Brown v. Grimes
192 Cal. App. 4th 265
| Cal. Ct. App. | 2011Background
- Brown and Grimes, both attorneys, formed a fee-sharing agreement for BP explosion cases in Texas with Brown as referring/associate and Grimes as lead; clients signed retainer agreements but did not sign the fee-sharing agreement itself.
- Ross, a former California attorney acting as a project coordinator, sought compensation from Brown (and allegedly from Grimes) under a 90/10 split favoring Ross, though Brown disputed any obligation to pay Ross.
- Grimes and Brown later modified the fee-sharing to 40/40/20 (Brown/Grimes/Ammons firm) without specifying the exact split between Brown and Grimes; clients approved some consents but not the explicit breakdown between Brown and Grimes.
- Grimes paid Brown $1.342 million from early settlements and later withheld Brown’s share for the remaining 40 cases; Ross demanded substantial sums for his purported hours and services.
- Brown refused to pay Ross, leading Grimes to withhold Brown’s distributions and place Brown’s funds in a trust; Ross settled with Grimes for up to $2.5 million, with payments tied to Brown’s recovery.
- The trial court held the fee-sharing agreement unenforceable due to Brown’s breach, unclean hands, and lack of client consent disclosures; it ordered Brown to repay a portion of monies and dismissed other claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Brown’s breach excused Grimes from performance | Brown asserts no performance breach; Ross’s nonpayment does not excuse Grimes. | Grimes’s withholding and Brown’s failure to pay Ross constitute a material breach excusing Grimes from continuing performance. | Grimes’s discharge affirmed; Brown’s breach excused Grimes from further performance. |
| Whether Brown has to restitute payments received | Total failure of consideration not shown; restitution not warranted. | Because of breach and unjust enrichment, Brown should disgorge payments. | Restitution denied; no total or substantial failure of consideration established. |
| Whether unclean hands barred enforcement | Brown’s fee-splitting with Ross violated professional conduct rules, implicating unclean hands. | Ross’s involvement and Brown’s conduct do not directly affect the Grimes-Brown agreement; unclean hands barred relief. | Unclean hands doctrine not applicable to bar enforcement; Grimes cannot recover via unclean hands. |
| Choice of law governing enforceability of the fee-sharing agreement | Texas law governs due to contract and disciplinary context; California law supports validity if properly disclosed. | California law should govern, and the agreement may be enforceable with disclosures; Texas law bars it. | California law applied for analysis; the court did not resolve the ultimate enforceability under Texas law but found enforceability barred on other grounds. |
| Whether the fee-sharing agreement was unenforceable due to client consent disclosures | California rules allow post-engagement disclosures; clients consented or were informed. | Texas law requires upfront client consent; lack of consent renders the agreement unenforceable. | Enforceability concluded to be problematic under applicable rules; not enforceable to compel Brown’s performance. |
Key Cases Cited
- Ghirardo v. Antonioli, 8 Cal.4th 791 (Cal. 1994) (standard for de novo review of questions of law)
- Schoenberg v. Exportadora de Sal, S.A. de C.V., 930 F.2d 783 (9th Cir. 1991) (choice-of-law and de novo review standards)
- White v. ABCO Engineering Corp., 221 F.3d 293 (2d Cir. 2000) (choice-of-law and contract principles applied in mixed issues)
- Chambers v. Kay, 29 Cal.4th 142 (Cal. 2002) (consent requirements for fee-sharing and nonbonus enforcement rule)
- Washington Mutual Bank v. Superior Court, 24 Cal.4th 906 (Cal. 2001) (de novo applying conflicts of law; depecage approach to issues)