Forbes v. American Bldg. Maintenance Co.

• Decision Date: 08 January 2009
• Docket Number: No. 25398-8-III.,25398-8-III.
• Citation: 148 Wn. App. 273,198 P.3d 1042
• Court: Washington Court of Appeals
• Parties: Cheryl FORBES, Respondent and Cross-Appellant, Colleen Myers, Plaintiff, v. AMERICAN BUILDING MAINTENANCE COMPANY WEST; ABM Janitorial Services; ABM Industries Inc., Defendants, Mary Schultz, Appellant.

198 P.3d 1042

148 Wn. App. 273

Cheryl FORBES, Respondent and Cross-Appellant Colleen Myers, Plaintiff, v. AMERICAN BUILDING MAINTENANCE COMPANY WEST; ABM Janitorial Services; ABM Industries Inc., Defendants Mary Schultz, Appellant.

No. 25398-8-III.

Court of Appeals of Washington, Division 3.

January 8, 2009.

Mary Elizabeth Schultz, Mary Schultz Law PS, Spokane, WA, for Appellant/Cross-Respondent.

Bryce James Wilcox, Michael D. Franklin, Attorneys at Law, Spokane, WA, for Respondent/Cross-Appellant.

KULIK, A.C.J.

¶ 1 Spokane attorney Mary Schultz represented Cheryl Forbes in an employment discrimination suit against ABM Industries Inc. and American Building Maintenance Company West (collectively "ABM"). Ms. Schultz and Ms. Forbes entered into an attorney fee contingency agreement that promised Ms. Schultz 40 percent of amounts reached in settlement or 44 percent of any judgment after a trial on the merits. Ms. Forbes won a jury verdict and the judgment was affirmed on appeal to this court. Forbes v. ABM Indus., Inc., noted at 127 Wash.App. 1003, 2005 WL 914836.

¶ 2 While ABM's petition for review was pending, Ms. Forbes fired Ms. Schultz and settled with ABM for less than the trial judgment. Ms. Schultz then demanded 44 percent of the trial judgment, plus statutory prevailing party fees and costs. The trial court awarded Ms. Schultz 40 percent of the settlement amount plus appellate fees, posttrial fees, and costs. The court ordered Ms. Forbes to pay prejudgment interest of 12 percent from the date of settlement on the contingent fees.

¶ 3 Ms. Schultz appeals, contending she is entitled to 44 percent of the original judgment because her services under the contract were completed when judgment was entered after trial. She also argues that she is entitled to the statutory prevailing party fees awarded in the trial judgment. In her cross-appeal, Ms. Forbes contends (1) the trial court erred by refusing to consider ethical misconduct and breaches of fiduciary duty when setting a reasonable fee; (2) the final contingency fee agreement was unenforceable for lack of consideration; and (3) the trial court incorrectly computed the fee and interest.

¶ 4 We agree with the trial court that the contract was ambiguous on the application of the contingency fees. Reading the contract against its drafter, we further agree that Ms. Schultz is entitled to only the settlement contingency (40 percent) applied to the amount received in settlement. But we also conclude that the amount actually received in settlement was the amount stated in the satisfaction of judgment. Accordingly, we modify the trial court's order and award Ms. Schultz 40 percent of the amount stated in the satisfaction of judgment, plus the additional fees and costs determined by the trial court. We affirm the judgment as modified.

FACTS

¶ 5 Ms. Forbes sued ABM in 1999 for sex discrimination, creating a hostile work environment and retaliation. Her action and that of another former ABM employee were joined for trial. Forbes, 127 Wash.App. 1003, 2005 WL 914836, at * 1. Because they were dissatisfied with the performance of their first attorney, the plaintiffs contacted Ms. Schultz in 2000. At that time, discovery was nearly done and the trial was scheduled to begin six months later. Little had been done to develop a theory of recovery for Ms. Forbes.

¶ 6 After the original attorney withdrew in December 2000, the plaintiffs asked Ms. Schultz to represent them. The parties' initial contract in January 2001 stated that Ms. Schultz would investigate the viability of the claims at an hourly rate. She agreed to take the case in February, but only if the clients would pay a hybrid contingency fee that included one-third of any amount reached in settlement or 40 percent of any judgment after trial, plus $100 per hour (to be deducted from any contingency fee earned) and statutory prevailing party fees. The clients would pay all costs as they were incurred. This agreement was signed on February 26, 2001. An amended version of this agreement was signed on May 17, 2001. That same day, Ms. Forbes and Ms. Schultz signed a similar fee agreement for a different employment discrimination suit against another employer.

¶ 7 Ms. Schultz and her clients discussed litigation expenses at various times from September 2001 through May 2002 when Ms. Forbes and the other plaintiff were delinquent in their payments of costs and hourly fees. As a result, the parties met on May 24, 2002, and agreed that Ms. Schultz would pay costs as they arose while the clients would remain responsible for — and make their best efforts to assist with — cost payments. Additionally, Ms. Schultz agreed to waive past defaults on the hourly fee. In return, Ms. Schultz would receive an increase in the contingency fee and would buy life insurance on her clients to secure the cash outlays. This new contract was sent to the plaintiffs in July 2002 and was edited by Ms. Schultz at their request in October and November 2002. It was executed on November 5, 2002.

¶ 8 Ms. Schultz obtained a continuance of the trial date, joined for trial American Building Maintenance Company West's parent corporation, ABM Industries Inc., wrestled with intricate and difficult discovery regarding ABM, and successfully defended against ABM's motion to sever. She was also pursuing Ms. Forbes's separate action against another employer.

¶ 9 The six-week ABM trial resulted in a verdict for Ms. Forbes of $4 million. The other plaintiff was not successful and is not involved in this appeal. Posttrial, Ms. Schultz defended against ABM's motion to vacate and motion for a new trial, and successfully pursued prejudgment interest ($270,890) and taxable consequences recovery ($759,893) for Ms. Forbes. The trial court awarded Ms. Schultz $504,737 in statutory attorney fees under RCW 49.60.030(2) and $84,378 in costs through September 23, 2003. Ms. Schultz also obtained a favorable settlement for Ms. Forbes in the separate action involving a different employer.

¶ 10 After trial, Ms. Forbes could not find employment, so Ms. Schultz hired her as office manager at Ms. Schultz's law firm. Citing stress and related health problems, Ms. Forbes resigned in mid-March 2005.

¶ 11 When ABM filed an appeal in February 2004, Ms. Schultz initially exercised her option under the contract not to undertake the appeal. Ms. Schultz arranged for Ms. Forbes to hire appellate counsel, who agreed to do the appeal for 1 percent of the verdict plus prevailing party fees. Appellate counsel withdrew just before the respondent's/cross-appellant's brief was due and Ms. Schultz rewrote the brief, timely filed it, and argued the case on appeal. This court affirmed and awarded Ms. Schultz additional attorney fees incurred after trial as well as attorney fees and costs on appeal. Forbes, 127 Wash.App. 1003, 2005 WL 914836, at *16.

¶ 12 After the appeal, the judgment was worth close to $7 million. ABM then filed a petition for review at the Washington Supreme Court. Forbes v. ABM Indus., Inc., No. 77154-5 (Wash. June 3, 2005).

¶ 13 In the months following the judgment and after it was affirmed on appeal, Ms. Schultz and Ms. Forbes could not agree on attorney fees or costs. Ms. Forbes understood the contract to state that the 44 percent judgment contingency covered fees on appeal, while Ms. Schultz argued that she was entitled to an additional two percent of the judgment: one percent to her and one percent to appellate counsel for his involvement. They also disagreed on whether the 44 percent contingency or the 40 percent contingency would apply if the case settled. Ms. Schultz began to suspect that Ms. Forbes was receiving advice from another attorney on the fee agreement and settlement. In fact, Ms. Forbes was in contact with attorneys at the Spokane law firm of Lukins & Annis during those months, especially in July and August 2005.

¶ 14 On July 26, 2005, ABM sent Ms. Schultz a settlement offer of $5 million with a request to reply, if possible, by August 2, 2005, when the board of directors would meet. The offer noted that, with taxes and an attorney contingency fee of 40 percent, Ms. Forbes would actually recover more with a settlement of $5 million than she would with a judgment that was now worth — according to ABM — around $6.2 million. Ms. Schultz responded to the offer by having an accountant assess the taxable interest and sending that information to Ms. Forbes. She also showed Ms. Forbes the benefits of counter-offering $6 million.

¶ 15 On the morning of Friday, July 29, 2005, Ms. Forbes e-mailed Ms. Schultz and directed her to reject the $5 million offer and to counter with $5.8 million. Ms. Forbes continued, "I also want to note that I disagree with your interpretation of our fee agreement and how the settlement money is to be split as you outlined in your previous e-mails." Forbes Ex. 74. Ms. Schultz responded later that morning with language that suggested she would not submit the counter offer until she and Ms. Forbes reached an agreement on distribution of the settlement;

Cheryl,

Surprising comments.

Per our contract, my fees are already earned at 44% of the judgment I received for you, plus all prevailing party fees, plus fees on appeal. You may agree to compromise the claim, but I am not prepared to compromise an already earned fee under conditions of dispute with you. The investment I have made here on your behalf is substantial.

The contract also gives me the authority to settle or compromise the claim, so long as I submit the compromise to you. Two things result. 1) Even though I am not required to obtain your agreement on the counter, I am trying to work with you on it. 2) Given your comment [in the previous e-mail], until and unless we reach some written agreement on distribution, I will require the earned 44% of the entire amount, plus prevailing party fees, from any settlement that is submitted.

You may e[-]mail me your proposal...