442 Mass. 692 | Mass. | 2004
We transferred this case here on our own motion
The background of the case is as follows. Loiselle suffered injuries on April 26, 1991, in a motor vehicle accident. The operator of the other vehicle was an employee of BFI. Within a few days of the accident, Loiselle retained Malonis to represent him in a personal injury action against BFI for a contingent fee of one-third the amount of any recovery received by Loiselle.
In June, 1993, Malonis filed a complaint in the Superior Court against BFI on Loiselle’s behalf. Written discovery was exchanged, and Loiselle was deposed and underwent an independent medical examination. As the litigation continued, Loiselle still complained of back pain. In April, 1994, on Malonis’s recommendation, Loiselle was examined by an orthopedic surgeon, who recommended disc surgery. Malonis forwarded the surgeon’s report to BFI. As a consequence of receiving the report, BFI decided to increase its settlement offer to $57,500, although it did not communicate that offer to Malonis. Settlement discussions that continued between Malonis and BFI focused on figures in the $60,000 to $80,000 range, but no agreement was reached.
On September 14, 1994, Loiselle discharged Malonis and engaged Harrington to represent him under a contingent fee agreement calling for one-third of the gross amount of the recovery. Harrington requested that Malonis forward his case file to him, and Malonis complied. On September 21, Malonis gave written notice to Loiselle, Harrington, and BFI that he would seek to establish an attorney’s lien, pursuant to G. L. c. 221, § 50, on any recovery in the case. Between December 16, 1994, and March 27, 1995, Harrington sent Malonis four written requests for an itemized bill for his legal services performed for Loiselle with respect to the BFI case. On March 23, Loiselle himself sent Malonis a written demand “to submit a full and complete invoicing of your fees due you,” and stating that “[i]t would be appreciated” if this were provided to himself, or to Harrington, on or before March 30, 1995.
In early April, Harrington completed a settlement with BFI for $57,500 (the figure that BFT had determined to offer the preceding year, but had not communicated to Malonis). Having received notice of Malonis’s attmey’s lien, and anticipating
On April 4, BFI issued two checks: the first in the sum of $40,000, payable to Loiselle’s wife, and the second in the sum of $17,500, payable to Harrington as attorney for Loiselle.
On July 31, Malonis filed a complaint in the Superior Court asserting claims against Loiselle, BFI, and Harrington with respect to his entitlement to payment for legal services performed for Loiselle in connection with the BFI case. A Superior Court judge allowed BFI’s motion to dismiss the only two claims asserted against it (claims to enforce an attorney’s hen on the settlement and for alleged violations of G. L. c. 93A), and Malonis has not appealed therefrom. That judge then remanded the case to the District Court, where the case was tried against Harrington on claims that (1) Harrington was unjustly enriched by failing to reimburse Malonis for his fees
Final judgment in favor of Harrington entered in the District Court on July 9, 2001, and on Malonis’s request, the case was retransferred to the Superior Court.
1. The dispute may be resolved in favor of Malonis on the case stated record. The Superior Court judge determined that it was the shared “expectation” of all the affected parties that Malonis’s attorney’s fees and expenses would be paid by Harrington from his contingent fee. On the basis of that understanding, the judge concluded that Malonis was entitled to recovery from Harrington, on a theory of quantum meruit, for the reasonable value of his efforts and contributions to the eventual recovery. We essentially agree with the judge’s reasoning.
Loiselle was entirely within his rights to discharge Malonis. See Herbits v. Constitution Indem. Co., 279 Mass. 539, 542 (1932) (uniformly recognized that client has unquestioned right to discharge attorney, with or without cause). The discharge terminated Malonis’s right to recover on the contingent fee
However, the record clearly establishes that by the time settlement was reached with BFI, it was the reasonable expectation of all of the parties in this case that Harrington had assumed responsibility to pay Malonis. Loiselle, in his pro se answer to the complaint, stated that the case was settled “with the knowledge and understanding that Attorney Harrington was to see to [Malonis] at no cost to [Loiselle] whatsoever.” BFI’s counsel testified as to Harrington’s specific assurance that he would “take care of” Malonis. His testimony on this matter is buttressed by letters to Harrington and Malonis reiterating his understanding that Harrington would pay Malonis out of his own $17,500 contingency fee. Malonis testified that although at the time of his discharge he had no direct communications with Harrington or Loiselle on the matter of his payment, he assumed (based in part on past interaction with Harrington) that discussions with Harrington would follow if and when the case settled.
Harrington is now obligated to compensate Malonis in quantum meruit for the value of his legal services. Given the expectations of the parties in this case, to conclude otherwise would allow Harrington to be unjustly enriched by permitting him to retain the entire fee when he, admittedly, was not the major force in obtaining the settlement. See Salamon v. Terra, supra (“injustice of the enrichment or detriment in quasi-contract equates with the defeat of someone’s reasonable expectations”).
Harrington contends that his enrichment was not unjust. As grounds for his contention, he points to (1) Malonis’s failure to take steps to secure his entitlement to payment by submitting a timely itemized bill and by attending court proceedings to determine the existence and validity of the attorney’s lien;
We now consider the fair value of Malonis’s quantum meruit recovery, mindful that “[t]he question of what is fair and reasonable compensation for legal services rendered is one of fact for a trial judge to decide.” Mulhern v. Roach, 398 Mass. 18, 23 (1986). The judge assessed the fees ($10,320) and expenses ($1,035.80) set forth in Malonis’s invoice and, quite properly, accepted them as fair and reasonable. The record demonstrates that Malonis invested substantial time and funds in the case, and his efforts contributed materially to the resulting $57,500 settlement.
2. We comment now on the broader question raised by the case. When a client discharges one attorney before settlement is reached and retains another on a contingent fee basis, who bears the cost of paying the discharged attorney the fair value of his legal services and expenses, the client or successor counsel?
There is no question that a client must have absolute trust in the integrity, the judgment, and the ability of his or her attorney. When a client, for whatever reason, loses faith in his or her
In withdrawing from a case, a discharged attorney must take all reasonable steps to protect the client’s interests, including surrendering papers and property to which the client is entitled, and discussing with the client the consequences of the discharge, including his or her expectation of being compensated for work performed.
The significant point is that the matter should be resolved by express agreement with the client, based on a frank discussion of the matter, thus allowing an intelligent decision as to which course is in the client’s best interests. Absent such express
This position is not cast in stone. We recognize some potential for a conflict of interest to arise when the burden of advising a chent of the obhgation to pay a former attorney, and the need to identify the source of payment, falls on the shoulders of the only alternate candidate, or when an attorney approaches settlement negotiations knowing that a portion of his fee (fixed or, as here, as yet undetermined) is owed to one no longer involved with the case. Attorneys in this situation should never lose awareness that, in matters of fees, attorneys “are fiduciaries who owe their clients greater duties than are owed under the general law of contracts.” Beatty v. NP Corp., 31 Mass. App. Ct. 606, 612 (1991), quoting Restatement (Third) of the Law Governing Lawyers § 46 comment b (Tent. Draft No. 4 1991). The matter is one of importance to the bar, particularly to lawyers who represent clients pursuant to contingent fee agreements. The standing advisory committee on the rules of professional conduct may wish to study the issue by obtaining necessary comment from affected and interested parties and recommend to us whether rule 1.5 should be amended to
Judgment affirmed.
The record does not establish whether the contingent fee agreement between Loiselle and Malonis was in writing, as was required at the time by S.J.C. Rule 3:05 (4), as appearing in 382 Mass. 762 (1981), and is now mandated by Mass. R. Prof. C. 1.5 (c), as amended, 432 Mass. 1301 (2000). That factual issue is not material to our decision in this case.
The judge in the Superior Court credited the District Court testimony of BFI’s counsel that BFFs willingness to consummate the settlement was premised on Harrington’s oral assurance that he would “take care of” Malonis. BFI’s counsel confirmed his understanding that Harrington intended to pay Malonis in a letter to Harrington dated April 10, 1995, in which he wrote: “As per our conversation today, you will resolve any issue regarding a . . . fee owed to Attorney George Malonis.” Two weeks later, BFI’s counsel reiterated in a letter to Malonis that Harrington “has advised me that he will be in touch with you regarding the issue of your attorneys fee.”
This amount represents a modest reduction from the one-third of the total recovery (plus expenses) specified in the fee agreement between Loiselle and Harrington.
Before retransfer, a judge in the District Court allowed Malonis’s unopposed motion to dismiss his only claim against Loiselle, who appears to have taken no part in the prior District Court proceedings.
Malonis, apparently, did not assert his conversion claim at the District Court trial or before the Superior Court judge. The Superior Court judge concluded that his G. L. c. 93A claim had no merit, and Malonis does not now argue otherwise. We thus need not address the merits of either claim.
There is no claim, and no basis in the record to conclude, that the discharge was in bad faith. See Opert v. Mellios, 415 Mass. 634, 636-637 (1993), citing Salem Realty Co. v. Matera, 384 Mass. 803, 804 (1981) (recognizing that, after substantial performance, bad faith termination might permit attorney to recover under contingency fee contract).
Malonis clearly expected that Harrington would pay him if the case settled. It is less clear what expectations he harbored if no settlement had been reached. Malonis testified that he and Loiselle had signed a written contingent fee agreement that explicitly provided he would be entitled to reasonable compensation (plus expenses and costs) in the event of his discharge from the case before its conclusion. Although Malonis was unable to produce the writ
On principle, the fact that an attorney was retained on a contingency basis, which assumes that no fee will be owed unless the attorney’s efforts secure an outcome favorable to the client, should have no bearing on a discharged attorney’s right to recover in quantum meruit. As a practical matter, however, a client who discharges a lawyer before the conclusion of an unsuccessful claim may have received little or nothing of value and should not fairly be burdened with the obligation to pay his former counsel, over and above reasonable expenses and costs.
Harrington claims that Malonis’s failure to allege Harrington’s promise to pay in the complaint now bars him from asserting the parties’ understanding of this promise as a basis for recovery. This is incorrect. We have considered the reasonable expectations of the parties in the context of Malonis’s (asserted) claim of unjust enrichment, on a theory of quasi contract, that is implied in law “for reasons of justice, without any expression of assent.” Salamon v. Terra, 394 Mass. 857, 859 (1985), quoting 1 A. Corbin, Contracts § 19 (1963). Our decision does not rest on traditional contract principles or any (unasserted) related claims.
As to the first, moreover, we note that, while perhaps inconvenient for Harrington, it was not unreasonable for Malonis, once discharged, to give notice of his attorney’s hen and then wait until the actual outcome of settlement negotiations before submitting his invoice. See note 7, supra. There are multiple factors to be considered in determining what is an attorney’s fair and reasonable measure of compensation in a case. Relevant factors include not only time spent, but the amount of the recovery, and the attorney’s impact on the actual outcome. See Mulhern v. Roach, 398 Mass. 18, 24, 30 (1986). See also Mass. R. Prof. C. 1.5 (a) (4), 426 Mass. 1315 (1998). The latter two could not be ascertained until negotiations had concluded in a final settlement. We agree, however, that it would have been better practice for Malonis to respond to Harrington’s inquiries on the subject, even if such a response did not specify a precise dollar amount.
The judge pointed out that Malonis’s invoice, reconstructed from his copy of the BFI case file and not from contemporaneous time records, set forth more conservative estimates of time expended on various tasks than ordinarily might be reflected in an attorney’s file.
The parties have suggested that courts elsewhere are divided on the answer. Our own reading of the cited cases reveals that other courts have resolved similar disputes much as we do today, by reference to governing rules of professional responsibility and application of equitable principles to the specific facts of each case. See, e.g., Saucier v. Hayes Dairy Prods., Inc., 373 So. 2d 102, 106 (La. 1979) (one contingency fee to be allocated among various attorneys involved in handling claim in question); Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655, 660 (1993) (discharged attorney entitled to percentage of judgment recovered in separate action on same claim brought by successor counsel in United States District Court); Pryor v. Merten, 127 N.C. App. 483, 487 (1997) (discharged attorney may proceed against new attorney for rightful share of total attorney’s fees). But see Adams v. Fisher, 390 So. 2d 1248, 1251 (Fla. Dist. Ct. App. 1980) (in absence of specific agreement, client must pay both discharged attorney for quantum meruit value of services and substituted attorney contingency fee in accordance with contract); Styer v. Hugo, 422 Pa. Super. 262, 270-272 (1993), aff’d, 535 Pa. 610 (1994) (discharged attorney not entitled to portion of recovery from subsequent counsel, when record established no contribution by discharged attorney to ultimate settlement and no knowledge on part of subsequent counsel that former attorney expected payment).
Comment [4] to Mass. R. Prof. C. 1.16, 426 Mass. 1369 (1998), cautions: “A client has a right to discharge a lawyer at any time, with or without cause, subject to liability for payment for the lawyer’s services. Where future dispute about the withdrawal may be anticipated, it may be advisable to prepare a written statement reciting the circumstances.”
