Opinion
18-P-1298
11-19-2019
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The defendant, Marilyn Dampies, appeals from a judgment of the Superior Court assessing the amount of legal fees she owed to her former counsel, the plaintiff, Stephen A. Roach, whom Dampies retained pursuant to a contingency fee agreement. Because Dampies failed to show that the judge erred in finding that the fee award (calculated pursuant to the plain terms of the contingency fee agreement) was not excessive, and because we agree with Roach's assertion in his cross appeal that he is entitled to interest and statutory costs under G. L. c. 231, § 6C, and G. L. c. 261, § 23, we affirm in part and reverse in part.
A default judgment entered against Dampies on liability; the only issue during the evidentiary hearing was the amount of damages.
Background. In October 2015, Dampies retained Roach in connection with an underlying dispute between Dampies and the cobeneficiaries of a trust (Exarchos family) regarding their respective beneficial interest in the trust, which had as its sole asset a parcel of real property in South Boston (property). Dampies claimed that she had a fifty-one percent beneficial interest in the trust, while the Exarchos family claimed that her interest was only twenty percent. At the time Roach was retained, a developer had offered to purchase the property for $8 million; however, Dampies and the Exarchos family would not agree to sell until they settled the dispute as to their respective beneficial interests in the trust.
Accordingly, Dampies -- through Chris Tsabouris, a sophisticated business person to whom she had given power of attorney -- retained Roach to negotiate on her behalf with the Exarchos family. Tsabouris negotiated with Roach the terms of the contingency fee agreement (fee agreement), which governed the scope of Roach's representation as well as his fee. Importantly, the fee agreement set $2.5 million as the amount of proceeds to be received by Dampies below which Roach would earn no fee because, at the time Roach was retained, the Exarchos family already had offered $2.5 million -- effectively, a 31.25 percent beneficial interest in the trust based on the then-pending $8 million developer's offer -- to Dampies to settle the trust dispute. Accordingly, paragraph 2A of the fee agreement, which governed Roach's contingency compensation, provided, inter alia, that Roach would be paid ten percent of "any additional monies" between $2.5 million and $3.5 million that Roach was successful in negotiating for Dampies's gross share of the property sale price and twenty percent of any amounts over $3.5 million.
In particular, the contingency fee agreement provided that Roach would negotiate with the Exarchos family, but would not be responsible for representing Dampies in any litigation.
Roach was also entitled to $12,000 out of Dampies's share of the down payment and twenty percent of Dampies's "gross interest share in any additional monies before closing of the sale for the property."
Approximately one month after Roach was retained, the Exarchos family filed a petition for partition in the Land Court, asserting that Dampies's beneficial interest was twenty percent. In December 2015, with no resolution of the trust dispute, the developer withdrew his $8 million offer to buy the property.
No documentation supported Tsabouris's claim that Dampies held a fifty-one percent interest in the trust. Instead, the only existing documentation (albeit signed only by the Exarchos family) listed Dampies as having a twenty percent interest.
In February 2016, Tsabouris told Roach that Dampies would accept $3.2 million on the sale of the property for $8 million -- reflecting a forty percent beneficial interest in the trust -- but only if Roach agreed to a flat fee of $60,000. Roach agreed, and prepared an addendum to the fee agreement, which provided that Dampies authorized a settlement of $3.2 million "and if there is no settlement for this sum, the original terms of Paragraph [2A] will come back into force and effect."
After execution of the addendum, Tsabouris directed Roach to reject the Exarchos family's offer of a forty percent settlement and instead seek to negotiate a forty-four percent interest in the trust. Responding, Roach stated, "I have agreed to cut my fees to make this work. As we agreed, however, if you go back to square one and insist on [forty-four percent] again, my fees go back up as well on our original agreement."
In March 2016, Tsabouris relented, and Dampies and the Exarchos family entered into a settlement agreement pursuant to which Dampies would get forty percent of the gross sales proceeds if the property sold for $8 million or more. In July 2016, Dampies and the Exarchos family agreed to sell the property to a second developer for $8.65 million, with a nonrefundable $250,000 deposit.
After reaching this settlement agreement, Roach continued to work for Dampies in connection with, inter alia, securing a buyer, reviewing and finalizing a purchase and sale agreement for the property, and attending to tax issues.
In December 2016, Dampies terminated Roach as her lawyer. Over the course of his fourteen months of negotiating on behalf of Dampies, Roach performed at least 112 hours of legal work for Dampies, and as the judge found, "probably significantly more, given that the case was a contingent fee case and Roach therefore did not bill all his time."
Significantly, this termination occurred after (1) Roach had performed the legal services he was retained to performed -- namely, negotiating Dampies's percentage interest in the trust; and (2) the second developer and the trust had entered into an agreement for the sale of the property at a value exceeding $8 million.
In approving the purchase and sale agreement with the second developer, Tsabouris acknowledged his understanding that Dampies would need to pay Roach pursuant to paragraph 2A of the fee agreement (as opposed to the flat fee from the addendum). He wrote to counsel representing the Exarchos family, "At this time ... Roach is no longer representing us .... We will honor our original fee agreement with him ...." The second developer ultimately paid a total of $9.5 million for the property, which included $850,000 in payments for extensions of the performance date set forth in the purchase and sale agreement. Dampies's forty percent share of the gross proceeds was $3.8 million.
Roach filed the present action, seeking recovery of his legal fees. A default entered against Dampies, and Roach moved for an assessment of damages. Dampies argued that Roach was entitled only to a $60,000 flat fee. Following an evidentiary hearing, the judge agreed with Roach that the formula in paragraph 2A of the fee agreement governed, and awarded Roach $176,000 in legal fees pursuant to that formula. This appeal followed.
In particular, Roach was entitled to the sum of (1) ten percent of the amount by which Dampies's share of the sales price exceeded $2.5 million (ten percent of $960,000); (2) twenty percent of the $340,000 Dampies received in additional payments; and (3) $12,000 from the down payment.
Discussion. 1. Legal fee award. Dampies contends that the legal fee award is excessive. "The question of what is fair and reasonable compensation for legal services rendered is one of fact for a trial judge to decide." Mulhern v. Roach, 398 Mass. 18, 23 (1986). On appeal, "unless our review of the record leaves this court with a definite and firm conviction that a mistake has been committed, or unless the judge's ultimate findings and conclusions are clearly erroneous or inconsistent with the relevant legal standards, we must affirm" (citation omitted). Id. We first address Dampies's arguments that paragraph 2A of the fee agreement should not govern Roach's fee award. Dampies appears to argue that the fee agreement is ambiguous in that it uses the term "settlement" to refer to the dispute between Dampies and the Exarchos family whereas the addendum uses the same term to refer to the sale of the property. There is no ambiguity. The meaning of words of a contract must be interpreted "according to their usual and ordinary sense." Suffolk Constr. Co. v. Lanco Scaffolding Co., 47 Mass. App. Ct. 726, 729 (1999). It is clear from the plain words of paragraph 2A of the fee agreement that Roach's fee was to be based on his success in resolving Dampies's disputed beneficial interest in the trust (whose sole asset was the property) such that, upon the property's sale, Dampies would receive over $2.5 million in gross proceeds. Specifically, under the fee agreement, Roach was entitled to (1) ten percent of the excess over $2.5 million if Dampies's gross proceeds from the sale were between $2.5 million and $3.5 million, and (2) twenty percent of gross proceeds above $3.5 million.
The fee agreement provides that Roach will represent Dampies "with regard to attempting to negotiate a settlement with" the Exarchos family regarding her interest in "the proposed sale of the property."
In relevant part, the addendum purports to amend paragraph 2A of the fee agreement as follows: "If a settlement is reached relative to the sale of [the] property with a gross payment to [Dampies] of [$3.2 million], [Roach] will be paid the gross sum of [$60,000].... [Dampies] authorizes a settlement of [$3.2 million], and if there is no settlement for this sum, the original terms of Paragraph [2A] will come back into force and effect."
We review de novo Dampies's argument that the agreement was ambiguous. See Bank v. Thermo Elemental, Inc., 451 Mass. 638, 648 (2008).
Dampies also apparently argues that, because Tsabouris testified that he believed that Roach agreed to a flat fee of $60,000 regardless of the sales price of the property, there was an ambiguity in the addendum. We disagree. The addendum provides in plain terms that Dampies authorized a settlement with the Exarchos family for $3.2 million, "and if there is no settlement for this sum, the original terms of Paragraph [2A] will come back into force and effect." Because the settlement was not for $3.2 million, paragraph 2A of the original agreement governed Roach's fees. Indeed, Tsabouris's e-mail to counsel for the Exarchos family, following Roach's termination, reflects his understanding that the original agreement (not the flat fee provided by the addendum) governed Roach's fee. Additionally, the judge considered Tsabouris's testimony as to his understanding of the flat fee arrangement, and, given Roach's differing understanding, he found that the addendum was of no legal effect as there was no meeting of the minds. See I & R Mechanical, Inc. v. Hazelton Mfg. Co., 62 Mass. App. Ct. 452, 455-456 (2004). Thus, the judge properly calculated Roach's fee pursuant to the formula provided in paragraph 2A of the fee agreement.
Dampies also apparently argues that the fee agreement does not govern Roach's damages because payment of Roach's legal fees depended on Dampies's receipt of a sum certain from the sale of the property. To the extent Dampies's argument is that Roach had a conflict of interest, this argument was not raised below and it is waived. Carey v. New England Organ Bank, 446 Mass. 270, 285 (2006). Even if the argument were not waived, there was nothing improper about the agreement. A contingency fee arrangement is, by definition, an agreement whereby the lawyer's fee depends on the success in accomplishing the goals of the representation. Such an arrangement is permitted so long as the resulting fee is not excessive. See Mass. R. Prof. C. 1.5 (a) & (c), as amended, 480 Mass. 1315 (2018) (permitting contingent fee arrangements).
Dampies also maintains that some of the factors set forth in rule 1.5 of the Massachusetts Rules of Professional Conduct render clearly erroneous the judge's finding that the fee award (under the paragraph 2A calculation) was reasonable. Specifically, Dampies contends that (1) the matter, which involved a "family squabble," was not particularly difficult or novel, (2) no litigation was involved, (3) the amount at issue was undetermined at the time of the retention, (4) there was minimal interaction between Dampies and Roach, and (5) there was little evidence of Roach's expertise in trust disputes. See Mass. R. Prof. C. 1.5 (a), as amended, 480 Mass. 1315 (2018). None of these arguments render the judge's finding clearly erroneous.
The judge reasonably found that "[g]iven the lack of any documentation of a beneficial interest for Dampies greater than [twenty percent], Roach faced a difficult task in increasing her percentage." Indeed, Roach risked receiving only a $12,000 payment for his efforts in the event that he failed to raise the settlement over $2.5 million. No documents showed Dampies having an interest of fifty-one percent, as she claimed. Nonetheless, Roach worked to increase Dampies's percentage, bringing it closer to her claimed percentage, by collecting trust documents reflecting potential breaches of fiduciary duty, which exposed the Exarchos family to an increased risk of litigation if they failed to settle favorably with Dampies. As a result of Roach's work over the fourteen-month engagement, Roach increased Dampies's beneficial share by over $800,000, of which Roach's legal fees represented twenty-one percent.
Contrary to Dampies's assertion, the record is clear that, at all relevant times, the parties understood that there was an outstanding $8 million offer from the developer and used this offer as the presumptive floor for the sales price of the property. Indeed, the settlement agreement with the Exarchos family conditions Dampies's percentage interest in the trust on the sale of the property for, at a minimum, $8 million.
Moreover, the fact that the representation involved Roach's legal acumen as a negotiator (as opposed to as a trial lawyer) is of no moment. Nor is the minimal interaction between Dampies and Roach -- Tsabouris had Dampies's power of attorney and Roach interacted with Tsabouris throughout the negotiations. The judge found that Tsabouris was a sophisticated business person. Tsabouris negotiated the terms of the fee agreement, and the record is clear that he understood that the fee would fluctuate with the sale price for the property. Moreover, the evidence supported a finding that Tsabouris understood that the original fee agreement he negotiated would govern the fee owed to Roach upon the sale of the property to the second developer. On this record, Dampies has failed to show that the judge erred in finding that the fee award was not excessive. ,
Dampies also argues that Roach's use of a form other than one of those approved pursuant to rule 1.5 renders the fee agreement unenforceable. Yet, Dampies does not show how any variance from the model forms was material in the context of this particular representation. See R.W. Granger & Sons, Inc. v. J & S Insulation, Inc., 61 Mass. App. Ct. 92, 96 (2004) (upholding contingency fee agreement that was "materially consistent" with rule 1.5 [c] ).
Because we conclude that the fee agreement is valid and enforceable in accordance with its terms (and, accordingly, the parties' rights and obligations are defined by an express contract), there is no basis for Dampies's contention that Roach's fee should be determined in accordance with principles of quantum meruit. To the extent that any of Dampies's other arguments are not expressly addressed, "they ‘have not been overlooked. We find nothing in them that requires discussion.’ " Commonwealth v. Brown, 479 Mass. 163, 168 n.3 (2018), quoting Commonwealth v. Domanski, 332 Mass. 66, 78 (1954).
2. Interest and statutory costs. Roach contends that the judge abused his discretion in denying Roach's motion to amend the judgment to include prejudgment interest, pursuant to G. L. c. 231, § 6C, and litigation costs, pursuant to G. L. c. 261, § 23. In denying the motion, the judge relied on the failure of the fee agreement itself to include a provision for prejudgment interests and litigation costs. However, there is no such requirement. General Laws c. 231, § 6C, "directs that the clerk of court shall add interest to contract damages as of the date of the breach of the contract when that date has been established" (citation omitted). Sterilite Corp. v. Continental Cas. Co., 397 Mass. 837, 838-839 (1986). Similarly, G. L. c. 261, § 23, provides that litigation costs "shall be allowed." Such interest and costs "command" a "ministerial act" and attach "automatically." O'Malley v. O'Malley, 419 Mass. 377, 381 (1995). See id. at 380 ("Because [prevailing party] was entitled to prejudgment interest as a matter of law ..., the judgment should have included such an award"). Accordingly, we reverse the order denying Roach's motion to amend the judgment and remand for calculation and inclusion of interest and costs. The judgment is otherwise affirmed.
The judge also apparently relied on his understanding that Roach had waived prejudgment interest and litigation costs. However, Roach filed an affidavit setting forth that he was seeking interest and costs.
So ordered.
Affirmed in part; reversed in part and remanded.