Evans & Luptak, PLC v. Lizza

• Decision Date: 23 August 2002
• Docket Number: Docket No. 223927.
• Citation: 251 Mich. App. 187,650 N.W.2d 364
• Parties: EVANS & LUPTAK, PLC, Plaintiff-Appellant/Cross-Appellee, v. John B. LIZZA and Dennis A. Dettmer, jointly and severally, Defendants-Appellees/Cross-Appellants.
• Court: Court of Appeal of Michigan — District of US

650 N.W.2d 364

251 Mich. App. 187

EVANS & LUPTAK, PLC, Plaintiff-Appellant/Cross-Appellee, v. John B. LIZZA and Dennis A. Dettmer, jointly and severally, Defendants-Appellees/Cross-Appellants.

Docket No. 223927.

Court of Appeals of Michigan.

Submitted January 10, 2002, at Detroit.

Decided May 3, 2002, at 9:05 a.m.

Released for Publication August 23, 2002.

Honigman, Miller, Schwartz and Cohn, LLP (by Peter M. Alter and John S. Kane), Detroit and Allan Falk, P.C. (by Allan Falk), Okemos, for the plaintiff.

Marc M. Susselman, Detroit, for the defendants.

Before: COOPER, P.J., and RICHARD ALLEN GRIFFIN and SAAD, JJ.

RICHARD ALLEN GRIFFIN, J.

This case involves an attorney conflict of interest. Plaintiff requests this Court to enforce an unethical referral fee contract.¹ Like the circuit court, we refuse to do so and, accordingly, affirm the summary disposition granted in favor of defendants. We hold that the alleged contract is unethical because it violates the Michigan Rules of Professional Conduct (MPRC). Furthermore, we hold that unethical contracts violate our public policy and therefore are unenforceable.

I

The genesis of the present action is a December 9, 1994, automobile accident. On that date, Robert P. Stephenson was the operator of an automobile² in which his son, Robert Brett Stephenson (Brett), and his mother-in-law, Florence Budge, were passengers. All three occupants were killed when the automobile suddenly crossed the centerline of the highway and collided with another vehicle.

Estates were opened for Robert P. Stephenson and Brett Stephenson in the Oakland County Probate Court, while an estate was opened in Ontario for Canadian citizen Florence Budge. Catherine Stephenson Topolsky (Robert's wife, Brett's mother, and Florence's daughter) was initially appointed personal representative of the estates of both Robert P. Stephenson and Brett Stephenson. She retained plaintiff Evans & Luptak, PLC, as the attorney at law for both estates.

Although plaintiff represented the estate of Robert P. Stephenson, on August 19, 1996, Evans & Luptak attorney Marilyn H. Mitchell wrote a demand letter to General Accident Insurance asserting wrongful death claims against her own client. Plaintiff admits in its appellate brief that it advocated the filing of wrongful death lawsuits against its client:

Plaintiff determined and advised that the estates of the Brett Stephenson and Florence Budge had causes of actions for wrongful death against the Estate of Robert P. Stephenson, but plaintiff also determined that the estates would have to sue the Estate of Robert P. Shephenson as a nominal defendant if the insurance company declined to negotiate a settlement. Plaintiff advised Mrs. Topolsky, as personal representative of Brett Stephenson's Estate and as a beneficiary of the Budge Estate, that such causes of action existed as a potential asset of her son's estate (as well as her mother's estate).

In the lower court, Evans & Luptak "senior member" Michael J. Mehr filed an affidavit in which he swore:

I consulted with my client, Mrs. Catherine Stephenson (now Topolsky) as Personal Representative of the Estate of Robert P. Stephenson (Mrs. Stephenson's deceased husband) and as Personal Representative of the Estate of Robert Brett Stephenson (her deceased son) in or about November 1996 with respect to my previous recommendation that the Estate of Robert Brett Stephenson and the Estate of Florence Budge (Mrs. Stephenson's mother) should pursue wrongful death lawsuits against the Estate of Robert P. Stephenson and Mr. Stephenson's employer, Maritz, Inc., to obtain insurance proceeds under Maritz's policy with General Accident Insurance.

Before the filing of the lawsuit Estate of Robert Brett Stephenson v. Estate of Robert P. Stephenson, Oakland Circuit Court, Docket No. 96-534994-NI, Mrs. Topolsky withdrew as personal representative of the Robert P. Stephenson estate and her friend Maurice J. Beznos was substituted as its personal representative. Also, plaintiff referred the wrongful death claims against its own client (estate of Robert P. Stephenson) to defendants pursuant to an alleged referral contract in which defendants agreed to pay plaintiff a one-third contingent fee of all recoveries obtained against plaintiff's client.

Following service of the complaint, attorney Marilyn H. Mitchell of plaintiff Evans & Luptak, (who six months earlier wrote a demand letter against her client) filed an answer on behalf of the Robert P. Stephenson estate. Thereafter, an attorney retained by General Accident Insurance to represent the Robert P. Stephenson estate and vehicle owner, Martiz, Inc., promptly demanded that attorney Mitchell withdraw from the litigation, citing her conflict of interest:

As you know, I was a bit chagrinned when you advised me that your law firm had filed an answer on behalf of defendant, Maurice J. Beznos, Personal Representative of the Estate of Robert P. Stephenson. As I advised you, my review of the file provided to me by General Accident Insurance Company, who has retained me to represent both defendants, disclosed that your law firm, and more particularly yourself, were making claim against the estate of decedent defendant Robert P. Stephenson, this being the very entity you supposedly filed an answer for. As I advised you, yes, I believe it is a conflict of interest to represent one party against another and then turn around and represent the interests of the party against whom you had already made a claim. [Emphasis added.]

In response to the letter, Evans and Luptak withdrew as attorneys for the estate of Robert P. Stephenson in the wrongful death action.

The wrongful death lawsuits proceeded and were eventually settled with the automobile insurance company paying all settlement proceeds.³ In the present lawsuit, plaintiff seeks to enforce its alleged referral agreement with defendants and claims one-third of the attorney fees realized in the wrongful death suits against its own client.

The lower court granted summary disposition in favor of defendants. The court ruled that the alleged referral agreement violated the MRPC and therefore was unenforceable. The lower court also rejected plaintiff's argument that the insurance company was the real party in interest and the personal representatives of the estates could waive plaintiff's conflict of interest. Finally, the lower court denied defendants' motion for sanctions that asserted the complaint was without a reasonable basis in law or in fact (MCR 2.114[D]) and was devoid of legal merit (M.C.L. § 600.2591[3][a]). Plaintiff appeals as of right the order granting summary disposition in favor of defendants; defendants cross appeal the order denying an award of sanctions. We affirm.

II

As its first issue on appeal, plaintiff argues that the MRPC may not be used as a defense to plaintiff's breach of contract action because the rules expressly provide that they do not give rise to a cause of action for enforcement of a rule or for damages caused by a failure to comply with an ethical obligation. Specifically, plaintiff relies on MRPC 1.0(b):

Failure to comply with an obligation or prohibition imposed by a rule is a basis for invoking the disciplinary process. The rules do not however, give rise to a cause of action for enforcement of a rule or for damages caused by failure to comply with an obligation or prohibition imposed by a rule. In a civil or criminal action, the admissibility of the Rules of Professional Conduct is governed by the Michigan Rules of Evidence and other provisions of law.

Defendants argue that MRPC 1.0(b) is inapplicable because defendants have not filed a cause of action for enforcement of a disciplinary rule or for damages arising out of a violation of a disciplinary rule. Rather, defendants have simply defended a cause of action brought by plaintiff raising as a defense that the alleged contract is unethical because it violates our public policy as expressed in the Michigan Rules of Professional Conduct. We agree with defendants.

Plaintiff's reliance on the lead opinion in People v. Green, 405 Mich. 273, 274 N.W.2d 448 (1979), is misguided. Green was a criminal case in which the issue was whether the extraordinary remedy of the exclusionary rule would be invoked to suppress evidence obtained in violation of our former Code of Professional Responsibility. The lead opinion by Chief Justice Coleman was joined by only one other justice and therefore is not precedentially binding. People v. Anderson, 389 Mich. 155, 170, 205 N.W.2d 461 (1973); also see Dean v. Chrysler Corp., 434 Mich. 655, 660-661, n. 7, 455 N.W.2d 699 (1990). Further, because the issue involved the scope of the criminal exclusionary rule, Green is readily distinguishable from the present issue whether the court should enforce an unethical contract in a civil action.

Plaintiff also argues that "the Michigan Rules of Professional Conduct are not rules of substantive law" and therefore are inapplicable in court proceedings. Plaintiff's argument appears to be that judges have no ethical oversight regarding their court officers and that the Attorney Grievance Commission is the exclusive authority regulating the ethical obligations of attorneys.

In this regard, plaintiff fails to understand the proper role of the court regarding the ethical conduct of its officers. Starting with In re Mills, 1 Mich. 392 (1850), Michigan has a long tradition of judicial oversight of the ethical conduct of its court officers. See Pasman, The conflict of "conflict of interest": The Michigan example, 1995 Det. Col. L.R. 133. Our ethics rules were originally based on statute and common law. However, in 1971, the Michigan Supreme Court adopted a version of the American Bar Association Code of Professional Conduct. Thereafter in 1988, the Code of Professional Conduct was superseded by the Supreme Court's adoption of a version of the ABA's Model Rules of Professional Conduct....