Mark Jay Kaufman, P.A. v. Howell, Milton & Liles, P.A.
Docket: Bankruptcy No. 90-9033; Adm. No. 86-00195
Court: United States Bankruptcy Court, N.D. Florida; May 10, 1991; Us Bankruptcy; United States Bankruptcy Court
Mark Jay Kaufman, P.A. and defendants Howell, Milton, Liles, P.A. filed cross-motions for summary judgment in an adversary proceeding before Bankruptcy Judge Lewis M. Killian, Jr. The court determined there were no genuine disputes of material facts, granting judgment to the plaintiff as a matter of law. The case is tied to Kaufman’s Chapter 11 filing, initiated on November 5, 1986, due to medical issues affecting his legal practice, during which his firm managed around 480 personal injury and wrongful death cases.
To address the workload, attorney Rodney D. McGalliard was appointed as a consultant to evaluate pending cases and facilitate their transfer to other firms. He negotiated an agreement with the defendant firm to split fees from 28 transferred cases on a 50-50 basis without requiring court approval for each settlement. This arrangement aimed to prevent delays due to the volume of cases and appropriately compensate Kaufman’s firm for their work.
The agreement was approved by the court on April 13, 1987, following a notice sent to creditors, which received no objections. Although Lori Bishop’s case was included in the transfer, her name was inadvertently omitted from the official list. Subsequently, all cases except Lori Bishop’s were settled and fees distributed as per the agreement. In the Bishop case, a $4,000,000 jury verdict was obtained, but due to Florida's sovereign immunity cap, the awarded judgment was limited to $100,000. The resulting $25,000 fee was split equally between the firms, consistent with prior arrangements.
Mr. Wilhelm successfully lobbied the Florida Legislature for a special claims bill that awarded Lori Bishop $1,050,000, which included a $262,500 attorney fee. Subsequently, the defendant law firm did not pay Kaufman the agreed 50% of the gross fees from this recovery, leading to Kaufman's lawsuit. In his complaint, Kaufman seeks to reform the contract to include Lori Bishop's name among the transferred cases, enforce the agreement, or recover damages for its breach. He also requests an injunction preventing any distribution of the disputed fees until the case is resolved.
The defendant firm denies that the Lori Bishop case was intended to be included in the agreement. However, Mr. Wilhelm’s deposition indicates he understood that it was part of the agreement, establishing that no genuine issue exists regarding this fact. The defendants contend that the agreement is illegal and unenforceable, claiming it violates the Florida Bar Code of Professional Responsibility, particularly Rule 4-1.5, which sets conditions for fee divisions between lawyers from different firms. They argue that the agreement does not comply with this rule since Kaufman performed only 10% of the work on Bishop's case.
Lori Bishop has also provided an affidavit stating her objection to any fee distribution to Kaufman that exceeds the proportion of work he performed, asserting she never consented to such an arrangement. The central legal question revolves around the contract's legality and enforceability under Florida law, which requires contracts to be legal and not against public policy. If the agreement is deemed illegal, it cannot be reformed or enforced by the court.
No evidence indicates that Lori Bishop or other clients were unaware of the terms when their cases were transferred from Kaufman to the defendant firm. The record shows Bishop endorsed the disbursal statement for attorney's fees following a $100,000 judgment against the State of Florida, which included a 50-50 fee split between Kaufman and the defendant firm. Defendants submitted an affidavit from Joseph W. Little, a law professor, asserting that a contract mandating a 50-50 fee split, regardless of service contribution or capability, contradicts Florida public policy and is unenforceable.
Plaintiff contends that the court should not address alleged violations of the Florida Bar's disciplinary rules, emphasizing that these rules are meant for guidance and do not create civil liability or augment the legal duties of attorneys. Plaintiff argues that defendants improperly use these rules as a defense in this contractual action, which violates the preamble stipulations.
Additionally, the plaintiff asserts that Rule 4-1.5(E) is not applicable since this case involves the administration of assets from a bankruptcy estate. Kaufman’s interest in his cases represented property of the bankruptcy estate under 11 U.S.C. § 541(a)(1) at the time of his Chapter 11 filing. The case transfer to the defendant firm was a disposition of assets for Kaufman’s estate, entitling them to 50% of generated fees, indicating that the transaction was not merely a referral but a significant transfer within the bankruptcy context. If the agreement were made outside a Chapter 11 proceeding, it might be seen as violating the Code of Professional Responsibility.
Concerns arise in arrangements where attorneys engage clients for personal injury cases on a contingency fee basis but lack the intent to handle the cases, subsequently referring them to competent trial attorneys for a referral fee. However, in this case, Kaufman actively participated in the majority of the work on cases he referred to the defendant law firm. Despite this, fees were split 50-50 regardless of the work distribution. After a significant fee amount of $262,500 emerged, the defendants claimed the contract was illegal and sought to retain most of the fee. The public policy of Florida, reflected in the Code of Professional Responsibility, is relevant, but so is the obligation of Kaufman, as a debtor-in-possession under Chapter 11, to maximize his estate's value for creditors. The court approved the agreement as beneficial to creditors, emphasizing the need to balance public policy with equitable considerations. Unless a contract violates public policy or is illegal, it should be enforced. The defendants, having benefited from the agreement, cannot now seek to retain more than their share. Ultimately, the court finds the agreement valid and binding, mandates its reformation to include the Lori Bishop case, and orders the defendants to pay the plaintiff 50% of the attorney's fees from the claims bill regarding Lori Bishop, along with pre-judgment interest. The court grants the plaintiff's Motion for Summary Judgment and denies the defendants’ Cross-Motion for Summary Judgment, with a final judgment to be entered accordingly.
