Deal Wireless, LLC et al v. Selective Way Insurance Company

Filing 48

ORDER Granting Plaintiffs' Counsel's 40 MOTION to Withdraw as Counsel for Plaintiffs, Impose a Lien on Any Recovery, and Stay Proceedings and Setting Status Conference, ( Status Conference set for 10/10/2017 03:00 PM before District Judge Denise Page Hood). Signed by District Judge Denise Page Hood. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DEAL WIRELESS, LLC,
ALL USA WIRELESS, LLC,
Plaintiffs,

CASE NO. 15-14280
HON. DENISE PAGE HOOD

v.
SELECTIVE WAY INSURANCE
COMPANY,
Defendant.
/
ORDER GRANTING PLAINTIFFS’ COUNSEL’S MOTION TO
WITHDRAW AS COUNSEL FOR PLAINTIFFS, IMPOSE A LIEN ON
ANY RECOVERY, AND STAY PROCEEDINGS [#40] AND
SETTING STATUS CONFERENCE
I.

BACKGROUND
On December 8, 2015, Plaintiffs Deal Wireless, LLC (“Deal”) and All USA

Wireless, LLC (“All USA”) filed a Complaint against Defendant Selective Way
Insurance Company (“Selective”) for breach of contract related to an insurance
claim arising out of a fire at Deal and All USA’s cell phone store in Madison
Heights, Michigan. (Doc # 1) This matter is now before the Court on Plaintiffs’
Attorney’s Motion to Withdraw as Counsel for Plaintiffs, Impose a Lien on any
Recovery, and Stay Proceedings, filed on January 6, 2017. (Doc # 40) Defendant

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has submitted a Response concurring with the Motion. (Doc # 44) The Court held
a motion hearing on January 25, 2017.
Selective issued a policy insuring Deal, All USA, and their cell phone store,
including their inventory. The policy voids coverage where an insured makes
material misrepresentations in claims on the policy. On September 20, 2014, a fire
occurred, causing damage to the cell phone store and inventory. Deal and All USA
notified Selective of their losses.
According to an Affidavit of James Pebble, Executive General Adjuster at
Selective, Deal represented that it acquired nearly $500,000.00 in inventory,
primarily with cash. (Doc # 31-2, Pg ID 452) However, Deal’s 2013 tax return
reported only $3,701 in purchases of inventory for the year, and Deal’s bank
statements showed withdrawals of only $39,298.00 in 2013. Id. When Selective
requested an explanation of how Deal obtained the cash to purchase the inventory,
Deal for the first time produced eight promissory notes indicating that Deal
acquired approximately $430,000.00 in inventory on credit from four different
creditors in the months preceding the fire. Id. The promissory notes required no
payment for three and sometimes four years. Id. Selective asserts that all of the
promissory notes are “highly irregular” because they are all nearly identical, they
provide for no payment to be made by Deal for a period of three to four years even
though cell phones and accessories become out of date in a year or two, and they
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designate individual business owners rather than the businesses as the payees on
the notes. According to the deposition of Gerald Scott, Deal’s inventory appeared
to be old and outdated. (Doc # 31-3, Pg ID 456) According to the deposition of
Mazen Maktari (“Maktari”), owner of Deal, Deal’s financial records reflected only
approximately $42,000.00 in sales of product from January 1, 2014 to September
20, 2014. (Doc # 31-4, Pg ID 464-65)
II.

ANALYSIS
A. Withdrawal of Attorney
Counsel for Plaintiffs argues that he has just cause to withdraw as Counsel

for Plaintiffs. Counsel asserts that Plaintiffs have breached their agreement with
Counsel and refuse to cooperate with Counsel after executing an initial settlement
agreement that resolved this matter for $185,000. Counsel argues that he cannot
continue representing Plaintiffs without possibly implicating Rule 11 given that
Defendant will likely file a motion to enforce the agreement. Defendant in its
Response concurs in the Motion and confirms that it intends to file a motion to
enforce the settlement. Defendant asserts that any opposition to the motion to
enforce the settlement would be groundless and should trigger sanctions under
Rule 11. 1

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Federal Rule of Civil Procedure 11 provides as follows. “By representing to the court a
pleading, written motion, or other paper . . . an attorney . . . certifies that to the best of the
person’s knowledge, information, and belief, formed after an inquiry reasonable under the
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On November 26, 2015, Plaintiffs executed a fee agreement with Counsel.
(Doc # 40-3) The agreement required Plaintiffs to cooperate with Counsel, and the
fee structure was contingent upon the outcome of the matter.

Plaintiffs and

Counsel agreed to apply the principles of quantum meruit to determine the fee if
the agreement was terminated.
On December 22, 2016, the parties went to mediation with the Honorable
Fred Mester.2 The parties reached an agreement, which provides as follows.
The parties do agree to full and complete settlement of the $185,000
payable within 30 days. Respecting Attorneys will be responsible to
work together and formulate the formal settlement agreement and
final order of dismissal for the Court within 10 days of the Execution
of the formal agreement.
(Doc # 40-2)
A formal settlement agreement has been prepared (Doc # 40-4), but Counsel
asserts that Plaintiffs have refused to sign the document without any explanation or
communication of any objection, despite multiple requests by Counsel.
Counsel asserts that there has been a breakdown in the attorney-client
relationship. He notes that on January 3, 2017, Plaintiffs hand delivered a letter to

circumstances: (1) it is not being presented for any improper purpose, such as to harass, cause
unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and
other legal contentions are warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for establishing new law . . . . If, after notice
and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated,
the court may impose an appropriate sanction on any attorney, law firm, or party that violated the
rule or is responsible for the violation.” Fed. R. Civ. P. 11(b)-(c).
2
The Honorable Fred Mester is a retired state court judge working in the mediation field.
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Counsel and demanded that Counsel sign a “Personal Proof of Service” (Doc # 405), which Counsel asserts he has never had happened in nine years of practice.
Counsel notes that he provided ample notice of his intention to withdraw because
of Plaintiffs’ failure to cooperate, communicating with Plaintiffs in writing on
December 30, 2016, on January 3, 2017, and on January 5, 2017.
A client’s total failure to cooperate is sufficient good cause to allow his
attorney to discontinue representing him and to recover for his services. Ambrose
v. Detroit Edison Co., 65 Mich. App. 484, 489 (1975). The refusal to settle by a
client can never be sufficient grounds to constitute good cause for an attorney to
withdraw, but may be so irrational as to constitute one factor in evaluating his
cooperation with his attorney. Id. at 491 (finding that attorney had good cause to
withdraw when client refused to accept settlement offer embodying virtually all of
the relief sought without justification, and there was a breakdown in the attorneyclient relationship).
In this case, Plaintiffs’ agreement with Counsel requires that they cooperate,
and provides that Counsel may terminate the agreement if Plaintiffs fail to do so.
Counsel represents that he has warned Plaintiffs of this several times. While the
plaintiff in Ambrose rejected a settlement offer, in this case, Plaintiffs actually
signed an agreement to settle the matter for a specified sum following mediation.
Like the plaintiff in Ambrose, Counsel represents that Plaintiffs have provided no
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explanation for why they have subsequently refused to sign the formal settlement
agreement. As the court observed in Ambrose, this makes intelligent decisions by
Counsel virtually impossible, as he cannot even tell which areas may be of concern
to Plaintiffs. See id. at 491. After review of the Motion and the hearing, the Court
is satisfied that there has been a breakdown in the attorney-client relationship, and
Rule 11 sanctions may be implicated if Defendant files a motion to enforce the
settlement agreement. The Court concludes that Counsel for Plaintiffs has just
cause to withdraw and grants his Motion.
B. Charging Lien Against Any Recovery
Counsel for Plaintiffs argues that he is entitled to a charging lien against any
recovery in this matter because he has just cause to withdraw. Counsel notes that
Plaintiffs contractually agreed that in this event Counsel’s attorney fee would be
determined through the principles of quantum meruit. Counsel represents that his
law firm has spent more than 275 hours on this matter. Defendant does not oppose
the Motion and responds that it will respect Counsel’s attorney’s lien on the
amounts payable under the settlement.
As the court explained in Ambrose,
The law creates a lien of an attorney upon the judgment or fund
resulting from his services. When an attorney withdraws from a case,
his reasons for doing so determine whether the lien will be preserved:
An attorney who withdraws from a suit without cause loses his
inchoate right to a lien on the ultimate recovery. But where an
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attorney is justified in refusing to continue in a case, he does not
forfeit his lien for services already rendered.
Id. at 487-88 (internal quotations and citations omitted). The decision whether to
impose an attorney’s lien lies within the trial court’s discretion. Id. at 489.
Since the Court finds that Counsel for Plaintiffs has just cause to withdraw
and will allow him to do so, the Court imposes a lien for the quantum meruit
measure of the reasonable value of the services rendered.
C. Staying Proceedings
Counsel for Plaintiffs argues that the Court should stay proceedings for 30
days because Defendant will likely file a motion to enforce the settlement,
implicating Rule 11 as discussed above. Defendant responds that it will file a
motion to enforce the settlement, and it does not oppose a stay of proceedings,
though it believes that the stay should exceed 30 days.
Pursuant to the Court’s last scheduling Order, the final pretrial conference
was scheduled for January 10, 2017, and the trial was scheduled for February 14,
2017. (Doc # 28) Those dates have passed. The Court notes that the parties had
not contemplated a final pre-trial order because of the settlement agreement, and
may still have motions in limine to prepare and file. Counsel noted that any
substitute counsel would have to depose Defendant’s expert in North Carolina (the
deposition was previously canceled because of the settlement), prepare a Daubert
challenge, and prepare for trial.
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The Court finds that Counsel for Plaintiffs has just cause to withdraw and
allows him to do so. The Court will reset pending dates and stay this matter for 30
days. A status conference is set for October 10, 2017 at 3:00 p.m.
III.

CONCLUSION
For the reasons set forth above,
IT IS HEREBY ORDERED that Plaintiffs’ Counsel’s Motion to Withdraw

as Counsel for Plaintiffs, Impose a Lien on any Recovery, and Stay Proceedings
(Doc # 40) is GRANTED.
IT IS FURTHER ORDERED that a status conference is set for October 10,
2017 at 3:00 p.m.

Dated: August 23, 2017

s/Denise Page Hood
Chief, U.S. District Court

I hereby certify that a copy of the foregoing document was served upon counsel of
record on August 23, 2017, by electronic and/or ordinary mail.
s/Julie Owens
Acting in the absence of LaShawn Saulsberry
Case Manager

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