Hannon Law Firm, LLC v. Melat, Pressman & Higbie, LLP

• Decision Date: 03 March 2011
• Docket Number: No. 009CA0788.,009CA0788.
• Citation: 293 P.3d 55
• Parties: HANNON LAW FIRM, LLC, f/k/a The Law Firm of Kevin S. Hannon, LLC, f/k/a The Law Firm of Kevin S. Hannon, Plaintiff–Appellant and Cross–Appellee, v. MELAT, PRESSMAN & HIGBIE, LLP, f/k/a Melat, Pressman, Ezell & Higbie LLP; and Howarth & Smith, Defendants–Appellees and Cross–Appellants.
• Court: Colorado Court of Appeals

293 P.3d 55

HANNON LAW FIRM, LLC, f/k/a The Law Firm of Kevin S. Hannon, LLC, f/k/a The Law Firm of Kevin S. Hannon, Plaintiff–Appellant and Cross–Appellee,

v.MELAT, PRESSMAN & HIGBIE, LLP, f/k/a Melat, Pressman, Ezell & Higbie LLP; and Howarth & Smith, Defendants–Appellees and Cross–Appellants.

No. 009CA0788.

Colorado Court of Appeals, Div. II.

March 3, 2011.

Burns, Figa & Will, P.C., Alexander R. Rothrock, David M. Pittinos, Greenwood Village, Colorado, for Plaintiff–Appellant and Cross–Appellee.

Cross & Bennett, LLC, Joseph F. Bennett, Colorado Springs, Colorado, for Defendants–Appellees and Cross–Appellants.

Opinion by Judge CASEBOLT.

In this action between attorneys, we must address whether, when multiple separate law firms represent clients under a contingent fee agreement, a withdrawing attorney's claim in quantum meruit against former co-counsel accrues at the time of the withdrawal or at the time that recovery under the contingent fee agreement occurs. We conclude that the claim cannot begin to accrue until the withdrawing attorney knows or should know of the recovery. We therefore reverse the trial court's judgment on the pleadings against plaintiff, The Hannon Law Firm (Hannon), and in favor of defendants, Melat, Pressman & Higbie, L.L.P. (Melat) and Howarth & Smith (Howarth), and remand for further proceedings.

We must also decide whether a withdrawing attorney may assert a claim in quantum meruit against former co-counsel where the withdrawing attorney would be barred by C.R.C.P. Ch. 23.3, Rule 5(d), from bringing such a claim against the clients. We conclude that Rule 5(d) applies only to claims in quantum meruit brought against a client. We therefore affirm the trial court's order denying Melat's and Howarth's motion to dismiss Hannon's claim.

I. Background

The following facts are taken from Hannon's complaint, which we must construe as true. See Platt v. Aspenwood Condominium Ass'n, 214 P.3d 1060, 1066 (Colo.App.2009).

Melat entered into a contingent fee agreement with certain clients who lived near a uranium mine and initiated tort claims in federal court against the mine owner. Eventually, other law firms, including Hannon, became co-counsel for the clients. With the apparent consent of the clients, those law firms engaged Howarth as lead trial counsel. The firms entered into a fee-sharing agreement, which provided that Howarth would receive forty percent of the total fees obtained in the litigation, and the other three firms would each receive twenty percent. The fee-sharing agreement was silent on the recovery of fees or other compensation if a law firm were to withdraw.

The relationship between Hannon and Howarth became strained to the point that Howarth “essentially took over the case to the exclusion of [Hannon].” Eventually, Hannon withdrew, with court approval, from representation in the case. At the time of its withdrawal, Hannon lawyers had worked 541.4 hours and Hannon paralegals had worked 1881.9 hours on the case. Hannon had also incurred over $160,000 in costs.

After multiple trials and appeals, the federal case settled, and the clients paid to Howarth and Melat the fees and costs called for under the contingent fee agreement. At that time, Melat paid Hannon for the costs Hannon had incurred before withdrawal, but refused to pay any compensation for the services that Hannon had rendered.

A little less than three years after being notified of the settlement, Hannon filed the complaint in this action, asserting a single claim for quantum meruit against Melat and Howarth for the reasonable value of the services it had provided before withdrawal. Melat and Howarth moved to dismiss the complaint for failure to state a claim upon which relief could be granted under C.R.C.P. 12(b)(5), contending that, because C.R.C.P. Ch. 23.3, Rule 5(d) would prevent Hannon's recovery of any fees from the client in quantum meruit, Hannon could not recover from Melat and Howarth. Concluding that Hannon had presented a viable theory of recovery, the trial court denied the motion.

Melat and Howarth then moved for judgment on the pleadings, asserting that the statute of limitations had run before Hannon commenced this action because the quantum meruit claim accrued, at the latest, when Hannon withdrew from representation of the clients. Hannon responded that the quantum meruit claim did not accrue until recovery occurred in the underlying case, and that it had commenced this action within the three-year period from that date. Concluding that it needed to consider an exhibit attached to Hannon's complaint to determine the issue, the trial court treated the motion as one for summary judgment and determined that the claim accrued at the time Hannon provided the services and withdrew from representation. Accordingly, it granted the motion, and this appeal followed.

II. Accrual of Quantum Meruit Claim

Hannon contends that the trial court erred in granting judgment on the pleadings because the quantum meruit claim could not accrue, for statute of limitations purposes, until at least the time Hannon learned or should have learned of the recovery under the contingent fee agreement. We agree.

A. Standard of Review

In considering a motion for judgment on the pleadings, the trial court must construe the allegations of the pleadings strictly against the movant, must consider the allegations of the opposing party's pleadings as true, and should not grant the motion unless the pleadings themselves show that the matter can be determined on the pleadings. Platt, 214 P.3d at 1066. Entry of judgment on the pleadings is proper only if the material facts are undisputed and the movant is entitled to judgment as a matter of law. Id. We review de novo an order entering judgment on the pleadings, id., employing the same standards as the trial court.

B. Law

The statute of limitations applicable to a quantum meruit claim is three years from the date the claim accrues. § 13–80–101(1)(a), C.R.S.2010; Rotenberg v. Richards, 899 P.2d 365, 368 (Colo.App.1995). A cause of action generally accrues “when a suit may be maintained thereon.” Jones v. Cox, 828 P.2d 218, 224 (Colo.1992).

Quantum meruit “is a theory of contract recovery that invokes an implied contract when the parties either have no express contract or have abrogated it.” Dudding v. Norton Frickey & Assocs., 11 P.3d 441, 444 (Colo.2000). Section 13–80–108(6), C.R.S.2010, provides that a cause of action for “breach of any express or implied contract” accrues “on the date the breach is discovered or should have been discovered by the exercise of reasonable diligence.” A claim in quantum meruit therefore accrues when a person discovers, or through the exercise of reasonable diligence should discover, that all elements of the claim are present. See Estate of Draper v. Bank of Am., 288 Kan. 510, 205 P.3d 698, 715 (2009); see also Jones, 828 P.2d at 224.

To recover in quantum meruit, a plaintiff must demonstrate that (1) at the plaintiff's expense; (2) the defendant received a benefit; (3) under circumstances that would make it unjust for the defendant to retain the benefit without paying for it. Dudding, 11 P.3d at 445. The statute of limitations therefore begins to run with respect to a quantum meruit claim when a plaintiff has conferred a benefit upon the defendant and the retention of the benefit becomes unjust. See Draper, 205 P.3d at 715 (citing Vila v. Inter–Am. Inv., Corp., 536 F.Supp.2d 41, 51 (D.D.C.2008), aff'd,570 F.3d 274, 284–85 (D.C.Cir.2009)).

There are no Colorado cases determining when the benefit of an attorney's services rendered pursuant to a contingent fee agreement and a fee sharing agreement becomes unjust so as to mark an accrual of the claim. We accordingly look to analogous cases to assist us.

In determining whether retention of the benefit is unjust, the supreme court has identified various fact-specific tests that apply in particular situations. See Lewis v. Lewis, 189 P.3d 1134, 1143 (Colo.2008) (where gifts or contracts between close family members fail, retention of benefit becomes unjust where one undertakes an action that is a significant deviation from mutual purpose); DCB Constr. Co. v. Central City Dev. Co., 965 P.2d 115, 122 (Colo.1998) (where contractor confers benefit on landlord for work done on behalf of tenant, landlord must engage in some type of malfeasance in order for retention of benefit to become unjust). In the absence of a particularized test, we conclude we should analyze the intentions, expectations, and behavior of the parties to determine when retention of the benefit becomes unjust. Lewis, 189 P.3d at 1143 (citing Cablevision of Breckenridge, Inc. v. Tannhauser Condo. Ass'n, 649 P.2d 1093, 1098 (Colo.1982)); see also26 Richard A. Lord, Williston on Contracts § 68:1, at 24 (4th ed.2003) (courts generally allow recovery in quantum meruit “when a party confers a benefit with a reasonable expectation of payment”).

C. Application

We first address the trial court's conversion of the motion for judgment on the pleadings to a motion for summary judgment and then address the trial court's determination of the accrual date for Hannon's quantum meruit claim.

1. Judgment on the Pleadings or Summary Judgment

We note initially that the trial court converted the motion for judgment on the pleadings to a motion for summary judgment because it concluded that it needed to review the exhibit attached to Hannon's complaint, which it construed to be outside the pleadings. Such a conclusion was unnecessary, however, because a document that is referred to in or is attached to a complaint may be reviewed by the court on a motion for judgment on the pleadings without converting the motion to one for summary judgment. See Yadon v. Lowry, 126 P.3d 332, 335 (Colo.App.2005) (upon considering a C.R.C.P. 12(b)(5) motion, a court may consider a document referred to in, but not attached the complaint, without converting the motion to dismiss...