Harvey J. Garod v. Steiner Law Office, PLLC & a.

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Belknap
No. 2016-0178
HARVEY J. GAROD
v.
STEINER LAW OFFICE, PLLC & a.
Argued: January 26, 2017
Opinion Issued: May 17, 2017
Law Offices of Harvey J. Garod, of Laconia (Harvey J. Garod on the brief
and orally), for the plaintiff.
Steiner Law Office, PLLC, of Concord (R. James Steiner on the
memorandum of law and orally), for the defendants.
LYNN, J. The plaintiff, Harvey J. Garod, appeals an order of the Superior
Court (O’Neill, J.) dismissing his conversion action against the defendants,
R. James Steiner and Steiner Law Offices, PLLC. We reverse and remand.
I
Accepting the plaintiff’s allegations as true, the pertinent facts are as
follows. See Coyle v. Battles, 147 N.H. 98, 100 (2001) (noting that, when
reviewing a trial court’s dismissal of a plaintiff’s action, we “assume the truth of
all well-pleaded facts” alleged by the plaintiff). The plaintiff was retained by a
client to pursue a personal injury action. In connection with the
representation, the client signed the plaintiff’s standard engagement contract,
which states, in relevant part:
If I discharge my attorney or he withdraws from
representation, I agree to pay him at the rate of $350.00 per hour,
$175.00 per hour for his legal assistant(s), quantum meruit, or
thirty-three and one-third percent (33-1/3%) of the last settlement
offer, whichever is greater, from any recovery obtained on my
behalf. I do further agree that my attorney will be entitled to the
full contingency fee identified in this contract if he substantially
performs under the contract. I grant my attorney a lien for his fees
and costs on any recovery I receive in my case.
The plaintiff worked for the client for two years before being discharged without
cause. The client subsequently hired the defendants, who filed an action
(underlying action) on behalf of the client. The defendants ultimately settled
the underlying action on the client’s behalf.
Prior to settlement, the plaintiff filed a motion to intervene in the
underlying action, asserting that he possessed a contractual lien for fees and
costs incurred during his representation of the client. The client objected to
the motion, claiming, among other things, that: (1) intervention would be
inappropriate because of the possibility of juror confusion and because the
plaintiff retained the ability to bring a separate quantum meruit claim; and (2)
the plaintiff had “neither a lien nor a contractual claim” and was limited to
recovery in quantum meruit. The court denied the plaintiff’s motion “for the
reasons stated in the [client’s] objection,” without further elaboration.
According to the defendants, the plaintiff subsequently filed a motion to vacate
the court’s order, which the court denied, ruling that it was “an untimely
motion to reconsider.”
After the settlement of the underlying action, the client filed a motion to
order that the settlement check be made “payable solely to [the client] and her
counsel, R. James Steiner.” The court granted the motion.
On the same day, the plaintiff filed a series of motions in the underlying
action, including a second motion to intervene wherein he again asserted that
he possessed a contractual lien, a motion for interpleader, and a motion to
foreclose lien. The client objected to all these motions, and the court denied all
of them without explanation.
The plaintiff then initiated this action against the defendants, again
alleging that he had an enforceable contractual lien for fees against the
defendants. The defendants moved to dismiss the action for failure to state a
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claim. In its order granting the motion, the court noted that the plaintiff’s
contractual lien claim was “arguably barred by the doctrine of collateral
estoppel.” Nonetheless, the court found that the plaintiff’s claim failed on the
merits because he had not submitted any evidence of his contract with the
client, and, thus, failed to allege “facts that c[ould] be reasonably construed to
meet the elements of an enforceable contract containing the lien term.”
The plaintiff moved for reconsideration and for leave to file an amended
complaint, along with the proposed amended complaint. The defendants
objected to these motions, and moved to dismiss the amended complaint. The
court denied the motion for reconsideration and scheduled a hearing on the
other motions. After the hearing, the court granted the plaintiff’s motion to file
the amended complaint and granted the defendants’ motion to dismiss the
amended complaint, noting that the plaintiff’s cause of action “remains barred
by the doctrine of collateral estoppel.” The court then quoted its earlier order
dismissing the plaintiff’s original complaint, stating:
[I]t is plain from the record that [the plaintiff repeatedly asserted
that he had a lien when he sought to intervene in the client’s
underlying action]. It is also clear that at least two separate
Justices issued orders rejecting the plaintiff’s assertion that he had
a lien, thus deciding this issue on the merits. Further, while the
plaintiff was not a formal party in the underlying action, the fact
that he first raised the issue of the lien in a Motion to Intervene
and the court’s determination of this issue was the precise basis
for denying said Motion suggests that the third condition of
collateral estoppel is also met.
(Quotation and citations omitted.) The court also ruled that the plaintiff’s
amended complaint failed to state a claim because it found, among other
things, that our decision in Adkin Plumbing v. Harwell, 135 N.H. 465 (1992),
limited him to recovery in quantum meruit. This appeal followed.
II
On appeal, the plaintiff argues that the trial court erred in: (1) finding
that his claim is barred by collateral estoppel; (2) invalidating the contractual
lien and determining that it is not binding upon the defendants; (3) concluding
that quantum meruit was his only method of recovery; and (4) determining that
the underlying action filed by the defendants on behalf of the client
“extinguished his property rights to the lien AND the secured fees and costs.”
He also appears to claim that the trial court’s various decisions violated his due
process rights.
We review motions to dismiss to determine whether the plaintiff’s
allegations are reasonably susceptible of a construction that would permit
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recovery. Coyle, 147 N.H. at 100. We assume the truth of all well-pleaded
facts alleged by the plaintiff, construing all inferences in the light most
favorable to him. Id. On appeal, the plaintiff has the burden to demonstrate
error and must provide an adequate record for our review. Id.
A
The plaintiff asserts that his claim is not barred by collateral estoppel
because there was no “appearance, hearing, and litigated decision on the
merits” relating to his lien claim in the underlying action. The defendants
claim that the trial court’s rulings denying the motions to intervene should be
given preclusive effect so as to bar the present action.
The doctrine of collateral estoppel “bars a party to a prior action, or a
person in privity with such party, from relitigating any issue or fact actually
litigated and determined in the prior action.” 412 S. Broadway Realty v.
Wolters, 169 N.H. 304, 314 (2016) (quotation omitted). It may preclude the
relitigation of findings made by a previous court when: (1) the issue subject to
estoppel is identical in each action; (2) the first action resolved the issue finally
on the merits; (3) the party to be estopped appeared in the first action or was in
privity with someone who did; (4) the party to be estopped had a full and fair
opportunity to litigate the issue; and (5) the finding at issue was essential to
the first judgment. Id. “The applicability of collateral estoppel is a question of
law that we review de novo.” Id. (quotation omitted).
We focus our analysis on whether the attorneys’ lien issue was essential
to the trial court’s decisions. In a comment explaining the final requirement for
collateral estoppel, the Restatement (Second) of Judgments states that if
“issues are determined but the judgment is not dependent upon the
determinations, relitigation of those issues in a subsequent action between the
parties is not precluded.” Restatement (Second) of Judgments § 27, cmt. h at
258 (1982). In this case, we must evaluate whether the lien issue was essential
when the trial court denied the plaintiff’s motion to intervene for multiple
reasons without stating which one of those reasons was dispositive. See Tyler
v. Hannaford Bros., 161 N.H. 242, 247 (2010).
In this case, the trial court made no specific findings of fact, but we must
assume that the court made all findings of fact necessary to support its
decisions. See In the Matter of Salesky & Salesky, 157 N.H. 698, 709 (2008).
Whether to grant a motion to intervene is a matter committed to the trial
court’s discretion. See Lamarche v. McCarthy, 158 N.H. 197, 200 (2008).
Here, findings with regards to whether the plaintiff had a contractual lien were
not necessary or essential to support the trial court’s decisions because the
trial court, regardless of whatever findings it might have made with regard to
that issue, could have denied the plaintiff’s motions to intervene for any one of
several reasons, including those identified by the client in her objection to the
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plaintiff’s first motion to intervene. With respect to the other motions filed by
the plaintiff in the underlying action, i.e., the motions for interpleader and the
motion to foreclose lien, because the court gave no explanation for its rulings
on these motions, it is entirely possible that the court denied them simply
because it had already denied the plaintiff’s motions to intervene and therefore
concluded that, having been denied intervenor status, the plaintiff had no
standing to file the motions in question. For these reasons, we hold that the
trial court erred in concluding that the plaintiff’s contractual lien claim was
barred by collateral estoppel.
B
The plaintiff next argues that, given that both “liens and unsecured
identifiable funds are subject to conversion,” the trial court erred in dismissing
his conversion claim regarding his alleged contractual lien against the
defendants. “Conversion is an intentional exercise of dominion or control over
a chattel which so seriously interferes with the right of another to control it
that the actor may justly be required to pay the other the full value of the
chattel.” Kingston 1686 House, Inc. v. B.S.P. Transportation, Inc., 121 N.H.
93, 95 (1981) (quotation omitted). Because the defendants do not argue that a
contractual lien cannot constitute a property interest, for the purposes of this
appeal we assume, without deciding, that an attorney’s lien for fees is subject
to conversion. Consequently, the plaintiff’s conversion claim turns upon: (1)
whether he possesses a valid contractual lien; and (2) whether that lien is
enforceable against the defendants.
The plaintiff asserts that he may recover from the defendants on the
basis of the contractual lien granted to him by the client. The plaintiff argues
that, because New Hampshire law permits contractual liens, and because the
client executed the engagement agreement that included a contractual lien, he
is entitled to the full contingency fee and costs secured by that lien. The
defendants argue, and the plaintiff does not dispute, that the statutory lien
created under RSA 311:13 (2015) is unavailable to the plaintiff inasmuch as it
attaches “no earlier than the date of entry of the appearance of counsel” in the
“proceeding” to which it relates. Peterson v. Reilly, 105 N.H. 340, 355 (1964).
Here, the plaintiff was discharged before any such proceeding was instituted.
However, this statute is not the exclusive method by which an attorney may
acquire a lien. As the Peterson court noted, long before the enactment of RSA
311:13 in 1963, our law had recognized a common law attorneys’ lien against
the client’s recovery, but the lien was limited to the attorney’s “taxable costs
and disbursements.” Id. at 354; see Wells v. Hatch, 43 N.H. 246, 247 (1861).
Moreover, nothing in our jurisprudence forbids an attorney and client from
entering into a contract that grants the attorney a lien against any recovery
that may be had in the case for which the attorney was engaged, provided the
contract conforms to our general rules regarding attorneys’ fees. See N.H. R.
Prof. Conduct 1.5, 1.8(i)(1); Model Rules of Prof’l Conduct 1.8 cmt. (2014).
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The defendants dispute the plaintiff’s right to a contractual lien on the
grounds that our case law restricts him “to a claim against the client in quantum
meruit.” There is no doubt that we have held that an attorney discharged
without fault may not recover pursuant to his contingent fee contract with the
client, but is instead limited to a recovery in quantum meruit for the reasonable
value of the services rendered prior to being discharged. Adkin, 135 N.H. at 467.
Our decision in Adkin is in accordance with the law in a majority of
jurisdictions, which holds “that an attorney employed on a contingent fee
contract who is discharged without fault . . . before the happening of the
contingency is not entitled to recover on the contract, but may recover merely on
a quantum meruit basis the reasonable value of the services rendered.” 1 Robert
L. Rossi, Attorneys’ Fees § 3:12, at 3-33 (3d ed. 2016). Yet Adkin does not defeat
the plaintiff’s entitlement to a lien. Rather, it simply means that, in the event
the attorney is discharged before a judgment or settlement is obtained, the
amount of the lien is limited to the reasonable value of the discharged attorney’s
services rather than any different amount that may be specified in the contract.
C
Having thus established that the plaintiff may have a valid lien for the
reasonable value of his services, we next consider whether that lien is
enforceable against the defendants. The plaintiff asserts that the contract
signed by the client is enforceable against the defendants because the
defendants were aware of the lien at the time they were retained, and because
the client should not be required to pay both lawyers’ fees. The defendants’
position is that, if the plaintiff has any claim for fees, the claim lies only against
the client. Under the particular circumstances of this case, we are persuaded
by the plaintiff’s argument.
Because the defendants do not argue that they were unaware that the
client had discharged a prior attorney before retaining their services, we
conclude that the lien for fees claimed by the plaintiff may be enforceable
against the defendants. In so holding, we follow the view espoused by the
Indiana Supreme Court in Galanis v. Lyons & Truitt, 715 N.E.2d 858 (Ind.
1999). As that court aptly explained:
In a system of professional responsibility that stresses
clients’ rights, it is incumbent upon the lawyer who enters a
contingent fee contract with knowledge of a previous lawyer’s work
to explain fully any obligation of the client to pay a previous lawyer
and explicitly contract away liability for those fees. If this is not
done the successor assumes the obligation to pay the first lawyer’s
fee out of his or her contingent fee. [The successor lawyer] was in
the best position to evaluate and to reach an agreement as to a
reasonable fee for the value of the work already done in [the
client’s] case. “Lawyers almost always possess the more
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sophisticated understanding of fee arrangements. It is therefore
appropriate to place the balance of the burden of fair dealing and
the allotment of risk in the hands of the lawyer in regard to fee
arrangements with clients.” In the Matter of Myers, 663 N.E.2d
771, 774-75 (Ind. 1996). [The successor lawyer] also had the
option to discuss with [the client] the need for someone to pay [the
prior lawyer’s] fee and to refuse to accept the case if [the client]
could not resolve any open issues with [the prior lawyer]. [The
successor lawyer] neither advised [the client] of the need to pay the
fee nor contracted away that responsibility for himself. Under
these circumstances, [the successor lawyer], not [the client],
should bear the burden of his silence. Accordingly, [the prior
lawyer] is entitled to recover the compensation due [him] from [the
successor lawyer’s] contingent fee.
Galanis, 715 N.E.2d at 863; see also Malonis v. Harrington, 816 N.E.2d 115,
123 (Mass. 2004) (“To avoid disputes in the future, we would advise successor
counsel, before he or she receives the case, to confer with the client on the
issue and to execute a written agreement unambiguously identifying the party
responsible for payment of former counsel’s reasonable attorney’s fees and
expenses.”); cf. Lubell v. Martinez, 901 So. 2d 951, 953 (Fla. Dist. Ct. App.
2005) (holding that successor attorney was not required to split contingency fee
with prior counsel where successor attorney advised client at retention that
client might have to pay both attorneys).
We find the Galanis court’s reasoning persuasive, and, therefore, hold
that the trial court erred in dismissing the plaintiff’s amended complaint.
Accordingly, we reverse the trial court’s judgment and remand for further
proceedings consistent with this opinion. In so doing, we emphasize that, for
purposes of this appeal, we have accepted the plaintiff’s allegations as true.
See Coyle, 147 N.H. at 100. On remand, the plaintiff will bear the burden of
establishing the reasonable value of his services, which, as the Galanis court
observed, is to be measured by the benefit conferred upon the client –– an
amount that may or may not be commensurate with the time or effort
expended by the plaintiff. See Galanis, 715 N.E.2d at 862. Also relevant to the
plaintiff’s entitlement to fees will be the issue of whether he was, as he alleges,
discharged without cause. See First National Bank of Cincinnati v. Pepper,
454 F.2d 626, 633 (2d Cir. 1972) (stating that “attorney discharged for cause
. . . has no right to payment of fees”); cf. People ex rel. MacFarlane v. Harthun,
581 P.2d 716, 718 (Colo. 1978) (en banc) (stating that attorney discharged or
removed “for professional misconduct in the handling of his client’s affairs” has
no right to assert a statutory attorney’s lien).
Reversed and remanded.
DALIANIS, C.J., and HICKS, CONBOY, and BASSETT, JJ., concurred.
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