Quantum Meruit Arbitration: Slocumb v. Quick

Kopec Law Firm

The Baltimore Medical Malpractice Lawyer Blog covers Maryland appellate opinions in medical malpractice cases and other personal injury cases involving issues that can arise in medical malpractice. The Appellate Court of Maryland addressed the arbitration of a quantum meruit legal fee claim. It issued an unreported opinion in Slocumb Law Firm, LLC v. Quick, No. 1144 (Sept. 20, 2023).

Factual Background to Quantum Meruit Arbitration

The client retained the plaintiff firm (Firm 1) for a car accident case.  Firm 1 recommended a $1.25 million settlement. The client declined and hired a second firm (Firm 2). Firm 1 asserted an attorney’s lien against the client. (Op. at 5-6). Afterward, Firm 2 went to trial and obtained a judgment of $1.46 million. (Id. at 6).

The firms discussed dividing the legal fee but could not agree. Firm 1 suggested arbitration and an arbitrator. Firm 2 agreed, and the firms agreed on an arbitration date (Id. at 6-7).

The arbitrator sent the lawyers an email in which he “offer[ed] his assessment from [his] position as the chosen arbitrator.” He noted that he had offered to act as a mediator, had been attempting to mediate, and had “felt that progress was being made” when, during the preceding week, Firm 1 stated it would not be participating in the quantum meruit arbitration. (Id. at 7). 

Firm 1 then filed an action against the client in circuit court. (Id. at 8). The arbitrator issued a decision considering Firm 1’s submission before withdrawing. The arbitrator awarded Firm 1 15% of the contingency fee, $87,500, and its costs. (Id. at 9).

In the circuit court case, Firm 2 moved for dismissal or summary judgment on behalf of the client. Firm 1 opposed the motion, contending that the emails between the firms did not constitute a written arbitration agreement. (Id. at 10). The circuit court granted summary judgment for Firm 2, finding that Firm 1 could have filed a motion to stay the arbitration. The court also found an agreement to arbitrate. It further noted that Firm 1 had not filed a petition to vacate the arbitration award. (Id. at 10-11).

Appellate Court Analysis on Quantum Meruit Arbitration

Maryland favors voluntary arbitration as reflected in the procedures outlined in the Maryland Uniform Arbitration Act, CJ 3-201 et seq. The Act provides that an arbitration award binds both parties and is enforceable in court. There are limited exceptions. (Id. at 2). To ensure voluntariness, the Act provides two ways to challenge the existence or validity of an arbitration agreement. (Id. at 2-3). These are a Petition to Stay Arbitration, CJ 3-208, and a Petition to Vacate an Arbitration Award, CJ 3-224. (Id. at 3-5).

Quantum Meruit Arbitration
Quantum Meruit Arbitration

On appeal, Firm 1 sought to challenge the existence of an agreement to arbitrate. However, the Appellate Court ruled that Firm 1 failed to raise the issue properly – by filing a petition to stay arbitration under CJ 3-208 or to vacate the arbitration award under CJ 3-224. (Id. at 11). Accordingly, the Appellate Court affirmed the circuit court. (Id. at 14).

Commentary by the Baltimore Medical Malpractice Lawyer

The decisions by the circuit court and the Appellate Court were predictable, in accordance with established law. The Arbitration Act sets forth ways to challenge an arbitration process or award, and, significantly, Firm 1 did not follow those. The Appellate Court did not answer whether there was a valid agreement to arbitrate. However, nothing in the opinion suggested that the issue would have had any merit.

The more interesting aspect of this case is why Firm 1 did not proceed with the quantum meruit arbitration. Although the reason is unknown, some factors may have influenced that decision, and they are worth examining. 

Contingency Fee

Firstly, Firm 1 represented the client under a contingency fee agreement. The money recovered for the client provided the basis for the legal fee, not the time spent on the case. The contingency fee percentage would have been in the standard range of 33-40%. Firm 1 conducted the litigation for a time and obtained a $1.25 million settlement offer. Using the expected fee range, Firm 1 anticipated a fee of $415,000 to $500,000. Firm 1 probably recommended this as a strong settlement offer. The only fact we have to evaluate the settlement offer in hindsight is the judgment of $1.46 million. Using the judgment as a reference point, I agree that the settlement offer was strong.

However, the choice ultimately belongs to the client. The client declined the settlement offer and changed law firms. We don’t know why. At this point, Firm 1 would likely not do as well as it would have if the client had accepted the offer. This reality highlights the importance of the client’s autonomy in legal proceedings.

Firm 2 took over, tried the case, and got a significantly better result at $1.46 million.

Quantum Meruit

Once the client left Firm 1, Firm 1’s compensation changed to an analysis of how much work it contributed to the overall work done on the case. We don’t have numbers, but Firm 2 spent much effort trying the case.

Medication Versus Arbitration

Mediation and Arbitration are different processes. Both are voluntary. Mediation remains voluntary, with a party able to terminate it at any time. It is a process where a neutral third party, the mediator, helps the disputing parties to reach a mutually acceptable agreement. Arbitration, however, is usually agreed to be binding on the parties once voluntarily entered into. It is a more formal process where a neutral third party, the arbitrator, makes a decision usually binding on the parties.

If these processes are conducted in one case, the mediator and arbitrator are usually different people, but not always. In this quantum meruit arbitration case, one person did both.

There is a difference in opinion on whether the mediator should share their assessment of the dispute’s merits in mediation. On the one hand, a mediator is supposed to be neutral, and that does not involve sharing an evaluation. However, some mediators have found that strategically sharing views on the merits can be a tool that allows them to be more effective than if they refrained from doing so. Medical malpractice lawyers who mediate want effective mediators. As a result, many active medical malpractice case mediators share their assessments of the case to an extent in mediation.

Mediators often strategically share assessments as the mediation progresses, and sometimes, they only do it if it looks like the mediation will break down. This approach limits any downside. It is generally an attempt to keep the mediation going. If one party does not like the mediator’s input, they can conclude the mediation. It was already almost there anyway.

Mediation and Arbitration

However, another aspect is when the mediator changes roles to become an arbitrator. While the mediator wants to encourage a settlement, the mediator must be careful not to share any view on the merits that would make a party lose confidence in the quantum meruit arbitration. I wonder if that happened here.

Firm 2 had offered 10% of the contingency fee to resolve the matter, which would have been approximately $58,000. (Id. at 6 fn. 4, 9).

The Appellate Court noted that the arbitrator had “offered his assessment as arbitrator” while mediating the case. It provides no further details. (Id. at 7). The arbitrator ultimately awarded Firm 1 a $87,500 fee, specifically representing 15% of the contingency fee.

We don’t know why Firm 1 did not go through with the quantum meruit arbitration. Maybe they received an assessment during mediation that they did not like. That would also highlight the dangers discussed above.

Of course, Firm 1 may have had other reasons. They had to be disappointed in missing out on a $400,000-500,000 fee. But that ship had sailed. The client went with another firm, and Firm 1 was going to be significantly limited by principles of quantum meruit. None of this gave Firm 1 a right to walk away from arbitration, but it may explain why they did.

Mark Kopec is a top-rated Baltimore medical malpractice lawyer. Contact us at 800-604-0704 to speak directly with Attorney Kopec in a free consultation. The Kopec Law Firm is in Baltimore and helps clients throughout Maryland and Washington, D.C. Thank you for reading the Baltimore Medical Malpractice Lawyer Blog.

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