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Bank of America, N.A. v. Prestige Imports, Inc.

Appeals Court of Massachusetts, Norfolk

July 20, 2016


          Heard: Date January 11, 2016.

         Civil action commenced in the Superior Court Department on February 1, 1991.

         A motion to adjudicate an attorney's lien, filed on December 9, 2013, was heard by Patrick F. Brady, J.

          Steven J. Bolotin for George Deptula.

          Timothy J. Fazio (Jennifer L. Morse with him) for the defendants.

          Present: Grainger, Rubin, & Milkey, JJ. [2]

          RUBIN, J.

         In 1992, attorney George Deptula agreed to represent Prestige Imports, Inc., and its principals, Helmut Schmidt and his wife Renate Schmidt[3] (collectively, Prestige), on a contingent fee basis in litigation with South Shore Bank and, later, its acquirer, Bank of America, N.A. (Bank of America), in exchange for a nonrefundable retainer and a percentage of any recovery on Prestige's counterclaims.[4] After victories at two trials and a reversal of those victories by this court, see Bank of America, N.A. Prestige Imports, Inc., 7 5 Mass.App.Ct. 741 (2009) (Prestige Imports), Deptula withdrew from the case without Prestige's consent in April, 2010. Represented by different counsel, Prestige won a judgment of $27, 031, 568.12, including statutory interest, at a third trial. While that judgment was on appeal at this court, Deptula filed a notice of attorney's fees lien pursuant to G. L. c. 221, § 50. Prestige brought a motion to adjudicate this lien, arguing that Deptula forfeited it by withdrawing without Prestige's consent and without good cause. After a jury-waived trial, a Superior Court judge -- who was also the trial judge for the third trial in the underlying litigation -- ordered the entry of judgment for Prestige. Deptula appealed that judgment and, for the reasons stated infra, we reverse.


         The litigation between Bank of America and Prestige involved claims by Bank of America for repayment of loans, and counterclaims by Prestige chiefly alleging Uniform Commercial Code violations, violation of G. L. c. 93A, and negligence, arising out of Bank of America's handling of certain checks and its issuance of treasurer's checks by which the comptroller of Prestige embezzled substantial funds from Prestige. Detailed facts about that litigation are set forth in Prestige Imports, supra at 742-752. We summarize here only the facts relevant to the attorney-client relationship between Deptula and Prestige. We take the facts as found by the judge, supplemented by uncontested facts in the record. Denver St. LLC Saugus, 462 Mass. 651, 653 (2012).

         After Deptula agreed to represent Prestige in April of 1992, he spent nine years conducting extensive discovery and opposing two motions for summary judgment filed by Bank of America. In 2001, Deptula asked Schmidt to allow him to bring in an attorney named Richard Grahn to help him try the case. Deptula proposed that Grahn would be compensated by sharing the contingent fee. Schmidt agreed to hire another attorney, but did not hire Grahn. Instead, he hired an attorney of his own choosing, Thomas Francis, whom Schmidt arranged to pay on an hourly basis. In 2002 and 2003, Deptula and Francis succeeded at two different trials, the first on liability and the second on damages. Although it was a difficult case, they obtained a net damages award of approximately $8 million, including statutory interest. Bank of America appealed these jury verdicts and, due primarily to delays in the preparation of the trial transcripts, this court did not hear the appeal until 2008. Prestige Imports, supra at 741.

         During the sixteen-year period following Prestige's retention of Deptula, there were a number of attempted revisions to the fee agreement. In 1999, Deptula requested and received a revision that provided him with additional upfront cash and required Schmidt to hold additional money in escrow for the payment of experts. In 2001, Deptula and Schmidt discussed, but apparently never formalized, another amendment to the fee agreement. In 2003, Deptula stated that hiring Francis on an hourly basis was Schmidt's choice, and Deptula proposed minor modifications to the fee agreement. Schmidt responded that the increased upfront payment requested by Deptula be offset by a portion of the fees he was paying to Francis. It appears that the two never memorialized any of these suggested changes. In April and December of 2004, and in November of 2007, Schmidt again unsuccessfully requested a change to the fee agreement in light of the money he was spending on Francis.

         During the period between the damages trial in 2003 and the 2008 oral argument in Prestige Imports, Schmidt expressed significant frustration with Deptula's performance. On a number of occasions, Schmidt stated or implied that the delays were Deptula's fault. Often, Schmidt drew connections between Deptula's flaws and the hiring and payment of Francis. For instance, in 2004, Schmidt wrote a letter to Deptula stating that his failure to return telephone calls showed "disrespect" and "lack of care and attention towards my case, " and that "[i]t was exactly this behavior and attitude which forced me three years ago, two month[s] prior to our first scheduled trial, to hire additional legal help." Schmidt also repeatedly returned to the issue of Francis's fees, expressing his belief that Deptula was procrastinating and producing inferior work product, and then over utilizing Francis to make up for these deficiencies.

         Schmidt's frustrations became even more pronounced during the preparation of a brief opposing Bank of America's petition for direct appellate review and the preparation of Prestige's appellate briefs. During this period, Schmidt wrote Deptula another letter stating that he "remember[ed] that [Deptula was] very negative prior to the first trial about our chances to succeed with the bad faith argument" and that "[t]hat attitude is what drove me to seek additional legal advice from Tom Francis." Schmidt stated that Deptula was once again displaying this negative attitude, which "ma[de] me feel helpless and without adequate legal representation." A few months later, Schmidt wrote an electronic mail message (e-mail) to Deptula expressing frustration about his progress in preparing a reply brief, stating that "[i]t appears again that your lack of commitment forces me to engage Tom to complete the job."

         These tensions came to a head after the 2008 oral argument in this court. In the hallway outside the court room, Schmidt expressed -- either by "screaming and yelling" or just "in a somewhat angry voice" -- that he thought that Deptula had failed to make the argument they had agreed he would make. Schmidt put his feelings into writing in a letter dated April 17, 2008, and titled "WHAT A DISAPPOINTMENT!!!" There, Schmidt once again expressed his belief that Deptula had failed to make the argument they had agreed upon. He concluded, "In light of our preparation for this hearing this demonstrates complete disregard for your client's interest and preferences. ... I do not know whether your presentation was a result of your overriding determination not to create grounds for a new trial or if you have other ulterior motives. . . . Until the Appeals Court has made its decision, the final consequences of what I perceive[d] to be a perplexing misrepresentation cannot be assessed." Deptula replied with a lengthy letter explaining that he needed to focus on the issues about which the justices asked questions. Schmidt responded to ...

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