Consolver v. Hotze, 110,483.

• Citation: 51 Kan.App.2d 286,346 P.3d 1094
• Decision Date: 20 March 2015
• Docket Number: 110,483.
• Parties: Mahnaz CONSOLVER, Appellant, v. Chris HOTZE, Defendant. (Bradley A. Pistotnik and the Affiliated Attorneys of Pistotnik Law Offices, P.A.), Appellees.
• Court: Court of Appeals of Kansas

51 Kan.App.2d 286

346 P.3d 1094

Mahnaz CONSOLVER, Appellant

v. Chris HOTZE, Defendant.(Bradley A. Pistotnik and the Affiliated Attorneys of Pistotnik Law Offices, P.A.), Appellees.

110,483.

Court of Appeals of Kansas.

March 20, 2015.

Stephen L. Brave, of Brave Law Firm, LLC, of Wichita, for appellant.

Jennifer M. Hill, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., of Wichita, for appellee.

Before SCHROEDER, P.J., BUSER and ATCHESON, JJ.

Opinion

ATCHESON, J.

Plaintiff Mahnaz Consolver decided to change lawyers partway through this personal injury action she filed in Sedgwick County District Court. Bradley A. Pistotnik, the forsaken lawyer, filed a lien against any recovery for his fees and expenses. After Consolver's new lawyer settled the underlying tort claim, the district court enforced the lien by awarding Pistotnik a partial fee based on the contingency clause of his contract with Consolver. The district court erred. We remand for a redetermination of the fee due Pistotnik founded on a lodestar calculation consistent with the equitable principles of quantum meruit that govern in this circumstance.

For purposes of the attorney fee issue in front of us, we need not recount the circumstances of the motor vehicle collision between Consolver and Defendant Chris Hotze. And given our conclusion that the district court applied the wrong measuring stick in fashioning the fee due Pistotnik, we similarly need not detail the evidence presented at the lien hearing. We offer only the facts essential to placing our legal determination in context.

Consolver signed a contract with Pistotnik in April 2011 to represent her in getting compensation for injuries she received in the motor vehicle collision about a month earlier. The contract set Pistotnik's compensation as 33 1/3 percent of any recovery realized before the final pretrial conference and 40 percent of a recovery after that point. If Consolver recovered nothing, she owed Pistotnik nothing for his services or the case expenses. The contract did not contain a clause governing termination of the lawyer-client relationship before resolution of the underlying personal injury claim or how Pistotnik should be compensated in that event.

Pistotnik filed suit against Hotze and undertook discovery. About a year later, Pistotnik had active settlement negotiations with Hotze's lawyer. Hotze had offered $225,000, and his lawyer indicated $300,000 might be available if Consolver were scheduled for additional surgery for her injuries. Pistotnik understood Consolver to say she had been set for another surgery, but he could not confirm that understanding with her physician. Pistotnik, however, advised Hotze's lawyer Consolver would be having more surgery. Actually, Consolver neither had the surgery nor had she ever been scheduled for the procedure. But based on Pistotnik's representation, Hotze's lawyer extended a $300,000 settlement offer by e-mail on June 30, 2011, and confirmed the offer by letter 2 days later.

In the meantime, however, Consolver fired Pistotnik as her lawyer in a letter faxed to his office on June 28. Consolver hired Stephen Brave. Pistotnik promptly filed and served a statutory lien claiming $106,771 in fees and expenses. Brave did additional discovery in the case and settled the suit against Hotze in mid–2012 for $360,000.

Consolver, still represented by Brave, could not resolve Pistotnik's fee lien. The district court held an evidentiary hearing on July 9, 2013, at which Consolver, Pistotnik, and Hotze's lawyer testified. The district court entered an order with accompanying findings of fact and conclusions of law awarding Pistotnik $86,944 in fees and $10,156 in expenses. To determine a fee satisfying the lien, the district court began with the $300,000 offer made shortly after Pistotnik had been fired, deducted the expenses, and then applied the 33 1/3 percent contingency from the contract—yielding $96,518. Based on its finding that Pistotnik “did the majority of the work to prepare the case for settlement [or] trial,” the district court concluded 90 percent of that amount or $86,944 represented an appropriate attorney fee. Finally, the district court added in the expenses to come up with an award of $97,101 to Pistotnik in satisfaction of his lien. The district court characterized that approach as reflecting a quantum meruit determination of the compensation due Pistotnik.

Consolver has timely appealed the district court's fee award.

The determination of reasonable legal fees is typically entrusted to the district court's sound discretion. Unruh v. Purina Mills, 289 Kan. 1185, 1200, 221 P.3d 1130 (2009) ; Johnson v. Westhoff Sand Co., 281 Kan. 930, 940, 135 P.3d 1127 (2006). A district court exceeds that discretion if it rules in a way no reasonable judicial officer would under the circumstances, if it ignores controlling facts or relies on unproven factual representations, or if it acts outside the legal framework appropriate to the issue. See Northern Natural Gas Co. v. ONEOK Field Services Co., 296 Kan. 906, 935, 296 P.3d 1106, cert. denied ––– U.S. ––––, 134 S.Ct. 162, 187 L.Ed.2d 40 (2013) ; State v. Ward, 292 Kan. 541, Syl. ¶ 3, 256 P.3d 801 (2011), cert. denied ––– U.S. ––––, 132 S.Ct. 1594, 182 L.Ed.2d 205 (2012).

Pistotnik's right to compensation for his legal services derives from his contractual relationship with Consolver. But the contract contained no terms dealing with payment should Consolver terminate Pistotnik before the litigation ended. In the absence of such provisions, the courts have generally held that a client must compensate the terminated lawyer based on equitable principles of quantum meruit or unjust enrichment. Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 904, 220 P.3d 333 (2009) ; Madison v. Goodyear Tire & Rubber Co., 8 Kan.App.2d 575, 579, 663 P.2d 663 (1983). Consolver and Pistotnik agree on this much of the law. Under a quantum meruit theory, a party conferring a benefit on another party is entitled to recover the value of the benefit conferred if the recipient knew of the benefit and retention of the benefit without compensation would be inequitable under the circumstances. Haz–Mat Response, Inc. v. Certified Waste Services Ltd., 259 Kan. 166, Syl. ¶ 6, 910 P.2d 839 (1996) ; City of Neodesha v. BP Corporation, 50 Kan.App.2d 731, 780, 334 P.3d 830 (2014) (necessary conditions for quantum meruit recovery include inequity of retaining benefit “without payment of its value”); Jones v. Culver, 50 Kan.App.2d 386, 390, 329 P.3d 511 (2014) (same).

Before discussing the application of quantum meruit in this case, we mention several matters that either are not disputed here or do not arise on these facts. First, nobody contends Pistotnik failed to perfect an attorney lien under K.S.A. 7–108, thereby encumbering the settlement funds to the extent of any compensation due him. The statute, however, does not address how to establish the amount of compensation. Next, Consolver had a right to terminate her contract with Pistotnik at any time with or without good cause. See Kansas Rule of Professional Conduct (KRPC) 1.16(a)(3), comment 4 (2014 Kan. Ct. R. Annot. 583) (client may discharge lawyer at any time); see also Nostrame v. Santiago, 213 N.J. 109, 121, 61 A.3d 893 (2013) (client free to discharge lawyer at any time); Balestriere PLLC v. BanxCorp, 96 A.D.3d 497, 497, 947 N.Y.S.2d 7 (2012) (well-settled public policy of New York permits a client to terminate attorney-client relationship freely at any time). Consolver did not discharge Pistotnik for demonstrable negligence or dereliction or some other good cause. We, therefore, do not presume to consider such a situation and expressly reserve any comment on what compensation, if any, might be equitable when a client dismisses a lawyer for good cause in a contingent-fee matter. Likewise, we do not speculate about two variations on the theme of this dispute: (1) the efficacy of a contract termination clause calling for the lawyer to receive some share of an eventual recovery or another measure of compensation; and (2) the compensation that might be due a terminated lawyer if his or her replacement recovered little or nothing for the client.

Payment based on quantum meruit depends on the value or worth of the benefit to the recipient. And the value, therefore, should be viewed from the perspective of the recipient. Put another way, the recipient ought to owe an amount roughly equivalent to what he or she might reasonably expect to pay on the open market for the goods or services constituting the benefit. Canyon Ambulatory Surgery v. SCF Arizona, 225 Ariz. 414, 422, 239 P.3d 733 (2010) ; Children's Hospital Central California v. Blue Cross of California, 226 Cal.App.4th 1260, 1274, 172 Cal.Rptr.3d 861 (2014) ; Matter of Estate of Carroll, 436 N.E.2d 864, 866 (Ind.App.1982) ; see Scheiber v. Dolby Laboratories, Inc., 293 F.3d 1014, 1022–23 (7th Cir.2002). We see no reason that measure shouldn't apply here.

In this case, the district court stepped outside the legal principles guiding quantum meruit to premise the fee award to Pistotnik on the contingency percentage in the contract with Consolver. A quantum meruit payment is fundamentally incompatible with a contingency fee in a contract for legal services. By design, a contingency fee builds in a premium over and above the fair market value of the services to account for the risk of no recovery—and, thus, no payment—not only in that case but in other cases the lawyer considers or takes. In other words, a contingency fee realized in a given case offsets uncompensated time the lawyer spends investigating or litigating matters that end up producing no revenue. See Burlington v. Dague, 505 U.S. 557, 565, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992) (“An attorney operating on a contingency-fee basis pools the risks presented by his various cases: cases that turn out to be successful pay for the time he gambled on those that did not.”); ...