Meyerhoff v. Garten, Civ. No. 15605.

• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)
• Writing for the Court: THOMSEN
• Citation: 232 F. Supp. 363
• Parties: Joseph MEYERHOFF et al. v. Herbert S. GARTEN, and Fedder and Garten, a partnership composed of Joel D. Fedder and Herbert S. Garten.
• Docket Number: Civ. No. 15605.
• Decision Date: 04 August 1964

232 F. Supp. 363

Joseph MEYERHOFF et al. v. Herbert S. GARTEN, and Fedder and Garten, a partnership composed of Joel D. Fedder and Herbert S. Garten.

Civ. No. 15605.

United States District Court D. Maryland.

August 4, 1964.

William L. Marbury, John Martin Jones, Jr., and Piper & Marbury, Baltimore, Md., for complainants.

James D. Nolan, Towson, Md., for respondents.

THOMSEN, Chief Judge.

Complainants seek remand of this case to the Circuit Court of Baltimore City, from which it was removed by respondents.

The bill of complaint filed in the Circuit Court alleges that complainants are the surviving directors of five Maryland corporations which have been dissolved; that for the tax year 1951 and for certain tax years thereafter, those corporations filed income tax returns and, pursuant to certain regulations then in force, paid taxes totaling approximately $1,000,000 with respect to certain ground rent transactions; that the late Morris Fedder, a member of the law firm of Fedder and Garten, was retained to prosecute refund claims for the several corporations; that such claims were duly filed, and after Fedder's death, several lawyers, including respondent Garten, were engaged to prosecute those claims; that since Internal Revenue Regulation 601.502(c)¹ prohibits the Internal Revenue Service from dealing with attorneys in the capacity of attorneys-at-law, complainants executed several powers of attorney, each of which appointed respondent Garten and other lawyers attorneys-in-fact to appear before the Treasury Department in connection with the refund claims with "full power to do everything whatsoever requisite and necessary to be done in the premises, and to receive refund checks, to execute waivers of the statute of limitations, and to execute closing agreements as fully as the undersigned might do if done in his own capacity, with full power of substitution and revocation, at any time subsequent to the date hereof and prior to the revocation * * *"; that each of the powers of attorney "requested that a copy of all communications regarding any matter in which the said attorneys are hereby authorized to act be addressed to them care of the law office of Fedder and Garten, 421 Title Building, Baltimore 2, Maryland."

The bill of complaint further alleges that acting under those powers of attorney Garten and the other lawyers engaged in negotiations with the Service as attorneys-in-fact, which led to a final compromise agreement pursuant to which five United States government checks, in the total amount of $702,312.01, each payable to one of the dissolved corporations, were issued in payment of the refund claims; that each of the checks was sent to respondents Fedder and Garten pursuant to the direction in the powers of attorney quoted above, and were received by them as such attorneys-in-fact; that complainants have demanded that respondents deliver the checks to them, but respondents have refused, claiming an attorney's lien to secure fees of $175,000 in connection with the tax refund claims.

Complainants deny that respondents have an attorney's lien under the circumstances alleged, deny that they agreed to pay respondents a fee of $175,000, concede that they agreed to pay a reasonable fee regardless of the outcome of the refund claims, allege that the claimed fee is exorbitant, and state that they are willing to pay Garten such reasonable fee as may be determined by the court.

The bill of complaint prays (a) an injunction requiring respondents forthwith to deliver to complainants all said checks; (b) a declaratory decree fixing a reasonable fee for respondents' services; and (c) other and further relief. A show cause order with respect to (a) was requested and issued by the Circuit Court.

Respondents' petition for removal under 28 U.S.C.A. § 1441² alleges that this is an action of a civil nature of which the district courts of the United States have original jurisdiction; that it involves the requisite jurisdictional amount, and "arises under the laws of the United States", because "the Complainants base their claim for relief against the Respondents, upon, by virtue of, and under the Federal statutes and Acts of Congress, and regulations pertaining thereto governing and controlling practice before an agency of the United States Department of the Treasury."

In support of their motion to remand, complainants contend that their cause of action for specific restitution of the checks is founded on state law, and not on a claim or right arising under the Constitution or laws of the United States or any regulations adopted pursuant thereto. They argue: that an attorney-at-law has a retaining lien on papers, securities and money belonging to his client only if they come into his possession in the course of his professional employment as such attorney, citing Ashman v. Schecter, 196 Md. 168, 173-174, 76 A.2d 139; that no lien arises if they were received by him in any other capacity than that of attorney-at-law, citing, inter alia, Poe on Pleading and Practice, Tiffany ed., vol. 2, p. 47; that respondents received the checks in question as attorneys-in-fact under the several powers of attorney and not as attorneys-at-law; that no charging lien is recognized by the Maryland Courts, citing Ashman v. Schecter, supra, and United States v. 72.71 Acres of Land, D.Md., 167 F.Supp. 512 (1958); cf. United States v. Jacobs, D.Md., 187 F.Supp. 630 (1960), aff'd 298 F.2d 469, 474 (1961); and with respect to their second cause of action, that the determination of the amount of the fee does not present a question of federal law, despite the fact that the checks are government checks issued in payment of refund claims against the United States, citing Bank of America Nat. Trust & Sav. Ass'n v. Parnell, 352 U.S. 29, 77 S.Ct. 119, 1 L.Ed. 2d 93 (1956), and United States v. 72.71 Acres of Land, supra.

The development of the law with respect to the phrase "arising under the Constitution and laws of the United States", as used in 28 U.S.C.A. §§ 1331 and 1441, was reviewed by this Court in Acme Markets, Inc. v. Retail Store Employees Union Local No. 692, 231 F.Supp. 566 (July 21, 1964). That discussion need not be repeated here. The controlling principles applicable in this case may be summarized by the following quotations from Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936): "How and when a case arises `under the Constitution or laws of the United States' has been much considered in the books. Some tests are well established. To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action. Starin v. City of New York, 115 U.S. 248, 257, 6 S.Ct. 28, 29 L.Ed. 388; First National Bank of Canton, Pennsylvania v. Williams, 252 U.S. 504, 512, 40 S.Ct. 372, 64 L.Ed. 690. The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another. * * * Indeed, the complaint itself will not avail as a basis of jurisdiction in so far as it goes beyond a statement of the plaintiff's cause of action and anticipates or replies to a probable defense. * * * Not every question of federal law emerging in a suit is proof that a federal law is the basis of the suit." 299 U.S. at 112-113, 115, 57 S.Ct. at 97.

Respondents argue that complainants might have alleged merely that they were the owners of certain checks which defendants were unlawfully withholding from them, and might have prayed only for...