Freeman v. Mayer
| Decision Date | 02 October 1996 |
| Docket Number | No. 95-3425,95-3425 |
| Citation | 95 F.3d 569 |
| Parties | William M. FREEMAN, Plaintiff-Appellee, v. Richard A. MAYER and Spangler, Jennings & Dougherty, P.C., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
J. Michael Trueblood (argued), Bruce W. Graham, Trueblood & Graham, LaFayette, IN, for plaintiff-appellee.
Peter G. Koransky, Robert D. Brown (argued), Richard A. Mayer, Spangler, Jennings & Dougherty, Merrillville, IN, for defendants-appellants.
Before CUMMINGS, EASTERBROOK, and DIANE P. WOOD, Circuit Judges.
Fee-sharing arrangements between lawyers are regulated in Indiana under Rule 1.5(e) of the Rules of Professional Conduct promulgated by the Indiana Supreme Court. In this case, we must decide whether such a fee-sharing agreement existed between William M. Freeman, at the relevant time an Illinois lawyer, and Richard A. Mayer, an Indiana lawyer and his law firm, Spangler, Jennings & Dougherty, P.C. (For convenience, we refer to both as Mayer, unless the context requires otherwise.) Because we conclude, like the district court, that a contract arose between Freeman and Mayer, we must also decide whether Mayer has any legally cognizable defense to its enforcement based on its alleged incompatibility with the Rules of Professional Conduct. In the circumstances of this case, we find that Mayer has no standing to raise a defense based on the Rules, and we therefore find that the district court correctly enforced the agreement between the parties.
On December 21, 1988, Kirk Weidenaar was badly injured in an accident at an Amoco Oil Company warehouse in Hammond, Indiana, which left him a quadriplegic. Shortly thereafter, Marion and Linda Morgan, Kirk's in-laws, contacted William M. Freeman, an Illinois attorney who was a friend of the family, for advice and assistance. Freeman immediately went to the site of the accident, along with Marion Morgan and a private investigator, to gather information and to take some photographs. On February 7, 1989, Dawn Weidenaar (on behalf of herself and Kirk) signed a written retainer agreement in Lansing, Illinois, engaging Freeman as their attorney to pursue any claims they might have in conjunction with Kirk's accident. The agreement provided for a standard one-third contingent fee from "whatever sum may be collected by suit, settlement or otherwise."
Freeman referred Kirk's potential workman's compensation claim to an Indiana lawyer, Ron Layer, who took over that part of the case. Otherwise, Freeman himself handled all matters for the next twenty months. This work involved liability investigation, research, medical documentation, and personal conferences with the Weidenaars, both at his Lansing, Illinois office and in their Indiana home. Freeman himself was not admitted to practice in Indiana, although he had handled Indiana cases before on a pro hac vice basis. Because of that fact, and because he was preparing to retire to North Carolina, he decided that he should associate with an Indiana attorney for the day-to-day handling of the case, including trial preparation and trial if necessary. After one false start, he met on September 24, 1990, with Richard A. Mayer, of the law firm Spangler, Jennings & Dougherty, P.C., in Merrillville, Indiana. At that meeting, Freeman explained the essentials of the case to Mayer and told Mayer that he needed an Indiana lawyer. At this meeting, Freeman asked whether Mayer would agree to share the attorney's fees on a fifty-fifty basis, in lieu of a one-third referral fee. Freeman claims that Mayer agreed, but the parties disagree about many details of this meeting: did Freeman state that he would refer the case only if Mayer agreed to the fifty-fifty split? did Mayer agree to this division of fees only on the condition that Freeman's work would be substantially equal to his own? did Freeman tell Mayer he was moving permanently to North Carolina? Whatever the answers to these questions, subsequent dealings between the two clarified the nature of their association.
Immediately after his meeting with Mayer, Freeman met with the Weidenaars and recommended that they accept Mayer as their Indiana counsel. He told them that he would split any fees with Mayer fifty-fifty and that his agreement with Mayer would not affect their potential judgment. In their affidavits filed in the present action, both Dawn and Kirk Weidenaar confirmed that Freeman had fully disclosed the fee-sharing arrangement to them and that they had consented both to his association with Mayer and to the fee arrangement. Neither at that time, nor at any other time in the action, did the Weidenaars sign any written retainer agreement directly with Mayer.
On October 11, 1990, Freeman wrote the first letter to Mayer that is claimed to form the basis of the written agreement between himself and Mayer. The October 11 letter stated, in pertinent part:
You [Mayer] and I have agreed that your firm and I will share the fees and costs advanced (e.g., experts, court reporters, photographs, filing fees, etc.) on an equal basis. These costs will be reimbursed to use by the clients if and when there is a recovery and will be paid from their share of any judgment or settlement.
* * * * * *
Please drop me a line [ new North Carolina address] acknowledging receipt of this letter and indicating whether or not I have accurately set forth our agreement.
As requested, Mayer responded with a letter dated October 25, 1990, which read as follows:
I received your letter, and enclosed herewith is a suggested Attorney/Client Agreement which is self-explanatory. Please feel free to change it in any way you see fit. When you come here on October 31, 1990, we can meet and talk further. I will try to get some preliminary information by then. I look forward to working with you on this matter. Thank you kindly.
As it happened, Freeman did not come for an October 31 meeting, but he did write another letter dated November 6, 1990, in which he apologized for not coming and for the disorganized state of the file. He encouraged Mayer to arrange a visit with the Weidenaars and asked him to file the complaint promptly. Finally, he wrote
On December 17, 1990, Mayer filed a complaint on behalf of the Weidenaars against AMOCO and NIPSCO. Freeman's name also appeared on the complaint; the parties dispute whether Freeman had asked Mayer to arrange for his pro hac vice admission or not, but it appears to be undisputed that the inclusion of Freeman's name without the necessary motion was a mistake that occurred in Mayer's office. Mayer sent a copy of the complaint to Freeman the same day, reported that "everything is just fine," and wished him a happy holiday. Mayer then began devoting considerable effort to the case. He and other attorneys at his firm conducted 38 depositions, reviewed records from 72 non-parties, prepared further pleadings and motions, and appeared at all pre-trial conferences, court hearings, and court-ordered mediation sessions. All told, the Spangler firm advanced some $41,317 in costs. Finally, they conducted a full jury trial. Following the trial, the jury returned a verdict in favor of Kirk Weidenaar in the amount of $7,000,000 and in favor of Dawn Weidenaar for $1,000,000, and it assessed Kirk's comparative fault at 40 percent.
Freeman took no part in any of this work, but it also appears that Mayer did not inform him of key times such as when depositions would be taken and that Mayer was not keeping Freeman's file up-to-date. Nevertheless, Freeman was continuing to consult with the Weidenaars. He attended the trial with Dawn Weidenaar and was recognized by the presiding judge as counsel of record based on what appeared in the original complaint.
Following the judgment, Mayer and the Spangler firm negotiated a final settlement on behalf of the Weidenaars in the amount of $4,725,581, and the firm assisted the couple with the financial planning in connection with their settlement. From the total amount, the Spangler firm was reimbursed the full $41,317.75 it had advanced as costs. It then received one-third of the remaining $4,684,263, or $1,561,421 as its attorneys' fees--the percentage that had been specified in the Weidenaars' original agreement with Freeman. Half that amount would have been $780,710. Freeman, however, only learned of the settlement in early January 1993, when Dawn Weidenaar mentioned it to him. He called Mayer to find out what was happening, and Mayer essentially told him the check was in the mail. When Freeman actually received the check on February 1, 1993, however, he was dismayed to learn that Mayer had sent only $520,473, which was just one-third of the net attorneys' fee award after deduction of the $41,317 in costs. Freeman objected immediately and did not negotiate the check. Eventually, Mayer stopped payment on it, claiming that the alleged fee-sharing agreement with Freeman violated the Indiana Rules of Professional Conduct.
This diversity suit in federal court followed more than a year and a half later. Freeman sued, claiming that Mayer and his firm had breached the fee-sharing agreement that arose by virtue of the fall 1990 correspondence and the course of dealing between the parties. The district...
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