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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1267 September Term, 2005

FRED S. SOMMER, ET AL. v. LORI DENISE RHOADS

Adkins, Krauser, Rodowsky, Lawrence F., JJ. Opinion by Adkins, J.

Filed: October 31, 2006

In this case, we consider whether a statutory attorney's lien against a client's cause of action for work performed before the client's bankruptcy may survive that bankruptcy, even though the attorney did not give the notices required to assert the lien at the time the bankruptcy was filed. We shall hold that it may.

FACTS AND LEGAL PROCEEDINGS Appellants Fred S. Sommer, an attorney, and Shulman, Rogers, Gandal, Pordy & Ecker, P.A., his law firm (collectively referred to in the singular as Sommer), appeal the grant of summary judgment in favor of their former client, appellee Lori Denise Rhoads.

Appellants are attempting to collect the alleged balance due for attorney's fees incurred by Rhoads in connection with her

employment discrimination lawsuit against her former employer.1 The First Trial In June 1994, Sommer filed a federal suit on behalf of Rhoads, alleging, inter alia, violations of the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA), arising from Rhoads's exposure to second-hand smoke in her workplace and her employer's allegedly retaliatory termination after she

threatened to file an ADA discrimination claim.

See Rhoads v.

F.D.I.C., 257 F.3d 373, 377-79 (4th Cir. 2001), cert. denied, 535 U.S. 93.3, 122 S. Ct. 1309 (2002). In February 1997, the district court granted summary judgment Rhoads was employed by Standard Federal Savings Association (SFSA). She sued the Federal Deposit Insurance Corporation (FDIC), as receiver for SFSA.
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in favor of the employer on nine of Rhoads's ten claims. Rhoads v. FDIC, 956 F. Supp. 1239 (D. Md. 1997).

See

A February 1998

jury trial of the remaining FMLA claim resulted in a defense verdict for the employer. Sommer filed various post-trial motions

on Rhoads's behalf, none of which were successful. Rhoads's Bankruptcy By that time, Rhoads claims, she had paid Sommer approximately $20,000 in attorney's fees and costs. On March 27, 1998, Rhoads

filed for Chapter 7 bankruptcy, thereby staying the discrimination suit before the time for noting an appeal from the district court judgment expired. See id.

In her bankruptcy schedules, Rhoads listed a $190,000 debt to Sommer for "Legal services" as "an unsecured nonpriority claim." Rhoads also disclosed her "[c]ivil claim for damages," which she noted resulted in a "judgment for defendant 3/4/96, time for appeal has not expired." notice. Sommer was identified as a creditor and served

He did not file any response or other claim in the

bankruptcy proceedings. The bankruptcy trustee concluded that there was no value to the estate in pursuing the litigation through appeal, and

ultimately that there was "no property available for distribution from the estate." He therefore released to Rhoads any interest she might have in the litigation. discharged on July 2, 1998. Rhoads's debts were unconditionally

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The First Appeal That summer, Sommer discussed with Rhoads an appeal of the district court judgment. He wrote Rhoads that he was "willing to

bring an appeal challenging the special verdict form used" to try the FMLA claim, and, depending on further research, "might also be willing to challenge the district court's summary judgment ruling" dismissing the ADA claim and limiting the period of back pay. Sommer stated that he was "not willing to raise any other issues or argument on appeal." In addition, Sommer proposed that Rhoads "would remain responsible for all unpaid fees and costs incurred to date and any future fees and costs, pursuant to the terms of our original fee agreement." While they continued to negotiate, Sommer noted an appeal on Rhoads's behalf to the United States Court of Appeals for the Fourth Circuit, in order to preserve her right to challenge the district court judgment. During their discussions about such an

appeal, Rhoads questioned, inter alia, whether a new retainer agreement would revive the debt that she believed had been

discharged in bankruptcy.

In response, Sommer took the position

that, although he did "not intend to seek recovery from you of the unpaid attorney's fees and costs," he still had "a statutory lien for those fees and costs against any recovery you obtain in this case," and that this lien was not discharged in bankruptcy. Disagreements between attorney and client continued. Sommer

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officially withdrew as Rhoads's attorney, effective August 29, 1998. One month later, on September 28, 1998, Sommer asserted an lien for $159,729.74 (hereinafter, "Sommer's Lien

attorney's

Claim"), asserting the right to require the FDIC or the Court "to hold any money payable . . . to Ms. Rhoads relating to the action, proceeding, judgment, or award." Rhoads proceeded with the appeal pro se. Although the Fourth

Circuit affirmed the judgment against Rhoads on her FMLA claims, the appellate court held that the district court erred in granting summary judgment on Rhoads's retaliation claim under the ADA. Rhoads, 257 F.3d at 394. that cause of action.2 See

The case was remanded for a new trial on

See id.

According to Rhoads, the ADA retaliation claim was what Sommer refused to pursue on appeal, whereas the FMLA arguments that Sommer advocated as grounds for appeal were rejected as contrary to the plain meaning of the statute. Not surprisingly, Sommer

disputes Rhoads's contentions, asserting that she prevailed by relying on theories and evidence that he developed in discovery, pleadings, and trial. The Second Trial And Appeal Rhoads continued to represent herself during the second trial. In December 2002, more than four years after Sommer withdrew as

Shortly thereafter, on August 8, 2001, Rhoads filed suit against Sommer for legal malpractice. She prayed for "[r]ecovery of fees paid" to him and "dismissal" of his lien. 4

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Rhoads's

attorney,

a

federal

jury

found

that

the

employer

terminated Rhoads for asserting her rights under the ADA. The jury awarded Rhoads damages of approximately $120,000. Rhoads then moved for an award of attorney's fees and costs. In support, she cited Sommer's "statutory lien in the amount of $159,729.74" and stated that she had "already paid Mr. Sommer a total of $20,398.52[.]" Rhoads asserted that during the five years of Sommer's representation, he billed "approximately 270 hours per year," which "was, in all regards, reasonable." She requested a

total award of $175,744.99, which included fees and expenses for legal work performed by her first attorney,3 Sommer, and herself. In June 2003, Sommer moved to intervene for the purpose of being heard on the fee issue. The district court denied leave to See

intervene and also denied Rhoads's claim for fees and costs.

Rhoads v. FDIC, 286 F. Supp. 2d 532, 545 (D. Md. 2003), aff'd, 94 Fed. Appx. 187 (4th Cir.), cert. denied, 543 U.S. 927, 125 S. Ct. 331 (2004). In its ruling, the federal court pointed out that Rhoads had asserted "that she owes nothing to Sommer as a result of the bankruptcy discharge." See id. at 543. In addition, "[i]t could

be a windfall . . . to award her attorney's fees when she is simultaneously pursuing a judgment for attorney's fees in another

Rhoads was briefly represented by another attorney before retaining Sommer. 5

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forum."

Id.

The court suggested that, "even if [Sommer] were

entitled to fees" for work performed prior to Rhoads's bankruptcy, "the amount would be very small" because "the prevailing party is not entitled to fees incurred in pursuing unsuccessful claims" and, "[o]f the approximately ten original claims, only one was

ultimately successful."

See id. at 542 n.7.

Finally, the federal

court observed that, due to Sommer's withdrawal "before Rhoads prevailed at the Fourth Circuit and second trial," Sommer "would need to establish that [his] efforts, and not those of Rhoads or amicus, produced the final judgment in favor of Rhoads." Rhoads's second appeal to the Fourth Circuit was unsuccessful. Sommer's Lien Action In December 2004, Sommer filed in the Circuit Court for Montgomery County a verified complaint in this action, seeking a declaration "that the Attorney's Lien is valid and enforceable against the" judgment Rhoads obtained in the second trial, and asking the court to "enforce the Attorney's Lien against" that judgment." The amount of Sommer's lien claim is $159,729.74, the Id.

same amount Sommer claimed when he withdrew six years earlier. Sommer also requested injunctive relief to ensure payment of his fees from any FDIC payment made to satisfy the judgment in favor of Rhoads. In response, the circuit court ordered the FDIC to pay

$40,000 of the $120,000 judgment into the court registry. Rhoads moved to dismiss Sommer's lawsuit. While that motion

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was pending, Sommer moved for summary judgment. After briefing and oral argument, the Circuit Court for Montgomery County granted judgment in favor of Rhoads, treating her motion to dismiss as one for summary judgment. The court interpreted the Retainer Agreement between Sommer and Rhoads to be a waiver of Sommer's statutory lien rights. It held that Sommer agreed to forego his statutory lien

rights by agreeing that, if his representation did not yield a judgment or settlement in Rhoads's favor, she would not be

obligated to pay more than $500 per month toward the outstanding fee balance. Sommer noted this appeal, raising six issues.4 We address

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Sommer presents the following questions in his brief: I. Whether the Circuit Court erred by interpreting the parties' Retainer Agreement to contain a "waiver" of Appellants' right to assert an attorney's lien. Whether Rhoads's Chapter 7 bankruptcy filing bars enforcement of Appellants' attorney's lien.

II.

III. Whether Appellants are entitled to enforcement of their attorney's lien where Rhoads admits that [(i)] the number of hours Appellants expended in representing her in the U.S. District Court Lawsuit was, in all regards, reasonable; (ii) the agreed-upon hourly rate was also reasonable; and (iii) all of the fees sought by the lien were incurred by Rhoads in the action in which the judgment was obtained. (continued...) 7

only the following issues: I. Under the terms of the Retainer Agreement and in light of Sommer's withdrawal as counsel after the unsuccessful first trial, did Sommer waive his right to a lien against the judgment Rhoads obtained in the second trial? Did Rhoads's Chapter 7 bankruptcy discharge her debt to Sommer arising from the first unsuccessful trial?

II.

We answer both questions no, vacate the judgment, and remand to the circuit court for resolution of the remaining issues that were not decided on summary judgment. DISCUSSION The Retainer Agreement The Retainer Agreement (the Agreement) between Sommer and

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(...continued) IV. Whether Appellants are required to establish that their services "produced" the judgment on which Appellants' attorney['s] lien is based. V. Whether, assuming that Appellants are required to establish that their services "produced" the judgment on which Appellants' attorney lien is based, the undisputed material facts establish as a matter of law that the judgment resulted from the work product and legal theories Appellants developed on Rhoads's behalf. Whether the Circuit Court erred in denying Appellants' motion for summary judgment; request for injunctive relief; dissolving the temporary restraining order and in granting Rhoads's motion to dismiss, which the Circuit Court treated as one for summary judgment. 8

VI.

Rhoads provides for a hybrid attorney's fee, consisting of both a "Guaranteed Fee" accruing at $100 per hour and a "Contingent Premium" that potentially could raise the total compensation to 30 percent of Rhoads's recovery "[i]n the event that [she] obtains a judgment or settlement in her favor[.]"5 The Guaranteed Fee is

"payable regardless of whether a judgment or settlement is obtained in Client's favor." In no event could the Guaranteed Fee plus the

Contingent Premium exceed 30 percent of the total recovery from settlement or judgment. With respect to the payment of fees and costs, the Agreement provides: 1. Monthly Payments

Client will be billed monthly for all fees and costs incurred. Except for certain additional fee payments set forth below, Client will be required to pay within 30 days of the monthly bill:

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