2008 WI App 141
court of appeals of
published opinion
Case No.: |
2007AP2133 |
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Complete Title of Case: |
†Petition for review filed. |
Opinion Filed: |
August 14, 2008 |
Submitted on Briefs: |
February 8, 2008 |
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JUDGES: |
Dykman, Bridge and Brunner, JJ. |
Concurred: |
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Dissented: |
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Appellant |
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ATTORNEYS: |
On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Howard B. Schoenfeld, Joseph A. Ranney and Michele L. Perreault, of DeWitt Ross & Stevens, S.C., Madison. |
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Respondent |
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ATTORNEYS: |
On behalf of the defendants-respondents, the cause was submitted on the brief of J. Michael Riley and Jason J. Knutson of Axley Brynelson, LLP, Madison. |
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2008 WI App 141
COURT OF APPEALS DECISION DATED AND FILED August 14, 2008 David R. Schanker Clerk of Court of Appeals |
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NOTICE |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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Appeal No. |
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STATE OF |
IN COURT OF APPEALS |
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Robert G. Lorge d/b/a Lorge & Lorge Law Firm,
Plaintiff-Appellant, v. Leann Marie Rabl, J. Michael Riley, Atterbury, Riley & Madison Property Management, Inc., Secura Insurance Company and Travelers Insurance Company,
Defendants-Respondents. |
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APPEAL
from a judgment and an order of the circuit court for
Before Dykman, Bridge and Brunner, JJ.
¶1 DYKMAN, J. Robert Lorge appeals from an order granting partial summary judgment to Michael Riley in Lorge’s action following Riley’s substitution as counsel for Lorge in a personal injury case, and Riley’s subsequent recovery and disbursement of a settlement amount. Lorge claims that Riley is liable for breach of trust and conversion for failing to hold in trust an amount sufficient to cover his attorney’s lien, and that Lorge is entitled to treble damages pursuant to Wis. Stat. § 895.446 (2005-06).[1]
¶2 Lorge also appeals from the judgment following trial awarding him $5,000 as the value of the services he provided before his client replaced him with Riley. Lorge claims that he is entitled to a larger fee under his contingency fee contract with his client. We conclude that Lorge cannot recover under his contingency fee contract with Rabl because he breached the contract by failing to provide adequate legal services. We also conclude that the trial court’s factual findings supported its award of attorney fees as a proper exercise of its discretion. Accordingly, we affirm.
Standard
of Review
¶3 This
case requires us to review a partial grant of summary judgment on Lorge’s
claims for damages as well as a judgment resulting from a trial on the merits
of Lorge’s claim for his attorney fees under his contingency fee contract. We review a trial court’s summary
judgment determination de novo, applying the standard found in Wis. Stat. § 802.08, which is the
same methodology that the trial court uses.
Sonday v. Dave Kohel Agency, Inc., 2006 WI 92, ¶20, 293
Background
¶4 The following facts are undisputed. In 1997, LeAnn Rabl retained Lorge to
represent her regarding a slip and fall in which she was injured. Lorge and Rabl entered into a contingency fee
agreement entitling Lorge to 33-1/3 percent of any recovery Rabl received. The contract stated that it served as an
attorney’s lien for Lorge’s fees and expenses.
Over the next four years, Lorge took some steps to advance Rabl’s case, including
filing a complaint on her behalf.
However, Lorge failed to move the case toward settlement contrary to
Rabl’s wishes, failed to communicate effectively with Rabl, and communicated
erroneous legal advice to her.[2]
¶5 In June 2001, Rabl hired Riley as her attorney and terminated Lorge’s services. Rabl signed a contingency fee agreement with Riley’s firm to pursue her claim.
¶6 Lorge forwarded Rabl’s file to Riley. Lorge signed a stipulation, and the court signed an order, substituting Riley for Lorge. Riley participated in mediation on behalf of Rabl, and in May 2002 the case settled for $100,000. In a letter dated July 1, 2002, Riley received a settlement check for $100,000, payable to Atterbury & Riley Trust Account and Rabl, and a release.
¶7 In a letter to Riley and Rabl dated July 2, 2002, Lorge asserted a right to proceeds from the settlement. Riley disbursed the $100,000 settlement without paying Lorge anything. Lorge sued Rabl, Riley, and Riley’s law firm, among others. Lorge alleged: (1) Rabl breached her contract with Lorge by failing to pay him and was liable to Lorge for damages; (2) Riley breached his trust obligations to Lorge, as described in SCR 20:1.15(d), and was liable to Lorge for damages; (3) under Wis. Stat. § 757.36, Lorge had a lien on Rabl’s cause of action as security for his attorney fees, and Riley disregarded this lien; and (4) Riley breached his obligation under Wis. Stat. § 757.38 to obtain Lorge’s consent in writing to the settlement, and, therefore, the settlement was invalid.[3]
¶8 The trial court granted partial summary judgment to Lorge and partial summary judgment to Rabl and Riley. The court granted summary judgment to Lorge on the issue of whether Lorge had a lien on the settlement proceeds because it concluded that the contract between Lorge and Rabl establishing Lorge’s lien was valid and that Rabl and Riley had notice of the lien. However, the trial court left for trial the determination of the value, if any, of the lien.[4]
¶9 The trial court granted summary judgment to Rabl and Riley on Lorge’s breach of trust claim, reasoning that SCR 20:1.15(d) does not provide a basis for a civil cause of action. The trial court also granted summary judgment to Rabl and Riley on Lorge’s Wis. Stat. § 757.38 claim that the settlement was subject to Lorge’s approval, concluding that there was no basis for invalidating the settlement.[5] Finally, the trial court granted summary judgment to Rabl and Riley on Lorge’s demand for treble damages under Wis. Stat. § 895.446, concluding that this claim was based on Lorge’s breach of trust claim and that, again, SCR 20:1.15(d) did not provide a basis for a civil cause of action.
¶10 Following trial, the trial court awarded Lorge $5,000 as the value of the legal services he had provided before being discharged and instructed Riley to forward this amount to Lorge. The trial court reasoned that Lorge was discharged for cause but that he had advanced the case to some extent, so there was a benefit to Rabl. The court then found that $5,000 was a fair and reasonable amount for the work Lorge did on the case. Lorge appeals.
Discussion
¶11 Lorge first contends that he is entitled to summary judgment on his claims for breach of trust and conversion because Riley failed to retain an amount sufficient to cover Lorge’s attorney’s lien, and that he is entitled to treble damages under Wis. Stat. § 895.446(3) because that same conduct also violated Wis. Stat. § 943.20. We disagree.
¶12 Lorge bases his claims for breach of trust, conversion and treble damages on Riley’s disregard of the attorney’s lien created in his contingency fee contract with Rabl. He argues that Riley is liable for breach of trust and conversion because he disbursed the entirety of the settlement amount he obtained on Rabl’s claim without retaining a sufficient amount to satisfy Lorge’s lien, despite the fact that Riley was aware that Lorge claimed a lien on the settlement amount.[6] He contends that Lorge was required to hold an amount in trust sufficient to cover his lien claim, and his failure to do so was a breach of trust, conversion, and a violation of Wis. Stat. § 943.20. Thus, we begin with an analysis of Lorge’s claim of a lien on the settlement funds in Riley’s possession.
¶13 In McBride v. Wausau Insurance Cos., 176
¶14 Next, we addressed McBride’s claim that she was entitled to a
statutory lien on the settlement proceeds.
does not create an attorney’s lien on settlement proceeds in absence of a contractual lien given by the client. Rather, this statute merely enables a client to give the attorney a contractual lien that, under certain conditions, must be satisfied out of the settlement proceeds. One of the conditions …. is that the contract that created the lien still be in force at the time the settlement is procured.
¶15 Here, the trial court found after trial that Lorge’s representation of Rabl fell below the standard of care of an attorney. Thus, as in McBride, Lorge breached his contingency fee agreement with Rabl, and therefore cannot seek to enforce the contract. Because Lorge breached his contract with Rabl, he did not have an enforceable lien at the time Riley collected and disbursed the settlement proceeds for Rabl’s claim.[8]
¶16 With these principles in mind, we turn to Lorge’s claims for
breach of trust, conversion, and treble damages under Wis. Stat. § 895.446.
To support his claim for conversion,[9]
Lorge cites Connecticut v. Blawie, 334 A.2d 484 (
and that the action of the [lawyers] in disbursing the funds in disregard of the [State’s] lien constituted a conversion for which the plaintiff is entitled to damages. A conversion is an unauthorized assumption and exercise of a right of ownership over property belonging to another, to the exclusion of the owner’s right. The essence of the wrong here is that property rights of the plaintiff have been dealt with in a manner which is adverse to it, is inconsistent with its right of dominion, and is to its harm.
Blawie, 334 A.2d at 487. Thus, the court concluded that the State had a claim for conversion because it had a property interest in the settlement amount through its lien, and the lawyers interfered with that property right by disbursing the settlement amount to others. See id.
¶17 Similarly, in Weg and Myers, the court concluded that a law firm that disbursed insurance proceeds to itself and the insured despite a claim by a secured lender was liable for conversion. The court explained that “Weg & Myers converted the proceeds in its possession to its own benefit and that of its client by knowingly exercising unauthorized dominion and control over property in which the Bank, as a secured creditor, had a superior property interest.” Weg and Myers, 69 N.Y.S.2d at 445 (citations omitted). Thus, as in Blawie, the court recognized a cause of action because of the existence of a valid property interest and the law firm’s disbursement to others despite its knowledge of that property interest. Because Lorge did not have an enforceable lien at the time Riley disbursed the settlement funds, Lorge does not have a claim for conversion.
¶18 To support his claim for breach of trust, Lorge cites the Restatement (Third) of the Law Governing Lawyers § 44 (2000). That section requires “[a] lawyer holding funds … in which a client claims an interest” to “take reasonable steps to safeguard the funds,” and recognizes that “[a] similar obligation may be imposed by law on funds … so held and owned or claimed by a third person.” Comment (c) provides that “[a] lawyer who violates this Section can be subject to civil liability as well as disciplinary sanctions. A lawyer who converts the property of another is of course liable ….” Thus, the Restatement recognizes that an attorney is obligated to hold and safeguard funds claimed by another, and failure to do so exposes the lawyer to potential disciplinary action and civil liability. However, the comment to this section says the lawyer can be subject to civil liability, not that the lawyer is liable based on those actions. In contrast, it says that a lawyer who converts the funds of another is liable. It is clear from the Restatement and its accompanying comments that an attorney who fails to retain in trust money claimed by another will be subject to liability only if an independent cause of action, such as conversion, arises from the conduct.[10] Because Lorge did not have a valid property interest in the settlement amount giving rise to an independent cause of action, any misconduct by Riley in failing to hold funds in trust for Lorge is not a basis for a civil action.
¶19 Finally, Lorge claims that he is entitled to treble damages
under Wis. Stat. § 895.446. Section 895.446(1) provides that “[a]ny
person who suffers damage or loss by reason of intentional conduct … that is
prohibited under … [Wis. Stat.
§] 943.20, … has a cause of action against the person who caused
the damage or loss.” Subsection (3)(c)
allows a plaintiff to recover treble damages for violation of subsection
(1). Section 943.20(1)(b), in turn, provides
that whoever does the following is guilty of theft:
By virtue of his or her office, business or employment, or as trustee or bailee, having possession or custody of money or of a negotiable security, instrument, paper or other negotiable writing of another, intentionally uses, transfers, conceals, or retains possession of such money, security, instrument, paper or writing without the owner’s consent, contrary to his or her authority, and with intent to convert to his or her own use or to the use of any other person except the owner. A refusal to deliver any money or a negotiable security, instrument, paper or other negotiable writing, which is in his or her possession or custody by virtue of his or her office, business or employment, or as trustee or bailee, upon demand of the person entitled to receive it, or as required by law, is prima facie evidence of an intent to convert to his or her own use within the meaning of this paragraph.
Again, this cause of action requires that a plaintiff suffer damage or loss through the defendant’s unauthorized use of the plaintiff’s property; Lorge’s claim is therefore predicated on his assertion that he had an ownership interest, through his lien, on the settlement funds that Riley then converted to his own use. Because he did not have an ownership interest, Lorge cannot recover under this statute.
¶20 We note, however, that Lorge’s claims are precluded by the
trial court’s findings after trial, while here Lorge appeals from the trial
court’s dismissal of his claims on summary judgment. The summary judgment submissions establish
that Lorge and Rabl entered into a contingency fee contract granting Lorge an
attorney’s lien on any settlement amount Rabl ultimately obtained; that after
Rabl substituted Riley as her counsel, Lorge forwarded Rabl’s case file to
Riley, including the retainer contract; that the parties disagreed over the
quality of services Lorge provided to Rabl before he was discharged; and that
Riley disbursed the settlement funds without paying Lorge. Thus, assuming that
¶21 Lorge next argues that, after trial on the merits of his claim
for attorney fees, the trial court erroneously exercised its discretion in
awarding him $5,000 as the quantum meruit value of his legal services because
the trial court failed to apply the correct legal standard under Tonn
v. Reuter, 6
¶22 In Tonn, the supreme court addressed the right of an attorney to
recover under a contingency fee contract after being discharged without
cause. It adopted the rule followed by a
majority of jurisdictions that “where the attorney has been employed to perform
specific legal services, his discharge, without cause or fault on his part
before he has fully performed the work he was employed to do, constitutes a
breach of his contract of employment and makes the client liable to respond in
damages.”
the proper measure of damages to apply in a case like the present is the amount of the contingent fee based upon the amount of the settlement or judgment ultimately realized by the client, less a fair allowance for the services and expenses which would necessarily have been expended by the discharged attorney in performing the balance of the contract.
¶23 Lorge argues, however, that Tonn’s holding is not so
narrow. He contends that the Tonn
formula applies whenever an attorney’s conduct does not fall under what he
categorizes as the “exception” created in McBride for attorneys who provide no
services of value. We do not read Tonn
and McBride
as creating a rule and an exception.
Instead, Tonn establishes the damages available to an attorney after a
client breaches the contingency fee agreement by discharging the attorney
without cause. McBride establishes the
damages available to an attorney who has breached the contingency fee agreement
and therefore cannot recover under the contract. In McBride, the attorney also provided no services of any value,
and therefore recovered nothing in quantum meruit. McBride, 176
By the Court.—Judgment and order affirmed.
[1] After
Lorge commenced this lawsuit, Wis. Stat.
§ 895.80 was renumbered as § 895.446. See 2005
[2] The parties initially disputed how much Lorge did or did not do to advance Rabl’s case and whether his actions were reasonable. Following trial, the trial court found that Lorge took some actions to advance Rabl’s case, but that his conduct fell below a reasonable standard of care as Rabl’s attorney. Neither party disputes the trial court’s factual findings on appeal.
[3] Wisconsin Stat. § 757.38 reads:
No settlement or adjustment of any action which shall have been commenced to recover damages for any personal injury ... in which an attorney shall have appeared for the person or persons having or claiming a right of action for such injury or death shall be valid, unless consented to in writing by such attorney or by an order of the court in which said action is brought approving of such settlement or adjustment.
[4] The trial court noted that whether the lien had any value turned on whether Lorge was discharged for cause, which was a factual issue for trial.
[5] Lorge does not appeal this issue.
[6] In his complaint, Lorge cites Supreme Court Rule 20:1.15(d) in his claim for breach of trust. However, as the trial court found, and Lorge concedes on appeal, supreme court rules do not establish civil liability. See SCR ch. 20 pmbl. Instead, Lorge claims that his complaint sets forth a claim for common law breach of trust and conversion. Riley argues that those claims are not set forth in Lorge’s complaint and that they are time barred. We need not resolve this dispute. Assuming Lorge properly pled common law claims for breach of trust and conversion, the record establishes that he is not entitled to damages on those claims.
[7] Neither
party discusses whether Lorge would be entitled to a common law equitable
attorney’s lien on the facts of this case.
We note, however, that we have concluded that an attorney does not
acquire a common law equitable lien if the underlying cause of action is in
tort and the case settles before coming to judgment. See
Weigel
v. Grimmett, 173
[8] In
McBride
v. Wausau Insurance Cos., 176
[9] Lorge does not separate his claims for breach of trust and conversion, arguing that his cited authority supports both claims under the facts of this case. He does not explain which authority supports which claim. However, because breach of trust and conversion are distinct causes of action, we address them separately, and discuss the cited authority within the cause of action it would reasonably support.
[10] This
approach is reflected in
[11] We
recognize, as Riley points out, that Lorge has only cited cases from foreign
jurisdictions and the Restatement, and has not identified a
[12] The
parties do not raise the issue of whether a quantum meruit approach is
appropriate where a discharged attorney sues a subsequent attorney to recover
for fees provided to a former client.
Quantum meruit requires that “(1) the defendant requested the plaintiff to perform
services, (2) the plaintiff complied with the request, and (3) the
services were valuable to the defendant.”
W.H. Fuller Co. v. Seater, 226