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The

appellant,

First

Union

National

Bank

of

Maryland,

challenges the Orders issued in the Circuit Court for Montgomery County granting the appellee's Motions to Dismiss. The sole issue

on appeal is whether the trial court erred in concluding that the appellant failed to state a claim upon which relief could be granted.

The Factual Background
In its Complaints1 against the appellee, Meyer, Faller,

Weisman and Rosenberg, P.C., the appellant set forth the following factual allegations: 1. The appellant was a secured creditor of the law firm Katz, Frome, Slan and Bleecker, P.A. ("the first law firm"). In September 1995, an involuntary Chapter 7 bankruptcy petition was filed against the first law firm. The firm exercised its right to convert the Chapter 7 proceeding to a proceeding under Chapter 11 of the United States Bankruptcy Code. During these proceedings the firm authorized the appellant, in accordance with the terms and conditions of the Loan Documents, to take all steps necessary to collect and/or pursue the collections of the firm's receivables. Following the break-up of the first law firm in September 1995, Lorin Bleecker, one of the three former shareholders of the firm, became employed as an attorney by the appellee, Meyer, Faller, Weisman and Rosenberg, P.C. ("the second law firm").

2.

3.

1 In the circuit court, the appellant had actually filed two separate actions against the appellee. Both complaints were dismissed. Because the legal issues involved in the cases are identical, the two appeals were consolidated by this Court.

-24. Prior to the break-up of the first law firm, Bleecker performed legal services in two contingency fee cases. Bleecker took the files for both contingency cases with him to the second law firm which was thereafter retained to handle and conclude the matters. The second law firm subsequently settled those two cases and received substantial attorneys' fees. The appellant demanded payment of a portion of those fees from the second law firm. The second payment. law firm refused to make

5.

6.

7.

8.

Based on those facts, the appellant, in an effort to collect receivables owed to the first law firm, set forth three alternative theories of recovery. Count I of the Complaint alleged that the

first law firm was entitled to a proportionate share of the contingency fees for the percentage of the total work performed in each case by the first firm prior to the settlement of the cases by the second law firm. Count II alleged that the first law firm was

entitled to 74.88% of the contingency fees based on the principles of partnership law.2 Count III alleged that the first law firm was

entitled to recover in quantum meruit for the reasonable value of legal services rendered by the first law firm in both cases.

The Complaint alleged that Bleecker was a the owner of 25.12% of the equity stock of the first law firm. As such, under partnership law, Bleecker would be required to pay the partnership 74.88% of all fees received.

2

-3In response to each of the Complaints, the appellee filed a Motion to Dismiss for failure to state a claim upon which relief could be granted. December 17, 1997. A joint hearing on the motions was held on On January 12, 1998, by separate orders, the This appeal is taken

trial court granted both Motions to Dismiss. from those dismissals. The standard of review is clear.

As Chief Judge Murphy

explained for the Court of Appeals in Faya v. Almaraz, 329 Md. 435, 443, 620 A.2d 327 (1993): In determining whether the trial court erred in granting the motions to dismiss, we must accept as true all well-pleaded facts and allegations in the complaints, together with reasonable inferences properly drawn therefrom. Dismissal is proper only if the facts and allegations, so viewed, would nevertheless fail to afford plaintiff relief if proven.

Two Working Assumptions
To simplify to some extent the analysis that follows we are going to make two working assumptions. Notwithstanding the

appellee's argument to the contrary, the appellant in this case (the creditor First Union Bank) and the first law firm will be treated by us as "one and the same." First Union was acting under

a Consent Order issued by the United States Bankruptcy Court which authorized it to take all steps necessary to collect and pursue the collection of the first law firm's receivables. it was stated that: In the Complaint,

-4First Union, in accordance with the terms and conditions of the Loan Documents, the Consent Order and applicable law, has commenced enforcement of its rights and remedies against KFB and its respective assets, including, without limitation, undertaking steps to collect KFB's Receivables and to pursue KFB's choses in action for the purpose of applying the proceeds arising therefrom to reduce the indebtedness owed to First Union under the Loan Documents. A. The First Working Assumption: We will operate on the working assumption that there is no distinction material to the outcome of this appeal between the literal appellant (First Union) and the first law firm itself. As

such, the appellant will be entitled to recover if, but only if, the first law firm, had it been the appellant, would have been entitled to a portion of the ultimate fees under any one of the three theories of recovery set forth in the complaints. We are concerned, in effect, with the respective rights and obligations of three parties: 1) the first law firm, 2) Bleecker (former partner in the first law firm and later employee of the second law firm), and 3) the second law firm. literally concerned with two fees generated Although we are by two lawsuits

involving two clients, we will, as a linguistic convenience, refer simply to "the client." B. The Second Working Assumption: The first law firm, including Bleecker, was technically a professional services corporation rather than a partnership. Our

-5second working assumption is that on the departure of Bleecker from the law firm, the continuing obligations of Bleecker to his former colleagues (to the firm) and of them to him would be those of partnership law spelled out by Resnick v. Kaplan, 49 Md. App. 499, 505-09, 434 A.2d 582 (1981). assumption. Indeed, this is more than a working

It was so held by us in Langhoff v. Marr, 81 Md. App.

438, 448-52, 568 A.2d 844 (1990), vacated on other grounds by Marr v. Langhoff, 322 Md. 657, 589 A.2d 470 (1991). there noted for this Court, 81 Md. App. at 451: Again, we are dealing with professional firms, professional organizations, professional entities. There is a very substantial value in having rules applicable equally, regardless of the form of the entity, be it partnership or professional service corporation. . . . Resnick v. Kaplan is the law of Maryland. Policy is well served to have the same rule applicable to all firms regardless of the form and this is separate and apart from the fact that almost all of the cases refer to the corporate form as merely a tax advantage decision as opposed to any real difference in the organization and operation of the firm. Although the Court of Appeals did not find it necessary to resolve this issue in Marr v. Langhoff, 322 Md. at 667, the decision of this Court in that regard is binding authority unless and until the Court of Appeals declares otherwise. See also the thorough As Judge Bishop

analysis of this issue in Fox v. Abrams, 163 Cal. App. 3d 610, 61517, 210 Cal. Rptr. 260 (1985).

The Holding In a Nutshell

-6Notwithstanding the fact that our first working assumption, putting the creditor bank in the shoes of the first law firm, operates to the advantage of the appellant, we nonetheless affirm the decision of the trial court to grant the appellee's motion to dismiss both the first and second counts of the complaint because of their failure to state viable claims. We do, however, hold that

the motion to dismiss should not have been granted with respect to the third count, based on the first law firm's claim to quantum meruit compensation for the work performed by it. Our analyses of why the first two counts did not state viable claims but why the third count may possibly have done so are closely intertwined. Our discussion with respect to the viability

or non-viability of any of the three counts, therefore, may well have pertinence to the other two counts. What follows is for that

reason an omnibus discussion rather than three separate discussions in three respective vacuum chambers.

The Contingency Fee Claim Based on Percentage of Work Done
The first count alleged that the first law firm was entitled to a stated percentage of the contingency fee ultimately received by the second law firm because the first law firm had performed, prior to its dissolution, that precise percentage of the total work. Under no interpretation of what happened when the first law

firm was dissolved, however, does the first count represent a viable claim. The first law firm, of which Bleecker was then a

-7partner, went into bankruptcy and ceased its operations as a law firm at sometime in September or October of 1995. Two clients, who

had earlier retained the first law firm on a contingency fee basis, in some fashion followed Bleecker to the second law firm, where he became employed simply as an attorney working for the firm. After

the September-October 1995 dissolution of the first law firm, it ceased to have any formal contractual relationship with the client, although, as will be discussed, the first law firm may have continued to have a legal relationship with its former member, Bleecker. With respect to the representation of the client at the time of the ultimate settlement, two possibilities are at least

inferrable.

The more likely scenario is that the second law firm

was independently retained by the client by virtue of a subsequent and sequential contract for representation. Indeed, the Complaint,

after recounting the dissolution of the first law firm and the fact that Bleecker took the client's file with him, further recited that the second law firm "thereafter was retained to handle and conclude the . . . matter." We will not, however, foreclose the arguable,

albeit less likely, inference that Bleecker himself continued to represent the client pursuant to the original contract of retention and that no one deemed it necessary to execute a new contract. Under neither scenario could the first law firm prevail on the first count.

-8-

Scenario One: A New and Independent Retainer Contract
We will look first at the more likely scenario, that the client terminated its retainer contract with the first firm and entered into a new and independent retainer contract with the second firm. That the client terminated the first retainer

contract for good cause, to wit, the inability of the dissolved firm to continue the representation, is not necessary to our ultimate holding. Even had the client terminated the first

professional relationship without good cause, Skeens v. Miller, 331 Md. 331, 628 A.2d 185 (1993), makes it clear that a client may discharge an attorney at any time and that the attorney may not thereafter recover on the basis of a contract that no longer exists. The first count asserts a claim to a precise percentage of the contingency fee and is necessarily based on the contingency fee arrangement contractually entered into by the first law firm and the client. As Judge Karwacki made very clear for the Court of

Appeals in Skeens, 331 Md. at 335, that contractual relationship no longer had any viability and could not serve as the basis for any recovery by the first law firm: It is well settled that the authority of an attorney to act for a client is revocable at the will of the client. The client's power to discharge the attorney is an implied term of the retainer contract. This right is deemed necessary in view of the confidential nature of the relationship between attorney and

-9client and the evil that would be engendered by friction or distrust. Because the client's power to end the relationship is an implied term of the retainer contract, the modern rule is that if the client terminates the representation, with or without cause, the client does not breach the retainer contract, and thus, the attorney is not entitled to recover on the contract. (Citations omitted; emphasis supplied). If the first law firm could not recover on the basis of its earlier retention contract with the client directly, a fortiori, it could not recover indirectly from the second law firm with which it never had any contractual relationship of any sort. No fee sharing

agreement between the first law firm and the second law firm was alleged and there was no intimation of any formal or informal agreement of any kind between the two law firms. The first law

firm no longer had any contractual interest in the contingency fee and no claim, therefore, could be predicated on any such nonexistent interest. This does not necessarily mean that the first law firm is utterly bereft of any entitlement to compensation for services earlier rendered. As Skeens v. Miller went on to explain and as we

shall discuss infra, there may well be a viable claim in quantum meruit for the fair value of the services performed. pointed out, 331 Md. at 342-43: [A]n attorney, who is retained on a contingent fee agreement and discharged prior to the occurrence of the contingency, acquires no As Skeens

-10vested interest in the client's suit, but may recover the reasonable value of the services rendered prior to discharge. Such an entitlement based on the fair value of services actually rendered was, indeed, the appellant's claim made in the third count, the claim based on quantum meruit. The first count,

by unfavorable contrast, was based on a contingency fee contract of retention which had become null and void. If, therefore, the

client terminated the retainer contract with the first law firm and entered into a subsequent retainer contract with the second law firm, the first count of the complaint was properly dismissed. Under this framework of analysis, moreover, the very existence of Bleecker, as anything more than a narrative link, is a non-factor.

Scenario Two: The First Retainer Contract Completed By Bleecker
Under the less likely but still conceivable scenario whereby the first retainer contract remained in force and whereby Bleecker wrapped up that unresolved piece of his former law firm's business, Bleecker becomes the decisive factor in the analysis. Either by

express agreement or by operation of law, Bleecker might well have had a contractual obligation to his former law firm for that part of the former law firm's business which, at the time of the firm's dissolution, he took and completed, to wit, for a share of the contracted contingency fee which he, or someone on his behalf, collected.

The Contingency Fee Claim

-11-

Based on Respective Shares in the Former Partnership
Our analysis of why, even under this second scenario, the first count of the complaint was properly dismissed replicates precisely our analysis of why the second count was also properly dismissed. The second count resembled the first in that it assumed

that the first law firm retained a contractual entitlement to a precise share of the ultimate contingent fee. contrast with the first, based that share The second count, by on the respective

interests that Bleecker had and that the remaining members of the firm had in the professional services corporation prior to its dissolution. Both theories of recovery were grounded in the

ostensibly continuing contractual relationship between Bleecker and his former law firm, a relationship which may have had legal sequelae even after the more general professional association between them was terminated.

The Reciprocal and Continuing Contractual Obligations of Former "Partners" to Each Other
The reciprocal and continuing obligations between former

professional associates are thoroughly analyzed in the decision of this Court in Resnick v. Kaplan, 49 Md. App. 499, 434 A.2d 582 (1981), and that of the Court of Appeals in Marr v. Langhoff, 322 Md. 657, 589 A.2d 470 (1991). Both cases involved erstwhile

members of a law firm who terminated their relationships with their former firms, took some of the firm's business with them when they left, and ultimately earned fees as they wrapped up those items of

-12unfinished business. on partnership law. was a professional Our analysis in Resnick v. Kaplan was based The law firm in Marr v. Langhoff, by contrast, service corporation. That institutional

difference between the two cases had no effect on the respective outcomes. In Resnick v. Kaplan, the former partner who left the firm and took some of the business with him was held to be liable to his former partners for part of the fees he subsequently collected on the unfinished business. In Marr v. Langhoff, by contrast, the

former firm member was held not to be liable for the fees he subsequently collected in wrapping up unfinished business. The

common denominator is that both decisions rested on the particular contractual relationship between the departing firm member and the former colleagues. Whatever the contractual relationship may have

been between the first law firm and Bleecker in this case, the decisive fact is that there was no contractual relationship between the first law firm and the second law firm and no possibility, therefore, of a claim by one against the other based on contract. If, upon the dissolution of the first law firm, Bleecker took one (or any number) of the unfinished cases from the firm and subsequently concluded them, Resnick v. Kaplan makes it clear that he would, absent any agreement to the contrary, be obligated to his former colleagues for the fees he collected. In Resnick v. Kaplan,

a departing member of the firm took 150 unresolved cases with him and the remaining members of the firm handled all of the other

-13cases. With respect to the reciprocal obligations of the departing

partner and the remaining partners to each other, Judge Moore observed for this Court, 49 Md. App. at 507: professional These were contractual, obligations and it was the duty of the respective partners to see to their completion. In the performance of these contracts, the fiduciary character of their relationship as partners continued. The Uniform Act conferred no right upon either side to compensation for services rendered in this winding up process, cf. 9401(6) and, in the absence of any provision in the partnership document, it was correctly held that the aggregate of the fees collected should be allocated according to the percentages specified in the agreement for the distribution of profits and losses. (Citations omitted; emphasis supplied). In the Resnick v. Kaplan opinion, we quoted with approval from the case of Frates v. Nichols, 167 So.2d 77, 80-81 (Fla.3d DCA 1964): "Although never having been passed on by a Florida court, the proposition is universally accepted that a law partner in dissolution owes a duty to his old firm to wind up the old firm's pending business, and that he is not entitled to any extra compensation therefor. "The dissolution date of February 28, 1961 did not put an immediate end to the partnership, it continued for the purpose of winding up its affairs, and inasmuch as Frates had a duty to wind up the affairs of the partnership, his signing of a retainer agreement with an already existing client was without consideration and void.

-14* * *

"We adopt the rule recognized by our sister states that the retention of a law firm obligates every member thereof to fulfilling that contract, and that upon a dissolution any of the partners is obligated to complete that obligation without extra compensation." (Footnotes omitted.) (Emphasis added.) (Emphasis in original). The contractual relationship entered into by partners with each other creates a fiduciary duty to make a faithful accounting to the partnership for fees earned even after the partnership is formally dissolved. at 509: Appellant in this case seizes upon language of the court in Platt (361 P.2d at p. 85), which recognized that a client has the right to elect the attorney he prefers, "and that a member of a firm cannot force himself upon a client of the firm merely because he is a member of that partnership." The proposition asserted by the court is sound; but it does not mean, as appellant contends, that the fees thereafter earned by the partner chosen by the client are not subject to division in accordance with the partnership agreement. Nor does it mean that the fiduciary duty imposed upon partners to render a faithful accounting to the partnership for fees earned is diminished in the slightest. (Emphasis supplied). Pervading that analysis is the contractual relationship and the consequential continuing fiduciary obligation of the former partners to each other with respect to unfinished partnership business that is completed after the termination of the Resnick v. Kaplan went on to add, 49 Md. App.

-15partnership. Pervading the analysis of Marr v. Langhoff as well is

the contractual relationship between members of a firm to each other even after dissolution, notwithstanding the fact that a different result was reached in that case. The departing firm

member was there held to be free of any further obligation to account to his former colleagues for fees collected. That holding,

however, was only by virtue of the fact that the firm members, at the time they terminated their relationship, contractually agreed that there would be no continuing fiduciary obligations of one to the other. The Court of Appeals commented, 322 Md. at 667, on the

fact that the former associates expressly contracted with each other to terminate their relationship free of any continuing

fiduciary obligations: It is unnecessary in this case to decide whether a partnership or corporate model applies. This is because the special agreement reached between Bennett and Langhoff on or about December 31, 1981, extinguished any continuing duty of loyalty to Marr P.C. which Langhoff might otherwise have had and which necessarily was the foundation of the tort sued upon. . . . Both Bennett and Langhoff testified concerning their conversation leading to the Langhoff-Bennett contract ("What's yours is yours, what's ours is ours"). (Footnote omitted; emphasis supplied). In Marr v. Langhoff, it was this express provision of the termination contract itself that relieved the departing partner of any further obligation to his former colleagues. The Marr v.

-16Langhoff Court, however, pointed out what the normal contractual obligation contrary: Work in progress at the time of dissolution is an asset of the dissolved firm and the partners of the dissolved firm have an obligation to complete the work in progress. The compensation of the partners for completing work in progress during the winding up of the dissolved partnership is determined, absent special agreement, by the partners' interest in the profits of the dissolved partnership. 322 Md. at 668-69 (emphasis supplied). In Marr v. Langhoff, there would be absent such a special agreement to the

was such a special agreement which extinguished what otherwise would have been a continuing fiduciary obligation. "[T]he 322

Langhoff-Bennett contract extinguishes the fiduciary duties." Md. at 672.

"Because the relationships of partner to partner, or

of partner to firm in dissolution, did not thereafter exist, the fiduciary duties derived either directly from, or by analogy to, those relationships no longer exist." 322 Md. at 672-73. "The 322

Langhoff-Bennett contract substituted for the fiduciary duty." Md. at 673. Indeed, as Judge Chasanow noted in Somuah v.

Flachs,

____Md.____, n.3, No. 9, Sept. Term, 1998 (filed December 18, 1998): The majority of jurisdictions follow the rule that a "discharged attorney may recover only on a quantum meruit basis." Judy Becker Sloan, Quantum Meruit: Residual Equity in Law, 42 DePaul L.Rev. 399, 438 (1992).

-17(Emphasis in original). The implications of Resnick v. Kaplan and Marr v. Langhoff for our present case are clear. the client on behalf of Had Bleecker continued to represent his former firm on the original

contingency-fee retainer contract and had he himself collected that contingency fee, he might well be liable to the firm for a portion of that fee by virtue of his former professional contract with it. The first law firm, indeed, sued on the basis of its ostensible contractual entitlement to a specific percentage of the contingency fee. In Count 1, the first law firm computed that percentage on In

the basis of its proportionate contribution to the work done.

Count 2, it computed its percentage on the basis of the percentage distribution between it and Bleecker in their partnership contract. Under either method of computation, however, the basic predicate for the claim would lie in the specific contractual relationship between the first law firm and Bleecker. In this case, however, all of that is beside the point for the first law firm never sued Bleecker. It sued instead the second law

firm with which it had never had any contractual relationship of any sort. There was no fee arrangement entered into between the As Judge Davis

first law firm and the second law firm.

recently noted in Parker v. Kowalsky, ____Md. App.____, No. 722, Sept. Term, 1998 (filed January 7, 1999): When an attorney changes law firms, certain clients may decide to continue representation by the attorney, rather than

-18the previous law firm. Therefore, the attorney's new law firm is not liable to the old law firm in conversion for subsequent fees because the client has the option of choosing representation. This conclusion does not presume that Waldron [the attorney who changed firms] would not be liable to appellant on . . . a breach of contract . . . claim. (Emphasis supplied). This case, moreover, does not resemble Vogelhut v. Kandel, 308 Md. 183, 188, 517 A.2d 1092 (1986), where there was found to have been an express "contract between the discharged attorney and the successor attorney [with respect to their division of a contingent fee] and not a contract between the client and the discharged attorney." As a result, there was demonstrably no basis for any

contractual claim to a fixed percentage of the contingency fee per se. See In Re Estate of Callahan, 144 Ill.2d 32, 40-41, 161 Ill.

Dec. 339, 342, 578 N.E.2d 985, 988 (1991) (attorney's recovery should not be linked to a contract contingency when the attorney's recovery is not based upon the contract, but upon quantum meruit). Consistent with our analysis and based upon the lack of any contractual relationship between the first law firm and the second law firm, the trial judge gave as his reason for dismissing the appellant's claim the following explanation: Having reviewed Resnick v. Kaplan, 49 Md. App. 499, 434 A.2d 582 (1981), the Court finds that the holding in Resnick does not apply in the present case. Resnick concerned litigation between five former partners of a law firm that had dissolved. Four of the former partners/shareholders, who continued to

-19practice together, sued a fifth partner/shareholder for a share of legal fees paid by clients of the former firm. The Court held that those fees should be distributed based on the partners' respective percentage interests in the partnership. In this case, the plaintiff, First Union National Bank of Maryland, is suing a successor law firm, not a shareholder of the dissolved law firm. (Emphasis supplied). Both the first and second counts, sounding in contract and brought against the second law firm, were for that reason properly dismissed.

Quantum Meruit
Our holding, however, is different with respect to the trial judge's dismissal of the third count, grounded in quantum meruit. We are by no means intimating that the first law firm will

necessarily be entitled, even on the basis of quantum meruit, to any part of the ultimate fee based upon its reasonable performance of valuable work. That entitlement may well depend, inter alia, on

whether its services are ultimately determined by the fact finder to have been terminated by the client, if terminated they were, 1) with good cause because of the fault of the first law firm, 2) without any justification whatsoever, or 3) without just cause but in good faith. See the discussion of Somuah v. Flachs,

____Md.____, Sept. Term, 1998 (filed December 18, 1998) infra. Skeens v. Miller, 331 Md. 331, 335-36, 628 A.2d 185 (1993), points

-20out that the reason for the termination of the earlier employment is a pivotal factor in measuring the first law firm's entitlement to any remuneration at all: If the client discharges the attorney for cause, the prevailing rule is that the attorney may not recover any compensation. Attorney Grievance Comm'n v. Korotki, 318 Md. 646, 669, 569 A.2d 1224, 1235-36 (1990); Vogelhut, 308 Md. at 192, 517 A.2d at 1097 (Rodowsky, J., concurring); F. MacKinnon, supra, at 77-78; S. Speiser, supra,

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