McCabe v. Arcidy

• Decision Date: 15 December 1993
• Docket Number: No. 91-435,91-435
• Citation: 635 A.2d 446,138 N.H. 20
• Parties: Edwin A. McCABE and another v. Louis J. ARCIDY, Sr.
• Court: New Hampshire Supreme Court

Page 446

635 A.2d 446

138 N.H. 20

Edwin A. McCABE and another v. Louis J. ARCIDY, Sr.

No. 91-435.

Supreme Court of New Hampshire.

Dec. 15, 1993.

As Modified on Denial of Rehearing Jan. 27, 1994.

The McCabe Group, Cambridge, MA (Edwin A. McCabe & a. on the brief, and Joseph P. Davis III orally), for plaintiff Edwin A. McCabe.

Kahn & Brown, Nashua (Kenneth M. Brown and John J. LaRivee on the brief, and Mr. Brown orally), for plaintiffs Joseph A. Foistner, Sr., A & F Development Corp., and Edelweiss Development Corp.

Cloutier, Beliveau & Fradette, P.A., Manchester (Richard E. Fradette on the brief), and McDermott, Will & Emery, Boston, MA (James J. Marcellino on the brief and orally), for defendant.

BATCHELDER, Justice.

The defendant Louis J. Arcidy, Sr., appeals from the Superior Court's (Flynn, J.) order that he comply with the terms of a written fee agreement, which he signed as guarantor. We affirm.

In October 1990, Edwin McCabe, a Massachusetts attorney, was contacted by Joseph Foistner and Louis Arcidy concerning possible legal representation. Foistner had litigation pending in the Hillsborough County Superior Court, on his own behalf and on behalf of A & F Development Corporation and Edelweiss Development Corporation, against First New Hampshire Mortgage Corporation and Don Wheeler Construction, Inc., based on claims of lender liability. The lawsuit had been filed by the New Hampshire firm of Wiggin & Nourie, and the plaintiffs were seeking new counsel.

During the following weeks, McCabe met with Foistner and Arcidy several times and communicated with them by telephone and in writing. Discussions concerning a fee agreement revealed that Foistner and the two corporations were insolvent and thus unable to pay attorney's fees and that McCabe was unwilling to accept the case on a purely contingent fee arrangement. Arcidy, who was a fifty percent shareholder in the two corporations, presented himself as an individual of substantial wealth and expressed his willingness to guarantee the payment of McCabe's fees and expenses.

On December 4, 1990, McCabe and Foistner entered into a fee agreement. The agreement provided that the clients, Foistner and the two corporations, were to pay a $25,000 retainer and, commencing January 1, 1991, and continuing to October 1, 1991 or the completion of the lawsuit, whichever occurred first, McCabe's invoices. Thereafter, McCabe would be entitled to twenty-five percent of the clients' net recovery from the prosecution, or thirty percent in the event of an appeal from judgment entered after trial. "Net recovery" was defined in the agreement as the amount of any judgment or settlement, less the aggregate amount of all payments made by the clients to reimburse McCabe for fees and expenses. In addition, McCabe was given the option to purchase for $10.00 a 22.4 acre parcel of land in New Hampshire with a stated value of $150,000. The clients were entitled to a further credit for that value in the event the option to purchase was exercised. The agreement was signed by Foistner, on his own behalf and as president of the two corporations, and by McCabe. Arcidy signed the agreement underneath the statement that "[p]erformance by the Clients of their obligations under the terms of this Fee Agreement it [sic ] is hereby guaranteed."

Arcidy thereafter paid the initial $25,000 retainer and $25,000 fee payments in the months of January, March, and April 1991. McCabe agreed to an extension of time for the February payment. In addition, Arcidy reimbursed McCabe for expenses through April 1991. In May 1991, however, Arcidy ceased making payments. Subsequently, McCabe, joined by Foistner and the two corporations, filed a petition for injunctive and declaratory relief, seeking enforcement of the written fee agreement. Following a two-day trial, the court denied the request for injunctive relief based on a finding that McCabe had failed to show irreparable harm. The court, however, issued an order that Arcidy pay McCabe $138,622.78 for fees and expenses incurred up to the time of trial in this case and that Arcidy comply with the provisions of the fee agreement.

Arcidy raises many issues on appeal. Although he argues that this court ought to reach conclusions different from those of the trial court, our role is not to undertake de novo review. Findings of fact by a trial court are binding on us unless they are not supported by the evidence or are erroneous as a matter of law. K & P, Inc. v. Town of Plaistow, 133 N.H. 283, 289, 575 A.2d 804, 808 (1990). An integral part of the process of decision-making includes resolving conflicts in the testimony, measuring the credibility of witnesses, and determining the weight to be given to testimony. We defer to the trial court's judgment on such issues. See Ballou v. Ballou, 118 N.H. 463, 465-66, 387 A.2d 1169, 1170 (1978).

Arcidy argues first that the trial court erred in finding that he was not McCabe's client. He also contends that McCabe had "the highest level of fiduciary duties" to disclose the difference in legal effect between signing the fee agreement as a guarantor rather than as a client, to inform Arcidy that he was not a client, and to advise Arcidy that he should seek independent counsel regarding the negotiation and execution of the fee agreement.

The trial court's order states:

"After considering the conflicting testimony on this issue the Court finds that the defendant was never a client of McCabe and, further, that McCabe met his professional responsibility toward the defendant. It should also be kept in mind that McCabe was dealing with an astute, experienced and very successful business man in the person of Arcidy."

The court denied the defendant's requested finding that "McCabe never explained to Arcidy the difference between signing the Fee Agreement as a guarantor rather than as a client." In addition, the court found that McCabe had no obligation to inform Arcidy that a client may discharge his attorney at any time, with or without cause, or that Arcidy should seek independent counsel before signing the fee agreement. The facts of this case support the trial court's conclusions.

An attorney-client relationship "is created when (1) a person seeks advice or assistance from an attorney, (2) the advice or assistance sought pertains to matters within the attorney's professional competence, and (3) the attorney expressly or impliedly agrees to give or actually gives the desired advice or assistance." Kurtenbach v. TeKippe, 260 N.W.2d 53, 56 (Iowa 1977). The burden of establishing the existence of the attorney-client relationship rests on the party who alleges such fact, see Matter of Grand Jury Subpoenas, Etc., 451 F.Supp. 969, 971 (E.D.N.Y.1978), and its existence is predicated on the circumstances of each case. Matter of Lieber, 442 A.2d 153, 156 (D.C.1982); Chavez v. State, 604 P.2d 1341, 1346 (Wyo.1979), cert. denied, 446 U.S. 984, 100 S.Ct. 2967, 64 L.Ed.2d 841 (1980). "That burden is not of course, discharged by mere conclusory or ipse dixit assertions, for any such rule would foreclose meaningful inquiry into the existence of the relationship, and any such spurious claims could never be exposed." Matter of Grand Jury Subpoenas, Etc., 451 F.Supp. at 971 (quotation omitted).

Consultation between an attorney and another person constitutes the fundamental basis of an attorney-client relationship. A critical element of that consultation, however, is that the person initiating it do so with the intent of seeking legal advice from the attorney. See United States v. United Shoe Machinery Corporation, 89 F.Supp. 357, 358 (D.Mass.1950). The evidence in this case offers no basis for concluding that when Arcidy consulted McCabe he did so to further his individual personal interest; there is only evidence that McCabe was retained to represent Foistner and the two corporations. See United States v. Stern, 511 F.2d 1364, 1368 (2d Cir.), cert. denied, 423 U.S. 829, 96 S.Ct. 47, 46 L.Ed.2d 46 (1975); Matter of Grand Jury Subpoenas, Etc., 451 F.Supp. at 971. Arcidy was not a party to the lender liability suit and did not have a claim involved in the litigation. McCabe testified at trial that:

"Mr. Arcidy was told from the outset who the clients were in this matter. Mr. Arcidy indeed repeatedly told me that this was Joe Foistner's case, that he was the one who was going to be making the decisions and Mr. Arcidy was simply providing the funding for it; and obviously, would enjoy the fruits of a successful prosecution of the claims, but that this was Mr. Foistner's case. There was never any question that was raised until after payment stopped in May that Mr. Arcidy purported to be a client of mine."

When asked on cross-examination whether "prior to Mr. Arcidy signing the fee agreement, [McCabe] explain[ed] to him the difference, the legal difference, between his signing as a client as opposed to a guarantor," McCabe answered "yes." Indeed, if Arcidy was a client there would have been no need for him to guarantee the fee agreement because presumably he would have been obligated to pay his lawyer's fee.

We disagree with Arcidy's argument that it was reasonable for him to believe he was a client due to his status as a fifty percent shareholder in the plaintiff corporations. "A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders or other constituents." N.H.R.Prof. Conduct 1.13(a); see Egan v. McNamara, 467 A.2d 733, 738 (D.C.1983). Absent evidence that a corporation's attorney furnished legal advice to a shareholder, see Professional Service Industries, Inc. v. Kimbrell, 758 F.Supp. 676, 681 (D.Kan.1991), the attorney is not the representative of the corporation's shareholders simply because the attorney's actions on its behalf also benefit the shareholders. Skarbrevik v. Cohen, England & Whitfield, 231 Cal.App.3d 692, 282...