Monday, August 6, 2012

Recovery in Quantum Meruit Denied Contingency Fee Attorney

Attorney Lacked “Good Cause” to Withdraw from Representation
and Recover Fee In Quantum Meruit

      A recent decision of the Kentucky Supreme Court addressed when an attorney may withdraw from a representation and thereafter recover in quantum meruit.  Lofton v. Fairmont Specialty Insurance Managers, Inc., 2010-SC-000749-OG (June 21, 2012).
      Lofton entered into a contingency fee arrangement with his client, Maxey, in connection with an automobile accident.  On behalf of the plaintiff, the insurer offered $25,000 in settlement.  While Lofton thought that settlement should be accepted, Maxey did not; she valued her claim at at least $1.2 million.  On the basis that the client was not following the attorney’s advice, Lofton withdrew from the representation.  Thereafter, after having acquired new counsel, the insurer again offered $25,000, which amount was accepted by Maxey.  Lofton sought to recover in quantum meruit for the time and effort he had expended in the matter, it having been substantially all the work that was done in connection with the plaintiff’s $25,000 recovery.
      The Supreme Court reviewed both the requirements for bringing a claim in quantum meruit and as well the ethical rules applicable to an attorney withdrawing from a representation, determining that “good cause” for withdrawing from the representation must exist in order for there to be a viable claim in quantum meruit.  On the facts, however, the Court found that no claim was possible.  Had Lofton and Maxey entered into an agreement specifying an acceptable settlement range that Maxey sought to repudiate after a settlement in that range was offered, there would have existed good cause.  However, where, as here, there had been no such agreement, and as well where the attorney had not otherwise protected himself in the engagement agreement, good cause did not exist.  Ergo, the fact that withdrawal under the ethical rules is permissible should not be equated with a determination that withdrawal has good cause to give rise to a claim in quantum meruit.
      In certain respects, this decision seems harsh to Lofton.  There seemed to be no question that the replacement attorney did not expend any significant effort on the case prior to the plaintiff’s acceptance of the simply repeated settlement offer of $25,000.  This decision should prompt plaintiff’s attorneys to carefully scrutinize their engagement agreements to protect a possible claim when the client changes attorneys.

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