The Tolson Firm, LLC v. Hezekiah Sistrunk, Jr.

Citations: 338 Ga. App. 25; 789 S.E.2d 265; 2016 Ga. App. LEXIS 421Docket: A16A0536

Court: Court of Appeals of Georgia; July 12, 2016; Georgia; State Appellate Court

Original Court Document: View Document

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Motions for reconsideration must be received by the clerk’s office within ten days of the decision date to be considered timely. In the case A16A0536, involving a dispute between law partners Hezekiah Sistrunk, Jr. and Jane Sams (collectively "the Cochran Firm") and former associate Audrey Tolson and her firm (collectively "Tolson"), the plaintiffs allege Tolson improperly took eight cases upon leaving the Cochran Firm, with five of those cases settling for nearly three million dollars. The defendants appeal the trial court's denial of their summary judgment motion regarding the Cochran Firm's claims of breach of duty of loyalty, tortious interference with contract, unjust enrichment, breach of fiduciary duty, quantum meruit, and money had and received. The appellate court affirms the denial of summary judgment for the plaintiffs' claims regarding breach of fiduciary duty, duty of loyalty, and quantum meruit, but reverses the denial on the claims of money had and received, unjust enrichment, and tortious interference with contract. Additionally, the court reverses the trial court's grant of summary judgment to the Cochran Firm on Tolson's counterclaim for quantum meruit and unjust enrichment. Summary judgment is appropriate when there are no genuine issues of material fact, and the review is conducted de novo, favoring the nonmoving party. The Cochran Firm conceded that Tolson was entitled to summary judgment on the claim for money had and received, as it was not the 'true owner' of the fees received by Tolson. Regarding Tolson's liability for breach of loyalty or fiduciary duty, any such claim must be grounded in a fiduciary duty owed by the employee.

A fiduciary or confidential relationship is established when one party exerts a controlling influence over another's interests, necessitating the utmost good faith, as seen in relationships like partners or principal and agent, per OCGA 23-2-58. Such relationships can arise from law, contract, or specific case facts. The existence of a fiduciary relationship is typically a factual issue for the jury. In this case, the Cochran Firm claims that Audrey Tolson, as its agent, owed a fiduciary duty. A partner’s affidavit indicates that Tolson was the primary contact for many cases, had the authority to engage clients, and could accept or reject cases, creating a genuine issue of material fact regarding her fiduciary duty of loyalty.

The fiduciary relationship between principal and agent prohibits the agent from profiting at the principal’s expense. Additionally, agents cannot compete with their employer while employed. Relevant case law illustrates that soliciting clients for a rival business before the end of employment is impermissible. The Restatement (Third) of Laws specifies that a departing attorney may solicit clients only under certain conditions, primarily related to active cases and requiring prior notice to the firm.

The trial court ruled that Tolson was not entitled to summary judgment because material factual disputes existed regarding her potential competition with the Cochran Firm and whether she solicited clients before her departure. Tolson testified she informed the office manager of her departure on May 6 but did not disclose her future plans and did not remove personal items from the office, indicating possible ambiguity around her actions prior to leaving.

Audrey Tolson informed the office manager of her decision to leave the firm but requested confidentiality. However, Tolson later testified that she did not explicitly instruct the office manager on whether to share this information. The following Monday, Tolson sent an email to a managing partner announcing her departure and intention to take seven clients, clarifying that she had only informed a few clients and had not persuaded them to follow her, while also expressing a desire to minimize disruption for clients left behind. She stated she hoped to issue a joint letter with the firm to notify clients of her departure and avoid any misconceptions about her commitment to their cases.

The Cochran Firm presented evidence of Tolson's potential breach of loyalty, including her resignation email that acknowledged soliciting clients before her official departure, and testimonies from clients indicating she had discussed her leaving the firm before her resignation. There is a dispute regarding whether Tolson's employment ended on May 6 or May 9, which affects the legality of her client solicitation during that weekend. State Bar Formal Advisory Opinion 97-3 emphasizes that client notification timing should prioritize client interests, advocating for joint notifications by the firm and departing attorneys, while also considering the attorney's duty to inform the firm prior to notifying clients.

The departing attorney must avoid engaging in dishonest practices concerning dealings with the firm, as outlined in Standard 4.3 regarding Quantum Meruit. In the case of Tolson v. Sistrunk, the court upheld the trial court's denial of summary judgment favoring Tolson and her firm regarding the Cochran Firm's quantum meruit claim. The ruling affirmed that a predecessor attorney can place a lien on a lawsuit filed by successor counsel, and fees awarded to a discharged attorney must correspond to the services rendered for the client's benefit.

Furthermore, unjust enrichment is defined as an equitable doctrine requiring a benefitted party to compensate for benefits received without a legal contract. The Cochran Firm's claim of unjust enrichment was based on resources and funding provided to Tolson during her employment. The court concluded that this claim fails as a matter of law because it was presented as a tort rather than an alternative recovery theory for a failed contract, leading to summary judgment in favor of the defendants.

Regarding tortious interference with contract, the Cochran Firm's claim was directed solely at Audrey Tolson, who cannot be held individually liable. Although the firm argued there were factual issues concerning interference related to the Tolson Firm, it did not amend its complaint to include this claim. Thus, the court focused only on whether the claim against Audrey Tolson could withstand summary judgment.

For a defendant to be liable for tortious interference with contractual relations, they must be a stranger to both the contract and the underlying business relationship. Audrey Tolson was not a stranger to the relationship between the Cochran Firm and its former clients; thus, the trial court erred by not granting summary judgment in her favor on this claim. 

In her counterclaim, Tolson argued she received no salary during her employment with the Cochran Firm, only a share of contingent fees from cases she worked on. She expected payment for her legal services based on the firm’s contingent fee income and claimed she was entitled to recover the value of her services through quantum meruit and asserted unjust enrichment against the firm. 

The Cochran Firm contended that an express oral employment agreement barred Tolson from recovering under quantum meruit or unjust enrichment, as concurrent express and implied contracts for the same matter cannot coexist. Summary judgment on this basis would be improper if a jury must determine whether a contract existed. 

While a party cannot claim quantum meruit for services covered by an express agreement, they may seek compensation for services outside the written agreement's scope. The Cochran Firm cited deposition testimony indicating a policy that associates would not be paid for work on cases unresolved at the time of their departure. Tolson, however, claimed genuine factual disputes existed regarding her claims, asserting she had no express agreement regarding compensation for work on cases resolved after her employment ended.

Tolson asserts that there was no understanding with the Plaintiff regarding compensation for her work, which she expected to be paid for if the firm earned fees from cases she worked on. The Cochran Firm argues that the Prophecy rule prevents Tolson from using her affidavit to create a genuine issue of material fact about an express contract, citing that self-contradictory or vague testimonies are interpreted against the witness. Tolson's deposition indicated she was paid through an "eat-what-you-kill" system and was aware she was an at-will employee, with her earnings based on case resolutions. The court found no conflict between her affidavit and deposition, stating that the affidavit merely provided fuller testimony. Therefore, genuine issues of material fact exist regarding an oral agreement about payment for work done after her employment ended, preventing the Cochran Firm from obtaining summary judgment on Tolson’s counterclaim for quantum meruit and unjust enrichment.

The Firm’s arguments concerning indefiniteness of Tolson's claims were rejected, as quantum meruit and unjust enrichment claims do not rely on contract law definiteness. Furthermore, the Firm's collateral estoppel claim was deemed unmeritorious; the trial court's prior order did not conclude that Tolson was owed no credit for work done as an employee. The court affirmed the denial of summary judgment in favor of Tolson on the Firm’s claims for quantum meruit and breach of fiduciary duty, reversed the denial of summary judgment on Tolson’s claims, and reversed the grant of summary judgment to the Firm on Tolson’s counterclaim. The judgment was affirmed in part and reversed in part.