COHEN v. PADDA C/W 81172 , 2022 NV 18 ( 2022 )

138 Nev., Advance Opinion IS
IN THE SUPREME COURT OF THE STATE OF NEVADA
RUTH L. COHEN, AN INDIVIDUAL, No. 81018
Appellant,
vs.
PAUL S. PADDA, AN INDIVIDUAL; FILED
AND PAUL PADDA LAW, PLLC, A
NEVADA PROFESSIONAL LIMITED MAR 3 1 2022
LIABILITY COMPANY,
Respondents.
PAUL S. PADDA, AN INDIVIDUAL;
AND PAUL PADDA LAW, PLLC, A
NEVADA PROFESSIONAL LIMITED
LIABILITY COMPANY,
Appellants,
vs.
RUTH L. COHEN, AN INDIVIDUAL,
Respondent.
Consolidated appeals from a district court summary judgment
and order denying attorney fees. Eighth Judicial District Court, Clark
County; Elizabeth Gonzalez, Judge.
Reversed in part, vacated in part, and remanded.
Campbell & Williams and Philip R. Erwin, Donald J. Campbell, and Molly
M. Higgins, Las Vegas; Hayes Wakayama and Liane K. Wakayama, Dale
A. Hayes, Jr., and Jeremy D. Holmes, Las Vegas,
For Appellant/Respondent Ruth L. Cohen.
Lewis Roca Rothgerber Christie LLP and Daniel F. Polsenberg, Joel D.
Henriod, and Abraham G. Smith, Las Vegas; Paul Padda Law, PLLC, and
Paul S. Padda, Las Vegas; Donald L. Fuller, Attorney at Law, LLC, and
Ryan A. Semerad Casper, Wyoming,
for Respondents/Appellants Paul S. Padda and Paul Padda Law, PLLC.
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Milan Chatterjee, Las Vegas,
for Amici Curiae Jay Bloom, South Asian Bar Association of Las Vegas, and
Veterans in Politics International, Inc.
BEFORE THE SUPREME COURT, EN BANC.'
OPINION
By the Court, STIGLICH, J.:
Just like other businesses, law firms routinely merge and
disband. In this case, we are asked whether an attorney who enters into a
fee-sharing agreement with a member of her law firm, departs from the
firm, and is later suspended from the practice of law may receive legal fees
recovered by the firm during her suspension.
We hold that she can, so long as she completed her work on the
cases subject to the agreement prior to her suspension and given that her
suspension was unrelated to her conduct in those cases. Those
requirements were met here. We therefore reverse the district court's order
and remand for further proceedings consistent with this opinion.
BACKGROUND
Ruth Cohen and Paul Padda formed a law practice in 2011. In
2014, Padda and Cohen entered into a fee-sharing agreement (Dissolution
Agreement) dissolving their law practice. The Dissolution Agreement
entitled Cohen to a 33.333% share of attorney fees (Expectancy Interest)
'The Honorable Elissa F. Cadish and the Honorable Abbi Silver,
Justices, voluntarily recused themselves and took no part in the
consideration of this appeal.
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recovered in all contingency cases for which the law practice had a signed
retainer agreement prior to December 31, 2014, the date of the Dissolution
Agreement. The parties identify three cases that were subject to the
Dissolution Agreement.2
In 2016, Cohen and Padda entered into a Business Expectancy
Interest Resolution Agreement (Buyout Agreement), in which Cohen
exchanged her Expectancy Interest for $50,000. Cohen now maintains that
Padda and his new law firm (collectively, the Padda Parties)
misrepresented the status and number of -cases in which she had an
Expectancy Interest before they signed the Buyout Agreement, that the
Padda Parties were only paying her 30% of the attorney fees instead of
33.333% as required per the Dissolution Agreement, and that Padda had
instructed employees to not disclose any documents to Cohen that reflected
settlement figures and attorney fees collected.
In April 2017, Cohen's law license was suspended for failing to
complete the 2016 continuing legal education requirements required per
SCR 210. Cohen refused to pay the fee required to be reinstated out of
"protest," and her license remained suspended until December 2019. Prior
to her suspension, one of the three cases in which Cohen had enjoyed an
Expectancy Interest was resolved. The remaining two cases covered by the
Dissolution Agreement were resolved during Cohen's suspension. It is
undisputed that Cohen did not work on these two cases while her law
license was suspended.
2 Cohen appears to contend that there were other cases subject to the
Dissolution Agreement but does not identify the names of those cases or
when they were resolved in her briefing. We therefore focus our discussion
on the three cases identified by the parties.
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While her suspension was still in effect, Cohen sent the Padda
Parties a letter demanding payment of attorney fees subject to the
Expectancy Interest in the Dissolution Agreement. Cohen argued the
Buyout Agreement should be rescinded due to the Padda Parties fraudulent
acts, misrepresentations, and omissions. The Padda Parties refused, and
Cohen sued the Padda Parties, claiming fraud, breach of fiduciary duty, and
breach of contract, among other things. Cohen sought more than $3,000,000
in damages that she alleged represented the amount of her Expectancy
Interest in the pending cases. The Padda Parties made an offer of judgment
pursuant to NRCP 68 for $150,000. Cohen did not accept the offer.
The Padda Parties moved for summary judgment, asserting
that Cohen's suspended law license made her a "nonlawyee and
determining that fee-sharing with her was prohibited under RPC 5.4(a).
The district court granted summary judgment on that basis and dismissed
Cohen's tort claims.
Cohen thereafter filed a motion for reconsideration, in which
she submitted legal authority from other jurisdictions that permit fee-
sharing agreements with suspended or disbarred lawyers so long as they
transfer their cases before suspension or disbarment and are no longer
involved in those matters. The district court denied Cohen's motion,
determining that the legal authority Cohen referenced did not render the
district court's summary judgment clearly erroneous.
The Padda Parties moved for attorney fees under NRCP 68 due
to Cohen's rejection of the offer of judgment. Cohen contended that her
rejection of the offer was reasonable given the strength of her case and the
amount of damages she was seeking. The district court denied the Padda
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Parties motion, applying the Beattie' factors and finding that although the
timing of the offer was reasonable, Cohen's decision to reject the offer was
not grossly unreasonable or in bad faith.
Cohen appeals, challenging the district court's orders granting
summary judgment and denying the motion for reconsideration. The Padda
Parties appeal the district court's order denying attorney fees. Amici curiae,
South Asian Bar Association of Las Vegas, Veterans in Politics
International, Inc., and Jay Bloom,• filed a brief in support of the district
court's summary judgment in favor -of the Padda Parties. This court has
consolidated the appeals in the interest of judicial economy. See NRAP 3(b).
DISCUSSION
Cohen did nOt waive her legal arguments by raising them in the motion for
reconsideration
As a preliminary issue, the Padda Parties contend that Cohen
waived her legal arguments presented in this appeal because she raised
them for the first time in her motion for reconsideration below and argue
that the district court did not engage with these arguments on the merits.
In response, Cohen maintains that this court may consider her arguments
because the reconsideration briefing and order are part of the record and
because the district court elected to entertain the motion for reconsideration
on the merits.
In Arnold v. Kip, 123 Nev. 410, 168 P.3d 1050 (2007), this court
established a two-part test to determine whether a motion for
reconsideration preserves arguments for appeal. First, the order denying
reconsideration must have been entered before the notice of appeal was
filed, such that the reconsideration motion and order are part of the record
3Beattie v. Thomas, 99 Nev. 579, 668 P.2d 268 (1983).
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on appeal. Id. at 416-17. 168 P.3d at 1054. Second, the district court must
have entertained the motion on its merits. Id. at 417, 168 P.3d at 1054.
Should these two elements be met, this court "may consider the arguments
asserted in the reconsideration motion in deciding an appeal from the final
judgment." Id.The Arnold test has been met here. First, the order denying
reconsideration was entered prior to the date when the notice of appeal was
filed. Thus, both the motion for reconsideration and the order denying it
are properly part of the record on appeal. Cf. id. at 416-17, 168 P.3d at
1054. Second, we conclude that the district court entertained the motion to
reconsider on its merits. The district court determined that its summary
judgment order was not clearly erroneous or subject to reconsideration
based on the new authorities and arguments Cohen presented in her motion
for reconsideration. Further, the district court thereafter engaged with
Cohen's legal arguments, stating that "the authorities Ms. Cohen cites in
her Motion do not apply" and explaining its reasoning. The district court's
analysis entertaining Cohen's arguments on the merits is sufficient to meet
the second prong outlined in Arnold. Therefore, we determine that Cohen
did not waive the legal arguments she presents on appeal and address the
merits of those arguments.
The Dissolution Agreement was enforceable because Cohen's suspension was
unrelated to the cases in which she enjoyed an Expectancy Interest
Cohen contends that the Expectancy Interest provision of the
Dissolution Agreement is enforceable notwithstanding her suspended law
license because the parties entered into the Dissolution Agreement before
her suspension and because the Dissolution Agreement did not require her
to work on the cases in which she enjoyed an Expectancy Interest. The
Padda Parties argue that Cohen's suspension from the practice of law
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prohibits her from receiving any legal fees earned during her suspension,
and thus the district court's summary judgment in favor of the Padda
Parties was proper. We review the district court's summary judgment order
de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029
(2005).
RPC 5.4(a) provides that a "lawyer or law firm shall not share
legal fees with a nonlawyer." Whether a suspended attorney may receive
compensation for work completed prior to and unrelated to her suspension
is an issue of first impression in Nevada. We therefore examine the
approaches taken by other jurisdictions in cases with similar facts to inform
our own.
In Lee v. Cherry, the Texas Court of Appeals considered
whether an attorney was entitled to a referral fee for a case• that settled
after he resigned his law license. 812 S.W.2d 361, 361 (Tex. App. 1991).
When the referring lawyer requested his referral fee, the other attorney
refused on the grounds that the referral agreement was void because Texas
rules of professional conduct prohibit sharing legal fees with a nonlawyer.
Id. at 362. It was undisputed that the referring lawyer had no further
duties after the contract was fully executed (i.e., when he referred the case)
and that the lawyer's resignation was unrelated to the referral fee case. Id.The court held that the referring lawyer could receive attorney fees because
he had completed all his contractual duties prior to surrendering his law
license and because the client approved of the referral fee contract. Id. at
363. A contrary holding "would do serious damage to legitimate contract
rights." Id. at 364.
The Supreme Court of Iowa considered a similar situation.
West v. Jayne, 484 N.W.2d 186 (Iowa 1992). An attorney, George West,
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entered into a contingency-fee agreement with an associate at West's firm.
Id. at 188. A few years later, West was disbarred for conduct unrelated to
the cases covered under the agreement. Id. In relevant part, the dispute in
this case was whether West was prohibited from earning legal fees after he
was disbarred. Id. at 190. The West court noted,
It is a common practice for attorneys who work
together as associates to afford the attorney who
secures business, or clients, a percentage of the
eventual fee, regardless of whether that attorney
performed the legal services or whether other
members of the association completed the work.
Except for possibly overseeing the work, the
attorney securing the client completes his portion
of the work and is entitled to a percentage of the
eventual fee at the time he turns the client's work
over to another member of the association.
Id. Therefore, the court held that West was entitled to the legal fees not
withstanding his disbarment because he completed his services before
disbarment. Id. However, the court limited its holding to cases in which
legal fees were divided amongst _lawyers who were associates at the same
firm. Id.In reaching its conclusion, the West court relied on Sympson v.
Rogers, 406 S.W.2d 26 (Mo. 1966), for support. West, 484 N.W.2d at 190-91.
In that case, the parties entered into a fee-sharing agreement with the
knowledge that one attorney to the agreement was about to surrender his
law 1icense.4 406 S.W.2d at 32. The court ruled that this contract was
4 The record in Sympson was unclear as to whether the disbarment
had any connection with the attorney's conduct in the cases covered by the
fee-sharing agreement. Sympson, 406 S.W.2d at 27.
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enforceable because it was an agreement between licensed attorneys for
legal services already rendered at the time at which it was entered. Id.
Several state bar ethics opinions are in accord. For example,
while the Connecticut Bar Association's Committee on Professional Ethics
noted that, on its face, Connecticut's analog to RPC 5.4 strictly prohibits
fee-sharing with a suspended lawyer, "such a strict constructiod would not
advance the policy rationale behind the rule, which is "to protect the
lawyer's professional independence of judgment." Conn. Bar Assn Cõmm.
on Prof? Ethics, Informal Op. 2013-01 (2013) (internal quotation marks
omitted). Therefore, the Committee decided that the rule does not issue
such a blanket prohibition where: (1) a right to receive the fee existed and
accrued before the suspension; (2) the suspension was unrelated to the
client or case that generated the fee; and (3) the payment is made in a
manner consistent with applicable rules and statutes. Id. So too did the
New York State Bar Association's Committee on Professional Ethics
determine that a disbarred attorney may share in fees for work performed
before disbarment, so long as the disbarment was unrelated to the matter
in which the fees were earned. N.Y. State Bar Ass'n Comm. on Profl Ethics,
Op. 609 (1990).
• These authorities are instructive. It is true that Cohen's
suspended law license made her a nonlawyer per RPC 5.4(a) from April 6,
2017, to December 19, 2019. Cf. NRS 7.285(1)(b) (prohibiting a person with
a suspended law license from practicing law); SCR 77 (requiring every
practicing attorney to be an active member of the state bar). Similarly, the
Nevada State Bar has determined that "an attorney's fee in a contingent fee
case has not been earned until there is a recovery," and the record reflects
that recovery in two of the three cases in which Cohen enjoyed an
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Expectancy Interest occurred while her law license was suspended. State
Bar of Nev. Standing Comm. on Ethics & Prof? Responsibility, Formal Op.
18 (April 29, 1994). However, Cohen completed her work on these cases
before she was suspended, and her suspension was unrelated to her
professional conduct in these cases.5 Cf. Lee, 812 S.W.2d at 363 (noting that
the referring attorney had no further duties after entering into the referral
fee contract); West, 484 N.W.2d at 190 (determining that the disbarred
attorney was entitled to compensation because he completed his work on
the cases encompassed by the fee-sharing agreement prior to disbarment
and observing that his disbarment was unrelated to his work on those
cases). Furthermore, Cohen and Padda were members of the same firm,
and both held valid law licenses, •at the time they entered into the
Dissolution Agreement. See West, 484 N.W.2d at 190 (concluding that a fee-
sharing agreement between attorneys at the same firm is enforceable even
though one attorney is later disbarred); Sympson, 406 S.W.2d• at 32
(enforcing a fee-sharing agreement that was entered into while all parties
had valid law licenses); see also Eichen, Levin.son & Crutchlow, LLP v.
Weiner, 938 A.2d 947, 951 (N.J. Super. Ct. App. Div. 2008) (concluding that
a disbarred attorney's interest in referral fees vested at the moment the
contracts were entered into, at which time his license was valid).
Preventing Cohen from receiving her Expectancy Interest would not
advance RPC 5.4(a)'s policy objective of protecting attorneys professional
judgment. Conn. Bar Ass'n Comm. on Prof? Ethics, Informal Op. 2013-01
(2013). Indeed, such a narrow construction of RPC 5.4(a) "would do serious
5As the Padda Parties concede in their answering brief, Cohen
stopped working on these two cases before her law license was suspended
in 2017.
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damage to legitimate contract rights" by rendering unenforceable a contract
that was valid at the time it was fully executed due to a party's unrelated
conduct. Lee, 812 S.W.2d at 364; Eichen, 938 A.2d at 951.
The Padda Parties present several cases they claim favor their
position, but only one of which arguably does. In Lessoff v. Berger, a New
York appellate court determined in a slip opinion that a suspended attorney
is not permitted "to share in fees during the period of his suspension." 767
N.Y.S.2d 605, 606 (App. Div. 2003). However, Lessoff s applicability to the
case at bar is limited, as it does not mention whether the suspended
attorney entered into a fee-sharing agreement prior to his suspension or
whether he had further responsibilities "with respect to the cases that were
open at the time of his suspension." Id. Therefore, we conclude that the
Padda Parties citation to Lessoff is unavailing.
Amici rely on a Nevada State Bar Ethics Opinion to support
their claim that Cohen is entitled, at most, to recover in quantum meruit
the reasonable value of services she rendered in the cases in which she
enjoyed an Expectancy Interest.6 Cf. State Bar of Nev. Standing Comm. on
Ethics & Prof? Responsibility, Formal Op. 18 (April 29, 1994). Their
reliance on the ethics opinion is misplaced, as it addressed the portion of a
contingency fee to which a discharged attorney was entitled. There is no
client discharge at issue in this case, as Cohen and Padda were members of
the same firm at the time that they entered into the Dissolution Agreement.
Therefore, amici's citation to this ethics opinion as support for their claim
that "long-standing authority in Nevade has already addressed this issue
6A party that pleads quantum meruit seeks recovery of the reasonable
value for services rendered. Certified Fire Prot., Inc. v. Precision Constr.,
Inc., 128 Nev. 371, 379, 283 P.3d 250, 256 (2012).
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is inapposite. Furthermore, while state bar opinions are persuasive
authority, they are not binding. See SCR 225(5) (determining that these
opinions are "advisory only" and are "not binding upon the courte), see also
Evans & Luptak, PLC v. Lizza, 650 N.W.2d 364, 373 (Mich. Ct. App. 2002)
(noting that state bar ethics opinions are persuasive but not binding). So
even if the formal opinion was on point, it would not necessarily be outcome-
determinative in this case.
We are unconvinced by the parade of horribles amici predict
will occur as a result of today's holding. They contend that our judgment
will (1) "perversely incentivize" attorneys facing suspension or disbarment
to enter into contingency-fee agreements and collect those fees after they
ultimately are suspended or disbarred, (2) reward attorneys who
voluntarily abandon their clients. and (3) injure the public's confidence in
the legal profession.
These claims are unfounded. Our ruling today permits
attorneys to collect contingency fees in matters unrelated to their
suspension or disbarment. An attorney who attempts to game her way into
an award of attorney fees in a matter related to her suspension or
disbarment will find no solace in this opinion. And the facts of this case are
categorically different to the doomsday scenario presented by amici. Cohen
did not enter into the Dissolution Agreement on the eve of her suspension—
she did so years prior. Likewise, it is unclear how today's judgment will
have a deleterious effect on the public's perception of attorneys. Cohen did
not abandon her clients, as amici and the Padda Parties purport: rather,
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Cohen completed her work on these cases prior to her suspension.7 Cf.
Eichen, 938 A.2d at 951 (determining that the disbarred attorney was
entitled to his referral fee pursuant to a fee-sharing agreement that did not
require him to perform any additional legal work). Thus, Cohen owed no
duty to clients in the three cases covered in the Dissolution Agreement
while her law license was suspended. See Lee, 812 S.W.2d at 363. Finally,
Nevadans of all vocational backgrounds regularly join and leave their places
of employment, and it is unclear why today's judgment would invite "public
cynicism and criticism" when it merely permits attorneys to engage in this
common practice. Again, it bears repeating that a suspended or disbarred
attorney may not receive compensation for work on a case that led to her
suspension or disbarment. No public interest is served by denying an
attorney the benefit of an agreement she reached while her law license was
active.
In its summary judgment order, the district court determined
that the Padda Parties obligation to pay Cohen her Expectancy Interest
was rendered unenforceable the moment Cohen's law license was
suspended. Because we conclude otherwise, we reverse the district court's
judgment and direct it to address the merits of Cohen's claims. Likewise,
we vacate the district court's order denying the Padda Parties' motion for
attorney fees under NRCP 68 because that decision was predicated on the
district court's summary judgment order. See NRCP 68(i); Pope Invs., LLC
v. China Yida Holding, Co., 137 Nev., Adv. Op. 33, 490 P.3d 1282, 1290
7In fact, as the district court noted, "Nothing in the Dissolution
Agreement required or anticipated that Ms. Cohen would perform work on
the contingency cases that comprised of her Expectancy Interest."
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(2021) (reversing an NRCP 68 judgment after the underlying decision was
reversed).
CONCLUSION
Attorneys regularly leave law practices, often signing fee-
sharing agreements as they depart. In this case, we hold that a fee-sharing
agreement between attorneys with valid law licenses at the time of the
agreement is enforceable even when one attorney is subsequently
suspended or disbarred, so long as the suspension or disbarment was
unrelated to the cases subject to the agreement and the attorney completed
her work on those cases prior to her suspension or disbarment. As these
requirements were met here, we reverse the district court's summary
judgment order in favor of the Padda Parties, vacate its order denying the
Padda Parties attorney fees under NRCP 68, and remand for further
proceedings consistent with this opinion.
J.
Stiglich
We concur:
C.J.
Parraguirre
J .
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