Mager v. Bultena

• Decision Date: 26 March 2002
• Citation: 797 A.2d 948
• Parties: Carol A. MAGER, Roberta D. Liebenberg & Ann D. White T/A Mager, Liebenberg & White v. Lynn M. BULTENA, Michael J. Salmanson, Esq., Linda D. Falcao, Esq., and Salmanson & Falcao, LLC (Three Cases) Appeal of Salmanson & Falcao, LLC. Appeal of Lynn M. Bultena Appeal of Carol A. Mager, Roberta D. Liebenberg & Ann D. White t/a Mager, Liebenberg & White.
• Court: Pennsylvania Superior Court

797 A.2d 948

Carol A. MAGER, Roberta D. Liebenberg & Ann D. White T/A Mager, Liebenberg & White v. Lynn M. BULTENA, Michael J. Salmanson, Esq., Linda D. Falcao, Esq., and Salmanson & Falcao, LLC (Three Cases)

Appeal of Salmanson & Falcao, LLC.

Appeal of Lynn M. Bultena

Appeal of Carol A. Mager, Roberta D. Liebenberg & Ann D. White t/a Mager, Liebenberg & White.

Superior Court of Pennsylvania.

Argued April 17, 2001.

Filed March 26, 2002.

Reargument Denied May 30, 2002.

Richard T. Brown, Philadelphia, for Salmanson & Falcao, LLC.

Gavin P. Lentz, Philadelphia, for Bultena.

Lawrence J. Fox, Philadelphia, for Mager, Liebenberg & White.

Before: McEWEN, P.J.E., JOYCE, J., and CERCONE, P.J.E.

McEWEN, P.J.E.

¶ 1 These cross appeals have been taken from the judgment in the amount of $183,600.00 entered in favor of the law firm of Mager, Liebenberg and White, (hereinafter ML & W) and against the law firm of Salmanson and Falcao, LLC (hereinafter S & F or appellant) and its client, Lynn M. Bultena, in this litigation over counsel fees. We are constrained to reverse and remand for the entry of a judgment in conformity with Pennsylvania law.

¶ 2 This unseemly lawsuit was initiated by Carol Mager, Roberta Liebenberg, and Ann White, trading as the law firm of Mager, Liebenberg and White (ML & W), against Michael Salmanson, individually, Linda P. Falcao, individually, the law firm of Salmanson and Falcao LLC (S & F) and Mr. Lynn M. Bultena, individually. ML & W, in its complaint, claimed entitlement to the fee which had been received by appellant as a result of Mr. Salmanson's representation of Lynn M. Bultena in a qui tam case¹ involving Mr. Bultena's former employer, Blue Shield.

¶ 3 Mr. Salmanson was employed as an associate at ML & W from July 1992 until June 10, 1997, when he resigned and began a practice with his wife, Linda Falcao. Mr. Bultena, as a result of a direct referral to Mr. Salmanson, had retained the law firm of ML & W in March of 1996, pursuant to a written retainer agreement dated March 15, 1996, which provided for Mr. Bultena to pay all costs associated with the firm's representation and to pay an hourly fee of $200.² Mr. Salmanson's agreement with his employer, ML & W, provided for him to receive 15% of all fees the firm collected from Mr. Bultena as an attribution fee for originating the client. The parties agree that no member of ML & W, other than Mr. Salmanson, ever worked on any matter for Mr. Bultena, and that at all times, ML & W paid 15% of the fees it collected from Mr. Bultena to Mr. Salmanson as an attribution fee.

¶ 4 Mr. Bultena testified that as a result of his prior employment with California Blue Shield, he had considerable experience with qui tam cases and, prior to presenting the rough draft of the complaint to Mr. Salmanson, spent between 100 and 200 hours drafting his qui tam complaint and organizing and reviewing the documents which supported the allegations of the complaint. Counsel for ML & W conceded at trial that the client, Mr. Bultena, in fact did the bulk of the work on the complaint.³

¶ 5 ML & W, via Mr. Salmanson, billed Mr. Bultena at the hourly rate of $200.00 for a total of 17.25 hours of time which Mr. Salmanson spent editing and reviewing Mr. Bultena's complaint prior to its filing. All parties are in agreement that Mr. Bultena paid in full for the editing and filing of the qui tam complaint at the rate of $200.00 per hour. The qui tam complaint was filed, pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., on June 17, 1996, under seal. The United States Attorney's Office sought and obtained an extension of the 60-day period provided by 31 U.S.C. § 3730(b)(2) within which to investigate the allegations and determine whether it desired to intervene in the action. After the filing of the complaint, from July 1, 1996, until March 11, 1997, ML & W, via Mr. Salmanson, billed Mr. Bultena an additional 13¼ hours for work related to the qui tam case.

¶ 6 In February of 1997, at the request of Mr. Bultena, ML & W entered into a new compensation agreement which was signed on February 24, 1997, but which related back to June 21, 1996, and covered the 13¼ hours billed since July of 1996. The new agreement provided for ML & W to be paid a contingent fee based on any recovery received by Mr. Bultena in the qui tam case. Mr. Bultena did not receive a refund of those costs and fees he had already paid to ML & W for the work performed prior to July 1, 1996, but ML & W agreed that Mr. Bultena would receive a credit for those sums against any contingency fee which might be owed to ML & W. Only an additional quarter hour of time was recorded by Mr. Salmanson from March of 1997 until his departure from ML & W in June of 1997. No provision was made in either of the two ML & W fee contracts for termination of the representation by the client prior to a resolution of the case.

¶ 7 When the law firm had declined to hire Mr. Salmanson's wife, Linda Falcao, as a regular employee as a result of a belief that married people should not work together, Mr. Salmanson resigned. Mr. Bultena then notified ML & W by letter dated June 10, 1997, that he had been referred to Mr. Salmanson specifically rather than to the firm of ML & W and desired to have his file transferred immediately to Mr. Salmanson.⁴

¶ 8 As of the date of Mr. Bultena's termination of ML & W in June of 1997, the federal government had not agreed to intervene in the action against Blue Shield, Mr. Bultena had not been informed of the existence of two other relators who would later attempt to claim his share of the settlement with Blue Shield under the first to file rule of 31 U.S.C. § 3730(b)(5), and Mr. Bultena had not yet convinced the federal government that he had not participated in the fraud.

¶ 9 Settlement negotiations between Blue Shield and the federal government commenced in March of 1998, more than nine months after ML & W's representation of Mr. Bultena had ceased, and resulted, on August 12, 1998, in a global settlement, whereby Blue Shield agreed to pay $38,500,000.00 to the federal government of which $16,000,000.00 was allocated to the claims first disclosed in Mr. Bultena's complaint. On August 14, 1998, pursuant to 31 U.S.C. § 3730(b)(4)(A) the government filed a notice of intervention. Following further negotiations with Mr. Salmanson, the government agreed to pay a relator's fee of $2,880,000.00, representing 18% of the $16,000,000.00, allocated to the claim raised by Mr. Bultena. Salmanson & Falcao LLC, based on its written contingent fee agreement with Mr. Bultena, received a fee of $864,000.00.

¶ 10 When Mr. Bultena, through counsel, filed a request for an award of statutory counsel fees in the qui tam action, Mr. Salmanson requested a copy of his time sheets from ML & W, and used these time sheets to separately include in the fee petition 30.50 hours of ML & W attorney time for a fee of $6,100.00 and ML & W costs of $744.66. Mr. Salmanson also accounted for 78.80 additional hours of attorney time for himself and 26.70 hours of attorney time for Linda Falcao while at Salmanson & Falcao, LLC for an additional counsel fee of $21,100.00 and additional costs incurred by Salmanson & Falcao, LLC of $753.56. Thus, the total amount requested in the fee petition was $27,200.00 in fees and $1,498.22 in costs.

¶ 11 ML & W thereafter claimed entitlement to the entire fee received by appellant and instituted suit by filing the five-count complaint which gave rise to the instant litigation.

¶ 12 Count I set forth a cause of action for breach of contract against Mr. Bultena, claiming that "[ML & W] by providing all of the legal services necessary to establish liability under the False Claims Act and substantially all of the services required by the ML & W agreement before its services were terminated, earned its full fee," sought an award of "one third of the $2.88 million recovery."

¶ 13 In Count II, ML & W claimed that it was entitled to "compensation in quantum meruit in an amount believed to be in excess of $50,000" under the theory of unjust enrichment⁵ claiming that "[d]efendant Bultena has been unjustly enriched to the extent that he has obtained all the legal services necessary to establish liability in the qui tam action without compensation to plaintiff." (emphasis supplied)⁶

¶ 14 In Count III, which ML & W designated as a claim for "breach of contract" against Linda Falcao and Michael Salmanson, individually, and against Salmanson & Falcao, LLC, ML & W claimed to be an "intended beneficiary" of the fee agreement entered into between appellant and Mr. Bultena and alleged that it was entitled to the contingent fee because "[d]efendants Salmanson, Falcao and Salmanson & Falcao, LLC, breached its [sic] fee agreement with defendant Bultena by failing to pay plaintiff [ML & W] for the legal services to be rendered in connection with the qui tam action." (emphasis supplied)

¶ 15 In Count IV, ML & W set forth a claim for "unjust enrichment" against Michael Salmanson, Linda Falcao, and Salmanson & Falcao, LLC, claiming that the defendants "reaped the benefits of plaintiff's efforts by settling defendant Bultena's qui tam claim less than three weeks after government intervention when it was plaintiff that had provided all the legal services." (emphasis supplied)

¶ 16 In the fifth and final count of the complaint, ML & W claimed that Salmanson and Falcao, individually, and the appellant corporation, were liable "for the full lost contingent fee or, in the alternative, in quantum meruit", based on tortious interference with contractual rights since they "interfered with plaintiff's contractual right to receive payment for the legal services it provided to defendant Bultena with regard to the qui tam action by refusing to pay the amount due under the ML & W agreement between defendant Bultena and plaintiff."

¶ 17 The trial court, in response to preliminary objections, dismissed the tortious...