WV Supreme Court hears law firm fee sharing case - WBOY.com: Clarksburg, Morgantown: News, Sports, Weather

WV Supreme Court hears law firm fee sharing case

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Was an engineering company the client of a law firm and should it have received one-third of the firm's recovery?

This is just one of the main questions recently presented to West Virginia Supreme Court justices in the case of Gaddy Engineering Company v. Bowles Rice McDavid Graff & Love LLP and partner, J. Thomas Lane.

Gaddy — which provides land/natural resource management services for land companies without funds to support in-house teams — appealed the final order in Roane County Circuit Court. The court granted Bowles Rice's motion for summary judgment.

Roane County Circuit Judge Thomas C. Evans III ruled that Gaddy was not a client and was not entitled to one-third of the firm's recovery.

The case stems from when Lane started looking into potential discrepancies in royalties to lessors by Columbia Natural Resources, court documents state.

John Bullock, Gaddy president, and Frank McCullough, Gaddy vice president, also started investigating royalty payment issues.

Bullock later approached Lane in December 2003 about the potential of litigation in this matter. Gaddy and Bowles Rice entered into an agreement in February 2004, in which Gaddy would evaluate potential claims of their clients and other Columbia land company lessors.

While Gaddy would assess the lessors' past and future losses from the shortchanging of royalties, Bowles Rice would evaluate lessors' individual legal claims.

Lane and Gaddy agreed they would charge each lessor a reduced flat fee for the evaluations consisting of a $750 fee for Gaddy's work and a $1,000 fee for the work of Bowles Rice.

This flat fee was later determined as insufficient for Gaddy's work.

Gaddy says this agreement also included a contingent fee-sharing agreement in which Bowles Rice would demand a one-third contingent fee from each lessor and pay one-third of the fee to Gaddy.

Bowles Rice and Lane said they did not agree to this proposal. However, court documents say Lane contemplated that if the flat fee evaluations led Bowles Rice to initiate litigation against Columbia, the firm would use Gaddy for consulting litigation and would negotiate fee arrangements to include a bonus feature if there was a favorable outcome.

Then came the Tawney case. The court later entered an order to certify a class in this case. Bowles Rice and Gaddy clients were included in this case.

The lower court's order says McCullough performed damage assessment but didn't begin work until March 5, 2004.

Although Bowles Rice was not appointed as class counsel, Lane wrote to land companies after the class was certified to explain the pros and cons of class action litigation.

Additionally, Lane proposed to pursue independent claims against Columbia in Kanawha County Circuit Court; however, class members did not opt out.

Court documents state Bowles Rice made a formal appearance in Tawney on behalf of a 12 land company subclass in December 2004.

Attorneys in the Tawney case said they had no use for Gaddy as expert consultants because they already had an expert. Attorneys did agree that if this case was successful, Gaddy's charges for previous claim evaluation work would be approved.

After the jury returned a verdict of more than $400 million, court documents continue, Gaddy submitted an invoice of $367,225.

This amount included the work Bullock did in 2000 but Bowles Rice objected to this.  

Later, Gaddy submitted another invoice to Bowles Rice that only contained charges for damage assessment work. This totaled $74,275.

The court approved this but Gaddy later rejected the check. The trial court notes Bowles Rice can still pay Gaddy this amount if they still want it.

Gaddy asserts the lower court erred in denying its claims for negligence, gross negligence and intentional breach. The court said these allegations were the company's breach of contract claim "couched in tort terminology."

The court additionally concluded there was "no viable claim" for promissory estoppel and denied claim for quantum meriuit.

Gaddy said even if the court determines the contract between the firm and itself did not exist then the company should receive damages because it relied on the firm's representations.

In the April 18 oral argument hearing, Gaddy attorney Paul Harris said an attorney-client relationship did exist because Gaddy relied on advice given by Bowles Rice regarding attendance of hearings and other matters.

Gaddy also asserted Bowles Rice assured Gaddy there was an agreement where they would share one-third of the recovery.

Justice Robin Davis asked why Gaddy would revise the bill back to $74,000 and if disputed the dollar amount, why didn't they appear before the judge in the hearing.

Harris argued Lane told Bullock not to come to the hearing and said Bullock's affidavit was not addressed at all in the order.

"We relied upon him and looked at him as our lawyer," Harris said.

However, Dave Johnson, the firm's attorney, said the trial court made the right decision and even if the firm entered into a contingent fee sharing agreement, the firm was excused under the doctrine of impracticability.

Johnson said the invoice was confined from March 5 to July 27 2004, all the work related to claim evaluations. He said an attorney-client relationship did not exist.