MacKinnon, et al. v. Berluti, et al. (Lawyers Weekly No. 12-145-16)

No. 13-4023 BLS 2
This case involves a dispute between an attorney and two of his clients about the fee that the attorney collected in connection with a settlement of his clients’ contract and Wage Act claims against their former employer. The plaintiffs (the former clients) contend that the defendant attorney misled them as to the value of their claims and then collected as part of that settlement a fee that was excessive and substantially more than the contingent fee that the plaintiffs had originally agreed to pay. Plaintiffs asserted, among other things, claims for breach of contract and a violation of 93A.
On September 26, 2016, the jury returned a verdict in favor of the defendants on the breach of contract counts. Specifically, they found that the written fee agreement that plaintiff Paul McKinnon had with the defendant Robert Berluti had been modified and that as a consequence of that modification, there was no breach of the fee agreement when the settlement proceeds were disbursed as they were. The jury made this finding in the context of a set of instructions which advised them of the special duties that an attorney owes to his client – duties which are fiduciary in nature. They also were instructed that the defendants bore the burden of
proving that there had been a modification. As to plaintiff Olivo, the jury found that he had no agreement with Berluti regarding the payment of attorney’s fees and therefore there was no breach of contract. This verdict was amply supported by the evidence.
This Court reserved for itself the 93A Count. I informed the parties before submission of the contract count to the jury that I intended to adopt the findings of the jury as part of my own findings on the reserved 93A claim. I do so now. Moreover, there are no additional facts that plaintiffs have proven which would support the conclusion that the defendants engaged in unfair and deceptive business practices. Defendants are therefore entitled to judgment in their favor on this last remaining count in the case. In support thereof, this Court makes the following findings of fact.
Olivo approached Berluti in 2008 about bringing a claim against his former employer Lindenmayr Monroe for unpaid commissions. Because Olivo had been terminated by the company and there was a possibility the company could assert counterclaims against him if he brought his own suit, it was agreed that Olivo would try to find another Lindemayr employee willing to be the named plaintiff in a class action against Lindemayr for these unpaid commissions. Olivo was successful in locating such a person. Paul McKinnon, who had recently retired from the company, was willing to serve as named plaintiff, and in September 2009, McKinnon entered into a written fee agreement with Berluti. That agreement provided among other things that McKinnon would be responsible for costs and expenses, but that he would pay no attorney’s fees unless he prevailed, either at trial or through a settlement. In that event, Berluti would receive a fee consisting of one-third of the proceeds. As the jury found, Olivo had no fee agreement with Berluti.
The case against Lindenmayr was brought as a putative class action and alleged a violation of the Wage Act and breach of contract among other claims. If McKinnon prevailed at trial, the Wage Act provided for an award of attorney’s fees as approved by the court, and for the assessment of treble damages in the discretion of the court (the statute has since been amended). Judge William Young, to whom the case was assigned, declined to certify the class until McKinnon’s individual claim was resolved. Thus, Olivo’s chance of recovery depended not only on McKinnon prevailing but also on Judge Young’s ultimately agreeing to permit class recovery.
The case also carried various other risks for the plaintiffs. Those risks were outlined by an attorney called by the defendants as an expert. Plaintiffs offered no credible evidence to rebut this testimony. Berluti explained these risks to both plaintiffs at various times in the litigation.
An effort was made to resolve the case through mediation, which proved unsuccessful. Then as the trial date approached, Berluti, with his client’s knowledge and consent, resumed settlement talks with opposing counsel. Although opposing counsel (David Kerman) was not called by either side as a witness at trial, this Court credits Berluti’s testimony as to the gist of those discussions.
The final offer by Kerman was to pay Berluti $ 215,000 for his attorney’s fees (about $ 30,000 less than the billing records showed his fees were as of that date), pay McKinnon $ 60,000 and pay Olivo $ 95,000. Although Olivo was not a named plaintiff, Kerman was insistent that he be included in the settlement and sign a confidentiality agreement regarding it, thus diminishing the chance that Lindemayr would face additional litigation by other former employees. Contrary to plaintiffs’ assertion, Kerman did not propose a lump sum settlement and leave it to Berluti to apportion. Thus, Berluti did not place his own interest ahead of his
clients, and the fee that he collcted was not excessive. Kerman was also firm in his position as to what McKinnon and Olivo would each receive. These amount were fair and reasonable in light of the risks they faced if the case had not been settled. Indeed, had the settlement not separately provided for attorney’s fees, the plaintiffs would have received less, since Berluti would have taken a third out of the recovery.
This Court is fully aware of an attorney’s obligations to his client and the professional rules of ethics which must be followed, particularly with respect to fee agreements. Berluti fulfilled those obligations and acted ethically and fairly in dealing with his clients in negotiating the settlement. Each of the plaintiffs fully understood the settlement offer that they accepted and agreed to. They also understood precisely what Berluti received as part of that settlement and the basis for it. In accepting the settlement, MacKinnon understood (as the jury concluded) that the apportionment of attorney’s fees was different from that contemplated by the original fee agreement. He accepted his share with that understanding and indeed expressed his satisfaction with the outcome. As already pointed out, Olivo’s chance of recovery was even more contingent – and thus the amount he received particularly reasonable— since he was not even a named plaintiff at that point.
In short, neither plaintiff was misled in any way, nor did Berluti engage in any conduct that was unfair and/or deceptive in violation of chapter 93A. Accordingly, it is hereby ORDERED that judgment enter in favor of the defendants on Count V.
Janet L. Sanders
Justice of the Superior Court
Dated: October 21, 2016

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