Court Opinion

ID: 9782213
Source: CourtListenerOpinion
Date Created: 2023-08-30 18:08:16.398368+00
Date Added: 2024-06-11T12:15:16.872004
License: Public Domain

BURKE, Justice,
dissenting.
[136] I respectfully dissent because I do not believe it is appropriate to adopt a rigid rule allowing deduction of the attorney's contingent fee percentage in all legal malpractice cases. The deductibility of those fees should be tied to the benefit that the client received from the attorney's efforts. Where the client has received no benefit, no deduction should be allowed.
[187] As noted by the majority, the issue presented is one of first impression for this Court. Understandably, the majority seeks guidance from other jurisdictions, and it relies upon several cases from other jurisdictions as support for its decision. Such reliance is misplaced. The majority's interpretation of Moores v. Greenberg, 834 F.2d 1105 (1st Cir.1987), which serves as the lynchpin of the majority's analysis, is illustrative.
[188] The majority describes the Moores case as "well-reasoned" and as standing for the proposition that the attorney's contingent fee should be deducted in all cases in caleu-lating a client's damages. Upon examination, however, it becomes readily apparent that the Moores court did not hold that attorney fees should be deducted in all cases. In Moores, the alleged malpractice consisted of the attorney's failure to convey a $90,000 settlement offer to Plaintiff. After Plaintiff lost at trial, Plaintiff sued his attorney claiming that he would have accepted the offer if he had known about it. The Moores court allowed deduction of the 1/3 contingent fee. There was no dispute that the settlement offer resulted from the efforts of the attorney. The Moores court noted, however, that the case might have been decided differently if the attorney had performed no services that benefited the client. The court stated:
The case before us, however, is altogether different. There was nothing uncertain or problematic about Greenberg's fee. The amount of the gross recovery was fixed: had the lawyer not breached his duty, $90,000 would have been paid. This is a far ery from cases like Andrews v. Cain, [62 A.D.2d 612, 613, 406 N.Y.S.2d 168, 169 (1978) ] where the attorney failed to file suit-leaving up in the air the question of how much money, if any, 'his client would have recovered. See also Duncan v. Lord, [409 F.Supp. 687, 691-92 (E.D.Pa.1976)] (similar; case involuntarily dismissed for want of prosecution due to counsel's laggardness in answering interrogatories). And the fee arrangement between Moores and Greenberg-a straight one-third-was equally definite, had the *80offer been communicated and accepted, counsel's recompense would have been $30,000. This contrasts sharply with cases such as Andrews, where the court believed "it was impossible to determine what the deduction from plaintiffs award would have been." 406 N.Y.S.2d at 169.
There is another important line of de-mareation as well. Many of the cases hawked by Moores, typically ones in which a lawyer neglected to sue before a temporal deadline expired, stress the fact that the attorney-defendant had furnished no services to his client. E.g., Andrews, 406 N.Y.S.2d at 169; Benard, 77 Cal.Rptr. at 551 (defendant had "not established that [the lawyer] performed any part of the contract"). These "do-nothing" cases are also distinguishable. Where a lawyer accepts an engagement and thereafter fails to show up at the starting gate, e.g., id. (failure to file suit within statute of limitations); Winter v. Brown, 365 A.2d 381 (D.C.1976) (failure to serve mandatory notice of claim within prescribed period), it is arguably equitable to fix damages without regard to a fee entitlement which would only have come into existence had the lawyer performed the contract. Those rough equities are in a different balance, however, where the lawyer-notwithstanding that he was guilty of some breach of duty-actually did the work. And the difference in the equities is heightened in a case like this one, where the sum in dispute-the $90,000 offer-arose during the trial, presumably in direct response to Greenberg's labors on his client's behalf. Cf. Strauss v. Fost, 517 A.2d at 145 ("We can envision cases where on a quantum meruait basis the efforts of a defendant attorney may have so benefited ... a plaintiff ... that it would be unfair to deny" the deduction); Foster v. Duggin, 695 S.W.2d at 527 ("in an appropriate case, the attorney may be entitled to credit for expenses ... which ultimately benefitted the client").
Id., 834 F.2d at 1112-13 (emphasis in original).
[139] The majority believes that Moores allows the deduction of attorney's fees in all legal malpractice cases, and observes that this is consistent with the typical rule for recovering breach of contract damages. As noted above, however, I believe that Moores supports a more flexible rule. Additionally, courts that have specifically considered applying a typical contract damages analysis to contingent fees in malpractice cases have rejected that approach because of the special nature of the attorney-client relationship.1 As one court noted:
We conclude that a reduction of the client's recovery should not be allowed in this case and for reasons of public policy, we decline to apply the traditional rules of contract damages to permit a negligent attorney to obtain credit for an unearned fee.
As we not too long ago observed, "[the unique relationship between an attorney and client, founded in principle upon the elements of trust and confidence on the part of the client and of undivided loyalty and devotion on the part of the attorney, remains one of the most sensitive and confidential relationships in our society." (Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 558, 556[, 444 N.Y.S.2d 55, 428 N.E.2d 387] ). Because of the role attorneys play in the vindication of individual rights in our society, they are held to the highest standard of ethical behavior (Code of Professional Responsibility, Preamble; EC 6-5). Yet without this relationship of trust and confidence an attorney is unable to fulfill this obligation to effectively represent clients by acting with competence and exercising proper care in the representation. (Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 553, 556[, 444 N.Y.S.24 55, 428 N.E.2d 387], supra ).
Because of the uniqueness of the attorney-client relationship, traditional contract principles are not always applied to govern disputes between attorneys and clients. Thus it is well established that notwith*81standing the terms of the agreement between them, a client has an absolute right, at any time, with or without cause, to terminate the attorney-client relationship by discharging the attorney. (Shaw v. Manufacturers Hanover Trust Co., 68 N.Y.2d 172, 177[, 507 N.Y.S.2d 610, 499 N.E.2d 864]; Teichner v. W & J Holsteins, 64 N.Y.2d 977, 979[, 489 N.Y.S.2d 36, 478 N.E.2d 177]; Demov, Morris, Levin & Shein v. Glantz, supra; Crowley v. Wolf, 281 N.Y. 59, 64-65[, 22 N.E.2d 234]; Martin v. Camp, 219 N.Y. 170, 176[, 114 N.E. 46]). Where that discharge is without cause, the attorney is limited to recovering in quantum meruit the reasonable value of the services rendered. (Teichner v. W & J Holsteins, supra; Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d, at 557[, 444 N.Y.S.2d 55, 428 N.E.2d 387], supra). Where the discharge is for cause, the attorney has no right to compensation or a retaining lien, notwithstanding a specific retainer agreement. (Teichner v. W & J Holsteins, 64 N.Y.2d, at 979[, 489 N.Y.S.2d 36, 478 N.E.2d 177], supra; Crowley v. Wolf 281 N.Y., at 65, 22 N.E.2d 234], supra). "Thlis] rule is well calculated to promote public confidence in the members of an honorable profession whose relation to their clients is personal and confidential." (Martin v. Camp, 219 N.Y., at 176[, 114 N.E. 46], supra ).
We view the public policy considerations that underpin this rule as both relevant and sufficiently compelling to warrant denying unearned attorney's fees, or credit for the monetary equivalent, to an attorney who is guilty of legal malpractice that results in the client's loss of recovery upon a valid claim. The attorney's malpractice constitutes a failure to honor faithfully the fidelity owed to the client and to discharge competently the responsibilities flowing from the engagement. It is especially appropriate to deny credit for a fee where, as here, the defendant attorneys performed absolutely no services in connection with the disputed claim....
Campagnola v. Mulholland, 76 N.Y.2d 38, 43-44, 556 N.Y.S.2d 239, 555 N.E.2d 611, 613-14 (N.Y.1990). This analysis is more consistent with Wyoming precedent, for we have previously recognized that the unique nature of the attorney-client relationship justifies divergence from typical contract rules. In Enos v. Keating, 39 Wyo. 217, 236, 237, 271 P. 6, 12, 13 (1928), for example, we recognized that a client may discharge an attorney at any time without cause, and while the attorney cannot sue for breach of contract, he can recover in quantum meruit. See also Morfeld v. Andrews, 579 P.2d 426, 482 (Wyo.1978) ("[Nlotwithstanding that Andrews could not claim under the contingent-fee contract be still has a right to recover upon quantum meruait.").
[T 40] -In addition to Moores, the majority relies upon three other cases from different jurisdictions allowing the deduction. All are problematic. Childs, 69 A.D. 160, 74 N.Y.S. 643, was a 1902 New York appellate division decision that has been specifically rejected in two more recent New York appellate decisions. See Andrews v. Cain, 62 A.D.2d 612, 613, 406 N.Y.S.2d 168, 169 (N.Y.App.Div.1978); Campagnola v. Mulholland, Minion & Roe, 148 A.D.2d 155, 158, 543 N.Y.S.2d 516, 518 (N.Y.App.Div.1989), aff'd, 76 N.Y.2d 38, 556 N.Y.S.2d 239, 555 N.E.2d 611 (N.Y.1990).
[141] Sitton, 385 F.2d 869, is a 1967 Sixth Circuit decision applying Tennessee law. The Sitton court did not directly address the deductibility issue, but only referenced a jury instruction allowing the deduction based upon the terms of the contract. In 1985, the Tennessee Supreme Court directly addressed deductibility of contingent fees in a legal malpractice action, and rejected the deduction:
In determining whether or not a malpractice award should be reduced by the fee which the attorney would have received had he competently handled the litigation, we are faced with two opposing lines of - decision. Those cases allowing the reduction hold, generally, that the client should recover only what he would have received had the original matter been properly handled. Since the client would have had to pay the attorney his fee, that fee is deducted from the malpractice award. See, e.g., Childs v. Comstock, 69 App. Div. 160, 74 N.Y.S. 643, 649 (1902); McGlone v. Lacey, *82288 F.Supp. 662, 665 (D.S.D.1968). There is some support for this view in Tennessee. See In re Woods, 158 Tenn. 383, 13 S.W.2d 800, 803 (1929); Sitton v. Clements, 257 F.Supp. 63, 65 (E.D.Tenn.1966), aff'd 385 F.2d 869 (6th Cir.1967).
The contrary line of decision, which appears to be the majority view, holds that no credit is due the attorney since he has breached the contract by performing negligently, and since deduction of his fee would not fully compensate the client who has incurred additional legal fees in pursuing the malpractice action. These additional fees are said to cancel out any fees which the plaintiff would have owed the attorney had he performed competently. See, e.g., Christy v. Saliterman, 288 Minn. 144, 179 N.W.2d 288, 307 (1970); Andrews v. Cain, 62 App. Div.2d 612, 406 N.Y.S.2d 168, 169 (1978); Kane, Kane & Kritzer, Inc. v. Altagen, 107 Cal.App.3d 36, 43, 165 Cal.Rptr. 534, 538 (1980).
On the facts of this case, we hold that Mr. Duggin should be denied any credit for the legal fees which he originally was to receive. It is the negligent attorney who is at fault for breaching the contract, and the burden of his incompetence should not be placed upon the innocent client. While in an appropriate case the attorney may be entitled to credit for expenses which were incurred on behalf of the client and which ultimately benefitted the client, the record here is silent as to any benefit incurring to the plaintiffs from the actions of Mr. Duggin. To the contrary, the plaintiffs have had to incur additional legal fees to pursue this malpractice action, and they should not be required to assume the burden of twice paying for legal representation. By taking into account the legal fees which plaintiffs have incurred in pursuing this malpractice action we are not, as Mr. Duggin argues, awarding the plaintiffs their attorney fees. The additional fees necessary to pursue this action are in the nature of incidental damages flowing from Mr. Duggin's breach of the contract. See Winter v. Brown, 365 A.2d 381, 386 (D.C.App.1976).
Foster v. Duggin, 695 S.W.2d 526, 527 (Tenn.1985).
[142] McGlone, 288 F.Supp. 662, is a decision from the federal district court in South Dakota granting summary judgment to the defendant attorney because plaintiff failed to establish the existence of the attorney-client relationship. In dicta, the court recognized deductibility based solely upon Sitton. Because Sitton has been rejected, McGlone retains little persuasive value.
[143] Most courts that have considered the issue have denied the deduction under the specific facts presented, but leave open the possibility that the deduction should be allowed on a quantum meruit basis.2 As indicated previously, Moores is, in essence a quantum meruit case. The $90,000 settlement offer was directly attributable to the efforts of the attorney. The deduction was allowed in the full amount of the 1/3 fee percentage specified in the agreement because the attorney had earned the fee. The sole justification provided by the majority for rejecting a quantum meruit approach to determine an appropriate deduction is that it would be "complicated." While complicated factual issues are conceivable, no factual complications exist in many cases. The Moores court had no difficulty allowing the deduction because it had been earned. Where the attorney has not performed any work that has benefited the client, such as missing a statute of limitations deadline, the courts do not have any difficulty rejecting the deduction. The mere possibility of complicated factual scenarios in some cases provides no justification for allowing the deduction in its entirety in all cases.
[144] While as a general rule courts do not allow the deduction, most allow for the possibility that, in the appropriate case, a deduction is warranted. As one court explained:
*83In Foster v. Duggin (1985), Tenn., 695 S.W.2d 526, the court denied a deduction for attorney's fees where the defendant attorney had failed to file the plaintiffs' claim prior to expiration of the statute of limitations. However, the court limited its holding to "the facts of this case." Id. at 527, The court ruled that while in an appropriate case the attorney may be entitled to credit for fees incurred on behalf of the client and which ultimately benefited the client, the record in that case was silent as to any benefit incurring to the plaintiffs from the actions of the attorney. Id.
Also, in Strauss v. Fost (1986), N.J.Super.A.D., 213 N.J.Super. 239, 517 A.2d 143, the court declined to establish a "hard and fast rule" that in no case can a negligent attorney be entitled to any portion of his legal fees. Id. at 145. "We can envision cases where on a quantum meruit basis the efforts of a defendant attorney may have so benefited a plaintiff or other circumstances exist that it would be unfair to deny all or part of the offset." Id. The court thus set forth a general rule that a negligent attorney is precluded from recovering his attorney's fees but held that courts should determine on a case-by-case basis whether to apply the general rule or relax the rule and permit deduction for attorney's fees where the interests of justice so dictate. Id. See also Campagnola v. Mulholland (1990), 76 N.Y.2d 38, 555 N.E.2d 611, 556 N.Y.S.2d 239 (ruling it "especially appropriate to deny credit for a fee where, as here, the defendant attorneys performed absolutely no services in connection with the disputed claim ..." and that "in these cireumstances" the attorney was precluded from claiming credit for an unearned fee). Cf. Moores v. Greenberg, 834 F.2d 1105 (1st Cir.1987) (allowing deduction for attorney's fees where counsel's efforts produced the rejected settlement offer upon which the legal malpractice action was based).
Schultheis v. Franke, 658 N.E.2d 932, 940 (Ind.Ct.App.1995).
[T45] In the final analysis, it does not appear that any court currently applies the rule adopted by the majority. I find the modern view regarding deductibility appropriate and the reasoning supporting that view persuasive. We should adopt the general rule that the contingent fee should not be deducted. However, in those cases where it would be inequitable to disallow the deduction, as exemplified by Moores, a quantum meruit approach would be more appropriate.3 In the instant case, however, the certified question does not include any facts indicating that Mr. Wooster benefited in any fashion from Mr. Horn's efforts. Accordingly, I would answer "No" to the first certified question.

. Indeed, while the majority does not explicitly say so, in fact it relies almost entirely on the unique nature of the attorney-client relationship to answer the second certified question in the negative.

. The exception appears to be Carbone v. Tierney, 151 N.H. 521, 864 A.2d 308, 319-20 (2004), where the New Hampshire Supreme Court specifically rejected the quantum meruit approach in favor of a rule of law that would not allow the contingent fee deduction in any legal malpractice case regardless of the work performed by the aitorney or the benefit received by the client.

. As Justice Kaye noted in Campagnola:
Should the application of this rule yield an absurd result in a future case presenting different facts ... lawyer defendants can be trusted to bring such additional facts to courts' attention, and the law can be trusted to respond sensibly in calculating and awarding damages.
555 N.E.2d at 616 (Kaye, J., concurring).