Santalucia v. Sebright Transportation

• Decision Date: 01 August 2000
• Docket Number: Docket No. 00-7228
• Citation: 232 F.3d 293
• Parties: (2nd Cir. 2000) FRANK G. SANTALUCIA, as Parent and Legal Guardian of Frank Santalucia, Jr., an infant, and as Administrator of the Estate of Pamela A. Santalucia, decedent Plaintiff, BRIAN D. PREMO, ESQ., Appellee, v. SEBRIGHT TRANSPORTATION, INC., a Michigan Corporation, SEBRIGHT PRODUCTS, INC., a Michigan Corporation, BRENT SEBRIGHT COMPANY, a Michigan Corporation and STEVEN LEWIS WHIPPLE, Defendants, MACKRELL, ROWLANDS, PREMO & PIERRO, P.C., Appellant
• Court: U.S. Court of Appeals — Second Circuit

Page 293

232 F.3d 293 (2nd Cir. 2000)

FRANK G. SANTALUCIA, as Parent and Legal Guardian of Frank Santalucia, Jr., an infant, and as Administrator of the Estate of Pamela A. Santalucia, decedent Plaintiff, BRIAN D. PREMO, ESQ., Appellee, v. SEBRIGHT TRANSPORTATION, INC., a Michigan Corporation, SEBRIGHT PRODUCTS, INC., a Michigan Corporation, BRENT SEBRIGHT COMPANY, a Michigan Corporation and STEVEN LEWIS WHIPPLE, Defendants, MACKRELL, ROWLANDS, PREMO & PIERRO, P.C., Appellant.

Docket No. 00-7228

August Term, 2000

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: September 27, 2000

Decided: November 09, 2000

Appellant challenges an order of the United States District Court for the Northern District of New York (Hurd, J.), apportioning the contingent fee award between plaintiff's counsel and the dissolved law firm in which he had been a shareholder.

VACATED AND REMANDED.

GEORGE F. CARPINELLO, Boies, Schiller & Flexner LLP, Albany, NY, for Appellant.

ELMER R. KEACH, III, Albany, NY, for Appellee.

Before: McLAUGHLIN, CABRANES, and KATZMANN, Circuit Judges.

McLAUGHLIN, Circuit Judge:

Following the settlement of a wrongful death action for $1 million, plaintiff's counsel, Brian D. Premo, Esq. ("Premo") sought an order apportioning the contingent fee award between himself and his former law firm, MacKrell, Rowlands, Premo & Pierro, P.C. (the "Firm"). Prior to its dissolution, the Firm had been retained as counsel in the same action. The United States District Court for the Northern District of New York (Hurd, J.) awarded the dissolved law firm $19,407.50 as a quantum meruit recovery - that is, a reasonable hourly fee multiplied by the number of hours it had devoted to the wrongful death matter. The balance of the contingent fee, $310,464.47, was awarded to Premo. The Firm now appeals, arguing that the contingency fee was a firm asset.

We hold that the district court erred by not applying the New York rule that, absent an agreement to the contrary, a dissolving law firm is entitled to the value of the contingent fee at the time of dissolution. Accordingly, we vacate the order of the district court and remand for findings: (1) whether there was an agreement among the Firm's shareholders as to the disposition of pending contingency cases; and (2) if no such agreement existed, what the value of the contingent fee was when the Firm dissolved.

BACKGROUND

In March 1997, Pamela Santalucia was killed when her automobile was rear-ended by a tractor trailer in Las Vegas, Nevada. Pamela was the mother of Frank James Santalucia ("Frank James") and former wife of Frank G. Santalucia ("Santalucia"). Santalucia was put in touch with the Firm in April 1997 regarding representation in a New York state court proceeding to determine the custody of Frank James, who was then an infant.

After meeting with Santalucia, the Firm agreed to represent him in connection with: (1) the custody proceeding; and (2) proceedings to have Santalucia appointed guardian of Frank James and administrator of the estate of Pamela Santalucia. The Firm agreed not to bill Santalucia for any of this work, anticipating that Santalucia would retain the Firm to prosecute a wrongful death action on a contingent fee basis. Through the efforts of the members of the Firm, Santalucia was appointed guardian of Frank James in October 1997, and was named administrator of Pamela Santalucia's estate in December 1997.

On January 16, 1998, Santalucia executed a retainer agreement with the Firm for representation in the wrongful death action. The Firm was named as counsel in the retainer agreement, although it was understood that Premo would be the lead lawyer in this action. Over the next year, Premo investigated the facts, researched applicable law, and otherwise provided representation in the wrongful death action.

One year later, on January 22, 1999, the shareholders agreed to dissolve the Firm and to cease operations as of February 15, 1999. It was agreed that each lawyer would retain his files and continue working on those matters for which he had been responsible. Thus, Premo was to continue representation in the wrongful death matter, while other members of the Firm were to continue representation in Santalucia's guardianship and estate matters. Beyond that, however, the precise terms of the dissolution are in dispute. The Firm claims that the shareholders had no agreement as to how pending contingency fees would be distributed upon collection. Premo, on the other hand, asserts that there was an oral agreement among the Firm's shareholders that each lawyer's cases, including contingency fee cases and profits derived therefrom, would remain the sole assets and profits of the respective attorneys.

Earlier, in September 1998, the other victims of the Las Vegas accident that killed Pamela Santalucia initiated a personal injury action against Sebright Transportation, Inc. ("Sebright") in the United States District Court for the District of Nevada. In this Nevada action, pre-trial matters were assigned to U.S. Magistrate Judge Lawrence R. Leavitt. On February 2, 1999, after the announcement of the Firm's dissolution, but prior to the cessation of operations, Magistrate Judge Leavitt invited Premo to attend a settlement conference with the parties in the Nevada action. Although Premo had not yet filed suit on behalf of the Santalucias, Sebright wanted him to attend the settlement conference in the hopes of achieving a global settlement with all of the accident's victims.

On February 15, 1999, as announced, the Firm ceased operations. After being notified by Premo, on or about February 12, that the firm would be dissolved, Santalucia retained Premo, individually, on February 16, to represent him in the wrongful death action. Santalucia and Premo agreed that any fee due to the Firm would come out of Premo's contingency fee. On February 16, Santalucia and Premo memorialized their arrangement by signing a formal retainer agreement.

On March 5, Premo went to Nevada to attend Magistrate Judge Leavitt's settlement conference. At that conference, Sebright offered to settle Santalucia's claims for $1 million.

To avoid any statute of limitations difficulty, Premo filed the instant action in the United States District Court for the Northern District of New York (Hurd, J.) on March 16, 1999. The very next day, Santalucia accepted Sebright's settlement offer of $1 million. By the end of July of that year, the settlement agreement was confirmed in writing.

Premo thereafter filed an application in the Northern District for court approval of the settlement, as well as a determination of attorneys' fees due to him and to the Firm. On October 12, 1999, Judge Hurd approved the settlement agreement and, pursuant to Premo's retainer agreement with Santalucia, directed Sebright to distribute $329,871.97 of Santalucia's settlement proceeds to Premo.

In a subsequent decision dated February 8, 2000, Judge Hurd apportioned the $329,871.97 contingent fee between Premo and the Firm. See Santalucia v. Sebright Transportation, Inc., No. 99-CV-391, 2000 WL 154727 (N.D.N.Y. Feb. 8, 2000). Judge Hurd based his decision principally upon the language of the original retainer agreement that Santalucia had signed with the Firm in January 1998. That agreement made the following provision in the case of termination of the representation:

The attorneys shall be entitled to payment of their full contingent share of any settlement of or judgment on the claim(s) or action(s) for prosecution or adjustment of which they are retained, if wrongfully discharged by client, or the quantum meruit value of their services rendered if they are otherwise discharged, substituted or withdraw from representation before such settlement or judgment is obtained.

Id. at *1.

The Firm never claimed that Santalucia had wrongfully discharged it from the representation. Therefore, having concluded that, by its dissolution, the Firm's representation of Santalucia had been terminated, the district court held that the Firm was entitled only to a quantum meruit recovery. The district court then calculated the reasonable value of the legal services rendered by the Firm from its retention in January 1998 until its dissolution on February 16, 1999 to be $19,407.50, (110.9 hours at $175.00 per hour). Thus, the district court directed Premo to remit $19,407.50 to the Firm, and to keep the remaining $310,464.47. See id. at *5 6. The Firm now appeals.

DISCUSSION

The district court had diversity jurisdiction over Frank James's underlying wrongful death claim pursuant to 28 U.S.C. § 1332. New York law requires court approval of attorney's fees when the client is an infant. See N.Y. Jud. Law § 474 (McKinney 1983). The district court, at Premo's request, then assumed ancillary jurisdiction over this fee dispute between Premo and the Firm. C.f. Chesley v. Union Carbide Corp., 927 F.2d 60, 64 (2d Cir. 1991) ("It is well settled that [a] federal court may, in its discretion, exercise ancillary jurisdiction to hear fee disputes . . . between litigants and their attorneys when the dispute relates to the main action. . . ." (citations and internal quotation marks omitted)). The parties' briefs assume that New York law controls this dispute, and such "implied consent . . . is sufficient to establish choice of law." Tehran-Berkeley Civil & Envtl. Eng'rs v. Tippetts-Abbet-McCarthey-Stratton, 888 F.2d 239, 242 (2d Cir. 1989).

We review the district court's interpretation and application of state law de novo. See Maska U.S., Inc. v. Kansa Gen. Ins. Co., 198 F.3d 74, 78 (2d Cir. 1999). In so doing, we of course look to the state's decisional law, as well as to its constitution and statutes. See id. (citing Travelers Ins. Co. v. 633 Third Assocs., 14 F.3d 114, 119 (2d Cir. 1994)). Where New York law is unsettled, this Court is obligated to "carefully . . . predict how the state's highest court would resolve the uncertainty...