Lead Opinion
We issued a writ of certiorari in this case to determine at what time an attorney, who is retained on a contingent fee agreement and who is discharged without cause by the client prior to the occurrence of the contingency, may recover for the reasonable value of the services performed prior to discharge.
I.
On June 28, 1989, respondent, Helen Martha Miller, retained petitioner, Edward John Skeens, to represent her in a personal injury claim arising out of an automobile accident that had occurred several days earlier. Their written agreement embodied a typical contingent fee arrangement by which Skeens was to be paid thirty-three and one-third percent of any amount recovered by Miller, whether by way of lawsuit or settlement. It also provided that in the event no recovery was made, or a lawsuit proved unsuccessful, Skeens was not entitled to any fee. Their agreement was silent as to any compensation due Skeens in the event that he was discharged by Miller prior to occurrence of the contingency.
Some fifteen months after retaining Skeens, Miller sent a letter to Skeens, discharging him as her attorney, and requesting that her file be forwarded to another attorney together with a bill for any costs incurred on her behalf. By a letter dated November 19, 1990, Skeens wrote Miller informing her that he was delivering her file to her new attorney that day and that he expected to be paid the reasonable value of the work he had performed for her. Skeens enclosed an itemized statement of his services, totaling more than eighteen hours of work. Skeens asserted that the reasonable value of
After failing to receive either an assignment of settlement proceeds or any money from Miller, Skeens filed suit on January 11, 1991, against Miller in the District Court of Maryland, sitting in Prince George’s County, for $2,740.00. In his complaint, Skeens alleged that he was discharged without cause, and based his claim solely on quantum meruit.
When the case was called for trial on June 19, 1991, Judge Thurman H. Rhodes granted Miller’s motion to dismiss the complaint without prejudice. The trial court reasoned that the claim for quantum meruit was premature until there was a recovery in Miller’s underlying personal injury action.
Skeens appealed to the Circuit Court for Prince George’s County. In an opinion an order, Judge Larnzell Martin, Jr. affirmed the judgment of the District Court, reasoning that Skeens’s claim for quantum meruit would arise only upon the successful occurrence of the contingency stated in the attorney-client agreement.
Skeens then appealed to the Court of Special Appeals which in turn transferred the action to this Court.
It is well settled that the authority of an attorney to act for a client is revocable at the will of the client. Palmer v. Brown,
Because the client’s power to end the relationship is an implied term of the retainer contract, the modern rule is that if the client terminates the representation, with or without cause, the client does not breach the retainer contract, and thus, the attorney is not entitled to recover on the contract. Vogelhut,
Because the trial court dismissed this case for failure of the petitioner’s complaint to state a claim upon which relief could be granted, we assume the truth of all relevant and material facts that are well pleaded and all inferences which can reasonably be drawn from those pleadings. FigueiredoTorres v. Nickel,
III.
Although courts generally agree that an attorney discharged without cause is entitled to be compensated for the reasonable value of legal services rendered prior to discharge, there is no clear consensus on the issue which we have never squarely addressed and which is the subject of the instant case. Namely, where an attorney has been retained on a contingent fee agreement and has been discharged without cause prior to the occurrence of the contingency, thereby entitling the attorney to be compensated for the reasonable value of the legal services rendered prior to discharge, when
Other courts that have addressed this issue follow one of two schools of thought referred to as the “California rule” and the “New York rule.” Courts following the California rule hold “that the cause of action to recover compensation for services rendered prior to the revocation of a contingent fee contract does not accrue until the occurrence of the stated contingency.” Fracasse v. Brent,
The Supreme Court of California adopted its rule for two reasons.
“First, one of the significant factors in determining the reasonableness of an attorney’s fee is ‘the amount involved and the result obtained.’ It is apparent that any determination of the ‘amount involved’ is, at best, highly speculative until the matter has finally been resolved. Second, and*338 perhaps more significantly, we believe it would be improper to burden the client with an absolute obligation to pay his former attorney regardless of the outcome of the litigation. The client may and often is very likely to be a person of limited means for whom the contingent fee arrangement offers the only hope of establishing a legal claim. Having determined that he no longer has the trust and confidence in his attorney necessary to sustain that unique relationship, he should not be held to have incurred an absolute obligation to compensate his former attorney.”
Courts following the New York rule hold that the discharged attorney’s cause of action accrues immediately upon the termination of the attorney’s services without cause, rather than being deferred until the happening of the contingency. Martin v. Camp,
In Tillman v. Komar, the Court of Appeals of New York provided two reasons for adoption of the rule allowing the cause of action to accrue immediately upon termination of the attorney-client relationship. First, the client cannot make the attorney’s recovery dependent upon a contract term when the client has terminated the contract.
“The value of one attorney’s services is not measured by the result attained by another. This one did not contract for his contingent compensation on the hypothesis of success or failure by some other member of the bar. A successor may be able to obtain far heavier judgments than the efforts of the original attorney could secure, or, on the other hand, inferior equipment of a different lawyer might render futile an attempt to prove damage to the client.”
In In re Estate of Callahan, the Supreme Court of Illinois expanded on the rationale for the New York rule by providing three additional reasons for its adoption. First, the court stated that quantum meruit is based on the implied promise to pay for those services which are of value to a recipient, and the recipient would be unjustly enriched if he were able to retain the services without paying for them.
Like the split among the various courts, commentators that have addressed this issue have not reached a consensus. In his 1991 supplement, Speiser states without much discussion that:
“The better rule to be followed, because of the peculiarity of attorney-client relationships, is that the client should have a right to discharge without cause an attorney employed under a contingent fee agreement and, upon such discharge, the attorney would be limited to a quantum meruit recovery for his services performed to the date of discharge, rather than recovering on the basis of the percentage provided in the agreement, and that no such recovery based on quantum meruit may be had until such time as the contingency provided for in the original agreement has occurred.”
S. Speiser, supra, § 4:36, at 73-74 (Supp.1991) (emphasis supplied). Other commentators disagree. See Note, Limiting the Wrongfully Discharged Attorney’s Recovery to Quantum Meruit—Fracasse v. Brent, 24 Hastings L.J. 771, 791-92 (1973); Note, Attorney-Client—Attorney’s Right to Compensation When Discharged Without Cause From a Contingent Fee Contract—Covington v. Rhodes, 15 Wake Forest L.Rev. 677, 684-87 (1979) (“The claim for relief ... should arise immediately upon discharge.”).
We have repeatedly held that an attorney discharged without cause is entitled to be compensated for the reasonable value of the legal services rendered prior to discharge. See Palmer v. Brown,
“Although the defendant had a right to terminate the litigation, yet the [attorneys] had rendered services to it, on the faith of a contract. It was not intended by either party that these services should be gratuitous.... [The attorneys] had entered into a contract for services; in the prosecution of this contract they had performed work and labor, and were ready to carry it out to the end, when by the act of the other party, they were prevented from proceeding. We think that the law on this point is settled. In Rodemer vs. Hazlehurst & Co., 9 Gill, 294, the Court, quoting from Smith’s Leading Cases, said:
‘Where there is a special contract, and the plaintiff has performed a part of it according to its terms, and has been prevented by the act or consent of the defendant from performing the residue, he may in general assumpsit recover for the work actually performed, and the defendant cannot set up the special contract to defeat him.’ To the like effect is Bull vs. Schuberth,2 Md., 57 , where it is said: ‘If the special agreement has been put an end to by the defendant, or the performance of it on the part of the plaintiff prevented by some act of the defendant; in all such cases the plaintiff may resort to, and recover under the common counts, for whatever may be due for so much of the contract as may have been performed.’ These cases are supported by a vast amount of authority, and they announce*342 a doctrine eminently just and reasonable. The Court below ruled that the [attorneys] were entitled to a reasonable compensation for the work and labor actually done by them; but that they were not entitled to the contingent compensation. Without reciting the prayers on the opposite sides, it is sufficient for us to say that this ruling disposed of the case with justice to both parties.”
Id.,
“If one party rescinds the contract, how can it be said to subsist as regards the other? ... Because once repudiated by the defendant, it cannot bind one and not the other. And. the party thus injured by the abandonment of the contract is not bound to resort to his special action, but may rely upon the implied legal liability of the other to compensate the services rendered, and may claim the adjustment in indebitatus assumpsit upon the basis of the work which he has actually performed. To defeat this, the defendant cannot be allowed to set up the special contract, which he was the first to violate and abandon. It would be manifestly unjust to allow him to do so, nor is it sanctioned by any principle of law or of pleading----
“All the authorities agree that by putting an end to the contract by one party, it must be considered as abandoned by him and if his acts in so doing are such as necessarily to prevent a performance on the part of the other, the whole contract must be considered as rescinded, and the other party may resort to his quantum meruit.”
In Boyd v. Johnson, we quoted from Western Union Telegraph Co. and held that an attorney, who is retained on a contingent fee agreement and discharged prior to the occurrence of the contingency, acquires no vested interest in the
“It may be conceded that the appellant had the right to terminate the contract of employment and to effect a settlement of his claim without his former attorney’s intervention, knowledge or consent (Boyd v. Johnson, supra), but it is equally well settled that for services rendered in good faith in part performance of the canceled contract the attorney may recover under the common counts ‘for whatever may be due for so much of the contract as may have been performed.’ Bull v. Schuberth [2 Md. 38, 57 (1852) ].”
Furthermore, in Vogelhut v. Kandel,
JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE’S COUNTY REVERSED; CASE REMANDED TO THAT COURT WITH INSTRUCTIONS TO REVERSE THE JUDGMENT OF THE DISTRICT COURT OF MARYLAND AND TO REMAND THE CASE TO THAT COURT FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION, COSTS TO BE PAID BY RESPONDENT.
Dissenting Opinion by ELDRIDGE, J., in which MURPHY, C.J., and ROBERT M. BELL, J., join.
Notes
. How Skeens arrived at a total of $2,740.00 is not clear. In his itemized statement of services, Skeens claims to have spent 1,090 minutes on Miller’s case which, when converted to hours and multiplied by his hourly rate of $150.00, would total $2,725.00. We also note that, in his itemized statement of services, Skeens appears to have expended $42.00 in costs in furtherance of Miller’s claim.
. Maryland Rule 8-132 provides:
"If the Court of Appeals or the Court of Special Appeals determines that an appellant has improperly noted an appeal to it but may be entitled to appeal to another court exercising appellate jurisdiction,*335 the Court shall not dismiss the appeal but shall instead transfer the action to the court apparently having jurisdiction, upon the payment of costs provided in the order transferring the action.”
. Although not speaking for the Court, Judge Rodowsky, concurring in Vogelhut v. Kandel,
"If the client terminates the representation without cause, the attorney is entitled to be compensated for the reasonable value of the legal services rendered prior to termination....
"Thus, as a matter of legal theory, [the client has] a present obligation as of the time of termination to pay [the attorney] the reasonable value of the services rendered by [the attorney].”
Id. at 192,
Dissenting Opinion
dissenting.
The majority in this case adopts the so-called “New York rule” as to when an attorney may sue for the value of services rendered prior to a client’s termination of a contingent fee agreement, holding that the attorney may recover as soon as the contingency contract is terminated. This decision is contrary to established Maryland agency law and to sound public policy.
The basis of the New York rule is that “a client cannot make the attorney’s recovery dependent upon a contract term when the client has terminated the contract.”
If the majority’s characterization of our cases were accurate, perhaps the Court’s decision to adopt the New York rule would be defensible on the basis of stare decisis, although not as a matter of public policy. The majority, however, mischaracterizes the Maryland eases cited. In fact, none of the seven Maryland cases relied upon by the majority involved an unfulfilled contingency in a fee agreement, and none of the cases cited furnish any support for the majority’s notion that an attorney may recover a fee from the former client before the happening of the contingency provided for in the terminated contract. Moreover, this Court has held in several cases, not cited by the majority, that an agent may not sue to recover for services rendered pursuant to a contingent fee contract as long as the contingency remains unfulfilled.
Four of the cases cited by the majority addressed the measure, rather than the timing, of an agent’s recovery on a contingent fee contract: Palmer v. Brown,
Similarly, in Western Union Telegraph Co. v. Semmes, supra, attorneys retained under a contingent fee contract were dismissed before the conclusion of the matter, but they did not bring suit until the matter was settled between the former client and its adversary. The contingency provision of the terminated contract was fulfilled by the settlement, so the Court did not address the timing issue which is presented by the instant case. Instead, the Court’s attention was directed only to the measure of the attorneys’ recovery. In Boyd v. Johnson, supra, an attorney who had been retained on a contingency basis to challenge a will was discharged before the trial. The attorney instituted a suit against the former client after judgment was entered in favor of his client in the underlying proceeding. Thus, the contingency was fulfilled by the recovery of a judgment in the former client’s favor. In Palmer v. Brown, supra, an attorney brought suit after his client settled the underlying action and received payment. The Court held that the attorney was entitled to compensation for his services. The Court did not address whether the attorney could recover before the happening of the contingency, because the event upon which his compensation was contingent—resolution of the client’s case—had already occurred.
The only other case cited by the majority which even involved a contingent fee dispute between attorney and client is Attorney Griev. Comm’n v. Korotki,
“In the contract is a stipulation, that during the progress of the work and until it is completed, there shall be a monthly estimate made by the agent of the defendants of the quantity, character and value of the work done during the month, four-fifths of which value shall be paid to the plaintiff at the office of the defendants in the Town of Cumberland, and when the work is completed and accepted by the agents of the company, there shall be a final estimate, when the value appearing to be due to the plaintiff, shall be paid, the said monthly estimates to be taken as conclusive between the parties.”
The plaintiff did not agree to perform services for the defendant on a contingency basis, thereby accepting the risk that the contingency might never be realized and that he might not be paid. Instead, the plaintiff entered into a standard contract, guaranteeing pay for his efforts. The Rodemer case does not furnish support for any proposition relating to the time when an attorney may obtain compensation for services rendered before termination of a contingent fee contract.
The majority relies upon the Court’s opinion in Vogelhut v. Kandel,
Moreover, the majority’s discussion of the Court’s reasoning in Vogelhut is completely inaccurate. The majority states,
As the above review demonstrates, no Maryland case cited by the majority supports the notion that Maryland law requires adoption of the New York rule. Other Maryland cases, however, support the opposite view, namely that an agent hired under a contingent fee contract has no right at all to recover for services rendered prior to termination if the contingency does not come to pass.
For example, we held in Childs v. Ragonese,
The Court today shows extraordinary concern for attorneys’ pecuniary interests. These interests are already well-protected by existing principles of Maryland law. For example, the cases cited by the majority establish that a discharged attorney who had a contingent fee contract with the client may be entitled to some recovery after the occurrence of the contingency. In addition, if a third party improperly interferes with an attorney-client retainer contract, the attorney may bring an
The majority shows far less concern for clients’ pecuniary interests. Under the rule announced today, a dissatisfied client who wishes to exercise his or her absolute right to discharge an attorney, will have to pay attorneys’ fees immediately, out of pocket, rather than out of any recovery, as bargained for. This rule undoubtedly will work tremendous hardship on exactly those clients who require contingent fee arrangements, ie., those who would not otherwise be able to afford to hire an attorney. Many of these clients will end up paying legal fees twice, first to the discharged attorney and then to any new attorney out of any recovery. In many cases, the client may have to pay a discharged attorney immediately, and then might not recover on the claim at all; thus, the discharged attorneys’ services, for which the client may have paid dearly, might turn out to be worthless. The majority’s decision extends beyond those clients who hire a new lawyer. In some cases, clients who retain attorneys under contingent fee arrangements may, in good faith, decide not to pursue their claims. The discharge of the attorney under such circumstances is presumably “without cause.” These clients still will be required to pay attorneys’ fees.
Concern for the welfare of the client is embedded in the policies of this State. For instance, Maryland Rule of Professional Conduct 1.5 governing “Fees” specifies that the reasonableness of a fee is dependent on “the amount involved and the results obtained.” Rule 1.5(a)(4). The Rule generally expresses concern that a client be charged fairly for legal services. The Comment to this Rule further suggests that, when an attorney undertakes to represent a client under a contingent fee agreement, that attorney cannot reasonably expect compensation for services rendered until the happening of the contingency. The very definition of a contingent fee, set forth in the Comment to Maryland Rule of Professional Conduct 1.5, communicates this idea. The Comment defines a contingent fee agreement as
*352 “an agreement for legal services (1) made before the services are completed, and (2) providing compensation for the lawyer which is contingent in whole or in part upon the successful accomplishment or disposition of the legal matter and which is either in a fixed amount or in an amount determined under a specified formula.”
The New York rule adopted by the majority today is not in keeping with the public policy reflected in the above-quoted Comment.
The common understanding of most people in Maryland, which is reinforced every day by attorneys’ television, newspaper, telephone book and other advertisements, is that when an attorney is retained in a personal injury case on a contingent fee basis, there is without exception “no .fee if no recovery.” C & P Telephone, Yellow Pages, Greater Baltimore Metropolitan Area at 554 (Suburban West Edition, Nov. 1992—Oct. 1993). See also, e.g., id. at 550 (“No Recovery No Fee”),- id. at 552 (“No Recovery—No Fee (On Injury Claims)); id. at 556 (“No Recovery No Fee For Personal Injury Cases”); id. at 557 (“No Fee If No Recovery”); id. at 558 (“No Fee Unless You Win (Client may be responsible for expenses)”); et seq. As previously discussed, Maryland cases dealing with agents generally are in accord with this common understanding. The majority today, however, creates a favored class of agents— lawyers—and holds that under the circumstances of this case, a lawyer hired on a contingent basis is entitled to a fee even though there is no recovery. In my view, this special treatment of lawyers is entirely unjustified.
Chief Judge MURPHY and Judge ROBERT M. BELL have authorized me to state that they concur in the views expressed herein.
. The general agency principle that an agent must wait for the fulfillment of the contingency set forth in a contingent fee contract in order to receive compensation already may have been applied to an attorney. We noted in Childs v. Ragonese,
. The majority would allow the attorney to recover now, even though there is no recovery out of which the attorney’s percentage fee can be taken, on the theory of quantum meruit. As stated above, in my view, there can be no recovery for the attorney until there has been a recovery for the client.
Moreover it may be doubted whether, under a contingent fee arrangement such as this, the principle of quantum meruit ordinarily applies under Maryland law. An agent who has entered into a contingent fee arrangement with a principal is normally only entitled to be paid out of the particular funds obtained. See Melvin v. Aldridge,
. As the majority acknowledges, the contingent fee agreement in this case "was silent as to any compensation due Skeens in the event that he was discharged by Miller prior to the occurrence of the contingency.”
