Stein v. Farmers Insurance Company of Arizona

• Court: District Court, S.D. California
• Decided: May 17, 2024
• Docket: 3:19-cv-00410
• Status: Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 Case No.: 19-cv-00410-DMS-AHG BARBARA STEIN, an individual, 11 ORDER DETERMINING THE 12 Plaintiff, AMOUNT OF ATTORNEYS’ FEES PLAINTIFF OWES FORMER 13 v. COUNSEL 14 FARMERS INSURANCE COMPANY 15 OF ARIZONA, a corporation, 16 Defendant. 17

18 Pending before the Court is Plaintiff Barbara Stein’s (“Plaintiff”) motion for 19 determination of attorneys’ fees. (Plaintiff’s Mot. for Determination of Attorneys’ Fees, 20 (“Pl.’s Mot.”), ECF No. 333.) Plaintiff’s Former Counsel, Michael Poli and Michael Dicks 21 (“Former Counsel”) filed a response in opposition to the motion, (Former Counsel’s 22 Response in Opposition to Plaintiff’s Motion, (“Former Counsel’s Opp’n”), ECF No. 337), 23 and Plaintiff filed a reply. (ECF No. 339.) 24 I. BACKGROUND 25 This matter involves a dispute as to the amount of attorneys’ fees owed to Plaintiff’s 26 Former Counsel in their representation of her insurance bad faith case against Defendant 27 Farmers Insurance Company of Arizona (“Defendant” or “FICA”). Plaintiff Barbara Stein 28 and her husband, former plaintiff Stuart Stein, are residents of New Mexico. On September 1 9, 2018, Plaintiff and her husband were involved in an automobile accident in Colorado in 2 which an uninsured driver rear-ended the Steins’ vehicle at a speed of nearly 70 miles per 3 hour. The Steins sustained injuries from this collision. The Steins were insured by FICA, 4 an Arizona insurer with its principal office in California. Plaintiffs initially hired Joseph 5 Dicks from Dicks & Workman (D&W), a California based law firm, to represent them in 6 their insurance bad faith claim against FICA under New Mexico’s Unfair Claims Practices 7 Act. The Steins incurred approximately $327,560 in hourly fees to D&W. When it became 8 clear the case was going to trial in San Diego, California, the Steins hired Michael Poli of 9 Poli, Moon, & Zane PLLC (“PMZ LLC”) and Michael Dicks of Dicks & Coglianese 10 (“D&C”) (together “Former Counsel”) to represent them in their claims against FICA. On 11 May 27, 2021, two months before trial, the Steins entered into a retainer agreement with 12 Mr. Poli, the only attorney signatory on the retainer agreement. The retainer agreement 13 stated that Former Counsel would accept all risks in the case in exchange for 40% of the 14 gross amount recovered. The agreement further provided that Former Counsel would split 15 the fees recovered with PMZ LLC taking 60% and D&C taking 40% of the fees recovered. 16 Former Counsel successfully represented Plaintiff in an eight-day jury trial in this 17 Court that concluded on August 5, 2021. The jury returned a favorable verdict for Plaintiff 18 and awarded her $2,500,000 in compensatory damages, $500,000 in contractual damages, 19 and $3,000,000 in punitive damages. The parties filed multiple post-trial motions and 20 objections. The Court issued an Order on January 24, 2022, in which the Court, in relevant 21 part: denied FICA’s post-trial motions; remitted punitive damages to $500,000; awarded 22 $776,222.37 in pre-judgment interest; and awarded Plaintiff attorneys’ fees from FICA in 23 the amount of $1,322,779.21, or 40% of the adjusted jury verdict.1 (ECF No. 302.) 24 Subsequently, FICA appealed the jury’s verdict to the Ninth Circuit. Former Counsel 25

26 1 The Court calculated an attorneys’ fees award of $1,322,779.21, or 40% of $3,306,948.02, which is the 27 total remitted damages award minus: (1) $175,000 advance payment by FICA to Plaintiff, (2) $9,869.98 reimbursement to Medicare, and (3) $8,182.00 for payments by FICA under the medical payments 28 1 successfully represented Plaintiff through the appeal and the Ninth Circuit affirmed the 2 jury’s verdict and judgment. 3 On November 2, 2023, FICA’s appellate attorney informed Former Counsel that FICA 4 was ready to pay the judgment. The next morning, Mr. Stein emailed Former Counsel 5 attempting to void the retainer agreement under California Business and Professions Code 6 Section 6147 because the agreement did not include a “statement that the fee is not set by 7 law but is negotiable between attorney and client” as required by California law. Cal. Bus. 8 & Prof. Code § 6147(a). Notably, the retainer agreement did not include a choice-of-law 9 provision. Thus, the heart of the instant motion is whether California or New Mexico law 10 applies to the retainer agreement which was signed by Mr. Poli, a licensed attorney in 11 Arizona, and the Steins, New Mexico residents, in relation to Former Counsel’s 12 representation of the Steins in their claims against FICA, an Arizona insurer. 13 Plaintiff argues the Court must apply California law and void the retainer agreement 14 under Section 6147. Additionally, Plaintiff argues that if the Court voids the retainer 15 agreement under California law, the Court should limit Former Counsel’s recovery to 16 $1,322,779.21, or 40% of the total damages recovered, the amount the Court ordered FICA 17 to pay in attorneys’ fees. (ECF No. 302.) Former Counsel argues the Court must apply 18 New Mexico law and enforce the contract as written thereby awarding Former Counsel 19 40% of the gross amount recovered. In the alternative, Former Counsel contends that even 20 if the Court were to void the retainer agreement under California or New Mexico law, the 21 Court should award Former Counsel 40% of the gross amount recovered as reasonable 22 compensation for their services. 23 Ultimately, to render a binding judgment in this matter, the Court must determine: (1) 24 whether the Court has subject matter jurisdiction over the instant motion; (2) which state’s 25 law applies to the retainer agreement; and (3) whether the retainer agreement is enforceable 26 under the applicable state’s law. 27 // 28 // 1 II. DISCUSSION 2 A. Ancillary Jurisdiction 3 Federal courts are courts of limited jurisdiction. See, e.g., Louisville & Nashville R.R. 4 v. Mottley, 211 U.S. 149 (1908). The party bringing the motion has the burden of proving 5 the court has jurisdiction over the instant matter. Kokkonen v. Guardian Life Ins. Co. of 6 Am., 511 U.S. 375, 377, (1994). If there is no diversity, federal question, or other 7 independent basis for jurisdiction, a party may ask a federal court to invoke the doctrine of 8 ancillary jurisdiction. “The doctrine of ancillary jurisdiction . . . ‘recognizes federal courts’ 9 jurisdiction over some matters (otherwise beyond their competence) that are incidental to 10 other matters properly before them.” K.C. ex rel. Erica C. v. Torlakson, 762 F.3d 963, 968 11 (9th Cir. 2014) (quoting Kokkonen, 511 U.S. at 378). 12 The Court does not have original jurisdiction over the instant motion. Thus, Plaintiff 13 asks the Court to exercise ancillary jurisdiction over the instant motion and resolve the 14 dispute for attorneys’ fees between Plaintiff and her Former Counsel. Defendants do not 15 dispute the Court’s authority to exercise such jurisdiction. Because “[t]here is no debate 16 that a federal court properly may exercise ancillary jurisdiction ‘over attorney fee disputes 17 collateral to the underlying litigation,’” the Court exercises ancillary jurisdiction over the 18 instant motion. K.C. ex rel. Erica C., 762 F.3d at 968 (quoting Fed. Sav. & Loan Ins. Corp. 19 v. Ferrante, 364 F.3d 1037, 1041 (9th Cir. 2004)); see Curry v. Del Priore, 941 F.2d 730, 20 731 (9th Cir. 1991) (“Determining the legal fees a party to a lawsuit properly before the 21 court owes its attorney, with respect to the work done in the suit being litigated, easily fits 22 the concept of ancillary jurisdiction.”) (quoting Jenkins v. Weinshienk, 670 F.2d 918 (10th 23 Cir. 1982)). The Court now addresses the merits of the instant motion. 24 B. Choice of Law 25 “A federal court sitting in diversity applies the conflict-of-law rules of the state in 26 which it sits.” Sarver v. Chartier, 813 F.3d 891, 897 (9th Cir. 2016). A federal court 27 exercising ancillary jurisdiction, must “apply the law of the forum state to the same extent 28 as if it were exercising its diversity jurisdiction.” Paulsen v. CNF, Inc., 559 F.3d 1061, 1 1080 (9th Cir. 2009) (citing Bass v. First Pac. Networks, Inc., 219 F.3d 1052, 1055 n.2 (9th 2 Cir. 2000)). Because this Court sits in California, the Court must apply California’s choice- 3 of-law rules to determine which state law governs the retainer agreement. The Ninth 4 Circuit acknowledges that there appears to be a dispute among California courts as to 5 whether California’s choice of law rule for contracts is the common law governmental 6 interest test or the statutory test under Cal. Civ. Code Section 1646. Arno v. Club Med Inc., 7 22 F.3d 1464, at 1468 n.6 (9th Cir. 1994). The common law governmental interest test is 8 a three-part test that requires the Court to consider whether the two states’ laws differ and 9 if so, examine each state’s interest in applying its law to the case at hand. Id. at 1467. The 10 statutory analysis test under Cal. Civ. Code Section 1646 states that “A contract is to be 11 interpreted according to the law and usage of the place where it is to be performed; or, if it 12 does not indicate a place of performance, according to the law and usage of the place where 13 it is made.” Id. (quoting Cal. Civ. Code § 1646). 14 In analyzing questions of state law, federal courts are bound by the decisions of the 15 state’s highest court. U. Broth. of Carpenters & Joiners of Am. Loc. 586 v. N.L.R., 540 16 F.3d 957, 963 (9th Cir. 2008). “Where the state’s highest court has not decided an issue, 17 the task of the federal courts is to predict how the state high court would resolve it.” 18 Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986). “If there is relevant 19 precedent from the state’s intermediate appellate court, the federal court must follow the 20 state intermediate appellate court decision unless the federal court finds convincing 21 evidence that the state’s supreme court likely would not follow it.” Ryman v. Sears, 22 Roebuck and Co., 505 F.3d 993, 994 (9th Cir. 2007) (emphasis omitted). 23 In Chen v. L.A. Truck Centers., LLC, the California Supreme Court held that “In 24 California, ‘general choice-of-law rules have been formulated by courts through judicial 25 decisions rendered under the common law, rather than by legislature through statutory 26 enactments.’” 7 Cal.5th 862, 867 (2019) (quoting McCann v. Foster Wheeler LLC, 48 27 Cal.4th 68, 83 (2010)). Although the California Supreme Court has not explicitly held that 28 the governmental interest test supplants the statutory analysis, the California Supreme 1 Court has not cited the statutory analysis since it adopted the governmental interest 2 approach outlined in Reich v. Purcell, 67 Cal. 2d 551 (1967), and summarized in Chen. 3 See Pep Boys Manny Moe & Jack of Cal. v. Old Rep. Ins. Co., 98 Cal. App. 5th 329, 347 4 (2023) (citing Reich, 67 Cal.2d at 551 [adopting governmental interest approach in tort 5 case]; Bernkrant v. Fowler, 55 Cal.2d 588, 594-96, (1961) [examining governmental 6 interests in a contract case]; Beneficial Fire & Casualty Ins. Co. v. Kurt Hitke & Co., 46 7 Cal.2d 517, 526 (1956) [last California Supreme Court case to cite § 1646].) 8 In the absence of an explicit ruling from the California Supreme Court that the 9 governmental interest test supplants the statutory analysis, intermediate appellate courts 10 have attempted to clarify if and when each test applies. In Frontier Oil Corp v. RLI Ins. 11 Co., a California appellate court held that the statutory analysis test applies when a court 12 seeks to interpret a contract and the governmental interest analysis applies to all other 13 choice of law issues. 153 Cal. App.4th 1436, 1459 (2007). Frontier Oil’s clarification has 14 yet to be confirmed or challenged by the California Supreme Court, however, it has been 15 adopted by lower courts in California and district courts in the Ninth Circuit. See, e.g., 16 Kelly v. Teeters, 2014 WL 6698787 at *8 (Cal. App. Nov. 26, 2014); Farmers Ins. Exch. 17 v. Veveriros, 2011 WL 1535404 at *5 n.1 (Cal. App. April 25, 2011); Schoelle Corp. v. Ag. 18 Ins. Co., 2012 WL 4244157 at *6 (Cal. App. Sept. 21, 2012); James River Ins. Co. v. 19 Medolac Lab., 290 F. Supp.3d 956, 964 (C.D. Cal. 2018); CSNK Working Cap. Fin. Corp. 20 v. Next Creation Holdings, No. 17-cv-00305-HRL, 2018 WL 276815 at *4 n.3 (N.D. Cal. 21 Jan. 3, 2018); Human Res. Adv., LLC. v. Hanover Ins. Co., No. 1:21-cv-01610-JLT-BAM, 22 2022 WL 1214899 at *6 (E.D. Cal. Apr. 25, 2022). 23 In Pep Boys, a California appellate court hinted that Frontier Oil’s clarification 24 might be dicta, however, the court ultimately applied Frontier Oil’s analysis and declined 25 to make a definitive ruling regarding which choice of law analysis applies to contract 26 disputes. 98 Cal. App.5th 329 at 347 (“we need not wade into those deep waters and 27 determine which choice of law analysis governs”). Until the California Supreme Court or 28 another California appellate court provides clear guidance regarding which choice of law 1 test to apply to contract disputes, the Court will follow the leading state intermediate 2 appellate court decision. Thus, the Court adopts Frontier Oil’s determination that the 3 statutory analysis test applies to questions of contract interpretation and the governmental 4 interest test applies to all other choice of law issues. 5 Applying Frontier Oil’s clarification, Former Counsel contends the Court need not 6 apply the statutory analysis under California Civil Code Section 1646 because Plaintiff 7 “does not seek to interpret the Fee Agreement but to void it.” (Former Counsel’s Response 8 at 13) (emphasis added). “California courts apply the choice-of-law rules found in 9 California Civil Code § 1646 to questions of contract interpretation, and the governmental 10 interest test to questions other than interpretation, such as acceptance, rejection, and 11 revocation.” CSNK Working Cap. Fin. Corp., 2018 WL 276815 at *4 n.3. Plaintiff seeks 12 to void the contract under California Business and Professions Code Section 6147; thus, 13 the Court finds that Cal. Civ. Code Section 1646 does not apply to the instant motion. The 14 Court will analyze the facts under the governmental interest test to determine if California 15 or New Mexico law governs the retainer agreement.2 16 i. Governmental Interest Test 17 California’s common law “governmental interest analysis” requires the Court to 18 consider which state has the greatest interest in governing the contract absent a choice-of- 19 law provision. Reich, 67 Cal.2d at 511. The governmental interest analysis test is 20 comprised of three steps: 21 First, the court must determine whether the substantive laws of California and the foreign jurisdiction differ on the issue before it. Second, if the laws do differ, then 22 the court must determine what interest, if any, the competing jurisdictions have in 23 the application of their respective laws. If only one jurisdiction has a legitimate 24

25 26 2 The parties do not contend that Arizona law applies to the retainer agreement, thus, the Court only addresses the parties’ arguments regarding the application of California or New Mexico law. It is worth 27 noting that the retainer agreement is enforceable under both Arizona and New Mexico law as neither Arizona nor New Mexico requires a retainer agreement to include the specific contractual language stated 28 1 interest in the application of its rule of decision, there is a ‘false conflict’ and the law of the interested jurisdiction is applied. But if more than one jurisdiction has a 2 legitimate interest, the court must move to the third stage of the analysis, which 3 focuses on the ‘comparative impairment’ of the interested jurisdictions. 4 Cooper v. Tokyo Elec. Power Co. Holdings, 960 F.3d 549, 559 (9th Cir. 2020). 5 A. First Step: Material Difference 6 The Court must first determine if New Mexico’s law on retainer agreements materially 7 differs from California’s law. A material difference of law exists if application of the 8 states’ laws would lead to different results. McCann, 48 Cal.4th 68, 88-90 (2019). Plaintiff 9 asks the Court to apply California’s Business and Professions Code Section 6147 which 10 sets multiple requirements for retainer agreements, including the requirement that such 11 agreements contain a statement “that the fee is not set by law but is negotiable between 12 attorney and client.” Cal. Bus. & Prof. Code § 6147. Under New Mexico law, by contrast, 13 the retainer agreement need not include this specific contractual language to be 14 enforceable. Because the retainer agreement failed to include the specific contractual 15 language required under California law, the contract is void under California law but 16 enforceable under New Mexico law. Thus, a true conflict exists, and the Court must 17 determine whether each state has an interest in the outcome of this motion. 18 B. Second Step: Each State’s Interest in Having its Law Applied 19 Under the second step of the governmental interest analysis, the Court must determine 20 “what interest, if any, each state has in having its own law applied to the case.” WA Mutual 21 Bank, FA v. Sup. Ct., 24 Cal. 4th 906, 910 (2001). “In assessing each state’s interest in 22 having its law applied, this Court must examine the policies underlying each state’s rule of 23 law.” Columbia Cas. Co. v. Gordon Trucking, Inc., 758 F. Supp.2d 909, 916 (N.D. Cal. 24 Dec. 13, 2010) (citing Offshore Rental Co., Inc. v. Continental Oil Co., 583 P.2d 721, 724- 25 25 (1978)). If the Court finds that only one state has an interest in having its own law 26 applied, the Court need not proceed to step three and determine “whose interest would be 27 ‘more impaired’ if its laws were not applied.” WA Mut. Bank, 24 Cal. 4th at 910 (citations 28 omitted). 1 The Court finds that New Mexico has an interest in applying its law to the retainer 2 agreement. The retainer agreement was negotiated and accepted in New Mexico between 3 New Mexico residents and their Arizona attorneys regarding representation of the Steins 4 in their claims against an Arizona insurer under New Mexico’s bad faith insurance statutes. 5 Certainly, New Mexico has an interest in protecting its residents when they contract with 6 out of state attorneys. See Jacobs v. Taylor, Civ. No. 22-135 SCY/LF, 2022 WL 14008463 7 (D. N. M. Oct. 24, 2022) (“New Mexico [] has a strong public policy interest in regulating 8 the attorneys that practice in New Mexico, represent New Mexico clients, and conduct New 9 Mexico UCC filings.”) 10 By contrast, the only connection California has to the parties and underlying facts is 11 the fact that the trial was held in federal court in San Diego, California. California’s law 12 seeks to “benefit and protect clients by informing them at the outset of the representation 13 in a signed writing, inter alia, of the amount of attorney fees they will incur under fee for 14 service and contingency fee agreements.” Missakian v. Amusement Indus., Inc., 69 Cal. 15 App. 5th 630, 644 (Cal. App. 2021). However, the Court finds that the California 16 legislature did not intend this statute to apply to contracts between New Mexico residents 17 and Arizona attorneys. See Columbia Cas. Co. v. Gordon Trucking, Inc., 758 F. Supp.2d 18 909, 916 (finding that California has no interest in applying its law to an insurance contract 19 between an Illinois corporation doing business with a Washington Corporation). While it 20 is true that generally, “as the forum state, California has an interest in applying its law to 21 this case,” the Court finds California does not have an interest in governing the contract in 22 dispute because the parties do not have any connection to California. Costco Wholesale 23 Corp. v. Liberty Mut. Ins. Co., 472 F. Supp.2d 1183, 1201 (S.D. Cal. 2007) (“Generally, 24 parties seeking to invoke California law have genuine connections to the state.”) (citing 25 Rosenthal v. Fonda, 862 F.2d 1398, 1402 (9th Cir. 1988)); Columbia Cas. Co., 758 F. 26 Supp.2d at 916 (citations omitted). 27 Plaintiff argues that California has an interest in applying its law to the retainer 28 agreement because Mr. Poli, a licensed Arizona attorney, appeared pro-hac vice in this 1 Court, and therefore, “has subjected himself to California’s professional standards and 2 sanctions including those related to the validity of the retainer agreements” pursuant to 3 Local Rule 83.3. (Pl.’s Mot. at 17.) However, Plaintiff does not cite any authority and the 4 Court is not aware of any authority supporting this proposition.3 Local Rule 83.3(4) 5 discusses requirements and procedures for out of state attorneys wishing to appear pro hac 6 vice in the Southern District of California. The rule states that attorneys seeking pro hac 7 vice admission must “adhere to this court’s rules, including without limitation, the Court’s 8 Code of Conduct under Civ. L.R. 2.1 and Crim L.R. 2.1 . . . .” Civ. L. R. 83.3(4). Contrary 9 to Plaintiff’s assertion, the local rules do not state that attorneys appearing pro hac vice are 10 subject to California’s state law requirements on retainer agreements, including Section 11 6147. See Grant & Eisenhofer, No. CV 17-5968 PSG (PJWx), 2018 WL 3817859 at *3 12 (C.D. Cal. Mar. 27, 2018) (finding that “§ 6147 is not properly applicable through the Local 13 Rules”). Plaintiff fails to cite any federal rule, circuit rule, or local rule that subjects Mr. 14 Poli to Section 6147. Thus, the Court finds Mr. Poli was not subject to Section 6147 by 15 appearing pro hac vice in the underlying matter. 16 Ultimately, Plaintiff’s argument that California has any interest in governing this 17 retainer agreement is tenuous at best and calculated at worst. Although the trial was held 18 in California, it is worth noting that it was held in federal court applying New Mexico 19 substantive law. Because California has no interest in the parties or subject matter as they 20 relate to the facts of this case, the Court declines to apply California law for the first time 21 in this matter to a post-judgment motion for determination of attorneys’ fees between New 22 Mexico residents and Arizona attorneys. See Hurtado v. Sup. Ct., 11 Cal.3d 574, 670 23 (1974) (“When one of two states related to a case has a legitimate interest in the application 24 25 3 Plaintiff cites California Rules of Court, Rule 9.40(f), to support her argument that an out of state attorney 26 admitted to appear pro hac vice in a California court is subject to California’s Business and Professions Code. However, the Court need not address this argument because the “California rules of court apply 27 only in state court, not federal court.” Inland Concrete Enterprises, Inc. v. Kraft, 318 F.R.D. 383, 406 (C.D. Cal. Aug. 24, 2016). Thus, the Court finds Mr. Poli was not subject to the California Rules of Court 28 1 of its law and policy and the other has none, there is no real problem; clearly the law of the 2 interested state should be applied.”) (citations omitted). Because the Court finds that only 3 New Mexico has a legitimate interest in governing the retainer agreement, the Court need 4 not proceed to step three in the governmental interest analysis. See WA Mut. Bank, 24 5 Cal.4th at 909 (“Only if the trial court determines that the laws are materially different and 6 that each state has an interest in having its own law applied, thus reflecting an actual 7 conflict, must the court take the final step and select the law of the state whose interests 8 would be ‘more impaired’ if its law were not applied.”) 9 C. Application of New Mexico Law to the Retainer Agreement 10 Under New Mexico law, “[w]here one employs an attorney and makes an express 11 valid contract, stipulating for the compensation which the attorney is to receive for his 12 services, such contract is generally speaking, conclusive as to an amount of such 13 compensation[,]” and, “[i]t is the function of the court to enforce the contract as made.” 14 Murphy v. Eagle’s Nest Condominiums Ass’n, 2018 WL 22144612 at *2 (N.M. App. 2018) 15 (quoting Citizens Bank v. C & H Constr. & Paving Co., 93 N.M. 422, 427 (N.M. App. 16 1979)) (internal quotation marks and citation omitted). “It is black letter law that, absent 17 an ambiguity, a court is bound to interpret and enforce a contract’s clear language and not 18 create a new agreement for the parties.” Montoya v. Villa Linda Mall, Ltd., 110 N.M. 128, 19 129 (N.M. App. 1990). However, to be enforced as written, “the agreement must be 20 reasonable and it must have ‘been fairly and freely made with full knowledge by the client 21 of its effect and all of the material circumstances relating to the reasonableness of the fee.’” 22 Castillo v. Arrieta, 368 P.3d 1249, 1255 (N.M. App. 2016) (quoting Citizens Bank, 93 23 N.M. at 428). 24 Both parties agree that the retainer agreement clearly states Former Counsel is 25 entitled to 40% of the gross amount recovered. Plaintiff does not contend that the contract 26 was entered into against her will or a result of Former Counsel’s misconduct. See Walters 27 v. Hastings, 84 N.M. 101, 108 (N.M. 1972) (“where, as here, the contract of retainer fixes 28 the amount of the attorney’s compensation, and the attorney has not offended, either 1 through misconduct or neglect, the court has not the power . . . to reduce the amount fixed 2 by the contract”) (citations omitted). Thus, the Court does not find the facts of this case 3 warrant an exception to New Mexico’s general policy requiring courts to enforce retainer 4 agreements as written. Lozano v. GTE Lenkurt, Inc., 122 N.M. 103, 109 (N.M. 1996) 5 (“Generally, courts should enforce contingency fee contracts as made) (upholding a 6 retainer agreement as written absent a finding of attorney misconduct). 7 Plaintiff contends the term “gross amount” is ambiguous because the retainer 8 agreement does not define gross amount. Under New Mexico law, “an ambiguity exists in 9 an agreement when the parties’ expressions of mutual assent lack clarity.” Mark V., Inc. 10 v. Mellekas, 114 N.M. 778, 845 (1993). A contract is ambiguous “if different sections 11 conflict or if the language is capable of more than one meaning.” Thompson v. Potter, 268 12 P.3d 57, 62 (N.M. App. 2011). Here, the Steins do not provide an alternative definition of 13 gross amount nor do they contend they understood gross amount to refer to anything but 14 the total amount of recovery. In fact, Former Counsel contends “Before signing, Mr. Stein 15 explicitly admitted that he and his wife understood the contingency fee was on all gross 16 amounts recovered.” (Former Counsel’s Opp’n at 5); see id. at Exhibit 5 (Email from Mr. 17 Stein stating, “Now that you have reminded us, we do remember you saying that your fees 18 are on the gross amount that you recover.”) Thus, the Court finds the term is not ambiguous 19 for the parties understood “gross amount” to refer to the total amount of recovery. 20 21 In the alternative, Plaintiff contends that an award of attorneys’ fees in the amount 22 of 40% of the gross amount recovered is unreasonable under New Mexico law and the 23 Court should award Former Counsel $1.3 million, or 40% of the total damages recovered, 24 the amount the Court ordered FICA to pay Plaintiff in attorneys’ fees. Plaintiff contends 25 the Court awarded this amount after considering the reasonableness factors under Rule 16- 26 105(A) of New Mexico’s Rules of Professional Conduct. While it is true the Court 27 analyzed the reasonableness factors under Rule 16-105(A) and ordered FICA to pay $1.3 28 million in attorneys’ fees, the Court analyzed these factors within the context of the amount 1 FICA, the losing party, should pay Plaintiff in attorneys’ fees not what constitutes a 2 reasonable fee distribution between Plaintiff and her Former Counsel. Additionally, the 3 Court analyzed these factors before Former Counsel represented Plaintiff in multiple post- 4 trial motions and the appeal. Thus, the Court’s prior decision ordering FICA to pay $1.3 5 million in attorneys’ fees does not void the retainer agreement nor limit Former Counsel’s 6 recovery to $1.3 million. 7 Plaintiff further argues in a footnote that the Court’s prior order dated January 24, 8 2022, ordering FICA to pay $1.3 million in attorneys’ fees is a final judgment and Former 9 Counsel “should be estopped from furthering argument that they are entitled to attorneys’ 10 fees beyond those ordered by the Court” under the doctrine of res judicata. (Pl. Mot. at 12 11 n.4.) “The doctrine of res judicata provides that a final judgment on the merits bars further 12 claims by parties or their privies based on the same cause of action,” and “is central to the 13 purpose for which civil courts have been established, the conclusive resolution of disputes 14 within their jurisdiction.” In re Schimmels, 127 F.3d 875, 881 (9th Cir.1997) (internal 15 quotation marks omitted). The elements necessary to establish res judicata are: “(1) an 16 identity of claims, (2) a final judgment on the merits, and (3) privity between parties.” 17 Tahoe–Sierra Pres. Council, Inc. v. Tahoe Reg'l Plan. Agency, 322 F.3d 1064, 1077 (9th 18 Cir. 2003). The Court addresses each element in turn. 19 First, the instant motion does not present the same claims as the prior motion for the 20 Court was not asked to determine if the retainer agreement between Plaintiff and Former 21 Counsel is enforceable under New Mexico or California law. Instead, the Court was asked 22 to determine the amount of money, FICA, the losing party, should pay Plaintiff in 23 attorneys’ fees. It cannot be said the instant motion involves the same claim or even a 24 similar claim as the prior motion. Second, the Court entered a final judgment on the merits 25 against FICA, not Former Counsel. Third, Former Counsel was a not a party to the prior 26 matter nor was Former Counsel in privity with the parties in the prior motion. Headwaters 27 Inc. v. U.S. Forest Service, 399 F.3d 1047, 1054 (9th Cir. 2005) (“Privity . . . is a legal 28 conclusion ‘designating a person so identified in interest with a party to former litigation 1 that he represents precisely the same right in respect to the subject matter involved.”) 2 (citing Schimmels, 127 F.3d at 881) (quotations omitted). It cannot be said that Plaintiff 3 and Former Counsel’s interests align when it comes to enforcing the retainer agreement. 4 Accordingly, the instant motion is not barred by the doctrine of res judicata. 5 The Court finds the retainer agreement to be reasonable, unambiguous, and fair 6 given the circumstances surrounding the case. This case involved multiple claims, an 7 eight-day trial, complex post-trial motions, and a challenging appeal. Former Counsel 8 expended a substantial amount of time and money in successfully litigating Plaintiff’s 9 claims at both the trial and appellate level totaling “nearly 2,000 hours” and “hundreds of 10 thousands of dollars of costs . . ..” (Former Counsel’s Opp’n at 18; Exhibits 19, 20.) 11 Former Counsel accepted representation only two months before trial and “pushed off other 12 work” to fully concentrate on the case at hand. (Id. at 18.) As a result of Former Counsel’s 13 significant efforts, counsel successfully recovered a jury verdict for $3 million in 14 compensatory damages and $3 million in punitive damages. Although this Court remitted 15 the punitive damages award to $500,000, Former Counsel recovered the following 16 additional sums in post-trial motions: $1,322,779.21 in attorneys’ fees; $776,222.37 in pre- 17 judgment interest; and $324,630.22 in costs/litigation expenses. This along with an award 18 for post-judgment interest resulted in an approximately $6 million judgment that Former 19 Counsel successfully defended on appeal. 20 It is undisputed that Plaintiff and Former Counsel entered into a retainer agreement 21 whereby Former Counsel was to receive 40% of the gross amount recovered. Thus, the 22 Court is not persuaded that the retainer agreement permitting Former Counsel to recover 23 40% of the gross amount recovered is so unreasonable or unconscionable that the Court 24 must void the contract as written. See Lozano v. GTE Lenkurt, Inc., 122 N.M. 103, 110 25 (N.M. App. 1996) (“[a]n attorney is entitled to the fee on which he and his client have 26 agreed”) (quotations and citations omitted); In re Carson’s Will, 87 N.M. 43, 44 (N.M. 27 1974) (“The contract between the parties was a standardized, unambiguous, contingent fee 28 contract. It is a long-standing rule in New Mexico that the court does not have the authority 1 to alter or amend a contract; instead—[i]t is the function of the court to interpret and enforce 2 the contract as made by the parties.”) (citing Hopper v. Reynolds, 81 N.M. 255, 261 3 (1970)). 4 III. CONCLUSION AND ORDER 5 For the foregoing reasons, the Court enforces the retainer agreement as written. 6 Former Counsel will take 40% of the gross amount recovered from FICA under the terms 7 of the contract. Accordingly, Former Counsel is entitled to 40% of the following damages 8 and costs awarded by the jury and/or this Court: compensatory damages; punitive damages; 9 pre-judgment interest; post-judgment interest; costs/litigation expenses; and attorneys’ 10 fees. 11 IT IS SO ORDERED. 12 Dated: May 17, 2024 ____________________________ 13 Hon. Dana M. Sabraw, Chief Judge United States District Court 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28