Alioto v. Hoiles
Decision Date | 02 August 2013 |
Docket Number | No. 10-1441,10-1441 |
Parties | JOSEPH M. ALIOTO, Plaintiff-Counter-Claim-Defendant-Appellant, v. TIMOTHY C. HOILES, Defendant-Counter-Claimant-Appellee. |
Court | U.S. Court of Appeals — Tenth Circuit |
(D. Colo.)
ORDER AND JUDGMENT*Before KELLY, SEYMOUR, and O'BRIEN, Circuit Judges.
Timothy Hoiles, a Colorado resident, and Joseph Alioto, a California attorney, entered into a written contingency attorney fee agreement (Fee Agreement or Agreement). Section 6147(a)(3) of the California Business and Professions Coderequires contingency fee agreements to contain, inter alia, The Fee Agreement did not contain a "related matters" statement. In our most recent decision (this is the third appeal in this case), we concluded § 6147(a)(3) did not require a "related matters" statement when in fact there are no related matters arising out of the attorney-client relationship not covered by the parties' contingency fee agreement. See Alioto v. Hoiles, 341 F. App'x 433, 441 (10th Cir. 2009). However, because the parties disputed whether related matters existed, we remanded to the district court to decide the issue in the first instance. Id. at 441-42.
The district court identified at least one related matter and therefore determined the absence of a "related matters" statement in the Fee Agreement rendered it voidable at Hoiles's option. See Cal. Bus. & Prof. Code § 6147(b) (). We agree there was a related matter (but not the one identified by the district court) and thus the Agreement was voidable. We also agree Hoiles did not ratify the Agreement prior to voiding it. The jury's quantum meruit verdict was correctly reinstated.
The historical and procedural facts are well known to the parties and have been reported in prior decisions of this Court and the district court.1 We repeat them only as necessary and then only briefly.
In 2001, Hoiles, his ex-wife, and two daughters owned 667,361.50 shares of stock in Freedom Communications, Inc., a closely-held California media corporation started by Hoiles's grandfather. (We will refer to shares owned by the ex-wife and daughters as the "Family Shares.") Hoiles decided he wanted out of Freedom with the ability to sell his shares for a fair price (market value).2 To that end, Holies sought out Alioto to represent him and specifically requested the representation be on a contingency fee basis. The two entered into a simple contingency fee agreement, which reads:
It will be an honor and privilege to represent you in this important litigation. (Joint App'x Vol. I at 85-88.)
Over the next two and a half years a "carrot and stick"3 strategy was employed to attain Hoiles's goal of achieving liquidity for his shares. It was devised and implemented by Alioto and the "posse."4 The "carrot" involved educating the shareholders as to the true value of their stock if it could be more freely traded. The "stick" was a complaint against certain shareholders alleging a violation of California's antitrust law and breach of fiduciary duty. Alioto sent a copy of the draft complaint to all shareholders; Hoiles frequently threatened to file it should the shareholders continue to thwart his desire to be bought out at a fair price.
The strategy met with some success—Freedom offered to purchase Hoiles's shares for $100 per share, the highest offer ever received by a shareholder. Hoiles rejected the offer and further negotiations eventually broke down. Nevertheless, in October 2002, Freedom's Board created a Special Committee to evaluate options for providing liquidity for Freedom shares, including a sale or merger of the company and recapitalization.Ultimately, the Committee recommended a recapitalization proposal from two private investment firms which would allow shareholders, like Hoiles, who wished to liquidate their shares to redeem them at $212.71 per share. The shareholders voted in favor of the proposal in December 2003 and the recapitalization closed in May 2004. Hoiles, his ex-wife, and daughters elected to redeem their shares, collectively obtaining a total of approximately $142 million.
In January 2004, Alioto demanded from Hoiles $28.4 million in attorneys' fees, which represented 20% of the amount realized on the redemption of Hoiles's shares as well as the Family Shares. The Fee Agreement called for only 15% of anything recovered before a complaint was filed and a complaint (while threatened) was never filed. Alioto justified his demand for 20% based on an oral amendment to the Fee Agreement. Alioto claimed Hoiles orally agreed to pay him 20% in order to remove any incentive Alioto may have had to prematurely file a complaint, to adequately compensate Alioto for his extensive work and as a reward for the extraordinary results he had achieved. Alioto also claimed Hoiles had agreed to increase the percentage because Hoiles had changed the scope of the representation—Alioto was expected to secure a competitive price not only for his shares and the Family Shares but also for other shareholders who might want liquidity.5
On January 21, 2004, Hoiles sent a letter to Alioto instructing him "to take no further actions as a lawyer on [his] behalf" and to submit a billing statement for his legal services at $1,000 per hour and for co-counsel's services at $500 per hour. (Joint App'x Vol. I at 381.) He further informed Alioto he had retained independent counsel to "deal with your demands and my rights." (Id.)
Unable to resolve their differences, Hoiles and Alioto filed separate lawsuits against each other—Hoiles in Colorado state court, Alioto in California state court. Both cases were removed to federal court and Alioto's case was eventually transferred to Colorado and consolidated with Hoiles's. The district court originally concluded the Fee Agreement was invalid under Colorado law. The case proceeded to a jury trial on a quantum meruit theory; the jury found in favor of Alioto and awarded him $1.15 million, which the district court reduced to a judgment of $650,000 after deducting the $500,000 non-refundable retainer already paid. We reversed, concluding California, not Colorado, law applied. See Hoiles v. Alioto, 461 F.3d 1224, 1238 (10th Cir. 2006).
On remand, the district court concluded the Fee Agreement was voidable under California law because it failed to comply with § 6147(a)(3) of the California Business and Professions Code. See Alioto v. Hoiles, 488 F. Supp. 2d 1148, 1151-52 (D. Colo. 2007). It wrote "[u]nder the plain language of [§ 6147(a)(3)], some sort of statementabout related matters is required, even if it is a statement that there are no related matters not covered by the agreement for which the client could be required to pay compensation." Id. at 1151-52. Because the Fee Agreement contained no such statement, the court decided it was...
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