Beauchamp v. Gust Rosenfeld

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

BEAUCHAMP LAW OFFICE PC, et al., Plaintiffs/Cross-
Defendant/Appellants,

v.

GUST ROSENFELD PLC, Defendant/Cross-Claimant/Appellee.

No. 1 CA-CV 17-0250
FILED 4-19-2018

Appeal from the Superior Court in Maricopa County
No. CV2013-009661, CV2013-014712 (Consolidated)
The Honorable Daniel J. Kiley, Judge

AFFIRMED

COUNSEL

Oracle Law Group, Phoenix
By Melanie E. Beauchamp
Counsel for Plaintiffs/Cross-Defendant/Appellants

Gust Rosenfeld P.L.C., Phoenix
By Charles W. Wirken
Counsel for Defendant/Cross-Claimant/Appellee

BEAUCHAMP, et al. v. GUST ROSENFELD
Decision of the Court

MEMORANDUM DECISION

Judge James B. Morse Jr. delivered the decision of the Court, in which
Presiding Judge Randall M. Howe and Judge Kenton D. Jones joined.

M O R S E, Judge:

¶1 Appellants Melanie Beauchamp ("Beauchamp") and
Beauchamp Law Office ("BLO") appeal the superior court's judgment
following a bench trial in favor of Appellees Gust Rosenfeld P.L.C. ("Gust").
For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 This case involves a dispute over attorney fees in connection
with the settlement of a medical malpractice case. In October 2010, C.B. and
her husband J.B. (collectively the "Clients") met with Melanie McBride
("McBride"), an attorney with Gust, regarding complications from C.B.'s
recent surgeries. The Clients subsequently retained Gust to represent them
and entered into a written contingent-fee agreement. The fee agreement
provided for a fee of one-third of any recovery after the initiation of
litigation, or reasonable compensation from recovery in the action based
upon specified hourly rates if the Clients terminated Gust before resolution
of the case. Over the next two years, Gust spent significant time developing
the case.

¶3 In December 2012, McBride resigned her position with Gust,
and the Clients elected to transfer their file to McBride at her new law firm.
Shortly thereafter, McBride left her new law firm and eventually joined
BLO. McBride and BLO formally substituted in as co-counsel of record for
the Clients in March 2013. BLO then entered into a fee agreement with the
Clients which provided for a fee of one-third of any recovery.

¶4 On July 17, 2013, McBride quit her employment at BLO. The
Clients chose to keep BLO as their attorney because their case was
scheduled to go to mediation later that month. Less than a week after
McBride quit, Gust sent a letter to BLO providing notice of its lien of
approximately $145,000 in fees and expenses previously incurred in the
case. BLO, Beauchamp, and a BLO employee who is not a party to this

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BEAUCHAMP, et al. v. GUST ROSENFELD
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appeal officially substituted in as counsel for the Clients and ultimately
obtained a settlement of $500,000 which was confirmed in late August 2013.

¶5 BLO distributed $185,225.83 of the settlement proceeds to the
Clients, paid itself $169,774.17, and held the remaining $145,000 in trust in
recognition of Gust's lien. That same day, BLO sent a letter to Gust, alleging
Gust told her there would be no liens asserted by Gust on the Clients' case
and claiming Gust had been negligent in the representation of the Clients
and performed little work. Gust responded the following day, disputing
BLO's letter in every respect and reinforcing its claim to a portion of the
proceeds of the Clients' settlement. BLO demanded an itemized list of
charges, and Gust provided a copy of its internal Prebill Summary.
Approximately two weeks later, Gust sent BLO a revised invoice. Two time
entries regarding drafts for potential closing agreements appeared on the
Prebill Summary but did not appear on the invoice.

¶6 In October 2013, BLO initiated a lawsuit for declaratory relief
against Gust, the Clients, and McBride. Various counterclaims and cross-
claims were subsequently asserted. At a hearing on July 21, 2014, the
superior court noted that all parties had agreed that the total amount of
attorneys' fees owed by the Clients should not exceed one-third of the total
settlement, and ordered BLO to distribute $15,558.77 of the $145,000 that it
had retained in its trust account to Gust for payment of costs incurred while
representing the Clients, and to distribute the balance of the account to the
Clients. The superior court also determined Gust had a lien against the one-
third contingent fee that BLO had received from the settlement proceeds in
the underlying case. After this ruling, BLO and Gust dismissed their
respective claims against the Clients.

¶7 A bench trial was held in December 2016. Gust was treated
as the plaintiff at trial because, as a result of various rulings over the course
of the litigation, the only claims left for the trial court to resolve were Gust's
claims against BLO for unjust enrichment and declaratory relief. Gust
presented expert witness testimony in support of the importance of the
work they performed on the underlying case. The expert witness offered
the court two approaches for apportioning the fees between Gust and BLO.
The first method would be to total the billings of each firm, determine the
percentage that each firm's billings bear to the total, and then apply the
percentage applicable to each firm to the amount of the fee award. The
second approach would be to award each firm a percentage share of the
one-third of the total settlement proceeds the parties had agreed was the
total amount of attorneys' fees owed by the Clients. Those percentages

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BEAUCHAMP, et al. v. GUST ROSENFELD
Decision of the Court

would be based upon the respective values the court believed each of the
parties added toward the obtaining of the settlement.

¶8 After considering the evidence, the superior court entered
judgment in favor of Gust, finding it had a valid charging lien on the funds
recovered in the underlying lawsuit. The superior court found that under
the doctrine of unjust enrichment, BLO was unjustifiably enriched by Gust's
work on the underlying suit, and therefore owed Gust restitution. The
court was not persuaded by BLO's arguments that Gust's only remedy
could be against the Clients, that Gust added no value to the case, and that
Gust acted improperly.

¶9 The superior court awarded a quantum meruit measure of
damages to Gust. After conducting a thorough review of Gust's invoices,
the court calculated Gust's portion of the contingency fee to be $125,532.50.
As this amount was close to 75% of the total contingency fee, the court
accepted Gust's expert's testimony as to the proportion of the contributions
and awarded Gust 75% of the contingency fee in the underlying case and
BLO 25%.

¶10 Before trial, BLO filed a motion for sanctions relating to a
document that Gust drafted in January 2013. Gust's Prebill Summary
provided that one of Gust's attorneys spent .5 hours drafting a "[c]losing
letter to client, discussing share of proceeds for fees and costs incurred by
Gust." Gust did not produce this draft letter until approximately one week
before trial. The Prebill Summary also discussed drafting a "letter to clients
regarding change of counsel firms," as well as a "potential agreement with
Melanie [McBride] and clients for sharing of fees and reimbursement of
expenses." Gust never produced this draft and asserted that it was lost
when an employee's computer crashed.

¶11 In its Findings of Fact and Conclusions of Law, the superior
court addressed the motion for sanctions, finding that the documents in
question were irrelevant because they were never approved by Gust or
circulated outside of Gust. In addition, the court found that the evidence
did not suggest Gust intentionally "destroyed" the draft document. The
court denied BLO's motion for sanctions.

¶12 BLO timely appealed. We have jurisdiction pursuant to
Article 6, Section 9, of the Arizona Constitution and Arizona Revised
Statutes ("A.R.S.") sections 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

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¶13 BLO argues the superior court erred by (1) finding unjust
enrichment absent impoverishment, improper conduct, and privity of
contract; (2) applying quantum meruit as the measure of damages; (3)
allowing the claim against BLO to go forward; and (4) failing to sanction
Gust for discovery violations.

¶14 We review questions of law de novo. We will accept the
superior court's factual findings, "unless they are clearly erroneous." Calisi
v. Unified Fin. Servs., LLC, 232 Ariz. 103, 106, ¶ 13 (App. 2013). "To be clearly
erroneous, a finding must be unsupported by any reasonable evidence." In
re Van Dox, 214 Ariz. 300, 304, ¶ 15 (2007). We view the evidence in the light
most favorable to sustaining the superior court's judgment and will uphold
it if it is correct for any reason. Great W. Bank v. LJC Dev., LLC, 238 Ariz. 470,
473 n.1 (App. 2015); Citibank (Ariz.) v. Van Velzer, 194 Ariz. 358, 359, ¶ 5
(App. 1998). We do not reweigh conflicting evidence on appeal. Great W.
Bank, 238 Ariz. at 478, ¶ 22.

I. Unjust Enrichment

¶15 The superior court found BLO was unjustly enriched by
Gust's work on the Clients' case. "Unjust enrichment occurs when one party
has and retains money or benefits that in justice and equity belong to
another." Trustmark Ins. Co. v. Bank One, Ariz., NA, 202 Ariz. 535, 541, ¶ 31
(App. 2002). As the trial court correctly stated, the party asserting a claim
of unjust enrichment bears the burden of showing: "(1) an enrichment, (2)
an impoverishment, (3) a connection between the two, (4) the absence of
justification for the enrichment and impoverishment, and (5) the absence of
any remedy at law." Mousa v. Saba, 222 Ariz. 581, 588, ¶ 29 (App. 2009).

¶16 BLO first argues the superior court erred in finding a
connection between Gust's impoverishment and BLO's gain because Gust's
expenditure of funds and time was for the Clients' benefit, not BLO's. The
superior court's detailed factual findings, however, establish that the two
years of work Gust performed led to BLO's successful settlement. Though
BLO argues that Gust did little to nothing of value in the underlying case,
she does not argue that the trial court's factual findings are erroneous. See
Ariz. R. Civ. P. 52(a) ("Findings of fact . . . must not be set aside unless clearly
erroneous."). Recognizing the connection between the enrichment and the
impoverishment, the superior court did not err when it concluded that
"Gust was impoverished by devoting hours of professional time to the
Clients' case without compensation, while BLO was correspondingly
enriched because it benefited from Gust's work product."

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¶17 Next, relying upon Wang Elec., Inc. v. Smoke Tree Resort, LLC,
230 Ariz. 314 (App. 2012), BLO argues that Arizona law precludes liability
under unjust enrichment because she did not engage in improper conduct
nor have privity with Gust. This argument fails for two reasons. First, the
law in this situation is contrary to BLO's argument. Rather than unjust
enrichment requiring the existence of a contractual arrangement, i.e.,
requiring privity, the doctrine of unjust enrichment cannot be applied
where there is a specific contract which governs the relationship of the
parties. Brooks v. Valley Nat'l Bank, 113 Ariz. 169, 174 (1976) (“[W]here there
is a specific contract which governs the relationship of the parties, the
doctrine of unjust enrichment has no application.”).

¶18 Second, unjust enrichment does not necessarily require a
finding of improper conduct. BLO contends that Wang Electric added an
"improper conduct" element to all analyses of unjust enrichment. This is
incorrect. Wang Electric articulated a limitation upon the reach of unjust
enrichment claims in situations involving subcontractors, tenants, and
property owners. 230 Ariz. at 320, ¶ 17. The court found that claims of
unjust enrichment do not stretch so far as to make property owners
"unwitting guarantors of their tenants' contracts for improvements." Id. at
¶ 16. Accordingly, Wang Electric held that "a contractor hired by a tenant to
make improvements to leasehold premises, or subcontractors retained by
that contractor, can recover unpaid monies for making tenant
improvements from the property owner only when that owner has engaged
in improper conduct." Id. at ¶ 17. Because this case does not involve such
a situation, the holding in Wang Electric regarding improper conduct does
not apply.

¶19 Here, the superior court correctly noted that although a claim
of unjust enrichment requires a showing of enrichment "without
justification," the term "without justification" is not synonymous with
"wrongfully" or "maliciously." See, e.g., Loiselle v. Cosas Mgmt. Grp., LLC, 224
Ariz. 207, 210, ¶ 10 (App. 2010) (fact that defendant "committed no tortious
or wrongful act" and "had no knowledge" of third party's wrongful acts did
not "preclude [plaintiffs] from recovering on their unjust enrichment
claim"). Ultimately, Gust was not required to demonstrate privity or that
BLO engaged in wrongful conduct to prevail on its unjust enrichment
claim.

¶20 BLO contends that limitations and equitable defenses apply
because Gust failed to follow the industry standards for lien noticing and
deprived BLO of the opportunity to refuse the work for which Gust's fees
claim existed. Like the superior court, we find no authority for the

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proposition that Gust's failure to assert a lien sooner should result in the
waiver of its subsequent but well-supported claims. A charging lien
becomes binding upon a third party when the party has notice of the lien.
See Millsap v. Sparks, 21 Ariz. 317, 322 (1920) (charging lien is not perfected
until notice has been given to obligor). When Gust filed its claim for fees,
the Clients, and presumably their by-then current counsel, obtained notice
of Gust's claim.

¶21 Additionally, BLO knew that Gust previously represented the
Clients through its employee McBride, and thus knew that Gust could
potentially assert a lien against the ultimate settlement. At trial, both Gust
and BLO presented evidence that the lien was discussed shortly after BLO
agreed to take the Clients' case1 and that is repeated within BLO's Opening
Brief. BLO's knowledge of Gust's potential charging lien negates her
argument that she did not have timely notice of it.

¶22 On appeal, BLO asserts defenses of accord and satisfaction,
waiver, estoppel, fraud, and failure of consideration. However, because
BLO did not assert these defenses below, and, on appeal, fails to cite
authorities or state with particularity why or how the determination of the
trial court might be deemed error, these arguments are waived. Ritchie v.
Krasner, 221 Ariz. 288, 305, ¶ 62 (App. 2009); Modular Sys., Inc. v. Naisbitt, 114 Ariz. 582, 587 (App. 1977); ARCAP 13(a)(7)(A).

II. Quantum Meruit

¶23 BLO argues the superior court misapplied quantum meruit as
the measure of damages because it is only available in quasi-contractual
circumstances. Not so. Quantum meruit is the correct measure of damages
imposed when a party prevails on the equitable claim of unjust enrichment.
W. Corr. Grp., Inc. v. Tierney, 208 Ariz. 583, 590, ¶ 27 (App. 2004).

¶24 BLO further argues that the superior court erred in its
application of quantum meruit because such claims are measured by the loss
to the plaintiff, not gain to the defendant. However, it is well settled that
"[r]ecovery under quantum meruit is based on the value of services
rendered." Landi v. Arkules, 172 Ariz. 126, 135 (App. 1992). Here, the
superior court properly found that the value of the services rendered is the
value of the benefit conferred to BLO. The superior court performed a

1At trial, BLO asserted that this discussion included an agreement by Gust
not to assert a charging lien. The superior court found that BLO's claims
were not credible.

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detailed analysis of the invoices submitted by Gust, declined fees that were
frivolous or not advantageous to the litigation, and arrived at a conferred
value of 75% of the contingency fee.

¶25 "Fashioning an equitable remedy is within the trial court's
discretion, and it will not be disturbed on appeal absent an abuse thereof."
Loiselle, 224 Ariz. at 210, ¶ 8. The superior court did not abuse its discretion
in its careful analysis calculating the proper measure of damages.

III. Action Against Successor Law Firm

¶26 BLO argues Gust's only avenue for recompense is through the
Clients. Per BLO, there is no legal support for Gust's claim that an attorney
may use a charging lien to satisfy pre-judgment fees, nor is there precedent
to support the claim that Gust may recover attorneys' fees from another law
firm. We disagree.

¶27 "[A]n attorney under a contingency fee contract who is
discharged prior to fulfillment of the contract is entitled to reimbursement
for the reasonable value of his services." Garrett v. Garrett, 140 Ariz. 564, 567
(App. 1983). A charging lien allows a lawyer to recover fees and costs from
the fund or property ultimately recovered on behalf of the client; charging
liens are not limited to clients. See Linder v. Lewis, Roca, Scoville & Beauchamp,
85 Ariz. 118, 123 (1958) (lien effective against assignee of client's judgment);
see also Holly v. State, 199 Ariz. 358, 360, ¶ 10 (App. 2001) (lien took priority
over State's right to statutory setoffs for inmate costs). The charging lien is
binding upon a third party when the party has notice of the lien. See Millsap,
21 Ariz. at 322 (noting that a charging lien is perfected when "notice has
been given to the obligor against whom it is asserted," or when "such person
has knowledge of the claim, or has notice of facts sufficient to put a prudent
person upon inquiry"). Here, Gust represented the Clients under a
contingent fee agreement and remained entitled to the reasonable value of
the services rendered to the Clients after their representation ended. Its
charging lien properly attached to the settlement monies when it provided
BLO written notice of the lien.

¶28 BLO also argues Gust must be the attorney who obtained the
judgment for its charging lien to apply. There is no rule or case authority
supporting BLO's position. Charging liens attach to the funds created or
obtained by the attorney's efforts. Nat'l Sales & Serv. Co. v. Superior Court, 136 Ariz. 544, 545 (1983). Though Gust did not represent the Clients by the
time the judgment was obtained, the superior court found that their efforts

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were instrumental in generating the settlement. Thus, Gust was properly
entitled to the portion of the funds obtained that it helped generate.

IV. Sanctions

¶29 BLO argues the superior court erred when it declined to
sanction Gust for "destroying seminal documents." The document in
question is a draft fee agreement between Gust and the Clients referenced
in Gust's Prebill Statement. BLO contends this court must remand the issue
to the trial court for specific findings as to Gust's intent in drafting the
agreement and then "losing" it. Despite the superior court's nearly three-
page discussion of the lost document, BLO claims the court did not make
any findings on the issue.

¶30 "A trial court has broad discretion in ruling on disclosure and
discovery matters, and this court will not disturb that ruling absent an
abuse of discretion." Marquez v. Ortega, 231 Ariz. 437, 441, ¶ 14 (App. 2013).
We defer to the trial judge with respect to factual findings and will affirm
them so long as they are supported by reasonable evidence. Twin City Fire
Ins. Co. v. Burke, 204 Ariz. 251, 254, ¶ 10 (2003).

¶31 The superior court found that there was no evidence that Gust
destroyed the draft fee agreement. Moreover, the court found the
document irrelevant because it would not have been binding as it was never
approved by Gust's management, nor was it sent to the Clients. BLO has
not shown that the loss of the draft agreement caused any harm. Therefore,
it has not shown that sanctions would be appropriate. Thus, there was no
abuse of discretion in denying BLO's motion for sanctions.

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CONCLUSION

¶32 For the foregoing reasons, we affirm. Gust requests its taxable
costs on appeal. We award Gust taxable costs on appeal in compliance with
ARCAP 21.

¶33 Additionally, Gust requests we impose sanctions against BLO
pursuant to ARCAP 25 for filing a frivolous appeal. "[A] frivolous appeal
is one brought for an improper purpose or based on issues which are
unsupported by any reasonable legal theory." Johnson v. Brimlow, 164 Ariz.
218, 222 (App. 1990). Gust requests BLO's share of the contingency fee,
approximately $20,000, as a sanction penalty. We impose ARCAP 25
sanctions with "great reservation." Ariz. Tax Research Ass'n v. Dep't of
Revenue, 163 Ariz. 255, 258 (1989). Under this standard, and in our
discretion, we decline to impose the requested sanction against BLO.

AMY M. WOOD • Clerk of the Court
FILED: AA

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