DH-1, LLC v. City of Falls City , 305 Neb. 23 ( 2020 )

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
04/10/2020 12:08 AM CDT
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
DH-1, LLC, a Nebraska limited liability
company, et al., appellants, v. City of
Falls City, Nebraska, appellee.
___ N.W.2d ___
Filed February 14, 2020. No. S-19-039.
1. Summary Judgment: Appeal and Error. An appellate court affirms a
lower court’s grant of summary judgment if the pleadings and admitted
evidence show that there is no genuine issue as to any material facts or
as to the ultimate inferences that may be drawn from the facts and that
the moving party is entitled to judgment as a matter of law.
2. ____: ____. In reviewing a summary judgment, an appellate court views
the evidence in the light most favorable to the party against whom the
judgment was granted, and gives that party the benefit of all reasonable
inferences deducible from the evidence.
3. Contracts. The interpretation of a contract and whether the contract is
ambiguous are questions of law subject to independent review.
4. Standing: Jurisdiction. The question whether a party has standing is
jurisdictional and may be raised at any time.
5. Contracts: Attorney and Client. The construction of contracts between
attorneys and their clients as to compensation is to be governed by the
usual rules relating to the construction of agreements generally.
6. Contracts. A contract written in clear and unambiguous language is not
subject to interpretation or construction and must be enforced according
to its terms.
7. Contracts: Words and Phrases. A contract is ambiguous when a word,
phrase, or provision in the contract has, or is susceptible of, at least two
reasonable but conflicting interpretations or meanings.
8. Contracts. A determination as to whether an ambiguity exists in a
contract is to be made on an objective basis, not by the subjective
contentions of the parties; thus, the fact that the parties have suggested
opposite meanings of a disputed instrument does not necessarily compel
the conclusion that the instrument is ambiguous.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
9. ____. Where a contract is found to be ambiguous, it is construed against
the drafter.
10. Contracts: Appeal and Error. An appellate court will not rewrite a
contract to provide terms contrary to those which are expressed. Nor is
it the province of a court to rewrite a contract to reflect the court’s view
of a fair bargain.
11. Contracts: Unjust Enrichment: Quantum Meruit. A claim that a
court should imply a promise or obligation to prevent unjust enrichment
goes by a number of names—“quasi-contract,” “implied-in-law con-
tract,” or “quantum meruit.”
12. Contracts. An express contract claim supersedes a quasi-contract claim
arising out of the same transaction to the extent that the contract covers
the subject matter underlying the requested relief.
13. ____. In the situation where both a contract claim and a quasi-contract
claim are alleged, a court should address the contract claim first.
Appeal from the District Court for Lancaster County: Susan
I. Strong, Judge. Affirmed.
J.L. Spray and Patricia L. Vannoy, of Mattson Ricketts Law
Firm, for appellants.
Michael R. Dunn, of Halbert, Dunn & Halbert, L.L.C., for
appellee.
Miller-Lerman, Cassel, Stacy, Funke, Papik, and
Freudenberg, JJ.
Freudenberg, J.
INTRODUCTION
This case presents the interpretation of a contingent fee for
legal services between the City of Falls City, Nebraska (Falls
City), and two law firms—Houghton Bradford Whitted, PC,
LLO, and Weaver & Merz, a partnership. The district court
concluded that no fees were due under the agreement or on the
firms’ equitable claim and accordingly dismissed the actions.
The law firms and DH-1, LLC, the organization to which
the firms had assigned their rights under the fee agreement,
appealed. We refer to the law firms and DH-1 collectively as
“the firms.” We affirm.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
BACKGROUND
Underlying Litigation.
This is the third appearance before this court by Falls City in
relation to the underlying litigation. We set forth the facts of the
underlying organizations—the Nebraska Municipal Power Pool
(NMPP), the Municipal Energy Agency of Nebraska (MEAN),
the National Public Gas Agency (NPGA), the American Public
Energy Agency (APEA), and the Central Plains Energy Project
(CPEP)—and the underlying litigation in our first opinion,
decided in 2010:
NMPP was created in 1975 as a nonprofit corporation
with the purpose of idea generation, research, analysis,
administration, and the creation of other entities to carry
out these activities. NMPP has a 16-member board of
directors made up of representatives from the participat-
ing municipalities. Falls City is a member of NMPP.
The first entity created by NMPP in 1981 was [MEAN]
. . . . NMPP created MEAN in order to obtain effi-
cient sources of electricity for participating communities.
[NPGA] was created in 1991 by NMPP in order to secure
natural gas for the participating municipalities. . . . NPGA
is governed by a board of directors made up of a repre-
sentative from each of the NPGA-member municipalities,
including Falls City. Both MEAN and NPGA require their
members to also be members of NMPP.
NMPP provides all the strategic planning and staffing
services for NPGA and MEAN. Other than an executive
director, who is employed jointly by NPGA and MEAN,
neither organization has employees. NMPP’s budgeting
process is administered through a joint operating com-
mittee, which consists of representatives from NMPP,
NPGA, and MEAN. At the beginning of each year, the
amount of time each NMPP employee will devote to a
particular organization is estimated and expenses are then
allocated among the organizations.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
In 1995, NMPP, NPGA, and MEAN created APEA,
another interlocal agency. APEA was intended to finance
bonds through which natural gas was purchased. APEA
remained separate from the joint operating committee
and had its own staff, but sometimes utilized NMPP staff
for various projects.
APEA issued bonds and purchased gas through a series
of “prepays.” A prepay involves the purchase of a large
supply of natural gas to be delivered in the future. The
goal is to purchase a large amount of natural gas at a
lower price than index, or market, price. The bonds used
to pay for the gas are tax exempt as long as municipal
entities purchase the gas later. As the gas is delivered and
paid for by the end user, the proceeds are used to repay
the principal and interest on the bonds.1
The complaint filed by Falls City against NMPP, CPEP,
and several individual defendants alleged breach of contract,
breach of fiduciary duty, and conspiracy to cause injury to
Falls City and others. As relevant, the district court found
in favor of Falls City in the amount of $628,267.90. In
our 2010 opinion, we reversed the district court’s award of
damages to Falls City on the ground that Falls City lacked
standing.2 The parties again appeared in 2011, this time with
respect to the order on costs assessed against Falls City.3
Upon remand, the district court entered an order assessing 22
percent of the costs to Falls City, which this court affirmed.
The appeal now before us deals with a fee dispute between
Falls City and the attorneys representing Falls City in the
prior litigation.
1
City of Falls City v. Nebraska Mun. Power Pool, 279 Neb. 238, 240-41,
777 N.W.2d 327, 330-31 (2010).
2
City of Falls City v. Nebraska Mun. Power Pool, supra note 1.
3
City of Falls City v. Nebraska Mun. Power Pool, 281 Neb. 230, 795
N.W.2d 256 (2011).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
Fee Agreement.
On November 20, 2006, Falls City and the firms entered
into the contingency fee agreement now at issue in this appeal.
As relevant, that agreement provided that Falls City retained
the firms
for the prosecution of any claims that Falls City may
have and any claims Falls City may pursue on behalf of
MEAN, NPGA, NMPP or any of their members includ-
ing those who might join in the prosecution of these
claims individually or by virtue of a class action or who
might benefit from any common fund created, discovered,
increased, preserved or protected or property to which
they may have a claim, against any person or entity
thought to be responsible for damages sustained as a
result of actions by NMPP, its employees or CPEP.
For this work, the firms were entitled to “$15,000.00 as
an Initial Fee” and a “contingent fee based upon the follow-
ing schedule: (a) 40% of all amounts recovered by settlement
or verdict which is not appealed; or, (b) 50% of all amounts
recovered in the event of an appeal of a verdict by any party
involved in the lawsuit.” The agreement indicates that it applied
to “relief in addition to, or in lieu of, an immediate monetary
benefit, but which relief has a calculable present value”; “secu-
rities, or other non-cash assets”; “or[,] if the settlement of this
case is made by a structured settlement[,] . . . the present value
of the settlement.”
While the action filed against NMPP and others proceeded
in district court, APEA, NPGA, and MEAN entered into an
agreement on February 26, 2007, which dissolved and restruc-
tured APEA and equitably distributed its assets. NPGA and
MEAN withdrew from APEA, with the withdrawal agreement
dividing the $23.1 million held by APEA between NPGA
and MEAN. NPGA received $9.8 million. Though Falls City
was not a party to the withdrawal agreement, as a member of
NPGA it received $1,567,570.02. Thereafter, Falls City elected
to become a direct member of APEA.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
The firms sought payment under the contingency fee agree-
ment, based upon the funds Falls City received pursuant to
the withdrawal agreement and improved equity positions in
the various organizations, but Falls City declined to pay. The
firms then assigned their claims to DH-1, which filed suit on
January 14, 2015, for the fee under the contingency agree-
ment. Eventually, a second amended complaint was filed which
joined the firms for purposes of their equitable claims. In total,
the firms sought $1,487,785.60 consisting of (1) a $627,028
fee from the APEA distribution, (2) $564,197.60 as a fee for
Falls City’s interest in the APEA, (3) $40,000 for the increase
in Falls City’s equity interest in NPGA, and (4) $256,560 for
the value of the “Agreement for Termination of Participation of
Members, Distribution of Funds to Members, and for Complete
Settlement, Mutual Releases and Covenants” entered into
between MEAN, NPGA, and APEA.
On October 10, 2017, the district court granted Falls City’s
motion for summary judgment as to the claims under the
fee agreement, concluding that the contingency under the fee
agreement was not met and that thus, the firms were not enti-
tled to a fee under the agreement. The district court also held
that DH-1’s standing was limited to legal rights under the fee
agreement and that it had “no equitable rights to assert against
Falls City.” However, the district court granted DH-1’s motion
to file a second amended complaint. DH-1 did so, adding the
firms as parties to the litigation.
At a hearing on December 21, 2018, ostensibly held with
regard to Falls City’s motion to compel, Falls City orally
moved for summary judgment. The firms waived notice, and
a hearing was held at which evidence was offered. The district
court granted the motion for summary judgment and dismissed
the complaint.
ASSIGNMENTS OF ERROR
The firms assign that the district court erred in dismissing
both their contract and equitable claims.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
STANDARD OF REVIEW
[1,2] An appellate court affirms a lower court’s grant of
summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from the
facts and that the moving party is entitled to judgment as a
matter of law.4 In reviewing a summary judgment, an appel-
late court views the evidence in the light most favorable to the
party against whom the judgment was granted, and gives that
party the benefit of all reasonable inferences deducible from
the evidence.5
[3] The interpretation of a contract and whether the con-
tract is ambiguous are questions of law subject to indepen-
dent review.6
ANALYSIS
Statute of Limitations and Standing.
Before reaching the substantive issues presented by this
appeal, we turn to Falls City’s arguments regarding the statute
of limitations and standing.
Falls City argues that the district court erred in not rul-
ing that the statute of limitations had run on all of the firms’
claims. But Falls City failed to file a cross-appeal on this issue,
and therefore, such issue is not properly before us, which pre-
vents us from reaching it.7
[4] Falls City’s argument regarding standing is different
in that the question whether a party has standing is jurisdic-
tional and may be raised at any time.8 Specifically, Falls City
argues that the firms have assigned, at least, their legal claims
to DH-1, which Falls City argues is an unlicensed collection
4
Williamson v. Bellevue Med. Ctr., 304 Neb. 312, 934 N.W.2d 186 (2019).
5
Id.
6
Wintroub v. Nationstar Mortgage, 303 Neb. 15, 927 N.W.2d 19 (2019).
7
See In re Estate of Graham, 301 Neb. 594, 919 N.W.2d 714 (2018).
8
See Hawley v. Skradski, 304 Neb. 488, 935 N.W.2d 212 (2019).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
agency and as a result lacks standing. We disagree. The record
shows that the firms assigned their claims to DH-1. That
assignment was not challenged below. As the assignee, DH-1
is the real party in interest and has standing to bring suit in
this case.9
We disagree with Falls City’s argument to the contrary.
Recovery Under Fee Agreement.
[5-8] We now turn to the firms’ argument that, contrary to
the district court’s conclusion, they were entitled to a fee under
the contingency fee agreement. The construction of contracts
between attorneys and their clients as to compensation is to
be governed by the usual rules relating to the construction of
agreements generally.10 A contract written in clear and unam-
biguous language is not subject to interpretation or construc-
tion and must be enforced according to its terms.11 A contract
is ambiguous when a word, phrase, or provision in the contract
has, or is susceptible of, at least two reasonable but conflicting
interpretations or meanings.12 A determination as to whether
an ambiguity exists in a contract is to be made on an objective
basis, not by the subjective contentions of the parties; thus,
the fact that the parties have suggested opposite meanings of a
disputed instrument does not necessarily compel the conclusion
that the instrument is ambiguous.13
[9,10] Where a contract is found to be ambiguous, it is con-
strued against the drafter.14 This court will not rewrite the con-
tract to provide terms contrary to those which are expressed.
9
See Neb. Rev. Stat. §§ 25-301 and 25-302 (Reissue 2016). See, also,
Hawley v. Skradski, supra note 8.
10
7A C.J.S. Attorney & Client § 457 (2019).
11
Meyer Natural Foods v. Greater Omaha Packing Co., 302 Neb. 509, 925
N.W.2d 39 (2019).
12
Id.
13
Id.
14
See Beveridge v. Savage, 285 Neb. 991, 830 N.W.2d 482 (2013).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
Nor is it the province of a court to rewrite a contract to reflect
the court’s view of a fair bargain.15
To support their argument that they are entitled to a fee
under the agreement, the firms note that the fee agreement
was broad both because it covered the “prosecution of any
claims that Falls City may have and any claims Falls City
may pursue” on behalf of a myriad of organizations or mem-
bers of those organizations and because it included language
allowing a fee to be recovered on the “receipt of securities, or
other non-cash assets,” or on the present value of a structured
settlement.
The firms further contend that the district court erred in
limiting the terms “prosecution,” “verdict,” and “settlement”
to the context of formal litigation and that Falls City received
benefits because of the underlying litigation even though Falls
City did not ultimately obtain a verdict or settlement with the
defendants in that litigation.
We find no error in the decision of the district court. Our
analysis begins with the plain language of the opening para-
graph of the parties’ fee agreement. That agreement, which
was entered into in November 2006, states that the firms
were retained to pursue claims “against any person or entity
thought to be responsible for damages sustained as a result
of actions by NMPP, its employees or CPEP.” In addition to
setting forth the 40- to 50-percent contingency fee owed in
the event of recovery, the agreement also notes that the firms
are entitled to “$15,000.00 as an Initial Fee . . . for the initial
investigation . . . and drafting of the Complaint.” It also states
that the firms were employed to “prosecute such claims and
assign to them a lien against all amounts recovered by settle-
ment or otherwise in connection with this litigation” (empha-
sis supplied).
When read together, this language plainly envisions the
agreement’s applying to the litigation as set forth in the
15
Meyer Natural Foods v. Greater Omaha Packing Co., supra note 11.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
complaint filed against NMPP, CPEP, and others alleging
breach of contract, breach of fiduciary duty, and conspiracy to
cause injury to Falls City and others. By contrast, the agree-
ment did not encompass other services the firms might provide
to Falls City.
The firms assert that the withdrawal agreement is within
the consideration of the agreement. However, the firms have
failed to establish what work they completed with regard to
the withdrawal agreement and how such work would bring the
withdrawal agreement within the parameters of the agreement’s
delineated list of claims. Therefore, since no recoverable ver-
dict or settlement occurred from the specified claims set forth
in the agreement, the contingency has not been met requiring
the payment of a fee.
There is no merit to the firms’ claim that they were entitled
to a fee under the agreement.
Recovery Under Equitable Principles.
[11] The firms also assign that the district court erred in
granting summary judgment in favor of Falls City on its equi-
table claims. A claim that a court should imply a promise or
obligation to prevent unjust enrichment goes by a number of
names—“quasi-contract,” “implied-in-law contract,” or “quan-
tum meruit.”16 Such claims do not arise from an express or
implied agreement between the parties; rather, they are imposed
by law “‘when justice and equity require the defendant to dis-
gorge a benefit that he or she has unjustifiably obtained at the
plaintiff’s expense.’”17
[12] Unjust enrichment or quasi-contract claims are viable
only in limited circumstances. For example, “‘[t]he terms of an
enforceable agreement normally displace any claim of unjust
16
Bloedorn Lumber Co. v. Nielson, 300 Neb. 722, 915 N.W.2d 786 (2018).
17
Id. at 729, 915 N.W.2d at 792, quoting City of Scottsbluff v. Waste
Connections of Neb., 282 Neb. 848, 809 N.W.2d 725 (2011).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
enrichment within their reach.’”18 Put another way, an express
contract claim will supersede a quasi-contract claim arising out
of the same transaction to the extent that the contract covers
the subject matter underlying the requested relief.19
[13] Though contract claims supersede unjust enrichment or
quasi-contract claims, a plaintiff is permitted to allege both.20
We have said that when a plaintiff does so, a court should
address the contract claim first.21
In this case, there was a contract, the contingency fee agree-
ment, which expressly covered the litigation against NMPP.
This agreement superseded the equitable claims to the extent of
that contract. Thus, the issue presented is what work not cov-
ered by the fee agreement remains unpaid. There is no dispute
that the firms would be entitled to compensation for work done
on matters not covered by the fee agreement.
Additional factual background is helpful to analyzing this
issue. During the course of this litigation, the parties had
engaged in discovery. As relevant, Falls City sought infor-
mation regarding services provided by the firms, including
“[w]hether the service provided related to the withdrawal
agreement[, the] membership agreement[,] or some other serv­
ice the [firms] claim to have provided not covered by the
contingency fee agreement.” To Falls City’s interrogatory, the
firms responded as follows:
The firm[s were] retained by [Falls] City to represent
[Falls] City and its related entities in efforts to protect
their interests and those of other community members of
NMPP, MEAN and NPGA in [APEA,] which at the time
18
City of Scottsbluff v. Waste Connections of Neb., 282 Neb. at 860, 809
N.W.2d at 740, quoting Restatement (Third) of Restitution and Unjust
Enrichment § 2, comment c. (2011).
19
Bloedorn Lumber Co. v. Nielson, supra note 16.
20
Id.
21
Id.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
was holding funds in excess of $20 Million and had valu-
able, proprietary, and profitable business interests. The
firm[s were] to file a legal action against individuals and
entities attempting to take APEA’s assets and business.
There was no “contingency fee agreement” when the
firm[s were] initially retained by [Falls] City. After the
firm[s] filed the action and [were] in the midst of discov-
ery, [Falls] City . . . requested that the firm[s] proceed on
a “contingency fee agreement.” At all times, the scope of
the engagement covered all efforts exerted by the firm[s]
for a percentage of all benefits derived from the attorney-
client relationship.
According to various motions to compel filed by Falls
City, counsel attempted to clarify or get the firms to supple-
ment this answer, but the firms stated they had no further
answer. Following a hearing, Falls City’s motion to compel
was granted, with the district court’s order noting:
[Falls City] seek[s] to have [the firms] specify what serv­
ices were provided or what hours were spent outside the
contingency fee agreement for which they have not yet
been compensated (under any other agreement) and for
which . . . Falls City received a benefit. Whether [the
firms] can recover under an implied contract or other
equitable theory of relief depends on whether they can
show that they performed some services for the benefit of
[Falls City] such that [Falls City] should be made to pay
the reasonable value of those services. See Sorenson v.
Dager, 8 Neb. App. [729], 601 N.W.2d 564 (1999). [The
firms] have a duty to comply with the discovery requests
by going through their time records and specifying such
services. It was not sufficient for [the firms] to simply
direct [Falls City] to hundreds of time records which have
already been produced, especially if most of those serv­
ices were expended in performance of the contingency
fee agreement.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
The firms were given 30 days to supplement their answers.
No supplementation occurred, and Falls City filed another
motion to compel. That motion was converted, with the agree-
ment of all parties, to Falls City’s motion for summary judg-
ment, which was granted, dismissing the firms’ equitable
claims.
For Falls City to obtain such relief as the defendant in this
litigation, Falls City had to show that if this case proceeded to
trial, the firms’ equitable claims would not have been success-
ful, and that Falls City was entitled to judgment.22 Falls City
did so by first relying on case law that showed that equitable
claims based on actions which were covered by the contingency
fee agreement should be determined under legal principles and
not under equity. Given this, the only claims remaining could
be those claims not covered by the contingency agreement.
Because the firms, in their answers to interrogatories, declined
to set forth any work they completed on behalf of Falls City
outside of the contingency fee agreement, Falls City met its
burden and was entitled to summary judgment.
There is no merit to the firms’ equitable claim.
CONCLUSION
The decision of the district court is affirmed.
Affirmed.
Heavican, C.J., not participating.
22
See Williamson v. Bellevue Med. Ctr., supra note 4.