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Attorney Who Quit Before $27M BofA Verdict Stills Get Fees

July 26, 2016 | Posted in : Contingency Fees / POF, Ethics & Professional Responsibility, Fee Agreement, Fee Issues on Appeal, Lawyering, Quantum Meruit

A recent Law 360 article, “Atty Who Quit Before $27M BofA Verdict Still Get Fees” reports that a Massachusetts attorney with a contingency agreement should get fees after representing a car dealership for 17 years in a suit against Bank of America NA, even though he bowed out before a third trial and $27 million verdict, the Massachusetts Appeals Court ruled.

Attorney George Deptula persuaded the appeals court that he had objectively good reasons to stop representing Prestige Imports of Weymouth and its owner, Helmut Schmidt, in a suit that claimed a BofA predecessor mishandled checks that were used in an employee’s embezzlement.  Two previous verdicts had been reversed on appeal, and the third verdict, which came down in 2011, is also at the appellate level.

Deptula withdrew from the case in 2010, citing an acrimonious breakdown in the attorney-client relationship and trust with his client.  The attorney later filed for an attorney’s lien against Prestige for his past work.  A trial court rejected the lien on the grounds that Deptula was subjectively motivated to withdraw from the case because he thought it was a "loser" and that he would never get his contingency fees. 

The trial judge had credited testimony from another of Schmidt’s lawyers that Deptula pressured his client to reject BofA's $2 million settlement offer if Deptula did not get a $400,000 to $500,000 fee, which exceeded the original contingency agreement.  That other lawyer — Schmidt's son-in-law, Ted Killory — said that he told Deptula it was unethical to pressure his client to not take the deal. The meeting ended with “yelling and swearing,” Deptula’s receptionist testified. 

But Massachusetts law instructs the courts to not look at a lawyer’s subjective reasoning for withdrawing — if that could even be divined — but at whether objective facts demonstrated good cause to withdraw, the appeals court said.

And Deptula certainly did have reason to withdraw, the appeals court said, citing vitriolic letters from Schmidt to Deptula about the attorney's integrity, work ethic and loyalty.  The tensions dated to 2004, but came to a head in 2008, after the pair lost an $8 million verdict at the appellate level.

Deptula not only withdrew from the case, but also contacted his insurance company, fearing a malpractice suit.  “Throughout my representation, you have frequently questioned my strategy decisions, rejected my input and work product, and hampered me from exercising independent professional judgment,” Deptula wrote in his withdrawal letter.

Schmidt, represented by Killory and the attorney Schmidt said had done most of the work anyway, won the $27 million verdict in 2011.  The court remanded the issue of how much Deptula will get on a quantum meruit basis.  His original contingency fee was for 15 percent of the first $1.5 million, 20 percent of the next $1.5 million, and 25 percent of anything over $3 million.

“As other jurisdictions have recognized, allowing attorneys to withdraw from contingent fee agreements and still retain compensation risks undermining the viability of the arrangements altogether,” the appeals court wrote.  “However, an attorney who agrees to bear the risk of losing a case is not thereby forced to bear the risk that his client's behavior will cause a breakdown in the attorney-client relationship.  When an attorney withdraws due to the behavior of the client, he is thus entitled to the reasonable value of services rendered, even while losing the opportunity for a larger payoff if, as occurred here, another attorney is able to win a significant judgment.”

The underlying suit involved the embezzlement of hundreds of thousands from Prestige by its former comptroller, starting in the late 1980s.  Schmidt and his wife guaranteed loans for cars sold off the books, leading to a suit from then-South Shore Bank.  The Schmidts countersued, claiming negligence and consumer protection violations.

In reversing the $8 million verdicts Deptula helped secure for the Schmidts in 2002 and 2003, the appeals court found that the trial judge had incorrectly instructed the jury about BofA’s bad faith, mixing in elements of negligence and indifference, which was too broad of a basis under Massachusetts law.

The case is Bank of America NA v. Prestige Imports Inc. et al., case number 15-P-248, in the Massachusetts Appeals Court.