Valder Law Offices v. Keenan Law Firm, 1 CA-CV 05-0217.

• Decision Date: 09 March 2006
• Docket Number: No. 1 CA-CV 05-0217.,No. 1 CA-CV 05-0358.,1 CA-CV 05-0217.,1 CA-CV 05-0358.
• Citation: 212 Ariz. 244,129 P.3d 966
• Parties: VALDER LAW OFFICES, an Arizona Professional Corporation, Plaintiff/Counter-Defendant/Appellant, v. KEENAN LAW FIRM, an Arizona Professional Corporation, Defendant/Counter-Plaintiff/Appellee.
• Court: Arizona Court of Appeals

129 P.3d 966

212 Ariz. 244

VALDER LAW OFFICES, an Arizona Professional Corporation, Plaintiff/Counter-Defendant/Appellant, v. KEENAN LAW FIRM, an Arizona Professional Corporation, Defendant/Counter-Plaintiff/Appellee.

No. 1 CA-CV 05-0217.

No. 1 CA-CV 05-0358.

Court of Appeals of Arizona, Division 1, Department A.

March 9, 2006.

Valder Law Offices Phoenix By Michael J. Valder and Lewis & Roca LLP By Lawrence A. Kasten, Kimberly A. Demarchi, Phoenix, Attorneys for Plaintiff/Counter-Defendant/Appellant.

Haralson Miller Pitt Feldman & McAnally PLC By Stanley G. Feldman, Lindsay E. Brew, Rebecca A. Reed, Tucson, and Murphy Lutey Schmitt & Fuchs PLLC By Michael R. Murphy, Prescott, Attorneys for Defendant/Counter-Plaintiff/Appellee.

OPINION

BARKER, Judge.

¶ 1 This case requires us to decide an issue of first impression in Arizona: whether the common fund doctrine may apply to the allocation of attorneys' fees in a wrongful death action. We reject the argument that because this action is one for wrongful death, rather than a class action, the common fund doctrine may not apply. However, we hold that on the facts of this particular wrongful death case the trial court correctly determined that the common fund doctrine does not apply.

I.

¶ 2 This case has its origins in an action for the wrongful death of Denise Robinson, who died in September 1997 after surgery.¹ Denise Robinson was survived by her husband, James Robinson ("James"), her son, James Jr., and her mother, Dorothy Evans ("Dorothy"). In October 1997, James retained attorney James Hill ("Hill") to represent him in the prosecution of an action against Denise's health care providers. Dorothy also attempted to retain Hill, but Hill informed her that she needed separate counsel.² On July 6, 1999, Dorothy retained the Keenan Law Firm ("Keenan") to "investigate, prosecute or settle" her claim for damages for Denise's wrongful death. Keenan's agreed contingency fee was forty percent of any sums collected or recovered through a first trial; if post-trial motions or an appeal was taken, the percentage increased to fifty.

¶ 3 On July 28, 1999, James signed a fee agreement jointly retaining Hill and also Valder Law Offices ("Valder")³ to prosecute any claims for damages arising from Denise's death. On or about September 14, 1999, Valder commenced a wrongful death action for James as statutory plaintiff on behalf of himself and the other statutory beneficiaries. The beneficiaries identified in the wrongful death action brought by James included himself, James, Jr. and Dorothy. Also named was Denver Evans as Denise Robinson's father, but Denver's claim was later dismissed when it was learned that he was not Denise Robinson's biological father and he had never adopted her. Shortly after the case was filed, Keenan entered his appearance in the action on behalf of Dorothy.

¶ 4 When the wrongful death action was filed, Valder wrote to Keenan to inform him of the filing and to assure him that James, as the surviving spouse and statutory plaintiff, would act as a fiduciary by bringing the case on behalf of himself and all other beneficiaries. Valder also advised Keenan that Valder and Hill would pursue the matter fully pursuant to James's fiduciary obligations:

We will take all necessary actions such as interviewing witnesses, retaining expert witnesses, conducting discovery, attempting to reach a pre-trial settlement, trying the case if necessary, and seeking fair and just compensation for all of the beneficiaries including [Dorothy].

Valder provided Keenan with a copy of his contingency fee contract with James. He informed Keenan he did not see or anticipate any conflicts of interest or other reasons why Dorothy would need separate counsel, and he stated that this would be "especially true" if they reached agreement regarding allocation of any net settlement proceeds:

Obviously, in the event of a trial, the jury will fix each beneficiary's damages separately and the jury's assessment of everyone's damages will guide the allocation of net proceeds from a judgment. In the calculation of net proceeds, whether by settlement or judgment, we will first deduct all costs and fees that are appropriate under our contingency fee contract, as approved by the court. Accordingly, any recovery allocated to [Dorothy] will be subject to a pro-rata reduction for attorney's fees and costs.

Valder proposed to Keenan that the beneficiaries attempt to reach an agreement as to an agreed percentage for each from any net settlement proceeds.

¶ 5 It appears from the record that the beneficiaries did not reach agreement as to the percentage of recovery for each in the event of settlement. Valder later asserted that Keenan obstructed his efforts to reach agreement. Prior to trial, a claim against one of the defendants was settled for a lump sum, and the beneficiaries could not agree as to how this amount should be allocated among them. They deferred distribution until the jury's damage award established the relative shares of the beneficiaries' recovery.

¶ 6 Valder testified that, in general, he did all of the work necessary to prepare the case with respect to liability issues.

[I]t was a medical malpractice case and there were numerous expert witnesses on all the medical issues, including nursing negligence, doctor negligence, and causation, and there was a lot of pathology evidence and pathology testimony and pathologists to cross-examine. And I don't remember how many medical or nursing witnesses there were. But I did all of that stuff.

Valder also stated he had handled all depositions for the defense's medical witnesses and had been responsible for obtaining medical experts for the plaintiff's case. He had handled all written discovery except for procuring draft answers from Dorothy for interrogatories directed to her, which was done by Keenan. Valder also handled all the motion practice.

¶ 7 When asked at his deposition what additional work Valder did in preparing the liability case because of Dorothy's involvement as a statutory beneficiary, Valder acknowledged that all of the work he did would have been necessary whether Dorothy had been a statutory beneficiary or just a percipient witness. Valder pointed out, however, that Dorothy's involvement required substantial work, including additional work as to the damage portion of the case. Valder attended Dorothy's deposition, examined her extensively at trial regarding liability and damages, developed testimony from a variety of other witnesses bearing on Dorothy's damage claim, and presented the case, including Dorothy's damage claim, to a focus group. Valder also had additional work because of the initial claim by Dorothy and Denver Evans about Denver's relationship to Denise.

¶ 8 Keenan provided an affidavit describing his efforts on behalf of Dorothy:

After filing the notice of appearance, I participated as the attorney for [Dorothy] throughout the duration of the litigation. I prepared discovery responses, and responded to correspondence from defense counsel. I personally attended certain depositions in the case, and participated in settlement negotiations. I reviewed all pleadings, written discovery, and correspondence exchanged between the parties in this case. I attended the hearings on the motions in limine, and engaged in pretrial preparations. I represented [Dorothy] at trial from start to finish which included, but was not limited to, giving an opening statement on [Dorothy's] behalf, examining [Dorothy] at trial, and giving a closing argument to the jury on behalf of [Dorothy]. My firm expended a minimum of 454.10 attorney/legal assistant hours up through the post-trial settlement on this matter.

Keenan did not purport to have been involved in the preparation and trial of the liability aspect of the case. Valder contended that the bulk of the 450 hours recorded by Keenan's firm was unnecessary and provided no value in obtaining the recovery.⁴

¶ 9 After a lengthy trial, the wrongful death action resulted in a jury verdict of $2.4 million, as follows:

                  James Robinson        $1 million
                  James, Jr.            $1 million
                  Dorothy Evans         $400,0005
                

Valder prepared a settlement summary for all beneficiaries. He calculated the beneficiaries' respective shares of the net proceeds and used the percentage that each beneficiary's recovery bore to the total to make a pro rata determination of the attorneys' fees attributable to each as established in Valder's fee agreement with James. Dorothy's pro rata share of the attorneys' fees was calculated to be $123,111.81, and her net recovery after attorneys' fees and costs was calculated to be $221,736.54.

¶ 10 Dorothy expressed concern over payment of attorneys' fees to Valder from her share of the verdict, and Valder placed those funds in a special money market account pending resolution of that dispute. Eventually, Dorothy demanded that Valder immediately remit the attorneys' fees he was withholding. She contended he had no right to them because she had never agreed that Valder should represent her.⁶

¶ 11 Shortly thereafter, Valder filed a declaratory judgment action in Yavapai County to establish that Dorothy's share of the wrongful death proceeds was properly subjected to a pro rata share of the attorneys' fees incurred in obtaining those proceeds. The common fund doctrine was the basis for this claim. Valder also sought a declaration that the payment of Keenan's attorneys' fees was a matter between Keenan and Dorothy and that Valder had no obligation to compensate Keenan. The next day Keenan filed suit in Maricopa County against Valder alleging conversion and unjust enrichment with respect to the withheld sum and that Valder was holding funds "that in law belong to and are the property of" Dorothy and Keenan. Venue for this action was transferred by stipulation to Yavapai County, after which Keenan's action was consolidated with Valder's. Keenan also filed a...