Opinion ID: 1966939
Heading Depth: 1
Heading Rank: 4

Heading: The Theories of Recovery.

Text: Watson contends it is entitled to recover the fees it would have realized if the clients had not left the firm, less Peterson's salary and expenses the firm would have incurred in earning the feesa lost-profits theory. The problem with this argument is that, by the time the cases were concluded and the fees were earned, there was no longer an attorney-client relationship between Watson and the clients. The termination of that relationship, of course, was due in large part to Peterson's active encouragement and participation, an issue we will discuss later. Nevertheless, the attorney-client relationship between Watson and these clients terminated when the clients made their election to follow Peterson. The right of a client to terminate the relationship with a lawyer is necessarily implied in the attorney-client relationship, and the right is absolute. Fracasse v. Brent, 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9, 10 (1972). The courts' solicitude toward a client's right to decide who will represent him explains the courts' aversion to restrictive covenants between attorneys. See Meehan v. Shaughnessy, 404 Mass. 419, 535 N.E.2d 1255, 1262 (1989) (The strong public interest in allowing clients to retain counsel of their choice outweighs any professional benefits derived from a restrictive covenant. Thus, the [firm] could not restrict a departing [attorney's] right to remove any clients who freely choose to retain him or her as their legal counsel.). See also Anderson v. Aspelmeier, Fisch, Power, Warner & Engberg, 461 N.W.2d 598, 601-02 (Iowa 1990) (discussing rationale for rule prohibiting restrictive covenants between lawyers); see generally, Robert W. Hillman, Professional Partnerships, Competition, and the Evolution of Firm Culture: The Case of Law Firms, 26 J. Corp. L. 1061 (2001). Attorneys, of course, have the right to be compensated for the value of their services rendered before the termination. When a contingency-fee case is concluded after the termination of the attorney-client relationship, the attorney is entitled to be paid the value of his services under a quantum-meruit theory, but not on the basis of the contract amount. See Fracasse, 100 Cal.Rptr. 385, 494 P.2d at 10. The court in Fracasse said: For the reasons hereinafter stated, we have concluded that this rule [allowing full contingent-fee recovery following termination of attorney-client relationship] is inconsistent with the strong policy, expressed both judicially and legislatively, in favor of the client's absolute right to discharge his attorney at any time, and that the attorney should be limited to a quantum meruit recovery for the reasonable value of his services, upon the occurrence of any contingency contemplated by this contract. Id. (overruling prior California case allowing recovery of full contingent fee); accord Ecclestone, Moffett & Humphrey, P.C. v. Ogne, Jinks, Alberts & Stuart, P.C., 177 Mich.App. 74, 441 N.W.2d 7, 8-9 (1989) (former firm was awarded appropriate portion of attorney fee, earned from case associate took with him when he left the firm, on the basis of quantum meruit); Baker v. Zikas, 176 Neb. 290, 125 N.W.2d 715, 717-18 (1964). Although a firm normally will prefer to carry a contingent-fee case to completion and receive the contractually based compensation rather than a quantum meruit recovery, the increasing acceptance of compensation based on the value of services rendered prior to discharge accommodates the interests of both the firm and its former client. This accommodation may well be appropriate in the grabbing context. Hillman, 67 Tex. L.Rev. at 27 (footnotes omitted). Watson's lost-profits claim could not prevail, even if it did not involve the unique rules applicable to lawyers. If Peterson were an employee at will in a manufacturing business and was the only employee capable of making a certain product, his employer could not sue him for lost profits that would have been realized for the products that could have been produced if Peterson had remained employed. In the present case, it is really not the fact that Peterson left the firm that gives rise to a compensable claim because, as an employee at will, he could do so at any time for any reason. Rather, it is the manner in which Peterson leftan issue we address laterthat presents the problem. Watson claims quantum meruit will not satisfy its contract claim for lost profits, which it calculates was $235,964. We conclude quantum meruit is the appropriate measure of recovery for the reasons discussed. Moreover, Watson has not shown that Peterson's failure to comply with ethics opinion 82-23 resulted in its loss of any contingent fees. If Peterson and the Watson firm had followed the recommended procedures of that opinion, the clients would still have been given the option to retain Peterson individually (or as a partner in EVP) and discharge Watson. Watson has not shown that the unilateral notification used by Peterson had any effect on the realignment of clients between the lawyers except, perhaps, to accelerate the process. Acceleration of the process is not shown by Watson to have had any effect on its claim to the contingent fees.