Hobson v. Chen ( 2020 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
LAW OFFICE OF WILLIAM R. HOBSON PC, Plaintiff/Appellant,
v.
ANGELLEE CHEN, Defendant/Appellee.
No. 1 CA-CV 20-0223
FILED 12-22-2020
Appeal from the Superior Court in Maricopa County
No. CV2016-091045
The Honorable Janice K. Crawford, Judge
REVERSED
COUNSEL
Stanley R. Lerner, P.C., Phoenix
By Stanley R. Lerner
Counsel for Plaintiff/Appellant
Angellee Chen, Oakland, CA
Defendant/Appellee
MEMORANDUM DECISION
Acting Presiding Judge David B. Gass delivered the decision of the Court,
in which Judge Michael J. Brown and Judge Lawrence F. Winthrop joined.
HOBSON v. CHEN
Decision of the Court
G A S S, Judge:
¶1 The Law Office of William R. Hobson, P.C. (Hobson), appeals
the superior court’s order dismissing its complaint for failure to state a
claim. Because some interpretations of the complaint entitle Hobson to
relief, we reverse.
FACTUAL AND PROCEDURAL HISTORY
¶2 Angellee Chen retained an attorney to sue Maricopa County,
her former employer. Chen then changed attorneys, retaining Hobson.
Hobson proposed a hybrid contingency fee agreement to Chen. Under the
proposed arrangement, Chen would pay an hourly rate that was fifty
percent lower than Hobson’s usual hourly rate and a reduced contingency
fee if she prevailed. Chen never signed the proposed agreement.
¶3 The proposed hybrid contingency fee agreement provided
Hobson’s “hourly rates will be . . . $350.00/hour” for senior attorneys. The
proposed agreement did not specify if $350.00 per hour was Hobson’s
regular hourly rate or the proposed reduced rate. Hobson sent two interim
invoices to Chen, charging $350.00 per hour for work completed to date,
which she paid. Hobson did not send any invoices after the first two,
believing Chen did not have the money to pay them.
¶4 Though Hobson sent no further invoices to Chen, it continued
representing her until it successfully opposed the County’s summary
judgment motion and induced a proposed settlement. At that point, Chen
fired Hobson and re-retained her first attorney. Soon after, Chen and the
County settled. Hobson and Chen could not reach an agreement on
outstanding fees owed for Hobson’s services.
¶5 Hobson filed a one-count complaint seeking to recover in
quantum meruit the attorney fees it alleges Chen should have paid. Hobson
and Chen filed a series of pretrial motions. Most relevant here is Chen’s
third motion to dismiss, which argued Hobson could not recover its fees as
a matter of law under any theory. The superior court initially denied the
motion. Chen moved for reconsideration, which the superior court also
denied. The superior court later reconsidered—sua sponte—Chen’s motions
and dismissed Hobson’s complaint for failure to state a claim.
¶6 Hobson timely appealed. This court has jurisdiction under
Article 6, Section 9, of the Arizona Constitution, and A.R.S. § 12-120.21.A.1.
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HOBSON v. CHEN
Decision of the Court
ANALYSIS
¶7 This court reviews de novo a dismissal for failure to state a
claim. Levine v. Haralson, Miller, Pitt, Feldman & McAnally, P.L.C., 244 Ariz.
234, 237, ¶ 7 (App. 2018). When reviewing a motion to dismiss, this court
must “assume the truth of all of the complaint’s material allegations.”
Stauffer v. Premier Serv. Mortg., LLC, 240 Ariz. 575, 577, ¶ 9 (App. 2016)
(quotation omitted). This court will not affirm such a dismissal unless the
plaintiff would not, as a matter of law, be entitled to relief under any
interpretation of the facts susceptible of proof. Id. (quotation omitted).
¶8 Under the Arizona Rules of Professional Conduct, a
contingency fee agreement must be in writing and signed by the client.
Ariz. R. Super. Ct. 42, ER 1.5(c). In Levine—as here—an attorney sought to
recover in quantum meruit for legal services provided before the client
changed counsel. Id. at 236, ¶¶ 2–3. The attorney admitted he had no
written contingency fee agreement, instead claiming he had an oral
agreement for a portion of the contingency fees upon success of the client’s
suit. Id. at ¶ 5. The Levine panel recognized unwritten, and therefore
unsigned, contingency fee agreements contravene public policy and
preclude recovery of such fees in quantum meruit. Id. at 238, ¶ 13.
¶9 Hobson argues Levine does not control because Hobson does
not seek to recover fees under its proposed hybrid contingency fee
agreement, as Chen did not sign that agreement. Rather, Hobson argues it
is seeking to recover the reasonable value of the services it provided—the
remaining balance under a $350.00 hourly rate. Longstanding precedent
establishes an attorney may claim fees from a client in quantum meruit if “the
amount of compensation claimed is not fixed by an agreement between the
parties.” Schwartz v. Schwerin, 85 Ariz. 242, 245 (1959). Accordingly, if there
was no operative agreement between Hobson and Chen, Hobson would be
allowed to recover the reasonable value of the legal services it provided.
¶10 This court may consider a document attached to the
complaint when evaluating a motion to dismiss for failure to state a claim.
See Ariz. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit
to a pleading is a part of the pleading for all purposes.”). Exhibit 1 to the
complaint is a copy of the proposed hybrid fee agreement. It states the
hourly portion of Hobson’s fees will be “calculated at the reduced hourly
rate of 50% of the hourly rate of each attorney” working on the matter,
which the agreement said was $350.00 per hour for senior attorneys.
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HOBSON v. CHEN
Decision of the Court
¶11 Admittedly, the proposed hybrid contingency fee agreement
does not make it clear whether the $350.00 represents the discounted rate
(from $700.00) or whether the $350.00 represents the standard rate to be
discounted (to $175.00). Exhibit 6 to the complaint—which contains an
email William Hobson sent to Chen’s rehired counsel when the fee issue
arose—adds to the ambiguity by arguably conflicting with the complaint’s
allegations. In the email, William Hobson said he only realized Chen had
not signed the proposed hybrid contingency fee agreement when Chen’s
rehired counsel asked to see the signed copy.
¶12 The above discussion establishes why, at the motion-to-
dismiss stage, the superior court could not reasonably resolve whether
Hobson was seeking to recover fees under the unsigned contingency fee
agreement. See Levine, 244 Ariz. at 239, ¶ 19. If we take Hobson’s well-pled
allegations as true, some allegations conflict with information in the
documents attached to the complaint, creating fact issues. Some
interpretations of the complaint’s allegations would allow Hobson to
recover its fees. The superior court, therefore, erred when it granted Chen’s
motion to dismiss for failure to state a claim. See Schwartz, 85 Ariz. at 245;
Levine, 244 Ariz. at 238, ¶ 13.
CONCLUSION
¶13 The superior court’s dismissal of Hobson’s complaint is
reversed. We grant Hobson’s request for costs incurred in this appeal under
ARCAP 21 and A.R.S. § 12-341. We decline to award attorney fees at this
stage, but the superior court may consider any requests for fees on remand,
including fees incurred in this appeal, pending the outcome of this
litigation. See Eans-Snoderly v. Snoderly, 249 Ariz. 552, 559, ¶ 27 (App. 2020).
AMY M. WOOD • Clerk of the Court
FILED: AA
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