Court Opinion

ID: 5158074
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:27:38.215694+00
Date Added: 2024-06-11T08:25:29.031881
License: Public Domain

Judge TERRY
dissenting.
I respectfully dissent.
*64This appeal addresses the acerual date of a quantum meruit claim asserted by one law firm (Hannon) against two others (Melat and Howarth) for services provided on a contingent fee case for their common clients. I conclude that the claim acerued, at the latest, when Hannon was permitted to withdraw from representing the parties' common clients. Therefore, in my view, the quantum meruit claim here was barred by the statute of limitations.
Accordingly, I would affirm the trial court's judgment on the pleadings in favor of Melat and Howarth, and against Hannon. Consequently, I would not address Melat and Howarth's cross-appeal.
I. Additional Background
In addition to the facts described in the majority opinion, the following facts were also alleged in Hannon's complaint:
In 1998, before the federal litigation for the law firms' common clients went to trial, Hannon withdrew as counsel due to disagreements about Howarth's handling of the case. Shortly after its withdrawal, Hannon filed a notice of attorney's lien, asserting that it was entitled to $160,281.35 in costs as well as quantum meruit compensation for the services rendered by its attorneys and paralegals.
II. Discussion
A. Basic Quantum Meruit Principles
"Quantum meruit is a theory of contract recovery that invokes an implied contract when the parties either have no express contract or have abrogated it." Dudding v. Norton Frickey & Assocs., 11 P.3d 441, 444 (Colo.2000). In Colorado, quantum meruit is synonymous with the doctrines of quasi-contract and unjust enrichment. Id. at 444-45; see also Mullens v. Hansel-Henderson, 65 P.3d 992, 999 (Colo.2002). These doctrines are all based on principles of equity and restitution, and have been adopted with the goal of preventing one party from being ben-efitted to the unfair detriment of another. See Dudding, 11 P.3d at 444; Mullens, 65 P.3d at 999; DCB Constr. Co. v. Central City Dev. Co., 965 P.2d 115, 119 (Colo.1998). A claim in quantum meruit accomplishes this goal by "gauging the equities and ensuring that the party receiving the benefit of the bargain pays a reasonable sum for that benefit." Dudding, 11 P.3d at 445.
B. Acerual of Quantum Meruit Claims
I agree with the majority's conclusions that Hannon's quantum meruit claim is subject to the three-year statute of limitations set forth in section 13-80-101(1)(a), C.R.S. 2010, and that section 18-80-108(6), C.R.S. 2010, governs the acerual of the quantum meruit claim here. The latter statute provides that a cause of action for breach of any express or implied contract accrues when "the breach is discovered or should have been discovered by the exercise of reasonable diligence."
I further agree that Hannon's claim for quantum meruit accrued when it discovered, or through the exercise of reasonable diligence should have discovered, that all the elements of a quantum meruit claim were present. However, I disagree with the majority's analysis as to when those elements were present here.
1. California versus New York Rules
The parties' accrual arguments are focused primarily on cases that deal with quantum meruit claims brought by attorneys against their former clients. I agree with the majority that, because this is not a claim by an attorney against a client, but rather a claim of attorney against attorney, many of the cases cited by the parties are not on point. However, in my view, those cases provide certain guidance by analogy.
The attorney-client cases line up on either side of a significant fault line. On one side are cases cited by Hannon, following the so-called California rule In those cases, a wrongfully discharged or justifiably withdrawing attorney, originally employed on a contingent fee basis, is held to have no quantum meruit cause of action against the client until the happening of the contingency stated in the parties' fee agreement. See, e.g., Fracasse v. Brent, 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9, 11 (1972). On the other side *65are cases that follow the so-called New York rule, holding that such an attorney need not wait for the outcome of the contingent litigation, but may sue and recover immediately in quantum meruit. See, e.g., Tillman v. Komar, 259 N.Y. 133, 181 N.E. 75, 76 (1932).
The policy considerations for requiring an attorney to await the outcome of litigation derive from a perceived lack of resources on the part of contingent-fee clients and a disparity in legal ability and power between the client and the attorney. See, e.g., Fracasse, 100 Cal.Rptr. 385, 494 P.2d at 14; see also Dudding, 11 P.3d at 445 (contrasting quantum meruit law in the attorney-client context with cases not involving that relationship; noting that there are "special considerations inherent in the attorney-client contractual relationship," given the relationship of trust and confidence between such parties, a circumstance that "distinguishes the attorney client relationship from other business relationships," and thus "creates a somewhat different framework for the analysis of quantum meruit claims in the context of attorney-client relationships"). Those policy considerations are inapplicable to attorney-against-attorney cases such as this one. Cf. Law Offices of J.E. Losavio, Jr. v. Law Firm of Michael W. McDivitt, P. C., 865 P.2d 934 (Colo.App.1993) (attorney-against-attorney quantum meruit claim); Murdock v. Cohen, 762 P.2d 691 (Colo.App.1988) (same); Polen v. Melonakos, 222 Mich.App. 20, 564 N.W.2d 467, 470 (1997) (same).
Nevertheless, two principles from the attorney-against-client cases are helpful by analogy here, and in this context, I am more persuaded by the reasoning of cases following the New York rule. In the attorney against-attorney context presented here, these principles are consistent with Colorado law.
e Principle No. 1: When the attorney, client relationship is abrogated, either by wrongful termination of the attorney or by the attorney's justified withdrawal, the terms of the contingent fee agreement no longer control the parties' relationship when the attorney sues in quantum meruit. That agreement does not dictate whether or when counsel may sue, or the amount of damages that may be recovered. Tillman, 181 N.E. at 75-76 ("[The attorney-client contingent feel agreement cannot be partially abrogated. Either it wholly stands or totally falls. After cancellation, its terms no longer serve to establish the sole standard for the attorney's compensation. Together with other elements they may, however, be taken into consideration as a guide for ascertaining quantum meru-it." (referencing "quantum meruit" in the sense of "the amount to be awarded")); see also Ambrose v. Detroit Edison Co., [65 Mich.App. 484], 237 N.W.2d 520, 524 (Mich.Ct.App.1975) ("[Aln attorney on a contingent fee arrangement who is wrongfully discharged, or who rightfully withdraws, is entitled to compensation for the reasonable value of his services based upon [qJjuantum meruit, and not the contingent fee contract.").
This first principle is consistent with Colorado quantum meruit law, which derives from, and is, at least for this purpose, functionally identical to, unjust enrichment law. See Dudding, 11 P.3d at 444-45 ("[Quantum meruit] does not depend upon the existence of a contract, either express or implied in fact. Rather, [quantum meruit] arises out of the need to avoid unjust enrichment to a party even in the absence of an actual agreement to pay for the services rendered.... Under some cireumstances, a party to an unenforceable express contract may recover under quantum meruit.... [IJn general, a quantum meruit claim may exist independently of a contract and need not turn on whether the contract between the parties met specified requirements.").
e Principle No. 2; The attorney's claim against the client accrues immediately upon wrongful termination or justified withdrawal. See In re Estate of Callahan, [144 Ill.2d 32, 161 Ill.Dec. 339], 578 N.E.2d 985, 988 (Ill.1991) ("[Thhe client cannot make the attorney's recovery dependent upon a contract term when the client has [wrongfully] terminated the contract. The contract no *66longer governs their relationship.... [Aln attorney's cause of action for a quantum merwit fee accrues immediately after discharge.").
At least in the context of attorney-against-attorney quantum meruit claims, this principle is congruent with Colorado law. See § 13-80-108(6) (cause of action for breach of express or implied contract accrues when breach is discovered or should have been discovered by exercise of reasonable diligence).
A quantum meruit claim accrues when all the elements of quantum meruit are present, namely, (1) at the plaintiff's expense, (2) the defendant received a benefit, (8) under circumstances that would make it unjust for the defendant to retain the benefit without paying. See Dudding, 11 P.3d at 445 (defining elements of quantum meruit).
In determining the date of accrual at the motion on the pleadings stage, we are constrained by the allegations of Hannon's complaint, which alleges cirenmstances that Han-non claims entitle it to quantum meruit relief. Hannon essentially alleges that it was justified in withdrawing from the case in April 1998 based on good cause, because Howarth "took over the case to the exclusion of" Han-non; that Howarth "was not willing to involve [Hannon] in trial preparation"; and that when it did involve Hannon, Howarth "imposed unreasonable demands." Hannon alleged that the other law firms received the benefit of Hannon's valuable legal services, and that it would be unjust for the other firms to retain the benefit of those services without paying for them.
In my view, based on the allegations of Hannon's complaint, all of the elements of quantum meruit were present by April 28, 1998, when the district court allowed Hannon to withdraw from representing the parties' common clients By that date, the other firms had received the benefit of Hannon's services. To those who might question what benefit they received, given that the federal court case had not yet gone to trial and no recovery had yet been obtained, the response is provided by Hannon's complaint: Han-non's services had value to the other law firms. Presumably, that value came from the other law firms not having either to perform the services that Hannon performed, or to pay another to perform those services. See Dove Valley Bus. Park Assocs., Ltd. v. Bd. of County Comm'rs, 945 P.2d 395, 403 (Colo.1997) (benefit forming basis for quantum meruit claim includes any form of advantage, including saving adverse party expense or loss). Whether Hannon, in fact, conferred a benefit on the other firms is not in issue at the motion on the pleadings stage.
The majority looks to the attorneys' intentions and expectations regarding whether and when they would be paid as the linchpin for determining when, if at all, the law firms' retention of the benefit of Hannon's work became unjust. I respectfully disagree with this approach, for two reasons. First, this approach overlooks facts alleged in Hannon's complaint that could establish unjust retention of Hannon's services even if the litigation for the firms' common clients were not resolved in the clients' favor. Second, it improperly focuses on a contract that is not the basis of the quantum meruit claim.
As to the first point, Hannon's complaint alleges that it had performed its services and was justified in withdrawing in 1998. If Hannon was justified in withdrawing then, it necessarily follows that it was then unjust for the other firms to retain the benefit Hannon had conferred on them. Thus, as alleged, the other firms' enrichment was unjust no later than the 1998 withdrawal date, and the claim acerued no later than that date. This conclusion is bolstered by Hannon's filing of its July 23, 1998, notice of attorney's lien, which asserted that it was entitled to reasonable compensation, based on quantum meru-it, for the time expended by Hannon's attorneys and paralegals, as well as to $161,231.35 for costs it expended. The filing of this lien is alleged specifically in Hannon's complaint.
As to the second point, the very nature of a quantum meruit claim precludes reliance on the terms of a contract. Under Dudding, 11 P.3d at 444, quantum meruit does not depend on any contract. See also Jorgensen v. Colo. Rural Props., LLC, 226 P.3d 1255, 1259 (Colo.App.2010) (quantum meruit, quasi-contract, and contracts implied in law are *67equivalent terms, and relate to a purely equitable remedy, given that the obligation "does not arise in any sense from promises made between the parties or any contract"; a contract implied in law is "not really a contract at all" (quoting DCB Constr. Co., 965 P.2d at 119); the remedy arises not from the intent of the parties but from the law of natural justice and equity; indeed, a quasi-contractual claim "may not be asserted if there is a valid contract covering the subject matter of the alleged obligation to pay"). Therefore, I believe it makes no sense to look to the terms of a contract that is not the basis for suit to see whether a contingency in that contract has come to pass, in order to determine whether Hannon's quantum meruit claim has accrued. The attorneys' expectations of payment as expressed in their contract (which is unenforceable by Hannon) are simply irrelevant to acerual of Hannon's quantum meruit claim.
Under Colorado law, whether and when Hannon conferred a benefit on the parties' common clients is irrelevant to whether and when it conferred a benefit on the other law firms. See Murdock, 762 P.2d at 692 (in attorney-against-attorney quantum meruit suit, fact that client was primary beneficiary of attorney's services did not preclude claim that attorney conferred benefit on other attorney). Thus, in my view, for purposes of establishing a quantum meruit claim against another law firm representing the same client, whether the client has received a recovery in the client's contingent fee case is a matter that is out of the former attorney's hands and is simply not relevant. See Zimmerman v. Kallimopoulou, 56 Misc.2d 828, 290 N.Y.S.2d 270, 273 (N.Y.City Civ.Ct.1967) (an "[alttorney's right to compensation cannot be made to depend upon the success or failure of another member of the bar"), cited with approval in Adkin Plumbing & Heating Supply Co. v. Harwell, 135 N.H. 465, 606 A.2d 802, 804 (1992).
Hannon cites the only case I have found that holds to the contrary in an attorney-against-attorney context, Chambers v. Kay, 106 Cal.Rptr.2d 702, 720 (2001), superseded and aff'd on other grounds, 29 Cal.4th 142, 126 Cal.Rptr.2d 536, 56 P.3d 645 (2002). Although the California Court of Appeal there held that a discharged attorney's quantum meruit claim did not accrue against former' co-counsel until the client recovered on a contingent fee claim, I am not persuaded by its reasoning for three reasons. First, the Court of Appeal's holding that the attorney conferred no benefit on remaining counsel until the contingent fee case had successfully concluded conflicts with Colorado law. See Murdock, 762 P.2d at 692 (whether attorney conferred a benefit on another attorney is not dependent on whether their mutual client received a benefit); Dove Valley, 945 P.2d at 403 (benefit for quantum meruit purposes is any form of advantage). Second, the Court of Appeal's decision has been superseded, and under California law, may not be cited as precedent. See Cal. Rules of Court 8.1105(e)(1), 8.1115(a), see also People v. Rogers, 21 Cal.3d 542, 146 Cal.Rptr. 732, 579 P.2d 1048, 1051 (1978) (granting of review by California Supreme Court automatically vacates the opinion of California Court of Appeal). And third, the California Supreme Court expressly declined to review the correctness of the Court of Appeal's ruling on that issue, because the appellant had not petitioned for review of that ruling, see 126 Cal.Rptr.2d 536, 56 P.3d at 658 n. 11.
Finally, I believe the majority treads into unnecessary territory when it states that "an attorney's retention of the benefit of legal services provided by a withdrawing attorney cannot be unjust if no recovery ever occurs in the underlying litigation." In my view, it is not necessary to establish such a rule to decide this appeal. Moreover, I am not convinced that such a rule is appropriate, as it would preclude a quantum meruit recovery even in a case where the remaining attorneys purposely or negligently scuttle the client's case, or otherwise arrange a resolution of the client's suit in a way that could improperly preclude any recovery by an attorney who was wrongfully discharged or who rightfully withdrew.
2. Other Considerations
Hannon urges us to consider a problem that trial courts may face in determining the reasonableness of fees before the underlying *68contingent fee litigation has resolved. It posits that allowing a quantum meruit claim to go forward before the conclusion of the underlying contingent fee litigation could result in either too great or too small an award of fees to the claiming attorney. In my view, that issue may be resolved by allowing the claiming attorney to file a quantum meruit claim and then ask that the trial court stay the proceedings until the underlying litigation has concluded. Invoking that same procedure would also mitigate any adverse impact on the client of having such quantum meruit litigation ongoing among counsel while the client's case is still pending.
Hannon also argues that affirming the trial court's holding would enable an attorney to withdraw from a contingent fee case before the case concludes and receive compensation for services through a quantum meruit claim where, had the attorney not withdrawn, he or she would not have received any compensation if the client ultimately lost. Hannon contends this creates an incentive for an attorney to withdraw from a contingent fee suit if it appears the suit may not succeed. While Hannon's argument could be raised as a defense to a quantum meruit claim, in the nature of unclean hands, I do not believe this is a valid consideration in determining application of the accrual date under section 13-80-108(6).
III,. Conclusion
As I interpret Colorado accrual law, the allegations of the complaint show that the claim acerued no later than the date of Han-non's withdrawal from the federal court litigation, namely April 28, 1998. Because suit was filed more than three years after the claim acerued, I would rule that the trial court correctly dismissed the complaint as time barred.