December 3, 1998
SARAH LANDISE, APPELLANT,
THOMAS MAURO, APPELLEE.
Appeal from the Superior Court of the District of Columbia, Hon. Henry F. Greene, Trial Judge. [725 A2d Page 446]
Before Steadman, Ruiz, Associate Judges, and King, Senior
[fn*] Judge King was an Associate Judge of the court at the
time of argument. His status changed to Senior Judge, on November
The opinion of the court was delivered by: Ruiz, Associate Judge:
Appellant, Sarah Landise, sued appellee, Thomas Mauro, alleging partnership in a law firm, and seeking damages for breach of an oral partnership agreement, conversion of partnership funds, breach of fiduciary duty and an accounting. Mauro's principal defense was that Landise's unauthorized practice of law barred her claim. The jury found that Landise and Mauro had not entered into an oral partnership agreement and that Landise had engaged in the unauthorized practice of law in the District of Columbia.
We hold that a partner's claim of partnership against a purported partner, if otherwise sustained by application of partnership law, is not precluded by the claimant's unauthorized practice. We also conclude that the trial court abused its discretion in excluding Mauro's statement admitting that Landise was entitled to share in the law firm's fees. This error, when viewed in the context of the weight of the evidence tending to show the existence of a partnership and possible jury confusion about the impact of Landise's unauthorized practice on her claim of [725 A2d Page 447]
partnership, may have seriously prejudiced Landise's claims. Thus, we reverse and remand for a new trial. *fn1
In June 1986, after Landise completed law school, Thomas Mauro, then employed with the law firm of Malley, Scott, Koffman & Heston ("Malley, Scott") hired her to work for the firm as a law clerk. When Landise was admitted to the Virginia Bar, she was hired by Malley, Scott as an attorney in the firm's District of Columbia office. *fn2 In early 1987, Mauro was terminated by the firm. Although Malley, Scott offered to continue to employ Landise, she chose to leave with Mauro. Landise was receiving a salary of $25,000 per year, had two children and owed a large student debt at the time she left Malley, Scott.
It is undisputed that Landise and Mauro started a firm sometime in 1987 named "Mauro and Landise." Letterhead stationery and a sign on the door identified the firm by that name. *fn3 Both Mauro and Landise signed the lease for the firm's sole office, which was located in the District of Columbia. Beyond these basic facts, the parties offered differing accounts of their relationship.
According to Landise, in January 1987, Mauro induced her to leave Malley, Scott by telling her that he did not think Malley, Scott would be around for long. She claims that Mauro proposed that she join him as a partner to share equally in all profits and losses of the cases that were handled by either her or Mauro. Landise testified that after agreeing to become Mauro's partner, she would periodically bring up the issue of creating a written partnership agreement, but that Mauro would always dismiss the issue. She dropped the issue once the first tax return was filed, as a partnership. In any event, their understanding was never reduced to writing.
Landise testified that about half of the law firm's practice was personal injury work, including several cases in Virginia. She also testified that fees from the Virginia cases constituted approximately half of the firm's revenue received through March 15, 1989. Income from all cases was deposited into the firm's operating account and the parties paid themselves "draws." Landise also testified that while Mauro was chiefly responsible for attracting clients to the firm, she performed 65% to 70% of the firm's written pre-trial work.
Prior to judgment in the Tuerr case, the law firm's cash flow had not been good, and [725 A2d Page 448]
in late 1988, Landise accepted an offer of employment with the federal government. *fn4 Before she left the firm, however, Landise devoted a substantial amount of her time to the Tuerr personal injury case. Landise testified that she made the initial contact with the client, drafted the complaint and did virtually all of the pre-trial preparation work. She estimated that she spent more than 2,000 hours working on the case. Landise left the firm to begin working for the government one week after the jury returned a verdict for $800,000 in favor of the firm's client. She testified that even after she had left the firm, she agreed to draft Tuerr's brief in opposition to post-judgment motions. According to Landise, 85% to 90% of the post-trial brief filed with the court by Mauro was identical to her draft and much of Mauro's appellate brief was word for word the same as her post-trial brief. *fn4 Landise's uncontradicted testimony was corroborated by two persons who had shared space in the same office, Bernard Simbole and Jeffrey Fanger. *fn4
In addition to her testimony, Landise presented substantial documentary evidence of the existence of a partnership in the form of tax returns and insurance and bank documents. The 1987 federal and District of Columbia tax returns for the law firm were signed by both Landise and Mauro, and included a K-1 distribution of partnership income form which listed both parties as equal partners. The 1988 federal and 1988 and 1989 District of Columbia tax returns for the firm were for the period of 1988 through March 15, 1989; they were signed solely by Mauro and filed after Landise had left the law firm to join the federal government. The 1988 K-1 form still listed Landise as a partner, but Landise's share of the partnership had been reduced from 50% to 34%; Mauro's share correspondingly had increased from 50% to 66%. Applications for malpractice insurance and a November 16, 1988, check for the insurance premium for the law firm of Mauro and Landise were signed by Mauro as partner and listed Landise as a partner. A bank signature card for the law firm also listed both parties as partners. The record demonstrates that documents filed on behalf of the law firm "Mauro and Landise" reflect that Landise was a partner and, in most cases, an equal partner, with Mauro. Mauro testified that after Landise left the firm, he acquired a new tax identification number for his business, and began using a new name, "Mauro & Associates."
Mauro's testimony painted a different picture of the terms of his understanding with Landise. According to Mauro, there was no partnership. Rather, he offered Landise only office space, and to pay her a salary, while she established her own practice. He also testified, however, that he informed her that if she were willing to share expenses, he would add her name to the letterhead. Mauro testified that he made most of the decisions at the firm, did all the planning in the Tuerr case and performed all of the substantive in-court work for both the Virginia and District of Columbia cases handled by the firm. Mauro stated that, as an experienced lawyer, he had no need to go into partnership with a fledgling lawyer such as Landise. He conceded, however, that a firm with more than one attorney would likely attract clients better than a sole practitioner. Mauro also testified that he advanced all of the money needed by the law practice. Landise corroborated Mauro's testimony in this regard by testifying that she did not contribute any substantial amount of money, but said that she did contribute some personal property — [725 A2d Page 449]
law books, office equipment and a microwave oven. *fn5
Mauro admitted signing tax filings, malpractice insurance application papers and banking records which listed Landise as a partner, but denied the assertion of partnership contained on the face of these documents. Instead, Mauro claimed, he filed partnership tax returns naming Landise as a partner purely as a benefit to Landise; as the firm's profit was less than her draw, if she were listed as a partner, she would then not have to pay taxes on the money she received from the firm. *fn6
At trial, one of Mauro's principal arguments that Landise was not his partner was his contention that because Landise was not admitted to practice in the District of Columbia, he would not have, as a matter of fact, and could not have, as a matter of law, entered into a partnership to practice law with Landise in the District. Mauro testified that he would not have entered into a partnership with a lawyer unlicensed in the District. During trial, repeated reference was made to Landise's failure to seek admission to the D.C. Bar, her actions in the course of representing the firm's clients, and whether those actions constituted unauthorized practice. In closing argument, Mauro's counsel argued to the jury that "the Judge will tell you if you conclude that [Landise's] practice in D.C. was without a license, you must find for Mr. Mauro you must do it." (Emphasis added). *fn7
The trial court refused Landise's request to bifurcate the issue of partnership from the issue of unauthorized practice. Instead, the jury was instructed and given a special verdict form consisting of six questions, the first of which concerned the existence of a partnership and the last of which addressed the issue of unauthorized practice. *fn8 The jury [725 A2d Page 450]
found that Landise and Mauro did not enter into an oral partnership contract and that Landise had engaged in the unauthorized practice of law in the District of Columbia. Landise moved for a new trial and for judgment as a matter of law on the issue of whether Landise had engaged in the unauthorized practice of law, both of which were denied by the trial court.
Landise argues that the judge's instructions concerning the unauthorized practice of law issue may have distorted the jury's consideration on the partnership issue, thereby seriously prejudicing her. She contends that the case must be retried because there is a possibility that the jury may have rested its verdict on an impermissible basis, and this court cannot determine the basis for the jury's finding that there was no partnership. See District of Columbia v. White, 442 A.2d 159, 165 (D.C 1982) (holding that where several theories of liability, one impermissible, may account for the verdict, if court cannot determine upon which theory jury relied, case must be remanded for retrial). But see Nimetz v. Cappadona, 596 A.2d 603, 607-08 (D.C. 1991) (noting that White rule cannot be invoked by a defendant who fails to preserve issue by requesting appropriate jury instruction). Specifically, Landise contends that based on the jury instructions and jury verdict form, it is impossible to say whether the jury found there was no partnership because of a failure of evidence of formation of a contract or because it considered that no partnership contract could be lawful or enforceable because appellant had engaged in the unauthorized practice of law in the District of Columbia.
As a procedural matter, we perceive no reversible error, standing alone, in the format of the trial court's instructions and its inclusion of question six on the jury verdict form concerning Landise's unauthorized practice of law. *fn9 As she disagreed with the trial court on the relevance of her alleged unauthorized practice to her partnership claim, *fn9 Landise properly requested a special verdict in order to preserve for appeal the issue of the availability of an unauthorized practice defense. See Robinson v. Washington Internal Medicine Assoc., 647 A.2d 1140, 1143 (D.C. 1994) (citing Nimetz v. Cappadona, supra, 596 A.2d at 607-08).
We do disagree, however, with the trial court's legal conclusion necessitating this procedure, that if Landise had engaged in unauthorized practice in the District of Columbia she could not prevail in her claim against Mauro. The District of Columbia Uniform Partnership Act defines a partnership as "an association of two or more persons to carry on as co-owners of a business for profit." D.C. Code § 41-105 (a). Proof of the existence of a partnership depends on evidence that the purported partners intended "to associate together to carry on as co-owners for profit." Beckman v. Farmer, supra note 1, 579 A.2d at 627. These principles of partnership law apply to lawyers creating associations to form law firms. Lawyers, of course, are also subject to the rules governing their professional conduct promulgated by this court. See D.C. Code § 11-2501 (1995); D.C. Bar R. X (1998). Under those rules, lawyers admitted to practice in the District of Columbia are permitted to enter into partnerships with lawyers from other jurisdictions. See Code of Professional Responsibility DR 2-102 (D); Rule of Professional Conduct 7.5 (b). There is no prohibition on an attorney sharing fees in partnership with an attorney licensed to practice in another state, see Charles W. Wolfram, Modern Legal Ethics, 867 n.98 (1986) (citing Dietrich Corp. v. King Resources Co., 596 F.2d 422, 426 (10th Cir. 1979)), nor indeed, [725 A2d Page 451]
since 1991 in our jurisdiction, with nonlawyers under certain specific circumstances, see Rules of Professional Conduct 5.4 (a)(4) and (b). *fn10 Thus, the fact that Landise was not admitted to the D.C. Bar did not in and of itself make her or Mauro incapable of entering into partnership with each other under governing principles of partnership law, or render their agreement to share fees unethical under our rules — assuming such an agreement were found to exist.
A somewhat different question is whether Landise's unauthorized practice of law is available to Mauro as a defense to vitiate a partnership agreement to which he was a party. We hold that in the context of a claim for breach of a law partnership agreement inter sese, brought by a party claiming to be a partner, the facts that the claimant, because she was not admitted to practice in the District of Columbia, may have engaged in the unauthorized practice of law in this jurisdiction does not bar the claim against a knowing, willing purported partner or firm. *fn11 There is no public interest at stake in such a private dispute that would be sufficiently furthered by refusing to enforce the claim. See J. H. Marshall & Assoc., Inc. v. Burleson, 313 A.2d 587, 599 (D.C. 1973) (citing Code of Professional Responsibility Canon 3, Note 1 ("The condemnation of the unauthorized practice of law is designed to protect the public from legal services by persons unskilled in the law.")). To render the contract unenforceable in such a situation would frustrate the expectations of a party and deny that party the fruit of her labors. See Metzler v. Edwards, 53 A.2d 42, 44-45 (D.C. 1947); Restatement (Second) of Contracts § 178 (1981); *fn11 cf. Cevern v. Ferbish, 666 A.2d 17, 21 (D.C. 1995); id. at 26 (Ruiz, J., dissenting). Finally, while we recognize that Landise's unauthorized practice of law violates our own court rule, D.C. App. R. 49, we cannot lose sight of the fact that Landise's unauthorized practice directly implicated Mauro's own violation of our professional rules as well. *fn11 Although some might [725 A2d Page 452]
propose that we simply declare a "pox on both their houses," to do so in this context would be overly simplistic as it would bestow a windfall, at the expense of another and without significant public benefit, on a party who participated in and benefited from the unauthorized practice.
In this case, Landise's unauthorized practice was only marginally relevant as evidence of Mauro's subjective intent: whether Mauro would have wanted to enter into a partnership with Landise in a law firm operating in the District of Columbia when she was not admitted to practice here. But see Beckman, supra, 579 A.2d at 627 ("[T]he question [of partnership] ultimately is objective: did the parties intend to do the acts that in law constitute partnership?") (internal quotations and citations omitted). Whatever inference favorable to Mauro's subjective intent not to enter into a partnership with Landise could have been drawn from a determination that Landise's practice in the firm would have been unauthorized was severely undermined, moreover, by undisputed evidence that the two of them practiced under the law firm name, "Mauro and Landise." To hold Landise out as his partner — as Mauro clearly did in the firm's name and in other documentation presented to an insurer, bank and local and federal taxing authorities — was powerful evidence of a partnership between the two. See id.
In this context, the jury's verdict finding both that there was no partnership and that Landise had engaged in the unauthorized practice of law raises a serious question of how the jury came to its decision on the partnership question. Specifically, even though the trial court properly submitted separate questions on the two issues, we cannot confidently conclude that the jury found, after weighing the evidence, that there was no partnership because Landise failed to meet her burden of proving the existence of a partnership contract, or whether the jury concluded that there could be no partnership because Landise engaged in unauthorized practice in the District of Columbia. *fn12 The latter would be an impermissible verdict because it would be based on an incorrect understanding of the applicable legal principles. On this record, there is evidence to support Landise's contentions that the jury may have been confused about the minor import that her unauthorized practice of law should have had in the jury's evaluation of the central issue in the case, whether there was a partnership between Landise and Mauro, and that the jury's verdict therefore may have rested on an impermissible basis. See White, supra, 442 A.2d at 165.
A related issue on appeal is Landise's claim that the trial court erred in denying her motion for a directed verdict on the unauthorized practice of law issue. A directed verdict is proper when, reviewing the evidence in the light most favorable to the nonmovant, the jury has "no evidentiary foundation on which a reasonable trier of fact could base a reliable verdict. . . ." Jackson v. Condor Management Group, Inc., 587 A.2d 222, 224 (D.C. 1991). We review motions for judgment as a matter of law de novo. See WMATA v. Jeanty, No. 96-CV-862, slip op. at 5 (D.C. Oct. 1, 1998). Landise argues that a directed verdict was required in this case because Mauro failed to present the evidentiary foundation for a jury finding that Landise engaged in the unauthorized practice of law in the District of Columbia.
The judge instructed the jury that either holding out as a licensed lawyer or engaging in the practice of law in the District of Columbia would constitute unauthorized practice unless the person is enrolled as an active member of the Bar of the District of Columbia. *fn13 For reasons already [725 A2d Page 453]
indicated, there was sufficient evidence which could lead a reasonable juror to find that Landise was engaged in the unauthorized practice of law, by, at a minimum, finding that Landise held herself out, without disclaimer, as authorized to practice in the District of Columbia even though she was not admitted to practice here. *fn14
We now turn to the evidentiary ruling made in the course of the trial that we determine was erroneous and, when considered against the background we have set out in previous sections, requires a new trial.
At trial Landise sought to introduce evidence that during a meeting held on February 26, 1989, the day before Landise was to join the federal government and before the Tuerr trial judgment was finally affirmed on appeal in 1992, Mauro proposed to change their respective shares in the Tuerr fee so that Landise would receive a reduced share, one third of any eventual fee in the Tuerr case, and divide equally the other assets and liabilities of the firm. The trial court excluded Mauro's proposal on the ground that it constituted a settlement offer. *fn15 The trial court allowed Landise to testify only to the fact that the two of them met to discuss the winding up of the law firm and that they had discussions about how the proceeds of the firm would be divided, but did not allow the specific terms of Mauro's proposal to be presented to the jury. The trial court stated that the actual discussions between Landise and Mauro would be "only marginally probative" and that Mauro would have been prejudiced by testimony of the terms of his offer to settle a dispute. On appeal, Landise argues that the substance of Mauro's proposal was relevant and admissible to show that Mauro acknowledged the existence of a partnership between them and that its exclusion caused her substantial prejudice.
The law of evidence generally excludes offers to compromise a disputed claim of liability. See Beckman v. Farmer, supra, 579 A.2d at 646; John W. Strong, McCormick on Evidence § 266, at 194 (4th ed. 1992). This principle, which reflects skepticism about the relevance of such offers to the issue of liability and is intended to promote out-of-court settlements, is not applicable when there is no actual dispute. See Crain v. Allison, 443 A.2d 558, 565 (D.C. 1982). In this case, the trial court declined to admit the evidence because it considered that it constituted an offer of settlement, and [725 A2d Page 454]
that Mauro's statement would add very little to Landise's "overwhelming evidence" on the partnership issue.
The trial court's exclusion of Mauro's proposal as coming within the scope of inadmissible offers to compromise was an abuse of discretion. First, the record does not support a finding that at the time of the February 26, 1989 meeting, there was a dispute between the parties. To the contrary, indications are that the relationship between the parties at that time was still amicable. The meeting occurred the day before Landise began to work for the federal government and was for the purpose of dividing the firm's assets and liabilities as a result of Landise's departure from the firm. Subsequent to the meeting, Landise prepared a draft post-trial brief on the Tuerr case, filed by Mauro on March 16, 1989, which supports the view that Mauro and Landise were still working together. Although there was some evidence that Landise considered taking legal action against Mauro soon after, this lawsuit was not filed until nearly two years later, after the Tuerr judgment, which constituted the firm's principal asset, was affirmed on appeal. In light of the firm's otherwise meager fees, there would have been little reason for Landise to assert her partnership claim against Mauro before that time. "[O]nly offers of compromise made after a controversy ha[s] arisen fall within the exclusionary rule and, here, [Mauro's] offer was made before [Landise] brought the suits. . . ." Joyner v. Jonathan Woodner Co., 479 A.2d 308, 312 n.5 (D.C. 1984).
Second, we perceive no basis for the trial court's rationale that because Landise's evidence of a partnership with Mauro was "overwhelming," evidence of Mauro's proposal when their relationship came to an end was of marginal significance to Landise's presentation of her partnership claim to the jury. Although the trial court undoubtedly has discretion to exclude cumulative evidence, presentation of the terms of Mauro's proposal was not merely cumulative, but served to respond to a particular component of Mauro's defense. During trial Mauro claimed that notwithstanding objective evidence of partnership, *fn16 he never intended to form a partnership with Landise, whom he described as a neophyte to the profession. Mauro's proposal, therefore, evidencing as it did his understanding at the time that their existing relationship entitled Landise to a one-half share in the firm's fees, as demonstrated by his proposal to reduce her portion of the Tuerr fee but otherwise equally divide the firm's fees and liabilities with Landise, was highly relevant and probative of the fact that he had intended to go into partnership with Landise notwithstanding his contrary protestations at trial. See D.C. Code § 41-106 (4) (1990) ("The receipt by a person of a share of the profits of a business is prima facie evidence that [s]he is a partner in the business"); see Beckman, supra, 579 A.2d at 628. Exclusion of the substance of the terms of Mauro's offer was correspondingly highly prejudicial to Landise.
As the record reveals, and was remarked upon by the trial judge who heard the evidence firsthand, the weight of the evidence overwhelmingly supported the existence of a partnership between Mauro and Landise. Viewed in the context of the evidence and instructions at trial, the jury's verdict that there was no partnership, therefore, can be explained on either of two grounds: either the impermissible one based on Landise's unauthorized practice, see discussion in text supra, or the jury's crediting Mauro's statements that he did not intend to enter into partnership with Landise. The excluded terms of Mauro's proposal in 1989 directly contradicted Mauro's testimony at trial concerning his purported intent. In the totality of this trial as it played out, the trial court's erroneous exclusion of that evidence cannot be deemed harmless and Landise is thus entitled to a new trial. *fn17
Reversed and remanded. [725 A2d Page 455]