R_E.NDERED AUGUST 24, 2017
TO BE PUBLISHED
a Supreme Tnnr'f of ‘Benhxckg
20 1 5~SC-OOO435-DG
HUGHES AND COLEMAN, PLLC ` APPELLANT
' oN REVIE_:W FROM c'oURT oF APPEALS
V. , No. 2013-cA-002074~MR
HARDIN cIRCUIT coUR'r No. 13-01-00166 .
ANN CLARK CHAMB-ERS, EXECUTRIX OF . n 7 ` APPELL]iJE
THE ESTATE_ OF JAMES W. CHAMBERS, ` '
DECEASED -
c OPINION OF THE COURT BY JUSTICE WRIGHT
REVERSING
Personal-injury law firm Hughes 85 coleman Was hired by Travis
UnderWood after he Was injured in a car crash. Underwood eventually became ' `
dissatisfied With the firm and fired them. Shortly after discharging I-Iughes &
Coleman and hiring another attorney, Underwood agreed to a final settlement
of his claims. This appeal asks whether Hughes 85 Coleman. is entitled to be
compensated for their services rendered before being iired. Our precedent _
entitles a discharged lawyer to receive, on a quantum meruit basis, a portion of
a contingency fee on a former client’s recovery-so long as the termination Was
not “for cause.” Because -Hughes_& Coleman’s firing Was not tor cause under
this rule, the firm is entitled to quantum meruit compensation.
I. background
On October l, 2012, Travis Underwood was injured when a commercial
truck crashed into the vehicle he was driving. His injuries required
hospitalization and other medical treatrnent, and forced him to miss‘about five .
weeks of work. The truck driver was apparently (at least mostlyl) at fault.
On October 9, Underwood‘ received a so-called Pe_rsonal Injury Protection
(PIP), or no-f`ault,2 payment of $200 from his insurer, Progressive, to replace
one week’s lost wages in the amount prescribed by KRS 304.39-130. On
October `18, Progressive disbursed another $990.06 of Underwood’s PIP
benefits to pay two‘medical bills. l
On October 23, Underwood hired the law firm Hughes 8a Coleman to
represent him in his motor-vehicle personal-injury matter. Their agreement
provided for Hughes 85 Coleman to be paid on a contingency-fee basis and
included, among other terms, that the firm would “assist `_the client in
submitting medical bills for payment to any responsible insurance carrier or
agency.” Attomey Judy Brown handled most of the pre~litigation Work in the
case, while another attorney, Brent Travelsted,3 primarily worked the case once
it entered active litigation in January 2013. The firm’s non-lawyer personnel
-also provided substantial assistance under the attorneys’ supervision and
‘1 There was some question whether Underwood’s own negligence may have
contributed to causing the crash and the extent of his injuries because of evidence
that he was speeding and not wearing a seat belt.
2 We use the synonymous labels rio-fault and Pl`P interchangeably. _
3 Sa_dly, Travelsted passed away in 2013`.
2
direction. The firm maintained, as the trial court put it, “a highly meticulous
database [that] document[ed] every event [e.g. letter, telephone call,
settlement offer)” related to its representation of Underwood.
Two days after Underwood retained its services, Hughes & Coleman
mailed Progressivel a letter advising the insurer of Underwood’s PIP claim and
'requesting, under KRS 304.39-241, that it reserve all no-fault benefits to “pay
bills or lost wages only as directed by _I-Iughes 85 Coleman.”`Through further
communications with Progressive, the firm learned that Underwood had a total
of $20,000 in PIP coverage-$I0,000 in basic reparation benefits (BRB]' plus
$10,000 in added reparation benefits (ARB). See KRS 304.39-020(1), (2];
KRS 304.39-140. The firm also learned that Underwood had not provided to
Progressive any physician statements or wage-verification documents'required
to verify his entitlement to further lost-wage payments See KRS 304.39-280.
Despite repeated~requests from Hughes & Coleman, Underwood never provided
these documents.
. On November 6, Hughes 8a Coleman mailed Progressive another letter,
this time asking it to release Underwood’s remaining rio-fault benefits of
$18,309.94 by check payable to Underwood and the`iirm. To support the:
request and show that Underwood’s covered losses would easily exceed that
amount, Hughes 85 Coleman attached a bill totaling $71,812.40 from
Underwood’s stay at the University of louisville Hospital. The firm received the
check on November 30. That same day, they mailed Underwood a “Power of -
Attorney” document, which he signed a couple days later. This limited power of
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attorney authorized Hughes 85 Coleman “to endorse [Underwood’s] name to a
settlement draft for the purpose of depositing [the outstanding PIP] funds in
[the firm’s] escrow account pending final distribution.”
On December 7, despite Underwood’s not providing any verifying
documentation, Hughes 85 Coleman issued-him a check for $973 from the
escrowed hinds .for lost wages. This was calculated by applying the $200-per-_
week statutory rate to the four weeks and three days that he had not worked or
been already compensated for.4 Later, Hughes & Coleman cut another check
from the escrowed funds for $3,492.88_a negotiated full-satisfaction of the
University of Louisville Hospital bill. See KRS 304.39-245. This left $14,344.06
remaining in the escrow account
By January 2013, Hughes 85 Coleman decided that the claim needed to
enter litigation, and Travelsted took over primary control of the case. On
January 23, Underwood authorized Travelsted’s filing suit on his behalf.
Travelsted then began negotiating a settlement with the tortfeasor’s insurer,
and by F_`ebruary, their back and forth had culminated in the insurer offering
$145,000, Which Underwood rejected. Hughes & Coleman’s case-management
notes show that Travelsted had valued the case at $200,000 or more and
recommended against settling for less than that amount.
4 Underwood returned to work on November 8. Because Progressive had already
paid him for the week of October 1-5, his remaining missed time included October 8~
12, 15-19, and 22-26; October 29-November 2; and Novem_ber 5-7.
4
Unfortunately, Underwood’s (and his mother’s5) relationship with his
counsel deteriorated -On March 13, Underwood fired Hughes 85 Coleman. In
her email discharging the firm and requesting the case file and remaining
escrow balance, his mother explained:
One of the reasons that we are letting you go is, the escrow money
could have been given to Travis when he needed the money but we
were not told that, we were told that you all had to take it and put
it in escrow. We have found out that this was not required like we
were made to think it was. `
On March 18, Hughes 85 Coleman sent Underwood the remaining escrow
balance of $ 14,344;.06.
Underwood then hired new counsel, James C_l_'lambers,6 to represent him.
Shortly thereafter, negotiations with the tortfeasor’s insurer concluded with the
parties’ agreeing to a final settlement of $200,000, resulting in the contingency
attort`tty fee of $ee,eeo? that is the subject of this diqute.
Hughes 85 Coleman asserted an attorney’s lien on that fee under
KRS 376.460,`claiming that it was entitled to a quantum meruit share of the
fee as compensation for its services rendered to Underwood before being
terminated Charnbers challenged_the firm’s entitlement to any portion of the
5 Underwood’s mother played a large role assisting him after the crash, and
much or most of Hughes 85 Coleman’s correspondence about the case was actually
with her.
6 After the Court of Appeals issued its opinion in this case, Chambers also sadly
passed away. As a result, Ann Clark Chambers_, as executrix of 'his estate, has been `
substituted as appellee.
7 Although the amount of the one-third contingency fee is $66,666.67, the
parties agreed to $66,660, presumably to make the math simpler. These funds are
being held by Selective lnsurance Company of America, the tortfeasor’s insurer, under
court order pending resolution of this dispute.
5 n
fee, insisting that its firing was “for cause” and so barred its quantum meruit
claim._ The firing’s justifiable cause, Chambers argued,' was Hughes 85
Coleman’s supposed mishandling of Underwood’s no-fault benefits, which he
maintained was both unethical and legally unauthorized Despit_e Hughes 85
Coleman’s willingness to do So, Chambers declined to participate in the
Kentucky Bar Association’s fee arbitration process. See SCR 3.810.
The circuit court, then, held an evidentiary hearing where it heard
testimony from pre-litigation attorney Brown and members of Hughes '85
Coleman’s staff who worked on Underwood’s case, The firm also submitted
deposition testimony from Reford Coleman (no relation to the iirrn’s named
principal), who testified as an expert in motor-vehicle personal-injury litigation.
He explained that it was common practice to handle clients’ no-fault benefits as
Hughes 85 Coleman had handled Underwood’s. He also opined that the firm
had provided diligent service, that Underwood’s case appeared to have been
progressing well, and that there was nothing about the representation that he
considered good cause for discharging .'the firm. Hughes 85 _Coleman also
submitted its entire 503-page, contemporaneously generated file for
Underwood’s case from its case-management system, which the trial court
found to be “extremely detailed and meticulous.” Chambers’s evidence included
only notarized statements from Underwood and his mother; he did not call any
Witnesses or personally testify|;it the hearing.
Relying primarily on Coleman’s testimony and the case-management
records, the trial court concluded that Hughes 85 Coleman’s representation of
6
Underwood was not deficient and that the firing was without cause. The court
rejected Chambers’s contention that the firm’s communications with
Und'erwood had been inadequate, finding “substantial evidence showing that
[Hughes 85 Coleman] -maintained excellent communication with [Underwood]
and returned telephone calls promptly.” The trial court also rejected
Chambers’s argument that Hughes_& Coleman improperly withheld or
otherwise mishandled Underwood’s no-fault benefits.
Having concluded that Hughes 85 Coleman was discharged without
cause, the trial court looked to the factors provided in SCR 3.13'0-1.5 and
apportioned 75% of the attorney fee to the firm and 25% to Chambers. ln the
trial court’s`view, that was “the allocation that most fairly recognize[d] both
Hughes 85 Coleman’s labor and Chambers’[s] ability to settle_.” So the court
ordered that $49,995 be paid to l-Iughes 85 Coleman and $16,66`5 to Chambers.
Chambers appealed to the Court of Appeals only the issue of whether
Hughes 85 Coleman’s termination was “for cause.”B The Court of Appeals
reversed, holding that in its-handling of Underwood’s rio-fault benefits, Hughes
85 Coleman had “maintained a position unsupported by law and adverse to its
client,” which “constituted valid cause” for Underwood’s terminating its
Se_rvices. So the Court of Appeals reversed the trial court’s judgment
apportioning 75% of thc contingency fcc to thc iinn; '
8 Because the trial court’s quantum meruit fee apportionment was not appealed
and is no longer a live issue in this case, we leave for another day discussion of how to
go about assessing the reasonable value of the discharged lawyer’ s services.
7 l
We granted Hughes 85 Coleman’s petition for discretionary review.
n . II. Analysis
With Bokcr v. Shcpcro, 203` s.W.sti 697 (Ky. 2006), this court brought
Kentucky in line with most other jurisdictions’ treatment of a discharged
attorney’s-entitlement to compensation on a former contingency-fee client’s
recovery. Before that, a Kentucky attorney whose client discharged her without
cause was entitled to the agreed-upon contingency fee on her former client’s
final-recovery (less the “reasonable cost” of the replacement attorney’s services),
despite having not completed the contracted-for work. See La.l§’ach v. Hampton,
585 s.w.2ti 434, 436 (i