The plaintiff, Vandenberg, was seriously injured when he fell from the upper deck of a yacht and broke his neck. The yacht was manufactured by Brunswick, while owned and operated by RQM. The Vandenbergs settled with RQM and proceeded to trial against Brunswick only. While the jury was out, Brunswick’s representative extended to McNabola, the Vandenberg’s counsel, an offer to settle for $25 million. McNabola informed the Vandenbergs of the offer, and the Vandenbergs told McNabola to accept it. Twleve minutes later, McNabola (who hadn’t yet informed Brunswick’s counsel that the offer was accepted) got a call from the judge’s clerk who advised that the jury sent a note asking whether they could find fault against RQM but not Brunswick. Without telling opposing counsel about the existence or contents of the note, McNabola called Brunswick’s lead counsel and then the person who had extended the settlement offer, and accepted it. Around 10 minutes later, the clerk called lead defense counsel and advised him of the note. When everyone returned to court around an hour after the note came in, the judge seemed surprised that it had taken so long for counsel to appear. Brunswick’s counsel were apparently advised of the contents of the note, but nevertheless apparently put the settlement on the record. The jury continued to deliberate and found for the defense. Brunswick then moved to vacate the settlement and have the jury verdict entered. The judge who presided over the trial recused herself, and a second judge vacated the settlement and entered a judgment on the defense verdict. (In the meantime, McNabola retained another lawyer named Montgomery to represent the Vandenbergs in this post-trial proceedings; although later waived, McNabola originally attempted to treat the almost $600,000 in legal fees incurred by Montgomery and his firm as expenses; McNabola did not suggest to the Vandenbergs that they should retain or consult with independent counsel or make them aware of any potential conflict between McNabola and the Vandenbergs.) Ultimately, the second judge recused himself, and a third judge reinstated the settlement, finding that Brunswick went forward even after its counsel was made aware of the contents of the note from the jury. And that decision – i.e. reinstatement of the settlement – was affirmed by the Illinois Court of Appeal.
Then, thru new counsel, the Vandenbergs challenged the lien for litigation costs and attorneys fees asserted by McNabola.
The trial court determined that McNabola breached the fiduciary duties he owed to the Vandenbergs by violating the Rules of Professional Conduct in the following ways: (1) improperly delegating his responsibilities and obligations to outside lawyers, (2) improperly charging the Vandenbergs for the outside lawyers’ fees, (3) failing to properly inform the Vandenbergs of the retention of outside lawyers, (4) failing to abide by the Vandenbergs’ instructions to settle their claim, (5) engaging in improper ex parte communications with a judicial employee, (6) failing to inform the Vandenbergs of the events of June 9, 2015, or that the settlement was in jeopardy, (7) improperly delegating his responsibilities to Montgomery posttrial, (8) failing to inform the Vandenbergs about the retention of Montgomery and billing the Vandenbergs for Montgomery’s fees and expenses as case expenses without having them sign a separate fee agreement, (9) improperly charging Montgomery’s legal fees as case costs, (10) failing to inform the Vandenbergs that they could seek advice from independent counsel, and (11) continuing his post-trial representation of the Vandenbergs in the face of an obvious conflict of interest. Regarding the attorney’s lien, the court found that McNabola did not show actual notice to Brunswick and thus failed to establish an enforceable lien. The court also found that McNabola “failed to provide any evidence of the total number of hours his firm engaged in the underlying case, thus failing to properly plead and prove Quantum Meruit fees for his hourly rate.” The court denied McNabola’s petition for fees and adjudicated his lien to “zero dollars”.
The Illinois Court of Appeal affirmed.
“Although for most of their arguments on appeal the parties proceed as if the retainer agreement between McNabola and the Vandenbergs ceased to have any legal effect upon McNabola’s termination, we are of the view that the circuit court’s decision can also be upheld on the alternative – and purely legal – basis that the provisions of the retainer agreement do in fact control here. Those provisions expressly provided for what fees would be paid if, as occurred in this case, McNabola was discharged. Under the agreement, McNabola’s fees would have been based on the hours it expended in this case multiplied by a reasonable hourly rate. McNabola does not dispute the circuit court’s finding that it failed to provide any evidence of how much time it spent working on this case. Nor does McNabola offer any answer to the Vandenbergs’ argument that it thereby forfeited any right to compensation on an hourly basis….
“McNabola contends that in this case, where it was discharged after performing a substantial amount of work, the only proper award was the full contingency amount, less the hourly fees earned by its successor counsel. But as McNabola well knows, a contingency fee often represents a windfall, an incentive for a firm to bear the full risk of loss in cases where the plaintiff has a potentially valuable claim but may not have the funds to advance the litigation. As such, contingency fees often bear little relation to the true value of the time a firm has spent on a case, measured in hours the firm expended multiplied by a reasonable hourly rate. While an award of the full contingency fee, less the amount earned by new counsel, may, in some cases, be an appropriate fee award for counsel terminated before the conclusion of litigation, the authorities McNabola relies on do not stand for the proposition that a circuit court is required to calculate a fee award in this manner….
“We agree with McNabola that, contrary to the Vandenbergs’ assertions on appeal, not every breach of fiduciary duty requires a complete forfeiture of quantum meruit fees…. But…when one breaches a fiduciary duty to a principal, the appropriate remedy is within the equitable discretion of the court. Here, the breaches that Judge O’Hara relied on were certainly factors appropriate for consideration. Moreover, because quantum meruit is an equitable remedy, it was appropriate for the circuit court to consider the conduct of the attorneys in deciding what they deserved to be paid in this case.
“We recognize that the adjudication of a firm’s fees to zero dollars is relatively uncommon, but this was an unusual case. Based on the record that Judge O’Hara had before him, we cannot say that his order was an abuse of his discretion or that no reasonable person could find that MLG was entitled to receive no fees from a recovery that the firm’s own conduct put in serious jeopardy, particularly where, as Judge O’Hara found to be the case here, that firm had repeatedly breached its duty to the Vandenbergs throughout the attorney-client relationship….
“In reaching this holding, we do not rely on the legal argument advanced by the Vandenbergs that, under Rhoades, an attorney discharged for cause may never recover quantum meruit fees…. The circuit court did not rest its decision on the view that McNabola’s termination for cause was sufficient to preclude an award of fees, and we are likewise disinclined to do so. However, the fact that the Vandenbergs had clear cause for terminating their representation by McNabola was certainly a factor that the circuit court was entitled to consider in awarding quantum meruit fees.”
Vandenberg v. RQM, No.1-19-0544, 2020 WL 3487529 (Ill. App. 1st Dist. June 26, 2020).