No
No. 97-317
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 204
JEANNIE CAMPBELL,
Plaintiff and Appellant,
v.
BOZEMAN INVESTORS OF DULUTH,
a Minnesota Limited Partnership, d/b/a
HOLIDAY INN OF BOZEMAN; and
PATRICK N. LUND,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Michael A. Salvagni, Judge presiding.
COUNSEL OF RECORD:
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For Appellant:
Stephen C. Pohl, Bozeman, Montana
For Respondent:
William M. O’Leary, Corette Pohlman Allen Black & Carlson, Butte, Montana
Submitted on Briefs: October 9, 1997
Decided: August 24, 1998
Filed:
__________________________________________
Clerk
Justice James C. Nelson delivered the Opinion of the Court.
¶1 Jeannie Rosseland Campbell (Campbell) brought an action in the District Court
for the Eighteenth Judicial District, Gallatin County, to recover damages from
Bozeman Investors of Duluth d/b/a Holiday Inn of Bozeman and Patrick Lund for
personal injuries she sustained in a motor vehicle collision. Two of Campbell's
attorneys in this action, Channing Hartelius (Hartelius) and Gregory Morgan
(Morgan), filed a Notice of Lien claiming entitlement, from the proceeds of
Campbell's claim, to payment of their costs and attorney fees as well as
reimbursement for advances made to Campbell. The District Court found the lien to
be valid and awarded judgment in favor of Hartelius and Morgan. From this
judgment Campbell appeals; Hartelius and Morgan cross-appeal. We affirm.
¶2 The issues, as framed by this Court, are:
¶3 1. Whether the District Court erred in concluding that Hartelius and Morgan are
entitled to attorney fees totaling $8800.
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¶3 2. Whether this Court may consider the medical report of Dr. Peter Wendt.
¶4 3. Whether the District Court erred in failing to require that Campbell reveal the
amount she received as settlement of her claim.
Factual and Procedural Background
¶5 On December 3, 1992, Campbell was seriously injured when her vehicle collided
with a van operated by Patrick Lund (Lund). The van was owned by Lund's
employer, Bozeman Investors of Duluth d/b/a the Holiday Inn of Bozeman (Bozeman
Investors). Bozeman Investors' insurer paid Campbell for the damage to her vehicle
as well as $4,000 to $5,000 of her medical bills.
¶6 In January 1994, Bozeman Investors' insurer made an unsolicited offer to settle
Campbell's claim for the sum of $22,000, less the amounts already paid for medical
care and for the damage to Campbell's vehicle. Campbell, who had not yet consulted
a physician to determine the extent of the injuries to her back, rejected the offer. On
April 29, 1994, Campbell filed a personal injury action against Lund and Bozeman
Investors.
¶7 Campbell had retained Stephen Pohl (Pohl) to represent her in her personal
injury action. However, when Campbell separated from her husband in November
1994, she perceived that there existed a possible conflict of interest with Pohl as
Campbell had originally been referred to Pohl by Campbell's mother-in-law for
whom Pohl had performed legal services.
¶8 Consequently, on December 8, 1994, Campbell entered into a contingent fee
agreement with Hartelius and Morgan to render legal services in her suit against
Bozeman Investors. The agreement provided that Campbell was to pay Hartelius and
Morgan "33 - 1/3% OF ANY SETTLEMENT OBTAINED IN SAID CASE IF
SAME IS SETTLED AT ANY TIME PRIOR TO INSTITUTING SUIT AND 40%
OF ANY SETTLEMENT OBTAINED IN SAID CASE IF SAME IS SETTLED AT
ANY TIME AFTER INSTITUTION OF SUIT." Pohl provided a complete copy of
Campbell's file to Hartelius and Morgan and agreed to wait until the case was
resolved to receive reimbursement for costs he expended on Campbell's behalf.
Hence, on April 19, 1995, Hartelius and Morgan were substituted as counsel of
record.
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¶9 By this time, Campbell had quit her job and was attending physical therapy on a
regular basis. She was also receiving treatment from a surgeon in Billings and was
looking into going to a specialist in Minnesota to determine whether she required
back surgery.
¶10 In April 1995, counsel for Bozeman Investors deposed Campbell. Although
neither Hartelius nor Morgan met with Campbell in person before her deposition,
Hartelius spoke with her on the phone and attended the deposition. It was
determined at the deposition that Bozeman Investors had not been provided with
copies of all of Campbell's medical records.
¶11 In June 1995, Campbell was examined by Dr. Michael Smith, an orthopedic
surgeon in Minneapolis, Minnesota. Dr. Smith indicated that he would perform the
necessary surgery on Campbell's back. However, in August 1995, Campbell learned
that Medicaid would not pay for an operation performed out-of-state, thus she was
forced to seek another surgeon. Campbell contacted Dr. Greg McDowell, a Billings
orthopedist, who agreed to perform the surgery.
¶12 During this time, Campbell was experiencing financial difficulties since she was
not working and had not received any further payments for her medical bills from
Bozeman Investors. She had applied for Social Security disability benefits, but was
turned down on December 1, 1995. Consequently, Hartelius obtained approval from
this Court to loan money to Campbell for her living expenses. To that end, Hartelius
loaned her $2,745.29.
¶13 On May 6, 1996, Campbell sent a letter to Hartelius and Morgan expressing
dissatisfaction with their services and discharging them. Campbell later testified that
she became dissatisfied with Hartelius and Morgan because they never wrote to
Bozeman Investors' insurer requesting an advance payment for medical costs for
surgery, did not request that a trial date be set, and did not adequately advise her
about obtaining Social Security disability benefits. Hence, on June 6, 1996, Campbell
filed a motion for substitution of counsel, requesting that Pohl be substituted as
attorney of record in place of Hartelius and Morgan. The court granted her motion
on June 25, 1996.
¶14 After they were dismissed by Campbell, Hartelius and Morgan refused to turn
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over her file to Pohl. On July 11, 1996, they filed a Notice of Lien claiming
entitlement from the proceeds of Campbell's claim against Bozeman Investors for
payment of their costs and attorney fees and requesting reimbursement for the
money they had advanced her.
¶15 On October 22, 1996, Campbell was examined at the request of Bozeman
Investors' attorney by Dr. Peter Wendt, an orthopedic surgeon practicing in
Anaconda. A settlement conference was held in December 1996, at the conclusion of
which Campbell's personal injury claim against Bozeman Investors was settled. In
accordance with the terms of the settlement, the amount of the settlement was kept
confidential. On April 3, 1997, a Stipulation and Order of Dismissal was filed by
Campbell and Bozeman Investors and the District Court entered its order dismissing
with prejudice Campbell's claim against Bozeman Investors.
¶16 After the settlement of Campbell's claim, Hartelius and Morgan were
reimbursed for the full amount of the costs and advances as itemized in their Notice
of Lien, but they did not receive any payment for attorney fees. Instead, Campbell
filed a motion for determination of attorney fees and for the release of the lien. At the
January 13, 1997 hearing on this motion, both Campbell and Hartelius presented
sworn testimony.
¶17 On March 5, 1997, the District Court entered its Findings of Fact and
Conclusions of Law wherein the court determined that Hartelius was entitled to a fee
of $6,600 and that Morgan was entitled to a fee of $2,200. The court entered
judgment in accordance with these findings and conclusions on March 14, 1997.
¶18 Campbell appeals from the District Court's judgment regarding attorney fees
and Hartelius and Morgan cross appeal.
Issue 1.
¶19 Whether the District Court erred in concluding that Hartelius and Morgan are
entitled to attorney fees totaling $8800.
¶20 The District Court concluded that a client's right to discharge an attorney
employed under a contingency fee contract is an implicit term of the contract and the
client's discharge of the attorney, with or without cause, does not constitute a breach
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of that contract. The court further concluded that a client who discharges an
attorney employed under a contingency fee contract for cause has no obligation to
pay a fee to that attorney unless the attorney has substantially performed the services
for which he was retained.
¶21 On that basis, the court determined that Campbell had not breached the
contract by discharging Hartelius and Morgan. Moreover, the court determined that
although Hartelius and Morgan were discharged for cause, they substantially
performed the services for which they were retained prior to their discharge.
Therefore, they were entitled to a fee limited to the reasonable value of their services.
Thus, the court awarded $6600 to Hartelius and $2200 to Morgan.
¶22 The standard of review of a district court's conclusions of law is whether the
court's interpretation of the law is correct. Carbon County v. Union Reserve Coal Co.
Inc. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686. See also Kreger v. Francis (1995),
271 Mont. 444, 447, 898 P.2d 672, 674; Steer, Inc. v. Department of Revenue (1990),
245 Mont. 470, 474-75, 803 P.2d 601, 603-04.
¶23 First, we must determine whether, as Hartelius and Morgan contend, a client's
discharge of his or her attorney is a breach of contract thus entitling the attorney to
contract damages. We hold that it is not and does not.
¶24 In 1916, the New York Court of Appeals held that a contract under which an
attorney is employed by a client has peculiar and distinctive features which
differentiate it from ordinary contracts of employment, thus a client may, at any time
for any reason or without any reason, discharge his or her attorney. Martin v. Camp
(N.Y. 1916), 114 N.E. 46, 47-48, modified 115 N.E. 1044. Thus, the court reasoned
that if the client has the right to terminate the relationship of attorney and client at
any time without cause, the client cannot be compelled to pay damages for exercising
a right which is an implied condition of the contract. Martin, 114 N.E. at 48. The
court held that although the attorney may not recover damages for breach of
contract, the attorney may recover the reasonable value of the services rendered.
Martin, 114 N.E. at 48.
¶25 A majority of jurisdictions have since adopted the "client discharge rule" as set
forth in Martin. (For a list of these jurisdictions, see Lester Brickman, Setting the Fee
when the Client Discharges a Contingent Fee Attorney (Spring 1992), 41 Emory L.J.
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367 n.37.) One such jurisdiction noted:
The attorney-client relationship is one of special trust and confidence. The
client must rely entirely on the good faith efforts of the attorney in
representing his interests. This reliance requires that the client have complete
confidence in the integrity and ability of the attorney and that absolute
fairness and candor characterize all dealings between them. These
considerations dictate that clients be given greater freedom to change legal
representatives than might be tolerated in other employment relationships.
Rosenberg v. Levin (Fla. 1982), 409 So.2d 1016, 1021. Another jurisdiction stated the
following regarding the payment of damages for exercising the right to discharge an
attorney:
To allow an attorney to recover damages for services not actually rendered
prior to termination of the attorney-client relationship would penalize the
client in direct contravention of the client's absolute right to discharge his
attorney. The right to discharge is obviously meaningless if the client is
penalized by having to pay for services that have not been rendered. The
client could conceivably be required to pay duplicate charges consisting of
fees to the discharged attorney for services not rendered, in addition to those
incurred by a newly appointed attorney for the same work.
Olsen and Brown v. City of Englewood (Colo. 1995), 889 P.2d 673, 676-77 (citations
omitted).
¶26 Finding considerable merit in the "client discharge rule" as expressed in Martin,
Rosenberg, and Olsen, we follow those jurisdictions in holding that the discharge of
an attorney by a client is not a breach of contract and does not give rise to contract
damages. Therefore, we affirm the District Court on this issue.
¶27 We next must determine whether Hartelius and Morgan are entitled to a fee and
on what basis that fee, if any, should be determined. The District Court concluded
that Hartelius and Morgan were discharged for cause, however, they substantially
performed the services for which they were retained and are thus entitled to a fee
based on the reasonable value of the services rendered. Campbell alleges error in the
court's determination arguing instead that this Court should formally adopt a rule
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that an attorney discharged for cause is not entitled to any fee. She contends that we
endorsed a similar rule in Bink v. First Bank West (1991), 246 Mont. 414, 804 P.2d
384. However, Campbell's reliance on Bink is misplaced.
¶28 In Bink, we remanded the case to the district court for an evidentiary hearing to
determine whether the client discharged his attorney for cause and to determine the
amount of attorney fees and costs. We did not, as Campbell suggests, endorse any
rule espousing the idea that an attorney discharged for cause is not entitled to a fee
and we decline to adopt such a rule now.
¶29 Instead, we agree with those jurisdictions that hold that regardless of whether an
attorney was discharged with or without cause, that attorney is entitled to a quantum
meruit recovery for the reasonable value of his services rendered to the time of
discharge. Fracasse v. Brent (Cal. 1972), 494 P.2d 9, 14-15. We note one exception to
this general rule, however--situations where the discharge occurs "on the courthouse
steps," just prior to settlement and after much work by the attorney. In those cases
some reviewing courts have, on appropriate facts, found that the entire fee was the
reasonable value of the attorney's services. Fracasse, 494 P.2d at 14. Here, however,
Hartelius and Morgan were not discharged "on the courthouse steps," and,
accordingly, we need not address this exception. Rather, the general quantum meriut
rule applies.
¶30 Moreover, in the case sub judice, because we have determined that the general
rule applies, it is not necessary for us to entertain a discussion of the reasons why
Campbell discharged Hartelius and Morgan or whether those reasons constituted
"cause." Rather, we review whether the District Court was correct in concluding
that the reasonable value of the services rendered by Hartelius and Morgan was
$6600 and $2200, respectively.
¶31 Hartelius testified at the hearing that he does not normally record his time in
contingency fee cases, so he had to reconstruct the time he spent on the case. Thus, he
estimated that he spent at least 100 hours on the case, his paralegal spent an
additional 50 hours on the case and Morgan spent 22 hours on the case. At the
conclusion of the hearing, the parties stipulated that the attorney fees on an hourly
basis for Hartelius and Morgan would be $110.
¶32 Campbell contends that there was no evidence presented at the hearing to
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demonstrate the value of the services Hartelius and Morgan performed, thus the
evidence was insufficient to award them any fee. Moreover, she contends that the fee
should be based on the reasonable value to her of their services. She argues that,
because Hartelius and Morgan did not turn her file over to her after she discharged
them, their services did not benefit her in the settlement of her case and that her case
was settled mainly on the basis of a report from a doctor with whom Hartelius and
Morgan had no involvement.
¶33 "The amount fixed as attorney fees is largely discretionary with the District
Court, and we will not disturb its judgment in the absence of an abuse of that
discretion." Talmage v. Gruss (1983), 202 Mont. 410, 412, 658 P.2d 419, 420 (citing
Carkeek v. Ayer (1980), 188 Mont. 345, 347, 613 P.2d 1013, 1015). Additionally, we
stated in Talmage that the question in determining whether the trial court abused its
discretion, is not whether we agree with the trial court, but rather,
did the trial court in the exercise of its discretion act arbitrarily without the
employment of conscientious judgment or exceed the bounds of reason, in
view of all the circumstances, ignoring recognized principles resulting in
substantial injustice.
Talmage, 202 Mont. at 412, 658 P.2d at 420 (quoting Porter v. Porter (1970), 155 Mont.
451, 457, 473 P.2d 538, 541). Moreover, in First Security Bank of Bozeman v. Tholkes
(1976), 169 Mont. 422, 429-30, 547 P.2d 1328, 1332, we set forth several guidelines for a
trial court to consider in determining the amount to be awarded as reasonable attorney fees:
the amount and character of the services rendered, the labor, time and trouble
involved, the character and importance of the litigation in which the services
were rendered, the amount of money or the value of property to be affected,
the professional skill and experience called for, the character and standing in
their profession of the attorneys. . . . The result secured by the services of the
attorneys may be considered as an important element in determining their
value.
¶34 We hold that, in the case before us, the District Court did not act arbitrarily,
exceed the bounds of reason or ignore recognized principles in determining the
amount of attorney fees to be awarded to Hartelius and Morgan. In its Findings of
Fact Nos. 27 and 28, the District Court set forth ten specific instances in the record
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evidencing work performed by Hartelius and Morgan on Campbell's behalf prior to
their discharge. The court then applied those facts to the guidelines set forth in
Tholkes in determining the amount to be awarded as reasonable attorney fees.
Furthermore, contrary to Campbell's contention, the court did not award attorney
fees based solely on Hartelius' estimate of the number of hours he worked on the case
or for the hours he estimated his paralegal worked on the case. Rather, the court
determined that a reasonable fee for Hartelius was $6600. Based on the hourly fee of
$110 stipulated to by the parties, the court determined that it was reasonable for
Hartelius to have put in 60 hours on Campbell's case.
¶35 Accordingly, we hold that the District Court did not abuse its discretion in
awarding attorney fees to Hartelius in the amount of $6600 and to Morgan in the
amount of $2200.
¶36 Having reached this decision, we are, nonetheless, compelled to address one
further troubling aspect of this issue--the failure of Hartelius and Morgan, after their
discharge by Campbell, to turn Campbell's file over to either Campbell or Pohl.
¶37 In 1988, the Ethics Committee of the State Bar of Montana issued an opinion
asserting that client files belong to the client and that if representation is ongoing and
the lawyer is discharged, that lawyer must still protect the client's interests and
surrender papers and property to successor counsel. Ethics Committee of the State
Bar of Montana, Formal Op. 880218 (1988). While ethics opinions are advisory only
and are not authoritative pronouncements of the law, this opinion is significant. In
making its determination, the Ethics Committee relied on Rule 1.16(d) of the
Montana Rules of Professional Conduct which provides, in pertinent part:
Upon termination of representation, a lawyer shall take steps to the extent
reasonably practicable to protect a client's interests, such as . . . surrendering
papers and property to which the client is entitled . . . .
¶38 Campbell argues that she was prejudiced by the failure of Hartelius and Morgan
to turn her file over to her because she was without the benefit of the information in
the file during settlement negotiations. Hartelius and Morgan contend that Campbell
was not prejudiced by their refusal to turn over her file and that their refusal to do
so was justified by their possessory lien. We see no justification for failing to return
to a client at the time of discharge, papers or property that rightfully belong to the
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client. Campbell's claim was still ongoing and by retaining her file, Hartelius and
Morgan failed to protect her interests.
Issue 2.
¶39 Whether this Court may consider the medical report of Dr. Peter Wendt.
¶40 Several months after Campbell discharged Hartelius and Morgan, Campbell was
examined, at the request of Bozeman Investors' attorney, by Dr. Peter Wendt, an
orthopedic surgeon practicing in Anaconda. In his report, Dr. Wendt rendered
several opinions that were favorable to Campbell and to the issues in her case.
Shortly after Dr. Wendt issued his report, a settlement conference was held at the
conclusion of which Campbell's personal injury case was settled.
¶41 Hartelius and Morgan contend that Dr. Wendt's report should not be considered
as part of the record on appeal as it was submitted after the hearing and is irrelevant
to the issues of termination of services or the amount of the fee earned. However, as
Campbell points out, since she did not have a copy of the report at the hearing, the
parties stipulated that the report would be admitted as Plaintiff's Exhibit No. 4 after
the conclusion of the hearing. Hartelius and Morgan did not object to the admission
of the report, thus they cannot now predicate error on its admission.
¶42 This Court has long held that a party may not raise for the first time on appeal
alleged errors pertaining to the introduction of evidence or testimony that was not
objected to at the time of trial. Flanigan v. Prudential Federal Sav. & Loan (1986),
221 Mont. 419, 430, 720 P.2d 257, 264.
Issue 3.
¶43 Whether the District Court erred in failing to require that Campbell reveal the
amount she received as settlement of her claim.
¶44 Hartelius and Morgan contend that the District Court should have required
Campbell to reveal the amount of the settlement. They argue that the court cannot
effectively determine the amount of attorney fees owed until the settlement amount is
known. We disagree. The amount of the settlement would only be necessary if the
attorney fees were to be based on a percentage of that figure. Since we have already
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determined that Hartelius and Morgan are entitled only to the value of the services
rendered, the amount of the settlement is immaterial.
¶45 Accordingly, we affirm the District Court's denial of Hartelius and Morgan's
request to force Campbell to disclose the settlement amount.
¶46 Affirmed.
/S/ JAMES C. NELSON
We Concur:
/S/ J. A. TURNAGE
/S/ KARLA M. GRAY
/S/ WILLIAM E. HUNT, SR.
/S/ W. WILLIAM LEAPHART
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