Rosenberg v. Levin

• Decision Date: 07 January 1982
• Docket Number: No. 57530,57530
• Citation: 409 So.2d 1016
• Parties: Terrence E. ROSENBERG and Gerald Pomerantz, Petitioners, v. George G. LEVIN, Respondent.
• Court: Florida Supreme Court

Page 1016

409 So.2d 1016

Terrence E. ROSENBERG and Gerald Pomerantz, Petitioners, v. George G. LEVIN, Respondent.

No. 57530.

Supreme Court of Florida.

Jan. 7, 1982.

Rehearing Denied March 4, 1982.

Kris E. Penzell of the Law Offices of Penzell & Diamond, Miami, Proby & Adkins, Coral Gables, and Barry J. Clyman, Miami, for petitioners.

Irwin J. Weiner, Ocala, for respondent.

ON REHEARING AND REARGUMENT

The opinion of June 11, 1981, is vacated and replaced by the following opinion.

OVERTON, Justice.

This is a petition to review a decision of the Third District Court of Appeal, reported as Levin v. Rosenberg, 372 So.2d 956 (Fla. 3d DCA 1979). The issue to be decided concerns the proper basis for compensating an attorney discharged without cause by his client after he has performed substantial legal services under a valid contract of employment. We find conflict with our decision in Goodkind v. Wolkowsky, 132 Fla. 63, 180 So. 538 (1938).

We hold that a lawyer discharged without cause is entitled to the reasonable value of his services on the basis of quantum meruit, but recovery is limited to the maximum fee set in the contract entered into for those services. We have concluded that without this limitation, the client would be penalized for the discharge and the lawyer would receive more than he bargained for in his initial contract. In the instant case, we reject the contention of the respondent lawyer that he is entitled to $55,000 as the reasonable value of his services when his contract fee was $10,000. We affirm the decision of the district court and recede from our prior decision in Goodkind.

The facts of this case reflect the following. Levin hired Rosenberg and Pomerantz to perform legal services pursuant to a letter agreement which provided for a $10,000 fixed fee, plus a contingent fee equal to fifty percent of all amounts recovered in excess of $600,000. Levin later discharged Rosenberg and Pomerantz without cause before the legal controversy was resolved and subsequently settled the matter for a net recovery of $500,000. Rosenberg and Pomerantz sued for fees based on a "quantum meruit" evaluation of their services. After lengthy testimony, the trial judge concluded that quantum meruit was indeed the appropriate basis for compensation and awarded Rosenberg and Pomerantz $55,000. The district court also agreed that quantum meruit was the appropriate basis for recovery but lowered the amount awarded to $10,000, stating that recovery could in no event exceed the amount which the attorneys would have received under their contract if not prematurely discharged. 372 So.2d at 958.

The issue submitted to us for resolution is whether the terms of an attorney employment contract limit the attorney's quantum meruit recovery to the fee set out in the contract. This issue requires, however, that we answer the broader underlying question of whether in Florida quantum meruit is an appropriate basis for compensation of attorneys discharged by their clients without cause where there is a specific employment contract. The Florida cases which have previously addressed this issue have resulted in confusion and conflicting views.

In Goodkind v. Wolkowsky, this Court held that an attorney who was employed for a specific purpose and for a definite fee, but who was discharged without cause after substantial performance, was entitled to recover the fee agreed upon as damages for breach of contract. The attorney in Goodkind was employed to represent several clients in a tax case for a fixed fee of $4,000 and was discharged without cause prior to his completion of the matter. He sought damages for breach of contract. The trial court sustained clients' demurrer to the complaint "on the ground that plaintiff's right to recover must be restricted to a reasonable compensation for the value of the services performed prior to the discharge." 180 So. at 540. The attorney appealed and this Court, after an extensive survey of the authorities, reversed the attorney's quantum meruit recovery and found instead that he was entitled to recover under the contract. The Goodkind court, while following the traditional contract rule, did recognize the right of the client to discharge his attorney at any time with or without cause. The Third District Court of Appeal later applied this contract rule to a contingent fee contract situation in Osius v. Hastings, 97 So.2d 623 (Fla. 3d DCA 1957), rev'd on other grounds, 104 So.2d 21 (Fla.1958).

In Milton Kelner, P.A. v. 610 Lincoln Road, Inc., 328 So.2d 193 (Fla.1976), we approved the enforcement of a specific attorney-client contract, but left open the issue of whether quantum meruit was the proper rule in a contingency fee case. The attorney in Kelner represented a client on an insurance claim under a contingency fee contract calling for "40% of all sums recovered." The insurer agreed to pay the face amount of the policy before trial, but the client rejected the settlement offer and discharged the attorney without cause. In effect, the maximum recovery from the insurance company had been obtained at the time of the discharge. The attorney then sought recovery under the contract in the trial court and was successful, with the jury resolving the dispute relating to fee calculation in favor of the attorney. On appeal, the district court reversed and limited the attorney's recovery to quantum meruit rather than the percentage of the insurance proceeds recovery provided by the contingency contract. The district court emphasized that recovery under the original contract might have a chilling effect on a client's exercise of the right to discharge. The district court then certified to this Court the question it had decided, whether quantum meruit should be the exclusive remedy in contingent fee cases. We chose to decide the Kelner case on its unique facts and held:

Under the peculiar circumstances of this case, where the proceeds of the insurance policy were fully recovered and the real issue of how the contingency fee was to be computed was settled by a jury, we will not disturb the verdict and restrict the computation of the attorney's fee to quantum meruit. We do agree with the District Court that Goodkind v. Wolkowsky applies to a fixed fee contract and does not establish the precedent for contingent fee contracts.

We continued by stating:

Quantum meruit may well be the proper standard when the discharge under a contingent fee contract occurs prior to the obtaining of the full settlement contracted for under the attorney-client agreement, with the cause of action accruing only upon the happening of the contingency to the benefit of the former client. That issue, however, is not factually before us and we do not make that determination in this cause.

328 So.2d at 196 (citation omitted).

The First District Court of Appeal, in Sohn v. Brockington, 371 So.2d 1089 (Fla. 1st DCA 1979), cert. denied, 383 So.2d 1202 (Fla.1980), subsequently determined that, based on the above-quoted language in Kelner, quantum meruit was the appropriate remedy when discharge occurred before the happening of the contingency. In Sohn, the attorney was employed under a forty percent contingent fee contract and was discharged without cause before filing the complaint. The client subsequently retained new counsel who secured a settlement of $75,000. The district court affirmed the trial court which had limited the attorney to a quantum meruit recovery and awarded him $950 as the reasonable value of his services. In so holding, the district court concluded that "the (modern) rule ... is the more logical and should be adopted in this state." 371 So.2d at 1092. That court also held that the attorney's cause of action accrued immediately upon discharge in accordance with the view expressed in Martin v. Camp, 219 N.Y. 170, 177, 114 N.E. 46, 49 (1916).

The existing case law in this state reflects that this Court is on record as favoring the traditional contract means of recovery. We have, however, inferred in dicta in Kelner that quantum meruit may be the proper basis for recovery in a contingent fee contract situation. The First District Court of Appeal in Sohn expressly held that quantum meruit is proper in a contingency contract. In the instant case, the Third District Court of Appeal held that quantum meruit is proper where the contingency does not control and limited such quantum meruit recovery to the maximum amount of the contract fee.

There are two conflicting interests involved in the determination of the issue presented in this type of attorney-client dispute. The first is the need of the client to have confidence in the integrity and ability of his attorney and, therefore, the need for the client to have the ability to discharge his attorney when he loses that necessary confidence in the attorney. The second is the attorney's right to adequate compensation for work performed. To address these conflicting interests, we must consider three distinct rules.

Contract Rule

The traditional contract rule adopted by a number of jurisdictions holds that an attorney discharged without cause may recover damages for breach of contract under traditional contract principles. The measure of damages is usually the full contract price, although some courts deduct a fair allowance for services and expenses not expended by the discharged attorney in performing the balance of the contract. E.g., Bockman v. Rorex, 212 Ark. 948, 208 S.W.2d 991 (1948) (fixed fee contract); Tonn v. Reuter, 6 Wis.2d 498, 95 N.W.2d 261 (1959) (contingency fee contract); see generally 1 S. Speiser, Attorneys' Fees §§ 4:24-:36 (1973). Some jurisdictions following the contract rule also permit an alternative recovery based on quantum meruit so that an attorney can elect between recovery based on the contract or the reasonable value of the performed services. E.g., In re Downs, 363 S.W.2d 679 (Mo.1963); French v. Cunningham, 149 Ind. 632, 49 N.E. 797 (...