Facts

Plaintiff Rufus Rhoades, a tax and business attorney, and defendant William Lansdale, a businessman and investor, had a 40-year attorney-client relationship.

Rhoades was Lansdale's attorney on a wide range of business, tax and corporate matters.

Over the years, Rhoades relied on Lansdale to pay his attorney fees on an informal basis and did not send Lansdale invoices for his legal work. Initially, there was no problem. Lansdale paid Rhoades periodically in the 1970s through the early 1980s for his legal work. After that, however, Lansdale did not pay Rhoades for his legal work.

On Dec. 22, 2005, Rhoades and Lansdale worked out a written agreement in which Lansdale would pay Rhoades for more than 20 years of past legal work, and for certain current and future legal work.

The total amount of the legal fees that Lansdale promised to pay was $3 million, payable in three payments due upon the occurrence of certain events, including the sale of real estate and the payment of certain increased "assignment" fees that homeowners at Lansdale's condominium project were supposed to pay to Lansdale's Southern California Financial Corporation ("SCFC"). The first $500,000 of the $3 million was to be paid to Rhoades when the U.S. Government paid Lansdale for the condemnation of real property Lansdale owned in Seal Beach.

The second payment of $500,000 and the final payment of $2 million had to be paid to Rhoades when Lansdale started receiving increased assignment fees from the homeowners at the Marina Pacifica condominiums in Long Beach.

Lansdale did not pay Rhoades the $500,000 when Lansdale received the money from the U.S. Government for condemnation of the Seal Beach property and thereafter did not pay Rhoades the $500,000 in installments or the $2 million following his receipt of the homeowner assignment fees.

Rhoades tried to negotiate with Lansdale for payment of the fees over several years, but Lansdale refused to pay, arguing that the amount of money he received from the Government on the condemnation and from the homeowners for the increased assignment fees was not sufficient to trigger his payment obligations to Rhoades.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that the Dec. 22, 2005 agreement was a valid and binding contract for the payment by Lansdale to Rhoades of $3 million in attorney fees. Each of the events to trigger the three payments actually took place and Lansdale was obligated to pay Rhoades $500,000 when he got the money from the Seal Beach condemnation and $500,000 (in $3,333 per month installments from Oct. 1, 2006) and $2 million when Lansdale started receiving the increased assignment fees from the homeowners in January 2009. There were no oral or implied conditions precedent that required Lansdale to receive a bigger condemnation payment for the Seal Beach property or a larger continuous stream of increased assignment fees from the homeowners in order to trigger the payment obligations to Rhoades. Lansdale and SCFC, therefore, were obligated to pay Rhoades $3 million, plus prejudgment interest, pursuant to the December 2005 agreement.

Alternatively, Lansdale owed Rhoades the $3 million in fees pursuant to an account stated in that Lansdale admitted orally and in the December 2005 letter, and in a sworn bankruptcy petition, which was eventually dismissed, that he owed Rhoades $3 million. Also, the reasonable value of legal work that Rhoades did for Lansdale and his companies over more than 20 years was at least $3 million if not more.

DEFENDANT'S CONTENTIONS:
Defendants claimed that there were oral and/or implied conditions precedent in the Dec. 22, 2005, agreement which required Lansdale to receive about $26 million from the Government from the Seal Beach condemnation before he would be obligated to pay Rhoades the first $500,000. Lansdale was not obligated to pay the second $500,000 because the increased assignment fees Lansdale started receiving from the Marina Pacifica homeowners were too small to trigger the payment obligation and since the homeowners eventually stopped paying the increased assignment fees and challenged the validity of the assignment fee in pending litigation Lansdale was not required to make either the second $500,000 payment or the final $2 million payment. Lansdale needed to receive a 20 to 30 year income stream of increased assignment fees from the homeowners in an amount of at least $88,000 per month before Lansdale would be obligated to pay Rhoades either the second $500,000 payment or the $2 million payment.

Defendants argued that the December 2005 agreement was really a contingency fee agreement and that none of the contingencies occurred that would require Lansdale to pay Rhoades any of the attorney fees in the agreement. Rhoades was not entitled to recover his fees on a quantum meruit basis because he did not record his time or bill his time and his estimates of the work he did were speculative. Also, he was not entitled to quantum meruit because his contingency fee arrangement with Lansdale was not successful. The account stated claim was not applicable to this situation.

Damages

Monetary damages for breach of contract and prejudgment interest.

Result

The jury found for Plaintiff on first cause of action for breach of contract and awarded damages of $3 million. The jury found for Plaintiff on second cause of action for account stated and awarded damages of $3 million. And the jury found for Plaintiff on third cause of action for quantum meruit (reasonable value of services) in the amount of $3 million. Plaintiff elected to recover on breach of contract claim and court entered judgment in favor of plaintiff for $3 million plus prejudgment interest totaling $1,165,479, for a total judgment of $4,165,479.

Other Information

Defendants' cross-complaint for legal malpractice, breach of fiduciary duty and breach of contract was settled for $105,000, paid by Rhoades's insurer, BCS Insurance Co., and dismissed with prejudice on March 28, 2012, following a mediation with mediator Ivan Stevenson. The parties had two sessions with Judge Owen Kwong in mandatory settlement conferences but were unable to settle the case. On July 11, 2012, Defendants filed a Notice of Intent to move for new trial and a motion for judgment notwithstanding the verdict. The hearing on these motions is Aug. 14, 2012. In an evidentiary Phase I trial, without the jury, the Court heard evidence and determined that the December 2005 agreement was not fully integrated and overruled Plaintiff's objections to Defendants' parol evidence of oral and/or implied conditions affecting the terms of the December 2005 written contract. Defendants were therefore allowed to present all of their evidence of oral and/or implied conditions to the jury in the second phase of the trial. FILING DATE: Nov. 1, 2010.

Deliberation

1.5 hours

Poll

11-1 (breach of contract), 12-0 (account stated), 12-0 (quantum meruit)

Length

nine days