Scheffler v. Adams and Reese, Llp

• Decision Date: 22 February 2007
• Docket Number: No. 2006-CC-1774.,2006-CC-1774.
• Citation: 950 So.2d 641
• Parties: William J. SCHEFFLER, III v. ADAMS AND REESE, LLP, et al.
• Court: Louisiana Supreme Court

950 So.2d 641

William J. SCHEFFLER, III v. ADAMS AND REESE, LLP, et al.

No. 2006-CC-1774.

Supreme Court of Louisiana.

February 22, 2007.

COPYRIGHT MATERIAL OMITTED

Montgomery, Barnett, Brown, Read, Hammond & Mintz, Daniel Lund, New Orleans, Jason A. Cavignac, for Applicant.

David Colvin & Associates, David Lawrence Colvin, Connie Phuong Trieu, Gretna, Lewis Scott Joanen, for Respondent.

WEIMER, Justice.

We granted certiorari in this case to determine whether two attorneys, separately engaged by a client to work as co-counsel on litigation, owe fiduciary duties to each other. Concomitantly, we must also determine whether a cause of action exists in favor of one attorney against the other attorney for breach of fiduciary duty on the theory that the latter attorney's misconduct caused the former to be terminated from the representation, resulting in damages in the form of prospective lost revenue expected to be realized from that representation. Finding that the petition in this case does not contain sufficient well-pleaded facts to establish the existence of a fiduciary relationship between co-counsel, we reverse the decision of the district court. In so doing, we hold that even if the existence of a fiduciary relationship could be established, no cause of action will lie between co-counsel based on the theory that such a fiduciary relationship obligates co-counsel to protect one another's prospective interest in a fee. In order to preserve the attorney's paramount duty of undivided loyalty to his or her client, considerations emanating from this court's constitutional obligation to regulate the practice of law demand that no collateral duties arise to interfere with that duty, such as the duty to conduct the representation in a manner that does not diminish or defeat co-counsel's interest in a prospective fee.

FACTS AND PROCEDURAL HISTORY

This case arises from a petition for damages filed on December 29, 2005, on behalf of William J. Scheffler, III (Scheffler), naming as defendants James G. Perdigao (Perdigao) and the law firm of Adams and Reese, LLP (Adams and Reese). The petition alleges that Scheffler is a Louisiana licensed attorney, maintaining a private law practice in this state. In October 2002, he was retained by Boomtown Casino Westbank (Boomtown) to defend personal injury claims (primarily slip and fall cases) filed against the casino. Prior to his formal retention, Boomtown informed Scheffler that his engagement was subject to the approval of the casino's corporate counsel, Perdigao, a partner in the law firm of Adams and Reese. Scheffler met with Perdigao and representatives of Boomtown, and was eventually approved as defense counsel, with his formal representation commencing on November 1, 2002. As remuneration for his services, Scheffler received a fixed monthly retainer, plus reimbursement of all expended litigation costs. He was instructed by Boomtown that he was to work with and report to Perdigao.

This arrangement continued without interruption until September 7, 2004, when Scheffler was informed by Boomtown that Perdigao had "ethical problems" and that, as a result, another Adams and Reese attorney would be taking his place. According to the petition, on October 13, 2004, the Times Picayune newspaper published an article reporting on the details of Perdigao's alleged "ethical problems." According to the article, Perdigao was billing and collecting fees outside of Adams and Reese's accounting system and disbursing the monies collected to companies he controlled. Although Scheffler had developed a close working relationship with Perdigao in the handling of claims against the casino, he had no knowledge of or involvement in Perdigao's wrongdoing. Nevertheless, on October 25, 2004, Scheffler received a letter from Boomtown terminating his representation of the casino "in light of recent events."¹

Scheffler's petition alleges that the foregoing facts give rise to claims against Perdigao for negligent interference with a contractual relationship, intentional interference with a contractual relationship, negligence, unfair trade practices, fraud, and breach of fiduciary duty. His petition additionally alleges that Adams and Reese is responsible for Perdigao's actions under principles of respondeat superior and that the firm is independently liable for its negligence in failing to adequately supervise Perdigao's activities. The petition seeks general damages in the form of past, present, and future economic loss, mental anguish, and loss of earning capacity.

Adams and Reese responded to the plaintiff's petition by filing a peremptory exception of no cause of action, asserting that the allegations in Scheffler's petition fail to set forth any facts or theory of liability upon which relief might be granted. Following a hearing, the district court sustained Adams and Reese's exception as to all claims except the claim alleging breach of fiduciary duty, finding that "the facts as set forth in the petition establish a fiduciary duty in favor of the plaintiff against Adams & Reese such that it's [sic] survives this exception."

Adams and Reese applied to the Fourth Circuit Court of Appeal for supervisory writs from the district court's ruling. A divided panel of the court of appeal denied that writ application, stating: "We find no error in the judgment by the district court that denied the Relator's peremptory exception of no cause of action." Scheffler v. Adams and Reese, LLP, 06-0700 (La.App. 4 Cir. 6/23/06). Judge Murray dissented from the writ denial, pointing out that the petition in this case does not allege or describe a fiduciary duty owed to plaintiff personally by either defendant. Further explaining her position, Judge Murray noted:

I am not aware of any Louisiana law, statutory or jurisprudential, that would support the existence of a fiduciary duty between co-counsel under any facts, much less under the facts alleged. Moreover, plaintiff has not alleged or established that he and Perdigao actually served together as co-counsel for Boomtown on any specific case or matter, only that Boomtown sought the approval of Perdigao before hiring the plaintiff and instructed the plaintiff generally to "work with and answer to" Perdigao. Assuming the law would recognize a fiduciary duty between co-counsel, such duty would have to be premised upon the existence of a co-counsel relationship.

Upon Adams and Reese's application, we granted certiorari to review the correctness of the district court's determination that the plaintiff's petition states a cause of action for breach of fiduciary duty. Scheffler v. Adams and Reese, LLP, 06-1774 (La.11/9/06), 941 So.2d 28.

LAW AND ANALYSIS

The narrow issue presented in this case is whether Scheffler's petition states a cause of action for breach of fiduciary duty.

As used in the context of the peremptory exception, a "cause of action" refers to the operative facts which give rise to the plaintiff's right to judicially assert the action against the defendant. Ramey v. DeCaire, 03-1299, p. 7 (La.3/19/04), 869 So.2d 114, 118; Everything on Wheels Subaru, Inc. v. Subaru South, Inc., 616 So.2d 1234, 1238 (La.1993). The purpose of the peremptory exception of no cause of action is to test the legal sufficiency of the petition by determining whether the law affords a remedy on the facts alleged in the petition. Ramey, at 7, 869 So.2d at 118; Everything on Wheels Subaru, Inc., 616 So.2d at 1235. No evidence may be introduced to support or controvert the exception of no cause of action. LSA-C.C.P. art. 931. The exception is triable on the face of the pleadings, and, for purposes of resolving the issues raised by the exception, the well-pleaded facts in the petition must be accepted as true. Fink v. Bryant, 01-0987, p. 4 (La.11/28/01), 801 So.2d 346, 349; City of New Orleans v. Board of Commissioners of Orleans Levee District, 93-0690, p. 28 (La.7/5/94), 640 So.2d 237, 253. The issue at the trial of the exception is whether, on the face of the petition, the plaintiff is legally entitled to the relief sought. Ramey, at 7, 869 So.2d at 118.

Louisiana retains a system of fact pleading, and mere conclusions of the plaintiff unsupported by facts will not set forth a cause or right of action. Montalvo v. Sondes, 93-2813, p. 6 (La.5/23/94), 637 So.2d 127, 131. The burden of demonstrating that a petition fails to state a cause of action is upon the mover. Ramey, at 7, 869 So.2d at 119; City of New Orleans, at 28, 640 So.2d at 253. Because the exception of no cause of action raises a question of law and the district court's decision is based solely on the sufficiency of the petition, review of the district court's ruling on an exception of no cause of action is de novo. Fink, at 4, 801 So.2d at 349; City of New Orleans, at 28, 640 So.2d at 253. The pertinent inquiry is whether, in the light most favorable to the plaintiff, and with every doubt resolved in the plaintiff's favor, the petition states any valid cause of action for relief. Ramey, at 8, 869 So.2d at 119.

Accepting all of the allegations in Scheffler's petition as true, and applying the legal principles set forth above, we find, contrary to the conclusions of the district and appellate courts, that the petition in this case fails to allege facts sufficient to state a cause of action for breach of fiduciary duty.

Generally, whether a fiduciary duty exists, and the extent of that duty, depends upon the facts and circumstances of the case and the relationship of the parties. As a basic proposition, for a fiduciary duty to exist, there must be a fiduciary relationship between the parties. A review of the factual allegations in Scheffler's petition in the instant case reveals that it fails to allege any facts which could give rise to a determination that a fiduciary relationship existed between Perdigao and Scheffler arising from their joint representation of Boomtown such that Perdigao owed Scheffler a...