Court denies attorney’s request for damages from ex-law partner (UPDATE)

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A published opinion from the Wisconsin Court of Appeals seeks to clarify when an attorney is able to collect fees for cases he or she worked on prior to leaving or breaking up a law practice.

The court, in a decision authored by Deputy Chief Judge Michael Hoover on Tuesday, ruled that Kenosha attorney Scott Winston, who previously worked in Eau Claire, is not entitled to contingency fees on cases he worked on when practicing with attorney Thomas Guelzow.

Attorneys familiar with the case said the decision should provide some guidance on the importance of drafting a written agreement on how to dissolve a firm and divvy up clients in situations that frequently become contentious.

According to the decision, Guelzow hired Winston as an associate for his law firm, Guelzow Law Offices Ltd., in 2002. They had an agreement, though it was largely unwritten, that Winston would provide office space and staff members, and front the money to prosecute personal-injury lawsuits. Guelzow’s name would be used to obtain clients and he would reimburse Winston for costs and expenses. The remaining money that came from client’s contingency fees would be split evenly.

In 2005, Winston started his own law firm. Both attorneys maintained separate practices yet publicly used the firm name Guelzow & Winston Ltd., which Winston owned.

Guelzow decided in 2011 that the pair should split up. They had 13 remaining clients, and the attorneys sent each of those clients a letter detailing the split and informing them of their options in future representation, according to the decision. The letter recommended going with Guelzow, as Winston was planning to take an extended break.

In the end, all of the clients went with Guelzow. He took over the cases in April 2011 and Winston assisted until that August. The pair had no contract drawn up for the work on those cases, though Guelzow reimbursed Winston $469,000 for any costs associated with resolving the cases.

Once the cases were resolved, Winston then filed suit asking for half of the contingency fees from other cases Guelzow took over from the joint practice. Rusk County Circuit Judge Steven Anderson, following a bench trial, awarded Winston $53,600 for undisputed fees and office costs, though $12,600 of that was offset by a loan he owed to Guelzow.

However, the judge said Winston had failed to prove any damages owed to him. Winston appealed, arguing that existing precedent regarding withdrawal from representation and contingency fees was not applicable.

But Hoover’s decision affirmed Anderson’s.

“Winston was financially unable to continue representing the clients,” according to the decision, “and he jointly recommended that all clients choose Guelzow to continue their cases.

Winston had argued that he was entitled to contingency fees based on Tonn v. Reuter, a Wisconsin Supreme Court decision from 1959 that dealt with a law firm suing a woman it represented after she terminated their agreement without cause. Hoover shot that argument down, though, since Winston was the one who withdrew, and it wasn’t improperly done by a client.

According to Hoover, when Winston stopped practicing with Guelzow, that constituted voluntarily withdrawing from representation, and therefore he was not entitled to any payment.

Guelzow, reached by phone on Wednesday, said he was pleased with Hoover’s decision. He said he learned that he should have spelled out what to do with clients once a partnership dissolves.

After Guelzow didn’t pay Winston what he wanted, according to Guelzow, Winston pursued an ethics charge with the Office of Lawyer Regulation, which never materialized. After that, Winston filed the lawsuit.

“It should have been an ideal situation,” Guelzow said. “It wasn’t.”

Winston could not immediately be reached for comment. His attorney, Terry Johnson of Peterson, Johnson & Murray SC, Milwaukee, did not immediately return a call.

“There was never a point that I saw, from his point, where it wasn’t contentious,” Guelzow said.

Attorneys who represent fellow lawyers said the case is a good example of the problems that arise when attorneys stop working together.

Christopher Kolb, of Halling & Cayo SC, Milwaukee, said lawyers who work together frequently have “an oral agreement with one another and don’t nail it down and don’t specify.” That often can spill into arguments that become very contentious, and most are arbitrated to prevent an ugly court battle.

“It’s kind of ironic with lawyers because that’s what we do,” Kolb said. “With other people, we draft contracts. Nobody enters into a contractual relationship thinking the other party is a snake in the grass.”

Attorney Nate Cade, who frequently represents lawyers in litigation and disciplinary cases, said he thought the case was published to clarify or reaffirm Tonn.

Guelzow said the decision addressed a “highly unusual situation” that didn’t get personal for him.

“It’s not personal and I’m not bitter,” he said. “I’ve done too many trials to personalize it.” Follow @eheisigWLJ