Monday, September 22, 2008
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C.A. Throws Out Lawyer’s Suit Over Fee-Sharing Agreement
Panel Says One Attorney Cannot Sue Another’s Clients Who Did Not Agree to Split
By SHERRI M. OKAMOTO, Staff Writer
An Orange County attorney was barred from seeking any form of compensation directly from her clients under a fee-sharing agreement the clients never signed, the Fourth District California Court of Appeal held Friday.
Affirming the decision of Orange Superior Court Judge Daniel J. Didier, Div. Three held that the unsigned fee-sharing agreement was unenforceable, leaving as Irvine attorney Kathleen Strong’s only recourse an action against her co-counsel, Aliso Viejo attorney Wayne “Bill” Suojanen.
Suojanen was retained by Ali Beydoun and Edwin Craig Sheldon to represent them in a claim against Novell Inc., alleging it had failed to pay them amounts due under a contract for the sale of certain software.
A solo practitioner, Suojanen said he wanted to bring in another attorney to assist him at trial and that a friend had recommended Strong to him.
Strong alleged that she and Suojanen entered into a fee-sharing agreement providing that she could receive one-third of any recovery obtained, and claimed that Suojanen told her he would get the signatures from his clients approving the agreement.
However, she claimed, Suojanen terminated her services after she worked on the case for more than one year.
Jury Trial
The Novell case was tried to a jury in 2006, and a judgment entered in favor of Suojanen’s clients and co-plaintiffs which Suojanen estimated to be in excess of $19 million, plus over $10 million in prejudgment interest and attorney fees.
Based on the fee-sharing agreement, Strong claimed she was entitled to at least $75,000, and she alleged causes of action against Suojanen for fraud, intentional interference with prospective economic advantage, and promissory estoppel. She also alleged causes of action against Beydoun, Sheldon, and Suojanen for quantum meruit and unjust enrichment.
However, the trial court sustained Beydoun and Sheldon’s demurrers without leave to amend based on Rule 2-200 of the Rules of Professional Conduct of the State Bar, which prohibits an attorney from dividing a fee for legal services unless the client consents in writing after receiving written disclosure of the proposed fee division and its terms.
On appeal, Strong argued that the rule did not bar noncontractual causes of action against a client who benefited from an attorney’s provision of legal services, but Presiding Justice David G. Sills, joined by Justices Eileen C. Moore and Raymond J. Ikola, concluded Strong could not recover the reasonable value of her services in light of the unenforceable fee-sharing agreement.
Premise of Recovery
“Allowing an attorney to recover the reasonable value of his or her services from a client is premised on the services being requested by the client,” he wrote, noting that even though Strong alleged that Beydoun and Sheldon knew she was working on their case and that she expected payment, she had not alleged that they asked her to do the work, or agreed to pay her.
Sills reasoned that because Rule 2-200 was adopted to protect clients, “[i]t makes no sense” to allow an attorney who failed to comply with the rule to recover from a client.
However, he did note that Strong’s causes of action against Suojanen for the reasonable value of her services had survived a demurrer in the trial court, and that she could recover from him in quantum meruit if she proved her case as pleaded.
While Strong expressed disappointment in the court’s decision, she said she thought it “definitely sets up my case against Suojanen.”
Strong maintained that Suojanen had repeatedly represented he would obtain the client’s approval of the fee-sharing agreement, and moreover, had specifically instructed her not to contact the clients because their status as his clients “was on shaky ground” and could cause them to align with another party to the Novell matter.
She asserted that Suojanen never intended to obtain the clients’ approval, and deliberately deceived her with the specific goal of inducing her to provide legal services for which she would not be compensated before “abruptly” terminating her services “without good cause.”
Strong also alleged that she had “every expectation of continuing with said representation through the conclusion of the case,” but Suojanen countered that Strong had abandoned the representation of Beydoun and Sheldon, and breached a written agreement to assist him in several other cases.
“That was why the fee sharing agreement was never signed,” Suojanen said.
Suojanen’s attorney, Michael G. York, said that Strong’s suit against Beydoun and Sheldon was “completely without merit, as shown by the fact that the court of appeal issued a decision only two days after oral argument.”
The action “never should have been brought in the first place,” he said, and predicted that Strong’s claim against Suojanen would also be decided in Suojanen’s favor.
Strong represented herself at trial and on appeal. Her case against Suojanen is set for trial Nov. 24.
The case is Strong v. Beydoun, 08 S.O.S. 5414.
Copyright 2008, Metropolitan News Company