Appeal by plaintiff and defendants from judgment entered 15 November 1996 by Judge Robert P. Johnston in Mecklenburg County Superior Court. Heard in the Court of Appeals 12 January 1998.
The opinion of the court was delivered by: Smith, Judge.
Plaintiff appellant Robinson, Bradshaw & Hinson, P.A. ("RB&H"), represented Bonita Harris Smith ("Mrs. Smith") in her equitable distribution claim for approximately 5-1/2 years pursuant to a contingency fee agreement. In addition, Mrs. Smith employed RB&H on an hourly basis to represent her in claims for child custody, support, and final divorce against Ollen Bruton Smith ("Mr. Smith"). RB&H obtained for Mrs. Smith a judgment in excess of $15.5 million dollars on the equitable distribution claim. Mr. Smith appealed that decision to this Court and to the North Carolina Supreme Court. See Smith v. Smith, 111 N.C. App. 460, 433 S.E.2d 196, disc. review denied, 335 N.C. 177, 438 S.E.2d 202 (1993), reversed in part on other grounds, 336 N.C. 575, 444 S.E.2d 420 (1994). RB&H represented Mrs. Smith in both of these appeals.
This Court affirmed that part of the judgment addressing the classification and valuation of the property owned by the parties. However, this Court reversed the trial court's failure to consider defendant's receipt of dividend income after the date of separation as a factor in determining equitable distribution and in the court's calculation and treatment of the post-separation appreciation of the marital property, including the credit given defendant for his discharge of the second mortgage on the marital home. Id. This Court vacated that part of the judgment addressing distribution of the marital property and remanded the case to the trial court for a redetermination of what constitutes an equitable distribution of the marital property and entry of a new judgment. See Smith, 111 N.C. App. 460, 433 S.E.2d 196.
The North Carolina Supreme Court reversed part of this Court's decision and remanded on one issue. Smith, 336 N.C. 575, 444 S.E.2d 420. Our Supreme Court held, contrary to the opinion of this Court, that the trial court was required to make written findings as to the character of the post-separation appreciation. Smith, 336 N.C. at 577, 444 S.E.2d at 422. The remainder of the Court of Appeals decision was undisturbed. Id.
On 28 June 1994, Mrs. Smith met with RB&H attorneys to discuss the status of her case. Mrs. Smith stated the minimum amount she would settle for was a net amount of $10 million after payment of all fees and expenses. Mrs. Smith authorized RB&H to attempt to settle the case for a lump sum payment of $13 million. In August 1994, RB&H conveyed this settlement offer to Mr. Smith's counsel. This offer was not accepted.
Beginning in late August or early September 1994, Mrs. Smith engaged in secret settlement negotiations with Mr. Smith. Unaware of these negotiations, RB&H continued preparing Mrs. Smith's case. On 9 September 1994, Mrs. Smith's friend Anna Lisa Johnson contacted attorney Pamela H. Simon ("Ms. Simon") to look over proposed settlement documents for Mrs. Smith. On 21 September 1994, Mrs. Smith again met with RB&H attorneys to discuss her remanded case without telling RB&H that she had retained the services of Ms. Simon to assist her. On 30 September 1994, Mrs. Smith and her friend Anna Lisa Johnson met with Ms. Simon. Mrs. Smith showed Ms. Simon a consent order proposed by Mr. Smith's counsel that purportedly resolved the equitable distribution case. RB&H never received a copy of this proposed consent order.
On 11 October 1994, RB&H, still unaware of Ms. Simon's representation of Mrs. Smith, faxed Mrs. Smith proposed stipulations for the upcoming hearing. Thereafter, Mrs. Smith faxed the stipulations to Ms. Simon, who used them in her work settling the domestic case. Additionally, Ms. Simon negotiated with Mr. Smith concerning fees owed by Mrs. Smith to RB&H, and the discharge of RB&H.
On 7 November 1994, Ms. Simon filed a lawsuit on behalf of Mrs. Smith in Iredell County for equitable distribution, without the knowledge of RB&H, even though the original case was still pending in Mecklenburg County. Ms. Simon informed Judge George T. Fuller, in the Iredell County court case, that a settlement between the two parties had been reached. On 15 November 1994, Mrs. Smith and Ms. Simon caused to be filed a voluntary dismissal of the case in Mecklenburg County at 12:09 p.m. No one attempted to contact RB&H prior to the filing of the dismissal. After the dismissal was filed, the discharge letter to RB&H was placed in a mailbox outside of the Mecklenburg County Courthouse. Thereafter, a judgment was entered in the Iredell County case by Judge Fuller at 12:44 p.m. On 16 November 1994, RB&H received the discharge letter.
The final settlement in the Iredell County case provided that Mr. Smith would pay Mrs. Smith her portion of the marital estate, as agreed upon by the parties, plus Mrs. Smith's attorneys' fees and expenses. The settlement further provided that Mrs. Smith would cooperate with Mr. Smith in defending any claim by RB&H, and that Mrs. Smith could not reach any agreement with RB&H concerning the amount of its fees. Mr. Smith agreed to pay Mrs. Smith's legal and other expenses incurred during these proceedings, and further agreed to indemnify Mrs. Smith for any judgment RB&H might obtain against Mrs. Smith for attorneys' fees. However, Mr. and Mrs. Smith did not pay RB&H's fees or repay the expenses advanced by RB&H on Mrs. Smith's behalf.
On 23 January 1995, RB&H filed the instant suit against defendant appellees Mr. and Mrs. Smith. RB&H asserted claims for: (1) breach of contract against Mrs. Smith; (2) tortious interference with contract, including punitive damages, against Mr. Smith; and (3) tortious interference with economic advantage against Mr. Smith.
Defendants Ollen Bruton Smith and Bonita Harris Smith appeal from summary judgment holding defendants jointly and severally liable for $1,597,152.50 on the equitable distribution contingency fee contract between Robinson Bradshaw and Hinson, P.A., and Bonita Harris Smith, and for $43,995.50 plus judgment interest for attorneys' fees for the underlying domestic cases, entered by Judge Robert P. Johnston in Mecklenburg County Superior Court on 15 November 1996 incorporating part of a sealed judgment involving the actual settlement terms of the equitable distribution case entered 15 November 1994 by Judge George T. Fuller in Iredell County District Court. Robinson Bradshaw and Hinson, P.A., appeal from the same order entered by Judge Johnston granting summary judgment in favor of Ollen Bruton Smith on the tortious interference with contract and economic advantage claims, and from the calculation of damages for the equitable distribution contingency fee contract.
Before we address the merits of this case, we note that Mrs. Smith obtained the aid of new counsel Ms. Simon to complete her equitable distribution settlement before the termination of RB&H as her counsel of record. The comment to Rule 4.2 of the Rules of Professional Conduct provides that "a lawyer who does not have a client relative to a particular matter [can consult] with a person or entity who, though represented concerning the matter, seeks another opinion as to his or her legal situation." Thus, it was not improper for Ms. Simon to advise Mrs. Smith concerning the equitable distribution case handled by RB&H. In addition, the comment to Rule 4.2 further provides that "[a] lawyer from whom such an opinion is sought should, but is not required to, inform the first lawyer of his or her participation and advice." In the instant case, Mrs. Smith requested that Ms. Simon refrain from telling RB&H about her representation. Rule 1.6 of the Rules of Professional Conduct provides that confidential information includes "information gained in the professional relationship that the client has requested be held inviolate . . . ." Thus, Ms. Simon acted appropriately in not revealing the initial consultation.
However, it soon became apparent that Ms. Simon was going to take over the representation of Mrs. Smith on the equitable distribution case. Although Mrs. Smith requested that Ms. Simon not tell RB&H that they were discharged until the last possible moment, the better practice, and probably the only ethical one, would have been to disclose the new representation by Ms. Simon to RB&H before RB&H continued unnecessary work on the case. Rule 0.1 of the Rules of Professional Conduct provides that "[a] lawyer should demonstrate respect for the legal system and for those who serve it, including Judges, other lawyers and public officials." (Emphasis added). Thus, RB&H should have been notified of their discharge when it was clear that Ms. Simon was taking over the representation of Mrs. Smith and the services of RB&H were no longer necessary.
Mr. Smith first assigns as error to the trial court's determination that the equitable distribution contingency fee contract between RB&H and Mrs. Smith is valid and enforceable. Mr. Smith claims the contract is void as against public policy. Additionally, Mr. Smith argues an enforceable contract was never formed ...