A lawyer who hasn’t been paid, and has no prospect of getting paid, can withdraw from a case, the U.S. Court of Appeals for the Third Circuit ruled last week.

The appeals court reversed the decision of the U.S. District Court for the Western District of Pennsylvania, holding that its opinion was an abuse of discretion when it ruled that John Richardson couldn’t withdraw until his client either gets new counsel or accepts voluntary judgment in the underlying breach-of-warranty suit.

"That decision runs counter to our holding in Ohntrup [v. Firearms Center], as Richardson is entitled to withdraw once his appearance continues to serve no meaningful purpose," Third Circuit Judge Thomas L. Ambro said on behalf of the three-judge panel in Erie Molded Plastics v. Nogah. Judges Thomas I. Vanaskie and Marjorie O. Rendell were also on the panel.

In its 1986 opinion in Ohntrup v. Firearms Center, the Third Circuit held that a law firm can withdraw from a case after it has proven that its participation no longer serves a meaningful purpose, particularly with regard to the opposing party’s interest, according to the opinion.

Soon after Nogah LLC had retained Richardson in 2011 to defend it in a suit filed by Erie Molded Plastics, Richardson asked the court to let him withdraw from the case because he hadn’t been paid.

Nogah owed him more than $5,000 for about four months of representation, including answering Erie’s complaint with affirmative defenses and making counterclaims, as well as participation in a Federal Rule of Civil Procedure 26(f) conference and requisite Rule 26(a) disclosures.

After several requests for payment, Nogah informed Richardson that it was out of money and would be going out of business.

However, the district court declined to let Richardson withdraw because "’it has been the law for the better part of two centuries that a corporation may appear in the federal courts only through licensed counsel,’" Ambro said, quoting from U.S. District Judge Maurice B. Cohill Jr.’s opinion in the Western District of Pennsylvania.

Cohill explained that Richardson could withdraw once Nogah had new counsel or accepted a voluntary judgment.

Looking to Ohntrup, Ambro said, "applying that rule here, Nogah engaged Richardson, did not pay for his services, told him it could not do so in the future, it was going out of business, no judgment has been entered against it, and neither Erie nor Nogah opposes Richardson’s motion to withdraw at this time.

"If Richardson were permitted to withdraw, one of two events would happen: (1) Nogah would be forced to retain new licensed counsel, or (2) if Nogah failed to retain substitute counsel, it would be subject to default judgment, because it can only appear in federal court through licensed counsel."

Either option would cause no harm or prejudice to Erie, the court held.

If Nogah retained new counsel, the suit would proceed through the district court in the same way it would have with Richardson.

Similarly, if Nogah doesn’t get new counsel, the court would enter a default judgment against it and the case would be expedited with a judgment in favor of Erie, Ambro said.

Richardson, who had been at Dinsmore & Shohl in Pittsburgh when he was retained by Nogah but is now at Goehring, Rutter & Boehm, couldn’t be reached for comment.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI.

(Copies of the six-page opinion in Erie Molded Plastics v. Nogah, PICS No. 13-0737, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •