Margolin et al. v. Shermaria, et al.

• Decision Date: 21 December 2000
• Citation: 102 Cal.Rptr.2d 502
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 2 Dist. 2000) ELYSE R. MARGOLIN et al., Plaintiffs and Appellants v. JOSEPH SHEMARIA et al., Defendants and Appellants B128298 Filed

102 Cal.Rptr.2d 502 (Cal.App. 2 Dist. 2000)

ELYSE R. MARGOLIN et al., Plaintiffs and Appellants v. JOSEPH SHEMARIA et al., Defendants and Appellants

B128298

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE

Filed 12/21/00

APPEAL from a judgment and an order of the Superior Court of Los Angeles County. Richard P. Kalustian, Judge. Affirmed.

(Los Angeles County Super. Ct. No. BC183931)

Gelfand and Gelfand, Gary B. Gelfand and Robert E. Fisher for Plaintiffs and Appellants.

Law Offices of Joseph Shemaria and Joseph Shemaria in pro per for Defendants and Appellants.

CERTIFIED FOR PARTIAL PUBLICATION^*

CROSKEY, J.

In this breach of contract suit between two law firms and their attorneys, the plaintiffs have filed an appeal from the judgment entered in favor of defendants. Plaintiffs are Elyse R. Margolin and the law offices of Levin and Margolin ("Margolin," or "plaintiffs"). Defendants are Joseph Shemaria, Joseph Shemaria, a professional corporation, and the law offices of Joseph Shemaria ("Shemaria"). Shemaria has cross-appealed, challenging several sanctions imposed on him by the trial court. His cross-appeal is addressed in the unpublished portion of this opinion.¹

The contract on which plaintiffs sued concerns a case referral made by plaintiffs to Shemaria. Plaintiffs claim that under the contract, they are entitled to 50% of the attorney's fees that Shemaria ultimately received for his efforts in the referred case. The trial court rejected plaintiffs' claim and granted Shemaria a directed verdict, finding that plaintiffs do not have a viable contract with Shemaria for fee sharing because the contract does not comply with rule 2-200 of the Rules of Professional Conduct of the State Bar of

California, which prohibits such sharing of fees unless certain specified conditions are met.²

Stated simply, plaintiffs have asked this court to decide whether they have the right to insist that Shemaria violate rule 2-200 (and thereby subject himself to possible disciplinary action by the State Bar of California) so that they can receive the benefit of their bargain with him. We find plaintiffs have no such right. We find the trial court properly applied rule 2-200 when it granted a directed verdict and entered judgment in favor of Shemaria. We further find, as more fully discussed in the unpublished portion of this opinion, that (1) the trial court did not abuse its discretion in imposing its original sanctions on Shemaria, and (2) we have no jurisdiction to review the sanctions it subsequently imposed on Shemaria because Shemaria's notice of appeal has limited our review to the original sanctions. We therefore affirm the judgment in its entirety.

I.PROCEDURAL BACKGROUND OF THE CASE

Plaintiffs' complaint, filed in January 1998, alleges plaintiffs referred a case to Shemaria in consideration for his oral agreement to (1) provide the referred client with the written disclosure of the referral agreement required by rule 2-200; (2) obtain the referred client's written acknowledgement and consent to the referral agreement, which is also required by rule 2-200; and (3) provide plaintiffs with fifty per cent of any fee received by him in conjunction with his representation of the referred client. Plaintiffs alleged Shemaria breached this oral agreement by failing to accomplish each of these three matters. According to the complaint, Shemaria received $450,000 in fees from the referred client.

Shemaria's general denial to the complaint alleged several affirmative defenses, including a violation by plaintiffs of rule 2-200. The case was tried to a jury in October 1998. The trial court granted Shemaria's motion for a directed verdict because of plaintiffs' failure to satisfy the requirements of rule 2-200.

ISSUE RAISED IN PLAINTIFFS' APPEAL

In their appeal, plaintiffs contend that rule 2-200 does not prevent them from sharing in the fees recovered by Shemaria from the referred client since (l) evidence at trial showed that the referred client received a full verbal explanation of the referral fee agreement between plaintiffs and Shemaria, and consented thereto, and (2) Shemaria promised Margolin that he would provide the referred client with a written explanation of the fee sharing agreement and would obtain the client's written consent to that agreement.

DISCUSSION

1. Standards of Review of the Trial Court's Directed Verdict

Against Plaintiffs on Their Cause of Action for Breach of Contract

Because plaintiffs appeal from a judgment based on a directed verdict in favor of defendant, we view the evidence in the light most favorable to plaintiffs. Conflicts in the evidence are resolved, and inferences from the evidence are drawn, in their favor. If there is substantial evidence to support plaintiffs' claim, and if the state of the law also supports that claim, we must reverse the judgment. (Colbaugh v. Hartline (1994) 29 Cal.App.4th 1516, 1521.) Interpretation of statutes and administrative regulations, such as the state's Rules of Professional Conduct for members of the State Bar, receive our independent review on appeal. (Home Depot, U.S.A., Inc. v. Contractors' State License Bd. (1996) 41 Cal.App.4th 1592, 1599.) In the instant case, our analysis of rule 2-200 requires our conclusion that the evidence presented at trial is not sufficient to support plaintiffs' assertion that they are entitled to a share of the fees recovered by Shemaria from the referred client.

2.Factual Basis of Plaintiffs' Breach of Contract Cause of Action

Plaintiff Margolin testified that approximately 75 percent of her law practice is devoted to dissolution of marriage cases, while the remainder is civil litigation matters. During the course of her discussions with one of her family law clients, Margolin learned of acts committed by the client's husband that Margolin felt might be the basis of a tort suit by the client-wife against the husband, separate from the family law case. Margolin suggested to wife that wife have a consultation with Shemaria and retain him to handle the tort matter. Margolin testified she had known Shemaria for more than 20 years, and she believed him to be a competent trial lawyer. Margolin arranged for the wife and herself to meet with Shemaria at Shemaria's office on December 9, 1994. Prior to that meeting, Margolin discussed with Shemaria the facts which she believed would be the basis of the tort case.

Margolin testified that the December 9 meeting lasted several hours. She, wife, and Shemaria discussed having Shemaria handle the proposed tort case against husband, and Shemaria agreed to take the case. Margolin and Shemaria agreed that the attorney's fees recovered by him from the tort case would be split equally between themselves. At the meeting, Shemaria agreed to prepare a written disclosure of the referral fee sharing agreement between himself and Margolin, and a written retainer agreement. Additionally, he agreed to obtain wife's written acknowledgement and consent to the fee sharing agreement. According to Margolin, wife was present during these arrangements, and she verbally consented to the fee sharing.

At trial, Shemaria stated that the agreement between himself and Margolin for fee sharing was not a 50-50 arrangement but rather was a one-third & two-thirds arrangement with Margolin to recover one-third of the fees. In his recollection of the December 9 meeting with wife and Margolin, the topic of fee sharing was not discussed at that time. However, at his deposition, Shemaria acknowledged that he was to prepare a retainer agreement which would comply with the Rules of Professional Conduct (apparently including rule 2-200).

During his representation of wife in the tort matter, Shemaria sent a letter to a Mr. Larry Adams, who is wife's personal representative, and he sent Margolin a copy of the letter. In the letter, Shemaria explained to Mr. Adams that Margolin had referred the tort case to him and that the standard fee-sharing rate for such referrals is 33&1/3 percent. He also explained that before he could give Margolin such a share of his fees, he would need to have wife's written consent to the fee sharing arrangement because the Rules of Professional Conduct require that this be done. Upon receiving the copy of Shemaria's letter, Margolin telephoned him. She indicated her concern that he had not obtained wife's written consent to the fee sharing, and she voiced her objection to his representation that her share of his fees was only to be one-third.

Initially wife and husband struck an agreement in both the family law and tort cases, but in the end, the couple reconciled and no written settlement agreement was ever executed. Shemaria testified that after wife and husband reconciled he retained an attorney to sue them to recover his fees for the referred case. He stated that his suit for legal fees settled in January 1996 for $450,000. He paid his attorney $100,000 to prosecute that case, plus approximately $20,000 in costs. He stated that he did not give Margolin any of that $450,000.

3.The Scolinos Decision

Our first opportunity to address issues arising under what is now rule 2-200 was in Scolinos v. Kolts (1995) 37 Cal.App.4th 635 ("Scolinos"). In that case, the attorney-plaintiff ("the plaintiff") sued the attorneys-defendants ("the defendants") for breach of contract, alleging the defendants wrongfully failed to give him a referral fee share of the attorney's fees which they received in a case referred to them by the plaintiff. The defendants moved for summary judgment on the basis of former rule 2-108 of the Rules of Professional Conduct, which, like current rule 2-200, provided that attorney's fees could not be shared unless the client consented in writing to the division of fees after a full written disclosure of the terms of the fee sharing agreement had been made to the client. The defendants asserted that the client that plaintiff...