Court Of Appeal Found Instructive The Reasoning In Mojtahedi Decision.
In this next case we post on, predecessor, discharged counsel was found to have sued the wrong party—successor counsel, rather than properly suing client to establish the validity and amount of an attorney’s lien in a retainer agreement under a “reasonable value of services” (quantum meruit) measure of recovery after predecessor counsel was discharged.
Duke Gerstel Shearer, LLP v. Pusiano, Case No. D068633 (4th Dist., Div. 1 Dec. 13, 2016, received for posting Dec. 16, 2016) (unpublished) involved a situation where plaintiff law firm entered into a written contingency agreement in a construction defect class action. After the death of the lead attorney occurred unexpectedly, another law firm attorney left and the class action plaintiffs discharged first law firm and retained departing attorney’s firm, which latter firm and other attorneys litigated the class action for another 5 years before resolving it through a settlement. Successors counsel moved to recover pursuant to a similar contingency arrangement with plaintiffs, a motion approved by an Arizona court in awarding successor attorneys a total of $1.2 million of the settlement. However, plaintiff predecessor firm submitted no fee submissions or request in the Arizona proceedings. Later, predecessor firm sued successor attorneys on various tort claims and a common count (money had and received), largely premised on the theory that predecessor firm had an attorney’s fees lien as set forth its contingency agreement with class representatives such that it was entitled to $1.1 million. The lower court sustained a defense demurrer without leave to amend, a ruling which was affirmed in part and reversed in part in a prior appeal. There, the appellate court determined that prior firm should be allowed an opportunity to plead conversion and money had/received claims if it could allege a valid attorney lien giving it a right to a share of the contingency fee received by successor attorneys. Prior law firm did file such another complaint with these two claims, but the lower court granted successor attorneys summary judgment because prior firm did not establish the enforceability and amount of the lien on which is based both its causes of action.
In the second appeal by prior law firm, the 4/1 DCA affirmed the summary judgment ruling.
Because prior law firm had been discharged, the proper measure of recovery for it was quantum meruit, which was further buttressed through a provision in the retainer agreement between clients and prior firm agreeing to (1) the quantum meruit recovery, and (2) submit the matter to binding arbitration. The reviewing court found Mojtahedi v. Vargas, 228 Cal.App.4th 974, 977-978 (2014) [discussed in our July 13 and August 8, 2014 posts] instructive, where a prior firm lost a suit to obtain fees based upon an attorney lien from successor counsel because discharged counsel did not establish the existence, amount, and enforceability of the lien in an independent action against the clients before suing successor counsel. Prior firm in Pusiano principally argued that Mojtahedi was distinguishable because an Arizona court had already awarded fees to class counsel, which was the necessary “independent action.” The 4/1 DCA disagreed because prior law firm did not submit fee billings or file a motion to recover fees in Arizona court, with the Arizona court never passing on the validity of its attorney’s lien. In fact, prior firm should have followed the retainer agreement procedure by trying to resolve the reasonable value of its services with clients and then submit the issue to binding arbitration as required under the retention contract. Because prior firm did not sue client to determine the validity of and amount of its attorney fees lien, it was premature to sue the successor attorneys for claims based on the claimed lien which necessarily had to be adjudged first vis-à-vis the former clients.