Fasing v. LaFond

Citations: 944 P.2d 608; 1997 Colo. App. LEXIS 23; 1997 WL 33590Docket: 95CA0927

Court: Colorado Court of Appeals; January 30, 1997; Colorado; State Appellate Court

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Richard C. LaFond appeals a trial court judgment that dismissed his counterclaims against plaintiffs Suzanne A. Fasing and Gregory J. Fasing, which included recovery of contingent fees based on promissory estoppel and claims for intentional interference with contract, civil conspiracy, and fraudulent misrepresentation. Fasing cross-appeals a judgment requiring her to pay attorney fees to LaFond and the dismissal of her breach of fiduciary duty claim against him. Both parties contest the trial court's denial of attorney fees, with Fasing also challenging the denial of costs and the calculation of prejudgment interest.

The dispute originated from a failed contingent fee agreement. Fasing, while employed with the Colorado Public Utilities Commission, engaged LaFond for legal assistance at a reduced hourly rate of $100, agreeing that she and her husband, both attorneys, would contribute to the legal work. After Fasing's termination in November 1991 and subsequent legal proceedings, LaFond claimed they reached a contingent fee agreement on March 25, 1992, which Fasing denied, asserting their arrangement remained at the hourly rate.

Following a settlement of $210,000 in November 1992, LaFond sought to enforce a 25% contingent fee, prompting Fasing to file a lawsuit for a declaratory judgment asserting no such agreement existed. The disputed settlement amount of $52,500 was held in a money market fund until the matter was resolved. LaFond's counterclaims relied on representations from the plaintiffs regarding the existence of a contingent fee agreement. The court's decision was to affirm in part, reverse in part, and remand with directions.

Prior to trial, the court conducted an off-the-record in limine hearing, with the agreement of all parties, to address several issues. The court ruled that no contingent fee agreement existed because the defendant failed to comply with the Rules Governing Contingent Fees, C.R.C.P. Chapter 23.3. Additionally, the court found that the defendant's claims of promissory estoppel, fraudulent misrepresentation, civil conspiracy, and intentional interference with contract were attempts to circumvent the public policy behind the contingent fee rules. The court also dismissed the breach of fiduciary duty claim by Fasing. Following a bench trial, the court established that an express contract required Fasing to pay the defendant $100 per hour for 180 hours of work, totaling $18,000 owed to the defendant, and that this express agreement precluded any recovery under quantum meruit.

The defendant challenged the dismissal of his counterclaim to enforce the contingent fee agreement and other counterclaims for damages, but did not contest the absence of a valid contingent fee agreement or his substantial compliance with the rules. He argued that the trial court erred in dismissing his counterclaims based on public policy grounds, asserting that the rules should not apply because Fasing, as a knowledgeable attorney, was not the type of unsophisticated client the rules were designed to protect. Nevertheless, the court upheld its decision, affirming that the strict requirements of the rules and their underlying policy apply regardless of the client's sophistication and preclude the defendant's claim.

The rules place an unequivocal obligation on attorneys to establish a valid contingent fee agreement, with no exceptions for noncompliance based on client representations, including when the client is an attorney. The trial court emphasized that attorneys, when acting as clients, may lack the professionalism necessary for objective decision-making, and thus are entitled to the same protections under the rules. Allowing claims like promissory estoppel would undermine these rules by enabling enforcement of an invalid contingent fee agreement, essentially negating the requirement for compliance. Consequently, the trial court dismissed the defendant's claims for fraudulent misrepresentation, civil conspiracy, and intentional interference with contract on public policy grounds, asserting that such claims would circumvent the contingent fee rules. The court concluded that any damages claims related to a failed contingent fee agreement are essentially barred, although this conclusion may be overly broad. Nevertheless, the dismissal of the fraudulent misrepresentation claim was affirmed on the grounds of unreasonable reliance, as the defendant was responsible for ensuring the agreement's validity. This also led to the dismissal of the civil conspiracy claim, which depended on the fraudulent misrepresentation claim, and the intentional interference with contract claim, as no valid contract existed. The trial court had previously indicated, during an off-the-record hearing, that an express contract existed between the defendant and Fasing, which would prevent recovery under quantum meruit.

Fasing's claim for breach of fiduciary duty was dismissed by the court, which limited trial testimony to the number of hours that could be charged to the plaintiff at a rate of $100 per hour. Although the court initially ruled in limine to restrict testimony, it indicated a willingness to reconsider these rulings based on evidence presented during the trial. Ultimately, the court reaffirmed its prior findings in a written order after trial without requesting additional evidence. The defendant argued that the court improperly dismissed his quantum meruit claim, asserting that the existence of an express contract was unsupported. The court found sufficient evidence to support the existence of a contract where Fasing testified that the contract was to remain in effect during the defendant's representation.

Fasing's breach of fiduciary duty claim was based on allegations of delayed settlement proceeds, excessive fees, threats to withhold undisputed funds, and inflated billing. The trial court heard relevant testimony and, despite Fasing being allowed to present further proof, she did not do so. The court considered the evidence and rejected Fasing's narrative, noting inconsistencies in her actions regarding fee arrangements. Consequently, the court's determination of no breach of fiduciary duty was upheld. In Fasing's cross-appeal regarding the defendant's compensation of $18,000 for 180 hours of work, the court found adequate record support for its determination, rejecting her claims of error.

Defendant provided evidence of 237.5 hours of work for Fasing, supported by detailed records and witness testimony, including from opposing counsel, affirming his competence and professionalism. Fasing argued that the trial court overlooked unrebutted testimony regarding incorrect billing. However, the court found defendant's testimony generally convincing and granted him leeway due to Fasing's failure to clarify her disagreement with the contingent fee agreement. Both parties contested the trial court's refusal to award attorney fees. Under C.R.S. § 13-17-102, attorney fees may be awarded if a claim lacks substantial justification, defined as being frivolous, groundless, or vexatious. The court's discretion in awarding fees is upheld if supported by evidence. The trial court did not err in refusing to sanction the husband for frivolous claims, as he had a reasonable belief of being a necessary party and voluntarily abandoned his claim during pre-trial. Furthermore, Fasing's assertion that defendant's claims against her were groundless was rejected, as she, being a sophisticated attorney, failed to timely reject the contingent fee contract, and there was credible testimony supporting its enforcement. However, the trial court's denial of Fasing's motion for costs was deemed improper since, under C.R.S. § 13-17-202, a defendant is entitled to costs when a plaintiff rejects a timely settlement offer and recovers less at trial.

Fasing and her husband proposed a joint settlement of $25,000 to resolve all of the defendant's counterclaims, but the trial court ultimately awarded the defendant $18,000. The court ruled that since the settlement offer was made collectively by Fasing and her husband, and the judgment was only against Fasing, the costs could not be assessed based on the settlement offer according to 13-17-202. Despite this, the lack of a judgment against the husband was deemed irrelevant. The counterclaims included allegations of fees owed under contract and claims of intentional interference, civil conspiracy, and fraudulent misrepresentation. The court distinguished the case from Taylor v. Clark, where an unapportioned offer to multiple plaintiffs did not trigger cost-shifting provisions, noting that here the joint offer was made to a single defendant who could evaluate it.

Fasing also contested the trial court's handling of her request for prejudgment interest. The statute (5-12-102(1)) mandates that interest be awarded on wrongfully withheld funds, calculated at eight percent per annum compounded annually. The court affirmed that the prevailing party does not need to prove tortious conduct to recover such interest. Fasing argued for interest on the undisputed portion of the settlement ($192,000), but the court found the delay in transferring these funds was brief and reasonable. Regarding the disputed funds, $52,500 was held in a money market account pending trial. The court awarded Fasing 65.7% of the interest generated from these funds based on her trial recovery of $34,500. Fasing claimed the interest on this amount should have been at the statutory rate, but the trial court did not address this. The appellate court affirmed the judgment and orders except regarding Fasing's costs and prejudgment interest on the $34,500, reversing those denials and remanding for further determination on these issues.