WV Supreme Court: Engineering company will not receive recovery - WBOY.com: Clarksburg, Morgantown: News, Sports, Weather

WV Supreme Court: Engineering company will not receive recovery

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Photo courtesy of the West Virginia Supreme Court Photo courtesy of the West Virginia Supreme Court

An engineering company was not a law firm's client and thus will not receive one-third of the firm's recovery, West Virginia Supreme Court justices recently decided.

Justices affirmed the Roane County Circuit Court's decision in the case of Gaddy Engineering Company v. Bowles Rice McDavid Graff & Love LLP and partner, J. Thomas Lane.

The state court granted Bowles Rice's motion for summary judgment, saying Gaddy was not a client and should not receive one-third of the 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 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 their per curiam opinion, justices said the record supports the decision that Gaddy stopped working on these claims in 2004, when large landowner clients refused Lane's recommendation and remained class members in the Tawney litigation.

Justices also said Bullock's affidavit "lacks any chronological point of reference regarding his ‘performance of an enormous amount of work that took years to complete.'"

"That vague avowal and the complete lack of any time submission by Mr. Bullock for the relevant time period suggests that whatever time Mr. Bullock personally invested in the matter preceded the decision of the parties to jointly investigate the royalty underpayment issues," the opinion states.

The opinion states there was no evidence to support that Bowles Rice agreed to share fees with Gaddy or that the parties had a client-lawyer relationship.

Justices Allen Loughry and Robin Davis wrote a concurring opinion, saying it is illegal to have a fee-sharing agreement between a lawyer and a nonlawyer, noting Bowles Rice sought to dismiss the case because the alleged fee-sharing agreement was an illegal contract and unenforceable.

"In view of this recognized need to protect the public from the harmful consequences of fee-sharing agreements, and like the majority of courts that have addressed the concerns at issue, this court should have reached the conclusion that a fee-sharing agreement between a lawyer and a nonlawyer that is in violation of Rule 5.4 of the Rules of Professional Conduct is unenforceable as being contrary to the public policy of this state," the concurring opinion states.

Justice Menis Ketchum filed a dissenting opinion, saying "a great injustice has been done in this case."

"When Gaddy asked Bowles Rice for its share of the fee according to the terms of their agreement, Bowles Rice essentially replied, ‘agreement? What agreement,'" the dissenting opinion states.

Ketchum's dissent said a jury should have been able to answer whether Gaddy entered into an agreement with Bowles Rice and if that agreement became impracticable when the Tawney case was certified

"Gaddy deserves its day in court," Ketchum said.

Even if the jury found the agreement was impracticable, Ketchum said Gaddy still would be entitled to relief.

"This ruling is baffling. How can a court say Gaddy performed no work in the class action when the same court granted Gaddy a $75,000 fee award for work performed in the class action?"