Metropolitan News-Enterprise


Thursday, September 30, 2021


Page 1


Court of Appeal:

Oral Pledge of Contingency Fee to In-House Counsel Is Void

Justice Moor Says Business and Professions Code Makes No Exception to Requirement of a Writing;

Presiding Justice Rubin Agrees With Result, in Light of Facts, but Rejects Broad Proposition


By a MetNews Staff Writer


A promise to pay a lawyer a bonus and a percentage of the recovery from litigation was not enforceable because it was not in writing, Div. Five of the Court of Appeal for this district held yesterday, declaring that it doesn’t matter that the lawyer was in-house counsel.

The decision strips Pasadena attorney Craig Missakian of a judgment of more than $4 million against Amusement Industry, Inc.

“Amusement contends the contract in question is void under Business and Professions Code section 6147, which requires contingency fee agreements to be in writing,” Justice Carl H. Moor said in the majority opinion, in which Justice Anne H. Egerton, on loan from Div. Three, joined. “We hold that, regardless of his status as in-house counsel, Missakian’s oral agreement with Amusement is a contingency fee agreement subject to section 6147 and is therefore unenforceable as a matter of law.”

Jury’s Award Pared

A jury awarded Missakian $5,025,000—$2.25 million for breach of an oral contract, $275,000 based on unpaid bonuses, $750,000 as compensation for promissory fraud, and $1.75 million in punitive damages—but Los Angeles Superior Court Judge Rafael A. Ongkeko granted Amusement a judgment notwithstanding the verdict on the cause of action for promissory fraud, bringing the award down to 4,275,000.

Not in issue in the appeal, but impacted by the outcome, was Ongkeko’s March 25, 2019 award to Missakian of $271,106.50 in attorney fees and $18,089.33 in costs, totaling $289,195.83, elevating the judgment to 4,564,195.83.

Div. Five left Missakian with some hope for a recovery for his services in obtaining a $26 million settlement, ordering a new trial on the promissory fraud claim against Amusement as well as its founder, Allen Alevy, who made the oral commitment to Missakian. Too, Moor provided advice to Missakian as to an additional cause of action to pursue on remand.

Concurring Opinion

Presiding Justice Laurence D. Rubin wrote a concurring opinion in which he said: “I agree with the result the majority opinion reaches. I write separately only to urge that the opinion be read narrowly, confined for the most part to facts similar to the present case.

“The majority’s analysis, although undoubtedly correct when applied here, should not be interpreted as a blanket rule that governs all in-house attorney arrangements. There are many corporate counsel relationships that, in my view, are not subject to Business and Professions Code section 6147.”

What distinguishes the circumstances in Missakian’s case from others where in-house counsel are offered bonuses in connection with the outcome of litigation, Rubin observed, is that Missakian came aboard as counsel on a contingency basis.

“I do not suggest that the timing of the contingency fee arrangement alone is dispositive,” he wrote. Nevertheless, that the percentage arrangement here was reached at the inception of the attorney-client relationship is a significant factor in my agreement with the majority that section 6147 applies.”

The presiding justice went on to remark:

“To insist that those attorneys already hired must ask their employer for a written agreement covering percentage compensation is unrealistic and likely to invite mischief. Nor is it in keeping with the language or the policies of Business & Professions Code section 6147.”

Moor’s Opinion

Moor rejected Rubin’s call for a holding confined to the facts. He wrote:

“Applying section 6147 to prevent all attorneys—including in-house attorneys—from enforcing oral contingency fee agreements serves valid public policy goals and is consistent with the purpose of the statute, which is to ensure that the person or entity agreeing to pay for legal services and the attorney providing those services have a mutual written understanding of the details of the contingent payment.”

He said in a footnote:

“We disagree with the concurrence’s statement that a significant factor in determining the scope of section 6147 is whether the contingency fee arrangement is made at the ‘inception of the attorney-client relationship.’ The concurrence agrees that section 6147 applies to Missakian, an attorney whose compensation included a contingent component from the “outset” of his employment at Amusement. However, where a hypothetical, long-term in-house counsel is promised the same fee for the same role, the concurrence inexplicably suggests section 6147 would be inapplicable. The statutory language obligates an attorney to provide the client with a written contingent fee agreement ‘at the time the contract is entered into’…, not just at the start of an attorney-client relationship.”

Responding to Rubin’s suggestion that a broad holding would likely “invite mischief,” Moor commented:

“[W]e emphasize that the purpose of the statute is to benefit and protect clients, not to protect attorneys.”

In a footnote, Moor provided a hint to Missakian as to how he should proceed on remand, remarking that the court would express no “opinion on Missakian’s ability to seek quantum meruit.”

New Trial

Explaining why there must be a new trial, Moor said:

“We find the jury’s special verdict to be inconsistent because it found Alevy did not make a false promise, but that Amusement (acting only through Alevy) did. Because the court cannot choose between the jury’s inconsistent responses, the court should have ordered a new trial as to all parties rather than JNOV.”

The case is Missakian v. Amusement Industry, Inc.,

Missakian represented himself, along with Richard H. Lee of the downtown Los Angeles firm of Salisian | Lee and Timothy T. Coates of the mid-Wilshire appellate firm of Greines, Martin, Stein & Richland.

Bashir E. Eustache of Westland Real Estate Group in Long Beach acted for Amusement Marc Richard Greenberg of the downtown Los Angeles firm of Tucker Ellis LLP was counsel for Alevy.


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