Date: 08-24-2001

Case Style: Edell & Associates, P.C. v. Law Offices of Angelos

Case Number: 00-2069

Judge: Hamilton

Court: United States Court of Appeals for the Fourth Circuit

Plaintiff's Attorney: Martin Stanley Himeless, Jr. of Zuckerman, Spaeder, Goldstein, Taylor & Better, L.L.P., Baltimore, Maryland, for Appellants.

Defendant's Attorney: William F. Gately of Howell & Gately, Baltimore, Maryland, for Appellee.

Description: This diversity jurisdiction action involves an attorneys' fee-sharing dispute between attorney Marc Edell (Edell) and his law firm, Edell & Associates, P.C., on the one hand, and the Law Offices of Peter G. Angelos (the Angelos Firm), on the other hand. The Attorney General of Maryland (the Maryland AG), Edell, his law firm, and the Angelos Firm jointly represented the State of Maryland (Maryland) in recent litigation against the tobacco industry to recover money dispersed in Medicaid payments for cigarette related diseases (the Maryland AG Action). The tobacco industry settled the Maryland AG Action for an estimated $4.4 billion.

The Angelos Firm had minimal experience with litigation against the tobacco industry prior to its participation in the Maryland AG Action. For this reason, the Angelos Firm asked Edell and his law firm to join it in making a litigation proposal to the Maryland AG in an effort to represent Maryland in the Maryland AG Action.

Edell is widely recognized as a preeminent legal authority on litigation against the tobacco industry. Indeed, the litigation proposal the Angelos Firm ultimately submitted to the Maryland AG touted this fact and added: "As lead trial counsel for the plaintiff in Cipollone v. Liggett Group, Edell was the first to bring a successful suit to verdict against tobacco companies on behalf of a smoker, after five years of intensive litigation and a four-month trial in federal court in New Jersey." (J.A. 912). The litigation proposal assured the Maryland AG that if the Angelos Firm was retained, Edell would serve as co-lead counsel.

The Maryland AG accepted the Angelos Firm's litigation proposal, and under a fee-agreement between Maryland and the Angelos Firm, Maryland agreed to pay the Angelos Firm twenty-five percent of any amount recovered. Maryland did not enter into a separate fee agreement with Edell and his law firm. The amount of legal fees that Edell and his law firm would receive for their participation in the Maryland AG Action was always an issue to be determined solely between Edell and his law firm and the Angelos Firm.

The dispute in the present case is over the amount the Angelos Firm agreed to pay Edell and his law firm for their substantial participation in the Maryland AG Action. Edell and his law firm contend that in addition to the $798,218 in attorneys' fees (based upon varying hourly rates) they have already received from the Angelos Firm in connection with the Maryland AG Action, the Angelos Firm repeatedly promised that they would share fairly in any contingency fee it received at the conclusion of the case. According to Edell and his law firm, they never would have continued their substantial participation in the Maryland AG Action had the Angelos Firm not made these repeated promises and the Angelos Firm fully understands this. Because the Angelos Firm denies that it agreed to share any amount of the estimated $1.1 billion contingency fee that it may potentially receive in connection with the Maryland AG Action, 2 Edell and his law firm allege in the present action that the Angelos Firm is liable for breach of contract and breach of the covenant of good faith and fair dealing implied in such contract. The Angelos Firm flatly denies that it ever agreed that Edell and his law firm would share in any contingency fee that it would possibly receive at the conclusion of the Maryland AG Action and, therefore, refuses to pay them any further fees.

Edell and his law firm alternatively allege that if the Angelos Firm repeatedly promised it would share fairly with them any contingency fee recovered at the end of the case with the intent never to allow them to so share, the Angelos Firm is liable for intentional misrepresentation. The Angelos Firm denies the allegation of intentional misrepresentation.

The district court granted summary judgment in favor of the Angelos Firm with respect to the three claims Edell and his law firm continue to press on appeal: (1) common law breach of contract; (2) common law breach of the covenant of good faith and fair dealing; and (3) common law intentional misrepresentation. 3 The district court also denied a motion filed by Edell and his law firm for leave to amend their complaint to allege a claim for negligent misrepresentation.

Edell and his law firm now appeal the grant of summary judgment in favor of the Angelos Firm with respect to all three listed claims. They also appeal the district court's denial of their motion for leave to amend their complaint to assert a negligent misrepresentation claim.

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We conclude that Edell and his law firm have met their summary judgment burden of proffering sufficient evidence for a reasonable jury to find that the Angelos Firm agreed to pay them (in addition to the hourly-rate fees agreed upon) a fair portion of any contingency fee it might receive at the conclusion of the Maryland AG Action. Consideration for this contractual arrangement is found in Edell and his law firm's promised continued substantial participation in the Maryland AG Action at the expense of foregoing other fee-generating cases. In part, they have met this burden by offering evidence that following the execution of the March 1996 and February 1997 Compensation Agreements, the Angelos Firm, through Smouse: (1) informed Edell, during a telephone conversation on June 4, 1997, that if and when there is a "payday," Edell and his law firm "will be generously compensated for [their] participation in this case" (J.A. 760); (2) Smouse's admission in a letter to Edell, dated July 10, 1998, that he had stated on more than one occasion, that he firmly believed "Peter would deal with [him] fairly . . ." at the conclusion of the case (J.A. 980); (3) Smouse's assurance in the same letter that he still believed this to be the case, and that he sincerely hoped Edell would continue in the case by trusting and having faith that Peter Angelos would deal with Edell and his law firm fairly at the conclusion of the case; and (4) on July 26, 1998, Smouse impliedly reaffirmed that Edell and his law firm would receive compensation in addition to the hourly billings agreed to in the March 1996 and February 1997 Compensation Agreements and queried Edell as to whether the 10% contingency fee figure suggested by Edell in his July 26, 1998 letter was negotiable. Porter v. General Boiler Casing Co., 396 A.2d 1090, 1095 (Md. 1979) (reiterating that under Maryland law acceptance of a contract can be accomplished by acts as well as words with no formal acceptance being required).

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We also find no merit in the Angelos Firm's ultra vires argument. We agree with Edell and his law firm that the Angelos Firm's ultra vires argument misapprehends the basic nature of an assignment when it argues that an agreement to share the potential contingency fee would have violated the prohibition of assignment in its contract with the Maryland AG. An assignment is a transfer of one's rights. Petals Factory Outlet v. EWH & Assocs., 600 A.2d 1170, 1174 (Md. Ct. Spec. App. 1992). Edell nor his law firm has ever claimed that the Angelos Firm assigned them any right under the Angelos Firm's fee agreement with the Maryland AG. Rather, Edell and his law firm's position has always been that the Angelos Firm had a contractual duty to pay them a fair portion of any contingency fee it may receive at the conclusion of the Maryland AG Action aside from any provisions in the Angelos Firm's fee agreement with the Maryland AG.

Turning to the balance of Edell and his law firm's evidentiary burden at summary judgment, we hold they have met the balance of their burden by offering evidence that: (1) the Angelos Firm knew the terms on which Edell and his law firm's services were being offered (i.e., hourly fees plus sharing fairly in any contingency fee the Angelos Firm received at the conclusion of the Maryland AG Action); (2) the Angelos Firm received the benefit of those services in silence until it became quite probable that the Maryland AG Action would result in a settlement amount significantly greater than initially anticipated; and (3) the Angelos Firm did so when it had an opportunity to express its rejection of the offer. Porter, 396 A.2d at 1095 (holding that silence operates as an acceptance to an offer where services are rendered under such circumstances that party benefitted thereby knows terms on which they are being offered and, he receives the benefit of those services in silence, having had a reasonable opportunity to express his rejection of offer) (holding under Maryland law that acceptance of a contract can be accomplished by acts as well as words; no formal acceptance is required); University Nat'l Bank v. Wolfe, 369 A.2d 570, 576 (Md. 1977) (parties can "substitute a new oral contract by conduct and intimation, as well as by express words"); Cole v. Wilbanks, 171 A.2d 711, 712 (Md. 1961) ("Assent to an offer to vary, modify or change a contract may be implied and found from circumstances and the conduct of the parties showing acquiescence or agreement.").

Allowing a party's silence to operate as an acceptance to an offer where services are rendered under such circumstances that the party who benefitted thereby knows the terms on which they are being offered and receives the benefit of those services in silence, having had a reasonable opportunity to express his rejection of the offer, is a consequence of the doctrine of equitable estoppel. Ganley v. G & W Ltd. Partnership, 409 A.2d 761, 764 (Md. Ct. Spec. App. 1980). Allowing the trier of fact to consider the import of the Angelos Firm's silence in the face of Edell and his law firm's repeated statements that they were continuing to devote significant portions of their time to the Maryland AG Action based in part on the mutual agreement that they would share fairly (in addition to the hourly-rate fees agreed upon) in any contingency fee the Angelos Firm received at the conclusion of the Maryland AG Action is in complete accord with Maryland law holding that "the determination of whether the conduct of the parties subsequent to the execution of a written contract constitutes a modification is ordinarily a question left to the fact-finder." Berringer v. Steele, 758 A.2d 574, 608 (Md. Ct. Spec. App. 2000).

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Click the case caption above for the full text of the Court's opinion.

Outcome: We affirm in part, vacate in part, and remand for further proceed- ings. Specifically, we: (1) vacate the district court's grant of summary judgment in favor of the Angelos Firm with respect to the breach of contract claim and remand for further proceedings with respect to that claim; (2) affirm the district court's grant of summary judgment with respect to the breach of the covenant of good faith and fair dealing claim; (3) vacate the district court's grant of summary judgment in favor of the Angelos Firm with respect to the intentional misrepresen- tation claim and remand for further proceedings with respect to that claim; and (4) vacate the district court's denial of the motion for leave to amend the complaint and remand with instructions that the district court grant the motion.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: E-mail suggested corrections, comments and/or corrections to: Kent Morlan

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