American Civil Liberties Union/Eastern Missouri Fund v. Miller

803 S.W.2d 592, 43 A.L.R. 5th 901, 1991 Mo. LEXIS 10, 1991 WL 14052

• Court: Supreme Court of Missouri
• Decided: February 7, 1991
• Docket: 72837
• Status: Published

Opinions

RENDLEN, Judge.

The American Civil Liberties Union/Eastern Missouri Fund (Fund), joined by Larry Katzenstein and Joyce Armstrong, representatives of the American Civil Liberties Union, Eastern Missouri (ACLU), brought this action against B. Stephen Miller, III (Miller) to recover attorney’s fees awarded while he was employed as a staff attorney for ACLU. Defendant appeals from the trial court’s order denying his summary judgment motion and granting plaintiffs’ motion for similar relief. Following reversal of the judgment in the court of appeals, the cause was transferred because of the general interest and importance of the issue presented, and is determined as though on original appeal. Mo. Const, art. V, § 10. We reverse and remand.

Miller, a practicing attorney, was hired at a monthly salary as ACLU’s first staff counsel in 1982. ACLU required that any attorneys’ fees he received while so employed would be “handed over to the organization.” In 1984 and 1985, a federal civil rights action styled D.C. and M.S. v. City of St. Louis, No. 84-1152 C(3), was tried in the Eastern District of Missouri. This action, sponsored by ACLU, challenged a City of St. Louis ordinance, and Miller, as ACLU staff counsel, with Arlene Zarembka as a “cooperating” or “volunteer” attorney, represented D.C. and M.S. ACLU’s agreement with D.C. required it to provide legal services free of charge, and in exchange, D.C. promised that any court “award of fees or costs shall be paid in full to the ACLU immediately upon my receipt of such award.”

D.C.’s challenge to the ordinance was successful, and in June, 1985, Miller and Zarembka filed a “Motion for Attorneys’ Fees and Costs” on behalf of D.C. pursuant to 42 U.S.C. § 1988. That motion asked the district court to award D.C. (1) $35,-765.00 for attorney fees based on services rendered by Miller and Zarembka and (2) $2,729.72 for costs advanced by ACLU.

On July 15, 1985, Miller resigned his position as ACLU staff counsel, effective August 23. On September 25, the district court ordered D.C.’s motion “granted so that [D.C.] is awarded $15,501.25 in reasonable attorneys’ fees and $2,729.79 in reasonable costs.” A memorandum accompanying the district court’s order disclosed that the award was based on credit for Miller’s work in the amount of $8,090.25 and Zarembka’s with $7,411.00.

In early October, Miller contacted the City Counselor’s office regarding the City’s payment of attorney fees and costs pursuant to the district court’s order. At his request, the City issued a separate check solely to Miller for $8,090.25 and a check for $2,729.79 to ACLU for costs.

ACLU demanded that Miller “hand over” the $8,090.25, asserting that Miller was contractually obligated so to do. Miller refused, insisting that such action would violate both the ethical prohibition against “fee-sharing” and § 484.150.1, RSMo 1986, but Miller offered to return to ACLU the proportion of his salary earned while working on the D.C. case. ACLU refused Miller’s offer, and instead commenced this litigation to recover the $8,090.25, pleading alternatively: (1) contractual obligation; (2) conversion; and (3) unjust enrichment.¹ The trial court sustained ACLU’s motion for summary judgment on all counts and denied Miller’s cross-motion for summary judgment.

In its first count, ACLU alleged Miller failed to fulfill his contractual obligation to deliver all awards of attorneys’ fees to the organization. Countering this charge, Miller maintains the trial court erred in “granting plaintiffs’ motion for summary judgment and in denying the cross-motion for summary judgment filed by defendant, because the unassailable proof established that defendant was entitled to judgment as a matter of law in that ... Missouri public policy, Missouri statutory law and the canons of professional responsibility ... prohibited defendant ... from sharing with plaintiffs ... any fees he received in the practice of law or in doing law business.”

Initially, we note that “it is no longer necessary to support a motion for summary judgment by ‘unassailable proof.’ ” Defino v. Civic Center Corp., 780 S.W.2d 665, 667 (Mo.App.1989). Summary judgment “shall be entered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Rule 74.04(c).

The parties agree that there is no genuine issue of material fact; accordingly, our review is limited to determining whether, as between these parties, Miller was entitled to a judgment as a matter of law. It should be emphasized that, although the federal court’s award was to D.C., he is not a party to this action, and therefore his right, if any, to the $8,090.25 is not here for consideration.

This brings us to an examination of the statutory and ethical prohibitions against fee-splitting. Section 484.150.1, RSMo 1986, provides:

It shall be unlawful for any licensed attorney in the state of Missouri to divide any fees or compensation received by him in the practice of law or in doing law business with any person not a licensed attorney or any firm not wholly composed of licensed attorneys, or any association or corporation, and any person, firm, association or corporation violating this section shall be deemed guilty of a misdemeanor and upon conviction therefor shall be punished by a fine of not less than twenty-five dollars nor more than five hundred dollars and costs of prosecution, which fine shall be paid into the treasury of the state of Missouri.

(Emphasis added.) Further, Disciplinary Rule 3-102, in effect at the time of the fee award at issue here, provided, with certain exceptions not applicable in this case, that “[a] lawyer or law firm shall not share legal fees with a non-lawyer.”²

Though there is little Missouri authority construing this statute or the rule, without question they apply to the situation at bar. The Advisory Committee of the Missouri Bar Administration has so opined, stating in a letter of December 31, 1985, that “[i]t is the Committee’s opinion that a staff attorney who is on salary to the American Civil Liberties Union and who is awarded attorneys fees cannot turn said fees over to the corporation.”³ This Court in State ex rel. McKittrick v. C.S. Dudley & Co., 340 Mo. 852, 102 S.W.2d 895, 901 (1937), noted that “[t]he public policy of this state as shown by the ... statute prohibits the splitting of fees between an attorney and a lay agency.” In a closely analogous situation, Missouri Bar Opinion No. 43 declared it impermissible for an attorney employed by a corporation on a salaried basis to request attorneys’ fees when it was understood that the corporation desired the fee for its own use.

ACLU, however, relying on NAACP v. Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963) and In re Primus, 436 U.S. 412, 98 S.Ct. 1893, 56 L.Ed.2d 417 (1978), urges we hold that application of the fee-splitting prohibitions to its organization would infringe its First Amendment rights. In Button, the United States Supreme Court held Virginia violated the First Amendment freedom of expression in prohibiting NAACP staff attorneys from soliciting prospective civil rights litigants and referring them to the NAACP legal staff. 83 S.Ct. 328. In Primus, 98 S.Ct. 1893, the Court similarly held South Carolina could not sanction a lawyer affiliated with the ACLU for informing a prospective civil rights litigant that legal assistance was available from ACLU. Though the State must tailor regulation so as not to abridge the associational freedom of nonprofit organizations such as the ACLU, id. 98 S.Ct. at 1908, the prohibition against fee-splitting does not infringe upon First Amendment rights so as to violate the Constitution. Indeed, a scholarly article by ACLU’s trial counsel in this case concedes that “the Supreme Court has never expressly extended First Amendment protection to fee-sharing arrangements with nonprofit groups.” Simon, Fee Sharing with Nonlawyers, 98 Yale L.J. at 1121. Though the article presents the author’s policy arguments why the fee-splitting prohibition should not be applied to public interest groups, we find no constitutional authority to strike down the firm policy of our state as declared by the legislature and by this Court in its rule against fee-splitting.

Assuming arguendo that Miller had a binding contractual obligation to return the fees to ACLU, we hold such agreement is unenforceable and ACLU’s first count must fail. See Faygal v. Shelter Insurance Co., 689 S.W.2d 724, 727 (Mo.App.1985).

ACLU’s second count, an action for conversion of the proceeds, fails for the simple reason that it had no enforceable right in the property. “In Missouri, in order to maintain a suit for conversion, the plaintiff must have title to, or a right of property in, and a right to the immediate possession of the property concerned at the time of conversion.” Twellman v. Lindell Trust Co., 534 S.W.2d 83, 97 (Mo.App.1976); see also Brede Decorating, Inc. v. Jefferson Bank & Trust Co., 345 S.W.2d 156, 164 (Mo.1961). There is no genuine issue of material fact as to this essential element.

The third count alleges unjust enrichment, which occurs “where a benefit is conferred upon a person in circumstances in which retention by him of that benefit without paying its reasonable value would be unjust.” Erslon v. Vee-Jay Cement Contracting Co., 728 S.W.2d 711, 713 (Mo.App.1987). An essential element of this tort is “a benefit conferred upon the defendant by the plaintiff.” Id. Again, ACLU fails to establish the required element, for as previously discussed, it had no right to the fees and thus conferred no benefit on Miller. The court awarded the attorneys’ fees on behalf of D.C., the plaintiff in the civil rights action, thus it cannot be said that Miller received the money at the expense of ACLU. In this connection we point out that D.C. is not a party to this action and we insinuate nothing as to his rights to the proceeds.⁴

The trial court erred in granting summary judgment in plaintiffs’ favor on each of the three counts. Miller was entitled to summary judgment, as a matter of law on all counts, hence the judgment is reversed and the cause, remanded for further proceedings consistent with this opinion. Miller’s request for an award of costs is denied.

HIGGINS, COVINGTON, BILLINGS and HOLSTEIN, JJ., concur. ROBERTSON, J., dissents. BLACKMAR, C.J., dissents in separate opinion filed.

1 . It should be emphasized that ACLU made no claim in its petition for return of any portion of the salary paid defendant; such was not an issue and was not decided in this case. Further, as noted above, appellant offered to refund a proportional share of the salary, but ACLU refused this offer and the issue fell from consideration. ACLU chose to plead and try an entirely different claim, attempting to enforce an illegal contract for fee-splitting. It was concerned not with recovering the salary paid but instead to enforce the illegal contract and in so doing abrogate the long-established rules of our profession which proscribe this condemned practice of lawyers splitting fees with nonlawyers. Further, the decision does not determine the so-called “ethical conduct" of appellant to which the dissent alludes, or any issue as to possible disputes between appellant and D.C. (or others) concerning the award of fees.

2 . Current Rule 5.4 contains identical language. Exceptions in both rules, not applicable here, involve payments to a lawyer’s estate or inclusion of non-attorney employees in a retirement plan, even though based on profit-sharing.

3 . We note that some states have reached a contrary determination. See Simon, Fee Sharing with Nonlawyers, 98 Yale L.J. 1069, 1073 n. 14 (1989).

4 . The parties attempt to make an issue of whether the fees were awarded to D.C. or to Miller. Although the order of the federal district court expressly awarded the fee to D.C., as is required by federal statute, it is manifestly clear that the award is intended to compensate the attorney representing him, and the City of St. Louis issued the check to Miller according to its standard procedure in such matters.