Scamardella v. Illiano

THIEME, Judge. This appeal is from an order of the Circuit Court for Montgomery County apportioning the proceeds of an aggregate settlement of claims arising from an automobile accident and an order denying the appellants’ Motion to Amend the court’s order. The appellants argue alternatively that there was no consent to the settlement, that the settlement agreement was unethically made and should therefore be voided, and that the court abused its discretion in apportioning the settlement. We affirm the court’s order apportioning the settlement, except with regard to the attorney fees assessed against the appellants.

Facts of the Case This case had its genesis in a tragic automobile accident that took place on June 30, 1994. Gloria Illiano was driving southbound on Route 27 in Montgomery County, Maryland. Sara Illiano, her infant daughter, and Giuseppina Scamardella, her mother, were passengers in the car. Jeffrey Fletcher, a teenager driving northbound on Route 27, lost control of his car, crossed over the center line, and violently struck the Illiano vehicle head-on.

Gloria’s injuries kept her in the hospital for several weeks, and eventually proved fatal. She was twenty-four years old and had been married to Fausto Illiano for eighteen months. Giuseppina Scamardella, who was forty-eight years old at the time of the accident, also suffered severe injuries. Sara, then six months old, escaped with minor physical injuries.

Giuseppina Scamardella and her husband, Cresenzo Scamardella, the appellants, who are citizens of Italy and reside in that country, and who speak very little English, retained Paul D. Bekman (Bekman) to represent them for claims arising out of the accident. Fausto ⁸² Illiano retained Bekman on his own behalf, on behalf of Sara, and on behalf of his wife’s estate, of which he is the personal representative. Statement of the Case On October 17, 1994, suit was filed in the Circuit Court for Montgomery County against Fletcher, his employer, William Jarcy (doing business as William Jarcy’s Film Delivery Service), and Century Ford, Inc. (Century Ford). On August 28, 1995, Century Ford filed a motion for summary judgment.

On February 16, 1996, the circuit court granted summary judgment in favor of Century Ford. That decision was appealed to this Court and was affirmed on April 7,1997. In October 1995, Fausto Illiano and Cresenzo Scamardella met with Bekman to discuss settlement of their claims in the event judgment in favor of Century Ford was affirmed on appeal. It was proposed that they would accept from Fletcher and Jarcy (the defendants) $1.25 million in settlement of their claims.

The amount of the settlement offer represented the full extent of insurance coverage of the defendants. No apportionment of the settlement proceeds among the parties was proposed. It was, however, proposed that the parties would later agree to a division of the settlement. If, after acceptance of the $1.25 million settlement, agreement could not be reached on a division of the proceeds, the parties would obtain other counsel, and the court would have to apportion the monies.

Although it is disputed by the appellants, it seems clear that assent to this plan was given by all the parties. Pursuant to the parties’ agreement, Bekman accepted the offer of $1.25 million in settlement of the parties’ claims. At Bekman’s request, Giuseppe DiRosano, the appellants’ nephew, who was acting as a go-between for the appellants and Bekman, conveyed to the Scamardellas Bekman’s proposal that the funds be allocated ninety percent (90%) to the claims of Fausto Illiano, Sara Illiano, and the estate of Gloria Illiano, and ten percent (10%) to the claims of Mr. and Mrs. Scamar-della. When DiRosano advised Bekman that the appellants rejected the proposal, Bekman asked DiRosano to inform ⁸³ them that they should retain other counsel.

The appellants, through DiRosano, hired new counsel. On July 16,1997, when it had become apparent that counsel for the parties could not agree, Bekman filed a Motion to Allocate the Proceeds of Settlement. After filing the motion to allocate, Bekman withdrew from further participation in the case. In response to the motion to allocate, the appellants, through new counsel, objected to a division of the proceeds in the manner proposed.

In an amended reply, they asserted that they had not consented to the settlement. On March 11, 1998, the court, sitting as trier of fact, concluded after plenary hearings that the appellants had consented to the settlement and that Bekman had not breached any duties to them. The court received evidence regarding the injuries to Mrs. Scamardella, the four-week period of hospitalization of Gloria before her death, and the economic and noneconomic losses to Sara and Fausto due to Gloria’s death. The court allocated the settlement monies in a manner proportionate to the respective injuries sustained and in consideration of the law of damages applicable to the parties’ claims. 1 Attorney fees of one-third were deducted from the parties’ allocations, as per their contingent fee arrangement.

The appellants object to payment of the contingent fee out of their share of the settlement.. After further hearing on April 17, 1998, the court denied the Appellants’ Motion to Amend Judgment and entered judgment accordingly. The appellants have appealed those determinations, their appeal being timely noted on May 8,1998. Questions Presented The appellants present two questions for our review, which we have recast in an abbreviated form: ⁸⁴ I. Did the trial court err in finding that the appellants had authorized settlement of their claims when their assent was arguably ambiguous and when they were not informed of the apportionment of the settlement prior to their consent being solicited?

II

Did the trial court abuse its discretion in allocating the $1.25 million in settlement proceeds? In response to Question I, we say, “no.” In response to Question II, in the main we say, “no.” On the issue of the court’s allotment of attorney fees, we reverse and remand. Standard of Review The two questions presented to us necessitate that we employ different standards of review. We will set out those standards at the beginning of the substantive discussion of each issue below.

Discussion Authority to Settle We begin by noting that it is well settled that the attorney’s authority to settle claims is a question of fact. [T]he burden of proof of express authority of an attorney to compromise a claim rests upon the party asserting such authority. This is so because the attorney-client relationship is governed by the law of agency and the issue of burden of proof must be determined by agency principles. As the Court of Appeals observed in Fertitta v. Herndon, 175 Md. 560 [, 3 A.2d 502 ] (1939): “[W]here the relation of the agency is dependent upon the acts of the parties (as here), the law makes no presumption of agency, and then it is always a fact to be proved, with the burden of proof resting upon the person alleging the agency to show not only the fact of its existence, but also its nature and extent.” Kinkaid v. Cessna, 49 Md.App. 18, 23 , 430 A.2d 88 (1981) (quoting Fertitta v. Herndon, 175 Md. 560, 564 , 3 A.2d 502 (1939)) (second alteration in original) (added emphasis in ⁸⁵ original deleted) (citations omitted). When the trial court determines a question of fact without a jury, we review such determinations only to see that they are not “clearly erroneous.” Md. Rule 8—131(c); Shallow Run Limited Partnership v. State Highway Admin., 113 Md.App. 156, 173-74 , 686 A.2d 1113 (1996) (discussion of “clearly erroneous” standard of review).

The trial court found as a matter of fact that the appellees had authorized Bekman to settle their claims as a contingency following upon the failure of the appeal of the summary judgment of their claims against Century Ford. There is sufficient evidence in the record to justify such a determination. The testimony of Bekman and Fausto Illiano, which is the obvious basis for the court’s conclusion, was that Mr. Scamardella, at the October 1995 meeting, both verbally (by saying, in Italian, ‘Tes, I understand”) and nonverbally (by nodding affirmatively), clearly indicated his assent to the contingent settlement plan. We will not disturb the court’s finding based on that evidence.

See Carroccio v. Thorpe, 230 Md. 457, 463-64 , 187 A.2d 678 (1963) (upholding the trial court’s finding of authority to settle claims as not clearly erroneous); Posko v. Climatic Control Corp., 198 Md. 578, 584 , 84 A.2d 906 (1951) (same). Maryland Lawyers’ Rules of Professional Conduct Rule 1.8(g) The appellants argue in the alternative that Bekman violated his ethical duty when representing multiple clients by failing to make adequate disclosure of all the factors of the aggregate settlement before obtaining consent to settle. On that basis, the appellants believe, the settlement should be set aside. We disagree.

The Maryland Lawyers’ Rules of Professional Conduct (MLRPC) provide that: A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients ... unless each client consents after ⁸⁶ consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement. MLRPC Rule 1.8(g) (1986). The appellants argue that the duty to disclose “the participation of each person in the settlement” requires that each client be informed not only of the involvement of all other clients in the settlement, but also of the exact share of the settlement proceeds that each is to receive. The weight of authority does not marídate that view in this case.

The cases that interpret Rule 1.8(g), 2 including those cited by the appellants, are in the main about the failure to obtain consent, not about the scope of disclosure. See ABA, Annotated Model Rules of Professional Conduct 134-35 (3d ed.1996) (annotations to Rule 1.8(g)) (citing In re Sonnier, 157 B.R. 976 (Bankr.E.D.La.1993); Knisley v. City of Jacksonville, 147 Ill.App.3d 116 , 100 Ill.Dec. 705 , 497 N.E.2d 883 (1986), appeal denied, 113 Ill.2d 575 , 106 Ill.Dec. 47 , 505 N.E.2d 353 (1987); In re Deloney, 470 N.E.2d 65 (Ind.1984); Estate of Vafiades v. Sheppard Bus Serv., Inc., 192 N.J.Super. 301 , 469 A.2d 971 (Law Div.1983); Oklahoma ex rel. Oklahoma Bar Ass’n v. Watson, 897 P.2d 246 (Okla.1994); In re Green, 291 S.C. 523 , 354 S.E.2d 557 (1987)); see also Hayes v. Eagle-Picher Indus., Inc., 513 F.2d 892 (10th Cir.1975); Scott v. Randle, 697 N.E.2d 60 (Ind.Ct.App.1998). New cases have addressed directly the scope of disclosure required by Rule 1.8(g).

See In re Anonymous Member of the South Carolina Bar, 297 S.C. 517 , 377 S.E.2d 567, 568 (1989) (noting the dearth of relevant authority); cf. Acheson v. White, 195 Conn. 211 , 487 A.2d 197, 201 (1985) (reserving the question of whether an attorney with a conflict of interest arising from multiple representation “can never effectively ⁸⁷ make the required disclosure”). One case that does seem to support the appellants’ contention directly is Quintero v. Jim Walter Homes, Inc., 709 S.W.2d 225 (Tex.App.1985). Quinte-ro involved the settlement of nearly 350 claims of misrepresentation against a builder. The appellants in that case had, unbeknownst to them, won a separate judgment against the appellee prior to consenting to a significantly smaller settlement.

The Court set aside the settlement on the basis that the appellants had not been “informed of the nature and settlement amounts of all the claims involved in the aggregate settlement, nor were they given a list showing the names and amounts to be received by the other settling plaintiffs.” Id. at 229 . Quintero is distinguishable on its facts from the case sub judice. Quintero involved a class-action-sized multiple representation, where all the plaintiffs were effectively anonymous, and their claims and their settlement allocations unknown to each other. The allocations were to be determined by the plaintiffs’ attorney, and the process was to be overseen by the defendant’s legal staff.

Additionally, upholding the settlement would have involved a clear injustice, given that the judgment previously won by the appellants was several times the size of the settlement that they had agreed to without actual knowledge of the judgment. None of these elements are present in the case sub judice. Here the parties are all well known to each other, as are their claims. The settlement amount is plain.

A method for formulating the apportionment was agreed upon, and any resulting apportionment either would be disclosed or would be transparent. Finally, there would be no such obvious injustice in upholding the settlement in this case where it is agreed the maximum recovery had been obtained. In fact, quite the opposite situation pertains. Upsetting the settlement would work against justice.

Additionally, other cases have held that an incomplete disclosure did not defeat a consented-to settlement when the information provided was adequate to make an intelligent decision to consent. See In re Petition of Mal de Mer Fisheries, Inc., 884 F.Supp. 635, 639-40 (D.Mass.1995) (up ⁸⁸ holding settlement even though fact of aggregate settlement was not disclosed); In re Anonymous Member of the South Carolina Bar, 377 S.E.2d at 568 (stating in dictum that safeguards to fairness of settlement were adequate, and holding that no disciplinary sanction ought to be imposed in that particular case, despite the fact that attorney failed to disclose names and settlement amounts of other parties to aggregate settlement); cf. Acheson, 487 A.2d at 199-200 (upholding the conclusion that “the appellant’s consent to the terms of the stipulated judgment as they affected her interest in [the property at issue] did not necessarily depend upon her specific knowledge of what interests in that property might be retained by other defendants not similarly situated”). Like these cases, we hold that the information provided to the appellants was sufficient to safeguard their rights, and we do not find the need to apply Rule 1.8(g) with the harsh force of Quintero . Another crucial distinction between the present case and all the others we have examined is that in this case the deficiency of disclosure did not result from a withholding of information but rather from a failure to formulate in advance the apportionment itself.

This distinction is admittedly rather fine. The appellants were left with an obvious uncertainty concerning apportionment when making their decision to consent to the settlement proposal. On the other hand, the very failure to formulate an apportionment preserved the representation from the major conflict of interest that occurs in aggregate settlement cases. In cases like the present one, where the maximum available settlement was reached, the apportionment of the settlement is exactly the locus of the conflict for the attorney: however much one party receives automatically means a detriment to the other party or parties.

See North Carolina State Bar v. Whitted, 82 N.C.App. 531 , 347 S.E.2d 60, 64 (1986), aff'd, 319 N.C. 398 , 354 S.E.2d 501 (1987); In re Guardianship of Lauderdale, 15 Wash.App. 321 , 549 P.2d 42, 45-46 (1976). If the multiple representation is to continue, this conflict may be resolved only by the consent of all the parties, fully informed as to the apportionment of the settle ⁸⁹ ment. In the present case, when this particular conflict of interest arose the parties sought and obtained separate counsel, thus avoiding the conflict. The appellants further argue that the substitute for apportionment — namely, the agreement to seek consensus concerning apportionment or, failing that, to petition the court to divide the settlement proceeds — was void as an “agreement to agree.” The appellants cite Horsey v. Horsey, 329 Md. 392 , 620 A.2d 305 (1993), for this proposition.

The agreement in Horsey was not, however, an “agreement to agree” strictly speaking. Rather, it was an agreement to agree with a provision for arbitration following upon a failure to agree. The difficulty came when both parties waived arbitration, as was their right. Because of the waiver of arbitration, the modification provision of the Horseys’ separation agreement is simply an agreement to attempt to agree in the future, without any guidelines, formula or basis for ascertaining the amount of modification.

In accordance with the principles that the terms of a contract must be sufficiently definite for enforcement and that a court will not make a contract for the parties, it is generally held that an “agreement to agree” is unenforceable. Id. at