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No. 06-____ In the Supreme Court of the United States. ____________________ Richard S. Ross. Esq., Petitioner, -v- State Contracting & Engineering Corporation, Respondent.
On Petition for Writ of Certiorari to the United States PETITION FOR WRIT OF CERTIORARI. |
Dennis P. Derrick
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-i Questions Presented. |
1. Has the court of appeals so fundamentally misread substantive Florida law on the effect of a contingent fee agreement between co-counsel when one of the attorneys is discharged by the client that it has nullified Florida law on the subject, created unprincipled federal common law and subverted the policies of comity and federalism which underlie this Court's decisions in Erie R. Co. v. Tompkins, 304 U.S. 65(1938) and its progeny? 2. Can the respondent be the “prevailing party” and therefore entitled to the payment of its attorneys' fees in this charging lien litigation brought by the petitioner where despite its four discrete defenses that there was no contract at all for attorney's fees, the petitioner nonetheless achieved enforcement of the contingent fee agreement and recovered $1,094,483.34 in fees thereunder? -ii- Table of Contents Questions Presented For Review.....................................................................................................i Table of Contents...........................................................................................................................ii Table of Authorities........................................................................................................................iii Citations of Opinions and Orders................................................................................................... Basis for Jurisdiction in this Court.................................................................................................. Constitutional and Statutory Provisions Involved............................................................................ Statement of the Case................................................................................................................... Argument Supporting Allowance of the Writ..................................................................................
Conclusion.................................................................................................................................. Appendix................................................................................................................................ post -iii- Table of Authorities
Citations of Opinions and Orders. The unpublished opinion of the United States Court of Appeals for the Federal Circuit in State Contracting & Engineering Corporation v. Condotte America, Inc. et al. and Richard S. Ross, C.A. Nos. 05-1423 and 1528, decided December 22, 2006, denying the request of the respondent State Contracting & Engineering Corporation to have the petitioner pay its appellate attorney's fees, is set forth in the Appendix hereto(App. 1-3). The published opinion of the United States Court of Appeals for the Federal Circuit in State Contracting & Engineering Corporation v. Condotte America, Inc. et al. and Richard S. Ross, 2006 U.S. App. LEXIS 18743, decided July 24, 2006, affirming the decision of the District Court which adjudicated the petitioner's charging lien for attorney's fees against the respondent State Contracting & Engineering Corporation, is set forth in the Appendix hereto(App.4-28). The published decision of the District Judge for the Southern District of Florida in State Contracting & Engineering Corporation v. Condotte America, Inc., 368 F. Supp. 2d 1296(S.D. Fla. 2005), filed March 31, 2005, adopting the Magistrate's findings and affirming his determination that the petitioner was entitled to a contingent fee from the respondent's recovery in its lawsuit in the amount of $1,094,483.34, is set forth in the Appendix hereto(App. 69-90). The unpublished decision of the District Judge for the Southern District of Florida in State Contracting & Engineering Corporation v. Condotte America, Inc., C.A. No. 97-7014-CV, decided May 27, 2005, granting in part and denying in part the petitioner's motion for reconsideration, is set forth in the Appendix hereto(App. 39-68). The unpublished decision of the District Judge for the Southern District of Florida in State Contracting & Engineering Corporation v. Condotte America, Inc., C.A. No. 97-7014-CV, decided August 11, 2005, adopting the Magistrate's findings and affirming his determination that the petitioner was not entitled to attorney's fees as the prevailing party while the respondent was entitled to an award of attorney's fees in the amount of $248,404.96, is set forth in the Appendix hereto(App. 29-38). The unpublished report and recommendation of United States Magistrate for the Southern District of Florida in State Contracting & Engineering Corporation v. Condotte America, Inc., C.A. No. 97-7014-CV, filed October 25, 2004, finding that the petitioner was entitled to a contingent fee from the respondent's recovery in its lawsuit in the amount of $1,094,483.34, is set forth in the Appendix hereto(App. 91-174). The unpublished opinion of the United States Court of Appeals for the Federal Circuit in State Contracting & Engineering Corporation v. Condotte America, Inc. et al. and Richard S. Ross, C.A. Nos. 05-1423 and 1528, decided October 2, 2006, denying the petitioner's combined petition for rehearing or for rehearing en banc, is set forth in the Appendix hereto(App.175-176). The Engagement Agreement executed by the petitioner, John H. Faro and the respondent, dated May 1, 1997, is set forth in the Appendix hereto(App. 177-179). Basis for Jurisdiction in this Court. The decision of the United States Court of Appeals for the Federal Circuit affirming the decisions of the District Court which determined that the petitioner was entitled to a contingent fee from the respondent's recovery in its lawsuit in the amount of $1,094,483.34 but deducting from that amount the respondent's attorney's fees of $248,404.96, was entered on July 24, 2006; and its further order denying the petitioner's timely filed combined petition for panel rehearing or for rehearing en banc was filed and decided on October 2, 2006(App. 2-28;175-176). On December 14, 2006, the petitioner timely applied to The Chief Justice of this Court for an extension of time to file his petition for writ of certiorari(Docket No. 06A622); and on December 27, 2006, The Chief Justice granted the petitioner's motion extending the time to file his petition for writ of certiorari until February 1, 2007. This petition for writ of certiorari is filed within the time limits prescribed by the Chief Justice in Docket No. 06A622, allowing the petitioner's application for an extension of time to file this petition. The jurisdiction of this Court is invoked pursuant to the provisions of 28 U.S.C. Section 1254(1). Constitutional, Statutory and Rule Provisions United States Constitution, Amendment V: No person shall...be deprived of life, liberty, or property, without due process of law.... United States Constitution, Amendment X: The powers not delegated to the United States by the Constitution, nor 28 U.S.C. Section 1338(a): The district courts shall have original jurisdiction of any civil action 28 U.S.C. Section 1367(a): Except as [otherwise] provided...by Federal statute, in any civil action in Rule 4-1.5(d) of the Rules Regulating the Florida Bar: Enforceability of Fee Contracts. Contracts or agreements for attorney's fees Rule 4-1.5(f)(1) and (2) of the Rules Regulating the Florida Bar: Contingent Fees. As to contingent fees: Rule 4-1.5(g) of the Rules Regulating the Florida Bar: Division of Fees Between Lawyers in Different Firms. Subject to the Statement of the Case. While an entity known as State Paving was performing various road projects for the Florida Department of Transportation (FDOT) in the late 1980's, one of its employees invented a new and more cost-effective way of constructing a sound wall system for use adjacent to highways. The respondent State Contracting & Engineering Corporation (“the respondent” or “State”) became an assignee of the patents for this system in1994. When FDOT and its subcontractors refused to pay royalties to State for using its patented sound wall system, State retained John H. Faro in order to prepare a pre-litigation memo in order to assess the advisability of bringing suit against FDOT and its subcontractors for patent infringement. After Faro advised State that because of a disability he could not provide it with litigation services, only litigation support services, Faro contacted the petitioner Richard S. Ross, Esq. (“the petitioner” or “Ross”), a qualified Florida patent litigation attorney, to act as lead counsel in this anticipated patent infringement suit. State agreed to retain Faro and Ross and by May 1, 1997, Faro had drafted and circulated to State for its acceptance a two-page engagement letter which described a partial periodic, partial contingency fee for the work which he (Faro) and Ross would perform on behalf of State(App. 177-179). The engagement letter was signed by Faro and Ross; and it had attached to it a four-page copy of Rule 4-1.5 of the Rules Regulating the Florida Bar. It proposed a reduced hourly billing fee of $100 per hour, plus expenses, as well as a one-third (33%) contingent fee consistent with the contingent fee schedule in the attached Rule but less any amount of attorney's fees billed and collected against recovery at the time of settlement(App. 102-103;178). The engagement letter further provided that “in no event would the amount of the net fee for representation be less than one third of the value of the settlement to your company”(App. 178). In case of a dispute concerning the described fee arrangement necessitating a collection action against State, both Faro and Ross reserved the right to seek attorney's fees as part of the costs of any collection(App. 178). State agreed with the engagement letter and its President (Tim Smith) signed it, initialed each page and returned it to Faro(App.178). Ross was not involved with the drafting of this engagement letter. However, the engagement letter itself indicated that a copy had been sent to Ross; he agreed with its terms; and he signed it(App. 101-103;178). Although the engagement letter made no mention of how the contingency fee would be divided between Faro and Ross, both assumed that it would be equally divided since both verbally agreed to work on the case equally and to share in the contingency equally, having never agreed to a proportionate share of the fee. In so agreeing, Ross knew that he would have the primary litigation responsibilities for State's patent infringement action against FDOT and the infringing sub-contractors. On August 25, 1997, the petitioner Ross on behalf of State brought the instant action in federal district court, the first of two patent infringement actions, against FDOT and several allegedly infringing contractors, positing jurisdiction on 28 U.S.C. Section 1338(a). Consistent with the engagement letter, Ross billed the respondent at $100 per hour for his services and by November of 2003, he had billed State 2,388.5 hours or $238,850 in fees, all of which State paid. Some of this work included Ross' efforts in having the trial court's grant of summary judgment against State successfully reversed by the court of appeals for the Federal Circuit. After remand, a jury trial of this matter ensued in the district court with Ross as lead counsel for State and Faro in the “second chair.” On February 6, 2002, a jury returned a verdict awarding State royalties for patent infringement in the amount of about $5.2 million; a permanent injunction was also entered in State's favor. The judgment which ultimately entered included prejudgment interest and totaled $9.3 million. The infringing contractors appealed. In the meantime, on March 1, 2002, Ross began a second patent infringement suit in federal district court on behalf of State against a new set of infringing FDOT subcontractors. Thereafter a dispute arose between Faro and the petitioner concerning their respective contingency shares under the engagement letter, a disagreement which led Ross to draft a new proposed engagement letter which would supercede the original one. Faro did not agree to the proposed revisions and neither did State. Instead, the original engagement letter continued to be the operating agreement between Faro, Ross and State. The relationship between Faro and Ross continued to deteriorate over the issue of their respective shares of the contingency fee so that by June 19, 2003, after learning that Faro was now investigating Ross's divorce in order to compromise him with State, the petitioner Ross gave State an ultimatum: because he could no longer work with Faro, State could discharge Faro, discharge him or discharge both of them. In the face this ultimatum by Ross, State decided to discharge Faro and did so by letter of June 23, 2003, about four months prior to the occurrence of the contingency described in the engagement letter. After Faro's discharge, the petitioner Ross by himself represented State in litigating the second patent infringement suit in federal district court. In the meantime, Ross was also responsible for responding to the appeal by the infringing subcontractors in the first suit. As a result of that appeal, the court of appeals for the Federal Circuit on October 7, 2003, affirmed the judgment in part and reversed the judgment in part, remanding the matter to the district court for the purpose inter alia of having the fact issue of the patents' obviousness decided by a jury. Faced with the prospect of a new trial on the first suit together with an imminent trial on its second patent infringement suit, State entered into a settlement agreement on October 15, 2003, whereby FDOT agreed to pay State $8 million and the parties agreed to dismiss all pending suits. In addition, FDOT would include State's patented method of constructing a sound wall system for use adjacent to highways on its list of approved sound wall systems. The contingency described in the engagement letter of May 1, 1997, took place on October 15, 2003, with the district court's order dismissing State's two infringement actions with prejudice. In the aftermath of the settlement, Faro and then Ross filed charging liens in the federal district court, invoking the court's supplemental jurisdiction under 28 U.S.C. Section 1367(a). On February 26, 2004, Faro settled his charging lien with State for a total quantum meruit fee of $1,315,900. This amount represented $1.1 million from funds in the court registry plus the $215,900 in hourly fees which State had previously paid Faro. On March 1, 2004, the petitioner Ross filed a motion to adjudicate his charging lien on the $6.9 million, plus interest, remaining in the court registry in connection with State's settlement of the litigation(App. 123). The petitioner's charging lien was assigned for resolution to Magistrate Judge Edwin G. Torres of the district court for the Southern District of Florida and he conducted a five-day evidentiary hearing commencing in March of 2004(App. 94-97;123). Throughout this hearing, State argued both orally and in writing that Ross was not entitled to recover in contract on his charging lien for a one-third (33%) contingent fee from the total recovery by State. Instead, it contended that Ross was relegated to a fee based upon a quantum meruit measure of compensation. Specifically, State raised four discrete defenses to Ross' recovery of his fee on a contract theory. It contended that the petitioner was not a party to the contract, i.e., the engagement letter of May 1, 1997, and therefore could not enforce the contingent fee agreement to his benefit; that the contract was unenforceable by Ross in any event because of his (and Faro's) violations of the Rules Regulating the Florida Bar about contingent fees; that the contract was fatally indefinite about the meaning of the term “value of the settlement” and was therefore unenforceable; and that once Faro was discharged by State on June 23, 2003, the contingency fee contract contained in the engagement letter was rescinded and was therefore a nullity(App. 126-150). On October 25, 2004, the Magistrate Judge issued his findings of fact and conclusions of law which in twenty-five pages rejected each one of these four separate arguments by State challenging the validity and enforceability of the petitioner's fee agreement(App. 126-150). Turning to Ross' argument that he was entitled to the entire contingent fee of $2.66 million because Faro was discharged by State prior to the occurrence of the contingency, the Magistrate Judge concluded that “the settled rule” was that absent contrary evidence, the petitioner and Faro were joint venturers who had implicitly agreed upon a 50-50% split of the contingent fee(App. 151-152). In so ruling, the lower court rejected as misplaced the petitioner's argument that depriving him of the entire contingent fee is contrary to Florida law, e.g., Rosenberg v. Levin, 409 So.2d 1016, 1021 (Fla. 1982), which provides that when an attorney is discharged prior to the occurrence of the contingency, he is only entitled to quantum meruit fee, not the contract fee(App. 153-155). Ignoring Rosenberg altogether, the Magistrate Judge instead concluded this was a joint venture and that Ross' contract fee must inevitably be reduced by Faro's contract fee(App.154-155). Having determined that Ross was entitled to “ his contractual contingent fee,” the Magistrate Judge calculated the total one-third contingent fee on this $8 million settlement to be $2.66 million(App. 162). The petitioner's 50% share was found to be $1.33 million less $238,850 in hourly fees already paid him or a total fee on his charging lien of $1,094,483.34 together with his pro rata share of interest earned by the funds while located in the court's registry(App. 92;162). The petitioner objected in the district court to some of the Magistrate Judge's findings of fact and his conclusion of law that he was not entitled to the entire contingent fee under the rationale of Rosenberg . In an omnibus order approving the Magistrate Judge's report and recommendation and discharging the petitioner's charging lien, the district court, Dimitrouleas, J., inter alia affirmed the Magistrate's determination that Ross was not entitled to the entire contingent fee of $2.66 million once Faro was discharged by State and before the contingency occurred(App. 76-78). It determined that this was a joint venture where both Faro and Ross had agreed to split the fee equally and that the Magistrate accordingly did not err by awarding just 50% of the contingent fee to Ross(App. 77-78). In a later order, the district judge refused to reconsider its ruling(App. 44). In the wake of the Magistrate Judge's decision in October of 2004, both Ross and State moved for the award of their respective attorney's fees, each claiming to be the prevailing party under the fee agreement. The matter was referred to the Magistrate Judge who on July 1, 2005, recommended that the district court find that State was the prevailing party and award it $248,404.96 for its attorney's fees(App. 30-31). As he found, “the crux of the dispute throughout the charging lien litigation was the numerical valuation of Ross' recovery—an issue on which Ross did not prevail”(App. 33). On August 11, 2005, the district judge, Dimitrouleas, J., approved the Magistrate Judge's recommendation by ruling that the significant issue in the charging lien litigation was not the validity and enforcement of the fee contract but rather the amount of Ross' recovery thereunder(App. 32-35). Ross appealed to the court of appeals for the Federal Circuit these decisions by the district judge adjudicating his charging lien against State to be in the amount of just $1,094,483.34 and awarding State its attorney's fees as the prevailing party(App. 5). On July 24,2006, a majority of the court of appeals affirmed both of these decisions by the district judge(App. 4-28). It first rejected the petitioner's claim under authoritative Florida law, especially Rosenberg and Adams v. Fisher, 390 So.2d 1248(Fla. Dist. Ct. App. 1980), that he was entitled to the entire contingent fee(App. 16-18). Ross had argued that under these decisions a discharged attorney such as Faro could only receive a quantum meruit fee; and the lawyer who is representing the client when the case is settled, i.e., Ross, is entitled to the entire contract fee(App. 16-18). As the majority saw it, those cases were distinguishable from this arrangement where Faro and Ross had initially agreed to share the fee equally and the parties continued to operate under the engagement letter even after Faro was discharged(App. 17-18). It therefore refused Ross' invitation “to reform the contract to increase State[‘s]...fee obligations beyond the amount to which it initially agreed,” i.e., to pay one-third of the value of the settlement in attorney's fees(App. 17-18). The majority also rejected the petitioner's argument that he was the prevailing party below and therefore should not have been assessed the payment of State's attorney's fees(App. 22-24). It concluded that there was no abuse of discretion by the district judge in deciding that State had prevailed on the significant issue in the litigation:
(App. 23)(emphasis supplied). Circuit Judge Dyk dissented from these two rulings by the majority(App.24-28). As he noted, Florida law clearly provides that having been discharged by State without cause, Faro was entitled to recover only the quantum meruit value of his legal services and that Ross who continued to work on behalf of State up to settlement, was entitled the remainder of the contingent fee(App. 25). Even though Faro and Ross had initially agreed to divide the contingent fee equally, Judge Dyk “fail[ed] to see how that agreement can change the result under the Florida cases”(App. 25). Moreover, as the dissent noted, the default rule adopted by the Florida courts that when an attorney is discharged without cause he is entitled to recover only the quantum meruit value of his legal services from the client
(App. 26). Nor did Judge Dyk think that the advanced stage of the litigation or the fact that Ross wanted Faro discharged make inequitable adherence to the default rule enunciated by the Florida courts in Rosenberg (App. 27). As he noted, there is nothing in Florida law to indicate that the result should turn on such considerations and, in any event, the decision by Faro and Ross to terminate their relationship was mutual and Ross performed the lion's share of the work up in this case until settlement(App. 27). Thus the dissent “saw no basis for denying recovery of the full contingent fee to Ross less whatever Faro's quantum meruit recovery should have been (which amount may be significantly different than the amount that State...agreed to pay Faro in settlement)”(App. 27). Because of this view, Judge Dyk would also have vacated the award of attorney's fees to State as the prevailing party and remanded the matter to the district court in order to determine the contract fee award for the petitioner. On October 2, 2006, the court of appeals denied the petitioner's timely filed combined petition for panel rehearing or for rehearing en banc (App. 175-176).On December 27, 2006, The Chief Justice granted the petitioner's motion extending the time to file his petition for certiorari until February 1, 2007. Argument Supporting Allowance of the Writ. 1. The Decision By the Federal Courts Below Has Effectively Nullified Substantive Florida Law On the Rights of Attorneys and Their Clients Under Contingent Fee Agreements When An Attorney Is Discharged Prior to the Contingency, Creating Federal Common Law, Instigating Forum Shopping and Subverting the Policies of Federalism and Comity Enunciated In Erie R. Co. v. Tompkins, 304 U.S. 63(1938) and Its Progeny. In Rosenberg v. Levin, 409 So. 2d 1016(Fla. 1982), the Supreme Court of Florida considered the proper basis for compensating an attorney discharged without cause by his client after he had performed legal services under a valid contract for employment. There the client hired two attorneys under a letter agreement which provided for a $10,000 fixed fee plus a contingent fee equal to 50% of all amounts recovered in excess of $600,000. Id. at 1017. The client later discharged both of them before the legal controversy was resolved and he subsequently settled the matter for $500,000. Id. at 1018. The attorneys sued for their attorney's fees based upon a quantum meruit evaluation of their services. The trial judge awarded them $55,000 using this standard of compensation. Id. The district court of appeal, however, while agreeing that quantum meruit was the appropriate basis for recovery, awarded them just $10,000, stating that their recovery could in no event exceed the amount which the attorneys would have received under their contract with the client if not prematurely discharged. Id. On further appeal, the Supreme Court of Florida noted the two conflicting interests involved when an attorney working for a client under a contingent fee agreement is prematurely discharged without cause by the client before the contingency takes place:
Id. at 1019. As the court noted, on the one hand, if recovery under quantum meruit is not limited to the terms of the contracted fee amount, the client may be penalized for exercising his right to discharge his attorney by becoming liable without limit for fees to which he never agreed, a result which would undermine public confidence in the legal profession. Id . at 1021. On the other hand, attorneys should not be penalized either and should have the opportunity to recover for services performed. Id. at 1021;1022. See The Florida Bar v. John Doe , 550 So. 2d 1111, 1113( Fla. 1989); Arabia v. Siedlecki et al., 789 So. 2d 380, 390-391( Fla. Dist. Ct. App. 2001); Searcy, Denney, Scarola et al. v. Scheller, 629 So. 2d 947, 950(Fla. Dist. Ct. App. 1993). In an attempt to harmonize these competing concerns, the Rosenberg Court adopted a modified quantum meruit rule. It held that an attorney employed under a valid contract of employment who is discharged by the client without cause before the contingency has occurred or before the client's matters have been concluded, can recover only the reasonable value of his services rendered prior to the discharge, limited by the maximum contract fee. Id. Furthermore, in a contingent fee case, the attorney's action for quantum meruit arises only upon the successful occurrence of the contingency; if the client fails in his recovery, the discharged attorney will similarly fail and recover nothing. Id. at 1022. Accord, Franklin & Marbin, P.A. v. Mascola, 711 So. 2d 46, 50(Fla. Dist. Ct. App. 1998); Schwanebeck v. Calzado, 524 So. 2d 478, 479(Fla. Dist. Ct. App. 1988). Rosenberg 's rule is informed by the Florida intermediate appellate decisions in both Jones & Granger v. Johnson, 788 So. 2d 381, 383-384( Fla. Dist. Ct. App. 2001) and Adams v. Fisher, 390 So. 2d 1248, 1250-1251(Fla. Dist. Ct. App. 1980), cases which answer the question: from whom can the discharged attorney recover his fees? In both of those cases, the attorney initially hired by the client under a contingent fee agreement was discharged without cause and replaced by another attorney who consistent with his own contingency fee agreement with the client brought the case to settlement. When the discharged attorneys in both cases were subsequently awarded compensation out of the fee recovered by the substitute attorney based upon quantum meruit principles, the Florida courts reversed both awards. It held that while quantum meruit was the proper basis of compensation, the client, not the substitute attorney, was liable for the payment of the discharged attorney's fees. 788 So. 2d at 383; 390 So. 2d at 1251.
Id. Thus the rule of Adams and Jones & Granger “may require a client to pay to the discharged and substituted attorneys an aggregate amount in attorney's fees which would exceed the amount of the contingency fee specified in the fee agreement.” Jones & Granger, supra. Accord, Lubell v. Martinez, 901 So. 2d 951, 952(Fla. Dist. Ct. App. 2005). Carman v. Guardianship of Potter, 768 So. 2d 1156, 1158(Fla. Dist. Ct. App. 2000); Sohn v. Brockington, 371 So. 2d 1089, 1093(Fla. Dist. Ct. App. 1979). The substantive law of Florida is therefore crystal clear about the result when an attorney under a contingent fee agreement is discharged by the client without cause before the occurrence of the contingency: Once the contingency occurs, he can recover only from the client the reasonable value of his services rendered prior to the discharge, limited by the maximum contract fee. Accordingly, when Faro was discharged by State on June 23, 2003, Florida law unmistakably mandated that State was bound to pay Faro's fee, one founded on quantum meruit principles; that it was also responsible to pay Ross his full fee under the contingent fee agreement; and that the aggregate amount in attorney's fees it would have to pay both Faro and Ross under this prescribed scheme might exceed the amount of the contingency fee specified in the fee agreement. Nothing in the contingent fee agreement here provides that the petitioner Ross, the attorney who after Faro's discharge remained in the case until a settlement was reached and the contingency occurred, was bound to pay Faro's fee from his earned contingent fee. Nothing in the contingent fee agreement provides that State was entitled to a fee reduction of any amount----much less 50%----in the payment of the contingent fee if only one attorney remained when the contingency occurred. Nor does the agreement relieve State of paying Ross his full fee under the contingent agreement if it voluntarily decides to pay Faro a fee in order to dismiss his charging lien. Indeed, State was obligated under Florida law to pay Faro a fee under quantum meruit principles in any event and meeting that obligation did not bring with it the right to reduce by half the fee due Ross under the contingent fee agreement. Yet this is precisely the conclusion which the two federal courts below have reached. Ignoring the holdings of Rosenberg, Jones & Granger and Adams, they have sought in violation of Florida law to transfer to the petitioner the obligation which belongs to State to pay Faro's fee. They have done so by improperly rewriting the fee agreement to include the above provisions; by wrongly characterizing the agreement between Faro and Ross to share equally in the fee agreement as surviving Faro's discharge which under Florida law extinguished Faro's rights under the fee agreement and relegated him to a quantum meruit assessment of his fee; and by calling the representation of State by Faro and Ross a joint venture which they claim invokes an equal division of the entire contract fee in any event. The decision below thereby endows Faro with a valuable contract right which even he admitted he does not possess under Florida law, i.e., the right to recover one half of Ross' fee under the fee contract instead of seeking his fee by quantum meruit; and it gives State a valuable property right it never possessed under Florida law, i.e., to be relieved of its duty under Rosenberg, Jones & Granger and Adams of paying Ross the entire fee due him under the contingent fee agreement. Under Erie R. Co. v. Tompkins, 304 U.S. 64(1938), when a federal court exercises diversity, pendent or supplemental jurisdiction over state law claims, “the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.” Felder v. Casey, 487 U.S. 131, 151(1988) quoting Guaranty Trust Co. York, 326 U.S. 99, 109(1945). Avoiding judge-made rules in federal court which undercut a litigant's rights which he otherwise would enjoy under state law promotes comity and federalism, discourages forum-shopping and acknowledges that the pronouncements of the State courts on the substantive rights of its citizens are in most cases expressions of their sovereignty. Bush v. Gore, 542 U.S. 692, 740-742(2000)(Rehnquist, C.J., concurring).
304 U.S. at 78-79. See Alden v. Maine, 527 U.S. 706, 754(1999)(our federal system bespeaks the fact that the various States remain sovereign entities whose judicial independence must be respected by Article III courts). Erie, a vital expression of our federal system, therefore mandates that a federal court sitting in supplemental jurisdiction in this patent infringement suit apply the substantive law of Florida, the forum State, in order to decide the rights of the parties absent a federal statutory or constitutional directive to the contrary. Salve Regina College v. Russell, 499 U.S. 225, 226(1991). “The nub of the policy that underlies Erie ...is that for the same transaction the accident of a suit by a non-resident litigant in a federal court instead of in a State court a block away should not lead to a substantially different result.” Ferens v. John Deere Co., 494 U.S. 516, 524(1990) quoting Guaranty Trust Co. v. York, supra. In addition, this Court has made clear in various decisions after Erie that federal courts determine state law in the same manner by which they determine federal law, i.e., “with the aid of such light as [is] afforded by the materials for decision at hand, and in accordance with the applicable principles for determining state law.” Salve Regina College v. Russell, supra, quoting Meredith v. Winter Haven, 320 U.S. 228, 238(1943). See Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 208-209(1938). See United States v. Kimbell Foods, Inc., 440 U.S. 715, 730(1979); West v. A.T. & T. Co., 311 U.S. 223, 236-237(1940); Six Companies v. Highway Dist., 311 U.S. 180, 188(1940). Moreover, in view of the court of appeals' affirmative duty under the decisions of this Court to review independently and then correct the district court's determination of state law when fixing the rights of the parties, Erie, supra; Salve Regina College v. Russell, 499 U.S. at 231; 234, it was incumbent on the court of appeals for the Federal Circuit to carry out this task with conviction so that the doctrinal coherence between State and federal courts was advanced and the twin aims of Erie — “discouragement of forum-shopping and avoidance of inequitable administration of the laws,” Hanna v. Plumer, 380 U.S. 460, 468(1965)— were accomplished. Yet the court of appeals here failed in this fundamental duty. Creating federal “general” common law at odds with the substantive law of Florida in order to reach a particular result, see Sosa v. Alvarez-Machain, 542 U.S. 692, 726(2004), it endowed Faro with a valuable contract right which even he admitted he does not possess under Florida law and it gives State a valuable property right it never possessed under Florida law, i.e., to be relieved of its duty under Rosenberg, Jones & Granger and Adams of paying Ross the entire fee due him under the contingent fee agreement. This “blatant federal-court nullification of state law,” Michael O. Leavitt v. Jane L., 518 U.S. 137, 144-145(1996), is therefore a matter which invokes this Court's power of superintendency over the federal courts so that the decision here does not damage federal-state relations, does not lead to divergent opinions on this issue of attorney-client relations, a legitimate interest of Florida state law as well as public policy generally, and does not promote forum shopping, all considerations which prompted this Court to decide Erie in the first place. 2. The Opinion Below Determining That the Respondent Was the “Prevailing Party” For Purposes of An Award of Attorney's Fees Decides An Important Question of Law In A Way That Conflicts With The Relevant Decisions of This Court. The Magistrate Judge described the principal controversy raised by the petitioner's attempt to enforce his charging lien against State thus:
(App. 125)(emphasis supplied). Indeed, throughout the hearing before the Magistrate Judge, State argued both orally and in writing that Ross was not entitled to recover in contract on his charging lien for a one-third (33%) contingent fee from the total recovery by State, contending instead that he was relegated to a fee based upon a quantum meruit measure of compensation. Specifically, State raised four discrete defenses to Ross' recovery of his fee on a contract theory. It contended that the petitioner was not a party to the contract, i.e., the engagement letter of May 1, 1997, and therefore could not enforce the contingent fee agreement to his benefit; that the contract was unenforceable by Ross in any event because of his (and Faro's) violations of the Rules Regulating the Florida Bar about contingent fees; that the contract was fatally indefinite about the meaning of the term “value of the settlement” and was therefore unenforceable; and that once Faro was discharged by State on June 23, 2003, the contingency fee contract contained in the engagement letter was rescinded and was therefore a nullity(App. 126-150). Ross was therefore put to the task of both briefing and orally arguing these threshold issues of whether as an initial matter, he could recover his fee under the contingent fee agreement. When the Magistrate Judge issued his findings of fact and conclusions of law, he devoted twenty-five pages of his decision to a reasoned rejection of State's four separate arguments by State challenging the validity and enforceability of the petitioner's contingent fee agreement (App. 126-150). Having found and ruled that the petitioner could recover in contract, he then proceeded to decide that Ross' contract fee must inevitably be reduced by Faro's so-called contract fee and that Ross' share under this calculation was $1,094,483.34 (App.154-155;162). Yet the Magistrate Judge later found that State was the prevailing party in this charging lien litigation and awarded it $248,404.96 for its attorney's fees, to be paid by the petitioner, because “the crux of the dispute throughout the charging lien litigation was the numerical valuation of Ross' recovery—an issue on which Ross did not prevail”(App. 33). The court of appeals affirmed this ruling. None of this squares with the decisions of this Court or the Florida Supreme Court defining a “prevailing party” for purposes of awarding attorney's fees. In order to be the prevailing party and therefore entitled to the payment of its attorney's fees, a party seeking such relief must show that it “succeed[ed] on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.” Farrar v. Hobby, 506 U.S. 103, 109(1992) quoting Hensley v. Eckerhart, 461 U.S. 424, 433(1983)(emphasis supplied). Accord, Moritz v. Hoyt Enterprises, Inc., 604 So. 2d 807, 809-810 (Fla. 1992); Inland Dredging Co. v. Panama City Port Authority, 406 F. Supp. 2d 1277, 1284(N.D. Fla. 2005)(applying Florida law; “prevailing party” is one who succeeds on the dominant contractual dispute). Indeed, even the recovery of one dollar is sufficient to find the petitioner was the prevailing party. Farrar v. Hobby, 506 U.S. at 109-110. If “[l]iability on the merits and responsibility for fees go hand in hand,” Kentucky v. Graham, 473 U.S. 159, 165 (1985), then the petitioner is entitled as a matter of law to the payment of his attorney's fees by State, not the reverse as the lower courts have ruled. The petitioner responded to and prevailed on State's four discrete challenges to his right to recover in contract, the dominant contractual issue. While the courts below considered the amount of recovery to be decisive in identifying the prevailing party, they ignored the fundamental challenges by State in the first instance to Ross' right to seek contract damages at all and the fact that he prevailed on this seminal issue. Indeed, the petitioner has found no case where an attorney has sought fees from a client, the client was then required to pay some or all of the fees to the attorney as here and the client was thereafter deemed to be the “prevailing party” for the purposes of an attorney's fee award. The petitioner achieved enforcement of the contingent fee agreement, recovered one half of his fees thereunder together with interest and is the prevailing party under the decisions of this Court. As a matter of law, he should not have been ordered to pay State's attorney's fees. Conclusion. For all of these reasons identified herein, a writ of certiorari should issue to review the judgment of the United States Court of Appeals for the Federal Circuit and, ultimately, to vacate that judgment and remand the matter to the United States District Court for the Southern District of Florida with instructions that the petitioner be awarded the entire amount of the contingent fee under the contract plus accrued interest; declare that he was the prevailing party; or provide the petitioner with such other relief as is fair and just in the circumstances of this case.
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| Respectfully
submitted, Dennis P. Derrick |
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