Court Opinion

ID: 3192365
Source: CourtListenerOpinion
Date Created: 2016-04-07 19:11:31.833505+00
Date Added: 2024-06-11T14:36:11.599863
License: Public Domain

STATE OF WEST VIRGINIA

                           SUPREME COURT OF APPEALS

                                                                                 FILED
Christopher J. Wallace and                                                    April 7, 2016
                                                                                released at 3:00 p.m.
The Wallace Firm, PLLC                                                        RORY L. PERRY, II CLERK
Plaintiffs Below, Petitioners                                               SUPREME COURT OF APPEALS
                                                                                 OF WEST VIRGINIA

vs) No. 14-1333 (Hancock County Civil Action No. 13-C-56-H)

Raymond A. Hinerman and
Hinerman & Associates, PLLC
Defendants Below,
Respondents

                              MEMORANDUM DECISION

               The petitioners Christopher J. Wallace and The Wallace Law Firm, PLLC,
(hereinafter jointly referenced as “the petitioner”), pro se, appeal the decision of the Circuit
Court of Hancock County denying the relief sought by the petitioner in his request for
declaratory judgment regarding the allocation of attorney fees between the petitioner and his
former employer, the respondents Raymond A. Hinerman and Hinerman & Associates, PLLC
(hereinafter jointly referenced as “the respondent”). The respondent, pro se, filed a timely
response.

              This Court has carefully reviewed the arguments of counsel, appendices, and
applicable precedent, and the case is mature for consideration. This Court finds that the
circuit court erred in resolving this matter upon the application of a clause within the
contingency fee agreement between the respondent and certain clients. This case satisfies
the “limited circumstances” requirement of Rule 21(d) of the West Virginia Rules of
Appellate Procedure and is appropriate for a memorandum decision rather than an opinion.

                              I. Factual and Procedural History

               The petitioner, Mr. Wallace, was employed as an attorney for Hinerman &
Associates, PLLC, in Weirton, West Virginia, for fourteen years. In January 2013, he
resigned from the firm to begin his own legal practice. While employed by the law firm, the
petitioner had represented workers compensation clients, and he solicited certain individuals

                                               1

as clients for his solo practice when he left the law firm.1 Certain clients chose to employ the
petitioner in his newly-created practice as their attorney, and the contingency fees generated
through those clients’ claims are at issue in this case.

               Subsequent to his departure from the law firm, the petitioner proposed a
division of attorney fees, based on the factors enunciated in Kopelman & Associates, L.C. v.
Collins, 196 W.Va. 489, 473 S.E.2d 910 (1996).2 The respondent declined to engage in such
division of fees. Thus, on April 8, 2013, the petitioner filed a declaratory judgment action
“limited to the fees earned from workers’ compensation matters in which clients originally
signed a contract with Hinerman & Associates, but have subsequently elected to have
Plaintiffs [Petitioner] represent them. . . .”

                On July 26, 2013, the circuit court and the parties agreed that Kopelman
provides the appropriate framework for dividing attorney fees. An August 14, 2013, order
provides: “The parties agree that Kopelman and Assoc., L. C. v. Collins . . . shall be the law
applied to the distribution of attorney fees in all disputed matters which are the subject of the
instant civil action.” That order also explains that the circuit court had “been informed that
[the petitioner] has deposited into an escrow account funds of and from workers’
compensation awards or other fees that are in dispute.”

              Pursuant to the parties’ agreement, the circuit court held an October 16, 2013,
hearing on five sample cases to resolve the method of fee division, utilizing the principles

       1
        The respondent emphasizes the manner in which the petitioner departed the Hinerman
law firm, leaving while the respondent was on vacation and asking other employees not to
inform the respondent about his departure. The petitioner also removed some of the firm’s
workers compensation files. He used “The Wallace Firm, PLLC” letterhead, listing his
office address as 320 Penco Road, Weirton, West Virginia, but the respondent contends that
the petitioner did not actually have an office at that address at that time. The petitioner also
used a form contract identical to that used by the respondent’s law firm to sign clients to The
Wallace Firm.
       2
        The Kopelman factors, as more thoroughly enumerated later in this opinion, include
such items as risks assumed by the attorneys, complexity of the case, funds invested and
results obtained, quality of representation and skill, reason for the client’s change of firms,
viability of the claim at time of transfer, and the amount of recovery. 196 W.Va. at 500-01,
473 S.E.2d at 921-22.

                                               2

of Kopelman.3 On March 1, 2014, the circuit court issued a “Judgment Order - Partial” on
the five sample cases evaluated during the October 2013 hearing.4 In that order, the circuit
court specifically indicated that “the parties unanimously agreed that Kopelman . . . shall be
the law applied to the distribution of attorney fees in all disputed matters which are the
subject of the instant civil action.” However, instead of applying the Kopelman factors, the
circuit court relied upon a contingency fee contract each client had signed with the
respondent. That contract provided, in pertinent part: “Should the client terminate this
relationship without good cause, Hinerman & Associates is entitled to collect their fee as set
forth herein. Otherwise, the law set forth in Kopelman v. Collins, 474 S.E.2d 910 (WV
1996), applies.”5 Based upon that contingency fee contract, the circuit court concluded that
the respondent was entitled to fully recover on each contingency fee contract because the
clients discharged Hinerman & Associates without good cause.

                The petitioner filed a motion to alter or amend the March 1, 2014, order. In
response, the circuit court issued a July 29, 2014,6 order denying the petitioner’s motion. On
appeal, the petitioner contends the circuit court’s decision was improperly based on the issue
of the existence of good cause for the clients’ departure, an issue that was not raised,
addressed, or contemplated by the parties. The petitioner argues that the respondent did not
assert a contract defense regarding good cause for the clients’ departure to sign with the
petitioner. Further, the petitioner contends the circuit court failed to apply the Kopelman
factors to the attorney fee dispute and this case should consequently be remanded for a ruling

       3
         The sample cases were analyzed during the hearing, and Attorney Sue Howard
testified as the respondent’s expert, opining that the petitioner had mishandled the five
sample cases. Attorney Vincent Gurrera also testified as the respondent’s expert and opined
that the petitioner had improperly solicited the respondent’s clients and had used a false
address on the letterhead of his new law firm.
       4
        According to the March 1, 2014, order, the sample cases were selected as follows:
“Plaintiffs were to select two files to be presented at an evidentiary hearing before the bench
where the Court would apply Kopelman. . . . Defendants were then to select two files to be
similarly presented. . . . The parties were urged to agree on a fifth file to be presented for
determination.”
       5
           The term “good cause” is not defined in the contract.
       6
         After this Court deemed the July 29, 2014, order interlocutory, the circuit court
denied the petitioner’s request for findings of fact and conclusions of law sufficient to seek
a writ of prohibition and instead entered a nearly identical order, dated December 2, 2014,
stating that it is was a final and appealable order.

                                               3

based upon the principles of Kopelman.

                                    II. Standard of Review

              In syllabus point one of Trickett v. Laurita, 223 W.Va. 357, 674 S.E.2d 218
(2009), this Court explained:

                      “ In reviewing challenges to the findings and conclusions
               of the circuit court, we apply a two-prong deferential standard
               of review. We review the final order and the ultimate
               disposition under an abuse of discretion standard, and we review
               the circuit court’s underlying factual findings under a clearly
               erroneous standard. Questions of law are subject to de novo
               review.” Syllabus point 2, Walker v. West Virginia Ethics
               Commission, 201 W.Va. 108, 492 S.E.2d 167 (1997).

With this standard of review as guidance, we proceed to address the issues of this case.

                                         III. Discussion

                As outlined above, this civil action was initiated as an effort to determine the
appropriate division of attorney fees in the subject contingency fee cases. The parties agreed
that the factors enumerated in Kopelman should govern the resolution, and they requested
a Kopelman hearing on the issue. The circuit court, sua sponte, transformed the matter into
a finding that the petitioner failed to prove good cause for the clients’ departure from the
respondent’s law firm and therefore the respondent was entitled to all fees. At the outset of
our discussion, we recognize that a client may discharge an attorney for any reason at any
time. Syllabus point six of Committee on Legal Ethics of The West Virginia State Bar v.
Cometti, 189 W. Va. 262, 430 S.E.2d 320 (1993), clearly provides: “Rule 1.16(a)(3) of the
Rules of Professional Conduct allows a client to discharge an attorney, and, with regard to
a civil case, an attorney may be discharged at any time with or without cause, subject to
liability for payment for the lawyer’s services.”7 This case does not present an issue of the

       7
         Variations on this general rule exist within other contexts, “such as the rule in
court-appointed criminal cases where there is a termination of the attorney-client relationship
or the issue of court approval of the termination of the attorney where a civil case is in
litigation.” Cometti, 189 W. Va. at 269 n.8, 430 S.E.2d at 327 n.8 (1993); see also Cardot v. Luff,
164 W.Va. 307, 312 n.5, 262 S.E.2d 889, 893 n.5 (1980) (holding that in court-appointed
criminal cases, “we have precluded the client from the absolute right of discharging the
                                                                                     (continued...)

                                                4

right to discharge an attorney; it is simply a matter of how attorney fees are to be divided in
a contingency fee case when an attorney is discharged, notwithstanding the circuit court’s
conversion of the issue into an examination of the clients’ good cause for departure.

               The petitioner contends he clearly asserted his position that the clients departed
the respondent’s law firm for good cause, namely to continue to employ the petitioner as their
attorney. He further emphasizes that the only evidence related to the good cause issue was
the petitioner’s own affirmative testimony that the clients desired to change law firms to
employ the only attorney who had ever worked on their claims. Moreover, the petitioner
maintains that the respondent did not deny the petitioner’s good cause averment in the
complaint; nor did he present evidence to the contrary on the issue of the clients’ good cause
departure.8 Therefore, the petitioner argues that the circuit court’s ultimate decision
represented a significant departure from the approach previously agreed to by the parties and
was improperly based on a contract issue neither raised nor argued by the parties.

              The Kopelman framework for division of attorney fees is explained in syllabus
point two of Kopelman:

                          Although the amount of time spent by each respective
                  firm is an important consideration in a contingency fee case
                  where lawyers employed by one firm leave that firm and take a
                  client with them and no contract exists governing how the fees
                  are to be divided, a circuit court also must consider
                  retrospectively upon the conclusion of the case: (1) the relative
                  risks assumed by each firm; (2) the frequency and complexity of
                  any difficulties encountered by each firm; (3) the proportion of
                  funds invested and other contributions made by each firm; (4)
                  the quality of representation; (5) the degree of skill needed to

       7
           (...continued)
attorney, which is the general rule.”).
       8
         The petitioner emphasizes the absence of any attempt by the respondent to plead,
assert, or argue the contract defense ultimately utilized by the circuit court. The respondent
failed to deny the petitioner’s specific averment that the contract term had been satisfied
through the clients’ election to continue representation by the petitioner; thus, the petitioner
asserts that the respondent essentially admitted the good cause contract term had been
satisfied. See W.Va. R. Civ. P. 8(d) (“Averments in a pleading to which a responsive
pleading is required, other than those as to the amount of damage, are admitted when not
denied in the responsive pleading.”).

                                                 5

              achieve success; (6) the result of each firm’s efforts; (7) the
              reason the client changed firms; (8) the viability of the claim at
              transfer; and (9) the amount of recovery realized. This list is not
              exhaustive, and a circuit court may consider other factors as
              warranted by the circumstances in addition to awarding
              out-of-pocket expenses. In making its determination, however,
              a circuit court must make clear on the record its reasons for
              awarding a certain amount. Such a determination rests in the
              sound discretion of the circuit court, and it will not [be]
              disturbed unless the circuit court abused its discretion.

196 W.Va. at 491, 473 S.E.2d at 921.

              As recognized in State ex rel. Bell & Bands, PLLC v. Kaufman, 213 W. Va.
718, 584 S.E.2d 574 (2003), “this Court has set up a mechanism in Kopelman . . . [through]
which circuit courts may determine fees in disputes between law firms.” Id. at 723, 584
S.E.2d at 579. This Court in Kopelman addressed a factual scenario similar to the present
case and clearly articulated the factors to be utilized to determine “how a law firm in a
contingency fee case should be compensated when lawyers from that firm leave and take
contingency fee clients with them.” 196 W.Va. at 493, 473 S.E.2d at 914. This mechanism
is appropriately designed to protect the interests of both the original and subsequent
attorneys, permitting evaluation of their rights to attorney fees. “[M]atters that will control
and determine how contingency fees are to be allocated between disgruntled and former law
associates involve, for the most part, a highly-fact-specific inquiry.” Id.

              Since its inception, the Kopelman approach has remained the primary
mechanism for division of attorney fees in contingency fee cases. In Shaffer v. Charleston
Area Medical Center, Inc., 199 W. Va. 428, 485 S.E.2d 12 (1997), this Court heralded the
Kopelman decision, noting that it “clarified our law on recovery of attorney’s fees. . . .” Id.
at 434, 485 S.E.2d at 18. This Court also explained that although Kopelman “sets out several
intangible factors that should be considered by circuit courts in their rulings in this area,
Kopelman made explicit that the factors listed are not exhaustive.” Id. at 435, 485 S.E.2d at
19.

              Other jurisdictions have also acknowledged the utility of a Kopelman-type
approach, acknowledging that “as a matter of policy, this rule preserves a client’s right to
discharge his or her attorney at any time.” Dudding v. Norton Frickey & Assocs., 11 P.3d
441, 447 (Colo. 2000); see also Galanis v. Lyons & Truitt, 715 N.E.2d 858, 861 (Ind. 1999)
(holding that quantum meruit recovery prevents client from paying percentage fee to more
than one attorney). As observed in Dudding, “the rule preserves the attorney’s right to

                                              6

receive some value for the legal services he or she provided.” 11 P.3d at 448; see also Fox
& Assocs. Co., 541 N.E.2d 448, 450 (1989) (“The new rule strikes the proper balance by
providing clients greater freedom in substituting counsel, and in promoting confidence in the
legal profession while protecting the attorney’s right to be compensated for services
rendered.”). “Without the remedy of quantum meruit, the client could receive significant
value from an attorney’s legal services without tendering any payment in return.” Dudding,
11 P.3d at 447.

               Thus, the efficacy of the Kopelman framework has been firmly established and
was recognized by the litigants in the case sub judice as the proper method for dividing
attorney fees. This Court finds that the circuit court abused its discretion in failing to engage
in a Kopelman analysis of the evidence adduced at the Kopelman hearing and in relying
instead upon the contractual issue of good cause for the clients’ departure, a matter not pled,
argued, or addressed in the evidentiary presentation at the Kopelman hearing below. Even
if this case had been pled and developed in the context of an alleged breach of contract,
including introduction of evidence regarding good cause for the clients’ departure, we
conclude that the ultimate division of attorney fees in these contingency fee cases must be
determined based upon the factors enumerated in Kopelman.9 One of those factors, as
referenced above, is “the reason the client changed firms.” 196 W.Va. at 500, 473 S.E.2d
at 921.10

                                       IV. Conclusion

               Based upon the foregoing, this Court reverses the decision of the Circuit Court
of Hancock County and remands this matter for a determination of division of fees between
the petitioner and the respondent’s law firm, as contemplated by Kopelman and based upon
evidence adduced at the hearing previously held in this case.

                                                    Reversed and Remanded with Directions.

       9
        This Court notes that the respondent’s law firm would be entitled to any portion of
fees earned while the petitioner was employed by the firm, based upon the employment
relationship between the petitioner and the respondent.
       10
        It is within the discretion of the circuit court to determine whether the current record
is adequate for purposes of this Kopelman division of attorney fees. Additional hearings may
be conducted, if the circuit court finds such hearings necessary.

                                               7

ISSUED: April 7, 2016

CONCURRED IN BY:
Justice Robin Jean Davis
Justice Brent D. Benjamin
Justice Margaret L. Workman
Justice Allen H. Loughry II

DISSENTING AND WRITING SEPARATELY:

Ketchum, Chief Justice, dissenting:

               The issue in this case is the amount of attorney fees Mr. Hinerman can collect
from his former clients. They are the persons responsible for the payment of Mr. Hinerman’s
fees. They are not parties to the declaratory judgment action. The declaratory judgment
action was brought in the name of their new lawyer, not by the clients. Although the issue
of the petitioner’s standing to bring the underlying declaratory judgment action was not
assigned as error in this appeal, it was raised by the respondent in a motion to dismiss and
as an affirmative defense in his answer. This issue should have been addressed by the circuit
court. On remand, I believe the circuit court should have been required to address the issue
of standing.

                                             8