Vuz v. DCSS III, Inc. et al, No. 3:2020cv00246 - Document 224 (S.D. Cal. 2022)
Court Description: Order Denying Peterson Bradford Burkwitz's Objection (ECF No. 216 ). The Court DENIES PBB's Objection and adopts Magistrate Judge Schopler's Report and Recommendation on the distribution of settlement proceeds in full. PBB is entitled to no recovery and its lien is hereby discharged. Signed by Judge Gonzalo P. Curiel on 9/9/22.(jmo)
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ASHLEY VUZ, Case No.: 20-cv-246-GPC-AGS Plaintiff, 12 13 v. 14 DCSS III, INC., et al.,, ORDER DENYING PETERSON BRADFORD BURKWITZ’S OBJECTION Defendants. 15 [ECF No. 216] 16 17 Before the Court is non-Party law firm Peterson Bradford Burkwitz’s (“PBB”) 18 Objection to Magistrate Judge Schopler’s Report and Recommendation regarding the 19 settlement distribution. ECF No. 216. Judge Schopler entered this Report and 20 Recommendation on July 15, 2022, recommending that PBB be entitled to no recovery 21 and that its lien be discharged. ECF No. 209. PBB’s Objection was filed on July 29, 22 2022, and Plaintiff Ashley Vuz (“Plaintiff”) filed a Response on August 12, 2022. ECF 23 No. 216, 219. 24 For the reasons below, the Court DENIES PBB’s Objection and adopts Magistrate 25 Judge Schopler’s Report and Recommendation in full. PBB is entitled to no recovery, 26 and its lien is hereby discharged. ECF No. 78. 27 28 1 20-cv-246-GPC-AGS 1 2 BACKGROUND On July 15, 2022, Magistrate Judge Andrew G. Schopler held a hearing to address: 3 (1) the distribution of settlement proceeds from the January 2021 settlement between 4 Plaintiff and Defendants DCSS III, Inc. and associated individual defendants (collectively 5 “Gossip Grill Defendants”), and (2) a lien asserted by PBB (Plaintiff’s former counsel) 6 on Plaintiff’s total recovery in this case. ECF No. 209. Magistrate Judge Schopler issued 7 a Report and Recommendation recommending that PBB be entitled to no recovery and 8 that its lien be discharged because the firm withdrew from representing Plaintiff without 9 justifiable cause. ECF No. 209. PBB timely objected to this ruling. ECF No. 216. 10 The Court recounts the facts relevant to the instant ruling. In April 2019, Plaintiff 11 and PBB entered into a contingency fee agreement providing that PBB’s legal fees would 12 be 35% of any net recovery against any party to this litigation. ECF No. 170 at 2. In 13 February 2020, while represented by PBB, Plaintiff filed this action. ECF No. 1. Ryan 14 Graham, a PBB attorney who had represented Plaintiff in this matter left PBB in October 15 2020. ECF 219 at 1. Mr. Graham, as a solo practitioner, then substituted as Plaintiff’s 16 counsel. Id. In January 2021, Plaintiff reached a settlement with the Gossip Grill 17 Defendants which was approved by the Court in September 2021. ECF No. 129, 146. On 18 October 8, 2021, Plaintiff filed an Ex Parte Motion to determine distribution of the 19 settlement proceeds. ECF No. 151. Shortly thereafter, Plaintiff’s then-counsel, Mr. 20 Graham, failed to file an Opposition to the Motions for Summary Judgment and 21 effectively abandoned representation of Plaintiff. See e.g., ECF Nos. 154, 166. The 22 matter was continued until Plaintiff was able to obtain her current counsel. ECF Nos. 23 188-91. 24 25 Plaintiff filed briefing on the issue of the settlement distribution on June 20, 2022. ECF No. 201. PBB filed its Response on June 27, 2022, and Plaintiff filed an Objection 26 27 28 2 20-cv-246-GPC-AGS 1 on June 28, 2022. ECF Nos. 202, 203. Magistrate Judge Schopler held a hearing on July 2 15, 2022. ECF No. 209. 3 4 LEGAL STANDARD Because this objection involves the distribution of settlement proceeds and is thus 5 a non-dispositive matter, Federal Rule of Civil Procedure Rule 72(a) governs. Pursuant to 6 Rule 72(a), a party to a hearing before a magistrate judge may file an objection to the 7 order within 14 days after being served with a copy. Fed. R. Civ. P. 72(a). A district 8 judge “must consider timely objections and modify or set aside any part of the order that 9 is clearly erroneous or is contrary to law.” Id. The “clearly erroneous” prong “applies to 10 factual findings and discretionary decisions made in connection with non-dispositive 11 pretrial discovery matters.” F.D.I.C. v. Fid. & Deposit Co. of Md., 196 F.R.D 375, 378 12 (S.D. Cal. 2000). To overturn something as “clearly erroneous,” a district judge must 13 have a “definite and firm conviction that a mistake has been committed.” In re Optical 14 Disk Drive Antitrust Litig., 801 F.3d 1072, 1076 (9th Cir. 2015). The “contrary to law” 15 prong “permits independent review of purely legal determinations by the magistrate 16 judge.” Deposit Co. of Maryland, 196 F.R.D. at 378. A magistrate judge’s order will be 17 contrary to law if it “applies an incorrect legal standard, fails to consider an element of 18 [the] applicable standard, or fails to apply or misapplies relevant statutes, case law, or 19 rules of procedure.” Martin v. Loadholt, No. 1:10-cv-00156-LJO-MJS, 2014 WL 20 3563312, at *1 (E.D. Cal. July 18, 2014). 21 DISCUSSION The Magistrate Judge’s Ruling 22 I. 23 In the hearing, Magistrate Judge Schopler provided reasoning for his 24 recommendation that PBB receive no proceeds from the settlement and that its lien be 25 discharged. Specifically, Judge Schopler stated that if a client fires an attorney, the 26 attorney has a quantum meruit claim against any ultimate recovery, but an attorney that 27 28 3 20-cv-246-GPC-AGS 1 voluntarily withdraws from representation cannot later seek fees for services rendered. 2 ECF No. 218 at 7 (citing Rus, Miliband & Smith v. Conkle & Olesten, 113 Cal. App. 4th 3 656, 671 (2003); Schroeder vs. San Diego Unified Sch. Dist., No. 7-cv-1266, 2010 WL 4 1948235, at *5 (S.D. Cal. May 12, 2010)). An inequity will result from allowing a lawyer 5 to “capitalize on their own voluntary actions [that leave the] client lawyerless by 6 collecting fees from a post-withdrawal settlement.” Id. The ultimate issue was “whether 7 Ms. Vuz voluntarily changed counsel, which is akin to firing her counsel, or whether 8 PBB voluntarily withdrew from representing Ms. Vuz.” Id. at 8. 9 PBB argued that Plaintiff voluntarily changed counsel because she wanted to 10 continue representation with Mr. Graham after he had left PBB. Id. Plaintiff argued that 11 “she was abandoned by PBB.” Id. at 9. Specifically, Plaintiff states that PBB “informed 12 [her] in an email that they would not continue on as counsel with Mr. Graham and did not 13 see it as feasible to continue representing her, even without Mr. Graham’s involvement.” 14 Id. Judge Schopler reviewed the record and ultimately found there were no circumstances 15 indicating a reason for mandatory withdrawal on the part of PBB and as such they were 16 not entitled to recovery. ECF No. 218 at 28. PBB’s Objections and Plaintiff’s Response 17 II. 18 PBB’s Objection raises two arguments. First, PBB argues that to give PBB “no 19 renumeration (zero) despite the hundreds of hours expended” would be unfair. ECF No. 20 216 at 4. Second, PBB argues that PBB did not “abandon” Plaintiff. Id. Plaintiff argues 21 PBB’s Objection should be rejected because their objections are not sufficiently specific 22 to identify the particular portion of the Report and Recommendation PBB disagrees with. 23 ECF No. 219 at 4. Plaintiff also argues PBB’s objections are meritless because it would 24 not be unfair to deny settlement proceeds to PBB because of the amount of litigation that 25 happened after their withdraw and that it is clear in the record PBB is the party who 26 voluntarily withdrew from representation. Id. at 4-5. 27 28 4 20-cv-246-GPC-AGS 1 III. 2 An attorney retained on a contingency fee basis cannot voluntarily withdraw from Analysis 3 representing a client and then later seek fees for the value of services rendered. 4 Schroeder, 2010 WL 1948235, at *5 (citing Estate of Falco v. Decker, 188 Cal. App. 3d 5 1004, 1014 (1987)). To retain fees after withdrawing from a contingency fee 6 representation, counsel must show withdraw was mandatory for ethical reasons and that 7 they in fact withdrew for that justifiable reason. Id. (citing Falco, 188 Cal. App. 3d at 8 1015). This is heightened standard, and to recover after withdrawal from a contingent fee 9 arrangement, an attorney must show: (1) counsel’s withdrawal was mandatory, not 10 merely permissive, under statute or State Bar rules; (2) the overwhelming and primary 11 motivation for counsel’s withdrawal was the obligation to adhere to these ethical 12 imperatives under statute or State Bar rules; (3) counsel commenced the action in good 13 faith; (4) subsequent to counsel’s withdrawal, the client obtained recovery; and (5) 14 counsel has demonstrated that his work contributed in some measurable degree towards 15 the client’s ultimate recovery. Id. (citing Falco, 188 Cal. App. 3d at 1016). “While a 16 personality clash between the parties may provide good reason for allowing the attorney 17 to withdraw, it is not necessarily a justifiable reason for purposes of awarding fees.” 18 Falco, 188 Cal. App. 3d at 1014. 19 Thus, the critical issues here are (1) whether it was Plaintiff who terminated PBB’s 20 representation or vice versa; and (2) whether PBB’s withdrawal was voluntary or 21 mandatory under the Rules. As to the first question, the Court agrees with Judge Schopler 22 that it was PBB who terminated this representation. Specifically, an October 8, 2020 23 email from PBB to Plaintiff states that “[t]here may be a question as to whether you 24 would want to continue working with PBB as counsel, without Ryan Graham’s 25 involvement. Again, we do not view that as feasible.” ECF No. 218 at 26. An individual 26 in Plaintiff’s shoes would reasonably interpret this to mean that under no circumstances, 27 28 5 20-cv-246-GPC-AGS 1 with or without Mr. Graham, would PBB represent Plaintiff. Nothing in the record 2 indicates that Plaintiff had voluntarily and definitively closed the door on PBB’s 3 continued representation of her without Mr. Graham prior to the October 8, 2020 email. 4 As to the second question, the Court further agrees with Judge Schopler that 5 mandatory withdrawal of PBB under the Rules was not required in this situation. The 6 California Rules of Professional Conduct state that withdrawal is mandatory when: (1) 7 the lawyer knows the client is bringing an action, conducting a defense, asserting a 8 position in litigation, etc. without probable cause and for the purpose of harassing or 9 maliciously injuring any person; (2) the lawyer knows or reasonably should know that 10 representation will result in violation of the Rules; (3) the lawyer’s mental or physical 11 condition renders it unreasonably difficult to carry out the representation effectively; or 12 (4) the client discharges the lawyer. Cal. R. Pro. Conduct 1.16(a). Circumstances rising to 13 one of these four reasons for mandatory withdrawal do not appear anywhere in the 14 record. The declaration in PBB’s initial Brief on this matter states that after Mr. Graham 15 left PBB it “became extremely difficult and frankly awkward for the firm to continue to 16 represent Ms. Vuz particularly because Ms. Vuz continued to trust Mr. Graham, remained 17 friends with him and specifically told [PBB] that he would continue to represent her 18 throughout the pendency of this matter.” ECF No. 202-1 ¶ 6 (Declaration of Avi 19 Burkwitz, Esq.). “Awkwardness” does not give rise to mandatory withdrawal under 20 California law. 21 As to PBB’s argument that it would be unfair for them to receive zero recovery 22 despite their work on the settlement, the Court does not see how this has bearing on the 23 legal question of whether they are entitled to recovery under California law. This 24 argument also ignores the fact that to allow them to recover under these circumstances 25 would be unfair in the sense that they were able to “shift the time, effort and risk of 26 obtaining the recovery . . . from [their firm], who originally agreed to bear those 27 28 6 20-cv-246-GPC-AGS 1 particular costs in the first place, to the client.” Schroeder, 2010 WL 1948235, at *5 2 (citing Rus, 113 Cal. App. 4th at 675-76). 3 Further, the Court agrees with Magistrate Judge Schopler that the fact that the 4 ultimate settlement was identical in many or all ways to the settlement terms negotiated 5 while PBB was still counsel has no bearing on the legal analysis. ECF No. 218 at 27. It 6 has no impact on the core issue of whether it was Plaintiff or PBB that terminated PBB’s 7 representation, or whether PBB’s withdrawal was permissive or mandatory. PBB 8 voluntarily terminated their representation of Plaintiff knowing an imminent settlement 9 was likely, and thus they willingly renounced any potential recovery. 10 In conclusion, because PBB terminated their representation of Plaintiff without 11 justifiable cause, under California law, PBB is not entitled to recover fees for any legal 12 services rendered. 13 14 CONCLUSION For the reasons stated above, the Court DENIES PBB’s Objection and adopts 15 Magistrate Judge Schopler’s Report and Recommendation on the distribution of 16 settlement proceeds in full. PBB is entitled to no recovery and its lien is hereby 17 discharged. 18 19 IT IS SO ORDERED. 20 21 Dated: September 9, 2022 22 23 24 25 26 27 28 7 20-cv-246-GPC-AGS
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