Cazares v. Saenz

Brief Fact Summary. Attorney 1 entered into an agreement with Attorney 2 and Attorney 3, working as a partnership, for the partnership to assist Attorney 1 in prosecuting a personal injury matter.  Attorney 1 wished only to work with only Attorney 2 and not Attorney 3.  Attorney 2 did a substantial amount of the work on the personal injury matter.  Attorney 2 became a judge and as such no longer could work on the personal injury matter.

Synopsis of Rule of Law. "[W]here one member of a two-person law firm becomes incapable of performing on a contract of association with another lawyer, the obligations of the parties to the contract are discharged if it was contemplated that the incapacitated attorney would perform substantial services under the agreement."

Facts. The Defendant, Phil Saenz (the "Defendant"), was an inexperienced attorney when he was contacted by the Mexican consulate in November 1978 about the electrocution of a Mexican national, Raul Gutierrez ("Mr. Gutierrez").  Mr. Gutierrez retained the Defendant and their retainer agreement allowed the Defendant to "retain co-counsel if he deems it necessary" and also stated "[a]ttorney fees shall be 33 1/3% of the net recovery; i.e., after all costs and medical expenses."  In September 1979, the Defendant agreed to associate the Plaintiff, Cazares & Tosdal (the "Plaintiff") on the Gutierrez case.  However, the Defendant wished to only work with the Roy Cazares ("Mr. Cazares") and not Thomas Tosdal ("Mr. Tosdal").  However, the Defendant did not care if Mr. Tosdal worked on the case if he did not have any interaction with him.  Mr. Cazares and the Defendant agreed to split the contingent fee.  The complaint filed in November 1979 had both the Mr. Cazares's and the Defendant's name on it.  For the next two and a half years, Mr. Cazares performed most of the legal work on the case, the Defendant maintained client contact and Mr. Tosdal did virtually nothing.  In June of 1981, the Plaintiff partnership dissolved, but they retained certain cases as partnership assets including Mr. Gutierrez's case.  In May of 1982, Mr. Cazares was appointed municipal court judge.  Around this time, Mr. Cazares urged the Defendant to allow Mr. Tosdal to assist in prosecuting Mr. Guitierrez's matter.  Mr. Tosdal also wrote the Defendant a letter offering his services.  Instead, however, the Defendant associated himself with another personal injury attorney, Isam Khoury ("Mr. Khoury") and hired a young attorney to do research.  The Defendant settled Mr. Guiterrez's case for $1.1 million dollars, which entitled him to a fee of about $366,000.  Out of that fee, the Defendant paid Mr. Khoury $40,000 and the research attorney $7,000.  About two weeks after the case settled, the Defendant offered to pay the Mr. Cazares $40,000 for his work on the case.  Mr. Cazares declined and said the Defendant owed the defunct Plaintiff partnership about $183,000.  This case was tried by a referee by stipulation and a judgment was entered in favor of the Plaintiff for $159,833.00.

Issue. "Are plaintiffs Roy Cazares and Thomas Tosdal, former partners in the law firm of Cazares & Tosdal, entitled to one-half of a contingent fee promised them by defendant Phil Saenz when he associated the firm on a particular personal injury case, notwithstanding that Cazares became a municipal court judge before the case was settled?"
•    How do the doctrines "frustration of purpose, incapacitation of parties to a contract, and the proper measure of quantum meruit recovery" apply to an attorney fee situation?

Held. "[W]here one member of a two-person law firm becomes incapable of performing on a contract of association with another lawyer, the obligations of the parties to the contract are discharged if it was contemplated that the incapacitated attorney would perform substantial services under the agreement." The court concluded that the Defendant was within his rights when he refused to work with Mr. Tosdal after Mr. Cazares became a judge.  According to Restatement Second, "[W]here a contract contemplates the personal services of a party, performance is excused when that party dies or becomes otherwise incapable of performing."  Additionally, "If the existence of a particular person is necessary for the performance of a duty, his death or such incapacity as makes performance impracticable is an event the non-occurrence of which was a basic assumption on which the contract was made."  The Defendant and Mr. Cazares "testified that Cazares's prosecution of the case to completion was a 'basic assumption on which the contract was made.' "
•    "[Mr.] Cazares and [Mr.] Tosdal are not entitled to 50 percent of the contingent fee as provided in the association agreement. They may, however, recover the reasonable value of the legal services rendered before [Mr.] Cazares's incapacitation, prorated on the basis of the original contract price."  The reasonable value of legal services is referred to as quantum meruit.  The courts then goes into a detailed discussion of how to calculate the reasonable value of legal services on an hourly basis and on a contingency basis.  "[I]n this type of case, where the contract is between associated attorneys, an unforeseen event which renders complete performance by one party impossible should not result in a windfall to the other attorney.  In essence, having contracted with the lawyer or firm to pay a particular fee, the associating attorney is estopped to deny that the pro rata contract price accurately measures the reasonable value of the services rendered."

Discussion. This case offers an interesting discussion of frustration of purpose in the context of relationships between attorneys.