The opinion of the court was delivered by: POLLAK
This action grew out of an application for injunctive relief filed initially in November 1979 by the plaintiff law firm, Mattioni, Mattioni & Mattioni, against numerous defendants, including Ecological Shipping Corporation and several of its officers, in the Pennsylvania Court of Common Pleas. That injunctive proceeding sought to halt a settlement which was just about to be consummated between Ecological and Sun Shipbuilding and Dry Dock Company, also one of the defendants in the Court of Common Pleas, resolving litigation which had been in process for some three years in which the plaintiff law firm, Mattioni, Mattioni & Mattioni, had been representing Ecological.
The essence of the Mattioni lawsuit against Ecological and the others was to protect what Mattioni fully expected would be a very substantial fee resulting from its extensive labors on Ecological's behalf. The fee basis rested on a contract of retainer between Mattioni and Ecological. The precise terms of that retainer went through some process of change in the course of the attorney/client relationship, but a very important element of the retainer agreement was the following provision: "Ecological Shipping Corp. agrees not to compromise its suit without its attorneys' consent, and said attorneys are not authorized to do so without client's consent."
I say that was a very important element of the agreement for the reason that in the complaint filed in the Court of Common Pleas that provision of the agreement is recited verbatim in Paragraph 23 and, though it is true that the complaint contains several counts, and the defendants are not identical from count to count since the counts reflect a variety of theories of recovery, Paragraph 23 together with other introductory paragraphs, is a predicate to every one of the causes of action.
I emphasize this because central to the motions and cross-motions which are before me today a motion for partial summary judgment by plaintiff; and a cross-motion for summary judgment or, in the alternative, for partial summary judgment, by defendants-what has chiefly been at issue is the validity of that provision insofar as it recites that Ecological was not at liberty "to compromise its suit without its attorneys' consent."
It is the defendants' position that an attorney consent provision is unenforceable and that it taints the entire attorney/client relationship, that plaintiff, Mattioni, Mattioni & Mattioni, cannot recover in the terms in which their retainer agreement was cast, which was largely a contingent agreement, or on quantum meruit.
Defendant also argues that the very bringing of the lawsuit and what defendants see as the excessive terms in which the claim for fees was calculated, at least under one theory of the plaintiff's entitlement, disallow any kind of recovery as a betrayal and undercutting of the attorney obligation to a client, at least in a situation in which the form of the proceeding was one which had at least the potential of precluding an advantageous settlement of the Ecological/Sun litigation-advantageous, that is to say, from Ecological's point of view.
Plaintiff for its part, of course, argues that the retainer provision to which I have referred is valid and enforceable and, beyond that, argues that, even if not valid, its validity is of no moment because it in no way infected the central attorney/client relationship and, hence, may be regarded as a severable provision.
Finally, of course, the plaintiff argues that even if the provision is bad and infects the entire retainer, it does not preclude an appropriate fee to plaintiff on a theory of quantum meruit.
The central issues then clearly rotate around the validity of a provision, a so-called attorney's consent provision, of the form embodied in this retainer agreement.
There has been extended discussion of authorities not alone in Pennsylvania but in many other jurisdictions, including references to cases in the United States Supreme Court. See, e.g., McGowan v. Parish, 237 U.S. 285, 35 S. Ct. 543, 59 L. Ed. 955 (1915). There has been the intriguing suggestion by defendants that the issue should be regarded as one of federal law because it so closely attends on the practice of law in the federal courts. Without suggesting that there may not be aspects of the character of law practice in the federal courts which should be regarded as directly within the supervisory domain of federal judges, so that federal standards can be asserted and policed whether or not the same standards would obtain in state courts, I am not persuaded that the counter-Erie thesis is applicable here.
The debate between the parties has, so far as it relates to Pennsylvania authorities, really focused on three cases, one in the Superior Court, Shoup v. Shoup, 25 Pa.Super.Ct. 552 (1904), a decision which plaintiff insists is a holding as to the enforceability of an attorney's consent provision, and two cases in the Pennsylvania Supreme Court, Wahl v. Strous, 344 Pa. 402, 25 A.2d 820 (1942) and Behrend v. Yellow Cab Company, 441 Pa. 105, 271 A.2d 241 (1970).
I find Shoup v. Shoup, supra, a case of ambiguous authority. It may be that the agreement the Superior Court talked about there was explicitly an attorney's consent provision, but, frankly, that doesn't leap from the printed page. It is, to be sure, a case which recognizes and, indeed, sanctions an attorney's litigating to challenge a settlement that a client who had just discharged the attorney was bent upon and which the attorney thought was dangerous not only to the client's interests but to his own independent interest as an assignee or former assignee of part of the recovery.
Wahl v. Strous, supra, is not a case, as one follows Justice Stern's opinion, in which an attorney consent provision was part of the agreement but it was a case in which Justice Stern, nonetheless-by dictum, to be sure, but by substantial and advertent dictum, to which authorities were appended-recited-" Indeed, it is almost universally held that even if a power of attorney provides in express terms that the client is not to have the right himself to compromise or settle his claim, such a provision is void as against public policy. Settlements are favored by the law which, therefore, frowns upon arrangements whereby a client would need his attorney's permission to ...