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Hughes and Coleman, PLLC v. Chambers

Supreme Court of Kentucky

August 24, 2017



          COUNSEL FOR APPELLANT: Peter Lucas Ostermiller.

          COUNSEL FOR APPELLEE: Charles E. Theiler II Ashby Angell.



         Personal-injury law firm Hughes & Coleman was hired by Travis Underwood after he was injured in a car crash. Underwood eventually became dissatisfied with the firm and fired them. Shortly after discharging Hughes & Coleman and hiring another attorney, Underwood agreed to a final settlement of his claims. This appeal asks whether Hughes & Coleman is entitled to be compensated for their services rendered before being fired. Our precedent entitles a discharged lawyer to receive, on a quantum meruit basis, a portion of a contingency fee on a former client's recovery-so long as the termination was not "for cause." Because Hughes 8s Coleman's firing was not for cause under this rule, the firm is entitled to quantum meruit compensation.

         I. Background

         On October 1, 2012, Travis Underwood was injured when a commercial truck crashed into the vehicle he was driving. His injuries required hospitalization and other medical treatment, and forced him to miss about five weeks of work. The truck driver was apparently (at least mostly[1]) at fault.

         On October 9, Underwood received a so-called Personal Injury Protection (PIP), or no-fault, [2] payment of $200 from his insurer, Progressive, to replace one week's lost wages in the amount prescribed by KRS 304.39-130. On October 18, Progressive disbursed another $990.06 of Underwood's PIP benefits to pay two medical bills.

         On October 23, Underwood hired the law firm Hughes 8b Coleman to represent him in his motor-vehicle personal-injury matter. Their agreement provided for Hughes & Coleman to be paid on a contingency-fee basis and included, among other terms, that the firm would "assist the client in submitting medical bills for payment to any responsible insurance carrier or agency." Attorney Judy Brown handled most of the pre-litigation work in the case, while another attorney, Brent Travelsted, [3] primarily worked the case once it entered active litigation in January 2013. The firm's non-lawyer personnel also provided substantial assistance under the attorneys' supervision and direction. The firm maintained, as the trial court put it, "a highly meticulous database ... [that] documented] every event (e.g. letter, telephone call, settlement offer)" related to its representation of Underwood.

         Two days after Underwood retained its services, Hughes 8b Coleman mailed Progressive a letter advising the insurer of Underwood's PIP claim and requesting, under KRS 304.39-241, that it reserve all no-fault benefits to "pay bills or lost wages only as directed by Hughes 6b Coleman." Through further communications with Progressive, the firm learned that Underwood had a total of $20, 000 in PIP coverage-$10, 000 in basic reparation benefits (BRB) plus $10, 000 in added reparation benefits (ARB). See KRS 304.39-020(1), (2); KRS 304.39-140. The firm also learned that Underwood had not provided to Progressive any physician statements or wage-verification documents required to verify his entitlement to further lost-wage payments. See KRS 304.39-280. Despite repeated requests from Hughes & Coleman, Underwood never provided these documents.

         On November 6, Hughes 6b Coleman mailed Progressive another letter, this time asking it to release Underwood's remaining no-fault benefits of $18, 809.94 by check payable to Underwood and the firm. To support the. request and show that Underwood's covered losses would easily exceed that amount, Hughes 8b Coleman attached a bill totaling $71, 812.40 from Underwood's stay at the University of Louisville Hospital. The firm received the check on November 30. That same day, they mailed Underwood a "Power of Attorney" document, which he signed a couple days later. This limited power of attorney authorized Hughes & Coleman "to endorse [Underwood's] name to a settlement draft for the purpose of depositing [the outstanding PIP] funds in [the firm's] escrow account pending final distribution."

         On December 7, despite Underwood's not providing any verifying documentation, Hughes 85 Coleman issued him a check for $973 from the escrowed funds for lost wages. This was calculated by applying the $200~per-week statutory rate to the four weeks and three days that he had not worked or been already compensated for.[4] Later, Hughes & Coleman cut another check from the escrowed funds for $3, 492.88-a negotiated full-satisfaction of the University of Louisville Hospital bill. See KRS 304.39-245. This left $14, 344.06 remaining in the escrow account.

         By January 2013, Hughes & Coleman decided that the claim needed to enter litigation, and Travelsted took over primary control of the case. On January 23, Underwood authorized Travelsted's filing suit on his behalf. Travelsted then began negotiating a settlement with the tortfeasor's insurer, and by February, their back and forth had culminated in the insurer offering $145, 000, which Underwood rejected. Hughes 85 Coleman's case-management notes show that Travelsted had valued the case at $200, 000 or more and recommended against settling for less than that amount.

         Unfortunately, Underwood's (and his mother's[5]) relationship with his counsel deteriorated. On March 13, Underwood fired Hughes & Coleman. In her email discharging the firm and requesting the case file and remaining escrow balance, his mother explained:

One of the reasons that we are letting you go is, the escrow money could have been given to Travis when he heeded the money but we were not told that, we were told that you all had to take it and put it in escrow. We have found out that ...

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