Harlow v. SLOSS INDUSTRIES CORP.

• Citation: 813 So.2d 879
• Parties: David G. HARLOW v. SLOSS INDUSTRIES CORPORATION et al.
• Decision Date: 11 May 2001
• Court: Alabama Court of Civil Appeals

813 So.2d 879

David G. HARLOW v. SLOSS INDUSTRIES CORPORATION et al.

2000603.

Court of Civil Appeals of Alabama.

May 11, 2001.

Certiorari Denied August 31, 2001.

David G. Harlow, pro se.

Fournier J. Gale III, Jarred O. Taylor II, John N. Bolus, and Stuart D. Roberts of Maynard, Cooper & Gale, P.C., Birmingham, for Sloss Industries Corporation.

Michael L. Edwards, Gregory C. Cook, and Mark E. Tindal of Balch & Bingham, L.L.P., Birmingham, for AVA Chemical Ventures, L.L.C.; Archibald Cox, Jr.; Kimball Chase Technologies, Ltd.; and Chemical Industry Services, Inc.

Alabama Supreme Court 1001473.

THOMPSON, Judge.

On May 22, 1998, Sloss Industries Corporation ("Sloss") filed a complaint against AVA Chemical Ventures, L.L.C. ("AVA"); Kimball Chase Technologies, Ltd.; Chemical Industry Services, Inc. ("CIS"); and Applied Power Concepts, Inc. ("APC"). Sloss's complaint related to a contract between Sloss and AVA. The various defendants to the action initiated by Sloss (hereinafter referred to as the "Sloss litigation") answered the complaint. AVA and CIS counterclaimed against Sloss.

AVA had anticipated that its dispute with Sloss would require negotiations and that the parties to the contract might be forced to resort to litigation to resolve their dispute. In 1997, AVA entered into an agreement with David Harlow, an attorney licensed to practice law in Illinois, for Harlow to represent AVA on a contingency-fee basis in its negotiations with Sloss and in any action AVA might file against Sloss. The negotiations failed, and Sloss filed its complaint before AVA could initiate an action. The agreement between AVA and Harlow was later amended to provide that Harlow would also represent several of the other defendants named in Sloss's complaint (the parties represented by Harlow are hereinafter collectively referred to as the "clients.")

Other parties and claims were added in the litigation. The parties to the Sloss litigation made various filings and conducted discovery for approximately two years. On June 16, 2000, all of the parties to the Sloss litigation agreed to settle the claims involved in that action. On July 5, 2000, after the parties reached an agreement to settle but before that agreement was signed and executed, Harlow filed a motion to intervene in the Sloss litigation. In that motion, Harlow sought a lien pursuant to § 34-3-61, Ala.Code 1975, for his attorney fee.

On July 25, 2000, all of the parties to the Sloss litigation filed a collective motion to dismiss the action, stating in that motion that they had reached a settlement of the claims involved in the Sloss litigation. Harlow opposed the motion to dismiss, and Harlow and the parties submitted evidence in support of their positions.

On August 18, 2000, the trial court conducted a hearing on the pending motions. On September 28, 2000, the trial court entered a judgment in which it, among other things, granted Harlow's motion to intervene, granted the parties' motion to dismiss the Sloss litigation, made detailed findings of fact, and ordered that Harlow receive a lien in the amount of $10,606.93 for his attorney fee, pursuant to § 34-3-61, Ala.Code 1975. Harlow appealed to the Supreme Court of Alabama, which transferred the appeal to this court, pursuant to § 12-2-7(6), Ala.Code 1975.

Harlow worked for 15 years as general counsel for a chemical company; he is licensed to practice law in Illinois. Harlow testified that he drafted the agreement between him and the clients and that the clients' corporate representatives who signed that agreement were not attorneys. The agreement between Harlow and the clients is a contingency-fee agreement that provided that Harlow would receive a percentage of the amount the clients ultimately recovered in attempting to resolve the dispute through settlement or through any ensuing litigation. The percentage of the recovery Harlow was to receive depended on the manner of the recovery. Harlow stated at the August 18, 2000, hearing that a settlement was one manner of recovery that was encompassed by the attorney-fee agreement.

Harlow testified that the contingencyfee agreement provided that he would act as lead counsel in the litigation, but that the clients would retain local Alabama counsel because Harlow was not licensed to practice law in Alabama. The contingency-fee agreement provided that Harlow would review and approve all reasonable fees charged to the clients by the firm hired to be local counsel in the litigation.

The clients retained the law firm of Balch & Bingham, L.L.P., as local Alabama counsel. The initial agreement between the clients and Balch & Bingham provided that Balch & Bingham would be paid on an hourly basis; that the "major work" in the litigation would be performed by Harlow; and that Balch & Bingham's role would be to, among other things, assist in hearings and depositions and review pleadings and motions for content and form.

It is undisputed that Balch & Bingham's role in the litigation increased, that its attorneys performed a substantial amount of the work in the representation of the clients, and that the clients asked Balch & Bingham, rather than Harlow, to represent them at the trial scheduled for July 2000. Harlow testified that he remained lead counsel and that he expected to direct the clients' case at the scheduled July 2000 trial. Harlow admitted that the clients had complained to him that they had expected him to perform the majority of the work in the litigation and that, because Balch & Bingham had performed that work, the attorney fees generated during the course of the litigation were higher than the clients had anticipated.

Harlow testified that the contingencyfee agreement provided that the attorneyfee charges Balch & Bingham submitted to the clients worked to reduce the overall recovery the clients hoped to obtain at the conclusion of the Sloss litigation. Harlow testified that because he was to be paid a percentage of the clients' total recovery, Balch & Bingham's fees also reduced his fees "by a percentage."

At the August 18, 2000, hearing, Harlow disputed the reasonableness of some of the attorney-fee charges submitted by Balch & Bingham in June and July 2000. Harlow challenged the amount of time Balch & Bingham spent summarizing depositions and creating witness outlines in preparation for the scheduled July 2000 trial date. Harlow admitted that he had little experience preparing witness outlines and that a large number of the depositions Balch & Bingham summarized were taken by him and were generally lengthy.

In its September 28, 2000, judgment, the trial court made detailed findings of fact. After reviewing the record on appeal, we conclude that those factual findings, quoted below, are fully supported by the record.

"After preliminary negotiations, on March 31, 1997, Sloss and AVA entered into a contract for the commercial manufacture of a food-grade additive (the `product') pursuant to a process developed by William Farone of APC and patented by AVA.

"After several failed attempts to manufacture the product, the relationship between the parties began to deteriorate. Sloss ultimately stopped attempting to manufacture the product.

"In light of these events, AVA contacted Harlow and eventually retained him to represent it regarding the dispute with Sloss. Although there was a dispute between the parties, at the time Harlow was retained, Sloss had not yet filed its action. Harlow's representation was a contingency arrangement and was unlimited in scope, thus covering all stages of resolving this dispute, including, if necessary, trial of this matter by Harlow.

"No evidence was presented that AVA was represented by counsel in its negotiation of the fee agreement with Harlow. The fee agreement between AVA and Harlow, drafted by Harlow, provides as follows:

"`AVA hereby agrees to pay [Harlow] all necessary costs and expenses of the above-described representation, PLUS a fee for the above-described. The fee shall be a TOTAL of the following:

"`1. A contingent fee of 25% of the "RECOVERY" (as such term is defined below) on behalf of the AVA.... In the event that formal mediation is commenced, suit is filed, or a trial is commenced, such 25% shall increase to 30%, 35% and 40%, respectively. Additional fees for appeal, if any, as to be agreed; PLUS

". . . .

"`3. A fee of $200 per hour for time spent on collateral issues (unrelated to the March 31, 1997, Agreement to Manufacture) with Sloss, such as AVA's placement of the manufacture of [another product] with Sloss, or AVA's right to place such manufacture with other than Sloss.

"`"RECOVERY" is defined to be the value received by AVA ... from Sloss ... as a result of Sloss's ... non-performance under the March 31, 1997, Agreement or under any modification of such Agreement or under any other agreement to work directly or indirectly together on the manufacture of [the product], MINUS fees paid to Balch & Bingham (and/or substitute law firm, if any) relating to this representation. Notwithstanding the foregoing, such fees shall not reduce RECOVERY, except to the extent such fees are reasonable and are approved by [Harlow] in writing prior to payment. Such approval shall not be unreasonably withheld by [Harlow]. [If "RECOVERY" is zero or negative, no contingent fee ... shall be payable to, or from, [Harlow]. No representation has been made as to what amount, if any, to which [the clients] might be entitled in this case].'

"Harlow admits that this fee agreement and the definition of `recovery' contemplate and provide for the possibility of a pre-trial settlement. Moreover, the fee agreement specifically provides that Harlow might receive nothing for this representation.

"On May 21, 1998, the fee agreement was amended to provide that Harlow would be paid an hourly rate for services rendered relating to [a] collateral issue.... Harlow has been paid for these services.

"Although Harlow claims that he had

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