Court Opinion

ID: 4570696
Source: CourtListenerOpinion
Date Created: 2020-09-29 17:00:23.370325+00
Date Added: 2024-06-11T13:30:40.372389
License: Public Domain

NOT PRECEDENTIAL
        UNITED STATES COURT OF APPEALS
             FOR THE THIRD CIRCUIT
                  _____________

                      No. 19-3062
                     _____________

                 MONTAGUE WALKER

                            v.

 PENNSYLVANIA DEPARTMENT OF CORRECTIONS,
     an agency of the Commonwealth of Pennsylvania;
          SCI EMPLOYEE SHELLY MANKEY;
      SCI EMPLOYEE KENNETH MCWILLIAMS;
          SCI EMPLOYEE STANLEY HENRY;
         SCI EMPLOYEE ROBERT D. RHODES;
           SCI EMPLOYEE TONY TRAYTOR;
  SCI EMPLOYEE DANIELLE TERNITSKY-GORDON;
           SCI EMPLOYEE MARY BOBECK;
WEXFORD HEALTH SOURCES, INC; DR.PAUL DASCANI;

                MONTAGUE WALKER;
               ALVIN F. DE LEVIE, ESQ.,
                              Appellants
                  _______________

      On Appeal from the United States District Court
         for the Western District of Pennsylvania
                 (D.C. No. 2-14-cv-1504)
         Magistrate Judge: Hon. Lisa P. Lenihan
                   _______________

        Submitted Under Third Circuit LAR 34.1(a)
                   September 25, 2020

 Before: McKEE, JORDAN, and RENDELL Circuit Judges.

               (Filed: September 29, 2020)
                    _______________
                                        OPINION
                                     _______________

JORDAN, Circuit Judge.

       Alvin F. de Levie, Esq. appeals the District Court’s determination that he and James

E. Beasley, Jr., Esq. of the Beasley Firm, LLC (“TBF”), reached a binding oral agreement

regarding their joint representation of plaintiff Montague Walker in the civil rights and

personal injury lawsuit that underlies this fee dispute. According to de Levie, the Court

lacked subject matter jurisdiction over the fee dispute and further erred in holding that he

and Beasley were parties to an enforceable contract. Because neither of de Levie’s

contentions have merit, we will affirm.

I.     BACKGROUND

       Walker suffered catastrophic injuries while incarcerated in a Pennsylvania

penitentiary, resulting in his permanent paralysis. He retained de Levie under a contingent

fee agreement to represent him in any potential lawsuit relating to the incident. Prior to

filing suit, de Levie “brought in” Beasley “to act as co-counsel” so that he could have “the

benefit of additional resources and another experienced lawyer for a case of this magnitude

and seriousness[.]” (Opening Br. at 5.) “The attorneys proceeded on an oral agreement

between de Levie and Beasley to work on the case together, with TBF and Mr. de Levie

both to advance costs, and to share a contingency fee equally in the event of a successful

       
        This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.

                                              2
conclusion to the case by trial or settlement.” (Opening Br. at 5-6.) The terms of de Levie’s

and Beasley’s agreement appear to be the same terms they had utilized in a previous

personal injury case in which de Levie had asked Beasley and TBF to become involved.

       de Levie and Beasley filed suit on behalf of Walker in November 2014, asserting

federal civil rights claims under 42 U.S.C. § 1983, as well as claims for negligence and

malpractice under Pennsylvania state law. Both attorneys signed the complaint and, along

with other TBF lawyers, continued to work together on Walker’s case until April 2016. At

that time, Walker, at de Levie’s behest, requested that TBF withdraw from the case,

purportedly because of Beasley’s failure to take a sufficiently active role and the firm’s

failure to diligently prosecute the matter. Shortly after receiving the withdrawal request,

TBF filed a “Notice of Attorney’s Charging Lien” (the “Lien”) with the District Court,

asserting “an attorney’s charging lien against any recovery in favor of [Walker] … with

respect to costs incurred and [TBF’s] contractual and/or equitable rights to an attorney’s

fee.” (App. 96). The Lien provided further that “distribution of any proceeds arising from

a recovery in this mater -- by way of settlement, judgment or otherwise -- shall not be made

until [TBF] has received written notice of the recovery, and the Court has had an

opportunity to adjudicate [TBF]’s right to reimbursement of costs/expenses and its right to

payment of an attorney’s fee out of the aforesaid proceeds.” (App. 96.) TBF and its

attorneys who had entered appearances on Walker’s behalf, including Beasley, then moved

to withdraw and were granted leave to do so.

       Following that withdrawal, de Levie continued to represent Walker on his own and

secured a significant settlement for Walker in January 2019. Thereafter, Walker moved to
                                             3
compel TBF to submit an affidavit justifying the Lien. TBF responded that the Lien was

proper for two reasons: (i) there was a binding oral contract between de Levie and Beasley

to equally split any counsel fees attributable to Walker’s recovery; and (ii) TBF

independently satisfied the five requirements for an equitable charging lien under the

Pennsylvania Supreme Court’s decision in Recht v. Urban Redevelopment Authority, 168
A.2d 134 (Pa. 1961).1

       After full briefing, an evidentiary hearing, and post-hearing supplemental briefing,

the District Court held that TBF was not entitled to an equitable lien under Recht but that

de Levie and Beasley were parties to an enforceable oral contract to work together and to

evenly divide the contingent fee associated with any recovery obtained. Accordingly, the

Court ordered that “[a]ny monies remaining [after reimbursement of costs] from the fee

collected from the settlement agreement of this matter are to be split 50/50 between each

firm pursuant to the terms of the oral agreement between [TBF] and de Levie.” (App. 14.)

       1
           The five requirements are:

               “(1) that there is a fund in court or otherwise applicable for
               distribution on equitable principles, (2) that the services of the
               attorney operated substantially or primarily to secure the fund out of
               which he seeks to be paid, (3) that it was agreed that counsel look to
               the fund rather than the client for his compensation, (4) that the lien
               claimed is limited to costs, fees or other disbursements incurred in the
               litigation by which the fund was raised and (5) that there are equitable
               considerations which necessitate the recognition and application of
               the charging lien.”

Recht, 168 A.2d at 138-39.
                                              4
       de Levie moved for reconsideration on the ground that the Court erred in concluding

there was a “meeting of the minds on the essential terms of the agreement[.]” (D. Ct. D.I.

409, at 5.) He also argued that the Court’s holding that counsel fees should be net of costs

and expenses, rather than a gross percentage of Walker’s recovery in addition to

reimbursement of costs and expenses, was contrary to the terms of his fee agreement with

Walker and “would result in a significant reduction in the attorney’s fee in this matter.”

(D. Ct. D.I. 409, at 6.) The District Court held there was no basis to reconsider its

conclusion regarding the existence of an enforceable contract between de Levie and

Beasley, and stated with respect to the proper calculation of attorneys’ fees in this case

“that costs are to be paid first and the 40% fee is to be taken from the remainder, or net,

settlement.” (App. 19.)

       de Levie timely appealed both the District Court’s order holding that he and Beasley

were parties to a binding contract and its order denying reconsideration.

                                             5
II.    DISCUSSION2

       A.     The District Court’s Subject Matter Jurisdiction3

       de Levie argued before the District Court that it had subject matter jurisdiction to

resolve the fee dispute with TBF. Having lost before that court, he now says that it never

had jurisdiction to decide the issue. We disagree.

       Federal courts may exercise ancillary jurisdiction over matters that “enable a court

to function successfully, that is, to manage its proceedings, vindicate its authority, and

effectuate its decrees[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 380

(1994). de Levie attempts to style this dispute as being entirely among lawyers and having

no effect on the underlying litigation. But that view is refuted by the Lien’s plain language.

TBF filed the Lien “against any recovery in favor of” Walker and sought to enjoin the

“distribution of any proceeds arising from a recovery in this matter” to which Walker was

entitled. (App. 96.) On its face, the Lien evidences a dispute between TBF and its former

client Walker, a party to the underlying litigation. Resolution of that dispute has had a

tangible effect on the litigation parties’ rights, including Walker’s, by hindering the parties

from finalizing their settlement. (See App. 6 (District Court noting that the settlement

amount “has not been deposited into the Court, but a settlement agreement was negotiated

       2
         The District Court had jurisdiction over the underlying Walker litigation under 28
U.S.C. §§ 1331 and 1367. For the reasons discussed herein, the District Court also had
ancillary jurisdiction to resolve TBF’s entitlement to attorneys’ fees. We have jurisdiction
under 28 U.S.C. § 1291.
       3
        We review a district court’s exercise of ancillary jurisdiction de novo. In re Cmty.
Bank of N. Va. Mortg. Lending Practices Litig., 911 F.3d 666, 670 (3d Cir. 2018).

                                              6
and defendants stand ready to pay once the Court determines how much each of [TBF and

de Levie] are entitled to”).)4 The District Court thus had subject matter jurisdiction to

adjudicate the propriety of the Lien, which directly affected the Court’s ability to manage

its proceedings and the rights of multiple litigants. Kokkonen, 511 U.S. at 379-80; see also

Novinger v. E.I. DuPont de Nemours & Co., 809 F.2d 212, 217 (3d Cir. 1987) (“This

description of the purpose of ancillary jurisdiction suggests that it is particularly necessary

for disputes such as this one. Attorneys’ fee arrangements in diversity cases, and in most

federal question cases as well, are matters primarily of state contract law. Nevertheless the

federal forum has a vital interest in those arrangements because they bear directly upon the

ability of the court to dispose of cases before it in a fair manner.”).

       To render a decision regarding the Lien, the District Court also found it necessary

to decide whether de Levie and TBF had reached a binding oral agreement regarding how

any recovery would be shared. (See App. 7 (District Court holding TBF satisfied third

Recht factor because “there was a fee splitting agreement between Beasley and de Levie”);
id. at 7-8 (“The Court further finds that the reason Beasley cannot meet the second Recht

factor is because de Levie precluded it from any further work on the file; in essence, de

Levie precluded it from fulfilling its obligation under the contract.”).)         In addition,

       4
          This is but one example in the record of how the fee dispute has affected the
litigation parties’ rights and how the Court did, functionally, exercise constructive control
over the settlement funds despite those funds never formally being deposited with it. (See,
e.g., App. 132 (Court authorizing distribution of settlement proceeds to special needs trust
established for Walker); App. 80-81 (docket entry discussing Court’s telephone conference
with the parties, which was requested by one of the defendants “because, given the Beasley
lien, there are issues with distribution of the fund”).)
                                               7
resolution of that contract dispute affected Walker’s rights, both in terms of the amount of

money he actually was entitled to receive from the settlement and the timing of his receipt

of the money. (See App. 19 (District Court confirming that attorneys’ fees would be net

of expenses, thereby reducing amount of attorneys’ fees and increasing Walker’s

recovery).) That further underscores the Court’s subject matter jurisdiction to rule on the

Lien and any matters integral to it, including what, if any, agreement de Levie and Beasley

had. And de Levie cites no authority for the proposition that a federal court lacks subject

matter jurisdiction over a fee dispute that directly affects the rights of one or more of the

litigants.5 Accordingly, his jurisdictional argument fails.

       B.     Existence of an Enforceable Contract6

       de Levie’s merits-based contentions fare no better than his jurisdictional one. He

says that any oral understanding between himself and Beasley was not an enforceable

contract because it lacked essential terms and was too indefinite. He goes on to say that,

       5
          de Levie’s reliance on In re Community Bank of Northern Virginia Mortgage
Lending Practices Litigation, 911 F.3d 666 (3d Cir. 2018) is misplaced. The core holding
in that case was that “a federal court should decline to exercise ancillary jurisdiction over
a fee dispute between two attorneys where the court has no control over the funds and the
fee-splitting dispute has no impact on the timing or substance of the litigants’ relief in the
underlying case over which the federal court has jurisdiction.” Id. at 672. As already
discussed, however, not only did the District Court functionally exercise control over the
funds at issue, the fee dispute between de Levie and Beasley impacted both the timing and
substance of the plaintiff’s relief in the underlying action.
       6
         “Th[e] issue of contract formation invokes a mixed standard of appellate review.”
ATACS Corp. v. Trans World Commc’ns, Inc., 155 F.3d 659, 665 (3d Cir. 1998). The
District Court’s factual findings are reviewed for clear error. Id. “Conclusions drawn with
respect to the legal effect of any agreement, however, are questions of law and therefore
subject to plenary review.” Id.
                                              8
even if an enforceable agreement existed, the District Court erred in not treating the

arrangement as a joint venture that was terminable at will. But de Levie has forfeited both

of those arguments by failing to properly raise them before the District Court.

       As to his essential terms/indefiniteness argument, de Levie says that the contract

was unenforceable because there was no evidence the parties agreed what would happen if

either terminated the agreement or if Walker discharged either of them. To the extent de

Levie raised before the District Court any argument about contract terms, however, that

argument was based entirely on the parties’ purported failure to agree on the specific role

that Beasley would play in representing Walker. de Levie never asked the District Court

to address whether the lack of a termination provision rendered the parties’ oral agreement

unenforceable. He thus failed to preserve the issue for appeal.7 See Garza v. Citigroup

Inc., 881 F.3d 277, 284 (3d Cir. 2018) (“To preserve a matter for appellate review, a party

must unequivocally put its position before the trial court at a point and in a manner that

permits the court to consider its merits. It is well established that arguments not raised

before the District Court are waived on appeal.” (internal quotation marks and citations

omitted)).

       7
         Moreover, and regardless of whether he properly preserved them, de Levie’s
challenges to the enforceability of his agreement with Beasley are meritless. There is
ample evidence in the record to support the Court’s holding that de Levie and Beasley had
a “meeting of the minds” and agreed to an enforceable contract pursuant to which “the
firms would run the case together, and if there were a recovery, each firm’s costs would be
reimbursed, and any counsel fees split 50/50.” (App. 17.) That evidence includes, but is
not limited to, the parties’ history and course of dealing and de Levie’s admission to the
District Court that he had a binding agreement with Beasley.
                                             9
       Regarding his joint venture assertion, de Levie readily acknowledges that he did not

raise the issue before the District Court. We will not consider it in the first instance. Id.

de Levie has thus failed to articulate a basis for us to disturb the District Court’s holding

that he and Beasley had a binding contract with respect to representing Walker.

III.   CONCLUSION

       For the foregoing reasons, we will affirm the orders of the District Court.

                                             10