Eckell v. Wilson

• Decision Date: 04 October 1991
• Citation: 597 A.2d 696,409 Pa.Super. 132
• Parties: Murray S. ECKELL, W. Donald Sparks, Arthur Levy, David E. Auerbach, Joseph L. Monte, Jr., Alvin Moses, Ronald J. Klimas and Nicholas A. Emper, T/A Eckell, Sparks, Levy, Auerbach, Monte and Moses, a Partnership, Appellants, v. William B. WILSON.
• Court: Pennsylvania Superior Court

Page 696

597 A.2d 696

409 Pa.Super. 132

Murray S. ECKELL, W. Donald Sparks, Arthur Levy, David E Auerbach, Joseph L. Monte, Jr., Alvin Moses, Ronald J Klimas and Nicholas A. Emper, T/A Eckell, Sparks, Levy Auerbach, Monte and Moses, a Partnership, Appellants, v. William B. WILSON.

Superior Court of Pennsylvania.

Argued June 11, 1991.

Filed Oct. 4, 1991.

Jeffrey A. Less, Philadelphia, for appellants.

Perry F. DiCola, Media, for appellee.

Before MONTEMURO, BECK and CERCONE, JJ.

CERCONE, Judge:

This is an appeal from the order of the Court of Common Pleas of Delaware County granting appellee's preliminary objections in the nature of a demurrer to appellants' complaint. We reverse.

Appellants raise four issues for our consideration:

1. Whether a complaint seeking recovery pursuant to an oral agreement can be dismissed for lack of a writing, where that defense is raised on preliminary objections;

2. Whether a complaint, which alleges an oral agreement by a client to compensate a law firm based on the reasonable value of its services, with the final determination of that value to be based in part on whether the firm achieves a favorable result, fails to state a cause of action;

3. Whether a contingency fee agreement for representation in an equitable distribution proceeding, where the client had already obtained a divorce at the time that he retained the law firm, is unenforceable based upon Ethical Consideration 2-20 of the Code of Professional Responsibility or public policy;

4. Whether the lower court's order granting the demurrer and dismissing the complaint with prejudice should be affirmed on any grounds?

Because we reverse on appellants' second issue, we need not consider the other issues raised in this proceeding.

Appellants are partners in the Delaware County law firm of Eckell, Sparks, Levy, Auerbach, Monte and Moses. Appellee/client, William Wilson, retained the law firm to represent him in his equitable distribution suit against his former spouse. In their complaint, appellants averred that they entered into a fee arrangement with Wilson whereby Wilson would pay the firm based upon the reasonable value of the services rendered. The arrangement also included a provision for appellee to pay appellants a minimum fee based on hourly rates on account during the pendency of the litigation, with the final fee to be determined at the conclusion of the litigation based upon the reasonable value of their services, based in part on whether a favorable result was achieved. Complaint, paragraph 6. The complaint additionally averred that appellants rendered their professional services and were able to accomplish results favorable to Wilson. Complaint, paragraph 10. The attorneys allege that the settlement between appellee and his wife resulted in a net savings to appellee of at least $3.5 million. Complaint, paragraph 12.

Appellants further alleged that the law firm sent a bill to appellee in the amount of $150,000 at the conclusion of the litigation. This amount represents professional services rendered less amounts appellee already paid the firm. In toto, appellants alleged that appellee owes the firm $121,498.90. Complaint, paragraphs 13, 14. Appellants also aver that, although the firm has demanded payment, appellee has refused such payment.

We note initially that our standard of review in an appeal from an order sustaining preliminary objections in the nature of a demurrer is the same as that which the trial court employs: all material facts set forth in the complaint as well as all inferences reasonably deducible therefrom are admitted as true for the purposes of review. Kyle v. McNamara & Criste, 506 Pa. 631, 634, 487 A.2d 814, 816 (1985). However, it does not admit conclusions of law. Wicks v. Milzoco Builders, Inc., 503 Pa. 614, 623, 470 A.2d 86, 91 (1983). The question presented by the demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible. Kyle v. McNamara & Criste, 506 Pa. at 634, 487 A.2d at 816. A demurrer should be sustained only in cases where the plaintiff has clearly failed to state a claim on which relief may be granted. Philmar Mid-Atlantic, Inc. v. York Street Associates II, 389 Pa.Super. 297, 301, 566 A.2d 1253, 1254-55 (1989); Wicks v. Milzoco Builders, Inc., supra. A demurrer should not be sustained if there is any doubt as to whether the complaint adequately states a claim for relief under any theory of law. Id.

Appellants argue that the lower court erred in characterizing the fee arrangement in question as an illegal contingency fee agreement under the now repealed Code of Professional Responsibility. To the contrary, appellee/client argues that although most contingent fees are either calculated based on a formula or provide for a specific sum of money to be paid, this arrangement is also a contingency agreement because it is dependent on the success at trial. ¹ The lower court found that the agreement, as alleged, constituted a contingency fee. The trial judge reasoned:

If, as the plaintiffs [appellants] contend, there was an oral agreement which required payment based upon the degree of success encountered during the equitable distribution proceeding, then, by definition, the plaintiffs' [appellants'] agreement with defendant [appellee] was contingent in nature.

Lower court opinion 12/17/90 at 3. The lower court then concluded that the agreement was void under Pa.R.Civ.P. Rule 202, 42 Pa.C.S.A. (rescinded April 4, 1990, effective July 1, 1990), ² and Code of Professional Responsibility, Ethical Considerations 2-19, 2-20, 42 Pa.C.S.A. (superseded by Rules of Professional Conduct, 42 Pa.C.S.A., effective April 1, 1988). ³ Rule 202 and Ethical Considerations 2-19 and 2-20 were in effect at the time the purported fee arrangement was made.

Contingency agreements have been defined in various forms. The Pennsylvania Rules of Professional Conduct characterize a contingency fee in the following manner:

A fee may be contingent on the outcome of the matter for which the service is rendered, except in a manner in which a contingent fee is prohibited by paragraph (d) or other law.

Rule of Professional Conduct, Rule 1.5(c), 42 Pa.C.S.A. While caselaw defining a contingency fee is lacking in Pennsylvania, we find it instructive to consider the pronouncements of the Supreme Judicial Court of Massachusetts which has defined a contingent fee agreement between an attorney and client as,

an agreement express, or implied, for legal services ... under which compensation, contingent in whole or in part upon the successful accomplishment or disposition of the subject matter of the agreement, is to be in an amount which either is fixed or is to be determined under a formula....

New England Telephone & Telegraph Company v. Board of Assessors of Boston, 392 Mass. 865, 870-71, 468 N.E.2d 263, 266-67 (1984).

While ostensibly the fee arrangement in the instant case is contingent in nature, a closer analysis leads us to conclude otherwise. We are guided in this decision by the analyses of various courts of our sister states which have previously had occasion to construe the type of agreement at issue here. See, e.g., Muldoon v. West End Chevrolet, 338 Mass. 91, 153 N.E.2d 887 (1958); Marriage of Malec, 205 Ill.App.3d 273, 150 Ill.Dec. 207, 562 N.E.2d 1010 (1990); Salerno v. Salerno, 241 N.J.Super. 536, 575 A.2d 532 (1990); Head v. Head, 66 Md.App. 655, 505 A.2d 868 (1986). For example, in Muldoon, supra, an attorney sought to recover "fair and adequate compensation " for legal services "and for the results achieved " in connection with Federal income tax adjustments. The client contended that the fee arrangement was a wholly or partially contingent fee and unlawful under Treasury Department regulations. Muldoon, 338 Mass. at 93, 153 N.E.2d at 889 (emphasis added). The trial court in that case found that the attorney's clients agreed to pay a retainer fee plus additional compensation for the attorney's services in an amount that would constitute fair, adequate and just compensation for the services rendered. Id.

The Massachusetts Supreme Judicial Court affirmed on appeal holding:

Such an arrangement is a usual and proper arrangement between lawyer and client and means that the lawyer's services, if they have any value at all, are to be paid for in some amount in any event and that their fair market value is to be computed, after the services have been rendered, by an appraisal of the services in the light of all relevant circumstances. Certainly, ... the importance, size and difficulty of the matter involved, and the attorney's success in dealing with them, are among the relevant considerations.

Id. at 95, 153 N.E.2d at 891 (citations omitted, emphasis added).

A more recent Illinois decision also concluded that a fee arrangement which determines the final fee based on the outcome of the case is not a contingency fee. In Marriage of Malec, supra, an attorney and his former partner entered into an agreement with John Malec, the petitioner, to represent Malec in his marriage dissolution. Marriage of Malec, 205 Ill.App.3d at 278, 150 Ill.Dec. at 211, 562 N.E.2d at 1014. The attorneys required a retainer fee and told Malec that the remainder of the fees would be settled, based on performance, at the end of the case. There was no written contract memorializing the agreement. Id. The petitioner/client argued that an enhanced fee or one that is based on results achieved, is a contingent fee. The Illinois court disagreed finding instead that the results obtained in litigation are a factor to be considered as a guide in determining reasonableness of the fee. Id. at 288, 150 Ill.Dec. at 217-18, 562 N.E.2d at 1020-21. The Malec court held that consideration of the reasonableness of a fee after litigation does not convert the fee into a contingency fee. Id. at 1020, 150 Ill.Dec. at 218, 562 N.E.2d at 1021. ⁴

A recent New Jersey decision also...