Bertelsen v. Harris

537 F.3d 1047, 2008 U.S. App. LEXIS 17078, 2008 WL 3271088
CourtCourt of Appeals for the Ninth Circuit
DecidedAugust 11, 2008
Docket06-36020
StatusPublished
Cited by17 cases

This text of 537 F.3d 1047 (Bertelsen v. Harris) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bertelsen v. Harris, 537 F.3d 1047, 2008 U.S. App. LEXIS 17078, 2008 WL 3271088 (9th Cir. 2008).

Opinions

Opinion by Judge BEA; Dissent by Judge MILAN D. SMITH, JR.

BEA, Circuit Judge:

We are called on to decide whether attorney misconduct towards clients, involving violations of rules of professional conduct binding on the attorney, requires forfeiture of the attorneys’ fees paid to them when, after all righteous furor is vented, the fees were eminently reasonable for the result produced.

Jeffrey and Amy Bertelsen, their now-defunct company Bertelsen Food & Gas, Inc., and Jeffrey Bertelsen’s parents Dr. Richard and Janice Jo Bertelsen (“Appellants”), appeal the district court’s judgment after a bench trial in favor of Appellants’ former attorney Roger Harris and his law firm (“Appellees”) on Appellants’ breach of fiduciary duty claims.

Appellants claimed Harris and his firm (1) violated Washington Rule of Professional Conduct (“RPC”) § 5.4(a) by agreeing to share legal fees with a nonlawyer; (2) failed to comply with Washington law when they modified their legal fee agreements during the course of representation; (3) overcharged Appellants by miscalculating their contingency fee and failed to comply with RPC § 1.5(c)(3)’s requirement that at the conclusion of a contingency fee matter, the attorney provide his client with a written statement showing the method of contingency fee calculation; and (4) failed fully to inform Appellants of conflicts of interest in their joint representation and obtain written waivers of the conflicts.

[1049]*1049Appellants sought disgorgement of $167,500 in fees they paid Harris, his firm, and Harris’s non-attorney consultant. The district court determined that, even assuming Harris and his firm breached the fiduciary duties to their clients imposed by the rules of professional conduct for attorneys, the circumstances of this case did not warrant an equitable award of disgorgement of fees.

This case does not call upon us to determine whether Appellees breached their fiduciary duty to their clients as a matter of Washington state law. Nor is this occasion to express opprobrium at an attorney’s failure to abide by the rules of professional responsibility in representing his clients. Rather, our task is a limited one: we must decide whether the district court abused its discretion when it declined to award disgorgement of fees. We hold there was no abuse of discretion.

I.

In the 1990s, Jeffrey and Amy Bertelsen owned six gas stations, which they operated through the now-dissolved Bertelsen Food and Gas, Inc. (“BFG”), a Washington corporation. BFG operated the gas stations under the ARCO brand. BFG ceased operations in December 2000, because it had no money to pay ARCO for gasoline or to pay other vendors for other products. On January 3, 2001, ARCO sent BFG a “notice of termination.” The notice stated ARCO’s intent to terminate its franchise agreements with BFG in 90 days (on April 9, 2001).

Jeffrey and Amy Bertelsen retained attorney Bill Hames for advice on filing for bankruptcy for the Bertelsens individually and for BFG. Hames advised the Bertel-sens to speak with an attorney with experience in the gas franchise industry. In lieu of immediately filing for bankruptcy, Hames and Jeffrey Bertelsen contacted Roger Harris, an Oregon attorney who had gas franchise industry experience.1 Jeffrey Bertelsen sought Harris’s assistance to try to resurrect BFG’s relationship with ARCO, so BFG could get gas from ARCO again and continue to use the ARCO brand name. On March 16, 2001, Hames called Harris to discuss BFG and the ARCO termination notice. On March 19, 2001, Harris contacted Ronald McPherson, a non-attorney client of Harris who has expertise in the gasoline franchise industry, and asked him to consult on the BFG matter.

A. The March 21, 2001 Retainer Agreement

In March 2001, Jeffrey and Amy Bertel-sen signed a retainer agreement (“the March 2001 agreement”) with Harris and his firm, Harris Berne Christensen LLP. The agreement stated the Bertelsens, for and on behalf of BFG, retained Harris and his firm “as attorneys for the purpose of representing and handling any and all legal matters on behalf of[BFG] which may, from time to time, be requested. You have specifically requested that we work to negotiate a resolution of the ARCO franchise terminations and related issues.” The agreement also stated BFG would pay the firm on an hourly basis, at its rates of $150-$195/hour for attorneys. The agreement also required BFG to pay a $10,000 retainer, which the Bertelsens paid on or about April 23, 2001.

Jeffrey and Amy Bertelsen received detailed bills describing services rendered between March 2001 and May 2001, with a breakdown of time spent and hourly rates, from Harris’s firm. They paid these bills [1050]*1050without objection (nor do they claim any breach of fiduciary duty with respect to those bills).

During Spring 2001, it became clear ARCO had no interest in continuing a business relationship with BFG and did not intend to rescind the notice of termination. Indeed, ARCO filed an action against BFG in August 2001 for money due under loan agreements with BFG. The Bertelsens decided they would try to sell the six gas stations as a business solution, to avoid bankruptcy. In May 2001, Jeffrey and Amy Bertelsen asked Harris and McPherson (the non-attorney industry consultant) to seek a buyer for the stations.

B. The May 29, 2001 Corporate Resolution

By May 2001, however, Jeffrey and Amy Bertelsen did not have money to pay hourly attorney or consulting fees. They asked Harris and McPherson if they would work on a contingency fee basis; Harris and McPherson agreed.

Harris then drafted a “Terms of Engagement pursuant to Corporate Resolution (Authorization) and Limited Power of Attorney,” which Jeffrey and Amy Bertel-sen signed on May 29, 2001 on behalf of BFG. The resolution stated BFG retained “the services of’ McPherson and Harris for 90 days (i.e., expiring August 27, 2001). The resolution further stated “Harris and McPherson will be reimbursed for their services associated with the undertaking ... at the rate of 1% of the gross value of any transaction(s) entered into with third parties plus full reimbursement of all out-of-pocket expenses incurred by Harris and McPherson.” The resolution also stated the Bertelsens could terminate the agreement, and Harris and McPherson would be entitled to compensation for work performed at their hourly rates of $195 and $150, respectively. Harris and McPherson agreed to split the contingency fee evenly between themselves (“50/50”).2

C. The September 19, 2001 Corporate Resolution

During the 90-day term of the May 2001 corporate resolution, no buyer for the gas stations was found. As early as July 2001, however, Tesoro Petroleum had expressed interest in doing a deal with BFG, but no offer had come to fruition. At the time of the expiration of the May 2001 corporate resolution on August 27, 2001, Jeffrey and Amy Bertelsen wanted to sign a new contingency fee agreement with Harris and McPherson to continue to try to sell the gas stations. Harris discussed with Jeffrey and Amy Bertelsen the fact the new agreement would be based on a 1.5% contingency (up from 1%).

On September 19, 2001, Jeffrey and Amy Bertelsen, on behalf of BFG, signed a revised corporate resolution and limited power of attorney.

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Cite This Page — Counsel Stack

Bluebook (online)
537 F.3d 1047, 2008 U.S. App. LEXIS 17078, 2008 WL 3271088, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bertelsen-v-harris-ca9-2008.