264 F.3d 424 (4th Cir. 2001), 00-2069, Edell * Assoc. v. Law Offices of Peter Angelos

Docket Nº:00-2069
Citation:264 F.3d 424
Party Name:EDELL & ASSOCIATES, P.C., a New Jersey Professional Corporation; MARC Z. EDELL, Plaintiffs-Appellants, v. LAW OFFICES OF PETER G. ANGELOS, a Maryland Professional Corporation, Defendant-Appellee.
Case Date:August 24, 2001
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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264 F.3d 424 (4th Cir. 2001)

EDELL & ASSOCIATES, P.C., a New Jersey Professional Corporation; MARC Z. EDELL, Plaintiffs-Appellants,

v.

LAW OFFICES OF PETER G. ANGELOS, a Maryland Professional Corporation, Defendant-Appellee.

No. 00-2069

United States Court of Appeals, Fourth Circuit

August 24, 2001

Argued: May 9, 2001

Appeal from the United States District Court for the District of Maryland, at Baltimore. Benson E. Legg, District Judge.

(CA-99-3546-L)

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COUNSEL ARGUED: Martin Stanley Himeless, Jr., ZUCKERMAN, SPAEDER, GOLDSTEIN, TAYLOR & BETTER, L.L.P., Baltimore, Maryland, for Appellants. William J. Brennan, III, SMITH, STRATTON, WISE, HEHER & BRENNAN, Princeton, New Jersey; Harley Thomas Howell, HOWELL & GATELY, Baltimore, Maryland, for Appellee. ON BRIEF: Michel F. Baumeister, Dorothea M. Capone, BAUMEISTER & SAMUELS, P.C., New York, New York, for Appellants. William F. Gately, HOWELL & GATELY, Baltimore, Maryland, for Appellee.

Before WIDENER and WILLIAMS, Circuit Judges, and HAMILTON, Senior Circuit Judge.

Affirmed in part, vacated in part, and remanded for further proceedings by published opinion. Senior Judge Hamilton wrote the opinion, in which Judge Williams joined. Judge Widener wrote a separate concurring and dissenting opinion.

OPINION

HAMILTON, Senior Circuit Judge:

This diversity jurisdiction action involves an attorneys' fee-sharing dispute between attorney Marc Edell (Edell) and his law firm, Edell & Associates, P.C., on the one hand, and the Law Offices of Peter G. Angelos (the Angelos Firm), on the other hand. The Attorney General of Maryland (the Maryland AG), Edell, his law firm, and the Angelos Firm jointly represented the State of Maryland (Maryland) in recent litigation against the tobacco industry to recover money dispersed in Medicaid payments for cigarette related diseases (the Maryland AG Action). The tobacco industry settled the Maryland AG Action for an estimated $4.4 billion.1

The Angelos Firm had minimal experience with litigation against the tobacco industry prior to its participation in the Maryland AG Action. For this reason, the Angelos Firm asked Edell and his law firm to join it in making a litigation proposal to the Maryland AG in an effort to represent Maryland in the Maryland AG Action.

Edell is widely recognized as a preeminent legal authority on litigation against the tobacco industry. Indeed, the litigation proposal the Angelos Firm ultimately submitted to the Maryland AG touted this fact and added: "As lead trial counsel for the plaintiff in Cipollone v. Liggett Group, Edell was the first to bring a successful suit to verdict against tobacco companies on behalf of a smoker, after five years of intensive litigation and a four-month trial in federal court in New Jersey." (J.A. 912). The litigation proposal assured the Maryland AG that if the Angelos Firm was retained, Edell would serve as co-lead counsel.

The Maryland AG accepted the Angelos Firm's litigation proposal, and under a fee-agreement between Maryland and the Angelos Firm, Maryland agreed to pay the Angelos Firm twenty-five percent of any amount recovered. Maryland did not enter into a separate fee agreement with Edell and his law firm. The amount of legal fees that Edell and his law firm would receive for their participation in the Maryland AG Action was always an issue to be determined solely between Edell and his law firm and the Angelos Firm.

The dispute in the present case is over the amount the Angelos Firm agreed to

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pay Edell and his law firm for their substantial participation in the Maryland AG Action. Edell and his law firm contend that in addition to the $798,218 in attorneys' fees (based upon varying hourly rates) they have already received from the Angelos Firm in connection with the Maryland AG Action, the Angelos Firm repeatedly promised that they would share fairly in any contingency fee it received at the conclusion of the case. According to Edell and his law firm, they never would have continued their substantial participation in the Maryland AG Action had the Angelos Firm not made these repeated promises and the Angelos Firm fully understands this. Because the Angelos Firm denies that it agreed to share any amount of the estimated $1.1 billion contingency fee that it may potentially receive in connection with the Maryland AG Action, 2 Edell and his law firm allege in the present action that the Angelos Firm is liable for breach of contract and breach of the covenant of good faith and fair dealing implied in such contract. The Angelos Firm flatly denies that it ever agreed that Edell and his law firm would share in any contingency fee that it would possibly receive at the conclusion of the Maryland AG Action and, therefore, refuses to pay them any further fees.

Edell and his law firm alternatively allege that if the Angelos Firm repeatedly promised it would share fairly with them any contingency fee recovered at the end of the case with the intent never to allow them to so share, the Angelos Firm is liable for intentional misrepresentation. The Angelos Firm denies the allegation of intentional misrepresentation.

The district court granted summary judgment in favor of the Angelos Firm with respect to the three claims Edell and his law firm continue to press on appeal: (1) common law breach of contract; (2) common law breach of the covenant of good faith and fair dealing; and (3) common law intentional misrepresentation. 3 The district court also denied a motion filed by Edell and his law firm for leave to amend their complaint to allege a claim for negligent misrepresentation.

Edell and his law firm now appeal the grant of summary judgment in favor of the Angelos Firm with respect to all three listed claims. They also appeal the district court's denial of their motion for leave to amend their complaint to assert a negligent misrepresentation claim.

We affirm in part, vacate in part, and remand for further proceedings. Specifically, we: (1) vacate the district court's grant of summary judgment in favor of the Angelos Firm with respect to the breach of contract claim and remand for further proceedings with respect to that claim; (2) affirm the district court's grant of summary judgment with respect to the breach of the covenant of good faith and fair dealing claim; (3) vacate the district court's grant of summary judgment in favor of the Angelos Firm with respect to the intentional misrepresentation claim and remand for further proceedings with respect to that claim; and (4) vacate the district court's denial of the motion for leave to amend the complaint and remand

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with instructions that the district court grant the motion.

I

Because this case comes to us from the grant of a motion for summary judgment in favor of the Angelos Firm, we present the facts in the light most favorable to Edell and his law firm, drawing all reasonable inferences from the evidence in their favor. Reeves v. Sanderson Plumbing Products, 530 U.S. 133, 149-150 (U.S. 2000).

In 1995, the Maryland AG solicited proposals from lawyers and law firms to represent Maryland against the tobacco industry in an effort to recover money that Maryland dispersed in Medicaid payments for cigarette related diseases. The Angelos Firm desired to submit such a proposal, but had minimal experience in prosecuting claims against the tobacco industry. Thus, in December 1995, the Angelos Firm approached Edell, a tobacco litigation expert, about the possibility of Edell and his law firm participating on the litigation team the Angelos Firm intended to propose to the Maryland AG. The Angelos Firm was also extremely anxious to obtain access to the data base of tobacco documents and testimony that Edell had amassed over more than a decade of pursuing litigation against the tobacco industry.

Relying on the repeated promises made by the Angelos Firm that Edell and his law firm would share with them any contingency fee recovered at the conclusion of the Maryland AG Action, Edell, on behalf of himself and his law firm, accepted its invitation to join the litigation team, although the terms of the compensation to be paid them were still undetermined. On December 29, 1995, Peter Angelos submitted his firm's litigation proposal to the Maryland AG, prominently naming Edell as co-lead counsel. The litigation proposal described Edell's credentials as a tobacco litigation expert in detail. That the Angelos Firm believed Edell was a heavy hitter in the field of litigation against the tobacco industry, and used Edell's reputation as such to lure the Maryland AG to accept its litigation proposal, is evidenced by the fact that the litigation proposal stated that the Angelos Firm's involvement of Edell "underscore[d] [its] commitment to field the strongest possible team." (J.A. 899).

After submission of the litigation proposal, Peter Angelos, through H. Russell Smouse (Smouse), a senior attorney employed by the Angelos Firm and Peter Angelos' "`right hand' and No.2 man," began negotiating with Edell regarding Edell and his law firm's compensation arrangement. (J.A. 747). On January 17, 1996, Edell sent a letter to Smouse proposing that he and his law firm receive a flat fee each year, and 20% of any contingency fee recovered in the final disposition of the Maryland AG Action.

Smouse responded by telephone a few days later. Smouse did not object to the basic structure of Edell's proposal; rather he advised Edell that he felt that the 20% amount suggested by Edell for the contingency fee component was "`too steep.'" (J.A. 751). Edell offered a revised proposal by letter dated January 25, 1996, proposing a larger...

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