Scruggs, Millette, Bozeman & Dent, P.A v. Merkel & Cocke, P.A.

• Court: Mississippi Supreme Court
• Decided: March 21, 2003
• Docket: 2003-CA-01322-SCT
• Status: Published

Opinion

IN THE SUPREME COURT OF MISSISSIPPI

NO. 2003-CA-01322-SCT

SCRUGGS, MILLETTE, BOZEMAN & DENT, P.A.

v.

MERKEL & COCKE, P.A., CHARLES M. MERKEL, JR., INDIVIDUALLY AND AS SHAREHOLDER IN MERKEL & COCKE, P.A.; CYNTHIA I. MITCHELL, INDIVIDUALLY AND AS SHAREHOLDER IN MERKEL & COCKE, P.A.; ALWYN H. LUCKEY; AND WILLIAM ROBERTS WILSON, JR., P.A.

DATE OF JUDGMENT: 03/21/2003 TRIAL JUDGE: HON. JAMES H. C. THOMAS, JR. COURT FROM WHICH APPEALED: JACKSON COUNTY CHANCERY COURT ATTORNEY FOR APPELLANT: MARK A. NELSON ATTORNEYS FOR APPELLEES: RICHARD M. THAYER STEPHEN W. BURROW W. LEE WATT JOE R. COLINGO VICKI R. SLATER E. FOLEY RANSON NATURE OF THE CASE: CIVIL - CONTRACT DISPOSITION: ON DIRECT APPEAL: AFFIRMED ON CROSS-APPEAL: DISMISSED AS MOOT - 09/15/2005 MOTION FOR REHEARING FILED: MANDATE ISSUED:

BEFORE WALLER, P.J., EASLEY AND GRAVES, JJ.:

WALLER, PRESIDING JUSTICE, FOR THE COURT:

¶1. This appeal involves a fee dispute between several attorneys. The first attorney, Richard

F. Scruggs (“Scruggs”), is a senior member of the Scruggs, Millette, Lawson, Bozeman & Dent, P.A. (“SMLB&D”), the appellant herein. Back in the 1980s, when mass tort litigation

pertaining to asbestos exposure was gearing up, he formed Richard F. Scruggs, P.A. (Scruggs,

P.A.), to handle many asbestos plaintiffs’ cases. These plaintiffs were allegedly exposed to

asbestos during their employment in Ingalls Shipyard in Pascagoula. Scruggs, P.A., hired

attorney Alwyn H. Luckey (“Luckey”), an appellee,1 to work on the asbestos cases.

¶2. In the meantime, the second attorney, William Roberts Wilson, was also being hired

by potential asbestos plaintiffs. He formed William Roberts Wilson, P.A. (Wilson, P.A.), an

appellee, to handle his asbestos cases.

¶3. Apparently, in the asbestos litigation, a lot of the footwork in developing the cases

involved obtaining “picture books” which contained pictures of each product allegedly

containing asbestos used in the different factories where the asbestos plaintiffs had worked.

There were hundreds, maybe thousands, of products allegedly containing asbestos. When an

asbestos plaintiff retained an attorney, the plaintiff would look at the attorney’s picture book

and identify any product he had seen or used during his employment. The attorney would then

add the manufacturer of that product to his list of defendants. Most asbestos suits had scores

of defendants.

¶4. A second labor-intensive aspect of the asbestos litigation was to acquire several expert

witnesses who would testify, e.g., that the defendant manufacturer made the product between

specific years, that the factory purchased the product in specific years, that the product was

used in specific ways, and that the plaintiff was employed by the factory during the years that

1 Luckey has been dismissed from this matter.

2 the product was in use. Medical expert witnesses were also needed to testify as to how the

exposure to asbestos affected each plaintiff.

¶5. Asbestos plaintiffs’ attorneys and asbestos defendants’ attorneys quickly realized that

sharing information and resources with one another would be time- and cost-effective.

¶6. As two asbestos plaintiffs’ attorneys, Scruggs and Wilson decided to share their

resources and formed another professional association, The Asbestos Group, P.A., to

administer the over 200 asbestos lawsuits they had filed. The documents creating the Asbestos

Group provided that Scruggs, P.A., and Wilson, P.A., would share all profits 50/50. Luckey,

the attorney hired by Scruggs, P.A., began working at the Asbestos Group and, therefore, was

working for both Scruggs and Wilson.

¶7. Sometime in the mid-1980s, a third attorney, Charles M. Merkel, Jr. (“Merkel”), an

appellee, was retained by the William H. Scott family to prosecute their wrongful

death/product liability claims against the asbestos manufacturers. Merkel was a senior

member of the Merkel & Cocke, P.A. (“M&C”), law firm, an appellee herein. Merkel, not

having any asbestos experience, approached Wilson to help him with the Scott lawsuit. Merkel

and Wilson orally agreed to share the Scott lawsuit profits 50/50. Wilson agreed to provide

Merkel with resources and expert witnesses, and Merkel was to prosecute the case. Merkel

then asked Cynthia I. Mitchell (“Mitchell”), an attorney who worked at M&C and who is an

appellee, to develop the Scott case. For all practical purposes, Merkel did not oversee the day-

to-day work done on the Scott file.

¶8. As a discovery deadline in the Scott lawsuit approached, Mitchell told Merkel that they

needed to obtain information on expert witnesses. Relying on his agreement with Wilson,

3 Merkel told Mitchell to call Wilson for that information. The information was provided as per

their agreement.

¶9. Later, before some depositions scheduled in Washington, D.C., Merkel met with

Wilson to discuss strategy. Wilson informed Merkel that he had other business to tend to, but

that Luckey would be able to prepare their expert witnesses and would attend the depositions.

Wilson then introduced Luckey to Merkel, and Luckey performed the preparation for the

depositions. Luckey attended the depositions but did not take part.

¶10. From that point on, it appears that Luckey and Mitchell did most of the work on the

case. Exhibits of record show that, in corresponding with Mitchell, Luckey sometimes used

the Asbestos Group letterhead and sometimes used the Scruggs, P.A., letterhead. Luckey then

entered an appearance and also listed Scruggs as counsel. Apparently, in the early 1990s, the

Asbestos Group became aware that its name could violate a trademark, so Scruggs, P.A., and

Wilson, P.A., stopped using the name “Asbestos Group.” The Asbestos Group did not acquire

a new name, but the agreement between Scruggs and Wilson and the administrative duties of

the Asbestos Group continued.

¶11. On February 26, 1991, Scruggs sent a memo to Luckey as follows:

What are the fee arrangements with Merkel in the Scott case? It appears from the enclosed materials that there is a 1/3 attorney[‘]s fee contract[] to be split equally between Merkel and us. What is not clear is who “us” is. It appears so far that Bob [Wilson] has taken 50% of our 50%. Please explain.

¶12. On August 7, 1992, Wilson, Wilson, P.A., Scruggs, Scruggs, P.A., and Luckey entered

into an agreement which provided that: (1) Wilson, Wilson, P.A., Scruggs, and Scruggs, P.A.,

initially shared ownership of the Group equally; (2) In October of 1988, Wilson, Wilson, P.A.,

4 Scruggs, and Scruggs, P.A., gave Luckey 5% of the stock, thereby decreasing Wilson and

Wilson, P.A.’s interest to 47.5% and decreasing Scruggs and Scruggs, P.A.’s interest to 47.5%;

(3) In 1990, Luckey acquired an additional 10% of the stock, increasing his interest to 15%.

Wilson and Wilson, P.A.’s interest was decreased to 40%, and Scruggs and Scruggs, P.A.’s

interest was decreased to 45%; and (4) The “business relationship . . . existing between Wilson

[and Wilson, P.A.] on one hand and Scruggs [and Scruggs, P.A.] and Luckey on the other hand

is terminated . . . .”

¶13. The Scott case was eventually settled for over $300,000.00. Settlement checks from

the various defendants were received by M&C over the next several years. As the checks were

received, M&C disbursed various sums to various payees: the Scott family, to itself, to

Wilson, to Luckey, to Wilson and Luckey, and to the Asbestos Group. Mitchell testified as

follows: “It was clear to me that they (Wilson or Luckey) didn’t particularly care how checks

were made payable, and different ways over the period of several years, and no one ever called

up and complained that we needed to do something different.”

¶14. In 1993, Scruggs fired Luckey. In April of 1994, Luckey hired M&C to represent him

in a suit against Scruggs and Wilson. This suit was filed in the Circuit Court of Hinds County.

¶15. On September 23, 1994, the Manville Personal Injury Settlement Trust wrote a letter

to Mitchell stating as follows:

Our records indicate your received the discounted settlement as lead counsel for [William H. Scott] in February 1994. The law office of Richard Scruggs has called requesting confirmation of this payment, as they claim to be the co-counsel on this case. The system does not list a co-counsel on this claim. I have not yet

5 pulled the file from the warehouse to verify any information that may be in file but not on the system. I would appreciate it if you could confirm if they are indeed co-counsel for the case and approve their receipt of the payment information for Mr. Scott’s claim.

¶16. On September 23, 1994, Mitchell responded as follows:

In response to your earlier inquiry, this law firm associated William Roberts Wilson, Jr., as co-counsel on this case. Mr. Wilson in some manner associated Alwyn Luckey in this matter. I do not know the arrangements, if any, between Mr. Wilson and Mr. Scruggs regarding this case. Mr. Wilson’s share of the fee has been paid to him.

¶17. After receiving notice of Scruggs’ interest in the Scott proceeds, M&C began

escrowing the money, interpleading it, or writing letters to Wilson, Luckey and Scruggs asking

how to distribute it.

¶18. On September 22, 1997, Scruggs and Scruggs, P.A., assigned any proceeds they might

receive from the Scott settlement to SMLB&D.

¶19. Scruggs filed this suit in the Jackson County Chancery Court against M&C, Merkel,

Mitchell, Wilson, Wilson, P.A., and Luckey, alleging that they tortiously interfered with his

contract with Wilson and Wilson, P.A., and that he is entitled to damages. Following a trial,

the chancellor dismissed Scruggs’ action with prejudice, finding that there was no evidence to

support a finding that Merkel, Mitchell, or M&C intended to harm Scruggs, and that it was

unclear, at best, whether Merkel, Mitchell or M&C had knowledge of Scruggs’ agreements

with Wilson and Luckey.

¶20. Based on the record, we conclude that the decision of whether or not to share their

portion of the Scott proceeds was for Wilson and Luckey to make and that there is absolutely

6 no evidence that M&C, Merkel, and Mitchell had an intention to interfere with Scruggs’

contract or to otherwise harm Scruggs. We therefore affirm the chancellor’s judgment

dismissing Scruggs’ complaint.

DISCUSSION

¶21. The standard of review of questions of law is de novo. Howard v. Totalfina E & P,

U.S.A., 899 So. 2d 882, 885 (Miss. 2005) (citing Miss. Transp. Comm'n v. Fires, 693 So. 2d

917, 920 (Miss. 1997)). We must reverse for erroneous interpretations or applications of law.

Howard, 899 So. 2d at 882 (citing Fires, 693 So. 2d at 920)). We cannot overturn the decree

of a chancellor unless we find with reasonable certainty that the decree is manifestly wrong

on a question of law or interpretation of facts pertaining to legal questions. Howard, 899

So. 2d at 882 (citing In re City of Oak Grove, 684 So. 2d 1274, 1276 (Miss. 1996)).

WHETHER THE CHANCELLOR ERRED IN DISMISSING SCRUGGS’ CLAIM OF INTENTIONAL INTERFERENCE WITH CONTRACT. 2

¶22. Even though Scruggs and Scruggs, P.A., assigned all rights to the settlement proceeds

to SMLB&D, and even though SMLB&D filed this lawsuit, all of the claims arise from Scruggs

and Scruggs, P.A’s relationship with Wilson, Luckey and Wilson, P.A. Therefore, when

discussing SMLB&D’s claim, we refer to the claim as belonging to Scruggs.

2 Scruggs raises two more issues: First, he claims that the doctrines of quantum meruit and implied contract apply to this case; however, the final judgment entered by the chancellor does not address either issue. Second, Scruggs claims that the chancellor should have granted him judgment on the interpled funds; however, the interpled funds were properly transferred to the Hinds County litigation. Both of these claims are without merit.

7 ¶23. In order to prevail on a claim for intentional interference with contract, a plaintiff must

establish (1) that the acts were intentional and willful; (2) that they were calculated to cause

damage to the plaintiff in his/her lawful business; (3) that they were done with the unlawful

purpose of causing damage and loss, without right or justifiable cause on the part of the

defendant (which acts constitute malice); and (4) that actual damage or loss resulted. Par

Indus., Inc. v. Target Container Co., 708 So. 2d 44, 48 (Miss. 1998).3

¶24. The chancellor found that Scruggs established that he had suffered actual damage or loss

(loss of 50% of the attorney’s fees acquired through the settlement of the Scott case because

Wilson and Luckey did not share with Scruggs, Scruggs, P.A., or the Asbestos Group their

portion of the attorney’s fees), but that Scruggs failed to make a prima facie case of intentional

interference with a contract.

¶25. First, the chancellor found that Merkel, M&C and Mitchell had not acted intentionally

or with malice when they did not include Scruggs, Scruggs, P.A., or the Asbestos Group in their

disbursements. This finding is amply supported by the evidence which clearly shows that

Wilson, Wilson, P.A., and Luckey were the ones who had the duty to share attorney’s fees with

Scruggs, Scruggs, P.A., or the Asbestos Group, and that they, not Merkel, M&C or Mitchell,

violated that duty. Indeed, Wilson admitted that he did not share some of his disbursements

with Scruggs because he felt that he had not gotten his fair share when the agreement between

3 Scruggs’ only claim against any of the defendants is that of tortious interference with a contract. A party to a contract cannot be liable for tortious interference with the same contract. Only a party independent of the contract can cause another to breach a contract. Par Industries, Inc. v. Target Container Corp., 708 So. 2d 44, 48 (Miss. 1998). Therefore, Scruggs’ complaint fails against Wilson, P.A., a party to the contract.

8 Wilson, P.A., and Scruggs, P.A., dissolved. A plaintiff claiming intentional interference with

a contract must prove that “the contract would have been performed but for the alleged

interference.” Par Indus., 708 So. 2d at 48. There is absolutely no evidence that Merkel told

Wilson not to pay Scruggs because Wilson had not gotten his fair share from Scruggs.

¶26. Texas courts require that an additional element 4 be shown in order to prove intentional

interference with a contract, and we find that this additional element is impliedly required by

Mississippi courts. Texas courts require a showing that the defendant’s acts were the

proximate cause of the loss or damage suffered by the plaintiff. See, e.g., Browning-

Ferris, Inc. v. Reyna, 865 S.W.2d 925, 926 (Tex. 1994). It is clear that Wilson and Luckey’s

actions were the proximate cause of Scruggs, P.A. and Scruggs’ losses, not anything Merkel

might have done or failed to do.

¶27. Finally, when Mitchell discovered that Scruggs or Scruggs, P.A., believed that it had a

claim to part of the settlement proceeds, M&C began escrowing or interpleading all

disbursements, or writing letters to Wilson, Luckey and Scruggs asking for directions on how

to distribute the funds.

¶28. Scruggs argues that intent may be implied when the “defendant knows of the existence

of a contract and does a wrongful act without legal or social justification that he is certain or

substantially certain will result in interference with the contract.” Par Indus., 708 So. 2d at

48. The chancellor correctly held that more than basic awareness of an association between

4 The Texas elements are: the existence of a contract subject to interference, a willful and intentional act of interference, actual damages or losses, and the willful and intentional acts being the proximate cause of the actual damages or losses. Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 926 (Tex. 1994).

9 two lawyers is necessary to constitute a finding of intentional interference with a contract. It

is clear that Merkel, M&C and Mitchell did not have knowledge of the existence of the

agreement between Wilson, P.A. and Scruggs, P.A. They did have knowledge of the fact that

Luckey worked in Scruggs’ office and that he sometimes used Scruggs, P.A. letterhead. But

Luckey explained away those disparities by stating that he worked for the Asbestos Group and

that the Asbestos Group could not continue to use that name. Because he could not use

Asbestos Group letterhead, he used Scruggs, P.A., letterhead. These circumstances do not

constitute actual or implied knowledge of the contract between Wilson, P.A., and Wilson, P.A.

Indeed, any rational person would be confused by all of the convoluted relationships under

which the asbestos claims were handled.

¶29. For intent to be implied, a plaintiff must show that the defendant knew of the existence

of a contract and did a wrongful act without legal or social justification that he was certain or

substantially certain would result in interference with the contract. Par Indus., 708 So. 2d at

48. The United States District Court for the Southern District of Mississippi has held that “it

is equally established that the interference complained of must be wrongful in order to be

actionable and that any interference is not wrongful and actionable if undertaken by someone

in the exercise of a legitimate interest or right, which constitutes ‘privileged interference.’”

Martin v. Texaco, Inc., 304 F. Supp. 498, 502 (S.D. Miss. 1969). Here, Merkel entered into

an agreement with Wilson to assist Merkel with the Scott case. As part of the agreement,

Merkel was required to pay Wilson, and only Wilson. Therefore, even if Merkel had

knowledge of an agreement between Scruggs and Wilson and Merkel’s act of paying Wilson

constituted interference, Merkel was still required to split the fees from the Scott case under

10 the Merkel-Wilson agreement and had a legitimate right to do so. In other words, although

Merkel’s payment to Wilson may have interfered with the Scruggs-Wilson agreement, Merkel

had a legitimate right to pay Wilson and, as such, Merkel’s actions constituted a privileged

interference.

¶30. Scruggs’ own actions belie his claims. Even after he had notice of the Scott settlement

as evidenced by his 1991 interoffice memorandum to Luckey, Scruggs never contacted anyone

at M&C to inform them that the funds were not being disbursed correctly.

¶31. Finally, there is no evidence that the disbursements were made to Wilson, Wilson, P.A.,

Luckey or the Asbestos Group in order to cause damage or loss to Scruggs or Scruggs, P.A.

There is no evidence of any ill will or malice between Merkel, M&C and Mitchell on the one

hand and Scruggs or Scruggs, P.A., on the other. Indeed, if there was any ill will or malice

between these parties, it arose after Scruggs attempted to have M&C disqualified in the Hinds

County action and, when the motion to disqualify was denied, Scruggs filed the instant lawsuit

against Merkel, M&C and Mitchell.

¶32. Scruggs’ claim of intentional interference with contract was properly dismissed by the

learned chancellor.5

CONCLUSION

¶33. Although the evidence supporting the chancellor’s decision is substantial, most telling

is the fact that Scruggs knew of the Scott settlement disbursements as early as 1991, and he

5 In a cross-appeal, Merkel, Mitchell and M&C argue that SMLB&D had no standing to bring this lawsuit and that the statute of limitations had run on SMLB&D’s claims before it filed this lawsuit. Because we find that the chancellor was correct in dismissing the lawsuit, we dismiss the cross-appeal as moot.

11 did absolutely nothing to assert and protect his claims until after Luckey filed the lawsuit

against Scruggs. The chancellor found that Scruggs’ claim had no merit, and that, indeed, what

little proof was offered to support his claim, amounted to nothing more than conjecture and

assumptions. We affirm the chancellor’s judgment dismissing Scruggs’ complaint.

¶34. ON DIRECT APPEAL: AFFIRMED. ON CROSS-APPEAL: DISMISSED AS MOOT.

SMITH, C.J., COBB, P.J., EASLEY AND DICKINSON, JJ., CONCUR. GRAVES, J., CONCURS IN RESULT ONLY. DIAZ, CARLSON AND RANDOLPH, JJ., NOT PARTICIPATING.