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Braude & Margulies, P.C. v. Fireman's Fund Insurance Co.

January 5, 2007

BRAUDE & MARGULIES, P.C., PLAINTIFF,
v.
FIREMAN'S FUND INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

Braude & Margulies, P.C. ("B&M") is a law firm that specializes in construction law. Because its client, J.A. Jones Construction Company ("Jones"), dissolved after bankruptcy without paying B&M for work on two matters, B&M attempts to recover attorneys' fees by bringing suit against Fireman's Fund Insurance Company ("Fireman's"), who was surety for Jones on the two projects. Unfortunately for B&M, none of the theories it advances is sufficient to establish liability on the part of Fireman's for Jones's legal bills. The Amended Complaint will be dismissed.

I. BACKGROUND FACTS

Fireman's is a surety company. Am. Compl. ¶ 6. It issued performance and payment bonds to Jones for construction projects at the Venetian Resort and Casino Complex in Las Vegas, Nevada (the "Venetian Project") and at the J. Murray Atkins Library at the University of North Carolina (the "Atkins Project"). Id. ¶¶ 6-8. Under the performance bonds, Jones agreed to indemnify and hold Fireman's harmless in the event a claim were made against Jones for alleged failure to perform its construction duties. Id. ¶ 6.

When disputes arose concerning the two Projects, Jones retained B&M to represent it. Id. ¶ 8. Jones and B&M entered into two separate written contingency agreements under which B&M was to receive specified percentages of any affirmative recoveries that it was able to obtain for Jones. Id. ¶¶ 15 & 28, Exs. D & F. B&M also agreed to represent Jones on any counterclaims that might be asserted against Jones in the litigation. Id. ¶ 16 & 29. Fireman's was not a party to the retainer agreements but, as surety, it had also been named as a defendant in the two suits. Id. As described by B&M, it also represented Fireman's in the two lawsuits because "the adverse parties asserted claims and/or counterclaims against both Jones and [Fireman's]" so that B&M defended Fireman's "pursuant to Jones's indemnification obligation." Id. ¶ 53.

The case involving the Venetian Project went to trial in 2002. Id. ¶ 18. The jury awarded Jones $1.15 million in damages from Lehrer McGovern Bovis ("LMB") and found that LMB was not entitled to any recovery from Jones or from Fireman's on LMB's counterclaims. Id. LMB did not appeal the jury verdict in Fireman's favor, so Fireman's dropped out of the suit. Jones appealed the jury's award, arguing that its recovery was insufficient and the instructions concerning damages were improper. Id. ¶ 20. The Nevada Supreme Court reversed the judgment, in part, in May 2004, and remanded to the trial court for a new trial. J.A. Jones Constr. Co. v. Lehrer McGovern Bovis, 89 P.3d 1009 (Nev. 2004). The case was continued indefinitely in February 2005. Am. Compl. ¶ 25.

The Atkins Project dispute ended with a negotiated settlement in March 2004, under which both parties dropped their respective claims against each other and signed mutual releases. Id. ¶ 31. At the time of this settlement, Herman Braude, a principal of B&M, proposed a new fee arrangement with Fireman's representatives to supercede the prior arrangement with Jones. Id. ¶ 32.

Mr. Braude proposed, informally and then in writing, that Fireman's pay B&M $100,000 as the reasonable value of the services rendered by B&M in reaching the settlement; since, by that time, Jones was protected by Chapter 11, B&M reasoned that its services actually benefitted Fireman's which might otherwise have had to pay out any award against Jones. Id. ¶ 32 & Ex. G. Ron Wills, Fireman's in-house attorney who acted as the surety's representative throughout the settlement discussions, contacted Mr. Braude in early April 2004 and informed him that the fee was reasonable and would be paid. Id. ¶ 33. Despite this assurance and further invoices sent to Fireman's, Fireman's has never paid B&M for its work on the settlement of the Atkins Project dispute.

In the meantime, as indicated, Jones filed for bankruptcy protection under Chapter 11 on September 25, 2003. Id. ¶ 9. The case was filed in the Bankruptcy Court for the Western District of North Carolina, and Fireman's was a major creditor. Id. In October 2003, Jones requested, and received, authorization from the Bankruptcy Court to continue to retain B&M for the disputes concerning the Venetian and Atkins Projects. Id., Exs. A & B. These matters were to be handled on a 25% contingency fee basis. Id., Ex. A.

On February 6, 2004, the Bankruptcy Court entered an order concerning the prosecution of certain bonded construction litigation involving Jones ("Construction Litigation Order"). The Construction Litigation Order appointed the sureties on Jones's construction projects, including Fireman's, to be representatives of Jones "for the purpose of prosecuting, liquidating and collecting the Bonded Claims." Id., Ex. C ¶ 4. Sometime in 2004 after entry of the Construction Litigation Order, Fireman's attorneys informed B&M that Fireman's would be taking over all of Jones's pending construction disputes on which it had been surety, including the Venetian and Atkins Projects. Id. ¶ 24. In January 2005, Fireman's terminated B&M by instructing the law firm to cease any further filings or appearances in connection with the re-trial of the Venetian lawsuit. Id. ¶ 25. As of February 2005, B&M had incurred more than 5,000 hours of attorney time in bringing that case through trial, the appeal process, and preparing the case for re-trial. Id. ¶ 26. At B&M standard billing rates, those hours were worth more than $950,000. Id.

B&M seeks to recover attorneys' fees owed for its work on the Venetian and Atkins disputes, and thus it brought suit against Fireman's with a six-count Amended Complaint:

1. Count I: Breach of an express contract relating to the representation of Jones and Fireman's in the Venetian Project dispute.

2. Count II: Breach of an implied contract relating to the representation of Jones and Fireman's in the Venetian Project dispute.

3. Count III: Breach of an express contract relating to the representation of Jones and Fireman's in the Atkins Project dispute.

4. Count IV: Breach of an implied contract relating to the representation of Jones and Fireman's in the Atkins Project dispute.

5. Count V: Quantum meruit for services rendered relating to both disputes.

6. Count VI: Account stated for services rendered relating to the ...


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