Result Was Reversal As A Matter Of Law Of Jury Verdict Based On Contractual Breach And Quantum Meruit, Because Contract Was Unenforceable And QM Claim Was Time Barred.
Reeve v. Meleyco, Case No. C085867 (3d Dist. Mar. 24, 2020) (published) is an ethics reminder to all practitioners to get an express written consent from a client to a referral fee arrangement. If not, the attorney has no contractual claim, being left to a quantum meruit claim which has a shorter two-year statute of limitations.
What happened here is that plaintiff attorney sued defendant attorney after he refused to pay a referral fee, with a jury find in attorney’s favor on both a breach of contract and a quantum meruit theory relating to a $900,000 settlement (although finding that plaintiff had sued too late to get a referral fee for a $3.375 million settlement). The jury awarded plaintiff $78,750 on both theories, with the trial judge adding another $49,364.35 in prejudgment interest. Defendant prudently appealed, and it all went POOF! based upon a reversal as a matter of law.
Justice Mauro, the authoring justice for a 3-0 panel of the Third District, decided that the facts did not show a compliant written consent required under former rule 2-200 of the State Bar Rules of Professional Conduct (now rule 1.5.1). The writing was defendant’s letter informing client “that the twenty-five percent (25%) referral fee that I [the referred-to attorney] am paying to [plaintiff referring attorney] will come out of my fee and will not increase the fees to either you or your daughter.” Client signed the writing as well as signed a pretyped acknowledgement stating: “I, JAMES G. LUOMA, acknowledge receipt of this letter and understand the contents.” In signing the acknowledgment, client merely confirmed that he received the writing and that he understood what it said. The Third District did not believe this was actual consent, finding consent way different from dictionary definitions for disclosures, receipt, or understanding. That meant that the contract was unenforceable such that the contract claim verdict could not stand.
That brought the appellate court to the quantum meruit verdict, with the claim having a two-year statute of limitations. The problem here was that plaintiff sued over three years after the settlement money was distributed, way too late. Plaintiff argued that the four-year limitations for written contracts applied, but this was swept away because quantum meruit is not based on a contract (especially one which is unenforceable). The judgment was reversed as a matter of law, including the prejudgment interest award.
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