Salmon v. Atkinson

• Decision Date: 11 December 2003
• Docket Number: No. 03-535.,03-535.
• Citation: 137 S.W.3d 383,355 Ark. 325
• Parties: Joy SALMON v. Virginia ATKINSON and James Howell.
• Court: Arkansas Supreme Court

137 S.W.3d 383

355 Ark. 325

Joy SALMON v. Virginia ATKINSON and James Howell.

No. 03-535.

Supreme Court of Arkansas.

December 11, 2003.

Wright, Lindsey & Jennings LLP, by: Alston Jennings, Little Rock, for appellant.

James R. Howell, North Little Rock, pro se.

DONALD L. CORBIN, Justice.

This case involves an issue of first impression: Whether an attorney who enters into a contingent-fee contract with a client and is later discharged by the client may bring an action for a quantum-meruit fee prior to the resolution of the former client's lawsuit. Appellant Joy Salmon contends that the discharged attorney's cause of action does not accrue unless and until the client is successful in recovering an award. She thus contends that the Pulaski County Circuit Court erred in awarding Appellees Virginia Atkinson and James Howell legal fees in the amount of $7,200, for work they performed in representing Appellant prior to date that she discharged them. Because this appeal raises an issue of first impression, our jurisdiction is pursuant to Ark. Sup.Ct. R. 1-2(b)(1). We affirm.

The essential facts are not disputed. In June 2000, Appellant hired Appellees to pursue a claim for damages against the estate of George Brown. Appellant had lived with Brown for some time prior to his death and had cared for him as his nurse. Additionally, Appellant believed that she was married to Brown and, as his widow, she wanted to pursue a claim against Brown's estate. Appellees agreed to take Appellant's case on a contingency basis, in which Appellees would receive fifty percent of any recovery awarded to Appellant, plus costs and expenses. The contingent-fee contract was entered into on June 19, 2000, and it provided in pertinent part: "It is understood that in the event of no recovery, no fee shall be charged by Atkinson Law Offices."

Appellees then began to work on Appellant's case. They interviewed multiple witnesses, researched Appellant's claim of marriage to Brown, researched the general law, and negotiated with the estate's attorneys. Through their research, Appellees discovered that Appellant was never married to Brown. However, they believed that Appellant had a valid claim against the estate, which was valued at approximately $4 million, for the care that she had given to Brown prior to his death. Based on their investigation and research, Appellees drew up a petition for Appellant to file in the probate case. Sometime in late July, they presented the petition to Appellant for her signature. Appellant indicated that she wanted to think about filing the claim, and she took the petition with her. The next communication Appellees received from Appellant was a letter, dated August 1, informing them that their services were no longer required.

Thereafter, in a letter dated August 21, 2000, Appellees informed Appellant that she had abrogated the June 19 contract without justification and that, therefore, she was required to pay Appellees for their services from June 19 to July 31. The letter reflects in part: "In investigation of your claims, legal research, and negotiation with the estate we expended 48 hours. At our customary billing rate of $150 per hour, the total fee payable at this time is $7200." The letter also informed Appellant that the last date for which she could file her claim against Brown's estate was September 1, 2000. The record reflects that on September 1, 2000, Appellant filed a petition against the estate, pro se.

On May 10, 2001, Appellees filed suit against Appellant in circuit court, seeking recovery in quantum meruit for work they had performed on Appellant's case prior to the date that she discharged them. Following a trial on December 3, 2002, the jury returned a verdict in favor of Appellees. Thereafter, Appellant filed a motion for judgment notwithstanding the verdict (JNOV), arguing that because the contingent-fee contract specifically provided that no fee would be charged unless there was a recovery, and because there had not yet been any recovery, the jury verdict was not supported by substantial evidence. The trial court denied that motion on December 17, 2002. The judgment was also entered of record on that date. On January 2, 2003, Appellant filed a motion for new trial and a renewed motion for JNOV. The trial court denied those motions on February 4, 2003. Appellant then filed a notice of appeal on February 28, 2003.

On appeal, Appellant argues that allowing Appellees to collect a quantum meruit fee directly conflicts with the language of the contract providing that no fee would be charged in the event that Appellant did not recover on her probate claim. Thus, she asserts that because she has not yet recovered on her claim, it was error to award a fee to Appellees. She contends further that the award of fees to Appellees under the circumstances impaired her absolute right, as the client, to discharge Appellees and terminate their services.

As stated above, the issue of when a discharged attorney's cause of action for a quantum meruit fee accrues is one of first impression in this court. However, this court has consistently held that a discharged attorney may be paid for the reasonable value of his or her services notwithstanding that the parties originally entered into a contingent-fee contract. See, e.g., Crockett & Brown, P.A. v. Courson, 312 Ark. 363, 849 S.W.2d 938 (1993); Lancaster v. Fitzhugh, 310 Ark. 590, 839 S.W.2d 192 (1992); Lockley v. Easley, 302 Ark. 13, 786 S.W.2d 573 (1990); Henry, Walden, & Davis v. Goodman, 294 Ark. 25, 741 S.W.2d 233 (1987) (superseded in part by statute). The plain rationale behind this rule is that where the attorney has conferred a benefit upon the client, i.e., legal services and advice, the client is responsible to pay such reasonable fees.

The question in this case is not whether the discharged attorney may recover a quantum meruit fee, but whether recovery of such a fee is dependent upon the contingency originally agreed to in the contract, i.e., the successful prosecution of the client's case. There is a split amongst the states on this issue. Some states adhere to the "California rule," which provides that the discharged attorney's cause of action does not accrue unless and until the occurrence of the stated contingency. See Clerk of Superior Court of Guilford County v. Guilford Builders Supply Co., Inc., 87 N.C.App. 386, 361 S.E.2d 115 (1987); Plaza Shoe Store, Inc. v. Hermel, Inc., 636 S.W.2d 53 (Mo.1982); Rosenberg v. Levin, 409 So.2d 1016 (Fla.1982); Fracasse v. Brent, 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9 (1972); First Nat'l Bank & Trust Co. of Tulsa v. Bassett, 183 Okla. 592, 83 P.2d 837 (1938). Under this rule, a discharged attorney is barred from receiving any fee if the client does not recover on the underlying matter. This is true even if the attorney was discharged without cause.

Other states subscribe to the "New York rule," which provides that the discharged attorney's cause of action accrues immediately upon discharge and is not dependent upon the former client's recovery. See Skeens v. Miller, 331 Md. 331, 628 A.2d 185 (1993); Adkin Plumbing & Heating Supply Co., Inc. v. Harwell, 135 N.H. 465, 606 A.2d 802 (1992); In Re: Estate of Callahan, 144 Ill.2d 32, 161 Ill.Dec. 339, 578 N.E.2d 985 (1991); Trenti, Saxhaug, Berger, Roche, Stephenson, Richards & Aluni, Ltd. v. Nartnik, 439 N.W.2d 418 (Minn.Ct.App.1989); Tillman v. Komar, 259 N.Y. 133, 181 N.E. 75 (1932). The courts that subscribe to this rule do so primarily for two reasons. First, they reason that when the client terminates the contingent-fee contract by discharging the attorney, the contract ceases to exist and the contingency term, i.e., whether the attorney wins the client's case, is no longer operative. As the New York Court of Appeals explained: "Either [the contract] wholly stands or totally falls." Tillman, 259 N.Y. at 135, 181 N.E. at 75. Because the contract is terminated, the client can no longer use the contract's term to prevent the discharged attorney from recovering a fee in quantum meruit. "A client cannot terminate the agreement and then resurrect the contingency term when the discharged attorney files a fee claim." Estate of Callahan, 144 Ill.2d at 40, 161 Ill. Dec. 339, 578 N.E.2d at 988.

The second primary reason that courts subscribe to the "New York rule" is that they believe that forcing the discharged attorney to wait on the occurrence of the contingency is unfair in that it goes beyond what the parties contemplated in the contract. The New York Court of Appeals said it best:

The value of one attorney's services is not measured by the result attained by another. This one did not contract for his contingent compensation on the hypothesis of success or failure by some other member of the bar.... In making their agreement, the parties may be deemed to have estimated this lawyer's pecuniary merit according to his own character, temperament, energy, zeal, education, knowledge and experience which are the important factors contributing to his professional status and constituting in a large degree, when viewed in relation to the volume of work performed and the result accomplished, a fair standard for gauging the value of services as prudent counsel and skillful advocate.

Tillman, 259 N.Y. at 135-36, 181 N.E. at 76 (emphasis added).

An additional reason for holding that a discharged attorney does not have to wait on the occurrence of the contingency is that the attorney is not claiming under the contingent-fee contract. The Illinois Supreme Court explained:

[Q]uantum meruit is based on the implied promise of a recipient of services to pay for those services which are of value to him. The recipient would be unjustly enriched if he were able to retain the services without paying for them. The claimants's recovery here should not be linked to a contract contingency when his recovery is not based upon the contract, but upon quantum meruit.

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