Friday, December 23, 2011
C.A. Rules in Favor of Lawyer Who Sued Adverse Party Over Direct Settlement With Clients
By KENNETH OFGANG, Staff Writer
A contractual attorney’s fee lien precludes the client from entering into a settlement that nullifies the attorney’s recovery under the lien, and opens up the adverse party to liability if it induces the client to enter into such a settlement, the Court of Appeal for this district ruled yesterday.
Div. Four affirmed a $900,000 judgment in favor of an attorney who sued his former clients, along with the company that helped them avoid his fee lien by settling with them directly.
Div. Four, in ruling for West Los Angeles attorney James J. Little, said the conduct of Amber Hotel Company constituted tortious interference with Little’s lien, and with his contractual relationship with longtime clients Satanand and Devanand Sharma. The court affirmed the judgment entered after a trial last year before Los Angeles Superior Court Judge Victor Chavez.
Amber sued the brothers, and various entities they controlled, in August 2004, claiming that they defrauded Amber out of a commission in connection with the sale of a hotel. Those claims were based in part on two contracts that included attorney fee provisions.
Little, who had represented the brothers throughout most of his 28-year legal career, agreed to handle the suit for $275 an hour. The agreement included a clause providing that all but $100 per hour would be deferred and paid at the conclusion of the case, and secured by a lien against a potential court award of fees if the brothers prevailed.
The agreement further provided that if the fee award exceeded the outstanding fees, Little would keep the entire award.
The brothers prevailed at a 2007 trial, and were awarded more than $160,000 in fees and costs. The brothers subsequently entered into direct negotiations with Amber, bypassing Little, and filed a satisfaction of judgment in June 2008.
Amber dropped its appeal a few days after the satisfaction was filed.
In May 2009, Little sued Amber, as well as his former clients. He also sued Amber’s lawyer, who was later dismissed from the case.
At the trial before Los Angeles Superior Court Judge Victor Chavez last June, Little testified that the fee agreement was structured as it was, with a deferral of a portion of the fees, because the clients were having “cash-flow problems” and because he hoped to collect a fee award from Amber. The brothers, who were advised to seek independent counsel with regard to the lien provision, concurred and executed the retainer agreement.
After Amber noticed its appeal, Little said, he declined to represent the brothers further because the retainer agreement did not obligate him to do so and the clients couldn’t afford to continue paying him. After he moved for a fee award in the trial court, he said, the clients told him that Amber had offered to settle for $75,000, which the clients wanted to keep two-thirds of.
Little said he reminded the clients of the fee agreement, notified Amber’s counsel of his lien, and served formal notices of the lien. He said he heard nothing more about a settlement until he received, from the trial court, copies of the acknowledgments of satisfaction of judgment—which were prepared by Amber’s lawyer—and a copy of Amber’s dismissal of the appeal.
By settling in that manner, he said, the clients avoided paying him over $190,000 in fees he had earned., including the amount awarded by the court. In addition, he said, the brothers stopped sending him legal work, costing him close to $1 million in expected future business.
Devanand Sharma, who uses the name “Frank Martini” in connection with his businesses and was referred to by that name in court, testified for Little. He said he never intended to avoid the lien, but was told by Amber’s president, Stephen Post, that it would be taken care of.
He agreed to a settlement, he said, because Amber’s lawyer told him that the judgment was certain to be reversed on appeal, and that he would be looking at a judgment for more than $1 million on retrial. He eventually reached an oral agreement with Post that the company would dismiss its appeal and pay him $100,000 “in a quiet way,” meaning that Little would not know about it.
He received the $100,000 from Post in cash, he said. He had no animus toward Little, he explained, but did not send him any more work because Little was suing him for the fees, and because he had entered into a relationship with another law firm.
Post claimed it was Martini who approached him about a settlement, and that he agreed to a “walk-away” settlement; no money changed hands. The agreement was intended to extinguish the company’s obligation to pay fees to Little, he said, adding that he could not recall whether he was aware of Little’s fee lien at the time.
Post’s attorney testified that he did not believe that Little had an enforceable lien, because no money exchanged hands under the settlement.
The jury awarded Post the $190,000 in fees for the underlying action as general damages, as well as nearly $700,000 in special damages for interference with contract.
In upholding the award, the appellate panel said that both Amber and the Sharma brothers were obligated to honor Little’s lien, and could not extinguish it by entering into a “walk-away” settlement.
Justice Nora Manella explained that Amber committed two related, but distinct, torts—intentionally inducing a breach of contract and intentionally interfering with the performance of a contract.
The company’s argument that Little’s lien “evaporated” when his clients settled without his knowledge or approval was unsound, Manella said, because “a client who creates an attorney’s lien through a fee agreement may undertake a contractual obligation not to frustrate the attorney’s recovery under the lien.”
Once it became final, the justice explained, the judgment for fees in the underlying suit became a final determination that Amber was liable to the brothers, implicating their agreement with Little granting him a lien against the fee award.
Baird A. Brown of the Law Offices of Baird Brown and Marc J. Poster of Greines, Martin, Stein & Richland represented Amber on appeal. Little represented himself, alongside his associate David Schultz.
The case is Little v. Amber Hotel Company, 11 S.O.S. 6927.
Copyright 2011, Metropolitan News Company