Opinion ID: 891620
Heading Depth: 1
Heading Rank: 8

Heading: Attorneys may recover only for services actually rendered.

Text: {47} Nearly a century ago, this Court stated, [t]he relation of attorney and client is one of the highest trust and confidence, requiring the attorney to observe the utmost good faith towards his client, and not to allow his private interests to conflict with those of his client. In re Barth, 26 N.M. 93, 126, 189 P. 499, 510 (1920). Ever mindful that worldly pressures and changing conditions may obscure or erode this ideal, this Court, acting as the sole arbiter of a self-governing profession, must ensure that we do not lose sight of every attorney's essential function: to provide competent, diligent, and loyal representation to every client. See Rule 16-101 NMRA; Rule 16-103 NMRA; Rule 16-107 NMRA committee cmt. [1]. These values are our lifeblood, critical to our professional survival. Without them, we put at risk the trust and respect of the public and of our clientspast, present, and future. {48} At the foundation of every attorney-client relationship is the client's unqualified right to discharge an attorney at any time, with or without cause. Rule 16-116 NMRA committee cmt. [4]; see also 23 Richard A. Lord, Williston on Contracts § 62:6, at 301-02 (2002) (Most courts have consistently held that the right of the client to dismiss an attorney is an absolute and essential incident to the attorney-client relationship, since the association is predicated upon mutual trust and respect. This right is unconditional, and may be exercised at any time, whether or not there is just cause for the dismissal. (footnote omitted)). As the Supreme Court of Minnesota aptly explained, a client should not be forced against his will to employ an attorney upon whose judgment he does not wish to depend and whose advice he feels he cannot follow with confidence. Since the relationship of attorney and client is a confidential one, it must of necessity be based on mutual trust. Forcing such [a] relationship upon the client against his will would not be conducive to an atmosphere of reciprocal confidence. State ex rel. Seifert, Johnson & Hand v. Smith, 260 Minn. 405, 110 N.W.2d 159, 167 (1961); see also Rule 16-107 committee cmt. [1] (Loyalty and independent judgment are essential elements in the lawyer's relationship to a client.); Rule 16-106 NMRA committee cmt. [4] ([T]rust ... is the hallmark of the client-lawyer relationship.). {49} A necessary corollary of the client's power to discharge an attorney at any time is the general rule that an attorney may collect fees only for services actually rendered, either under contract or principles of quantum meruit. See 1 Robert L. Rossi, Attorney's Fees § 3:10, at 3-26 (3d ed. 2002) (The clear trend, in both fixed-fee and contingency fee cases, is to not allow recovery for the contract price but rather to generally limit the recovery of an attorney discharged without cause to the reasonable value of the services rendered prior to discharge.); see also, e.g., Olsen & Brown v. City of Englewood, 889 P.2d 673, 677 (Colo.1995) (holding that an attorney discharged without cause is entitled only to quantum meruit and may not recover fees for services not rendered); Clegg v. USAgencies Ins. Co., 985 So.2d 781, 784 (La. Ct.App.2008) (where attorney was not given the work that was promised, he is only entitled to receive compensation for work actually performed); cf. In re Winston's Will, 40 N.M. 348, 354, 59 P.2d 904, 907 (1936) (limiting recovery of discharged attorney to the fair proportion of the statutory fee as the services performed bears to the whole services contracted to be performed). {50} This rule holds true in a variety of circumstances, irrespective of the reasons for terminating the attorney-client relationship. See, e.g., Calderon v. Navarette, 111 N.M. 1, 2, 800 P.2d 1058, 1059 (1990) (As a general rule an attorney may recover the reasonable value of services rendered under a void contract. However, recovery is grounded on a quantum meruit theory, not on the terms of the voided contract.); see also United States v. 36.06 Acres of Land, 70 F.Supp.2d 1272, 1276-77 (D.N.M.1999) (barring full recovery of contingency fee and otherwise limiting recovery to quantum meruit after attorney withdrew from representation); Cato v. Ark. Mun. League Mun. Health Benefit Fund, 285 Ark. 419, 688 S.W.2d 720, 723-24 (1985) (holding that an attorney was entitled to quantum meruit after the client settled without the attorney's knowledge); Ambrose v. Detroit Edison Co., 65 Mich.App. 484, 237 N.W.2d 520, 524 (1975) (holding that an attorney working under a contingency-fee agreement was entitled only to quantum meruit for work already done when dismissed); Wilson v. Brooklyn Trust Co., 24 N.Y.S.2d 161, 161 (App. Term 1940) (holding that an attorney may recover the value of his services rendered up to the time of the client's death). {51} Similarly, our Rules of Professional Conduct require an attorney to return any unearned portion of a retainer when an attorney-client relationship has been terminated. Rule 16-116(D) (Upon termination of representation, a lawyer shall ... refund[ ] any advance payment of fee or expense that has not been earned ....); see also In re Yalkut, 2008-NMSC-009, ¶ 26, 143 N.M. 387, 176 P.3d 1119 (per curiam) ([A] flat fee for future legal services cannot be considered as earned when paid and must be held in trust until earned.). While there are some exceptions to the general rule, especially concerning in-house counsel serving under an employment contract, they are not relevant here. See, e.g., Crews v. Buckman Labs. Int'l, Inc., 78 S.W.3d 852, 861-62 (Tenn.2002) (holding that an attorney acting as in-house counsel to a corporation may recover damages (e.g. unearned wages) for retaliatory discharge). {52} Holding a client liable for work not performed undermines the trust essential to the attorney-client relationship. Although no New Mexico cases are on point, courts in other jurisdictions have relied on this principle in refusing to allow attorneys to collect unearned fees from their clients. For example, in Olsen & Brown v. City of Englewood, 889 P.2d 673, 677 (Colo.1995) (en banc), the Colorado Supreme Court held that a discharged attorney could not recover fees for work that he was promised but that he never performed. The court noted that as an attorney, the plaintiff owed the highest fiduciary duty to his client; if the attorney were allowed to collect an unearned fee, the client, in effect, would be punished for exercising its right to terminate. Id. at 675-77; see also Clegg, 985 So.2d at 784 (denying recovery of fees for work not performed because an attorney may not force his continued representation [on] a client (alteration in original) (internal quotation marks and citation omitted)). {53} Guest argues that these cases and authorities are inapposite because they uniformly involve an attorney suing a client for breach of the professional services contract itself, whereas she is suing for breach of a contract for insurance, not employment. Guest did not sue Allstate for wrongfully discharging her; she sued Allstate for breach of Allstate's contract to defend and indemnify her, an obligation independent of her former retention as Allstate's attorney. According to Guest, all the evidence presented at trial demonstrates that, but for Allstate's breach, she would have continued working for Allstate indefinitely. She was happy representing Allstate, and Allstate was satisfied with her performance. Allstate even tried to send her new cases after this lawsuit was pending, which Guestnot Allstateput an end to. Consequently, Guest insists that she is entitled to the fees she would have earned from Allstate far into the futureten years as claimed at trialhad Allstate not breached its contract to defend and indemnify her. {54} We acknowledge that Guest's argument has some force. In another context, we might consider whether an employee in an at-will relationship (other than an attorney-client relationship) may recover future earnings for breach of a collateral agreement with the employer. However, we are not willing to allow recovery where the underlying relationship is between an attorney and her client, especially where the collateral agreement bears some relationship to her employment. {55} The nature of the attorney-client relationship demands that the client retain the power to discharge the attorney at any time. As a corollary, we agree with the corresponding rule that an attorney's damages must be limited to quantum meruit for services actually rendered, not damages for services anticipated but never provided. To permit Guest to recover unearned fees from Allstate would set a dangerous precedent, potentially conditioning or encumbering a client's absolute right to discharge an attorney. In our judgment, such a result could tarnish the legal profession. This is too high a price for our profession to pay, no matter how deserving Guest's position might have appeared to the jury in this case. {56} To be clear, we are not announcing a rule that categorically precludes an attorney from recovering future earnings under any circumstances. For example, a victim of personal injury who happens to be an attorney might sue the tortfeasor for damages that include lost earnings, a claim upon which we state no opinion herein. We hold only that under circumstances such as these, where a contract arising out of the attorney-client employment relationship gives rise to a claim for breach that effectively negates the continued viability of that relationship, the attorney cannot recover fees for unearned services. {57} Guest argues in the alternative that an award of future earnings may be predicated on her separate claims for prima facie tort and breach of the duty of good faith and fair dealing. Because these claims arose out of the same circumstances as her contract claimher employment relationship with Allstateour reasoning applies regardless of the theory of liability. [1] {58} Turning to the damages in this case, the only evidence supporting the jury's $1,842,900 compensatory award was Guest's estimate of her future earningswhich we hold are barred as a matter of lawand the cost of defending herself in the underlying Durham lawsuit, which we leave unaltered in this Opinion. At trial, Guest did not present evidence of any outstanding fees that Allstate owed to her for work already performed. Consequently, we limit Guest's compensatory damages to the amount supported by the evidence for out-of-pocket expenses that Guest incurred in defending herself in the Durham lawsuit up to the time of the trial in this case: a total of $73,873. We add to that figure Guest's projection of the total cost of her future appeals related to the Durham litigation in the amount of $50,000.