Shamberg, Johnson & Bergman v. Oliver

• Decision Date: 30 October 2009
• Docket Number: No. 97,584.,97,584.
• Citation: 289 Kan. 891,220 P.3d 333
• Parties: SHAMBERG, JOHNSON & BERGMAN, CHTD., Plaintiff, v. Michael P. OLIVER, Appellant, and Wallace, Saunders, Austin, Brown & Enochs, Chtd., Appellee.
• Court: Kansas Supreme Court

220 P.3d 333

289 Kan. 891

SHAMBERG, JOHNSON & BERGMAN, CHTD., Plaintiff, v. Michael P. OLIVER, Appellant, and Wallace, Saunders, Austin, Brown & Enochs, Chtd., Appellee.

No. 97,584.

Supreme Court of Kansas.

October 30, 2009.

Mark D. Hinderks, of Stinson Morrison Hecker LLP, of Overland Park, argued the cause, and Donald C. Ramsay, of the same firm, of Overland Park, and Stewart M. Stein, of the same firm, of Kansas City, Missouri, were with him on the briefs for the appellant.

Derrick A. Pearce, of Wallace, Saunders, Austin, Brown and Enochs, Chartered, of Overland Park, argued the cause, and Richard T. Merker, of the same firm, was with him on the brief for the appellee.

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

Michael P. Oliver appeals the district court's grant of summary judgment in favor of his former law firm, Wallace, Saunders, Austin, Brown & Enochs, Chartered (Wallace Saunders), in this dispute over a referral fee in a medical malpractice action. Shamberg, Johnson & Bergman, Chartered (Shamberg), the firm that had agreed to pay a contingent referral fee and that subsequently obtained a settlement judgment in favor of the injured person, filed this interpleader action and paid the referral fee into court in order to remove itself from this winner-take-all battle over the referral fee. Accordingly, Shamberg did not participate in this appeal. We reverse the district court's grant of summary judgment and remand with directions to enter summary judgment in favor of Oliver.

FACTUAL OVERVIEW

Wallace Saunders is a law firm, duly incorporated under the laws of the State of Kansas, with which Oliver entered into an employment agreement on January 1, 1987. Subsequently, Oliver was elected a director of the firm.

Oliver first became involved in this case when he was contacted by the family of Sara Hotchkiss after she experienced severe medical complications. Sara's husband, Rob, first requested assistance with the medical situation, and Oliver referred him to Jim Butler at Wallace Saunders. Butler drafted a power of attorney for the Hotchkisses. Next, Oliver met with Sara's husband and her father to discuss the possibility of a medical malpractice claim. However, because Wallace Saunders was principally engaged in defense work, it had a policy against suing medical care providers. Therefore, Oliver proposed to refer the case to another firm and arranged for the Hotchkisses to meet with two attorneys to determine who they would want to retain. Oliver attended the meetings and assisted the Hotchkiss family in asking questions. The Hotchkisses selected Victor Bergman of the Shamberg firm.

On January 8, 2003, Sara and Robert Hotchkiss entered into an employment agreement with Shamberg, in which they agreed to a contingent fee of 40% of the net recovery after expenses. Bergman wrote Oliver at Wallace Saunders on January 13, 2003, offering 25% of Shamberg's attorney fees as a referral fee. Bergman asked Oliver to confirm that the referral fee was acceptable or to make a counterproposal. Shamberg would take responsibility to do the work and to finance the case, but Bergman solicited Oliver's suggestions with regard to the areas on which Bergman planned to focus. The record reflects no written response to Bergman's letter.

Oliver had his paralegal complete both a new file intake sheet and a new client intake sheet on or about February 19, 2004. These forms identified Sara Hotchkiss as the plaintiff and Olathe Medical Center as the defendant. The new file documentation identified the case as a plaintiff, medical malpractice contingent fee case with the notation that "will receive a referral fee at the end of the case." Sara Hotchkiss was identified as the new client and was listed as a contingent fee client.

A litigation file was opened, assigned to Oliver, placed upon the firm's master inventory of cases, and placed in Oliver's personal inventory. A file was also set up in the Wallace Saunders corporate accounting system for tracking time and expenses, showing Oliver as the billing attorney and listing the case as medical malpractice.

On May 5, 2004, over a year after Bergman's first letter mentioning the referral fee, he wrote to Oliver at the Wallace Saunders offices and modified the fee-sharing arrangement, offering to divide the net attorney fees as follows: 10% of the first $100,000 of net attorney fees; plus 15% of any net attorney fees from $100,001-$250,000; plus 20% of any net attorney fee between $250,001-$500,000; plus 25% of all net attorney fees greater than $500,001. The letter said that Shamberg would be responsible to advance all of the expenses of litigation and do all of the work. It also stated that if the Hotchkisses needed assistance with obtaining governmental benefits, Wallace Saunders would either help them or assist them with an appropriate referral. Bergman also requested Oliver to accompany him for an off-the-record visit with a physician. In the letter, Bergman said that the fees would be divided between "our firms," referring to Shamberg and Wallace Saunders. Neither Oliver nor Wallace Saunders wrote a response to this May 5, 2004, letter until after Oliver departed from Wallace Saunders.

Oliver resigned as an employee and director of Wallace Saunders, effective January 31, 2005. On February 1, 2005, Richard Merker of Wallace Saunders wrote to Bergman at Shamberg to advise him of a disagreement between Wallace Saunders and Oliver regarding entitlement to the referral fee. The next day, Merker wrote another letter to Shamberg, reciting the terms of the referral fee payment formula and reiterating that Wallace Saunders claimed the entire referral fee. On April 5, 2005, after he had resigned from Wallace Saunders, Oliver wrote to Shamberg, purporting to accept the referral fee agreement described in the May 2004 letter.

When Oliver left Wallace Saunders, he took the Hotchkiss file at the clients' request. He continued to work on the Hotchkiss case, including assisting with mediation, drafting settlement documents, and being present for the first 2 days of trial. Oliver and his staff spent 151.3 hours working on the Hotchkiss file after his departure from Wallace Saunders. In contrast, while employed at Wallace Saunders, Oliver did not make a record of the time he worked on the Hotchkiss file, albeit he now claims to have put in approximately 15 hours on the Hotchkiss case before his departure from the firm. The Wallace Saunders file did reflect some paralegal time during that period, and some expenses were charged against the file in May and November 2004.

While researching on the Johnson County District Court online docket system after he left Wallace Saunders, Oliver discovered at least three different 2004 medical malpractice cases in which a Wallace Saunders attorney had entered his appearance on behalf of the Olathe Medical Center, after the Hotchkiss file was opened by Wallace Saunders in February of 2004. Wallace Saunders did not inform Olathe Medical Center of its relationship with the plaintiff in the Hotchkiss v. Olathe Medical Center matter and did not seek or obtain a conflict waiver. Wallace Saunders produced a conflict check dated March 20, 2006, which reflected that Wallace Saunders represented Sara Hotchkiss as a plaintiff against Olathe Medical Center. The Hotchkisses claimed they were not aware that Wallace Saunders was also representing Olathe Medical Center during the pendency of their lawsuit. The Hotchkisses also said that they did not know, at the time of settlement, that Wallace Saunders was claiming the entire referral fee. Wallace Saunders did not disclose to anyone at Shamberg that, while representing the Hotchkisses, it had been simultaneously representing Olathe Medical Center.

The Hotchkisses' malpractice claim against certain physicians was settled and approved by the court on July 11, 2005. The claim against the Olathe Medical Center proceeded to trial but was settled during trial. The district court approved the settlement and attorney fees on September 2, 2005. Shortly thereafter, on September 16, 2005, Shamberg filed this interpleader action. The total amount of referral fee at issue is $582,881.90.

Both Oliver and Wallace Saunders filed motions for summary judgment. The district court, in a memorandum decision and order, denied Oliver's motion and granted Wallace Saunders' motion, resulting in the court's awarding the entire referral fee to Wallace Saunders. Oliver timely appealed, and the matter was transferred to the Supreme Court pursuant to K.S.A. 20-3018(c).

LAW FIRM EMPLOYMENT CONTRACTS

In 1987, Oliver and Wallace Saunders executed an employment contract. As part of Oliver's consideration, he agreed that he "shall not, without the express prior written consent of [Wallace Saunders], directly or indirectly, during the term of this agreement, render services of a professional nature to or for any person or firm for compensation or engage in any activity competitive with and adverse to [Wallace Saunders'] business or practice." The contract set forth the manner in which it could be terminated and noted that upon termination, Oliver "shall not be entitled to keep or preserve files or records of [Wallace Saunders] as to any client unless said client shall specifically request a different disposition of his file." Further, Oliver agreed "to carry out and to perform orders, directions and policies" of the firm and acknowledged that [Wallace Saunders] "shall have final authority over acceptance or refusal of any client and over the amount of fee to be charged any client for professional services."

The same date, Oliver and Wallace Saunders entered into a Deferred Compensation Agreement (DCA), whereby the firm agreed to pay Oliver compensation in addition to the salary and bonus referred to in the employment contract. The additional compensation represented an amount "equal to [Oliver's] interest in the active accounts...