John D. Smith Co., LPA v. Lipsky

• Decision Date: 07 August 2020
• Docket Number: Appellate Case No. 2019-CA-65
• Citation: 2020 Ohio 3985
• Parties: JOHN D. SMITH CO., L.P.A. Plaintiff-Appellee v. DANIEL S. LIPSKY, et al. Defendant-Appellant
• Court: Ohio Court of Appeals

2020 Ohio 3985

JOHN D. SMITH CO., L.P.A. Plaintiff-Appellee v. DANIEL S. LIPSKY, et al. Defendant-Appellant

Appellate Case No. 2019-CA-65

COURT OF APPEALS OF OHIO SECOND APPELLATE DISTRICT GREENE COUNTY

August 7, 2020

Trial Court Case No. 2017-CV-460

(Civil Appeal from Common Pleas Court)

OPINION

JOHN D. SMITH, Atty. Reg. No. 18138 & ANDREW P. MEIER, Atty. Reg. No. 0083343, 140 North Main Street, Suite B, Springboro, Ohio 45066 Attorneys for Plaintiff-Appellee

ANDREW R. MAYLE, Atty. Reg. No. 0075622, P.O. Box 263, Perrysburg, Ohio 43552 Attorney for Defendant-Appellant

FROELICH, J.

{¶ 1} Daniel S. Lipsky appeals from a judgment of the Greene County Court of Common Pleas, which awarded $66,427.74 plus interest to John D. Smith Co., LPA, for unpaid professional services fees, pursuant to a jury verdict. Lipsky also appeals the subsequent denial of his motion for a new trial. For the following reasons, the trial court's judgments will be affirmed.

I. Factual and Procedural History

{¶ 2} At trial, Attorney John D. Smith was the sole witness on behalf of John D. Smith Co., LPA ("the Smith Firm"). Lipsky testified on his own behalf, and he also called Sherry Ann Scott, Vice President of Administration for Nationwide Biweekly Administration, Inc. ("NBA"), to testify. A summary of the evidence is as follows.

{¶ 3} Smith is an attorney licensed in the state of Ohio since 1980. He also has been admitted to practice in the Southern District of Ohio, the Sixth Circuit Court of Appeals, and the United States Supreme Court. Smith has been admitted to practice pro hac vice in other state and federal courts. At all relevant times, Smith was the sole shareholder of the Smith Firm, a firm with ten employees, located in Springboro, Ohio.

{¶ 4} Lipsky is the president and sole shareholder of NBA, a company that assists clients with making biweekly mortgage payments. NBA's corporate offices are located in Xenia, Ohio. During the relevant time, Lipsky consulted with Sherry Ann Scott and Barbara Bison Jacobson, long-standing outside counsel for NBA, over various matters pertaining to litigation involving NBA.

{¶ 5} In January 2016, Lipsky, individually, hired the Smith Firm to represent him in a post-decree divorce matter. The engagement letter included enumerated sections discussing (1) what Lipsky could expect from the firm, (2) what the firm expected from him, (3) the hourly rates for Smith, other attorneys with the firm, and paralegals, (4) that Lipsky was responsible for litigation costs and expenses, (5) the payment of a retainer and invoicing for services, (6) client files and records, (7) withdrawal from representation, (8) appeals and other related proceedings, and (9) the granting of a lien on monies due. (Def.'s Ex. B.)

{¶ 6} The following month, the Smith Firm agreed to represent NBA and an NBA employee in a discrimination action in the federal district court in Dayton. Lipsky signed a more abbreviated engagement letter (Def.'s Ex. C), which indicated that the Smith Firm would be substitute counsel in the action and that the firm would be reviewing the joint representation documents between the employee and the company to ensure no conflict of interest. The engagement letter also provided the hourly rates for firm personnel, requested a retainer, and indicated that the firm would present monthly itemized bills, which it requested to be paid within 15 days of receipt.

{¶ 7} Several months later, Lipsky and Smith discussed the Smith Firm's representation of NBA and Lipsky individually in two actions against them in California, one in federal court in San Francisco and one in state court. The state action was brought by the California Department of Business Oversight; the federal action was brought by the federal Consumer Financial Protection Bureau. Both actions alleged, in essence, that NBA employed deceptive marketing strategies.

{¶ 8} On July 8, 2016, Smith sent a letter to NBA and Lipsky, detailing the terms and conditions of his firm's representation of Lipsky and NBA in the California cases. Smith emphasized in his testimony that Lipsky had been sued individually and that the engagement letter "clearly indicates that I'll be representing both [Lipsky] and NBA" in the litigation. (Tr. at 228.)

{¶ 9} The engagement letter indicated that the Smith Firm would be assisting Sean Ponist, an attorney licensed in California who had already been retained by NBA and Lipsky to work on the pending lawsuits. Smith reduced his hourly rate from $350 to $300 to match Ponist's hourly rate; Smith's associates would be paid at $200 per hour and paralegals at $85 per hour. The engagement letter addressed litigation costs, stating: "[W]e will keep each other posted of litigation costs, such as travel and whatnot, make agreements prior to expending same, and move forward." Smith testified that clients were responsible for paying Smith's plane tickets, hotel lodging, office expenses, and other expenses due to case-related travel. Clients also were responsible for other litigation expenses, such as court reporter fees for depositions. As to the payment of the Smith Firm's fees, the July 8 engagement letter stated: "As with our past practice, we will continue to bill monthly with itemized statements, holding the $10,000.00 security deposit in Trust with the company paying its bills on a monthly basis upon receipt of the invoices."

{¶ 10} With Ponist's sponsorship, Smith was admitted pro hac vice to practice in the relevant California courts. The engagement letter indicated that Smith and Ponist would divide the work, and Smith testified that he and Ponist did so "in a way that was kind of like east of the Mississippi and west of the Mississippi." (Tr. at 237.) Ponist handled the filing of documents and information requests in state court while Smith handled federal court. Ponist obtained all the experts, but Smith defended the depositions if they were on the East Coast.

{¶ 11} Throughout 2016, NBA regularly paid the Smith Firm's invoices in full, although it missed a payment in April 2016. The Smith Firm's invoices (Pl.'s Ex. 6; Def.'s Ex. A) reflect the following payment history:

 Invoice Date Invoice Amount Date Paid Amount,if not in full  3/2/2016  $365.00  3/11/2016   4/1/2016  $1,118.25  5/16/2016   5/10/2016  $1,038.00  5/16/2016   6/1/2016  $2,415.66  6/22/2016   7/5/2016  $12,675.75  7/18/2016   8/8/2016  $12,095.80  8/15/2016   9/6/2016  $29,444.93  9/19/2016  $29,419.43  10/4/2016  $23,210.11  10/24/2016   11/1/2016  $38,154.50  11/21/2016   12/1/2016  $34,625.81  1/4/2017   1/9/2017  $57,988.48  1/13/2017   

As of January 13, 2017, NBA's account with the Smith Firm was current.

{¶ 12} However, toward the end of 2016, Lipsky's assets were becoming depleted. Smith testified that, in January 2017, Lipsky told him that he (Lipsky) had $500,000 remaining to expend on litigation. Lipsky agreed that he told Smith that he had $500,000 left, but asserted that the conversation occurred in November 2016. Lipsky asserted at trial that the Smith Firm's failure to take into account Lipsky's financial condition was a breach of fiduciary duty.

{¶ 13} On February 2, 2017, the Smith Firm emailed an invoice for $49,944.49, representing work performed in January. NBA did not send any payment in February 2017.

{¶ 14} In late February 2017, Smith travelled to New York to defend the deposition of an expert. After the deposition, Smith communicated with Lipsky and recommended that NBA fly that expert to California to testify in person at trial. Trial in the federal action was scheduled for April 24, 2017.

{¶ 15} On March 2, the Smith Firm emailed an invoice for $28,732.50 for professional services rendered in February. The same day, Lipsky mailed correspondence on NBA letterhead to Smith, thanking him and his firm for "work[ing] tirelessly" on the California litigation and requesting a new payment agreement for the firm's invoices. (Pl. Ex. 2; Def.'s Ex. G.) Lipsky wrote, in part:

First, I am not able to replenish the $10,000 retainer fund. In addition, we need to do the following:

Payment on the February, 2017 invoice of $25,000 today with payment of the remaining approximate $25,000 balance plus 20% as soon as funds are available after the April 24 CFPB trial.

Payment on the subsequent 2017 invoices of 50% of the charges with payment of the remaining 50% plus an additional 20% of that balance payable as soon as funds are available after the April 24 CFPB trial.

We have no doubt that we are going to be victorious.

Also, I want to let you know that I am reaching out to possible sources of additional funding that are intended to keep us afloat and to provide funding for our legal battle. This may allow me to modify the above arrangement and I will keep you informed about our progress as we go along in that process. In the meantime, however, please consider the above proposal.

Lipsky enclosed a $25,000 check from NBA to the Smith Firm.

{¶ 16} Lipsky also emailed Ponist on March 2 about altering the payment agreement with Ponist's firm. Ponist responded by email on March 3 that he would consider Lipsky's proposal; Ponist attached an invoice for services rendered in February. (Ponist was owed $119,655.77.)

{¶ 17} On March 5, Smith had a conversation with Jacobson (long-standing outside counsel for NBA) about Lipsky's letter, which Smith had not yet received. Smith testified that this conversation was odd, because his communications primarily were by email at that point.

{¶ 18} On March 6, Smith sent a letter to Lipsky, detailing the upcoming pretrial conferences and trial dates, attaching the March invoice for February expenses, and stating what payments were necessary for Smith's work to proceed. Specifically, Smith wrote:

Our original agreement was that the monthly bills would be paid timely. This has not occurred. I am unable to proceed without all bills being current and a deposit/retainer for the Trial and the March bill to be paid in the amount of $125,000.00. The

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