himself out" as BTP‘s "Executive Vice President." For the reasons set out below, we reverse and remand.

 L&R‘s complaint alleges that in 2011, BTP engaged the law firm‘s services to provide the company with "advice and representation regarding cross-border intellectual property claims." The engagement, which entailed extensive motions practice in the Eastern District of Virginia (the "Rocket Docket") and elsewhere as well as depositions and interviews "across the country and overseas," began after Kalin contacted L&R seeking representation for the company. 

There were a series of retainer agreements as unpaid bills mounted.

On January 31, 2013, after attempts to collect payment proved unsuccessful, L&R brought suit in the Superior Court, suing BTP for breach of contract (Count I); CBL and Guirguis for breach of guarantee (Count II); each of the BTP defendants for "Failure to Pay Accounts Stated" (Count III); and all defendants for fraud (Count IV), and conspiracy (Count V). The complaint alleges that as of June 5, 2012, BTP had incurred but failed to pay hourly fees of $1,233,683.08, a "success fee' of $358,659.96, and expenses of $196,605.67, for a total of $1,788,948.71.

The court

Here, the L&R-BTP relationship was an open-ended engagement; i.e., it had no fixed termination date. L&R‘s complaint alleges that the law firm reserved the right to "move to withdraw absent payment" and threatened to invoke that right when confronting Guirguis and Kalin about BTP‘s failure to pay billed amounts. The complaint further alleges that during those conversations, BTP (through Guirguis) and Kalin induced L&R to continue providing legal services to BTP under modified engagement letters, and thus not to withdraw, through false statements about payment sources available to pay the law firm‘s bills (e.g., CBL‘s purported credit line) and through omissions about "the fact and magnitude of liens" against BTP, loans by Kalin to BTP, and BTP‘s level of "indebtedness." In the context of these alleged transactions, the defendants/appellees had a duty independent of the subsequent modified engagement letters to "state truly"what "they told the law firm and also not to suppress or conceal any facts within [their] knowledge which would materially qualify those [representations] stated."

The scope of the ACAB authority 

Under the rules of then ACAB, that body‘s jurisdiction is limited to disputes "about the fee paid, charged, or claimed for legal services." D.C. Bar Att‘y-Client Arb. Bd. R. 3 (b). In addition, the Superior Court did not find, and none of the parties has argued that, Kalin is a privy of any of the BTP defendants such that he could be bound by the ACAB decision to which the BTP defendants were subject. For those reasons, the ACAB arbitration decision did not have res judicata effect as to L&R‘s claims sounding in fraudulent inducement and civil conspiracy against the BTP defendants, and likewise is not a res judicata bar with respect to any claim against Kalin.

Result

In this case, the amount L&R billed BTP for legal services under the second modified engagement letter is some measure of what the law firm could have earned if the lawyers involved had withdrawn from representing BTP and taken on work for another or other clients. As L&R has suggested, its damages (if any) in this regard were likely "up to" rather than equivalent to the billed $1.8 million, because that amount was billed for what L&R has asserted was "round-the-clock work" and also because it included a success fee ($358,659.96) that the law firm would not necessarily have earned through other engagements, as well as expenses ($196,605.67, for, inter alia, "depositions and interviews across the country and overseas") the law firm would not necessarily have incurred in representing other clients. Whatever L&R might be able to prove in the way of "damages . . . up to the claimed 1.8 million dollars," the point we make here is that L&R‘s inclusion of a prayer to recover such an amount as damages for alleged fraudulent inducement does not necessarily require a conclusion that the law firm is attempting to recharacterize a contract claim as a fraud claim, or is merely trying to obtain the benefit of its bargain under its contract with BTP.  Though monetarily equivalent to L&R‘s claimed damages for breach of contract, the law firm‘s prayer in Counts IV and V for approximately $1.8 million in damages may have a different basis and may pertain to damages that are not compensable under contract principles.

Associate Judge Thompson authored the opinion. (Mike Frisch)

June 7, 2018 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, June 6, 2018

For What It's Worth

The Minnesota Supreme Court affirmed but modified a remand decision of the Court of Appeals.

This case requires us to clarify the proper method for calculating the quantum meruit value of an attorney’s services when a client terminates the contingent-fee agreement before a matter concludes. Respondent API, Inc. Asbestos Settlement Trust (API Trust), retained appellant Faricy Law Firm, P.A. (Faricy), under a contingent-fee agreement to assist with asbestos litigation. Faricy represented the predecessor to API Trust and then API Trust for about 10 years and was involved in pursuing several claims. Two months before settling a claim upon which Faricy had worked, API Trust discharged Faricy.

Minnesota law prohibits a discharged contingent-fee lawyer from receiving the contingent fee as a contract remedy, instead allowing recovery only of the reasonable value of services under a theory of quantum meruit. See In re Petition for Distribution of Attorney’s Fees Between Stowman Law Firm, P.A., 870 N.W.2d 755, 761 (Minn. 2015); Lawler v. Dunn, 176 N.W. 989, 990 (Minn. 1920). The district court concluded that Faricy had failed to prove the value of the services that it had provided and dismissed Faricy’s attempt to recover a portion of API Trust’s settlement funds. The court of appeals reversed and remanded, concluding that the district court had applied the wrong test for determining quantum meruit. It provided a set of factors for the district court to consider on remand. Faricy seeks review on the issue of whether the contingent-fee agreement can be considered as a factor when determining the reasonable value of services in quantum meruit, and API Trust seeks cross-review regarding the amount of evidence required to prove quantum meruit. We granted review on both issues.

 The law

A discharged attorney may file a lien to recover attorney fees. Minn. Stat. § 481.13, subd. 1(a)–(c). But a discharged attorney may not sue for breach of contract damages because the client always has an implied right to terminate the attorney-client relationship...

We conclude that district courts should use the following factors to determine the quantum meruit value of a discharged contingent-fee attorney’s services:

(1) time and labor required;
(2) nature and difficulty of the responsibility assumed;
(3) amount involved and the results obtained;
(4) fees customarily charged for similar legal services;
(5) experience, reputation, and ability of counsel;
(6) fee arrangement existing between counsel and the client;
(7) contributions of others; and
(8) timing of the termination.

We have chosen these factors because they combine considerations that we have previously applied to determine the value of an attorney’s services in other contexts with concerns that are specific to the context of a discharged contingent-fee attorney.

Result

Because we have clarified that the calculation of a quantum-meruit award includes considering the “fee arrangement existing between counsel and client,” we agree with the court of appeals that a remand is necessary so that the district court may consider the contingent-fee agreement between Faricy and API Trust, in addition to the other relevant factors that we have identified. The fee agreement “is merely one factor, among a host of others that the district court is to consider in awarding reasonable attorney fees.” See Green, 826 N.W.2d at 538.

(Mike Frisch)

June 6, 2018 in Billable Hours | Permalink | Comments (0)

Wednesday, April 11, 2018

Time To Pay

The Vermont Supreme Court held that an attorney suing for fees had established entitlement to summary judgment

 the record indicates the following undisputed facts. Defendant’s mother died in 2011, and defendant hired plaintiff to represent him in the probate case and other related actions. At the time of her death, defendant’s mother was the sole owner of the Ski Inn. Defendant and his sister were joint beneficiaries of the residue of their mother’s estate, which included the Ski Inn. Defendant wanted to continue operating the inn; his sister, the Executrix of the Estate, believed the inn should be sold because it was operating at a loss and in violation of a state fire safety closure order. probate court granted a license to sell the inn. Defendant, represented by plaintiff, tried to avoid the sale of the inn by repeatedly but unsuccessfully challenging the license to sell. Defendant, represented by plaintiff, also challenged through Vermont Rule of Civil Procedure 75 an order from the State Department of Fire Safety closing down the inn. In December 2012, the trial court dismissed the Rule 75 action and held defendant in contempt for continuing to operate the inn.

Defendant and the Estate then entered into a settlement agreement. Under the agreement, in exchange for a blanket waiver of claims against his sister and the Estate, defendant was given ninety days in which to purchase the inn. The agreement provided for the sale of the property if defendant did not timely exercise his right to purchase it. Defendant did not timely purchase the property and it was sold to a third-party in 2013. In January 2014, following several more months of dispute in the Estate focused on the accounting of sale proceeds and the calculation of the beneficiaries’ distributive shares, plaintiff withdrew as defendant’s attorney. Defendant subsequently appealed from the Probate Division’s Amended Final Decree of Distribution, and in a November 2016 order, the trial court granted judgment as a matter of law to the Estate, upholding the Amended Final Decree. Among other things, the court rejected defendant’s argument that the settlement agreement was invalid because he entered it under "economic duress." Although defendant filed a notice of appeal from this ruling, the appeal was dismissed on the merits due to defendant’s failure to file a brief as ordered.

The court

 We reject defendant’s related assertion that Stevens had in fact been paid in the form of security interests to secure his attorney fee obligation by the time of his withdrawal, and thus,  could not have withdrawn for lack of payment. The fee agreements defendant signed with plaintiff called for monthly billing, authorized interest on overdue balances at the rate of one percent per month, and affirmed counsel’s right to withdraw, subject to court approval, if defendant did not pay according to the terms of the agreements. The promissory note defendant signed in connection with his past due attorney’s fees and the partial assignment of his distributive share do not on their face purport to supplant the parties’ rights and obligations pursuant to the underlying fee agreements.

(Mike Frisch) 

April 11, 2018 in Billable Hours | Permalink | Comments (0)

Lien On Thee

The New York Appellate Division for the First Judicial Department held that a law firm had a lien after withdrawing

Order, Supreme Court, New York County (Erika M. Edwards, J.), entered April 25, 2017, which denied the petition to enforce a charging lien, with prejudice, unanimously reversed, on the law, without costs and the petition granted to the extent that the matter is remanded for a hearing and determination of the reasonableness of petitioner's claim for unpaid fees for legal services rendered.

The record demonstrates that petitioner had good cause to seek to withdraw from representation of Ms. Wylomanska (see Bok v Werner, 9 AD3d 318 [1st Dept 2004]; Bankers Trust Co. v Hogan, 187 AD2d 305 [1st Dept 1992]; Kiernan v Kiernan, 233 AD2d 867 [4th Dept 1996]). The irreconcilable differences between client and counsel as to litigation strategies and choices to be made, as well as Ms. Wylomanska's placing of restrictions on petitioner's communications with her and her expressed lack of trust and confidence that petitioner would represent her interests competently, establish a deterioration of the attorney/client relationship that significantly undermined petitioner's ability to represent Ms. Wylomanska effectively. Petitioner is therefore entitled to recover for services rendered on the basis of quantum meruit (Bok v Werner, 9 AD3d 318), to be determined at a hearing (see Sharbat v Law Offs. of Michael B. Wolk, P.C., 121 AD3d 426 [1st Dept 2014]; Bankers Trust Co. v Hogan, 187 AD2d at 305).

(Mike Frisch)

April 11, 2018 in Billable Hours | Permalink | Comments (0)