Law Offices of Ronald J. Palagi v. Howard

• Decision Date: 04 April 2008
• Docket Number: No. S-07-757.,No. S-06-384.,No. S-06-664.,S-06-384.,S-06-664.,S-07-757.
• Citation: 275 Neb. 334,747 N.W.2d 1
• Parties: LAW OFFICES OF RONALD J. PALAGI, P.C., L.L.O., Appellee and Cross-Appellant v. Steven H. HOWARD, Appellant and Cross-Appellee. Rosa Jurado, Special Administrator of the Estate of Salvador, Jurado-Melendez, deceased, and Law Offices of Ronald J. Palagi, P.C., L.L.O., Appellees, and Steven H. Howard, Appellant, v. Agri Co-op, a Nebraska corporation, and Union Insurance Company, Appellees.
• Court: Nebraska Supreme Court

747 N.W.2d 1

275 Neb. 334

LAW OFFICES OF RONALD J. PALAGI, P.C., L.L.O., Appellee and Cross-Appellant v. Steven H. HOWARD, Appellant and Cross-Appellee.

Rosa Jurado, Special Administrator of the Estate of Salvador, Jurado-Melendez, deceased, and Law Offices of Ronald J. Palagi, P.C., L.L.O., Appellees, and Steven H. Howard, Appellant, v. Agri Co-op, a Nebraska corporation, and Union Insurance Company, Appellees.

No. S-06-384.

No. S-06-664.

No. S-07-757.

Supreme Court of Nebraska.

April 4, 2008.

Michael F. Coyle, David J. Stubstad, and Sherman P. Willis, of Fraser Stryker, P.C., L.L.O., Omaha, for appellant.

Joseph B. Muller, of Law Offices of Ronald J. Palagi, P.C., L.L.O., Omaha, for appellee Law Offices of Ronald J. Palagi.

Thomas F. Hoarty, Jr., Omaha, for appellee Law Offices of Ronald J. Palagi in Nos. S-06-384, S-06-664.

Jeffrey Jacobsen, Kearney, for appellee Law Offices of Ronald J. Palagi in No. S-07-757.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, J.

These consolidated appeals relate to a dispute between The Law Offices of Ronald J. Palagi, P.C., L.L.O. (Law Offices), and attorney Steven H. Howard, a former employee of the firm. The dispute involves entitlement to attorney fees in two cases which were pending at the time Howard left his employment with Law Offices in 2003. The fee in one of those cases, No. S-07-757, is the subject of all three consolidated appeals.

I. FACTS

Ronald J. Palagi was admitted to practice law in Nebraska in 1975. After practicing with an Omaha firm for a short period, Palagi started Law Offices in Omaha. Howard was admitted to practice law in Nebraska in 1987. In September 1991, he began working at Law Offices as an independent contractor.

In 1993, Howard and Law Offices entered into an "Attorney's Agreement" which "establish[ed] the terms and conditions of their business relationship." Under this agreement, Howard was designated as an employee of Law Offices. Law Offices agreed to pay Howard 15 percent of "any attorney fees received from client files which [Howard] is assigned and which he will resolve." The Attorney's Agreement further provided at paragraph 4:

The parties agree that [Howard] is offered an amount equal to an additional 5% of any total attorney fees received from the client files assigned and resolved by him for the month. The parties agree that this additional 5% is not consideration for past work, but rather is consideration for any future legal work as set forth in Paragraph 11.

Paragraphs 11 and 12 then provided:

The parties acknowledge that the clients listed on the client list may exercise their right to choose [Howard] as their attorney in the event [Howard's] association with The Firm is terminated.

... If clients of [Law Offices] request that [Howard] represent them, then [Howard] may decide to represent them, but all attorney fees generated on such matters would be paid to [Law Offices], and no attorney fees will be paid to [Howard]. [Howard] acknowledges that the consideration for this commitment is the consideration set forth above, including the additional 5% payment....

The Attorney's Agreement also set forth terms and conditions that would be followed in the event the parties' association terminated, including that Howard was to give 30 days' written notice, that Howard was not to contact any client of Law Offices prior to giving his notice, and that Howard was not to remove any client documents or papers from Law Offices.

The parties acknowledge that in 1997, they orally agreed to a change in the manner in which Howard was to be compensated, but they dispute the terms of the change. According to Palagi, the sole shareholder of Law Offices, Howard told him in the summer of 1997 that he was having financial difficulties and wanted a fixed salary instead of the percentage payments. Palagi stated that in July 1997, they agreed that Howard would receive a salary of $7,000 per month. According to Palagi, the parties agreed that this amount would be divided into two paychecks, one for $4,500 payable on the first of the month and the second for $2,500 payable in the middle of the month. According to Palagi, this pay structure was intended to reflect the provisions regarding "future consideration" contained in paragraphs 4, 11, and 12 of the 1993 Attorney's Agreement. Palagi also indicated the possibility that Howard would be paid discretionary bonuses.

Howard's version of the 1997 agreement is substantially different. He testified that in the summer of 1997, Palagi told him that his current caseload, consisting primarily of workers' compensation and accident cases, would be assigned to another lawyer and that Howard would begin working with Palagi on more substantial cases and would eventually "try some very significant cases." According to Howard, 100 to 120 cases were then transferred from him to another lawyer, and Howard was not paid for any of the work he had done on those cases. Howard testified that Palagi did not specifically mention the Attorney's Agreement, but did tell him that they were "starting over." Howard viewed the change as a favorable professional opportunity. Howard agreed to the $7,000 monthly salary and understood that Palagi would also pay him bonuses based on performance. Howard testified that he chose to split the $7,000 into the two monthly payments because it fit with his bill schedule.

In December 1998, Rosa Jurado, special administrator of the estate of her late husband, Salvador Jurado-Melendez, retained Law Offices to represent her. Jurado-Melendez had been killed in a grain elevator accident which occurred in Buffalo County, Nebraska, in 1997. In 1999, Law Offices filed a wrongful death action on Jurado's behalf in the district court for Buffalo County, naming Agri Co-op, the owner of the grain elevator, and Union Insurance Company, its workers' compensation carrier, as defendants. Howard prepared the case for trial with the assistance of Palagi and other Law Offices personnel. Law Offices advanced almost $122,000 in litigation expenses.

Between 1997 and 2002, Law Offices paid Howard the agreed-upon salary of $7,000 per month in two monthly payments, and also paid him periodic bonuses. In the summer of 2002, just prior to the scheduled trial of the Jurado case, Howard and Palagi again discussed Howard's compensation. Palagi testified that he offered Howard up to 25 percent of any fee recovered in the Jurado case if Howard would pay, prior to trial, a corresponding percentage of the litigation expenses which had been advanced by Law Offices. Palagi testified that Howard declined this offer.

Howard's account of this conversation is different. He testified that during the first 6 months of 2002, he had generated substantial fees for Law Offices but was still receiving only his $7,000 monthly salary. In July 2002, just before leaving on a planned vacation, he told Palagi that he was frustrated and was thinking of leaving the firm. Howard testified that Palagi immediately wrote him a check for $25,000 and told him to go on vacation and that they would talk more when he returned. Howard testified that they met again when he returned from vacation and at that time, Palagi offered Howard 50 percent of any fee recovered in the Jurado case if Howard paid 50 percent of the costs Law Offices had advanced. Alternatively, Palagi offered 25 percent of the fee recovered in the Jurado case and two other cases the firm was litigating, referred to in the record as the "Barker" and "Christiansen" cases. Howard testified that he accepted this latter offer and agreed to stay at the firm.

Howard tried the Jurado case in the district court for Buffalo County, with the assistance of a paralegal employed by Law Offices. Palagi did not participate in the trial. On September 16, 2002, the jury returned a verdict in the amount of $2,125,000 in favor of Jurado. Agri Co-op appealed and filed a supersedeas bond.

In November 2002, while the Jurado appeal was pending, Law Offices paid Howard a bonus. Palagi testified that the bonus was for the work Howard had done during the year. He denied having any agreement with Howard regarding the fees in the Barker or Christiansen cases at the time of this payment. Howard testified that the bonus he received in November 2002 included 25 percent of the fee in the Barker case, which had been settled during the preceding month. He testified that in December 2002, when Law Offices received the fee in the Christiansen case, he approached Palagi about payment of his 25-percent share, but Palagi responded that Howard had already received a "nice check" in November and did not pay him any additional bonus. This upset Howard.

In late December 2002, Howard visited Jurado at her home in Holdredge, Nebraska. He spoke with her about a settlement offer of $500,000 received during the pendency of the appeal and recommended that she reject it. Near the end of the conversation, Howard mentioned that he was thinking of leaving Law Offices, and Jurado asked him to let her know if he decided to do so.

On February 9, 2003, Howard returned to Jurado's home and informed her that he would probably be leaving Law Offices, but that he would continue to represent her if she wanted him to do so. He informed her that she had the right to choose her lawyer and that she could choose him but was not required to do so. He answered questions asked by Jurado and a family member who was present. Before leaving, Howard gave Jurado a proposed retention agreement, a sample letter to Law Offices terminating its representation, and a blank copy of her fee agreement with Law Offices. After consulting with another attorney, Jurado retained Howard to continue representing her and terminated her relationship with Law Offices by letter dated February 19, 2003. Jurado testified that Howard had been her main contact throughout the course of the litigation and that it was her...