Lee v. State Volunteer Mutual Insurance Company, Inc., No. E2002-03127-COA-R3-CV (TN 1/21/2005)

• Decision Date: 21 January 2005
• Docket Number: No. E2002-03127-COA-R3-CV.,E2002-03127-COA-R3-CV.
• Parties: J. D. LEE, ET AL. v. STATE VOLUNTEER MUTUAL INSURANCE COMPANY, INC., ET AL.
• Court: Supreme Court of Tennessee

Page 1

Unpublished Opinion

J. D. LEE, ET AL. v. STATE VOLUNTEER MUTUAL INSURANCE COMPANY, INC., ET AL.

No. E2002-03127-COA-R3-CV.

Court of Appeals of Tennessee, at Nashville.

January 6, 2004 Session.

Filed January 21, 2005.

Appeal from the Circuit Court for Knox County; No. 3-343-02; Wheeler A. Rosenbalm, Judge.

Judgment of the Circuit Court Affirmed.

Thomas L. Rasnic, Kingsport, Tennessee, for the appellants, J. D. Lee; David C. Lee; and Lee, Lee & Lee.

Amelia G. Crotwell, Knoxville, Tennessee, for the appellees, L. Martin McDonald, individually; and L. Martin McDonald; Farrell A. Levy; and Charles G. Taylor; III d/b/a McDonald, Levy & Taylor.

William C. Koch, Jr., P.J., M.S., delivered the opinion of the court, in which William B. Cain and Patricia J. Cottrell, JJ., joined.

OPINION

WILLIAM C. KOCH, JR., P.J., M.S.

This appeal involves a dispute among lawyers following the settlement of a medical malpractice case. The two lawyers originally retained to represent the plaintiffs filed suit in the Circuit Court for Knox County against five law firms, seven lawyers, and one insurance company alleging, among other things, that the defendants had tortiously interfered with their contract with their clients. After the trial court granted the defendants' Tenn. R. Civ. P. 12.02(6) motion to dismiss, the plaintiff lawyers filed a "petition to rehear" requesting permission to file a substantially pared down amended complaint against two of the defendant lawyers and law firms. The trial court denied the "petition to rehear" after concluding that the proposed amended complaint also failed to state a claim upon which relief could be granted. The plaintiff lawyers assert on this appeal that the trial court erred by denying their request for a continuance prior to the first hearing on the defendants' Tenn. R. Civ. P. 12.02(6) motions and by denying their "petition to rehear." We affirm both the denial of the continuance and the denial of the "petition to rehear." We also find that this appeal is frivolous in accordance with Tenn. Code Ann. § 27-1-122 (2000).

I.

Devin Shoughrue suffered serious brain damage on December 21, 1993, two days after he was born at St. Mary's Medical Center in Knoxville. In November 1994, his parents, Kelvin and Laura Shoughrue, entered into a contingency fee agreement with J. D. Lee to represent them in a medical malpractice case against the hospital and the attending physicians (collectively, "Devin's healthcare providers").¹ In December 1994, Mr. Lee filed a medical malpractice complaint in the Circuit Court for Knox County on behalf of the Shoughrues, individually and as Devin's natural guardians, for the injuries Devin suffered as a result of the alleged negligent acts and omissions of Devin's healthcare providers.

This complaint was dismissed without prejudice in June 1996. When the complaint was refiled, it sought $2.5 million in damages for the Shoughrues and $22.5 million in damages for Devin. Later, Mr. Lee amended the complaint to add alternative theories of lack of informed consent and medical battery. In September 2000, after the case languished for several years, Mr. Lee offered to settle the case for $12.5 million. Devin's healthcare providers rejected the offer. During mediation conducted in February 2001, Mr. Lee repeated his $12.5 million settlement offer. When Devin's healthcare providers countered with an offer of $350,000, Mr. Lee raised his demand to $22.5 million. The mediation ended shortly thereafter with no settlement.

Ms. Shoughrue died on March 1, 2001. Gerald L. Gulley, Jr. was appointed as the administrator ad litem for her estate, and the estate was substituted as a party to the lawsuit in the place of Ms. Shoughrue. Less than a week after Ms. Shoughrue's death, Jean Baker, Ms. Shoughrue's mother, filed a petition in the Knox County Juvenile Court seeking to be appointed as Devin's temporary custodian. Ms. Baker testified that Mr. Shoughrue had a violent temperament and that she feared for Devin's safety. The juvenile court granted Ms. Baker's petition and awarded her temporary custody of Devin.

On May 11, 2001, Ms. Baker, represented by L. Martin McDonald and the law firm McDonald, Levy & Taylor, filed a petition seeking to intervene in the pending medical malpractice case. Ms. Baker also requested that the trial court appoint a guardian ad litem to protect Devin's interests. The trial court appointed Jennifer Bjornstad, who had previously served as Devin's guardian ad litem in the juvenile court case, as Devin's guardian ad litem in the medical malpractice case. The trial court directed Ms. Bjornstad to investigate the status of the case and the prospects for settlement and to ensure that Devin's interests were being protected. The trial court also appointed Gary Dawson to assist Ms. Bjornstad.

At a May 18, 2001 hearing, Ms. Bjornstad advised the trial court that allowing Ms. Baker to intervene in the medical malpractice case would be in Devin's best interests. The trial court agreed that Ms. Baker should be allowed to participate in the case, though not as a separate plaintiff. The trial court also determined that further mediation should take place before the scheduled trial date of June 25, 2001. The trial court determined that Mr. Lee would take the lead in the negotiations for Mr. Shoughrue, Devin, and Ms. Shoughrue's estate, and that Mr. McDonald and Ms. Bjornstad would be allowed to participate in the mediation of the claims of Devin and Ms. Shoughrue's estate.²

The second mediation was held on June 15, 2001. Mr. Lee, Mr. McDonald, Ms. Bjornstad, and Ms. Baker were all present. According to Mr. Lee, Mr. McDonald and Ms. Bjornstad had agreed prior to the mediation not to accept any offer less than $3.5 million to settle Devin's claim. However, as the mediation progressed, Mr. McDonald and Ms. Bjornstad, despite Mr. Lee's objections, made counter-offers to settle Devin's case for less than $3.5 million. Mr. Lee voluntarily left the mediation in frustration without informing Mr. McDonald or Ms. Bjornstad that he was leaving. Because Mr. Lee did not instruct the mediator to halt the mediation, the negotiations continued, and the participants eventually agreed to settle the claims of Devin and Ms. Shoughrue's estate for a substantial sum, though less than $3.5 million. Devin's portion of the settlement was subject to court approval pursuant to Tenn. Code Ann. § 34-1-121(b) (2001).

When Mr. Lee was informed of the proposed settlement, he treated it as an offer and rejected it on behalf of Devin and Ms. Shoughrue's estate. When the trial court conducted a hearing on June 19, 2001 to review the results of the second mediation, Mr. Lee insisted that the settlement was inadequate. After weighing the strength of Devin's malpractice claim and the extent and urgency of his needs, the trial court determined that the proposed settlement was in the best interests of both Devin and Ms. Shoughrue's estate. Accordingly, on July 13, 2001, the trial court entered an order approving the settlement and setting aside one-third of the settlement to cover attorneys' fees.

In May and August of 2002, the trial court held hearings on applications for attorneys' fees filed by Mr. Lee and his firm and by Mr. McDonald and McDonald, Levy & Taylor. On December 18, 2002, the court entered an order awarding Mr. Lee and his law firm $175,000 in attorneys' fees in addition to the $138,768 in attorneys' fees they had previously been awarded. The court awarded Mr. McDonald and McDonald, Levy & Taylor $175,000 in attorneys' fees plus accrued interest for their services in the case. Because the total attorneys' fees awarded amounted to less than one-third of the total settlement, the trial court ordered that the remaining funds set aside to cover attorneys' fees be returned to Devin's estate.

Mr. Lee and his law firm did not appeal the order approving the settlement of the claims of Devin and Ms. Shoughrue's estate. They did, however, appeal the trial court's division of attorneys' fees. In Shoughrue v. St. Mary's Med. Ctr., Inc., No. E2003-00116-COA-R3-CV, 2004 WL 948381 (Tenn. Ct. App. May 4, 2004), perm. app. denied (Tenn. Nov. 15, 2004), the Eastern Section of this court rejected Mr. Lee and his law firm's challenge to the trial court's attorneys' fees award. We noted that Tenn. Code Ann. § 29-26-120 (2000) requires the trial court to determine the amount of attorneys' fees to be awarded in contingency fee medical malpractice cases, irrespective of the provisions of an attorney-client contract, and sets the maximum possible attorneys' fees award at one-third of the total damages awarded to the client. We also noted that under Tennessee law, attorneys' fees agreements are not binding on a minor, and although an attorney who confers a benefit on a minor is entitled to receive the reasonable value of his or her services, the value of those services must be determined by the trial court under the circumstances of the case. Thus, we concluded that "regardless of the fact that Mr. and Ms. Shoughrue agreed that Mr. Lee would receive thirty-three and one-third of the total recovery in this case, he is only entitled to that fee which the Trial Court determines to be reasonable." Shoughrue v. St. Mary's Med. Ctr., Inc., 2004 WL 948381, at *5.

We then addressed whether the amount of attorneys' fees awarded to Mr. Lee and his firm for their services in the medical malpractice case was reasonable. We acknowledged the trial court's finding that Mr. Lee and his firm had prepared the case for trial, and that without their work, there would have been no possibility of a settlement for Devin at all. However, we also recognized that the trial court had found serious deficiencies in Mr. Lee's representation of Devin. We concluded that the record on appeal supported the trial court's findings (1) that Mr. Lee's simultaneous representation of both Devin and Mr. Shoughrue presented a conflict of...