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Paddick v. Butt

United States District Court, E.D. Pennsylvania

April 27, 2018

RYAN M. PADDICK Movant
v.
SHENECQUA BUTT; THERESA HOWARD; and. ELLEN BRONSON, a/k/a ELLEN BROWN Respondents RYAN M. PADDICK Movant
v.
THERESA HOWARD Respondent

          MEMORANDUM AND OPINION

          DAVID R. STRAWBRIDGE, UNITED STATES MAGISTRATE JUDGE

         Presently before the Court is a discharged attorney's motion to enforce a charging lien against the settlement fund ultimately obtained by his former clients. Following upon reports that all claims in the related cases (09-4285 and 13-374) had been settled, attorney Ryan Paddick Esq. (“Paddick”), former counsel for Plaintiffs Shenecqua Butt (“Butt”), Theresa Howard (“Howard”), and Ellen Brown (“Brown”) (formerly Bronson) (hereinafter collectively “Former Clients”), filed two motions-a “Motion for Leave to Intervene for Recognition and Enforcement of Lien” (Doc. 305) and with it his companion “Motion for Recognition and Enforcement of Lien.” (“Enforcement Motion”) (Doc 306.)[1] On November 14, 2017, we ordered Sandra Thompson, Esq. (“Thompson”), current counsel for the Former Clients to file a response to both of the Paddick motions, and that he reply. (Doc. 309.) Upon receipt of these briefings, we entered an Order granting Paddick's motion for leave to intervene. In the same order, we set a hearing date and granted leave to the Former Clients to file a surreply to Paddick's reply. (Doc. 327.) On January 13, 2018 Butt filed a “Motion for Recognition and Enforcement of Lien” against Tanya Mitchell, a former plaintiff, and Paddick. (Doc. 329.) Paddick responded to that motion on January 24, 2018. (Doc. 333.)

         During the interim, and having a strong belief that this dispute cried out for a negotiated resolution, we consulted with counsel and recommended that they explore settlement discussions with the assistance of my colleague, United States Magistrate Judge Timothy R. Rice, who agreed to preside over such a conference. (Doc. 324.)[2] That effort was unavailing.

         We then proceeded to an evidentiary hearing which began on February 2, 2018 and was continued on February 7 and 12, 2018. Testimony was taken from Marc Gelman, Esq., who represented the Carpenters Union and Edward Coryell and Mark Durkalec (collectively “Union Defendants”) in both underlying cases, Catherine Straggas, Esq., who represented the Philadelphia Housing Authority (“PHA”) in the 13-374 case, Mitchell, the one underlying plaintiff who did not terminate Paddick, Paddick himself, Anthony Jackson, a disbarred attorney who assisted Paddick as a legal assistant in his representation of the Former Clients, each of the Former Clients, and Thompson. Both parties were instructed to file post-hearing briefs and have now done so. (Doc. 349, Doc. 351.)[3]

         On the morning of February 12, 2018, as we convened for the last day of the hearing, the Former Clients filed a “Motion for Recusal [of me] filed by Ellen Brown, Shenecqua Butt, and Theresa Howard.” (“Recusal Motion”) (Doc. 343.) The motion was supplemented on February 13, 2018 with an affidavit from Butt. (Doc. 345.) I deferred ruling on that motion subject to the completion of the hearing, and in order to give Paddick an opportunity to respond. He did so on February 14, 2018. (Doc. 348.) These motions are all ripe for resolution.

         By our accompanying order, we (1) grant with limitation Paddick's Enforcement Motion; (2) deny Butt's “Motion for Recognition and Enforcement of Lien” against Mitchell and Paddick; and (3) deny the Recusal Motion. We set out our reasoning below.

         I. Enforcement Motion

         A. Jurisdiction

         Paddick asserts that we have subject matter jurisdiction over his enforcement lien by way of ancillary jurisdiction. (Doc. 306-3 at 1.) His Former Clients respond that we lack jurisdiction over this fee dispute “as the underlying case was dismissed a month before Paddick filed a motion to assert a lien and the asserted claims have no nexus to the underlying claims filed against the Union or PHA.” (Doc. 328-1 at 2-3.) As to Butt's assertion of the lien against Paddick and Mitchell, she asserts that “There is ancillary jurisdiction to hear instant Movant's claims, because the Court is exercising jurisdiction of Ryan Paddick's claims.” (Doc. 329-3 at 2.)

         We begin by noting that under 28 U.S.C. § 1367, ancillary, or supplemental jurisdiction may be exercised “over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.” In Novinger v. E.I. DuPont de Nemours & Co., the Third Circuit cited a commentator who noted that “[a]ncillary jurisdiction exists because without it the federal court neither could dispose of the principal case effectively nor do complete justice in the dispute that is before the tribunal.” 809 F.2d 212, 217 (3d Cir. 1987) (citing 13 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure, § 3523, at 85 (1984). The Court continued to explain that

This description of the purpose of ancillary jurisdiction suggests that it is particularly necessary for disputes such as this one. Attorneys' fee arrangements in diversity cases, and in most federal question cases as well, are matters primarily of state contract law. Nevertheless the federal forum has a vital interest in those arrangements because they bear directly upon the ability of the court to dispose of cases before it in a fair manner.

Id.

         Thus, we conclude that this Court has ancillary jurisdiction over Paddick's claims under 28 U.S.C. § 1367 as the claims form part of the same case or controversy to the underlying suit. Without our exercising ancillary jurisdiction over these claims, the principal case could not be disposed of efficiently; nor could we do complete justice without deciding this dispute. Novinger, 809 F.2d at 217-18.

         With regard to Butt's motion, however, we are not convinced that our jurisdiction over Paddick's claims compels us to exercise jurisdiction over that claim. These claims are fundamentally different: Paddick's claim pertains directly to his efforts leading (or not) to the creation of the settlement fund; Butt's claims have nothing to do with creating the fund but rather are based upon an apparent separate agreement between her and co-plaintiff Mitchell where one (Butt) allegedly advanced money for counsel fees for the benefit of the other (Mitchell). We also observe that, unlike Paddick's enforcement claim, which requires extensive knowledge of the underlying litigation and the activities of the lawyers involved over several years, Butt's motion concerns a simple claim to enforce an asserted debt which Mitchell has stated in open court that she would pay. We decline to exercise jurisdiction over this claim.

         B. Parties Contentions

         Paddick contends that he is entitled to recover from his Former Clients based upon the terms of two separate contracts: (1) the agreement to represent them in the Court of Appeals as they sought to overturn Judge Baylson's initial dismissal of the case (“Appellate Agreement”) and (2) the agreement to represent them upon remand (“Contingency Fee Agreement” or “CFA”). Paddick's argument on the Appellate Agreement is simply that he is owed an outstanding balance to be paid under that agreement. With regard to the CFA, he argues that he has acquired an interest in the Respondent's settlement award through a charging lien. He then seeks damages on one of three bases: as a percentage of the fund; his lodestar for his time spent prior to his termination; or quantum meruit based on equitable principles. (Doc. 306-3.)

         The Former Clients disagree. They assert that they paid the full amount Paddick was owed under the Appellate Agreement; that the CFA is void as it was signed under duress, and that even if it was not, Paddick breached the agreement and has “unclean hands” leaving him unable to recover in equity.

         C. Discussion

         We examine these arguments as we recount the chronological history of the case and what we see as the relevant events to take into account. We then apply these considerations in the context of the law governing each particular issue. Ultimately, we conclude that Paddick's claims for his entitlement to fees under the Appellate Agreement are dependent upon the interpretation of the CFA. Accordingly, we discuss the CFA and the work completed by Paddick throughout his representation of his Former Clients.

         1. Litigation leading to first Motion for Summary Judgment

         This litigation began on September 21, 2009, when Butt, represented by counsel not involved in this current dispute, filed a complaint against the United Brotherhood of Carpenters & Joiners of America, Carpenter Health & Welfare Fund of Philadelphia & Vicinity (“Union”), Edward Coryell and Mark Durkalec asserting gender and race based discrimination and retaliation. (Doc. 1.) By amended complaint filed November 5, 2009, Mitchell and Allegra King[4] joined Butt as plaintiffs. (Doc. 6.) On June 2, 2010 and July 6, 2010, Howard and Brown respectively filed a complaint against the Union Defendants, asserting essentially the same claims as Butt and Mitchell. (10-2633, Doc. 1; 10-3269, Doc. 1.) On May 25, 2011, Judge Baylson ordered the cases consolidated for all discovery. (Doc. 38.) Discovery was undertaken between March and June 2011. The Union Defendants then filed a Motion for Summary Judgment which Judge Baylson granted on January 26, 2012. (Docs. 40, 55.) While not necessary for consideration of our case, it appears that the Karpf, Karpf & Cerutti, P.C. firm which had been representing all plaintiffs withdrew after the adverse ruling from Judge Baylson, leaving the plaintiffs to file a pro se Notice of Appeal to the Court of Appeals. (Doc. 56.) This history, which predates Howard's 13-374 suit against PHA and the Union for unrelated conduct concerning Howard's employment relationship with PHA, leads us to the first fee arrangement which was for the work done on the appeal.

         2. Appellate Agreement

         Upon filing their Notice of Appeal, and upon the Karpf firm's withdrawal, the then-five plaintiffs sought new counsel to represent them on the appeal. The Former Clients testified that they went to the NAACP offices in Philadelphia in search of legal assistance where they met Paddick. On February 21, 2012, they entered an agreement whereby Paddick agreed to represent them in connection with the appeal. Paddick presented two copies of the agreement, one signed by Butt, and one signed by Howard. (M-1.)[5] The latter document lists Butt, Howard, King, and Brown as clients. Although there was no signed contract from Brown offered into evidence, she testified that she entered into an identical agreement as her co-plaintiffs. (R-2 at 1-2.) We accept that all three former clients were parties to the same agreement and are so bound.

         The Former Clients have identified several issues associated with this agreement.[6] The principal question is whether the fee to be paid was capped at $15, 000, as the Former Clients assert, and if not, whether Paddick is entitled to all or any portion of the additional $13, 757.50 that he has billed. (R. 349 at 10.) As we are responding to Paddick Enforcement Motion, we must look to whether Paddick has established a charging lien, and if so whether the scope of that lien reached back to work done under the Appellate Agreement. As we set out within, we conclude that he has established a valid charging lien, but he has failed to establish that that lien reaches back to include the work done pursuing the appeal. Accordingly, it is not for us to resolve the issues the parties identified under the Appellate Agreement.

         3. Contingency Fee Agreements

         On January 6, 2013, the eve of oral argument before the Court of Appeals, Paddick and his Former Clients entered into contingency fee agreements whereby Paddick would, following remand, be paid from the proceeds of any recovery at trial or from settlement. (M-2.) The Former Clients argue that this fee agreement is void as they signed it only under duress when Paddick threatened not to appear for oral argument. (Doc. 311 at 2-3.) They also assert, should this first argument fail, that Paddick breached the agreement by refusing to advance litigation costs as they say he was obligated to do under the arrangement and by failing to secure an economic expert. (Id. at 3-4.) This, they claim, was a material breach which discharged them of their responsibility to perform under the contract. (Doc. 311-2 at 5.) We address each of these arguments in turn, and then address the ability of Paddick to recover fees from the appellate work under this agreement.

         a. Duress

         We first address the issue of the alleged coercion, or duress. We have testimony from the Former Clients that Paddick was particularly forceful in seeking to reach finality in the role that he would play in the event the Court of Appeals reversed and remanded the case back to District Court. (See also R-3 at 3.) Paddick has strongly denied this charge and asserted vigorously that he did not engage in any such misconduct. (See M-9 at 3.) The parties agree that the CFAs were signed during a meeting at the NAACP office where Jackson, who was involved with the NAACP's Social Justice Law project and was assisting Paddick was also present. Jackson testified in support of Paddick on this issue, stating that he (Jackson) participated in the meeting where there was an orderly, albeit brief discussion about the upcoming oral argument, a review of the papers Paddick had filed, a prayer, and the signing of the CFAs. He stated that this discussion took about 10 minutes. (See also M-8.) Howard also testified about the meeting and said that Paddick did not walk the parties through each line in the agreement. In her affidavit, Butt stated “Attorney Paddick and Mr. Jackson threatened not to appear for oral argument in the Third Circuit Court of Appeals unless we also agreed to allow them to take the case if the appeal was won.” (R-3 at 3.) Although Howard and Brown did not discuss duress in their affidavits, both testified that they had the impression during the meeting that they had to sign the agreement in order for Paddick to show up to oral argument. Mitchell disagreed, and testified that Paddick never threatened to not show up for oral argument.

         Turning to the agreements themselves, we see nothing out of the ordinary. These are relatively standard CFAs, and there are no particularly abnormal terms. As to the clients obligations, the CFA provides:

Client agrees to pay Law Office the greater of the following fees:
(a) Client agrees to pay a fee for time and efforts by attorney Forty Percent (40%) of net proceeds of any settlement or judgment and attorney's fees awarded; or should the Court award attorneys' fees
(b) Client agrees attorneys shall be owed at the rate shall of $350.00 per hour.

(M-2.)

         We begin this discussion with the understanding that “parties are bound by their agreements, absent fraud, misrepresentation or duress… without regard to whether the terms were read and fully understood and irrespective of whether the agreements embodied reasonable or good bargains.” Sabad v. Fessenden, 825 A.2d 682, 688 (Pa. Super. 2003) (citing Simeone v. Simeone, 581 A.2d 162, 165 (Pa. 1990). In Pennsylvania, duress is defined as “that degree of restraint or danger, either actually inflicted or threatened and impending, which is sufficient in severity or apprehension to overcome the mind of a person of ordinary firmness.” Strickland v. Univ. of Scranton, 700 A.2d 979, 986 (Pa. Super. 1997) (citing Carrier v. William Penn Broadcasting Co., 233 A.2d 519, 521 (Pa. 1967)). In order to succeed in a claim for duress, a party “must show a wrongful act or threat by the other party that left the victim no reasonable alternative.” Seal v. Riverside Fed. Sav. Bank, 825 F.Supp. 686, 695 (E.D. Pa. 1993).

         A fraud or duress claim in Pennsylvania must be proven by “clear and convincing evidence.” Rohm & Haas Co. v. Cont'l Cas. Co., 781 A.2d 1172, 1179 (Pa 2001). This standard requires that the evidence be “so clear, direct, weighty, and convincing as to enable the jury to come to a clear conviction, without hesitancy, of the truth of the precise facts of the issue.” Id. (citing Lessner v. Rubinson, 592 A.2d 678, 681 (Pa. 1991)); see also Sabad, 825 A.2d at 691.

         Understanding that the Former Clients testified vigorously about duress, they have failed to convince us that there is “clear and convincing” evidence of sufficient weight as to void the contract. We observe that Howard emailed Paddick on February 1, 2013, a month after she signed the CFA, and after the case had been successfully remanded, thanking him for his representation. (M-29.) At the same time, we accept that by October 2013 Butt, who came to be the informal spokeswoman for the Former Clients, wrote to Paddick stating that “I have concerns about trial and being prepared and I believe we need someone with civil experience to help out with the case and don't want to be procrastinating till last minute getting things done.” (M-19.) She also discussed the issue of alleged coercion with Jackson in November of 2013 but took no action. (R-4 at 2-5.)[7] Despite these concerns, and understanding that the agreement provides that “Client has the authority to discharge attorney at any time, ” (M-2) the Former Clients did not terminate their relationship with Paddick until late April of 2015, over eighteen months after Butt's email to Paddick expressing concerns about procrastination, and over two years after the signing of the original agreement.

         Moreover, we consider the Former Clients' claims that Paddick threatened to pull out from arguing before the Court of Appeals as unlikely, particularly where he would have certainly known that he would have little prospect of succeeding.[8] In reviewing the evidence on the whole, we find Paddick's testimony on this point more credible than that which was offered by the Former Clients. The Former Clients have failed to carry their burden of showing by clear and convincing evidence that the agreement was the product of duress.

         b. The cost of paying for obtaining experts

         As we have found that the contract is enforceable, we next examine the primary dispute about the substance of the agreement-that is: who was responsible under the CFA for paying the initial cost of retaining experts. We also examine whether this dispute caused any harm to the Former Clients. While ultimately the agreement provides that the clients are “responsible for reimbursement of all expenses (such as court costs, transcripts, telephone, travel and lodging, postage, copying, expert witness fees, etc.). . . Such expenses as are advanced by attorney and have not been paid by client directly shall be deducted by attorney from client's share of any money recovered, ” the agreement also states that “Client agrees to reimburse Law Office for all costs associated with the action and pay 1/3 of costs within 30 days of the report of such costs. . . . Such costs may and will likely include: filing fees, expert witness fees. . . and any other direct costs of the case.” (M-2) (emphasis added.)

         The Former Clients argue from this language that Paddick was obligated to initially fund the cost of obtaining an expert, and that his failure to do so constituted a breach of the agreement. They assert that at least as early as November 2014, Paddick knew that he did not have funding to retain an expert witness. (R-14.) He did, however, identify some potential experts who were not retained at that point as the Former Clients could or would not contribute to the payment of their retainer. Paddick argues that the provision in the agreement that “Client understands that he/she is also responsible for reimbursement of all expenses” (M-2) puts the burden of paying the expert on the clients. (Doc. 317 at 4-5.) While he is right about the language of the agreement, we are troubled by the unfortunate lack of clarity created by these clauses in combination when the real issue was not reimbursement but who would fund the case when funds were needed. We understand that the clients' assumption was that he would secure the appropriate expert subject to the reimbursement provision in the policy.

         The record contains text message and email communications between Paddick and certain of his Former Clients, usually Butt, on this topic. In an August 2014 email, Butt stated “we are not responsible for expert witness fees. If you believe this to be wrong please point out in contract.” (R-1 at 12; see also R-9 at 1-6, 14-17.) We find nowhere in the evidence produced that he did so. He did, however, seek help from other attorneys. On November 7, 2014, over five months before his termination, Paddick emailed Alice Ballard, Esq. stating “it is time to have experts issue a report. And, frankly neither I or my clients have the funds right now…. If new counsel is to step in or collaborate, it should be soon because expert reports are currently due November 21.” (R-14.) In March 2015, a month before he was terminated, he told the clients that they were free to change counsel if they were not willing to contribute to the cost of an expert or proceed without one. (R-8.) Regardless of that email, we conclude that Paddick failed to communicate clearly with his clients regarding their responsibility to reimburse him for the cost of retaining an expert.[9] But, for reasons we discuss within, the Former Clients are unable to show that this circumstance brought them any significant harm. We take this into account as we discuss his entitlement under a quantum meruit analysis.

         c. Recovery of fees from appellate work

         We next consider Paddick's claim that he is entitled to recoupment of unpaid fees under the Appellate Agreement from the contingency fee agreement settlement fund even when he has been terminated. The CFA states that:

Client has the authority to discharge attorney at any time and have the entire file returned. Discharge of attorney does not avoid duty to pay fees hereunder. Client also agrees that attorney shall have the right to withdraw representation, subject to court approval, in the event client breaches this agreement or there is a breakdown in the attorney-client relationship and there is no prejudice to client.
Client further agrees that in such event, any unpaid fees which may be due to attorney may be obtained directly from the proceeds recovered by client from any defendant ...

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