BOISE, Idaho (Legal Newsline) - In a battle over legal fees, an Idaho attorney out for vengeance against his former firm will be sanctioned for continuing to represent a client he took with him when he left.
The state Supreme Court reached this conclusion on Sept. 2 as it sorted out the mess created by Melissa Gryder's simple car-accident lawsuit. She hired Litster Frost Injury Lawyers for her case, but that was soon complicated when her lawyer, Seth Diviney, felt betrayed when his attempt to buy the firm was rejected in favor of others'.
So he quit and started his own firm - Idaho Injury Law Group. When he settled Gryder's case for $120,000, a dispute arose over 40% in attorneys fees. In return, Diviney and Gryder said the Litster Firm had violated consumer protection laws when it claimed it wouldn't charge her anything if she terminated her retention agreement.
Mucking the waters more was Diviney's revenge. He and other former Litster employees, including members of his family, sent a series of demands for hundreds of thousands of dollars, and he filed a complaint against Litster in February 2020 with the Attorney General's Office.
On Facebook, he posted:
"I’m driven by rebuilding a place for my tribe to take refuge and be safe. Our wonderful community has been corrupted and violated by greed and betrayal. I am consumed with need for justice. I sharpen my sword and it galvanizes with a fine edge. I’m ready to wield my focused revenge at those who devasted our kindly village. Until my tribe has found shelter, I will not rest. I’m grateful for my people and I am disgusted by the greed of small men."
The Idaho Supreme Court found he had a conflict of interest as he pursued his firm's financial interests (the splitting of the attorneys fees) and his client's (her counter-claim under the Idahoa Consumer Protection Act).
"Under Gryder's ICPA claim, not only may she seek rescission, she may also pry for the trial court to use its broad equitable powers and award 'any other appropriate relief which the court in its discretion may deem just and necessary,'" the decision says.
"Because of this, Gryder's ICPA claim necessarily includes claims that Litster should be barred from any recovery in equity; that Gryder - not IILG - should be entitled to retain the portion of the fund Litster would otherwise be entitled to; and that IILG's claim to the fund should be proportionately reduced to avoid a windfall for only partial performance."
"Conflict-free" pursuit of her ICPA claim could have led a different attorney representing Gryder to seek punitive damages, which could have been assessed against Diviney as her attorney there, the decision says.
"(W)e do not presume to know what sanction will be appropriate in the district court's discretion, or what sanction Gryder might argue for on remand," the decision says.
"(T)he district court may appropriately require that Diviney forfeit, and disgorge himself of, any fee owed to him by Gryder in her underlying personal injury claim and on her ICPA counterclaim after determining how to equitably distribute the disputed portion of Gryder’s settlement fund."
"It is possible that Gryder may argue fairness and the integrity of the judicial process requires time for her to acquire conflict-free counsel; to investigate Diviney and Litster for 'repeated or flagrant' violations of the ICPA to add punitive damages to her ICPA claim; and to present such evidence in a new trial."
As for the fee-splitting issue, the trial court found Litster was owed 85% or $48,000 in fees. It reduced by $8,211.85 for violating the ICPA.
The Supreme Court said the trial court only considered Litster's and Diviney's stake in the outcome and didn't factor Gryder's. It remanded the issue for a new calculation.