Fidelity Nat. Title Ins. Co. v. Intercounty Nat.

• Citation: 310 F.3d 537
• Decision Date: 08 November 2002
• Docket Number: No. 02-3581.,02-3581.
• Parties: FIDELITY NATIONAL TITLE INSURANCE COMPANY OF NEW YORK, Plaintiff, v. INTERCOUNTY NATIONAL TITLE INSURANCE COMPANY, et al., Defendants. Appeal of: Myron M. Cherry & Associates LLC.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

310 F.3d 537

FIDELITY NATIONAL TITLE INSURANCE COMPANY OF NEW YORK, Plaintiff, v. INTERCOUNTY NATIONAL TITLE INSURANCE COMPANY, et al., Defendants Appeal of: Myron M. Cherry & Associates LLC.

No. 02-3581.

United States Court of Appeals, Seventh Circuit.

Submitted October 25, 2002.

Decided November 8, 2002.

Albert E. Fowerbaugh, Jr. (submitted), Lord Bissell & Brook, Chicago, IL, for Plaintiff-Appellee.

Matthew D. Tanner (Submitted), Tanner, Lehman & Dean, Chicago, IL, for Defendants-Appellees.

Myron M. Cherry (submitted), Cherry & Associates, Chicago, IL, for Appellants.

Before BAUER, POSNER, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

Fidelity National Title Insurance contends that $20 million vanished from real estate escrow accounts under the control of defendants and related entities. It seeks a judgment for that amount in this diversity litigation. Five of the defendants—Intercounty National Title Insurance Co., Intercounty Title Co., INTIC Holding Co., Terry Cornell, and Susan Peloza (collectively the INTIC parties)—retained Myron M. Cherry & Associates LLC to represent them in the suit. The three corporations are defunct but have made claims against co-defendants (and third parties) that may have value; the financial status of Cornell and Peloza, who controlled the three corporations, is unclear. The INTIC parties promised to pay Cherry an hourly fee for its services and to reimburse expenses. For some time they kept this promise. But about a year ago they began to fall behind, and by July 2002, when Cherry first moved to withdraw, they owed more than $430,000 in fees and out-of-pocket expenses. (The total now exceeds $470,000.) Cherry informed the district court that its clients had stopped paying and were making no efforts to engage new counsel. The district judge denied this motion to withdraw and a later one, making it clear that in her view Cherry must represent the INTIC parties to the bitter end, no matter how much this costs (and no matter how little the INTIC parties pay), unless a new lawyer files an appearance on their behalf. Substitution is unlikely, because the district court's order provides Cherry's clients with free legal assistance, while the INTIC parties would have to give any replacement a hefty retainer (for Cherry anticipates that the trial of the suit may require lawyers' time plus outlays for copying, transcripts, and other expenses that will bring the total tab to $1 million). Cherry, which does not fancy throwing good time after bad, asks us to reverse the district court's order and to permit its withdrawal.

Appellate jurisdiction depends on the collateral order doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). The Supreme Court has held that neither an order disqualifying a lawyer, nor an order declining to do so, is appealable under this doctrine. Richardson-Merrell Inc. v. Koller, 472 U.S. 424, 105 S.Ct. 2757, 86 L.Ed.2d 340 (1985); Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981). Orders denying motions to withdraw are superficially similar to orders denying motions to disqualify. But there is also a vital difference: incorrect decisions about disqualification may justify reversal at the end of the case, while an incorrect decision forcing an unpaid lawyer to continue providing services never would supply a reason to reverse the final judgment. Because an order compelling a lawyer to work without prospect of compensation is unrelated to the merits of the dispute, cannot be rectified at the end of the case, and has a potential to cause significant hardship, we join the second circuit in holding that the order is immediately appealable as a collateral order. See Whiting v. Lacara, 187 F.3d 317, 320 (2d Cir.1999). Accord, Industrial Distribution Corp. v. Polytop Corp., 2001 WL 196759 (1st Cir.2001) (non-precedential order). An interim order keeping the lawyer in the case while the motion to withdraw was under advisement would not meet Cohen's requirement that the decision finally determine the issue in question, but there can be no doubt that the district judge's order is conclusive because it allows reconsideration only if the INTIC parties retain new counsel. This is as final a denial as is conceivable.

Responding to an order this court issued, the INTIC parties have made it clear that they do not have another lawyer. Nor do they promise to retain one or to pay Cherry. It is therefore difficult to see why Cherry should be obliged to provide them with future legal services. Litigants have no right to free legal aid in civil suits. The INTIC parties do not appear to be good candidates for pro bono representation— which is at any event voluntary rather than compulsory. See Mallard v. United States District Court, 490 U.S. 296, 109 S.Ct. 1814, 104 L.Ed.2d 318 (1989). Corporations don't qualify for even the slight benefit of proceeding in forma pauperis. See Rowland v. California Men's Colony, 506 U.S. 194, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993).

The ABA's Model Rules of Professional Conduct state that lawyers are entitled to stop working when clients stop paying. Rule 1.16(b) provides that a lawyer may withdraw if

(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;

(6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or

(7) other good cause for withdrawal exists.

Failure to cover $470,000 in legal fees and expenses (despite undertaking via contract to do so) satisfies subsection (5), and the prospect of a further uncompensated outlay worth $500,000 satisfies subsection (6), especially because Cherry is a small law firm (it has four lawyers). See Geoffrey C. Hazard, Jr. & W. William Hodes, 1 The Law of Lawyering: A Handbook on the Model Rules of Professional Conduct § 1.16:303 (1990 & 1998 Supp.). The Northern District...