LOS ANGELES (Legal Newsline) – A lawyer’s failure to be licensed in his state won’t cause his firm to pay more than $5 million to an unhappy client.
On Aug. 3, the California Second Appellate District ruled for the law firm Loeb & Loeb in its dispute with former clients – healthy dessert company Turtle Mountain and its founder Mark Brawerman.
Brawerman hired Loeb & Loeb to assist it in securing funding and a partnership with Wasserstein & Co. that would allow him to keep control over the future of Turtle Mountain. That didn’t work out.
In fact, when Wasserstein grabbed control of the company’s board of directors, Brawerman hired a different lawyer to take on litigation that could be filed against him but never was. He paid that lawyer a contingency fee taken from the amount of a buyout.
So Brawerman sued Loeb & Loeb, arguing he never would have had to pay that lawyer that $5.6 million that he did.
Loeb & Loeb argued an arbitration clause in its original representation agreement with Brawerman was enforceable, but Brawerman noted a lawyer there who spent more than 300 hours on his case, Christopher Kelly, wasn’t licensed to practice in California at the time.
He called it a fraud that should void the entire retainer agreement. An arbitrator disagreed and mostly ruled for Loeb & Loeb, ordering it to pay back $138,000 in the lawyer’s fees and another $94,933 for fees incurred in the arbitration litigating that issue.
The arbitrator found Brawerman couldn’t prove Loeb & Loeb’s actions while it represented him led directly to him paying his second lawyer the $5.6 million contingency fee. Brawerman appealed, but the Second Appellate District ruled the licensure status of the Loeb & Loeb lawyer wasn’t enough to void an entire retainer agreement.
The agreement was signed for Loeb & Loeb by Thomas Rohlf and said he would be principally responsible for representing Brawerman and Turtle Mountain but also assisted by other attorneys.
“There is nothing unlawful about this arrangement,” the Second District wrote. “Kelly is not a signatory to the retainer agreement. The retainer agreement is not conditioned on his participation in the representation.
“Indeed, he is not even mentioned in it.”
Any illegality occurred in the performance of the agreement, not its entry, the court said, considering Loeb & Loeb had plenty of capable California attorneys.