Dykema Gossett v. Ajluni

• Decision Date: 16 November 2006
• Docket Number: Docket No. 259218.
• Citation: 730 N.W.2d 29,273 Mich. App. 1
• Parties: DYKEMA GOSSETT, PLLC, Plaintiff/Counter-Defendant-Appellee/Cross-Appellant, v. Roger M. AJLUNI, M.D., Medical Fitness Center, and RMA Physicians, PC, Defendants/Counter-Plaintiffs-Appellants/Cross-Appellees.
• Court: Court of Appeal of Michigan — District of US

730 N.W.2d 29

273 Mich. App. 1

DYKEMA GOSSETT, PLLC, Plaintiff/Counter-Defendant-Appellee/Cross-Appellant, v. Roger M. AJLUNI, M.D., Medical Fitness Center, and RMA Physicians, PC, Defendants/Counter-Plaintiffs-Appellants/Cross-Appellees.

Docket No. 259218.

Court of Appeals of Michigan.

Submitted October 10, 2006, at Detroit.

Decided November 16, 2006, at 9:00 a.m.

Released for Publication March 14, 2007.

Stark Reagan, P.C. (by Ava K. Ortner and Peter L. Arvant), Troy, for the plaintiff.

Mark Granzotto, P.C. (by Mark Granzotto), Royal Oak, for the defendants.

Before: BORRELLO, P.J., and JANSEN and COOPER, JJ.

COOPER, J.

Defendants¹ appeal an order of judgment entered after a jury trial; plaintiff Dykema Gossett, PLLC, cross-appeals an order of remittitur modifying the jury's award of damages.

I. Facts and Procedural History

This suit arises from Dykema's representation of Ajluni in a suit Ajluni brought against Blue Cross Blue Shield of Michigan (BCBSM).² BCBSM began investigating Dr. Ajluni in 1991, and federal investigators conducted an examination of Dr. Ajluni's billing in 1993. As a result of these investigations, in 1997 Dr. Ajluni entered into a pretrial diversion agreement with the United States Attorney's office whereby prosecution of Dr. Ajluni was deferred and the doctor paid restitution to BCBSM for improper charges in the amount of $12,500. Two months later BCBSM "departicipated" Dr. Ajluni from its programs, meaning Dr. Ajluni could no longer bill Blue Cross directly for services to patients covered by Blue Cross.³ Dr. Ajluni appealed this decision to Blue Cross, but his appeal failed.

On August 17, 1998, Dr. Ajluni⁴ retained plaintiff⁵ to represent him in a suit against BCBSM. According to the trial testimony of Dykema attorney Joseph Erhardt, who worked with Young on the BCBSM litigation, Dykema rarely works on contingency; however, due to the prior working relationship between Young and Pastore, the parties negotiated a retention agreement that was a mixed hourly and contingency fee agreement. Pastore advised Ajluni in this negotiation. The agreement specified that work would be billed on an hourly basis at half the normal billing rate, up to a maximum of $50,000, and Dykema would receive 25% of any net monetary recovery realized by Dr. Ajluni. The agreement also stated: "If there is a resolution of the litigation which involves something other than a cash payment, fair value will be given for the benefit based on an agreement to be reached between you and the Dykema firm."

Ajluni's complaint against BCBSM alleged that BCBSM had breached its provider agreement by wrongfully departicipating Dr. Ajluni from the BCBSM program, and defamed him by erroneously stating that he had been charged, tried, and convicted for his wrongful billing practices. Ajluni's damages expert⁶ projected total economic damages over the course of Ajluni's remaining career as $1.9 million. Ajluni anticipated an additional $1.9 million in non-economic damages from the defamation claim.

According to the trial testimony of Erhardt and Young, four weeks into the trial, Dykema learned that BCBSM was again investigating Dr. Ajluni's billing practices. Because he had been departicipated, Dr. Ajluni could not bill BCBSM directly for services to patients. BCBSM investigators discovered by interviewing some of Dr. Ajluni's patients that the clinic RMA had billed for services to some patients under another RMA doctor's billing number when in fact Dr. Ajluni had been the treating physician. This process of billing for Dr. Ajluni's services under another doctor's billing number had apparently been done for about 18 months. Believing that these improper billing practices could expose their client to criminal fraud charges, and at a minimum rendered invalid the damages theory they had presented to the jury, Young and Erhardt discussed with Dr. Ajluni the possibility of pursuing a settlement with BCBSM. Dr. Ajluni agreed. Young and Erhardt further discussed the issue of the improper billing with Howard (Buck) O'Leary, Jr., a white collar crime attorney in Dykema's Washington, D.C., office. According to O'Leary's trial testimony, criminal charges would be a likely outcome if these billing practices were brought to the attention of state or federal prosecutors, particularly given the fact that Dr. Ajluni had previously signed a pretrial diversion agreement related to improper billing.

Young and Erhardt testified that, in discussion with BCBSM's counsel, it became clear to Dykema that BCBSM and its counsel were aware of the improper billing practices, and that Dr. Ajluni would be recalled as a witness and questioned about them.⁷ Young and Erhardt realized that if their client were recalled, he would either have to lie or to admit to failure to comply with BCBSM's billing regulations; that is, admit to fraud. To prevent this, Dykema negotiated a settlement by which Ajluni dropped all claims against BCBSM, and BCBSM dropped all counterclaims⁸ and agreed not to turn over to authorities the information it had gathered about Dr. Ajluni's billing of services using another doctor's name. Dr. Ajluni agreed to and signed the Confidential Settlement Agreement and Release of Claims.

Dykema requested payment from Ajluni for costs and services incurred in the BCBSM litigation, nearly four years of representation. Ajluni refused to pay. Dykema filed the complaint that underlies this appeal, alleging: Count I, breach of contract, obligation to pay in the event of a non-cash resolution; Count II, breach of contract, obligation not to hinder performance; Count III, quantum meruit; Count IV, fraud, intentional misrepresentation; Count V, negligent misrepresentation; and Count VI, innocent misrepresentation.

The jury found that defendants were liable to plaintiffs for breach of contract on a quantum meruit basis; that defendants were liable for fraud and/or misrepresentation; and that the total amount of damages due plaintiff from defendants was $700,000.

Defendants filed a motion for judgment notwithstanding the verdict (JNOV) or for a new trial. Judge Warfield Moore, Jr., denied the motion for JNOV or a new trial, but remitted the jury award from $700,000 to $500,000. Defendants filed this appeal, and plaintiff cross-appealed the court's remittitur of the jury's award.

II. Plaintiff's Quantum Meruit Claim

Defendants first argue on appeal that the trial court erred in denying a pretrial motion defendants had filed under MCR 2.116(C)(8) and (10) seeking summary disposition of plaintiff's quantum meruit claim.

We review de novo the grant or denial of a motion for summary disposition. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998). A motion brought under MCR 2.116(C)(8) relies only on the pleadings, taking all factual allegations as true, and testing the legal sufficiency of the claim; summary disposition is proper where no factual development could support relief under the claim. Maiden v. Rozwood, 461 Mich. 109, 119, 597 N.W.2d 817 (1999). A motion brought under MCR 2.116(C)(10) tests the factual sufficiency of a claim, relying on pleadings, affidavits, depositions, and other documentary evidence; summary disposition is proper only where no genuine issue of material fact exists. Id. at 120, 597 N.W.2d 817.

Defendants argue that the quantum meruit claim should have been dismissed because it is not an available remedy where there is an express contract. Defendants are correct that where an express contract exists, a contract will not be implied. Scholz v. Montgomery Ward & Co., Inc., 437 Mich. 83, 93, 468 N.W.2d 845 (1991). And where an express contract is breached, quantum meruit is still inappropriate: "Where the plaintiff relies on breach of an express contract there can be no recovery on quantum meruit." Geistert v. Scheffler, 316 Mich. 325, 335, 25 N.W.2d 241 (1946); see also Borisoff v. Schatten, 335 Mich. 684, 686, 57 N.W.2d 430 (1953); Shurlow Tile & Carpet Co. v. Farhat, 60 Mich.App. 486, 491, 231 N.W.2d 384 (1975).

However, where the contract is for legal services as opposed to other services, such as construction contracts, quantum meruit seems to be interchangeably used to mean both the reasonable value of services rendered and the appropriate remedy for an implied contract. Despite that ambiguity, where there is an express contract for legal services, prior case law in Michigan suggests that quantum meruit has been an available remedy only if the express contract is expressly terminated by either party. See, e.g., Ambrose v. Detroit Edison Co., 65 Mich.App., 484, 491, 237 N.W.2d 520 (1975) ("[A]n attorney on a contingent fee arrangement who is wrongfully discharged, or who rightfully withdraws, is entitled to compensation for the reasonable value of his services based upon quantum meruit, and not the contingent fee contract."). Here, however, neither party in fact terminated the contract. By continuing the representation through to the settlement, Dykema fully performed its obligation under the binding and valid contract, which was to represent defendants to the completion of the lawsuit.

We note that when it became clear to Dykema that Dr. Ajluni's fraudulent billing practices had caused it to proffer a false theory of damages to the jury in the BCBSM litigation, Dykema arguably had reasonable grounds to withdraw from the case. Had it done so, it would clearly be positioned to recover under a quantum meruit theory. "An attorney retained on a contingent fee arrangement who withdraws from a case for good cause is entitled to compensation for the reasonable value of his services based upon quantum meruit, and not the contingent fee contract." Ecclestone, Moffett & Humphrey, PC. v. Ogne, Jinks, Alberts & Stuart, PC, 177 Mich.App. 74, 76, 441 N.W.2d 7 (1989). To preclude recovery because the Dykema attorneys did not abandon their client's cause, but instead worked out a settlement on his behalf,...