BENCHMARK CONSULTING, INC

v.

USAA CASUALTY INSURANCE COMPANY

Before the Court are the Plaintiff’s Amended Motion to Strike and/or Discharge Kovar Law Group’s [KLG] Charging Lien (Doc. 37); KLG’s Motion to Enforce Charging Lien (Doc. 39); and the responses in opposition to same (Docs. 38, 40, 41).1 For the reasons discussed below, the Plaintiff’s motion is granted in part, and KLG’s motion is denied.

I.

In November 2018, Plaintiff Benchmark Consulting Inc., doing business as Castle Roofing and Construction (Castle), initiated this action in state court against

Roughly one week prior to Saval’s withdrawal, KLG filed a Notice of Attorney’s Charging Lien, claiming that it had not received full payment from Castle for the legal services it had rendered and the costs it had advanced. (Doc. 13). The Notice further stated: By filing and service of this Notice of Attorney’s Charging Lien in this case, [KLG] places CASTLE, its current legal counsel, the Defendant, and its legal counsel on notice of [KLG’s] claim of charging lien, and requests that [KLG] be advised of any settlement, trial, or judgment. Additionally, [KLG] requests that the Court reserve jurisdiction in any final judgment entered to adjudicate the amount of [KLG’s] charging lien. No distribution of any such recovery should be made without satisfying the foregoing lien. . . .

Id. at 3 (emphasis in original). In late September 2019, Castle—through its new counsel, Smith Thompson— filed a notice advising the Court that it had settled its dispute with USAA and requested that the “Court retain original jurisdiction to resolve any issues with respect to the pending charging lien filed by” KLG. (Doc. 23). Based on that notice, the Court entered an Order dismissing the case without prejudice and affording the parties the right either to re-open the action within sixty days upon a showing of good cause, or to submit a stipulated form of final judgment. (Doc. 24). The Court’s Order, however, did not explicitly address or retain jurisdiction as to the matter of KLG’s charging lien. During the ensuing sixty-day period, Castle and USAA worked to finalize and execute their settlement agreement. (Doc. 82 at 3). In early October 2019, while Castle and USAA were preparing the release documents in connection with their settlement, Saval informed USAA’s counsel in writing that: (1) KLG objected to any settlement that did not include its attorney’s fees and costs being paid in full; (2) KLG’s incurred attorney’s fees and costs were $9,348.50 and $430.55, respectively; and (3) KLG would accept the sum of $9,029.05 as full satisfaction of its charging lien. Id. USAA did not respond to KLG’s correspondence. Id. Two weeks later, Castle and USAA signed their settlement agreement, which provided that USAA would pay Castle $100,000 for a release of any and all claims, including attorney’s fees, costs, and extra-contractual damages. Id. at 4. The agreement required USAA to pay $85,000 of the $100,000 figure to Castle and the remaining $15,000 to Smith Thompson and KLG to cover all attorney’s fees and costs owed to these two law firms, including those reflected in KLG’s charging lien. Id. The agreement also stated that Castle would indemnify and hold USAA harmless for any and all claims relating to such fees and costs. Id.

In late November 2019, Castle moved to re-open the case for purposes of either striking or discharging KLG’s charging lien. (Doc. 27). KLG opposed Castle’s motion as premature (Doc. 28), and, following a hearing on the matter, the Court denied the motion without prejudice and directed the parties to confer in an effort to resolve their fee dispute (Doc. 36). When Castle and KLG were unable to reach such a resolution, the Court scheduled an evidentiary hearing on the matter in late June 2020. Two weeks prior to that proceeding, the Court conducted a pre-hearing conference, at which the parties agreed to USAA’s dismissal from the case in light of its tender of the above described settlement amounts. (Doc. 76). KLG also agreed at the conference to file amended exhibit and witness lists to ensure that its evidence was not cumulative. In addition, the day before the hearing, the parties filed a joint statement of agreed-upon facts (Doc. 82), as well as a stipulation waiving any attorney-client privilege and confidentiality concerns related to their dispute (Doc. 83). At the hearing, KLG called its owner and principal, Jeremy “Jay” Kovar, who testified to, inter alia, his law firm’s fee agreement with Castle, the type of work KLG performed for Castle, and the reasons KLG withdrew from representing Castle in this action. (Doc. 87). Upon the completion of Kovar’s testimony, the parties stipulated that KLG’s remaining witness, Austin Fowler (who is an employee at KLG) would corroborate Kovar’s testimony relative to KLG and Castle’s fee arrangement. Id. In addition to this testimony, the parties admitted a total of twenty-one exhibits (Docs.

85, 86), including emails sent by KLG to Castle’s owner, James Lathrop, regarding KLG’s termination of its relationship with Castle. The Court has carefully reviewed the evidence tendered at the hearing as well as the parties’ submissions, and the matter is now ripe for resolution.

II.

A. The Court has supplemental jurisdiction over this charging lien matter pursuant to 28 U.S.C. § 1367(a). See Shackleford v. Sailor's Wharf, Inc., 770 F. App’x 447, 449, n.1 (11th Cir. 2019) (per curiam) (finding the district court had supplemental jurisdiction over a charging lien following the conclusion of the underlying admiralty action); Moreno Farms, Inc. v. Tomato Thyme Corp., 490 F. App’x 187, 188 (11th Cir. 2012) (per curiam) (noting that the “existence of an attorney’s lien against a party’s recovery in a lawsuit is part of the same case or controversy as the underlying lawsuit”) (citations omitted). In adjudicating attorney charging liens, the federal courts apply the law of their home state. See Buckley Towers Condo., Inc. v. Katzman Garfinkel Rosenbaum, LLP, 519

F. App’x 657, 660 (11th Cir. 2013) (per curiam); In re Washington, 242 F. 3d 1320, 1322- 23 (11th Cir. 2001) (per curiam). Under Florida law, the “preferred method” of enforcing an attorney’s charging lien is through a summary proceeding. Daniel Mones, P.A. v. Smith, 486 So. 2d 559, 561 (Fla. 1986); see also New Eng. Mut. Life Ins. Co. v. Podhurst, Orseck, Josefsberg, Eaton, Meadow, Olin & Perwin, P.A., 690 So. 2d 1354, 1356 (Fla. Dist. Ct. App. 1997) (“A summary proceeding represents a speedy and simple method to set the amount of the charging lien.”). A product of Florida common law, summary proceedings are equitable in nature, Nichols v. Korelinger, 46 So. 2d 722, 724 (Fla. 1950), and are subject to a well-developed body of case authority, Sinclair, Louis, Siegel, Heath, Nussbaum & Zavertnik, P.A. v. Baucom, 428 So. 2d 1383, 1384-85 (Fla. 1983); see also Austin Laurato, P.A. v. United States, 539 F. App’x 957, 961 (11th Cir. 2013) (per curiam) (“The requirements for imposing an attorney’s charging lien are not codified in a Florida statute, but rather are governed by case law.”) (citing Smith,

486 So. 2d at 561). Given their equitable character, there is no right to a jury trial in such proceedings. See Hard Candy, LLC v. Anastasia Beverly Hills, Inc., 921 F. 3d 1343, 1352 (11th Cir. 2019).

B.

An attorney seeking to impose a charging lien must show: (1) there was an express or implied contract between the attorney and the client; (2) the parties had an express or implied understanding that the attorney’s fees would be paid out of the recovery; (3) that the client avoided making payment or there was a dispute as to the amount of the fees; and (4) the attorney provided timely notice of his charging lien claim.² Smith, 486 So. 2d at 561; Baucom, 428 So. 2d at 1385.

1. Express or Implied Contract between KLG and Castle

According to Kovar’s testimony (and as the parties stipulate), KLG began representing Castle in insurance-related matters in approximately 2017 or 2018 pursuant to an oral contingency fee agreement. (Docs. 82, 87). Under that arrangement, rather than collect its attorney’s fees and costs directly from Castle, KLG maintained a record of the time it expended on each case and recouped its fees and costs from the insurer pursuant to Florida Statute § 627.428. That statute requires an insurer to pay the insured “a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit” when the insured obtains a judgment or decree against the insurer. Fla. Stat. § 627.428(1). In instances where Castle settled with the insurer, the parties negotiated the reasonable fees and costs owed to KLG as part of the parties’ resolution of the matter. According to Kovar, Castle never paid KLG’s attorney’s fees, nor did KLG ever receive fees where it did not obtain a favorable outcome for Castle. The problem with this arrangement, as Kovar candidly acknowledged during his testimony, is that an oral contingency fee agreement violates Rule 4-1.5 of the Rules Regulating the Florida Bar. Rule 4-1.5 requires that contingency fee agreements be: (1) reduced to writing; (2) signed by the client; and (3) executed by a lawyer for the lawyer or for the law firm representing the client. Rule 4-1.5(f)(2), Rules Regulating the Florida Bar. Castle contends that KLG’s admitted violation of this rule means that its oral fee agreement is void and unenforceable. While KLG concedes the oral agreement is a nullity, it asserts that it may still prevail on its charging lien under the theory of quantum meruit. (Doc. 87 at 38). Both parties rely on the Florida Supreme Court’s decision in Chandris, S.A. v. Yanakakis, 668 So. 2d 180 (Fla. 1995) in support of their respective positions. In Chandris, the court held that “a contingent fee contract entered into by a member of The Florida Bar must comply with the rule governing contingent fees in order to be enforceable.” 668 So. 2d at 185-86. Applying a prior version of Florida’s Code of Professional Responsibility, id. at 185 n.3, the court reasoned that the requirements for contingency fee contracts “are necessary to protect the public interest” and are thus “not enforceable by the member of The Florida Bar who has violated the rule,” id. at 185-86. The court added, however, that “[e]ven though a member of The Florida Bar cannot claim fees based upon a noncomplying agreement, the attorney would still be entitled to the reasonable value of his or her services on the basis of quantum meruit.” Id. at 186 n.4 (citing Rosenberg v. Levin, 409 So. 2d 1016 (Fla. 1982)); see also Lackey v. Bridgestone/Firestone, Inc., 855 So. 2d 1186, 1188 (Fla. Dist. Ct. App. 2003) (noting that, under Florida law, an attorney who has no contingent fee agreement with a client may still recover on a quantum meruit basis) (citations omitted); King v. Young, Berkman, Berman & Karpf, P.A., 709 So. 2d 572, 574 (Fla. Dist. Ct. App. 1998) (per curiam) (finding that when a fee agreement between attorney and client is void because it fails to comply with the Rules Regulating the Florida Bar, the attorney is still entitled to recover on the basis of quantum meruit), review denied, 725 So. 2d 1111 (Fla.); Salter v. St. Jean, 170 So. 2d 94, 95-96 (Fla. Dist. Ct. App. 1964) (per curiam) (observing in dicta that, even where a fee agreement is void, an attorney is still allowed a fee based on quantum meruit). Admittedly, Chandris was not a charging lien dispute but rather stemmed from a tortious interference with business relations case. Yanakakis v. Chandris, S.A., 9 F. 3d 1509, 1510 (11th Cir. 1993), certified question answered, 668 So. 2d 180 (Fla. 1995). That said, while there is no binding authority directly addressing the issue, the general propositions espoused in Chandris have been applied to charging lien disputes. See, e.g., Everett v. City of St. Petersburg, 2017 WL 1434785, at *5 (M.D. Fla. Apr. 24, 2017) (finding charging lien enforceable despite the fact that the fee agreement at issue did not satisfy Rule 4-1.5, noting the Rule “is not inconsistent with the holding in Chandris that an attorney seeking fees who has a noncomplying agreement must pursue the claim on a quantum meruit theory”). A party seeking to recover in quantum meruit must show that it had an implied contract with the party for whom it performed services. See 14th & Heinberg, LLC v. Terhaar & Cronley Gen. Contractors, Inc., 43 So. 3d 877, 881 n.1 (Fla. Dist. Ct. App. 2010); Corn v. Greco, 694 So. 2d 833, 834 (Fla. Dist. Ct. App. 1997) (per curiam) (“Quantum meruit relief is founded upon the legal fiction of an implied contract.”). A contract implied in fact “exists where the parties have made an agreement of sorts which falls short of being an enforceable, true contract.” 14th & Heinberg, 43 So. 3d at 881 n.1; see also Commerce P'ship 8098 Ltd. P'ship v. Equity Contracting Co., 695 So. 2d 383, 386 (Fla. Dist. Ct. App. 1997) (en banc), as modified on clarification (June⁴, 1997). As one court observed: Common examples of contracts implied in fact are where a person performs services at another's request, or where services are rendered by one person for another without his expressed request, but with his knowledge, and under circumstances fairly raising the presumption that the parties understood and intended that compensation was to be paid. In these circumstances, the law implies the promise to pay a reasonable amount for the services.

Equity Contracting Co., 695 So. 2d at 386 (internal citations and quotation marks omitted).

Here, Castle does not present, nor does the Court find, any reason to believe that KLG did not have an implied contract with Castle for the payment of the services it rendered to Castle. Thus, the Court finds that KLG has satisfied the requirement of an express or implied contract between it and Castle.³ 2. Express or Implied Understanding KLG’s Fees to be Paid Out of Castle’s Recovery On the question of whether there was an express or implied understanding for payment of attorney’s fees out of Castle’s recovery, KLG and Castle again diverge.

This time, however, Castle has the better argument. As both sides acknowledge, the law in Florida has long been that an attorney’s voluntary withdrawal from representation before the occurrence of the contingency contemplated by the parties’ agreement forfeits that attorney’s claim to compensation. Faro v. Romani, 641 So. 2d 69, 71 (Fla. 1994). In recognition, however, that withdrawal is not always an attorney’s choice but his duty to the court, the Supreme Court of Florida has carved out exceptions to this general rule where the client's conduct would make “the attorney’s continued performance of the contract either legally impossible or would cause the attorney to violate an ethical rule of the Rules

Regulating The Florida Bar.” Id. Under such circumstances, “th[e] attorney may be entitled to a fee when the contingency of an award occurs.” Id.; see also DePena v. Cruz, 884 So. 2d 1062, 1063-64 (Fla. Dist. Ct. App. 2004).

(Doc. 85-1) (emphasis added).

In a subsequent email sent approximately twelve minutes later under the same subject line, Kovar advised Lathrop, among other things, that he (Kovar) had been

Dean Makris, Michael Germain, Harvey Cohen, Steve Batisti, Guy Gilbert, and Mark Nation all do this kind of work.

We will be placing fee liens for the work we have already done on every case.

Do not contact me, do not contact my firm or any of my employees, unless it is about transferring your cases to a new firm.

(Doc. 85-4); see also (Doc. 82 at 2).

At the hearing, Kovar testified that he did not instruct Firlik to convey the message in the first of these emails, and that the “irreconcilable differences” to which he referred in the last email pertained to an ethical conflict, which prevented KLG from continuing to serve as Castle’s counsel. (Doc. 39 at 10; Doc. 87). Regarding the ethical conflict, Kovar explained that KLG became aware that Castle was using the firm’s services to commit insurance fraud and decided it could no longer represent the company under Rule 4-1.16(a)(4) of the Rules Regulating the Florida Bar. That rule provides that an attorney must terminate his representation of a client if “the client

As for the second reason, it is not sufficiently supported by the evidence. To begin, there is no indication that Castle’s alleged fraud involving the waiving of deductibles and the claiming of non-existent interior work was present in the instant case. Moreover, the evidentiary weight of the above contemporaneous emails between KLG and Castle on the matter of KLG’s withdrawal overcomes whatever persuasive value Kovar’s testimony may have. As such, the Court finds that KLG fails to meet its burden of demonstrating that its withdrawal was involuntary. Because KLG terminated its representation of Castle before the settlement occurred (i.e., the contingency), KLG forfeited its claim to compensation. Faro, 641 So. 2d at 71.6

C.

Even assuming arguendo that KLG satisfies all four of the above requirements for a charging lien, it fails to provide evidence upon which the Court can base a quantum meruit award predicated on the theory that it was constructively discharged by Castle due to the above ethical conflict. It is well settled that an attorney who performed services on behalf of a client on a contingency fee basis and who is discharged before the contingency is accomplished may recover for services only in quantum meruit. Sohn v. Brockington, 371 So. 2d 1089, 1093 (Fla. Dist. Ct. App. 1979). If the discharge was without cause, the compensation to which the attorney is entitled is the reasonable value of the services rendered not to exceed the maximum amount set forth in the fee agreement. Rosenberg, 409 So. 2d at 1021; see also Everett, 2017 WL 1434785, at *3 (citing Kushner v. Engelberg, Cantor & Leone, P.A., 699 So. 2d 850, 851 (Fla. Dist. Ct. App. 1997); Searcy, Denney, Scarola, Barnhart & Shipley, P.A. v. Scheller, 629 So. 2d 947, 954-55 (Fla. Dist. Ct. App. 1993)). The reasonable value of the services is based on the “lodestar”

III.

Accordingly, in light of the above, it is hereby ORDERED: 1. PlaintifPs Amended Motion to Strike and/or Discharge Kovar Law Group’s Charging Lien (Doc. 37) is granted to the extent that KLG’s charging lien (Doc. 13) is discharged; and 2. Kovar Law Group’s Motion to Enforce Charging Lien (Doc. 39) is denied. DONE and ORDERED in Tampa, Florida, this 24th day of September 2020. UNitebodio Act.

HONORABLE CHRISTOPHER P. TUITE

United States Magistrate Judge

Copies to: Counsel of record