Shopoff & Cavallo Llp v. Hyon

• Decision Date: 31 October 2008
• Docket Number: No. A116182.,No. A114918.,A114918.,A116182.
• Citation: 85 Cal. Rptr. 3d 268,167 Cal.App.4th 1489
• Court: California Court of Appeals Court of Appeals
• Parties: SHOPOFF & CAVALLO LLP et al., Plaintiffs, Cross-defendants and Respondents, v. JUNHO HYON, Defendant, Cross-complainant and Appellant; LAURENCE COLANGELO et al., Defendants and Respondents; ERIC SELTEN, Defendant, Cross-defendant and Respondent.

167 Cal.App.4th 1489

85 Cal. Rptr. 3d 268

SHOPOFF & CAVALLO LLP et al., Plaintiffs, Cross-defendants and Respondents, v. JUNHO HYON, Defendant, Cross-complainant and Appellant LAURENCE COLANGELO et al., Defendants and Respondents ERIC SELTEN, Defendant, Cross-defendant and Respondent.

No. A114918.

No. A116182.

Court of Appeals of California, First District, Division One.

October 31, 2008.

Sheppard Mullin Richter & Hampton, Robert J. Stumpf, Jr., and Craig A. Pinedo for Defendant, Cross-complainant and Appellant.

Hinshaw & Culbertson, Ronald E. Mallen, Paul E. Vallone and David L. Winnett for Plaintiffs, Cross-defendants and Respondents.

Nunziato Buckley Weber, Tom A. Nunziato, Illece Buckley-Weber; and Alfred B. Stedman for Defendant, Cross-defendant and Respondent and for Defendant and Respondent Laurence Colangelo.

Law Offices of Jeffrey D. Kirk and Jeffrey D. Kirk for Defendants and Respondents Jeffrey D. Kirk, Pine & Pine and Norman Pine.

Ervin, Cohen & Jessup and Heather L. McCloskey for Defendant and Respondent Ervin, Cohen & Jessup.

OPINION

SWAGER, J.

These consolidated appeals have been taken by Junho Hyon from a judgment in an interpleader action that awarded respondents percentage shares in the proceeds derived from a global settlement of former litigation. The awards were based upon respondents' contingent fee agreements with Hyon and Laurence Colangelo. The court subsequently awarded respondents as prevailing parties attorney fees based on provisions in the same agreements.¹ In a wide-ranging attack on the judgment, Hyon claims that respondent Shopoff's demurrers to his amended cross-complaint were erroneously sustained, he was improperly denied a jury trial, the judgment in favor of respondents is barred by principles of collateral estoppel, the retainer agreements are unenforceable under Business and Professions Code section 6155 and rule 3-300 of the Rules of Professional Conduct, and the awards of attorney fees to respondents are based on unenforceable agreements.

We conclude that respondent Shopoff's demurrers were properly sustained, appellant Hyon had no right to a jury trial in the interpleader action, and only the judgment and award of attorney fees in favor of respondent Eric Selten were based on an illegal, unenforceable contract. In all other respects we affirm the judgment and awards of attorney fees.

STATEMENT OF FACTS AND PROCEDURAL HISTORY²

We have before us another appeal in this contentious and long-running dispute between parties claiming various interests in the assets (hereafter the Recovery) obtained from litigation known as the "Decker Island litigation." This litigation had been initiated by appellant Junho Hyon and respondent Laurence Colangelo as coplaintiffs in 1993. By January of 1997, Hyon and Colangelo began to search for a replacement attorney to continue the prosecution of the Decker Island litigation. To assist in that endeavor they entered into a contract (the 1997 Agreement) with National Legal Network (NLN). Respondent Eric Selten, who is not an attorney, was then president of NLN. The 1997 Agreement called for NLN to act as Hyon and Colangelo's "agent, consultant, and case manager with regard to" the Decker Island litigation. NLN was authorized to retain counsel for Hyon and Colangelo and to provide other litigation support services, which included facilitating communication among Hyon, Colangelo, and counsel. The contract further provided that NLN was to receive a contingent fee of 10 percent of any recovery in the Decker Island litigation upon successfully retaining new counsel for Hyon and Colangelo, and performing the other services specified in the contract. If "NLN [was] unsuccessful in arranging" for new counsel to represent Hyon and Colangelo in the litigation, then NLN would "not be entitled to compensation under this Agreement." The 1997 Agreement also specifically provided that Selten shall not be expected to perform any legal services for Hyon and Colangelo. "In 1999, NLN assigned `all rights, title and interest' and `all the remaining and executory obligations' under the contract to Selten," and the parties agreed to increase his contingent fee from 10 to 12 percent. (Selten v. Hyon, supra, 152 Cal.App.4th 463, 465 (Hyon).)

Selten successfully recruited respondent Eliot Disner of the law firm of Ervin, Cohen & Jessup to represent Hyon and Colangelo in the Decker Island litigation. Disner's firm in turn hired respondent Jeffrey Kirk as local counsel to assist with the case, primarily by pursuing and preventing fraudulent conveyances by the defendants in the Decker Island litigation that would dissipate recoverable assets. (Hyon, supra, 152 Cal.App.4th 463, 465.)

In November of 1998, a jury returned a $42 million verdict in favor of Hyon and Colangelo, but the trial court granted a defense motion for judgment notwithstanding the verdict, leading to an appeal. To pursue the appeal, Hyon and Colangelo retained new appellate counsel, Elliot Bien, upon Disner's recommendation. The appeal was successful resulting in a reversal of the judgment notwithstanding the verdict, and a remand for a retrial of the action.³ Disner, who had been working on a contingency basis, declined to handle the retrial, so Hyon and Colangelo were compelled to retain new trial counsel on a "pure contingency" basis. By March of 2002, Hyon and Colangelo retained respondent Jeffrey Shopoff of the law firm of Jeffer, Mangels, Butler & Marmaro. According to Shopoff's agreement with Hyon and Colangelo, he was to receive a contingent fee of 21 percent of the Recovery, along with a lien on the Recovery. Shopoff later left the Jeffer, Mangels law firm, but continued to represent Hyon and Colangelo in the Decker Island litigation through retrial of the case, which resulted in a $7.6 million verdict for Hyon and Colangelo.

Shortly thereafter, faced with obstacles to enforcing the $7.6 million judgment Shopoff negotiated a Global Settlement Agreement (GSA) on behalf of Hyon and Colangelo that finally resolved the Decker Island litigation. Pursuant to the terms of the GSA, the assets which constituted the Recovery were transferred to Hyon and Colangelo. Those assets consisted of "all of the common stock of two corporations, Mega Sand Incorporated and Taiki Corporation, which in turn own[ed] a sand mining operation with related use permits, along with real property called Decker Island which was encumbered by a deed of trust; equipment for the mining operation and other tangible and intangible property; real property and partnerships in Oregon; and cash. With the assets of Mega Sand Incorporated and Taiki Corporation, [Hyon] and Colangelo intended to operate the sand mining business to protect and enhance their interests in the Recovery. The GSA expressly granted them `sole and exclusive discretion to sell or operate Decker Island and the sand business.' The GSA also required [Hyon] and Colangelo to pay the defendants in the Decker Island litigation a total of $2.6 million, in annual payments of $450,000, beginning in October of 2005." (Shopoff & Cavallo LLP v. Hyon, supra, A111396.)

In addition to the 21 percent and 12 percent shares in the Recovery claimed by Shopoff and Selten, respectively, "other attorneys who performed legal services for [Hyon] and Colangelo during the course of the lengthy and protracted Decker Island litigation also claimed percentage shares of the Recovery and associated lien interests pursuant to separate contingent fee agreements: Elliot Bien, 6 percent; Norman Pine and the law firm of Pine & Pine (Pine), 6.5 percent; the law firm of Ervin, Cohen & Jessup, 10 percent; and Jeffrey Kirk, 5 percent.[⁴]" (Shopoff & Cavallo LLP v. Hyon, supra, A111396.) Hyon and Colangelo "realized that the total of the contingent fees owed to all of the attorneys and Selten could amount to between 48.5 percent and 60.5 percent of the Recovery." (Ibid.)

By the time the GSA was executed, however, Hyon and Colangelo were already embroiled "in a dispute over their own relative ownership interests in the Recovery. Colangelo believed he was entitled to one-half of the proceeds of the Recovery, less any contingent fee claims and amounts previously contributed by [Hyon] to finance the litigation. [Hyon] claimed that he was entitled to a larger percentage share of the proceeds due to his commensurately greater efforts and financial contributions to the pursuit of the Recovery." (Shopoff & Cavallo LLP v. Hyon, supra, A111396.) According to the terms of a preexisting agreement between Hyon and Colangelo, the "disputed amount" of the Recovery had been placed in the "Col-On Trust." Shopoff was subsequently appointed trustee of the Col-On Trust until Hyon and Colangelo resolved their "differences" and finally distributed the proceeds of the GSA. "Pursuant to the terms of the Col-On Trust, Shopoff, acting in the capacity of trustee, ... took `legal possession' of the assets of the Recovery, including cash, stock certificates, and assignment of deeds of trust." (Ibid.)

Hyon and Colangelo "continued to negotiate their [respective] rights to the Recovery proceeds. On December 19, 2003, they executed an agreement that contemplated their joint operation of the `Decker Island Business' and delineated their respective shares in the business assets. A successor and superseding agreement dated May 25, 2004 (the 2004 Settlement Agreement), `resolve[d] the differences of the parties' and confirmed their interests in the Recovery and the Decker Island Business: 22.31 percent to [Hyon], and 11.59 percent to Colangelo.[⁵] They expressed an intent to transfer the assets of the Recovery to `a new entity' formed and managed by the parties in accordance with `their respective percentage interests' stated in the 2004 [Settlement] Agreement. [Hyon] and Colangelo further agreed to use their `best efforts to cooperate in the operation of the business of Decker Island' and resolution of their...