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Arnold v. Janssen Pharmaceutical

April 26, 2006

ASHLEY ARNOLD, PLAINTIFF,
v.
JANSSEN PHARMACEUTICA, INC. AND JOHNSON & JOHNSON, INC., DEFENDANTS.



The opinion of the court was delivered by: Morton Denlow United States Magistrate Judge

Magistrate Judge Morton Denlow

MEMORANDUM OPINION AND ORDER

This case raises the important question of what duties are imposed upon an attorney to discuss and resolve the obligation by a client to a former attorney under a contingent fee agreement when the new attorney is aware of the prior attorney and enters into a new contingent fee agreement with the client. This case comes before the Court to resolve a $13,500 claim brought by the law firm of Hubbard & O'Connor Ltd. ("Hubbard law firm") against its former client Ashley Arnold Vaccaro ("Arnold"or "Plaintiff"). The Hubbard law firm claims Plaintiff owes it $13,500 arising out of a settlement agreement entered into between Plaintiff and Janssen Pharmaceutica, Inc. and Johnson & Johnson, Inc. (collectively "Defendants") in the underlying lawsuit. The Court conducted an evidentiary hearing on February 22, 2006. The Court has carefully considered the testimony of the four witnesses*fn1 who testified at the hearing, the exhibits received in evidence, the written submissions of the parties, and the arguments of counsel.

The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent certain findings of fact may be deemed conclusions of law, they shall also be considered conclusions. Similarly, to the extent matters contained in the conclusions of law may be deemed findings of fact, they shall also be considered findings.

I. BACKGROUND FACTS

A. FILING OF SUIT AND SUBSTITUTIONS OF COUNSEL.

On October 23, 2001, the Best, Vanderlaan & Harrington law firm ("Best law firm") filed suit on behalf of Plaintiff against Defendants alleging violations of the Americans with Disabilities Act. 42 U.S.C. § 12101 et. seq. Dkt. 1*fn2 . On September 5, 2002, the Best law firm was granted leave to withdraw from the case pursuant to a motion to substitute counsel. Dkt. 42-43. On or about October 22, 2002, the Best law firm served a notice of attorney's lien. See Dkt. 178, Ex. B.

On September 5, 2002, the law firm of Keith L. Hunt & Associates ("Hunt firm"), entered its appearance for Plaintiff and later withdrew its appearance on February 14, 2003. Dkt. 43-4, 55-6. The Best law firm and the Hunt firm entered into contingent fee agreements with Plaintiff that allocated each of them one-third of any settlement. T. 69.*fn3

On March 27, 2003 Plaintiff met with O'Connor to discuss whether the Hubbard law firm would undertake her case. T. 7. During their discussions, O'Connor described a contingent fee arrangement of 33-1/3% of the gross value of any settlement or 40% of the gross value of a judgment or verdict. Id. In addition, Plaintiff would pay a $3,500 fee retainer to be credited against attorney's fees or costs, and she would be required to pay outof-pocket costs. Id. At no time during these discussions did O'Connor agree with Plaintiff that she would remain responsible for any attorney's fees claimed by the Best law firm or the Hunt firm. T. 36. Plaintiff testified that when she asked O'Connor about the prior attorneys, O'Connor explained that in the event of a dispute, a judge would divide the 33-1/3% contingent fee among the attorneys. T. 70-1. O'Connor denies discussing the topic of the prior counsel's fees before entering into the written Fee Agreement. T. 110. O'Connor was aware that she had signed fee agreements with two other firms. T. 114.

On April 7, 2003, O'Connor sent Plaintiff two copies of a draft attorney-client agreement ("Fee Agreement"). T. 8, Hubbard Ex. A.*fn4 The cover letter does not mention who would be responsible for the fees of prior counsel. Plaintiff signed and returned the Fee Agreement to the Hubbard law firm on April 22, 2003. Ex. A. The Fee Agreement also fails to mention who would be responsible for fees claimed by the Best law firm. T. 36. The Hubbard law firm never bargained with Plaintiff regarding the issue of prior counsel's fees until the settlement. Id. The only reference to other counsel is contained in paragraph 2 under Additional Matters, which states:

Co-Counsel:

The client authorize [sic] Attorney to obtain the services of any of-counsel or co-counsel as the situation may arise, provided Attorney provides client with notice. Utilization of co-counsel shall not require any payments from client for legal fees to co-counsel.

Hubbard Ex. A, p. 3.

On April 25, 2003, the Hubbard law firm entered its appearance on behalf of Plaintiff and continued to represent Plaintiff through the settlement of the underlying litigation. Dkt.

59. The Hubbard law firm withdrew its appearance once this fee dispute arose with Plaintiff. On February 15, 2006, George Collins entered his appearance on behalf of Plaintiff. Dkt. 202.

B. SETTLEMENT OF SUIT AND BEST LAW FIRM'S ATTORNEY LIEN.

The Best law firm's lien impeded settlement because Defendants insisted that it be resolved as a condition of any settlement. T. 12. The Hubbard law firm believed the lien was defective. Id. Plaintiff did not want to pay the Best law firm any money. Id. The Hubbard law firm explained to Plaintiff that even if the lien was defective, the Best law firm could still sue her on a quantum meruit theory in state court. T. 13. The Hubbard law firm discussed the possibility of setting up a reserve from Plaintiff's portion of the settlement to resolve the lien. T. 14.

On or about August 12, 2005, the litigation was settled in principle between Plaintiff and Defendants. T. 15. On August 25, 2005, Plaintiff presented a motion to adjudicate the Best law firm's lien. Dkt. 178. The Best law firm was seeking $150,000 in fees and threatening to file a quantum meruit action in state court. T. 16.

Judge Mark Filip conducted a settlement conference and resolved the attorney lien issue. A term sheet ("Term Sheet") was completed. Best law firm motion to enforce, Ex.

A. Dkt. 190 (Exhibits filed in camera). The Term Sheet was executed by Hubbard on behalf of Plaintiff and the Hubbard law firm, by James F. Best on behalf of the Best law firm, and by counsel for Defendants. Id. The Term Sheet provided, in relevant part, as follows:

1. Payment of $32,000 (Thirty-Two Thousand Dollars) to Plaintiff's Former counsel, Best, Vanderlaan & Harrington (BV & H).

5. The $32,000 will be paid $5,000 by Defendant, and $27,000 in two equal parts by Plaintiff and her current counsel.

A Settlement Agreement and Release of all claims ("Settlement Agreement") was executed by Plaintiff, the Hubbard law firm and Defendants in October, 2005. Id., Ex. B. The Settlement ...


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