Dudding v. Norton Frickey & Associates

Decision Date10 October 2000
Docket NumberNo. 99SC403.,99SC403.
Citation11 P.3d 441
PartiesRichard DUDDING, Petitioner, v. NORTON FRICKEY & ASSOCIATES, a Delaware corporation, Respondent.
CourtColorado Supreme Court

Roberta Earley, Colorado Springs, Colorado, Attorney for Petitioner.

Norton Frickey & Associates, Robert B. Carey, Dawn R. Kubik, L. Dan Rector, Colorado Springs, Colorado, Attorneys for Respondent.

Justice KOURLIS delivered the Opinion of the Court.

This case concerns the interrelationship between a contingency fee agreement and an attorney's request for quantum meruit recovery. Richard Dudding (Dudding) hired Norton Frickey & Associates (Frickey) to litigate a wrongful termination of employment claim on his behalf. Dudding and Frickey entered into a contingency fee agreement setting out the conditions of payment for Frickey's services. Ultimately, Dudding terminated Frickey's services and Frickey filed an attorneys' lien against the proceeds of Dudding's wrongful termination lawsuit, and also sought in a separate proceeding to compel arbitration of the fee dispute.

The trial court that heard the request for arbitration found the contingency fee agreement void and unenforceable for failure to comply with the Colorado Rules of Civil Procedure Governing Contingency Fees. In the employment termination case, the trial court denied Frickey any recovery, both under the terms of the agreement and on a theory of quantum meruit.

The court of appeals reversed in an unpublished opinion. See Dudding v. Kaman Sciences, Inc., No. 97CA2066 (Colo.App. Mar. 11, 1999) (not selected for official publication). The court of appeals held that Frickey should be allowed to proceed on a quantum meruit claim, despite the deficiencies in the contingent fee agreement.

We accepted certiorari.1 We now affirm the court of appeals in part and reverse in part. We hold that an attorney may proceed on a quantum meruit claim if that eventuality is outlined in the contingency fee agreement, even if the agreement contains other deficiencies and is unenforceable for purposes of the contingency. Language in a contingent fee agreement notifying the client that, upon termination, the attorney may seek recovery based on a predetermined hourly rate provides insufficient notice of the possibility of equitable relief. Therefore, in this case, Frickey is not entitled to recover quantum meruit payment.

I.

In August 1995, Dudding retained Frickey to represent him on a claim of wrongful termination against his employer Kaman Sciences, Inc. Dudding and Frickey entered into a written contingency fee agreement that set out the terms and conditions of payment from Dudding to Frickey. The agreement did not address what would happen in the event that Dudding accepted reemployment with Kaman in lieu of, or in addition to, any damages.2

Frickey filed suit on Dudding's behalf, case number 95CV2105, in El Paso County District Court. Dudding engaged in settlement negotiations without Frickey's assistance; and Dudding and the employer ultimately agreed to settle the lawsuit in exchange for reinstating Dudding to a comparable position within the company at the same salary, benefits, and terms of employment. On August 27, 1996, Frickey wrote a letter to Dudding stating that Dudding's reemployment with Kaman resulted from the fruit of Frickey's legal labor and should be valued for purposes of computing Frickey's one-third contingency fee. Dudding strongly objected to the notion of Frickey's entitlement to one-third of Dudding's first year's salary and immediately terminated Frickey's representation of him.

On October 29, 1996, Frickey filed a separate lawsuit, also in El Paso County District Court, case number 96CV2542. The suit sought an order compelling arbitration of the fee dispute pursuant to section 13-22-204, 5 C.R.S. (1999), and paragraph 12 of the fee agreement, which provided that "[i]n the event a dispute arises over this Agreement, the parties agree to submit this matter to arbitration."

Contemporaneously, on November 20, 1996, Frickey filed an attorneys' lien, case number 95CV2105, against any settlement or judgment arising out of the underlying lawsuit in the amount of $22,713.22. Frickey calculated the amount based on one-third of Dudding's first year's salary, plus costs.

Dudding filed a motion to dismiss the arbitration request alleging, among other things, that the fee agreement was void and unenforceable. On June 7, 1997, Judge Theresa Cisneros ruled that the contingency fee agreement between Dudding and Frickey did not substantially comply with Chapter 23.3 of the Colorado Rules of Civil Procedure Governing Contingent Fees, because it did not

disclose the nature of other types of fee arrangements, the nature of expenses, the potential for an award of costs and attorneys' fees to the opposing party, what is meant by associated counsel, what is meant by subrogation, and did not set out that the attorney could recover one-third of the Defendant's salary in the event the Defendant were reinstated at his job.

Accordingly, Judge Cisneros concluded that the void contingent fee agreement rendered the arbitration clause void and granted Dudding's Motion to Dismiss.

On June 24, 1997, counsel for Dudding filed a motion in the underlying case, case number 95CV2105, to strike the attorneys' lien because of Judge Cisneros's determination that the contingency fee agreement was void. Frickey opposed striking the lien, asserting that given the ruling on the contingency fee agreement, quantum meruit based upon the legal services actually provided constituted the appropriate measure of damages. Simultaneously, Frickey filed an amended lien claiming quantum meruit recovery.

On July 30, 1997, Judge Michael Heydt granted Dudding's motion to strike the attorneys' lien. Judge Heydt concluded that Frickey could not enforce the lien as a matter of law, because: (1) another court had declared it void, and this ruling bound subsequent courts under principles of collateral estoppel; and (2) the agreement did not include any provision detailing the client's responsibilities in the event the agreement was declared unenforceable. Therefore, Judge Heydt found the agreement void because it failed to disclose the particular circumstances that occasioned Frickey's request for payment.

Frickey and Dudding stipulated to the deposit of monies into escrow, pending a final ruling on Frickey's appeal. Frickey released Kaman from all liability under the lien, and Dudding and Kaman entered into a dismissal with prejudice of the underlying lawsuit.

Frickey then appealed Judge Heydt's ruling to the court of appeals. That court reversed the trial court, holding that Frickey may proceed on the quantum meruit claim. See Dudding v. Kaman Sciences, Inc., No. 97CA2066. Specifically, the court of appeals determined that the deficiencies of the contingency fee agreement did not vitiate the law firm's right to pursue quantum meruit, but rather existed independently of that agreement. The court concluded that recovery in quantum meruit depended upon whether Dudding terminated Frickey without cause, and remanded to the trial court for further proceedings on that point. The court of appeals also ruled that because the parties did not bring the issue of quantum meruit before Judge Cisneros in the context of the arbitration lawsuit, her ruling did not collaterally estop Judge Heydt from considering and ultimately granting such quantum meruit recovery.

Justice Erickson, sitting as a senior judge assigned to the court of appeals, dissented. He opined that Judge Cisneros's decision holding the agreement void for failure to comply with the Rules governing contingent fees foreclosed any consideration of the quantum meruit claim.

II.

The questions on certiorari ask us to determine whether a request for quantum meruit recovery is valid when the contingent fee agreement does not substantially comply with the Rules Governing Contingent Fees. We hold that quantum meruit recovery can exist independently of a contract — even a nonconforming contract — so long as the attorney provided some initial notice to the client of his option to seek such equitable recovery.

A.

Quantum meruit is a theory of contract recovery that invokes an implied contract when the parties either have no express contract or have abrogated it. Application of the doctrine of quantum meruit, also termed quasi-contract or unjust enrichment, does not depend upon the existence of a contract, either express or implied in fact. Rather, it arises out of the need to avoid unjust enrichment to a party even in the absence of an actual agreement to pay for the services rendered. See Dove Valley Bus. Park Assocs., Ltd. v. County Comm'rs of Arapahoe County, 945 P.2d 395, 403 (Colo.1997)

; Cablevision of Breckenridge v. Tannhauser Condominium Ass'n, 649 P.2d 1093, 1097 (Colo.1982).

Quantum meruit literally means "as much as [is] deserved." Black's Law Dictionary 1255 (7th ed.1999). Accordingly, the equitable doctrine seeks to restore fairness when a contract fails. See Dove Valley, 945 P.2d at 403

; see also DCB Constr. Co. v. Central City Dev. Co., 965 P.2d 115, 119 (Colo.1998) (stating that quantum meruit recovery springs "from the law of natural immutable justice and equity"); Ninth Dist. Prod. Credit Ass'n v. Ed Duggan, Inc., 821 P.2d 788, 795 (Colo.1991) (finding "the concept of unjust enrichment centers attention `on the prevention of injustice'"). Quantum meruit strikes the appropriate balance by gauging the equities and ensuring that the party receiving the benefit of the bargain pays a reasonable sum for that benefit. See Black's Law Dictionary 1255.

To recover in quantum meruit, a plaintiff must demonstrate that: (1) at plaintiff's expense; (2) defendant received a benefit; (3) under circumstances that would make it unjust for defendant to retain the benefit without paying. See DCB Constr. Co., 965 P.2d at 119. A benefit denotes any form of advantage....

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