Beatty v. NP Corp.

• Citation: 31 Mass.App.Ct. 606,581 N.E.2d 1311
• Decision Date: 03 December 1991
• Docket Number: No. 90-P-463,90-P-463
• Parties: Paul F. BEATTY v. NP CORPORATION. 1
• Court: Appeals Court of Massachusetts

Page 1311

581 N.E.2d 1311

31 Mass.App.Ct. 606

Paul F. BEATTY v. NP CORPORATION. ¹

No. 90-P-463.

Appeals Court of Massachusetts Suffolk.

Argued Oct. 9, 1991.

Decided Dec. 3, 1991.

James D. St. Clair, John J. Regan with him, for plaintiff.

Charles R. Parrott, Michael J. Engelberg with him, for defendant.

Before WARNER, C.J., and KASS and GREENBERG, JJ.

KASS, Justice.

For six years, ² during which it sent progress bills aggregating $132,173.59, ³ which the client paid, Sullivan & Worcester, a law firm, computed its bills on the basis of time charges and disbursements. The case on which the work billed was done involved a dispute with the Commonwealth over excise taxes. Ultimately, the law firm achieved a highly successful result for its client and billed a "premium" fee of an additional $721,888. The question is whether, on this record, the law firm was free to render a "premium" bill. A judge of the Superior Court, acting on a motion for summary judgment, decided the law firm could not charge the "premium" and dismissed the complaint against the client, NP Corporation (NPC). We affirm.

As the case was decided on summary judgment, we are obliged, in the first instance, to inquire whether the record leaves material facts in dispute. Kourouvacilis v. General Motors Corp., 410 Mass. 706, 711, 575 N.E.2d 734 (1991). The motion judge does not pass on the weight or credibility of the evidence, which may be in the form of affidavits, depositions, interrogatories, admissions, and sworn pleadings. Attorney General v. Bailey, 386 Mass. 367, 370, 436 N.E.2d 139, cert. denied, 459 U.S. 970, 103 S.Ct. 301, 74 L.Ed.2d 282 (1982). Inferences from the evidentiary materials are to be drawn in the light most favorable to the party opposing the motion (in this case the law firm). Id., 386 Mass. at 371, 436 N.E.2d 139. That some facts are in dispute will not necessarily defeat a motion for summary judgment. The point is that the disputed issue of fact must be material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 2509-2510, 91 L.Ed.2d 202 (1986). Norwood v. Adams-Russell Co., 401 Mass. 677, 683, 519 N.E.2d 253 (1988). "As to materiality, the substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. at 248, 106 S.Ct. at 2510.

With those principles in mind, we summarize the undisputed facts and examine those which are disputed, in order to consider whether they are material.

Sullivan & Worcester began rendering legal services to NPC--then called Northeast Petroleum Corporation--in 1968. The lawyer and client relationship had been established by John A. Kaneb, who controlled NPC, and Mr. Paul F. Beatty, a member of the Sullivan & Worcester firm. ⁴ Generally, the law firm billed NPC on the basis of time charges, i.e., hours or fractions of hours spent multiplied by hourly rates assigned to the particular lawyers and paralegal personnel who worked on NPC matters. Expenses such as postage, telephone, photocopying, travel, secretarial overtime, computerized research, taxi fares, delivery services, and parking and meals incident to night work were billed as disbursements on behalf of the client and added to the fee component of the bills. In connection with the State excise tax case, Sullivan & Worcester, billed on a time and charges basis at periodic intervals. ⁵ Sometimes a bill would cover services in addition to the tax case. A representative bill read as follows:

"FOR LEGAL SERVICES AND ADVICE rendered to you from November 14, 1981 through June 30, 1982 as your special counsel for specific affairs referred to us, including, in particular, the following: continued research, memoranda and correspondence with your general counsel concerning your claim against The Commonwealth of Massachusetts for excise taxes paid by you under protest with respect to the liquidation of Energy Company of Louisiana, Ltd., and preparation for the hearing before the Appellate Tax Board over that issue; miscellaneous postclosing documentation of subleases and leases of property formerly used by Mercury Oil; ..."

Kaneb had expressed himself as pleased with the Sullivan & Worcester time charges, which he thought were somewhat lower than those of other "Class A law firms" in Boston. Beatty had responded that he had tried to keep the bills that way. Concerning the Massachusetts excise tax case, neither Kaneb and Beatty, nor anyone else at NPC and Sullivan & Worcester, had discussed what Sullivan & Worcester would regard as a fair and reasonable fee or the method of billing. There was no explicit fee agreement.

On February 28, 1983, The Charter Company bought the stock of NPC and the management of The Charter Company became responsible for business decisions about the excise tax case. A decision of the Appellate Tax Board about the case issued on May 16, 1983, was adverse to the taxpayer, ⁶ and the management of Charter inquired of Sullivan & Worcester about the costs and benefits to be considered in deciding whether to press an appeal. In response, Mr. Buchanan of Sullivan & Worcester wrote a letter on June 28, 1984, to the vice president and controller of NPC, which included the following pertinent paragraph:

"There is approximately $4 million, including interest, at stake in this appeal. The issues were thoroughly briefed before the Appellate Tax Board, but we would have to update our research and adapt our earlier briefs to concentrate on the grounds of decision in the enclosed report. The legal fees for carrying the case through our Supreme Judicial Court would be a small fraction of the amount at stake, no more than $50,000 and probably a good deal less.

Therefore, we recommend that the appeal be taken and prosecuted to completion."

Richard Bastien, who at the time was acting as the chief operating officer of NPC, decided to go ahead with the appeal as it was "a good business deal." The subject of bonus or performance premium billing, should the case have a successful ending, was not mentioned by the law firm or the client.

Although the appeal to the Supreme Judicial Court was successful, that was not the end of the affair. The case was remanded to the Appellate Tax Board and from there took another trip to the Supreme Judicial Court, this time with the Commissioner of Revenue as appellant. Three progress statements for services rendered appear in the record for this period. They disclose $50,141.22 billed for fees and costs. Those charges were paid. The fee component ($47,337.35) reflected time charges. In the last of those statements, dated April 21, 1987, those charges fluctuated from $210 per hour attributable to the most senior lawyer to $45 per hour for the most junior person, apparently a paralegal.

Ultimately, the Commonwealth was required to pay a refund of excise taxes plus interest which totalled $7,218,889. Sullivan & Worcester sent a final bill of $721,888, ten percent of the recovery, plus $280.07 for disbursements.

What may be seen as disputed is whether there had been three occasions on which NPC had knowingly paid performance premium bills in connection with other matters without prior agreement so to do. Kaneb said NPC had been billed by Sullivan & Worcester for all matters on a time basis "[u]nless otherwise agreed." He recalled two cases, relating to tax assessments in Revere and Chelsea, when NPC had paid a performance premium, although he was uncertain whether he had agreed "beforehand" or whether it was entirely voluntary after the "pretty good result" was achieved. Mr. Buchanan testified on deposition that there was a performance premium component of "roughly $10,000" in connection with an arbitration involving a "New Haven Terminal." Mr. Russell D. Castleberry, at the pertinent time senior attorney and assistant secretary of The Charter Company, made an affidavit that he approved the final bill on the New Haven Terminal case for payment without realizing that it had a component in excess of time charges.

Sullivan & Worcester's position on appeal is that, on the basis of inferences most favorable to it, there was no fee agreement in connection with the excise tax case and that it could, therefore, charge a fair and reasonable fee. In the absence of an agreement between lawyer and client, the lawyer may charge a fair and reasonable fee, giving account to such factors as the success achieved. First Natl. Bank v. Brink, 372 Mass. 257, 264-267, 361 N.E.2d 406 (1977). What factors are to be considered in determining whether a lawyer's fee is fair and reasonable have been amply discussed in the cases and it is not necessary to dilate on the subject here. In addition to First Natl. Bank v. Brink, supra, see Mulhern v. Roach, 398 Mass. 18, 25-30, 494 N.E.2d 1327 (1986), and Salem Realty Co. v. Matera, 10 Mass.App.Ct. 571, 576, 410 N.E.2d 716 (1980). See also S.J.C. Rule 3:07, DR 2-106(B), as amended, 382 Mass. 772 (1981).

Unlike the circumstances in the Brink case, when no fee formula had been suggested, the uncontroverted material facts in the instant case march to the conclusion that Sullivan & Worcester and NPC had agreed that NPC was to be billed on a time charge basis unless the firm and NPC agreed otherwise. There was no evidence of agreement to the contrary. Rendering bill...