Referral fee hell

FLORIDA LAW WEEKLY

VOLUME 44, NUMBER 6

CASES FROM THE WEEK OF FEBRUARY 8, 2019

ATTORNEY NOT ENTITLED TO PARTICIPATE IN AN ATTORNEY’S FEE PURSUANT TO A FEE AGREEMENT EMAILED BY THE CLIENT’S ATTORNEY, WHERE NEITHER PARTY ENTERED INTO A WRITTEN CONTRACT IN VIOLATION OF RULE 4-1.5 OF THE BAR RULES--SETTLEMENT STATEMENT SIGNED BY CLIENT UPON RECEIVING DISTRIBUTION FROM CLIENT’S ATTORNEY DID NOT CURE THE EARLIER FAILURE TO COMPLY WITH THE ETHICAL RULES, LEAVING THE PARTIES TO RECOVER ONLY ON THE BASIS OF QUANTUM MERUIT.

Katz v. Frank, Weinberg & Black, 44 Fla. L. Weekly D332 (Fla. 4th DCA January 30, 2019):

While the case was actually dismissed by the parties, the Fourth District decided to opine on it (still having appellate jurisdiction because it invoked an issue of great public importance). The Fourth noted that the failure to follow the Bar rules mandated by the supreme court for participation referral fees, typically “occurs in the shadows and rarely emerges in the light of day.”

An attorney was employed as an associate at a law firm and was contacted by a friend of his wife to represent her in a qui tam whistleblower action. The managing partner in the firm told the associate that the firm could not take the case because it lacked experience in the area, and advised the associate to refer the case to an attorney with whom the firm shared space.

The associate and the client met with the attorney to whom the case was going to be referred. The client entered into a retainer agreement with that attorney, but the agreement made no reference to the associate or his firm. Neither the associate nor his firm ever signed a retainer agreement with the plaintiff. Still, the attorney handling the case emailed the associate and stated that his participation fee would be 25%.

The associate was later terminated from his firm, and purportedly reached an oral agreement with his firm that he could take clients he originated that were not homeowner or condominium association clients. The law firm had a very different view of the separation. The associate ultimately opened his own firm.

When the case settled, the attorney contacted the associate to arrange for payment of the participation/referral fee. The attorney who handled the case asked the associate to provide an invoice from his own P.A. for the $500,000 participation/referral fee, and also asked the associate to obtain a release from the law firm, confirming that it waived any interest in the participation fee.

Needless to say, the law firm refused. The Fourth District admonished that on appeal, the associate and his law firm were arguing contract and agency law, “sprinkling in some procedural points as if it were a garden variety commercial dispute.” The court admonished that this was not such a basic dispute. The court ruled that the contract the parties were seeking to enforce was void because it violated the rules of the Bar.

At oral argument, both parties advised the court not to concern itself with the legality of the underlying fee contract because neither party to the appeal raised it. The court said that just as parties cannot by stipulation confer subject matter jurisdiction on a court, parties cannot agree to challenge the validity of a void contract violative of public policy, and magically elevate it into a contract that the court will enforce. When a contract is void as against public policy there is no alleged “right” founded upon the contract or agreement, that can be enforced in a court of justice.

Bar rule 4-1.5(f)(2) sets forth the requirements for every lawyer who seeks to share in a contingent fee. The rule requires the consent of the client in writing. That never happened in this case. Further, the email noting the 25% contingent participation fee agreement was not valid, and the agreement was void.

Finally, the fact that the plaintiff ultimately signed the closing statement upon receiving the distribution, did not cure the earlier failure to comply with the ethical rules. The rules contemplate that a client’s consent be secured at the outset of the case, not when a case is 99.9% over, the court said.

The court did say that there could be a claim for quantum meruit, but noted that such a claim would be small. It also noted that none of the attorneys involved in the case--the attorney who handled the case, the associate, or the original law firm--were “without sin.” The court left the question of who is entitled to the $500,000 referral fee up in the air.

TRIAL COURT DEPARTED FROM ESSENTIAL REQUIREMENTS OF LAW BY AUTHORIZING AMENDMENT TO ADD PUNITIVE DAMAGES: TRIAL COURT FAILED TO MAKE FINDINGS IDENTIFYING EVIDENCE IT CONSIDERED SUFFICIENT TO PROVIDE A STATUTORY “REASONABLE BASIS” FOR GRANTING MOTION TO AMEND, AND FAILED TO CONSIDER OR ADDRESS AN ISSUE OF LEGAL INSUFFICIENCY RAISED BY DEFENDANTS.

Cat Cay Yacht Club v. Diaz, 44 Fla. L. Weekly D324 (Fla. 3rd DCA January 30, 2019):

In yet another decision which seems to reflect a bit of a pendulum swing in the way appellate courts review motions to amend to add claims for punitive damages, the appellate court granted defendant’s petition for certiorari which was directed at the trial court’s ruling to allow the plaintiff to amend his complaint.

The plaintiff many years before had joined the Cat Cay Yacht Club, purchasing an ocean front home, vacant lots, and a dock at the marina. He later built several ocean front homes and villas on the island.

The plaintiff’s fifth amended complaint alleged that he had contributed funds and services to the club over a course of many years, including charitable fundraising to restore island facilities after Hurricane Andrew and other storms. He also served as the president of the club for several years.

Following the election of one of the defendants as president in 2009, plaintiff alleged that disputes arose which percolated into a scheme to justify the firing of the club’s then manager and ultimately resulted in the plaintiff’s own expulsion from the club.

As the basis for his amendment for punitive damages, the plaintiff asserted that the club and the director defendants had acted in bad faith or with malicious purpose exhibiting a willful disregard of his property rights.

During the hearing on the proposed amendment, the trial court stated that the club and the director defendants had not challenged the evidence. The court then entered the order making no written findings, or identifying any evidence considered to constitute a “reasonable basis” for the recovery of punitive damages. The order was entered without elaboration and without any differentiation among the club and any of the 14 director defendants.

During the hearing, plaintiff characterized the expulsion as a “witch hunt,” and the trial court asked several questions, but made no findings identifying the evidence it considered sufficient to provide a statutory reasonable basis.

The court referenced a decision it rendered last fall (Levin v. Pritchard) where the court had denied certiorari to quash an order allowing punitive damages. As the court reminded us, the plaintiff’s motion to amend in that case contained a detailed table outlining record evidence and sworn declarations that provided the basis for the claim. The trial court conducted two hearings and requested supplemental memoranda as to the evidentiary basis. Defendants presented arguments in a written opposition. The court in granting the motion found based on the plaintiff’s motion, the supplemental memoranda and the arguments presented during the two hearings that plaintiff had made the requisite showing in the record by proffering evidence that would support a reasonable basis for recovery of punitive damages.

The trial court in this case also did not consider, or address in its order, the legal insufficiency issues raised by the club and the director defendants. Florida law generally defers to the rights of social organizations to regulate their own membership. There was also an argument regarding a one year statute of limitations under the Florida Not for Profit Act.

Because the trial court did not employ the proper procedure in this case to articulate a reasonable basis for punis, and because the prospect of intrusive financial discovery following authorization for an amendment for a claim for punitive damages is a remediable injury constituting the need for the appellate court’s jurisdiction, the court granted the petition.

NO CERTIORARI FOR DEFENDANT REQUIRED TO PRODUCE A SURVEILLANCE VIDEO OF THE INCIDENT TAKEN BEFORE THE PLAINTIFF’S DEPOSITION.

Business Telecommunication Services v. Madrigal, 44 Fla. L. Weekly D326 (Fla. 3rd DCA January 30, 2019):

The surveillance in this case was evidence of what occurred on the day of the accident--not post-injury surveillance. Under those circumstances, where the videotape is “surveillance” taken of the claimant well after an alleged injury to impeach the claimant’s testimony--it is discoverable.

Simply put, “date of accident” videotape is distinguishable from “post-accident surveillance videos” of a plaintiff’s activities. As such, the scenario is distinguishable from Dodsen v. Persell, and the defendant failed to satisfy its obligations for certiorari review (i.e., departure from essential requirements of law resulting in material injury not correctible on final appeal).

EVIDENCE REGARDING REASONABLENESS OF EXPERT’S FEE CAN COME FROM INDIVIDUAL EXPERTS WHOSE CHARGES ARE AT ISSUE, OR ANOTHER QUALIFIED EXPERT IN THE FIELD.

Belniak v. McWilliams, 44 Fla. L. Weekly D341 (Fla. 5th DCA February 1, 2019):

A prevailing party’s burden at an evidentiary cost hearing to recover an expert witness fee is to present substantial competent evidence of the services performed and the reasonable value of those services. That evidence can come from the individual expert whose charges are at issue, or another qualified expert in the same field.

ABUSE OF DISCRETION IN DENYING AN EXTENSION OF TIME WITHIN WHICH TO EFFECT SERVICE (AND IN DISMISSING ACTION) PARTICULARLY WHERE THE STATUTE OF LIMITATIONS HAD RUN AND PLAINTIFF HAD ESTABLISHED GOOD CAUSE FOR FAILURE TO SERVE WITHIN THE TIME ALLOWED BY RULE 1.070(j).

CapitalSource International v. Pitsoulakis, 44 Fla. L. Weekly D341 (Fla. 5th DCA February 1, 2019):

When the court dismisses an action when the statute of limitations has run, thereby precluded refiling of the complaint, the court should exercise its discretion in favor of extending the service deadline (especially here, where the plaintiff established good cause for the failure to serve within the time allowed).