Summary
finding that implied covenant of good faith and fair dealing does not provide cause of action apart from breach of contract claim
Summary of this case from Dickens v. Sahley Realty Co.Opinion
No. 12–0206.
2013-06-14
GADDY ENGINEERING COMPANY, Plaintiff Below, Petitioner v. BOWLES RICE McDAVID GRAFF & LOVE, LLP, and J. Thomas Lane, individually, Defendants Below, Respondents.
Paul J. Harris, Esq., Wheeling, WV, for Petitioner. David D. Johnson, III, Esq., Winter Johnson & Hill PLLC, Charleston, WV, for Respondents.
Syllabus by the Court
1. “Under the doctrine of impracticability, a party to a contract who claims that a supervening event has prevented, and thus excused, a promised performance must demonstrate each of the following: (1) the event made the performance impracticable; (2) the nonoccurrence of the event was a basic assumption on which the contract was made; (3) the impracticability resulted without the fault of the party seeking to be excused; and (4) the party has not agreed, either expressly or impliedly, to perform in spite of impracticability that would otherwise justify his nonperformance.” Syl. Pt. 2, Waddy v. Riggleman, 216 W.Va. 250, 606 S.E.2d 222 (2004).
2. “ ‘Fraud cannot be predicated on a promise not performed. To make it available there must be a false assertion in regard to some existing matter by which a party is induced to part with his money or his property.’ Syllabus Point 1, Love v. Teter, 24 W.Va. 741 (1884).” Syl. Pt. 3, Croston v. Emax Oil Co., 195 W.Va. 86, 464 S.E.2d 728 (1995).
Paul J. Harris, Esq., Wheeling, WV, for Petitioner.David D. Johnson, III, Esq., Winter Johnson & Hill PLLC, Charleston, WV, for Respondents.
PER CURIAM:
The petitioner, Gaddy Engineering Company (“Gaddy”), appeals from an adverse summary judgment ruling entered by the Circuit Court of Roane County on January 12, 2012, in a case that involves an alleged fee-sharing agreement between Gaddy and the respondents. The respondents are an individual lawyer, J. Thomas Lane, and the Charleston, West Virginia, law firm in which Mr. Lane is a partner—Bowles Rice McDavid Graff & Love, LLP (“Bowles Rice”). At the center of this dispute is the petitioner's contention that Mr. Lane agreed to pay Gaddy one-third of all sums Bowles Rice received in connection with its provision of legal representation to a group of land companies in a case to be filed against Columbia Natural Resources (“Columbia”) for alleged underpayment of gas royalties. Through two separate orders, the circuit court granted summary judgment to the respondents as to all of the claims Gaddy asserted against the respondents. Upon a meticulous review of the sizeable record submitted to this Court and in consideration of well-established principles of law, we conclude that the circuit court did not commit error. Accordingly, we affirm.
Rather than directly pursuing relief from Columbia Natural Resources through either individual actions or a consolidated action as initially contemplated by Gaddy and Mr. Lane, the land companies opted to join a class action that involved approximately 8,000 plaintiffs. See Estate of Tawney v. Columbia Natural Resources, Civil Action No. 03–C–10E, Roane County Circuit Court.
By ruling entered on September 19, 2011, the circuit court initially granted summary judgment as to all claims arising from the alleged breach of contract. In a subsequent order entered on January 12, 2012, the circuit court granted summary judgment on the remaining counts asserted by Gaddy in this civil action.
I. Factual and Procedural Background
In December 2003, John Bullock, the president of Gaddy, approached Mr. Lane to discuss exploring whether Columbia was underpaying its royalty obligations. In January or February 2004, Gaddy and the respondents reached a verbal agreement to jointly evaluate potential claims on behalf of their current clients as well as other additional land company lessors. The stated objective for the proposed evaluations was to ascertain (1) whether there were viable claims; (2) whether the lessors wished to pursue such claims; and (3) whether the likely value of those claims would justify the cost of litigation against Columbia. Under the terms of this agreement, Gaddy would assess the lessors' past and future losses from underpayment of royalties while Bowles Rice would review the respective leases to evaluate the lessors' individual legal claims. In order to attract the largest pool of potential clients, Mr. Lane and Gaddy agreed to charge a reduced flat fee of $1,750 for this evaluation. That combined charge would include a $750 fee for Gaddy's assessment and a $1000 fee for the legal work performed by Bowles Rice.
Gaddy is a company that provides land and natural resource management services.
Mr. Bullock stated in his affidavit that he “explored why Columbia Gas routinely paid approximately 67% less royalties than other gas companies.”
The parties concur that the flat fee charged to the land companies for the initial evaluations did not fully compensate either of them for their time and work product.
Gaddy would send a separate invoice for each damage evaluation it performed and Bowles Rice would then invoice the lessor for the total fee of $1,750. Upon its receipt of payment, Bowles Rice would remit $750 to Gaddy in payment of its submitted invoice.
In accordance with the terms of this undisputed aspect of the agreement, Mr. Lane contacted various land companies in writing and offered the claim evaluation described above. In response to the letters distributed by Mr. Lane through Bowles Rice, a number of land companies sought the claim evaluation which was then jointly performed by the parties. As a result of these evaluations, twelve land companies (the “land companies”) decided to utilize the services of Bowles Rice to pursue litigation against Columbia in connection with its alleged underpayment of royalties.
The controversy at the center of this case stems from Gaddy's allegation that Bowles Rice, through Mr. Lane, agreed to give the petitioner one third of any recovery it received for pursuing claims against Columbia. According to the respondents, John Bullock proposed more than once that Gaddy should receive some percentage of any legal fee Bowles Rice obtained as a result of the Columbia litigation. The respondents, however, deny that they ever agreed to this proposal. Through his affidavit and during his deposition, Mr. Lane avowed that in the event Bowles Rice initiated litigation against Columbia on behalf of the land companies, his understanding was that Gaddy would serve as a litigation consultant and that Gaddy would separately negotiate a fee agreement with the respective clients. In Mr. Lane's mind, this fee agreement between Gaddy and the land company clients would have been structured to include a bonus feature in the event of a favorable outcome.
Gaddy had no dispute with the fee distribution for the claim evaluations. See supra note 6.
The petitioner readily admits that Mr. Lane explained that a fee-sharing agreement between a lawyer and a nonlawyer was prohibited; Gaddy maintains, however, that Mr. Lane suggested there were ways to get around this fee-sharing impediment.
When the parties began their joint venture, they were aware of a pending action before the Circuit Court of Roane County—the Tawney case —which involved a large group of oil and gas lessors seeking damages against Columbia for alleged royalty underpayments. Due to concerns based on the proposed class size and differing lease terms, it was unclear for some time whether that case would be certified as a class action. Following its decision to certify the class in Tawney, the circuit court imposed a deadline of October 15, 2004, for class members to opt out of the class action.
See supra note 1.
That action was initiated on February 3, 2003.
Certification was approved by the circuit court's order entered on February 27, 2004; this Court, by order entered on June 10, 2004, refused a petition seeking a writ of prohibition to prevent enforcement of the certification ruling.
Despite the recommendation by Bowles Rice that the land companies exercise the option to pursue their claims in the Circuit Court of Kanawha County rather than as a part of the class action, the land companies decided to participate in the Tawney case. From that point forward, the possibility that Bowles Rice would be prosecuting independent claims for the land companies ceased to exist. And, while Bowles Rice registered a formal appearance in Tawney on behalf of a subclass composed of its land company clients, Marvin Masters, as lead counsel, was in control of the litigation decisions affecting the plaintiff class.
This appearance occurred on December 7, 2004,
Marvin Masters and the law firm of Masters & Taylor, L.C. and Michael W. Carey and George M. Scott and the law firm of Carey, Scott & Douglas were appointed as class counsel for the plaintiffs in the Tawney case in the certification order.
When Mr. Lane approached class counsel to inquire about allowing Gaddy to serve as an expert consultant, Mr. Masters stated that he had already retained an expert witness and had no use for Gaddy's services. He did indicate, however, a willingness to seek court approval of the claim evaluation work Gaddy had previously performed if the plaintiffs were successful in establishing their royalty claims. In February 2006, Mr. Lane informed Gaddy that he would need to submit an invoice to the circuit court reflecting hourly rate charges for its claim evaluation work. On January 31, 2007, during the week after the jury verdict was returned in Tawney, Gaddy submitted an invoice to Bowles Rice for the amount of $367,225. This invoice, which we refer to as the “Bullock invoice,” purported to charge for work performed by Mr. Bullock on a weekly basis from January 1, 2000, through the end of 2006. Because the invoice reflected time for work that preceded any agreement between the respondents and Gaddy by more than four years as well as charges for work that clearly post-dated the “opt out” date of October 15, 2004, Mr. Lane told Mr. Bullock he could not submit that invoice to the trial court for payment approval. Based on Mr. Lane's insistence that a new invoice reflecting work performed by Gaddy beginning in March 2004 would be required, Gaddy submitted a revised invoice to Bowles Rice on February 14, 2007. That invoice, which we refer to as the “McCullough invoice,” set forth a total of $74,275 in charges which pertained primarily to work performed by Gaddy's Vice President Frank McCullough from March 5 through July 27, 2004.
The verdict returned was for more than 400 million dollars.
The amount of fees that Mr. Bullock sought for his time in the matter was $258,400.
While there were no charges included on the McCullough invoice for work performed solely by Mr. Bullock, there were three charges of two to four hours included for work performed by Gaddy employees, which totaled less than one thousand dollars. While all three of these charges occurred in 2006, it appears that they relate to internal meetings among Gaddy employees pertaining in one instance to a review of time charges.
Mr. McCullough began working at Gaddy as an independent contractor in mid–2003 and immediately started looking into the royalty payment issues involving Columbia.
Bowles Rice submitted the McCullough invoice to the circuit court and obtained approval for the work and expenses Gaddy reflected on the invoice. When Bowles Rice tendered payment to Gaddy for the full amount of the McCullough invoice after receiving its counsel fee and expense reimbursements, the payment was refused. Gaddy later instituted this civil action against the respondents on May 14, 2010, asserting claims for breach of contract; professional negligence; negligence; gross negligence; negligent misrepresentation; fraud; conversion; promissory estoppel; unjust enrichment; and quantum meruit.
In its motion to dismiss the complaint, the respondents argued that the doctrine of illegality stood as a bar to the enforcement of the alleged fee-sharing agreement in view of the public policy violation indicated by the Rules of Professional Conduct (the “Rules”). In ruling on the motion to dismiss, the trial court observed that this Court had never addressed the precise question of whether the ethical violation that results from a fee-sharing agreement between a lawyer and a nonlawyer would render the agreement void and unenforceable as a matter of public policy. Looking to the language designated in the “scope” section of the Rules, the trial court found guidance in the language which provides that the rules “are not designed to be a basis for civil liability” but are offered to “provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies.” Citing both the hortative introductory language of the Rules and the lack of governing precedent, the trial court denied the respondents' motion to dismiss.
In moving to dismiss the complaint, the respondents denied the existence of the alleged fee-sharing agreement.
See R. Prof'l Cond. 5.4 (prohibiting fee-sharing agreements between lawyers and nonlawyers).
After discovery had been completed, the respondents filed a motion seeking summary judgment. Upon considering the respondents' argument that application of the doctrine of impracticability excused the performance of any alleged fee-sharing agreement, the trial court agreed and granted summary judgment to the respondents as to the petitioner's breach of contract claim by order entered on September 19, 2011. In its subsequent ruling, which was entered on January 12, 2012, the trial court granted summary judgment to the respondents on the remaining counts of the complaint, expressly finding no genuine issues of material fact as to any of the multiple claims asserted by the petitioner. It is from these adverse rulings that the petitioner seeks relief.
See Syl. Pt. 2, Waddy v. Riggleman, 216 W.Va. 250, 606 S.E.2d 222 (2004).
II. Standard of Review
Our review of the trial court's grant of summary judgment is de novo. See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). It is axiomatic that summary judgment “should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law.” Syl. Pt. 3, Aetna Cas. & Sur. Co. v. Fed. Ins. Co., 148 W.Va. 160, 133 S.E.2d 770 (1963). Against these standards, we proceed to determine whether the trial court's decision to grant summary judgment to the respondents was in error.
III. Discussion
A. Doctrine of Impracticability
In its first order granting summary judgment in this matter, the trial court addressed the applicability of the doctrine of impracticability to the petitioner's breach of contract claim. Once the land companies decided to participate in the Tawney class action, the respondents contend that the parties were no longer capable of performing the alleged fee-sharing agreement as that agreement presumed that Bowles Rice would individually prosecute the claims of the land companies. As a consequence, the respondents argued that even if a jury should find the existence of a fee-sharing agreement between the parties, the doctrine of impracticability would excuse their performance of all obligations under the agreement.
This doctrine, which was previously referred to as the doctrine of impossibility, developed through the common law as a means of alleviating, in limited circumstances, the harsh results brought about by requiring absolute contractual performance. See Waddy v. Riggleman, 216 W.Va. 250, 256, 606 S.E.2d 222, 228 (2004). Adopting the modern position—the rule of impracticability—this Court held in syllabus point two of Riggleman:
Under the doctrine of impracticability, a party to a contract who claims that a supervening event has prevented, and thus excused, a promised performance must demonstrate each of the following: (1) the event made the performance impracticable; (2) the nonoccurrence of the event was a basic assumption on which the contract was made; (3) the impracticability resulted without the fault of the party seeking to be excused; and (4) the party has not agreed, either expressly or impliedly, to perform in spite of impracticability that would otherwise justify his nonperformance.
Id. at 252, 606 S.E.2d at 224.
Our holding in Riggleman was informed by the Restatement (Second) of Contracts section entitled Discharge by Supervening Impracticability, which provides:
Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
216 W.Va. at 257, 606 S.E.2d at 229 (quoting Restatement (Second) of Contracts § 261 (1979)).
In its ruling, the circuit court found that the fee-sharing agreement alleged by Gaddy presupposed that Bowles Rice would individually prosecute civil actions against Columbia on behalf of the land companies; that Bowles Rice would enter into a contingent fee agreement with each of those land company clients entitling it to a fee of one-third of any recovery; that Bowles Rice would rely on Gaddy to provide expert litigation support services for the claims against Columbia; and that Bowles would tender to Gaddy one-third of its one-third fee in the event of any recovery. As the trial court reasoned, in applying the factors set forth in Riggleman, the non-occurrence of the presupposed events rendered performance by Gaddy and the respondents impracticable. In reaching that decision, the trial court determined that the respondents did not control the decision of the landowner clients with regard to their participation in the Tawney class action; did not have control of the Tawney litigation; did not enter into contingency fee agreements with the landowner clients; and did not have control over the decision to hire an expert consultant in the Tawney case.
Central to the application of the doctrine of impracticability is a determination that the party who seeks to be excused from performancewas not at fault or had no control as to the nonoccurrence of the presupposed event upon which the contract depended. See Frederick Mgt. Co. v. City Nat'l Bank, 228 W.Va. 550, 560, 723 S.E.2d 277, 287 (2010) (holding that genuine issues of fact regarding fault of party seeking to be excused from contract performance prevented application of doctrine of impracticability). In this case, the trial court found that “the uncontradicted evidence is that Bowles Rice and J. Thomas Lane did not cause, directly or indirectly, the large landowner group of clients to decide to remain in the Tawney class action litigation.” As the circuit court reasoned, [t]his was the event that set in motion the impracticability of performance by both Plaintiff Gaddy and Defendants Bowles Rice and J. Thomas Lane.”
In challenging the trial court's ruling on this issue, Gaddy maintains that it provided litigation support for the plaintiffs in the Tawney case. The record does not support this contention. The bulk of the work that Gaddy performed, and for which it sought and the court approved payment, predated the October 2004 “opt out” date. When Mr. Lane refused to submit the Bullock invoice purporting to delineate work performed from 2000 to 2006, and then Mr. Bullock subsequently transmitted the McCullough invoice to Mr. Lane as a replacement document without any correspondent charges for his time, Mr. Bullock essentially acknowledged that the first invoice was fabricated. And, when Mr. Lane, upon his receipt of the McCullough invoice, inquired of Mr. Bullock regarding an additional invoice reflecting his personal time charges, Mr. Bullock stated by means of electronic correspondence dated February 11, 2007, that he would not be submitting a separate invoice as he “didn't keep good enough record.” [sic]
See supra note 16.
The record in this case supports the trial court's finding that “the undisputed evidence ... shows that Gaddy in fact did stop working on these claims in 2004, at the time the large landowner clients refused Defendant Lane's recommendation and elected to remain as class members in the Tawney litigation.” Mr. Bullock's affidavit, as the respondents point out, lacks any chronological point of reference regarding his “perform[ance of] an enormous amount of work that took years to complete.” That vague avowal and the complete lack of any time submission by Mr. Bullock for the relevant time period (February/March 2004 to October 2004) suggests that whatever time Mr. Bullock personally invested in the matter preceded the decision of the parties to jointly investigate the royalty underpayment issues. Moreover, there is no evidence that the respondents agreed, as part of the alleged fee-sharing agreement, to share fees with Gaddy even if the presupposed events did not transpire (i.e. to perform despite the occurrence of impracticability). Having determined that the trial court correctly applied the doctrine of impracticability, we find no error in the trial court's decision to grant summary judgment as to the breach of contract claims under this doctrine.
In explanation of what work he performed, Mr. Bullock stated:
I regularly conducted research into Columbia Gas' post-production expenses, administrative expenses, and impression expenses. I also researched Columbia Gas' Securities and Exchange Commission (SEC) filings and compared those filings with the filings of other gas companies.... I contacted numerous land companies, engineers, and attorneys to discuss the legality of Columbia Gas' actions. I also coordinated numerous meetings with potential litigants against Columbia Gas.
The respondents suggest that Mr. Bullock's affidavit, signed a month and a half after his deposition was taken, conflicts with his deposition testimony and thus renders it a “sham affidavit.” See Kiser v. Caudill, 215 W.Va. 403, 410, 599 S.E.2d 826, 833 (2004). At his deposition, Mr. Bullock stated that he had no idea whether any of Gaddy's work product had been used in the Tawney case. As to the question of whether Gaddy had been asked by Bowles Rice to do any work relating to Columbia once the claim evaluation work performed by Mr. McCullough was completed, Mr. Bullock could not provide an affirmative answer. Mr. Bullock did testify, however, that he, personally, was not asked to do any work after the claim evaluation period ended.
B. Attorney–Client Relationship
In its order of September 19, 2011, the trial court determined that there were no genuine issues of material fact with regard to whether there was an attorney-client relationship between Gaddy and the respondents. The circuit court ruled that
only one conclusion can be drawn from the undisputed facts, and it is that the relationship was one between a law firm representing certain clients on the one hand and, on the other, a litigation support service provider engaged by the law firm/attorney to provide services for those same clients in anticipated litigation.
To challenge this ruling, Gaddy offered the deposition testimony of one of its employees—Mr. McCullough—where he indicated his personal opinion that Bowles Rice was Gaddy's attorney as well as Mr. Lane's proffer of “advice” to Gaddy that it not appear at the hearing before the circuit court in Tawney on the issue of fees and expenses.
There was never any assertion, as the respondents make clear, that Gaddy had any intention of being a party-plaintiff in any litigation that might ensue against Columbia. A review of the submitted record in this matter demonstrates a working relationship between Gaddy and the respondents for the purpose of evaluating potential royalty underpayment claims for their mutual clients. The record does not support Gaddy's contention that the respondents undertook a client-lawyer relationship with regard to Gaddy. Furthermore, as the respondents note, Gaddy never articulated any breach of a professional duty owed to it by them or offered any evidence tending to support any alleged breach. Finding no error as to the trial court's ruling on the lack of an attorney-client relationship between Gaddy and the respondents, we coextensively find no error in the trial court's decision to grant summary judgment on the petitioner's professional negligence claim.
Gaddy's failure to produce any billing statements from the respondents “for services rendered” further supports the lack of any client-lawyer relationship between the parties.
C. Fraud
The petitioner's fraud claim is wholly predicated on the alleged fee-sharing agreement. After reasserting the terms of the alleged agreement, the petitioner avers that the respondents made unspecified material and false representations with regard to the alleged promise to share the prospective contingency fee. In its analysis of the fraud claim, the trial court stated:
The undisputed material facts demonstrate that Gaddy's evidence is ... that a promise was made by Defendants to pay Gaddy 1/3 of a 1/3 contingency fee and a failure to pay such sum. Gaddy has no evidence that Bowles Rice or Mr. Lane made any “intentional misrepresentation of a past or existing fact.”
In proceeding to grant summary judgment on this claim, the trial court recognized: “ ‘Fraud cannot be predicated on a promise not performed. To make it available there must be a false assertion in regard to some existing matter by which a party is induced to part with his money or his property.’ Syllabus Point 1, Love v. Teter, 24 W.Va. 741 (1884).” Syl. Pt. 3, Croston v. Emax Oil Co., 195 W.Va. 86, 464 S.E.2d 728 (1995).
Further addressing the scope of fraud, we explained in Croston that
[A]ctionable fraud must ordinarily be predicated upon an intentional misrepresentation of a past or existing fact and not upon a misrepresentation as to a future occurrence. Somewhat similarly, it cannot be based on statements which are promissory in nature or which constitute expressions of intention, unless the non-existence of the intention to fulfill the promise at the time it was made is shown.
Id. at 90, 464 S.E.2d at 732 (emphasis supplied). As was the case in Croston, there is no evidence that any representations made by the respondents were untruthful expressions of intention; what the evidence demonstrates instead is “that subsequent events rendered the execution of the intention ... [impossible].” Id. at 91, 464 S.E.2d at 733. Simply put, the petitioner has fundamentally failed to demonstrate the critical elements necessary to prove fraud. See Syl. Pt. 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66 (1981).
As we held in Lengyel,
The essential elements in an action for fraud are: “(1) that the act claimed to be fraudulent was the act of the defendant or induced by him; (2) that it was material and false; that plaintiff relied upon it and was justified under the circumstances in relying upon it; and (3) that he was damaged because he relied on it.” Horton v. Tyree, 104 W.Va. 238, 242, 139 S.E. 737 (1927).
167 W.Va. at 272–73, 280 S.E.2d at 67, syl. pt. 1.
Rather than citing to intentional misrepresentations that the respondents made about existing or past facts to prove its fraud case, the petitioner simply redoubled its efforts in trying to prove the existence of the alleged oral fee-sharing agreement. And, by taking this tack, the petitioner has demonstrated what the respondents argued: that the fraud claims asserted by petitioner were simply breach of contract claims masquerading as fraud claims. In seeking to prevent the recasting of a contract claim as a tort claim, courts often apply the “gist of the action” doctrine. Under this doctrine, recovery in tort will be barred when any of the following factors is demonstrated:
While the petitioner points to electronic communications from Mr. McCullough to Mr. Lane in which Mr. McCullough sought on several occasions in 2007 to obtain a written acknowledgment of a “verbal understanding” of an alleged agreement, the record is utterly devoid of any such writing by which the respondents agreed to a fee-splitting arrangement.
(1) where liability arises solely from the contractual relationship between the parties; (2) when the alleged duties breached were grounded in the contract itself; (3) where any liability stems from the contract; and (4) when the tort claim essentially duplicates the breach of contract claim or where the success of the tort claim is dependent on the success of the breach of contract claim.
Star v. Rosenthal, 884 F.Supp.2d 319, 328–29 (E.D.Pa.2012); accord Backwater Props., LLC v. Range Resources–Appalachia, LLC, No. 1:10CV103, 2011 WL 1706521 at *6 (N.D.W.Va.2011) (recognizing that “[u]nder the ‘gist of the action’ doctrine, a tort claim arising from a breach of contract may be pursued only if the action in tort would arise independent of the existence of the contract”) (internal citations omitted and quoting Syl. Pt. 9, in part, Lockhart v. Airco Heating & Cooling, Inc., 211 W.Va. 609, 567 S.E.2d 619 (2002)); Cochran v. Appalachian Power Co., 162 W.Va. 86, 92–93, 246 S.E.2d 624, 628 (1978) (stating that “where the gist of the action is the breach of contract ... additional averments ... will not convert the cause of action into one for tort”) (quoting 1 Am. Jur. 2d Actions § 8 (1962)).
Succinctly stated, whether a tort claim can coexist with a contract claim is determined by examining whether the parties' obligations are defined by the terms of the contract. See Goldstein v. Elk Lighting, Inc., No. 3:12–CV–168, 2013 WL 790765 at *3 (M.D.Pa.2013). While the trial court's grant of summary judgment on the fraud claim was not decided pursuant to the “gist of the action” doctrine, we think it is obvious that the petitioner's fraud claims were clearly contract claims disguised as tort claims as the source of the alleged breach of duties was the alleged fee-sharing agreement and not “the larger social policies embodied by the law of torts.” Goldstein, at *3.
Because we find no error in the trial court's determination that the petitioner failed to introduce evidence of an intentional misrepresentation of a past or existing fact made by the respondents, we find no basis for disturbing the grant of summary judgment on the petitioner's claim of fraud.
D. Negligence, Gross Negligence and Intentional Breach
These claims, combined in one count of the complaint, were supported by the bare bones averment that “Defendants negligently, fraudulently and intentionally breached their agreement with, and duty to” the petitioner. The trial court dispensed with this count by ruling that “this is nothing more than Gaddy's breach of contract claim couched in tort terminology” and referenced its previous grant of summary judgment on the contract claim. Referring to the need for a legal duty upon which to predicate an alleged tort, the circuit court opined: “The only basis alleged by Gaddy for a legal duty owed to it by Mr. Lane and Bowles Rice is the alleged attorney-client relationship, and the Court has already ruled that there was no such relationship between Gaddy and the defendants.”
In challenging this ruling, Gaddy asserted that in every contract there is a covenant of good faith and fair dealing. However, as the respondents observe, this covenant “does not provide a cause of action apart from a breach of contract claim.” Highmark West Virginia, Inc. v. Jamie, 221 W.Va. 487, 492, 655 S.E.2d 509, 514 (2007). It has been observed “that the West Virginia Supreme Court of Appeals has declined to recognize an independent claim for a breach of the common law duty of good faith and has instead held that such a claim sounds in breach of contract.” Corder v. Countrywide Home Loans, Inc., No. 2:10–0738, 2011 WL 289343 at *3 (S.D.W.Va.2011) (internal quotation marks and citation omitted). Given the clear contractual nature of this claim and the circuit court's proper grant of summary judgment to the contract-based claims, we find no error in the trial court's decision to grant summary judgment on the petitioner's claims of negligence, gross negligence, and intentional breach.
E. Negligent Misrepresentation
The circuit court concluded that this count, like the previous count, was directly tied to the breach of contract allegations. As with the group of claims couched in negligence, the previous disposition of the contract claim and the lack of any duty owed to Gaddy by the respondents compel the conclusion that the trial court's grant of summary judgment on the petitioner's claim of negligent misrepresentation was not made in error.
F. Conversion
This claim, like the others, is predicated on the alleged fee-sharing agreement. Gaddy argues that the respondents' failure to give it one-third of the attorney's fees it was awarded in Tawney amounted to a wrongful conversion of property which belonged to Gaddy. Critical to any claim for conversion, however, is “title or right of possession.” See Thompson Dev., Inc. v. Kroger Co., 186 W.Va. 482, 487, 413 S.E.2d 137, 142 (1991) (citation omitted). As the circuit court opined, “[b]ecause Gaddy has not demonstrated a right to possession of any portion of the Bowles Rice fee, its claim for conversion fails.” Accordingly, we find no error in the trial court's decision to award summary judgment on the petitioner's claim of conversion.
G. Promissory Estoppel
Gaddy asserted in its complaint that the respondents “are estopped from claiming ownership of and retaining” its money with reference to the award of attorney's fees in the Tawney case. The trial court concluded that the doctrine of promissory estoppel has no application to this case. We agree. While Gaddy argues that it “has proven that it relied on the promise that ... [Mr.] Lane made to its detriment,” the record in this case fails to show the existence of that alleged fee-sharing agreement. And, the petitioner, as the respondents observe, specifically chose not to accept payment of the fees that it previously submitted for the trial court's approval. Absent proof of the alleged agreement, we cannot conclude that the trial court erred in determining that summary judgment was warranted on the petitioner's promissory estoppel claim.
We wish to make clear that this Court is not deciding the issue of whether Mr. Lane made any type of oral promise to share fees with Gaddy. The issues before us do not require that we make such a determination.
The respondents remain prepared to retender these funds to Gaddy.
H. Unjust Enrichment
It is axiomatic that property which is the subject of an unjust enrichment claim must have been acquired by means of fraud or other similar circumstances which negate the property holder's continued retention of the subject property. See Annon v. Lucas, 155 W.Va. 368, 382, 185 S.E.2d 343, 352 (1971) (recognizing that relief for unjust enrichment is provided where “property which has been acquired by fraud, or ... it is against equity that it should be retained by the person holding it”). Because the trial court had previously rejected the petitioner's claim of fraud, the trial court concluded that this claim must likewise fail. In challenging this ruling, Gaddy merely states its disagreement with the trial court's decision to grant judgment against it on the claim of fraud. We find no basis for concluding that the trial court committed error in granting summary judgment on the petitioner's claim grounded in unjust enrichment.
I. Quantum Meruit
From the outset, Gaddy recognized that it might not be able to establish an enforceable contract and thus included a count in its complaint through which it asserted entitlement to recovery under quantum meruit. By definition, “such a claim requires as an element of recovery that the services at issue were performed under such circumstances by the individual seeking recovery that he reasonably expected to be paid for such services by the person sought to be charged.” Copley v. Mingo Co. Bd. of Educ., 195 W.Va. 480, 486–87, 466 S.E.2d 139, 145–46 (1995). Examining the petitioner's claim that it was entitled to more than the fees submitted in the McCullough invoice, the trial court initially focused on the fact that Gaddy was not asked by Bowles Rice to perform any additional work after the claim evaluations were completed in July 2004 and that Gaddy did not “dispute [the respondents' contention] that its work product was never used in Tawney.” In addition, the circuit court referenced Mr. Bullock's “failure to keep sufficient record of his work or time devoted to the Columbia matter to be able to create an invoice for that work.”
After considering Gaddy's submitted documentation of its work during the relevant time period, the trial court rejected Gaddy's claim for quantum meruit relief but ruled that “Gaddy is entitled to receive the sum of $74,275.00 reflected in the McCullough invoice.” Barring any further submission of legitimate invoices, the trial court had no other basis from which to determine that Gaddy was entitled to be paid more money. The petitioner complains that the amount reflected in the McCullough invoice “is not enough to compensate Gaddy for its work.” While that may be true in the abstract, other than the charges included in the McCullough invoice, there was simply no verifiable proof of work that Gaddy performed relevant to this matter. Accordingly, we find no error in the trial court's decision to grant summary judgment on the petitioner's claim seeking relief in quantum meruit.
See supra note 29.
IV. Conclusion
Based on the foregoing, the decision of the Circuit Court of Roane County is affirmed.
Affirmed. Justice DAVIS and Justice LOUGHRY concur and reserve the right to file concurring opinions.
Justice KETCHUM dissents and reserves the right to file a dissenting opinion.
LOUGHRY, Justice, concurring, and DAVIS, Justice, joining:
While I agree with the decision reached by the majority to affirm the trial court's grant of summary judgment, I find it necessary to write separately to fault the majority for its absolute failure to recognize the critical need—as the body charged with the responsibility to both oversee and enforce this state's rules of professional conduct —to address the illegality of a fee-sharing agreement between a lawyer and a nonlawyer. From the outset of this case, the respondents sought to dismiss the case on the grounds that the alleged fee-sharing agreement was an illegal contract and, thus, unenforceable. See Syllabus Ben Lomond Co. v. McNabb, 109 W.Va. 142, 153 S.E. 905 (1930) (holding that contracts aimed at accomplishing fraudulent or illegal purposes are unenforceable). In denying the motion, the trial court found the lack of precedent on the issue to be determinative. Despite the clear invitation from the trial court to resolve this previously unaddressed issue, the majority opted not to decide that a fee-sharing agreement between a lawyer and a nonlawyer that is in violation of Rule 5.4 of the Rules of Professional Conduct is unenforceable as being contrary to the public policy of this state. In so doing, I believe that the majority did a serious disservice to both the bench and the bar of this state.
See Syl. Pt. 3, in part, Comm. on Legal Ethics v. Blair, 174 W.Va. 494, 327 S.E.2d 671 (1984) (recognizing that “[t]his Court is the final arbiter of legal ethics problems”).
As further support its ruling, the trial court wrongly relied upon Watson v. Pietranton, 178 W.Va. 799, 364 S.E.2d 812 (1987). That case, which upheld a fee-splitting agreement between lawyers, is both factually and legally inapposite. Fee-sharing agreements between lawyers and nonlawyers, as is the case here, invoke distinct ethical issues which have at their core the protection of the public. As discussed within this concurrence, it is that crucial need to protect the public's interest which regularly compels the conclusion that fee-sharing agreements between lawyers and nonlawyers violate public policy and are thus unenforceable as illegal agreements.
While the grant of summary judgment was on different grounds, this Court was free to affirm the lower court's ruling on grounds other than those relied upon by the trial court. See Schmehl v. Helton, 222 W.Va. 98, 106 n. 7, 662 S.E.2d 697, 705 n. 7 (2008) (“[T]his Court may in any event affirm the circuit court on any proper basis, whether relied upon by the circuit court or not.”); Murphy v. Smallridge, 196 W.Va. 35, 36–37, 468 S.E.2d 167, 168–69 (1996) (“An appellate court is not limited to the legal grounds relied upon by the circuit court, but it may affirm or reverse a decision on any independently sufficient ground that has adequate support.”).
In resolving whether the violation of a rule of professional conduct constitutes a public policy violation, the trial court stated:
The court is of the opinion, then, that the W.Va. Rules of Professional Conduct do not amount to positive statements of the law or of public policy sufficient to render the alleged fee-sharing agreement between Gaddy and Defendants void and unenforceable. In other words, these words do not define “illegal conduct” but do define “unethical conduct” for which an attorney may be disciplined or sanctioned by the Supreme Court of Appeals.
Numerous other courts, when presented with the issue of whether rules which govern attorney conduct constitute statements of public policy, have resoundingly determined that rules of professional conduct contain explicit declarations of a state's public policy. See Fields v. Ratfield, No. A132766, 2012 WL 5359775 at *9 (Cal.App.2012) (“The Rules of Professional Conduct are not only ethical standards to guide the conduct of members of the bar; but they also serve as an expression of public policy to protect the public.”) (internal quotation marks omitted); Cruse v. O'Quinn, 273 S.W.3d 766, 776 (Tex.App.2008) (finding that disciplinary rules constitute an expression of Texas public policy on issue of fee-sharing agreements); Evans & Luptak, PLC v. Lizza, 251 Mich.App. 187, 650 N.W.2d 364, 370 (2002) (recognizing “fundamental principle that contracts that violate our ethical rules violate our public policy and therefore are unenforceable”); Brandon v. Newman, 243 Ga.App. 183, 532 S.E.2d 743, 747 (2000) (upholding trial court's ruling that state bar disciplinary provisions establish public policy of disapproving of fee-sharing agreements with nonlawyers); Albert Brooks Friedman, Ltd. v. Malevitis, 304 Ill.App.3d 979, 238 Ill.Dec. 46, 710 N.E.2d 843, 846 (1999) (“Supreme court rules have the force of law and are indicative of public policy in the area of attorney conduct”).
In Martello v. Santana, 713 F.3d 309 (6th Cir.2013), the Sixth Circuit Court of Appeals recently affirmed the district court's decision that a fee-sharing contract between a physician and an attorney was unenforceable as being void against public policy. As the appellate court related, “[c]entral to its breach of contract determination was the district court's belief that the Kentucky Rules of Professional Conduct inform public policy, and that Martello's agreements with Santana violated Rule 5.4” which bars fee agreements between lawyers and nonlawyers. 713 F.3d at 312–13. Specifically rejecting the appellant's argument that “public policy can only be created by the Kentucky Legislature,” the Sixth Circuit reasoned that “the Kentucky Rules of Professional Conduct are public policy set by the Kentucky Supreme Court.” Id. at 313. As further support for its conclusion, the Sixth Circuit observed that the Restatement (Second) of Contracts, in referring to the use of legislation to identify public policy violations, defines “legislation ‘in the broadest sense to include any fixed text enacted by a body with authority to promulgate rules....' ” Id. (quoting Restatement (Second) of Contracts § 178 cmt. (1981)).
.Rule 5.4 of the Kentucky Rules of Professional Conduct mirrors this Court's Rule 5.4, a codification of the Model Rules of Professional Conduct adopted by the ABA, which provides in pertinent part that “[a] lawyer or law firm shall not share legal fees with a nonlawyer....” W.Va. R. Prof'l Cond. 5.4.
Addressing the issue of whether fee-sharing agreements between lawyers and nonlawyers violate public policy, the Supreme Court of Indiana reasoned as follows in Trotter v. Nelson, 684 N.E.2d 1150 (Ind.1997), abrogated on other grounds by Liggett v. Young, 877 N.E.2d 178 (Ind.2007):
The Rules of Professional Conduct, as enacted by this Court, contain both implicit and explicit declarations of public policy. The Indiana Rules of Professional Conduct exist, to a large extent, as a means of protecting the interests of the public as potential clients. “These Rules and this Court's willingness to enforce them help ensure that the public is well served by the bar. Forces that undermine the standards on which the Rules of Professional Conduct are founded disserve the public by weakening the client-lawyer relationship.
Id. at 1153 (footnote and internal citation omitted). Continuing its discussion, the Court in Trotter underscored the heightened import of the Rules that are framed imperatively:
Certain of the Rules are explicit declarations of what an attorney can or cannot do. They are “cast in the terms ‘shall’ or ‘shall not.’ ” Prof. Cond. R. Preamble, Scope. Some of these imperatives concern agreements that an attorney can or cannot enter into. The Rules at issue in this case (Rules 5.4(a) and 7.3(f)) are such imperatives. Rules 5.4(a) and 7.3(f) are explicit judicial declarations of Indiana public policy and, akin to contravening a statute, agreements in violation of these rules are unenforceable.
684 N.E.2d at 1153 (emphasis supplied).
The reasons for the general prohibition against fee-splitting agreements are detailed in Trotter:
.Rule 5.4 contains exceptions to the general prohibition, none of which apply to this matter. See R. Prof'l Cond. 5.4 (setting forth exceptions that pertain to payments following a lawyer's death and permit inclusion of nonlawyer employees in compensation or retirement plans).
Rule 5.4(a) prohibits an attorney from sharing legal fees with a nonlawyer. This Rule states the public policy against fee-splitting with a nonlawyer.... [F]ee-splitting with a nonlawyer is disfavored because of its potential affect on the client-attorney relationship. For example, fee-splitting with a nonlawyer provides the incentive for a nonlawyer to recommend an attorney's services for their own pecuniary interests rather than the client's legal best interests. Furthermore, fee-splitting provides a potential disincentive to the attorney to devote their full time and energy to the client, as the attorney must share fees with another who has done little to earn it. Finally, fee-splitting might interfere with the attorney's “professional independence of judgment.” Thus, in general, fee-splitting agreements with a nonlawyer are contrary to Indiana public policy and unenforceable.
684 N.E.2d at 1154–55 (internal citations omitted); accord O'Hara v. Ahlgren, Blumenfeld & Kempster, 127 Ill.2d 333, 130 Ill.Dec. 401, 537 N.E.2d 730, 734–35 (1989) (discussing “variety of harms” associated with fee-sharing agreements and recognizing that “[t]he public is best served ... by [attorney] recommendations uninfluenced by financial considerations”).
All decisions that involve issues of public policy have at their core a recognized need to act in furtherance of the public's interest. Observing the difficulty in formulating a precise definition of public policy, we articulated in Cordle v. General Hugh Mercer Corp., 174 W.Va. 321, 325 S.E.2d 111 (1984):
All are agreed that its meaning is as “variable” as it is “vague,” and that there is no absolute rule by which courts may determine what contracts contravene the public policy of the state. The rule of law, most generally stated, is that “ public policy ” is that principle of law which holds that “no person can lawfully do that which has a tendency to be injurious to the public or against public good * * * ” even though “no actual injury” may have resulted therefrom in a particular case “to the public.” It is a question of law which the court must decide in light of the particular circumstances of each case.
Id. at 325, 325 S.E.2d at 114 (quoting Allen v. Commercial Cas. Ins. Co., 131 N.J.L. 475, 37 A.2d 37, 38–39 (1944) and emphasis supplied). That the prohibition of fee-sharing agreements between lawyers and nonlawyers set forth in Rule 5.4 of the Rules of Professional Conduct is rooted in the need to protect the public from various potential injuries is clear. See O'Hara, 130 Ill.Dec. 401, 537 N.E.2d. at 734;Trotter, 684 N.E.2d at 1154;see also Malevitis, 238 Ill.Dec. 46, 710 N.E.2d at 847 (“A single focus animates our rules of professional conduct and the common law of this state: the client's best interest.”). In view of this recognized need to protect the public from the harmful consequences of fee-sharing agreements, and like the majority of courts that have addressed the concerns at issue, this Court should have reached the conclusion that a fee-sharing agreement between a lawyer and a nonlawyer that is in violation of Rule 5.4 of the Rules of Professional Conduct is unenforceable as being contrary to the public policy of this state.
With regard to the trial court's concern that litigants may not rely upon the Rules in the course of civil actions, this issue has been firmly rejected. In Evans & Luptak, the Michigan Court of Appeals considered the argument that the Michigan Rules of Professional Conduct could not be used as a defense to the plaintiff's breach of contract claim based on the provision within the rules which states that the rules “do not give rise to a cause of action for enforcement of a rule or for damages caused by a failure to comply with an ethical obligation.” 650 N.W.2d at 368 (discussing MRPC 1.0(b)). In rejecting the plaintiff's argument, the court specifically approved of the use of the rules “as a defense that the alleged contract is unethical because it violates our public policy as expressed in the Michigan Rules of Professional Conduct.” 650 N.W.2d at 368 (emphasis in original). Similarly, the court rejected any reliance on the language which indicates that the rules are for disciplinary purposes only and that they may not be used to support or shield against civil liability. Id. at 369. As the court observed in Evans & Luptak, it would be absurd for the judicial system to assist a party to enforce an agreement that is in furtherance of a purpose which violates public policy. Id. Succinctly stated, “a party to a contract which is contrary to public policy is not precluded from raising its illegality as a defense.” O'Hara, 130 Ill.Dec. 401, 537 N.E.2d at 738.
There is an obvious distinction between the concern expressed in the scope section of the Rules that they are not to serve as a basis for civil liability and the assertion by a defendant of a rule in defense to the enforcement of an allegedly illegal contract. The respondents neither sought to invoke the Rules as a procedural weapon nor to demonstrate the existence of a legal duty as a result of a breach of the Rules. See R. Prof'l Cond., scope.
The fact that one party may benefit from an illegal fee-sharing agreement does not tip the proverbial scales of justice in favor of enforcement. As one court observed,
Martello asserts that voiding these contracts would create a windfall for Santana at Martello's expense. This argument, while possibly true, is unpersuasive. The Rules of Professional Conduct were not created to protect non-lawyers who enter into contracts with attorneys, but were instead designed to ensure both that the judicial process is ethical and to protect potential clients.
Martello, 713 F.3d at 314;accord Trotter, 684 N.E.2d at 1155 (“[W]hen a court determines that a contract must be declared void as against public policy, it does so on the grounds that the good of the public as a whole must take precedence over the circumstances of the individual, no matter the hardship or inequities that may result.”); see also Infante v. Gottesman, 233 N.J.Super. 310, 558 A.2d 1338, 1344 (1989) (“While we recognize that our decision may unjustly enrich defendant to the extent that he has received the benefit of any investigative and paralegal services performed by plaintiff, the pervasive proscriptions against such agreements require that we not render any assistance to these parties.”); O'Hara, 130 Ill.Dec. 401, 537 N.E.2d at 737–38 (rejecting plaintiff's argument that lay persons be permitted to enforce fee-sharing agreement, stating that “[b]y refusing in every case to assist the lay party, courts may deter laypersons as well as attorneys from attempting such agreements” and “in this way, the public will be protected more effectively from the potential harms posed by fee-sharing agreements”).
To borrow from the astute observation of an esteemed former member of this Court: “For the majority to completely fail to tackle at least an examination of the ethical considerations of the ... fee [sharing agreement] ..., undermines this Court's responsibility to uphold the ethical principles of the legal profession and sends the wrong message to the members of our Bar.” Bass v. Coltelli–Rose, 207 W.Va. 730, 739, 536 S.E.2d 494, 503 (2000) (Scott, J., dissenting).
For these reasons, Justice Davis and I concur. Justice KETCHUM, dissenting:
A great injustice has been done in this case. Gaddy Engineering Company contends that (1) it discovered that a gas company was underpaying its natural gas lessors; (2) it met with J. Thomas Lane of the law firm Bowles Rice, explained what it had found and proposed that the two parties work together to identify lessors and obtain clients who had been underpaid in order to bring a lawsuit against the gas company; (3) Bowles Rice liked the idea and the two parties entered into an oral agreement to jointly work on the case and to split the fee recovered from the lawsuit; (4) Bowles Rice was to charge a contingent one-third fee to the clients it obtained and Gaddy would get one-third of the contingent fee recovered by Bowles Rice; (5) Gaddy alleged that Mr. Lane of Bowles Rice told Gaddy that lawyers are not allowed to split their fees with non-attorneys, but stated that Bowles Rice would give Gaddy one-third of its recovery and call it a “bonus”; (6) after both parties obtained clients and performed work under the terms of the agreement, Bowles Rice recovered a fee of approximately $4,000,000.00 from a class action settlement ; and (7) when Gaddy asked Bowles Rice for its share of the fee according to the terms of their agreement, Bowles Rice essentially replied, “Agreement? What agreement?”
Gaddy employees testified that they were to go out and “chum” clients for the lawsuit.
Gaddy's pretrial memorandum asserts that the fee received by Bowles Rice was $4,000,000.00.
Gaddy subsequently filed a lawsuit against Bowles Rice asking for its share of the $4,000,000.00 fee. The circuit court found that Gaddy presented a genuine issue of material fact on whether the two parties entered into a fee-splitting agreement and concluded that a jury question was presented on this issue. Nevertheless, the court granted summary judgment in favor of Bowles Rice because it concluded that even if an agreement existed, Bowles Rice was excused from performing because of impracticability. This Court's majority decision agreed with the circuit court. Gaddy was denied the opportunity to present its case to a jury. I am deeply troubled by this result.
My review of the record reveals that there is a question of fact regarding whether the agreement Gaddy allegedly entered into with Bowles Rice became impracticable to perform once the Tawney class action was certified. A jury should decide this issue. Also, assuming arguendo that a jury found that the class action rendered the agreement impracticable to perform, Gaddy is nevertheless entitled to potential relief pursuant to the Restatement (Second) of Contracts § 272.
A. Question of Fact on Impracticability
The circuit court granted Bowles Rice's motion for summary judgment, finding that if there was a fee-splitting agreement, it became impracticable to perform because the clients obtained by Bowles Rice and Gaddy decided to join the Tawney class action litigation. Syllabus Point 2 of Waddy v. Riggleman, 216 W.Va. 250, 606 S.E.2d 222 (2004), sets forth our impracticability test:
Under the doctrine of impracticability, a party to a contract who claims that a supervening event has prevented, and thus excused, a promised performance must demonstrate each of the following: (1) the event made the performance impracticable; (2) the nonoccurrence of the event was a basic assumption on which the contract was made; (3) the impracticability resulted without the fault of the party seeking to be excused; and (4) the party has not agreed, either expressly or impliedly, to perform in spite of impracticability that would otherwise justify his nonperformance.
By way of background, Gaddy contends that the agreement was that 1) Gaddy and Bowles Rice would identify lessors with claims against Columbia Natural Resources for the underpayment of natural gas royalties; 2) Gaddy and Bowles Rice would get those lessors to hire them to pursue litigation against Columbia; and 3) the case would proceed to litigation and Gaddy and Bowles Rice would split the fee recovered therein. Gaddy alleged that Bowles Rice agreed to give Gaddy one-third of the fee Bowles Rice recovered in the litigation against Columbia. Both parties performed the first two parts of the agreement: they jointly identified a number of clients and got them to hire Bowles Rice to pursue litigation against Columbia. After Gaddy and Bowles Rice jointly identified these clients, the Tawney class action, led by another lawyer, was filed. All of the Gaddy/Bowles Rice clients opted to join the Tawney class action in 2004. Nevertheless, Bowles Rice appeared in the class action on behalf of the clients it identified with Gaddy. These large landowner clients comprised a subclass in the class action.
Gaddy presented evidence showing that it continued working on the case after the class action was certified. The Tawney class action resulted in a $400,000,000.00 verdict for the plaintiffs in the class. The circuit court approved an attorney fee award of $125,000,000.00. Bowles Rice received a substantial fee, approximately $4,000,000.00 as a result of this successful litigation.
The circuit court determined that the agreement between Gaddy and Bowles Rice became impracticable to perform once their clients joined the class action. In so ruling, the circuit court relied largely on its finding that Gaddy performed no work in the case after the class was certified. This ruling ignores evidence Gaddy presented that creates a question of fact on this issue. This evidence includes an affidavit filed by John Bullock, the president of Gaddy, which states
Our longstanding summary judgment jurisprudence is clear that a circuit court is not to weigh the evidence at the summary judgment stage, rather, the circuit court's function is to determine whether a genuine issue of disputed fact exists. Syllabus Point 3 of Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994), states “[t]he circuit court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter, but is to determine whether there is a genuine issue for trial.”
I performed an enormous amount of work that took years to complete.... I contacted numerous land companies, engineers, and attorneys to discuss the legality of Columbia Gas' actions.... Gaddy relied on the existence of an agreement and incurred substantial time and costs in performing work for the Tawney litigation. Gaddy continues to do work for the Tawney claim, even today. Mutual clients of Gaddy and Bowles Rice still contact Gaddy for assistance in settlement distributions.
(Emphasis added.) The circuit court did not discuss this affidavit in its summary judgment order and did not address why Mr. Bullock's statement that Gaddy performed work in the Tawney class action did not create a genuine issue of material fact for a jury to resolve.
In addition to Mr. Bullock's affidavit, Gaddy was awarded $75,000.00 by the circuit court in the Tawney class action for work it performed in the case. This award was based on an invoice Bowles Rice submitted to the Tawney court on Gaddy's behalf. Gaddy refused to accept the $75,000.00 award, arguing that it was entitled to one-third of the fee award Bowles Rice received as the parties had previously agreed upon.
The Gaddy invoice includes three entries from 2006 entitled “Litigation preparation.” The Tawney class action was certified in 2004. The circuit court in the class action approved payment to Gaddy for the “litigation preparation” work it performed in 2006. This is undisputed. This document confirms that there is a question of fact as to whether Gaddy continued to perform work in the case after the Tawney class action was certified. Despite this evidence showing that Gaddy worked on the Tawney class action in 2006, the circuit court concluded that it was undisputed that Gaddy performed no work in the case after the class action was certified. This ruling is baffling. How can a court say Gaddy performed no work in the class action when the same court granted Gaddy a $75,000.00 fee award for work performed in the class action?
The record also includes deposition testimony from Ellen Bullock, a Gaddy employee, who testified that she was at a meeting in February or March of 2007 (three years after the class action was certified) with Mr. Lane of Bowles Rice. Ms. Bullock testified that Mr. Lane stated that the litigation was going well and that Bowles Rice would honor its agreement with Gaddy. This testimony does not provide direct evidence that Gaddy continued working on the case after 2004. However, it shows that Bowles Rice and Gaddy continued communicating well after the class action was certified and raises the following question: if Gaddy stopped working on the case when the class action was certified in 2004, why is Mr. Lane continuing to meet with Gaddy in 2007.
The record contains two further items showing the continuing communication between Gaddy and Bowles Rice after the class action was certified. First, there is a letter from Bowles Rice to Gaddy in July 2007, memorializing a recent meeting between the parties in which Gaddy's fee was discussed. Second, the record includes a transcribed voicemail from Mr. Lane to a Gaddy employee, Frank McCullough, in 2007, in which Mr. Lane states “my goal from the beginning is to figure out a way to compensate Gaddy[.]”
Based on all of the above, Gaddy presented more than enough evidence to overcome a summary judgment motion on the issue of impracticability. It is clear that genuine issues of material fact exist as to whether Gaddy continued to perform after the class action was certified. A jury should be allowed to decide (1) whether Gaddy and Bowles Rice entered into an agreement, and (2) if there was an agreement, whether the Gaddy/Bowles Rice clients joining the class action made it impracticable to perform.
B. Restatement (Second) of Contracts § 272
If a jury found that Bowles Rice was excused from performing under the doctrine of impracticability, Gaddy should still be permitted to seek relief pursuant to the Restatement (Second) of Contracts § 272. This Court has previously adopted §§ 261 and 265 of the Restatement (Second) of Contracts. See Waddy v. Riggleman, 216 W.Va. at 258, 606 S.E.2d at 230. The Restatement (Second) of Contracts § 272 allows a court, that finds that an injustice has been committed, to consider just and equitable remedies when a party is excused from performing its contractual duty because of impracticability. Comment a. of § 272 explains that
[b]ecause the rules stated in this Chapter might otherwise appear to have the harsh effect of denying either party any recovery following the discharge of one party's duty based on impracticability or frustration, this Section makes it clear that several mitigating doctrines may be used to allow at least some recovery in a proper case.
(Emphasis added.) The present case illustrates “the harsh effect” of denying a party any recovery based on impracticability of performance. Gaddy researched Columbia's underpayment of royalties. Gaddy then approached Bowles Rice and pitched the idea of the two parties working together to obtain clients and to pursue litigation against Columbia. Gaddy alleges that the parties performed the first two parts of their agreement, jointly identifying clients and preparing for litigation against Columbia. After their clients joined the class action, neither Gaddy nor Bowles Rice appear to have played a substantial role in the resolution of the class action. At the conclusion of the class action, Bowles Rice received a fee award of approximately $4,000,000.00. Gaddy should be allowed to pursue damages pursuant to § 272 to avoid injustice in this case.
The record includes an email from Gaddy employee Frank McCullough to Mr. Lane of Bowles Rice in March of 2004, describing Gaddy's understanding of the agreement the parties had reached:
Clearly though, the $750 fee (initial fee Gaddy charged to potential claimants), as with your legal evaluation fee, does not cover the true cost of the time expended on the evaluation. Rather, its like fishing—sometimes you have to chum some to gather in the big fish. That is how I view the effort. The big fish will produce some sort of big settlement and I am presuming that there will be some sort of equitable sharing of those proceeds between the folks that make it happen—i.e., the client, Bowles/Lane/George and Gaddy. The more clients the (1) greater probability of having the critical mass I think is important to obtaining an equitable settlement sooner than later and (2) the aggregated larger pot available to split among the participating parties[.]
Based on all of the above, I disagree with the majority decision affirming the grant of summary judgment. Gaddy deserves its day in court.