Judge: Mark H. Epstein, Case: BC604882, Date: 2023-09-11 Tentative Ruling

Case Number: BC604882    Hearing Date: September 11, 2023    Dept: I

This is styled as a motion for specific performance, but it is really a fee dispute.

The motion arose in an odd way.  The underlying suit was an auto accident in which the plaintiff claimed to have suffered very significant injuries.  Plaintiff was, at various times, represented by three different attorneys.  First, she was represented by Kashani.  Later, she was represented by Panah.  And finally, she was represented by McElfish.  McElfish states that Panah’s representation ended at some point but Panah asserts that he represented Merhi from the time he started until the litigation ended.  The case eventually settled.  Defendant issued the settlement check in the name of the plaintiff and counsel.  To deposit the check, therefore, required Panah’s signature.  Attorney Panah, however, would not sign.  He was concerned that if he endorsed the check he would never see the fee to which he believed he was entitled.  Attorney McElfish offered to hold the amount Panah claimed as a fee in his client trust account until the dispute could be resolved so that he could distribute proceeds to the client (and there was no dispute as to the client’s entitlement to the funds or the amount).  Panah refused to agree, essentially holding Merhi’s undisputed money hostage.  Whatever the ethics of that decision—and the court does have some views on the subject—that was the state of play when McElfish, on the client’s behalf, sought relief in this court to order Panah to endorse the check.  At the initial hearing, the court told Panah to endorse the check and stated that McElfish would be required to hold the disputed amount safe in the trust account.  Panah stated that he did not trust McElfish for various reasons.  (Panah did not want to air that dirty laundry in court, and the court does not question that determination.)  The parties came back and Panah still had not endorsed the check.  The court directly ordered Panah to endorse the check.  But it also ordered McElfish to hold all amounts in dispute in the client trust account and not to disburse them to anyone absent agreement of the parties or further order of the court.  Panah obeyed the order and the money was deposited.  Merhi has since (finally) obtained her recovery.  (The court notes that Kashani’s fee was settled.)  At the last hearing, Panah, in the court’s view, treated the matter as a question of bargaining power.  He asked that the court order that McElfish not be given even the amount of the fee over which there was no dispute.  The court, seeing no reason to make any such order other than to give Panah additional bargaining strength, refused.  Panah then asked that he be paid any amount that McElfish agreed Panah was owed.  The court agreed conceptually, but McElfish stated that he did not think Panah was entitled to anything.  While the court does not believe that McElfish’s statement was actually made in good faith—and McElfish disclaims that position in the instant round of briefing—by that point the argument was devolving into an angry bargaining session that was, frankly, unbecoming of the profession.

And that is where things stood when McElfish brought the instant motion.  McElfish claims to have combed through the records to determine what Panah did, and the answer (according to McElfish) is practically nothing.  McElfish is willing to pay Panah a percentage of the fee based on the relative hours Panah put into the case, which amounts to $28,788.50 (according to McElfish).  Panah has since obtained counsel—a wise move.

Panah’s opposition is that the court lacks jurisdiction over the matter because this is nothing more than a fee dispute between two lawyers.  That would certainly be the case but for the way the case got here.  It got here through what one could (strongly) argue was a gross breach of Panah’s fiduciary duty to his client in refusing to allow the amount of the settlement to which all agreed she was entitled to be paid to her even when there were promises of adequate protection for his part of the fee.  That is what led to the order above.

But that said, the court agrees generally that its role is not to resolve fee disputes between the lawyers.  Panah claims that he represented Merhi until the end—including at the time he refused to let her get her money.  Merhi apparently differs and believes that she discharged Panah.  That difference might matter because a discharged attorney is entitled to quantum meruit only.  But the court will not wade into that morass unless it must.  The court’s offer to retain jurisdiction was designed to protect Panah, not McElfish.  By ordering McElfish to hold the money pending agreement of the parties or order of the court, there was an added penalty if McElfish resorted to self-help.  Not only might he be violating a promise that he made (which would sound in contract), or maybe violating some lien rule (although the court does not know because the lien issue has not been presented to it), but it would also amount to contempt of court and subject McElfish to contempt penalties and the danger of a referral to the State Bar.  The court added that potential sanction to address Panah’s concern that McElfish would simply take the money because whatever other sanctions might be out there would not be enough to deter him.  And McElfish agreed to the process.

Panah, however, is now of the view that the added sanction is not required (or at least he does not want it), and the court tends to agree.  Accordingly, the motion is DENIED WITHOUT PREJUDICE to the normal fee dispute resolution procedures.  The court’s prior orders to McElfish are VACATED.  That does not mean that the court agrees that McElfish can take the money; the court takes no position on that.  It is only to say that if McElfish did so, he would not be violating any court order and there would be no contempt sanction.  Lest there be confusion, though, neither is the court giving McElfish any protection for whatever action he might or might not take.  The money is in McElfish’s client trust account for now, but what happens to it after today is not the court’s concern now that the client has received her money.  Because the underlying matter has been dismissed with prejudice, the court considers this case closed.  The parties are left to their own devices to resolve the fee dispute, and nothing herein will bar either party from bringing appropriate legal action if necessary.