Schackow v. Medical-Legal Consulting Service, Inc.

Moore, J., delivered the opinion of the Court. Appellant, Gerald D. Schackow, a member of the Florida Bar, was trial counsel for the successful plaintiff in a serious medical malpractice action tried before a jury in Gainesville, Florida in March 1977. Appellee, Medical-Legal Consulting Service, Inc., a Maryland corporation engaged in the business of providing consulting services to attorneys in the preparation of cases involving medico-legal issues, brought suit against appellant in the Circuit Court for Montgomery County to enforce payment of a ten percent contingent fee for services rendered in the case under a consulting agreement with attorney Schackow and his client. The total recovery in the malpractice action was 1.435 million dollars.

The court below (Mitchell, J.) awarded judgment to the consulting firm in the sum of $130,351.25. We shall affirm. I The malpractice action had its genesis in Florida when John Judd Dixon, age 35, fell while waterskiing on June 5, 1974. Twelve days later, with symptoms of headaches, personality changes, and amnesia, Mr. Dixon went to his family physician, Dr. George Little.

The latter prescribed Midrim and ordered a routine neurological examination for June 26,1974. Two days before the examination, Mr. Dixon, suffering from the same but aggravated complaints, went to the emergency room of the North Florida Regional Hospital. ¹⁸¹ He was seen by Dr. Donald T. Quick, the neurologist with whom his routine examination had been scheduled. Dr. Quick admitted Mr. Dixon and arranged for a series of neurological tests. On June 25, 1974, the day following Mr. Dixon’s admission to the hospital, a skull x-ray and brain scan were performed.

Dr. A. J. Dickhaus, a radiologist, interpreted the scan between 7:30 and 10:55 that very morning. It was the radiologist’s opinion, based on the tests, that Mr. Dixon had a subdural hematoma — bleeding inside the skull beneath the dura mater, the outermost of three membranes covering the brain. The report and opinion were transmitted routinely to Dr. Quick. Meanwhile, Mr. Dixon’s condition was rapidly deteriorating.

At 12:45 p.m. the pressure from the expanding hematoma caused a portion of the brain to herniate by protruding into a sinus cavity. An hour later Dr. Joseph Cauthen, a neurosurgeon, bored emergency and temporary burr holes to relieve the pressure. Subsequently, complete surgical procedures were employed to remove the hematoma. Due to the herniation of his brain, caused by delay in proper medical treatment, Mr. Dixon was rendered cortically blind and a quadriplegic.

While a patient at the Veterans Administration Hospital in Gainesville, he was adjudged mentally incompetent by a Florida court, and his wife, Glenda Ann Dixon, was appointed as guardian. (At the time of the accident, Mr. Dixon held a Master’s Degree in Business Administration and was a doctoral candidate at the University of Florida.) (a) The Contract with MLCS Mrs. Dixon consulted Gerald D. Schackow, Esq., the defendant in this case, with reference to a potential malpractice suit against the health care providers who treated her husband. Mr. Schackow agreed to accept the case. Although admitted to practice in 1966 and possessing substantial trial experience, he had never handled a medical malpractice suit and therefore embarked upon a search for ¹⁸² help in assembling a case against the physicians and the hospital.

Another Florida attorney recommended the plaintiff, Medical-Legal Consulting Service, Inc. (MLCS), headquartered in Chevy Chase, Montgomery County. MLCS was described in the proceedings below as a consulting service designed to assist attorneys in preparing medically oriented litigation and in locating physicians willing to testify at trial; it essentially serves as an educator and conduit, bringing together attorneys and physicians and familiarizing them with the critical aspects of the case. MLCS determined, in a written "Preliminary Analysis” dated May 9, 1975, that Mr. Dixon’s malpractice claim was meritorious. Thereafter, on May 20, 1975, a contract for assistance in the preparation of the case was entered into between MLCS, Schackow, and Glenda Dixon.

Under the agreement MLCS would receive a percentage of the net recovery, on a graduated basis. Effectively, MLCS would be paid ten per cent if the recovery exceeded $1,000,000.00. MLCS undertook to "exert its best efforts and abilities” but made "no promises or guarantees regarding the outcome. ...” Authorized expenses of the consultants as well as fees and expenses of experts were to be paid by Mrs. Dixon irrespective of the outcome. (b) Dixon v. Little, et al. A malpractice action was subsequently filed against Doctors Little, Quick, and Dickhaus, and North Florida Regional Hospital in the Circuit Court of Florida, Eighth Judicial Circuit In and For Alachua County.

Mr. Schackow and MLCS began to prepare the malpractice action against the health care providers. The consultants were to assist counsel by helping them to understand the medical aspects of the case and locating qualified physicians willing to testify. A search was begun for a neurologist to testify as an expert against Dr. Quick who, in the judgment of MLCS, was "80 per cent” responsible for Mr. Dixon’s condition. Two neurologists were contacted by MLCS.

Dr. Gunter R. Haase, chairman of the department of neurology at Pennsylvania Hospital in Philadelphia, received the pertinent medical ¹⁸³ records, agreed to testify, and was deposed in April 1976. At the time of his deposition Dr. Haase indicated that he felt that there was possible malpractice in the handling of Mr. Dixon’s treatment; however, he had not been given the depositions of Drs. Quick or Little. 1 Upon being furnished by MLCS with copies of those depositions some nine months later, Dr. Haase opined in a letter of February 23, 1977 to Mr. Schackow that "I am not too sure that I will be a good witness for you.” He based this determination on a further review of the medical records and the depositions provided to him, and he concluded that "I will not be able to say that this was a clear case of malpractice... .” Dr. Haase was, of course, lost to the plaintiff as a potential expert witness. MLCS also contacted Dr. Gerald F. Winkler, an eminent neurologist at Massachusetts General Hospital in Boston.

He reviewed the case and agreed to testify for the plaintiff. It happened, however, that the trial date was set at a time — the only time in his schedule — when Dr. Winkler had a long-standing prior commitment. Although he offered to appear by way of videotaped deposition, Mr. Schackow ultimately decided that he would not be an appropriate witness for an Alachua County jury; he apparently also felt that the doctor’s fee was too high. The videotaped deposition of Dr. Winkler was never taken.

Placed on notice that the two neurologists, who were expected to appear as plaintiffs expert witnesses, would be unable to do so, MLCS wrote to Mr. Schackow on February 1,1977 that "we might be wise to allow these issues to lie for the time being and attempt to find a Florida neurologist who will speak to the issues.... [I]t’s in the case’s best interest to temporize.” February 18, 1977 was the final day for the naming of experts for the impending trial. On February 16th MLCS contacted Dr. Sharif Shafey, a Miami neurologist, who apparently agreed to peruse Mr. Dixon’s records, which were delivered to him a day later. The ¹⁸⁴ same day, February 16th, MLCS informed Mr. Schackow that they had contacted a "[s]uper board-certified neurologist from Miami willing to speak to issue.” Mr. Schackow then listed Dr. Shafey as an expert witness for the plaintiff, but the doctor thereafter refused to be deposed or to participate in any manner, stating: "I have declined this case and I have not accepted to testify ... on anybody’s behalf.” In reviewing the circumstances surrounding the abortive attempt to enlist Dr. Shafey as an expert the trial court was "persuaded that Mr. Militana [President of MLCS] told Mr. Schackow that Dr. Shafey would testify for the Dixons before the doctor had actually received the records, found malpractice, and agreed to testify.” Plaintiff went to trial without the benefit of expert testimony from a neurologist. Between February 12 and March 18, 1976, Mr. Schackow sent four letters to MLCS in which he requested MLCS to locate a radiologist to testify as an expert witness against Dr. Dickhaus.

On March 23, 1976 Robert Militana, MLCS’s president, stated in a letter to Mr. Schackow that "we are prepared to present your client’s case to one of the best Neuro-Radiologists in the country who practices in the Washington, D. C. are [sic] and is willing to work with us and testify at the trial of this case.” MLCS did not contact the radiologist until February 10, 1977, eleven months later. The radiologist was of the opinion that Dr. Dickhaus had not been negligent in handling Mr. Dixon’s brain scan. No other radiologists were contacted by MLCS, and plaintiff went to trial without a radiologist to testify against Dr. Dickhaus. No expert witnesses were found to testify against the hospital.

The trial court stated in its opinion: "It could not ... reasonably have been expected that MLCS would employ much time and effort in pursuing this aspect of the case, but there was no evidence that the Plaintiff ever asked any expert to consider the hospital’s possible negligence.” In a memorandum dated February 9, 1977 Mr. Schackow acknowledged that his case against the hospital was "poor.” Nevertheless, he obtained a $35,000.00 settlement from the hospital prior to trial. ¹⁸⁵ On March 14, 1977 Mr. Dixon’s case went to trial against Doctors Little, Quick, and Dickhaus. Two Florida general practitioners, who had been located by MLCS, testified that Dr. Little violated the standard of care for general practitioners in Florida. At the close of plaintiffs case Doctors Quick and Dickhaus obtained directed verdicts in their favor because plaintiff had no experts to testify against them. 2 The jury returned a verdict against Dr. Little, the remaining defendant, in the amount of $1,500,000.00. An appeal was noted by Dr. Little, but prior to the filing of briefs the parties settled for $1,400,000.00.

The total recovery in the case was thus $1,435,000.00, and MLCS’s ten per cent share of the net recovery, pursuant to its contract with Mrs. Dixon and Mr. Schackow, was $142,051.25. Mr. Dixon was, as previously noted, incompetent, and Mr. Schackow filed a petition with the Florida court having jurisdiction over Mr. Dixon’s guardianship for approval of the contingency fee contract. The contract, which was signed by the parties and approved by the court on May 20, 1977, included the representation: "The ten (10%) fee for MLCS will be paid from the attorney’s fee, outlined above.” The attorney’s fee was to be 47.5% of the net recovery, representing a reduction from 50% originally negotiated in a contract signed on May 9, 1975. (c) Refusal to Pay Consultants Mr. Schackow refused, however, to pay MLCS the fee set in the contract dated May 20, 1975.

On September 9, 1977 MLCS filed a declaration in the Circuit Court for Montgomery County asking for its ten per cent fee plus interest and costs. Prior to the trial of the case Mrs. Dixon executed an assignment to Mr. Schackow of any "claims, demands and causes of action of whatsoever kind and nature ...” that she may have had against MLCS. Mr. Schackow’s primary defense to MLCS’s action against him ¹⁸⁶ was premised on alleged material breaches of contract that rendered MLCS’s performance deficient. He averred that MLCS should be denied any recovery on the contract, contending that the recovery, if any, should be on the basis of quantum meruit.

After a five day trial, the court held the case sub curia. An extensive and well-reasoned Memorandum and Order was filed on July 16, 1979 in which the court found that MLCS had not fully performed its consulting agreement but that it had substantially performed. The court also found that the breaches by MLCS might have caused three general types of damages for which Mr. Schackow could be compensated: (1) failure to collect on the judgment because the verdict was against only one defendant; (2) additional expense and work incurred by Mr. Schackow to perform functions that should have been accomplished by MLCS; and (3) damages resulting from the directed verdicts in favor of the doctors and the resulting judgment for costs. The court found that the evidence supported only the last category of damages, and therefore it reduced plaintiffs recovery by the appropriate amount.

With regard to defendant’s contention that the contract with MLCS was void as against public policy, the court found the contract valid. Judgment in the amount of $130,351.25 was entered in favor of the plaintiff; defendant took a timely appeal to this Court and assails the lower court’s action on five grounds: 1. MLCS materially breached the contract; 2. The doctrine of substantial performance was erroneously applied; 3.

The doctrine of quantum meruit should have been applied; 4. In awarding damages to Mr. Schackow, the court erred in its application of the burden of proof; and 5. The contingent fee contract contravened the public policy of Maryland. ¹⁸⁷ II During the trial of this case MLCS asserted and attempted to prove that it had fully performed its obligations under the contract with Mrs. Dixon and Mr. Schackow. In his written opinion, after reviewing the testimony and voluminous exhibits, Judge Mitchell found: "The Court concludes from all of the evidence that the Plaintiff did meet most of its obligations under the contract.

MLCS did let down at times, but over the two-year period its personnel assisted Mr. Schackow and his associates in many ways. By March, 1977, Mr. Schackow probably could have done without MLCS’s help, but in the preceding years MLCS’s assistance was substantial and of great value to the lawyer inexperienced in medical malpractice work. While MLCS should have done more to aid the Defendant with experts, the corporation did give him a lot of help in this area, too. Accordingly, the Court concludes that MLCS’s breaches did not prevent it from performing substantially everything that could have reasonably been expected under the contract.” On appeal, Mr. Schackow attacks this finding, contending that the trial court should have found that MLCS was guilty of major and material breaches in the performance under the contract.

It is firmly entrenched in the law of Maryland that: "What is or is not substantial performance of a contract is a question of fact to be determined by the trier of facts in the light of the circumstances of each case.” William F. Klingensmith, Inc. v. David H. Snell Landscape Contractor, Inc., 265 Md. 654, 665 , 291 A.2d 56, 62 (1972). See Pleasant Place, Inc. v. Levinson, 260 Md. 279, 290 , 272 A.2d 35, 41 (1971); and Evergreen Amusement Corp. v. Milstead, 206 Md. 610, 621 , 112 A.2d 901, 906 (1955). Of ¹⁸⁸ course, we cannot reverse the trial court’s finding that the contract was substantially performed, unless our review of the record discloses that the trial court committed clear error in making its findings. Id.; Md. Rule 1086.

Mr. Schackow’s position, as stated in his brief, is that the "failure of MLCS to obtain, prepare and deliver experts was ... a material breach that went to the essence of the contract.” Specifically, he complains that MLCS did not have experts to testify against Dr. Quick, the neurologist, Dr. Dickhaus, the radiologist, and the hospital. In the contract that forms the basis of the subject action it was stated "that MLCS will exert its best efforts and abilities on this case... .” MLCS did find two neurologists who agreed to testify for the plaintiff. Dr. Haase, however, eventually concluded that there was no negligence in the case. The delay, blamed on MLCS by Mr. Schackow, in submitting medical records or depositions to Dr. Haase did not, apparently, influence his ultimate conclusion that medical malpractice was not present in the case.

Dr. Winkler, also obtained by MLCS, was willing to testify in person or on videotape, but he could not personally appear for trial due to a prior commitment. Mr. Schackow declined the opportunity of taking his deposition for subsequent use at trial. After hearing all the evidence the trial court made specific findings with respect to the performance of the consultants which may be summarized as follows: 1. MLCS helped Mr. Schackow "in many ways.

They helped him obtain the necessary background knowledge for trying a malpractice case.... MLCS also continually discussed tactics with Mr. Schackow;...” 2. "MLCS assisted Mr. Schackow with the discovery process. [Its] personnel suggested interrogatory questions. People from MLCS helped to prepare Mr. Schackow for the depositions of defense witnesses;” ¹⁸⁹ 3.

"MLCS also used its efforts to locate and prepare expert witnesses for Mrs. Dixon’s case;” 4. "MLCS directed Mr. Schackow to Drs. Chapman and Pepper, helped to prepare these experts, and persuaded them to work with Mr. Schackow;” and 5. "Finally, MLCS helped Mr. Schackow once the Dixon trial had begun.

He was provided with an extensive medical brief... . MLCS also supplied Mr. Schackow with possible cross-examination questions... . [A]fter the defense