Court Opinion

ID: 67727
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:24:57+00
Date Added: 2024-06-11T09:39:02.211792
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                           August 20, 2009

                                       No. 08-20743                    Charles R. Fulbruge III
                                                                               Clerk

UNITED STATES OF AMERICA

                                                   Plaintiff-Appellee
v.

HAROLD A CHAMBERLAIN

                                                   Movant-Appellant

               Appeal from the United States District Court for the
                           Southern District of Texas
                            USDC No. 4:08-CV-2313

Before REAVLEY, SMITH, and DENNIS, Circuit Judges.
PER CURIAM:*
       Ira Klein was convicted by a jury of numerous counts of mail and health
care fraud and was ordered to pay $11,590,784.95 in restitution. On November
28, 2007, Appellant Harold Chamberlain, as Klein’s tax attorney, filed a claim
of right with the Internal Revenue Service for a tentative refund of $3,924,690,
asserting that Klein’s income for three previous tax years should be reduced
under 26 U.S.C. § 1341 because of the court-ordered restitution. The terms of
Chamberlain’s fee agreement with Klein granted Chamberlain a 40% interest

       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
                                   No. 08-20743

in “any recovery.” On June 13, 2008, the IRS issued a tentative refund of
$4,070,998 which it deposited in the court’s registry in light of the outstanding
restitution order.   A few weeks later, the Government filed a declaratory
judgment action pursuant to 26 U.S.C. § 7405 seeking the return of the
erroneous refund. Chamberlain moved to intervene as a matter of right under
F ED. R. C IV. P. 24(a)(2), seeking to “step into the shoes of [Klein]” to defend the
refund because of his contingent interest in any recovery. The Government
objected, attaching letters from Klein acknowledging that the refund was
improper and objecting to Chamberlain’s motion. The district court summarily
denied the motion to intervene, and Chamberlain filed this appeal.             Soon
thereafter, the district court entered an agreed final judgment in which Klein
conceded that he was not entitled to the refund and directed that the funds be
returned to the Government. Reviewing the denial of intervention de novo, see
Ross v. Marshall, 426 F.3d 745, 753 (5th Cir. 2005), we AFFIRM for the
following reasons:
1.   According to Chamberlain, the district court erred in denying his motion to
intervene pursuant to Rule 24(a)(2). To intervene of right based on an interest
relating to the property or transaction: “(1) the application for intervention must
be timely; (2) the applicant must have an interest relating to the property or
transaction which is the subject of the action; (3) the applicant must be so
situated that the disposition of the action may, as a practical matter, impair or
impede his ability to protect that interest; [and] (4) the applicant’s interest must
be inadequately represented by the existing parties to the suit.” New Orleans
Pub. Serv., Inc. v. United Gas Pipe Line Co. (“NOPSI”), 732 F.2d 452, 463 (5th
Cir. 1984) (en banc) (internal quotation marks and citation omitted).
Intervention is subject to prudential limitations that bar an applicant from
asserting rights belonging to a third party. NOPSI, 732 F.2d at 464. Although
Chamberlain possessed a contingent interest in any recovery obtained by Klein

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                                  No. 08-20743

from the Government, see Keith v. St. George Packing Co., 806 F.2d 525, 526 (5th
Cir. 1986); Gaines v. Dixie Carriers, Inc., 434 F.2d 52, 54 (5th Cir. 1970),
Chamberlain’s basis for intervention, including his request for declaratory relief,
turned solely upon the merits of Klein’s entitlement to the refund that Klein
himself disavowed.      The right to challenge the collection of tax belongs
exclusively to Klein, as the taxpayer. Cf. Jewell v. United States, 548 F.3d 1168,
1172 (8th Cir. 2008) (taxpayer alone has standing to sue for wrongfully collected
tax). Klein elected to relinquish any claim to the funds by entering into an
agreed judgment directing their return to the Government.
2.    Chamberlain argues that he already has a right to the funds so that he can
intervene to assert his own right rather than Klein’s. “An attorney’s right to
compensation pursuant to a contingency fee agreement is a property right
determined under applicable state law.” Marré v. United States, 117 F.3d 297,
307 (5th Cir. 1997). The Texas Supreme Court has followed Section 35(2) of the
Restatement (Third) of the Law Governing Lawyers, which says, “Unless the
contract construed in the circumstances indicates otherwise, when a lawyer has
contracted for a contingent fee, the lawyer is entitled to receive the specified fee
only when and to the extent the client receives payment.” R ESTATEMENT (T HIRD)
OF THE L AW G OVERNING L AWYERS § 35(2) (2000); Hoover Slovacek LLP      v. Walton,
206 S.W.3d 557, 562 (Tex. 2006) (quoting R ESTATEMENT § 35(2)). Moreover, the
Texas Supreme Court has also adopted comment d to Section 35, which provides,
“‘[i]n the absence of prior agreement to the contrary, the amount of the client’s
recovery is computed net of any offset, such as a recovery by an opposing party
on a counterclaim.’” Levine v. Bayne, Snell & Krause, Ltd., 40 S.W.3d 92, 94
(Tex. 2001) (quoting R ESTATEMENT § 35(2) cmt. d). There is no language in the
contract between Chamberlain and Klein that would clearly override these
presumptions. The contract simply assigns Chamberlain 40% of “any recovery.”
Klein never actually received money from the tentative refund; therefore, there

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                                 No. 08-20743

was no recovery. Absent any recovery to Klein against which Chamberlain may
assert his contingent interest, there is no longer a suit in which to intervene.
Compare with Gaines, 434 F.2d at 54 (holding dismissal of the underlying suit
did not preclude intervention because the settlement funds in which the attorney
asserted an interest were held in the registry of the court).
      AFFIRMED.

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