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Hunt v. Hadden

United States District Court, E.D. Michigan, Southern Division

June 2, 2015



DAVID M. LAWSON, United States District Judge.

The plaintiffs have sued their former lawyer and his professional corporation alleging legal malpractice. The matter is in this Court under diversity jurisdiction. The malpractice claim is based on the defendants’ advice to the plaintiff to sign a broad release, by which they unwittingly surrendered a potentially valuable claim against additional tortfeasors. The conversion claim arises from the defendants’ retention of excess attorney’s fees, which failed to account for the payment of litigation expenses to determine the net recovery from which the contingent fee should have been calculated. The plaintiffs filed a motion for partial summary judgment, on which the Court heard oral argument on January 12, 2015. Since then, the parties have asked to file - and did file - supplemental briefs, the defendants filed a motion for partial summary judgment of their own, and the plaintiffs have moved for leave to file a second amended complaint. It appears that the plaintiffs have abandoned their malpractice claim and seek relief on the conversion counts only. On the conversion claims, there is no genuine issue of material fact, and the plaintiffs are entitled to a judgment as a matter of law on liability and damages, but not treble damages, which must be decided by the fact finder. The plaintiffs’ request to file a second amended complaint is moot, as is the defendants’ motion for partial summary judgment and their motion in limine.


Plaintiffs C. David Hunt, a medical doctor, and his wife, Carol Santangelo, an attorney, leased a condominium near Marquette, Michigan from Robert and Amy Armstrong (“the Armstrongs”) in early 2007. Dr. Hunt and Ms. Santangelo moved there from New Jersey after Marquette General Hospital hired Dr. Hunt as a neurosurgeon. Shortly after his relocation, Hunt began experiencing memory problems, cognitive dysfunction, and trouble balancing, which interfered with his responsibilities as a neurosurgeon. On May 29, 2007, Hunt felt so disoriented during an operation that he removed himself and called for a replacement surgeon. The situation triggered a peer review investigation and a temporary suspension of Hunt’s surgical privileges. In June 2007, Hunt voluntarily resigned and forfeited his staff privileges at the hospital because his symptoms showed no signs of improvement.

Dr. Hunt soon learned that he was suffering from prolonged exposure to toxic fumes that had been circulating throughout the condominium. Hunt later discovered that the condominium never received a final certificate of occupancy (COO) because the water heater, fireplace, and furnace intake vents and exhaust vents were located too closely to each other. That caused contaminated, toxic air to re-circulate into the condominium. Dr. Hunt’s exposure to the toxins left him permanently disabled and unable to work.

On October 19, 2007, the plaintiffs hired Donnelly W. Hadden, a Washtenaw County, Michigan lawyer, to file a lawsuit against the persons responsible for Hunt’s exposure to the toxins. The fee agreement, signed the same day, entitled Hadden to a contingent fee based on “33% of the net sum recovered from the defendants(s) . . . after all reasonable and necessary advances, costs and expenses . . . Fee in no event to be greater than authorized by court rule.” (Emphasis added).

In February 2009, Hadden filed a federal lawsuit against the owners of the condominium, Robert and Amy Armstrong, and the condominium association, Harbor Ridge Townhouse Condominium Association (“Condominium Association”). Hunt v. Armstrong, Case No. 2:09-cv-0038 (“Lawsuit I”). It appears that Dr. Hunt paid a significant portion of the costs of the suit on an ongoing basis.

In February or March 2010, Hadden settled the lawsuit against the condominium association for $42,000. Hadden kept a fee equal to one-third of the gross settlement amount - $14,000 - without first deducting costs and expenses, as required by the retainer agreement and Michigan’s Rules of Professional Conduct. Hadden acknowledged that the amount of costs incurred were $14,181.78, of which the plaintiffs advanced $13,078.76. Hadden contends that the plaintiffs’ advance was repaid, and the plaintiffs have not disputed that. Nonetheless, it is clear that the fee Hadden retained was excessive because it was based on the gross recovery, not the net recovery.

In June 2010, the plaintiffs settled the case with the Armstrongs for $21,000. Hadden retained one-third of the gross settlement amount or $7,000. The plaintiffs contend that Hadden converted $5,665.85 in excess fees because Hadden failed to account for costs before calculating his fees. The defendants disagree, asserting that Hadden expended no additional costs settling the case with the Armstrongs and therefore the gross and net settlement amounts are identical.

As part of the settlement, the plaintiffs executed a release. The release stated that the plaintiffs

release and forever discharge Robert Armstrong and Amy Armstrong and any and all other persons, firms or corporations charged or chargeable with responsibility of liability, their heirs, representatives, or assigns, from any and all claims, demands, damages, costs, expenses, loss of services, actions or causes of actions arising out of any act or occurrence up to the present time and particularly on account of all personal injury, disability, property damage, diminution in value, loss of damages of any kind, which have been sustained or that we may hereafter sustain in consequence of the lease of a condominium unit and associated property located at 235 North Lakeshore Blvd, Marquette, Michigan.

Amend. Compl. ¶ 36, Page ID 41-42 (emphasis added).

Despite the language of the release, on December 6, 2010, Hadden filed a lawsuit in Marquette County, Michigan circuit court against the developer, the builder, and the HVAC contractor. Predictably, the defendants answered the lawsuit by including as an affirmative defense that the release barred the plaintiffs’ claims. The trial court agreed and summarily dismissed the case based on the broad language of the release. The Michigan Court of Appeals affirmed on October 23, 2012 in an unpublished decision. The Michigan Supreme Court denied leave to appeal on April 26, 2013, marking the end of the parties formal attorney-client relationship.

On February 14, 2014, the plaintiffs filed a complaint against the defendants in this Court, which they amended on March 20, 2014 to correct jurisdictional allegations. The amended complaint contains ten counts: legal malpractice (count I); breach of fiduciary duty (count II); common law conversion (count III); statutory conversion (count IV); unjust enrichment/restitution/forfeiture (count V); constructive trust (count VI); actual/constructive fraud (count VII); innocent misrepresentation (count VIII); silent fraud (count IX); and loss of consortium (count X).

On the defendants’ motion, the Court dismissed the counts alleging unjust enrichment. Apparently due to the expense of prosecuting the legal malpractice claims (and having to prove their case within a case) against a potentially uncollectable defendant, and in response to the defendants’ motion for partial summary judgment based on the plaintiffs’ failure to disclose its liability experts, the plaintiffs agreed to dismiss counts I (legal malpractice) and X (loss of consortium) of the amended complaint.

In their own motion for partial summary judgment, the plaintiffs argue that they are entitled to a judgment as a matter of law on their statutory conversion claim, because Hadden has acknowledged that he retained legal fees in excess of the amount to which he was entitled under the contingent fee agreement. The plaintiffs arrive at the amount owed by deducting from all the settlement proceeds the total costs expended, which include costs spent on the ill-fated second lawsuit. They then state that they are entitled to treble those damages per the conversion statute.

The defendants contend that there is a factual dispute on the liability claim, because, they say, knowledge is an element of statutory conversion under Michigan law, and Hadden denies that he knowingly, willfully, or wrongfully received, or aided in the concealment of embezzled or converted property. The defendants also contend that there is a factual dispute concerning the amount of defendant Hadden’s alleged conversion. That argument is based on the notion that lawsuit one (which generated settlement proceeds) and lawsuit two (which generated no proceeds) must be treated separately, so that the costs incurred in the second case should not be deducted from gross proceeds received in the first case. Finally, the defendants contend that there is a factual dispute over whether treble damages should be awarded even if the defendants are liable for statutory conversion, because they believe the conversion statute leaves treble damages as a discretionary matter.


Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” ...

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