Martinez v. Mintz Law Firm, LLC

JUSTICE GABRIEL delivered the Opinion of the Court. ~ {1 This cage presents several novel issues arising from a dispute regarding an attorney's charging lien. After a contingent fee plaintiff's initial attorneys were discharged for cause and replaced by successor counsel, initial counsel asserted a lien against any settlement or judgment entered in the underlying action and in favor of the plaintiff, The underlying action was subsequently settled, and successor counsel filed a motion to void the lien. Initial counsel responded by moving to strike successor counsel's motion and to compel arbitration, based on an arbitration clause contained in initial counsel's contingent fee agreement with the plaintiff. T2 The district court ultimately concluded that this dispute was between initial and successor counsel, and thus, the arbitration clause contained in initial counsel's contingent fee agreement with the plaintiff did not apply. Having thus determined that the matter was properly before it, the court proceeded to determine whether initial counsel was entitled to any of the fees that itrwas seeking to recover, The court concluded that initial counsel was not. entitled to such fees because it had been discharged for cause, and under the express terms of the contingent fee agreement, it had forfelted the fight to those fees. ~ 3 Initial counsel appealed, and a division of the court of appeals reversed, Martinez v, Mintz, No, 12CA1878, slip op. at 10, 2013 WL 6163635 (Colo. App. Nov. 21, 2018). As pertinent here, the division concluded that the present dispute was between initial counsel and the plaintiff, Id. at 6, Accordingly, the division concluded that the matter was subject to arbitration and that the district court had erred in denying initial counsel's motion to compel arbitration and in ruling on the merits of the issues presented. Id, at 8-9. T4 We granted certiorari and now reverse.1 We conclude that successor counsel's motion to void the lien at issue was properly filed in the underlying action and that the underlying action was a "proper civil action" within the meaning of section 12-5-119, C.R.S. (2015), In light of this determination, we further conclude that the lien dispute was between initial and successor counsel and that therefore, the matter (1) was not subject to arbitration. pursuant to the arbitration clause in initial counsel's contingent fee agreement with the plaintiff and (2) was properly before the district court. Finally, we conclude that the record supports the district court's finding that initial counsel was not entitled to recover the fees that it was seeking, 15 Accordingly, we reverse the Judgment of the court of appeals and remand this case for further proceedings consistent with this opinion. I. Facts and Procedural History T6 After April Martinez fell in a stairwell at her apartment complex and injured her knee, she hired the respondents, Mints Law Firm, LLC and Eric Krajewski (collectively, "Mintz"), to represent her in a personal injury action. April later died from pulmonary — 673 — emboli that had formed in her leg and moved into her lung. . T7 Thereafter, April's mother, petitioner Ramona Martinez ("Ms. Martinez"), retained Mintz to pursue a wrongful death action against the apartment complex, and Ms. Martinez and Mintz entered into a contingent fee agreement (the "Mintz-Martinez. Agreement") to document the engagement. As pertinent here, this agreement entitled Mintz to 33-1/8% of the gross recovery collected if the matter settled out of court, The agreement further provided, "In the event the Client terminates this contingent fee agreement without wrongful conduct by the Attorney which would ecause the Attorney to forfeit any fee," Mintz could ask the court to order Ms. Martinez to pay a fee based on the reasonable value of the services that Mintz had provided. And the agreement stated, "In the event of a dispute between Attorney and Client concerning any aspect of the Attorney/Client relationship including controversies over Attorney's fees,... said dispute shall be submitted to final and binding arbitration pursuant to the Uniform Arbitration Act of 1975 as adopted by Colorado.. T8 Prior to filing a lawsuit on Ms. Martinez's behalf, Mintz received a $100,000 settlement offer from the apartment complex, but Mintz rejected that offer by making an $850,000 written counteroffer. (Ms. Martinez later testified that Mintz had rejected the offer without her authority.). T9 The apartment complex did not accept the counteroffer, and after a lengthy delay, Mintz filed a wrongful death action on Ms: Martinez's behalf against the complex. Several days later, however, Ms. Martinez discharged Mintz and hired petitioner Stevens Law Offices ("Stevens") to represent her. Stevens notified Mintz in writing of Ms. Martinez's decision, after which Mintz filed a notice of lien on any settlement or judgment entered in the wrongful death case and in favor of Ms. Martinez. The claimed lien was in the amount of $83,338.83 in attorney fees and $1,530.21 in costs. The fee amount was based on the $100,000 offer that Mintz had previously rejected. 10 Stevens proceeded to 11t1gate Ms. Martinez's wrongful death action and ultimately settled it for $110,000. Upon receipt of the settlement funds, Stevens deposited its 40% contractually agreed 'upon contingency fee into its trust account and disbursed the remaining 60%, less costs, to Ms. Martinez. "fii Thereafter, Stevens filed a motion in the underlying wrongful death action to void Mintz's attorney's lien. In response, Mintz filed a "Motion to Compel Arbitration and Motion to Strike Motion to Void Attorney's Lien." In these motions, Mintz argued that Stevens did not have standing to move to void the lien because the instant dispute was between Mintz and Ms,. Martinez and not between Mintz and Stevens, Mintz further asserted that the dispute was subject to the arbitration clause in the Mintz-Martinesz Agreement and that even if Stevens' motion were amended to substitute Ms. Martinez as the movant, the court "must refer the dispute to arbitration as required by the contract and applicable Colorado law.": # T 12 The district court denied Mintz's' motions. The court noted that Mintz purported to hold an enforceable lien against all third parties, including Stevens. Thus, Stevens had standing to challenge the lien. In addition, the court found that the Mintz-Martinesz Agréement did not purport to bind anyone other than Mintz and Ms. Martinez, and therefore, the arbitration clause did not apply to the present dispute. The court thus concluded that it had jurisdiction and ordered Mintz to file a response to Stevens' motion to void Mintz's attorney's lien. 1 13 The matter proceeded to an evidentia-ry hearmg after which the court reaffirmed its prior ruling that because the dispute was not between Ms, Martinez and Mintz, it was not subject to the arbitration clause. In addition, the court found that Mintz had been terminated for cause, and therefore, under the terms of the Mintz-Martinez Agreement, Mintz had forfeited any entitlement to attorney fees. Finally, the court found that Mintz's lien on the settlement funds held by Stevens was frivolous, and the court awarded Stevens fees and costs. 14 Mintz appealed, and a division of the: court of appeals reversed. Martinez, slip op. at 10. As pertinent here, the division conclud — 674 — ed, contrary to the district court, that the dispute over the funds at issue was between Mintz and Ms. Martinez and not between Mintz and Stevens. Id, at 6, The division thus concluded that the arbitration clause of the Mintz-Martinez Agreement continued to apply and that "any issues regarding the reasonableness of the agreement and whether Mintz had forfeited its fee or had been terminated for cause were matters for the arbitrator." Id, at 8-9. 15 We subséquently granted Ms. Martinez's and Stevens' petition for certiorari. II. Analysis {16 Because the issue implicates the district court's jurisdiction to hear the current dispute, we first address whether the division erred in reversing the district court's denial of Mintz's motion to compel arbitration. We conclude that the district court correctly found that the dispute at issue was between Mintz and Stevens and not between Mintz and Ms. Martinez and that therefore, the arbitration clause in the Mintz-Martinez Agreement did not apply. We then address whether Ms. Martinez was personally liable to Mintz for the reasonable value of the services that it rendered under the Mintz-Martinez Agreement when, as here, Stevens received the full contingency fee. We conclude that because Mintz was discharged for cause, under the terms of the Mintz-Mar-tinez Agreement, it was not entitled to fees,. A. Standard of Review +117 We review de novo the district court's decision on a motion to compel arbitration, employing the same standards that the district court employed. Lujan v. Life Care Ctrs. of Am., 222 P.3d 970, 972 (Colo.App.2009). Similarly, to the extent that Stevens' contentions require us to construe seetion 12-5-119, we construe those contentions de novo. See Klingsheim v. Cordell, 2016 CO 18, ¶ 14, - P.3d -("Statutory interpretation is a question of law that we review de novo."). And to the extent that Stevens' contentions implicate the district court's factual findings, we review such findings for clear error or an abuse of discretion, and we will not disturb those findings unless they are unsupported by the record. See In re Marriage of de Koning, 2016 CO 2, ¶ 17, 364 P.3d 494, 496; Page v. Clark, 197 Colo. 306, 592 P.2d 792, 796 (1979). B. Motion to Compel Arbitration 118 Stevens contends that the division erred in reversing the district court's denial of Mintz's motion to compel arbitration and its award of attorney fees and costs to Stevens. We agree. e 1 19 As noted above, the division concluded that the present dispute is, in substance, between Mintz and Ms. Martinez, Martinez, slip op. at 6. Based on that premise, the division concluded that the arbitration clause contained in the Mintz-Martinez Agreement controls. Id. at 8-9. We respectfully disagree with the division's premise. T20 The lien at issue was asserted against any settlement or judgment entered in the wrongful death action and in favor of Ms. Martinez, and as noted above, Stevens held funds subject to the lien and was entitled to some portion of those funds. See Gold v. Duncan Ostrander & Dingess, P.C., 143 P.3d 1192, 1193 (Colo.App.2006) ("An attorney's lien attaches automatically to any monies or property due or owing to the client on any underlying judgment the attorney may have obtained or assisted in obtaining to the extent of the attorney's reasonable fees remaining due and unpaid."). Because the lien effectively froze assets that Stevens believed belonged to it, Stevens had standing to contest that lien. See Wainscott v. Centura Health Corp., 2014 COA 105, ¶¶ 12-21, 351 P.3d 513, 518-19 (concluding that the plaintiffs had standing to contest a. lien against settlement funds to which they had a claim). 121 The question this becomes whether Stevens properly filed its motion to void the lien in the present case. If it did, then the dispute, on its face, would be between Mintz and Stevens and not between Mintz and Ms. Martinez. See Law Offices of J.E. Losavio, Jr. v. Law Firm of Michael W. McDivitt, P.C., 865 P.2d 934, 935-37 (Colo.App.19983) (noting that "[iIn the case of a dispute between attorneys, it is of no consequence that the client is the primary beneficiary of the — 675 — legal services"). If, conversely, only Mintz or Ms. Martinez could properly take action to enforee or contest the lien, then the dispute would arguably be between them. We conclude that Stevens properly filed 1ts motion in this case. 122 Section 12-5-119 concerns attorney's Hens like that at issue here and prowdes, pertinent part: All attorneys- and counselors-at-law shall have a lien on any money, property, choses in action, or claims and demands in their hands, on any judgment they may have obtained or assisted in obtaining, in whole or in part, and on any and all claims and demands in suit for any fees or balance of fees due or to become due from any client. In the case of demands in suit and in the case of judgments obtained in whole or in part by any attorney, such attorney may file, with the clerk of the court wherein such cause is pending, notice of his claim as lHenor, setting forth specifically the agreement of compensation between such attorney and his client, which notice, duly entered of record, shall be notice to all persons and to all parties, including the judgment creditor, to all persons in the case against whom a demand exists, and to all persons claiming by, through, or under any person having a demand in suit or having obtained a judgment that the attorney whose appearance is thus entered has a first lien on such demand in suit or on such judgment for the amount of his fees.... Buch lien may be enforced by the proper civil action. (emphasis added); see also In re Ranes, 31 B.R. 70, 72 (Bankr.D.Colo,1988) (noting that a charging lien attaches immediately upon the obtaining of a judgment and that if the attorney files a notice with the court, then the lien becomes enforceable against third parties). 1 23 Section 12-5-119 does not specify the procedure for enforcing an attorney's len. See Gold, 148 P.3d at 1193. We have long held, however, that such a lien may be enforced either in an independent action or in the action in which the attorney performed the services. Gee v. Crabtree, 192 Colo. 550, 560 P.2d 835, 836 (Colo.1977). 1.24 In light of the foregoing, it is indisputable that an attorney can enforce his or her own lien in the underlying civil action. The question presented here is whether an attorney who holds funds against which another attorney's charging lien is asserted can challenge the lien by filing a motion in that action, We conclude that the objecting attorney can do so.. 1 25 Although no published Colorado state appellate case appears to have addressed this issue, the United States District Court for the District of Colorado addressed a substantially similar question in Dietz v. University of Denver, Nos. 95-cv-02756-WDM-OES, 97-cv-00897-WDM-OES, 2011 WL 723118 (D. Colo. Feb. 22, 2011). € 26 In Dietz, 2011 WL 723118, at *1, the plaintiff retained attorney Johnson to handle the plaintiff's discrimination lawsuit against the University of Denver, After Johnson had billed substantial time on the case, she was allowed to withdraw and then filed a notice of attorney's lien for the amount of fees and costs that she claimed the plaintiff owed her. Id. at *4-5. On, the same day, successor counsel entered its appearance on the plaintiffs behalf, Id. at *5. 127 Subsequently, the parties settled the underlying lawsuit, and they stipulated that they would deposit the settlement funds into the court's registry,, to allow the plaintiff to contest the validity or reasonableness of Johnson's lien. Id, «I 28 Thereafter, the plaintiff? moved to dismiss Johnson's lien, arguing that Johnson's billing 'was "outrageous" 'and that the lien was "an abuse of process and frivolous." Id, The matter was referred to a magistrate judge for a ruling or recommendation, and the magistrate judge ultimately denied the motion and awarded Johnson the amount of her lien claim plus accrued interest. Id. at *5-6, The plaintiff then filed with the district court an objection to the magistrate judge's ruling. Id, at *7. 129 As pertinent here, the district court began its analysis by noting that to enforce a lien, the lien claimant must bring a "proper civil action." Id. at *10 (quoting § 12-5-119). The court thus addressed first whether this — 676 — statutory prerequisite was satisfied in the case before it, notwithstanding the fact that Johnson had not filed a motion in the present ease or a separate civil action to enforce her lien, Id, The court concluded that the "proper civil action" requirement was sat1sf1ed 0pm-ing: [The client's motion to dismiss the lien claim put the enforcement of the lien claim at issue to the same effect as if the claimant had moved to reduce the lien to judgment in the civil action that gave rise to the lien claim, and therefore, constitutes a "proper civil action" under.$ 12-5-119. Id. at #11." 30 For several reasons, we are persuaded by this analysis. .T81 First, the Diets court's analysis is consistent with the express language of seetion 12-5-119. That statute does not say that the lien claimant must file a particular form of motion or action to enforce its Hen. Nor does it preclude a client or third party from raising the hen s enforceabfllty 'by way of an objection or motion in the underlying civil action. Accordingly, whether the lien's enforceability is raised by the claimant's motion, a third party's motion or objection, or a separate civil action, the court is being asked to address the lien's enforceability in a proper 'civil action (Le., an action in which all interested parties are given notice and an opportunity to be heard). In our view, to hold otherwise (e.g., by requiring a lien claimant to file its own motion or separate action, even when another party has already initiated a challenge to the claimant's lien) would elevate form over substance and would serve no useful purpose. , A1 82 Second, we perceive no basis for distinguishing Dietz based on which party objected to the Hien, Whether it was the lien claimant's client (as in Dietz) or successor counsel who is holding funds against which a lien is asserted (as here), the objection to the lien placed at issue the enforceability of that lien. 383 Third, allowing a successor attorney to challenge a prior attorney's charging lien in the underlying action promotes judicial efficiency and economy by (1) allowing the affected parties to resolve the issue in the present case rather than -in-a separate action and (2) ensuring that the judge most knowledgeable about the issue (Le., the judge who tried the case) can rule on the matter, See Gee, 560 P.2d at 836 ("To restrict the means of enforcement of an attorney's lien [slolely to independent civil actions would be a waste of judicial time, as well as contrary to the legislative intent reflected by the statutory language, The trial judge who heard the proceedings which gave rise to the lien is in a position. to deterrmne whether the amount asserted as a lien is proper and can determine the means for the, enforcement of the Ten."), | 34 Fourth we note that Mintz has not argued that it was improper for Stevens to proceed by motion (Mintz argued lack of jurisdiction based on the arbitration clause and Stevens' alleged lack of standing). Nor have we seen any applicable authority suggesting that such a motion was improper. To the contrary, in cases in which parties like Stevens have moved to strike lien notices, we have not questioned the propriety of such motions. See, e.g., Dudding v. Norton Frickey & Assocs., 11 P.3d 441, 444 (Colo.2000). 1 35 For all of these reasons, we conclude that Stevens properly filed its motion to void Mintz's lien in this case. As a result, we further 'conclude that the lien dispute was between Mintz and Stevens and not between Mintz and Ms. Martinez. Accordingly, the arbitration clause contained in the Mintz-Martinez Agreement was inapplicable, and the district court properly denied Mintz's motion to compel arbitration and proceeded to address the merits of the issues presented. C. Mintz's Entitlement to Fees: from Ms. Martinez 186 Having concluded that the district court had jurisdiction to hear the present dispute, we next address Mintz's contention that Ms. Martinez was personally liable to it for the reasonable value of the services that it had provided. Like the district court, we reject this contention. - T37 The Mmtz—Martmez Agreement stated, in pertinent part, "In the event the Client terminates this contingent fee agreement — 677 — without wrongful conduct by the Attorney which could cause the Attorney to forfeit any fee," Mintz could ask the court to order Ms. Martinez to pay it a fee based on the reasonable value of the semces that it had provided. - 1138 The district court found, with ample record support, that Mintz was not entitled to any such fee because (1) Ms. Martinez terminated Mintz's representation for cause and (2) "[nljone of [Ms. Martinez's ultimate] recovery was primarily based on the Mintz Law Firm's efforts." Specifically, the evidence showed, among other things, that (1) in December 2009, Ms. Martinez had hired Mintz to represent her, but no complaint was filed in her case until October 2010; (2) Mintz's complaint named the wrong defendant and contained claims that were dismissed because they were invalid; (8) Mintz did not keep Ms. Martinez informed about her case, did not advise her regarding settlement offers or how the legal process worked, and generally failed to communicate with her; (4) Mintz did not advise Ms. Martinez regarding the initial $100,000 offer to settle "the wrongful death action, and Ms. Martinez did not authorize Mintz to reject that offer or to make an $850,000 counteroffer, which a lawyer working for Stevens . described as "ridiculous" and “completely out of the ballpark," given apphcable damages Timits; and (5) Mintg's. bfllmg records indicated that dur— ing the approximately ten months of its representation, it billed just under 4.5 hours for work performed, compared 'with the over 350 hours that Stevens had devoted to Ms, Martinez's case during the course of its representation. 11 39 Accordingly, we conclude that the ree-ord amply supports the district court's findings that Mintz was discharged for cause and that none of Ms. Martinez's ultimate recovery was based primarily on Mintz's efforts, and we will not disturb those findings on review. See In re Marriage of de Koning, ¶ 17, 364 P.3d at 496; Page, 592 P.2d at 796. As a result, under the express terms of the Mintz-Martinez Agreement, Mintz was not entitled to fees, and therefore, Ms. Martinez was not personally liable to Mintz. ~ D. Other Issues - - 140 In light of our foregoing determinations, we need not address Stevens' remaining and alternative arguments, including its assertions that (1) we should adopt a "one-fee" rule for apportioning contmgency fees among the attorneys who had contributed to the recovery and (2) the Mintz-Martinez Agreement was unenforceable for failing to comply with C.R.C.P. ch. 28.3. HL Concluéion '{41 For these reasons, we reverse the judgment of the court of appeals and remand this case for further proceedings consistent with this op1n10n JUSTICE COATS dissents, and J USTICE EED joins in the dissent. JUSTICE MARQUEZ and JUSTICE HOOD do not participate. Footnotes [1] We granted certlorarl to rev1ew the followmg issues: 1. Whether a client is personally liable to a discharged attorney for the reasonable value of services rendered under a contingency fee agreement when a successor attorney received the full contingency fee. *2,. Whether the court of appeals erred by re'versing the trial court's denial of respondent's motion to compel arbitration and its award of attorney's fees=and costs to petitioner. 3. Whether the court of appeals erred by failing to address the appellees' arguments that the arbitration clause was inapplicable 'because the coritingent fee agreement was ~ unenforcéable and void for fallure to comply with C.R.C,P. ch, 23.3. , ~