Court Opinion

ID: 6768842
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:40:50.790612+00
Date Added: 2024-06-11T16:02:42.960548
License: Public Domain

Douglas, J.,
concurring in part and dissenting in part. Our decision today may be the worst of the bad jokes about lawyers. Unfortunately, this is no joke. What we say today is that lawyers are the only persons in this state who are *578prohibited from enforcing written contracts according to their express terms and conditions when such contracts involve payment for services and a dispute, regardless of cause or merit, arises over representation. I would think that even those who are most critical of lawyers and the legal profession would find this policy to be patently unfair.
Accordingly, I concur with the majority in paragraph one of the syllabus. If quantum meruit is to remain the test, I also concur -with paragraph three of the syllabus. I respectfully dissent with regard to paragraph two of the syllabus and, specifically, the continued application, in cases such as the one before us, of the rule of quantum meruit. I also dissent with regard to the ultimate judgment of the majority in reversing the judgment of the court of appeals. I would affirm the judgment of the court of appeals for the reason stated by that court and/or for the reasons stated infra.
This case graphically presents a problem that is increasing in scope in our profession. It is a problem that is unpleasant to confront and dealing -with the problem may appear, to some, to be lawyer self-serving in nature. It would be easier to quietly ignore the problem as though it did not exist and, thereby, keep our dirty linen within our own household. Unfortunately, such a course of action ignores reality and does nothing to help those who must confront circumstances such as are presented by today’s case. The genesis of this case and others like it should be branded for what it is — “case stealing.”
Given Fox & Associates Co., L.P.A. v. Purdon (1989), 44 Ohio St.3d 69, 541 N.E.2d 448, the majority opinion very fairly sets forth the facts necessary for a determination in this matter. However, there is more to the story and this story should be told.
There are three principal players in this case. Two are parties: the law firm of Reid, Johnson, Downes, Andrachik & Webster (“Reid”) and Donald Lansberry (“Lansberry”). The third is attorney William A. LeFaiver (“LeFaiver”), a non-party.
LeFaiver was admitted to practice law in Ohio in 1969. Between August 1969 and April 1979, LeFaiver was an attorney with the United States Department of Justice in Cleveland. From April 1979 to April 1983, he was in private practice with the law firm of Hahn, Loeser, Freedheim, Dean & Wellman. In May 1983, LeFaiver became associated with the law firm of Guren, Merritt, Fiebel, Sogg & Cohen. This association continued for one year (until May 1984). In June 1984, LeFaiver joined the Reid law firm and, as an employee of the firm, was paid an annual salary of $60,000. This employment relationship continued until June 1986 when LeFaiver either withdrew from or was discharged by the firm.
In October 1984, Lansberry was injured in a motor vehicle accident. Lansberry and his wife asked LeFaiver, who was then an associate of the Reid law firm, *579to represent them.4 After consultation with others in the firm, LeFaiver had the Lansberrys sign an agreement denominated as a “Contingent Fee Contract.” The contract was executed on December 10, 1984 and the parties were the Reid law firm and the Lansberrys. The law firm agreed to represent the Lansberrys and, for its services, the law firm was to receive 33.3 percent of the proceeds of any settlement before suit or 40 percent after suit. The contract is part of the record in this case and, without question, the only parties to the contract are the Reid law firm and the Lansberrys.
After LeFaiver left the. Reid law firm in 1986, a dispute between LeFaiver and the law firm erupted with the law firm contending that LeFaiver, in various ways, was undermining the law firm’s relationship with various clients. The majority opinion details only some of the activity involving Reid, the Lansberrys and LeFaiver. This activity (as later found by the referee) included LeFaiver writing letters to the Reid law firm which were signed by Lansberry; LeFaiver entering into another contingent fee contract (on the same day as Lansberry’s first letter to Reid) with the Lansberrys, with LeFaiver knowing full well of the existence of the contingent fee contract between the Lansberrys and Reid; and LeFaiver drafting, and having the Lansberrys execute on October 20, 1986, a guaranty of payment of the Reid contingent fee contract, which guaranty contract Mrs. Lansberry, at trial, testified she and her husband never planned to abide by even as they signed the agreement.
While the majority opinion tells us some of this story, what the majority does not tell us is that the Reid law firm, on October 23, 1986, filed a declaratory judgment, injunctive relief and money damages action against LeFaiver alleging, inter alia, that LeFaiver “[p]rior to June 1, 1986 and subsequent to June 1, 1986 * * * embarked on a course of conduct that was intended to interfere with, damage, and compromise plaintiffs [Reid’s] professional relationship with various clients.” Reid then prayed for an order “ * * * enjoining and restraining defendant [LeFaiver] from interfering with the contractual relationships that exist between plaintiff firm and various clients”; an order “ * * * enjoining defendant from issuing defamatory statements [against the Reid law firm]”; an order “ * * * restraining and enjoining defendant from harassing, annoying, or interfering with the pending litigation or settlement negotiations that are ongoing between the firm and various firm clients and defense representatives”; an order for defendant to “ * * * establish an escrow account and deposit any and all funds received from various firm clients * * * and an order for defendant to immédiately account to the firm for any and all funds that defendant has received *580from various firm clients * * * ” and for compensatory damages of $100,000 and punitive damages of $150,000.
Since the full record of this underlying case is not before us, it cannot be determined what all went into the resolution of the Reid versus LeFaiver lawsuit. What we do know from the record before us is that the case was settled and at least part of the settlement included LeFaiver’s writing letters to the Lansberrys, a Ms. Klein and a Mr. and Ms. Nannarone renouncing any right or claim in various settlement checks sent by insurance carriers to the letter recipients. LeFaiver’s letter to the Lansberrys, dated September 28, 1987, was typical and stated, in part, that “[a]s to that settlement check sent to you in the amount of $21,666.67 and made payable by the involved insurance carrier to both you and the Reid, Johnson law firm * *• *, please be advised that I make absolutely no claim to nor assert any right or benefit in or to any such sum. * * * ” (Emphasis in original.) It is difficult to ignore these letters and their import.
Meantime, in either October or November 1987, Lansberry’s suit for his personal injuries was settled for about $94,000. By order entered in that case, Judge Winter directed funds from an insurance company draft for $21,666.67 (presumably pursuant to the Reid-Lansberry contingent fee contract) be placed in escrow “ * * * until the fee dispute among Plaintiffs [Lansberrys] and their former [Reid] and present [LeFaiver] attorneys is resolved.” Subsequently, on December 8,1989, Reid, in the case now before us, sued Lansberry in an effort to enforce the contingent fee contract.
This case was assigned to Judge Morgan. Judge Morgan had the right idea of how to settle the matter in this and like cases. At a March 13, 1990 pretrial, Judge Morgan indicated that Reid should file an amended complaint and bring LeFaiver into the case as a necessary party. Reid declined to do this on the basis that LeFaiver had, by this time, waived any claim to the escrowed funds. Judge Morgan’s suggestion was right on point, especially given that LeFaiver filed an affidavit in the case saying that the Lansberrys owed LeFaiver “ * * * more than $33,000.00 which is yet to be paid * * *.”5
Judge Morgan referred the case for trial before Referee Shoemaker. Upon conclusion of the trial, the referee filed a report with the trial court which is both extensive and illuminating. For a complete understanding of this case, the *581referee’s report should be read in full. Several of the referee’s “conclusions of law” should be noted here.
The referee reported to the judge that “[throughout all this, they [the Lansberrys] had legal advice from Attorney LeFaiver, who not only drafted the original letters in August and September, but also the guaranty] which was to secure the payment of the $21,666.67. It is also concluded that neither Mr. Lansberry nor Mrs. Lansberry ever intended to live up to the agreement, even when they signed it and gave it to their attorney to be returned to the Plaintiff. * * * There is also no evidence that the execution of such document was the only way that the Defendant and his wife could get their file so they might be able to file a suit to protect the running of the two year statute of limitations in the matter. Likewise, the record is barren of proof that the Plaintiffs conduct in retaining the Defendant’s file was in violation of some professional code requirement and/or let alone in violation of any law in Ohio. While that point is suggested by Attorney LeFaiver [who had, without apparent cause, sent information concerning Reid to Disciplinary Counsel — another problem we may have to deal with some day], there is no indication that any board or agency adjudicated the conduct of the Plaintiff in such matter. Considering the background, education and the totality of the circumstances surrounding this matter, the Defendant and his wife are found not to have signed the document of October 20, 1986 [the guaranty agreement] because of any duress or coercion. Rather, the Referee concludes the signing of the document and its presentation through Attorney LeFaiver to the Plaintiff was done to trick the Plaintiff into releasing the file, based upon the promise of the Defendant and his wife to pay the $21,666.67 set forth therein.” (Emphasis added.) Now we know “the rest of the story.”
The referee went on to say that “[t]he evidence overwhelmingly and well beyond the preponderance standard, established that the Defendant held out to the Plaintiff that he and his wife wished to modify the original contingent fee agreement by means of the negotiated October 20, 1986 document * * *.” (Emphasis added.) Finally, the referee said, “[w]herefore, the Plaintiff has established by a preponderance of the evidence that it is entitled to the $21,666.67 amount * * *.”
In his judgment entry, Judge Morgan first noted that no objections, pursuant to Civ.R. 53(E)(2), to the referee’s report had been filed. The judge then adopted the referee’s report, conclusions, findings and recommendations as his own— except the portion of the report dealing “with the applicable rule of law.” Judge Morgan then noted that prior to this court’s ruling in Fox, supra, “ * * * Ohio recognized that an attorney could recover upon a contingent fee contract with a client if he had been discharged without cause. If he had been discharged with *582cause, the most he could recover would be a quantum meruit amount. However, Fox, supra, substantially changed the previous line of Ohio cases regarding an attorney’s recovery on a contingent fee contract * * Being bound to follow Fox, Judge Morgan then held that Reid was only entitled to recover “its quantum meruit services in the amount of $2,500.”
Thus, Reid had two written unambiguous contracts with the Lansberrys and could collect on neither. Reid appealed. The court of appeals found, it thought, a way around the dilemma. The appellate court found that Fox did not apply because the Lansberrys “ * * * entered into a new guaranty contract, upon the advise [sic ] of attorney [LeFaiver] * * * ” after having discharged the law firm in September 1986. Thus, concluded the court of appeals, “[t]he law firm is therefore entitled to a fee based on the terms of the guaranty.”
Now the case is before us to take another look at whether we did the right thing in Fox. I concurred in Fox and still agree that a client has an absolute right to discharge an attorney or law firm at any time, with or without cause, subject, however, to the obligation of the client to compensate the attorney or firm. I no longer agree, given this case and numerous other like situations that are well-known in the profession, that quantum meruit should be the basis of fee recovery. To continue this test deprives lawyers of the basic rights of contract law that all other citizens are afforded. I now believe I was in error in concurring in Fox.
It is a fundamental principle that parties are generally free to negotiate the terms of a contract. In Blount v. Smith (1967), 12 Ohio St.2d 41, 47, 41 O.O.2d 250, 253, 231 N.E.2d 301, 305, this court said that “[t]he right to contract freely with the expectation that the contract shall endure according to its terms is as fundamental to our society as the right to write and to speak without restraint. Responsibility for the exercise, however improvident, of that right is one of the roots of its preservation.” (Emphasis added.)
Not so long ago the General Assembly decided that the tort system needed to be looked at — and maybe overhauled better describes its action. In R.C. 4705.15(B), the General Assembly said that “[i]f an attorney and a client contract for the provision of legal services in connection with a claim that is or may become the basis of a tort action and if the contract includes a contingent fee agreement, that agreement shall be reduced to writing and signed by the attorney and the client. The attorney shall provide a copy of the signed writing to the client.”
Given our decision in Fox and our holding today, one might logically ask, “What happened to what the Ohio Supreme Court said in Blount and what purpose does R.C. 4705.15 serve when the contract can be breached at will by a client?” The only logical answer is that the law of contract protects all but *583lawyers whose services involving a contingent fee contract are terminated, even without cause, by a client.
It should be recognized that in today’s competitive market place, substantial expense has been incurred by a law firm (lawyer) before a client even comes in the door. Much of this expense, such as that related to a firm’s reputation, contacts, consultation and services not covered by a fee, office space with attendant overhead and even advertising of the law firm (lawyer) through public appearances and other forms, inures to the benefit of a client. When a case is pirated by a firm member or associate or even by another attorney not ever connected with the firm who will, maybe just before settlement, “do it for less”— and the rule for the original attorney for compensation is quantum meruit, we just encourage such activity.
This need not be so! In Cleveland Co. v. Standard Amusement Co. (1921), 103 Ohio St. 382, 387-388, 133 N.E. 615, 616, this court set forth “ * * * that where one party repudiates a continuing contract the injured party may (1) treat the contract as rescinded and recover on a quantum meruit so far as he has performed, or (2) keep the contract alive for the benefit of both parties, being at all times himself ready and able to perform at the end of the time specified in.the contract, and sue and recover under the contract, or (3) he may treat the repudiation as putting an end to the contract for all purposes of performance and sue to recover as far as he has performed and for the profits he would have realized if he had not been prevented from performing.” See, also, Wellston Coal Co. v. Franklin Paper Co. (1897), 57 Ohio St. 182, 48 N.E. 888; 3 Restatement of the Law 2d, Contracts (1981), Sections 344-347, 378; 2 Restatement of the Law 2d, Agency (1958), Sections 453, 455; and 11 Williston, Law on Contracts (3 Ed.1968), Section 1358; 12 Williston (1970), supra, at Section 1459. Until Fox and the decision today which farther perpetuates Fox, this court has long adhered to the general rule of contract law set forth above, allowing an attorney or law firm discharged by a client prior to completion of the contract to recover the bargained-for contract price. See Scheinesohn v. Lemonek (1911), 84 Ohio St. 424, 95 N.E. 913; Roberts v. Montgomery (1926), 115 Ohio St. 502, 154 N.E. 740; and Bolton v. Marshall (1950), 153 Ohio St. 250, 41 O.O. 270, 91 N.E.2d 508. Fox changed all this law by overruling these cases.
If we make it clear that contingent fee contracts will be enforced and that any lawyer taking a case being handled by another firm or lawyer takes the case encumbered with the fee agreement with the original firm subject, of course, to a judicial determination as to how the fee should be divided between the lawyers, then we serve the purpose and theory of the law and protect clients. Clients should not be required to .be involved in lawyer fee disputes. If an action is filed to recover under a contingent fee agreement, then the subsequent lawyer (as *584Judge Morgan suggested) can be joined and we could require that the client be responsible only for that which the client has contracted for and the dispute (and the expense of the dispute) should be only between the lawyers.
In the case before us, to date Lansberry has paid nothing even though he has received a settlement of over $90,000. He now wants to pay Reid only $2,500. Viewing what has gone on in this case to this point, it is difficult to determine the outcome of LeFaiver’s and the Lansberrys’ contingent fee agreement. Maybe Lansberry, now that he has won in this case, will tell LeFaiver that he (Lansberry) has a good thing going, discharge LeFaiver before payment is made and then tell LeFaiver to sue because the amount due will only be quantum meruit.
To reach a just decision in this case, I would affirm the judgment of the court of appeals. I would go further, however, and have the syllabus paragraphs read:
“1. A client has an absolute right to discharge an attorney or law firm at any time, with or without cause, subject to the obligation to compensate the discharged attorney or firm.
“2. If the discharge is without cause and the client has entered into a contingent fee contract, the fee for services rendered shall be based upon the terms of the fee contract. (Fox & Associates Co., L.P.A. v. Purdon [1989], 44 Ohio St.3d 69, 541 N.E.2d 448, overruled.)
“3. If a dispute arises between attorneys over distribution of the amount of fees realized from a contingent fee contract, such dispute shall be settled between the attorneys without expense to any client.”6
Because the majority opinion does not reach this result, I must respectfully dissent in part.
F.E. Sweeney and Pfeifer, JJ., concur in the foregoing opinion.

. The Lansberrys knew, and had been represented by, LeFaiver before LeFaiver became associated with the Reid law firm.

. On this subject, LeFaiver testified as follows:
“Q. Did you warn them [the Lansberrys] — it’s a simple question. Did you warn them, You may have to pay two fees’? That can be answered yes or no.
“A. I told — I told them that it was likely they would have to pay the law firm of Reid, Johnson what the law firm earned as well as my fee, which I had a contractual agreement with them regarding(Emphasis added.)

. Contingent fee contracts remain under attack and scrutiny. See Passell, Contingency Fees in Injury Cases Under Attack by Legal Scholars, N.Y. Times, National Edition, Feb. 11, 1994, at Al, col. 1. This dissent is not meant to lend support or nonsupport for such fee agreements as we know them today. My whole and only theme is that if a contract (any contract) is definite in nature and is entered into between two or more competent parties and is based upon a legal consideration to do or refrain from doing some lawful thing, then it should be enforced.