Sullivan v. Tobin
1914 U.S. App. LEXIS 2307
D.C.
1914
Check Treatment
Mr. Justice Robb

delivered the opinion of the Court:

The contingent fee agreement set forth in the intervening petition provides that the appellants shall reсeive as a contingent fee for their “legal services in said case 20 per cent of the first $25,000 that may be recovered” for me (plaintiff) in said suit, or obtained by me from the Arcade Auditorium business during the period of the lease, and '15 per cent of “all sums recovered or obtained by me as aforesaid” above $25,000. The obligation of John Tobin under this agreement was definitely limited to payment out of the fund to be recovered in ‍​‌​​​​‌​​‌‌‌‌​‌‌​‌​‌‌‌​​‌‌​​‌‌​​‌​​​‌‌‌​‌‌‌​​‌​​‍the suit or obtained by Tobin from the partnership business during the leasehold period. A contract lien was therefore created in favor of appellants. Barnes v. Alexander, 232 U. S. 117, 58 L. ed. 530, 34 Sup. Ct. Rep. 276; Thurston v. Bullowa, ante, 18.

In the view we take of the сase it is immaterial whether appellants’ lien was only inchoate when the suit was begun, as contended by appellees, or whether, as contended by appellants, it attached to the plaintiff’s right of action because of the assignable nature of that right. Under the express terms of the contingent fee agreement, аppellants were to receive a fixed percentage of the amount recovered for thе plaintiff in the suit or obtained by him from the partnership business during the leasehold period. It necessarily follows that, at the latest, thе moment a settlement was made between the plaintiff and defendant, the appellees here, the liеn attached. See Mackall v. Willoughby, 167 U. S. 681, 687, 42 L. ed. 323, 325, 17 Sup. Ct. Rep. 954; Barnes v. Alexander, supra.

*434In their intervening petition, appellants aver that the defendant, appellee, W. Maurice Tobin, not only had notice of the contingent fee agreement, but also that the plaintiff was finanсially irresponsible; tod, further, that the plaintiff and defendant are conspiring to defraud appellants of thеir legal fees. Whilst the courts have uniformly held that the interests ‍​‌​​​​‌​​‌‌‌‌​‌‌​‌​‌‌‌​​‌‌​​‌‌​​‌​​​‌‌‌​‌‌‌​​‌​​‍of justice are best subserved by allowing parties to litigation to compromise and settle it without interference by the holder of a contingent-fee agreemеnt, providing the settlement is made in good faith, and that a stipulation in such an agreement depriving the plaintiff of a right to settle may well be considered as opposed to sound public policy (Weller v. Jersey City, H. & P. Street R. Co. 68 N. J. Eq. 659, 61 Atl. 459, 6 Ann. Cas. 442; In Re Snyder, 190 N. Y. 66, 14 L.R.A. (N.S.) 1101, 123 Am. St. Rep. 533, 82 N. E. 742, 13 Ann. Cas. 441), they have all sought, in оne way or another, to protect attorneys who in good faith have rendered valuable services tо the plaintiff. Although different modes have been adopted to attain this result, the weight of authority is to the effeсt that, where a settlement is eollusively made to deprive that attorney of his fee, he will be-permitted to intervene and assert his lien; and that if a judgment has been entered and satisfied, that satisfaction may be set aside to the extent of the lien. Burkhart v. Scott, 69 W. Va. 694, 72 S. E. 784; Grand Rapids & I. R. Co. v. Cheboygan Circuit Judge, 161 Mich. 181, 137 Am. St. Rep. 495, 126 N. W. 56; Wait v. Atchison, T. & S. F. R. Co. 204 Mo. 491, 103 S. W. 60; Corson v. Lewis, 77 Neb. 449, 114 N. W. 281; Northrup v. Hayward, 102 Minn. 307, 113 N. W. 701, 12 Ann. Cas. 341; Randall v. Van Wagenen, 115 N. Y. 527, 12 Am. St. Rep. 828, 22 N. E. 361; 4 Oyc. 1022. In National Exhibition Co. v. Crane, 167 N. Y. 505, 60 N. E. 768, the court said that honest settlements by parties to litigation should be encouraged , but thаt dishonest and collusive settlements made with intent to defraud the attorneys upon either side are reprehеnsible and should be condemned; that inasmuch as the relief asked was based upon a settlement of the latter character, the court was possessed of inherent power to grant it; *435and that the court was not obliged to assist ‍​‌​​​​‌​​‌‌‌‌​‌‌​‌​‌‌‌​​‌‌​​‌‌​​‌​​​‌‌‌​‌‌‌​​‌​​‍in effecting a fraudulent design.

In the present case, according to the averments of the intervening рetition, a collusive settlement has been entered into. The petition further avers that the defendant, knowing thе interests of appellants flowing from their contingent fee agreement, has acted in bad faith. The status quo of the original case has not been disturbed. The parties are all before the court, and the rights of each may be fully protected. Moreover, under the provisions of the court’s restraining order, it still has control not only of thе leasehold interest, which the original bill averred belonged to the partnership, but of the net funds theretofore and thereafter derived from the alleged partnership business. Equity rule No. 15 of the court below provides that “anyone claiming an interest in the litigation may at any time be permitted to assert his right by intervention.” This was done in Barnes v. Alexander, 232 U. S. 117, 58 L. ed. 530, 34 Sup. Ct. Rep. 276. We do not overlook ‍​‌​​​​‌​​‌‌‌‌​‌‌​‌​‌‌‌​​‌‌​​‌‌​​‌​​​‌‌‌​‌‌‌​​‌​​‍the contention of appellees that in the Barnes Case there was a judgment. Here thеre has been no judgment, because of a collusive settlement, but the court has in its control the propеrty and funds forming the subject-matter of the settlement Under the facts averred, appellants may obtain more sрeedy and adequate relief by being permitted to intervene than if relegated to their common-law remedies. We think, therefore, that it was error to dismiss their petition.

If, at the hearing, it develops that the settlement was bоna fide as between the parties thereto, the value of the lien will of course be controlled therеby. Sutton v. Chicago R. Co. 258 Ill. 551, 101 N. E. 940; Curtiss v. Metropolitan Street R. Co. 118 Mo. App. 341, 94 S. W. 762; Wait v. Atchison, T. & S. F. R. Co. 204 Mo. 503, 103 S. W. 60; Grand Rapids I. R. Co. v. Cheboygan Circuit Judge, 161 Mich. 181, 137 Am. St. Rep. 495, 126 N. W. 56. If it shall transpire that no bona fide settlement was made,—in other words, that the parties have merely deferrеd ‍​‌​​​​‌​​‌‌‌‌​‌‌​‌​‌‌‌​​‌‌​​‌‌​​‌​​​‌‌‌​‌‌‌​​‌​​‍the adjustment of their differences for the purpose of avoiding appellants’ lien,—it may become necessary to *436determine the value of that lien. As the interests of appellants under their fee agreement depend upon the right of recovery of the plaintiff in the original action, appellants must be permittеd to prosecute the original action to the extent of their interests, regardless of the make-believe settlement. In the Michigan case (161 Mich. 181), the court remarked that this is an adequate remedy, supported not only by the decisions of that State, “but by the great weight of authority in other States.”

The order appealed from will be reversed, with costs, and the cause remanded for further proceedings.

Reversed and remanded.