Updike, Kelly & Spellacy v. Beckett

• Decision Date: 15 June 2004
• Court: Connecticut Supreme Court
• Parties: UPDIKE, KELLY AND SPELLACY, P.C. v. STEWART W. BECKETT, JR., ET AL.

269 Conn. 613

850 A.2d 145

UPDIKE, KELLY AND SPELLACY, P.C. v. STEWART W. BECKETT, JR., ET AL.

(SC 16947), (SC 16948), (SC 16949).

Supreme Court of Connecticut.

Argued January 7, 2004.

Officially released June 15, 2004.

Sullivan, C. J., and Norcott, Katz, Palmer and Vertefeuille, Js.

Leon M. Rosenblatt, for the appellants-appellees (defendants).

Jeffrey L. Williams, with whom were Barbara A. Frederick and, on the brief, Michael J. Byrne, for the appellee-appellant (plaintiff).

Opinion

SULLIVAN, C. J.

These appeals arise from an action filed by the plaintiff, Updike, Kelly & Spellacy, P.C., a law firm, against the defendants,¹ former airline pilots, seeking to recover legal fees incurred in representing the defendants in three cases. The plaintiff's third amended revised complaint alleged breach of contract (count one) and sought damages in quantum meruit (count two). The defendants filed a five count counterclaim seeking disgorgement of excessive legal fees (count one) and alleging legal malpractice (count two), intentional misrepresentation (count three), violations of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. (count four), and negligent misrepresentation (count five).² The trial court directed a verdict against the defendants on counts one, two, three and five of their counterclaim. The parties agreed that the fourth count of the counterclaim alleging CUTPA violations would be decided by the court. The court also directed a partial judgment for the plaintiff on count one of its third amended revised complaint alleging breach of contract. The court instructed the jury that the only issues that it was required to determine were (1) whether the plaintiff was entitled to certain fees for nonattorney time and disbursements pursuant to the contract or under a theory of quantum meruit and (2) whether the defendants owed the damages jointly and severally or severally only. The jury determined that the plaintiff was not entitled to charge fees for nonattorneys but that it was entitled to recover for disbursements. It found damages in the amount of $596,324.28. The jury also found that the damages were not owed jointly and severally, but severally only.

After granting the plaintiff's motion for award of interest in the amount of $267,447.92, the trial court rendered judgment for the plaintiff in the amount of $863,772.12. Thereafter, the court clarified that judgment had entered against each defendant separately in the amount of $13,087.46 and rendered judgment for the plaintiff on the defendants' CUTPA claim. The defendants then filed these appeals,³ raising numerous challenges to the trial court's rulings. The plaintiff cross appealed claiming that the trial court improperly had: (1) submitted the issue of several liability to the jury; and (2) allowed the defendants' expert witness to instruct the jury on the nature of fiduciary duty. We conclude that the trial court improperly directed a partial verdict for the plaintiff on the plaintiff's breach of contract claim. We also conclude that the trial court improperly directed a verdict for the plaintiff on the defendants' claims of negligent and intentional misrepresentation and breach of fiduciary duty. Finally, we conclude that the trial court improperly rendered judgment for the plaintiff on the defendants' counterclaim alleging a violation of CUTPA. Accordingly, we reverse the judgment.

Evidence of the following relevant facts was presented at trial. The defendants are airline pilots who formerly were employed by Pan American World Airways, Inc. (Pan Am). In 1991, Pan Am filed a bankruptcy plan under which Delta Air Lines, Inc. (Delta), was to purchase many of its assets and fund a successor entity, Pan Am II. The plan also provided that some Pan Am pilots would transfer to Delta and others would work for Pan Am II. Several pilots became concerned that their union representatives in the Air Line Pilots Association (union) were not adequately protecting their rights in the transfer process. A group of the pilots, including the defendants Stewart W. Beckett, Jr., and Edward Spellacy, formed a Concerned Pilots Committee (committee) and authorized Beckett to retain counsel to protect their interests.

Stewart Beckett first discussed the pilots'⁴ concerns with his daughter, Suzann Beckett, an attorney with the law firm of Eisenberg, Anderson, Michalik & Lynch. Suzann Beckett's firm could not handle the case, so she referred the matter to Scott Karsten, an attorney with the law firm of Sack, Spector & Barrett. On August 29, 1991, Stewart Beckett sent a memo to the pilots stating that the committee anticipated taking legal action against the union and Pan Am and that Karsten had been retained to represent the committee in those matters. The memo also invited the pilots to join in the actions and to contribute to a legal expense fund.

On November 26, 1991, Karsten wrote to Stewart Beckett to memorialize the fee arrangements for the anticipated litigation. He informed Beckett that he anticipated bringing two actions, one against the union and one against Pan Am or Delta, or both. The letter indicated that Karsten's firm intended "to conduct these proceedings from initiation through trial, if necessary, on behalf of all persons in your group who indicate by countersigning this letter their desire to participate." It also stated that, "[i]n view of the uncertainties of recovery in this type of litigation, the need to devote substantial resources to its proper prosecution and the likely duration and complexity of the proceedings," the firm would neither charge its full hourly rate nor expect a contingency fee of one third of the ultimate recovery. Instead, the firm would "reduce [Karsten's] 1991 usual hourly rate of $175 to $100 per hour, with annual increases . . . in the amount of $10 per hour." In addition, the firm would receive 20 percent of any gross recovery as a contingency fee. The letter also stated that "[i]n the event of affiliation with other counsel, as in connection with the age discrimination claim, these fee arrangements will be the objective . . . ."⁵ The following language appeared at the bottom of the last page of the letter: "I agree to participate in litigation against [the union], Delta Airlines and Pan American World Airways, under the terms and conditions set forth in this letter." The language was followed by date and signature lines. Stewart Beckett testified at trial that he forwarded copies of the retainer letter to the other pilots. Karsten testified that every defendant in the present case signed a copy of the letter. Several pilots who signed copies of the letter indicated on the copies that their involvement in the litigation would be limited to a specific dollar amount.⁶

During late 1991, Karsten had discussions with a number of law firms about the possibility of working with him on the pilot litigation. In December, 1991, Karsten and Suzann Beckett met with Thomas Shortell, the head of the plaintiff's litigation department, to discuss the plaintiff's potential involvement in the case. Suzann Beckett testified that Shortell assured her that he and one of his partners, Debra Neubert, would be primarily responsible for handling the case and "there would not be heavy use or really any use of associates." She also testified that Shortell had "specifically agreed that paralegals would not be charged."⁷ Karsten testified, however, that he chose the plaintiff to work on the case because the firm had a large staff of associate attorneys to handle the work. He also testified that he had informed Stewart Beckett that paralegals would be charged at a lower hourly rate than associates.

There was another meeting at the plaintiff's offices later in December, 1991. Karsten, Stewart Beckett, Spellacy, Shortell, Neubert and Suzann Beckett attended. Suzann Beckett testified that Neubert stated at the meeting that she thought that the litigation would cost approximately $400,000. Shortell indicated that he thought, on the basis of his extensive experience, that the costs would be between $200,000 and $400,000. The meeting participants discussed the fact that approximately 100 pilots would participate in the actions. Suzann Beckett also testified that Shortell assured Stewart Beckett that, if each pilot paid $500 twice annually for the three to four years that the litigation would probably take, that would cover the costs of litigation. Stewart Beckett testified that although they discussed the possibility that each pilot would contribute $4000, Shortell did not say anything at the meeting about how the money was going to be assessed or who would be responsible for paying the plaintiff's fees. He also testified that 164 pilots participated in the actions at one time or another.

On December 30, 1991, Karsten wrote to Shortell to propose a course of action. He indicated that approximately fifty-five pilots had responded to his November 26, 1991 retainer letter and had agreed to the fee arrangement discussed therein.⁸ Karsten noted that there were four possible causes of action, including breach of the duty of fair representation, age discrimination, breach of contract and a shareholders' derivative action. He stated: "I believe we are agreed, that whichever of our two firms performs work during the preparation of this litigation will be compensated at [$100 per hour with an annual $10 increase]." He also proposed splitting the 20 percent contingency fee on all claims except the duty of fair representation claim as follows: 12 percent to the plaintiff, 6 percent to Karsten's law firm and 2 percent to Suzann Beckett. With respect to the duty of fair representation claim, he proposed splitting the fee as follows: 9 percent to the plaintiff, 9 percent to Karsten's firm and 2 percent to Suzann Beckett. Karsten testified at trial that, as of the date of his letter to Shortell, he had not discussed the...