Olsen and Brown v. City of Englewood

• Decision Date: 01 July 1993
• Docket Number: No. 92CA1241,92CA1241
• Citation: 867 P.2d 96
• Parties: OLSEN AND BROWN, a law partnership and John R. Olsen, Plaintiffs-Appellants, v. CITY OF ENGLEWOOD, a Colorado home rule city, Defendant-Appellee. . V
• Court: Colorado Court of Appeals

Page 96

867 P.2d 96

OLSEN AND BROWN, a law partnership and John R. Olsen Plaintiffs-Appellants, v. CITY OF ENGLEWOOD, a Colorado home rule city, Defendant-Appellee.

No. 92CA1241.

Colorado Court of Appeals Div. V.

July 1, 1993.

As Modified on Denial of Rehearing

Aug. 5, 1993.

Certiorari Granted Jan. 24, 1994.

Olsen & Brown, John R. Olsen, Boulder, for plaintiffs-appellants.

Hall & Evans, David R. Brougham, Denver, for defendant-appellee.

Opinion by Judge TAUBMAN.

In this action for damages based upon termination without cause of an attorney-client relationship, plaintiffs, Olsen & Brown, a law partnership, and John R. Olsen, individually, appeal the trial court's partial summary judgment entered in favor of the defendant, City of Englewood. We affirm and remand for further proceedings.

The following facts are not in dispute. The parties entered into an oral agreement whereby plaintiffs were to represent the City in toxic tort litigation to its conclusion, including all appeals. Plaintiffs billed a monthly set fee starting in October 1989, devoted substantially all of their time to the City's legal work, and even retained outside counsel for consulting purposes. In December 1990, the City terminated the attorney-client relationship without cause.

Plaintiffs' complaint against the City alleges breach of contract, equitable estoppel, and misrepresentation. The City moved for dismissal pursuant to C.R.C.P. 12(b)(5), or in the alternative, under the doctrine of sovereign immunity. Since the trial court considered materials outside of the complaint, the City's motion was treated as a motion for partial summary judgment.

Construing the contract here as "an open-ended agreement for legal representation," the court held that it "does not bind a client for a financial obligation to an attorney discharged without cause."

Thus, the trial court granted summary judgment in favor of the City, ruling that plaintiffs were not entitled to any unearned fees.

Summary judgment is a drastic remedy to be granted only when there is a clear showing that the controlling standards have been met. It is appropriate only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Churchey v. Adolph Coors Co., 759 P.2d 1336 (Colo.1988).

In determining whether summary judgment was properly entered, an appellate court must accord the nonmoving party the benefit of all favorable inferences that may reasonably be drawn from the undisputed facts, and all doubts must be resolved against the moving party. Mancuso v. United Bank, 818 P.2d 732 (Colo.1991).

I.

Plaintiffs argue that Mutter v. Burgess, 87 Colo. 580, 290 P. 269 (1930) is controlling on the breach of contract claim. We disagree.

In Mutter, the client contracted to pay a $1,000 retainer fee and then either an additional $500 or $1,500 depending on the outcome of the trial. The client, in fact, paid only $200 of the $1,000 retainer, and the supreme court affirmed the award of this $800 difference to the lawyers.

In our view, Mutter is distinguishable on its facts from the instant case.

First, in Mutter, the lawyers sued only for the balance of a retainer under their contract of employment. Significantly, they did not seek an additional amount to which they would have been entitled under the contract of employment. Thus, while the recovery they obtained from the supreme court was based upon breach of contract principles, it was limited to the unpaid portion of an initial retainer. Here, by contrast, plaintiffs seek far more than merely an unpaid retainer. They wish to obtain an unspecified sum based upon their view that their contract of employment provided for them to represent the City on an ongoing basis until the conclusion of certain litigation.

Second, Mutter might well be decided differently today because of ethics rules promulgated by the supreme court after Mutter was decided.

Thus, Code of Professional Responsibility DR 2-110(A)(3), in effect at the time this action arose, requires that "a lawyer who withdraws from employment shall refund promptly any part of the fee paid in advance that has not been earned." See Colorado Rules of Professional Conduct 1.16(d). When a client discharges counsel, he or she must withdraw. Code of Professional Responsibility; DR 2-110(B)(4); see Colorado Rules of Professional Conduct 1.16(a)(3). Additionally, Code of Professional Responsibility DR 2-106(A) provided that a lawyer "shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee." Cf. Colorado Rules of Professional Conduct 1.5(a) (lawyer's fee shall be reasonable). Accordingly, because of these ethical rules, the circumstances presented in Mutter would, in our view, require a court to conclude that any unearned part of a retainer must be returned to the client.

Plaintiffs make an argument, to which we are not unsympathetic, that they devoted their entire firm's resources to fulfillment of their employment contract with the City. Thus, when the City then discharged the plaintiffs without cause, they were left to suffer a wrong without a remedy.

While this may be so, we conclude that when an attorney is employed under a fixed fee contract to render specific legal services and is discharged by the client without cause, the attorney is entitled only to compensation for the reasonable value of the services rendered up to the time of the discharge.

Two intermediate appellate courts recently have addressed circumstances similar to those presented here. In O'Brien v. Plumides, 79 N.C.App. 159, 339 S.E.2d 54 (1986), our sister court was confronted with a decision of its state supreme court which had applied breach of contract principles to the termination of a fixed fee employment contract between a client and an attorney. There, the court noted that the North Carolina Supreme Court had "implicitly adopted the modern rule" with its adoption, first, of the Code of Professional Responsibility and, second, with its adoption of the Rules of Professional Conduct.

Under this "modern rule," a client's discharge of his or her attorney is not considered a breach of contract since "it is a basic term of the contract, implied by law into it by reason of the special relationship between the contracting parties, that the client may terminate the contract at will." O'Brien v. Plumides, 79 N.C.App. at 161, 339 S.E.2d at 55. Thus, the O'Brien court concluded that the client had a right to discharge his or her attorney at any time, pursuant to the Code of Professional Responsibility or the Rules of Professional Conduct, but the lawyer was entitled only to recover the reasonable value of the services he or she had already provided--in other words, a quantum meruit recovery.

Similarly, the intermediate appellate court in Indiana reasoned that both the Rules of Professional Conduct and the Code of Professional Responsibility militated in favor of the conclusion that "an attorney employed under a contract providing for a specific fee, who is discharged without cause, is relegated to recovery under the theory of quantum meruit for services rendered before being discharged." Estate of Forrester v. Dawalt, 562 N.E.2d 1315, 1316 (Ind.App.1990). In so doing, it distinguished a 90 year-old state supreme court decision which had applied breach of contract principles as an alternative theory of recovery for an attorney discharged in violation of a contract. Analogous to the holding in O'Brien, the court found that elements of trust and confidence inherent in an attorney-client relationship implicitly added to the employment agreement a provision to allow the client to terminate the contract at will without penalty.

As in O'Brien, the Estate of Forrester court noted that the Code of Professional Responsibility and the Rules of Professional Conduct supported its conclusions. In particular, the court noted that Indiana Professional Conduct Rule 1.16(d) provides in pertinent part: "Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as ... refunding any advance payment of fee that has not been earned." (emphasis added)

The identical provision of the Colorado Rules of Professional Conduct has been effective since January 1, 1993. It is immaterial that the dispute here arose while the Colorado Code of Professional Responsibility was still in effect. The Estate of Forrester court in turn...