Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-02209/USCOURTS-ca8-06-02209-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-2209

___________

Immigration Law Group, LLP; *

Visa Law Group, L.L.C., *

*

Appellants, *

*

v. * Appeal from the United States

* District Court for the

Danna McKitrick, P.C.; Danna * Eastern District of Missouri.

Stockenberg, P.C.; Danna McNary *

Stockenberg and Soraghan, P.C.; *

Danna Soraghan Stockenberg and *

McNary, P.C.; Dana Soraghan *

Stockenberg and Shaw, P.C.; Danna *

and Shaw, P.C.; Klamer Danna and *

Shaw, P.C., *

*

Appellees. *

___________

Submitted: December 14, 2006

Filed: April 4, 2007

___________

Before WOLLMAN, RILEY, and SHEPHERD, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

The Immigration Law Group (ILG) alleges that Danna McKitrick, P.C. (Danna)

breached its immigration services contract with various former clients now

represented by ILG by refusing to transfer unearned retainer fees to ILG as requested

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The Honorable Rodney W. Sippel, United States District Judge for the Eastern

District of Missouri.

2

For concision, we hereinafter refer to these steps as step (a), step (b), and step

(c), respectively.

3

The district court’s judgment addressed claims pertaining to the retainer fees

of 106 client contracts. ILG appeals the district court’s ruling on seven of these. 

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by the clients. After a bench trial, the district court1

 held, inter alia, that ILG was

equitably estopped from pursuing its claims against Danna and that no contract had

been breached. ILG appeals from the district court’s equitable estoppel and breach

of contract rulings. We affirm.

I. Background

American Immigration Services, Inc. (AIS), a for-profit corporation, connected

clients with Danna for the provision of legal services associated with an immigrant

investor visa program established by AIS. The program allowed foreign investors to

obtain permanent lawful United States resident status under the Immigration and

Naturalization Services’ (INS) EB-5 classification. Gene McNary, who was a partner

at Danna, the head of its immigration practice, a member of its executive committee,

and a former commissioner of the INS, had a relationship with AIS and secured the

retainer agreements from the various clients for the legal work. The legal work

involved three steps: (a) preparing and filing a “Petition for Immigrant Investor” form

(I-526) with the INS; (b) attending a visa interview resulting in the issuance of a twoyear conditional green card; and (c) preparing and filing a “Petition to Remove TwoYear Condition with the INS” (I-829).2

 

Danna entered into different retainer agreements with different clients.3

 The

various differences resulted from McNary’s revisions of a basic AIS contract.

McNary considered the clients’ fees earned upon issuance of the conditional visa –

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step (b) – for all of the agreements, although not all of the agreements explicitly

specify when fees are deemed earned. Accordingly, once the conditional visas were

issued, McNary had the associated fees transferred out of client trust accounts and into

Danna’s general operating account. From there, even though the clients had not yet

become eligible for the removal of conditions under step (c), the fees were treated as

revenue and distributed among the partnership – with a significant portion going to

McNary under his compensation agreement. 

McNary left Danna and joined ILG on March 31, 1998. Prior to his departure,

David Morris, a partner at ILG, wrote a letter to McNary in which he acknowledged

that the legal retainer fees collected by Danna were eligible to be deemed earned as

of the completion of step (b). In April 1998, after McNary had joined ILG, McNary

and Morris met with Danna partners to discuss the transfer of the EB-5 program’s

clients to McNary’s new firm. The Danna partners “made it clear that there was not

going to be any money” turned over to McNary from the retainer fees paid by the

clients. In the face of this knowledge, McNary and his new firm induced the clients

to terminate their relationship with Danna. ILG agreed to complete the remaining

legal services without charge, whereupon the clients sent letters to Danna stating that

they were assigning to ILG their rights to any remaining legal retainer fees paid to

Danna that had not yet been earned and instructing Danna to transfer the money and

relevant case files to ILG. Because Danna considered all of the fees earned and had

already distributed them from its general operating account, Danna refused to remit

any money to ILG. ILG, nevertheless, completed the step (c) work for the clients.

One client subsequently sent a letter to the Missouri Bar Association alleging that

Danna had violated the Rules of Professional Responsibility by treating the fees as

earned prior to the completion of step (c). The Chief Disciplinary Counsel informed

the complaining client that his “investigation does not establish probable cause to

believe that [there had been any violation of] the Rules of Professional Conduct.”

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It also held, in the alternative, that for all but two of the contracts, the statute

of limitations had either lapsed or Danna had earned its retainer and had not breached

the contracts. With respect to the remaining two contracts, the court held that ILG

could not recover on the contracts because ILG had introduced evidence suggesting

that it had not completed the step (c) work for the contracts’ respective clients, despite

a joint stipulation between the parties that ILG had, indeed, completed the work.

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ILG brought this action, seeking remedies under breach of contract and

quantum meruit theories. Danna asserted an equitable estoppel defense and also

asserted that the statute of limitations had run on the claims. As stated above, the

district court held, inter alia, that ILG was equitably estopped from asserting its

claims.4

II. Discussion

We review a district court’s factual findings for clear error and its legal

conclusions de novo. Tamko Roofing Prods., Inc. v. Smith Eng’g Co., 450 F.3d 822,

827 (8th Cir. 2006). We apply Missouri law in this diversity action. Lindsay v.

Safeco Ins. Co. of Am., 447 F.3d 615, 617 (8th Cir. 2006). The doctrine of equitable

estoppel prevents a party from taking inequitable advantage of a situation it caused.

Weiss v. Rojanasathit, 975 S.W.2d 113, 120 (Mo. 1998) (superseded by statute on

other grounds). An equitable estoppel defense requires a showing of three elements:

(1) an admission, statement, or act inconsistent with the claim afterward asserted or

sued upon; (2) action by the other party on the faith of the admission, statement, or

act; and (3) injury to such other party resulting from allowing the first party to

contradict or repudiate the admission, statement, or act. Stone v. Crown Diversified

Indus. Corp., 9 S.W.3d 659, 668 (Mo. Ct. App. 1999) (citing Missouri Highway &

Transp. Comm’n v. Myers, 785 S.W.2d 70, 73 (Mo. 1990)). 

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A. Equitable Estoppel

In regard to the first element, ILG does not contest that McNary acted

inconsistently with the claim in this suit by treating the clients’ funds as fully earned

upon the issuance of a conditional visa when he transferred the fees out of client trust

accounts.

Instead, ILG contends that the second element is not satisfied because Danna

failed to introduce sufficient evidence demonstrating its reliance on McNary’s action

and belief. It points out that McNary never shared his interpretation of the agreements

with anyone at Danna. It further argues that because Danna knew it would incur

additional costs completing step (c) for each of McNary’s clients, it could not have

justifiably relied on McNary’s conclusion. Additionally, it suggests that if Danna

relied on McNary’s act of transferring the fees to the firm’s operating account, such

reliance was misplaced because Danna had equivalent access to the agreements and

could have made its own determination as to when the fees were earned. We find

these contentions unpersuasive.

First, removing the fees from the client trust account demonstrated McNary’s

belief that the fees were earned, even though he never mentioned his opinion on the

matter to anyone at Danna. The firm relied on the propriety of McNary’s shifting of

the fees to the firm’s operating account when it thereafter distributed the operating

account funds to it partners. See Stone, 9 S.W.3d at 668 (noting that an action may

be relied upon for equitable estoppel purposes). 

Second, the mere fact that Danna knew potentially costly step (c) work

remained does not render its reliance on McNary’s assessment unreasonable. After

all, as ILG concedes, fourteen of the retainer agreements explicitly state that the fees

would be deemed earned upon completion of step (b) even though Danna was obliged

to complete step (c). Although many contracts were silent on the matter, in these

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circumstances it was not unreasonable for Danna to rely on McNary’s conclusion that

the other contracts likewise permitted Danna to deem fees earned after the completion

of step (b). 

Third, Danna’s independent access to the text of the agreements does not render

its reliance any less reasonable in this case. ILG contends that we should adhere to

a proposition stated in Farmland Industries, Inc. v. Bittner, 920 S.W.2d 581, 583 (Mo.

Ct. App. 1996), that “one cannot set up another’s act or conduct as the ground of an

estoppel when [one] knew or had the same means of knowledge as the other to the

truth.” ILG’s reliance on Bittner is misplaced. Unlike the situation in Bittner, in

which the party seeking estoppel failed to request and adequately review an available

agreement that would have clearly indicated key information contrary to what was

relied upon, many of the retainer agreements here are not models of clarity and thus

necessitated and justified Danna’s reliance on McNary’s opinion. As the attorney of

record who selected or modified the relevant agreements and who, even if not in direct

contact with the clients, was the Danna representative that worked with AIS in

securing the clients’ consent, McNary was the closest thing Danna had to an authority

for the purpose of construing the agreements’ provisions based on the intentions of

their signatories. See Burrus v. HBE Corp., 211 S.W.3d 613, 616-17 (Mo. Ct. App.

2006) (“‘[t]he cardinal rule in the interpretation of a contract is to ascertain the

intention of the parties and to give effect to that intention’” (alteration in original)

(quoting J. E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo.

1973))). Accordingly, for the above reasons, we do not consider the district court’s

finding that Danna justifiably relied on McNary’s action clearly erroneous. 

Regarding the last equitable estoppel element, Danna would suffer damages had

the district court allowed McNary and ILG to contradict or repudiate McNary’s prior

acts because Danna would have to pay ILG (and, thus, McNary) a sum of money that

included the sizeable sum already disbursed to McNary. Accordingly, the district

court’s finding on the damage element was not clearly erroneous. 

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“As stated in the standard retainer agreement, legal fees are only eligible to be

deemed as ‘earned’ AFTER initial conditional visa issuance. . . . According to the

records you have provided our office, and those provided by AIS, . . . [f]or the above

stated 200 cases, it is our understanding that [the] legal retainer fees were eligible to

be deemed as ‘earned’ in a manner identified in the standard ‘Retainer Agreement.’”

(Appellant’s App. at 362).

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B. The Nexus Between ILG and McNary

Finally, ILG submits that even if the facts discussed above support equitable

estoppel as to McNary, ILG itself cannot be equitably estopped by McNary’s

inconsistent acts because McNary is not a plaintiff in this action and was not an ILG

partner when he originally acted. This distinction is of no consequence here. It would

be inequitable to disassociate the respective roles of ILG and McNary in inducing and

maintaining Danna’s reliance on McNary’s conclusion. David Morris, acting in the

capacity of an ILG principal, sent a letter to McNary while McNary was still a Danna

partner, seeking to work out the details for transferring the clients to ILG. In this

letter, Morris indicated that ILG considered the retainers earned by Danna.5

 Because

ILG’s stated position in its correspondence implied that it would not be pursuing the

money already earned and distributed to Danna partners after ILG took on the clients,

McNary had no obligation in his role as a Danna fiduciary to take precautionary steps

that would have insulated Danna from potentially damaging liability resulting from

his imminent departure and transfer of clients to ILG. Additionally, both McNary and

ILG were well aware of the disposition of the fees when ILG agreed to take on

McNary’s clients. ILG completed the step (c) work even after the Danna partnership

had unequivocally indicated to ILG that it would remit no fees even should ILG do

the work. In light of the extent to which ILG’s and McNary’s combined and knowing

actions created the potential liability underpinning this suit, and given ILG’s decision

to complete the work while knowing full well that Danna would forward no fees, ILG

cannot disassociate its own involvement from McNary’s. 

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Because equitable estoppel bars its claims, we need not consider ILG’s breach

of contract arguments. The judgment is affirmed.

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