Hurst v. IHC Health Services, Inc. et al

Filing 59

MEMORANDUM DECISION AND ORDER denying 55 Motion for Attorney Fees/for Relief Pursuant to I.C. § 3-205. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

CINDY HURST,
Case No. 4:10-cv-00387-BLW
Plaintiff,
MEMORANDUM DECISION AND
ORDER

v.
IHC HEALTH SERVICES, INC., a Utah
General Non-Profit Corporation, d/b/a
CASSIA REGIONAL MEDICAL
CENTER; INTERMOUNTAIN
HEALTH CARE, INC., a Utah General
Non-Profit Corporation,
Defendants.

INTRODUCTION
The Court has before it Rossman Law Group. PLLC’s Motion for Relief Pursuant
to I.C. § 3-205 (Dkt. 55). For the reasons explained below, the Court will deny the
motion.
BACKGROUND
Cindy Hurst sued the defendants in this case alleging various employment claims.
She hired Chad Nicholson of the Rossman Law Group (“RLG”) to represent her in the
case. She and RLG signed a document entitled “Contract To Employ Attorney” to
formalize their attorney-client relationship. Nicholson Decl., Ex. A (Dkt. 55-2). Nicholson

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then represented Hurst during much of the litigation, including dispositive motion
practice.
After the Court denied in part the defendants’ motion for summary judgment, the
defendants presented Hurst with an offer of judgment for $50,000.00. Nicholson
suggested to Hurst that she accept the offer, but Hurst refused to accept it. Nicholson then
filed a motion to withdraw as counsel, which the Court granted. Attorney Lincoln Hobbs
then entered an appearance for Hurst. A few months later, Hurst and the defendants
settled the case for $50,000.00. Based on the contingency fee arrangement set forth in the
Contract To Employ Attorney, RLG now asks the Court to order Hurst pay it $20,602.09.
ANALYSIS
RLG argues that it is entitled to its contingency fee pursuant to Idaho Code § 3205. That statute states that compensation of attorneys is left to the agreement of the
attorney and her client. I.C. § 3-205. It further states that “[f]rom the commencement of
an action, or the service of an answer containing a counterclaim, the attorney who appears
for a party has a lien upon his client’s cause of action or counterclaim, which attaches to a
verdict, report, decision or judgment in his client’s favor and the proceeds thereof in
whosoever hands they may come; and can not be affected by any settlement between the
parties before or after judgment.” Id. The purpose of this statue is to secure payment for
legal services rendered by giving the attorney an interest in the fruits of his labors.
Jarman v. Hale, 731 P.3d 813, 817 (Idaho 1986).
However, the Idaho Supreme Court has held that the attorney-client contract is like
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any other contract, and either the attorney or the client is entitled to sue for damages for
its breach. Anderson v. Gailey, 606 P.2d 90, 96 (Idaho 1980). Either non-breaching party
to an attorney-client contract shall receive the benefit of the contract if the other breaches
it. Id. at 96. Thus, a client who discharges an attorney without cause is liable to the
attorney for breach of contract, and the liability of the client is limited to the fee specified
in the contract diminished by the savings in time and effort to the attorney resulting from
discharge.” Id. The discharged attorney shall not recover a windfall of receiving a full fee
for only part performance. Id.
Accordingly, had Hurst breached the attorney-client contract and discharged RLG
without cause, the Court would have no problem awarding RLG its fees specified in the
contract diminished by the savings in time and effort to RLG resulting from the discharge.
The problem for RLG is that Hurst did not breach the contract. The Contract To Employ
Attorney states that RLG’s representation of Hurst “shall terminate upon resolution of this
matter or otherwise in accordance with this Agreement.” Nicholson Decl., Ex. A (Dkt. 552). It then states that the attorneys “shall be entitled to their full fee as set forth in
paragraph 3 above, notwithstanding that [Hurst] may discharge Attorneys or obtain the
substitution of counsel before Attorneys have completed the services described herein or
before resolution of [Hurst’s] case. Id.
Although RLG tries to suggest that Hurst decided to obtain substitute counsel and
effectively terminate RLG, the evidence before the Court tells a different story. Attorney
Nicholson filed a motion to withdraw as counsel for Hurst. (Dkt. 39). In his affidavit
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supporting his motion to withdraw, Nicholson did not suggest that Hurst fired him.
Instead, he stated that there was a “vast divergence between the firm’s professional
assessment as to how to proceed in this case and [Hurst’s] perspective as to how to
proceed.” Nicholson Aff., ¶ 3 (Dkt. 40). The “vast divergence” on how to proceed was
that Nicholson wanted Hurst to accept a $50,000.00 offer of judgment, and Hurst wanted
to reject it. Nicholson then advised Hurst of his intention to withdraw from the matter,
and was advised that Hurst had retained new counsel. Id. at ¶¶ 6-7.
The Ninth Circuit has indicated that only the client may decide whether to make or
accept an offer of settlement. Nehad v. Mukasey, 535 F.3d 962, 970 (9th Cir. 2008).
Moreover, a lawyer may not burden a client’s decision making process by threatening to
withdraw if the client refuses to settle. Id.1
This case is not a situation where the client tried to stiff her attorney out of a
contingency fee by firing him just before she received her settlement. RLG disagreed with
Hurst’s initial decision not to accept a settlement offer, and then asked the Court to
withdraw as Hurst’s counsel because of that disagreement. Hurst was then forced to
obtain new counsel, and she incurred additional attorney fees in the amount of at least
$17,590.04. Had Hurst fired RLG without cause, and then settled the case, RLG would
likely be entitled to payment for their services. But that is not what happened.

1

Although Nehad addressed a California immigration court case, the principles regarding
the attorney-client relationship are quite general and sound. Moreover, the Court found no Idaho
cases which would suggest a different conclusion.
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Moreover, Idaho Code § 3-205 does not entitle RLG to its fees. Section 3-205 is
not an insurance policy for an attorney who violates the general rule prohibiting an
attorney from threatening to withdraw if the client refuses to settle. Idaho Code § 3-205
simply codified the common law charging lien held by an attorney on his client’s
judgment or verdict. Nancy Lee Mines, Inc. v. Harrison, 471 P.2d 39, 41 n.4 (Idaho
1970). “A charging lien is the equitable right of an attorney to have fees and costs due
him for services in a particular suit secured by the judgment or recovery in such suit . . . .”
Id. RLG does not have fees and costs due it from Hurst because Hurst did not breach the
contract, and the firm unilaterally asked to withdraw from representing her before the
case was resolved.2
Finally, in Nehad the Ninth Circuit cited to a Fifth Circuit case indicating that
courts almost universally agree that failure of a client to accept a settlement offer does not
constitute just cause for a withdrawing attorney to collect fees. Nehad, 535 F.3d at 970
(citing Augustson v. Linea Aerea Nacional-Chile S.A., 76 F.3d 658, 663 (5th Cir. 1996)).
Although the Court could not find an Idaho case on point, the Ninth Circuit’s decision
tracks with the majority rule adopted by most courts, indicating that “[a]n attorney who
voluntarily withdraws from a case without good cause forfeits recovery for services
performed.” Hinshaw v. Vessel M/V Aurora, 2007 WL 4287567, *2 (N.D.Cal. 2007)
2

While the Court concludes that RLG does not have a claim under its retention
agreement with Hurst, or under the statute creating an attorneys fee lien, the Court does not offer
any view as to whether RLG has a claim for quantum meruit, or a similar legal doctrine, for the
reasonable value of services expended by RLG or received by Hurst. That is a question not
raised in the proceedings here and is better left to the state courts to resolve.
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(internal citation omitted); see also Bell & Marra, pllc v. Sullivan, 6 P.3d 965, 970 (Mont.
2000); Ausler v. Ramsey 868 P.2d 877, 880 (Wash.App. 1994). Only if the attorney has
justifiable cause for withdrawing, may he recovery for services. Id. Justifiable cause may
include many reasons, but disagreeing with the client’s decision not to accept an offer of
judgment is not one of them. Accordingly, the Court will deny RLG’s motion.
ORDER
IT IS ORDERED:
1.

Rossman Law Group. PLLC’s Motion for Relief Pursuant to I.C. § 3-205
(Dkt. 55) is DENIED.

DATED: June 12, 2012

Honorable B. Lynn Winmill
Chief U. S. District Judge

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