Opinion ID: 1257756
Heading Depth: 1
Heading Rank: 3

Heading: the calhoune matter

Text: In May 1983, Mellon National Corporation (Mellon), the holding company for Girard Bank of Pennsylvania (Girard), retained Evans & Harter in a collection matter against Pelham Calhoune, doing business as Hans Christian Anderson Yacht Club (Calhoune). Calhoune had evidently received an overpayment of $85,000 from Girard; though he agreed to return the sum, he refused to pay any interest. The fee arrangement between Evans & Harter and Mellon, confirmed in letters to the firm from Keith James, Mellon's legal counsel, on May 10 and May 23, stipulated that Mellon would pay for the firm's services on an hourly basis, and that one of the firm's associates would do the majority of the work on the matter. The firm assigned the case to petitioner. By the end of June, he had negotiated a settlement with Calhoune. He notified James that Calhoune had already sent him $10,000, and that Calhoune had agreed to return the remaining $75,000 plus interest and costs. He then sent Mellon a check for $10,000 drawn on the firm's client trust account. On August 9, Calhoune sent petitioner $78,984, the amount remaining on his obligation to Mellon. Petitioner did not deposit the money in Evans & Harter's client trust account, however, as he had done when he received Calhoune's first check. Instead, without the firm's knowledge or authorization, he opened a trust account in his own name at another bank and deposited the check there. Though he notified Mellon of the account number and location, he did not mention that it was not the firm's normal client trust account or that he was the sole signatory. He also did not immediately forward the money to Mellon, as he had done with Calhoune's first payment. When petitioner learned that the firm was terminating his employment, he sent James a letter informing him that he was leaving Evans & Harter as of August 31. He explained that he expected the matter to be resolved before he left the firm, but if not, that Harter, a partner of the firm, would thereafter handle the case. At this time, the only work left to be done on the case was the execution of a mutual release form by Calhoune and Mellon and the settlement of Evans & Harter's legal fees. Nonetheless, petitioner was unable to obtain a signature on the mutual release by August 31. Because so little work remained to be done, petitioner contacted James and told him that he would obtain the mutual release and review the accuracy of Evans & Harter's bill for services free of charge. James then informed Harter that petitioner would do all further work on the case, which James represented as being very close to resolution. He also requested a detailed statement of the firm's bill for services on the matter. Petitioner soon obtained Calhoune's signature on the release form. On September 12, he forwarded the release to Mellon, along with a check for $71,616.87, which represented, according to petitioner, 90% of the original deposit made by Mr. Calhoun [ sic ], or $71,085.95, plus 100% of the interest earned, or $530.92. Even though James never authorized him to do so, petitioner retained $7,898.44 as payment for Evans & Harter's legal services, and stated that he would return any excess to Mellon once the final bill was resolved. In the same letter, he confirmed the billing agreement between himself and Mellon: As I stated, my limited efforts to settle this matter since September 2, when I left Evans & Harter, have been and will be done on a courtesy basis. James returned the signed release form to petitioner on September 13. He also asked petitioner to repeat his earlier request to Evans & Harter for a more detailed billing statement, review the charges, and advise Mellon of their accuracy. He did not object to petitioner's retention of $7,898.44 to cover Evans & Harter's fee. On September 15, petitioner requested the billing information from Harter. [1] Harter sent him a revised invoice the next week, listing $4,444.97 as the total amount of legal fees due from Mellon. At this time, $7,898.44 of Calhoune's $78,984 remained in petitioner's trust account. By checks made payable to himself, petitioner withdrew $3,228.69 on October 10 and the remaining balance of $4,892.14 on December 28. Petitioner sent James a final accounting on December 28, [2] in which he, for the first time, contended that he was entitled to legal fees from Mellon for his work on the Calhoune matter. In fact, he had already appropriated the $7,898.44 from the trust account, which was supposedly reserved for payment to Evans & Harter, as payment toward his bill. His letter stated that in the absence of an express agreement [between] myself and your client and Evans & Harter and your client, it is necessary to make a reasonable estimate of the value of services rendered on Girard Bank's behalf. He claimed that Mellon owed him a contingency fee for the work he did on the matter after leaving Evans & Harter, while it owed Evans & Harter payment for services rendered prior to his departure from the firm. Mellon allegedly owed him $8,429.36 as the remainder of his contingency fee: As to the $71,616.87, although the normal fee on a contingency basis is 33 1/3%, I am willing to reduce this percentage to 20%, or $15,796.88, meaning there is a balance still owing of $8,429.36 [ sic ]. Concomitantly, as [to] the $10,000 I agree to hold your client harmless from any claim for attorney's fees from Evans & Harter. In other words, I will take the responsibility for any compensation for which Evans & Harter may be entitled to as the result of any agreement resulting from my negotiations with Gene Harter. He would thus pay Mellon's legal fee to Evans & Harter out of his supposed contingency fee. Harter requested payment of Mellon's bill on January 3, 1984, noting that its account was quite overdue. He told Mellon that petitioner had never contacted him to negotiate the bill, and that, in any case, the firm would not reduce the amount due. In response to petitioner's letter of December 28, James sent a letter to petitioner outlining Mellon's concerns regarding its fee arrangement with him and its bill with Evans & Harter. He adamantly denied ever agreeing to pay petitioner a contingency fee: I strongly object to your express assumption that your services were rendered on a contingency basis ... particularly since, at the time of your departure from the Evans & Harter firm, the only open item on the agenda was the issue of attorney's fees.... My charge to you at that time was to obtain a revised invoice and review it for its accuracy. Certainly you do not mean to suggest that my client now owes you $15,796.88 for this simple task. Though petitioner had agreed to resolve the matter free of charge, James agreed to pay him at his normal hourly rate for any work he performed on the case after leaving Evans & Harter out of our anxiety and our desire to conclude the matter. James also questioned petitioner regarding his lack of progress on negotiations over the Evans & Harter bill. He explicitly instructed petitioner to pay the firm $4,444.97 out of the funds remaining in his trust account, and to send him a copy of the check, the transmittal letter and all bank statements. He concluded by threatening to pursue other avenues of recovery of the balance of the funds if he did not receive all of the requested documents within a week. (He later extended this deadline by a week, so that petitioner could attempt to negotiate a lower legal bill from Evans & Harter, after petitioner represented to him that the bill was overstated somewhat.) Harter then wrote to petitioner requesting a check for $4,444.97 so that Evans & Harter could close Mellon's account, as well as asking for the return of the Calhoune file. On January 23, petitioner sent Mellon a revised invoice which stated that he was not charging Mellon for the services he rendered up to that date, and that he would not charge Mellon for any future work assuming that no litigation will be involved. He did not, however, send any money to Evans & Harter or any bank statements to Mellon. Mellon made two more formal requests to petitioner to obtain the balance from his bank account. In a letter dated February 3, Mellon's senior attorney directed petitioner to immediately discontinue negotiation with Evans & Harter regarding their fee charged for this case, and to immediately send a check to Evans & Harter for the full amount of the fee ($4,444.97), and send the balance in the trust account to us.... An associate general counsel sent a second letter on March 5 noting that petitioner had failed to respond to the February 3 letter or numerous telephone calls and requesting the immediate return of all funds to Mellon, from which Mellon would pay Evans & Harter directly. Petitioner never responded to Mellon's queries, never gave any of the $7,898.44 to either Evans & Harter or Mellon, and never sent Mellon any of his bank records. Mellon eventually paid Evans & Harter out of its own funds in April 1984, and then filed a complaint with the State Bar against petitioner.