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Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C. v. DuBois

Alabama Court of Civil Appeals

July 14, 2017

Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C.
Jason DuBois

         Appeal from Etowah Circuit Court (CV-12-900349)

          THOMAS, JUDGE.

         Pope, McGlamry, Kilpatrick, Morrison & Norwood, P.C. ("the firm"), appeals a judgment of the Etowah Circuit Court ("the trial court") denying its request for an award of attorney fees for its representation of Jason DuBois. We affirm.


         In August 2011, DuBois was working on a railroad crew that was traveling from Virginia to Maryland and was forced to jump from a runaway rail vehicle that was traveling more than 60 miles per hour. His injuries were severe and included skull, neck, and back fractures and swelling and bruising of his brain; he was hospitalized for several months and required ongoing treatment and rehabilitation. This appeal involves a dispute regarding whether the firm should receive attorney fees stemming from litigation regarding DuBois's injuries.

         After the severity and longevity of DuBois's injuries became clear, his uncle and holder of his power of attorney, Steve DuBois ("Steve"), contacted an attorney, Walter Gray, on DuBois's behalf about pursuing litigation to seek compensation for DuBois's injuries. Steve contacted Gray because Gray had represented him in the past and because they had been friends for many years. Gray referred Steve to David Rayfield, who was a partner in Pope, McGlamry, Kilpatrick, Morrison & Norwood, LLP ("the partnership"), an entity that had been created in Georgia before the formation of the firm. Rayfield advised Steve that, due to the nature and complexity of a potential suit seeking damages for DuBois's injuries, obtaining the services of an attorney with more relevant experience would be prudent. Rayfield thereafter introduced Steve to another partner in the partnership, George Walker III, who was from Etowah County and was experienced with the court system there.

         Steve met with Walker several times and independently researched his professional accomplishments and reputation. After concluding that Walker was a skilled and experienced trial attorney, Steve entered into an agreement ("the fee contract") with the partnership and Gray's law firm, Gray Legal Firm, P.C., which were referred to collectively in the fee contract as "LAW FIRMS, " on behalf of DuBois to secure the representation of Rayfield and Walker for litigation related to his injuries. In relevant part, the fee contract provided:

"CLIENT is employing LAW FIRMS, and/or any other attorney or law firm hired by or associated with same, to investigate the potential of recovery through workers' compensation and against third parties who are or which may be legally responsible, in whole or in part, for damages sustained by CLIENT arising from an August 27, 2011 accident in Maryland ... and to prosecute those claims if merited.
"LAW FIRMS will receive as their attorneys' fees fifteen percent (15%) of any compensation recovered through workers' compensation, or such other amount as set by the trial court in an amount not to exceed fifteen percent (15%) of the compensation recovered. LAW FIRMS will also receive as their attorneys' fees forty (40%) of any recoveries obtained on behalf of CLIENT by LAW FIRMS from third parties outside of workers' compensation, whether by settlement or trial.
"Said attorneys agree to charge nothing for their services if nothing is received or recovered. In the event of any recoveries by settlement and/or judgment of claims arising as a result of the above, the [partnership's] out-of-pocket expenses will be deducted from the gross recovery, and attorneys' fees shall be based on net recovery after deduction of expenses ....
"LAW FIRMS may, at any time upon reasonable notice, refuse to continue in this personal services contract, but if this termination is at no fault of CLIENT, LAW FIRMS forfeit their right, if any, to any fee for services rendered.
"If CLIENT discharges LAW FIRMS, LAW FIRMS will be owed a fair value for services rendered up to the termination of the agreement."

         Among the attorneys involved, it was also agreed that Gray Legal Firm, P.C., would ultimately receive all the attorney fees stemming from any workers' compensation claim, namely 15% of that recovery amount, in addition to 20% of the attorney fees stemming from any other claims. With the exception of Walker, Rayfield, and an associate who was employed by the partnership, Shaun O'Hara, Steve had little to no contact with any of the partnership's attorneys regarding its representation of DuBois.

         In November 2011, the firm was formed in Georgia. There was no written assignment of the partnership's assets or liabilities to the firm. It appears, however, that all the partners in the partnership became shareholders in the firm and that the firm took over the responsibility of handling the partnership's cases.

         In June 2012, DuBois filed a complaint in the trial court against several defendants that included a workers' compensation claim and several tort claims. On DuBois's complaint, Walker and Rayfield were listed as DuBois's counsel on behalf of the firm, and the partnership was not referenced on the complaint. Gray was listed as DuBois's counsel on behalf of Gray Legal Firm, P.C. Over the next few years, the case proceeded through the initial phases of discovery. The record indicates that, from the outset, Steve had understood that DuBois's case would progress slowly because DuBois had not yet reached maximum medical improvement. See Equity Grp.-Alabama Div. v. Harris, 55 So.3d 299, 303 (Ala. Civ. App. 2010)("In order to recover permanent-disability benefits [under a workers' compensation claim], an employee must have reached maximum medical improvement.").

         In February 2015, Walker withdrew as a shareholder in the firm after having been diagnosed with a serious form of cancer. Whether he voluntarily left is disputed, but, in June 2015, Walker's employment with the firm terminated. As a result of the firm's increased focus on mass-tort litigation, Rayfield also left the firm in July 2015 to seek work in other types of litigation. That same month, Steve sent a letter to the firm, which read, in relevant part:

"Pope McGlamry:
"It is my understanding that David Rayfield will be leaving your firm on July 17, 2015. Although I have been advised that I have the option to continue with Pope McGlamry as counsel in the above-styled matter, I have decided that I want Mr. Rayfield to remain [DuBois]'s lawyer instead.
"Accordingly, accept this letter as notice of termination of Pope, McGlamry, Kilpatrick, Morrison & Norwood, PC as counsel in the above-styled case. I ask that you please provide me with [DuBois]'s file on this case by July 17, 2015, or alternatively, you may provide the file to Mr. Rayfield upon his departure from the firm.
"Thank you for your assistance."

         In August 2015, the firm filed a motion to intervene in DuBois's action pursuant to Rule 24(a), Ala. R. Civ. P., and included a verified complaint seeking an attorney-fee lien under § 34-3-61, Ala. Code 1975, based on the terms of the fee contract and the theory of quantum meruit. Additionally, the firm sought an award of $80, 388.45 as reimbursement for expenses that it had allegedly incurred during its representation of DuBois. The trial court granted the firm's motion to intervene the next day. In August 2016, the trial court conducted a hearing regarding the firm's claim at which it heard arguments of counsel, DuBois and the firm stipulated to certain facts, and certain documentary evidence was admitted; the trial court did not, however, receive ore tenus testimony at that hearing.

         In September 2016, the trial court entered orders indicating that DuBois had settled the claims set forth in his complaint. DuBois's tort claims were dismissed with prejudice pursuant to the terms of a confidential settlement agreement after the tort defendants paid into court certain sums required by the agreement. The joint stipulation of dismissal regarding those claims was signed by Walker and Rayfield as DuBois's attorneys. In a separate order, the trial court incorporated by reference a settlement agreement reached between DuBois and the workers' compensation defendant and, pursuant to the terms of that agreement, ordered the trial-court clerk to pay from DuBois's settlement funds received from the tort defendants $150, 000 to the workers' compensation defendant "as full and complete satisfaction of [its] liens and/or subrogation claims/interests." That settlement agreement is signed by Walker as DuBois's attorney. Following entry of the trial court's September 2016 orders, the only claim still pending was the firm's claim against DuBois for attorney fees and reimbursement of expenses.

         The trial court conducted a trial regarding the firm's claim on October 18, 2016, at which it received ore tenus testimony from Rayfield; Steve; a shareholder of the firm and founding partner of the partnership, Paul Kilpatrick; and a local attorney, George Ford. On November 2, 2016, the trial court entered a judgment that included lengthy factual findings and determined that the firm could not enforce the fee contract because of its own breach, that the firm was not a real party in interest, that the firm lacked capacity to maintain its claim under § 10A-1-7.21, Ala. Code 1975, and that the firm had failed to meet its burden of proving that it was entitled to an award of attorney fees. Accordingly, the trial court's judgment awarded the firm no attorney fees and no reimbursement for expenses.

         The record indicates that the firm is seeking as attorney fees an award of a portion of DuBois's confidential settlement proceeds from the tort defendants that were deposited with the trial-court clerk; the amount of those funds still on deposit appears to be a six-figure sum. The firm timely filed a notice of appeal of the trial court's judgment to the Alabama Supreme Court on November 30, 2016. On December 21, 2016, the supreme court issued an order transferring the appeal to this court and indicating that it was within our subject-matter jurisdiction pursuant to § 12-3-10, Ala. Code 1975, presumably after concluding that it was an appeal in a workers' compensation case. The parties thereafter provided this court with appellate briefs, and the appeal was submitted for our consideration on April 25, 2017.

         Because, upon initial review, it appeared that this appeal involves an attorney-fee dispute that does not require examination of the workers' compensation statutory framework and because the amount involved appeared to far exceed the $50, 000 limitation imposed upon this court's subject-matter jurisdiction by § 12-3-10, we sought confirmation from the supreme court that this court has subject-matter jurisdiction over this appeal. On May 1, 2017, the supreme court issued an order rescinding its December 21, 2016, order and instead transferring the appeal to this court pursuant to § 12-2-7(6), Ala. Code 1975. This court therefore has subject-matter jurisdiction.


         On appeal, the firm argues that each legal conclusion set forth in the trial court's judgment is erroneous. Whether the firm is a real party in interest and whether the firm has capacity to maintain its claim under § 10A-1-7.21, Ala. Code 1975, are issues that do not implicate subject-matter jurisdiction; therefore, for purposes of the following analysis, we assume without deciding that the firm could properly seek enforcement of the terms of the fee contract in the trial court. See Ex parte Scottsdale Ins. Co., 180 So.3d 1, 1 (Ala. 2015)(Murdock, J., concurring specially)("[A] claim may fail for lack of support in the law or in the facts, including, in the case of a claim of breach of contract, a lack of proof of the existence of a contract between the plaintiff and the defendant. Such a failure, however, is a failure on the merits, not a failure of standing .... And the prospect of failure of a claim on such grounds certainly does not deprive the trial court of ... subject-matter jurisdiction."), and Wausau Dev. Corp. v. Natural Gas & Oil, Inc., 144 So.3d 309, 312 (Ala. 2013)(quoting Penick v. Most Worshipful Prince Hall Grand Lodge F & A M of Alabama, Inc., 46 So.3d 416, 425 (Ala. 2010))("'A foreign corporation's failure to obtain authorization to do business in Alabama is a capacity defense and does not per se implicate standing and subject-matter jurisdiction.'").

         Whether based on the terms of the fee contract or the theory of quantum meruit, the firm seeks an award of a reasonable fee, or the fair value of its services, and reimbursement of its expenses for its representation of DuBois under § 34-3-61, Ala. Code 1975. See Harlow v. Sloss Indus. Corp., 813 So.2d 879, 887 (Ala. Civ. App. 2001)("Pursuant to § 34-3-61, Ala. Code 1975, and its predecessors, an attorney may establish his [or her] right to an attorney-fee lien either through contract or on the theory of quantum meruit."). We first therefore consider the general propriety of the firm's request.

         In Goldberg & Associates, P.C. v. Donohoe, 777 So.2d 144, 146 (Ala. Civ. App. 2000), this court considered a factually similar case in which a plaintiff hired a law firm to represent him in a workers' compensation action. Id. at 144. The plaintiff thereafter terminated the law firm's representation, and the lawyer working on the plaintiff's case left the law firm and filed a notice of appearance in the workers' compensation action. Id. After a settlement was reached, the law firm intervened in the workers' compensation action seeking a "quantum meruit lien on the attorney fee awarded in that action." Id. at 145. The trial court entered a judgment denying the law firm's request for an award of attorney fees, and the law firm appealed the trial court's judgment to this court. Id.

         On appeal, we reversed the trial court's judgment and concluded that "the law is clear that an attorney may obtain a lien for the reasonable value of services rendered, on the theory of quantum meruit. ... [T]he trial court erred in failing to award some portion of the attorney fee in [the] workers' compensation action to [the plaintiff's] former attorneys, [the law firm]." Id. at 146. However, Goldberg is distinguishable from this case in at least one important respect.

         As we noted in Goldberg, the trial court's judgment in that case was entered without receiving ore tenus evidence, and we therefore afforded the judgment no presumption of correctness. Id. at 145. In this case, however, the trial court conducted a trial at which it received ore tenus testimony, and, as noted above and quoted in part below, its lengthy judgment contains specific findings and determinations regarding its evaluation of the witnesses' testimony and credibility.

"'"The ore tenus rule is grounded upon the principle that when the trial court hears oral testimony it has an opportunity to evaluate the demeanor and credibility of witnesses." Hall v. Mazzone, 486 So.2d 408, 410 (Ala. 1986). The rule applies to "disputed issues of fact, " whether the dispute is based entirely upon oral testimony or upon a combination of oral testimony and documentary evidence. Born v. Clark, 662 So.2d 669, 672 (Ala. 1995). The ore tenus standard of review provides:
"'"[W]here the evidence has been [presented] ore tenus, a presumption of correctness attends the trial court's conclusion on issues of fact, and this Court will not disturb the trial court's conclusion unless it is clearly erroneous and against the great weight of the evidence, but will affirm the judgment if, under any reasonable aspect, it is supported by credible evidence."'
"Reed v. Board of Trs. for Alabama State Univ., 778 So.2d 791, 795 (Ala. 2000)(quoting Raidt v. Crane, 342 So.2d 358, 360 (Ala. 1977))."

Yeager v. Lucy, 998 So.2d 460, 463 (Ala. 2008).

         In support of its claim, the firm first presented the testimony of Kilpatrick, who testified that he had practiced law for more than 51 years. Kilpatrick agreed that the only attorneys who had worked directly on DuBois's case during the firm's employment were Walker, Rayfield, and O'Hara, and he described the work done during that time as "extensive." Kilpatrick also testified that, during that time, the firm was compensating Walker, Rayfield, and O'Hara and had been incurring costs for overhead expenses.

         Regarding the amount of time spent working on DuBois's case, Kilpatrick testified that the firm did not keep hourly records because its fees were generally earned on a contingency basis. He also stated, however: "We have calendar entries. We have pleadings. We have discovery. We have depositions. So we can pretty much approximate any amount of work that's gone on." Thus, the primary documentary evidence offered by the firm consisted of contemporaneous logs ("the logs") that had been created by Rayfield's assistant at the firm and appear to document each item of correspondence, discovery, and pleading related to DuBois's case during the firm's employment. However, the logs do not indicate the amount of time required to complete each task or, for the entries related to discovery and pleadings, which of the firm's three attorneys performed which aspects of those tasks or whether any portions of those tasks were performed by assistants who were not attorneys.

         In addition to the logs, the firm also offered as evidence a written estimate prepared by Kilpatrick of what he testified was a reasonable number of hours that would be required to complete the tasks specified in the logs. Although portions of Kilpatrick's testimony indicate that he did not read every item of correspondence, discovery, or pleading referenced on the logs, other portions of his testimony indicate that he might have reviewed at least some of those documents in addition to the logs. Kilpatrick's estimate indicates that he assigned 30 minutes to each of 201 items of correspondence, or approximately 100 hours total; 5 hours to each of 68 items of plaintiff's discovery, or approximately 340 hours total; 3.5 hours to each of 143 items of defendant's discovery, or approximately 500.5 hours total; 30 hours for each of 9 depositions, which included time for travel and preparation, or approximately 270 hours total; 8 hours for each of 38 items of pleading, or approximately 304 hours total; 20 hours for each of 4 meetings with expert witnesses, or approximately 80 hours total; 50 hours for each of the firm's ...

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