Grayson & Grayson, P.A. v. Couch

678 S.W.3d 789

GRAYSON & GRAYSON, P.A., Appellant/Cross-Appellee

v.David A. COUCH, Appellee/Cross-Appellant

No. CV-20-213

Court of Appeals of Arkansas, DIVISION IV.

Opinion Delivered October 25, 2023

Rehearing Denied December 6, 2023

APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, THIRD DIVISION [NO. 60CV-06-9369], HONORABLE CATHLEEN V. COMPTON, JUDGE

Robert S. Tschiemer, Mayflower, for appellan/cross-appellee.

Brian G. Brooks, Attorney at Law, PLLC, by: Brian G. Brooks, for appellee/cross-appellant.

KENNETH S. HIXSON, Judge

₁This appeal arises from a longstanding fee dispute between a law firm, appellant Grayson & Grayson, P.A. (hereinafter referred to as "Grayson"), whose principals are Keith Grayson and Melanie Grayson; and an attorney, appellee David A. Couch. The litigation was initiated by Grayson on August 24, 2006, when it filed a complaint alleging breach of contract and unjust enrichment against David A. Couch, individually (hereinafter referred to as "Couch" or "Couch, individually"), and David A. Couch, PLLC (hereinafter referred to as "Couch, PLLC"), for his failure to pay Grayson its alleged portion of fees collected in certain settled nursing-home cases.¹ After a long and complicated procedural history, including a reversal and ₂remand in a prior appeal to this court,² a bench trial was held on October 1-3, 2019. After the bench trial, the Pulaski County Circuit Court entered an order finding that a contract did not exist because the terms were too indefinite and thus denied Grayson’s claims for breach of contract and unjust enrichment. Thereafter, the trial court entered an order denying Couch’s motion for attorney’s fees.

Grayson now appeals, and on appeal it does not challenge the trial court’s ruling that there was no enforceable contract between the parties. Instead, Grayson argues that (1) the trial court erred in denying its motion to amend the pleadings to conform to the proof to allow Grayson to add two more claims against Couch, and (2) the trial court erred in concluding that its unjust-enrichment claim was unavailable and failed as a matter of law.

Couch cross-appealed and argues that the trial court erred in denying his motion for attorney’s fees because he was the prevailing party.

We affirm the trial court’s denial of Grayson’s motion to amend the pleadings to conform to the proof, but we reverse the judgment and remand the case to the trial court for further consideration of Grayson’s unjust-enrichment claim. Because on direct appeal we are reversing and remanding for further consideration, we decline to address Couch’s argument on cross-appeal concerning the trial court’s denial of attorney’s fees, and we dismiss the cross-appeal as moot.

₃I. Facts and Procedural History

The dispute between these parties was the subject of a previous appeal in Grayson & Grayson, P.A. v. Couch, 2012 Ark. App. 20, 388 S.W.3d 96. Many of the facts and the procedure from 2006 through 2010 can be found in the previous opinion. Of particular importance to this appeal is the status of the various claims when the case was remanded to the trial court in 2012. Couch, PLLC had been dismissed with prejudice from the litigation in 2009 for failure of service of process, and that ruling was not disturbed on appeal. Accordingly, because Couch, PLLC was no longer a party to the litigation, all counterclaims and third-party claims made by Couch, PLLC against Grayson and Keith Grayson and Melanie Grayson, individually, had been dismissed. On remand, the only claims that remained were a claim for breach of contract and a claim for unjust enrichment by Grayson against Couch, individually.

After our remand, a three-day bench trial was held on October 1-3, 2019. Keith Grayson, Melanie Grayson, and David Couch testified at the trial.

Keith Grayson testified that he and his wife, Melanie, had been friends with Couch and Couch’s wife and that they socialized. Couch and Darren O’Quinn were partners in a law firm.³ On September 26, 2003, Couch informed Keith that his law firm was dissolving. Within a few days, Couch had dinner at the Graysons’ house, and they discussed Couch joining their law firm. Keith stated that Grayson’s staff was very efficient and well trained on the intake process for nursing-home cases and that he told Couch, "You need to come join us, bring your cases and we will split the fees with you." According to Keith, Couch showed him and his wife all the files he was working on, and Couch "said I have all these files, I don’t have a ₄secretary, I don’t have an office to work in, I don’t have a copy machine, I am not set up." Keith then told Couch that "[they] would plug him right in." Keith stated that Couch is a "rainmaker" and has the ability to generate cases, and he entered into the agreement with Couch because he thought Couch would be a good addition to the law firm. Keith stated that the agreement was for Grayson to provide an office for Couch, that he would bring his cases, and they would split the fees. According to Keith, that night over dinner, Couch stated, "That sounds good I’m looking forward to it, we’re going to win some cases, we’re going to make some money, and we’re all going to be happy, cheers." Keith acknowledged that it would have been much better "had an overall global agreement [been] in writing," but he maintained that they had a binding oral agreement.

Keith also testified that at the time they made the agreement, he was not aware of the existence of Couch, PLLC. Keith said that he only became aware of the PLLC’s existence during the first month after Couch moved into the office. Keith testified further:

I considered my donation to him of overhead as part of the consideration for him coming and practicing and splitting the fees with me. That was just part of it. The part of the consideration that was my staff would be available…. My staff would be available to him, we would be able to provide everything he needed to work up his cases and be successful because we were on parallel tracks. I wanted him to be successful because that meant I would…. I really didn’t care how much work [Couch] did or didn’t do. He could do a little or he could do a lot of the work, it really didn’tmatter to me. My deal with him was bring your eases over and we will split the fees 50/50. If these eases had not settled, [Couch] would have expected me to help him try those cases. But because they settled now [Couch] does not want to pay 50% of the fee.

Keith testified that in the nursing-home eases in which Grayson was claiming entitlement to fees, the cases had been in the early stages of litigation and were settled with minimal work from a litigation standpoint. Keith testified that the fees collected by Couch in ₅those cases were substantial and amounted to hundreds of thousands of dollars in each case. Keith took the position that Grayson is entitled to half of those fees.⁴

Melanie Grayson testified that the agreement with Couch was for Couch to bring his files and come to the firm and be "of counsel," which meant that he would have all the benefits of the firm, including its staff. Melanie testified:

In exchange for what we were giving him we were going to split the fees on his cases and we were going to split the fees on any cases he generated in the future. We saw [Couch] as a rainmaker. Keith is absolutely correct that that was [Couch’s] talent.

Melanie stated that the agreement was with Couch individually, and that she did not know Couch had formed a PLLC until after the deal was done.

David Couch then testified. Couch said that it was his position that there was never an agreement to split fees in the nursing-home cases identified in Grayson’s complaint, and that if there was any such agreement, it was with Couch, PLLC, and not Couch individually. Couch stated that "everybody knew from the day I walked in the door that I was David A. Couch, PLLC" and that "David A. Couch wasn’t an employee so I was an agent of a disclosed principal." Couch stated that with respect to employment contracts with clients, he did not hold himself out as his own PLLC. However, in the pleadings he filed and on his business cards at the front desk of the Grayson law firm, he was identified as David A. Couch, PLLC. Furthermore, when the cases at issue were settled, the fees were deposited with Couch, PLLC’s trust account. Couch acknowledged that during his affiliation with Grayson he wrote checks to himself out of the Couch, PLLC account.

₆With respect to an agreement with Grayson, Couch stated that the first time they discussed it was on October 9, 2003, which was the day after he formed Couch, PLLC. Couch acknowledged that he had recently split with his former law partner, that he needed some help, and "that’s why I accepted the Graysons’ offer to come over." Couch stated that he brought quite a few eases with him to the firm but that the agreement was for Grayson and Couch, PLLC to split fees only on the cases that they worked on together. In the cases where Couch solely worked the case himself, Grayson would not be entitled to one-half the fee. Couch maintained that there was no global agreement. He stated further that the Graysons knew he was filing settlement agreements in the cases identified in Grayson’s complaint. Couch maintained that Grayson did not work on those cases and therefore, Grayson was not entitled to any of the fees in those cases. Couch acknowledged that, during this time frame, he was using Grayson’s resources and staff, including legal assis- tant Jan Armstrong, who helped him with preparation of pleadings, and that she was being paid by Grayson.

At the close of the plaintiff’s case, Grayson moved to amend the pleadings to conform to the proof to add additional claims for breach of fiduciary duty and alter ego. Grayson argued:

The failure to pay attorney’s fees that were the result of this case we believe is a breach of fiduciary duty. Mr. Couch was an attorney practicing in the Grayson law firm as

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