Court Opinion

ID: 3167374
Source: CourtListenerOpinion
Date Created: 2016-01-05 21:06:37.447591+00
Date Added: 2024-06-11T11:56:33.855712
License: Public Domain

J-A34045-14

                                  2016 PA Super 2

ANGINO & ROVNER                                     IN THE SUPERIOR COURT OF
                                                          PENNSYLVANIA
                            Appellant

                       v.

JEFFREY R. LESSIN & ASSOCIATES, ET
AL

                            Appellee                    No. 941 MDA 2014

                  Appeal from the Order entered May 27, 2014
                In the Court of Common Pleas of Dauphin County
                     Civil Division at No: 2012-CV-08019-CV

BEFORE: FORD ELLIOTT, P.J.E., SHOGAN, and STABILE, JJ.

DISSENTING OPINION BY STABILE, J.:                   FILED JANUARY 05, 2016

       I respectfully dissent from the learned Majority’s decision because it

fails to enforce a termination provision contained in a duly executed

contingency fee agreement between Angino and Zarreii.1           The Majority

believes that attorneys are prohibited per se from including a fee recovery

provision in contingency fee agreements that governs the termination of the

attorney-client relationship prior to the occurrence of the contingency. Thus,

it is the Majority’s conclusion that discharged attorneys, like Angino, are

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1
  It is worth noting that Zarreii limits his challenge to Angino’s demand for
payment under the Agreement to the argument that Angino is entitled only
to a quantum meruit claim for services. Thus, I will not address any other
defenses or rules that might affect the ability of counsel to collect under a
termination provision in a contingent fee agreement.
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entitled only to the equitable remedy of quantum meruit for services

rendered to former clients. I find no support in our law for this limitation of

remedies where a termination provision is included in a contingency fee

agreement and that provision is not challenged and established to be either

excessive or unconscionable.

      Contrary to the Majority’s view, it is well-settled that a claim premised

on quantum meruit may be asserted only when “one sounding in breach of

express contract is not available.”   Shafer Elec. & Const. v. Mantia, 96

A.3d 989, 995-96 (Pa. 2014). It is undisputed that the issue in this case is

not whether Angino is entitled to payment for services rendered to Zarreii or

whether Zarreii is liable to pay for the services received.    Rather, as the

Majority recognizes, the issue presently before us is whether an attorney

only has resort to quantum meruit for a fee recovery even where a

contingency fee agreement, like the one at issue here, contains a

termination provision governing the termination of the attorney-client

relationship prior to the occurrence of the contingency.       After a careful

review of applicable law, I conclude that attorneys are not precluded per se

from providing a termination fee provision in a contingent fee agreement.

Our case law does not dictate that counsel, upon termination by a client,

only has resort to quantum meruit in a contingent fee case when a

termination provision has been agreed to between the parties. Accordingly,

I disagree with the Majority’s decision and would reverse the trial court’s

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order granting Zarreii’s and denying Angino’s motion for partial judgment on

the pleadings.

        Briefly, Angino seeks to collect its fee from Zarreii based on the

termination provision of the Agreement.    The termination provision of the

Agreement, which Zarreii duly executed, provided in pertinent part that

Zarreii agreed “to pay or direct [his] new attorney to pay as a fee 20% of

the gross recovery” to Angino in the event of a successful outcome in the

case.     Contingency Fee Agreement, 5/21/07, at ¶ 5.        Thus, only the

occurrence of the condition precedent, i.e., resolution of the case favorable

to Zarreii, would trigger the percentage fee outlined in the termination

provision of the Agreement.    It is uncontested in the case sub judice that

Zarreii indeed settled his case through representation by Lessin for a

substantial amount of money. As a result, as Angino argues, the settlement

of Zarreii’s case triggered Angino’s right to receive payment for services

under the termination provision of the Agreement.

        In Capek v. Devito, 767 A.2d 1047 (Pa. 2001), our Supreme Court

entertained a fee dispute arising out of a contingency fee agreement

containing a termination provision. A client entered into a contingency fee

agreement with the appellant (an attorney) in connection with a personal

injury action. Subsequently, the appellant agreed to a settlement figure of

$275,000.00.     The client refused to accept it because the settlement was

reached without the client’s authorization.       Following the appellant’s

unsuccessful efforts to confirm the settlement, the client terminated the

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appellant and retained new counsel.         The client ultimately reached a

settlement in excess of four million dollars. The appellant filed an action to

recover his fees under the contingency fee agreement.       In particular, the

appellant sought $86,500.00 in fees because that figure represented thirty

percent of the settlement offer that he had negotiated with the defendant.

Because the agreement contained a “no recovery no fee” clause, the trial

court entered summary judgment in favor of the client because, inter alia,

the appellant had not obtained relief on behalf of the client.     This Court

affirmed the trial court’s ruling.   Our Supreme Court, however, disagreed.

In describing the terms of the agreement at issue, the Court noted:

      [I]t is evident from the Agreement that the parties intended to
      provide for payment to [the appellant] in the event of two
      possible outcomes: (1) when it is the case that [the appellant] is
      retained until resolution of the litigation, and (2) when the
      Agreement is terminated prior to resolution of the litigation. In
      the event that [the appellant] is retained until the claim’s
      resolution, the “no recovery no fee” provision (in conjunction
      with the 30% contingency fee clause) establishes that [the
      appellant] will be paid 30% of any amount [the client] receives,
      only if there is recovery by suit or settlement; if there is no
      recovery, then [the client] pays no fee. In contrast, in the
      event that the Agreement is prematurely terminated, the
      liquidated     damages     clause    establishes     that    [the
      appellant] will receive the greater of 30% of a negotiated
      settlement offer or a fee based upon his prevailing rate.

Id. at 1050 (emphasis added).        Using contract principles to construe the

agreement, the Court concluded that this Court’s interpretation of the

agreement “improperly nullified the . . . liquidated damages [(or

termination)] provision, which addressed the specific outcome that occurred

in this case—a termination of the [a]ppellant’s services.” Id. (emphasis

added).    In other words, the Supreme Court did not determine the

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termination provision to be unenforceable or unlawful.      Instead, the Court

remanded the matter to the lower courts to consider, inter alia, outstanding

issues relating to whether the agreement was conscionable and whether it

complied with the Rules of Professional Conduct. Id. at 1051 n.4.

      Like the attorney in Capek, Angino premises its contract claim on

Zarreii’s breach of the termination provision contained within the parties’

contingency fee agreement. The parties do not contest that Zarreii engaged

Angino to represent him, signed a contingency fee agreement featuring a

termination clause, terminated representation by Angino, hired Lessin, and

subsequently refused to pay Angino for legal fees following the settlement of

the underlying case. Thus, what the parties contest is the enforceability of

the termination provision of the Agreement. As noted earlier, in Capek, our

Supreme Court had an opportunity to assess the enforceability or validity of

a termination provision in a contingency fee agreement. Although the Court

was not asked to approve explicitly the use of such a provision in

contingency agreements, the Court did so tacitly by upholding counsel’s

right to claim fees under the termination provision.       The Court held the

attorney could proceed on his breach of contract claim triggered by the

client’s failure to honor the termination provision, so long as the lower courts

determined the agreement was not unconscionable or against the Rules of

Professional Conduct. Unlike the client in Capek, however, Zarreii here did

not challenge the Agreement as unconscionable or violative of the Rules of

Professional Conduct before the trial court. Nonetheless, consistent with our

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Supreme Court’s decision in Capek, I conclude that Angino properly based

its contract claim on Zarreii’s alleged breach of the termination provision of

the Agreement.     Accordingly, given the facts of this case, I cannot agree

with the Majority’s conclusion that Angino’s recovery in this case is limited to

quantum meruit.

       Notwithstanding    the   Capek   decision,   the   Majority   insists   that

discharged attorneys are entitled only to quantum meruit relief and that

termination provisions per se amount to a penalty imposed upon former

clients.   The Majority characterizes termination provisions as penalties,

because it believes they “inhibit the client from engaging another lawyer to

pursue his claim.” Maj. Op. at 13.       Although the Majority recognizes the

importance of contingency fee agreements generally and the salient purpose

they serve specifically, it suggests that attorneys hold an unfair advantage

vis-à-vis their clients, resulting in the possibility that attorneys could impose

unfair terms of representation.    Thus, to protect clients, the Majority has

embraced the equitable remedy of quantum meruit.

      In applying quantum meruit sub judice, however, the Majority

recognizes that a strict adherence to quantum meruit is unfair. Citing Judge

Joyce’s concurring opinion in Magar v. Bultena, 797 A.2d 948 (Pa. Super.

2002), appeal denied, 814 A.2d 678 (Pa. 2002), the Majority proposes a

holistic approach to calculating quantum meruit. Id. at 15. Specifically, the

Majority suggests that more than “an hours and expenses quantum meruit”

must be established to determine Angino’s fees. In so doing, the Majority

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recognizes Angino’s efforts and contributions to Zarreii’s ultimate recovery in

this case.    The issue here therefore, is not whether a termination fee is

permissible, but rather whether the basis for that fee may be agreed to

between the parties prior to termination of a representation.

        I emphasize I agree with the Majority that clients hold an inalienable

right    to   discharge     their   attorneys    regardless   of   any   contractual

arrangements between the parties, and that in doing so, a client does not

stand in breach of a representation agreement. I, however, disagree with

the Majority that from this it naturally follows that attorneys do not have a

right to impose a reasonable termination provision in a contingency fee

agreement.2 The right to terminate a representation without breach exists

apart from an independent obligation to honor a payment term, the failure of

which may establish a breach. Instantly, the termination provision provides

that 20% of Zarreii’s arbitration award be due to Angino. As noted, Zarreii

does not challenge the amount due to Angino. To the extent the Majority

invokes the Rules of Professional Conduct, those rules have not been raised

or relied upon by Zarreii to challenge the Agreement.              Moreover, I must

underscore the fact that this case did not arise within a disciplinary context.

“Ethical considerations are aspirational in character” and do not represent
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2
  If a former client deems a termination provision to be unreasonable, he or
she always has a right to challenge the same. The ability of former clients to
challenge an agreement necessarily acts as a deterrent for attorneys to
avoid unreasonable termination provisions.

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mandatory laws.       Eckell v. Wilson, 597 A.2d 696, 698 n.3 (Pa. Super.

1991). Nonetheless, it certainly is conceivable that using the Majority’s own

calculation of quantum meruit, Angino could receive 20% or more of the

arbitration award.

      In support of quantum meruit, the Majority primarily relies upon

Hiscott & Robinson v. King, 626 A.2d 1235 (Pa. Super. 1993), appeal

denied, 644 A.2d 163 (Pa. 1994); Fowkes v. Shoemaker, 661 A.2d 877

(Pa. Super. 1995), appeal denied, 674 A.2d 1072 (Pa. 1996); and Mager.

The Majority’s and Zarreii’s reliance on Mager, Fowkes, and Hiscott is

inapposite, and those cases are readily distinguishable.      In Mager, a law

firm employed an attorney who entered into a contingency fee agreement

with a client in a qui tam case involving the client’s former employer. After

the attorney left his prior law firm to start his own firm, the client terminated

his representation by the law firm.     The client, however, continued to be

represented by the attorney who had departed from the law firm.              The

attorney ultimately settled the client’s case and received a contingency fee

for his services.    Thereafter, the law firm sued, among others, its former

attorney and the client seeking the full contingency fee the attorney had

earned in the case.

      On appeal, this Court vacated the trial court’s judgment that the law

firm was entitled to 25% of the contingency fee and remanded the matter to

the lower court to enter a quantum meruit fee based on a computation using

a fair hourly rate and number of hours worked.         In so doing, this Court

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recognized that the contingency fee agreement at issue did not contain a

termination provision that would have triggered a breach of contract claim.

See Mager, 797 A.2d at 952, 954 n.8 (noting that “[n]o provision was made

in the [agreement] for termination of representation by the client prior to

the resolution of the case”).   The Mager Court noted that “[b]ecause the

contingency fee agreement did not provide for any monies to be paid if the

[law firm] was terminated prior to a verdict or settlement in the action, the

[law firm] has no claim against [its former client] for breach of contract.”

Id. (emphasis added).

     Stated differently, given the circumstances in Mager, we determined

that to hold the client to the contingency fee agreement whose provisions

did not survive the termination of the attorney-client relationship would

amount to the courts’ reviving an agreement that “no longer existed,” when

the client discontinued his representation by the law firm prior to the

occurrence of the contingency. Id. at 957. This Court, therefore, concluded

the law firm was entitled only to recovery of fees in quantum meruit for the

services rendered to the client until the time when the client severed the

relationship. Id. at 957 (“While the termination of the [agreement] by [the

client] created an immediate right in [the law firm] to compensation for all

work performed and costs incurred pursuant to that [agreement], that right

included only quantum meruit compensation which is to be calculated based

on the number of hours worked multiplied by a fair fee.”).

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        Finally, to the extent we remarked in Mager that “[a]n attorney . . .

does not acquire a vested interest in a client’s action,” for it would amount

to a penalty against the client’s right to terminate the attorney-client

relationship, id. at 958, such remark was within the factual context of that

case.     Our remark was premised on the recognition that, because the

contingency triggering the fee under the agreement was not satisfied at the

time of termination, the law firm was not entitled to recovery on a

contractual basis.

        In Fowkes, terminated attorneys initiated a quantum meruit action

against the client’s subsequent attorney, after the successor attorney settled

the client’s personal injury case.     See Fowkes, 661 A.2d at 879.         In

affirming the trial court’s grant of summary judgment in favor of the

subsequent attorney, this Court concluded the terminated attorneys’

quantum meruit action lay properly against their former client and not the

subsequent attorney. See id. Additionally, this Court determined the trial

court did not abuse its discretion in denying the terminated attorneys’

request to amend their complaint to include the former clients, because their

quantum meruit claim against the former clients was time-barred. See id.

at 880. The circumstances in Fowkes are inapposite to the present action.

        In Hiscott, terminated attorneys filed a complaint against their former

client, who settled the case through the engagement of a subsequent

attorney, to recover “‘a fair and equitable fee based on the relative value of

services performed.’” Hiscott, 626 A.2d at 1236. The terminated attorneys

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entered into a contingency fee agreement with their former client, which

provided for percentage fees to the attorneys depending on when the case

settled. Id. The trial court granted a directed verdict in favor of the former

client because under the fee agreement the terminated attorneys were not

entitled to collect a fee. Thereafter, the terminated attorneys filed post-trial

motions challenging the trial court’s ruling. The trial court granted the post-

trial motion by entering an order “‘to resolve the issue of the nature and

amount of the compensation to be afforded to [the terminated attorneys]

outside of the scope and terms of the contingency fee agreement.’”              Id.

Thus, the trial court ordered relief in quantum meruit to the terminated

attorneys, calculated by multiplying the hourly rate by the number of work

hours. Id.

      On appeal, we recognized that under the terms of the contingency fee

agreement, the terminated attorneys were not entitled to collect a fee

because the contingency contemplated by the agreement was not met. See

id. at 1237 (noting the client terminated the fee agreement “when, under its

terms,    there     was   nothing   due   to   [the   terminated   attorneys]   as

compensation”). We, therefore, concluded, inter alia, that the trial court did

not abuse its discretion in rendering a directed verdict in favor of the former

client.   See id.    Moreover, we concluded that the trial court also did not

abuse its discretion in granting the terminated attorneys post-trial relief in

the nature of quantum meruit, which is all they were entitled to in that case.

See id. at 1237-38 (noting that “[i]n light of the case law set forth above, it

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is clear that [the terminated attorneys are] limited to a quantum meruit-

based recovery”).

       Here, unlike the fee agreements in Mager, Fowkes, and Hiscott that

did not contain a termination provision, Angino sought relief based on

Zarreii’s alleged breach of the Agreement occasioned by Zarreii’s refusal to

honor the termination provision.           In Mager, Fowkes, and Hiscott, the

appellants sought relief in quantum meruit because there was no contractual

right to relief.3 It bears repeating that a claim anchored in quantum meruit

may be asserted only when one sounding in contract is unavailable.            See

Shafer Elec., 96 A.3d at 995-96.               As noted above, consistent with our

Supreme Court’s decision in Capek, I conclude Angino asserted a colorable

right to relief under the termination provision of the Agreement. Therefore,

the case sub judice is distinguishable from our decisions in Mager, Fowkes,

and Hiscott. Additionally, I note that I am unable to find any support in our

case law that prohibits per se a contingent fee agreement from providing for

a termination fee prior to the occurrence of a fee contingency.

       In light of my conclusion that, under the circumstances of this case,

Angino is entitled to pursue recovery of its fees in accordance with the

termination provision of the Agreement, I next address the legal question
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3
  Even if the statute of limitations had not run in Fowkes, the facts of that
case do not indicate that the terminated attorneys sought to bring a breach
of contract action against their former client. As stated, they merely sought
to include the former client in their quantum meruit action.

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whether Zarreii indeed breached the Agreement. It is settled that “[t]hree

elements are necessary to plead properly a cause of action for breach of

contract: (1) the existence of a contract, including its essential terms, (2) a

breach of a duty imposed by the contract and (3) resultant damages.”

Omicron Sys., Inc. v. Weiner, 860 A.2d 554, 564 (Pa. Super. 2004)

(citations omitted).

      In the instant case, based on the pleadings, I observe Zarreii does not

contest the existence or validity of the Agreement or that a breach thereof

has occurred.    As noted earlier, the parties do not contest that Zarreii

engaged Angino to represent him, signed a contingency fee agreement

containing a termination provision, terminated representation by Angino,

hired Lessin, and subsequently refused to pay $107,130.00 to Angino for

legal fees following the settlement of the underlying case.      I agree with

Angino that, in so refusing, Zarreii breached the termination provision of the

Agreement, which obligates Zarreii to pay a 20% fee to Angino upon the

resolution of the UIM case.    Accordingly, I conclude Zarreii breached the

Agreement and Angino was entitled to have judgment on the pleadings

entered in its favor.

      In sum, unlike the learned Majority, I hold that the trial court erred in

concluding that once a client terminates representation by a law firm prior to

the occurrence of the fee contingency, the terminated law firm may recover

its fees only in quantum meruit, regardless of any termination provision in a

contingency fee agreement. Based on Angino’s properly pursued contractual

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claim, I conclude Zarreii breached the Agreement when he failed to pay to

Angino 20% (or $107,130.00) of his $535,650.00 arbitration award.

     Accordingly, I would reverse the trial court’s order and remand the

case for further proceedings.

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