McCaffrey Professional Association v. McDowell & Osburn, P.A ( 2017 )

THE STATE OF NEW HAMPSHIRE
SUPREME COURT
In Case No. 2016-0539, McCaffrey Professional Association
v. McDowell & Osburn, P.A., the court on March 24, 2017, issued
the following order:
Having considered the briefs and record submitted on appeal, we conclude
that oral argument is unnecessary in this case. See Sup. Ct. R. 18(1). We affirm.
The plaintiff, McCaffrey Professional Association, appeals an order of the
Superior Court (Wageling, J.) dismissing its action against the defendant,
McDowell & Osburn, P.A., for failure to post security for the defendant’s costs as
a condition of proceeding with the action. See Super Ct. Civ. R. 45 (governing
taxation of costs). The plaintiff contends that the trial court: (1) lacked the
authority pursuant to RSA 498:1 (2010) or Superior Court Civil Rule 49 to
require it to post security; and (2) violated Part I, Article 14 of the New Hampshire
Constitution by requiring it to post security.
We first address whether the trial court had authority to require the
plaintiff to post security. We assume, without deciding, that this issue is
preserved. We conclude that, even if the trial court lacked authority under
Superior Court Civil Rule 49 to require security from the plaintiff, its general
equitable powers under RSA 498:1 authorized such relief under the
circumstances of this case.
The purpose of equity is to secure complete justice. Chase v. Ameriquest
Mortgage Co., 155 N.H. 19, 24 (2007). The court’s broad and flexible equitable
powers allow it to shape the precise relief to the requirements of the particular
situation. Id. A court of equity will order to be done that which in fairness and
good conscience ought to be done. Id.The propriety of awarding equitable relief rests in the sound discretion of
the trial court to be exercised according to the circumstances and exigencies of
the case. Id. We will uphold a trial court’s equitable order unless it constitutes
an unsustainable exercise of discretion. Id. When we determine whether a
ruling made by a judge is a proper exercise of judicial discretion, we are really
deciding whether the record establishes an objective basis sufficient to sustain
the discretionary judgment made. State v. Lambert, 147 N.H. 295, 296 (2001).
To show that the trial court’s decision is not sustainable, the plaintiff must
demonstrate that its ruling was clearly untenable or unreasonable to the
prejudice of its case. Id.The plaintiff identifies the merits of its claim against the defendant as a
“key factor” in determining whether requiring security is equitable; it argues that
its “case is meritorious.” The fee agreement upon which the plaintiff’s action
rests was captioned “CONTINGENT FEE AGREEMENT,” was signed by the clients
and both firms, and provided that “the firms shall be paid a thirty-three and a
third (33-1/3%) percent of the gross recovery, plus costs.” The agreement further
provided that the “law firms shall represent the [clients] with respect to” the
accident, that “[i]f no recovery is obtained, the firms shall not be paid any fee,”
that the clients have been advised that they “may hire the law firms” on a per-
hour basis, and that the clients have “declined to hire the firms on an hourly
basis and desire to hire them on a contingent basis.” Thus, the agreement
contemplated that the plaintiff would be actively involved in representing the
clients.
However, the plaintiff’s sole attorney and shareholder, Brian McCaffrey,
was suspended from the practice of law five months after the agreement was
signed. The defendant represents, and the plaintiff does not challenge, that this
was more than nine months before the complaint was filed in the clients’ case
and almost three years before the case was settled. Once McCaffrey was
suspended, he could not work on the clients’ case. See Kalled v. Albee, 142 N.H.
747, 751 (1998) (stating that from the time he was suspended, a lawyer could not
have “any responsibility or risk” for a case). The plaintiff did not allege that
McCaffrey actually worked on the case. On appeal, it argues only that he “was
not suspended until . . . almost six months after this contract was signed,
indicating he may have been involved in the work in this case.”
The plaintiff argues that its claim rests on the fact that it “referred a
lucrative personal injury lawsuit to the Defendant” and that the “custom and
practice . . . between the Plaintiff and the Defendant was previously to provide
the Plaintiff with one-third of the total recovery as a referral fee for a personal
injury case.” However, the contingent fee agreement does not mention a referral
fee. If the agreement provided a “naked” referral fee, requiring no work from the
plaintiff, this would have had to be made clear, in writing, to the clients. N.H. R.
Prof. Conduct 1.5(f). Furthermore, a lawyer cannot share a fee with a non-
lawyer, except under certain limited conditions not relevant here. N.H. R. Prof.
Conduct 5.4(a); cf. Kalled, 142 N.H. at 751. If a contract cannot be performed in
accordance with the disciplinary rules, performance may be excused as against
public policy. Kalled, 142 N.H. at 750.
The plaintiff does not argue that the trial court was unreasonably
concerned about its inability to satisfy the defendant’s costs in the event the
defendant won. The plaintiff acknowledges that it was administratively dissolved
on September 4, 2012, more than a year before the clients’ case was settled. The
plaintiff’s complaint lists only its “former” address. Furthermore, the plaintiff
describes itself as having “only debts, not assets.”
2
The plaintiff argues that “a bond for costs in the amount of $5,000 is
excessive,” that “there is no reason that an expert witness is required,” and that,
“even if an expert witness is required[,] this witness would only be compensated
for preparation for trial and for actual testimony.” However, the trial court could
have reasonably concluded that a bond in the amount of $5,000 was warranted,
especially in light of the defenses raised in the defendant’s answer, including
fraud in the inducement and misrepresentation by concealment.
To the extent that the plaintiff argues that requiring security was
“tantamount to a $5,000 filing fee,” we disagree. The plaintiff has not been
denied access to the courts. Rather, it has contested this requirement in the trial
court and this court. Cf. Boynton v. Figueroa, 154 N.H. 592, 609-10 (2006)
(stating post-judgment bond to secure payment of judgment did not violate Part I,
Article 14 of the State Constitution).
Accordingly, we conclude that the trial court reasonably determined, based
upon the circumstances and exigencies of the case, that, in fairness and good
conscience, the plaintiff should post security of $5,000 to cover the defendant’s
costs if the plaintiff lost its claim. See Chase, 155 N.H. at 24. To the extent that
the plaintiff urges us to adopt standards to govern security for trial costs, the
record does not reflect that it raised this issue to the trial court. See Town of
Atkinson v. Malborn Realty Trust, 164 N.H. 62, 69 (2012).
We next address the plaintiff’s argument that it has no assets and, thus,
requiring it to post security for costs violates Part I, Article 14 of the New
Hampshire Constitution and its “right of access to the Courts.” Cf. Lamarche v.
McCarthy, 158 N.H. 197, 205 (2008) (stating that dismissing case because
plaintiff failed to pay $50 fee for alternative dispute resolution would not be
unconstitutional). The trial court must have had the opportunity to consider any
issues asserted by the appellant on appeal. Malborn Realty, 164 N.H. at 69. To
satisfy this preservation requirement, any issues which could not have been
presented to the trial court prior to its decision must be presented to it in a
motion for reconsideration. Super. Ct. Civ. R. 12(e); see N.H. Dep’t of Corrections
v. Butland, 147 N.H. 676, 679 (2002).
In this case, the plaintiff did not move for reconsideration of the trial
court’s order requiring it to post security. It did not argue that it had no assets
with which to post security until two and a half months after the defendant’s
motion to require the security was granted. It did not raise its constitutional
argument until its subsequent objection to the defendant’s motion to dismiss,
titled “Objection to Motion to Dismiss and Motion to Vacate the Order that It Post
$5,000 in Security for Costs” (capitalization and underlining omitted), filed three
months after the trial court’s order requiring security. In its objection to the
motion for security, the plaintiff argued merely that the amount of security that
the defendant sought was unreasonable. It did not argue that requiring it to post
security was a constitutional violation. Nor did it argue that it had no assets to
3
use for security, even though it had been dissolved over three and a half years
prior to the motion.
Three months after the order requiring the plaintiff to post security, the
trial court identified the motion to vacate as an untimely motion for
reconsideration and refused to consider it. The plaintiff did not seek
reconsideration of that order. Accordingly, we decline to consider the plaintiff’s
constitutional argument. See Malborn Realty, 164 N.H. at 69.
Affirmed.
Dalianis, C.J., and Hicks, Conboy, Lynn, and Bassett, JJ., concurred.
Eileen Fox,
Clerk
4