ALIOTO v. HOILES

contemplated in the Contingency Fee Agreement, because he believed that he no longer was dealing just with Hoiles' shares or even the combined 667,000 shares belonging to Hoiles and Hoiles' ex-wife and daughters. Rather, he also was dealing with the related matter of shares held by other Freedom Communication shareholders.

Hoiles' Br., App., Ex. 9, Reporter's Tr. of Jury Trial, Day 3, hereinafter "Trial Tr. Day 3", at A.266.

Alioto's Response, Ex. 3, "Exhibit 83", Alioto Trial Test., at p. 408, ll. 8-15 (emphasis added).

See Alioto's Br., Ex. 15, Ex. 16.

See Hoiles' Br., App., Ex. 9, Trial Tr. Day 3, at p. A. 266; see also Alioto's Br., Ex. 8, Alioto Dep., at pp. 197-98.

Regardless of whether the Contingency Fee Agreement encompassed the shares of Hoiles' ex-wife and two adult daughters, Alioto's attempt to recover additional compensation, combined with Alioto's testimony as to his justification for seeking such additional compensation, provides conclusive evidence that at least one related matter existed, i.e., receiving a fair share price for shareholders other than Hoiles. Because Alioto is attempting to collect fees for at least one related matter and because the Contingency Fee Agreement does not include a related matter statement, the Contingency Fee Agreement is voidable at Hoiles' option. See Hoiles, 341 Fed. Appx. at 441 (discussing Tishgart, 2004 Cal. App. Unpub. LEXIS 8071, 2004 WL 1941193) ("If Alioto claimed additional compensation for related matters, as did the attorney in Tishgart, it would likely (perhaps conclusively) suggest undisclosed related matters existed, permitting Hoiles to void the Fee Agreement.").

3. Whether Hoiles Voided the Contingency Fee Agreement

On August 8, 2007, the trial court concluded that Hoiles effectively voided the Contingency Fee Agreement on January 21, 2004. The U.S. Court of Appeals for the Tenth Circuit declined to address this issue on appeal. See Hoiles, 341 Fed. Appx. at 442 ("[t]he detailed issues, as well as these other [issues], are best addressed by the district court in the first instance"). For the reasons discussed below, this Court concurs with the August 8, 2007 trial court decision, and concludes that Hoiles effectively voided the Contingency Fee Agreement.

Alioto, 2007 U.S. Dist. LEXIS 57893, at *11; Alioto, 2007 U.S. Dist. LEXIS 93915 at *5, *6, *14.

In the instant case, after Hoiles and Alioto had entered into the Contingency Fee Agreement, Hoiles sent a letter dated January 21, 2004, instructing Alioto to "take no further actions as a lawyer on [Hoiles'] behalf"; and, in accordance with paragraph 5 of the Contingency Fee Agreement, requesting that Alioto submit "a billing statement for [his] legal services at $1000 an hour for [his] time." In short, Hoiles both instructed Alioto to take no further action as his attorney and requested an accounting regarding the attorney's fees. See Service Employees International Union, Local 87, 2004 Cal. App. Unpub. LEXIS 9112 at *4. Hoiles' letter explicitly states Hoiles' intention to pay his attorney at the hourly rate specified in the Contingency Fee Agreement, thus, implicitly declining to pay Alioto on a contingent basis. See Fergus v. Songer, 150 Cal. App. 4th 552, 570 (Cal. Ct. App. 2007) (holding a client's intention to void a contingent fee agreement does not have to be explicit to effectively void the agreement). This Court concludes that the January 21, 2004 letter from Hoiles to Alioto, which included an instruction to engage in no further legal services on Hoiles' behalf and which also included a statement regarding payment at an hourly rate, was sufficient to void the Contingency Fee Agreement.

Alioto's Br., Ex. 42.

4. Whether Hoiles Ratified the Contingency Fee Agreement

Alioto contends that, subsequent to sending the January 21, 2004 letter voiding the Contingency Fee Agreement, Hoiles ratified the Contingency Fee Agreement. Alioto concedes that this issue is governed by Fergus v. Songer, 150 Cal. App. 4th 552, 571 (Cal. Ct. App. 2007) (holding that ratification of a contingent fee agreement requires knowledge by the client that he possesses the right to void the agreement because the "very essence either of an election or ratification is that it is done advisedly, with full knowledge of the party's rights"). Nonetheless, Alioto argues that two letters written by Hoiles in February 2004 demonstrate ratification by Hoiles. The first such letter included the statements: "I still consider you to be bound by our attorney-client relationship and to have obligations under our contract, so I want to be clear, all of these instructions are from me as your client. The request that you provide no further legal services at this time, still stands, however." The second letter, dated February 20, 2004, is from Hoiles to Messrs. Shulman, Stratmore and Schwartz in which Hoiles stated that he has "not terminated Joe Alioto, nor has he resigned as my lawyer."

Alioto's Br. at pp. 56-58.

Alioto's Br., Ex. 43.

Alioto's Br., Ex. 44.

Alioto asserts that Hoiles' statements in these letters indicate a ratification of the Contingency Fee Agreement because Hoiles asserts that he and Alioto still have an attorney-client relationship and that Alioto still has obligations under the contract. However, the Court finds no support within either of these letters for the conclusion that Hoiles intended to "ratify" the Contingency Fee Agreement or that he had knowledge of his right to void the Contingency Fee Agreement. This Court agrees with Judge Kane's analysis in his December 21, 2007 Order. Attorney fee agreements are not considered ordinary, arms-length contracts; rather, they are governed by statutes like § 6147 that specifically delineate the required contents of the agreement for the purposes of protecting clients and assuring fee agreements are fair and understood by clients. Alderman v. Hamilton, 205 Cal. App. 3d 1033, 1037 (1988); see also Severson Werson, 235 Cal. App. 3d at 1572 (attorney fee agreements are "strictly construed against the attorney"). In light of Fergus v. Songer, 150 Cal. App. 4th 552, 571 (Cal. Ct. App. 2007), to prove the defense of ratification (1) Alioto must show that Hoiles ratified the agreement with full knowledge of his right to void it; (2) the knowledge of Hoiles' attorneys as to the agreement's enforceability may not be imputed to Hoiles for purposes of ratification; and, (3) Hoiles' actual knowledge as to the fee agreement's enforceability is only relevant to the extent he obtained such knowledge before he allegedly ratified the agreement.

Contrary to Alioto's assertions, Hoiles' letters to Alioto confirm that he requested that Alioto provide no further legal services. Nothing in these statements evidences an intent by Hoiles to reverse his decision of January 21, 2004, to cancel or void the Contingency Fee Agreement. In addition, nothing in these statements can be read as indicating that Hoiles was willing to pay Alioto a contingency fee for any legal services provided, as opposed to the hourly rate, as indicated in the January 21, 2004 letter from Hoiles to Alioto. There is no indication that Hoiles learned independently from his attorneys that the fee agreement did not comply with § 6147 or any other state's laws. In fact, there is undisputed, direct evidence, in the form of deposition testimony of Hoiles, Barletta, Susemihl, and Quan, that Barletta, Susemihl, and Quan never advised Hoiles as to the agreement's statutory compliance. Confirming Hoiles' testimony that he did not receive advice from his attorneys regarding the agreement's enforceability, Barletta testified that he acted primarily as Hoiles' business advisor and that he assumed Susemihl or Quan would review the agreement before Hoiles signed it. Susemihl and Quan both testified that Hoiles sent them a copy of the agreement as an FYI, but neither read it nor did they provide advice to Hoiles on the agreement's enforceability. There is no evidence in the record to contradict these statements. As such, the Court finds no evidence that Hoiles had the requisite knowledge regarding his right to void the Contingency Fee Agreement. The fact that Hoiles may have believed that Alioto and Hoiles still had an attorney-client relationship provides no evidence regarding Hoiles' knowledge regarding his right to void the Contingency Fee Agreement. Similarly, such belief provides no evidence of any intention on the part of Hoiles to compensate Alioto on a contingent basis (as opposed to the hourly basis Hoiles demanded in his January 21, 2004 letter to Alioto).

Doc. # 496, Hoiles' Mot. for Summary Judgment on Issue of Ratification ("Hoiles' Mot."), Attach. #5, Dep. of Joseph F. Barletta, 12/20/2004, at p. 46, ll. 8-9, p. 117, l. 1-p. 118, l. 9, p. 119; Attach #4, Dep. of Peter M. Susemihl, November 4, 2004, at p. 40, ll. 15-17, p. 45, ll. 2-16; Attach. #3, Dep. of Paul Quan, 12/14/2004, at p. 18, l. 21-p. 19, l. 15.

Alioto's contention that the knowledge of Hoiles' attorneys can be imputed to Hoiles is contrary to California law which provides "it is an inherent element of ratification that the party to be charged with it must have fully known what he was doing." Fergus, 150 Cal. App. 4th at 571 (quoting Brown, 38 P. 507; 104 Cal. at 676); Gallagher v. California Pacific Title Trust Co., 57 P.2d 195, 201 (Cal. Ct. App. 1939), ("The doctrine of constructive knowledge of material facts . . . does not generally obtain in the case of ratification, as ordinarily it is what the principal knows, and not what he has mere legal notice of, that is to be considered in determining whether there has been ratification"). None of the cases cited by Alioto, in support of his contention that knowledge of Hoiles' attorneys can be imputed to Hoiles, addresses constructive or imputed knowledge in the context of ratification. Thus, these cases are factually distinguishable and Alioto's reliance thereon is misplaced.

See Stalberg v. W. Title Ins. Co., 230 Cal. App. 3d 1223, 1230-31 (Cal. Ct. App. 1991) (knowledge regarding the timing of the discovery of a property deed in the context of breach of fiduciary duty and slander); Watson v. Sutro, 86 Cal. 500, 525-26 (1890) (knowledge regarding infirmity of title); People v. Amerson, 151 Cal. App. 3d 165, 169 (Cal. Ct. App. 1984) (knowledge of defense counsel imputed to client regarding waiver of rights under Cal. Penal Code § 1170.8); Nelson v. Nelson, 131 Cal. App. 126, 133 (Cal. Ct. App. 1933) (imputing knowledge of fraud of an attorney to his client under agency law); Hanlon v. W. Loan Bldg. Co., 46 Cal. App. 2d 580, 596 (Cal. Ct. App. 1941) (imputing knowledge of an attorney to the client regarding knowledge of a deed of trust).

The Court finds no evidence upon which a trier of fact could reasonably conclude that the two letters sent by Hoiles to Alioto after January 21, 2004 constituted a ratification of the Contingency Fee Agreement. Even assuming that one or both of the two letters could be interpreted as ratifications of the Contingency Fee Agreement, the Court further concludes that there is no evidence upon which a trier of fact reasonably could conclude that Hoiles possessed the requisite knowledge of his right to void the Contingency Fee Agreement.

Having found the Contingency Fee Agreement was voidable due to noncompliance with CALIFORNIA BUSINESS AND PROFESSIONS CODE § 6147; that it was voided by Hoiles on January 21, 2004; and, that it was not ratified by Hoiles, the Court concludes that Alioto's claim to enforce the Contingency Fee Agreement fails and summary judgment for Hoiles is proper on this claim based on the undisputed evidence.

Hoiles also contends that the Contingency Fee Agreement does not comply with CAL. RULES OF PROF'L CONDUCT, Rule 3-300 (1992) and CAL. BUS. PROF. CODE § 6148 (2000). See Hoiles' Br., at pp. 19-27. However, as the Court has concluded that the Contingency Fee Agreement does not comply with CAL. BUS. PROF. CODE § 6147, the Court declines to address these issues.

5. Alioto's Fraud and Misrepresentation Claims

Alioto concedes that his fraud and misrepresentation claims arise only if the Contingency Fee Agreement is enforceable. Due to the Court's finding that the Contingency Fee Agreement was voided effectively, Alioto's fraud and misrepresentation claims also fail. Accordingly, summary judgment shall enter in favor of Hoiles on Alioto's claims for fraud and misrepresentation.

Alioto's Br. at p. 58 ("Alioto's fraud and misrepresentation claims arise only if . . . the Fee Agreement is enforceable.").

6. Alioto's Quantum Meruit Claim

Alioto's sole remaining claim is that of quantum meruit. Before evaluating the merits of this claim, the Court must decide whether California or Colorado law applies. Hoiles, 461 F.3d at 1238, n. 9.

a) Whether Colorado or California Law Applies

"A federal court in a diversity case applies the choice of law principles of the state in which it sits." Century 21 Real Estate Corp. v. Meraj Int'l Inv. Corp., 315 F.3d 1271, 1281 (10th Cir. 2003) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Progressive Cas. Ins. Co. v. Engemann, 268 F.3d 985, 987 (10th Cir. 2001)).

Colorado has adopted the Restatement (Second) approach, i.e., the most significant relationship approach, for actions based in contract. Wood Bros. Homes, Inc. v. Walker Adjustment Bureau, 198 Colo. 444, 447 (1979); see also Restatement (Second) of Conflict of Laws `188 (1971). "A claim for quantum meruit is essentially based on implied contract." Camas Colorado, Inc. v. Bd. Of County Comm'rs, 36 P.3d 135, 139 (Colo. Ct. App. 2001).

According to Colorado law, the factors relevant to the choice of the applicable rule of law include:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

Restatement (Second) of Conflict of Laws § 188(1), (2), § 6 (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447.

Relevant to the Court's review of these seven factors is the place of contracting; the place of negotiation of the contract; the place of performance; the location of the subject matter of the contract; and, the domicile, residence, nationality, place of incorporation and place of business of the parties. Restatement (Second) of Conflict of Laws § 188(2).

In determining whether California or Colorado law applies to Alioto's claim of quantum meruit for the recovery of attorney's fees, the first factor to be evaluated is the needs of the interstate and international systems. See Restatement (Second) of Conflict of Laws § 188(1), (2), § 6(2)(a) (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447. The purpose of this factor is "to further harmonious relations between states and to facilitate commercial intercourse between them." Restatement (Second) of Conflict of Laws § 6 cmt. d. (1971); Hoiles, 461 F.3d at 1230. In the instant case, Alioto did not travel to Colorado to seek Hoiles' business, rather Hoiles and another of his attorneys traveled to California in order to request Alioto's services. The Contingency Fee Agreement was negotiated in California and, although Alioto's co-counsel once traveled to Hoiles' office in Colorado to review Hoiles' files, most of the services provided by Alioto and his team were performed in California. The complaint drafted by Alioto was to be filed in California state court and it alleged antitrust violations under California law. It is likely that attorneys in California would be less willing to provide services to Colorado residents if the Court were to apply Colorado law under these circumstances. For these reasons, this factor favors the application of California law to Alioto's quantum meruit claim for attorney's fees.

Stipulated Facts, ¶ 13. See also Hoiles, 461 F.3d at 1230.

The second and third factors in the choice of law analysis are the relevant policies of the forum and of other interested states and the relative interests of those states in the determination of the particular issue. See Restatement (Second) of Conflict of Laws ¶ 188(1), (2), ¶ 6(2)(b), (c) (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447; supra pp. 26-27. Because Alioto is licensed by California as an attorney and Hoiles is a Colorado resident who sought legal services, both California and Colorado have an interest in the determination of whether Alioto is entitled to an attorney's fee under quantum meruit. The Court notes, however, that California statutes and rules governing the conduct of California attorneys apply to those attorneys regardless of the residency of their clients. See, e.g., CAL. BUS. PROF. CODE § 6147 (2000); CAL. RULES OF PROF'L CONDUCT, Rule 2-200(A)(1) (1992). In this case, California has a stronger interest than Colorado in ensuring that Alioto complies with its statutes and rules governing the provision of legal services and in the determination of a reasonable fee when these statutes and rules are violated. Hoiles, 461 F.3d at 1232 ( quoting Goldfarb v. Va. State Bar, 421 U.S. 773, 792 (1975) ("States have a compelling interest in the practice of professions within their boundaries") ( citing Int'l Tele-Marine Corp. v. Malone Assocs., Inc., 845 F.Supp. 1427, 1431 (D. Colo. 1994))). California's interest is further enhanced by the fact that Hoiles traveled to California to seek Alioto's services, negotiated a contract for these services in California, and received services that largely were provided by Alioto in California. The Court concludes that factors two and three both favor the application of California law to Alioto's claim for attorney's fees under quantum meruit.

The fourth factor relevant to the determination of the appropriate choice of law is the protection of justified expectations. See Restatement (Second) of Conflict of Laws § 188(1), (2), § 6(2)(d) (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447; supra pp. 26-27. Both of the parties originally expected that their Contingency Fee Agreement would be valid and enforceable and, hence, that the Contingency Fee Agreement would govern the circumstances under which Alioto would be entitled to a fee and the amount of such fee. See Hoiles, 461 F.3d at 1232 ("neither party disputes that they intended to enter into a contingent fee agreement"). However, the parties may have some expectations regarding the circumstances under which Alioto would be entitled to a fee if the Contingency Fee Agreement was determined to be unenforceable. As previously mentioned, Hoiles traveled to California to seek Alioto's services, negotiated a contract for these services in California, and received services that largely were provided by Alioto in California. Therefore Alioto's potential expectation that his recovery of an attorney's fee in such an instance would be governed by quantum meruit under California law is reasonable, especially as compared with any potential expectation on the part of Hoiles that Colorado law would apply under these circumstances. For these reasons, the Court concludes that factor four also favors the application of California law.

The fifth factor requires analysis of the basic policies underlying the particular field of law, i.e., whether attorney's fees can be recovered based on the theory of quantum meruit and, if so, what is a reasonable attorney's fee. See Restatement (Second) of Conflict of Laws § 188(1), (2), § 6(2)(e) (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447; supra pp. 26-27.

Under California law, " Quantum Meruit refers to the well-established principle that `the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered.'" Huskinson Brown v. Wolf, 84 P.3d 379, 381, 32 Cal. 4th 453, 458 (2004) (quoting Long v. Rumsey, 12 Cal. 2d 334, 342 (1938)). A party attempting to recover under quantum meruit must show that "the circumstances were such that `the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.'" Id. (quoting Estate of Mumford, 173 Cal. 511, 523 (1916) (other citations omitted)). A "person who renders services under an invalid [] contract . . . may secure quantum meruit for the value of those services." Orella v. Johnson, 38 Cal. 2d 693, 697 (1952) (citation omitted); see also Fracasse v. Brent, 6 Cal. 3d 784, 796 (1972) ("He may treat the contract as rescinded and may recover upon a quantum meruit so far as he has performed") (citations omitted).

Under Colorado law, quantum meruit is founded upon the principle of equity. Mullens v. Hansel-Henderson, 65 P.3d 992, 999 (Colo. 2002). In situations where "an attorney completes the legal services for which he was retained, the fact that the underlying fee agreement was unenforceable does not in itself preclude the attorney from being paid the reasonable value of his services." Id. When the attorney has a "good faith belief that he would receive an agreed upon compensation for his services," it would be unjust to allow the client to receive the benefit of the attorney's services without providing any compensation. Id.

Thus, under both California law and Colorado law, the policies regarding quantum meruit are the same: it is unjust for a client to retain a benefit of legal services in situations where there was a reasonable expectation by both parties that compensation to the attorney is appropriate.

The Court also notes that California law and Colorado law appear nearly identical with respect to the factors relevant to determining whether an attorney's fee is reasonable. See CAL. R. PROF. CONDUCT 4-200 (1992); COLO. R. PROF. CONDUCT 1.5 (2002). Seven of the eight factors relevant in Colorado are indistinguishable from the California factors; eight of eleven factors relevant in the California rule are also identical to those in the Colorado rule. Colorado includes the factor of "fee customarily charged in the locality for similar legal services," while California includes the factors of "amount of the fee in proportion to the value of the services performed," the "relative sophistication of the member and the client," and, the "informed consent of the client to the fee."

The mathematical discrepancy is due the fact that California divides one of Colorado's factors into two separate factors.

Because there is scant difference between the policies of California and Colorado law regarding both the recovery of attorney's fees under quantum meruit and the determination of a reasonable attorney's fee, the Court concludes that the fifth factor favors neither California law nor Colorado law.

The sixth factor is certainty, predictability, and uniformity of result. See Restatement (Second) of Conflict of Laws § 188(1), (2), § 6(2)(f) (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447. In this case, a Colorado citizen traveled to California in order to request legal services from an attorney licensed in California; the majority of said services were conducted in California; and, legal services and advice were rendered in accordance with California law. In contrast, other than Hoiles' residency in Colorado, the parties' contacts with Colorado were minimal. Under these circumstances, the application of California law would create more certainty and uniformity of result. A California attorney who negotiates in California an agreement for services to be provided in California pursuant to California law should be able to assume with relative certainty that his reimbursement for services would be governed by California law. See Hoiles, 461 F.3d at 1233-34.

The final factor relevant to the determination of the choice of law analysis is ease in the determination and application of the law to be applied. See Restatement (Second) of Conflict of Laws § 188(1), (2), § 6(2)(g) (1971); see also Wood Bros. Homes, Inc., 198 Colo. at 447. As is apparent from the Court's previous discussion, both California and Colorado rules regarding the determination and application of a reasonable attorney's fee under a quantum meruit theory of recovery are nearly identical. Thus, factor seven does not favor the application of either California law or Colorado law.

In summary, with respect to the seven factors of the most significant relationship test, five favor the application of California law, whereas none favor the application of Colorado law. As such, the Court concludes that California law applies to Alioto's quantum meruit claim.

b) Applying California Law to Alioto's Quantum Meruit claim

Alioto's quantum meruit claim was determined by a jury which applied Colorado law. Therefore, the Court must determine if the jury verdict on Alioto's quantum meruit claim can stand or if a new trial must be held in which California law is applied. Alioto does not take issue with the jury's finding that he was entitled to an award of attorneys fees based on quantum meruit. Rather, Alioto contends that a new trial must be held because, in determining the amount of a reasonable attorneys' fee, the jury was not allowed to consider three factors that they would be entitled to consider under California law: 1) that the parties' original fee agreement was a contingency fee agreement; 2) that the parties had agreed upon a 15%-20% contingency fee; and 3) that a percentage of the recovery could be considered by the jury in determining a reasonable fee. Quantum meruit, Latin words for "as much as is deserved," is a legal theory based upon the principle that a person should not be obliged to pay, nor should another be allowed to receive, more than the value of the goods or services exchanged. Thus, under the facts of this case, in which the Court has found that the Contingency Fee Agreement was voidable for failure to comply with the law of California, allowing the jury to in effect reinstate the Contingency Fee Agreement by awarding a percentage of Hoiles' recovery would violate both the purpose of CAL. BUS. PROF. CODE § 6147 and the intent of the doctrine of quantum meruit. Contrary to Alioto's assertions, California law does not hold "that the terms of an unenforceable contingent fee contract — including the percentage contained in the agreement — are relevant and admissible in determining a reasonable quantum meruit fee." In fact, the leading California case on point holds just the opposite.

With respect to this third alleged prejudicial error, the issue in this case is not whether a jury can ever consider awarding a percentage of the recovery as a reasonable fee. Rather, the issue is whether a jury must be so instructed when a contingent fee agreement has been voided by the client. Only one of the cases cited by Alioto in support of this argument is from a California Court; and, none of the cited cases is on point. See Gottlieb v. Welch, 43 F.3d 474, 487 (10th Cir. 1994) (after special master determined attorneys' fees should be awarded as a percentage of the fund, trial court erred in awarding a lower fee based upon the reasonable lodestar analysis); In re Quest Communications Int'l. Inc. Secs. Litig., 625 F. Supp. 2d 1143, 1147-48 (D. Colo. 2009) (attorneys pursuing class action litigation are entitled to an award of fees from any common fund created for the benefit of the class, generally based on a percentage of the common fund created by counsels' efforts); Consumer Privacy Cases, 175 Cal. App. 4th 545, 552 (Cal. Ct. App. 2009) (appeal of court's award to class action counsel of an amount lower than that provided for in a settlement agreement not prejudicial error). For these reasons, in the case at bar, the Court finds the aforementioned cases distinguishable; and, less persuasive than Fergus. See Fergus, 150 Cal. App. 4th at 573.

See Alioto Brief at p. 59.

In Fergus v. Songer, 150 Cal. App. 4th 552 (Cal. Ct. App. 2007), the trial court held a contingent fee agreement to be void for noncompliance with CALIFORNIA BUSINESS AND PROFESSIONS CODE § 6147. The trial court instructed the Fergus jury that during deliberations it could not "base compensation fees to [the attorney] on a contingency basis." On appeal, the court was faced with the issue of whether "the trial court erred in refusing to instruct the jury that, in determining a reasonable fee, it could consider the contingent nature of the fee arrangement." Id. at 572-73. The California Court of Appeal concluded that "[w]here, as here, a client exercises his right to void a contingency fee agreement, section 6147 does not permit the trier of fact to consider the contingent nature of the fee arrangement in determining a reasonable fee. If the contingency fee agreement is void, there is no contingency fee arrangement." Id. at 573. The court's rationale for this conclusion was "[t]he deterrent and protective purposes of Business and Professional Code section 6147 would be impaired if an attorney who was barred from enforcing a contingency fee agreement would nevertheless be entitled to a percentage of the recovery based on the contingent risk factor. The attorney would in effect be receiving a contingency fee even though the contingency fee agreement had been voided by the client." Id.

Alioto contends that this Court should disregard Fergus, and instead follow one of the ten cases cited in support of his argument. Quantity of citations does not trump the quality of Fergus, which the Court finds much more on point than any of the cases cited by Alioto. Thus, the Court rejects Alioto's argument that a jury should be allowed to consider the Contingent Fee Agreement in deciding upon a reasonable fee for Alioto on his quantum meruit claim.

Alioto's Br. at pp. 58-61. All of the cases cited by Alioto are distinguishable from the instant case and less persuasive than Fergus. See Herbold v. Miller, No. CV 02-01639 (C.D. Cal. Aug. 6, 2004) (unpublished, superceded by the holding in Fergus, and factually distinguishable); In re Pacific Far East Line, Inc., 654 F.2d 664, 668 (9th Cir. 1981) (contingency fee agreement unenforceable due to client's bankruptcy, not lawyer's violation of § 6147); LuMetta v. U.S. Robotics, Inc., 824 F.2d 768, 769 (9th Cir. 1987) (valid contract existed, dispute involved proper percentage to award as contingency fee); Donfeld, Kelly Rollman v. Bass, 2002 WL 31160867 at *1, *3 (Cal. Ct. App. 2002) (unpublished and contingent fee unenforceable due to client's discharge of attorney); George v. Double-D Foods, Inc., 155 Cal. App. 3d 36, 40 (Cal. Ct. App. 1984) (written contract of employment never executed by decedent, whose executrix wife sought recovery); Offeman v. Robertson-Cole Studios, Inc., 251 P. 830, 835, 80 Cal. App. 1 (Cal. Ct. App. 1926) (oral employment contract unenforceable due to noncompliance with the statute of frauds); Joost v. Sullivan, 111 Cal. 286, 289, 292-93, (1896) (contract regarding a lien on real property was not filed in the recorder's office as required); Cazares v. Saenz, 208 Cal. App. 3d 279, 281 (Cal. Ct. App. 1989) (obligations of contract discharged when plaintiff partner became incapable of performing the contract after being appointed to a judge's position); Watson v. Wood Dimension, Inc., 209 Cal. App. 3d 1359, 1361 (Cal. Ct. App. 1989) (terminated employee sued to enforce oral employment contract regarding commissions on sales); Ferrier v. Commercial Steel Corp., 142 Cal. App. 2d 424, 424, 425, 426-27 (Cal. Ct. App. 1956) (manual laborers sued contractor for compensation for services rendered where contract price allegedly too low).

Alioto's final contention is that "under California law, Alioto's quantum meruit recovery should be based on all the work performed by the attorneys who were to be compensated from the contingent fee." The only case cited by Alioto in support of this argument is Huskinson Brown, LLP v. Wolf, 84 P.3d 379, 32 Cal. 4th 453 (2004). Alioto correctly cites Huskinson Brown for the proposition that in California "an attorney may recover from another attorney in quantum meruit." Alioto then takes this holding and incorrectly asserts that "because Alioto may be liable to [other attorneys] for work they have performed, Alioto's recovery in quantum meruit from Hoiles" should include the work performed by these other attorneys. However, Huskinson Brown involved a dispute between attorneys and did not address the issue in the instant case, i.e., whether an attorney (Alioto) is entitled to recover a fee in quantum meruit from the client (Hoiles) for work performed by other attorneys who have entered into a fee-sharing agreement with him (Alioto). This Court agrees with the prior two judges who have ruled on this issue and concludes that Alioto has not demonstrated that he has standing to recover fees in quantum meruit on behalf of other attorneys who are not parties to this action.

Alioto has failed to provide this Court with any authority for the proposition that he has standing to sue a client for attorney's fees generated by attorneys outside his firm. According to California law, a "person who renders services under an invalid [] contract . . . may secure quantum meruit for the value of those services." Orella, 38 Cal. 2d at 697; see also Fracasse, 6 Cal. 3d at 796 ("He may treat the contract as rescinded and may recover upon a quantum meruit so far as he has performed.") (emphasis added). The Court can find no authority for the contention that a party to an invalid contract can seek quantum meruit recovery for services rendered by a third party. For these reasons, the Court rejects Alioto's contention that it was improper for the jury to be instructed that they could not consider the work of the other attorneys in determining a reasonable fee.

The Court concludes that none of Alioto's arguments alleging prejudicial error as a result of the quantum meruit instructions that were given to the jury in the original trial of this case has merit. As such, the Court also finds no reason to disturb the jury's verdict on the quantum meruit claim.

III. CONCLUSION

For the foregoing reasons, the Court DENIES Alioto's motion for summary judgment (Doc # 568). Instead, given the undisputed facts and the Court's resolution of the legal issues, the Court GRANTS summary judgment to Hoiles on Alioto's claims of breach of contract, fraud and misrepresentation. ( See Doc. # 565 at 50.) In addition, the final judgment in favor of Alioto on his unjust enrichment claim in the amount of $1,150,000, minus $500,000 previously paid to Alioto, shall be REINSTATED.

DATED: September 21, 2010