Thomas J. Tucker, United States Bankruptcy Judge
Because of several orders previously filed, all counts and claims in the Plaintiff's Complaint in this adversary proceeding (Docket # 1) have been resolved. The only claim that is not yet resolved is the counterclaim filed by Defendant Ackerman & Ackerman, P.C. (the “Ackerman Firm”)(Docket # 68, the “Counterclaim”). The Court held a bench trial on the Counterclaim on April 28, 2015, and took it under advisement.
The Court has considered all of the arguments of the parties; all of the exhibits admitted into evidence at trial, namely Plaintiff's Exhibits 1, 3, 4, 5, and 6 and Defendant's Exhibit B; and all of the testimony of the trial witnesses, namely Darius Dynkowski, Alan Ackerman, and Gene Kohut. This opinion constitutes the Court's findings of fact and conclusions of law regarding the Counterclaim.
For the reasons stated in this opinion, the Court will enter judgment for the Defendant Ackerman Firm on the Counterclaim in the amount of $324,023.49.
This Court has subject matter jurisdiction over this adversary proceeding under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D. Mich.). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), 157(b)(2)(B), and 157(b)(2)(O).
III. Background and factsInitially, the Court incorporates by reference into this opinion, as part of its findings of fact, all of the facts stipulated to by the parties in the Final Pretrial Order.1 Next, the Court adopts and finds as fact the following things, which the Court stated in its December 24, 2014 opinion filed in the main case:2
The state law action (the “Becker Action”) was filed by McInerney in 2009, against Charles E. Becker and Becker Ventures, LLC (the “Becker Parties”) in the Oakland County, Michigan Circuit Court. McInerney sought damages in excess of $9 million, based on claims of breach of contract; breach of fiduciary duty; unjust enrichment; and promissory estoppel. The suit arose out of two written agreements and an alleged oral agreement entered into between McInerney and the Becker Parties. This Court described and discussed the Becker Action at length in its first settlement opinion in this case. See [In re McInerney, 499 B.R. 574, 576–80, 584–97 (Bankr.E.D.Mich.2013).]
Before McInerney filed his voluntary petition in this bankruptcy case on July 12, 2011, under Chapter 11, he had been represented initially in the Becker Action by the Bush Seyferth firm. That firm had represented McInerney on an hourly-rate basis. After that firm withdrew, McInerney was represented by the Ackerman Firm. The Ackerman Firm was retained under a contingency-fee agreement with McInerney. Under that agreement, the parties agreed that the Ackerman Firm would be paid a fee “from the proceeds of the recoveries” from the claims against the Becker Parties, “a fee of 33–1/3 % of all monies recovered.” In addition, McInerney agreed “to pay and reimburse to the law firm all costs, disbursements, and expenses incurred or deemed necessary by the law firm in handling the client's case.”
By the time McInerney filed his Chapter 11 bankruptcy case, the state trial court in the Becker Action had granted summary disposition in favor of the Becker Parties on McInerney's claims, and had denied a motion for reconsideration filed by McInerney. And McInerney had appealed those decisions to the Michigan Court of Appeals. While that appeal was pending, but before briefs were filed in the Michigan Court of Appeals, McInerney filed his Chapter 11 case.
As debtor-in-possession in the Chapter 11 case, McInerney filed a motion seeking approval to employ the Ackerman Firm, to continue representing him in the Becker Action. Objections were filed, and the Court held a hearing and ultimately granted McInerney's motion, with modifications. In its Order filed November 9, 2011, this Court approved McInerney's employment of the Ackerman Firm as special counsel, on the same contingency-fee basis as in the pre-petition Contingent Fee Retainer Agreement.
While this bankruptcy case was in Chapter 11, the Ackerman Firm did substantial work, including the filing of extensive briefs in the Michigan Court of Appeals.
McInerney failed to obtain confirmation of a Chapter 11 plan, and on November 2, 2012, the Court converted this case to Chapter 7.
After the conversion, the Chapter 7 Trustee chose not to employ the Ackerman Firm to represent him in prosecuting the Becker Action. Thus, the Ackerman Firm's representation of the bankruptcy estate in the Becker Action was terminated.
At the time of the conversion to Chapter 7 and the termination of the Ackerman Firm's employment as counsel in connection with the Becker Action, the status of that state court action was that McInerney's appeal had been fully briefed in the Michigan Court of Appeals, and was awaiting an oral argument date. The Chapter 7 Trustee and his counsel did no substantive work on the case in the Michigan Court of Appeals. Basically their only work on the matter in that court was to seek and obtain several delays by the Michigan Court of Appeals in setting any oral argument date, pending the outcome of the Trustee's efforts to settle the case and obtain bankruptcy court approval of the settlement.
The Chapter 7 Trustee and his counsel (Wolfson Bolton PLLC) investigated and evaluated the claims against the Becker Parties, and negotiated and sought approval of an initial proposed settlement that was denied by the Court, and a second, higher settlement that was approved by this Court.
On March 11, 2013, the Chapter 7 Trustee filed a motion seeking approval to compromise, on behalf of the bankruptcy estate, the Becker Action, for $250,000. Several creditors objected, including the Ackerman Firm, and the Court ultimately denied the Trustee's settlement motion as unreasonably low. The Court's opinion and the related order were filed on October 17, 2013. (The Court's opinion is published as In re McInerney, 499 B.R. 574 (Bankr.E.D.Mich.2013).)
The Trustee then negotiated a higher settlement with the Becker Parties, this time in the amount of $1 million. The Trustee moved for approval of that higher settlement on November 13, 2013. Several creditors objected to that motion, including the Ackerman Firm, but the Court approved that higher settlement, in an opinion and related order filed August 7, 2014. (The Court's opinion regarding the second settlement motion is reported as In re McInerney, 516 B.R. 171 (Bankr.E.D.Mich.2014).) The Becker Parties then paid the $1 million settlement amount to the bankruptcy estate.
(footnotes containing record citations omitted).
The Court makes additional findings in the next section of this opinion.
As the Court discussed in its December 24, 2014 opinion, and as the parties to the Counterclaim agree, the Ackerman Firm has an enforceable common law charging lien, under Michigan law, against the $1 million Becker settlement proceeds that the McInerney bankruptcy estate received. This common law charging lien secures the payment of the attorney fee and expense reimbursement that the Court finds the Ackerman Firm is entitled to for its work on the Becker lawsuit.
In the Final Pretrial Order3 and at trial, the Plaintiff Trustee and the Defendant Ackerman Firm have agreed that the total of the expenses incurred by the Ackerman Firm in working on the Becker matter is $34,319.25. The parties agree, and the Court now concludes, that the Defendant Ackerman Firm is entitled to reimbursement of expenses in this amount.
The issue remaining is what attorney fee amount the Ackerman Firm is entitled to for its work on the Becker matter. The Court discussed in detail the law applicable to this issue at pp. 10–15 of its December 24, 2014 opinion. The Court adopts that discussion now, and incorporates it into this opinion by reference.
The Plaintiff Trustee and the Defendant Ackerman Firm agreed at trial, in effect, to the following. Because the cash value of the Becker settlement is $1 million, and because the reimbursable expenses incurred by the Ackerman Firm in working on the Becker matter total $34,319.25, the 1/3 contingent fee that the Ackerman Firm would be entitled to under its retainer agreement (Defendant's Exhibit B), would be $321,893.60, that is, if the Court were to find that 100% of the bankruptcy estate's recovery of the $1 million Becker settlement amount is attributable to the Ackerman Firm, as compared to successor counsel.4
The Court agrees with the foregoing. The remaining dispute between the parties is what percentage of the bankruptcy estate's $1 million recovery is attributable to the Ackerman Firm's work on the Becker matter, before the November 2, 2012 conversion of the McInerney case to Chapter 7, when the Ackerman Firm's retention as counsel on the Becker matter terminated. At trial, the Ackerman Firm argued that its percentage is 100%; but the Plaintiff Trustee argued that the Ackerman Firm's percentage is no more than 15%.
In its December 24, 2014 opinion, at pp. 13–15, this Court described the applicable law as follows:
More recently, in the 2013 case of Island Lake Arbors Condominium Assn. v. Meisner & Associates, P.C., the Michigan Court of Appeals refined the quantum meruit analysis to be applied, at least in the case like this one, where the terminated attorney represented a party in a non-personal injury case on a contingency fee basis. The attorney in Meisner represented the plaintiff in a civil action against a condominium developer/builder. The fee agreement provided the
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