Metropolitan News-Enterprise


Monday, August 10, 2009


Page 1


C.A. Rules Client Cannot Selectively Void Fee Agreement


By a MetNews Staff Writer


A client cannot selectively void portions of a voidable  contingency fee agreement for the provision of a single set of legal services, according to a Sixth District Court of Appeal decision upholding a Sacramento attorney’s recovery of $55,000 in quantum meruit.

In its unpublished decision Thursday affirming the judgment of Santa Clara Superior Court Judge John Garibaldi, the panel ruled that Chris Taylor’s receipt of two separate deliveries of stock pursuant to a settlement could not be attributed to distinctive services provided by attorney William W. Palmer.

In 1991, the Intel Corp. transferred 1,632 shares of stock Taylor had acquired during his six-year tenure with the company through an employee stock participation plan to the state as unclaimed property.

Upon learning of the transfer in 1995, Taylor retained Palmer to pursue a claim against Intel to “reverse the process” and “get his stock back.” Taylor insisted that he never asked Palmer to recoup his funds held by the state, but rather requested that the attorney “compel Intel to go get the cash from California and give him his stock back.” 

Palmer and Taylor executed a agreement which provided for “[r]epresentation… with respect to enforcement, litigation, and collection of payments and shares of stock allegedly owed by Intel Corporation” at a contingent fee of 35 percent of any recovery.

The attorney eventually negotiated a settlement with Intel wherein the corporation agreed to make two deliveries to Taylor of restricted shares, each worth $315,000.

Pursuant to the settlement agreement, the trial court dismissed Taylor’s action against Intel and ordered the state to disburse the $380,000 it held from the sale of Taylor’s Intel stock to Intel.  Intel then delivered 9,093 restricted shares to Taylor and Taylor transferred 3,182 shares to Palmer.

When Intel made a second delivery of 10,902 shares three months later, Taylor declined to compensate the attorney any further.

Taylor contended that the shares were outside the scope of the fee agreement because they were acquired with funds from the state accounts. He argued that he only owed Palmer a contingency fee on the difference between the value of the stock he received and the value of the state accounts.

Palmer subsequently filed suit against Taylor for breach of contract and other claims. Taylor moved for judgment on the pleadings based in part on his claim that the fee agreement was void due to the absence of certain recitals required by Business and Professions Code Sec. 6147.

Garibaldi granted Taylor’s motion, but with leave for Palmer to amend. Palmer then filed an amended complaint alleging all of the original causes of action plus a cause of action for quantum meruit seeking $800,000 as a reasonable fee if the fee agreement was found to be defective or voidable.

After Garibaldi partially sustained Taylor’s demurrer, Palmer apparently chose not to amend and proceeded solely on the quantum meruit cause of action. 

At trial, Palmer testified that Taylor’s suit against Intel involved complex issues requiring a high level of skill to achieve a favorable outcome against heavy odds. He valued his services to Taylor at $257,705. Deducting the $110,250 value of the Intel shares that he had received against this amount, Palmer claimed entitlement to $147,455 on his quantum meruit claim.

Garibaldi determined Taylor had only benefited from the first stock delivery and that Palmer was entitled to a reasonable fee for securing that benefit. He accepted Palmer’s claim of having expended 736.3 hours at $350 per hour working for Taylor, but found that this would result in an excessive fee and that a payment of $55,000, plus costs, would be reasonable.

Taylor appealed, contending Garibaldi had “misapplied” Alderman v. Hamilton (1988) 205 Cal.App.3d 1033, but in his decision for the appellate court, Justice Nathan D. Mihara said Alderman was inapposite.

The clients in Alderman retained an attorney to represent them in a “possible defense of will contest by distant relatives and/or challenge to joint tenancy deed.” They  later agreed to compensate  the attorney pursuant to the terms of their contingency fee agreement for his work on the will contest, but resisted his request for fees on the joint tenancy issue.

On appeal, the Third District Court of Appeal held that the clients “had an absolute right to void the contract before or after services were performed” because it violated Sec. 6147.

Although the clients had waived their right to void the entire contract by agreeing to pay the contingency fee relating to the will contest, the Third District said the clients “were free to and did exercise their absolute right to void the contract provision regarding the joint tenancy property.”

Pursuant to Alderman, Taylor insisted that he had a right to void the fee agreement with Palmer as to the recovery of funds from Intel for one stock transfer and not the other.

He maintained that Palmer had provided two distinguishable legal services to him: pursuing his claims against Intel for its wrongful transfer of his stock to the state, and securing the return of funds held by the state after the transfer of his stock from Intel. Since the trial court found that this second set of services did not provide a basis for quantum meruit fees, Taylor argued that his payment of the contingency fee on the first set of services absolved him of any further liability. 

But Mihara, joined by Justices Eugene M. Premo and Franklin D. Elia, concluded that the fee agreement between Palmer and Taylor did not contemplate two separate  sets of legal services.

“Just a single set of services was provided, directed at a single goal, and achieving a single remedy,” he said. “Consequently, this is not a case in which the client could selectively void the fee agreement, thereby picking and choosing which services the client wished to compensate by paying a contingency fee under the fee agreement, and which services the client wished to compensate with a ‘reasonable fee.’ ” 

The case is Palmer v. Taylor, H032957


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