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Trice v. Toyota Motor Corp.

United States District Court, D. Minnesota

April 27, 2018

Bridgette Trice, as trustee for the heirs and next of kin of Devyn Bolton, deceased, Plaintiffs,
v.
Toyota Motor Corporation, et al., Defendants. Quincy Ray Adams, Plaintiff,
v.
Toyota Motor Corporation, et al., Defendants.

          W.B. Markovits, Esq., Christopher D. Stock, Esq., and Louise M. Roselle, Esq., Markovits, Stock & DeMarco, LLC, Cincinnati, OH, on behalf of Plaintiffs Bridgette Trice and Quincy Ray Adams.

          Karlowba R. Adams Powell, Esq., Powell Law Office, St. Paul, MN, on behalf of Padden Law Firm, PLLC.

          Nicholas R. Farnolo, Esq., and Hunter J. Shkolnik, Esq., Napoli Shkolnik, PLLC, Melville, NY, on behalf of Napoli Shkolnik.

          MEMORANDUM OPINION AND ORDER

          ANN D. MONTGOMERY U.S. DISTRICT JUDGE

         I. INTRODUCTION

         Before the Court is Plaintiffs Bridgette Trice (“Trice”) and Quincy Ray Adams' (“Adams”) (collectively, “Plaintiffs”) Motion for Authorization to Distribute Disputed Attorneys' Fees and Medical Expense Proceeds [Trice Docket No. 716; Adams Docket No. 464].[1] The Motion asks the Court to divide among the law firms that represented Plaintiffs the 40% contingency fee earned in these companion cases.[2] Responses have been filed by Padden Law Firm LLC (“Padden Firm”), Napoli Shkolnik PLLC (“Napoli Firm”), [3] and Robert Bolton.[4]See Trice Docket Nos. 736, 746, 849. Also before the Court are the Napoli Firm's Motion to Seal [Trice Docket No. 843; Adams Docket No. 566] and Trice's Motion to Strike [Trice Docket No. 850; Adams Docket No. 570]. For the reasons set forth below, Plaintiffs' Motion is granted, Trice's Motion to Strike is denied, and the Napoli Firm's Motion to Seal is granted.

         II. BACKGROUND

         A. Procedural Posture

         In February 2015, a jury found that a product defect in a 1996 Toyota Camry was the direct cause of a tragic 2006 car accident that permanently injured Adams and rendered Trice's daughter, six-year-old Devyn Bolton, a quadriplegic until she died from her injuries in 2007. See Verdict [Trice Docket No. 550; Adams Docket No. 349]. On appeal, the Eighth Circuit affirmed the jury's finding of liability but remanded the judgment amounts to this Court. See Op. USCA [Trice Docket No. 693; Adams Docket No. 446]. Thereafter, the parties stipulated to judgment amounts of $5, 543, 453.22 for Trice and $1, 717, 384.82 for Adams. See Stipulation J. Amounts [Trice Docket No. 714; Adams Docket No. 462]. A judgment reflecting these amounts was entered on December 8, 2017. See J. [Trice Docket No. 729; Adams Docket No. 474].

         Plaintiffs' recoveries are subject to a 40% contingency fee in favor of the multiple law firms that represented them over the course of the litigation. There is no dispute that the law firm of Markovits, Stock & DeMarco, LLC (“MSD”) is entitled to 55% of the overall contingency fee. The Court entered orders authorizing distribution of MSD's portion of the contingency fee on December 8, 2017. See Order Approving Wrongful Death Distribution (“Trice Distribution Order”) [Trice Docket No. 732]; Order Directing Distribution Attorneys' Fees Adams (“Adams Distribution Order”) [Adams Docket No. 475].

         A dispute remains over allocating the remaining 45% of the contingency fee, which totals $997, 090.83 in the Trice case and $308, 885.68 in the Adams case. The disputed amounts are being held in the trust account of the Law Office of Kenneth R. White, P.C. (“White Firm”) pending further Order of the Court. See id. The three firms vying for a share of the remaining fees are the Napoli Firm, which served as Plaintiffs' lead counsel from late 2012 to April 2014, and the Padden and White Firms, which have represented Plaintiffs since 2010.

         Plaintiffs argue that the Napoli Firm is not entitled to any fees because the Plaintiffs terminated the Napoli Firm for cause and were harmed by the Napoli Firm's negligent prosecution of their case. The Napoli Firm disagrees and argues that it performed significant work on the file and is entitled to recover its fees of $112, 202.50 under the theory of quantum meruit.

         Plaintiffs also argue that the remaining 45% of the contingency fee should be divided among the Padden and White Firms by paying 30% to the White Firm and 15% to the Padden Firm. Plaintiffs contend that this allocation reflects the relative contributions of each firm to Plaintiffs' cases. The Padden Firm disagrees and argues that it is entitled to 30% of the contingency fee pursuant to the fee agreement that Plaintiffs signed in April 2014. The Padden Firm further argues that it is entitled to 40% of the recovery obtained by Robert Bolton, one of the next of kin in the Trice case. Robert Bolton disputes the Padden Firm's claim.

         On January 16, 2018, United States Magistrate Judge David T. Schultz conducted a settlement conference on the disputed attorneys' fees, as well as the disputed claims to the judgment proceeds by medical providers. See Min. Entry [Trice Docket No. 835; Adams Docket No. 559]; Order Approving Stipulation [Trice Docket No. 769; Adams Docket No. 502]. Although settlement was reached on the medical providers' claims, [5] the attorneys' fee issues were not resolved. All counsel waived any hearing on the attorneys' fee issues and asked the Court resolve the dispute based on counsels' written submissions. See Letter District Judge [Trice Docket No. 765; Adams Docket No. 499].

         B. Relevant Factual Background

         Resolution of this dispute requires a review of the many attorney-client relationships in these cases.

         1. Padden Law Firm LLC and Law Office of Kenneth R. White, P.C.

         In 2010, Plaintiffs retained the Padden Firm to represent them in these companion cases. Pls.' Mem. Supp. Mot. Distribute [Trice Docket No. 718; Adams Docket No. 466] at 3; Padden Mem. Opp'n [Trice Docket No. 829] at 7. Shortly thereafter, the Padden Firm's principal, Michael B. Padden, Esq. (“Padden”) requested and obtained the assistance of the White Firm to serve as additional counsel on the cases. Kenneth R. White, Esq. (“White”) is a principal at the White Firm.

         In addition to being retained by Adams and Trice in 2010, Padden also entered into a June 2010 Attorney-Client Consent Distribution Proposal (“Distribution Proposal”) with Robert Bolton. Padden Letter Br. [Trice Docket No. 842] Ex. 1. In the Distribution Proposal, Robert Bolton: acknowledged paternity of Devyn Bolton; requested that Trice be approved as trustee for Trice's wrongful death claim on behalf of Devyn Bolton; agreed to receive 10% of any recovery obtained by Trice; stated that he had no obligation to pay attorneys' fees of 40% unless he received a recovery; and stated that Bridgette Trice consents to Padden's representation of him. Id. ¶¶ 3, 6-8. Padden has not communicated with Robert Bolton since this 2010 meeting. Bolton Letter Br. [Trice Docket No. 849] Ex. 1 (“Bolton Decl.”) ¶ 3.

         2. Waite, Schneider, Bayless and Chesley Co., LPA

         In April 2010, Padden and White, with Trice and Adams' consent, chose the Ohio law firm of Waite, Schneider, Bayless and Chesley Co., LPA (the “Chesley Firm”) to serve as primary litigation counsel in Trice and Adams' cases. See Markovits Reply Decl. Ex. 1 [Trice Docket No. 774; Adams Docket No. 507]; First Trice Decl. [Trice Docket No. 722; Adams Docket No. 468] ¶ 2. The Chesley Firm was chosen because White had previously worked with the firm and knew that Stanley Chesley (“Chesley”) served as counsel in multidistrict litigation alleging instances of sudden unintended acceleration in Toyota vehicles (“Toyota MDL”). First White Decl. [Trice Docket No. 723; Adams Docket No. 469] ¶ 2; Padden Decl. [Trice Docket No. 737] Ex. 8.

         The Padden, White, and Chesley Firms entered into an April 8, 2010 letter agreement outlining the division of fees among the firms. See Markovits Reply Decl. Ex. 1. The Chesley Firm agreed to advance all ongoing expenses of the litigation. Id. On April 26, 2010, the agreement was amended to provide that the Chesley Firm would pay Padden $1, 500 per month for “overhead expenses.” Markovits Reply Decl. Ex. 2 [Trice Docket No. 775; Adams Docket No. 508]. The amendment provides that if one of the cases should “result in payments of fees or costs, the total amount of these overhead payments up to that time will be deducted from [Padden's] share and paid to [the Chesley] firm.” Id. Pursuant to this amendment, Padden received monthly payments totaling $34, 500 from the Chesley Firm. Markovits Reply Decl. [Trice Docket No. 772; Adams Docket No. 505] ¶ 25, Exs. 32, 33 [Trice Docket Nos. 805, 806; Adams Docket Nos. 538, 539]. In an August 2012 letter to Chesley, Padden acknowledged that “in the event of recovery, I am obligated to reimburse these funds to your firm.” Markovits Reply Decl. Ex. 3 [Trice Docket No. 776; Adams Docket No. 509].

         Although a recovery has been obtained in these cases, Padden has not reimbursed the Chesley Firm for the $34, 500 payments he received as “overhead expenses.”

         3. Napoli Bern Ripka Shkolnik LLP

         In July 2012, Chesley recommended that the Napoli Firm take over the Chesley Firm's role as primary litigation counsel. First White Decl. ¶ 3; Padden Mem. Opp'n at 18. Chesley made the recommendation in light of his disbarment proceedings arising from conduct in an unrelated case. First Farnolo Decl. [Trice Docket No. 745; Adams Docket No. 479] ¶¶ 3-4. The Napoli Firm had also been counsel in the Toyota MDL. First White Decl. ¶ 3. The clients consented to the change in lead counsel and the Napoli Firm began working on the cases in July 2012. Id. ¶ 3. The Chesley Firm withdrew from Plaintiffs' cases in June 2013. Id.

         After the Napoli Firm took over as lead counsel, the Court issued orders requiring expert disclosures to be served in November 2012 and discovery to be completed by May 31, 2013. See Order Joint Mot. Extension Time Expert Disclosure [Trice Docket No. 249; Adams Docket No. 136]; Fourth Am. Scheduling Order [Trice Docket No. 262; Adams Docket No. 139]. In November 2012, White sent an email to the Napoli firm stating, “I assume that we will be designating experts in some manner in compliance with the court order.” White Reply Decl. [Trice Docket No. 808; Adams Docket No. 541] ¶ 6, Ex. 2 [Trice Docket No. 811; Adams Docket No. 544]. On January 23, 2013, White received a courtesy copy of a letter sent by Toyota to the Napoli Firm informing them that discovery responses were overdue and that Plaintiffs had not served expert disclosures by the November 2012 deadline. First White Decl. ¶ 6, Ex. 5. White sent an email to the Napoli Firm referencing the letter and stating, “I trust that you will get these issues corrected immediately to the extent that the letter is accurate.” White Reply Decl. Ex. 4 [Trice Docket No. 813; Adams Docket No. 546]. The Napoli Firm responded by saying, “We responded to this already, they were looking for medicals on Devyn Bolton.” Coates Decl. [Trice Docket No. 754; Adams Docket No. 490] Ex. 3.

         In April 2014, White and Padden discovered that the Napoli Firm made an unauthorized settlement demand to Toyota in February 2014 without Plaintiffs' knowledge or consent. First White Decl. ¶ 4, Ex. 3. Padden and White first learned of the settlement demand through an email they received from Toyota's counsel stating that settlement demands relayed by the Napoli Firm to Toyota were “too high to lead to productive negotiations.” First White Decl. Ex. 3. The Napoli Firm had not consulted with Padden, White, or Plaintiffs before making the demand. First White Decl. ¶ 5, Ex. 4. Upon learning of the Napoli Firm's unauthorized settlement demand, Trice and Adams each sent the Napoli Firm an April 22, 2014 letter terminating their attorney-client relationship and demanding that the Napoli Firm withdraw from their cases immediately. First White Decl. Ex. 4.

         On July 23, 2014, three months after Plaintiffs had terminated the Napoli Firm, Padden sent a letter to the Napoli Firm asking that Plaintiffs' case files be forwarded to the Padden Firm. First Markovits Decl. [Trice Docket No. 721; Adams Docket No. 467] Ex. 1 at 2.[6] On August 4, 2014, the Napoli Firm responded that it would “draft a letter outlining any expenses incurred, ” and that “[u]pon payment of the expenses we will immediately make arrangements to transfer the file.” Id. at 5. Plaintiffs' attorneys informed the Napoli Firm that the files were needed as quickly as possible because trial was scheduled for November 3, 2014, less than three months away. Id. at 4. Nevertheless, the Napoli Firm persisted in its position until Plaintiffs' counsel alerted the Napoli Firm to Minnesota Rule of Professional Conduct 1.16(g), which prohibits a lawyer from conditioning the return of client papers and property upon the payment of the lawyer's fees or the cost of copying the file. First Markovits Decl. ¶ 3, Ex. 1 at 2-3, 7; First Farnolo Decl. ¶ 21.

         After the files were returned, Plaintiffs learned that the Napoli Firm had failed to disclose approximately $500, 000 of Devyn Bolton's $1.5 million in expenses before the close of discovery. First Markovits Decl. ¶ 5. This failure subsequently impacted the amount of medical expenses which was admissible evidence at trial, because of Toyota's successful argument that expenses be limited to the amounts disclosed in discovery. Id. As a result, Plaintiffs were limited to medical expenses of $1 million rather than $1.5 million. Id. Thus, there was an approximate $500, 000 difference between the medical expenses incurred and those Trice was awarded on behalf of the next of kin. Id. The amount of pre-judgment interest Plaintiffs would have recovered on the additional $500, 000 would also have been substantial based on the extended duration of the litigation. See id.

         Plaintiffs also learned that the Napoli Firm failed to disclose any expert prior to the deadline set by the Court. Id. ¶ 6. Thus, Plaintiffs' only damages expert, Dr. Harvey Rosen, could not be used at trial even though he had prepared a report and had been deposed. Id. Plaintiffs paid Dr. Rosen's expert witness fees of $4, 000 although he could not testify at trial because of discovery violations by counsel. Id. ¶ 6, Ex. 3.

         4. Markovits, Stock & DeMarco, LLC

         Following termination of the Napoli Firm, Plaintiffs retained MSD to assume the role of lead counsel. Two of MSD's principals, Markovits and Stock, were former associates of the Chesley Firm and had worked on Plaintiffs' cases when they were employed at the Chesley Firm. Markovits Reply Decl. Ex. 3 [Trice Docket No. 776; Adams Docket No. 509] .

         In April 2014, Plaintiffs signed a retention agreement with MSD that (a) reaffirmed the 40% contingency fee structure that had been in place since the case began; (b) directed MSD to serve as lead litigation counsel should the case go to trial; and (c) provided for an allocation of the contingent fee as follows: 55% to MSD, 30% to the Padden Firm, and 15% to the White Firm. First Padden Decl. Ex. 12; First Markovits Decl. ¶ 8; First Trice Decl. ¶ 7.

         Plaintiffs' case was tried to a jury beginning January 7, 2015, and the jury reached a verdict on February 3, 2015. White was involved in the trial preparations and attended the trial; Padden did not. First ...


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