Opinion
C.A. No. 01C-10-131 CLS.
Submitted: May 4, 2005.
Decided: August 31, 2005.
Joel E. Friedlander, Esquire, Bouchard Margules Friedlander, Wilmington, Delaware, Attorney for Plaintiff.
Stephanie Matthews, Esquire, The Law Office of Stephanie Matthews, Chicago, Illinois, Attorney for Defendants Kimberly I. Gaylord, Lisa M. Gaylord, Lori I. Gaylord, and Robert M. Gaylord, Jr.
Linda M. Gilchrist, Esquire, and Edward M. McNally, Esquire, Morris James Hitchens Williams, Attorneys for Defendant Baise Miller Freer, P.C.
MEMORANDUM OPINION
I. INTRODUCTION
The issue before the Court is whether Defendant Gaylord family ("Gaylords") entered into a capped fee agreement of $250,000 with Plaintiff Bouchard Margules and Friedlander firm ("BMF). A bench trial was held from September 8 through September 10, 2004. The Court reserved decision pending receipt of post-trial briefs. This is the Court's ruling.
II. PARTIES' CONTENTIONS
BMF argues that they did not enter into a capped fee agreement with the Gaylords. Instead, they contend that the agreement was for legal representation at an hourly rate. BMF seeks to recover $60,827.33 from the Gaylords. BMF asserts that it would never have entered into a $250,000 capped fee agreement; taking time and complexity into account, $250,000 would be less than they normally would receive.
In contrast, the Gaylords argue that they entered into a fee contract with Baise Miller Greer, P.C. (Baise Miller) capped at $250,000. They contend that their contract was formed solely with Marshall Miller of Baise Miller. It is their position that BMF contracted with Baise Miller to perform legal services. Accordingly, BMF's fee dispute should be addressed with Baise Miller.
III. FINDINGS OF FACT
The relationship between BMF and the Gaylords commenced in early December, 2000. On November 30, 2000, the Gaylords contacted Marshall Miller of Baise Miller in Washington, D.C. The Gaylords hoped he would assist them in opposing an asset sale by Ingersoll International, Inc. ("Ingersoll"). Ingersoll was a multi-million dollar privately-held Delaware corporation owned by the Gaylords and other descendants of its founder. Miller agreed to file a Temporary Restraining Order in Delaware's Chancery Court on their behalf. He stated that he would have to associate with local, Delaware counsel, specifically, a Skadden Arps attorney. Skadden ran a conflict check and determined that it could not represent the Gaylords. Skadden contacted David Margules of BMF, a former employee of the firm.
During the initial contacts with the Gaylords, Miller convinced them that he had key United States government contacts that could help stop the sale of their company. Miller informed the Gaylords that he had spoken with three-star, Lieutenant General Jim Williams who had operatives waiting to investigate the Israeli-based Iskar. Miller also assured the Gaylords that he had friends in the media who could dig up dirt on the acquiring company. Regardless of his game plan, Miller was going to be the leader of any team put together to stop the sale of Ingersoll.
Tr.I at 229; Tr.II at 146.
Tr.I at 230.
Tr.I at 230.
Margules met with Marshall Miller at Skadden on December 1, 2000. The two spoke with the Gaylords via telephone and learned introductory details of the Ingersoll sale. The Gaylords informed Miller and Margules that they had initiated a lawsuit in Illinois seeking a Temporary Restraining Order contesting a shareholder vote. On November 13, 2000, the Gaylord's TRO had been granted, however, that same day it was dissolved.
In return, Margules informed the Gaylords about his educational background and professional experience. Upon receiving his J.D., Margules worked at Skadden Arps where he specialized in corporate litigation. After several other legal positions, Margules formed his own five-lawyer corporate boutique. He explained that BMF specialized in Chancery Court litigation and that the Gaylord's case was his "bread and butter." Despite the recitation of Margules' work history, the Gaylords were still under the impression that he worked for Skadden, and that they would be paying Skadden for their help in the Ingersoll matter. As of December 1, 2000, the Gaylords had not formally retained Miller or Margules as counsel in the Ingersoll litigation.
Tr. I at 28-30.
Tr.II at 154.
Tr.II at 147.
On December 3, 2000, Miller and Margules went to the Gaylords' home in Rockford, Illinois. The purpose of the visit was two-fold: become acquainted with the Ingersoll sale, and formulate a legal game-plan. In Illinois, the Gaylords, BMF, and Baise Miller agreed to a unified bill for the representation. BMF would submit bills to Baise Miller instead of submitting its own bill to the Gaylords. In addition, an oral agreement was reached for a $100,000 retainer agreement; however, no other contract details were discussed. BMF informed Baise Miller that it wanted to receive $25,000 of the retainer because, at that time, they were going to do 25-30% of the work.
On December 12, 2000, Marshall Miller sent the Gaylords a retention letter that laid forth the unified billing process, the $100,000 retainer, and included a contingency fee clause. The retention letter referred to "The Firm" as in Baise Miller. While Margules' hourly rate was specified in the letter, the letter cautioned "be advised that . . . Mr. Margules . . . [is] not [a] member of this Firm . . . he will be submitting fee statements to us which will be incorporated in our monthly statement of legal services." No mention of a capped fee agreement was included. The Gaylords, shocked at the contingency fee clause, did not sign the contract.
DX 1.
Baise Miller drafted a second retention letter that was again rejected by the Gaylords. The only contract that was memorialized in writing was Margules' letter to Baise Miller stating "[t]his letter confirms that you have engaged this firm to assist you in representing certain minority shareholders . . ." Margules "did not send a written document to the Gaylords stating that they would be responsible for [his] bills."
PX 15.
Tr. I at 128-29.
Meanwhile, BMF reassessed their financial needs in representing the Gaylords. As the preliminary injunction drew closer, Margules knew he would be working solely for the Gaylords. As a result, he needed a higher retainer than $25,000. Miller arbitrarily decided on a new retainer figure, $250,000, because that was the next "notch" up. Marshall Miller contacted the Gaylords and alerted them to his need for an increased retainer.
Tr. I at 251.
Kimberly and Lori Gaylord told Marshall Miller that the $250,000 would have to be approved by their father. Robert Gaylord spoke to Marshall Miller about the $250,000. Miller assured Mr. Gaylord that $250,000 was the outside figure and that he would return any unused portion. Robert Gaylord finally agreed with Marshall Miller that $250,000 was reasonable in light of thirty days work. Mr. Gaylord orally agreed to the increase but not a penny more. Miller did not object to $250,000 as the absolute maximum payment.
Tr. I at 63.
Tr. III at 122.
Id.
Tr. III. At 123.
Throughout December of 2000, BMF worked diligently on Gaylord v. Ingersoll. Margules himself was deeply involved. He drafted myriad complaints including the § 220 and § 225 Motions. He also drafted the following: affidavits for Lori and Robert Gaylord; an opening and reply brief to the preliminary injunction; a scheduling letter to Vice-Chancellor Strine; an expedited proceedings motion; and a plenary lawsuit action. In addition, BMF along with Baise Miller and an Illinois firm, Haldeman Associates, filed a rule to show cause why Ingersoll was not in contempt for violating the November 13 temporary restraining order. This written work was in conjunction with various office conferences with Vice-Chancellor Strine and depositions of key Ingersoll employees.
The Gaylords were kept apprised of the pending litigation through email. Kimberly Gaylord emailed Baise Miller and Margules' stating that Margules had "all my files" in connection with the pending lawsuits. Margules assured the Gaylords that he was working around the clock on the matter in a December 14, 2000 email stating "My dear Ms. G, I am, as always at your disposal." Hopeful that Baise Miller and BMF could stop the asset sale, Kimberly Gaylord encouraged the men "gentlemen, go to our family's destiny."
DX 4.
Id.
Id.
In regard to the preliminary injunction, Vice-Chancellor Strine stressed that he did not want to schedule a Delaware proceeding if it meant there would be dueling proceedings between Delaware and Illinois. The Illinois proceeding was dismissed without prejudice. At the Gaylord's December 15, 2000 office conference for Gaylords v. Ingersoll, Vice-Chancellor Strine set January 2, 2001 as the date for the preliminary injunction hearing.
David Margules argued the Motion for the Gaylord's on January 2, 2001. Vice-Chancellor Strine did not grant the preliminary injunction because, inter alia, half of the two-part sale had been finalized. However, he commended Margules for his "first rate work," "excellent product," and was impressed that, under the circumstances, the plaintiffs still managed to show a reasonable probability of success on the merits.
PX 38 at 233-34.
The first installment of the $250,000 retainer was paid on December 29, 2000 in the amount of $125,000. This amount was deposited by Lori Gaylord into Baise Miller's Salomon Smith Barney escrow account. A week later, on January 4, 2001, BMF submitted their first invoice to Baise Miller billing the Gaylords for $182,823.96. This bill included all services rendered through the preliminary injunction. Baise Miller partially paid the BMF $182,823.96 invoice in the amount of $50,000 on January 10, 2001. As work progressed towards the January 1-2 Chancery proceeding, BMF continued to send invoices to Baise Miller.
DX 9.
As of January 29, 2001, the Gaylords had not received any bills from Baise Miller for work done by either law firm. Lori Gaylord emailed Marshall Miller asking whether the Baise Miller and BMF bills had been sent. The bills were not sent to the Gaylords until Lori requested them. Miller told Lori that he would resend the bills to her Naples, Florida address.
On January 30, 2001, two months into the representation of the Gaylords, David Margules emailed Marshall Miller to express his frustration in not receiving a substantial part of the January 4, 2001 invoice. The next day, Margules sent an invoice to Baise Miller billing Kimberly Gaylord for $11,774.02. The second installment of the $250,000 was paid to the escrow account on February 9, 2001 in the amount of $125,000.
DX 10.
On March 9, 2001, BMF sent Baise Miller a copy of all of the invoices in the Gaylord v. Ingersoll matter. Included was an analysis of the billing. The packet included the January 4 and 31 invoices, and a credit of $647.54 dated February 28, 2001. On March 15, Baise Miller billed Robert Gaylord for $149,514.44. This invoice did not include services rendered by BMF. The next day, Baise Miller paid BMF $84,205.13.
Near the end of March, the Gaylords received the invoices submitted by both Baise Miller and BMF. They were shocked to see that the invoices totaled close to $390,000. Because this figure was over $250,000, they objected immediately. In a letter dated April 3, 2001, Marshall Miller acknowledged the billing impasse of whether there was a $250,000 capped fee agreement between his firm and the Gaylords. Baise Miller and BMF asserted that $140,000 remained to be paid for the representation. Despite the dispute, BMF submitted an invoice to Baise Miller billing Kimberly Gaylord for $67.50.
Tr.III at 23.
Furious by the request for an additional $140,000, Kimberly Gaylord responded to Marshal Miller's April 3 letter. Kimberly Gaylord stated that she orally agreed to $250,000 for all of the work performed and nothing more. Furthermore, she argued, her oral contract was solely with Baise Miller. She stated that her family "had fully honored this agreement by depositing $250,000 in your [Baise Miller's] Salomon Smith Barney escrow account." In addition, she stated that she never agreed to the $140,000. The last two bills BMF submitted to Baise Miller for payment by Kimberly Gaylord were in the amounts of $274.86 and $92.12 respectively. The total amount of money allegedly outstanding to BMF is $60,179.79.
DX 7.
On July 11, 2001, David Margules filed a Motion to Withdraw as counsel for the Gaylord family in the matter of Gaylord v. Doar. On August 10, 2001, Chancellor Strine granted BMF's Motion to Withdraw. Seven months of representation ended.
PX 67.
This Court denied Baise Miller's Motion to Dismiss the Amended Complaint and Motion to Dismiss Cross claim on August 10th, 2004. The motions were denied because they were not timely filed. At that time, this Court also believed Baise Miller to be an indispensable party for resolution of the fee dispute in the present case.
Subsequently, Baise Miller was a party to a declaratory relief action brought by the Gaylords before the District of Columbia Bar Attorney/Client Arbitration Board on August 17, 2004. The Gaylords were seeking declaratory relief on the issue of the capped fee agreement. On August 27, 2004, the D.C. arbitrator awarded Baise Miller $199,514.44 in attorney fees but did not confirm or deny that a capped fee agreement existed.
This Court granted Baise Miller's Motion to Dismiss on September 17, 2004 holding that the issue of the amount of fees owed by the Gaylords to Baise Miller was barred under collateral estoppel and res judicata. BMF never indicated a position. This Court did not address the issue of the capped fee agreement in that Motion.
IV. Conclusions of Law
A. Contract Formation in Delaware
It is well settled that "whether a contract has been formed essentially turns upon a determination whether the parties to an alleged contract intended to bind themselves contractually." The parties' intent is a question of fact to be determined from overt acts and statements of the parties. In other words, in order for a contract to be enforceable in Delaware, there must be a meeting of the minds. The Court looks to the ordinary meaning of the language used in writings reflecting agreements and the course and substance of negotiations to determine if a contract has been formed. The Court notes that in reviewing the factors, the subjective beliefs of the parties are irrelevant.
Leeds v. First Allied Connecticut Corp., 521 A.2d 1095, 1097 (Del.Ch. 1986).
Id. (citing Indus. America, Inc. v. Fulton Indus., Inc., 285 A.2d 412, 415 (Del.Supr. 1971)).
Sowell v. Townsends, Inc., 2000 WL 305502 *11 (Del. Super).
Leeds, 521 A.2d at 1097.
Id.
This Court finds by a preponderance of the evidence that a contract has not been formed between the Gaylords and BMF because the Gaylords did not intend to bind themselves contractually with BMF. The ordinary meaning of the language used in the retainer letters between BMF, the Gaylords, and Baise Miller does not show intent to form a contract between BMF and the Gaylords. Starting on December 12, 2000, the Letter of Retention was sent to the Gaylords from Marshall Miller. The letter refers to "The Firm" as Baise Miller. No where does the retention letter state the firms including BMF. While Margules' hourly rate is specified in the letter, the letter explicitly states that he is not a member of Baise Miller.
DX. 1. See also, DX. 2 for the December 15, 2000 retention letter from Marshall Miller to the Gaylord family.
Furthermore, the Court finds that the substance of the negotiations between the parties involved does not lend itself towards an interpretation that the Gaylords were contractually bound with BMF. Baise Miller sent two retention letters, and both were rejected by the Gaylords because of contingency fee clauses. The Gaylords also made both installments of the $250,000 retainer into Baise Miller's Salomon Smith Barney account. When BMF expressed frustration over not getting paid, they confronted Baise Miller first, not the Gaylords to whom they wish to paint as their contractual adversary. In addition, Margules himself testified that he "did not send a written document to the Gaylords stating they would be responsible for my bills."
DX. 9, 10.
PX. 46. In this letter from Margules to Marshall Miller, Margules reiterates the problems in the representation by focusing on "the fact that we have received very little of the amounts billed."
Tr. I at 128-29.
Finally, the Court finds that there was not a sufficient meeting of the minds between BMF and the Gaylords for a contract to be formed. The objective evidence demonstrates that the Gaylords and BMF never agreed to any terms of the contract. Instead, the objective evidence demonstrates that the Gaylords engaged in contractual negotiations with Baise Miller. The mere fact that BMF said they had a contract does not create one. BMF's subjective beliefs of the Gaylord representation do not bind this Court to find that an enforceable contract exists. Baise Miller had contracts with both the Gaylords and BMF, but BMF did not have a contract with the Gaylords.
DX. 7. "As you know from the beginning, we contracted with you and your firm only. It was agreed that you would assume responsibility for paying all persons associated with this manner."
B. Capped Fee Agreement
This Court finds by a preponderance of the evidence that there was a capped fee agreement between the Gaylords and Baise Miller for $250,000. The Court finds that Robert Gaylord's statement that he would not pay a penny over $250,000 to be the most credible evidence that the Gaylord's desired to have a $250,000 cap. In addition, Marshall Miller's failure to object to the $250,000 is fatal to BMF's claim that neither attorney would work for $250,000. This Court also finds that $250,000 for thirty days of work is not unreasonable.
BMF was a subcontractor to Baise Miller's contract with the Gaylords. As such, they cannot recover under the quasi-contract theory. If the DC arbitration board awarded Baise Miller $199,514.44 for its work under the $250,000 retainer, then $50,485.56 remains in the Baise Miller escrow account. The Court finds that any money owed to BMF would have to be addressed directly with Baise Miller, the general contractor.
Chrysler Corp. v. Airtemp Corp., 426 A.2d 845, 854 (Del.Super. 1980).