Goldstein and Price, L.C. v. Tonkin & Mondl, L.C., 72402

• Decision Date: 16 June 1998
• Docket Number: No. 72402,72402
• Citation: 974 S.W.2d 543
• Court: Missouri Court of Appeals
• Parties: GOLDSTEIN AND PRICE, L.C., Plaintiffs/Appellants, v. TONKIN & MONDL, L.C, and Simon Tonkin, Defendants/Respondents.

Page 543

974 S.W.2d 543

GOLDSTEIN AND PRICE, L.C., Plaintiffs/Appellants, v. TONKIN & MONDL, L.C, and Simon Tonkin, Defendants/Respondents.

No. 72402.

Missouri Court of Appeals,

Eastern District,

Division Three.

June 16, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Aug. 6, 1998.

Application to Transfer Denied

Sept. 22, 1998.

Eugene K. Buckley, Evans & Dixon, St. Louis, for appellant.

Joanne Martin Descher, Descher & Schultz, St. Louis, for respondent.

AHRENS, Presiding Judge.

The law firm Goldstein & Price, L.C. ("Goldstein & Price") appeals from a declaratory judgment entered on March 5, 1997 by the Circuit Court of the City of St. Louis. The trial court determined the parties' rights to attorneys' fees arising from contingency fee agreements and interpreted an operating agreement, governing the withdrawal of a member from Goldstein & Price.

Simon Tonkin ("Tonkin") worked as a partner and then member of Goldstein & Price for over seven years. In December, 1989, during his tenure with Goldstein & Price, Tonkin settled a case, filed on behalf of Harold Clark, a towboat engineer, against his employer, Spartan Transportation Company ("Spartan"), to recover for personal injuries. Spartan's underwriter, Neare, Gibbs & Company, insured the loss.

After settlement, an attorney and the head of claims for Neare, Gibbs & Company discussed with Tonkin the possibility of an action for indemnity and contribution against the United States. Tonkin, acting on behalf of Goldstein & Price, agreed to represent Neare, Gibbs & Company & Spartan in an action for indemnity and contribution. Neare, Gibbs & Company and Goldstein & Price entered into a contract, whereby Goldstein & Price agreed to provide representation on a contingent fee basis. They contracted as follows:

You requested that our firm handle the subrogation action on a contingency fee basis, and we have agreed to do so. The contingency fee will be 1/3 of all monies recovered by judgment or settlement, plus expenses incurred.

Tonkin filed the case ("Spartan case") on January 28, 1990 in the United States District Court for the Southern District of Illinois. Tonkin and Douglas Gossow, an associate at Goldstein & Price, principally handled the case on behalf of the firm. Goldstein & Price devoted a total of 421.35 hours to the Spartan case. Of the total hours, Tonkin's time spent accounted for 243.25 hours.

On September 23, 1994, the District Court entered judgment against the United States in the amount of $1,471,965.09. Tonkin advised Deborah Sproehnle, a representative of Neare, Gibbs & Company, of the risks involved in an appeal by the United States. Pursuant to Federal Rule of Appellate Procedure 4(a)(1), the United States had sixty (60) days from entry of judgment, to and including November 22, 1994, to file a notice of appeal. On November 22, 1994, Tonkin contacted the Clerk's office and learned the United States filed no notice of appeal.

Goldstein & Price converted from a partnership to a limited liability company in January of 1994. The members of Goldstein & Price adopted their partnership agreement as the company's operating agreement until a new operating agreement, consistent with the limited liability company statute, could be prepared. The members discussed a proposed operating agreement on October 22, 1994. Tonkin had concerns about the proposed operating agreement and requested additional time to review it. Goldstein & Price set up a special evening meeting on November 22, 1994 to address Tonkin's concerns about the proposed operating agreement.

Ten minutes before the meeting, Tonkin advised members of Goldstein & Price that he intended to withdraw from the firm. He provided written notice of withdrawal, claiming an effective withdrawal date of December 31, 1994. Two of the managing members later met to discuss Tonkin's withdrawal. They reviewed Section 12 of the operating agreement that was still controlling. ¹ The managing members concluded the operating agreement compelled Tonkin's withdrawal on November 30, 1994. Because of the Thanksgiving Holiday, Goldstein & Price scheduled a meeting on November 28 to discuss the details of the withdrawal with Tonkin and his attorney.

The attorney for the United States in the Spartan case, realizing he had miscounted the sixty days, filed a notice of appeal on November 23, 1994.

Goldstein & Price informed Tonkin and his attorney at the November 28, 1994 meeting that the effective date of his withdrawal would be November 30, 1994, pursuant to all members' interpretation of the controlling operating agreement.

After another meeting on November 29, 1994, Tonkin contacted Neare, Gibbs, & Company and offered to continue to represent them and Spartan in the subrogation action. Tonkin supplied a written authorization for use in directing the transfer of the file to his new firm, Tonkin & Mondl, L.C. ("Tonkin & Mondl"). Neare, Gibbs, & Company signed the authorization. On November 30, 1994, Neare, Gibbs & Company instructed Goldstein & Price to transfer the Spartan file to Tonkin & Mondl. On November 30, 1994, Sproehnle and Tonkin discussed the terms upon which Tonkin & Mondl would handle the Spartan appeal, agreeing to a contingency arrangement. Tonkin sent a letter to Neare, Gibbs & Company on December 9, 1994 confirming the telephone conversations in which Tonkin & Mondl agreed to represent Neare, Gibbs & Company for one-third (1/3 rd) of the recovery obtained. The confirmation letter stated that Goldstein & Price's lien would be satisfied out of Tonkin & Mondl's contingency fee.

On December 8, 1994, the Seventh Circuit issued an order in the Spartan appeal, instructing the United States to obtain leave to file its notice of appeal out of time before December 23, 1994, to avoid dismissal. Tonkin & Mondl filed a motion to dismiss the Spartan appeal for lack of jurisdiction on January 27, 1995. On February 24, 1995, the United States filed a withdrawal of its appeal and the Seventh Circuit issued its order dismissing the appeal. Tonkin & Mondl devoted 35.25 hours to the Spartan appeal.

On April 3, 1995, Neare, Gibbs & Company received two checks totaling $1,471,965.09, payable to Spartan. Neare, Gibbs & Company filed an interpleader petition, which was granted. On February 9, 1996, Neare, Gibbs & Company deposited the sum of $488,162.03 (one-third of the recovery amount less attorney's fees and expenses in filing the interpleader action) into the registry of the court.

Out of the sum paid into the registry of the Court on the interpleader petition, the trial court allocated $463,162.03 to the firm of Goldstein & Price. The trial court then apportioned the amount earned by Goldstein & Price between the parties, awarding Tonkin 59% ($273,265.60) and Goldstein & Price 41% ($189,896.43). The trial court awarded $25,000.00 to Tonkin & Mondl. Finding Tonkin's effective date of withdrawal as December 31, 1994, the trial court further awarded Tonkin the sum of $6,028.75 on his counterclaim for breach of contract. The trial court dismissed with prejudice counterclaims III and IV, finding Goldstein & Price and its individual members did not act improperly after Tonkin's withdrawal and did not breach fiduciary duties owed to Tonkin. Both parties appealed.

Appellate review of a court tried civil case is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). The judgment of the trial court will be affirmed unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law.

Dispute Between Law Firms

Goldstein & Price contends it satisfied the contingent fee agreement when it obtained a judgment for Neare, Gibbs & Company. Goldstein & Price argues that Plaza Shoe Store, Inc. v. Hermel, Inc., 636 S.W.2d 53, 55 (Mo. banc 1982), sets out a bright line test, in which quantum meruit must be applied when an attorney is discharged without cause prior to obtaining a settlement or judgment, while an existing contract would be enforceable if an attorney is discharged without cause after reception of a settlement or judgment. Tonkin & Mondl argues Goldstein & Price did not satisfy the contingent fee agreement prior to discharge because no money had been collected on the judgment. Tonkin & Mondl, therefore, contends Goldstein & Price is now limited to a recovery based on quantum meruit.

In 1982, the Missouri Supreme Court revisited the attorney-client relationship, due in part to an increase in litigation and a corresponding growth in contingent fee contracts. Plaza Shoe Store, Inc. v. Hermel, Inc., 636 S.W.2d 53, 56-57 (Mo. banc 1982). Acknowledging the absolute right of the client to discharge client's attorney at any time, with or without cause, the Missouri Supreme Court questioned the logic of recovering a fee under a contract despite a discharge prior to full performance. Id. at 58. "If the client has the right to discharge the attorney, then the contract of employment can no longer be entirely viable upon the exercise of that right." Id. The Missouri Supreme Court adopted the modern rule, "limiting the recovery of the attorney, [discharged prior to occurrence of the contingency], to the reasonable value of services rendered [quantum meruit], not to exceed the contracted fee, and payable only upon the occurrence of the contingency." Id. at 60.

In Plaza Shoe, the attorneys representing Plaza Shoe Stores, Inc. obtained a reasonable offer and recommended acceptance to their client. After a disagreement, the attorneys terminated their employment contract with Plaza Shoe Stores, Inc. The attorneys filed a lien and after an eventual settlement, sought to recover on a contract entitling them to one-third of any and all amounts received by way of settlement.

Plaza Shoe found a proper recovery available to an attorney employed under a contingent fee contract and discharged without cause prior to settlement or...