HOTEL ASSOCIATES, INC., Appellant v. RIEVES, RUBENS AND MAYTON, an Arkansas General Partnership; Michael R. Mayton; Elton Allison Rieves, III; and Belinda E. Rubens, Individually and in Her Capacity as Administratrix of The Estate of Kent J. Rubens, Appellees
No. CV-13-1114
Supreme Court of Arkansas
May 29, 2014
2014 Ark. 254
COURTNEY HUDSON GOODSON, Justice
Williams & Anderson PLC, by: Philip E. Kaplan, Stephen A. Hester, and Bonnie Johnson, for appellees.
COURTNEY HUDSON GOODSON, Justice.
Appellant Hotel Associates, Inc. (Hotel) appeals an order entered by the Pulaski County Circuit Court upholding the validity of an oral contingency-fee agreement for legal services rendered by attorney Kent J. Rubens, deceased, when he was a general partner in the law firm of appellee Rieves, Rubens and Mayton (RRM). As a result of this ruling, the circuit court granted judgment in the amount of $2,295,756.70 in favor of RRM1 and the other appellees, Michael R. Mayton, Elton Allison Rieves, III, and Belinda E. Rubens, individually and in her capacity as the administratrix of the estate of Kent J. Rubens. For reversal, Hotel contends that the circuit court erred in ruling that oral contingency-fee
Our review of the record discloses that, in 2005, J.O. “Buddy” House retained Rubens to represent Hotel, one of House‘s companies, in bringing a civil lawsuit against Holiday Inn Franchising, Inc. Rubens and House had enjoyed an attorney-client relationship for many years. By all accounts, the two men were close, and as was their practice, the engagement for Rubens‘s services was not reduced to writing. However, it is undisputed that Hotel agreed to pay Rubens a contingency fee amounting to one-third of any recovery obtained in the lawsuit. Thereafter, Rubens enlisted attorney Timothy Dudley to assist in the representation of Hotel. As per oral agreement, Rubens and Dudley were to divide equally the one-third contingency fee to be paid by Hotel in the event that the litigation was successful.
Rubens died of a sudden illness on November 5, 2008. With House‘s consent, Dudley continued to represent Hotel in the Holiday Inn litigation, and he retrieved the files from RRM on November 18, 2008.
On or about October 21, 2011, Holiday Inn paid the compensatory-damages award with interest to Hotel via Dudley in the amount of $11,287,930. From that award, Hotel authorized Dudley to retain his share of one-sixth of the award and to remit to RRM its fee of one-sixth of the award. However, in authorizing the payment of fees to RRM, Hotel did so under a reservation of rights. Thereafter, Holiday Inn sought a writ of certiorari to the United States Supreme Court to challenge the award of punitive damages. When the Court denied the writ, Holiday Inn paid the punitive-damages award with interest in the amount of $13,800,000. Upon Dudley‘s receipt of the funds, Hotel authorized Dudley to deduct his one-sixth fee, but it instructed Dudley not to transmit any fee to RRM. Anticipating litigation over RRM‘s portion of the attorney‘s fee, Dudley retained RRM‘s putative share of the fee to be deposited into the registry of the court.
In March 2011, Hotel filed suit.3 In its third amended complaint, Hotel asserted a
Hotel subsequently filed a motion for partial summary judgment asserting that RRM‘s counterclaim for breach of contract should be dismissed as a matter of law because an oral contract for a contingency fee is unenforceable as against public policy, as set forth by
RRM also filed a motion for summary judgment on Hotel‘s claims and its counterclaim for breach of contract. It argued that RRM and Hotel had entered into a valid, enforceable contract for legal services based on terms that are not in dispute; that the contract survived Rubens‘s death because Rubens and Dudley were partners in a joint venture; that the rules
After a hearing, the circuit court denied Hotel‘s motion for partial summary judgment. The court, however, granted RRM‘s motion for summary judgment on all of Hotel‘s claims and on RRM‘s counterclaim. Thereafter, RRM filed a motion for prejudgment interest pursuant to
This case comes to us from an order of summary judgment. A circuit court may grant summary judgment only when it is apparent that no genuine issues of material fact exist requiring litigation
As its primary issue on appeal, Hotel contends that the circuit court erred in ruling that oral contingency-fee agreements are enforceable in Arkansas. As support for this argument, Hotel relies on
In deciding this question, we are persuaded by reasoning of the Mississippi Supreme Court in Lowrey, supra. Like Arkansas, Mississippi has a rule of professional conduct that requires contingency-fee agreements to be in writing. In Lowrey, however, the agreement was not reduced to writing. Although the court observed that this was a “serious problem,” the court nonetheless enforced the agreement, limiting its ruling to the “unusual facts of this case.” Lowrey, 543 So. 2d at 1162-63.
Like the Mississippi Supreme Court, we have no reason to draw a bright-line rule when the circumstances of the instant case compel the enforcement of the agreement. Here, there is no dispute over the existence and the terms of the agreement, nor does Hotel contend that the agreed-upon fee was unreasonable. Significantly, Rubens and House had a long-term professional, as well as personal, relationship. Based on this relationship of mutual trust and confidence, it was not their practice to reduce their arrangements to writing. Under these unique facts, we hold that the fee agreement, although oral, is enforceable according to its uncontested terms.
Alternatively, Hotel presents the argument that questions of fact remain in dispute. It contends that the remaining
First, Hotel asserts that a question of fact remains whether it specially hired Rubens to represent it in the lawsuit against Holiday Inn. It contends that this issue is important because the fee agreement terminated at Rubens‘s death, if it specifically engaged the services of Rubens and not RRM. In a related issue, Hotel argues that the circuit court erred in determining as a matter of law that RRM and Dudley were engaged in a joint venture in the representation of Hotel. In this regard, Hotel questions whether there was an equal right of control with respect to the joint undertaking.
The uncontradicted proof offered by RRM was that Rubens was a partner in RRM, which operated under an arrangement that all fees earned were considered partnership income that was shared by the partners on an equal basis. The circuit court found that Rubens represented Hotel as a partner of RRM, and Hotel has not met proof with proof to dispute this fact. To constitute a joint venture under Arkansas law, the following elements must be present: (1) two or more persons combine in a joint business enterprise for their mutual benefit; (2) right of mutual control or management of the venture; and (3) an expressed or implied understanding that they are to share in the profits or losses of
Hotel further contends that there are remaining issues of fact as to whether RRM abandoned its representation of Hotel following Rubens‘s death and whether Hotel acknowledged the fee agreement after Rubens died. However, it is commonly accepted that, where a partnership or attorneys in a joint venture are retained under a contingent-fee contract, the death of one of the attorneys prior to completion of the contemplated services will not relieve the client‘s responsibility to pay according to the terms of the contract where the required performance is accomplished by the survivors of the partnership or joint venture with the consent or acquiescence of the client. Kespohl v. Northern Trust Co., 93 Ill. App. 2d 211, 236 N.E.2d 268 (1968); see also Senneff v. Healy, 155 Iowa 82, 135 N.W. 27 (1912) (holding that where there is a joint venture between attorneys, and following the death of one, the survivor proceeds with the case to protect their mutual interests, and carries it through to the end, the representative of the deceased joint venturer is entitled to his share of the profits or proceeds of the joint enterprise without diminution). Here, with Hotel‘s consent, Dudley concluded the Holiday Inn litigation. Dudley‘s correspondence and deposition testimony reveal that he agreed to continue the representation under the terms of the existing agreements. Hotel has provided no evidence that the terms were changed or that Dudley and RRM agreed to continue the representation under any terms but those of the original agreements. Although Hotel had the option of terminating its contractual obligations and offering to settle with RRM for services rendered, it allowed Dudley to conduct the litigation to its close, resulting in full performance of the agreements by the surviving joint venturer. Under these circumstances, payment of the agreed-upon fee is warranted. See Clifton v. Clark, Hood & Co., 83 Miss. 446, 36 So. 251 (1904). Therefore, we conclude that summary judgment on this point was appropriate as well.
Finally, Hotel asserts that questions of fact exist on its claim of unjust enrichment. It contends that if the oral contingency-fee agreement fails based on its previous arguments, then RRM is only entitled to a fee based on quantum meruit. Because we have rejected Hotel‘s arguments challenging the continuing efficacy of contingency-fee agreement, we necessarily find no merit in this argument. RRM is entitled to recover on the agreement; thus, there is no basis for a finding of unjust enrichment.
As its last point on appeal, Hotel contests the award of prejudgment interest under the authority of
Affirmed; motion to dismiss denied.