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Anwyl, Scoffield & Stepp v. Regina L. Blackhurst

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT Sacramento


March 25, 2011

ANWYL, SCOFFIELD & STEPP, PLAINTIFF AND RESPONDENT,
v.
REGINA L. BLACKHURST, DEFENDANT AND APPELLANT.

Super. Ct. No. 06AS02759

The opinion of the court was delivered by: Raye, P.J.

Anwyl, Scoffield & Stepp v. Blackhurst CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

In this attorney fee dispute, a client, Regina L. Blackhurst, asserts the judgment compelling her to pay the 40 percent contingency fee she agreed to pay plaintiff Anwyl, Scoffield & Stepp, LLP, constitutes a miscarriage of justice because the trial court did not award her the pro rata fees an Anwyl associate accrued on the case after leaving the firm. We conclude there was no miscarriage of justice in awarding plaintiff the fees for legal services it provided before Blackhurst discharged the firm since the associate waived any right to those fees and the contingency fee was less than the reasonable value of plaintiff's services rendered before the associate quit and took its client. We affirm.

FACTS

In its thorough 26-page statement of decision, the trial court attributed most of the blame to Elisa W. Ungerman, plaintiff's associate, for the misunderstandings that gave rise to this lawsuit. Her role is central to an understanding of the issues on appeal despite the fact she is not a party to this appeal and she makes no claim for fees for the Blackhurst matter. In the absence of a reporter's transcript, we cannot inquire into the sufficiency of the evidence as it is conclusively presumed to support the judgment and we must treat the appeal as a judgment roll appeal. (Estate of Fain (1999) 75 Cal.App.4th 973, 992; Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830, 832; Williams v. Inglewood Board of Realtors, Inc. (1963) 219 Cal.App.2d 479, 481-482.)

Plaintiff hired Ungerman to work primarily on various insurance defense matters. There were, however, two or three matters Ungerman was handling on behalf of the firm on a contingency fee basis. Plaintiff paid Ungerman a full salary; various bonuses were available based on company policy. Plaintiff's employee handbook set forth the bonus policies and the relationship the firm had with each of its associates. Ungerman had no other oral or written agreement with the firm regarding fees or bonuses.

In the summer of 2004 a jury returned a multimillion dollar verdict in one of the contingency matters (the Wrysinski matter) Ungerman handled while working for plaintiff. Regina and David Blackhurst read an article about the verdict and wished to retain Ungerman to take over a pregnancy discrimination lawsuit they were prosecuting in propria persona against Trinity Church (Trinity). They did not understand her relationship to plaintiff. On July 26, 2004, they signed a contingency fee contract whereby plaintiff was entitled to 40 percent of the net proceeds of the litigation or settlement of their employment claim. While still working for the firm, Ungerman billed 309 hours on the Blackhurst case.

Shortly after the verdict was returned in Wrysinski, Ungerman approached plaintiff to discuss how much of the attorney fee award in the Wrysinski matter she would be receiving. She believed, although she had not communicated her belief to plaintiff, that she was engaged in a joint venture with her firm. The negotiations collapsed, and within a few days Ungerman resigned.

Ungerman told plaintiff that the Blackhursts had decided to leave with her, and she told the Blackhursts plaintiff was not interested in retaining the case. Plaintiff, believing that it would be unethical to contact a client represented by another attorney, did not call or correspond with the Blackhursts. It did, however, offer continuing assistance to Ungerman on the case until she was able to establish her own practice and work on the case exclusively. Plaintiff never voluntarily withdrew or abandoned the Blackhursts. Having not heard from plaintiff, however, the Blackhursts felt plaintiff had abandoned them.

The Blackhursts signed a second contingency fee agreement with Ungerman. It was identical to the first, except it listed Ungerman as the sole attorney. Both contingency fee agreements provide for the creation of an attorney lien in the event of nonpayment of legal services. After leaving the firm, Ungerman billed more than 200 hours on the case.

Blackhurst settled the case with Trinity for $230,000. Ungerman recommended to the Blackhursts to have two drafts issued, one for $105,000 and a second for $125,000, for attorney fees by convincing them that the second draft would cover any costs and legal fees, and the remainder would be paid to them. Ungerman believed she was entitled to more than the 40 percent and persuaded Blackhurst, the mediator, and Trinity to identify more than the acknowledged $10,000 in costs and $88,081.24 in contingent legal fees to be put in a blocked account.

Ungerman also advised the Blackhursts not to disclose the terms of the second contingency fee to plaintiff. Plaintiff was attempting to determine whether Ungerman had "a lien equivalent to 40 percent on the proceeds of the settlement, and whether said lien was in addition to, or the same as, the lien under the first contract; and whether there were additional terms that might affect a quantum meruit split of any attorney fees, so that an expeditious settlement of the contingency fee payment could be resolved more amicably." Stonewalled, plaintiff attempted to assure the Blackhursts that only 40 percent of the net settlement proceeds plus costs needed to be retained if Blackhurst would agree to waive any claim that this amount was insufficient to pay all the attorney fees to both plaintiff and Ungerman. The Blackhursts refused.

As a result, plaintiff filed the underlying action for fees against the Blackhursts and Ungerman. Ungerman continued to maintain that she was involved in a joint venture with plaintiff and that she had a right to fees under not only the original contingency fee agreement for 40 percent, but also the second contingency fee agreement, and for her additional work for the Blackhursts in trying to straighten out the fee dispute. The Blackhursts insisted throughout that they never agreed to pay more than 40 percent in a contingency fee to any or all the attorneys who had represented them in the Trinity matter.

Before trial, plaintiff settled its fee dispute with Ungerman on both the Wrysinski and Blackhurst matters. Plaintiff agreed that Ungerman would receive $1.2 million in fees plus interest in the Wrysinski matter, and Ungerman agreed to waive any claim she had upon any of the funds in the blocked account retaining the settlement funds in the Blackhurst matter.

The issues remaining for trial included whether plaintiff had lost its right to the contingency fee and, if not, to what fees it was entitled under its quantum meruit claim. The trial court found plaintiff was entitled to fees because "the evidence was more than sufficient to establish that Plaintiff did not abandon or dismiss Defendant as a client so as to waive Defendant[']s claim to quantum meruit compensation from any future recovery."

The trial court also concluded that plaintiff was entitled to its contingency fee as agreed. The court explained: "Ungerman has waived any claim to a fee in any amount from the Blackhurst matter. As such, the Court need not apportion the fees between the two firms. The question arises, however, as to whether the Court should apportion the fee anyway, and return the remaining amount to the Blackhursts.

"Under the state of the law, a firm such as Anwyl must present a case to the Court and either in the same, or separate action, provide the client an opportunity to argue for or against a particular amount of funds as the quantum meruit award for reasonable attorney fees under a contingency fee arrangement, where that attorney or firm has been released from service prior to a judgment or settlement. In this instance, the Blackhursts readily acknowledged that they always agreed to pay 40 percent of any settlement to their attorneys, whether one or more of them. If there was any confusion, or ill feelings engendered which prompted the Blackhursts to file a cross-action and engage an attorney in the instant matter, the Court finds it was fostered and engendered in large part by Ungerman. The Court finds that Anwyl did not abandon the Blackhursts. Ungerman is no longer before the Court as a party. As a result, the Court finds that since Anwyl has proved that the reasonable value of its services while representing the Blackhursts exceeded $88,081.24, and that it paid $9,797.19 in costs. Judgment shall be entered in favor of Anwyl in the sum of $88,081.24 in legal fees and $9,797.19 in costs, together with interest on the same as earned from Washington Mutual Account No. 567-808-7860, the remainder plus any additional interest to be released to the Blackhursts.

"The Blackhursts believe that the award would be a 'windfall' to Anwyl. There is no windfall when one earns that which has been awarded. The Blackhursts contracted for legal services and agreed to pay 40 percent as a contingency or attorney fee. That is what they are paying, not one cent more or less."

Blackhurst appeals.

DISCUSSION I

Misreading the court's findings and cases involving contingency fees, Blackhurst insists that plaintiff was entitled to no fees at all. The absence of a reporter's transcript, the findings, and the law lead us to reject her claim.

We begin with Blackhurst's most obvious hurdle. The trial court expressly found that plaintiff did not abandon Blackhurst. In the absence of a reporter's transcript, we cannot examine the sufficiency of the evidence to support the trial court's finding. Despite Blackhurst's feelings of victimization and abandonment, for purposes of this appeal we must begin with the unassailable finding that she discharged the firm and now seeks to deny it the fees it earned.

Undeterred by the adverse factual finding, Blackhurst turns our attention to some of the critical remarks the trial court made about plaintiff as evidence that it bears responsibility for its associate, the real culprit in the case. Indeed, in answering the question whether the Blackhursts ever agreed to pay attorney fees in excess of a total of 40 percent of the settlement, the court discussed the unfortunate confluence of circumstances that led to the fee dispute. Quite simply, the court found the Blackhursts had never agreed to pay more than a total of 40 percent, irrespective of how those fees were divided between the attorneys. This finding was dispositive.

Nevertheless, the court went on to explain how and why the confusion over fees arose. Ungerman, in the court's view, deserved the lion's share of the blame as she fomented the misunderstanding between the Blackhursts and plaintiff, a misunderstanding that was in her financial self-interest. The court also pointed out, however, how plaintiff might have averted the confusion. In this context, the court volunteered: "Based on the testimony heard in open court, it is the conclusion of the Court that any confusion arising from the issue of the total percentage of fees available for attorney fees and costs should primarily be laid at the door of Ungerman. While Anwyl could have and should have made clear the relationship between Ungerman and Anwyl at the time of accepting representation, and while Anwyl could have and should have provided better supervision of the drafting of the contingency fee agreement to make clear that it was only the firm that was entering into the agreement with the clients, these issues never affected the Blackhursts['] consistent position that they had only agreed to pay one contingency fee totaling 40 percent of any settlement proceeds. It therefore is the conclusion of the Court that all confusion arising from the instant fee dispute is the result of improper supervision by Anwyl of an associate attorney in the drafting of the contingency fee agreement, combined with later efforts by Ungerman to improperly obtain more legal fees from the Blackhursts, in spite of the express provisions of the initial and second contingency fee agreements and her understanding from her clients of their position regarding their unwillingness to pay more than 40 percent in total in legal fees."

Blackhurst also points to the court's comment that plaintiff was reticent to contact her under the rules of professional conduct precluding a lawyer from contacting a person represented by another lawyer, but noting that such contact might have clarified its desire to continue to represent her. The court also found, however, there was no credible evidence that plaintiff was not willing to stay on as counsel. Blackhurst tries to circumvent her inability to attack the sufficiency of the evidence by arguing the trial court abused its discretion by issuing inconsistent findings, failed to apply the law properly, or both. In essence, she contends that Ungerman's disreputable conduct should be attributable to plaintiff, and as a result, plaintiff should forfeit its fees to Blackhurst.

Whether Blackhurst fired plaintiff, as the trial court found, or plaintiff voluntarily withdrew from the case and abandoned its client, as plaintiff would have us believe, determines whether plaintiff has a quantum meruit claim for the reasonable value of the legal services it performed under the contingency fee agreement. As a result, Blackhurst attempts to massage the trial court's comments to fit the legal template necessary to deny plaintiff any recovery for the legal services it provided.

Blackhurst relies on the simple and common-sense principle that a lawyer cannot enter into an agreement for a contingency fee, dump the client, and then expect to be paid for the reasonable value of the services rendered under the agreement. (Rus, Miliband & Smith v. Conkle & Olesten (2003) 113 Cal.App.4th 656, 671-672 (Rus); Estate of Falco (1987) 188 Cal.App.3d 1004, 1015; Hensel v. Cohen (1984) 155 Cal.App.3d 563, 568.) As the court in Falco aptly explained, "an attorney employed on a contingency fee basis may not 'determine that it is not worth his time to pursue the matter, instruct his client to look elsewhere for legal assistance, but hedge his bet by claiming a part of the recovery if a settlement is made or a judgment obtained . . . .'" (Falco, at pp. 1015-1016.) In each of these cases, however, the lawyer withdrew from the case; the client did not discharge the lawyer. Thus, these cases provide no support for her notion that she should not have to pay for the legal services she received before signing a substitution of attorney discharging plaintiff in favor of Ungerman.

Yet Blackhurst insists that because the trial court criticized plaintiff for some missteps, including its failure to adequately supervise her lawyer, the fact she discharged the firm should be disregarded. In other words, Blackhurst asserts plaintiff should have intervened to save her from her own decision to follow the lawyer she specifically sought and retained because of that lawyer's impressive success in the Wrysinski discrimination case. She further challenges the court's ruling that plaintiff reasonably relied on Ungerman's representation that she had decided to retain Ungerman, reliance she characterizes as inherently unreasonable given Ungerman's character deficiencies.

Her arguments are nothing more than a camouflaged attack on the sufficiency of the evidence. Whether plaintiff's reliance was reasonable or not is simply not before us. Whether or not plaintiff's actions or omissions helped to create confusion does not detract from the court's central finding that it did not abandon Blackhurst, did not discharge her, and, in fact, assisted Ungerman on the case until she was able to handle it exclusively. Moreover, we reject Blackhurst's attempt to reframe the court's explanation of its determination that she had not agreed to any fees in excess of a total of 40 percent of the settlement as a factual finding that plaintiff's negligence was responsible for all that followed. That is a serious misreading of the record and a misreading of the law.

This case presents the simple scenario alluded to in Rus. "[W]hen the client unilaterally discharges the attorney[,] there is a bright line. If the client fires the attorney, the law is clear that the attorney may assert a quantum meruit claim against any recovery." (Rus, supra, 113 Cal.App.4th at p. 671.) Blackhurst's Herculean efforts to obfuscate the simple reality that she fired plaintiff by picking isolated portions of the statement of decision does not render inapplicable law applicable. Plaintiff is entitled, as the trial court found, to the reasonable value of its services rendered to the time of discharge. (Fracasse v. Brent (1972) 6 Cal.3d 784, 792 (Fracasse).) In this case, Blackhurst benefited by the 40 percent cap since the reasonable value of the services, in fact, exceeded the 40 percent cap. There is no question, however, that plaintiff is entitled to its fees.

II

The second question is whether Blackhurst is entitled to the pro rata amount of fees Ungerman billed after she left the firm. The court concluded there should be no apportionment as Ungerman waived her right to any fees. Blackhurst mangles Cazares v. Saenz (1989) 208 Cal.App.3d 279 (Cazares) to justify her meritless claim that a client who fires a law firm should receive a pro rata share of the attorney fees because the law firm has only partially performed the contract.

In Cazares, Phil Saenz, an inexperienced lawyer representing a Mexican national in a personal injury case, retained co-counsel, Roy Cazares, who spoke Spanish and had worked in the Mexican-American community. (Cazares, supra, 208 Cal.App.3d at pp. 282-283.) Cazares, however, was a partner in a two-man law firm, Cazares & Tosdal. Saenz did not feel comfortable with Cazares's partner and was not willing to work with him. (Ibid.) Cazares and Saenz agreed to a 50/50 split of the contingency fee. (Id. at p. 283.) Cazares worked on the case for two and one-half years before the Cazares & Tosdal partnership was terminated and another year before he was appointed to the bench. (Ibid.) He urged Saenz to accept his former partner's help, but Saenz refused. (Id. at pp. 283-284.) After Saenz settled the case, the defunct partnership sought one-half of the attorney fees Saenz collected. (Id. at p. 284.)

Cazares is a fight for fees between lawyers, both of whom had performed significant legal work on a contingency case. Dismissing this fundamental foundational fact that the client made no claim for fees, Blackhurst cites legal principles purportedly derived from Cazares inapplicable to the entirely different situation where, as here, there is only one law firm making a claim for a fee under a contract for a contingency fee. Certainly, when multiple attorneys seek compensation from a pot capped by the contingency fee agreement, their compensation must be apportioned between them, and according to the court in Cazares, they are entitled to a pro rata share of the total fee. (Cazares, supra, 208 Cal.App.3d at p. 289.) In that context, a lawyer who has partially performed is entitled to a pro rata share.

Blackhurst argues that Cazares established that a law firm's partial performance, whether or not a second lawyer is also entitled to fees, requires apportionment. In her view, a discharged lawyer is not entitled to the reasonable value of the services performed and the client is entitled to the pro rata contract price for the percentage of the work the discharged lawyer could not perform. She insists that Cazares sets a pro rata contract price as "an upper limit on the amount which can be recovered on a restitution or quantum meruit theory." (Cazares, supra, 208 Cal.App.3d at p. 289.) She ignores the basic legal principles that do apply to her factual circumstances and misreads the law that does not apply.

"In California it is clear that a client has an absolute right at any time to discharge an attorney, with or without cause. (Fracasse[, supra,] 6 Cal.3d [at p.] 792.)" (Kroff v. Larson (1985) 167 Cal.App.3d 857, 860.) As a corollary, the discharged attorney is entitled to the reasonable value of the services rendered up to the time of discharge, whether the attorney was discharged with or without cause. (Fracasse, supra, 6 Cal.3d at pp. 791-792.) A law firm, therefore, is entitled to quantum meruit fees where a former attorney employed by the firm takes the case when the former attorney leaves the firm. (Champion v. Superior Court (1988) 201 Cal.App.3d 777, 785.)

Here the trial court applied these basic principles. It found that Ungerman had billed 309 hours on Blackhurst's case before leaving the firm. A reasonable billing rate for her at the time was $325 an hour. Thus, the reasonable value of plaintiff's services before discharge amounted to $100,425. The court awarded plaintiff $88,081.24, plus costs, however, because Blackhurst agreed to pay a maximum of 40 percent of the ultimate settlement and the reasonable value of its services exceeded the 40 percent cap by more than $12,000. As a result, Blackhurst paid precisely what she agreed to pay.

Nevertheless, Blackhurst would have us disregard these principles and fashion a new rule that would limit a discharged attorney's recovery not to the reasonable value of the services or to the contract price, but to a pro rata contract based on the attorney's partial performance of the contract. Under her proposition, a client could rewrite the terms of her agreement by discharging her lawyer and reducing the fee she agreed to pay.

We reject Blackhurst's argument. We do not accept the notion that a client should receive a windfall at the lawyer's expense when such a windfall would be at odds with the contingency fee agreement and the equitable principles underlying the law of restitution. Cazares requires apportionment of fees in a pro rata manner only where a contingent fee is insufficient to satisfy quantum meruit claims by more than one attorney. Here pro rata apportionment was unnecessary because there were no competing claims to be adjudicated. Blackhurst and plaintiff received precisely the benefits of the bargain to which they agreed. The trial court did not err by refusing to apportion fees in the absence of a competing fee by Ungerman.

III

Our resolution of the two issues identified above moots Blackhurst's related arguments that she was entitled to a new trial, and reversal requires reversal of the award of attorney fees to plaintiff. Absent abuse of discretion, a showing of error, and a miscarriage of justice, a trial court's denial of a motion for new trial or to vacate the judgment will not be disturbed on appeal. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1176.) Her motions were based on the same grounds we resolved in this appeal. In the absence of a reporter's transcript, she cannot challenge the sufficiency of the evidence. She has failed to demonstrate legal error for the reasons explained at length above. Thus, the trial court did not abuse its discretion by denying the motion for a new trial. Since we have sustained the court's rulings, plaintiff is entitled to attorney fees.

DISPOSITION

The judgment is affirmed. Plaintiff shall recover costs on appeal.

We concur: HULL,J. BUTZ,J.

20110325

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