Friday, April 7, 2023

Contingency Fee Not Enforced

The Nebraska Supreme Court affirmed the disposition of a civil action 

Sieg H. Brauer is a licensed attorney doing business as Brauer Law Office. Kent Hartmann and Kirk Hartmann are brothers and were, at all relevant times, joint owners of Hartmann Hay Co., LLC (HHC), a farming and livestock company. In December 2015, Kent met with Brauer about a claim that HHC wanted to bring against Wilbur-Ellis Company (WECO). WECO had provided agricultural services to HHC; according to Kent, WECO had negligently misapplied chemicals and caused some of HHC’s crops to fail during the 2014 crop year. Kent explained to Brauer that a setoff might be possible insofar as WECO had a potential claim against him for nonpayment of charges for chemicals and services. Brauer prepared an engagement letter, as well as a contingency fee agreement.

As to the potential counterclaim

Brauer later sent Kent an “Hourly Fee Agreement” for “General Matters Including Defending Claim by [WECO] for Chemicals.” The document was never signed and returned; however, the parties agree that with respect to WECO’s claim against Kent, Brauer agreed to defend Kent for a fee of $100 per hour.

The underlying case

HHC and WECO ultimately settled and dismissed their claims against one another with prejudice. As part of the settlement, neither HHC nor WECO admitted liability. On March 9, 2018, HHC and WECO obtained judicial approval of their settlement. Brauer billed Kent and HHC for unpaid fees and costs. For the most part, Kent and HHC failed or refused to provide the requested payments.

Hence this litigation

On August 25, 2021, the county court entered a judgment. The court found for Brauer on his first cause of action. But the court found for Kent and HHC on Brauer’s other causes of action. Specifically, the court concluded that Brauer was not entitled to recover under the contingency fee agreement. The county court also found that Brauer did not prove damages as necessary to recover for fraudulent misrepresentation. Brauer appealed to the district court.

The district court affirmed; hence Brauer's appeal

Here, the evidence at trial established that Brauer and Kent entered into two fee agreements, one being an hourly fee agreement and one being a contingency fee agreement. Brauer was previously paid $3,500 toward the hourly fee agreement and has received a judgment in the amount of an additional $3,876.70 under the hourly fee agreement. No party challenges these amounts. Brauer seeks to recover an additional $42,474.50 under the contingency fee agreement; thus, Brauer must produce evidence that the additional sum he demands is reasonable based on the work he has performed and the value he has provided through his services.

Insufficienct evidence

it suffices to say that Brauer has produced insufficient evidence of the work performed and value provided pursuant, specifically, to the contingency fee agreement. We can only speculate as to whether or not the claimed fee computed pursuant to the contingency fee agreement is reasonable.  Resultingly, Brauer has not met his burden in attempting to enforce the contingency fee agreement; because this conclusion is dispositive as to Brauer’s request for a contingency fee, we do not reach his assigned errors thereunder. Moreover, we express no opinion as to the general enforceability of what the appellees have labeled a “reverse” contingency fee agreement under Nebraska law. An appellate court is not obligated to engage in an analysis that is not necessary to adjudicate the case and controversy before it.

The claim of fraudulent misrepresentation also failed.

The case is BRAUER V. HARTMANN Cite as 313 Neb. 957. (Mike Frisch)

April 7, 2023 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, March 1, 2023

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The United States District Court for the District of Columbia (Judge Timothy Kelly) granted judgment on the pleadings to a defendant attorney sued by his former client.

This case is an episode in a long-running row between Plaintiff and Defendant, Plaintiff’s former lawyer. Having repeatedly failed to vindicate his belief that Defendant owes him money under their representation agreement, Plaintiff now sues alleging torts arising mostly from their first legal clash. Because he has not stated claims, the Court will enter judgment on the pleadings for Defendant.

Defendant had represented Plaintiff in a D.C. Superior Court case

Plaintiff’s case settled in 2013 without the award of any damages, and the same day, Defendant charged Plaintiff’s credit card for his services. Compl. at 6. Defendant also announced that he would keep Plaintiff’s retainer. Compl. at 6–7. Plaintiff disputed those charges, and so requested arbitration before a D.C. lawyer-client arbitration board. See Compl. at 43. Defendant then sued Plaintiff in Virginia state court. See Compl. at 8

Plaintiff, though, believed Defendant was bound by D.C. attorney-ethics rules to arbitrate their dispute. See Compl. at 8. He told Defendant so, and suggested that the two proceed to arbitration instead. See ECF No. 15-1 at 4–5. Defendant refused, claiming that any arbitration would require his consent—and that he would not agree. Id. at 5. Plaintiff replied with more information, and Defendant conceded that he did not “know anything” about the D.C. arbitration program, “having never used it before.” Id. at 6. But Defendant claimed that was irrelevant because arbitration would require the state court to stay its proceedings, which he said would “not happen.” Id. Those opening salvos kicked off years of multi-forum litigation. See generally Compl. at 10–16.

Plaintiff responded partly by suing Defendant in D.C. Superior Court for legal malpractice. Compl. at 43. That court held that Defendant was bound to arbitrate the dispute being heard by the Virginia court, but that it lacked jurisdiction to order further relief while the Virginia suit was pending. See Compl. at 51. Eventually, the Virginia court agreed, and the dispute proceeded to arbitration. ECF No. 12 at 34 n.22. But the Virginia court ultimately dismissed Defendant’s claims with prejudice. Compl. at 39–40. Thus, the D.C. Court of Appeals concluded that the arbitration was moot. ECF No. 12 at 5 n.3.

Towards the end of those battles, Defendant’s law firm received an unfavorable internet review. A user named “Alan R.,” whose avatar resembled the notorious murderer Charles Manson, called Defendant “sleazy” and advised potential clients to “[r]un away!” Compl. at 111. The review suggested that Defendant was incompetent and malicious. Id. Defendant responded to the posting online by explaining that he had “never represented an Alan R. or Charles Manson.” Id. at 112. He charged that Plaintiff, whom he called an “obsessed former client,” had posted the review under a false name and image. Id. He said Plaintiff had “posted many negative reviews” about him and “sued him unsuccessfully 6–10 times.” Id. But he took no issue with the chosen avatar—he stated that “Charles Manson is a perfect capture of [Plaintiff’s] psyche.” Id.

In D.C. federal court

Plaintiff sued Defendant in this Court both for filing the Virginia state-court case and for attributing the bad review to him.

The claims

Plaintiff brings four claims. First, he says Defendant conspired with another lawyer to deprive Plaintiff of money and his right to arbitration when Defendant sued him in Virginia state court. Compl. at 21–23. Second, he argues Defendant abused the Virginia court process by filing and maintaining that suit because his purpose was to evade required arbitration. Compl. at 23–24. Third, he claims that suit constituted malicious prosecution. Compl. at 24–25. Fourth, he contends that Defendant’s response to the online review invaded his privacy by portraying him in a false light. Compl. at 25–26.

The court applied choice of law analysis to apply D.C. law to the first two claims and Virginia law to the remaining claims.

That proved fatal to the "false light" cause of action

Plaintiff’s final claim is that Defendant invaded his privacy by falsely accusing him of posting the review under the name “Alan R.” and comparing him to Charles Manson. Compl. at 25–27. That accusation, he says, created publicity about him in a way that would be “highly offensive to a reasonable person.” See ECF No. 28 at 49–55.

Those allegations do not state a claim because, as the Court has already explained, Virginia “simply do[es] not recognize such a common law cause of action.” Falwell v. Penthouse Int’l, 521 F. Supp. 1204, 1206 (W.D. Va. 1981). So the Court must dismiss that claim.

(Mike Frisch)

March 1, 2023 in Clients | Permalink | Comments (0)

Friday, January 20, 2023

Mississippi Rejects Implied Attorney-Client Relationship As Basis To Disqualify

The Mississippi Supreme Court overturned an order disqualifying counsel in litigation

This case presents an issue of first impression: whether an attorney’s representation of a general partnership creates an implied attorney-client relationship between the attorney and the individual members of the general partnership, and, if so, whether the Mississippi Rule of Professional Conduct prohibiting communication by a lawyer with an individual represented by other legal counsel was violated. James L. Pettis, III, attorney for the plaintiff, appeals an order of the chancery court disqualifying him for a violation of Mississippi Rule of Professional Conduct 4.2, which prohibits a lawyer from communicating with a person they know to be represented about the subject of the representation. After a careful review of the law, this Court reverses the chancery court’s order, renders a judgment in favor of Pettis, and remands for further proceedings.

Facts

Newell Simrall, IV (“Newell”), John Karsten Simrall (“Karsten”) and Catherine Rea Leist n/k/a Catherine Rea Ray (“Rea”) are siblings and shareholders in the closely held Mississippi corporation B.N. Simrall & Son, Inc. (“the Corporation”). On April 1, 2010, Karsten and Rea, along with Dorman Dewayne Leist, entered into an amended partnership agreement for the general partnership Simrall & Simrall (“the Partnership”). In December of 2012, Newell, represented by J. Lawson Hester (“Hester”), filed a lawsuit (“the underlying litigation”) in the chancery court of Warren County, naming as defendants Karsten, the Corporation, the Partnership, and several other entities connected to Karsten. Penny Lawson (“Lawson”) represented all named defendants in the underlying litigation.

James L. Pettis, III (“Pettis”), was the law partner of Hester and had represented Newell in various matters over the years. In 2011, prior to the commencement of the underlying litigation, Pettis represented Newell in the negotiation of a stock purchase and  land-transfer agreement (“the Agreement”) with Karsten. The alleged breach of the Agreement formed part of the basis for the underlying litigation. Although Pettis was involved in the negotiation of the Agreement, he was not retained to represent, nor did he enter an appearance on behalf of Newell in the underlying litigation.

Rea withdrew from the partnership while the litigation was pending

Sometime in 2019, two years after Rea had disassociated from the Partnership, Rea became aware that Karsten was attempting to sell land belonging to the Corporation. At Newell’s request, Rea and Newell met with Pettis on April 8, 2019, in his office to discuss the attempted sale. On April 11, 2019, Rea spoke with Lawson via telephone and informed her that she had met with Pettis. Pettis met Rea a second time when he attended the meeting of the shareholders and board of directors of the Corporation at Rea’s home on April 15, 2019. At both meetings with Rea, Pettis asked whether she was represented by Lawson or any other attorney in the underlying litigation. Rea responded on both occasions that she was not represented by anyone, nor did she wish to seek representation in connection with the underlying litigation. Both Rea and Pettis submitted affidavits stating they only discussed how to prevent the sale of the Corporation’s land by Karsten and that Rea was not represented by counsel in connection with the underlying litigation.

The trial court had disqualified Pettis

We hold that the chancery court erred by finding an attorney-client relationship existed between Lawson and Rea. Additionally, presuming such a relationship did exist, there was no evidence of knowledge or discussion of illicit subject matter which would provide the grounds for Pettis’s disqualification.

No implied attorney-client relationship on these facts

The representation of a general partnership by an attorney does not automatically give rise to an attorney-client relationship between the attorney and any of the individual partners.

And

Even if an attorney-client relationship had arisen between Rea and Lawson, the chancery court erred by disqualifying Pettis because there was no evidence concerning the knowledge and subject matter requirements of Rule 4.2 of the Mississippi Rules of Professional Conduct. Rule 4.2 states that “[i]n representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.” Miss. R. Pro. Conduct 4.2 (emphasis added). The comment to Rule 4.2 specifically states that the rule does not bar communications with a party “concerning matters outside the representation.” Miss. R. Pro. Conduct 4.2 cmt. The only finding the chancery court made was that “[Rea] is no longer a partner of the partnership but was a partner when Plaintiff’s Complaint was filed in 2012[,] . . . that Penny Lawson represented the general partnership and its individual members,” and that Pettis “violated the Rules of Mississippi Professional Conduct by conducting meetings with [Rea], a represented person.”

Conclusion

Although not explicitly argued by the parties, as Hester’s law partner, Pettis’s disqualification does not fall under Rule 1.10 of the Mississippi Rules of Professional Conduct as an imputed disqualification of a law firm due to a conflict of interest because the chancellor only made a finding that Pettis violated Mississippi Rule of Professional Conduct 4.2, not that a conflict of interest existed. Hester’s disqualification was within the jurisdiction and authority of the chancery court because he was engaged in practices and proceedings before the court as Newell’s attorney in the underlying litigation. Because Rea was not a party to the underlying litigation and because Pettis did not represent Newell in the litigation, no conflict of interest existed. Therefore, this Court finds the disqualification of Pettis under the theory of an imputed disqualification as a member of Hester’s law firm to be untenable.

(Mike Frisch)

January 20, 2023 in Clients | Permalink | Comments (0)

Friday, January 13, 2023

Lawyer Beats The Rap

The New York Appellate Division for the First Judicial Department rejected Lil Wayne's claims against his former attorney

Plaintiff, a prominent rap artist and musician, alleges that defendant Sweeney, his former representative and lawyer of 13 years, fraudulently induced his retention by (1) representing that he was a lawyer authorized to provide legal services despite having been administratively suspended in California for brief periods around that time, and (2) by practicing law in New York without a license. To state a claim for fraudulent inducement, a plaintiff must show that the defendant's misrepresentation or concealment induced the plaintiff to enter into the transaction and directly caused the plaintiff to suffer a loss (Meyercord v Curry, 38 AD3d 315, 316 [1st Dept 2007]). Here, however, plaintiff has not alleged that Sweeney was suspended from practice at the time he was retained, or that a misrepresentation regarding his status induced the retention. Nor has plaintiff pointed to any direct harm he suffered on account of not knowing Sweeney's status at the time of his retention, more than a decade ago.

The legal malpractice claim, largely premised on the same allegations, also fails. Plaintiff clarifies on appeal that his malpractice claim is tethered to the contingency fee agreement that Sweeney drafted with a litigation firm in California on his behalf and Sweeney's actions in a breach of settlement agreement action in New York that resulted in a default judgment entered against plaintiff. In a legal malpractice action, a plaintiff must also prove that, but for the defendant's negligence, the plaintiff would have been successful in the underlying action or not sustained the alleged damages (Rudolph v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442-443 [2007]). In both instances, however, plaintiff has failed to sufficiently allege how any purported shortcoming by Sweeney was the direct cause of harm.

Plaintiff's breach of fiduciary duty claim, based upon the same alleged misrepresentations and omissions regarding Sweeney's status as a lawyer as those contained in the fraudulent inducement and legal malpractice claims, fails for the same reasons (see e.g. EBC I, Inc. v Goldman Sachs & Co, 5 NY3d 11, 19-20 [2005]). Plaintiff has failed to establish that damages were directly caused by defendant's conduct other than the payment of his fees (Retirement Plan for Gen. Empls. of the City of N. Miami Beach v McGraw, 158 AD3d 494, 496 [1st Dept 2018]).

Plaintiff's unjust enrichment claim, largely based upon a theory that Sweeney was unjustly enriched because he received a percentage fee that was higher than what other lawyers might have charged, fares no better. Unjust enrichment is a quasi-contractual claim that is "imposed by law where there has been no agreement or expression of assent, by word or act, on the part of either party involved. The law creates it . . . to assure a just and equitable result" (Bradkin v Leverton, 26 NY2d 192, 196 [1970]). The motion court properly rejected this claim both because (1) the 10% contingency fee was not so high as to demand the intervention of equity, and (2) plaintiff did not object to the 10% fee for more than 13 years, until after the parties had a dispute and plaintiff fired Sweeney. Further, to the extent plaintiff's unjust enrichment claim is grounded upon Sweeney's purported 10% retention of the amounts recovered by the California litigation firm, the claim also fails. The parties were operating under a contractual agreement until the time of defendant's termination, thus precluding a claim for unjust enrichment.

(Mike Frisch)

January 13, 2023 in Clients | Permalink | Comments (0)

Tuesday, September 20, 2022

Class Action Against Class Counsel Revived

The Tennessee Court of Appeals reversed and remanded the dismissal of a legal malpractice claim against class counsel

This is a proposed class action lawsuit pertaining to actions allegedly taken by attorney Kathryn Barnett and others in connection with prior class action litigation concerning the Galilee Memorial Gardens cemetery. In the prior class action case (“the Galilee Class Action”), Ms. Barnett served as lead counsel for a class that alleged several defendant funeral homes had wrongfully abandoned the remains of the class’ deceased loved ones at the cemetery. See Wofford v. M.J. Edwards & Sons Funeral Home Inc., 528 S.W.3d 524, 527 (Tenn. Ct. App. 2017) (affirming trial court’s decision granting class certification in the Galilee Class Action). Under the operative complaint in the present case, which is brought by Plaintiff April Hawthorne, a member of the Galilee Class Action class, it is generally alleged that Ms. Barnett and attorney John Morgan, along with their corporate affiliates, refused to entertain and respond to over $14,475,000.00 in settlement offers made by the funeral home defendants during the pendency of the Galilee Class Action.

Result

Having considered the matter on appeal, we respectfully disagree with the trial court and hold that claims for legal malpractice and breach of fiduciary duties are sufficiently well-pleaded in the complaint. It is not exactly clear why the trial court was of the opinion that the Plaintiff’s allegations do not rise to the level of actionable conduct, but it appears clear to this Court that the Plaintiff has pled facts implicating valid legal theories. Indeed, the Plaintiff has accused the class counsel in the Galilee Class Action of having acted recklessly, by among other things, ignoring settlement offers and rejecting them on illogical bases, and of having failed to carry out fundamental obligations owed to represented clients, namely not communicating the fact that settlement offers had been made. Of course, the Plaintiff has asserted that damages resulted from class counsel’s failures to act upon the settlement offers such that actual settlements could be achieved.

We also conclude that the claim for punitive damages was sufficiently pled and note that the complaint submits that the Defendants’ actions were, among other things, “at the bare minimum, reckless.” We, therefore, reverse the trial court’s dismissal of the legal malpractice, breach of fiduciary duties, and punitive damages claims.

(Mike Frisch)

September 20, 2022 in Clients | Permalink | Comments (0)

Tuesday, February 1, 2022

State Of The Union (Counsel)

The Massachusetts Supreme Judicial Court affirmed the dismissal of a legal malpractice case on the grounds that no attorney-client relationship existed

The defendants, Dwyer & Duddy, P.C., and attorney Christina C. Duddy (collectively, union counsel), are legal counsel to the Boston Teachers Union (union). The plaintiff (grievant) was a tenured teacher and a member of the bargaining unit. Union counsel and the union followed a discrete protocol governing the filing of arbitration demands when the union agreed to take a case of a teacher termination2 to either contractual or statutory arbitration. See the Education Reform Act (ERA or act), G. L. c. 71, § 42. Union counsel was authorized to demand arbitration only when directed to do so by the union leadership, in writing.

Grievant was terminated after an untimely demand was made.

As to the merits of the prohibited practice charge, the hearing officer ruled that the grievant would have been successful in reversing her dismissal and would have been reinstated, but for the untimely filed arbitration demand. The hearing officer imputed to the union the conduct of union counsel as agents of the union. The hearing officer found that "no attorney-client relationship exists between the [union counsel] handling an arbitration and the grievant." The department ordered the union to make the grievant whole, but restricted the remedy to wages and contractual benefits lost between her September 25, 2014 termination and March 16, 2015. This restriction was based on the factual finding that the grievant would not have returned to work. No appeal was filed from the hearing officer's decision.

The grievant filed suit in the Superior Court alleging legal malpractice against union counsel due to the untimely filing of the arbitration demand. Union counsel moved for summary judgment, contending that they never had an attorney-client relationship with the grievant, and, alternatively, that the grievant was unable to establish recoverable damages due to the award issued by the department. After a hearing, a Superior Court judge allowed the motion, concluding that no attorney-client relationship existed; judgment entered in favor of union counsel. This appeal followed.

To no avail

Because the grievant's claims against union counsel are for actions they took as agents of the union, summary judgment was properly granted to union counsel. The grievant's exclusive remedy for a breach of the duty of fair representation by the union or its agents was the filing of prohibited practice charges with the department.

(Mike Frisch)

February 1, 2022 in Clients | Permalink | Comments (0)

Thursday, January 13, 2022

Forced Arbitration Of Fee Dispute In Retainers Unenforceable

The New Jersey Appellate Division affirmed a decision that  declined to enforce an arbitration provision in a law firm's retainer agreements.

In these ten one-sided appeals, which we consider back-to-back and have consolidated for the purpose of writing a single opinion, appellant Weinberger Divorce & Family Law Group LLC (the firm), challenges the denial of its motions to enforce the terms of its retainer agreement (RA) to obtain a judgment against its former clients for unpaid fees, or alternatively, to compel the former clients to submit to binding arbitration to resolve the parties' fee disputes. We affirm.

There were detailed retainer agreements in each matter

Once a fee dispute arose in each of the ten cases before us, the firm mailed the client a pre-action notice (PAN) via regular and certified mail pursuant to Rule 1:20A-6. The PAN stated that the client owed the firm legal fees and that the firm would "place [the] account into suit" unless the client complied with the RA and paid the "total outstanding balance."

The notice advised each former client of the Bar's fee arbitration services; none opted to pursue that option.

None of the ten clients requested fee arbitration with the District Fee Arbitration Committee. Consequently, in lieu of filing a complaint, the firm filed motions to enforce the RAs in the underlying matrimonial matters and sought entry of a judgment for the unpaid fees. Alternatively, the firm sought an order requiring it and the client "to attend binding arbitration governed by the New Jersey Uniform Arbitration Act, N.J.S.A. 2A:24-1 et. seq., with an Arbitrator to be selected by the [c]ourt from the listed options provided by [the firm] respecting the parties' fee dispute, in accordance with paragraph 17 of the" RAs. The firm also sought an award of counsel fees.

The facts of each case and the trial court actions are set out at length.

A recent decision does not impact the analysis

when determining the enforceability of the arbitration provisions contained in the firm's RA, the ordinary contract principles applicable to arbitration provisions in consumer and employment contracts apply, and the heightened Delaney standard does not.

But the fees must be reasonable

Here, we are satisfied the firm's certifications in support of its motions did not adequately address the factors under RPC 1.5(a). For example, the firm included one paragraph in each certification that generally explained the nature of the work performed and, in some cases, noted the results obtained, e.g., a final judgment of divorce. The certifications did not inform the court of the outcome of every motion filed. Moreover, the certifications did not address the fee customarily charged in the locality for similar legal services or offer any information regarding the experience, reputation and ability of the lawyer or lawyers who performed the services.

And as to compelled arbitration

Similarly, we cannot conclude the judges erred in denying the firm the alternate relief it requested in its motions, i.e., to enforce the binding arbitration provision in the firm's RA.

...the plain language of Rule 1:20A-6 makes clear that it is the client who has the right to initiate fee arbitration proceedings conducted under Rule 1:20A. Stated differently, "[w]hether or not a fee dispute will be arbitrated" pursuant to Rule 1:20A "is a matter within the exclusive control of the client" and "[t]he lawyer may not unilaterally invoke the binding arbitration technique of this rule." Pressler & Verniero, cmt. 1 on R. 1:20A-6. Therefore, the language in Paragraph Seventeen of the firm's RA, mandating that its clients initiate fee arbitration pursuant to Rule 1:20A-6, is contrary to the Rule itself, and is unenforceable.

The provision of the RA that the law firm sought to enforce was confusing and contradictory

Given the confusing, contradictory and improper language included in Paragraph Seventeen, we are convinced the judges did not err in declining to compel the firm's former clients to submit to binding arbitration. We hasten to add, however, that although Paragraph Seventeen of the RA is unenforceable, the balance of the RA is not rendered a nullity. Thus, striking Paragraph Seventeen's binding arbitration provision does not "defeat[] the primary purpose of the contract," Jacob v. Norris, McLaughlin & Marcus, 128 N.J. 10, 33 (1992), i.e., the firm's provision of legal representation to the client in exchange for payment of reasonable fees and costs.

(Mike Frisch)

January 13, 2022 in Clients | Permalink | Comments (0)

Saturday, October 9, 2021

No Small Potatos

The Idaho Supreme Court reversed and remanded a disqualification and gag order in a bicycle accident claim against the property owner.

The issue involved an associate move

The law firm Hepworth Holzer, LLP (“Hepworth Holzer” or “the firm”), petitions this Court for a writ of mandamus or prohibition, seeking relief from a district court order disqualifying it as counsel for Dr. Gary Tubbs in a personal injury lawsuit against Bogus Basin Recreational Association, Inc. (“Bogus Basin”). Bogus Basin was represented by Elam & Burke in the proceedings. Elam & Burke moved to disqualify Hepworth Holzer after an associate attorney who worked at Elam & Burke when Tubbs initiated his lawsuit went to work for Hepworth Holzer and assisted the firm on a memorandum in support of a motion to reconsider filed in the case. The district court granted Elam & Burke’s motion. The district court ordered that “[a]ny attorney associated with Hepworth Holzer, LLP, including [the associate attorney], are disqualified from any further representation of [Dr.] Gary Tubbs in this matter and from providing any information from its files after January 21, 2021, and cannot relay any information discussed or received about this case after January 21, 2021[,] to Tubbs or any new attorney/firm representing Tubbs.” Hepworth Holzer contends the district court’s disqualification and gag order is clearly erroneous and unconstitutional.

The move

Dr. Gary Tubbs was severely injured in a bicycle accident that occurred on Bogus Basin’s property. In 2019, Tubbs hired Hepworth Holzer to represent him on a contingency fee basis in a personal injury lawsuit against Bogus Basin. John Janis was the primary attorney representing Tubbs. Elam & Burke represented Bogus Basin. The case proceeded to summary judgment, where Bogus Basin argued that Tubbs’ claims were barred because, after the accident, he signed three waiver agreements releasing Bogus Basin from any and all liability or claims arising from Tubbs’ use of the Bogus Basin ski area. After Elam & Burke filed Bogus Basin’s motion for summary judgment, but before a final judgment was entered, an associate attorney working for Elam & Burke resigned and started working for Hepworth Holzer. Later, the district court granted summary
judgment to Bogus Basin. After working at Hepworth Holzer for one month, the associate attorney helped draft a memorandum in support of a motion for reconsideration in Tubbs’ case. In the motion to reconsider, Tubbs allegedly raised a new legal argument that Bogus Basin claimed was attributable to the associate attorney’s prior communications and access to internal files while he was still an attorney for Elam & Burke...

Bogus Basin’s motion alleged the associate attorney did research and had knowledge of work product and strategy in defending the case against Tubbs based on his
employment with Elam & Burke. Bogus Basin alleged the associate attorney’s conflict was imputed to the entire firm under Idaho Rule of Professional Conduct (“I.R.P.C.”) 1.10. Tubbs opposed the motion, supported by the declaration of Hepworth Holzer attorney John Janis. The associate attorney also submitted a declaration in which he adamantly denied: (1) ever having represented Bogus Basin while employed by Elam & Burke, (2) having otherwise obtained any confidential information about Bogus Basin, or (3) having used any information related to Bogus Basin to its disadvantage. In support, the associate attorney emphasized that he did not bill Bogus Basin for any legal services—highlighting the brief nature of his involvement in the case.

Standing

Hepworth Holzer suffered a distinct and palpable injury from the district court’s order that it cease all representation and communication with Tubbs. The firm had invested significant time, money, and resources into its representation of Tubbs. The value of its reputation and standing in the local legal community is also at stake. Not only did the district court’s order preclude the firm’s ability to recover any financial benefit of that representation, but it also placed Hepworth Holzer  in breach of its contract with Tubbs. Hepworth Holzer’s injury is directly connected to the district court’s order; thus, Hepworth Holzer has standing to petition this Court for relief.

The trial court had jurisdiction to disqualify

Here, the district court used its discretion to grant Bogus Basin’s motion to disqualify Hepworth Holzer based on an imputed conflict of interest. A writ of prohibition is not appropriate here because the district court did not exceed its jurisdiction in issuing the disqualification order. Hepworth Holzer’s request to enter such a writ is therefore denied.

But mandamus relief was appropriate

Here, the district court entered its disqualification and gag order based on its review of documents Elam & Burke submitted to the district court in camera. The documents were not provided to Hepworth Holzer, leaving the firm with no recourse or ability to challenge the district court’s decision, inasmuch as it could not know the basis for the district court’s ruling. The district court erred as a matter of law by limiting Hepworth Holzer’s opportunity to be heard and preventing the firm’s ability to meaningfully respond to Bogus Basin’s claims of impropriety.

Result

Ultimately, no one at Hepworth Holzer, including the associate attorney, could discern what argument allegedly raised confidential arguments that would merit the far-reaching action taken by the district court. The district court needed to consider the prejudice that would result to Tubbs in disqualifying Hepworth Holzer as his counsel. “The goal of the court should be to shape a remedy which will assure fairness to the parties and the integrity of the judicial process.” Foster, 145 Idaho at 32, 175 P.3d at 194 (quoting Weaver, 120 Idaho at 697, 819 P.2d at 115) (“whenever possible, courts should endeavor to reach a solution that is least burdensome to the client.”).

Tubbs suffered substantial and catastrophic physical injuries that led to him filing the underlying lawsuit. Tubbs’ prejudice includes the loss of his long-standing counsel who is familiar with the facts of the case and who undertook representation on a contingent fee basis. It is impractical to conclude that Tubbs retaining new counsel is “a plain, speedy and adequate remedy in the ordinary course of law.” The district court’s order disqualifying Hepworth Holzer as counsel is reversed.

And remanded to a new judge

while we make no finding that the district court is biased against Hepworth Holzer in this case, to avoid even the appearance of impropriety we order that the administrative district judge assign a new judge to this case upon remand. This holding is limited to the unique facts presented here and this determination, made via a special writ, should not be viewed as an expanded means of disqualifying a sitting judge throughout a case.


(Mike Frisch)

October 9, 2021 in Clients | Permalink | Comments (0)

Thursday, September 30, 2021

Kentucky Rejects Non-Client Standing To Seek Disqualification

The Kentucky Supreme Court reversed a disqualification of defense counsel in medical malpractice matters, holding that opposing parties (as here) have no standing to seek disqualification

Consistent with these authorities, and our reading of the pertinent Rules of Professional Conduct, we conclude a general requirement exists that to raise a conflict of interest and seek disqualification of counsel, a party must be a current or former client of the attorney against whom disqualification is sought.

We need not—and do not today—determine whether a non-client may ever have standing to assert an alleged conflict of opposing counsel. However, in our view, a non-client’s standing to raise an alleged conflict of interest by opposing counsel is questionable at best. Absent an unethical change of sides or a violation so open and obvious it compels a court to act, the ability of a non-client to “champion the rights” of an opponent typically does not exist. See FMC Technologies, Inc. v. Edwards, 420 F. Supp. 2d 1153, 1156 (W.D. Wash. 2006) (citing In re Yarn, 530 F.2d at 89). No such circumstances are present in this case sufficient to confer standing on Appellees. The trial court and the Court of Appeals erred in not so finding.

Further, the Appellees’ continually shifting reasoning and their failure to point to a single issue of fact revealing an actual conflict after years of litigation exposes the weakness of their position. It further reveals the true purpose of the motions: to gain a tactical advantage and wrest control of attorney selection from the opposition. Morgan-White’s own affidavit states she files disqualification motions in every case where an attorney represents multiple parties, regardless of whether she believes an actual conflict exists. This is the very sort of weaponizing which should be avoided.

We are convinced Appellants have shown all parties represented by Effinger and Piekarski have agreed to joint representation and a unified defense has been and continues to be asserted against all of Appellees’ claims. There appear to be no factual, legal, or strategic conflicts among any of Effinger and Piekarski’s clients. Although the trial court and Appellees can conjure potential scenarios where conflicting interests might possibly emerge, that is simply not enough. The appearance-of-impropriety standard was rejected in Marcum wherein this Court held “there should be something more substantive than just a possible conflict before disqualification takes place.” 457 S.W.3d at 717. Thus, contrary to the holdings of the trial court and the Court of Appeals, even if Appellees had standing to raise an alleged conflict—which they do not—we discern no issue exists here warranting the draconian sanction of attorney disqualification. The trial court’s disqualification orders were improper and writs of prohibition barring their enforcement is the appropriate remedy.

(Mike Frisch)

September 30, 2021 in Clients | Permalink | Comments (0)

Friday, September 10, 2021

Fee Flee Leaves Law Firm Stuck

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

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

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

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

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

In response the Commission asserted governmental immunity.

The circuit court agreed and here

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

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

Thus waiving that issue on appeal.

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

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

Thursday, September 2, 2021

Utah On Flat Fees And Safe Harbors

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

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

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

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

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

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

The court decision in the Jardine case considered that opinion

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

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

There are two concurring and dissenting opinions.

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

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

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

Monday, August 9, 2021

Withdrawal Negated Liability

The Tennessee Court of Appeals affirmed the grant of summary judgment to the defendant in a legal malpractice case where the law firm had withdrawn before the statute of limitations had expired

In this legal malpractice action, the trial court determined that any duty owed by the defendant law firm to the plaintiff ceased when the law firm undisputedly terminated its representation of the plaintiff more than five months prior to expiration of the statute of limitations applicable to the plaintiff’s underlying claim. The court found that the plaintiff had ample time within which to hire new counsel before the statute of limitations would have run on his personal injury claim. The court also found that the plaintiff had failed, within that timeframe, to obtain new counsel or inquire about the status of his claim such that any damages he suffered were due to his own inaction. The court accordingly granted summary judgment in favor of the defendant law firm. The plaintiff has appealed. Discerning no reversible error, we affirm.

The law firm withdrew after the plaintiff failed to sign documents to effectuate a settlement. (Mike Frisch)

August 9, 2021 in Clients | Permalink | Comments (0)

Monday, July 26, 2021

Fee Dispute May Proceed

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

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

However, the defendant may pursue a claim involving fees

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

(Mike Frisch)

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

Wednesday, July 7, 2021

Irreconcilable Differences

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

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

Crucial to the holding

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

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

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

Friday, June 11, 2021

Unpaid Fee Lost

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

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

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

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

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

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

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

Here, he appealed the failure to order a constructive trust

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

(Mike Frisch)

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

Tuesday, April 27, 2021

Poaching Of Clients As Tortious Interference

A defamation claim has failed but a tortious interference claim survives in a suit brought against attorneys who had taken cases from the plaintiff law firm.

So held the New York Appellate Division for the First Judicial Department

The defamation claim must be dismissed as against all defendants, because the only statements found actionable by the motion court were made to plaintiff's paralegal, i.e., plaintiff's representative, and not to a third party (see Richards v Security Resources, 187 AD3d 452, 453 [1st Dept 2020]). The defamation per se claim is included, since no harm can be presumed to result to plaintiff from statements made to its own representative. Contrary to plaintiff's contention, the court did not "infer" that defamatory statements were made to its clients. It ruled that statements made to plaintiff's clients were nonactionable because they were pleaded without the requisite particularity and/or time-barred (see CPLR 3016[a]; BCRE 230 Riverside LLC v Fuchs, 59 AD3d 282 [1st Dept 2009]).

As to the tortious interference claim, the parties do not challenge the court's articulation of the elements of such a claim in the context of terminable-at-will retainer agreements, namely, that the defendant's conduct must constitute a crime or an independent tort (see e.g. Steinberg v Schnapp, 73 AD3d 171, 176 [1st Dept 2010]). We find that the complaint, as augmented by affidavits submitted in opposition to defendants' motions to dismiss, and in conjunction with the undisputed proof of the four clients who substituted plaintiff for either the Schweitzer firm or the Garcia firm, states at a minimum a cause of action for tortious interference premised on violations of Judiciary Law §§ 479 and 482, which are unclassified misdemeanors (Matter of Ravitch, 82 AD3d 126, 127 [1st Dept 2011]; Matter of Boter, 46 AD3d 1, 3 [1st Dept 2007]). Affidavits show that defendants' efforts to lure away plaintiff's clients involved the use of case runners to solicit business on their behalf. Although the affidavits by the unnamed Clients 1-5, who remained plaintiff's clients, do not alone support the tortious interference claim, they shed light on the tactics to which defendants were apparently willing to resort, as does the affidavit by the Schwitzer firm's former employee, which is consistent with those by Clients 1-5. The court properly declined to consider the affidavit by Cerda Rodriguez, a client who substituted the Schwitzer firm for plaintiff, which was submitted by the Schwitzer Defendants in support of their motion for leave to renew, because they failed to offer reasonable justification for failing to submit it on the prior motion (CPLR 2221[e][e]). We note that in any event the affidavit is not the determinative blow to the tortious interference claim that the Schwitzer Defendants maintain it is.

Moreover, as the court found, the tortious interference claim is supported, at this pleading stage, by the departure of the three other clients who retained the Garcia firm, which, in turn, retained the Schwitzer firm as trial counsel. The Garcia Defendants argue that these substitutions do not show any wrongful conduct on their part, and the Schwitzer Defendants argue that their retention as trial counsel in these matters post-dated the events alleged in the complaint. However, at a minimum, the circumstances raise issues of fact as to the business relationship between the Garcia and Schwitzer firms and, in view of the evidence of the Schwitzer firm's tactics, invite inquiry as to how the Garcia firm, which then brought in the Schwitzer firm, became counsel to these individuals. The dates on which the Schwitzer firm formally became trial counsel do not constitute evidence of its first consultation as to these cases or whether, and to what degree, the two firms coordinated in an effort to secure these clients.

The court correctly declined to dismiss the complaint as against the individual defendants. Given these individuals' alleged direct involvement in the events that underlie the tortious interference claim, supported by affidavits submitted by plaintiff, the Schwitzer Defendants' arguments premised on the shortcomings of vicarious liability doctrines are not relevant.

The Supreme Court decision appealed from characterizes the allegations as "poaching" clients.  (Mike Frisch)

April 27, 2021 in Clients | Permalink | Comments (0)

Monday, April 26, 2021

Malpractice Arbitration Upheld In Wyoming

The Wyoming Supreme Court has held that 

We conclude the district court: erred when it failed to stay the malpractice action as required by the Wyoming and Utah Uniform Arbitration Acts; properly limited its review to whether the arbitration provision was enforceable; and correctly ruled on the enforceability of the arbitration provision. We therefore affirm the district court’s order compelling arbitration, but reverse its dismissal of the action and remand with instructions to stay the proceedings pending arbitration.

The attorney had represented three beneficiaries to a trust

Grimmer represented Ms. Inman, Patterson, and Daisha over the next three years, including in a probate action and a civil action in Wyoming against Daralee, challenging her depletion of trust assets. Grimmer also grew involved in Ms. Inman’s life, helping her find employment, arranging educational tutors, and assisting her with travel arrangements, health care, and buying a car. After she turned 18 in 2015, Ms. Inman signed a new engagement agreement at Grimmer’s request. The new agreement contained an arbitration provision. Grimmer also continued to represent Patterson and Daisha.

Ms. Inman’s and Patterson’s interests soon diverged. By 2017, Ms. Inman wished to end the litigation against Daralee but Patterson did not. In 2016 and 2017, Grimmer helped Patterson attempt to buy real property from the WPI Trust. During this time, Grimmer also drew up and had Ms. Inman sign documents regarding the real property and the trust litigation that benefitted Patterson. Ms. Inman claims Grimmer told her these documents would help end the litigation against Daralee, and did not explain how they might adversely effect her interests. Ms. Inman fired Grimmer in September 2017. Grimmer continued to represent Patterson in matters involving Ms. Inman.

The court found the arbitration provision enforceable

The provision clearly covered malpractice claims, and plainly listed the rights Ms. Inman relinquished when she signed the agreement. In the end, the law and rules of professional conduct permit attorneys to include arbitration provisions that encompass malpractice claims in their engagement agreements; Ms. Inman does not claim the arbitration provision is harmful to the public as whole; Grimmer had no duty under Utah law or rules of professional conduct to verbally explain the provision to her; and the provision as written was adequate to inform her of its scope and effect. Under these circumstances, Ms. Inman has not convinced us that Utah courts would invalidate the arbitration provision on public policy grounds.

(Mike Frisch)

April 26, 2021 in Clients | Permalink | Comments (0)

Friday, March 5, 2021

Second Remand In Billing Litigation

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

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

The attorney had represented the client in a divorce.

The client filed a bar complaint, which was dismissed.

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

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

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

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

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

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

The court

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

And so another remand

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

The Alexander criteria

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

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

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

Monday, December 21, 2020

Duty To Explain Arbitration Provision In Retainer Agreement

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

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

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

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

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

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

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

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

Here   

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

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

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

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

Friday, November 20, 2020

Collectible Judgment Not An Element Of Legal Malpractice Claim

The Louisiana Supreme Court has held that the plaintiff in a legal malpractice suit need not prove that the underlying lost judgment was collectible 

We granted this writ application to determine whether “collectibility” is a relevant consideration in a legal malpractice action. Specifically, we must decide whether plaintiff’s damages in this legal malpractice action are limited to the amount she could have actually collected on a judgment against the tortfeasor in the underlying lawsuit. For the following reasons, we answer these questions in the negative, holding proof of collectibility of an underlying judgment is not an element necessary for a plaintiff to establish a claim for legal malpractice, nor can collectibility be asserted by an attorney as an affirmative defense in a legal malpractice action.

The underlying case involved an automobile accident claim that had been dismissed as untimely filed.

The trial court granted summary judgment to the defendants on non-collectibility grounds.

The court of appeals reversed and was affirmed here

Moreover, applying the collectibility rule assumes that the underlying tortfeasor will remain insolvent or unable to pay for the life of the judgment. But impecunity is a snapshot in time. Under Louisiana law, a money judgment is valid for ten years and may be revived for successive ten-year periods if appropriate steps are taken. La. C.C. art. 3501.5 It would be inherently unfair to deprive the malpractice plaintiff of recovery against the negligent attorney if the underlying judgment would be collectible at a later point in time, within the statutory prescriptive period for satisfaction of a judgment.

A money judgment rendered against a tortfeasor has intrinsic value, regardless of collectibility of that judgment. We hold collectibility is not relevant to the correct measure of a legal malpractice plaintiff’s damages. This is consistent with the policy set forth by this court in Rodriguez v. Traylor, 468 So. 2d 1186, 1188 (La. 1985) that the financial condition of the defendant is not a proper consideration in the determination of compensatory damages. We will not allow a malpractice defendant to assert a defense based on the wealth or poverty of the underlying tortfeasor when a defendant in any other type of tort action could not assert a similarly based defense.

Justice Crain dissented

Thirty states have determined collectibility is relevant in a legal malpractice action. No state has reached a contrary conclusion, until now. In reaching this conclusion, the majority correctly observes there is no codal, statutory, or jurisprudential authority that requires it. Close scrutiny of the distinct causes of action and damages unique to such claims confirms that in this instance, our civilian traditions align with those of our common law neighbors.

A hypothetical

...assume an insolvent, uninsured driver rear-ends a world-class professional athlete rendering him a paraplegic, resulting in damages of $50 million. The plaintiff hires a lawyer to sue the insolvent, uninsured driver. Then, the lawyer misses the prescription date. The plaintiff sues the lawyer for legal malpractice. The lawyer has $50 million legal malpractice insurance coverage. What did the plaintiff lose, or what harm did the lawyer cause the plaintiff, when the lawyer failed to preserve the claim against the insolvent, uninsured driver? The lawyer did not cause the paraplegia, nor did he cause the loss of $50 million, as that money was clearly uncollectible. Instead, the plaintiff lost the right to obtain a judgment against the insolvent, uninsured driver in the amount of $50 million. The determinative question, then, by a trial court is: “What is the value of the ‘lost judgment’?” That value depends largely, if not totally, on the collectibility of the “lost judgment.” This quantum determination should be left to the trial court after considering the relevant collectibility evidence, which should not be barred by the bright-line rule adopted by the majority.

(Mike Frisch)

November 20, 2020 in Clients | Permalink | Comments (0)