Lawyer entitled to $1.05 million default judgment

The Indiana Court of Appeals affirmed a default judgment in favor of an Indiana attorney because an Illinois attorney demonstrated "contumacious disregard" for a trial court's orders.

In David J. Fitzpatrick d/b/a David J. Fitzpatrick and Associates v. Kenneth J. Allen and Associates, P.C., No. 64A03-0811-CV-545, Illinois attorney David Fitzpatrick challenged the trial court's decision to enter default judgment in Indiana attorney Kenneth J. Allen's favor for $1.35 million in attorney fees. Allen, Fitzpatrick and attorney Mitchell Iseberg entered into a fee-sharing contract in which Fitzpatrick would handle a couple's products liability claim in an Illinois court and Allen would handle the medical malpractice suit filed by the couple. The agreement stipulated the attorneys would be paid 33 1/3 percent of any judgments or settlements in the couple's favor – Allen would receive 50 percent and Fitzpatrick and Iseberg would split the remaining 50 percent.

At some point during the litigation, Fitzpatrick proposed a different fee-sharing agreement and Allen rejected it. The next day, the couple terminated Allen's representation regarding the products liability case but retained him for the medical malpractice suit. The products liability case settled, but Fitzpatrick refused to disclose the amount. In August 2004, the trial court ordered disclosure of the settlement amount; Fitzpatrick refused and eventually the trial court entered a default judgment in favor of Allen. By this time, Allen had withdrawn from representing the couple in the medical malpractice suit.

Fitzpatrick eventually disclosed the products liability suit settled for $8.1 million, and the trial court entered judgment in favor of Allen, basing the award on 50 percent of the $2.7 million, which is 33 1/3 percent of the settlement amount.

Fitzpatrick argued that Indiana law prefers to give parties their day in court, but Indiana Trial Rule 37 doesn't require a trial court to impose a lesser sanction before dismissing an action or entering default judgment when a disobedient party has displayed contumacious disregard for a court's orders, wrote Judge Nancy Vaidik. Fitzpatrick had plenty of opportunities to disclose the settlement amount, but did not, despite the 2004 order that the information was discoverable.

The trial court was also correct in ordering a judgment in favor of Allen based on the fee agreement contract and not quantum meruit damages. Fitzpatrick's argument that the Indiana Rules of Professional Conduct 1.5(e) prohibits Allen from collecting more than quantum meruit damages is misplaced, the appellate court ruled.

"The flaw in Fitzpatrick's argument is that he focuses upon Allen's level of participation in the products liability suit alone," the judge wrote.

Instead of examining what Allen did under the products liability case, one should examine the broad agreement encompassing both suits. Allen performed the work required of him under the parties' contract.

The trial court did err in awarding Allen $1.35 million by failing to take into account $600,000 that had been awarded to an attorney who worked on the couple's case and was dismissed after the couple hired Fitzpatrick. The Court of Appeals remanded for the trial court to enter a new judgment ordering Fitzpatrick to pay $1.05 million in damages, plus costs and interest, to Allen.