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Fair Housing Center of Metropolitan Detroit v. Iron Street Properties, LLC

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

November 5, 2019




         This matter came before the court for an evidentiary hearing to determine the distribution of attorney fees among two attorneys who represented plaintiff Fair Housing Center of Metropolitan Detroit (“FHCMD”). The issue arises due to a dispute between attorneys Stephen Thomas and Chui Karega as to attorney fees of $99, 632.49, generated from the $300, 000 settlement of the underlying case on November 13, 2018 in favor of FHCMD.


         Attorney Stephen Thomas was retained by plaintiff Dar'Sha Hardy on July 24, 2015, to represent her in a Fair Housing Case involving an alleged familial status violation. Thomas attended the “tester” interviews with the Michigan Department of Civil Rights, and then filed a housing discrimination action on behalf of Hardy on February 22, 2016. The complaint alleged that Hardy had been discriminated against when she was denied an apartment because she had children under 18 years of age, in violation of the Fair Housing Act of 1988. The complaint also asserted a race discrimination claim.

         FHCMD requested that Thomas represent it in its own action against the same defendants. On March 29, 2016, Thomas entered a written contingency fee retainer agreement with FHCMD. Thomas filed a complaint on behalf of FHCMD on June 10, 2016. The two cases proceeded independently and were eventually consolidated on April 19, 2017.

         Thomas participated in three Rule 26(f) conferences, served initial disclosures, filed witness lists, served interrogatories, requests for admission and requests for production of documents. When proper responses were not filed, Thomas filed a motion to compel. Defendants moved to dismiss Hardy's racial discrimination claim, which plaintiff stipulated to based on a lack of evidence. The familial status claim remained.

         Thomas took the depositions of defendant Dennis Kefallinos and leasing manager Liz Telegadas, who both denied that defendants had any policy against leasing to families with children. Thomas met with the Department of Justice (“DOJ”) and they decided to assist in the FHCMD case. The DOJ participated in the investigation and discovered a recorded telephone message and admission against interest by Liz Telegadas. Thomas interviewed and took the depositions of plaintiff Hardy; FHCMD Executive Director Margaret Brown; FHCMD Coordinator of Systemic Investigations and Testing, Engela Bertolini; four of the testers; and two independent witnesses. Motions for summary judgment were filed by both sides, with briefing for plaintiffs undertaken by Thomas.

         On September 26, 2017, Ms. Brown requested that Thomas call her. Brown informed Thomas that she did not think the case would settle. Thomas agreed and, given the admission against interest of Liz Teledadas, he said he believed he would obtain a good result at trial. Then Brown allegedly told Thomas, “I do not think that you have the experience and background to try the case. I am basing this on the way you handled my deposition last week.” Brown allegedly indicated she was contacting attorney Chui Karega to take over the case. Brown allegedly told Thomas that FHCMD “will pay you for the work you have done” and that Karega would contact Thomas to enter into a substitution of attorney.

         Thomas believed he was being discharged. Thomas denies that Brown requested that he stay on as “second chair” or in any other capacity. The first time this suggestion was made in writing was in Karega's Statement Regarding Attorney Fees on December 14, 2018. ECF No. 67, PageID 1175, 1176, 1182. Thomas waited 24 hours, but Karega did not contact him or provide him with the substitution paperwork. On September 27, 2017 Thomas filed his motion to withdraw as counsel for FHCMD due to “a breakdown in the attorney client relationship.” ECF No. 46. Thomas also filed a Charging Lien. ECF No. 47. A stipulated order of attorney substitution was entered by the court on November 1, 2017. Discovery ended on November 2, 2017.

         On January 24, 2018, Thomas argued the motion for summary judgment on behalf of both plaintiffs. Thomas did so even though Karega now represented FHMCD and was present at the hearing. Judge O'Meara issued an opinion denying the motion on March 19, 2018.

         The matter was referred for settlement conference before Magistrate Judge Grand on February 16, 2018. Thomas settled Ms. Hardy's claim at the conference. Karega did not settle FHCMD's claim. The FHCMD case was eventually referred for a settlement conference before Magistrate Judge Majzoub on October 22, 2018. A settlement was entered on the record on November 13, 2019. The case settled for $300, 000 and a Consent Order was filed on January 10, 2019. ECF No. 71.

         The matter is before the court on the attorney fee dispute between attorneys Thomas and Karega. Of the settlement amount, $99, 632.49 was set aside as attorney fees and was deposited in the court's registry in an interest-bearing account. ECF No. 79. Thomas and Karega appeared before the court for an evidentiary hearing on September 26, 2019.

         Thomas argues that he is entitled to a fee based on quantum meruit because he was not discharged for cause and in fact he had a reasonable basis for withdrawing. Thomas' retainer agreement provides:

8. DISCHARGE AND WITHDRAWAL. FHCMD may discharge STEPHEN A. THOMAS, PLC, at any time, upon written notice to STEPHEN A. THOMAS, PLC. Such a discharge does not, however, relieve FHCMD of the obligation to pay any and all costs, disbursements, and litigation expenses Incurred prior to such termination, and STEPHEN A. THOMAS, PLC, has the right to recover from FHCMD the reasonable value of STEPHEN A. THOMAS: PLC,' legal services in accordance with the terms of their Agreement from the effective date of this Agreement to the date of discharge. STEPHEN A. THOMAS, PLC, may withdraw from representation of FHCMD if, among other things, FHCMD does not honor the terms of the ...

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