MATTIONI, MATTIONI, ETC. v. ECOLOGICAL SHIPPING

• Citation: 530 F. Supp. 910
• Decision Date: 08 January 1982
• Docket Number: Civ. A. No. 79-4360.
• Parties: MATTIONI, MATTIONI & MATTIONI, LTD. v. ECOLOGICAL SHIPPING CORP., et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

530 F. Supp. 910

MATTIONI, MATTIONI & MATTIONI, LTD. v. ECOLOGICAL SHIPPING CORP., et al.

Civ. A. No. 79-4360.

United States District Court, E. D. Pennsylvania.

September 9, 1981.

On Motion For Reconsideration January 8, 1982.

Harold Cramer, Philadelphia, Pa., for plaintiff.

Franklin Poul, Philadelphia, Pa., for defendants.

OPINION^*

LOUIS H. POLLACK, District Judge.

This action grew out of an application for injunctive relief filed initially in November 1979 by the plaintiff law firm, Mattioni, Mattioni & Mattioni, against numerous defendants, including Ecological Shipping Corporation and several of its officers, in the Pennsylvania Court of Common Pleas. That injunctive proceeding sought to halt a settlement which was just about to be consummated between Ecological and Sun Shipbuilding and Dry Dock Company, also one of the defendants in the Court of Common Pleas, resolving litigation which had been in process for some three years in which the plaintiff law firm, Mattioni, Mattioni & Mattioni, had been representing Ecological.

The settlement which was worked out in the fall of 1979 was the result of discussions between Ecological and its New York counsel and Sun and its counsel, which plaintiff, Mattioni, Mattioni & Mattioni, essentially played no role in and received some, but hardly complete, information about.

The essence of the Mattioni lawsuit against Ecological and the others was to protect what Mattioni fully expected would be a very substantial fee resulting from its extensive labors on Ecological's behalf. The fee basis rested on a contract of retainer between Mattioni and Ecological. The precise terms of that retainer went through some process of change in the course of the attorney/client relationship, but a very important element of the retainer agreement was the following provision: "Ecological Shipping Corp. agrees not to compromise its suit without its attorneys' consent, and said attorneys are not authorized to do so without client's consent."

I say that was a very important element of the agreement for the reason that in the complaint filed in the Court of Common Pleas that provision of the agreement is recited verbatim in Paragraph 23 and, though it is true that the complaint contains several counts, and the defendants are not identical from count to count since the counts reflect a variety of theories of recovery, Paragraph 23 together with other introductory paragraphs, is a predicate to every one of the causes of action.

I emphasize this because central to the motions and cross-motions which are before me today a motion for partial summary judgment by plaintiff; and a cross-motion for summary judgment or, in the alternative, for partial summary judgment, by defendants — what has chiefly been at issue is the validity of that provision insofar as it recites that Ecological was not at liberty "to compromise its suit without its attorneys' consent."

It is the defendants' position that an attorney consent provision is unenforceable and that it taints the entire attorney/client relationship, that plaintiff, Mattioni, Mattioni & Mattioni, cannot recover in the terms in which their retainer agreement was cast, which was largely a contingent agreement, or on quantum meruit.

Defendant also argues that the very bringing of the lawsuit and what defendants see as the excessive terms in which the claim for fees was calculated, at least under one theory of the plaintiff's entitlement, disallow any kind of recovery as a betrayal and undercutting of the attorney obligation to a client, at least in a situation in which the form of the proceeding was one which had at least the potential of precluding an advantageous settlement of the Ecological/Sun litigation — advantageous, that is to say, from Ecological's point of view.

Plaintiff for its part, of course, argues that the retainer provision to which I have referred is valid and enforceable and, beyond that, argues that, even if not valid, its validity is of no moment because it in no way infected the central attorney/client relationship and, hence, may be regarded as a severable provision.

Finally, of course, the plaintiff argues that even if the provision is bad and infects the entire retainer, it does not preclude an appropriate fee to plaintiff on a theory of quantum meruit.

The central issues then clearly rotate around the validity of a provision, a so-called attorney's consent provision, of the form embodied in this retainer agreement.

There has been extended discussion of authorities not alone in Pennsylvania but in many other jurisdictions, including references to cases in the United States Supreme Court. See, e.g., McGowan v. Parish, 237 U.S. 285, 35 S.Ct. 543, 59 L.Ed. 955 (1915). There has been the intriguing suggestion by defendants that the issue should be regarded as one of federal law because it so closely attends on the practice of law in the federal courts. Without suggesting that there may not be aspects of the character of law practice in the federal courts which should be regarded as directly within the supervisory domain of federal judges, so that federal standards can be asserted and policed whether or not the same standards would obtain in state courts, I am not persuaded that the counter-Erie thesis is applicable here.

There is no such glaringly clear standard laid down by any of the federal authorities that I can see. The cases, to the extent that there are federal cases, can be looked to as, indeed, plaintiff has attempted to, to support an arrangement of this kind. I am not persuaded that they are significantly supportive but I certainly don't think that they give a federal trial judge the kind of guidance which would allow him or her to announce a federal standard for all to behold and to have beheld for years and decades past. So I regard the matter as one which should be resolved by Pennsylvania law, if it is findable.

The debate between the parties has, so far as it relates to Pennsylvania authorities, really focused on three cases, one in the Superior Court, Shoup v. Shoup, 25 Pa.Super.Ct. 552 (1904), a decision which plaintiff insists is a holding as to the enforceability of an attorney's consent provision, and two cases in the Pennsylvania Supreme Court, Wahl v. Strous, 344 Pa. 402, 25 A.2d 820 (1942) and Behrend v. Yellow Cab Company, 441 Pa. 105, 271 A.2d 241 (1970).

I find Shoup v. Shoup, supra, a case of ambiguous authority. It may be that the agreement the Superior Court talked about there was explicitly an attorney's consent provision, but, frankly, that doesn't leap from the printed page. It is, to be sure, a case which recognizes and, indeed, sanctions an attorney's litigating to challenge a settlement that a client who had just discharged the attorney was bent upon and which the attorney thought was dangerous not only to the client's interests but to his own independent interest as an assignee or former assignee of part of the recovery.

Wahl v. Strous, supra, is not a case, as one follows Justice Stern's opinion, in which an attorney consent provision was part of the agreement but it was a case in which Justice Stern, nonetheless — by dictum, to be sure, but by substantial and advertent dictum, to which authorities were appended — recited — "Indeed, it is almost universally held that even if a power of attorney provides in express terms that the client is not to have the right himself to compromise or settle his claim, such a provision is void as against public policy. Settlements are favored by the law which, therefore, frowns upon arrangements whereby a client would need his attorney's permission to settle a suit and it is immaterial that the attorney may be interested in the sense of his compensation being contingent upon the result of the litigation or settlement."

The vitality of the case was acknowledged by the Pennsylvania Supreme Court in Behrend, supra, in which a portion of Justice Stern's language was cited with approval. I find that Justice Stern's language, although technically dictum (albeit dictum which arguably at least builds structurally into the holding), is the clearest statement of Pennsylvania law on this subject.

Also, I would bring to the attention of the parties that there is an older case by an inferior Pennsylvania court which seems to have addressed the issue directly, Murphy's Estate, 13 County Court Rep. 70 (1893). At page 74 of that decision, one finds the following: "We think a sound public policy, one which duly regards the purpose for which courts are established and the relation of attorneys to the courts and their clients and of parties to each other, forbids that an attorney, besides agreeing for a contingent fee, should so arrange with his client as to preclude him from negotiating with his adversary and agreeing upon satisfactory terms of settlement of the controversy."

I do not argue that Presiding Judge Sealy's opinion was authoritative when announced, but I find nothing that indicates any departure from what Judge Sealy said and Justice Stern some 50 years later was to say.

So I come to the conclusion that, to the extent that there is a Pennsylvania line of doctrine, it supports the defendant's position that a provision such as that contained in its retainer agreement with Ecological is void as against public policy.

What flows from that? The suggestion that the void provision is severable and may be disregarded seems to me simply inconsistent with the central role the provision played in the inception of this litigation. I think it quite clear that plaintiff saw it as one of the sharpest and straightest arrows in its quiver and drew its complaint on that theory. So I regard it as a nonseverable provision and an unenforceable provision.

Does it follow from this that, as defendants would argue, plaintiff is disallowed not only to enforce the agreement but to recover at all from the work done? Here I find no Pennsylvania authority compelling...