GRAEFF, J.
This appeal arises out of a suit filed in the Circuit Court for Baltimore County by The Law Offices of Peter G. Angelos, P.C. ("PGA"), appellee, against Brault Graham, LLC ("BG"), William Gately, Esquire, and Albert D. Brault, Esquire (collectively "appellants"), seeking recovery of attorneys' fees.
At some point prior to this Court's decision, PGA terminated its relationship with Mr. Gately, with an effective date of April 30, 2008. The Bargars then discharged PGA and retained Mr. Gately and Mr. Brault under a new retainer agreement, which provided for a contingent fee of 40% in the event of recovery. Mr. Gately and Mr. Brault represented the Bargars for the next 18 months, ultimately settling the case for an undisclosed amount. The agreed contingency fee to Mr. Gately and Mr. Brault was deposited into BG's escrow account.
PGA then filed a quantum meruit claim in the circuit court, seeking to recover a percentage of the contingency fee paid to Mr. Gately and Mr. Brault. After a three-day bench trial, the circuit court granted judgment in favor of PGA and ordered Mr. Gately and Mr. Brault to pay PGA 65% of the fees recovered.
On appeal, appellants present two questions for our review,
On January 8, 2001, Mr. Bargar arrived at St. Joseph's Hospital emergency room in cardiac distress. Mr. Bargar was informed that Dr. Mark Midei, who ran the cardiac catheterization lab, had determined that Mr. Bargar needed a "re-do" bypass surgery. Mr. Bargar requested that the surgery be performed by Dr. Peter Horneffer, a cardiac surgeon with Cardiac Surgery Associates, P.A. ("CSA"), who previously had performed bypass surgery on Mr. Bargar in 1992. Dr. Timothy Bessent, an emergency room physician, told Mr. Bargar, falsely, that Dr. Horneffer was not available to do the surgery. He said that Dr. Jeffrey Sell, a cardiac surgeon who, along with Dr. Midei, was associated with Midatlantic Cardiovascular Associates, P.A. ("Midatlantic"), a group of cardiac surgeons and cardiologists, would perform the surgery. The following day, Dr. Sell performed the bypass surgery on Mr. Bargar. On January 19, 2001, three days after Mr. Bargar was discharged, he suffered a massive heart attack and was left severely disabled.
At the time Dr. Sell performed the surgery on Mr. Bargar, CSA and Midatlantic were involved in a longstanding dispute. In February 2001, CSA and its affiliated surgeons, including Dr. Horneffer, retained PGA to represent them in a suit against Midatlantic (the "CSA case"), for unfair competition in hiring surgeons and unfair trade practices, including lying to patients regarding surgeon availability. Mr. Gately and another PGA attorney, H. Russell Smouse, along with Kathleen McDermott, who was retained as outside counsel as an expert in federal health care law, Medicare, fraud and abuse law, were counsel of record in the CSA case.
In September or October 2003, Mr. Bargar asked Dr. Horneffer about Mr. Gately's representation of CSA. Dr. Horneffer, who had worked closely with Mr. Gately in the CSA case, advised that he thought that Mr. Gately was an excellent lawyer.
Mr. Gately testified that, after he met with the Bargars and reviewed their potential claims against St. Joseph's Hospital and the physicians involved in his surgery, he recommended to Mr. Angelos that PGA take the case, thinking that the case had potential claims for both medical malpractice and fraud. Mr. Angelos directed Mr. Gately, who had limited experience in medical malpractice, to investigate the matter further, and Mr. Gately met with Thomas Summers, chairman of the medical malpractice department at PGA.
On October 23, 2003, Mr. Bargar entered into a contingent fee retainer agreement with PGA, in which he agreed to pay PGA 40% of any settlement, verdict, or recovery in the case, plus PGA's reimbursable out-of-pocket expenses. Mrs. Bargar entered into a similar agreement on November 3, 2003.
Mr. Gately was a direct employee of PGA at the time the retainer agreements were executed:
In December 2003, Mr. Gately, with the assistance of Mr. Summers, drafted a complaint against Midatlantic, Dr. Midei, Dr. Sell, and other defendants, alleging, inter alia, medical malpractice, fraud, battery, and failure to obtain Mr. Bargar's informed consent for the surgery (the "Bargar case"). The complaint initially was filed with the Health Claims Arbitration Office, and on January 6, 2004, the case was removed to the circuit court. Although Mr. Gately believed that Mr. Summers would handle the medical malpractice aspects of the Bargar case, Mr. Summers withdrew from the case with Mr. Angelos' permission soon after the complaint was filed. From February 2004 through April 2005, Mr. Gately, despite numerous requests to Mr. Angelos for assistance with the medical malpractice matters, was the only attorney handling the Bargar case. He handled "voluminous and very involved" preliminary motions, conducted depositions, and met with the Bargars "constantly."
In April 2005, Mr. Gately was advised that Mr. Angelos had authorized him to engage Mr. Brault's services to handle the medical malpractice aspects of the litigation. There was no discussion about Mr. Brault's fee until after the jury verdict. Mr. Gately recommended to Mr. Angelos that Mr. Brault receive a 25% to 30% fee, but Mr. Angelos refused. Following Mr. Gately's discharge from PGA, however, Mr. Smouse advised that Mr. Angelos had agreed that Mr. Brault was entitled to 25% of the Barger fee.
On December 16, 2005, after more than three weeks of trial, the jury returned a verdict in favor of the Bargars, awarding $2,253,250 in compensatory damages against Midatlantic, Dr. Midei, and Dr. Sell, based on a failure to obtain Mr. Bargar's informed consent, battery, and fraud. The jury also awarded the Bargars $2,750,000 in punitive damages against Midatlantic based on fraud. The jury found no liability for medical malpractice. PGA agreed that the verdict was the product of the "phenomenal job" by Mr. Gately and Mr. Brault.
The Midatlantic defendants appealed the judgment to this Court. The issues were briefed in 2006 with the assistance of Mr. Howell, who was retained to assist Mr. Gately with the appellate proceedings, and who was compensated by PGA for his services in that regard. On March 7, 2007, the case was argued in this Court. On March 17, 2008, this Court vacated the judgment and remanded the case for a new trial based on evidentiary grounds. Between oral argument and the filing of this Court's opinion, no work was done on the Bargar case. On April 10, 2008, Mr. Gately and Mr. Brault filed a Motion for
At some point prior to this Court's decision, the relationship between Mr. Gately and PGA had "significantly deteriorated," and Mr. Gately was informed that PGA would terminate its association with him, effective April 30, 2008. In the interim, there was discussion regarding who would notify the Bargars that Mr. Gately no longer would be employed by PGA. According to Mr. Gately, on April 15, 2008, after PGA failed to make arrangements for handling the Bargar case and failed to advise the Bargars of their dissociation with Mr. Gately, Mr. Gately mailed the following letter to the Bargars:
On April 16, 2008, Mr. Angelos sent a letter to the Bargars on behalf of PGA. That letter provided:
The Bargars received PGA's letter, which was hand-delivered, before they received Mr. Gately's mailed letter. Mrs. Bargar stated in an affidavit that, upon receipt of Mr. Angelos' letter, the Bargars were "shocked" and "disturbed at the content of the letter which indicated that Mr. Gately would no longer be representing [them]." They were "totally unaware of any difficulties" between Mr. Gately and PGA or of any "potential disassociation" between Mr. Gately and PGA.
After receiving Mr. Gately's letter, the Bargars decided immediately to discharge PGA and retain Mr. Gately and Mr. Brault to represent them. There was no question in their minds that they wanted Mr. Gately and Mr. Brault to "continue handling the case because of their prior handling of the matter and their dealing with us and our confidence in them." Ms. Bargar stated
On April 19, 2008, the Bargars mailed the following letter, drafted by Mr. Brault, to Mr. Smouse of PGA:
Mrs. Bargar later testified in a deposition, the transcript of which was admitted at trial in this case, that there was no interruption in the legal services provided in the Bargar case after the Bargars discharged PGA and retained Mr. Gately and Mr. Brault. She also testified that she and Mr. Bargar had "every confidence in" Mr. Gately and Mr. Brault, and that Mr. Gately and Mr. Brault had been "very aggressive and very compassionate and [they] saw no need to go anywhere else."
Between October 30, 2003, and April 30, 2008, PGA paid Mr. Gately $1,193,016 in compensation. In addition, PGA paid a total of $252,695 to employ a full-time assistant for Mr. Gately. PGA also incurred direct expenses of $74,503.99 in connection with the Bargar case, including the $53,338.73 in fees that it paid to Mr. Howell and to other outside counsel, Blank Rome, LLC and Ms. McDermott, to assist Mr. Gately with various aspects of the case, and $21,165.26 in other expenses.
After April 30, 2008, when Mr. Gately no longer was employed by PGA, Mr. Gately and Mr. Brault continued their representation of the Bargars pursuant to a contingent fee agreement providing that, in the event of settlement or favorable judgment, the Bargars would pay them a 40% contingency fee out of "the gross amount recovered" on the Bargars' behalf, minus costs and expenses. That representation included a July 10, 2008, petition for certiorari in the Court of Appeals, which was denied on August 26, 2008.
Meanwhile, on May 6, 2008, PGA sent a letter to Mr. Gately and Mr. Brault asserting its statutory attorney's lien on any settlement or judgment, stating:
On March 29, 2010, after filing an initial motion in January, PGA filed an Amended Motion to Enforce Attorney's Lien on the proceeds of the settlement. It noted that it had represented the Bargars for more than four years, from October 2003 through April 2008, including trying the case and handling the appeal in this Court, with a 40% contingency fee agreement. PGA sought either: (1) a statutory attorney's lien, pursuant to Md.Code (2009 Supp.) § 10-501 of the Business Occupations & Professions Article, on the settlement proceeds in the amount of 40% of the gross amount of the settlement, together with the expenses PGA disbursed on the Bargar's behalf; or (2) in the alternative, "an amount in quantum meruit, based on a percentage of the total fee payable by [the Bargars], said amount to be determined by the [c]ourt," to compensate PGA for its services to the Bargars, asserting that "the settlement of this case was in very significant measure due to PGA's efforts."
On December 10, 2010, prior to a ruling on this motion, PGA filed its initial complaint in this case seeking quantum meruit recovery against Mrs. Bargar,
On March 24, 2011, the court held a hearing on the Amended Motion to Enforce Attorney's Lien. It denied the motion, noting that PGA had filed a complaint seeking recovery under a quantum meruit theory, which it determined was the appropriate forum for the resolution of the issue.
On July 21, 2011, PGA filed a Second Amended Complaint for Quantum Meruit. The complaint asserted that PGA was entitled to "a substantial portion of the contingent fee that was paid to, and is being held by, Gately and Howell & [Mr.] Gately and/or [Mr.] Brault and Brault Graham... for the services PGA provided and the expenses it disbursed on behalf of the Bargars from October 23, 2003 through April 19, 2008." PGA requested "quantum meruit judgment against Defendants measured by the reasonable value of the services PGA provided and the expenses it disbursed on behalf of the Bargars."
During the ensuing discovery prior to trial, PGA asked in an interrogatory whether the settlement of the Bargar case "was in whole or in part not the result of work performed on behalf of the Bargars by PGA prior to April 19, 2008." In their answer, Mr. Gately and Mr. Brault responded that the settlement "was wholly the result of a combination of" thirteen separate outside factors, unrelated to work performed by PGA, including a federal investigation of Midatlantic and public disclosure of a stent scandal. In a deposition, however, Mr. Gately stated that the settlement occurred because "[w]e got lucky because things happened that had nothing to do whatsoever with the work we had
On January 4, 5, and 20, 2012, the court held a non-jury trial. During trial, Mr. Gately agreed that he and Mr. Brault had nothing to do with those thirteen events he attributed to bringing about a settlement, and he reiterated that they "were lucky those events occurred on our watch," and they "became fortunate." When asked whether it was his view that none of the work that was done during his association with PGA prior to April 30, 2008, contributed to the settlement in the Bargar case, Mr. Gately responded: "I don't think I would make an extreme statement like that." Nevertheless, Mr. Gately took the position that the "wealth of knowledge" that he and Mr. Brault had accumulated about the Bargar case while working for PGA "didn't amount to a row of pins in terms of the way [they] manoeuvred [sic] this thing to a settlement in light of the subsequent events." At trial, however, PGA admitted into evidence an email to counsel for Midatlantic, dated April 1, 2009, wherein Mr. Brault indicated that the Bargars' settlement demand was "based on the verdict that we obtained in December, 2005," plus post-judgment interest.
Mr. Gately agreed that the verdict was obtained while he was associated with PGA and that the docket entries in the Bargar case, numbered 1 through 326, reflected work that had been done on the case while he was working for PGA. He opined that the effect of PGA "telling the Bargar[s] that [they] couldn't have the lawyers that they had" throughout nearly five years of litigation, and through the verdict and remand, "was essentially an abandonment of their interest. They discharged [PGA].... [and] that discharge entitled [PGA] to no fee whatsoever."
Mr. Gately testified that he had a 25% "split fee" agreement with PGA, whereby he would receive 25% of any fee obtained by PGA in the Bargar case. He explained that, in August 2003, when Mr. Angelos suggested that Mr. Gately become a direct employee of PGA, Mr. Smouse told Mr. Gately that, in the capacity of a direct employee, he would receive certain benefits, including a 25% fee for any matter he brought to the firm. After the Bargars retained PGA, Mr. Gately made a request for the 25% fee on an intake form, but he did not fill out the amount of the fee. Mr. Gately never discussed the matter with Mr. Angelos or Mr. Smouse prior to leaving PGA in 2008, and he did not find out that intake form listing a 25% split fee had been signed until after his discharge, when he found the intake form filled out in the Bargars' case file.
Paul Raschke, an attorney employed by PGA, testified that, in November 2009, Mr. Gately told him that PGA had rejected his request for a 25% fee in the Bargar case, but he wanted PGA to reconsider in light of the Bargar settlement. Mr. Raschke conveyed that information to Mr. Smouse and to Mr. Angelos, but they did not reconsider Mr. Gately's request. Mr. Raschke testified that the fee-split request had been rejected by Mr. Smouse and "had never been seriously considered."
Mr. Gately disagreed with Mr. Raschke's recollection of these events. He asserted that he never said that his request for a 25% fee split was denied in 2003, but rather, he said that the request was denied when he asserted it during his discharge.
Ward Coe testified on behalf of PGA regarding the ethical implications of a lawyer leaving a law firm and how to value legal services on a quantum meruit basis. He testified, to a reasonable degree of
Mr. Coe did not agree with Mr. Gately that PGA had forfeited its right to a quantum meruit share of the attorney's fees in the Bargar case based on abandonment, explaining that, in order for a discharged attorney to forfeit a fee, the attorney must have committed misconduct materially prejudicing the client's case. He testified that there was no basis to conclude that PGA abandoned the Bargars, noting that it represented the Bargars from November 2003 until the letter of discharge came from the Bargars, and PGA "represented them with a very high level of competence, and the representation continued without interruption by Mr. Gately and Mr. Brault after [PGA] was discharged." Mr. Coe believed that PGA's offer to the Bargars to continue its representation of them was genuine, and PGA had lawyers equipped to take over the case.
With respect to the value of the legal services and the appropriate allocation of fees under a quantum meruit theory, Mr. Coe compared the benefit of the services PGA provided to the Bargars with the services provided by Mr. Gately and Mr. Brault after the Bargars discharged PGA, and he concluded that 95% of the value to the Bargars occurred while the case was at PGA. He based this conclusion on three different methods of analysis.
First, he looked at the docket entries before and after PGA's discharge through the date of settlement. He calculated that 326 of the 342 docket entries, or approximately 95%, were attributable to work done while PGA was handling the Bargar case.
Second, he looked at the "total time involved," noting that PGA devoted a "total of 41 months of engagement on behalf of the Bargar[s] in a very intense way," compared to three months of active work undertaken by Mr. Gately and Mr. Brault after the Bargars discharged PGA. Thus, PGA was responsible for 93% of the total time incurred in the Bargar case.
Third, Mr. Coe examined the parties' respective representation of the Bargars under the Maryland Lawyers' Rules of Professional Conduct ("MLRPC"), in particular, Rule 1.5, concerning the reasonableness of attorney's fees. He concluded that, based on the time, labor, and skill involved, and the complexity of the issues in the Bargar case, as well as the result obtained while the case was at PGA, the value of the services the Bargars received while PGA handled their case entitled PGA to a substantial portion of the attorney's fees. Mr. Coe stated that, had PGA not determined to file a lawsuit, or had it lost early motions to dismiss, or for summary judgment, or the jury trial, or the appeal in its entirety, the case never would have reached settlement.
Mr. Michael also was critical of PGA's actions when the issue of terminating Mr. Gately's employment arose at the beginning of April 2008, opining that PGA should have "made an arrangement with Mr. Gately and Mr. Brault to continue with" the case following PGA's discharge of Mr. Gately. Mr. Michael did not believe that the Bargar case was the type of case that easily could be transferred to a new attorney, and the course of action PGA took concerning Mr. Gately and his representation of the Bargars effectively removed the case from the firm and constituted abandonment. Mr. Michael also opined that, after the case was remanded by this Court, it "wasn't the same case anymore." He agreed that the transition of representation did not prejudice the Bargars' case, due to the "intervention of Mr. Gately and Mr. Brault," but he stated that the "potential for prejudice was there." Mr. Michael did not testify to the value of the legal services provided to the Bargars on a quantum meruit basis.
At the conclusion of trial, the court rendered its decision from the bench. Initially, it found no merit to the argument that PGA abandoned the Bargars and forfeited its fee.
After finding that a quantum meruit fee was appropriate, the court stated that the second issue was "where does that fee come from." The court noted Mr. Brault's position that "there can be no cause of action against a successor lawyer and that in effect it has to come as a second fee from the client." The court disagreed, stating:
The court then stated that the final issue for the court to determine was the proportion of the already earned 40% contingency fee to which PGA was entitled. Because the settlement was confidential, the court stated that it would determine that amount by percentage.
The court noted that there was no dispute that PGA was entitled to its expenses of $21,165.25, and it deducted those expenses first. The court next addressed, "from the balance owed, what, if any, quantum meruit is the firm entitled to." In that regard, it looked at two things. First, it considered the testimony of Mr. Coe, who "analyzed the work done both on docket entries, time and labor and analyzed it as a 95/5 percent." The court then
After considering all these factors, the court found that PGA was entitled to a fee based on quantum meruit in the amount of 65% of the contingency fee paid to Mr. Gately and Mr. Brault.
Mr. Brault then asked the court to clarify its ruling with respect to appellants' argument that PGA had fee-split agreements with Mr. Gately and Mr. Brault. The court stated that it determined that,
Accordingly, the court entered judgment in favor of PGA, requiring appellants to pay PGA 65% of the 40% contingent fee earned in the Bargar case, as well as an additional $21,165.26 as reimbursement for expenses incurred by PGA in the Bargar case.
This Court recently set forth the standard of review of a court's ruling during a bench trial:
Dynacorp Ltd. v. Aramtel Ltd., 208 Md.App. 403, 451, 56 A.3d 631, cert. denied, 430 Md. 645, 62 A.3d 731 (2012).
The Court of Appeals has discussed, on several occasions, the fees to which a discharged lawyer is entitled after termination of a contingency contract when the termination occurred prior to the occurrence of the contingency, i.e., the client's recovery of money. In Skeens v. Miller, 331 Md. 331, 335, 628 A.2d 185 (1993), the Court observed that "the client's power to end the relationship is an implied term of the retainer contract," and therefore, "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 [contingency] contract."
The Court subsequently made clear, however, that an attorney may be entitled to recover fees on a quantum meruit basis. In Somuah v. Flachs, 352 Md. 241, 721 A.2d 680 (1998), the Court of Appeals held:
Appellants acknowledge the Court's holdings in this regard. Nevertheless, they contend that the circuit court's order awarding quantum meruit fees to PGA was erroneous for several reasons.
First, they argue that PGA was not entitled to any fee because a lawyer who, without justification, terminates representation is not entitled to any fee, and PGA "unilaterally terminated the attorney-client relationship then existing" by "removing the only lawyers assigned to the Bargar case." They assert that, "by terminating the attorney-client relationship then existing, the Angelos firm abandoned its client and materially breached its agreed undertaking under the contingent fee agreement, thereby forfeiting any claim to recover compensation in quantum meruit."
Second, appellants argue that, even assuming that it was the Bargars who discharged PGA, "quantum meruit recovery must be denied or reduced to the extent of the nature and gravity of the cause that led to the firm's discharge." They assert that the "indisputable fact" is that PGA "was the sole cause of its own discharge," in that it "forced the clients to choose between the attorneys who had represented them all along and the firm that had fired those attorneys, with no identification of their replacements." Appellants argue that the court's failure to consider that issue, instead finding that "everything was done properly," was an abuse of discretion.
Third, appellants contend that, in allowing quantum meruit recovery "by a law firm directly against attorneys later retained by the clients, the trial court created a new cause of action." They assert that "a suit for quantum meruit, as recognized by the Court of Appeals, requires an implied attorney-client contract between the parties, and cannot be maintained against third parties." Thus, they argue, a quantum meruit cause of action by a discharged attorney can be maintained only against a former client, based on an implied-in-fact contract pursuant to which the attorney renders services for which he or she expects to be paid, the client expects to pay, and there is a meeting of the minds.
Fourth, and finally, appellants assert that, even if PGA was entitled to some fees, the court erred in refusing "to enforce the fee sharing agreements that [PGA] made with Gately and Brault." Specifically, they assert that Mr. Gately and Mr. Brault were each entitled to 25% of PGA's fee.
PGA disagrees with all these contentions. It argues that the circuit court's judgment should be affirmed, asserting that the court was not clearly erroneous in concluding that PGA was entitled to 65% of the contingency fee in the Bargar case as compensation in quantum meruit for the reasonable value of the services PGA provided to the Bargars. It contends that the law is clear "that an attorney is entitled to be compensated for the reasonable value of services provided prior to the time the attorney is discharged by the client," and that the circuit court was not clearly erroneous in finding that most of the contingency fee obtained "was attributable to work performed by PGA."
With respect to appellants' argument that the circuit court erred when it found
PGA disputes appellants' argument that the court erred in failing to find that a downward adjustment of the percentage of the fee was required based on the "nature and gravity of the cause that led to the attorney's discharge." It notes that the court found that "everything was done properly" in terms of notifying the Bargars of the circumstances and the transfer from PGA to Mr. Gately and Mr. Brault was "seamless," arguing that those findings were supported by the evidence and not clearly erroneous.
PGA further disputes appellants' argument that the court created a new, unauthorized, cause of action in allowing a quantum meruit claim by a law firm directly against attorneys later retained by clients. It contends that the Court of Appeals has "specifically set forth the process for bringing such a claim [seeking quantum meruit attorney's fees], which PGA followed to the letter."
With respect to the contention that the court erred in failing to enforce fee-sharing agreements with Mr. Gately and Mr. Brault, PGA makes two arguments. First, it contends that the argument has been waived. In any event, it asserts, the argument is without merit.
We begin with appellant's contention that PGA unilaterally terminated the agreed upon representation and abandoned the Bargars, without justification, and therefore, PGA forfeited its right to any fees. To be sure, there are situations where a discharged attorney's compensation may be forfeited, including where an attorney, "without justification, terminates an agreed undertaking." Attorney Grievance Comm'n v. Korotki, 318 Md. 646, 669, 569 A.2d 1224 (1990). See also Somuah, 352 Md. at 264, 721 A.2d 680 ("quantum meruit recovery may be inappropriate where an attorney engages in misconduct, prejudicial to the client, for which the attorney may be disciplined, or where recovery by the attorney would be contrary to public policy").
In this case, however, the circuit court made a factual finding that PGA did not abandon the Bargars. Instead, it found that PGA advised the Bargars of Mr. Gately's termination and offered to continue to represent the Bargars in their lawsuit. The Bargars, however, elected to continue with representation by Mr. Gately and Mr. Brault, the attorneys in whom the Bargars had "confidence" and "who had been successful in the past." The court's findings in this regard are supported by competent material evidence in the record, and the finding that there was no evidence to support a forfeiture by PGA of its fee is not clearly erroneous.
Appellant's next contention is that, even if there was not a forfeiture of all fees, the court erred in failing to deny or reduce PGA's recovery "to the extent of the nature and gravity of the cause that led to the firm's discharge." In that regard, appellants argue that the "indisputable fact" is that PGA "was the sole cause of its own discharge" in that it "forced the clients to choose between the attorneys who had represented them all along and
In Somuah, 352 Md. at 264, 721 A.2d 680, the Court of Appeals stated: "Where an attorney has been discharged for cause but that cause does not justify forfeiture, some courts have reduced the quantum meruit recovery of the attorney by a percentage due to the `nature and gravity of the cause leading to discharge.'" The Court quoted Reynolds v. Polen, 222 Mich.App. 20, 564 N.W.2d 467, 472 (1997), for the proposition that, "where an attorney bears substantial responsibility for his or her discharge[,] the court `should deduct the costs of work that had to be duplicated or modified from the discharged counsel's quantum meruit recovery.'" Somuah, 352 Md. at 264, 721 A.2d 680.
Here, as PGA notes, the evidence supports the circuit court's finding that the transition was "seamless," and the record does not suggest that any work had to be duplicated. Under these circumstances, even if it can be said that PGA was the cause of its discharge, it still had the "right to fair compensation for services competently rendered prior to discharge." Id. at 265, 721 A.2d 680.
In assessing the amount of compensation to which PGA was entitled, the court determined that, based on the facts and circumstances, PGA was entitled to a recovery of 65% of the 40% contingency fee earned in the Bargar case. In other words, it determined that this was "the appropriate portion of the total fee generated by the recovery." Id. at 268, 721 A.2d 680. In reaching this determination, the court considered, inter alia, the expert testimony regarding the time and labor required, the novelty and complexity of the case, the length of the relationship with the client, and the experience of the lawyers involved. The court also considered the time Mr. Gately and Mr. Brault spent on the case after they were retained by the Bargars. The court observed that, following the Bargars' election to discharge PGA, the transfer of the case to Mr. Gately and Mr. Brault was seamless and caused no prejudice to the Bargars. Although, as discussed, infra, we disagree with the court's analysis regarding the applicability of any fee-sharing agreements, we find no error in the court's decision not to reduce any quantum meruit recovery by PGA due to the "nature and gravity of the cause that led to the attorney's discharge."
We turn next to appellants' contention that, "[b]y allowing quantum meruit recovery by a law firm directly against attorneys later retained by the clients, the trial court created a new cause of action unauthorized by" law. PGA disagrees, asserting that the Court of Appeals in Somuah, 352 Md. at 268 n. 8, 721 A.2d 680, "set forth the process for bringing such a claim, which PGA followed to the letter."
To be sure, appellants cite cases from other states holding that an attorney who initially represents a client, and subsequently is dismissed, can obtain quantum meruit recovery for work performed, but only against the client, not the successor attorney. See King v. Lessinger, 276 Ga.App. 145, 622 S.E.2d 381, 384 (2005); Howard & Bowie, P.A. v. Cloutier & Briggs, PA, 759 A.2d 707, 712 (Me.2000). In both of these cases, however, the courts made a point of noting that the cases involved situations where one counsel succeeded the other in working on the litigation, and the attorneys had not worked together on the case. King, 622 S.E.2d at 384-85; Howard, 759 A.2d at 711. Where the attorneys worked together on a case, the result was different, at least in Georgia. See Kirschner & Venker, P.C. v. Taylor & Martino, P.C., 277 Ga.App. 512, 627 S.E.2d 112, 113 (2006) (attorney could recover
Moreover, other jurisdictions hold that a discharged attorney may sue a successor attorney. See, e.g., Melat, Pressman & Higbie, L.L.P. v. Hannon Law Firm, L.L.C., 287 P.3d 842, 848-49 (Colo.2012) (en banc); Carr v. Pearman, 860 N.E.2d 863, 870 (Ind.Ct.App.2007); Pryor v. Merten, 127 N.C. App. 483, 490 S.E.2d 590, 592-93 (1997), review denied, 347 N.C. 578, 502 S.E.2d 597 (1998). The Maryland Court of Appeals has indicated agreement with these latter jurisdictions.
In Somuah, 352 Md. at 267, 721 A.2d 680, the Court of Appeals held that, in a contingency fee case where the client had a good faith basis to discharge the attorney, the discharged attorney's claim accrues upon the fulfillment of the contingency, i.e., when the client recovers damages. The Court explained that there may be an advantage in waiting to see if the contingency occurs: "If there is a large recovery that is in significant measure due to Respondent's efforts, a good argument can be made for basing the quantum meruit recovery on a percentage of the total fee." Id. at 268, 721 A.2d 680. The Court then explained the procedure for the discharged attorney to follow:
Id. at 268, n. 8, 721 A.2d 680 (emphasis added).
Despite this plain language, appellants assert that, "by allowing quantum meruit recovery by a law firm directly against attorneys later retained by the clients," as opposed to allowing recovery solely against the clients, the parties who undertook the obligation to pay for the attorney's services, "the trial court created a new cause of action." According to appellants, because the Somuah language provides that an "attorney is entitled to compensation based on the reasonable value of services rendered prior to discharge," 352 Md. at 258, 721 A.2d 680 (emphasis added), and PGA sought a judgment in the circuit court for the "reasonable value of services and expenses they expended between October of 2003 and April, 2008," (emphasis added), it necessarily follows that PGA "proceeded below under an implied-in-fact contract theory of quantum meruit," which is untenable because there was no "meeting of the minds" between PGA and Mr. Gately and Mr. Brault.
Appellants are correct that an implied-in-fact contract exists when the conduct of the parties indicates a mutual intention to contract, a "meeting of the minds," and the services rendered indicate that the person rendering them expected
An implied-in-law contract is a quasi-contract that "implies a promise on the part of the defendant to pay a particular debt" and "requires restitution to the plaintiff of something that came into defendant's hands but belongs to the plaintiff in some sense." Id. at 275, 790 A.2d 43. A quasi-contractual quantum meruit claim is identical to a charge of unjust enrichment. Mohiuddin v. Doctors Billing & Mgmt. Solutions, Inc., et al., 196 Md.App. 439, 447, 9 A.3d 859 (2010), recons. denied, 196 Md.App. 439, 9 A.3d 859 (2011). The quasi-contract is
Slick v. Reinecker, 154 Md.App. 312, 319, 839 A.2d 784 (2003) (quoting County Comm'rs of Caroline County v. J. Roland Dashiell & Sons, 358 Md. 83, 94-95, 747 A.2d 600 (2000)).
In Alternatives Unlimited, Inc. v. New Baltimore City Board of School Commissioners, 155 Md.App. 415, 843 A.2d 252 (2004), we explained that unjust enrichment is the "unifying principle" for all quantum meruit claims based upon a single factual situation, and that the remedy of restitution in the form of a money judgment is the "award made to vindicate that principle." Id. at 454, 843 A.2d 252 (emphasis omitted). With respect to the measure of recovery on a contract implied-in-fact versus recovery on a quasi-contract, we explained that, although technically, recovery in an implied-in-fact contract, if an amount is unexpressed, is the reasonable market value of the plaintiff's services, and recovery in quasi-contract is in restitution, and thus is the amount of the defendant's unjust gain, the "`reasonable market value of plaintiff's services can be viewed as the correct remedy in most quantum meruit cases, even in many cases in unjust enrichment because the reasonable value can be viewed as the defendant's gain in certain situations.'" Id. at 487, 843 A.2d 252 (quoting Candace S. Kovacic, A Proposal to Simplify Quantum Meruit Litigation, 35 Am. U.L.Rev. 547, 553 (1986)). In other words,
Id. at 486-87, 843 A.2d 252. Applying this law to the present case, the amount of damages, whether based on a implied-in-fact contract with the Bargars, or an implied-in-law contract with Mr. Gately and Mr. Brault, is based on the reasonable value of the services rendered.
Pursuant to Somuah's directive, PGA appropriately waited for its cause of action to accrue, i.e., for the fulfillment of the contingency, the settlement of the case. It then pursued its claim for quantum meruit
Appellants' next argument involves their contention that PGA had fee-sharing agreements with Mr. Gately and Mr. Brault. They assert that the court "either forgot the evidence or otherwise neglected to deal with the issues," and they contend that the court erroneously "refuse[d] to enforce the fee sharing agreements."
PGA asserts that there "is no merit to [a]ppellants' argument that the trial court erroneously failed to enforce fee-sharing agreements which Messrs. Gately and Brault allegedly entered into with PGA." In support, it makes several assertions.
First, PGA contends that appellants waived this argument. This is so, they contend, because appellants "never asserted a counterclaim against PGA for breach of contract or raised an affirmative defense of setoff based on the existence of alleged agreements between them and PGA for a percentage of the fee."
Second, PGA argues that any contract-based claims "should be disregarded as a matter of law because the retention agreement upon which all counsel operated prior to April 19, 2008, was terminated and was no longer enforceable after the Bargars discharged PGA." In that regard, it states: "PGA received absolutely nothing under its retainer agreement with the Bargars. Appellants' contract claim is to a percentage of nothing."
Third, on the merits, PGA asserts that the court properly weighed the credibility of the witnesses in concluding that there was no fee-split agreement between Mr. Gately and PGA. With respect to Mr. Brault's claim to a percentage of PGA's share, PGA notes that the court expressly stated that it had considered that claim in its calculations, awarding 35% of the Bargar fee to appellees.
After the court rendered its oral opinion, Mr. Brault asked the court to "make a finding did [PGA] agree to 25 percent to Mr. Gately and did they agree to 20 percent to [Mr. Brault]." The court replied: "I am not going to give you a finding on that because I have considered all the evidence and I have factored that into my decision in terms of the 65 percent." The following colloquy ensued.
Initially, we are not persuaded by PGA's assertion that appellants waived, their argument that they were entitled to credit for fee-splitting agreements because they did not assert a counterclaim or raise the defense of set-off. In Maryland, counterclaims are permissive and not compulsory. Rowland v. Harrison, 320 Md. 223, 233, 577 A.2d 51 (1990). See Md. Rule 2-331(a) (A "party may assert as a counterclaim any claim that party has against any opposing party, whether or not arising out of the transaction or occurrence that is the subject matter of the opposing party's claim.") (emphasis added). Moreover, set-off is not an affirmative defense that must be set forth in an answer. See Md. Rule 2-323(g).
PGA's next assertion, however, that any contract-based claims "should be disregarded as a matter of law because the retention agreement upon which all counsel operated prior to April 19, 2008, was terminated and was no longer enforceable after the Bargars discharged PGA" has more merit. At least one other court has agreed with the proposition that a separate fee-sharing agreement between counsel, which is predicated on a contingency fee agreement with a client, ceases to exist if the client terminates the contingency fee agreement.
In Olsen v. Harbison, 191 Cal.App.4th 325, 119 Cal.Rptr.3d 460 (2010), Christopher Olsen was retained by Kathleen Klawitter to represent her in a personal
Mr. Olsen sued Mr. Harbison to recover attorney fees, asserting claims for, inter alia, quantum meruit and breach of contract based on the agreement to divide attorneys' fees. Id. at 328, 119 Cal.Rptr.3d 460. With respect to the breach of contract claim, the Court stated:
Id. at 341, 119 Cal.Rptr.3d 460.
We agree with this analysis. We hold that, when a client discharges his or her lawyer, any contingency fee contract ceases to exist, and generally, absent contractual language to the contrary, any fee-splitting agreement predicated on the initial contingency fee contract also ceases to exist.
We thus turn to the agreements in this case. Initially, with respect to Mr. Gately, the circuit court found that a fee-splitting agreement did not exist between Mr. Gately and PGA. This finding was not clearly erroneous. See Md. Rule 8-131(c). The court had conflicting evidence before it, specifically Mr. Gately's testimony that there was a fee-splitting agreement, and Mr. Raschke's testimony that Mr. Smouse had rejected any such agreement and that the arrangement "had never been ... seriously considered." It was within the court's province to weigh that evidence, judge the credibility of the witnesses, and to conclude, as it did, that no such agreement existed.
With respect to Mr. Brault, however, the court appeared to find that a fee-sharing agreement existed, although no specific findings were made in that regard. And the evidence presented regarding a split-fee agreement was sparse, with the terms of any such agreement being far from clear.
In its Second Amended Complaint for Quantum Meruit, PGA acknowledged that, "[a]t Gately's request, Brault was retained as co-counsel for the Bargars, and PGA agreed to pay Brault a portion of any contingency fee PGA received in the case under the terms of the Retainer." Appellants acknowledged in their brief on appeal, however, that Mr. Brault "never got anything in writing" from PGA with regard to a fee-splitting agreement.
Under these circumstances, we will apply the general rule that the termination of a contingency fee agreement terminates a fee-sharing agreement predicated on it. Because PGA is not entitled to a contingency fee, there is no contingency fee for Mr. Brault to share. Accordingly, to the extent the circuit court factored in the fee-sharing agreement, the circuit court's ruling must be vacated and remanded for further proceedings.
We stress that our decision in this case does not mean that Mr. Brault is not entitled to compensation for his work while the contingency agreement was in effect. Like PGA, however, his claim would be for the reasonable value of his services. On remand, the circuit court should factor that into the analysis in determining the award to which PGA is entitled.
