A law firm that was discharged by a client may recover damages in quantum meruit from the firm that takes over the case, rather than from the client, the Pennsylvania Supreme Court has ruled.
In its unanimous Tuesday opinion, the court held that Meyer Darragh Buckler Bebenek & Eck can obtain damages from Malone Middleman, which took over an estate case from Meyer Darragh following a lateral move. Malone Middleman ultimately received $67,000 in attorney fees from the client, and the Supreme Court concluded Tuesday that Meyer Darragh can collect nearly $15,000 of that fee from the firm.
In his opinion, Justice Kevin Dougherty acknowledged that in many cases, quantum meruit actions are brought only against the former client, rather than another law firm. But those cases are distinguishable from Meyer Darragh’s, he said.
“Accordingly, we hold, under circumstances like those presented here, predecessor counsel may recover damages in quantum meruit against successor counsel in a contingent fee dispute,” Dougherty wrote in a 20-page ruling. “Such a claim is viable only where the facts demonstrate unjust enrichment, that is, successor counsel has received and retained a benefit from predecessor counsel, which would be unjust to retain without some payment to predecessor counsel.”
The case, which has already been to the state’s highest court once before, stems from William Weiler Jr.’s representation of the estate of Richard Eazor in an automobile accident case beginning in 2005. Later that year, Weiler joined Meyer Darragh and entered into a contract agreeing that all legal work would be deemed work on behalf of the firm.
Meyer Darragh attorney Scott Millhouse became primarily responsible for the case.
Weiler left Meyer Darragh and agreed the firm would receive two-thirds of the attorney fees from the litigation. However, after Weiler joined Malone Middleman, the Eazor estate decided to discharge Meyer Darragh and retain Weiler and Malone Middleman.
Following the change in representation, Meyer Darragh told Malone Middleman it was entitled to two-thirds of the fees, which Malone Middleman contested, arguing it was not bound by the agreement between Weiler and Meyer Darragh.
The Eazor estate litigation subsequently settled for $235,000 after 343 hours of legal work, and Malone Middleman received $67,000 in attorney fees. Meyer Darragh sued both the Eazor estate and Malone Middleman, alleging breach of contract against the firm and quantum meruit against both defendants.
The trial court eventually entered a verdict for Meyer Darragh on the quantum meruit claim for nearly $15,000, but denied the firm’s breach of contract claim.
On appeal to the Superior Court, Malone Middleman challenged the finding on quantum meruit, and Meyer Darragh contended that the trial court erred in denying its breach of contract claims. The Superior Court vacated the quantum meruit award, but found that Meyer Darragh may be entitled to a greater amount under a breach of contract claim.
The Supreme Court, the first time it considered the case, rejected the Superior Court’s reasoning. A breach of contract claim was not appropriate, the court said in a 2016 opinion, but quantum meruit might be. So the court allowed Meyer Darragh to appeal again for the purpose of evaluating the quantum meruit claim.
Meyer Darragh noted that no appellate opinions in Pennsylvania expressly allowed quantum meruit recovery against a successor firm, but no precedent expressly prohibits such recovery either, Dougherty wrote.
In evaluating the claim, Dougherty found ”there is no question that Meyer Darragh’s work on the Eazor litigation contributed to the settlement ultimately negotiated by Malone Middleman.” And while Meyer Darragh received no compensation for its work on the case, the client paid Malone Middleman in full, he wrote.
There is no “clear roadmap” on how to handle that, Dougherty noted. But in a 1978 Superior Court case, Johnson v. Stein, the court said a predecessor counsel could bring “a ‘quasi-contract’ action” against a successor firm when the client has already paid their fee and cannot be held liable for further payment.
The justices then remanded the case to the Allegheny County Court of Common Pleas for reinstatement of the $14,721 award to Meyer Darragh.
Millhouse said the ruling from the court is “logical, sensible and fair.”
“Our argument was it made no sense for us to pursue the client because the client had already paid,” Millhouse said. “We’ve always argued therefore that the money, or whatever benefit … should be paid by Malone Middleman, because they collected it.”
Ray Middleman, now a partner at Eckert Seamans Cherin & Mellott, represented Malone Middleman and did not return a call seeking comment.