Searcy, Denney, Scarola, Barnhart & Shipley, P.A. v. Scheller

• Decision Date: 15 December 1993
• Docket Number: No. 92-2539,92-2539
• Citation: 629 So.2d 947
• Parties: 18 Fla. L. Weekly D2651 SEARCY, DENNEY, SCAROLA, BARNHART & SHIPLEY, P.A., Appellant, v. Zbigniew SCHELLER, Appellee.
• Court: Florida District Court of Appeals

Page 947

629 So.2d 947

18 Fla. L. Weekly D2651

SEARCY, DENNEY, SCAROLA, BARNHART & SHIPLEY, P.A., Appellant, v. Zbigniew SCHELLER, Appellee.

No. 92-2539.

District Court of Appeal of Florida Fourth District.

Dec. 15, 1993.

Joel D. Eaton, Podhurst, Orseck, Josefsberg, Eaton, Meadow, Olin & Perwin, P.A., and Stewart Tilghman Fox & Bianchi, P.A., Miami, for appellant.

Eugene E. Stearns, Lisa K. Bennett and Bradford Swing, Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A., Miami, for appellee.

FARMER, Judge.

This epilogue to our decision in American Medical Intern. Inc. v. Scheller, 590 So.2d 947 (Fla. 4th DCA 1991), essays the folk wisdom that too much success may not be good. Although the subject is attorney's fees, here the warring parties are the prevailing party and his lawyers. With 10 years of litigation, including two trials and four appeals ¹ behind them, and a substantial recovery on a $26 million judgment at hand, the price of success had ironically become the occasion for its own controversy.

The first fee agreement executed by the parties in 1982 had provided for 40% of any recovery to the trial lawyers, and 5% for appellate fees. Five years later they executed a modified fee agreement reducing the trial lawyer's fee to 40% on the first $1 million, 30% on the second, and 20% on anything in excess of $2 million. The case then proceeded to trial, resulting in a verdict of more than $19 million. In the midst of post-appeal settlement negotiations, the client [Scheller] discharged his trial attorneys [Scarola] before the supreme court had accepted jurisdiction or entered a stay. The client contends that Scarola tried during the negotiations to extort a new and unreasonable fee agreement to pad his share of the recovery, while Scarola claims that Scheller was trying to avoid paying the agreed fee. After a lengthy trial on the fee dispute, the circuit judge found that Scarola breached the fee agreement during the negotiations and had thus forfeited his entitlement to a fee. Without disturbing the factual findings, which are supported by competent substantial evidence, we reverse his decision as to the appropriate remedy.

Briefly summarized, the trial judge's extensive findings of fact show that, after filing its notice to invoke the discretionary jurisdiction of the supreme court to review our affirmance in the Scheller case, AMI (the losing party) engaged Scarola in settlement negotiations. During what the trial court described as the "critical phase," AMI offered $19.9 million to settle a judgment that was then over $26 million. Rather than concentrating his efforts during this critical time to effect a settlement at that figure--as, indeed, he had been directed by his client to do--Scarola instead sought to pressure his client into signing a new fee agreement, which he refused to do. The moment passed without a settlement, and Scheller discharged Scarola and his firm. Later with a new lawyer, Scheller reached a settlement at $15.5 million, from which Scarola seeks a fee based on the earlier (1982) agreement entitling him to 40% of any recovery.

The history of fee agreements between Scheller and Scarola's firm was recounted by the trial judge. When the matter began in 1979, the parties' written agreement provided for $125 per hour in his dispute with AMI. Then in 1982 the parties signed a new fee agreement providing for the 40% contingency fee [the 1982 agreement]. The 1987 revision occurred, however, when the firm concluded that it had no written agreement, and it thereupon sent Scheller a new fee contract providing for the 40-30-20% contingency fee [the 1987 agreement]. Scheller signed the 1987 agreement and returned it to Scarola's firm, where he then executed the contract on the firm's behalf. The case was tried two years later in 1989.

In this fee dispute, Scarola contended that the 1987 contract was made and executed in error through a mistake in the firm's bookkeeping department. Scheller contended, however, that it was no mistake and that it was made and executed to conform the parties' agreement to a change in Florida Bar rules governing contingency fee agreements. ² Although the trial judge expressly found that Scheller reasonably believed that the 1987 revision had superseded the earlier 1982 contract, he did not make a specific finding as to which contract controlled the fees. Indeed he also found that the 1987 revision arose from sloppy procedures and through error.

When the settlement was first proposed by AMI, Scarola caused Scheller to believe that his fee from any settlement would be $11.79 million, or 45% ³ of the total judgment, which by then had grown to $26.2 million. During settlement discussions, he later suggested that the firm was entitled also to 45% of "all valuable benefits," in addition to cash recovered, that his legal services had conferred on the client during the long litigation. He ultimately asked Scheller to sign a new agreement memorializing such an understanding.

Scheller responded that he would not sign a new agreement to that effect but that he would pay Scarola and his firm 45% of the money actually recovered [the recovery] and nothing more. During the critical time period of intense settlement negotiations, Scarola took the position that Scheller was trying to avoid paying his agreed fee by refusing to sign the new agreement. In effect, Scarola sought to fragment the litigation for fee purposes into separate parts and contended that the extant fee agreements did not cover all of the parts. This came at a time when AMI was insisting on a settlement of all claims and demands. Hence, Scarola wrote Scheller an ultimatum, giving him three alternatives: 1) acknowledge in writing that the 45% agreement covered all facets of the Scheller/AMI litigation; 2) sign a new contract; or 3) get another lawyer. At this point, Scheller discharged him.

Scarola's firm filed a charging lien in the Scheller lawsuit in which it claimed that the discharge occurred after full performance by the firm and that it was therefore entitled under the 1982 agreement to 40% of the $15.5 million recovery; alternatively it sought quantum meruit. Scheller responded with a pleading that the firm had been discharged with cause before the recovery and that any fee due under quantum meruit would be exceeded by the damages caused by Scarola's conduct.

The trial judge concluded that Scarola's conduct constituted: (a) an attempt to force his client to give up his position that the 1987 fee agreement controlled; (b) an attempt to pressure his client, at a time of great disadvantage for the client, into signing a new fee agreement with more favorable terms to the lawyer; and (c) an abandonment of the client at a critical stage, without adequate protection for the client's interests. ⁴ He then concluded that this conduct amounted to a material breach of the entire contract of representation. The remedy, according to the trial judge, was a forfeiture of any fee due, even though Scheller had explicitly made clear that he was not seeking a forfeiture.

We, of course, give great deference to the trial judge's factual findings, especially when they are supported as here by competent substantial evidence. We are not bound, however, to accept a trial court's legal conclusions. Indeed, the search for the rule of decision to be applied to factual findings is our primary role. In this hotly contested, post-judgment proceeding, we have great sympathy for the position of the trial judge and admire his great patience, fair and dispassionate consideration, attention to detail and nuance, and his thoughtfully crafted findings of fact and legal conclusions. It is only after great deliberation that we disagree with his conclusion as to the remedy.

In Rosenberg v. Levin, 409 So.2d 1016 (Fla.1982), the supreme court held that an attorney representing a client under a contingency fee agreement, who is discharged without cause by the client before any recovery, is entitled to a fee based on quantum meruit but not to exceed the maximum fee provided in the fee agreement. The court did not say, and Rosenberg did not involve, what fee would be due when the lawyer was discharged with cause. This case directly presents that issue.

We begin our analysis by distinguishing the circumstance where no valid fee agreement ever came into being because of misconduct by an attorney in procuring the agreement for representation. See e.g., Jackson v. Griffith, 421 So.2d 677 (Fla. 4th DCA 1982) (attorney not entitled to fee under quantum meruit where fee agreement procured by coercion, duress and threats); Spence, Payne, Masington & Grossman P.A. v. Philip M. Gerson P.A., 483 So.2d 775 (Fla. 3d DCA), rev. denied, 492 So.2d 1334 (Fla.1986) (attorney whose fee contract is void for violation of Sec. 877.02(1) is not entitled to quantum meruit fee). These cases do not stand for a forfeiture of fees so much as they reject the idea that an attorney who violates statutes or rules of discipline in procuring contracts for fees can validly earn any fee. That is not the situation here.

In Rosenberg, the court was mainly concerned with fashioning a rule to govern fees for lawyers who have done nothing wrong but who nonetheless have been discharged by the client before the contingency fee could be wholly earned. The court concluded that it was necessary to adopt a rule that would do the least possible violence to the principle that clients should be freely able to terminate the attorney's representation at any time, while also ensuring that lawyers are reasonably able to be fairly compensated for their services when so discharged, i.e., without cause or breach on their part.

The rule thus adopted was that the attorney discharged without cause before the contingency had occurred is entitled to a fee under quantum meruit but not to exceed the amount provided in the discharged attorney's fee contract. In essence, Scarola's...