Nadim Kalla v. Progressive Michigan Insurance Company ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
NADIM KALLA, UNPUBLISHED
January 14, 2016
Plaintiff-Appellant,
v No. 323416
Wayne Circuit Court
PROGRESSIVE MICHIGAN INSURANCE LC No. 13-007318-NI
COMPANY,
Defendant-Appellee.
Before: SAAD, P.J., and WILDER and MURRAY, JJ.
PER CURIAM.
Plaintiff appeals as of right the circuit court’s order denying plaintiff’s motion to enforce
an attorney’s charging lien against a settlement reached between defendant, Progressive
Michigan Insurance Company (Progressive), and plaintiff’s nonparty medical provider, St. Peter
Medical Center (SPMC), in a different action in the district court. We affirm.
Plaintiff argues that the trial court erred by refusing to enforce an alleged attorney
charging lien of his trial counsel, Nazek A. Gappy. As a preliminary matter, we note that
plaintiff’s arguments that the trial court erred by (1) failing to grant Gappy attorney fees under a
quantum meruit theory, or to (2) hold an evidentiary hearing to determine the precise contractual
relationship between Gappy and SPMC, are unpreserved issues, as plaintiff failed to raise them
in the trial court. See Hines v Volkswagen of Am, Inc, 265 Mich. App. 432, 443; 695 NW2d 84
(2005). We also refuse to consider exhibits 2-5 and 7 and 9 that were appended to plaintiff’s
brief on appeal. These exhibits were never filed in the trial court, and constitute an
impermissible attempt to expand the record on appeal. MCR 7.210(A)(1); see also Sherman v
Sea Ray Boats, Inc, 251 Mich. App. 41, 56; 649 NW2d 783 (2002) (“This Court’s review is
limited to the record established by the trial court, and a party may not expand the record on
appeal.”).
This Court reviews a lower court’s decision whether to impose a charging lien for an
abuse of discretion. Reynolds v Polen, 222 Mich. App. 20, 24; 564 NW2d 467 (1997), citing
Ambrose v Detroit Edison Co, 65 Mich. App. 484, 489; 237 NW2d 520 (1975). “An abuse of
discretion occurs when the decision results in an outcome falling outside the principled range of
outcomes.” Woodard v Custer, 476 Mich. 545, 557; 719 NW2d 842 (2006). On the other hand,
“[w]hether a lien is authorized in a particular case is a question of law” that this Court reviews de
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novo. Ypsilanti Charter Twp v Kircher, 281 Mich. App. 251, 281; 761 NW2d 761 (2008).
“Interpretation of a statute or court rule constitutes a question of law that is also reviewed de
novo,” Silich v Rongers, 302 Mich. App. 137, 143; 840 NW2d 1 (2013), as is the proper
“construction of the rules of professional conduct,” Grievance Administrator v Fieger, 476 Mich.
231, 240; 719 NW2d 123 (2006).
“Attorney charging liens are not recognized by statute but exist in the common law.”
Souden v Souden, 303 Mich. App. 406, 411; 844 NW2d 151 (2013). Such liens exist “as part of
the court’s inherent power to oversee the relationship of attorneys, as officers of the court, with
their clients,” and, as such, an attorney’s charging lien “is subject to the control of the court for
the protection of the client and third parties as well[.]” Id., quoting Kysor Indus Corp v DM
Liquidating Co, 11 Mich. App. 438, 445; 161 NW2d 452 (1968) (quotation marks and citations
omitted). “A special or charging lien is ‘an equitable right to have the fees and costs due for
services secured out of the judgment or recovery in a particular suit.’ ” Souden, 303 Mich. App. at
411, quoting George v Sandor M Gelman, PC, 201 Mich. App. 474, 476; 506 NW2d 583 (1993).
“The attorneys’ charging lien creates a lien on a judgment, settlement, or other money recovered
as a result of the attorney’s services.” Id. “The ability to enforce an attorney’s charging lien is
ancillary to a trial court’s exercise of jurisdiction over the cases before it.” Souden, 303 Mich
App at 412.
For several reasons, plaintiff’s claim of error necessarily fails. First, Gappy failed to
demonstrate the existence of an attorney-client relationship between herself and SPMC. Indeed,
in the circuit court, Gappy explicitly acknowledged the lack of a direct contractual relationship
between herself and SPMC, admitting that plaintiff was her client in this action, not SPMC. “An
attorney-client relationship must be established by contract before an attorney is entitled to
payment for services rendered.” Id. at 414, quoting Plunkett & Cooney, PC v Capitol Bancorp
Ltd, 212 Mich. App. 325, 329; 536 NW2d 886 (1995). Since Gappy failed to demonstrate the
existence of an attorney-client relationship between herself and SPMC, she could not
demonstrate her entitlement to a charging lien for attorney fees allegedly owed by SPMC.
Second, even if Gappy had a valid charging lien against SPMC’s recovery in the district
court action, she cannot enforce that charging lien by filing a motion to do so in a circuit court
action. “The ability to enforce an attorney’s charging lien is ancillary to a trial court’s exercise
of jurisdiction over the cases before it.” Souden, 303 Mich. App. at 412 (emphasis added). In this
matter, the circuit court exercised jurisdiction over plaintiff’s first-party no-fault claim, not
SPMC’s third-party no-fault claim. SPMC was never a party to this action. Thus, SPMC’s
third-party no-fault claim against Progressive was not before the circuit court, leaving that court
without ancillary jurisdiction to enforce Gappy’s proposed charging lien against SPMC’s
recovery in the district court. See id.
Third, in order for an attorney’s charging lien to attach to a client’s recovery, that
recovery must be a result of the attorney’s services. Dunn v Bennett, 303 Mich. App. 767, 778;
846 NW2d 75 (2014); see also George, 201 Mich. App. at 476 (“The attorneys’ charging lien
creates a lien on a judgment, settlement, or other money recovered as a result of the attorney’s
services.”). In the circuit court, Gappy acknowledged that she was unaware of the district court
action, or its settlement, until after the settlement was already effective. Consequently, any
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settlement reached in the district court action was not a result of Gappy’s legal services, leaving
her alleged charging lien unattached to SPMC’s recovery in the district court. See id.
Finally, even if Gappy had an otherwise enforceable charging lien, the circuit court had
discretion to deny enforcement of that lien for Gappy’s violation of the court rules and rules of
professional conduct. In the circuit court, Gappy claimed that she had a contingent-fee
agreement with SPMC under which she would receive a third of “any fee that was collected on
their behalf,” but she admitted that the agreement was not written. Thus, the circuit court
decided that even if such an agreement existed, it was unenforceable.
MCR 8.121(F) provides that, “Contingent fee arrangements made by an attorney with a
client must be in writing and a copy provided to the client.” Likewise, MRPC 1.5(c) provides in
part that, “A contingent-fee agreement shall be in writing and shall state the method by which the
fee is to be determined.” An attorney’s charging lien “is subject to the control of the court for
the protection of the client and third parties as well[.]” Souden, 303 Mich. App. at 411, quoting
Kysor Indus Corp, 11 Mich. App. at 445 (quotation marks and citations omitted). Furthermore,
“[t]his Court has repeatedly recognized that a trial court has inherent authority to impose
sanctions on the basis of the misconduct of a party or an attorney,” up to and including dismissal
of an action. Persichini v William Beaumont Hosp, 238 Mich. App. 626, 639; 607 NW2d 100
(1999).
By seeking a charging lien, Gappy was requesting the exercise of the circuit court’s
equitable powers. See Souden, 303 Mich. App. at 411. However, it is a bedrock principle of our
jurisprudence “that one who seeks the aid of equity must come with clean hands.” Rose v Nat’l
Auction Group, Inc, 466 Mich. 453, 463; 646 NW2d 455 (2002), quoting Stachnik v Winkel, 394
Mich. 375, 382; 230 NW2d 529 (1975), quoting Charles E Austin, Inc v Kelly, 321 Mich. 426,
435; 32 NW2d 694 (1948). Gappy’s alleged agreement with SPMC is not only a direct violation
of the requirement that such agreements be written, MCR 8.121(F), but it is also an ethical
violation under MRPC 1.5(c). As such, the circuit court did not abuse its discretion by refusing
to enforce the agreement. On the contrary, Gappy cannot expect a court sitting in equity to help
her enforce a fee agreement that is specifically prohibited by both the court rules and the rules of
professional conduct.
Affirmed. Defendant may tax costs, having prevailed in full. MCR 7.219(A).
/s/ Henry William Saad
/s/ Kurtis T. Wilder
/s/ Christopher M. Murray
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