Stеven U. MULLENS, Petitioner, v. Victoria Lynn HANSEL-HENDERSON, Respondent.
No. 01SC622
Supreme Court of Colorado, En Banc.
Dec. 16, 2002.
As Modified on Denial of Rehearing Jan. 13, 2003.
58 P.3d 992
Law Offices of J.E. Losavio, Jr., J.E. Losavio, Jr., Pueblo, Colorado, Attorneys for Respondent.
Law Offices of Bennett S. Aisenberg, P.C., Bennett S. Aisenberg, H. Paul Himes, Jr.,
Justice MARTINEZ delivered the Opinion of the Court.
I. Introduction
We granted certiorari to decide whether the court of appeals erred in holding that an attorney must return fees received for legal services when the services were successfully completed but the agreement was not in writing. The court of appeals ordered attorney Steven Mullens to return fees earned during representation of Victoria Hansel-Henderson in claims against her former employer because the underlying contingent fee agreement did not comply with the requirements of
II. Facts and Procedural History
In 1990, respondent Victoria Hansel-Henderson1 entered into a written contingent fee agreement with petitioner Steven Mullens, a Colorado attorney with over twenty years experience in Workers’ Compensation claims. Under the terms of this initial contract, Mullens agreed to represent Hansel in a Workers’ Cоmpensation claim against her employer Public Service Company for injuries sustained on the job. In exchange for representation, Mullens would receive twenty percent (20%) of any monies received by him on her behalf. Mullens agreed to carry all costs related to this litigation.
As Mullens worked on the Workers’ Compensation claim over the next two years, he learned of attempts by Public Service Company to influence medical diagnoses being made for purposes of evaluating Hansel‘s injuries. Mullens recognized that these tac-
In 1993, after three years of work, Mullens settled the two claims. The employer agreed to pay Hansel $37,560 to settle the Workers’ Compensation claim and $262,440 to settle the Bad Faith claim for a total on the two claims of $300,000. From the settlement amounts Mullens retained thirty-three percent (33%) of the total settlement amount, instead of twenty percent (20%) of the Workers’ Compensation claim and forty percent (40%) of the Bad Faith claim.3 This arrangement allowed Hаnsel to receive $12,488 more than she could have expected to receive under the terms of the oral contingent fee agreement. Hansel accepted the amounts and signed two documents, one for each claim, releasing the employer from further liability. The trial court found that at disbursement Hansel was very pleased with the outcome of the claims and did not object to the amounts of attorney‘s fees. Hansel negotiated the settlement checks.
In 1995, two years after Mullens received his attorney‘s fees and Hansel accepted the settlement money, Hansel initiated action against Mullens to recover all of the attorney‘s fees paid for the Bad Faith settlement. Hansel asserted in her complaint that Mullens was nоt entitled to attorney‘s fees from the Bad Faith settlement because the contingent fee agreement for the Bad Faith claim was not in writing as required by
After finding an oral agreement for forty percent (40%) of all settlement monies on the Bad Faith claim, the trial court held that the agreement was not enforceable because it was never reduced to writing as required by
On appeal, the court of appeals decided that Dudding v. Norton Frickey & Assoc., 11 P.3d 441 (Colo.2000), controlled. According
Since we have not had the opportunity to examine whether quantum meruit recovery is available for unenforceable contingent fee agreеments where the agreed upon legal services have been completed, and because
III. Analysis
This case requires us to examine whether an attorney may keep attorney‘s fees paid for services performed pursuant to an unenforceable oral contingent fee agreement when the services were successfully completed.6 Our examination of this issue is broken into thrеe areas. First, we consider how attorney‘s fees under unenforceable contingent fee agreements are limited by our rules. Specifically, we examine the
A. Rules Governing Contingent Fees
Whether or not the terms of a contingent fee agreement are enforceable is controlled by
According to
Although recovery under quantum meruit is generally allowed for unenforceable fee agreements,
The limitation that
The client is not to be liable to pay compensation otherwise than from amounts collected for the client by the attorney, except as follows:
In the event that the client terminates this contingent fee agreement without wrongful conduct by the attorney ... or if the attorney justifiably withdraws from the represеntation, the attorney may ask the court ... to order the client to pay the attorney a fee based upon the reasonable value of the services provided by the attorney.10
Specifically, the language in both
B. Elliott and Dudding
Two prior decisions of this court hold that the
In Elliott, attorney Elliott and client Joyce entered into a written contingent fee agreement. After Elliott expended about 120 hours of time on Joyce‘s behalf, Elliott moved to withdraw from the case. The motion was granted and Joyce retained new counsel who was able to obtain a settlement. Elliott then sought attorney‘s fees based on quantum meruit for the time and efforts he expended on Joyce‘s behalf. Applying
Citing our
In Dudding, client Dudding and attorneys with Norton Frickey & Associates entered into a written contingent fee agreement which set forth the conditions of payment as a percentage of damages recovered for representation in a wrongful termination suit against Dudding‘s employer. The agreement did not address any payment in the event that Dudding was reinstated in his employment and no monies were recovered. Although, Norton Frickey attorneys filed suit on Dudding‘s behalf, Dudding independently settled the case, obtaining reinstatement in his employment without the assistance of his attorneys. In Dudding, as in Elliott, the attorneys did not recover the monies from which the contingency fee was to be paid.
In the case before us, the court of appeals based its decision on Dudding. Quoting Dudding, the court of appeals stated that “attorneys may seek quantum meruit recovery even when a contingent fee contract fails, provided that the attorney gave the client
We believe that our holding in Dudding is limited to those circumstances where the attorney has failed to substantially perform the agreed upon legal services. We specifically recognized this limitation in Dudding by stating “[t]he case before us today does not encompass the question of whether substantial performance of the agreement entitles the attorney to the full contingent fee.”11 Therefore, we conclude that the rule in Dudding, and in Elliott, does not apply to those situations where the agreed upon services have been completed.
C. Quantum Meruit When the Legal Services are Completed
We have never before examined whether the
In Beeson, the contested fees arose from an oral contingent fee agreement where attorney Fogel had obtained a settlement for client Beeson, thereby completing the contingency of the contract. Beeson, 942 P.2d at 1315. Two years after accepting the distribution of funds, Beeson sought to retrieve her payment of attorney‘s fees because the fee agreement failed to comply with
The Beeson court determined that fees may be recovered on the basis of quantum meruit so long as the attorney shows that a benefit was conferred, appreciated, and accepted by the client under such circumstances that it would be inequitable for the benefit to be retained without payment of its value. Id. Because the services agreed upon in the unenforceable oral agreement were completed, the
The notice requirement fulfills an important function. The purpose of
In contrast, if the agreed upon legal services are not completed, the client will have
When an attorney completes the legal services for which he was retained, the fact that the underlying fee agreement was unenforceable does not in itself preclude the attorney from being paid the reasonable value of his services. When a contract fails, equity steps in to prevent one party from taking advantage of another. Quantum meruit, founded upon the principle of equity, exists to prevent unjust enrichment. D. Dobbs, Handbook on the Law of Remedies, § 4.2 (1973); 1 D. Dobbs, Law of Remedies § 4.2(3) (2d ed.1993). Not allowing an attorney to receive reasonable payment for completing legal services agreed to by both the attorney and client to the benefit of the client, under a good faith belief that he would receive an agreed upon compensation for his services, solely because the contract was not in writing is inequitable and unjustly enriches the client.
In her complaint Hansel asserts a claim for “money had and received,” under which she argues that all fees retained by Mullens should be returned to her.12 Under this principle, a pаrty will not be allowed to keep money which in equity and good conscience should be returned to another. D. Dobbs, Handbook on the Law of Remedies, § 4.2 (1973). Under the claim “money had and received” the task of the court is not to determine whether something was taken away from the client but whether the attorney was unjustly enriched by wronging the client, such as accepting payment he was not entitled to. Recovery Based on Tortfeasor‘s Profits in Action for Procuring Breach of Contract, 5 A.L.R.4th 1276 (2002); D. Dobbs, Handbook on the Law of Remedies, § 4.2 (1973).
“Money had and received,” like quantum meruit, exists to prevent unjust enrichment. In the circumstances before us, “money had and received” operates to return funds to a client from an attorney who has been unjustly enriched. Quantum meruit, on the оther hand, assists the attorney in obtaining fees from the client to prevent unjust enrichment of the client. The difference between the two doctrines in the circumstances before us is merely whether the fees have been received by the attorney. Both doctrines seek to prevent unjust enrichment in the attorney-client relationship, and to determine the reasonable value of the legal services rendered. For this reason, our discussion of quantum meruit completely resolves the claim for “money had and received.”
Neither the Rules Governing Contingency Fees under
IV. Conclusion
We hold that Mullens earned reasonable attorney fees, despite an unenforceable contingency agreement, under quantum meruit. Thus, we reverse the judgment of the court
Justice KOURLIS dissents, and Justice RICE joins in the dissent.
Justice BENDER does not participate.
Justice KOURLIS dissenting:
While I sympathize with Mullens‘s position that he earned and should be permitted to keep payment for the services rendered to Hansel for the Bad Faith claim, it is my view that Mullens is not entitled to that payment because he failed to follow the requirements of
I. Facts
As the facts were thoroughly outlined in the majority opinion, I review them here only briefly. Petitioner Mullens began his representation of Respondent in connection with a Workers’ Compensation claim Hansel had against her employer, Public Service Company, involving a head injury. To initiate his services, Mullens and Hansel entered into a written contingency fee agreement, dated September 6, 1990, which provided that Mullens would receive twenty percent of any recovery obtained, whether through award, compromise, or otherwise. The agreement made no mention of any fees that might be recoverable if their relationship terminated or if Mullens failed to obtain a recovery—the condition precedent to payment. In the course of Mullens‘s representation in the Workers’ Compensation claim, he discovered actions taken by an employee of Public Service to influence medical diagnosis, thus implicating the possibility of a claim of Bad Faith against the employer. While there was conflicting testimony at trial, the trial court found that Mullens discussed the claim with Hansel and that she agreed to Mullens‘s representation in both the Workers’ Compensation and Bad Faith claims. The trial court determined that an oral agreement existed between Mullens and Hansel pursuant to which Mullens would receive forty percent of any settlement of the Bad Faith claim. Mullens failed to reduce the oral agreement to writing.
Mullens eventually settled both claims on behalf of Hansel. He retained thirty-three percent of the total recovered amount, rather than the twenty percent agreed to in the contingency fee agreement for the Workers’ Compensation claim, or the forty percent for the Bad Faith claim. The Workers’ Compensation claim settled for $37,500, of which Mullens retained $12,500.1 The Bad Faith claim settled for $262,440, of which Mullens retained $87,440. Two years after the settlement, Hansel brought this claim to recover the attorney fees paid to Mullens for settlement of the Bad Faith claim.
II. Analysis
As noted by the majority, this court faces the question of whether quantum meruit recovery is available for unenforceable contingent fee agreements where the contingеncy has been satisfied. Maj. op. at 994-995. While I agree that attorneys can recover under the theory of quantum meruit in certain circumstances, I believe our precedent and the spirit of the
Reviewing
The fundamental purpose underlying our Rules concerning fee agreements is to ensure that clients understand the terms and conditions of payment when contracting for attorney services. See Dudding v. Norton Frickey & Assoc., 11 P.3d 441, 446 (Colo.2000); see also Fasing v. LaFond, 944 P.2d 608, 612 (Colo.App.1997) (noting that the plain language of
The questions concerning quantum meruit recovery arise when the attorney seeks a contingency fee but fails to obtain a complying fee agreement under the Rules. In the absence of such an agreement, the attorney turns to quantum meruit and asks the court to do equity.
As we have previously stated, we are obliged to examine such requests for quan-
In both Dudding and Elliott v. Joyce, 889 P.2d 43 (Colo.1994), this court determined that the Rules did not preclude an attorney from seeking recovery in quantum meruit if the attorney notified the client that circumstances may exist where he or she would seek quantum meruit recovery. See Dudding, 11 P.3d at 447; Elliott, 889 P.2d at 46. Both of these cases arose in circumstances where the specified contingency failed because the attorney-client relationship was prematurely terminated; however, in my view, the outcomes in those cases hinged on notice and not on the fact that the contingency failed. Dudding, 11 P.3d at 448 (“The case lаw and Rules in Colorado require clear written statements of the fee arrangements between the attorney and the client early in the relationship. Even in the area of quantum meruit recovery, which has arisen precisely to address the absence of a written agreement, we feel compelled to honor that precedent by requiring the attorney to provide some notice to the client of the possibility that he or she may seek quantum meruit recovery if the contract fails.“); Elliott, 889 P.2d at 46 (“[W]e do not disapprove of contingent fee arrangements permitting recovery by attorneys from clients in quantum meruit. However, in order to enforce such agreements, a client‘s liability must be expressly provided within the written contingent fee agreement, as required by our rules.“).
The policies behind requiring client notification of fee arrangements are not altered
Even though the trial court found that an oral agreement existеd for the Bad Faith claim, that agreement was a contingency fee agreement and is, of course, unenforceable, as it did not comply with the Rules. There is no evidence to suggest that Hansel was ever notified of the possibility that she might be responsible for paying Mullens in quantum meruit because he failed to secure a written agreement outlining the contingent agreement. If we look to the written contingency fee agreement for the Workers’ Compensation claim, for the purpose of determining what Hansel may have been aware of, we find that the only written agreement failed to mention the possibility of recovery in quantum meruit, whether the contingency was met or not.
III. Conclusion
Quantum meruit recovery where a contingency fee agreement is unenforceable for failing to meet the requirements of
I am authorized to state that Justice RICE joins in this dissent.