In re Distribution of Attorney's Fees Between Stowman Law Firm, P.A.

870 N.W.2d 755, 2015 Minn. LEXIS 627, 2015 WL 6498389
CourtSupreme Court of Minnesota
DecidedOctober 28, 2015
DocketNo. A13-2225
StatusPublished
Cited by15 cases

This text of 870 N.W.2d 755 (In re Distribution of Attorney's Fees Between Stowman Law Firm, P.A.) is published on Counsel Stack Legal Research, covering Supreme Court of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Distribution of Attorney's Fees Between Stowman Law Firm, P.A., 870 N.W.2d 755, 2015 Minn. LEXIS 627, 2015 WL 6498389 (Mich. 2015).

Opinions

OPINION

DIETZEN, Justice.

Appellant Stowman Law Firm, P.A. (Stowman), which represented a client pursuant to a contingent-fee agreement, voluntarily withdrew from the representation of the client when efforts to settle the case failed. The client retained substitute counsel who then successfully settled the case. Stowman brought an action to recover in quantum meruit the value of the services provided pi'ior to the 'withdrawal. Following a bench trial, the district court found that Stowman failed to establish good cause for withdrawal and, therefore, was not entitled to recover in quantum meruit. The court of appeals affirmed. We conclude that an attorney may withdraw from a contingent-fee agreement with or without cause, provided that the withdrawal satisfies the rules of professional responsibility. But the attorney must establish that the withdrawal is for good cause in order to recover in quantum meruit the reasonable value of the services rendered prior to withdrawal. Because Stowman failed to establish good cause, we affirm.

In July 2007 Stowman entered into a contingent-fee agreement to represent a client in a medical-malpractice claim against a doctor based on a one-third contingent fee, plus reimbursement for out-of-pocket expenses. The contingent-fee agreement, which is only three-quarters of a page in length, permitted Stowman to “withdraw from representation of this agreement,” if “after reasonable investigation of [the] claim” and notice to the client, it “determine[d] that it is not feasible to prosecute [the] claim.” The agreement also states that no settlement may be made without the client’s consent, and provides in relevant part that the client agreed to pay Stowman for its services one-third “of the gross amount recovered.” [757]*757“If there is no recovery, by either settlement or verdict, [the client] shall not be indebted to said attorneys for services rendered, and there shall be no attorney’s fees paid.”

Over the next 2 years Stowman investigated the facts and reviewed the law to determine whether there was a basis for a medical-malpractice claim against the doctor. Stowman completed its investigation and decided to proceed with the case. To support its- theory of the case, Stowman retained expert, witnesses to provide favorable testimony on liability and damages. Stowman did not file a lawsuit or conduct any formal discovery.

In December 2009 the parties participated in mediation to resolve the case. Stow-man agreed to present a settlement demand of $1.6 million at the mediation even though the Stowman lawyer responsible for the case believed the demand was too high. The mediation recessed without reaching a settlement. The next day, the mediator notified Stowman that the doctor would offer $100,000 if that amount would settle the claim. Stowman repeatedly ad-vised the client to accept the offer, but the client declined to do so. Stowman subsequently told the client that the firm would withdraw if the case was--not settled by January 1, 2010. ■

During the same time period, Stowman. sought an advisory opinion from the Office of Lawyers Professional Responsibility (OLPR) on how to ethically withdraw from the client’s case. As part of that exchange, the Stowman lawyer forwarded notes of a conversation with the client, which stated:

I have a client whose expectations I will be unable' to meet. She has compromised to $1.4 million. The defense has offered $100,000.00, which is the high end of my evaluation of her damages and settlement value. I plan- to withdraw from her representation if she does not accept the settlement offer.

The OLPR advised Stowman to follow the process to decline or terminate representation set forth in -Minn. R. Prof. Conduct 1.16(b).

On January 4, 2010, Stowman verbally notified the client that it was withdrawing from representation. In a letter to the client the next day, 'the Stowman lawyer stated:

I do not think I can obtain a better result, either through continued negotiations, mediation, or at trial than the $100,000.00 offer from the defense. Therefore, I must withdraw immediately to allow you the opportunity to find an attorney whose evaluation of your claim is consistent with yours.

No other reasons for withdrawal were stated in the letter, or in other documents, between the mediation and the withdrawal.

Thereafter, the client retained respondent Lori Peterson Law Firm (Peterson) as substitute legal counsel to represent her pursuant to a 40-percent contingent-fee agreement: Subsequently, Peterson successfully ' negotiated a settlement of the claim for $200,000.

When Stowman learned of the settlement, it filed and served an attorney’s lien, and asked the defendant’s attorney to name Stowman on the settlement draft in order to protect its fee interest. In February 2011 the client and the defendants entered into a confidential settlement agreement and-mutual full and final release of all claims. The settlement agreement provided, among Other things, that in consideration of the settlement terms, which included any claim for attorney fees, the -client released the defendants and other releasees. Additionally, the 'client had 30 days to negotiate a resolution of any attorney liens, and if the negotiation was [758]*758unsuccessful, a check in the amount of $200,000 payable to the client, Peterson, and Stowman would be delivered to Peterson’s attorney.

Separately, the client, Peterson, and Stowman entered into a distribution agreement that established a process to facilitate the distribution of the settlement proceeds to the client pending resolution of the fee dispute between Peterson and Stowman. The agreement provided in relevant part:

40% of the total settlement will be placed into Lori Peterson’s law firm trust account. The costs claimed as advanced by these two law firms will also be placed into that trust account. None of these amounts will be distributed without a final order of the court or arbitrator in the fee dispute between Lori Peterson and the Stowman Law Firm, or by mutual consent of Lori Peterson and the Stowman Law Firm.
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The balance of the settlement proceeds will be paid to [the client].

The amount of the contingent fee and costs claimed by Stowman and Peterson was deposited into Peterson’s trust account; the balance of the settlement proceeds was paid to the client.

Because the client was unable to resolve the contingent-fee dispute between Stow-man and Peterson, Stowman petitioned the district court for recovery of the costs advanced and for an equitable distribution of the contingent fees. Stowman sought a division of the fees based on the value of the services the firm rendered to the client prior to its withdrawal, under a theory of quantum meruit. The district court denied Peterson’s motion for summary judgment and the matter proceeded to a bench trial. The district court limited the trial to whether Stowman “rightfully withdrew from representation” so as to be entitled to recover in quantum meruit. The court found that Stowman withdrew because the client failed to follow Stowman’s recommendation to accept the offer of settlement, which was based on the firm’s belief that a better offer could not be obtained at trial. The court concluded that Stowman failed to establish good cause for its withdrawal and therefore could not recover in quantum meruit.

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Bluebook (online)
870 N.W.2d 755, 2015 Minn. LEXIS 627, 2015 WL 6498389, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-distribution-of-attorneys-fees-between-stowman-law-firm-pa-minn-2015.