Court Opinion

ID: 9630232
Source: CourtListenerOpinion
Date Created: 2023-08-22 10:05:56.431277+00
Date Added: 2024-06-11T09:40:49.640223
License: Public Domain

ELDRIDGE, Judge,
dissenting.
The majority in this case adopts the so-called “New York rule” as to when an attorney may sue for the value of services rendered prior to a client’s termination of a contingent fee agreement, holding that the attorney may recover as soon as the contingency contract is terminated. This decision is contrary to established Maryland agency law and to sound public policy.
The basis of the New York rule is that “a client cannot make the attorney’s recovery dependent upon a contract term when the client has terminated the contract.” 331 Md. 331, 339, 628 A.2d 185, 189 (1993); citing Tillman v. Komar, 259 N.Y. 133, 135, 181 N.E. 75, 75 (1932). The crux of the majority’s reasoning in adopting this approach is that “the rationale of the courts adopting the New York rule is consis*345tent with our view of the rights and liabilities of the parties to a contingent fee agreement.” 331 Md. at 343, 628 A.2d at 191. This view of Maryland law is based on the majority’s analysis of the Maryland cases which have addressed an agent’s recovery when a contingent fee contract has been terminated. The majority reviews seven Maryland cases, and concludes that, “in each of these cases we held that the unfulfilled contingency in the fee agreement which had been rescinded by the client had no effect upon the attorney’s right to recover the reasonable value of the services performed by the attorney pursuant to the agreement.” Id.
If the majority’s characterization of our cases were accurate, perhaps the Court’s decision to adopt the New York rule would be defensible on the basis of stare decisis, although not as a matter of public policy. The majority, however, mischaracterizes the Maryland eases cited. In fact, none of the seven Maryland cases relied upon by the majority involved an unfulfilled contingency in a fee agreement, and none of the cases cited furnish any support for the majority’s notion that an attorney may recover a fee from the former client before the happening of the contingency provided for in the terminated contract. Moreover, this Court has held in several cases, not cited by the majority, that an agent may not sue to recover for services rendered pursuant to a contingent fee contract as long as the contingency remains unfulfilled.
Four of the cases cited by the majority addressed the measure, rather than the timing, of an agent’s recovery on a contingent fee contract: Palmer v. Brown, 184 Md. 309, 40 A.2d 514 (1945); Boyd v. Johnson, 145 Md. 385, 125 A. 697 (1924); Western, Union Telegraph Co. v. Semmes, 73 Md. 9, 20 A. 127 (1890); and Bull v. Schuberth, 2 Md. 38 (1852). In each of these cases the contingency in the underlying contract had been fulfilled. In Bull v. Schuberth, supra, a talent agent entered into a contract with a musician, in which the agent’s fee was expressed in terms of a percentage of profits to be realized from a series of concerts. After playing two concerts under the agreement, the musician fired the agent. This Court held that the agent was entitled be paid for his services *346to the musician, given that the musician had already realized profits from the concerts. There was no issue as to whether the agent could recover before the happening of the contingency, because the “contingency” in the original contract—the realization of profits—was fulfilled.
Similarly, in Western Union Telegraph Co. v. Semmes, supra, attorneys retained under a contingent fee contract were dismissed before the conclusion of the matter, but they did not bring suit until the matter was settled between the former client and its adversary. The contingency provision of the terminated contract was fulfilled by the settlement, so the Court did not address the timing issue which is presented by the instant case. Instead, the Court’s attention was directed only to the measure of the attorneys’ recovery. In Boyd v. Johnson, supra, an attorney who had been retained on a contingency basis to challenge a will was discharged before the trial. The attorney instituted a suit against the former client after judgment was entered in favor of his client in the underlying proceeding. Thus, the contingency was fulfilled by the recovery of a judgment in the former client’s favor. In Palmer v. Brown, supra, an attorney brought suit after his client settled the underlying action and received payment. The Court held that the attorney was entitled to compensation for his services. The Court did not address whether the attorney could recover before the happening of the contingency, because the event upon which his compensation was contingent—resolution of the client’s case—had already occurred.
The only other case cited by the majority which even involved a contingent fee dispute between attorney and client is Attorney Griev. Comm’n v. Korotki, 318 Md. 646, 569 A.2d 1224 (1990). The Korotki case itself was a disciplinary proceeding, based upon an attorney charging his clients a grossly unreasonable contingent fee. The proceeding did not arise until after the contractual contingency came to pass, as a judgment had been obtained and had been satisfied. The case in this Court concerned the reasonableness of the contingent fee and the appropriate discipline. Neither the measure nor the timing of the attorney’s recovery was at issue in Korotki.
*347The majority quotes at length from Rodemer v. Hazlehurst, 9 Gill 288 (1850), as indicative of this Court’s concurrence with the underpinnings of the New York view. The case, however, does not support the majority’s reasoning. As the majority notes, the Rodemer case did not involve the termination of an attorney-client relationship. The Court in Rodemer held that a breaching party may not raise provisions of the breached contract as a defense. As the majority recognizes, however, a client’s termination of a retainer contract with an attorney cannot constitute a breach of contract, 331 Md. at 335, 628 A.2d at 187. Moreover, there was no contingent contract at issue in Rodemer at all. The contract called for payment in installments, based on the value of the plaintiffs construction work for the defendant as of specified intervals, to be calculated according to a formula set forth in the contract. This Court described the payment arrangement, stating (9 Gill at 291):
“In the contract is a stipulation, that during the progress of the work and until it is completed, there shall be a monthly estimate made by the agent of the defendants of the quantity, character and value of the work done during the month, four-fifths of which value shall be paid to the plaintiff at the office of the defendants in the Town of Cumberland, and when the work is completed and accepted by the agents of the company, there shall be a final estimate, when the value appearing to be due to the plaintiff, shall be paid, the said monthly estimates to be taken as conclusive between the parties.”
The plaintiff did not agree to perform services for the defendant on a contingency basis, thereby accepting the risk that the contingency might never be realized and that he might not be paid. Instead, the plaintiff entered into a standard contract, guaranteeing pay for his efforts. The Rodemer case does not furnish support for any proposition relating to the time when an attorney may obtain compensation for services rendered before termination of a contingent fee contract.
The majority relies upon the Court’s opinion in Vogelhut v. Kandel, 308 Md. 183, 190-191, 517 A.2d 1092, 1096 (1986), and *348upon a statement contained in the concurring opinion in that case, 308 Md. at 192, 517 A.2d at 1097 (Rodowsky, J., concurring). Only the statement in the concurring opinion, quoted by the majority 331 Md. at 337 n. 3, 628 A.2d at 188 n. 3, to the effect that a client has an immediate obligation to pay his or her discharged attorney, provides any authority for the majority’s view. The concurring opinion in Vogelhut represented the view of only one judge, the author of the concurring opinion. No other judge joined the concurring opinion. Furthermore, the Vogelhut concurring opinion cites no authority whatsoever in support of its assertion. Additionally, the Vogelhut case itself is clearly distinguishable from the case at bar. It did not involve a fee dispute between a discharged attorney and a former client, but instead arose out of a negotiated fee sharing arrangement between the discharged attorney and the new attorney. The “fee suit” was between the discharged attorney and the new attorney, who refused to pay as promised. The public policy considerations underlying the law governing fee disputes between attorneys and clients are different from the considerations presented by fee sharing arrangements between attorneys. Most importantly, the fee dispute was not based on an unfulfilled contingency; the new attorney negotiated a settlement of the client’s case before the dispute arose between the attorneys. Thus, the case did not involve the timing issue presented by this case.
Moreover, the majority’s discussion of the Court’s reasoning in Vogelhut is completely inaccurate. The majority states, 331 Md. at 343, 628 A.2d at 191, “we reasoned that an attorney who had been retained on a contingent fee basis was entitled to assert immediately his right to a retaining lien based upon the reasonable value of the legal services he rendered prior to his discharge without cause.” This was not the reasoning of the Court; it was the reasoning set forth in the concurring opinion. Furthermore, the case did not involve the discharged attorney’s right immediately to assert a retaining lien, as the attorney did not attempt to do so. The majority’s inaccurate statement of the Court’s reasoning leads it to an inaccurate *349characterization of the Court’s holding. The Court in Vogelhut did not hold that relinquishment of the lien furnished consideration for the fee sharing agreement, as the majority states, 331 Md. at 343, 628 A.2d at 191. The Court held that mere delivery of the file furnished consideration, the adequacy of which the Court would not question. 308 Md. at 190-191, 517 A.2d at 1096. The case also did not involve any claim by the attorney based on the reasonable value of his services; instead, the new attorney attempted to pay the discharged attorney on a reasonable value basis in order to avoid paying him the negotiated portion of the fee. See 308 Md. at 187, 517 A.2d at 1094.
As the above review demonstrates, no Maryland case cited by the majority supports the notion that Maryland law requires adoption of the New York rule. Other Maryland cases, however, support the opposite view, namely that an agent hired under a contingent fee contract has no right at all to recover for services rendered prior to termination if the contingency does not come to pass.
For example, we held in Childs v. Ragonese, 296 Md. 130, 136, 460 A.2d 1031, 1034 (1983), that an agent could not retain a sales commission because the sale was not actually consummated. Consequently, the client had a right to a refund of the commission already paid. See also Berman v. Hall, 275 Md. 434, 340 A.2d 251 (1975); Wyand v. Patterson Agency, 271 Md. 617, 319 A.2d 308 (1974). Under our cases, an agent hired pursuant to a contingent fee contract is not entitled to be compensated until the contingency has been fulfilled. This principle “is not part of a body of law peculiar to real estate brokers. Instead, as the cases make clear, it is a rule of contract interpretation applicable to agents generally.” Childs, supra, 296 Md. at 136, 460 A.2d at 1034, citing, inter alia, J. Russell, A Treatise On The Laws Relating To Factors And Brokers, 159-160 (1845). An attorney-client relationship is an agency relationship, and is governed by principles of agency law. Switkes v. John McShain, 202 Md. 340, 96 A.2d *350617 (1953).1 Under principles of Maryland agency law, an agent who, under a contract or custom and usage, is to be compensated from funds which the agent is to assist the principal in recovering, is not entitled to compensation until there is a recovery.2
The Court today shows extraordinary concern for attorneys’ pecuniary interests. These interests are already well-protected by existing principles of Maryland law. For example, the cases cited by the majority establish that a discharged attorney who had a contingent fee contract with the client may be entitled to some recovery after the occurrence of the contingency. In addition, if a third party improperly interferes with an attorney-client retainer contract, the attorney may bring an *351action against the third party. See Sharrow v. State Farm Mutual, 306 Md. 754, 511 A.2d 492 (1986).
The majority shows far less concern for clients’ pecuniary interests. Under the rule announced today, a dissatisfied client who wishes to exercise his or her absolute right to discharge an attorney, will have to pay attorneys’ fees immediately, out of pocket, rather than out of any recovery, as bargained for. This rule undoubtedly will work tremendous hardship on exactly those clients who require contingent fee arrangements, ie., those who would not otherwise be able to afford to hire an attorney. Many of these clients will end up paying legal fees twice, first to the discharged attorney and then to any new attorney out of any recovery. In many cases, the client may have to pay a discharged attorney immediately, and then might not recover on the claim at all; thus, the discharged attorneys’ services, for which the client may have paid dearly, might turn out to be worthless. The majority’s decision extends beyond those clients who hire a new lawyer. In some cases, clients who retain attorneys under contingent fee arrangements may, in good faith, decide not to pursue their claims. The discharge of the attorney under such circumstances is presumably “without cause.” These clients still will be required to pay attorneys’ fees.
Concern for the welfare of the client is embedded in the policies of this State. For instance, Maryland Rule of Professional Conduct 1.5 governing “Fees” specifies that the reasonableness of a fee is dependent on “the amount involved and the results obtained.” Rule 1.5(a)(4). The Rule generally expresses concern that a client be charged fairly for legal services. The Comment to this Rule further suggests that, when an attorney undertakes to represent a client under a contingent fee agreement, that attorney cannot reasonably expect compensation for services rendered until the happening of the contingency. The very definition of a contingent fee, set forth in the Comment to Maryland Rule of Professional Conduct 1.5, communicates this idea. The Comment defines a contingent fee agreement as
*352“an agreement for legal services (1) made before the services are completed, and (2) providing compensation for the lawyer which is contingent in whole or in part upon the successful accomplishment or disposition of the legal matter and which is either in a fixed amount or in an amount determined under a specified formula.”
The New York rule adopted by the majority today is not in keeping with the public policy reflected in the above-quoted Comment.
The common understanding of most people in Maryland, which is reinforced every day by attorneys’ television, newspaper, telephone book and other advertisements, is that when an attorney is retained in a personal injury case on a contingent fee basis, there is without exception “no .fee if no recovery.” C & P Telephone, Yellow Pages, Greater Baltimore Metropolitan Area at 554 (Suburban West Edition, Nov. 1992—Oct. 1993). See also, e.g., id. at 550 (“No Recovery No Fee”),- id. at 552 (“No Recovery—No Fee (On Injury Claims)); id. at 556 (“No Recovery No Fee For Personal Injury Cases”); id. at 557 (“No Fee If No Recovery”); id. at 558 (“No Fee Unless You Win (Client may be responsible for expenses)”); et seq. As previously discussed, Maryland cases dealing with agents generally are in accord with this common understanding. The majority today, however, creates a favored class of agents— lawyers—and holds that under the circumstances of this case, a lawyer hired on a contingent basis is entitled to a fee even though there is no recovery. In my view, this special treatment of lawyers is entirely unjustified.3
*353I would affirm the judgment of the District Court, affirmed by the circuit court, dismissing the complaint.
Chief Judge MURPHY and Judge ROBERT M. BELL have authorized me to state that they concur in the views expressed herein.

. The general agency principle that an agent must wait for the fulfillment of the contingency set forth in a contingent fee contract in order to receive compensation already may have been applied to an attorney. We noted in Childs v. Ragonese, 296 Md. 130, 136 n. 3, 460 A.2d 1031, 1034 n. 3 (1983), that an early case to this effect, Keener v. Harrod, 2 Md. 63, 56 Am.Dec. 706 (1852), "does not indicate whether the 'agent' was a real estate broker, auctioneer, attorney, or other type of agent.” (Emphasis added).

. The majority would allow the attorney to recover now, even though there is no recovery out of which the attorney’s percentage fee can be taken, on the theory of quantum meruit. As stated above, in my view, there can be no recovery for the attorney until there has been a recovery for the client.
Moreover it may be doubted whether, under a contingent fee arrangement such as this, the principle of quantum meruit ordinarily applies under Maryland law. An agent who has entered into a contingent fee arrangement with a principal is normally only entitled to be paid out of the particular funds obtained. See Melvin v. Aldridge, 81 Md. 650, 658-659, 32 A. 389, 391 (1895) (holding that the agent’s compensation must be paid out of funds actually received by the principal); McCullough v. Pierce, 55 Md. 540, 546 (1881) (same). Our cases have indicated that where an agent undertakes to obtain a particular result for a principal, where the undertaking is to perform the service in exchange for a percentage of the recovery, and where the agent is not entitled to any fee absent a recovery, quantum meruit has little or no place. Under these circumstances, the agent " ‘is employed not to expend time and effort but to accomplish a particular result.’ ” Yasuna v. Nat'l Capital Corp., 273 Md. 617, 626, 331 A.2d 49, 54 (1975), quoting Nily Realty v. Wood, 272 Md. 589, 598, 325 A.2d 730, 736 (1974). See Steward Village v. Melbourne, 274 Md. 44, 50-51, 332 A.2d 626, 629 (1975).

. As the majority acknowledges, the contingent fee agreement in this case "was silent as to any compensation due Skeens in the event that he was discharged by Miller prior to the occurrence of the contingency.” 331 Md. at 333, 628 A.2d at 186. The majority, however, creates an implied-in-law exception to the standard arrangement in personal injury cases of "no recovery, no fee.” In my view, if an attorney desires to protect his or her interests in the event the client discharges the attorney before a recovery is obtained, the attorney can include in the agreement the promise, "no recovery, no fee, unless you discharge me without cause prior to the recovery.” In light of the general obligation of attorneys to apprise their clients of the fee arrangement, any attorney *353who wishes to avail himself of the majority’s holding in this case ought to be required to disclose to his potential clients that there is an instance in which the client will have to pay the attorney even though there is no recovery. Otherwise, I believe that the representation of “no recovery, no fee” would be misleading.