Tuesday, July 25, 2017
Court of Appeal Decides:
Lawyer Gets No Fee Though Client Received Benefit
Justice Fybel Says Contingency Fee Agreement in Bad-Faith Insurance Case Didn’t Contemplate Insurer Paying Off $12.9 Million Judgment Against the Insureds as Part of the Settlement
By a MetNews Staff Writer
An attorney who was entitled to a one-third share of any recovery, under a contingency fee agreement in an action against an insurer and others for bad-faith denial of coverage, does get his one-third chunk of a $1.1 million cash settlement, but will receive nothing in connection with a proviso of the settlement agreement that the insurer will satisfy a $12.9 million default judgment against the client, the Fourth District Court of Appeal has held.
The default judgment occurred after the insureds, ABS Power Brake, Inc. and its three principals, referred to in the opinion collectively as “the Gomez brothers,” dropped their defense in a federal trademark infringement action against them because the attorney fees had mounted to the point where they could not satisfy them.
Nothing appears in the record, the opinion said, as to how much the insurer actually paid to satisfy the default judgment.
The opinion, by Justice Richard D. Fybel of Div. Three, upholds the determination by Orange Superior Court Judge Ronald L. Bauer that Redondo Beach attorney David C. Kadin is entitled to receive nothing in connection with his efforts to bestow on his clients the benefit of being relieved of the judgment against them.
Fybel’s opinion, which was not certified for publication, was filed Friday.
The retainer agreement provided:
“Client agrees to pay to Attorney a fee of 33-1/3 percent of any recovery. If Attorney is unable to obtain money for Client in this case, then Attorney will receive no Attorney fee at all.”
“The words of the Retainer Agreement support the interpretation that Kadin is not entitled to receive an amount equal to a percentage of the amount the Trademark Litigation judgment. The Retainer Agreement states the client agrees to pay ‘a fee of 33-1/3 percent of any recovery’ and ‘[i]f attorney is unable to obtain money for client in this case, then attorney will receive no attorney fee at all.’ The juxtaposition of these two passages reinforces the notion that ‘recovery’ refers to and means money obtained for the client. If the client recovers no money, then the client pays no attorney fees. If the client recovers money, then the client pays the attorney one‑third of the money recovered by the client.”
Blames Kadin’s Draftsmanship
The jurist said extrinsic evidence as to the parties’ understanding supports this interpretation, and added:
“Kadin drafted the Retainer Agreement and could have defined ‘recovery’ in a manner that was both broad and specific enough to encompass nonmonetary recovery such as satisfaction of judgment….
“The Retainer Agreement did not define ‘recovery’ to include forgiveness or satisfaction of debt, satisfaction of judgment, or any kind of nonmonetary recovery. The Retainer Agreement provided no definition of ‘recovery’ at all.”
Fybel rejected Kadin’s contention that Bauer erred in granting the defendants a nonsuit of his cause of action for recovery under quantum meruit theory, explaining:
“When, as in this case, the parties have an express contract (the Retainer Agreement) governing the compensation at issue, quantum meruit recovery is not available because the law will not imply a promise to pay a reasonable value of services at variance with the parties’ express agreement.”
There was also an issue as to whether ABS and the Gomez Brothers argue are entitled to prejudgment interest under Civil Code §3287(a), which provides, in part:
“A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt.”
Judgment was ‘Oddity’
Bauer was correct in denying the interest, Fybel said. He wrote:
“The judgment itself is an oddity. It does not make an award of damages. It does not state it is “ordered, adjudged, and decreed” that any party or parties shall recover a specified amount from any other party or parties….Rather, the judgment recites that Kadin has a duty to distribute to ABS and the Gomez Brothers $304,333.33 out of the $500,000 received in settlement from the Insurer. Imposition of that duty makes the judgment sound like a decree of specific performance of the Retainer Agreement or an order of restitution. In the case of either specific performance or restitution, ABS and the Gomez Brothers are not ‘entitled to recover damages’ within the meaning of section 3287(a).”
The case is Kadin v. ABS Power Brake, G052734.
Kardin’s lawyers on the appeal were John P. Blumberg and Ave Buchwald of the Blumberg Law Corporation in Long Beach and the defendants’ lawyers were Brian Mitchell Davis and Stephen P. Farkas of Newport Beach.
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