Estate of Donna Lee v. Ford Motor Company ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
MARY VIED, Personal Representative of the UNPUBLISHED
Estate of DONNA LEE, and Next Friend of KL, a September 10, 2015
minor, and NICHOLAS LEE, Individually,
Plaintiffs,
v No. 321478
Oakland Circuit Court
FORD MOTOR COMPANY, LC No. 2011-119637-NI
Defendant,
and
SOMMERS SCHWARTZ, P.C.,
Appellant/Cross-Appellee,
and
ROBERT H. DARLING,
Appellee/Cross-Appellant.
Before: TALBOT, C.J., and WILDER and FORT HOOD, JJ.
PER CURIAM.
This case involves an attorney fee dispute between a law firm, Sommers Schwartz, and
an attorney formerly employed by the firm, Robert Darling, in connection with a case Darling
handled while a member of the firm. The trial court determined that because both parties had
unclean hands, the parties should “share the fee equally.” Sommers Schwartz now appeals as of
right, and Darling has filed a cross-appeal, both challenging that decision. Because we conclude
that Sommers Schwartz is entitled to the entire attorney fee, we reverse and remand for entry of
an order awarding the entire attorney fee to Sommers Schwartz.
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I. FACTS
Plaintiffs, Mary Vied and Nicholas Lee, retained Sommers Schwartz to represent them in
an action against Ford Motor Company under a contingency fee arrangement.1 Darling handled
the case and reached a settlement with Ford in February, 2011. The settlement agreement
included payment of a specified amount for Sommers Schwartz’s costs and attorney fees. At that
time, Darling’s continued employment with the firm was in question.2 At his request, the
settlement agreement specified that the check was to be “made payable to Plaintiffs and
Plaintiffs’ attorneys, Robert H. Darling and Sommers Schwartz, P.C.” Darling then filed a
motion to approve the settlement and authorize the payment of Sommers Schwartz’s attorney
fees and costs. The motion alleged that the firm was “entitled to reimbursement of costs and
payment of an attorney fee in accordance with a contingency fee agreement previously entered
into.” On April 19, 2012, the trial court approved the settlement, approved the firm’s costs and
attorney fees as reasonable, and authorized payment of same. The trial court’s order specifically
stated that Vied was “authorized and empowered to reimburse the Law Firm of SOMMERS
SCHWARTZ, P.C. for costs advanced and to pay attorney fees . . . .”
On June 15, 2012, Darling’s employment with Sommers Schwartz ended, and Darling
created his own law firm. At this time, Ford had not issued the settlement check. Plaintiffs
chose to discharge Sommers Schwartz and be represented by Darling and his new firm. On June
18, 2012, Darling filed a substitution of counsel. Shortly thereafter, Darling contacted Paul
Nystrom, counsel for Ford, and asked that Ford make the settlement check payable to Darling’s
new firm. Nystrom refused the request because it did not comply with the trial court’s order.
Nystrom also suspected that a fee dispute might arise between Darling and Sommers Schwartz,
and did not want Ford involved in any such dispute. On June 28, 2012, Ford issued the
settlement check, which was made payable to “Robert H. Darling & Sommers Schwartz PC &
Vied Plaintiffs.”
On July 9, 2012, Darling personally picked up the check from Nystrom and signed a
receipt for the check. Without notifying his former firm, Darling endorsed the check
“individually and as Senior Shareholder of Sommers Schwartz.” He deposited the check in his
own IOLTA account. Darling disbursed plaintiffs’ share of the funds and retained the attorney
fees and costs in his account. After Sommers Schwartz learned that the check had been issued
1
The underlying case involved a car accident that resulted in Donna Lee’s death. Vied is the
personal representative of Donna Lee’s estate. Vied also filed suit on behalf of KL as KL’s next
friend.
2
This was because Darling disagreed with a proposed plan which would make substantial
alterations to the firm’s compensation structure. On April 16, 2012, Sommers Schwartz adopted
a restructuring plan which made a variety of changes to the terms of employment applicable to
its attorneys. These changes took effect on August 5, 2012.
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and deposited, it filed a notice claiming an “attorneys’ lien on the proceeds of any settlement or
judgment in the within cause.”3
On January 7, 2013, Sommers Schwartz filed a motion seeking an order compelling
payment of this lien. This motion noted that the parties had been unable to settle their dispute to
the fees. Sommers Schwartz argued that it was entitled to the entire fee on a quantum meruit
theory because all of the work done on the case was performed before Darling left the firm. The
trial court conducted an evidentiary hearing. After this hearing, Darling filed a brief explaining
his position. Darling asserted that Sommers Schwartz was not entitled to equitable relief because
it had not acted equitably toward Darling in the context of the dispute over the firm’s
restructuring. Darling then argued that if Sommers Schwartz was entitled to equitable relief, the
trial court should either split the fee equally, or in the alternative, award $100,000 of the fee to
Sommers Schwartz and the remainder to Darling.4
In a written opinion, the trial court stated that the employment dispute was pending
before another judge and was not a matter to be resolved in the instant matter. The court also
rejected Sommers Schwartz’s claim that it was entitled to the entire fee because “the matter
required some work by Darling” after he left the firm and “the case law requires imposition of
the lien and division of the attorney fee based upon equitable principles.” The trial court found
that both parties had unclean hands in this case. According to the trial court, Sommers Schwartz
had unclean hands because it “owe[d] Darling pursuant to a prior agreement which is not directly
related to” the instant matter and because there was evidence to suggest that the law firm “has
agreed to an equal split with at least one other former member in circumstances very much like
the case at bar.” Darling had unclean hands because he had endorsed and deposited the
settlement check without authorization. The trial court concluded that “good conscience dictates
3
As this Court explained in Souden v Souden, 202 Mich App 406, 411; 844 NW2d 151 (2013)
(citations and quotation marks omitted):
There are two types of attorney’s liens. A general, retaining, or
possessory lien grants the attorney the right to retain possession of property of the
client, including money and documents, until the fee for services is paid. 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. The
charging lien creates a lien on a judgment, settlement, or other money recovered
as a result of the attorney’s services. Attorney charging liens are not recognized
by statute but exist in the common law.
The lien asserted by Sommers Schwartz in this matter falls into the second category, as it is a
lien asserted on the judgment recovered as a result of services it provided.
4
This figure was reached by assuming that Darling should receive one-third of the fee as a
referral fee, and 10% of the remainder to represent the “work” he did on the case after he left the
firm.
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the parties share the fee equally,” and awarded them each one half of the fees. Both Darling and
Sommers Schwartz now appeal.
II. ANALYSIS
A. STANDARD OF REVIEW
Questions of law are reviewed de novo on appeal.5 Equitable issues are also reviewed de
6
novo, although any findings of fact supporting a trial court’s decision are reviewed for clear
error.7 The trial court’s factual findings are clearly erroneous “if there is no evidence to support
them or there is evidence to support them but this Court is left with a definite and firm conviction
that a mistake has been made.”8
B. DISCUSSION
Sommers Schwartz sought recovery in quantum meruit, a claim that sounds in equity.9
This claim was based on the premise that “an attorney on a contingent fee arrangement who is
wrongfully discharged, or who rightfully withdraws, is entitled to compensation for the
reasonable value of his services based upon quantum meruit, and not the contingent fee
contract.”10 This Court has also recognized that because a client has the right to discharge an
attorney, “it will frequently be the case that a client’s termination of an attorney-client
relationship will not be ‘wrongful’ but that the attorney’s conduct will also not be ‘wrongful’ to
the extent that it should bar quantum meruit recovery of attorney fees.”11 In such a case, a
discharged attorney may still recover in quantum meruit, so long as the discharged attorney has
not engaged “in disciplinable misconduct prejudicial to the client’s case or conduct contrary to
public policy that would disqualify any quantum meruit award . . . .”12
5
Ter Beek v City of Wyoming, 495 Mich 1, 8; 846 NW2d 531 (2014).
6
System Soft Technologies, LLC v Artemis Technologies, Inc, 301 Mich App 642, 650; 837
NW2d 449 (2013).
7
46th Circuit Trial Court v Crawford Co, 275 Mich App 82, 86; 739 NW2d 361 (2007).
8
A&M Supply Co v Microsoft Corp, 252 Mich App 580, 588; 654 NW2d 572 (2002).
9
Morris Pumps v Centerline Piping, Inc, 273 Mich App 187, 199; 729 NW2d 898 (2006).
10
Reynolds v Polen, 222 Mich App 20, 24; 564 NW2d 467 (1997) (quotation omitted).
“[R]ecovery in such circumstances is based on quantum meruit rather than the amount provided
for in a contingent fee agreement because a client has an absolute right to discharge an attorney
and is therefore not liable under the contract for exercising that right.” Id. at 25.
11
Id. at 27.
12
Id.
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In this case, the trial court concluded that neither Sommers Schwartz nor Darling had
clean hands, and on this basis, ordered that the parties equally split the fee. This conclusion was
erroneous.
“It is well settled that one who seeks equitable relief must do so with clean hands.”13 The
clean-hands doctrine “closes the doors of a court of equity to one tainted with inequitableness or
bad faith relative to the matter in which he seeks relief, however improper may have been the
behavior of the defendant.”14 The trial court initially rejected Darling’s claim that Sommers
Schwartz had not acted equitably based on the parties’ employment dispute because that was a
separate issue pending in another case and was “not presented for resolution as part of the case at
bar.”15
But despite this statement, the court ultimately concluded that Sommers Schwartz had
unclean hands because it allegedly owed Darling money that he earned, but was not paid before
he left the firm. Whether Sommers Schwartz owed Darling any unpaid compensation is the
precise issue the trial court determined was not before it to decide. Nor did the trial court reach a
conclusion that Sommers Schwartz actually owed any unpaid compensation to Darling. The
court stated that “[i]f the testimony of the parties is believed,” Sommers Schwartz owed “Darling
pursuant to a prior agreement which is not directly related to the instant matter.” However, the
trial court never stated whether it believed the testimony before it. In other words, the trial court
stated that it would reach a certain conclusion if a condition was met, but never decided if that
condition was satisfied. Because the issue was not presented for resolution and the trial court did
not actually determine that Sommers Schwartz was indebted to Darling, the court erred in relying
on that matter to find that Sommers Schwartz had unclean hands.
Rather, this Court has explained that “quantum meruit recovery of attorney fees is barred
when an attorney engages in misconduct that results in representation that falls below the
standard required of an attorney (e.g., disciplinable misconduct under the Michigan Rules of
Professional Conduct) or when such recovery would otherwise be contrary to public policy.”16
There is no evidence that Sommers Schwartz engaged in disciplinable conduct, nor would
recovery of the fee by Sommers Schwartz be contrary to public policy. Accordingly, Sommers
Schwartz is entitled to recover in quantum meruit.
We further conclude that, under the circumstances presented in this case, Sommers
Schwartz is entitled to the entire fee. Such a determination is properly made by considering the
13
Attorney Gen v PowerPick Club, 287 Mich App 13, 52; 783 NW2d 515 (2010).
14
Rose v Nat’l Auction Group, 466 Mich 453, 463; 646 NW2d 455 (2002) (quotation omitted).
15
The trial court similarly stated in a footnote that “the employment dispute between Darling and
[Sommers Schwartz] is currently pending before another judge in this circuit, and is no longer an
issue in the instant matter.”
16
Reynolds, 222 Mich App at 26.
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relative proportions of the work completed by Sommers Schwartz and Darling.17 Here, it is clear
that all of the work leading to the settlement was completed by Sommers Schwartz. Darling,
while still employed by Sommers Schwartz, settled the dispute with Ford. The trial court entered
an order approving the settlement well before Darling left the firm. When Darling left Sommers
Schwartz, the litigation was complete; the only task to be completed was obtaining the settlement
check and disbursing the proceeds. This was a simple ministerial task. Under the circumstances,
we find that Sommers Schwartz is entitled to the entire fee.18
Reversed and remanded for entry of an order awarding the disputed costs and attorney
fees to Sommers Schwartz. We do not retain jurisdiction.
/s/ Michael J. Talbot
/s/ Kurtis T. Wilder
/s/ Karen M. Fort Hood
17
See Reynolds, 222 Mich App at 30-31 (remanding to the trial court to “determine the
percentage of the one-third fee that represents” the discharged attorney’s “overall contribution to
the settlement.”).
18
We reject Darling’s various arguments based on the premise that because he performed the
work leading to the settlement, he should be entitled to all (or at least the majority) of the fee in
this matter. Darling ignores a simple fact: when he completed this work, he did so as an
employee of Sommers Schwartz.
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