Goldman, Skeen & Wadler, P.A. v. Cooper, Beckman & Tuerk, L.L.P.

Page 29

122 Md.App. 29

712 A.2d 1

GOLDMAN, SKEEN & WADLER, P.A. v. COOPER, BECKMAN & TUERK, L.L.P., et al.

No. 1038, Sept. Term, 1997.

Court of Special Appeals of Maryland.

May 21, 1998.

Within a few months, the first of many disputes arose between the two parties. CBT believed that the representation called for still more resources than the two parties could provide and demanded that additional counsel be brought in. GSW initially opposed such a move, but eventually both GSW and CBT signed a second fee-sharing agreement with Mr. Stanley J. Levy of Kreindler & Kreindler. (The latter firm is the predecessor to the LPK firm, and for ease we will refer to them collectively as LPK.) Under this second agreement, dated 18 April 1980, LPK would handle "the major burden" of the Local 24/Key Highway asbestos representation and advance most of the costs in return for fifty percent of all fees generated therefrom. CBT and GSW would share equally the other half of the fees. The agreement also allocated among the parties responsibility for certain specific tasks and expenses, but it was silent as to any derivative representation.

Over a year later, another pair of fee-sharing agreements was executed. One of these agreements was memorialized in a document dated 4 November 1981 and signed by only GSW and CBT. The agreement pertained to their joint representation of a different set of asbestos litigation clients who were members of Local 33 of the IUMSWA, employed at Bethlehem Steel's Sparrows Point Shipyard. We refer to this agreement as "Local 33/Sparrows Point." GSW and CBT agreed to share equally the fees derived from the representation "after payment of the net fee of other litigation counsel."

The fourth and final fee-sharing agreement is memorialized in a document dated 5 November 1981 and signed by GSW, CBT, and one Bernard G. Link, Esq. Mr. Link was general counsel to union Local 31 from the Maryland Shipbuilding and Drydock Company. The agreement called for joint representation of Local 31 members in asbestos litigation, with LPK acting as lead counsel in return for fifty percent of the fees. Mr. Link would receive twenty-five percent of all fees, and CBT and GSW would collectively receive the remaining twenty-five percent, as local counsel.

Mr. Goldman's relations with the other parties were strained from the outset. Mr. Goldman complained that CBT was violating the agreements by deducting overhead expenses from GSW's portion of fees and by failing to disclose fees generated from "spin-off" representation arising out of the Local 24/Key Highway cases. LPK and CBT considered Goldman difficult to deal with and derelict in his participation in this litigation. They tended to adopt the strategy of ignoring his frequent complaints, moving ahead with the litigation, and sending Mr. Goldman bills and checks according to their understanding of the agreements.

As this case is primarily concerned with the Local 33/Sparrows Point agreement, we note some further facts brought out at trial regarding this agreement. Mr. Goldman drafted the two-paragraph letter memorializing the agreement. According to him, this fee-sharing agreement never concerned LPK at all but left CBT and GSW free to associate with whatever "other litigation counsel" they saw fit to bring in. In fact, Mr. Goldman claimed that he specifically excluded LPK from the agreement because he was so dissatisfied with its performance in the Local 24/Key Highway cases. LPK and CBT apparently believed that LPK was, at the very least, the intended third-party beneficiary of the agreement. At some point during the late 1980's, GSW made some demands of CBT for reimbursement of expenses in Local 33/Sparrows Point representation. CBT refused to pay, allegedly because GSW already owed them an even greater sum arising from expenses in cases covered by other agreements. In April of 1989, Mr. Goldman met with Carl E. Tuerk, Jr., of CBT in a hotel dining room to discuss their disputes. According to Mr. Goldman, the meeting ended with an agreement to terminate the Local 33/Sparrows Point agreement, but according to Mr. Tuerk and CBT, it was merely another opportunity for Mr. Goldman to "blow off steam," and it did not result in a modification or termination of the Local 33/Sparrows Point Agreement. After that time, GSW associated with other counsel to pursue the Local 33/Sparrows Point claims.

In August 1989, Mr. Goldman notified CBT of some settlements that had been obtained in Local 33/Sparrows Point cases and informed CBT that he would hold a portion of the funds in escrow pending the resolution of their financial disputes. No response was made with regard to these funds, and Mr. Goldman eventually withdrew them. By 1994, several more Local 33/Sparrows Point cases had settled for considerable sums, and CBT contacted GSW regarding its share, at which point Mr. Goldman asserted that CBT no longer had any right to any such funds. The instant suit ensued eighteen months later.

At trial, the jury returned a special verdict indicating the following. The first Local 24/Key Highway agreement between just CBT and GSW was no longer in effect and neither party had breached the agreement. The second Local 24/Key Highway agreement remained in effect and both CBT and LPK had breached that agreement and were liable to GSW for one dollar in damages. The Local 33/Sparrows Point agreement also remained in effect, and GSW had breached that agreement. GSW was liable to CBT for one dollar in damages and liable to LPK for one dollar in damages. The final Local 31 agreement remained in effect, but neither party had breached it. The court entered two final judgments in the case. In a Final Judgment on Breach of Contract Claims, the court entered judgment on the verdicts, including the three damages awards. In a contemporaneous Final Judgment and Order Granting Declaratory Relief, the court declared the status of the four agreements in accord with the jury's verdict. The court also ordered GSW to remit $1,830,942.07 to CBT and to remit $3,861,657.53 to LPK, these sums "representing [CBT's and LPK's] contractual share of legal fees received by" GSW to the date of the jury verdict. Further facts will be set forth where necessary for particular discussions.

DISCUSSION

MLRPC Rule 1.5(e)

and Post v. Bregman

We first take up appellant GSW's claim that the lower court erred by excluding from the trial all matters pertaining to the Maryland Lawyers' Rules of Professional Conduct (MLRPC) and earlier ethical rules. Appellant requests we order a new trial limited to the issue of whether the contracts remain in effect. (GSW does not request and has never requested any relief from the breach of contract judgment below.) Prior to trial, GSW gave notice of its intent to call an expert witness in legal ethics to testify on the ethical rules governing fee-sharing agreements, including MLRPC Rule 1.5(e) and the predecessor rule in effect at the time the agreements were made. GSW also sought to have clients testify to factual matters relevant to these ethical rules, to introduce the text of Rule 1.5(e) and its predecessor, and to instruct the jury thereon. The court sustained objections to all such evidence and denied the requested instruction.

This Court took up the issue of the effect of MLRPC Rule 1.5(e) on a suit for breaching a fee-sharing agreement in Post v. Bregman, 112 Md.App. 738, 686 A.2d 665 (1996), decided just three weeks before trial in this case. We ruled that Rule 1.5(e) does not constitute a judicial precedent and that it cannot be read into a fee-sharing contract. Relying on our decision, the circuit court granted a motion in limine preventing GSW from presenting any evidence or defense based on that ethical rule.

On 15 January 1998, however, the Court of Appeals reversed this Court on that very point. Post v. Bregman, 349 Md. 142, 707 A.2d 806 (1998). The Court began its analysis by noting that the question of whether ethical rules are enforceable outside of disciplinary proceedings stems from the larger question of whether such rules constitute public policy. Id. at 161-62, 707 A.2d at 815. Unlike some states' rules which are promulgated by a local bar association, Maryland's rules of legal ethics are adopted by the Court of Appeals "in the exercise of its inherent Constitutional authority to regulate the practice of law." Id. at 163, 707 A.2d at 816. The Court also pointed out that these rules thoroughly regulate "virtually every aspect of the practice of law." Id. "Unquestionably, so thorough a regulation of an occupation and professional calling, the integrity of which is vital to nearly every other institution and endeavor of our society, constitutes an expression of public policy having the force of law." Id. The Court concluded, "MLRPC constitutes a statement of public policy by the only entity in this State having Constitutional authority to make such a statement, and it has the force of law." Id. at 164, 707 A.2d at 816.

As for the crucial question of whether such rules could be raised as a defense to an action on a contract, the Court first noted multiple instances in which the appellate courts of Maryland have given at least some effect to various ethical rules outside of the disciplinary context. The rules have been referred to in determining whether an attorney is a fiduciary for certain liability purposes, Advance Fin. Co. v. Trustees of the Clients' Sec. Trust Fund, 337 Md. 195, 652 A.2d 660 (1995), whether a Public Defender must release client information under the Public Information Act, Harris v. Baltimore Sun, 330 Md. 595, 625 A.2d 941 (1993), whether the goodwill of a legal practice may constitute marital property, Prahinski v. Prahinski, 321 Md. 227, 582 A.2d 784 (1990), whether an attorney should be disqualified, Harris v. David S. Harris, P.A., 310 Md. 310, 529 A.2d 356 (1987), and whether an attorney harbored criminal intent in receiving stolen goods...