Betz v. Diamond Jim's Auto Sales

• Decision Date: 15 July 2014
• Docket Number: No. 2012AP183.,2012AP183.
• Parties: Randy L. BETZ, Plaintiff–Appellant, v. DIAMOND JIM'S AUTO SALES, Defendant–Respondent–Petitioner.
• Court: Wisconsin Supreme Court

355 Wis.2d 301

849 N.W.2d 292

2014 WI 66

Randy L. BETZ, Plaintiff–Appellant,

v.DIAMOND JIM'S AUTO SALES, Defendant–Respondent–Petitioner.

No. 2012AP183.

Supreme Court of Wisconsin.

Argued Jan. 9, 2014.

Decided July 15, 2014.

For the defendant-respondent-petitioner, there were briefs by Lawrence J. Drabot, Sara C. Mills, and Crivello Carlson, S.C., Milwaukee, and oral argument by Lawrence J. Drabot.

For the plaintiff-appellant, there was a brief by Timothy J. Aiken, Vincent P. Megna, Susan M. Grzeskowiak, and Aiken & Scoptur, S.C., Milwaukee, and oral argument by Susan Grzeskowiak and Timothy J. Aiken.

ANNETTE KINGSLAND ZIEGLER, J.

¶ 1 This is a review of a decision of the court of appeals, Betz v. Diamond Jim's Auto Sales, 2012 WI App 131, 344 Wis.2d 681, 825 N.W.2d 508, reversing an order of the Milwaukee County Circuit Court ¹ denying a motion by the attorneys representing Randy L. Betz (“Betz”) to recover statutory attorney's fees from Diamond Jim's Auto Sales (“Diamond Jim's”).

¶ 2 In this case we are asked to determine the circumstances under which plaintiff's counsel may recover statutory attorney's fees directly from a defendant when, without counsel's knowledge or approval, the plaintiff and defendant enter into a settlement agreement that does not address attorney's fees.

¶ 3 Betz hired Milwaukee attorney Vincent Megna (“Megna”) to represent him in his dispute with Diamond Jim's.² Megna filed a lawsuit on Betz's behalf under two fee-shifting statutes. During the litigation, Betz and Diamond Jim's met and settled the case without their attorneys' knowledge or approval. The settlement agreement did not reference payment of Megna's statutory attorney's fees. Subsequently, Megna filed a motion with the circuit court seeking to recover his statutoryfees from Diamond Jim's. The circuit court denied Megna's motion. The court of appeals reversed, citing public policy concerns with enforcing settlements made “behind the backs” of the attorneys in cases brought under fee-shifting statutes.

¶ 4 Diamond Jim's argues that the right to recover statutory attorney's fees belonged to Betz, and that Betz did not assign his right to recover those fees to Megna. As a result, Diamond Jim's argues that Megna cannot recover fees directly from Diamond Jim's. Further, Diamond Jim's argues that public policy encourages parties to settle disputes, and requiring counsel's consent to such settlements in fee-shifting cases presents a conflict of interest.

¶ 5 Megna argues that Betz did assign his statutory right to recover attorney's fees, and that the public policy underlying fee-shifting statutes would be undermined if clients were allowed to settle fee-shifting cases without ensuring payment of statutory attorney's fees. Megna further asserts that attorney involvement and consent to settlement agreements in fee-shifting cases will not serve as a barrier to settlement.

¶ 6 We conclude that the statutory right to recover attorney's fees belonged to Betz, and that Betz did not assign his right to recover those fees to Megna in their fee agreement. Because we conclude that Betz did not assign his right to recover statutory attorney's fees to Megna, we must conclude that Diamond Jim's could not have had notice of the assignment. As a result, we conclude that Megna may not seek statutory attorney's fees directly from Diamond Jim's, and that the settlement agreement entered into between Diamond Jim's and Betz is clear, unambiguous, and enforceable. We therefore reverse the court of appeals.

I. FACTUAL BACKGROUND

¶ 7 On October 19, 2009, Betz purchased a 1999 Cadillac Escalade from Diamond Jim's. Betz paid $8,705.98 for the vehicle, including sales tax, title, and license fee. Over the following months, Betz experienced problems with the vehicle, which Diamond Jim's was unable to address to Betz's satisfaction.

¶ 8 On February 12, 2010, Betz hired Megna to represent him in his dispute with Diamond Jim's. The terms of the fee agreement ³ between Betz and Megna provided, in relevant part:

I understand that I do not have to pay any attorney fees unless my attorneys recover money for me in this case.

FEE SHIFTING

I understand that Sec. 100.18, Wis. Stats., __________ is a fee[-]shifting statute. This means if I win at trial or settle my case during litigation, the defendant is usually responsible for paying my attorney fees based on my attorney's hourly rate. I understand that the Law Offices of Vince Megna is accepting my case with the agreement that it will look to the defendant for payment of attorney fees pursuant to the fee[-]shifting provision once a lawsuit has been filed.

....

SETTLEMENT PRIOR TO LAWSUIT

If a settlement is reached prior to a lawsuit being filed in my case, I understand that the defendant may not be responsible for payment of my attorney fees. In this event, the Law Offices of Vince Megna agrees to charge a flat rate attorney fee in the amount of ______.

COSTS AND EXPENSES

I understand that the Law Offices of Vince Megna will need to pay costs and expenses. In the event my case is lost through no fault of my own, I understand that the Law Offices [of] Vince Megna will not bring a claim against me for these costs and expenses.

I understand that if I do not accept a settlement that my attorneys deem reasonable and my case continues without settlement, I will be required to immediately reimburse the Law Offices of Vince Megna for all costs and expenses paid up until that point and then be responsible to pay all further costs and expenses as same become due.

TERMINATION

I understand that my attorney has the right to “terminate” me as a client. The Law Offices of Vince Megna will be entitled to fees for the work done at its hourly rate and its costs, not to exceed 33 1/3% of my gross recovery.

I understand that I have a right to terminate my attorneys. However, if I do so, I will be responsible for the Law Offices of Vince Megna fees and costs due on the date of termination, not to exceed 33 1/3% of my gross recovery.

(bolding omitted) (all blanks in original).

¶ 9 On March 1, 2010, Betz sued Diamond Jim's in Milwaukee County Circuit Court. Betz asserted claims for false advertising, contrary to Wis. Stat. § 100.18 (2009–10),⁴ intentional fraudulent misrepresentation and violations of automobile dealership regulations, contrary to Wis. Stat. § 218.0116. In addition to compensatory and punitive damages, Betz also claimed “actual attorney's fees” from Diamond Jim's under fee-shifting statutes §§ 100.18(11)(b)2.⁵ and 218.0163(2).⁶

¶ 10 On May 17, 2010, Megna, on behalf of Betz, made a settlement offer pursuant to Wis. Stat. § 807.01. The settlement offer sought $10,750 in damages and $5,900 in attorney's fees. The offer stated that the check for attorney's fees should be made payable to Megna's firm. Diamond Jim's rejected this offer through counsel.

¶ 11 On September 28, 2010, counsel for Diamond Jim's made a counter-offer to settle the case by repurchasing the vehicle and paying $2,000 towards Betz's attorney's fees. Megna, on behalf of Betz, rejected this offer.

¶ 12 On April 4, 2011, Betz and Thomas Letizia (“Letizia”), the general manager of Diamond Jim's, met without counsel and settled the case. The settlement agreement provided, in relevant part:

The purpose of this Agreement is the Amicable Resolution of the Action without the need for further litigation, the relinquishment by each of the parties of any claim or cause of action arising from or relating to the issues in the Action, and the mutual release of all liability.

Therefore, in consideration of the following mutual promises and releases made by the Parties as well as other good and valuable consideration, the Parties to this Agreement agree that this Agreement is entered into as a compromise of disputed claims and does not constitute of liability [sic] or obligation whatsoever on behalf of any of the parties pursuant to the respective claims.

The parties agree to solve the action [sic] pursuant to the following specified terms:

A) James Letizia and Diamond Jim's Auto Sales agree to Pay to Randy L. Betz the sum of [$15,000] paid in form of check number 7114;

B) Randy L. Betz hereby agrees that [his suit against Diamond Jim's] [s]hall be dismissed.

¶ 13 On April 5, 2011, counsel for Diamond Jim's learned of the settlement and drafted a letter advising Megna that the case was resolved. The letter referenced the parties' “confidential settlement” agreement and included a draft stipulation to dismiss the case.

II. PROCEDURAL POSTURE

¶ 14 On April 21, 2011, Megna filed three motions with the circuit court. First, Megna asked the circuit court to compel Diamond Jim's to pay statutory attorney's fees pursuant to Wis. Stat. § 100.18(11).⁷ Megna argued that the right to recover attorney's fees under the statute belonged to the lawyer and not the client, and that he and his firm were owed $16,808.50 at the time of the settlement. Second, Megna requested leave to amend the complaint and intervene as a plaintiff, arguing that he had a cause of action against Diamond Jim's for intentional interference with a contractual relationship. Third, Megna sought a court order compelling disclosure of the confidential settlement between Betz and Diamond Jim's.

¶ 15 Diamond Jim's opposed Megna's motions. Diamond Jim's argued that the statutory right to recover attorney's fees belonged to Betz, and that the settlement agreement was a clear and unambiguous contract between the parties and should be enforced. Diamond Jim's asserted that the parties were entitled to settle the case without counsel if they chose, and that while Wis. Stat. § 100.18(11) allows for recovery of attorney's fees, it does not mandate such a recovery in the event of a settlement. Diamond Jim's also argued that the settlement agreement should remain confidential unless the parties agreed to disclose the terms.

¶ 16 On July 26, 2011, the court granted Megna's motion to require disclosure of the...