Court Opinion

ID: 9704264
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:28:54.313883+00
Date Added: 2024-06-11T18:21:59.276435
License: Public Domain

WAHL, Justice
(dissenting).
L
I respectfully dissent. There is no basis for distinguishing between these cases and Rice v. Perl, 320 N.W.2d 407 (Minn.1982). In Rice, this court held that Perl, the defendant in that case as well, breached his fiduciary duty to his client by failing to disclose to that client that he and his firm were making payments to the adverse insurance adjuster who was settling her claim. Rice established the rule that an attorney’s undisclosed business relationship with an adverse insurance adjuster is a breach of fiduciary duty to the client whose claim is being adjusted that results in a total forfeiture of attorney fees paid by the client. In establishing that rule, it did not matter to this court that Rice had failed to allege that she suffered any damages due to Perl’s failure to disclose. It did not matter whether the nondisclosure was unintentional. What did matter was the need to insure the attorney’s absolute fidelity to the client’s interests in order to establish the trust necessary to the proper functioning of the attorney-client relationship. Id. at 411.
This total forfeiture rule applies to the cases now before us. The facts with regard to the 128 plaintiffs granted summary judgment in Klein and the facts with regard to the single plaintiff in Gilchrist, denied summary judgment on the basis of footnote 5 in Perl v. St. Paul Fire and Marine Insurance Co., 345 N.W.2d 209, *420214 n. 5 (Minn.1984), are identical to the facts in Rice. In each case, in accordance with an attorney-client retainer agreement, the plaintiff paid attorney Perl 33⅛ percent of any settlement obtained pursuant to her Daikon Shield claim as attorney fees. In each case, Perl breached his fiduciary duty to the client by failing to disclose his business relationship with the adverse insurance adjuster who adjusted the client’s claim. And, in each case, Rice mandates total forfeiture of the attorney fees paid.
Yet, with a few deft strokes, the majority opinion renders our decision in Rice meaningless. There, it is said, we discussed fee forfeiture only within the context of a single claim, not within the context of many claims. What, one must ask, does this mean? Does it mean that if an attorney breaches a fidiciary duty to one client by failing to disclose a business relationship with an adverse insurance adjuster, total fee forfeiture is mandated, but if that same attorney breaches the same fidi-ciary duty in the same way to a great number of clients, the degree of misconduct is somehow less? This is a strange concept of logic and justice.
The majority opinion further insists that because Rice never raised nor discussed the issue of whether a fee forfeiture might be scaled to the degree of misconduct, we must decide that issue here. Certainly Perl, aware of his potential exposure, could have raised this issue in Rice. Certainly the Rice court could have discussed the issue had it been thought necessary to do so. Instead, the court in Rice determined without hesitation that this particular misconduct warranted total forfeiture of the attorney’s right to compensation. Whether some lesser degree of misconduct presented by other facts might dictate adoption of a scaled fee forfeiture we can decide on the day that case is presented to us. As to this particular misconduct, the decision was made in Rice and that decision was that total forfeiture of fees was the proper result. Precedent dictates that the bright line we drew in Rice be drawn again today.
II.
The concept of a sliding scale for forfeiture of attorney fees for breach of a fiduciary duty to a client does not, in my view, sufficiently protect the integrity of the legal profession in the perception of the public. I would propose an alternative rule defining two levels of severity of breach of fiduciary duty to a client with two corresponding degrees of fee forfeiture as the result. First, for actual fraud and breaches of fidelity to the client which, like that of Perl’s, we find to endanger the trust necessary to the proper functioning of the attorney-client relationship, total forfeiture is appropriate, and we so ordered in Rice. Second, for lesser breaches, breaches that present a minimal threat to the trust and confidence between lawyer and client, the attorney would be permitted to retain that portion of the fees paid to compensate for costs, expenses, and office overhead, but would not be permitted to retain what the majority opinion characterizes as the attorney’s net fee. In other words, the attorney would not be permitted to profit by his or her breach, but would be recompensed for actual costs and expenses in handling the client’s case.
III.
With regard to the other issues raised, I agree with the holdings of the majority opinion: 1) There is sufficient commonality among class members to justify class certification in the Klein action; 2) the plaintiff class in Klein is not entitled to recover attorney fees from the defendant except that the plaintiff class is entitled to recover reasonable attorney fees incurred in proving what defendants unjustifiably refused to admit in a request for admission; and 3) the trial court correctly ruled the imposition of treble damages inappropriate.
I would reverse the trial court’s denial of Gilchrist’s motion for summary judgment.
I would affirm the award of damages, including prejudgment interest, in the Klein class action, but would reverse the award of attorney fees except that I would remand for determination of the attorney *421fees and costs to be awarded for the failure to answer the request for an admission.