O'Brien v. Seyer

• Decision Date: 17 February 1981
• Citation: 439 A.2d 292,183 Conn. 199
• Court: Connecticut Supreme Court
• Parties: D. T. O'BRIEN v. Frank H. SEYER.

Page 292

439 A.2d 292

183 Conn. 199

D. T. O'BRIEN v. Frank H. SEYER.

Supreme Court of Connecticut.

Argued Dec. 3, 1980.

Decided Feb. 17, 1981.

Philip S. Walker, with whom, on the brief, was Dean M. Cordiano, Hartford, for appellant-appellee (plaintiff).

David Goldstein, with whom were Richard A. Johnson, and Keith A. Rubenstein, Bridgeport, for appellee-appellant (defendant).

Before BOGDANSKI, PETERS, ARMENTANO, SHEA and WRIGHT, JJ.

BOGDANSKI, Associate Justice.

This is an action brought by the plaintiff attorney against the defendant, a former client, to recover the value of legal services rendered by him during the period between November 1, 1969, and November 19, 1971, and expenses incurred as a result of such services, and interest. The jury rendered a verdict in favor of the plaintiff in the amount of $283,162.44. The defendant filed a motion for judgment in favor of the defendant notwithstanding the verdict, a motion to set aside the jury verdict and order a new trial, and a motion to discharge an attachment. The court denied the motion for judgment but ordered the verdict set aside unless the plaintiff filed a remittitur in the amount of $251,525.54 which would effectively reduce the verdict to $31,636.90. The court further ordered that the prejudgment attachment be reduced from $300,000 to $35,000 if the remittitur is not filed.

The plaintiff moved to stay the order reducing the prejudgment attachment until this court had determined his appeal. The trial court denied the motion. The plaintiff thereafter filed a motion for review with this court and on November 28, 1979, this court vacated the trial court's order denying the plaintiff's motion for stay of execution of the modification of the prejudgment attachment. Accordingly, the original prejudgment remedy continues in effect.

The legal problems for which the plaintiff's services were rendered grew out of certain corporate manipulations which took place in 1969. The management of Consumers National Life Insurance Company of Indiana (Consumers Life), in an attempt to stop the United Founders Life Insurance Company of Oklahoma (Founders Life) from gaining control of it, sold to the defendant and his associates 280,000 shares of its common stock for $3,640,000, payable $280,000 in cash and $3,360,000 by way of a promissory note. The 280,000 shares of the Consumers Life stock were then pledged to secure payment of the note. As a result, the defendant and his associates gained control of Consumers Life.

Thereafter, Founders Life instituted an action against the defendant and his associates to declare the sale of the stock void, and to enjoin them from voting said stock. The stockholders of Consumers Life also brought suit against the defendant and his associates to set aside the sale of the stock and to recover damages for alleged violations of security and fiduciary laws. Thus, the defendant and his group found themselves in the position of being subject to liability for the $3,360,000 note plus interest at a time when there was a substantial drop in the market price of the stock of Consumers Life.

The defendant and his group were initially represented by a Stamford, Connecticut, law firm. The defendant, however, became dissatisfied with the fees charged by that firm. He later met with the plaintiff in New York and, after some discussion, entered into an agreement whereby the plaintiff would represent the defendant in the matter of his involvement with Consumers Life. No specific fee for those services was discussed or agreed upon by the parties. Some time later, the plaintiff received a call from another member of the defendant's group, a Mr. Arbour, who also retained him for the same purpose.

The plaintiff was a member in good standing of the Connecticut bar, a graduate of Yale Law School and Harvard Business School and, at the time, was general counsel to a corporation located in New York City. He did not maintain an office in Connecticut, except in his home. He had no office overhead and occasionally hired Yale law students to do his research.

The plaintiff performed his legal services over a period of approximately two years. They consisted of negotiating a settlement between the defendant and the stockholders of Consumers Life. This service required approximately 400 hours of the plaintiff's time, which included meetings in New York and Indiana. Local counsel in Indiana performed all the necessary legal services in court during the pendency of the litigation and in obtaining the court's approval of the settlement of the Founders Life suit and the Consumers Life stockholders suit, including the appeal to the United States Court of Appeals for the Seventh Circuit. The plaintiff testified before the District Court for Indiana and perfunctorily participated in the services rendered by Indiana counsel. Local counsel in Indiana rendered a bill in the amount of $18,000 for his services to both the defendant and Mr. Arbour and he was paid in full.

The settlement provided that the 280,000 shares of stock would be returned to Consumers Life, that the note of $3,360,000 would be cancelled, and that the litigation instituted by Founders Life and the stockholders of Consumers Life would be withdrawn. It also provided that Consumers Life would retain the $280,000 down payment. The settlement, however, did not affect the defendantand his associates' claim against Founders Life for an alleged breach of an agreement which was subsequently settled for $50,000. In sum, the settlement negotiated by the plaintiff eventually placed the defendant and his associates in the position of losing $280,000 on the transaction less the net amount of $50,000 received by settlement from Founders Life.

On December 27, 1971, the plaintiff rendered to the defendant for his legal services the following bill in the amount of $1,128,432.44 for which he sought to charge the defendant one-half or the sum of $564,216.22:

"Fee for results achieved in the elimination of your liability to Consumers National Life Insurance Company calculated as follows:

                Original note - 3/25/'69              $ 3,360,000.00
                Interest at 6% from 3/25/'69 to
                11/18/'71 (date of release of
                final instruments from escrow)            534,240.00
                                                  ------------------
                Total liability                         3,894,240.00
                

                Less: Possible recovery on a
                forced sale of 280,000 shares of
                letter stock at $.50 per share            140,000.00
                                                  ------------------
                Liability eliminated                    3,754,240.00
                Application of contingent fee
                factor of 30% to liability
                eliminated                              1,126,270.00
                Disbursements to 11/18/'71                  2,162.44
                                                  ------------------
                Total contingent fee and
                disbursements                           1,128,432.44
                

                Fifty percent of above total
                representing your share of the
                fee                                   $   564,216.22
                                                      **************
                together with interest at the rate of
                8% per annum from this date to date
                of final payment
                                                      **************
                

As set forth in my Memo of October 22, 1971, the following factors were considered carefully in arriving at this fee:

1. the amount involved and the final results achieved. viz. a reduction in total liability of $3,754,240.00;

2. the legal difficulty and complexity of the matter, viz. removing this note and all accrued interest from the books of a publically (sic) held and regulated insurance company;

3. the experience, judgment responsibility and initiative involved in conceiving the legal strategy and in following thru to the final result;

4. the going legal rates for such responsibility;

5. the fact that the fee was contingent on results achieved and for this one matter as opposed to a fee certain regardless of results, for a continuing client."

The plaintiff sought to charge the other half of the bill to Mr. Arbour. Mr. Arbour settled with the plaintiff by agreeing to pay him $150,000 as follows: $50,000 in cash and a $100,000 note payable on demand. The defendant refused to pay the bill rendered to him and the plaintiff commenced this action.

The plaintiff, in paragraph two of his complaint, alleged a caused of action based upon a contingency fee contract. The trial court did not allow this claim to be submitted to the jury. The plaintiff does not contest this action.

The case was submitted to the jury on a quantum meruit basis. The plaintiff contends that the trial court improperly instructed the jury that the contingent nature of the agreement should not be taken into consideration in determining a reasonable fee. The court, in its charge to the jury, stated: "Accordingly, the court as a matter of law instructs the jury that they are not to give any consideration to paragraph 2 of the complaint and not to take into consideration the allegations that the fee was contingent based upon results."

Generally, the contingent nature of a fee is a proper factor in the jury's determination of a reasonable attorneys' fee. 1 Speiser, Attorneys' Fees § 8:10. There are several general factors which may properly be considered in determining the amount to be allowed as reasonable compensation to an attorney. These factors are summarized in DR 2-106 of the Code of Professional Responsibility. ¹ The fee arrangement here, however, was too indefinite to allow a contingency element to be considered by the jury. ² A contingent fee is one which will be paid to the attorney for his services only in case he wins; that is, a fee which is made to depend upon the success or failure to enforce a supposed right, and which is generally paid out of the recovery for the client. Pocius v. Halvorsen, 30 Ill.2d 73, 78, 195 N.E.2d 137 (1963). The fee discussion between the plaintiff and the defendant did not indicate that the plaintiff had the risk of...