KOUROUVACILIS v. AM. FED. OF STATE, CTY., 65 Mass. App. Ct. 521 (2006)

No. 04-P-1747.Appeals Court of Massachusetts. Hampden.September 13, 2005.
February 9, 2006.

Present: Laurence, Kafker, Trainor, JJ.

Attorney at Law, Lien, Withdrawal, Suspension. Rules of Professional Conduct.

This court concluded that the suspension of an attorney for ethical misconduct barred him from recovering compensation for legal services rendered prior to the disciplinary action — whether pursuant to a contingent fee agreement, in a quantum meruit action, or in a proceeding to enforce the statutory lien — where the penalized misconduct was related to the case in which the services were rendered and for which the attorney sought a fee, and where the penalized misconduct impaired the value of the client’s cause of action or otherwise imperiled the client’s right to relief [527-533]; further, this court concluded that there was no merit to the argument that the attorney’s conduct should not be imputed to his law firm, where the attorney’s misconduct was committed within the normal scope of legal representation, and where, given his disciplinary history, the attorney’s acts were foreseeable [533-535].

Page 522

CIVIL ACTION commenced in the Superior Court Department on December 1, 1987.

Following review by this court, 53 Mass. App. Ct. 116 (2002), the case was heard by Tina S. Page, J., on motions for summary judgment.

Norma Kerlinsky for Louis Kerlinsky, P.C.

Dawn D. McDonald for Cooley, Shrair, P.C.

LAURENCE, J.

This case involves a novel issue: whether an attorney forfeits his right to his charging lien (under G.L. c. 221, § 50) by virtue of being suspended from the practice of law by the Supreme Judicial Court for unethical conduct in a separate litigation when that misconduct was related to, and arguably caused harm to, his client’s interests in the case in which the lien is sought to be enforced. We affirm a Superior Court judge’s summary judgment ruling that, in the circumstances presented, the attorney cannot enforce the lien, although we do so on different grounds from those relied on by the judge.

Background. In November, 1985, Diane Kourouvacilis retained attorney Louis Kerlinsky[2] on a contingent fee basis to represent her in an action against General Motors (GM) and Avis Rent-A-Car (Avis) for personal injuries she allegedly sustained when a GM automobile she had purchased from Avis caught fire while she was driving. See Kourouvacilis
v. General Motors Corp., 410 Mass. 706, 707 (1991); Matter of Kerlinsky, 428 Mass. 656, 660, cert. denied, 526 U.S. 1160 (1999) (Kerlinsky II). Kourouvacilis subsequently retained Kerlinsky in November, 1987, for the litigation that underlies this appeal

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(again on a contingent fee basis)[3] to represent her in a wrongful termination action against the Commonwealth of Massachusetts and Monson State Hospital (Monson) (collectively, the Commonwealth)[4] in which she also alleged breach of the duty of fair representation against her union, American Federation of State, County and Municipal Employees (AFSCME).[5]

On December 3, 1997, Kerlinsky was suspended from the practice of law by the Board of Bar Overseers (board) for two years.[6] Kerlinsky II, 428 Mass. at 659. Although the suspension

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arose out of his conduct in the automobile fire action, his unethical conduct was found to be related to, and to have had an adverse impact upon, Kourouvacilis’s wrongful discharge case. In his handling of the automobile fire case, Kerlinsky was determined to have performed a perfunctory and inadequate investigation of the automobile fire, to have failed to have the car inspected by an expert (before it was sold for salvage), and to have failed to investigate Kourouvacilis’s claims of personal injury. Id. at 660-661. He failed to counsel his client to correct misstatements she made in her deposition. Id. at 661. He prepared an affidavit and answers to interrogatories that falsely represented that expert witnesses were available to testify in support of Kourouvacilis’s claims. Id. at 661-662.

Most pertinently, Kerlinsky made deliberate misstatements regarding Kourouvacilis’s employment and lost wages allegedly resulting from the automobile fire, which constituted the unethical conduct directly related to the unlawful termination case. In answers to interrogatories propounded by GM, he allowed his client to claim that she only lost two weeks of wages, while in answers to Avis’s interrogatories, he advanced the client’s claim that she was not employed for two years after the automobile fire because of resulting emotional problems, and that she had a lost earning capacity of $36,000. Id. at 662.

The Supreme Judicial Court (SJC) specifically found that these inconsistent interrogatory answers were detrimental to the unlawful termination suit:

“These statements were not only inconsistent as between GM and Avis, but they contradicted and jeopardized the theory of Kourouvacilis’s Monson suit. In that case, Kourouvacilis claimed that she was ready and able to work after her 1984 termination, but had been unable to find work until June, 1986. [Kerlinsky] advanced these misstatements of his client, and did not counsel her to correct

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either the misstatements or the inconsistencies.” (Emphasis added.)

Ibid. The SJC found “more than adequate evidence to support” all of the charges of Kerlinsky’s intentional and knowing ethical violations, which represented “fraudulent, dishonest conduct . . . prejudicial to the administration of justice, and reflected adversely upon [his] fitness to practice. . . .” Id. at 662, 664. In sum, Kerlinsky “neglected his client’s case. He prosecuted a frivolous claim, needlessly consuming the resources of the judicial system for several years. He filed false and misleading affidavits and interrogatory answers.” Id. at 664. In increasing Kerlinsky’s suspension from two to three years, the SJC relied not merely on the large number of ethical violations he had committed in the GM-Avis case but also on his record of past misconduct. The court found it significant that Kerlinsky “continued to engage in the unethical behavior at issue in this case during the pendency of and subsequent to . . . earlier disciplinary proceedings.”[7] , [8] Id. at 665.

As a result of the suspension, Kerlinsky was required to withdraw from all of his cases, including the wrongful discharge action. See S.J.C. Rule 4:01, § 17(1)(a), as amended, 426 Mass. 1301 (1997). Kourouvacilis retained Cooley, Shrair, P.C. (Cooley, Shrair), as successor counsel. Louis Kerlinsky, P.C.

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(Kerlinsky, P.C.), along with Kerlinsky individually and his wife, Norma Kerlinsky, thereafter served and filed a notice of attorney’s lien against Kourouvacilis; Cooley, Shrair; and the named defendants in the unlawful termination suit.[9] Cooley, Shrair, ultimately settled that case for $50,000, receiving $20,000 for its efforts (whether on the basis of a contingent fee agreement or reasonable time spent being unclear from the record). The action was then dismissed pursuant to a stipulation.

In October, 1999, Kerlinsky, P.C., filed a “motion to determine and enforce” its claimed attorney’s lien against the proceeds of the settlement. A judge of the Superior Court (not the motion judge here) denied the motion after concluding that “no statutory basis exists to enforce any lien.” On Kerlinsky, P.C.’s, appeal, this court vacated the order on the authority of Craft v. Kane, 51 Mass. App. Ct. 648, 652-653
(2001), and remanded the case because the judge erred in failing to recognize that a stipulation of dismissal constitutes a judgment within the meaning of the attorney’s lien statute. Kourouvacilis v. AFSCME, 53 Mass. App. Ct. 1116 (2002).[10]

Following the remand, Cooley, Shrair, and Kerlinsky, P.C., cross-moved for summary judgment on the latter’s attorney’s lien motion. A judge of the Superior Court denied Kerlinsky, P.C.’s, motion but allowed Cooley, Shrair’s. The judge determined that Kerlinsky (and through him Kerlinsky, P.C.) had waived the right to any attorney’s lien because Kerlinsky’s

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withdrawal from Kourouvacilis’s case had not been for “good cause.”[11]
This appeal followed.

Discussion. Whether an attorney forfeits, or waives, his right to an attorney’s lien by engaging in unethical conduct harmful to his client’s case that compels his withdrawal from the representation before the case is concluded is a question our appellate courts have not before addressed. It has been judicially determined that an attorney does not waive his right to the lien by voluntarily withdrawing from the representation in certain circumstances. See Phelps Steel, Inc. v. Von Deak, 24 Mass. App. Ct. 592, 593-594 (1987), and cases cited. “[I]f, for example, withdrawal occurs because of a breakdown in the lawyer-client relationship, illness of the lawyer, or development of an unforeseen, and reasonably not foreseeable, conflict of interest the attorney’s lien remains intact.” Id. at 594. In determining whether the circumstances of withdrawal were sufficiently justified to preserve the lien, the critical issue is whether the attorney had “good cause to withdraw.” Ibid. See Eliot v. Lawton, 7 Allen 274, 276 (1863); Powers v Manning, 154 Mass. 370, 377 (1891). It is this “good cause” analysis that the lower court judge relied on in finding that Kerlinsky, P.C. — charged with responsibility for Kerlinsky’s actions under ordinary agency principles — was not entitled to an attorney’s lien, because Kerlinsky’s withdrawal due to suspension from practice for unethical conduct did not constitute good cause.

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We are unpersuaded by the judge’s stated basis for allowing summary judgment. As an objective matter, Kerlinsky’s withdrawal from further representation of Kourouvacilis plainly rested on “good,” i.e., proper, cause: it was required by law. Massachusetts Rules of Professional Conduct 1.16(a)(1), 426 Mass. 1369 (1988), mandates withdrawal “if . . . the representation will result in violation of the rules of professional conduct or other law.” The SJC’s disciplinary decision suspending Kerlinsky from the practice of law for three years was a legal command that Kerlinsky’s continued representation of Kourouvacilis — i.e., his failure to withdraw — would have violated. Such representation in the face of the temporary disbarment resulting from the three-year suspension also would have violated G.L. c. 221, § 41, penalizing the unauthorized practice of law. Additionally, S.J.C. Rule 4:01, § 17(1)(a), explicitly requires such withdrawal. Kerlinsky’s withdrawal, was, therefore, actuated by the most compelling of good causes — the law itself, as pronounced by the Commonwealth’s highest court.

The judge’s ultimate conclusion — that Kerlinsky, P.C., had no right to enforce the attorney’s lien because of Kerlinsky’s unethical conduct prejudicial to his client — can nevertheless be upheld on any correct legal ground that supports the judgment on the record, regardless of whether the judge’s stated reasons were sound. See West Broadway Task Force v. Boston Hous. Authy., 414 Mass. 394, 397-398 (1993); Doeblin v Tinkham Dev. Corp., 7 Mass. App. Ct. 720, 722 (1979). Such valid alternative grounds exist here.

Since the attorney’s lien is a “tool for recovery of legal fees,”Boswell v. Zephyr Lines, Inc., 414 Mass. 241, 248 (1993), which was created as a matter of public policy to protect attorneys’ right to compensation for services legitimately rendered, see PGR Mgmt. Co., Inc., Heath Properties v. Credle, 427 Mass. 636, 640 (1998), the right to enforce the lien may be considered, legally as well as functionally, the equivalent of the right to compensation. The relevant issue here, therefore, becomes whether Kerlinsky, P.C., has a right to compensation for Kerlinsky’s legal services to Kourouvacilis in the unfair termination case in these circumstances, most pointedly in light

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of Kerlinsky’s suspension for unethical conduct that “jeopardized the theory” of the case.

As previously noted, no Massachusetts authority on the issue appears to exist. Two principal lines of authority have emerged in other jurisdictions concerning an attorney’s right to compensation after he has been suspended or disbarred before completion of his services for the client. Under one view, supportive of the judge’s challenged ruling here, the fact that an attorney was suspended or disbarred is regarded as the equivalent of unjustified voluntary abandonment of the client and precludes recovery for legal work performed prior to the disciplinary action. See In re Woodworth, 85 F.2d 50, 51 (2d Cir. 1936), superseded by statute on other grounds as stated in Banner v. Bagen, 186 B.R. 824
(1995) (withdrawal because of disbarment forfeits attorney’s right to lien because “[t]he attorney’s incapacity follows from his own wrongful act”); Fletcher v. Krise, 120 F.2d 809, 812 (D.C. Cir.), cert. denied, 314 U.S. 608 (1941) (“appellant’s disbarment deprived him of any right to compensation either under his contract or on a quantum meruit [basis]”) Kimmie v. Terminal R.R. Assn. of St. Louis, 344 Mo. 412, 420 (1939) (in rejecting attorney’s request for legal fees, court equated attorney’s suspension with a voluntary abandonment of his contract of employment) Davenport v. Waggoner, 49 S.D. 592, 597 (1926) (attorney disbarred while case was pending on appeal found to have abandoned his contract “without just cause,” thereby “forfeit[ing] all right to payment for any services previously rendered”); Royden v. Ardoin, 160 Tex. 338, 342 (1960) (court denied attorney’s request for compensation for services rendered prior to suspension because “[h]is disbarment or suspension is considered tantamount to and to have the same effect as a voluntary abandonment, for the attorney by knowingly and willfully practicing such a course of conduct that would lead to the termination of his right to practice, renders it impossible to complete the work that he engaged to perform”).

A second line of authority does not bar recovery per se, but rather allows a disbarred or suspended attorney to recover the reasonable value of services rendered prior to the discipline in certain situations. Se Eisenberg v. General Motors Acceptance

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Corp., 761 F. Supp. 20, 22 (E.D. Pa. 1991); In re Mekler, 672 A.2d 23, 24 (Del. 1995); Harris Trust Sav. Bank v. Chicago College of Osteopathic Med., 116 Ill. App. 3d 906, 909 (1983); Pollock v Wetterau Food Distrib. Group, 11 S.W.3d 754, 773 (Mo.Ct.App. 1999) (distinguishing Kimmie, supra); Stein v. Shaw, 6 N.J. 525, 527 (1951) Flecha v. Goodman, 31 Misc. 2d 444, 445 (1961).[12] In these cases, most pertinently, either the courts stated explicitly that the attorney was disciplined for conduct unrelated to the case at hand, or the facts of the case demonstrated the lack of relationship.[13] See Eisenberg, 761 F. Supp. at 21 (attorney resigned “for reasons unrelated to his representation of the defendant”); Harris Trust, 116 Ill. App. 3d at 907
(attorney “disbarred for making several material false statements on his application for admission to the bar”); Pollock, 11 S.W.3d at 773
(plaintiff’s lawyer “disbarred for reasons wholly unrelated” to the case); Stein, 6 N.J. at 526, 528 (attorney disbarred “for reasons not connected in anywise with the prosecution of the defendant’s suit” and “wholly unrelated to his client’s case”); Flecha, 31 Misc. 2d at 445
(court noted that there was no “claim of any misconduct in this action which, itself, would destroy such lien”).[14]

The reasoning behind allowing suspended or disbarred attorneys

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to recover in some circumstances was, in our view, most persuasively discussed in a thoughtful opinion by the New Jersey Supreme Court:

“We are of the opinion that the plaintiff should be permitted to recover in quasi contract for the reasonable value of his services rendered and disbursements made prior to his disbarment, for otherwise the defendant [i.e., client] will be unjustly enriched at the expense of the plaintiff. To deprive an attorney of his claim for any and all compensation for services rendered prior to his disbarment when the services are not involved in the unprofessional conduct occasioning disciplinary action, would be inequitable. There is no sound reason in law or morals for permitting the defendant to use the plaintiff’s disbarment as an escape from paying him for services rendered or necessary disbursements made by him in her behalf. . . . Disbarment is not a form of outlawry. . . . [W]e cannot subscribe to the theory . . . that withdrawal from a suit by reason of disbarment constitutes a voluntary abandonment of the contract without just cause. Such is actually not the fact in those cases. The contract was not voluntarily abandoned, it was automatically terminated by operation of law, when the order of the court made further performance impossible. While the plaintiff was disbarred because of his own wrongful acts, so far as this defendant is concerned he is guiltless. It is pure fiction to say that he has intentionally and without cause abandoned his contract with her . . .” (Emphasis added.)

Stein, 6 N.J. at 527-528 (Vanderbilt, C.J.). What is clear from Stein and the other similarly reasoned cases, however, as noted above, is that there is a necessary condition for recovery of fees, namely, that the unethical conduct resulting in discipline was not related to the case in which the attorney seeks a fee. Although Kerlinsky, P.C., cites and relies on some of these cases allowing recovery by the disciplined attorney, it fails to take into account the critical fact that they are all distinguishable, because here the unethical conduct occasioning the

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discipline was related to, and, indeed, directly affected, the case in which the attorney is attempting to collect fees under the lien.[15]

On the facts of this case, we hold that disbarment or suspension of an attorney for ethical misconduct bars him from recovering compensation for legal services rendered prior to the disciplinary action — whether on a contingent fee agreement, in a quantum meruit action, or in a proceeding to enforce the statutory lien — when the penalized misconduct was (as here) related to the case in which the services were rendered and for which a fee is sought and impaired the value of the client’s cause of action or otherwise imperiled the client’s right to relief. As the SJC observed, Kerlinsky’s misstatements in interrogatory answers in the automobile fire case “were not only inconsistent as between GM and Avis, but they contradicted and jeopardized the theory of Kourouvacilis’s Monson suit,” i.e., this case. Kerlinsky II, 428 Mass. at 662.

Although the record is insufficiently complete to evaluate the merits of Kourouvacilis’s unjust termination claim with any degree of precision,[16] we can confidently conclude that Kourouvacilis was damaged by Kerlinsky’s misconduct in several ways.

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First, she was put to the unanticipated burden of retaining new counsel in mid-stream upon Kerlinsky’s withdrawal, a circumstance that, as a matter of common sense and experience, inevitably results in added transition costs. Moreover, she eventually had to pay combined lawyers’ fees that exhausted sixty percent of her settlement, a far higher share (to the court’s knowledge) than is customary in such cases.[17] Most harmfully, Kerlinsky’s ethical breach provided the defendants with documentation to impeach Kourouvacilis’s credibility on the most critical issue in the case during cross-examination,[18] potentially crippling the likelihood of her recovering a favorable judgment, probably putting her damages demand at serious risk, and almost certainly diminishing the settlement value of her claim.[19]

There is no merit (as the motion judge correctly ruled) in

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Kerlinsky, P.C.’s, repeated assertions that Kerlinsky’s unethical conduct should not be imputed to it, or to Norma Kerlinsky, its sole stockholder, director, and officer, because they could not reasonably have foreseen such “clearly inappropriate” conduct. Under ordinary principles of agency, however, a professional corporation is vicariously liable for the tortious conduct of its employee committed within the scope of his employment. See Bockser v. Dorchester Mut. Fire Ins. Co., 327 Mass. 473, 477 (1951) (“In general, the fraud of an agent acting in the course of his employment is binding upon his principal”); Worcester Ins. Co. v. Fells Acres Day Sch., Inc., 408 Mass. 393, 404 (1990) (“An employer may be held vicariously liable for the intentional tort of an agent if the tortious act or acts were committed within the scope of employment”). See generally G.L. c. 156A, § 6(b); S.J.C. Rule 3:06(3)-(5), as amended, 423 Mass. 1301-1302 (1996). An act is committed in the scope of an agent’s “employment if it is of the kind he is employed to perform, . . . if it occurs substantially within the authorized time and space limits, . . . and if it is motivated, at least in part, by a purpose to serve the employer.” Wang Labs., Inc. v Business Incentives, Inc., 398 Mass. 854, 859 (1986). “The fact that the predominant motive of the agent is to benefit himself does not prevent the act from coming within the scope of employment as long as the act is otherwise within the purview of his authority.” Id. at 859-860.[20]

The record demonstrates that Kerlinsky’s misconduct while representing Kourouvacilis was committed within the normal scope of legal representation. See generally Restatement (Second) of Agency § 228 (1958) (discussing relevant criteria for determining if conduct is within the scope of employment). Advising a client with respect to answering interrogatories is among the most common kinds of service a lawyer engaged in litigation performs. Kerlinsky’s interrogatory misstatements

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were indisputably made during the authorized time, while he was actively engaged in representing Kourouvacilis. We may also infer that his acts were motivated at least in part to serve his firm, Kerlinsky, P.C. Although in retrospect his actions were ill-advised, they may be presumed to have been motivated by a desire to achieve the best financial outcome for his client in both the unlawful termination suit and the automobile fire suit, a pecuniary benefit that would redound directly to Kerlinsky, P.C., particularly on proof of a contingent fee agreement entitling the attorney to a significant percentage of any recovery.[21]

As a final note, we consider peculiarly unpersuasive (indeed, disingenuous) Kerlinsky, P.C.’s, argument that Kerlinsky’s acts were unprecedented and unforeseeable, given his disciplinary history expressly deplored and emphasized by the SJC in 1999 as the basis for the substantial enhancement of his suspension.[22]

Judgment affirmed.

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