Immigration Law Group, Llp v. McKitrick

• Decision Date: 04 April 2007
• Docket Number: No. 06-2209.,06-2209.
• Citation: 484 F.3d 998
• Parties: IMMIGRATION LAW GROUP, LLP; Visa Law Group, L.L.C., Appellants, v. Danna McKITRICK, P.C.; Danna Stockenberg, P.C.; Danna McNary Stockenberg and Soraghan, P.C.; Danna Soraghan Stockenberg and McNary, P.C.; Danna Soraghan Stockenberg and Shaw, P.C.; Danna and Shaw, P.C.; Klamer Danna and Shaw, P.C., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

484 F.3d 998

IMMIGRATION LAW GROUP, LLP; Visa Law Group, L.L.C., Appellants, v. Danna McKITRICK, P.C.; Danna Stockenberg, P.C.; Danna McNary Stockenberg and Soraghan, P.C.; Danna Soraghan Stockenberg and McNary, P.C.; Danna Soraghan Stockenberg and Shaw, P.C.; Danna and Shaw, P.C.; Klamer Danna and Shaw, P.C., Appellees.

No. 06-2209.

United States Court of Appeals, Eighth Circuit.

Submitted: December 14, 2006.

Filed: April 4, 2007.

Matthew J. Sauter, argued, St. Louis, MO, for appellant.

Thomas J. Plunkert, argued, St. Louis, MO, for appellee.

Before WOLLMAN, RILEY, and SHEPHERD, Circuit Judges.

WOLLMAN, Circuit Judge.

The Immigration Law Group (ILG) alleges that Danna McKitrick, P.C. (Danna) breached its immigration services contract with various former clients now represented by ILG by refusing to transfer unearned retainer fees to ILG as requested by the clients. After a bench trial, the district court¹ held, inter alia, that ILG was equitably estopped from pursuing its claims against Danna and that no contract had been breached. ILG appeals from the district court's equitable estoppel and breach of contract rulings. We affirm.

I. Background

American Immigration Services, Inc. (AIS), a for-profit corporation, connected clients with Danna for the provision of legal services associated with an immigrant investor visa program established by AIS. The program allowed foreign investors to obtain permanent lawful United States resident status under the Immigration and Naturalization Services' (INS) EB-5 classification. Gene McNary, who was a partner at Danna, the head of its immigration practice, a member of its executive committee, and a former commissioner of the INS, had a relationship with AIS and secured the retainer agreements from the various clients for the legal work. The legal work involved three steps: (a) preparing and filing a "Petition for Immigrant Investor" form (I-526) with the INS; (b) attending a visa interview resulting in the issuance of a two-year conditional green card; and (c) preparing and filing a "Petition to Remove Two-Year Condition with the INS" (I-829).²

Danna entered into different retainer agreements with different clients.³ The various differences resulted from McNary's revisions of a basic AIS contract. McNary considered the clients' fees earned upon issuance of the conditional visa—step (b)—for all of the agreements, although not all of the agreements explicitly specify when fees are deemed earned. Accordingly, once the conditional visas were issued, McNary had the associated fees transferred out of client trust accounts and into Danna's general operating account. From there, even though the clients had not yet become eligible for the removal of conditions under step (c), the fees were treated as revenue and distributed among the partnership—with a significant portion going to McNary under his compensation agreement.

McNary left Danna and joined ILG on March 31, 1998. Prior to his departure, David Morris, a partner at ILG, wrote a letter to McNary in which he acknowledged that the legal retainer fees collected by Danna were eligible to be deemed earned as of the completion of step (b). In April 1998, after McNary had joined ILG, McNary and Morris met with Danna partners to discuss the transfer of the EB-5 program's clients to McNary's new firm. The Danna partners "made it clear that there was not going to be any money" turned over to McNary from the retainer fees paid by the clients. In the face of this knowledge, McNary and his new firm induced the clients to terminate their relationship with Danna. ILG agreed to complete the remaining legal services without charge, whereupon the clients sent letters to Danna stating that they were assigning to ILG their rights to any remaining legal retainer fees paid to Danna that had not yet been earned and instructing Danna to transfer the money and relevant case files to ILG. Because Danna considered all of the fees earned and had already distributed them from its general operating account, Danna refused to remit any money to ILG. ILG, nevertheless, completed the step (c) work for the clients. One client subsequently sent a letter to the Missouri Bar Association alleging that Danna had violated the Rules of Professional Responsibility by treating the fees as earned prior to the completion of step (c). The Chief Disciplinary Counsel informed the complaining client that his "investigation does not establish probable cause to believe that [there had been any violation of] the Rules of Professional Conduct."

ILG brought this action, seeking remedies under breach of contract and quantum meruit theories. Danna asserted an equitable estoppel defense and also asserted that the statute of limitations had run on the claims. As stated above, the district court held, inter alia, that ILG was equitably estopped from asserting its claims.⁴

II. Discussion

We review a district court's factual findings for clear error and its legal conclusions de novo. Tamko Roofing Prods., Inc. v. Smith Eng'g Co., 450 F.3d 822, 827 (8th Cir.2006). We apply Missouri law in this diversity action. Lindsay v. Safeco Ins. Co. of Am., 447 F.3d 615, 617 (8th Cir.2006). The doctrine of equitable estoppel prevents a party from taking inequitable advantage of a situation it caused. Weiss v. Rojanasathit, 975 S.W.2d 113, 120 (Mo.1998) (superseded by statute on other grounds). An equitable estoppel defense requires a showing of three elements: (1) an admission, statement, or act inconsistent with the claim afterward asserted or sued upon; (2) action by the other party on the faith of the admission, statement, or act; and (3) injury to such other party resulting from allowing the first party to contradict or repudiate the admission, statement, or act. Stone v. Crown Diversified Indus. Corp., 9 S.W.3d 659, 668 (Mo.Ct.App.1999) (citing Missouri Highway & Transp. Comm'n v. Myers, 785 S.W.2d 70, 73 (Mo.1990)).

A. Equitable Estoppel

In regard to the first element, ILG does not contest that McNary acted inconsistently with the claim in this suit by treating the clients' funds as fully earned upon the issuance of a conditional visa when he transferred the fees out of client trust accounts.

Instead, ILG contends that the second element is not satisfied because Danna failed to introduce sufficient evidence demonstrating its reliance on McNary's action and belief. It points out that McNary never shared his interpretation of the agreements with anyone at Danna. It further argues that because Danna knew it would incur additional costs completing step (c) for each of McNary's clients, it could not have justifiably relied on McNary's conclusion. Additionally, it suggests that if Danna relied on McNary's act of transferring the fees to the firm's operating account, such reliance was misplaced because Danna had equivalent access to the agreements and could have made its own determination as to when the fees were earned. We find these contentions unpersuasive.

First, removing the fees from the client trust account demonstrated McNary's belief that the fees were earned, even though he never mentioned his opinion on the matter to anyone at Danna. The firm relied on the propriety of McNary's shifting of the fees...