Opinion
CIVIL ACTION 02-1154, SECTION "K" (4).
July 25, 2003.
On January 21, 2003, the movant, Milling Benson Woodward, L.L.P. ("Milling"), through James K. Irvin, filed a Motion for Leave to Intervene (doc. #15) claiming that it is entitled to the proceeds of any settlement or judgment in this matter in preference to other creditors. The plaintiff, State Farm Fire and Casualty Company opposes the motion contending that Milling has no right to the subject of intervention.
I. Background
The plaintiffs filed this civil products liability action on March 18, 2002, in the 24th Judicial District Court for the Parish of Jefferson, State of Louisiana. The defendant removed the matter to this Court on April 17, 2002.
State Farm contends that Jill Patent placed a waffle in a Black Decker Toaster, Model No. T245, pushed the lever down to toast the waffle and moments later the toaster, as well as the cabinets behind the toaster were engulfed in flames. The Patents attempted to put out the fire with a fire extinguisher, however, their attempts were unsuccessful. The Patents then exited the house and the fire spread throughout the home. State Farm alleges that the Patent's home was destroyed and had to be completely renovated. State Farm paid the Patents $314,739.00 for the damages sustained. State Farm thereafter filed the instant suit as subrogee to the Patents alleging that the Black Decker Toaster, Model No. T245 caused the fire and was unreasonably dangerous in design, manufacture and warning.
State Farm is represented in this matter by Elton A. Foster. On July 31, 2001, prior to the filing of the instant suit, Foster entered into a Contract of Employment with the law firm of Milling Benson Woodward, L.L.P. ("Milling Benson"). According to the contract, Foster was to serve as Special Counsel to Milling Benson for a period of one year. As Special Counsel, Foster's professional law corporation ("PLC") was to receive payments, but have no participation in the net income or ownership of Milling Benson. Prior to joining Milling Benson, Foster had several clients, including State Farm, who he represented under a contingency agreement.
Rec. Doc. No. 17. Memo in Opp. to Motion for Leave to Intervene, Exhibit A.
In the contract, it was agreed that Milling Benson would provide Foster's PLC a distribution of S90,000, payable in monthly installments of $7,500. Also, it was agreed that if Foster's collections surpassed the firms "Collection Target" of $214,000 without hiring additional help, he would be provided an additional bonus. Further, the contract provided that as Special Counsel, Foster's PLC had no vote in any of the business of Milling Benson, could not participate in the profits and could not guarantee any debt.
As the expiration of the initial one year term neared, Foster prepared a "state of the union" memorandum to Milling Benson concerning the status of his files. In the memo, which was written on July 29, 2002, Foster indicated that because the majority of his files were from State Farm and taken on contingency, some were currently ripe for collection, while others would not be ripe for collection until some time in the future. Foster also noted that State Farm was not his only client.
Id. at Exhibit B.
According to Foster, no response was received from Milling Benson regarding the contract until September 2002. However, Milling Benson continued to pay the $7,500 monthly installments and Foster continued to work, although no formal agreement was in place.
On October 14, 2002, Foster prepared a proposal in which he asserted that the total value of the files listed in his July 29, 2002 memorandum was $373,750. He also submitted a memorandum in which he detailed, on a file by file basis, his expected recoveries. He stated that the $373,750 did not account for any new files but was based solely on his current workload. Foster further indicated that it was reasonable to expect that State Farm would continue to send him files, as would his other clients. Foster also stated that he would like to re-sign with Milling Benson for another year, but with an increase in distribution from $90,000 to $99,000 annually.
Foster claims that although the memorandum is dated October 14, 2002, it was written and disseminated in September 2002.
Rec. Doc. No. 17. Memo in Opp. to Motion for Leave to Intervene, Exhibit D.
Foster contends that a few days later, Milling Benson offered to renew the contract but only under the exact terms of the July 31, 2001 contract. Thus, the contract was slated for a one year term, beginning on October 1, 2002 and expiring on October 1, 2003. Although never formally resigned, Foster accepted the offer, and the contract was renewed.
Foster claims that ten days after the contract was renewed, the management committee of Milling Benson informed him that the firm was experiencing financial hardship. The firm indicated that many of the partners had agreed to take reduced draws and even forego monthly draws altogether until the problems were resolved. Foster refused to take a similar reduction of his monthly installment despite the fact that his previous contract did not generate the fees the firm had hoped.
Thereafter, on November 15, 2002, Foster submitted another memorandum to Milling Benson. In this memorandum, Foster indicated that he would consider their request to temporarily reduce his monthly installments. Foster also set forth an alternative; Foster asked the firm to consider allowing him to loan a portion of his installments to the firm.
Shortly thereafter, however, Foster's accountant informed him that Milling Benson had not paid him for the month of November 2002. After a telephone conversation with a member of Milling Benson's Management Committee, it was agreed that $5,000 would be deposited in Foster's account to cover checks that had been drawn. Concerned that Milling Benson would be unable to pay him in upcoming months, Foster indicated that he wished to completely restructure his contract. He stated that he did not wish to continue under the terms of the previous agreement and proposed several alternative agreements. Milling Benson rejected each of Foster's proposals. As a result, Foster left Milling Benson on November 27, 2002.
Each of Foster's clients, including State Farm, chose to allow all files to remain with Foster. Thereafter, Milling Benson sought to intervene in each of Foster's remaining cases, including the instant matter. Milling Benson filed the instant request to intervene claiming that, while employed with Milling Benson, Foster expended time and services on behalf of State Farm that would be compensable by attorney fees. Milling Benson contends that it incurred expenses and earned fees in the prosecution of these proceeding based on an hourly amount of $5,855. Thus, it claims that it is entitled to a portion of the fee award in the instant matter for the services it has performed and reimbursement of the costs it has incurred.
State Farm opposes the motion arguing that Milling Benson has no right to the subject of the intervention. State Farm also asserts that the employment contract with Foster did not entitle Milling Benson to continued fees after its termination. It contends that Foster represented State Farm well before he became Special Counsel for Milling Benson. State Farm states that although two associates, a paralegal and a secretary worked on State Farm matters with Foster, any time entered on the file was never billed but was only recorded to compare the amount of time expended on a file with the recovery of the particular file. State Farm also submits that each of its files were sent directly to Foster on a contingency basis and Milling had no authority to accept or reject the files. Thus, State Farm contends that Milling Benson's request to recover the arbitrary hourly value is without merit.
II. Analysis
A. Untimely Opposition
Milling Benson contends that State Farm's opposition to the instant motion should not be considered because it was untimely filed. Local Rule 7.5E requires that:
"[e]ach party opposing a motion shall file, in duplicate, a memorandum of the reasons advanced in opposition to the motion and a list of . . . authorities. . . . [relied upon] . . . no later than the eighth calendar day prior to the noticed hearing and shall at the same time serve a copy thereof on the opposing parties."
Here, the instant motion was set for hearing for February 5, 2003. Thus, State Farm had until January 28, 2003 to file its opposition. State Farm did not file its opposition until February 4, 2O03. The Court notes, however, that Milling Benson was granted leave to file a memorandum in reply to State Farm's opposition. Therefore, Milling Benson suffered no prejudice as a result of State Farm's untimely filing. Thus, despite State Farm's failure to submit a timely opposition the Court will not grant the motion to intervene as unopposed, but instead will consider the motion on the merits.
State Farm contends that its opposition was untimely filed because Milling Benson failed to provide notice of the February 5, 2003 hearing date.
Rec Doc. No. 14.
B. Intervention of Right
Rule 24(a) of the Federal Rules of Civil Procedure governs intervention of right. The rule provides that "[u]pon timely application anyone shall be permitted to intervene in an action . . . (2) when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties." FED. R. Civ. P. 24(a)(2).
Here, the parties do not dispute that Milling Benson's application was timely. The issue is whether the employment contract entered between Foster and Milling Benson provided Milling Benson with an interest sufficient to permit an intervention of right in the instant case. Milling Benson argues that it has an interest in this litigation because it was retained in this proceeding by State Farm. In support of this contention, Milling Benson cites Sonnier v. Tako Towing, Inc., 1992 WL 329723 (E.D.La. Nov. 2, 1992).
In conducting its analysis, the Court will discuss the Fifth Circuit's decision in Gaines v. Dixie Carriers, Inc., 434 F.2d 52 (5th Cir. 1970), as well as this Court's decision in Sonnier v. Tako Towing. Inc., 1992 WL 329723 (E.D. La. Nov. 2, 1992).
1. Gaines v. Dixie Carriers, Inc.
According to Fifth Circuit precedent, a discharged attorney initially retained on a contingent fee basis is entitled to intervene as of right in an action in order to protect his interests under the contingent fee contract. This rule is derived from Gaines v. Dixie Carriers, Inc., 434 F.2d 52 (5th Cir. 1 970). In Gaines, the plaintiff signed a contingent fee contract with a law firm to represent him in his personal injury suit. After the law firm spent a considerable amount of time prosecuting the claim, the plaintiff discharged the law firm and hired new counsel. Id. at 53.
See Keith v. St. George Packing Co., 806 F.2d 525, 526 (5th Cir. 1986) ("Although Gaines may not represent the most persuasive use of FED. R. Civ. P. 24, it binds us as the law of this Circuit until modified en banc.").
Following the discharge, the law firm filed a motion to intervene in an effort to protect its claimed interest in the contingency fee contract. The district court denied the request to intervene, however the Circuit Court reversed stating: "[w]e think it clear that the appellant law firm here claimed an interest in the subject of the action against Dixie Carriers, Inc., and is so situated that the final disposition of the action may as a practical matter impair or impede its interest." Gaines, 434 F.2d at 54.
The Gaines decision was reaffirmed in Gilbert v. Johnson, 601 F.2d 761, 767 (5th Cir. 1979), cert. denied, 445 U.S. 961 (1980). Therefore, it is clear that in the Fifth Circuit, an intervention of right exists for an attorney who has a contingency fee contract with a client. Keith v. St. George Packing Co., Inc., 806 F.2d 525, 526 (5th Cir. 1986); Gilbert, 601 F.2d at 767; Gaines, 434 F.2d at 54; see Langley v. Department of Interior, 2000 WL 1742057 (E.D. La. Nov. 22, 2000); Command Credit Corp. v. Mackie, 1995 WL 321771 (E.D. La. May 24, 1995).
2. Sonnier v. Tako Towing, Inc.
Milling Benson relies heavily on Sonnier v. Tako Towing, Inc., 1992 WL 329723 (E.D. La. Nov. 2, 1992) to support its proposition that it is entitled to intervene in this matter. In Sonnier, the plaintiff, Paul Sonnier Jr., and the defendant, Tako Towing, Inc., entered a settlement agreement. Following the settlement, the law firm of Gainsburgh, Benjamin, Fallon, David Ates ("Gainsburgh") sought to intervene in the matter to recover attorney fees incurred by J. Mac Morgan, a former associate of Gainsburgh.
Prior to working for Gainsburgh, Morgan was retained by Sonnier. Id. Subsequently, Morgan joined Gainsburgh and entered into a contract which provided that Morgan would receive 50% of any fee collected in cases in which he had been retained before joining the firm. Id. It also provided that in the event he was terminated, Morgan would receive 50% of the fees later paid by clients who chose to be represented by Morgan. Finally, the agreement stated that Morgan would reimburse Gainsburgh for any expenses incurred regarding such cases. Id.
While employed with Gainsburgh, Morgan filed Sonnier's claim against Tako Towing. Several months later, Morgan was terminated by Gainsburgh. Nonetheless, Sonnier retained Morgan as counsel. Id. Thereafter, Morgan and Gainsburgh signed a joint stipulation which had been drafted by Morgan. The stipulation stated that Gainsburgh had incurred over $4,000 in costs; that Gainsburgh was entitled to recover such costs; and that Gainsburgh was entitled to recover 50% of any fees received by Morgan in prosecuting Sonnier's claim. Id. Gainsburgh sought to intervene to recover these fees. Morgan opposed the request to intervene arguing that Gainsburgh did not have an interest in the litigation because Sonnier never entered a contingency fee agreement with the firm. See id. at *2. Gainsburgh responded by contending that it had a sufficient "interest" under Rule 24(a) allowing intervention of right because of Morgan's contract with the Firm. Id.
After considering Gaines v. Dixie Carriers, Inc., 434 F.2d 52, 53 (5th Cir. 1970), this Court determined that Gainsburgh clearly had no "interest" under a contingency fee agreement with Sonnier which, alone, would allow an intervention of right in the Fifth Circuit. Sonnier, 1992 WL 329723, at *3 However, the Court found that Gainsburgh had a sufficient "interest" under Rule 24(a) as a result of its fee division agreement with Morgan. Id.
In reaching this decision, the Court also discussed Mothersill D.I.S.C. v. Petroleos Mexicanos, S.A., 831 F.2d 59 (5th Cir. 1987).
In so finding, the Court cited Scurto v. Siergrist, 598 So.2d 507, 508 (La.App. 1st Cir. 1992) which held:
In the situation where a retained attorney associates, employs or procures the employment of another attorney to assist him in handling a case involving a contingency' fee, the agreement regarding division of the fee is a joint venture which gives the parties to the contract the right to participate in the fund resulting from the payment of the fee by the client.Scurto, 598 So.2d at 510.
In Scurto, the plaintiff (Smith) retained Scurto on a contingency fee basis in a personal injury action. Pursuant to the contingency agreement, Scurto was entitled to one-third of any amount recovered. With Smith's consent, Scurto sought the services of another attorney, Siergrist. Scurto v. Siergrist, 598 So.2d 507, 508 (La.App. 1st Cir. 1992). Scurto and Siergrist agreed that Scurto would receive tow-thirds of the proceeds of the contingency fee while Siergrist would receive one-third. Id. After settlement of Smith's case, Scurto demanded his two-thirds share, but Siergrist refused, alleging that Scurto had not performed sufficient work to receive such fee. Id. Scurto then instituted a breach of contract action against Siergrist. Id. After trial on the merits, the jury found Scurto was entitled to only 60% of the contingency fee. Id. On appeal, Scurto alleged he was entitled to the full contractual amount as had been agreed with Siergrist. The Louisiana Court of Appeal agreed.
Thus, the Court determined that the fee agreement between Morgan and Gainsburgh was a "joint venture." Sonnier, 1992 WL 329723, at *4. The Court found that because Morgan and Gainsburgh contracted in advance to participate in any funds resulting from the Sonnier action, Gainsburgh had a legally protectable interest sufficient to allow intervention of right. Id. 3. Instant Case
The facts of the above cases are clearly distinguishable from those of the instant matter. In Gaines, the intervening law firm initially represented the plaintiff pursuant to a contingency contract but was subsequently discharged. In Sonnier, although the discharged law firm did not have a contingency agreement with the plaintiff, the firm had a sufficient interest due to its fee division agreement with the plaintiffs counsel.
In the instant case, the Court has not been provided with any evidence that a fee division agreement existed between Foster and Milling Benson. Also, State Farm did not enter a contingency agreement with Milling Benson. Although State Farm retained Foster pursuant to a contingency agreement and Foster subsequently became Special Counsel to Milling Benson pursuant to an employment contract, the contract did not provide for a division of fees. The contract simply addressed the payments to be received by Foster. There are no provisions in the contract which suggest that the fees earned by Foster would be turned over to Milling Benson.
Rec. Doc. No. 17. Memo in Opp. to Motion for Leave to Intervene, Exhibit A.
Moreover, there is no provision in the contract which provides that any clients retained by Foster prior to joining Milling Benson would be transferred to the firm. As such, no contingency agreement existed between Milling Benson and State Farm. Thus, Milling Benson's has failed to establish that its claim for attorney's fees is "an interest relating to the property or transaction which is the subject of the action." Keith v. St. George Packing Co., Inc., 806 F.2d 525 (5th Cir. 1986). As such, based on the evidence presented, the Court finds that Milling Benson has no right to intervene under Rule 24(a).
Because the Court finds that Milling Benson has not claimed an interest relating to the property or transaction which is the subject of the action, it is not necessary to determine whether a legal interest would be impaired. See FED. R. Civ. P. 24(a)(2).
It is equally apparent that Rule 24(b) permissive intervention is not appropriate. Rule 24(b) provides that "[u]pon timely application anyone may be permitted to intervene in an action . . . when an applicant's claim or defense and the main action have a question of law or fact in common." In this case, there are no issues of law or fact common to the plaintiff s claim and the would-be intervenor's claim for attorney's fees.
Accordingly,
IT IS ORDERED that the Motion for Leave to Intervene (doc. #15) is DENIED.