Post v. Bregman

• Citation: 349 Md. 142,707 A.2d 806
• Decision Date: 01 September 1997
• Docket Number: No. 15,15
• Parties: Alan F. POST, Chartered v. Douglas M. BREGMAN et al. ,
• Court: Court of Appeals of Maryland

Page 142

349 Md. 142

707 A.2d 806

Alan F. POST, Chartered v. Douglas M. BREGMAN et al.

No. 15, Sept. Term, 1997.

Court of Appeals of Maryland.

Jan. 15, 1998.

Reconsideration Denied March 6, 1998.

Roger T. Scully (Andrew Robertson, on brief), Bethesda, for Petitioner

Glen M. Cooper (Patricia M. Weaver, Paley, Rothman, Goldstein, Rosenberg & Cooper, Chartered, on brief), Bethesda, for Respondent.

William J. Murphy, Robert T. Shaffer, III, Murphy & Shaffer, Baltimore, brief amicus curiae of Goldman, Skeen & Wadler, P.A.

Argued before BELL, C.J., ELDRIDGE, RODOWSKY, CHASANOW, RAKER and WILNER, JJ., and ROBERT L. KARWACKI, Judge (retired), Specially Assigned.

WILNER, Judge.

This is a dispute between two lawyers over the division of one-third of a fee. A letter agreement called for petitioner, Alan F. Post, Chartered (Post), to receive 60% of the third and for Douglas Bregman and his firm (Bregman) to receive the other 40%. The remaining two-thirds of the fee was paid to another firm that is not involved in the instant dispute. When the underlying case that generated the fee was settled, Post received the entire one-third share, $260,000, and he then balked at paying Bregman the 40% called for in the letter agreement ($104,000), contending that Bregman had done insufficient work to warrant a fee in that amount. Instead, Post filed an action for declaratory judgment in the Circuit Court for Montgomery County, asserting that his honoring of the 60/40 fee arrangement would violate Rule 1.5(e) of the Maryland Lawyers' Rules of Professional Conduct (MLRPC). Bregman filed a two-count counterclaim for declaratory judgment and for breach of contract.

The circuit court concluded, on summary judgment, that the fee agreement was clear and unambiguous, that Post breached the agreement and was liable for damages, and that the alleged violation of MLRPC Rule 1.5(e) did not suffice to constitute a defense to the breach of contract action. It granted Bregman's motion for summary judgment, entered judgment on the breach of contract counterclaim in favor of Bregman for $112,881, and dismissed the opposing actions for declaratory judgment as moot. The Court of Special Appeals affirmed, Post v. Bregman, 112 Md.App. 738, 686 A.2d 665 (1996), and we granted certiorari to consider (1) whether a fee-sharing agreement between lawyers is subject to MLRPC

Rule 1.5(e) and may be rendered unenforceable if in violation of that rule, and (2) whether there was a sufficient dispute of material fact regarding Bregman's performance to preclude summary judgment. Our affirmative answer to the first question will obviate the need to answer the second. We shall reverse the judgment of the Court of Special Appeals and direct that the case be remanded to the circuit court for further proceedings.

FACTUAL BACKGROUND

MLRPC Rule 1.5 deals generally with lawyers' fees. Section (a) requires that the fees be reasonable and sets forth some factors to be considered in determining reasonableness. Section (b) requires that the basis or rate of the fee be communicated to the client, if the lawyer has not regularly represented the client. Section (c) allows contingent fees, subject to certain conditions set forth in that section and certain prohibitions specified in § (d); and § (e)--the section at issue here--deals with the splitting of fees among lawyers who are not part of the same firm. It states:

"A division of fee between lawyers who are not in the same firm may be made only if:

(1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation;

(2) the client is advised of and does not object to the participation of all the lawyers involved; and

(3) the total fee is reasonable."

In 1988, Stanley Taylor was diagnosed as suffering from chronic myleogenous leukemia. Believing that his condition may have been caused by exposure to a toxic substance during his employment, he sought legal assistance for the purpose of obtaining workers' compensation benefits. He found a lawyer, who filed a claim, but when benefits were initially denied the lawyer withdrew. Taylor then, in August, 1989, interviewed Mr. Bregman as a prospective replacement. Bregman informed While the compensation case was pending, Taylor retained Post to file a separate action against the suppliers of the toxic substance. The retainer agreement with respect to the third-party action called for Post to receive a fee of one-third of any recovery if the case was settled and 40% if suit was filed and discovery undertaken. The agreement also provided that "[a]ssociate counsel may be employed at the discretion and expense of Alan F. Post, Chartered without any increase in the attorneys' fees to be paid by client."

Taylor that his firm did not handle workers' compensation claims but introduced him to Post who, Bregman explained, had considerable experience in that field. Bregman, it appears, had referred other cases or clients to Post in accordance with a mutually acceptable fee-sharing arrangement. Taylor later retained Post to pursue the compensation claim, which Post did successfully.

Post did not believe himself capable of handling the litigation alone, so, in June, 1990, he brought in the firm of Connerton, Ray & Simon, and entered into a three-way arrangement with that firm and Bregman's firm. ¹ On June 14, 1990, he confirmed the arrangement in letters to Bregman and to Ron Simon, of the Connerton firm. In his letter to Bregman, Post acknowledged that Bregman had referred Mr. Taylor with respect to both the worker's compensation claim and the third-party action and that "we have brought in as co-counsel" the Connerton firm. He noted that he and Bregman had discussed the active participation of Bregman's firm in the case and that he (Post) and Simon believed that "there will certainly be opportunities for the use of manpower from your office to handle various pleadings, depositions, etc." He continued "Therefore, we have agreed that the firm of Bregman, Berbert & Schwartz will share in the recoveries to the extent of 25% of all fees recovered from the third party litigation.

You will be called upon to contribute 25% of all out-of-pocket expenses and an appropriate allocation of the labors of litigation."

That arrangement was recited in Post's letter to Simon as well. There, he confirmed that they had agreed, with respect to Taylor's case, that "the referring law firm of Bregman, Berbert & Schwartz will be entitled to 25% of the net fee recovery, provided that they meet their commitment of contributing 25% of costs as well as such litigation related tasks as shall be assigned to them." The letter continued that Post and Connerton would share the other 75% equally. It was anticipated that Taylor's case would be consolidated with at least two others, in which Bregman had no interest, and that the fees generated in those cases would be shared equally between Post and the Connerton firm. Bregman claimed that he responded to Post's letter on June 21, noting in his response that the letter correctly stated the understanding, subject to two clarifications. The one of interest here is Bregman's statement that "our firm's involvement in the third party actions is dependent upon direction from you or Ron Simon. We are excited about working the case with you, but we cannot do work until you delegate. If you do not ask us to do 25% of the work, nevertheless, our fee will still be 25%." A copy of Bregman's letter, properly addressed to Post, is in the record; Post claimed that he did not recall having seen that letter, although he never denied having received it.

In September, 1990, suit was filed in Taylor's case in the Superior Court of the District of Columbia, with the Connerton firm acting as lead counsel. Connerton continued in that role until October, 1991, when it withdrew from the case. Faced with that withdrawal, Post then contacted the firm of Paulson, Nace, Norwind & Sellinger, which, as a condition of assuming the role of lead counsel, insisted on receiving two-thirds, rather than one-half, of the total contingency fee. In a "Unfortunately, the one draw back is that there has been an upset in the fee arrangements, and we are no longer in a position to extend a referral fee of 1/3 of the gross amount of fees. Barry [Mr. Nace, of the Paulson firm] is insisting on a 2/3 share for [h]is firm, which in a sense is reasonable considering the fact that he is taking on the expenses as well. That leaves 1/3 as a remaining fees [sic] to be divided up and I would propose that I will split that remaining portion with you on a 60/40 basis in an effort to be reasonably fair."

                letter to Barry Nace of that firm, dated December 20, 1991, Post agreed to that arrangement--one in which the Paulson firm would act as lead counsel "and bear responsibility for the costs entailed in the litigation." 2  That required a new arrangement with Bregman.  The next day, December 21, 1991, Post wrote to Bregman, informing him that he (Post) had decided to engage the Paulson firm, which had agreed to fund the litigation, including expected discovery costs in excess of $100,000.  The letter concluded
                

With one modification, Bregman accepted the new arrangement. At the bottom of the letter, the words "Plus Costs" and "Plus unpaid fees owed" were added in handwriting and initialed by Post.

On November 1, 1994, the Taylor case was settled, as a result of which Post received $260,000, representing one-third of the fee. The Paulson firm received the other two-thirds. It is not clear from the record before us what initial communications occurred between Post and Bregman regarding Bregman's share of the fee. Bregman asserted that, upon his inquiry, Post informed him that his (Bregman's) share of the fee was between $80,000 and $90,000. It appears that, on November 10, 1994, Post wrote to Bregman...