Wednesday, October 2, 2002
C.A. Rejects Claim That Law Firm Botched Wrongful Firing Settlement
By KENNETH OFGANG, Staff Writer/Appellate Courts
A Santa Monica lawyer who claims that a Westside law firm botched the settlement of her wrongful termination suit against a former employer owes the firm more than $160,000 in fees, the Court of Appeal for this district has ruled.
Div. Three Monday affirmed Los Angeles Superior Court Judge Jon Mayeda’s ruling in favor of Donfeld, Kelley & Rollman against former client Daphne Sheridan Bass.
Presiding Justice Joan Dempsey Klein, in an unpublished opinion, agreed with Mayeda that Bass should be required to pay nearly the full amount of Donfeld Kelley’s contingency fee because the terms on which she settled the case after firing the firm were nearly identical to those her lawyers had negotiated.
Bass retained the firm to sue her former employer, Giorgio Beverly Hills, Inc., and its parent company, Proctor & Gamble, in 1997. She agreed to pay a contingency of 33 percent if the firm settled the case prior to a final status conference or pretrial conference, or 40 percent if it settled at a later stage.
After 17 months of litigation, including nearly 20 days of depositions, the case went to mediation. After a full day of negotiating, the parties signed a written memorandum setting forth settlement terms.
The agreement, which expressly contemplated the drafting of further documents but declared the settlement terms to be “binding and admissible,” provided for a lump sum payment of $525,000, a mutual release, dismissal of the lawsuit, non-disclosure by the plaintiff to anyone outside her immediate family, with liquidated damages of $20,000 for an impermissible disclosure; binding arbitration of disputes regarding the agreement; a waiver by the plaintiff of any possibility of future employment with the defendant; and each party to bear their own costs and attorney fees.
After the mediation, however—and after spending $4,000 on tax advice—Bass prepared a proposed former settlement agreement that varied from the terms of the handwritten document. It would have provided for payment of the settlement in installments, secured by a standby letter of credit, and would have required that any arbitration claim be head by a five-member panel whose decision would have to be unanimous.
The defendants rejected the proposal and moved to enforce the handwritten agreement under Code of Civil Procedure Sec. 664.6. A Los Angeles Superior Court judge granted the motion, and Bass fired her lawyers before the order was signed.
The Donfeld firm filed a lien for its 33 percent contingency of over $170,000, sued Bass for the money, and obtained an order requiring that the amount of the lien be taken out of any settlement fund and placed in trust pending resolution of the fee dispute.
Bass appealed the settlement order, but agreed in April 2000 to drop her appeal in exchange for two modifications—the portion of the settlement not involved in the fee dispute was to be paid in three yearly installments, and the liquidated-damages clause regarding breach of confidentiality was replaced with a provision for payment of actual damages.
Proctor & Gamble then paid the Donfeld firm’s proposed fees into trust pursuant to the earlier order.
Mayeda, after a nine-day bench trial, ruled that the firm had proven its right to quantum meruit. He also rejected Bass’ cross-complaint, in which she claimed that attorneys Paul Kelley and Amy Semmel had pressured her into settling and had been negligent in not negotiating a provision for payments over time and not advising her of the tax consequences of the settlement.
Mayeda concluded that it would be reasonable to award the entire contingency amount, but granted Bass offsets for the cost of tax advice and for nearly $3,000 in expenses she incurred in settling the underlying case herself after firing her lawyers. He also awarded Donfeld Kelly 10 percent interest from the date the money was placed in trust.
On appeal, Bass argued that the fee claim was excessive because the handwritten agreement was nothing more than a “deal memo,” that her own efforts substantially enhanced the value of the settlement after the lawyers were fired, and that the lawyers had not properly negotiated the agreement or adviser her as to its terms.
But Klein said the trial judge was entitled to credit the attorneys’ testimony that Bass told them a week prior to mediation that she was not interested in a settlement payable over time.
The jurist also rejected Bass’ characterization of the final settlement as materially better than the one Kelley and Semmel had negotiated.
If having the money paid in installments was a benefit, the presiding justice wrote, it was one she could have gotten if she had asked for it prior to mediation. The dropping of the liquidated damages clauses was not necessarily to her benefit either, Klein wrote, since it is possible that actual damages for a breach of confidentiality could exceed $20,000.
Bass represented herself on appeal; Paul Kelley represented his firm along with Douglas C. Purdy and Mark E. Hellenkamp of Morris, Polich & Purdy.
The case is Donfeld, Kelley & Rollman v. Bass, B150938.
Copyright 2002, Metropolitan News Company