Court Opinion

ID: 4387979
Source: CourtListenerOpinion
Date Created: 2019-04-17 09:05:34.497759+00
Date Added: 2024-06-11T09:37:02.728023
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                            STATE OF MICHIGAN

                            COURT OF APPEALS

PHILIP JOHNSON and LISA JOHNSON,                                   UNPUBLISHED
                                                                   April 16, 2019
              Plaintiffs,

v                                                                  No. 341436
                                                                   Wayne Circuit Court
MICHIGAN DEPARTMENT OF                                             LC No. 15-010804-CD
CORRECTIONS,

              Defendant,

and

ERNST & MARKO LAW PLC,

              Appellee,

and

RASOR LAW FIRM,

              Appellant.

Before: JANSEN, P.J., and METER and GLEICHER, JJ.

PER CURIAM.

        The trial court granted Ernst & Marko Law PLC’s motion to extinguish Rasor Law
Firm’s attorney’s charging lien in the underlying civil matter. As this Court has repeatedly held
in cases between these parties, Rasor is entitled to its share of the fees earned while attorney
Marko was employed at its firm. We vacate and remand for further proceedings consistent with
this opinion.

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                                       I. BACKGROUND

       It is undisputed that Philip and Lisa Johnson retained the Rasor firm to represent them in
a lawsuit against Philip’s employer, the Michigan Department of Corrections. Jonathan R.
Marko took the lead in the case. The Johnsons remained Rasor’s clients until Marko left to start
a new firm, Ernst & Marko. The Johnsons followed their attorney. It is undisputed that Marko’s
employment agreement with Rasor provided for a base pay plus 25% of the attorney fees earned
on Rasor-firm cases he worked on and 40% of the fees earned on any cases he originated and
brought to the firm.

        After Marko’s resignation, Rasor filed an attorney’s lien in this matter to secure fees
arising from its representation of the Johnsons. The Johnsons subsequently reached a settlement
with the MDOC. Following the settlement, Marko filed a motion to extinguish Rasor’s lien,
arguing that (1) Rasor was not entitled to a lien because it had a legal remedy—and a lawsuit
pending—to seek recovery of the claimed fees; (2) even if Rasor were entitled to a lien, Rasor
was only entitled to a small amount of attorney fees; and (3) Rasor would owe a portion of the
fees Rasor earned to Marko under the terms of his employment agreement. Rasor responded that
it was entitled to an attorney’s charging lien because it had entered into a retainer agreement with
the Johnsons, and specifically sought a one-third contingent fee or other pro-rata division of fees
under the agreement.

         One week before the hearing on Marko’s motion to extinguish the lien, the trial court’s
law clerk emailed Rasor and inquired, “Is the Rasor Law firm asserting a lien against the
Johnson case? If so, how much is the lien and what is the legal analysis?,” noted that a different
circuit court judge “was handling the Marko v Rasor litigation, #15-016404-CB,” and asked
whether the current lien question should “be resolved in that litigation.” Rasor responded that it
was entitled to one-third or an appropriate pro-rata share of the fees. Rasor also attached a
statement claiming that Marko had not properly accounted for time spent on this matter while
still in its employ, and that Rasor needed time to reconstruct the time records before filing a
supplemental exhibit. Rasor’s response further asserted entitlement to a quantum meruit fee that
could include as much as the entire one-third contingent fee contemplated by the original
retainer.

        At the hearing on Marko’s motion, the trial court twice explicitly stated that Rasor had a
valid lien on the proceeds of the settlement in this case. Yet, the court granted Marko’s motion
to extinguish that valid lien because Rasor had not established entitlement to the entire
contingent fee contemplated by the original retainer agreement and had not shown the exact
amount of fees it was owed. The failure to establish entitlement to a sum certain (a factual issue)
in response to Marko’s motion to extinguish the lien on legal grounds was fatal, in the court’s
estimation. Rasor unsuccessfully requested an evidentiary hearing to determine the proper
amount of fees given the trial court’s ruling that a contingent fee was not appropriate. And the
court denied Rasor’s reconsideration motion.

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                                         II. ANALYSIS

        We review for an abuse of discretion a trial court’s decision “whether to impose an
attorney’s lien.” Reynolds v Polen, 222 Mich App 20, 24; 564 NW2d 467 (1997). An attorney’s
“special or charging lien is an equitable right to have the fees and costs due for services secured
out of the judgment or recovery in a particular suit.” George v Sandor M Gelman, PC, 201 Mich
App 474, 476; 506 NW2d 583 (1993). “The attorneys’ charging lien creates a lien on a
judgment, settlement, or other money recovered as a result of the attorney’s services.” Id.
Charging “liens automatically attach to funds or a money judgment recovered through the
attorney’s services.” Id. at 477.

       Here, there is no actual dispute that Rasor is entitled to a charging lien. The Johnsons
were clients of Rasor until Marko left the firm and at least some work was done while the
Johnsons were still Rasor’s clients. Rasor and Marko dispute how much work was done and by
whom while the case was still with Rasor. Because there was an attorney-client relationship
between the Johnsons and Rasor during which Rasor provided legal services that ultimately led
to a settlement, the trial court properly concluded that an attorney’s charging lien, “which
automatically attach[es] to funds . . . recovered through the attorney’s services,” George, 201
Mich App at 477, attached to the Johnson’s settlement in Rasor’s favor.

        Marko relies on the proposition that generally “[a]n equitable lien cannot be imposed . . .
if the proponent has an adequate remedy at law,” In re Estate of Moukalled, 269 Mich App 708,
719; 714 NW2d 400, 407 (2006), to argue that Rasor is not entitled to a lien. Marko asserts that
because Rasor has already sued Marko in another matter and included claims regarding the
division of attorney’s fees, Rasor should not be granted a lien in this matter. But as this Court
noted in Hedrick v Dep’t of Corrections, unpublished per curiam opinion of the Court of
Appeals, issued December 12, 2017 (Docket No. 335489), another appeal involving Marko and
Rasor, the lien secures funds the plaintiffs in the underlying lawsuit (and not Marko) owes Rasor
for legal services rendered by Rasor to the plaintiffs. A lawyer’s entitlement to attorney fees
must arise from a contract. Plunkett & Cooney, PC v Capitol Bancorp Ltd, 212 Mich App 325,
329; 536 NW2d 886 (1995). The Johnsons (not Marko) entered into a contract with Rasor under
which the Johnsons (not Marko) assumed a contractual obligation to compensate Rasor for its
services. A civil suit between Marko and Rasor that does not involve the Johnsons necessarily
cannot determine the Johnsons’ obligation to Rasor. Moreover, Rasor does not have an adequate
remedy at law; it cannot sue the Johnsons for breach of contract as a client has an absolute right
to discharge a lawyer for any reason. Id. at 330. See Vorus v Dep’t of Corrections, unpublished
per curiam opinion of the Court of Appeals, issued August 21, 2018 (Docket No. 338474), slip
op at 4 (addressing this same issue between Marko and Raser).

        The trial court erred, however, in ruling that Rasor’s otherwise valid lien was rendered
invalid by Rasor’s failure to establish the exact amount owed. This was not Rasor’s motion to
enforce the lien, but rather Marko’s motion to extinguish it. Therefore, Rasor was not yet
required to prove the amount of fees it was owed. The only reason Rasor had any reason to
believe it would need to discuss the amount of the lien at all was an email from the trial court’s
law clerk (that apparently was delayed in reaching Rasor in the first place). Rasor asserted the
amount it believed it was owed and supported that assertion with legal analysis. As discussed
below, the trial court did not err in rejecting Rasor’s claimed entitlement to one-third of the

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settlement proceeds, but did err in refusing to hold an evidentiary hearing to resolve the dispute
over the amount of reasonable fees.

        Turning to the issue of the method of calculating the amount of Rasor’s lien, “ ‘an
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
quantum meruit, and not the contingent fee contract.’ ” Reynolds, 222 Mich App at 24, quoting
Ambrose v Detroit Edison Co, 65 Mich App 484, 491; 237 NW2d 520 (1975). “[R]ecovery in
such circumstances is based on quantum meruit rather than the amount provided for in a
contingent fee agreement because a client has an absolute right to discharge an attorney and is
therefore not liable under the contract for exercising that right.” Reynolds, 222 Mich App at 25.
“[Q]uantum meruit is generally determined by simply multiplying the number of hours worked
by a reasonable hourly fee.” Id. at 28.

         Rasor, however, contends that the trial court should have followed Morris v Detroit, 189
Mich App 271; 472 NW2d 43 (1991), in which this Court held that an attorney fee awarded post-
discharge on a quantum-meruit basis in a contingent-fee arrangement can be for an amount
greater than simply the hours-times-rate amount. In Morris, the trial court found that the
discharged attorney had completed 99.44% of the work in the case before being replaced by
another attorney; the trial court then awarded the entire contingent fee to the fired lawyer. Id. at
277. This Court held that under the circumstances, the trial court properly found that the former
attorney was entitled to a larger attorney fee, but that the trial court wrongly awarded him the
entire fee. Id. at 280. The trial court should have “only” awarded 99.44% of the fee, and so this
Court vacated and remanded for entry of a new order. Id. Likewise, in Reynolds, this Court
reversed a trial court’s order denying the discharged law firm any fee and remanded for
consideration of a proper fee under the Morris framework where the discharged firm had done
all of the work in the case before being discharged almost literally on the eve of trial. Reynolds,
222 Mich App at 30-31.

        Here, the dividing line between services performed by Rasor and by Marko was not
nearly as stark as in Morris or Reynolds. Marko had performed a significant amount of work
after the case went with him to his new firm (indeed, the record suggests that the lion’s share of
work on this matter occurred after Marko changed employment). Accordingly, the trial court
concluded that the standard quantum meruit framework (hours times a reasonable rate) was
appropriate for computing Rasor’s fee. Given this record, the trial court correctly determined
that Morris and Reynolds did not control here. It did, however, abuse its discretion in denying
Rasor any fees, particularly given Rasor’s request for an evidentiary hearing.

                                                -4-
      In Smith v Khouri, 481 Mich 519; 751 NW2d 472 (2008), the Supreme Court set forth a
framework1 for trial courts to use to determine the “reasonable attorney fee” to be awarded:

       [T]he trial court should begin the process of calculating a reasonable attorney fee
       by determining factor 3 under MRPC 1.5(a), i.e., the reasonable hourly or daily
       rate customarily charged in the locality for similar legal services, using reliable
       surveys or other credible evidence. This number should be multiplied by the
       reasonable number of hours expended. This will lead to a more objective
       analysis. After this, the court may consider making adjustments up or down in
       light of the other factors listed in Wood [v DAIIE, 413 Mich 573; 321 NW2d 653
       (1982)] and MRPC 1.5(a). In order to aid appellate review, the court should
       briefly indicate its view of each of the factors. [Smith, 481 Mich at 522.]

“The fees customarily charged in the locality for similar legal services can be established by
testimony or empirical data found in surveys and other reliable reports.” Id. at 531-532. But
anecdotal, subjective testimony is not sufficient. Id. at 532. “Smith clearly contemplates that the
trier of fact must independently review these State Bar surveys and determine what information
contained in those surveys is most relevant and helpful to a determination of the market rate for
each attorney for whom a reasonable attorney fee is sought.” Adair v Michigan (On Fourth
Remand), 301 Mich App 547, 559; 836 NW2d 742 (2013). Ultimately, “[t]he fee applicant bears
the burden of supporting its claimed hours with evidentiary support.” Smith, 481 Mich at 532.
“If a factual dispute exists over the reasonableness of the hours billed or hourly rate claimed by
the fee applicant, the party opposing the fee request is entitled to an evidentiary hearing to
challenge the applicant’s evidence and to present any countervailing evidence.” Id.

       Here, Rasor was not, strictly speaking, the “fee applicant” at the time the trial court
rendered its ruling. Rasor was instead merely defending against Marko’s attempt to extinguish
what is, in the trial court’s own words, Rasor’s “obvious” entitlement to a charging lien. There
was clearly a dispute over the amount of fees Rasor was entitled to. Moreover, if Rasor is
believed, the reason it could not fully establish the number of hours expended on this matter is
that Marko failed to properly document his time. In a similar vein, an email from the trial court’s
law clerk should not have served as a substitute for an evidentiary hearing. The trial court should
have held a hearing, especially after Rasor requested one. Because it extinguished Rasor’s
“obvious,” valid charging lien without a hearing, the court abused its discretion.

1
 Though Smith involved an award of attorney fees as case-evaluation sanctions, this Court and
our Supreme Court have since applied it to awards of attorney fees in other situations as well.
See, e.g., Kennedy v Robert Lee Auto Sales, 313 Mich App 277; 882 NW2d 563 (2015)
(Magnuson-Moss Warranty Act and Michigan Consumer Protection Act); Ford Motor Co v
Dep’t of Treasury, 313 Mich App 572; 884 NW2d 587 (2015) (frivolous-action sanctions); Pirgu
v United Servs Auto Ass’n, 499 Mich 269; 884 NW2d 257 (2016) (no-fault act); Adair v
Michigan (On Fourth Remand), 301 Mich App 547; 836 NW2d 742 (2013) (Headlee
Amendment). We conclude that it is an appropriate framework for determining the proper fees
here.

                                                -5-
        We vacate the order extinguishing Rasor’s attorney’s charging lien and remand for a
hearing to determine the proper division of the fees owed by the Johnsons. We do not retain
jurisdiction.

                                                       /s/ Kathleen Jansen
                                                       /s/ Patrick M. Meter
                                                       /s/ Elizabeth L. Gleicher

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