In re Petition for Distribution of Attorney's Fees Between Stowman Law Firm, P.A. & Lori Peterson Law Firm, A13–2225.

• Decision Date: 03 November 2014
• Docket Number: No. A13–2225.,A13–2225.
• Citation: 855 N.W.2d 760
• Court: Minnesota Court of Appeals
• Parties: In re Petition for DISTRIBUTION OF ATTORNEY'S FEES BETWEEN STOWMAN LAW FIRM, P.A., AND LORI PETERSON LAW FIRM, Formerly Doing Business as Lori Peterson and Associates.

855 N.W.2d 760

In re Petition for DISTRIBUTION OF ATTORNEY'S FEES BETWEEN STOWMAN LAW FIRM, P.A., AND LORI PETERSON LAW FIRM, Formerly Doing Business as Lori Peterson and Associates.

No. A13–2225.

Court of Appeals of Minnesota.

Nov. 3, 2014.

David L. Stowman, Stowman Law Firm, P.A., Detroit Lakes, MN, for appellant Stowman Law Firm, P.A.

Zenas Baer, Zenas Baer Law Office, Hawley, MN, for respondent Lori Peterson Law Firm.

Considered and decided by KIRK, Presiding Judge; HUDSON, Judge; and STAUBER, Judge.

OPINION

KIRK, Judge.

Appellant Stowman Law Firm, P.A., challenges the district court's denial of its petition for distribution of contingent attorney fees paid to respondent Lori Peterson Law Firm from a settlement that Lori Peterson Law Firm obtained for Stowman Law Firm's former client. Stowman Law Firm argues that the district court: (1) erred by determining that it was not entitled to quantum meruit recovery of a portion of the contingent fee because it did not establish a “good cause” basis for withdrawal from representation; (2) was bound at trial by the law cited in the order denying summary judgment; and (3) abused its discretion by denying its motion for a new trial. We affirm.

FACTS

In July 2007, Stowman Law Firm entered into a contingent-fee agreement with C.D. to represent her in a medical-malpractice claim against her former physician. For over two years, attorney Jeffrey Stowman investigated and developed evidence to support a malpractice claim, but he did not file a complaint or conduct any formal discovery. Stowman incurred approximately $8,272.69 in out-of-pocket expenses while he developed the claim.

In December 2009, Stowman represented C.D. in mediation, but the parties did not reach an agreement. The next day, the mediator notified Stowman that C.D.'s former physician was willing to offer C.D. $100,000, provided that her acceptance of that amount would settle the claim. Stowman advised C.D. to accept the offer, but C.D. declined to do so. On January 4, 2010, Stowman notified C.D. that Stowman Law Firm was withdrawing from her representation. In a letter to C.D. dated January 5, Stowman explained that he did not think he could obtain a better result than the $100,000 settlement offer if he continued to represent her.

In May 2010, Lori Peterson Law Firm assumed representation of C.D. After a second mediation, attorney Lori Peterson negotiated a settlement of $200,000, which included a 40% attorney fee. In February 2011, C.D., Peterson, and Stowman Law Firm signed a distribution agreement to place 40% of the settlement proceeds into Lori Peterson Law Firm's trust account until they resolved the dispute over the proceeds.

The parties did not resolve the dispute, and Stowman Law Firm petitioned the district court for distribution of the contingent fee in January 2012. Lori Peterson Law Firm moved for summary judgment. The district court denied the motion, finding that there were genuine issues of material fact.

In April 2013, the district court held a bifurcated court trial that was limited to the issue of whether Stowman Law Firm rightfully withdrew from representation of C.D. so as to maintain its claim for attorney fees. Following the trial, the district court determined that Stowman Law Firm “failed to establish a ‘good cause’ basis for withdrawal from representation to support a quantum [meruit] recovery of a portion of the contingent attorney fee received by [Lori Peterson Law Firm].” The district court awarded Stowman Law Firm $8,272.69 in expenses.

Stowman Law Firm moved for amended findings, judgment notwithstanding the findings and conclusions, or a new trial. After a hearing, the district court granted the motion for amended findings in part, but denied the other motions. This appeal follows.

ISSUES

I. Did the district court err by determining that Stowman Law Firm was not entitled to quantum meruit recovery of a portion of the contingent fee?

II. Was the district court bound at trial by the law cited in its order denying summary judgment?

III. Did the district court abuse its discretion by denying Stowman Law Firm's motion for a new trial?

ANALYSIS

On appeal from judgment following a court trial, this court reviews whether the district court's findings were clearly erroneous and whether the district court erred as a matter of law. Birch Publ'ns, Inc. v. RMZ of St. Cloud, Inc., 683 N.W.2d 869, 872 (Minn.App.2004), review denied (Minn. Oct. 19, 2004). A finding is clearly erroneous if we are “left with the definite and firm conviction that a mistake has been made.” Minn. Pub. Interest Research Grp. v. White Bear Rod & Gun Club, 257 N.W.2d 762, 783 (Minn.1977). We review issues of law de novo. Frost–Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn.1984).

I. The district court did not err by determining that Stowman Law Firm was not entitled to quantum meruit recovery of a portion of the contingent fee.

Stowman Law Firm argues that the district court erred by determining that it was not entitled to quantum meruit recovery of a portion of the contingent attorney fee for representing C.D. because it did not establish a “good cause” basis for its withdrawal of representation. In reaching that conclusion, the district court considered two Minnesota cases.See Ashford v. Interstate Trucking Corp. of Am., 524 N.W.2d 500 (Minn.App.1994) ; Stall v. First Nat'l Bank of Buhl, 375 N.W.2d 841 (Minn.App.1985). But because the district court determined that neither case was directly on point, it looked to several foreign cases for guidance. Relying on those foreign cases, the district court determined that Stowman Law Firm could not recover attorney fees on the basis of quantum meruit. On appeal, Stowman Law Firm argues that the district court erred by applying the standard of law outlined in the foreign cases rather than the standard required under Minnesota law.

A. Minnesota caselaw.

In Stall, an attorney represented a bank in two collection matters on a contingent-fee basis. 375 N.W.2d at 843. The attorney had a dispute with the bank about his contingent fee in one of the matters. Id. at 843–44. Because of that dispute, the attorney decided that he could not continue to represent the bank in the other matter, and he submitted his bill to the bank on an hourly basis for that matter. Id. at 844. The attorney brought an action against the bank to recover the fees. Id. The district court found that the attorney was not entitled to any fees for either matter, in part because of the attorney's decision that he could not represent the bank in the second matter. Id. at 844–45.

On appeal, this court concluded that the attorney's withdrawal from representing the bank in the second case was not “unjustified,” and thus he could maintain an action in quantum meruit. Id. at 846. In reaching that conclusion, this court stated that “[a]n attorney on a contingent fee arrangement who is discharged by his client is entitled to compensation for the reasonable value of his services, based on quantum meruit, not on the contingent fee contract.” Id. at 845. This court further stated that “[a]lthough no Minnesota case has decided the issue, the same rationale applies when the attorney rightfully withdraws from the representation.” Id. at 846. This court cited two foreign cases in support of that statement: Ambrose v. Detroit Edison Co., 65 Mich.App. 484, 237 N.W.2d 520 (1975), and In re Spellman, 4 A.D.2d 215, 164 N.Y.S.2d 182 (N.Y.App.Div.1957). Id.

In Ambrose, the Michigan Court of Appeals held that the district court properly imposed an attorney's lien because it concluded that the client's “total failure to cooperate” was “sufficient ‘good cause’ to allow an attorney to discontinue representing his client and to recover for his services.” 237 N.W.2d at 522–23. The court of appeals stated that the client's “total failure to cooperate” included, among other things, “a total lack of communication” between the client and his attorneys, the client's refusal to elect payment options despite his attorneys' advice that he was legally obligated to do so, and the client's refusal “to accept a settlement offer, which embodied virtually all of the relief he demanded in his complaint, without stating coherent reasons for doing so.” Id. at 523. In Spellman, which was an attorney disciplinary proceeding, the New York Supreme Court, Appellate Division, considered several incidents involving the attorney who was the subject of the proceeding. 164 N.Y.S.2d at 183–84. In one of the incidents, the court noted that the attorney could “have asserted a right to withdraw from the litigation because of a claimed lack of co-operation. In the event of such a withdrawal or in the event of abandonment of the action by his clients, he might then have asserted a right to compensation on the basis of quantum meruit.”Id. at 184 (emphasis omitted).

In Ashford, the second Minnesota case that the district court discussed, a law firm withdrew from representing a client after repeated failed attempts to get the client to sign forms and warnings to the client that failure to sign would result in withdrawal. 524 N.W.2d at 502. The law firm filed an attorney's lien against the client. Id. The client hired another law firm to pursue her claim and moved to discharge the attorney's lien. Id. The district court denied the motion because it found that the first law firm “had justifiably withdrawn from representation, and therefore had the right to impose a lien.” Id. After the client's claim settled, the district court held a hearing to determine the amount of the attorney's lien. Id. The district court awarded the first law firm its expenses and, based on the theory of quantum meruit, it awarded each firm half of the one-third contingency fee. Id.

On appeal, this court relied on Stall, stating that “[a]n attorney continues to be entitled to compensation for the reasonable value of his or her services after the attorney rightfully withdraws from representation.”...