Angino & Rovner v. Lessin, J. & Assoc. , 131 A.3d 502 ( 2016 )

J. A34045/14
2016 PA Super 2ANGINO & ROVNER, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
: No. 941 MDA 2014
JEFFREY R. LESSIN & :
ASSOCIATES, ET AL :
Appeal from the Order, May 27, 2014,
in the Court of Common Pleas of Dauphin County
Civil Division at No. 2012-CV-08019-CV
BEFORE: FORD ELLIOTT, P.J.E., SHOGAN AND STABILE, JJ.
OPINION BY FORD ELLIOTT, P.J.E.: FILED JANUARY 05, 2016
Appellant Angino & Rovner P.C. (“Angino”) appeals from the order
entered on May 27, 2014,1 in the Court of Common Pleas of Dauphin
County, denying Angino’s and granting appellee Monsour Zarreii’s
(“Zarreii”)2 motions for partial judgment on the pleadings.3 This case
1
The trial court docket indicates Angino filed, on May 30, 2014, a praecipe
to enter judgment in favor of the appellee. We consider the judgment
entered to be superfluous to this appeal, since judgment need not be
entered on an order granting judgment on the pleadings. See
Pa.R.C.P. 227.1. Accordingly, we have corrected the caption in this case.
2
Appellee Monsour Zarreii is also known as Michael Zarreii.
3
On May 30, 2014, Angino filed in the trial court a praecipe to dismiss its
outstanding claim against appellee Jeffrey R. Lessin & Associates, P.C.
(Lessin). As a result, Lessin is not a party to the instant appeal.
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involves a fee dispute between Angino and Zarreii, its former client. Upon
review, we affirm.
The facts and procedural history underlying this appeal are
undisputed.4 In June 2007, Zarreii engaged Angino -- specifically Richard C.
Angino, Esq. -- to represent him in litigation stemming from a motor vehicle
accident which occurred in April of 2006. In this regard, on June 21, 2007,
Zarreii executed a contingency fee agreement (“Agreement”) with Angino
containing a termination provision, which provided:
If for any reason I (we) take my (our) case to
another attorney or law firm including a former
A & R[5] attorney or handle it myself (ourselves), I
(we) recognize that A & R has, in good faith,
expended money and time for my (our) benefit and I
(we) therefore agree to pay, or have my (our) new
attorney pay, immediately upon severing the A & R
attorney/client relationship, all the out-of-pocket
expenses incurred on my (our) case plus interest at
the rate of 6% per annum from the date of each
expenditure. In addition, when the case is
successfully concluded, I (we) agree to pay or direct
my (our) new attorney to pay as a fee 20% of the
gross recovery to A & R.
Contingency Fee Agreement, 5/21/07 at ¶5 (emphasis added). On
November 21, 2007, Angino obtained an offer of the policy limits of
$100,000 from the tortfeasor’s insurance carrier, Progressive Insurance, in
exchange for a full release from liability relating to the motor vehicle
4
Unless another source is cited, the facts are taken from the trial court’s
memorandum opinion, 5/27/14 at 1-2.
5
A & R is an abbreviation for Angino Angino & Rovner, P.C.
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accident. On December 20, 2007, Zarreii accepted Progressive’s offer.
Because the matter was settled with Progressive prior to the commencement
of a civil action, Angino received a fee of 30% -- or $30,000 -- under the
Agreement.
Angino thereafter pursued an underinsured motorist (“UIM”) claim
under Zarreii’s motor vehicle insurance policy. As a result, Angino engaged
the services of expert witnesses, and negotiated with Zarreii’s insurance
carrier, Erie. Because Zarreii’s insurance policy required arbitration for
UIM claims before a panel of three arbitrators6 prior to filing a civil suit,
Angino selected an arbitrator and scheduled the matter for arbitration.
Before the arbitration could be conducted, however, Zarreii, by letter
dated March 30, 2010, terminated his relationship with Angino and retained
Lessin to represent him in his UIM case against Erie.7 By letter dated
March 2, 2012, Zarreii’s new counsel informed Angino that arbitration in
Zarreii’s UIM case was scheduled for March 27, 2012. Additionally, new
counsel stated in the letter, “[s]ince you chose Mr[.] Zarreii’s arbitrator and
6
Of the three arbitrators assembled, one is selected by each party, and the
third is selected by both parties to serve as the neutral arbitrator on the
panel.
7
Zarreii apparently terminated his relationship with Angino because of a
disagreement over the valuation of his UIM case.
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you have a 50% stake[8] in the outcome of the case, I would like you to
attend [the] same.” (Letter to Angino from Jeffrey R. Lessin, 3/2/12.)
On August 31, 2012, the arbitrators issued an award in favor of Zarreii
and against Erie for $635,650. The arbitrators also awarded Zarreii’s wife,
Marilin Zarreii, $50,000 on her loss of consortium claim against Erie. The
total award, therefore, was $685,650. Erie, however, was entitled to offset
the $100,000 already received by Zarreii under the tortfeasor’s insurance
policy. As a result, the total amount at issue in this fee case was $585,650.
By letter dated September 4, 2012, Zarreii’s new counsel informed Angino
that Angino was not entitled to receive a fee of 20% under the termination
provision of the Agreement, despite the fact Zarreii terminated his
representation with Angino, subsequently engaged Lessin, and settled his
UIM case against Erie.
On September 11, 2012, Angino filed a complaint in the trial court,
alleging that Zarreii breached the Agreement when he failed to pay Angino a
contingency fee of 20% of the gross arbitration award ($585,650) in the UIM
case. In other words, Angino alleged that Zarreii failed to pay him $117,130
under the termination provision of the Agreement. In addition, Angino
alleged that Zarreii’s subsequent counsel -- i.e., Lessin -- also breached a
8
According to Angino, 50% of the total fees received by Lessin in connection
with Zarreii’s UIM case amounts to a fee of 20% under the termination
provision of the Agreement. (See Angino’s brief at 11.) It would thus
appear Lessin was to be paid a 40% contingency fee.
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verbal contract with Angino whereby Lessin had agreed to share with Angino
50% of its fees received from Zarreii.
Subsequently, Zarreii and Lessin filed separate yet identical answers to
the complaint, generally denying Angino’s allegations and raising new
matter. The parties thereafter each filed motions for partial judgment on the
pleadings9 under Pa.R.C.P. 1034 with respect to Zarreii’s breach of the
Agreement. On May 27, 2014, the trial court issued an order and
memorandum opinion, granting Zarreii’s and denying Angino’s motion for
partial judgment on the pleadings. The trial court agreed with Zarreii’s
argument that under Pennsylvania law, an attorney, or in this case Angino,
may recover only on a theory of quantum meruit, regardless of a
termination provision in a contingency fee agreement, when a client
terminates an attorney, engages the services of other counsel, and
subsequently settles the case. (See trial court opinion, 5/27/14 at 4.) In so
doing, the trial court principally relied upon three Pennsylvania Superior
Court decisions: Hiscott & Robinson v. King, 626 A.2d 1235 (Pa.Super.
1993), appeal denied, 644 A.2d 163 (Pa. 1994); Fowkes v. Shoemaker,
661 A.2d 877 (Pa.Super. 1995), appeal denied, 674 A.2d 1072 (Pa. 1996);
and Mager v. Bultena, 797 A.2d 948 (Pa.Super. 2002), appeal denied,
814 A.2d 678 (Pa. 2002). The trial court observed Angino failed to assert a
9
Angino filed what it termed “Plaintiff’s Renewed Cross-Motion for Partial
Judgment on the Pleadings.”
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quantum meruit claim against Zarreii in this case. (See trial court opinion,
5/27/14 at 4.) The trial court, therefore, denied relief to Angino.
On May 30, 2014, Angino filed a praecipe dismissing its breach of
contract claim against Lessin,10 thereby rendering final the trial court’s
May 28, 2014 order disposing of the parties’ motions for partial judgment on
the pleadings. Angino timely filed a notice of appeal. Although the trial
court did not direct Angino to file a Pa.R.A.P. 1925(b) statement of errors
complained of on appeal, the trial court filed a Rule 1925(a) opinion, by
which it merely adopted its memorandum opinion in support of its May 27,
2014 order.
On appeal, Angino raises a single issue for our review:
Did the trial court err in granting Summary
Judgment in favor of Mr. Zarreii and denying
Summary Judgment to [Angino] where the facts are
undisputed that Mr. Zarreii, an adult, knowingly and
voluntarily entered into a contingent fee agreement
with [Angino] that required the payment of a 20%
fee if Mr. Zarreii [terminated] [Angino] and secured
other counsel, particularly under the circumstances
where [Angino] had prepared the underinsured
motorist case completely to the point of selecting
arbitrators and awaiting an arbitration hearing?
10
Lessin agreed, pending resolution of this dispute, to escrow that portion of
Zarreii’s settlement proceeds from the arbitration award that would
represent Angino’s 20% termination fee.
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Angino’s brief at 4.11
In reviewing a trial court’s grant of a motion for judgment on the
pleadings, our scope of review is plenary. See Vetter v. Fun Footwear
Co., 668 A.2d 529, 531 (Pa.Super. 1995) (en banc), appeal denied, 676
A.2d 1199 (Pa. 1996). We apply the “same standard employed by the trial
court.” Coleman v. Duane Morris, LLP, 58 A.3d 833, 836 (Pa.Super.
2012) (citations omitted), appeal granted in part, 68 A.3d 328 (Pa. 2013),
appeal discontinued, No. 29 EAP 2013 (Pa. September 18, 2013). “A
motion for judgment on the pleadings is similar to a demurrer. It may be
entered when there are no disputed issues of fact and the moving party is
entitled to judgment as a matter of law.” Citicorp N. Am. v. Thornton,
707 A.2d 536, 538 (Pa.Super. 1998) (citation omitted).
To determine whether there are disputed issues of fact, we must
confine the scope of our review to the “pleadings and documents properly
attached thereto.” DeSantis v. Prothero, 916 A.2d 671, 673 (Pa.Super.
2007) (citation omitted). Accordingly, “[we] must accept as true all
well[-]pleaded statements of fact, admissions, and any documents properly
attached to the pleadings presented by the party against whom the motion
11
Angino mistakenly refers to the underlying cross-motions for partial
judgment on the pleadings as motions for “summary judgment.” Our review
of the docket does not indicate the filing of any summary judgment motions
by either party in this case. Accordingly, we shall disregard any references
to summary judgment and address this case under the standards governing
motions for judgment on the pleadings.
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is filed, considering only those facts which were specifically admitted.”
Lewis v. Erie Ins. Exch., 753 A.2d 839, 842 (Pa.Super. 2000) (citations
omitted). No factual material outside of the pleadings may be considered in
determining whether there is an action under the law. See Bensalem Twp.
Sch. Dist. v. Commonwealth, 544 A.2d 1318, 1321 (Pa. 1988). “We will
affirm the grant of such a motion only when the moving party’s right to
succeed is certain and the case is so free from doubt that the trial would
clearly be a fruitless exercise.” Coleman, 58 A.3d at 836.
With our standard of review in mind, we summarize the issue and
arguments on appeal before us. Angino seeks to recover damages under
the termination provision of the Agreement. Angino argues Zarreii entered
into an enforceable contingency fee agreement with Angino, which Zarreii
breached when he terminated Angino, engaged the services of Lessin, and
subsequently failed to pay to Angino a fee of $107,130,12 which represents
12
In its brief to this court, Angino determines its contingency fee under the
termination provision of the Agreement to be either $117,130 or $107,130.
(See Angino’s brief at 25, 30.) We, however, observe Angino abandoned in
its renewed cross-motion for partial judgment on the pleadings its demand
for a $117,130 contingency fee, which included 20% of the $50,000 received
by Mrs. Zarreii for loss of consortium. Specifically, Angino alleged in the
motion that “[p]ursuant to [the Agreement], [Angino] is entitled to [20%] of
the gross arbitration award (less payment of the underlying award and less
the $50,000.00 award for Mrs. Zarreii who did not sign [the Agreement]).
In other words, [Angino] is entitled to [20%] of $535,650.00, which equals
$107,130.00.” (Angino’s Renewed Cross-Motion for Partial Judgment on
the Pleadings, 1/23/14 at ¶ 25 (emphasis added); see also trial court
opinion, 5/27/14 at 3 n.2 (“In its [c]omplaint, [Angino] requests monetary
relief in the amount of $117,130, representing twenty percent of the
Zarreii’s total arbitration award, less the payment made by Progressive.
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20% of the gross arbitration award after it is reduced by the $100,000
settlement received by Zarreii from Progressive under the tortfeasor’s policy.
Angino argues any violations of the Agreement must be construed according
to established contract principles. Specifically, Angino disagrees with
Zarreii’s position, accepted by the trial court, that, notwithstanding an
arguably valid contingency fee agreement, terminated attorneys are entitled
only to a quantum meruit recovery for their fees when their clients replace
them with other counsel or proceed pro se, and ultimately obtain relief in
their case.
At the outset, we observe attorneys are allowed to enter into
contingency fee agreements because they provide attorneys with the
potential for a higher fee, which compensates the attorneys for assuming the
risk of nonpayment for services in the event a case is lost. See Lester
Brickman, ABA Regulation of Contingency Fees: Money Talks, Ethics Walks,
65 FORDHAM L. REV. 247, 271 (1996) (“The ethical justification for these
approvals necessarily lies in the assumption that the lawyer’s risk of
receiving no fee, or a fee that effectively will be well below her normal
hourly rate or opportunity cost, merits compensation in and of itself:
[The trial court] note[s], however, that [Angino], in its [c]ross-[m]otion,
seeks only $107,130, disregarding the portion of the arbitration award
entered in favor of [Mrs. Zarreii].”).) Accordingly, we conclude Angino seeks
to recover from Zarreii only $107,130 as its contingency fee under the
Agreement.
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Bearing the risk entitles the lawyer to a commensurate risk premium.”).
Clients, however, are largely shielded from incurring a financial loss resulting
from an unfavorable outcome.
Nonetheless, “under Pennsylvania law, a client has the absolute right
to terminate an attorney-client relationship, regardless of any contractual
arrangement between the two parties.” Kenis v. Perini Corp., 682 A.2d
845, 849 (Pa.Super. 1996); see Pa.R.P.C. 1.16 cmt. [4] (“A client has a
right to [terminate] a lawyer at any time, with or without cause, subject to
liability for payment for the lawyer’s services.”). Upon a client’s termination
of an attorney-client relationship prior to the occurrence of the contingency
set forth in a fee agreement, the client is not relieved of his or her obligation
to compensate the attorney for services rendered until the time of
termination. In such situations, the terminated attorney generally has a
claim in quantum meruit to recover his fees. See Hiscott, 626 A.2d at
1237 (noting the contingency contemplated in the agreement was not
satisfied). “Quantum meruit is an equitable remedy[, which] is defined as
‘as much as deserved’ and measures compensation under an implied
contract to pay compensation as reasonable value of services rendered.”
Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of
Malone Middleman, PC, 95 A.3d 893, 896 (Pa.Super. 2014) (citation
omitted), appeal granted, 113 A.3d 277 (Pa. 2015). The issue presently
before us is whether an attorney only has resort to quantum meruit for a
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fee recovery even where a contingency fee agreement, like the one at issue
here, contains a termination provision governing the termination of the
attorney-client relationship prior to the occurrence of the contingency.
A client’s right to discharge his attorney for any or no reason and
without penalty is an implied term of every attorney-client engagement
contract and is based on the unique concepts of trust and confidence that
flow from this fiduciary relationship. “Therefore, when a client exercises this
implied contractual term it is not a breach of contract, and hence there is no
liability for contract damages.” Lester Brickman, Setting The Fee When The
Client Discharges A Contingent Fee Attorney, 41 Emory L.J. 367, 370
(1992).
Without question, contingency fee agreements serve a salient purpose.
Besides compensating attorneys for assuming the risk of nonpayment in the
event the case is lost, such arrangements allow for the vindication of legal
rights and enable injured persons access to both counsel and the courts.
In exchange for assuming the risk of no or low
recovery, as well as the risk of having to devote
considerably more time to the venture than
anticipated, the attorney charges a risk premium:
. . . That premium is both payment for the lawyer’s
lending of services to the client and assumption of
the recovery and time expenditure risks. A
contingent fee is, therefore, a financing device which
provides access to the courthouse for both the
impecunious client and the risk-averse client . . .
Id. at 379-380 (footnotes omitted).
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With a contingency agreement, an attorney will evaluate the risks
related to a recovery in a case and what percentage of an award will best
compensate the attorney and the firm for their labors. The attorney accepts
the risk that if there is no recovery, then the attorney receives no
compensation.
Examining the contract provision in question, upon Zarreii’s
termination of the relationship, the firm is entitled to quantum meruit
damages. In addition, if recovery is had by the client through the efforts of
another attorney, then Angino is also entitled to a 20% fee on that award,
presumably half of the firm’s standard contingency fee of 40%. As this
contingency does not actually reflect the efforts and contributions made
toward the client’s ultimate recovery, this latter provision must be
characterized as nothing more than a penalty on the client for severing the
relationship with Angino. Clearly, a discharged contingency fee lawyer is
entitled to just compensation and this is had through quantum meruit.
See Meyer, Darragh, 95 A.3d at 896 (“It is well-settled that ‘a client may
terminate his relation with an attorney at any time, notwithstanding a
contract for fees, but if he does so, thus making the performance of the
contract impossible, the attorney is not deprived of his right to recover on a
quantum meruit a proper amount for the services he has rendered.’”),
quoting Mager, 797 A.2d at 958-959 (Joyce, concurring) (citations omitted).
To add a contingency fee charge on any subsequent recovery to the
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quantum meruit amount is additional compensation without any additional
legal services performed. Additionally, it may well inhibit the client from
engaging another lawyer to pursue his claim.
Angino makes much of the trial court’s failure to apply basic contract
principles to this engagement contract. Angino asserts that this contract
was an arm’s length agreement between two adults. Angino argues that the
latter provision is there to specifically protect the firm against the
long-standing line of cases in Pennsylvania holding that the only remedy
available to a discharged attorney, on a contingency or any other contract
with a client, is through quantum meruit. This is precisely why the
contract provision is unenforceable.
In a fiduciary relationship, such as attorney and client, attorneys are
not free to impose any terms they wish on their clients. Rather, the Rules of
Professional Responsibility and the very nature of the relationship based on
confidence and trust set the limits of engagement contracts. Just as a
lawyer may not charge an exorbitant fee or place a “no termination” clause
in the contract or assert a vested interest in a client’s claim, a lawyer may
not penalize a client for discharging him or her. It is of no moment that
Zarreii did not challenge the contract as unconscionable or violative of the
rules for attorney conduct. The assertion of quantum meruit as the only
recovery available to Angino, as a matter of law, is all that is necessary to
establish the lack of enforceability of the contract. This unenforceablity is
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based on unconscionability and a violation of the fiduciary relationship
between attorney and client.
Angino distinguishes Mager because the contingency contract involved
did not contain a termination provision. (Angino’s brief at 23.) This is not
surprising considering the long-standing precedent in this Commonwealth
referenced above. However, we cannot so easily dismiss the rationale of the
decision:
No Pennsylvania appellate court has ever
awarded a proportionate share of a contingency fee
to a firm discharged by the client well prior to the
occurrence of the contingency, for the simple reason
that a client may discharge an attorney at any time,
for any reason. Once the contractual relationship
has been severed, any recovery must necessarily be
based on the work performed pursuant to the
contract up to that point. Where the contingency
has not occurred, the fee has not been earned.
An attorney, contrary to the argument urged
upon us by ML & W, does not acquire a vested
interest in a client’s action. To rule otherwise would
make fiction of the oft-repeated rule that a client
always has a right to discharge his attorney, for any
reason or for no reason, Richette v. Pennsylvania
Railroad, 410 Pa. 6, 19, 187 A.2d 910, 917 (1963);
Dorsett v. Hughes, 353 Pa.Super. 129, 509 A.2d
369, 373 (1986). Surely, to accept the argument of
appellant would be to impose a penalty on the
exercise of that right.[Footnote 14]
[Footnote 14] In fact, Mr. Fox, counsel
for ML & W argued to the trial court that
“the client had a right to leave, but the
client has to leave with the consequences
of leaving.”
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Mager, 797 A.2d at 958 (footnote 13 omitted).13
However, an important aspect of Judge Joyce’s dissent in Mager is the
idea that a quantum meruit recovery need not be limited to an hours and
expenses analysis. As discussed by Judge Joyce, quantum meruit is
13
We cannot agree with our esteemed colleague’s reliance on Capek v.
Devito, 767 A.2d 1047 (Pa. 2001), to support the position that such
contract provisions as involved herein are valid and enforceable. Our
Supreme Court’s decision in Capek clearly sets out the issue to be decided
by the court in the first paragraph of the Opinion.
The issue presented is whether the lower courts
erred in awarding summary judgment to Appellee
Jennifer Devito, thereby precluding Appellant, an
attorney, from claiming a fee under a contingency
fee agreement (“Agreement”) that included the
language “no recovery no fee”, where the Agreement
also provided for recovery of a fee under the doctrine
of quantum meruit.
Id. at 1048.
Clearly, the court was looking to the liquidated damages clause in the
contingency contract as allowing Mr. Capek to recover for his time and effort
in his representation of his client. The contract provided for something more
than an hourly rate calculation. Rather, Mr. Capek would receive a
percentage of the settlement offer he supposedly negotiated or a fee based
upon his prevailing rate. Our Supreme Court, while deciding that the
liquidated damages provision was not interpreted correctly by the Superior
Court, did not enter an award on appeal for Mr. Capek. Rather, as noted by
the dissent, the court remanded to determine if the Agreement was
unconscionable, illegal, and/or violated the Rules of Professional Conduct
and to determine the validity of the alleged settlement agreement. This
case hardly represents a ringing endorsement of the liquidated damages
provision in the contingency agreement. The court in Capek merely
determined that the trial court and the Superior Court had erred in
interpreting the “no recovery no fee” provision in the contract as precluding
Mr. Capek from receiving any compensation for his services if discharged by
his client.
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an equitable action and principles of fairness should prevail. Mager, 797
A.2d at 962. Depending on the nature of the case, merely multiplying the
hourly rate by the number of hours worked may be too narrow of an
approach. Id. at 961-962. In Judge Joyce’s opinion, deciding the
reasonable value of an attorney’s services requires the court to take into
consideration the particular circumstances of the case before it, including the
complexity of the litigation and the results achieved:
[I]n the absence of a special agreement, an attorney
is entitled to be paid the reasonable value of his
services. In addition to the labor and time involved,
other factors must be taken into consideration, such
as the character of services rendered, the
importance of the litigation, the skill necessary, the
standing of the attorney, the benefit derived from
the services rendered and the ability of the client to
pay, as well as the amount of money involved. The
question of reasonableness is within the sound
discretion of the trial court.
Id. at 960-961 (Joyce, J., concurring), quoting Robbins v. Weinstein, 17
A.2d 629, 633 (Pa.Super. 1941).
The facts of this case represent a compelling reason to award Angino
more than an hours and expenses quantum meruit recovery. As set out
above, Angino successfully pursued an insurance liability case against the
tortfeasor’s insurer for which he received a percentage fee. However, a
great deal of the work devoted to this claim was relevant and important to
the UIM action. Angino participated in the selection of two of the arbitrators
who would eventually render a substantial award to Zarreii, and the Lessin
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firm implicitly recognized Angino’s contributions to the case when they asked
Angino to attend the arbitration. The facts of this case would clearly support
the notion that quantum meruit recovery should be based on a fair
assessment of the contributions of the discharged attorney to any eventual
award in the case. We make no determination as to whether such a
recovery is still available to Angino in this case.
Since the termination penalty imposed by the contingency contract in
this case is unenforceable, we affirm the trial court’s order granting Zarreii’s
and denying Angino’s motion for partial judgment on the pleadings.
Order affirmed.
Shogan, J. joins the Opinion.
Stabile, J. files a Dissenting Opinion.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/5/2016
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