HOWARD SACHS, Senior District Judge
Plaintiff (CLEAN), as the prevailing party in environmental litigation, seeks approximately $7 million in fees and expenses. Various statutes provide for such recoveries "whenever . . . appropriate." 33 U.S.C. § 1365(d); 42 U.S.C. § 7604(d); 42 U.S.C. § 9659(1). About $5.9 million is asserted for the period when lead counsel, Charles Speer, was an attorney with the Armstrong Teasdale law firm (Armstrong), attorneys of record for the great bulk of the work. After disagreements between Speer, CLEAN and Armstrong, Speer left the firm in August 2000 and Armstrong withdrew as counsel. Payne Jones, substitute counsel with Speer continuing as lead counsel, prosecuted the litigation further and it was ultimately settled with a consent decree. For present purposes I assume, contrary to defendants' contention, that CLEAN is entitled to reasonable fees as the prevailing party.
While litigation continued and while negotiations were brewing, Armstrong entered into negotiations with defendants for settlement of fees that would be ultimately payable to it and for satisfaction of a claimed lien for such fees, first asserted in November 2000. Plaintiff became aware of such negotiations in late April 2001. Over protest by plaintiff, Armstrong settled its claim for $1.7 million, some $4 million less than the sum plaintiff is now seeking for the Armstrong work. The May 4, 2001 settlement document took the form of a Release and Assignment of Claim. Defendants interpose the settlement payment to Armstrong as a bar to recovery for the Armstrong portion of the fee claim.
The lien claim was presumably made under § 484.130 and § 484.140, RSMo. As in the Curtis decision, infra, I assume the lien claim is valid under federal law, at least when asserted by former counsel.
Plaintiff responds that it rather than the law firm has statutory entitlement to pursue a claim for "reasonable attorneys fees." It contends that Armstrong acted in violation of ethical rules, a statute against fee sharing (by reason of the assignment), and without legal authority in settling its claim for reimbursement. Plaintiff further asserts that the assessment of reasonable fees is not controlled by fee agreements by clients with attorneys, and that fees can be recovered, for instance, even if counsel were offering free legal aid to a party unable to pay fees. Similarly, if attorneys are retained on a contingent fee basis and the result is not lucrative on that basis, the contingent fee agreement is not a cap on what a plaintiff can recover under the statute.
§ 484.150, RSMo.
Plaintiff's contentions as to standing to sue and as to the nondispositive aspect of the fee agreement with its attorneys are sound. One problem with plaintiff's claim is that a prevailing plaintiff has an obligation to reimburse counsel at least to the extent of the recovery of fees, and plaintiff shows no inclination to act as a conduit. For plaintiff to retain fees collected (absent agreement by counsel to donate part or all of such fees to plaintiff) would constitute a windfall, contrary to the statutory scheme. Image Technical Service, Inc. v. Eastman Kodak Co., 136 F.3d 1354, 1359 (9th Cir. 1998) ("Absent some representation that [the client], the party requesting fees, will not retain the $400,000 [the portion of the fee the law firm could not receive because of unethical conduct] it stands to receive a sizable windfall.") In the absence of such assurance the Ninth Circuit ruled that defendant could not be assessed the disputed portion of the requested fee. See also United States ex rel. Virani v. Jerry M. Lewis Truck Parts Equipment, Inc., 89 F.3d 574, 578 (9th Cir. 1996) ("the fee is for the attorney and the attorney should receive it" — once a fee application has been made by a prevailing plaintiff); Phillips v. General Services Administration, 924 F.2d 1577, 1583 (Fed. Cir. 1977) ("The statute does not contemplate that a fee award may be made to a party to be retained.") Therefore, as ruled in the Image case, if plaintiff is not committed to paying Armstrong the full recovery made for Armstrong's services, it is not equitably or appropriately entitled to a full assessment of the fees it claims, even though they would otherwise be classified as "reasonable." And if Armstrong's agreement with defendants bars Armstrong from receiving further payment (from plaintiff or otherwise) financed involuntarily by defendants, it seems to me that there is an indirect bar on plaintiff's obtaining the money to which Armstrong is not now entitled. That again seems to be the lesson to be learned from the Image case.
As will be seen, however, I do think it pertinent that plaintiff agreed, as between itself and Armstrong, that any fee award would be the "sole property" of Armstrong.
What I have said disposes of the claim based on the Armstrong activity, but further discussion may be useful, particularly if there is an appeal.
I am satisfied that these equitable considerations override any ethical or statutory question posed by plaintiff. There is no citation of cases from any jurisdiction that forbid the type of agreement made by Armstrong, under the circumstances of this case, where Armstrong's status had reverted to that of former counsel, and it had been delayed in receiving compensation for its services for a considerable period. Essentially plaintiff contends that Armstrong must wait indefinitely, rather than exercising self-help to the extent it did here. Although an expert opinion has been cited for that proposition, it is conclusory, and not supported by ethical advisory opinions or case law. I do not find the black letter rules or the statute clearly prohibitory. Defendants' expert opinion, from a former dean at UMKC Law School who is a well-qualified expert on legal ethics, is generally consistent with my views and is well reasoned and much more fully supported. If there is a novel and significant question of ethics, plaintiff has not made a complaint and pursued it with appropriate authorities, but seems to have relied on using it as a ploy in litigation.
The most plausible contention made by plaintiff, at first blush, is that fee claims have occasionally been identified as "bargaining chips" for a plaintiff to use at its discretion and that the settlement of a claim for fees could, under some circumstances, be deemed to have seriously prejudiced plaintiff`s negotiating position. See Evans v. Jeff D., 475 U.S. 717 (1986). The common sense of the situation, it seems to me, is that "former client" probably is the key term, and exonerates Armstrong from allegedly acting in a way arguably prejudicial to plaintiff. If a former attorney can sue an ex-client for a large fee, even when the fee claim may bankrupt the former client, I cannot imagine that the action taken by Armstrong here could be characterized as a grave ethical violation.
No actual prejudice is asserted herenand probably could not be asserted when Armstrong was willing to settle its claim for less than the claim now asserted for the Armstrong work. Prejudice occurs when lawyers get fees otherwise available to remedy the client's complaints.
Even if there were such an ethical breach as to deprive Armstrong of all rights to a fee, as appropriate punishment, this would not enable plaintiff to recover the fee on its own, and keep it for itself (or share it with Speer, or whatever). This again is a lesson from the Image ruling. Such a recovery would require a conclusion that defendants should pay twice for corrupting Armstrong, which is a spin unsupported by any citations. One could imagine allowing plaintiff to seek the $1.7 million from Armstrong if a total fee disqualification had occurred, but anything more as punishment for encouraging self-help to collect fees committed by contract to Armstrong after the basic duties of Armstrong had terminated seems to me almost unimaginable.
Plaintiff's status as a former client presents another issue, not briefed by the parties, which in my opinion raises serious questions as to plaintiff's right to throw in its "chip" or discount it as it sees fit, without consideration of Armstrong's entitlements. In a related context (insurance) the party controlling litigation has a fiduciary responsibility to a helpless party whose interests are at stake. Dairy Farmers of America, Inc. v. Travelers Ins. Co., 292 F.3d 567 (8th Cir. 2002).
My supposition is that when the attorneys whose "chip" is at stake no longer share control of negotiations, new ethical considerations come into play and the chip becomes a valuable property that cannot be sacrificed or discounted in a selfish manner by the former client. plaintiff's "chip" theory reinforces Armstrong's need for self-help to protect against bad faith handling of negotiations over the fee claim against defendants. Direct negotiations between Armstrong and defendants gave appropriate assurance, it seems to me, that the Armstrong claim, newly "monetized" although not guaranteed the previous August, would be appropriately valued in an arms-length transaction.
This view is not foreclosed by the unpublished decision inHogobroooks v. Carter, 542 F.3d 335 (table) (8th Cir. 2000), which left a possibly defrauded attorney to pursue remedies in state court.
At the risk of engaging in speculation going well beyond the briefing, I note that the Armstrong settlement may not have given full value to its work in this case if the contemporaneous settlement of an unrelated case was sufficiently attractive to have caused discounting of the fee claim in question here. If that is so, and if Speer had a continuing financial stake in the Armstrong fee claim — as seems possible, although not asserted — but no say in its disposition, then he might have a claim for breach of fiduciary duty. This would be the flip-side of the fiduciary duty running to Armstrong as former counsel. Thus, although the result here favors plaintiff's and Armstrong, it could lead to further claims by Speer against Armstrong, if my suppositions are sound.
Plaintiff is seeking to expand the concepts of the Jeff D. case to persuade me to reject the rationale of Image and Virani cases. Jeff D. was, however, a close and somewhat delicate case that should be cabined as the Ninth Circuit has done. There were persuasive dissents in Jeff D. As pointed out in another dissenting opinion, by Judge Skelly Wright, in at least one jurisdiction it has been opined by an ethics committee that a defendant's attorney who seeks to have plaintiff surrender a bargaining chip by waiving fees is engaged in unethical conduct. Moore v. National Association of Securities Dealers, 762 F.2d 1093, 1112 (D.C. Cir. 1985). So the plot thickens.
The Eighth Circuit has concluded, in a ruling pertinent to the practice here, that a fee award is not the property of a plaintiff, but rather that of the successful attorneys, and that under state law the attorneys can assert a lien and collect the fee allowance from the defendants.Curtis v. City of Des Moines, 995 F.2d 125 (8th Cir. 1993). As previously noted, the retainer between plaintiff and Armstrong agreed that any award would be the "sole property" of Armstrong. Thus Armstrong had an expectancy and a beneficial interest in any award, even though formal title to any claim might be in plaintiff and plaintiff had a right under Jeff D. to force then-currently employed attorneys to surrender or discount their fee claims under the statute.
The presumption seems to be that in most situations an attorney and client will work together to bring about a favorable result. Compromise of conflicting interests could normally be expected. As previously stated, this seems neither realistic nor consistent with fiduciary obligations when control passes to a former client and a successor attorney.
In the Curtis decision, as here, the attorneys received their compensation from defendants, not their clients. This is the very practice that plaintiff's expert contends violates Missouri criminal law. As Armstrong's expert points out, any prohibition on attorneys "selling" their earned fees as receivables would be motivated by concerns for preservation of confidential information. There is no such issue presented in this case. plaintiff's argument would create conflict between the lien statutes and the criminal law. I think it unlikely the lien statutes would yield, if the matter were presented to the Missouri courts (or to Missouri prosecutors for that matter).
Insofar as it is the assignment that troubles plaintiff's expert, it serves no purpose that I can fathom, and if invalid for some reason, that language could readily be stricken and discarded as a useless ornament.
As former dean Powell opines, the transaction in question seems based on "a relatively routine agreement" unless, as I have noted, there is an issue of undervaluation, which I believe could be raised by Mr. Speer as a separate issue testing Armstrong's performance of any fiduciary responsibilities to him.
I therefore conclude that only the Payne Jones portion of plaintiff`s claim for fees and costs remains for evaluation and assessment.
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Assuming plaintiff will likely appeal from this ruling, which involves some novel issues, we do need to have a final judgment on the last claim, slightly exceeding $1 million. The parties need to regroup and deal realistically with the much reduced controversy. If this ruling does not induce a global settlement, I urge the parties to seriously try to settle the Payne Jones claim, and take up only my present ruling. A procedural conference will be scheduled in about thirty days.
Plaintiff's motion for attorneys' fees and costs of litigation will be denied in part; that is, the fees and costs sought for services of Armstrong Teasdale are hereby DENIED.