Butt v. United Brotherhood of Carpenters & Joiners of America, ___ F.3d ___ (3d Cir. 2021). This opinion by Judge Hardiman involved an attorneys’ fee dispute. In the underlying consolidated discrimination cases, plaintiffs’ original attorney, Ryan Paddick, had a 40% contingency fee agreement with his clients. After winning in the Third Circuit a reversal of a prior summary judgment for the defense and, on remand, taking 24 depositions, briefing nine motions, and undertaking other activities, found himself unable to advance the necessary funds for an expert. With his consent, plaintiffs retained a new attorney, Sandra Thompson, at a 35% contingency. Paddick told Thompson about his work in the case and stated that “fees remain due on the work [he] did on the cases prior to [her] stepping in.”
Nearly two and one-half years later, the case settled for $385,000. Thompson’s share was $138,000. The District Court “acknowledged the settlements and dismissed the Clients’ cases with prejudice.” Paddick then to sought to intervene in the case in order to enforce a charging lien against the settlement proceeds. The District Court ordered the settlement funds escrowed, and ultimately awarded Paddick $54,562.73 from Thompson’s share of those funds.
Thompson appealed, arguing primarily that the District Court had no power to act on Paddick’s request because the court’s jurisdiction “terminated” once the cases had been dismissed with prejudice. Judge Hardiman did not agree. “[T]he District Court had ancillary enforcement jurisdiction based on its inherent powers rooted in the common law and unrelated to the statutory grant of authority [under 28 U.S.C. § 1367), on which the District Court had relied].”
Citing cases going back to 1812, Judge Hardiman explained that ancillary settlement jurisdiction “exists to enable a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees.” Nor does that jurisdiction end when a court enters judgment on the merits or dismisses a case. Citing an 1825 opinion by Chief Justice Marshall, Judge Hardiman said that “[t]he jurisdiction of a [c]ourt is not exhausted by the rendition of its judgment, but continues until that judgment shall be satisfied.”
After citing and discussing “the abundance of caselaw supporting the application of ancillary enforcement jurisdiction to attorney’s fee disputes—even after disposition of the underlying case where jurisdiction was not explicitly retained,” Judge Hardiman held that the District Court had not erred “in exercising such jurisdiction over this fee dispute that was raised for the first time after dismissal of the underlying case but was necessary to effectuate the Court’s judgment.” He then rebuffed Thompson’s other arguments as well.
Among other things, Thompson claimed that Paddick had made errors in his representation of the clients, so that unclean hands defeated his claim to a quantum meruit fee. But Judge Hardiman said that while Paddick’s representation may not have been “flawless,” any “shortcomings in performance go to the amount he deserves under the equitable doctrine of quantum meruit. Imperfect representation does not necessarily bar Paddick from recovery.”
Thompson also argued that any fee to Paddick should have been paid out of the clients’ share of the settlement fund, not out of Thompson’s share. Judge Hardiman quickly dispatched that notion. “Relying on a Massachusetts Supreme Court case as persuasive authority, the District Court held that Thompson’s request was ‘manifestly unjust, because a client ‘should never be made to pay twice,’ (quoting Malonis v. Harrington, 816 N.E.2d 115, 123 (Mass. 2004)) (District Court’s emphasis).”
Settlements frequently state expressly that the court retains jurisdiction to enforce or otherwise deal with the settlement. This opinion seems to say that such an express reservation is not necessary. Nonetheless, it still seems prudent to so provide in order to ensure enforcement via the court if necessary.