Garrick v. Weaver

• Decision Date: 30 October 1989
• Docket Number: 87-2812 and 87-2813,Nos. 87-2807,s. 87-2807
• Citation: 888 F.2d 687
• Parties: Roberta GARRICK, Individually, Plaintiff, and Roberta Garrick, Individually and as parent and next friend of Jamie Alan Garrick, a minor, and Sandi Jean Garrick, a minor, Plaintiff-Appellant, v. Don WEAVER, Harry Weaver, Todd Lecesne, and Errol Lecesne, Defendants, Chris Key, Appellant, Melton & Puccini, P.A., Intervenors-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 687

888 F.2d 687

15 Fed.R.Serv.3d 324

Roberta GARRICK, Individually, Plaintiff and Roberta Garrick, Individually and as parent and next friend of Jamie Alan Garrick, a minor, and Sandi Jean Garrick, a minor, Plaintiff-Appellant, v. Don WEAVER, Harry Weaver, Todd Lecesne, and Errol Lecesne, Defendants Chris Key, Appellant Melton & Puccini, P.A., Intervenors-Appellees.

Nos. 87-2807, 87-2812 and 87-2813.

United States Court of Appeals Tenth Circuit.

Oct. 30, 1989.

Richard B. Addis and David L. Plotksy, Albuquerque, N.M., for plaintiff-appellant Roberta Garrick.

Robert E. Melton, of Melton & Puccini, P.A., Albuquerque, N.M., for intervenors-appellees, Melton & Puccini, P.A.

Chris Key, Albuquerque, N.M., pro se.

Charlotte Mary Toulouse of Toulouse, Toulouse & Garcia, P.A., Albuquerque, N.M., guardian ad litem.

Before McKAY, TACHA, and EBEL, Circuit Judges.

TACHA, Circuit Judge.

This appeal is from an order of the magistrate approving a settlement and apportioning a fund. The case was heard by the magistrate after reference by the district court pursuant to 28 U.S.C. section 636(c). ¹ The appellant attorneys, Robert Melton and Chris Key, and plaintiff-cross-appellant Roberta Garrick, on behalf of herself and her two minor children, allege that the magistrate abused his discretion in reviewing and revising attorneys' fees under two contingency fee contracts. Additionally, Roberta Garrick challenges the magistrate's order directing that the funds apportioned to the minor Garrick children be placed in a trust, claiming violations of the family's freedom of religion and New Mexico law. We affirm.

I.

The claims in this case arose from an automobile accident that seriously injured the plaintiffs, Roberta Garrick and her two minor children, and killed a passenger, Russell Littlepage. All three Garricks suffered permanent disabilities as a result of the accident. The Garricks and the defendants agreed to settle for $338,755, and the settlement was taken before the court for approval because of the presence of the minor Garrick children.

The Garricks were first represented in the settlement negotiations by attorney Melton, who also represented the Littlepage estate. Melton's dual representation created a potential conflict of interest because Garrick, the driver of the car in which Littlepage was killed, was potentially liable to the Littlepage estate. Melton and Garrick agreed that Melton was entitled to 33 1/3% of any recovery the Garricks obtained. They later agreed to a fee of 25% if the case settled. Melton undertook settlement negotiations and procured a settlement offer that Garrick rejected. Garrick then discharged Melton.

Garrick next retained attorney Key to represent both herself and her children. Garrick and Key exchanged a number of letters trying to settle the terms of Key's retainer. Garrick eventually signed a retainer letter dated April 18, 1986, which purported to accept the terms offered in Key's earlier letter of February 6, 1986. Key and Garrick otherwise never formalized the terms of the retainer agreement. Key apprised Garrick of a potential conflict of interest between her and her children and procured the appointment of a guardian ad litem to safeguard the children's interests. After the relationship between Key and Garrick deteriorated, Key notified Garrick that he was withdrawing and moved for permission to withdraw and for instructions regarding the representation of the children. Before the court granted Key permission to withdraw, Key signed a settlement offer on behalf of Garrick with her approval. Garrick then retained her current counsel.

Upon determining that Garrick had settled, Melton intervened to assert an attorney's lien for his fee pursuant to the Melton-Garrick contingency fee agreement. Key also appeared to defend his contingency fee. At the hearing the magistrate found that Melton had told both Garrick and representatives of the Littlepage estate of the conflict of interest, but also found that Melton had not outlined adequately to Garrick the ramifications of the conflict of interest. With respect to Key, the magistrate found that despite the long series of letters, Key and Garrick had not arrived at a common understanding of the material fee agreement. The magistrate entered judgment apportioning the settlement funds between Garrick and her two children and directed the guardian ad litem to place the children's money into a corporate trust in a federally insured national banking institution. The magistrate also awarded fees to attorneys Melton, Key, and the two guardians ad litem on a quantum meruit basis. Subsequent to his order apportioning the settlement fund, the magistrate granted the defendants' motion to pay the entire amount into the registry of the court pending resolution of the dispute over attorneys' fees on appeal. Following post-judgment motions and an earlier untimely appeal, these appeals followed.

II.

We review the magistrate's award of attorneys' fees for abuse of discretion. See Garrett v. McRee, 201 F.2d 250, 254 (10th Cir.1953); Rosquist v. Soo Line R.R., 692 F.2d 1107, 1112 (7th Cir.1982).

A.

Attorney Robert Melton challenges the magistrate's order setting aside his contingency fee agreement and awarding him fees on a quantum meruit basis. We first review the propriety of the magistrate's assumption of jurisdiction in determining attorneys' fees. Melton argues that the magistrate was without jurisdiction to review the propriety of his fees because Melton never participated in litigation before the court on the underlying subject matter. We disagree. It is well established that "[d]etermining the legal fees a party to a lawsuit properly before the court owes its attorney, with respect to the work done in the suit being litigated, easily fits the concept of ancillary jurisdiction." Jenkins v. Weinshienk, 670 F.2d 915, 918 (10th Cir.1982) (emphasis in original). Even though Melton did not personally litigate before the court, his claim still is derived from "work done in the suit being litigated." Melton's claim thus falls within the rule of Jenkins. Moreover, to the extent Melton seeks to recover from the fund, the court has jurisdiction. See Rosquist, 692 F.2d at 1110 (court retains control of fund while disposition of fund is unsettled).

The second issue we must decide is whether federal or New Mexico law controls our analysis. Melton argues that we must look to New Mexico law concerning judicial modification of contractual contingent fees, citing Novinger v. E.I. DuPont de Nemours & Co. Inc., 809 F.2d 212, 218 (3d Cir.) (reviewing Pennsylvania law governing contingency fees), cert. denied, 481 U.S. 1069, 107 S.Ct. 2462, 95 L.Ed.2d 871 (1987); and that New Mexico law does not permit a court to modify a contractual contingent fee, relying on language in Citizens Bank v. C & H Construction & Paving Co., Inc., 93 N.M. 422, 600 P.2d 1212 (Ct.App.1979). Although in our view a federal court does have inherent power to review attorneys' fees, see Rosquist, 692 F.2d at 1111; Dunn v. H.K. Porter Co., 602 F.2d 1105, 1108-09 (3d Cir.1979), we assume, arguendo, that New Mexico law governs the power of a federal court to superintend attorneys' fees in a diversity action. We hold that under New Mexico law the magistrate did not abuse his discretion in setting aside Melton's contingency fee agreement and awarding fees to Melton on a quantum meruit basis.

In Walters v. Hastings, 84 N.M. 101, 500 P.2d 186 (1972), the New Mexico Supreme Court implicitly recognized that a contingent fee agreement may be altered where the attorney is discharged for cause. To be entitled to such relief, the court held that the party disputing the fee must

prove some shortcoming in their attorney's professional activities in order to prevail.... [T]he prevailing standards must generally be established, by expert ... testimony.... We recognize that situations may arise in which the proof is so clear and obvious that a trial court could, with propriety, rule as a matter of law on whether the attorney met the standards. Similarly, cases may arise in which the asserted shortcomings of the attorney are such that they may be recognized or inferred from the common knowledge of laymen.

Id. 500 P.2d at 192 (citation omitted). The Garricks complied with this requirement. The trial court found that although Melton had discussed the conflict of interest with Garrick, he had failed to outline adequately the ramifications of the conflict of interest. The magistrate determined that this failure violated New Mexico ethics rule SCRA 16-107(A)(2), adopted by Local Rule 3.0 for the District of New Mexico. The magistrate thus declined to enforce the contingent fee agreement. Instead, he properly awarded fees to Melton based on the reasonable value of Melton's legal services. See Rosquist, 692 F.2d at 1112 (attorneys' fees viewed under reasonableness standard); Northern Pueblos Enters. v. Montgomery, 98 N.M. 47, 644 P.2d 1036, 1038 (1982) (where attorney asserts lien, court may assess reasonableness of asserted fee); see also Novinger, 809 F.2d at 218 (quantum meruit recovery for reasonable value of attorney services allowed under Pennsylvania law); Garrett v. Garrett, 140 Ariz. 564, 567, 683 P.2d 1166, 1169 (App.1983) (dictum) (discharged attorney entitled to reimbursement for reasonable value of services under Arizona law); Fracasse v. Brent, 6 Cal.3d 784, 100 Cal.Rptr. 385, 390, 494 P.2d 9, 14 (1972) (en banc) (quantum meruit recovery where attorney discharged for cause under California law); Ross v. Scannell, 97 Wash.2d 598, 647 P.2d 1004, 1010-11 (1982) (en banc) (attorney discharged for cause recovers under quantum meruit, but misconduct may cause forfeiture of all fees). Based on this record and New Mexico law, we cannot say the magistrate abused his discretion. ²

Garrick and the guardian ad litem in the cross appeal urge that the magistrate erred in awarding Melton any fees...