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Jury Finds Attorney Must Return Half of Bonus Paid by Client
The Legal Intelligencer
May 15, 2008
A Philadelphia jury found last week that a family law attorney must return half of the $200,000 bonus a client claimed she was duped into paying after the attorney and his firm helped her secure nearly $5 million in a post-nuptial settlement.
In Schubert v. Shainberg, an eight-member jury awarded plaintiff Junko Schubert $100,000 on her breach of contract claim against Charles C. Shainberg of Shainberg & Viola of Philadelphia, but did not find the firm liable on that claim. The jury found for both defendants on the remaining claim, which alleged a breach of fiduciary duty, according to the docket.
Philadelphia Common Pleas Court Judge Jacqueline F. Allen presided over the trial, but Judge William J. Manfredi ruled on some key motions beforehand. A judgment of non pros for failure to file a certificate of merit was originally entered against Schubert, but Manfredi overturned the judgment in September 2007.
Schubert argued the case was not about legal malpractice but instead a breach of contract and fiduciary duty matter that did not require a certificate of merit. Manfredi allowed the issue to be appealed to the Superior Court as a matter of law, but the court declined in December 2007 to review the ruling, according to court documents.
In a slightly unusual twist, Theodore A. Schwartz of personal injury firm The Law Offices of M. Mark Mendel represented defendants Shainberg and his firm and defense attorney Abbe F. Fletman of Flaster Greenberg represented plaintiff Schubert.
Schwartz said he and his client view the case as a win and have no plans to appeal. He said the judge declined to charge the jury on disgorgement of attorney fees and presented only the breach of contract and breach of fiduciary duty claims. He said the eight-member jury unanimously found for the defendants on the breach of fiduciary duty claim and seven of the eight jurors "split the baby" and awarded Schubert $100,000 against Shainberg -- not the firm -- on the $200,000 breach of contract claim. Schwartz said his clients had offered before trial to settle for $100,000.
According to Fletman, the jury was not polled, and she was not aware that the jury made any comment as to whether it was unanimous in finding for the defendants on the breach of fiduciary duty claim. In discussions with the jury outside of the courtroom, Fletman said the jurors said it was not unanimous on the breach of contract claim.
According to court documents, Shainberg & Viola was retained in July 2003 to represent Schubert in her divorce from her husband, B. Kingsley Schubert. The couple reconciled a year later after the husband was diagnosed with terminal cancer and a post-nuptial agreement was signed.
Court documents filed by Shainberg alleged Schubert returned to her husband after she left to live in New York City in order to protect her rights in the couple's estate and avoid a finding of abandonment if the marital issues went to court. Schwartz said Shainberg's ability to secure Schubert a settlement that was $2.7 million more than she would have gotten had she been found to have abandoned her husband and two children was deserving of a bonus.
According to the documents, Shainberg secured $4.9 million from the marital estate for Junko Schubert. At the same time, Kingsley Schubert executed a will that bequeathed a similar amount to his wife. Kingsley Schubert died in November 2004.
After Kingsley Schubert's death, Shainberg negotiated a payment of $1.05 million to Junko Schubert in satisfaction of an obligation owed to her under the $4.9 million post-nuptial agreement. According to court documents filed by the plaintiff, Schubert was then called to Shainberg & Viola's offices on March 31, 2005, where she was presented with a letter from Shainberg that stated: "I advised you that there were some cases where the result we have achieved for our client deserves the payment of a bonus to the firm. We believe your case is one of those."
The letter then asked Schubert to indicate on a blank line the amount she thought appropriate for a bonus and to sign the document. According to Schubert's court filings, Shainberg said the bonus was important to him because he had promised a $200,000 bonus to the people working for him. The documents also alleged "Shainberg insisted that signing the bonus letter was a prerequisite to [Schubert] receiving any monies from the [$1.05 million] distribution check."
In documents filed by Shainberg's attorney, the firm claimed to have sent the letter via mail to Schubert on March 31, 2005, with blank lines for her signature and proposed bonus. It was not until April 13, 2005, that she came to the firm's office and "voluntarily filled in the amount of $200,000," Shainberg's filings claimed. The signed letter is dated March 31, 2005.
"No pressure was exerted on Ms. Schubert to pay Mr. Shainberg any bonus money, but Ms. Schubert did so because of the extraordinary result obtained by Mr. Shainberg, and because of the competent, professional and caring effort that he gave to her," Shainberg's attorney said in court filings.
The filings also claimed that Schubert was so happy with Shainberg's representation that she retained him for another matter in August 2005.
In December 2006, Fletman sent Shainberg a letter requesting the return of the bonus on behalf of her client before they went ahead with filing a complaint in the case. The letter stated that the $200,000 made Shainberg's legal fees excessive and the collection of the bonus was a breach of fiduciary duty.
"Moreover, this 'bonus' appears to be an end run around the prohibition against contingency fees in matrimonial disputes," Fletman said in the letter.
Temple University Beasley School of Law professor Louis M. Natali Jr. testified as an expert witness on Schubert's behalf. Natali testified that the bonus was never mentioned in the original retainer agreement and that it was excessive compared to the fee that she paid Shainberg based on his hourly rate.
Albert Momjian, chairman of Schnader Harrison Segal & Lewis' family law practice, and University of Pennsylvania Law School professor Geoffrey C. Hazard Jr. served as expert witnesses for the defense.
Schwartz said they both testified to the appropriateness of Shainberg's bonus request. The jury came back with its verdict on May 7.
