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MULHOLLAND v. KERNS

April 30, 1993

JOHN AND MARTHA JANE MULHOLLAND, Plaintiffs
v.
CHRISTOPHER KERNS and KERNS AND KLIMEK, P.C., Defendants



The opinion of the court was delivered by: WILLIAM H. YOHN, JR.

 Yohn, J.

 Plaintiffs brought this suit, seeking declaratory relief and damages arising from their attorney-client relationship with defendants. Plaintiffs allege that defendants received portions of contingent fees to which they were not entitled, and they seek to have them returned. In addition, plaintiffs contend that defendant Kerns was terminated for good and just cause, and they seek a declaratory judgment that defendants are therefore not entitled to any further attorneys' fees. Alternatively, the plaintiffs ask that, if the court finds that Kerns was not terminated for good and just cause, the court find that defendants have already been adequately compensated for their work and are entitled to no further fees. Defendants, in their counterclaim, contend that they are entitled to recover quantum meruit for the reasonable value of their services until the date of their discharge.

 A bench trial was held in this case on April 5, 6, 7 and 14, 1993. In accord with the following findings of fact and conclusions of law, the court finds for the defendants on the plaintiffs' claims and finds for the defendants on their counterclaim in the amount of $ 30,000.00

 I.

 The court makes the following findings of fact:

 1. Plaintiffs are and at all relevant times were citizens of Oklahoma.

 2. Defendants are and at all relevant times were citizens of Washington, D.C.. Defendant Kerns and Klimek, P.C., was a law firm with its principle place of business in Washington, D.C.

 3. On or about March 9, 1984, plaintiff John Mulholland, on behalf of himself and his wife, Martha Jane Mulholland, entered into a fee agreement ("original fee agreement") with defendant Kerns, acting for the firm of Kerns and Klimek, P.C., ("the Firm").

 4. Under this original fee agreement, the Firm represented the Mulhollands in a lawsuit arising out of an automobile accident on February 1, 1984 in Montgomery County, Pennsylvania, which seriously injured Mr. Mulholland.

 5. The original fee agreement provided that the Firm would be paid a contingency fee to be calculated as follows:

 
25% of the gross recovery if settled prior to trial stage (one month before the scheduled trial is usually defined as the "trial stage") or 30% of the gross recovery if the case must proceed to the trial stage. The reason for the trial stage, being the intense trial preparation which always takes place within the month prior to trial.

 6. During the course of his representation of plaintiffs in this suit, defendant Kerns left the Firm and joined two other law firms in succession before assuming his present position, that of Vice-President and General Counsel for Fort Meyer Construction Company.

 7. Defendants, initially both Kerns and the Firm, and later, Kerns as a member of other law firms or by himself, represented plaintiffs in a suit captioned Mulholland, et al. v. Palmen, et at., C.A. No. 84-11623, filed in the Montgomery County Court of Common Pleas ("underlying suit"). Until his dismissal by plaintiffs, defendant Kerns continued to represent plaintiffs in the underlying suit.

 8. Plaintiff John Mulholland and defendant Kerns, on behalf of the Firm, entered into a second fee agreement on January 11, 1985, during a visit by Kerns to the home of plaintiffs in Oklahoma. This second agreement was handwritten. The contested terms are all in the handwriting of Martha Jane Mulholland. Several remaining terms are in the handwriting of Christopher Kerns.

 9. This second fee agreement referred to $ 15,000.00 to be collected from "Palmen," a defendant in the underlying lawsuit who had previously tendered his $ 15,000/$ 30,000 insurance policy limits, and $ 5,000.00 to be collected from "Western Auto," which was plaintiffs' insurance carrier, Western Casualty and Surety Company. With regard to these amounts, the agreement specified, in Mrs. Mulholland's hand, that the "1st 20,000 John gets without contingency b› [because] it is automatic and b› he paid $ 2,948.00 previously in atty [attorney] fees [to defendants]."

 10. Plaintiffs' claims against all of the defendants in the underlying suit and against their own insurer have been settled out of court and without trial.

 11. During the time of defendant Kerns' representation, the plaintiffs settled claims relating to the underlying suit yielding a total recovery of $ 517,500.00, of which defendants received $ 141,590.00 in fees. In addition, by agreement, defendants received some $ 2900.00 in fees for the initial investigation before the contingent fee contract was signed.

 12. In the spring of 1990, after a period of dissatisfaction with Kerns because of his inability to move the case forward, plaintiffs terminated their attorney-client relationship with defendants.

 13. After Kerns' representation was terminated, plaintiffs settled claims relating to the underlying suit yielding a total recovery of $ 269,870.00, of which Kerns' successor received $ 80,961.00 in fees under an agreement which gave the attorney a 30% contingency fee.

 14. No agreement was reached at the time of defendants' termination or subsequently as to any additional compensation for defendants' services, although the matter was discussed.

 Plaintiffs' Claim of $ 26,500 from Western Auto Payment

 15. The policy with Western Casualty and Surety Company ("Western Auto") provided $ 5,000.00 in medical payments if the insured were injured. In the second fee agreement, it was understood by plaintiffs and defendant Kerns that the $ 5,000.00 to be collected from Western Auto on which there would be no contingency fee was this medical payments benefit, which was described in the agreement as "automatic."

 16. On its face, the policy with Western provided, in addition to medical payments, uninsured coverage to plaintiffs. None of the defendants in the underlying suit was uninsured. The policy said nothing about underinsured motorists. In Oklahoma, however, uninsured motorists' coverage is interpreted to provide coverage for underinsured claims as well. In addition, under Oklahoma law, coverages may be stacked. Plaintiffs had $ 35,000.00 of coverage on each of their three motor vehicles, for a total of $ 105,000.00 in uninsured or underinsured coverage or both.

 17. Neither plaintiffs nor defendants knew with any specificity at the time the second fee agreement was signed that an additional $ 105,000.00 claim could be made against "Western Auto" for underinsured motorists' benefits.

 18. At the time the second fee agreement was signed, defendants cannot reasonably be expected to have been sufficiently familiar with Oklahoma law to know that the Western Auto policy included underinsured motorists' benefits.

 19. Plaintiffs argued fraud at trial with regard to defendants' not having informed them of the possibility of the underinsured motorists' recovery; however, fraud was not pleaded in the complaint and no evidence of fraud was introduced at trial. Furthermore, even if such a charge had been made and supported, it would have been subject to a statute of limitations defense.

 20. The underinsured motorists' coverage was in no sense "automatic." It was excess coverage. In order to collect it, plaintiffs had to demonstrate that the amounts that they had collected or would be able to collect from the defendants in the underlying suit would not be enough to cover their damages. This demonstration took a substantial amount of work in the form of preparation of the rest of plaintiffs' case in terms of liability and damages.

 21. If plaintiffs had meant for any payments from Western Auto that were not "automatic" to be excluded by the second fee agreement, Mrs. Mulholland, an attorney herself, who was writing that part of the agreement, would have written it that way. The plaintiffs' oral testimony to the contrary at trial was not credible.

 22. The claim against Western Auto for underinsured motorists' coverage was settled for $ 105,000.00 in September of 1986. Following the settlement, defendant Kerns claimed a fee of 25% for the defendants.

 24. At the time the settlement with Western Auto was achieved, John Mulholland and Christopher Kerns had a telephone conversation concerning the payment of counsel fees. At this point all parties were aware of the exact nature of the underinsured motorists' coverage. During the discussion, Mulholland agreed that a 25% contingency fee would be paid on the settlement for underinsured motorists' benefits.

 25. Defendant Kerns sent the check from Western Auto for the entire $ 105,000.00 to the plaintiffs and authorized them to sign his name to the check so that they could deposit the check in their ...


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