Opinion
No. CV-03-0475833 S
July 19, 2004
MEMORANDUM OF DECISION RE MOTION FOR SUMMARY JUDGMENT
The defendant George Kramer has filed a motion for summary judgment claiming that there is no genuine issue of material fact that the fee agreement entered into by Kramer and the plaintiff was extinguished when the plaintiff entered into two subsequent fee agreements with two subsequent law firms. The two subsequent fee agreements contained provisions, wherein the defendant Kramer would continue to share legal fees with the other two law firms in the event of any recovery for the plaintiff-client.
A summary of the facts reveals that the plaintiff was injured in a work related accident on June 3, 1994. On June 15, 1994, the plaintiff entered into a written fee agreement with Kramer, an attorney, to represent him in his workers' compensation case, and a separate written fee agreement for representation for the personal injury claim, as well. Subsequent to the signing of these agreements, Kramer referred these matters to the law firm of Carmody Torrance for representation. As a result, the plaintiff entered into a written fee agreement with Carmody and Torrance on July 9, 1994, wherein Carmody Torrance would represent the plaintiff for the workers' compensation and personal injury claims. The agreement with Carmody Torrance contained a provision that Kramer would share legal fees with Carmody Torrance in the event of any recovery on behalf of the plaintiff. The fee schedule set forth in the agreement signed by the plaintiff was pursuant to General Statutes § 52-251c.
Sec. 52-251c(b) reads as follows:
(b) In any such contingency fee arrangement such fee shall be the exclusive method for payment of the attorney by the claimant and shall not exceed an amount equal to a percentage of the damages awarded and received by the claimant or of the settlement amount received by the claimant as follows: (1) Thirty-three and one-third per cent of the first three hundred thousand dollars; (2) twenty-five per cent of the next three hundred thousand dollars; (3) twenty per cent of the next three hundred thousand dollars; (4) fifteen per cent of the next three hundred Thousand dollars; and (5) ten per cent of any amount which exceeds one million two hundred thousand dollars.
Pursuant to the signing of this second fee agreement, Carmody Torrance initiated suit on the plaintiff's personal injury claim and assumed representation of the plaintiff in his workers' compensation case. On May 4, 1998, Carmody Torrance obtained a default judgment in the personal injury case against a defendant, Coastal Energy, Inc., and proceeded to a hearing in damages, wherein the court awarded the plaintiff $792,898.89, on May 6, 1998. However, no compensation from this judgment was received in the plaintiff's behalf.
Acting on the recommendation of Carmody Torrance, the plaintiff on January 10, 2001, entered into a written fee agreement with the law firm of Gersten Clifford, wherein Gersten Clifford agreed to represent the plaintiff in an insurance coverage lawsuit that Park commenced against the Commerce Industry Insurance Company AIG, for allegedly exercising bad faith, violations of CUTPA, CUIPA, breach of contract and negligence as a result of the plaintiff's suit against Coastal Energy, Inc. This written fee agreement with Gersten Clifford provided that Carmody Torrance, Gersten Clifford and the defendant Kramer would share in a legal fee, which would be "a one-third contingency fee." The agreement further provided that the attorneys would share the one-third contingency fee as follows.
George Kramer will receive $50,000. He will receive an additional $10,000 if the verdict or settlement exceeds $500,000. He will receive an additional $10,000 if the verdict or the settlement exceeds $750,000. He will receive an additional $10,000 if the verdict or settlement exceeds $1 million.
Carmody Torrance and the Gersten Clifford will divide equally any fees after George Kramer has been paid.
In the event that this case settles at the pretrial, scheduled for January 11, 2001, at the New Britain Superior Court, I (Eliot B. Gersten) will be paid for my time only, based on an hourly rate of $500/hour. George Kramer and Carmody Torrance will divide the remaining fees equally.
In February 2002, a settlement of the plaintiff's suit against the insurance carriers was achieved for a gross settlement amount of $1,450,000. The plaintiff accepted this settlement and requested a modification of the January 10, 2001 fee agreement whereby Gersten Clifford and Carmody Torrance would reduce its fee in connection with the $1,450,000 from one-third ($483,333.33) to $450,000. On March 7, 2002, the plaintiff requested a further modification of the January 10, 2001 fee agreement whereby Carmody Torrance and Gersten Clifford would reduce their fees to $380,000. In light of the plaintiff's request these two law firms requested that the defendant Kramer reduce his portion of the attorneys fees, and Kramer agreed to accept $60,000.
On or about April 14, 2002, the proceeds of the $1,450,000 settlement were disbursed, with Gersten Clifford and Carmody Torrance receiving a total fee of $380,000. From this sum, they, in turn, paid Kramer $60,000.
The plaintiff has filed this action against all three law firms, ("Carmody," "Gersten" and Kramer) claiming that the fees collected violated General Statutes § 52-251c, which governs the maximum fees collected by attorneys on a contingency fee basis. Further the plaintiff claims that he had to reimburse the State of Connecticut for his workers' compensation claim from the monies obtained from the settlement, for which the defendants failed to account in their collection of fees. Lastly the plaintiff claims that the defendants based their portion of the fees collected on the sum of $1,450,000 and did not deduct costs, "which was clearly agreed to on the fee agreement."
The fee agreement between the plaintiff and Kramer dated June 15, 1994, bears the following handwritten sentence directly above the date and signatures of the plaintiff and Kramer: "The firm shall reduce its fee by an amount equal to The expenses and costs incurred."
Kramer, in filing for summary judgment argues that the plaintiff's fee agreements entered into with Kramer on June 15, 1994 were extinguished by the agreement between the plaintiff and Carmody Torrance dated July, 9, 1994, and Carmody's representation of the plaintiff in the workers' compensation claim and the personal injury claim. Kramer relies on the theory of novation.
Kramer also argues that even if the fee agreement with Gersten Clifford was violative of § 52-251c, Kramer still received less ($60,000) than he would have been entitled to had the maximum fee been computed pursuant to § 52-251c.
The maximum attorneys fees pursuant to § 52-251c is computed to be $305,000. Based on the Gersten Clifford fee agreement Kramer computes his fee at $80,000, because Kramer's fee was to be computed on a gross recovery amount of $1,450,000 as set forth in formula recited herein. It was not contingency based. He later agreed to accept the lesser sum of $60,000.
"A Motion for Summary Judgment is designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried." Wilson v. New Haven, 213 Conn. 277, 279, 576 A.2d 829 (1989). "In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." Hertz Corp. v. Federal Ins., Co., 245 Conn. 374, 381, 713 A.2d 820 (1998). In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact but rather to determine whether any issues exist. Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). The moving party has the burden of demonstrating the absence of any genuine issue of material fact. Hertz Corp. v. Federal Ins. Corp., supra, 245 Conn. 381. "The opposing party must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." Id. "A material fact is a fact which will make a difference in the result of a case." Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 639 A.2d 507 (1994).
The test used by the court is to determine if the moving party would be entitled to a directed verdict if the same set of facts were presented at trial. Connell v. Colwell, 214 Conn. 242, 246-47, 571 A.2d 116 (1990). A directed verdict is properly rendered if a trier of fact cannot reasonably and legally find in any fashion other than that directed. Santopietro v. New Haven, 239 Conn. 207, 225, 682 A.2d 106 (1996).
I GENERAL STATUTES 52-251c
Before determining the issue of whether the fee agreements signed by the plaintiff with Kramer and later, Carmody Torrance were extinguished by the signing of the third contingency fee agreement with Gersten Clifford, the court reviews General Statutes § 52-251c, which places limitations on attorney contingency fees in personal injury actions. Section 52-251c "was intended to regulate the attorney-client relationship in order to protect plaintiffs from excessive legal fees." Berry v. Loiseau, 223 Conn. 786, 830 n. 22, 614 A.2d 414 (1992). Section 52-251c was discussed in the case of Gagne v. Vaccaro, 255 Conn. 390,401-02, 766 A.2d 416 (2001). The court stated:
Sec. 52-251c. Reads as follows:
(a) In any claim or civil action to recover damages resulting from personal injury, wrongful death or damage to property occurring on or after October 1, 1987, the attorney and the claimant may provide by contract, which contract shall comply with all applicable provisions, of the rules of professional conduct governing attorneys adopted by The judges of the Superior Court, that the fee for the attorney shall be paid contingent upon, and as a percentage of: (1) Damages awarded and received by the claimant; or (2) settlement amount pursuant to a settlement agreement. CT Page 11082
(b) In any such contingency fee arrangement such fee shall be the exclusive method for payment of the attorney by the claimant and shall not exceed an amount equal to a percentage of the damages awarded and received by the claimant or of the settlement amount received by the claimant as follows: (1) Thirty-three and one-third per cent of the first three hundred thousand dollars; (2) twenty-five per cent of the next three hundred Thousand dollars; (3) twenty per cent of the next three hundred Thousand dollars; (4) fifteen per cent of the next three hundred thousand dollars; and (5) ten per cent of any amount which exceeds one million two hundred thousand dollars.
(c) For the purposes of this section, "damages awarded and received" means in a civil action in which final judgment is entered, that amount of the judgment or amended judgment entered by the court that is received by the claimant, except that in a civil action brought pursuant to section 38a-368 such amount shall be reduced by any basic reparations benefits paid to the claimant pursuant to section 38a-365; "settlement amount received" means in a claim or civil action in which no final judgment is entered, the amount received by the claimant pursuant to a settlement agreement, except that in a claim or civil action brought pursuant to section 38a-368 such amount shall be reduced by any basic reparations benefits paid to the claimant pursuant to section 38a-365; and "fee" shall not include disbursements or costs incurred in connection with the prosecution or settlement of the claim or civil action, other than ordinary office overhead and expense.
When an attorney undertakes to represent a client in a personal injury action, the attorney and his client "may provide by contract, which contract shall comply with all applicable provisions of the rules of professional conduct governing attorneys adopted by the judges of the Superior Court, that the fee for the attorney shall be paid contingent upon, and as a percentage of: (1) [d]amages awarded and received by the claimant; or (2) settlement amount pursuant to a settlement agreement. General Statutes § 52-251c(a).
Id.
Rule 1.5(c) of the Rules of Professional Conduct provides in relevant part:
A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages of the recovery that shall accrue to the lawyer as a fee in the event of settlement trial or appeal, whether and to what extent the client will be responsible for any court costs and expenses of litigation, and whether such expenses are to be deducted before or after the contingent fee is calculated . . .
The Rules of Professional Conduct caution those who seek to rely on their provisions. They "provide a framework for the ethical practice of law . . . Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a Rule is a just basis for a lawyer's self-assessment or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule. Accordingly, nothing in The Rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such a duty."[fn 13] Rules of Professional Conduct, scope, p. 3; Gagne v. Vaccaro, supra, at 403.
While all three contingency fee agreements were in writing and were signed by the plaintiff, the third agreement with Gersten Clifford, dated July 9, 1994, provides for a straight one-third attorneys fee, regardless of the amount of recovery, rather than the maximum fee schedule provided in § 52-251c. Upon disbursement of the settlement proceeds, the plaintiff, after modifications were negotiated, was assessed a total attorneys fee of $380,000, rather than the statutory maximum of $305,000, based on the recovery of $1,450,000. Regardless of whether Kramer's fee of $60,000 was less than he would have been entitled to had the Gersten Clifford agreement conformed to § 52-251c and had the total fee collected been the statutory maximum of $305,000, the fact remains that Kramer's fee was paid pursuant to an agreement that violated § 52-251c. "We also acknowledge that a court should not allow itself to be made the instrument of enforcing obligations arising out of an agreement that is against public policy, either in law or in equity." Gagne v. Vaccaro, supra, 255 Conn. 408.
II NOVATION
Kramer argues that his original fee agreements with the plaintiff to represent the plaintiff in his workers' compensation claim and the personal injury claim were extinguished when the plaintiff retained Carmody Torrance to represent him. He argues novation and states that he did not file an appearance in any of the plaintiff's lawsuits, and nor did he direct or control the litigation in any manner. This is despite the fact that all of the agreements provided for a fee for Kramer, and all agreements either directly stated or strongly implied that Kramer would remain active in the plaintiff's representation.
The plaintiff in opposing the argument of novation claims that the subsequent fee agreements with Carmody Torrance and Gersten Clifford did not extinguish all rights and obligations between the plaintiff and Kramer, as Kramer continued his representation of the plaintiff and received a fee based upon the successful termination of the litigation. The terms of the subsequent fee agreements were not intended to novate the agreement with Kramer, and the terms of the two later agreements were not so inconsistent with the Kramer agreement so that the first, second and third agreements could not stand with each other. CT Page 11080 Riverside Coal Co. v. American Coal Co., 107 Conn. 40, 45, 139 A. 276 (1927).
"An essential element of any novation is the extinguishing of the original contract by substitution of a new one." Flagg v. Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 145, 709 A.2d 1075 (1998); Mace v. Conde Nast Publications, Inc., 155 Conn. 680, 688, 237 A.2d 360 (1967); Ruwet Sibley Equipment Corp. v. Stebbins, 15 Conn. App. 21, 26, 542 A.2d 1171, cert. dismissed, 209 Conn. 806, 548 A.2d 437 (1988).
Novation may be broadly defined as a substitution of a new contract or obligation for an old one which is thereby extinguished. Bushnell Plaza Development Corp. v. Fazzano, 38 Conn. Sup. 683, 688, 460 A.2d 1311 (App.Sess. 1983). A recognized test for whether a later agreement between the same parties to an earlier contract constitutes a substitute contract looks to the terms of the second contract. If the second contract contains terms inconsistent with the former so that the two cannot stand together, it exhibits characteristics indicating a substitute contract. Id. "[A]n essential element of any novation is the extinguishing of the original contract by substitution of a new one." Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 145, 709 A.2d 1075 (1998). See also, Birarelli v. Wright, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 02 0389534 (June 7, 2002, Melville, J.).
"Novation is properly pleaded as a special defense. See, e.g., Union Trust v. Jackson, 42 Conn. App. 413, 416, 679 A.2d 421 (1996); Ruwet-Sibley Equipment Corp. v. Stebbins, 15 Conn. App. 21, 24, 542 A.2d 1171, cert. dismissed, 209 Conn. 806, 548 A.2d 437 (1988). Moreover, whether a novation has occurred depends on the resolution of factual questions properly left to the trier of fact. See Mace v. Conde Nast Publications, Inc., 155 Conn. 680, 688-89, 237 A.2d 360 (1967); Vumbacco v. Papallo, 102 Conn. 562, 564, 129 A. 525 (1925); Spicer v. Spicer, 33 Conn. App. 152, 158-59, 634 A.2d 902 (1993), cert. denied, 228 Conn. 920, 636 A.2d 850 (1994)." Siebe Environmental v. Johnson Goodyear, Inc., Superior Court, judicial district of Hartford, Docket No. 585061 (October 6, 2000, Hale, J.).
Accordingly, as to the defendant Kramer's claim of contract novation, the court finds there are genuine issues of material fact. The court, therefore, denies the motion for summary judgment.
THE COURT
By Arnold, J.