Appeal from the Order Entered on November 8, 2010 In the Court of Common Pleas of Philadelphia County Civil Division at No(s): June Term, 2008, No. 4299
The opinion of the court was delivered by: Wecht, J.:
BEFORE: STEVENS, P.J., BOWES, J., GANTMAN, J., PANELLA, J., SHOGAN, J., ALLEN, J., LAZARUS, J., MUNDY, J., and WECHT, J.
Robert A. Huber ["Appellant"] appeals from a November 8, 2010 order.*fn1 That order granted Michael A. Etkin ["Appellee"]'s post-trial motion and ordered a new trial. After careful review, we affirm.
The trial court concisely summarized the facts as follows:
[Appellant] and [Appellee] are former law partners in two partnerships: Etkin & Huber, LLP ("E&H") and Yankowitz, Etkin and Huber, LLP ("YEH").
E&H was formed in 2002 by [Appellant] and [Appellee]. There was no written partnership agreement governing E&H. Pursuant to the oral partnership agreement profits were divided 52% for [Appellee] and 48% for [Appellant]. In October of 2002, YEH was formed by a written partnership agreement providing that Jack A. Yankowitz and the law firm of E&H were each 50% owners. On May 31, 2007, [Appellant] withdrew from E&H and YEH and notified both [Appellee] and Mr. Yankowitz.
[Appellant] and [Appellee] sent letters to all E&H and YEH clients, informing them of the dissolution of each partnership. The letters gave clients the choice of selecting which E&H partner they would retain to continue representation. Upon selection, that attorney continued representation. [Appellant]
has been paid a total of $78,000 in pre-dissolution profits from E&H and YEH. No post-dissolution profits have been paid by either party.
Trial Court Opinion ["T.C.O."], 12/13/10, at 1-2 (internal footnotes omitted). Appellant commenced suit in June 2008 with a praecipe for writ of summons. Appellant's complaint sought an accounting, as well as damages for breach of fiduciary duty, breach of contract, conversion, and tortious interference with business relations. The gravamen of the complaint was that Appellant had provided to Appellee an accounting of former E&H and YEH clients he retained, but that Appellee had not done the same. Appellant also alleged that Appellee improperly had retained control of partnership assets. Appellee filed counterclaims seeking an accounting and requesting damages for breach of fiduciary duty, conversion, and tortious interference with business relations. Appellee averred that Appellant had not made a full accounting and had diverted partnership assets and clients to Appellant.
A non-jury trial was held on May 25 and 27, 2010. At that point, Appellant was seeking the money he believed was owed him at the time that the partnerships dissolved. Notes of Testimony ["N.T."], 5/25/10, at 7.
Appellant believed he was owed approximately $203,000 from E&H and YEH.
At trial, Appellee was seeking his share of post-dissolution contingency fees that had been realized. N.T., 5/25/10, at 10-12. The partnerships had over 450 cases at the time of dissolution. N.T., 5/25/10, at 10. Appellee alleged that Appellant had collected over $400,000 in contingency fees for cases that began during the partnership, but finished after dissolution. N.T., 5/25/10, at 11.
Essentially, the parties held diametrically opposed views. Appellant believed that he should receive his share of the partnership assets as of the date of dissolution, and that anything earned after dissolution belonged to his new firm regardless of when the case had begun. Appellee believed that any case that was initiated during the partnership belonged to the partnership and that any sums earned from those cases, regardless of when earned and regardless of which attorney the client chose upon dissolution, were partnership assets.
After trial, the court: found for Appellant on his claim for money owed at the time of dissolution and awarded him $163,902.60; found for Appellee on Appellant's claim of tortious interference; and denied Appellee's counterclaim. Order, 7/1/10. The trial court relied on Solo v. Padova, 21 Phila. Co. Rptr. 22, 1990 WL 902426 (C.P. Phila 1990), in reaching its decision on Appellee's counterclaim. See T.C.O., 7/1/10.
Appellee filed a post-trial motion arguing that Solo was not consistent with Pennsylvania law on post-dissolution contingency fees. On November 5, 2010, the trial court granted Appellee's motion and ordered a new trial. The trial court based its order on the conclusion that Solo was wrongly decided and that the contingency fee cases were assets of the partnership. Order, 11/5/10.
Appellant filed his notice of appeal on December 3, 2010. The trial court did not order a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b), and Appellant did not file one. A three-judge panel of this Court*fn2 affirmed the trial court. Appellant sought en banc review in this Court, and that request was granted on October 12, 2011.
Appellant presents five issues for our review:
A. Whether the trial court erred in granting Appellee's motion for post-trial relief and in ordering a new trial after entering a verdict in favor of Appellant in the amount of $163,902.60 plus interest for the pre-dissolution distributions owed to Appellant and in holding that uncollected contingency fees may not be awarded where there was no written agreement concerning the disposition of contingent fee profits after dissolution?
B. Whether the trial court erred in granting Appellee's motion for post-trial relief where the court found as a fact that the parties implicitly agreed to dispose of all profits as of the date of dissolution based upon the surrounding circumstances where the parties arranged for the clients to select the attorney to continue their representation, where new contingency fee agreements were signed for all ongoing representation by the selected attorney and where the profits and costs were to flow exclusively to the selected partner?
C. Whether the trial court erred in granting Appellee's motion for post-trial relief and in holding that Solo v. Padova is not the law of Pennsylvania with respect to unresolved contingency fee cases at the time of dissolution but subsequently resolved?
D. Whether the trial court erred in failing to order that at most, Appellee is only entitled to quantum meruit from any portion of post-dissolution fees earned by Appellant from the cases which originated at Etkin & Huber and Yankowitz, Etkin and Huber, LLP?
E. Whether the trial court erred in failing to deny Appellee's motion for post-trial relief and in failing to dismiss Appellee's claim for post-dissolution fees earned by Appellant where Appellee did not plead an entitlement to any post-dissolution fees based upon quantum meruit?
Our Supreme Court has delineated in detail the scope and standard of review that we employ when considering a challenge to the grant of a new trial:
Trial courts have broad discretion to grant or deny a new trial. ... Although all new trial orders are subject to appellate review, it is well-established law that, absent a clear abuse of discretion by the trial court, appellate courts must not interfere with the trial court's authority to grant or deny a new trial.
[W]hen analyzing a decision by a trial court to grant or deny a new trial, the proper standard of review, ultimately, is whether the trial court abused its discretion.
Each review of a challenge to a new trial order must begin with an analysis of the underlying conduct or omission by the trial court that formed the basis for the motion. There is a two-step process that a trial court must follow when responding to a request for new trial. First, the trial court must decide whether one or more mistakes occurred at trial. These mistakes might involve factual, legal, or discretionary matters. Second, if the trial court concludes that a mistake (or mistakes) occurred, it must determine whether the mistake was a sufficient basis for granting a new trial. The harmless error doctrine underlies every decision to grant or deny a new trial. ...
To review the two-step process of the trial court for granting or denying a new trial, the appellate court must also undertake a dual-pronged analysis. A review of a denial of a new trial requires the same analysis as a review of a grant. First, the appellate court must examine the decision of the trial court that a mistake occurred.
At this first stage, the appellate court must apply the correct scope of review, based on the rationale given by the trial court. There are two possible scopes of review to apply when appellate courts are determining the propriety of an order granting or denying a new trial. There is a narrow scope of review: [w]here the trial court articulates a single mistake (or a finite set of mistakes), the appellate court's review is limited in scope to the stated reason, and the appellate court must review that reason under the appropriate standard.
[I]f the trial court leaves open the possibility that reasons additional to those specifically mentioned might warrant a new trial, or orders a new trial 'in the interests of justice,' the appellate court applies a broad scope of review, examining the entire record for any reason sufficient to justify a new trial.
Even under a narrow scope of review, the appellate court might still need to examine the entire record to determine if there is support for any of the reasons provided by the trial court.
The appropriate standard of review also controls this initial layer of analysis. If the mistake involved a discretionary act, the appellate court will review for an abuse of discretion. If the mistake concerned an error of law, the court will scrutinize for legal error. If there were no mistakes at trial, the appellate court must reverse a decision by the trial court to grant a new trial because the trial court cannot order a new trial where no error of law or abuse of discretion occurred.
If the appellate court agrees with the determination of the trial court that a mistake occurred, it proceeds to the second level of analysis. The appellate court must then determine whether the trial court abused its discretion in ruling on the request for a new trial. ... An abuse of discretion exists when the trial court has rendered a judgment that is manifestly unreasonable, arbitrary, or capricious, has failed to apply the law, or was motivated by partiality, prejudice, bias, or ill will. A finding by an appellate court that it would have reached a different result than the trial court does not constitute a finding of an abuse of discretion. ...
When determining whether the trial court abused its discretion, the appellate court must confine itself to the scope of review, as set forth in our preceding discussion. If the trial court has provided specific reasons for its ruling on a request for a new trial, and it is clear that the decision of the trial court is based exclusively on those reasons, applying a narrow scope of review, the appellate court may reverse the trial court's decision only if it finds no basis on the record to support any of those reasons.
Harman ex rel. Harman v. Borah, 756 A.2d 1116, 1121-23 (Pa. 2000) (internal citations and quotation marks omitted).
Instantly, the trial court articulated one basis for its decision to grant a new trial: that it erroneously relied on the Solo case in determining that the contingency fees were not partnership assets. Accordingly, our scope of review is limited to that basis alone. Because the trial court's decision is based upon its reading of case law, our standard of review is to determine whether the trial court made a legal error. If we conclude that an error did occur, we must then determine whether the trial court abused its discretion in granting a new trial.
Applying the above-stated scope of review to the instant case, we must first determine whether the trial court erred in concluding that Solo is not determinative of the outcome of the instant case. To do so, we must address whether contingency fees from cases that were initiated during the partnership, but realized following dissolution of the partnership, are the property of the partnership subject to division ...