Brief – Fitzpatrick v. Allen

IN THE INDIANA COURT OF APPEALS

CASE NO. 64A03-0811-CV-00545

_________________________________________________

DAVID J. FITZPATRICK

d/b/a DAVID J. FITZPATRICK AND ASSOCIATES,

Cross-Defendant/Appellant,

v.

KENNETH J. ALLEN AND ASSOCIATES, P.C.,

Cross-Plaintiff/Appellee.

_________________________________________________

Appeal from the Porter Superior Court

Cause No.: 64D02-0312-CT-10532

The Honorable William Alexa, Judge

_________________________________________________

APPELLEE’S BRIEF

_________________________________________________

Kenneth J. Allen (3857-45)

William Lazarus (24638-64)

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TABLE OF CONTENTS

Table of Contents. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . i

Table of Authorities. . . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . v

Statement of Issues . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 1

Statement of Case . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 2

Statement of Facts . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 3

Hiring Allen, splitting fees. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 4

Action on two fronts. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 5

Settlement approaches, Fitzpatrick proposes new deal . . . . . . .. . . . . . . . . . . . 6

Litigation ensues over fees . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 7

Separation with Hills; default motions . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 8

More delay. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 10

Non answers and default . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 10

Disclosure after default, entry of judgment . . . . . . . . . . . . . . . .. . . . . . . . . . . 12

Summary of Argument . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 14

Argument . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 15

I. The trial court properly entered a default judgment

against Fitzpatrick, and found him to be in breach

of his contract with Allen & Associates. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 15

Standard of Review. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 15

A. The trial court properly exercised its discretion in ordering default. . . . 16

1. Fitzpatrick repeatedly disobeyed orders of the court. . . . . . . . . . 16

2. Lesser sanctions were not required. . . . . . . . . . . .. . . . . . . . . . . 17

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3. False rationalizations underlaid Fitzpatrick’s

contumacious disregard. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 18

B. Fitzpatrick breached his contract with Allen. . . . . . . . . . .. . . . . . . . . . . 19

1. Default establishes breach by Fitzpatrick. . . . . . .. . . . . . . . . . . 19

2. Fitzpatrick, in fact, breached his contract

by repudiating key terms. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 19

II. The trial court properly awarded contract damages

for the breach. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 20

Standard of Review. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 20

A. Fitzpatrick’s breach established his obligation

to pay contract damages. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 20

B. Fitzpatrick’s quantum meruit argument misinterprets

Galanis, wrongly assumes the Hills could unilaterally

amend the contract they approved, and ignores the

consequences of Fitzpatrick’s breach. . . . . . . . . . . . . . .. . . . . . . . . . . 21

1. Under Galanis, the lawyers’ agreement controls. .. . . . . . . . . . . 22

2. The Hills could not amend the contract to fire Allen

on the products case alone. . . .. . .. . .. . .. . .. . .. . .. . .. . .. 24

3. Percentage of fees not challenged. . . . . . . . . . . .. . . . . . . . . . . 26

C. Allen & Associates was entitled to the benefit of its bargain. . . . . . . . . 27

1. The firm performed under the agreement

through the time of breach. . . .. . .. . .. . .. . .. . .. . .. . .. . .. 27

2. Fitzpatrick played wait and see before invoking

equitable relief. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 27

3. Allen & Associates was entitled to share in the products

case fees under contract terms. . . . . . . . . . . . . . .. . . . . . . . . . . 29

D. Allen’s subsequent withdrawal does not defeat his claim

to contractual damages arising from Fitzpatrick’s prior breach. . . . . . . 30

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III. Ethical rules do not preclude Allen’s recovery. . . . . . . . . . . . . .. . . . . . . . . . . 32

A. No rules were violated. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 32

1. Allen’s fee was proper under the alternative

prongs of Rule 1.5(e)(1) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 33

2. Neither Allen nor Fitzpatrick were required to appear as

counsel of record in the case to be handled by the other. . . . . . 34

3. The totality of representation must be considered. . . . . . . . . . . . 35

B. The ethics rules are not to be used as procedural weapons. . . . . . . . . 35

IV. The trial court properly awarded liquidated damages. . . . . . . . .. . . . . . . . . . . 36

A. No hearing was required. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 36

B. Fitzpatrick improperly sought after the judgment to raise

extensive evidence, including claims concerning

the Lewis settlement. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 37

C. Fitzpatrick failed to plead setoff. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 38

D. Under T.R. 19, Allen is entitled to recovery from Fitzpatrick alone. . . . . 39

V. Fitzpatrick’s T.R. 60(B) argument must fail for reasons discussed

above and for failure of evidence of waiver. . . . . . . . . . . . . . . .. . . . . . . . . . . 40

Conclusion . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 42

Word Count Certificate. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 42

Certificate of Service . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 43

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TABLE OF AUTHORITIES

Cases

Babinchak v. Town of Chesterton, 598 N.E.2d 1099 (Ind. Ct. App.1992) . . . . . . . . . 38

Berkel & Co. Contrs., Inc. v. Palm & Assocs., 814 N.E.2d 649 (Ind. Ct. App. 2004) . 20

Boles v. Weidner, 449 N.E.2d 288 (Ind. 1983) . . .. . .. . .. . .. . .. . .. . .. . .. . . 15, 17

Burns v. St. Mary Medical Center, 504 N.E.2d 1038 (Ind. Ct. App. 1987) . . .. . .. . . 18

Centex Home Equty Cor. V. Robinson, 776 N.E.2d 935 (Ind. Ct. App. 2002). . . .. . . 19

Colonial Life v. Newman, 152 Ind. App.554, 284 N.E.2d 137 (1973) . .. . . . . . . . 31, 32

Csicsko v. Hill, 822 N.E.2d 968 (Ind. 2004) . . .. . .. . .. . .. . .. . .. . .. . . 2, 3, 5, 6, 27

Dundee Cement Co. v. Howard Pipe & Concrete Products, Inc.,

722 F.2d 1319, 1323 (7th Cir. Ill. 1983) . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 36

Evansville-Vanderburgh School Corp. v. Moll, 264 Ind. 356,

344 N.E.2d 831 (1976) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 21

Farmer v. Lawson, 855 N.E.2d 686 (Ind. Ct. App. 2006) . . .. . .. . .. . .. . .. . .. 22, 29

Fitzpatrick v. Allen, 2006 U.S. Dist. LEXIS 59643 (N.D. Ill. Aug. 23, 2006) . . .. . .. . 10

Foote v. Baltimore & Ohio R. Co., 465 N.E.2d 219 (Ind.App. 1985). . .. . .. . .. . .. . 17

Freeman v. Mayer, 95 F.3d 569 (7th Circuit 1996) . . .. . .. . .. . .. . .. . .. . .. 25, 34-36

Galanis v. Lyons & Truitt, 715 N.E.2d 858 (Ind. 1999) . . .. . .. 14-15, 20-25, 38-30, 40

Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d 349 (Ind. 2005) . . .. . .. . .. . .. . .. . . 18

Henthorne v. Legacy Healthcare, Inc., 764 N.E.2d 751 (Ind. Ct. App. 2002) . . . . . . . 25

Hill v. Baxter Healthcare Corporation, Case No. 01-C-9315 (N.D. Ill.) …. 1-2, 18-19, 24

Hofreiter v. Leigh, 124 Ill. App. 3d 1052; 465 N.E.2d 110 (Ill.Ct.App. 1984) . . .. . 23-24

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Illinois Bankers Life Ass’n. v. Armstrong, 100 Ind. App. 696,

192 N. E. 901 (1934) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 31

INS Investigations Bureau, Inc. v. Lee, 784 N.E.2d 566 (Ind. Ct. App. 2003),

trans. denied. . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 20

Kincaid v. Lazar, 405 N.E.2d 615 (Ind. Ct. App. 1980) . . .. . .. . .. . .. . .. . .. . . 27, 29

Landis v. Brooks, 637 N.E.2d 1365  (Ind. Ct. App. 1994) . . . . . . . . . .. . . . . . . . 29, 39

Laudig v. Marion County Bd. of Voters Registration,

585 N.E.2d 700 (Ind. Ct. App.1992).. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 37

Mallard’s Pointe Condo. Ass’n v. L&L Investors Group, LLC,

859 N.E.2d 360 (Ind. Ct. App. 2006) . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 36, 40

Matzat v. Matzat, 854 N.E.2d 918 (Ind. Ct. App.2006) . . .. . .. . .. . .. . .. . .. . .. . . 37

Mid-States Aircraft Engines, Inc. v. Mize Co., Inc.,

467 N.E.2d 1242 (Ind.App.1984) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 38

Nesses v. Specialty Connectors Co., 564 N.E.2d 322 (Ind. Ct. App. 1990) . . .. . .. . 18

New York Life Ins. Co. v. Viglas (1936), 297 U.S. 672, 56 S. Ct. 615. (1936) . . .. . . 32

Page v. Schrenker, 439 N.E.2d 694 (Ind. Ct. App. 1982). . . . . . . . . . .. . . . . . . . 27, 29

Paint Shuttle, Inc. v. Continental Cas. Co., 733 N.E.2d 513

(Ind. Ct. App. 2000), trans. denied. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 39

Patton v. State, 537 N.E.2d 513 (Ind. Ct. App. 1989). . .. . .. . .. . .. . .. . .. . .. . .. 38

Prudence Life Ins. Co. v. Morgan, 138 Ind. App. 287, 213 N. E. 2d 900 (1966) . . .. 31

Ralph E. Koressel Premier Elec., Inc. v. Forster,

838 N.E.2d 1037 (Ind. Ct. App. 2005) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 19

Salin Bank & Trust Co. v. Peden Trust, 715 N.E.2d 1003 (Ind. Ct. App. 1999) . . . . . 30

Siebert Oxidermo, Inc. v. Shields, 446 N.E.2d 332 Ind. 1983) . . .. . .. . .. . .. . .. . . 15

Smith v. Gary Pub. Transp. Corp., 893 N.E.2d 1137 (Ind. Ct. App. 2008) . . . . . . . . . 20

State ex rel. Court Goldsmith v. Marion County Superior, 275 Ind. 545 (Ind. 1.9.8.1.). . . 26

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Stelko Electric, Inc. v. Taylor Community Schools Building Corporation,

826 N.E.2d 152 (Ind. Ct. App. 2005) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 26

Walb Construction Co. v. Chipman, 202 Ind. 434, 175 N.E. 132 (1931) . . . . . . . . . . 21

Wedgewood Cmty. Ass’n v. Nash, 810 N.E.2d 346 (Ind. 2004) . . .. . .. . .. . .. . .. . 28

Whitewater Valley Canoe Rental, Inc. v. Franklin Cty. Bd. of Commissioners,

507 N.E.2d 1001 (Ind. Ct. App. 1987), trans. denied. . . .. . .. . .. . .. . .. . .. 18

Wilt v. Bueter, 186 Ind. 98 (Ind. 1916) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 28

Rules

Indiana Rules Professional Conduct . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 32-36

Rule 1.5(e) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 32-33, 35-36

Trial Rule 8(C) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 38-39

T.R. 19 . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 39

T.R. 19(E)(1). . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 40

T.R. 26(F) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 10

T.R. 55(B) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 36

T.R. 59(A)(1) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 37

T.R. 59(H) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. 38

T.R. 60(B) . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 3, 13, 37, 40-41

Other

CORBIN, CONTRACTS (1951), § 969 . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 32

RESTATEMENT (2ND) CONTRACTS § 235 cmt. a, 237 cmt. c. . . .. . .. . .. . .. . .. . .. . . 30

RESTATEMENT (2ND) CONTRACTS § 243. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . . 20, 31

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STATEMENT OF ISSUES

1) Did the trial court abuse its discretion in defaulting Fitzpatrick after Fitzpatrick failed  to comply with repeated court orders that he disclose on a confidential basis the amount of the settlement in the products liability case, Hill v. Baxter Healthcare Corporation, Case No. 01-C-9315, in federal district court in Chicago..

2) Did the default establish Fitzpatrick’s breach of his agreement with Allen & Associates to share attorney’s fees in the product case as well as the medical malpractice case? Do the facts of this case also show the breach through Fitzpatrick’s repudiation of his agreement to share fees in Hill v. Baxter?

3) Did Fitzpatrick’s breach of his contract with Allen & Associates relieve Allen of any further contractual duty to Fitzpatrick as to litigating the Hills’ medical malpractice case?

4) Did the trial court err in not holding a hearing prior to finding that Fitzpatrick owed liquidated damages under his contract with Allen & Associates of half the attorney’s fees produced by the settlement in Hill v. Baxter?

5) Was the trial court required to apply quantum meruit analysis to determine the amount of attorneys fees due to Allen & Associates from Hill v. Baxter, given: a) the Hills’ global retention of Allen & Associates and their continued retention of the firm at the time of the Baxter settlement; b) the contract of Allen and Fitzpatrick to equally share the attorneys fees generated in both the medical malpractice case in Indiana and the products liability case in Illinois, which was approved by the Hills and did not affect the amount of money they were due; and c) Fitzpatrick’s default?

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STATEMENT OF CASE

Fitzpatrick correctly states that this case concerns a dispute about $2.7 million in attorneys’ fees produced by a settlement of Hills v. Baxter, a products liability case. (Br. 4) Fitzpatrick and Allen agreed to share the fees equally both as to the products case and a medical malpractice case on behalf the Hills, with Fitzpatrick being responsible for litigating the products case in federal court in Illinois and Allen & Associates being responsible for the medical malpractice case in Indiana. (App. 87-88, Br. 7) Fitzpatrick was to split his share of fees with attorney Mitchell Iseberg. (App. 88, 91) For more than two years, Fitzpatrick and Allen litigated the cases as agreed. (App. 165, Csicsko v. Hill, supra, 808 N.E.2d 80 (Ind. Ct. App. 2004), transfer den. On the eve of settling the products case, Fitzpatrick sought to change the 50/50 fee sharing agreement with Allen, and the next day the Hills purported to terminate Allen & Associates as to the products case alone, although they had hired the firm in a global retainer agreement. (App. 91, 160-162, 164, 165) Allen & Associates eventually joined as a cross-plaintiff in this suit for attorneys fees initiated by Neal Lewis, the first attorney hired by the Hills. (App. 125-130, App. 213) On four separate occasions the trial court ordered Fitzpatrick to disclose the settlement of the products case. (App. 171, 242, 329, 401, Supp. App. 3) The court stated the disclosure was to be confidential, and not disclosed to third parties. (App.171, 242) Ultimately, the court defaulted Fitzpatrick for not disclosing as ordered. (App. 62-63) Later, the court awarded Allen contract damages amounting to $1.35 million or half the fees generated in the Baxter case. (App. 64)

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On August 25, 2008, Fitzpatrick filed a combined Trial Rule 59 motion to correct error and a T.R. 60(B) motion for relief from judgment. (App. 570-571) He also filed an affidavit containing facts he had failed to previously present to the trial court, along with 500 pages of exhibits, and which Allen moved to strike, specifying the affidavit and other documents containing evidence outside the record. (App. 563-569, Supp. App. 94) Allen’s accompanying response brief addressed the claimed errors, including Fitzpatrick’s quantum meruit argument and challenge to awarding damages under the contract, entry of judgment without a hearing and issues of liability. (Supp. App. 79, 88-93). Fitzpatrick timely filed this appeal. (App. 57)

STATEMENT OF FACTS

Section I of Appellant’s facts statement accurately, though incompletely, describes John and Susan Hill’s initial retention of attorneys in connection with their underlying claims for medical malpractice and products liability arising from John’s loss of three limbs, and several internal organs, during cardiac bypass surgery in December 1999 at Parkview Memorial Hospital in Ft. Wayne. Csicsko v. Hill, supra, 808 N.E.2d at 81. The Hills first retained Neal Lewis, who settled their claims against the hospital, and then hired Illinois attorneys David Fitzpatrick and Mitch Iseberg on November 19, 2001. (App. 81, 145) Nine days later, Fitzpatrick notified Lewis of his retention, and the Hills advised Lewis of his termination. (App. 82 and 83)  Because he was not licensed in Indiana, Fitzpatrick asked

Kenneth Allen to handle the remaining medical malpractice claims against Mr. Hill’s physicians. (Br. 6-7, App. 154 ¶5) On January 11, 2002, Fitzpatrick forwarded Mr. Hill’s medical records to Allen. (App. 84-85) At the end of the month, Fitzpatrick wrote Allen that While Allen himself negotiated with Fitzpatrick, he did so on behalf of his firm Allen & 1 Associates, p.c., the Appellee, and the Hills retained Allen’s firm with respect to all their claims.  (App. 87-91) For instance, the contract dated March 8, 2002, although signed by Allen, has Allen & Associates, p.c. at its top. (App. 88) Unless the context specifically indicates otherwise,  Allen and Allen & Associates are used interchangeably in this brief.

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he “would be amenable to a written fee arrangement that secures your efforts in the medical negligence action.” (App. 86)

Hiring Allen, splitting fees

After discussions, Fitzpatrick and Allen agreed a month later that Allen and his law firm Allen & Associates would take responsibility for the Indiana medical malpractice litigation and Fitzpatrick would take responsibility for the products liability case in Illinois – an arrangement that the Hills approved. (App. 87, Br. 7) Allen and Fitzpatrick also agreed, with the Hills approval, they would share the fees from the two cases equally, with Allen & Associates taking 50 percent and Fitzpatrick and Iseberg splitting the other half. (App. 87- 88, 90-91) The agreement was formalized in a contract dated March 8, 2002 concerning 1the product liability action. (App. 88) The final agreement came a few days later, when the Hills hired Allen & Associates for all purposes in connection with injuries and damages arising out of an incident which occurred on or about the 6 day of December 1999, in the th  State of Indiana, on the following terms and conditions:

1. Counsel will devote their full professional abilities to this case and, in return, Client agrees to cooperate fully with Counsel … Client has also been advised of, and consents to, a 50%-50% fee-sharing arrangement by and between Attorney David Fitzpatrick and the undersigned counsel pertaining to all fees earned as a result of any verdict or settlement derived from Client’s medical malpractice, negligence and/or product’s liability claim(s). (App. 91) (emphasis added) Allen faxed this retainer agreement to Fitzpatrick on April 2, 2002, and mailed it that day also, enclosing an executed copy of the agreement dated In Appellant’s Appendix, the date of the retainer agreement between the Hills and Allen 2 is mistakenly listed as December 6, 1999. (App. i) While that date is handwritten on the agreement, it refers to the date that John Hill underwent surgery leading to his injuries. (App. 145) Fitzpatrick’s brief develops a lengthy and irrelevant non-sequitur: Allen’s suspension 3 from the practice of law in Indiana for a period of 90 days prior to the onset of depositions in the products case. (Br. 7-9) While a 90-day suspension was later reciprocally imposed in Illinois,  neither suspension prevented Allen & Associates from continuing to work on the Hill matter and only prevented Ken Allen himself from doing so for the specified period.

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March 8, 2002. (App. 90-91) While not noting the final retainer agreement encompassing 2 all claims between the Hills and Allen, Fitzpatrick accurately describes the global nature of the agreement between Fitzpatrick and Allen as to the 50/50 sharing all fees between Fitzpatrick and Allen, while Fitzpatrick undertook responsibility for the products lawsuit in Illinois and Allen for the malpractice action in Indiana. (Br. 7)

Action on two fronts

During the next two years, Allen & Associates and Fitzpatrick and Iseberg proceeded to work as agreed: Fitzpatrick pursued discovery in the products case while Allen & Associates undertook a medical malpractice administrative claim against the physicians. (App. 116, Csicsko v. Hill, supra, 808 N.E.2d 80) The physicians sought a preliminary 3 court determination that the hospital’s release in the prior settlement applied to them and that the settlements as to the hospital and the patient compensation fund totaling $1.25 million was the maximum the Hills could receive under the Indiana Medical Malpractice Act. Id. Allen defeated that effort. (Id.) In affirming the trial court’s decision which allowed the Hills’ additional claims to proceed, the appellate court on March 24, 2004, concluded that “a genuine issue of material fact exists as to whether the injuries Hill suffered, including the loss of many limbs, the failure of multiple organs, and the necessity of having to undergo

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several surgeries, constituted separate injuries from separate acts of malpractice under the Medical Malpractice Act.” Id. at 84. The physicians sought transfer, which was denied on July 8, 2004, enabling the Hills to proceed with seeking multiple recoveries on their medical malpractice claim. Csicsko v. Hill, 822 N.E.2d 968 (Ind. 2004).

Settlement approaches, Fitzpatrick proposes new deal

While the transfer petition was before the Indiana Supreme Court, Fitzpatrick was working out a settlement of the products case he had filed in federal court in Illinois on behalf of the Hills. (App. 165) On June 2, 2004, Allen wrote Fitzpatrick, noting their conversation of the day before and “the prospect of settlement on the horizon in the products case.” Allen also discussed arguments the medical malpractice defendants would likely  invoke to use the products case settlement to defeat recovery in the medical malpractice case, and concluded that “we are pretty much where we started on the issue of our respective fee-shares.” (App. 156-157) Fitzpatrick responded on June 8, 2004, proposing to change the terms of their agreement. (App. 160-162) Instead of an equal division, he proposed to “set aside in an interest bearing account fifty (50%) of all fees received in the products case up to a maximum amount of $555,555″ towards payment of Allen’s fees in the medical malpractice action. (Id.) Allen responded by fax that day, proposing to escrow all fees from the products and medical malpractice cases for future division when the cases are concluded. (App. 163) Though Fitzpatrick later swore that he “did not counsel the Hills to terminate Mr. Allen from the product liability action” (App. 564), the next day, June 9, 2004, the Hills sent Allen a letter, notifying him that “effectively immediately … we have terminated you and your firm

Lewis and Conseco both requested the court to order disclosure of the settlement 4 amount on August 19, 2004. (App. 172-174) On Sept. 14, 2004, Conseco also moved to vacate

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as our legal counsel relative to the products action against the pharmaceutical companies responsible for the injuries suffered by us in this matter in December of 1999. Please note that this termination does not apply to the medical negligence action that you and your firm are prosecuting on our behalf in Indiana.” (App. 164) On June 29, 2004, the federal court entered the stipulation of dismissal of the products case. (App. 165-166)

Litigation ensues over fees

Meanwhile, on November 25, 2003, Lewis filed a complaint in Porter Superior Court accusing Fitzpatrick of wrongfully inducing John Hill to terminate Lewis as his attorney as to the product liability claims. (App. 126) Lewis’s complaint sought a lien for attorney’s fees and named several other defendants, namely Allen, Allen & Associates and John Hill, and Conseco Life Insurance Company, which had a subrogation lien for the cost of part of Hill’s medical care. (App. 125-130, 172) Lewis subsequently dismissed Allen as to any claims alleging tortious interference. (Supp. App. 1) Lewis served discovery on Fitzpatrick, seeking, among other things, the total amount of the settlement. (App. 204) On August 19, 2004, the court ordered Fitzpatrick and other defendants “to disclose all settlement amounts from the Illinois action on or before October 1, 2004, and the Court orders all parties to whom such amounts have been disclosed to treat them as, and they hereby are, confidential - not to be disclosed to anyone outside of the parties to this action.” (App. 171) (emphasis added) On October 5, 2004, the court denied Fitzpatrick’s motion to vacate the disclosure order and his motion to seek leave to file an interlocutory appeal. (App. 210) The next day, 4 the disclosure order, explaining that its subrogation interest had been satisfied and therefore it  “no longer needs the Illinois action settlement amounts to be disclosed”. (App. 173) Lewis and Allen & Associates opposed Conseco’s motion to vacate the order, although Allen withdrew his opposition after receiving a letter dated Sept. 17, 2004 from Fitzpatrick asserting that it “is inconsistent with your fiduciary obligation to Mr. Hill in potentially compromising his ability to settle the Illinois action.” (App. 176, 202-203) However, the Illinois action was already dismissed, by the federal court’s order of June 29, 2004. (App. 165-166)

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Allen filed a cross-claim against Fitzpatrick, seeking recovery of attorney fees due from the settlement of the products case and for conversion of those funds. (App. 213) On November 23, 2004, Lewis notified the court of his decision to dismiss his tortious interference claims against Allen and his firm. (App. 26; Supp. App. 1-2) Seven days later, the court ordered Fitzpatrick to answer “fully and truthfully” the interrogatories, requests for admission and production requests propounded to him” by plaintiff and ordering the parties to keep the responses “in strictest of confidence” and not to be disclosed to third parties without the court’s permission. (App. 242) On December 10, 2004, the court ordered Fitzpatrick “to immediately disclose” the locations and amounts of settlement funds released to John Hill in the products case. (App. 28; Supp. App. 3)

Separation with Hills; default motions

Shortly thereafter, on December 22, 2004, the Hills asked Allen and his firm to withdraw as their attorneys in the case brought by Lewis, while remaining as their counsel in the medical malpractice case. (App. 243) In response, Allen notified the Hills of his withdrawal from the medical malpractice case as well, citing their “demonstrated unwillingness to follow our advice”. (App. 257) The court granted Allen & Associates’ motion to withdraw its appearance on behalf the Hills from the Lewis case on February 10, 2005. (App. 276) On December 30, 2004, Lewis moved for a default judgment against Fitzpatrick and

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Hill for repeated failures to obey orders compelling discovery. (App. 253) Allen later sought to join the motion, which the court took under advisement. (App. 264, 267) Meanwhile, Lewis settled his claim against Fitzpatrick, resulting in its dismissal on October 20, 2005. (App. 351) On May 4, 2005, Allen & Associates again sought to default David Fitzpatrick for his continued failure to obey the trial court’s disclosure orders of August 19, 2004 and thereafter. (App. 286-288) The court denied the motion. (App. 297) On June 24, 2005, Allen & Associates served discovery requests on Fitzpatrick seeking, among other things in interrogatory 25 and the corresponding document request, to learn the total amount of the settlement in the products case and to obtain the documents relating to the settlement. (App. 304, 318) On July 6, 2005, Fitzpatrick moved to stay discovery, pending mediation, or to extend time to respond to Allen’s discovery. (App. 298-300, 327) On July 25, 2005, the court denied Fitzpatrick’s motion for a stay, and granted Fitzpatrick to September 2, 2005 to respond to Allen’s discovery. (App. 329) On September 2, 2005, the court granted Allen & Associates’ motion to assert its cross-claim against Fitzpatrick, allowing it to relate back to October 6, 2004, the day it was filed; the court also denied Fitzpatrick’s pending motion to dismiss Allen & Associates’ claim on personal jurisdiction grounds, and it granted Fitzpatrick’s motion to seek leave to file an interlocutory appeal of the matter. (App. 345-347) The court further granted Fitzpatrick’s motion for a stay, pending the interlocutory appeal. (App. 350) On December 19, 2005, the Court of Appeals denied an interlocutory appeal. (App. 352)

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More delay

Noting the stay no longer was in effect, Allen & Associates on February 15, 2006 requested that Fitzpatrick fully respond to the outstanding written discovery on or before February 27, 2006 or be available for a T.R. 26(F) conference at 9 a.m. the next day. (App. 384) Citing scheduling conflicts, Fitzpatrick did neither, but agreed to discuss the matter on March 3, 2006 at 10 a.m., but was then unavailable when counsel for Allen & Associates tried to call him. (App. 385) Allen & Associates on March 6, 2006, filed its motion to compel the discovery responses. (App. 353-385) Fitzpatrick responded on March 10, asserting a mix-up in communications, and seeking an additional 30 days to respond to written discovery. (App. 386-397) On March 13, 2006, the court ordered Fitzpatrick to respond to the outstanding discovery (which included disclosure of the settlement amount) by April 10, 2006. (App. 389). Meanwhile, on April 7, 2006, Fitzpatrick filed suit in the U.S. District Court in Chicago, Cause No. 06-1989, raising as to his claims the same issues pending in this case. (Supp. App. 4-14) The action was dismissed the following summer. Fitzpatrick v. Allen, 2006 U.S. Dist. LEXIS 59643 (N.D. Ill. Aug. 23, 2006).

Non answers and default

On April 10, 2006, Fitzpatrick served discovery responses consisting of extensive

objections and minimal information.  (App. 390-407) As to settlement amount, which the

trial court first ordered disclosed under confidentiality strictures on August 19, 2004,

Fitzpatrick answered:

Objection, seeks to invade the attorney-client privilege.  Additionally, the

information is protected by the confidentiality agreement reached in the

settlement of Hill’s product liability case.

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Counsel for Allen & Associates attempted to speak to Fitzpatrick’s counsel to resolve

the discovery dispute, but again he was unavailable. (Supp. App. 15) Allen & Associates

then on April 13, 2006 filed its third motion to default Fitzpatrick for his refusal to cooperate

in discovery or adhere to this Court’s orders. (App. 408-412) On the same day, Fitzpatrick

again moved for a stay, arguing that Iseberg is a necessary party and that the case he filed

in federal court in Chicago should proceed on comity grounds. (App.45, 60-61)

On June 5, 2006, the trial court rejected Fitzpatrick’s bid for a stay, and granted default

against him. (App. 60-63) As to the stay, the court found that “Iseberg’s presence or

absence will not increase or decrease Allen’s claim to 50% of the total fees” and noted that

it had previously ruled that Iseberg is not a necessary party. (App. 61) The court further

rejected Fitzpatrick’s comity argument, finding, “Fitzpatrick is unreasonably burdening the

judicial system of Illinois by asking us to adjudicate issues (as they apply to him) that are

identical to the issues in this case.” (Id. at 62) (parenthesis in original)

At a hearing on Allen & Associates’ default motion, Fitzpatrick’s counsel argued that

he would disclose the amount of the settlement if the court ordered him to do so. (App.

434-435) In ordering default, the court noted its original order of August 19, 2004, requiring

disclosure of the settlement amount under confidential conditions to the parties by October

1, 2004, and continued:

Allen has attempted to obtain the settlement amount from Fitzpatrick on

multiple occasions after the Order was rendered. Then, in the eleventh hour,

after Allen filed its Motion for Default Judgment, Fitzpatrick answered the

interrogatories but did so by objecting to the question regarding the

settlement amount. Fitzpatrick objected to disclosure of the settlement

amount based upon relevancy and privilege. These objections were

overruled by the aforementioned Order on August 19, 2004. In all respects,

we are back to square one.

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It is not necessary for this Court to dilute the efficacy of its discovery powers

by allowing a party to force this Court to render duplicate orders to comply

in hopes that the party will begin to take this Court seriously. Therefore,

based on this Court’s discretion and Fitzpartrick’s continued refusal to

comply with this Court’s discovery process, Allen’s Motion for Default

judgment is GRANTED.

(App. 62-63)

Disclosure after default, entry of judgment

On June 9, 2006, Allen & Associates filed a motion noting that the amount due under

the default judgment could not be ascertained until Fitzpatrick disclosed the settlement

amount of the products case, and asking the court’s assistance by directing Fitzpatrick to

disclose the amount within 14 days or face monetary sanctions of 10 percent of the total

liquidated damages for each day that Fitzpatrick continued to defy the court’s orders. (App.

447-449) Also, Allen & Associates scheduled twelve out-of-state depositions for June 28,

2006 concerning the settlement of the products case, serving valid subpoenas and

tendering proper witness fees to each of the deponents. (Supp. App. 17-63)

On June 16, 2006, Allen & Associates was contacted by Maja Eaton, counsel for one

of the pharmaceutical companies who were defendants in the products liability case.

(Supp. App. 64-66) Ms. Eaton, on behalf of all counsel for the pharmaceutical companies,

agreed to supply cross-plaintiff with the requested information immediately upon the entry

of an Agreed Protective Order that would apply in the Allen/Fitzpatrick litigation in federal

court as well as in Porter Superior Court. (Id., Supp. App. 67-74) Other than specifically

requiring Allen to maintain confidentiality and mediate and not staying the case pending

mediation, the order was parallel to the agreed order previously signed by Lewis and

Fitzpatrick and previously entered by the court. (Supp. App. 67-70; App. 281-284) Both

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orders required,

1. Any document produced or obtained by any party during discovery that

sets forth or contains any ‘confidential information’ shall be stamped by the

party producing it with a notation that it is “confidential.”

(Supp. App. 69, App. 283) In a disclosure served by mail on the parties on June 27,

2006 and filed with the court, Fitzpatrick stated that the products case settled for $8.1

million. (App. 469-470 The disclosure filed by Fitzpatrick was not stamped confidential, as

required by the agreed protective order signed by Fitzpatrick and entered by Judge Alexa.

(App. 281-284, 283, ¶ 1, App. 469)

On June 29, 2006, Allen & Associates moved for entry of judgment, seeking liquidated

damages of one half of the entirety of the one-third fee on the products case on his count

for breach of contract, along with treble damages under the conversion count. (App. 472-

473) In a supporting legal memorandum seeking entry of judgment and filed August 4,

2006, Allen & Associates waived its claims to any unliquidated damages, seeking only

$1.35 million in liquidated damages – 50% of the attorneys fees in the product case – for

which, it argued, no hearing was necessary. (App. 492-497) At the hearing that day on

Fitzpatrick’s motion to vacate the default, Allen also explicitly waived the claim to treble

damages on grounds of conversion, and the court stated at the end of the hearing that

default was awarded only as to the contract claim. (App. 535, 538-539) Fitzpatrick

submitted a brief to the court on August 17, 2006, and a supplemental brief on July 22,

2008 in opposition to Allen & Associates motion for judgment in the amount of $1.35 million

in liquidated damages. (App. 540, 547) On July 24, 2008, the court entered judgment for

the $1.35 million. (App.64) Fitzpatrick filed his combined T.R. 59 and 60(B) motion for relief

from judgment on August 25, 2008 (App. 570), along with accompanying exhibits, including

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Fitzpatrick’s affidavit, containing facts that were not previously before the trial court. (App.

563, Supp. App. 94) Allen & Associates responded on September 12, 2008, addressing

arguments of quantum meruit measure of damages, the fairness of the process, and

liability which Fitzpatrick asserts were not contested and waived. (Supp. App. 79, 88-93,

Br. 47-50) Allen also moved to strike Fitzpatrick’s affidavit and other exhibits as improper.

(Supp. App. 94)

SUMMARY OF ARGUMENT

Fitzpatrick’s argument is founded on a number mis-assumptions and untrue

conclusions of law and fact. First, it incorrectly concludes that the Hills were able to

unilaterally modify the terms of their agreement with Allen & Associates by firing the firm

as to the products case while retaining it as to the medical malpractice case. Given that

Allen & Associates’ responsibility was always as to the medical malpractice case alone, this

attempted modification only had one ostensible effect – to prevent the firm from collecting

its agreed upon attorneys fees in the products case. Second, it concludes that Galanis v.

Lyons & Truitt, 715 N.E.2d 858, 860 (Ind. 1999), would not recognize the validity of an

agreement between attorneys to share fees equally where the agreement had been

approved by the clients and did not affect the amount the clients would receive in a

contingency fee case; Galanis shows otherwise.

Third, Fitzpatrick’s argument concludes that Allen & Associates did nothing of

consequence on the Hills’ medical malpractice case, despite the firm’s success on appeal

in enabling the Hills to seek multiple recoveries under the Indiana Medical Malpractice Act.

Fourth, it assumes that Fitzpatrick cannot be held liable for Allen’s share of the fees that

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Fitzpatrick kept for himself and distributed to others. Fifth, it concludes that a damages

hearing must be held even when the amount of damages is liquidated by contract.

Sixth, Fitzpatrick’s argument assumes that Fitzpatrick’s breach (established by the

default as well as his actual repudiation of the contract with Allen by keeping and

concealing the attorneys fees in the products action) did not release Allen from any

subsequent duty to Fitzpatrick to continue working the Hills’ medical malpractice action.

Seventh, it assumes that the trial court lacked discretion to sanction Fitzpatrick with default

after the attorney defied repeated court orders to disclose the products case settlement.

Finally, the argument incorrectly asserts that Allen & Associates did not address issues of

liability, of quantum meruit, the application of Galanis v. Lyons & Truitt, 715 N.E.2d 858

(Ind. 1999), and the fairness of judgment on liquidated damages without holding a hearing.

ARGUMENT

I. The trial court properly entered a default judgment against Fitzpatrick, and

found him to be in breach of his contract with Allen & Associates.

Standard of Review

Indiana courts limit their review of the entry of a default judgment to abuse of

discretion. Boles v. Weidner, 449 N.E.2d 288, 290 (Ind. 1983), citing Siebert Oxidermo,

Inc. v. Shields, 446 N.E.2d 332, 340 (Ind. 1983). “The trial court’s discretion is necessarily

broad in this area as any determination of excusable neglect must turn upon the unique

factual background of each case. No fixed rules or standards have been established as the

circumstances of no two cases are alike. … An abuse of discretion is an erroneous

conclusion and judgment, one clearly against the logic and effect of the facts or the

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reasonable, probable deductions to be drawn therefrom.” Id. (citations omitted.)

A. The trial court properly exercised its discretion in ordering default.

Judge Alexa acted within his discretion in defaulting Fitzpatrick after nearly two years

of Fitzpatrick’s refusal to abide by court orders requiring him to disclose the settlement

amount in the products action. (App. 171, 242, 329, 401, Supp. App. 3) Fitzpatrick  justified

his non-compliance by asserting the confidentiality of the settlement agreement. (See e.g.

App. 185, Answer to No 22, App. 207) But from the outset, and subsequently, the court

had ordered the parties to maintain the confidentiality of the settlement amount. (App.171,

242) Fitzpatrick’s justification of seeking to maintain confidentiality was hollow, and

ultimately ignored by Fitzpatrick himself when he publicly disclosed the settlement amount

without the required confidential stamp. (App. 281, 469)

1. Fitzpatrick repeatedly disobeyed orders of the court.

On four separate occasions, the court ordered Fitzpatrick to disclose the settlement

amounts:

*Order of August 19, 2004, including the requirement that the parties keep

the settlement amount confidential. (App. 171)

*Order of November 30, 2004, that Fitzpatrick answer “fully and truthfully” -

and confidentially to the parties in this litigation only – Lewis’s discovery,

seeking, among other things, the settlement amount. (App. 242);

*Order of December 10, 2004 that Fitzpatrick “immediately” disclose the

locations and amounts of the settlement funds. (App. 28, Supp. App. 3); and

*Order of March 13, 2006, compelling Fitzpatrick to respond to Allen’s

discovery (including disclosure of the settlement amount in the underlying

case) by April 10, 2006 (App. 3, 401).

While Fitzpatrick finally submitted a response to the interrogatory, he did so with a non-

answer, objecting that the interrogatory “seeks to invade the attorney-client privilege” and

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that “the information is protected by the confidentiality agreement reached in the settlement

of the Hill’s product liability case.” (App. 401)

2. Lesser sanctions were not required.

Having denied two prior default motions, Judge Alexa granted default after Fitzpatrick’s

continued intransigence over a span of nearly two years, finding,

Allen has attempted to obtain the settlement amount from Fitzpatrick on

multiple occasions after the Order was rendered. Then, in the eleventh hour,

after Allen filed its Motion for Default Judgment, Fitzpatrick answered the

interrogatories but did so by objecting to the question regarding the

settlement amount. Fitzpatrick objected to disclosure of the settlement

amount based upon relevancy and privilege. These objections were

overruled by the aforementioned Order on August 19, 2004. In all respects,

we are back to square one.

It is not necessary for this Court to dilute the efficacy of its discovery

powers by allowing a party to force this Court to render duplicate orders to

comply in hopes that the party will begin to take this Court seriously.

Therefore, based on this Court’s discretion and Fitzpatrick’s continued

refusal to comply with this Court’s discovery process, Allen’s Motion for

Default judgment is GRANTED.

(App. 62-63)

Under the totality of the circumstances, this ruling cannot be reasonably characterized

as an “erroneous conclusion and judgment, one clearly against the logic and effect of the

facts or the reasonable, probable deductions to be drawn therefrom.”  Boles, supra, 449

N.E.2d at 290.

Fitzpatrick argues lesser sanctions could have sufficed, though the court concluded

otherwise, quoting Foote v. Baltimore & Ohio R. Co., 465 N.E.2d 219 (Ind.App. 1985),

“Although extreme sanctions for discovery should rarely be utilized, they are appropriate

where imposition of a lesser sanction would merely add to the innocent party’s frustration

and delay.” (App. 62) After repeated disclosure orders and incessant battles the same false

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issue, the court was unwilling to abide by further frustration and delay.

T.R. 37(B) allows such sanctions “as are just” including “rendering a judgment by

default against a disobedient party”. Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d 349, 351

(Ind. 2005) Here, the default ordered by the court was just, given Fitzpatrick’s continued

refusal to obey court orders and disclose the amount of settlement to Allen & Associates

– a disclosure that was central to Fitzpatrick’s contractual duty to share the fees generated

by the products case with Allen & Associates.

The court explained in Nesses v. Specialty Connectors Co., 564 N.E.2d 322, 327 :

Indiana does not require trial courts to impose lesser sanctions before

applying the ultimate sanction of dismissal or default judgment. Burns v. St.

Mary Medical Center (1987), Ind. App., 504 N.E.2d 1038; Mulroe, supra. This

is especially true when the disobedient party has demonstrated

contumacious disregard for the court’s orders, “and the conduct of that party

has or threatens to so delay or obstruct the rights of the opposing party that

any other relief would be inadequate.” Whitewater Valley Canoe Rental, Inc.

v. Franklin Cty. Bd. of Commissioners (1987), Ind. App., 507 N.E.2d 1001,

1008, trans. denied.

3. False rationalizations underlaid Fitzpatrick’s contumacious disregard.

The repetitious and false nature of Fitzpatrick’s arguments that he could not disclose

the settlement amount because it would violate the agreed order of confidentiality entered

in Hill v. Baxter was, in itself, contumacious. Had Fitzpatrick given due regard to the court’s

first and subsequent orders (App. 171, 242), he would have recognized that it required the

parties to keep the settlement information confidential. Instead, Fitzpatrick chose to

disregard that part of the order. It did not fit his effort to conceal the information because

he wished to avoid paying 50 percent of the $2.7 million attorney fee to Allen, as he was

contractually required to do.

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In addition to its order of August 19, 2006, the court entered a parallel agreed order on

April 12, 2005, requiring any party disclosing confidential information to stamp the

document “confidential”. (App. 283-284) Yet, when after default and after the defendants

in the Baxter case made clear their willingness to confidentially disclose the settlement

amount, Fitzpatrick failed to abide by the order that he stamp the document disclosing the

amount as “confidential”. (App. 469) Fitzpatrick knew from the outset that disclosure was

required to be confidential; that he finally violated even this requirement underscores the

contemptuous nature of his continual disregard of the court’s orders.

B. Fitzpatrick breached his contract with Allen.

1. Default establishes breach by Fitzpatrick.

“The effect of a default is the admission of those matters properly averred in the

complaint.”  Centex Home Equty Cor. V. Robinson, 776 N.E.2d 935, 948 (Ind. Ct. App.

2002). Allen & Associates’s cross-claim asserted that the firm had performed all its

obligations under the contract with Fitzpatrick, diligently prosecuted the Hills’ case from

pre-trial discovery through an appeal, when Fitzpatrick breached the contract by settling

the product liability action and not remitting the fees due Allen & Associates under the

contract. (App. 213-215)

2. Fitzpatrick, in fact, breached his contract by repudiating key terms.

These averments, indeed, are also supported by the facts of record, which show that

while Allen was working the Hills’ medical malpractice action, as he had agreed, Fitzpatrick

repudiated his contractual obligation to pay to Allen 50 percent of the attorneys fees

generated by the products action. By failing to remit those fees to Allen & Associates, and

by concealing the fees, Fitzpatrick took positive actions that repudiated the contract. See

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e.g. Ralph E. Koressel Premier Elec., Inc. v. Forster, 838 N.E.2d 1037, 1045 (Ind. Ct. App.

2005). Thus, Fitzpatrick materially breached the contract, entitling Allen & Associates to

damages for total breach. Id., Restatement (2d) Contracts § 243.

II. The trial court properly awarded contract damages for the breach.

Standard of Review

The trial court determined damages in this case based on the language of the contract

between Fitzpatrick and Allen, providing for a 50-50 split of attorneys fees in both the

products liability and medical malpractice cases. De novo review applies to interpretation

of contracts. Smith v. Gary Pub. Transp. Corp., 893 N.E.2d 1137, 1138 (Ind. Ct. App.

2008). Allen agrees that de novo review also applies to the issue of the the measure of

damages under Galanis v. Lyons & Truitt, supra.

A. Fitzpatrick’s breach established his obligation to pay contract damages.

Allen & Associates is entitled to collect the money due it under the contract at the time

that Fitzpatrick breached it. “A party injured by a breach of contract may recover the benefit

of the bargain.” Berkel & Co. Contrs., Inc. v. Palm & Assocs., 814 N.E.2d 649, 658 (Ind.

Ct. App. 2004), citing INS Investigations Bureau, Inc. v. Lee, 784 N.E.2d 566, 577 (Ind. Ct.

App. 2003), trans. denied.

Here, the bargain was simple. Under its contract with Fitzpatrick, Allen & Associates

was entitled to 50 percent of the fees from the products liability action after it was settled.

Fitzpatrick admits that the trial court’s entry of a $1.35 million judgment against Fitzpatrick

amounted to exactly half of the $2.7 million in fees generated by the products case. (Br.

4)

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“The cardinal rule in the interpretation of contracts is to ascertain the intention of the

parties, as expressed in the language used, and to give effect to that intention, if it can be

done consistent with legal principles.” Evansville-Vanderburgh School Corp. v. Moll, 264

Ind. 356, 362, 344 N.E.2d 831 (1976), quoting Walb Construction Co. v. Chipman, (1931)

202 Ind. 434, 441, 175 N.E. 132 (1931). Fitzpatrick admits that under the contract, 50

percent of the attorneys fees were to go to Allen, and “the other 50 percent going to

Fitzpatrick and Iseberg, which they would split equally.” (Br. at 7). Here, the intention of the

parties in this appeal as to the division of fees as provided by their contract is both clear

and admitted.

B. Fitzpatrick’s quantum meruit argument misinterprets Galanis, wrongly

assumes the Hills could unilaterally amend the contract they approved,

and ignores the consequences of Fitzpatrick’s breach.

Fitzpatrick’s reliance on Galanis is misplaced. Galanis recognized that if the former and

current lawyers agreed between themselves how to split fees, that agreement should be

put into effect rather than a quantum meruit balancing analysis. Id., supra, 715 N.E.2d at

860. That is the case here.

Also, Fitzpatrick’s quantum meruit argument fails to recognize that the Hills hired Allen

& Associates as to all their claims – the medical malpractice claim as well as the products

claim – arising from the medical malpractice in December 1999 that resulted in John Hill

losing three limbs and suffering failure of multiple organs. (App. 91) It wrongly assumes the

Hills could unilaterally amend the contract by terminating Allen’s services as to the products

case alone, while keeping him as to the medical malpractice action. Because the Hills

could not so amend the contract, they did not terminate Allen, and the quantum meruit

analysis discussed in Galanis does not apply. On that score, also, Allen & Associates is

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entitled to the benefit of its bargain to split with Fitzpatrick the one-third contingency fee

paid by the Hills in the products case. (App. 87-88)

That Allen & Associates terminated its representation of the Hills at a point after the

settlement of the products case makes no difference. (App. 257) Once the products case

was settled and judgment entered, Allen & Associates was entitled to its share of the fees

from it. Farmer v. Lawson, 855 N.E.2d 686 (Ind. Ct. App. 2006) Also, Fitzpatrick’s prior

breach of his agreement with Allen & Associates cut off any duty that Allen & Associates

had to Fitzpatrick to continue to perform under its contract with the attorney. While

quantum meruit analysis may apply to determine fees owing to Allen & Associates in the

medical malpractice action (and Fitzpatrick may seek to claim a share of those fees), Allen

& Associates’ interest in the products case is established by the prior judgment and the

terms of its contract with Fitzpatrick.

1. Under Galanis, the lawyers’ agreement controls.

Fitzpatrick’s reliance on Galanis fails to recognize that the measure of damages is set

by the contract between Fitzpatrick and Allen & Associates. In Galanis, no contract existed

between the attorneys as to how to divide the contingency fee. Rather, the former attorney

and the current attorney were each seeking a separate contingency fee recovery from the

client. The Indiana Supreme Court found that piling on of such fees would chill a client’s

right to terminate his lawyer, and concluded that the lawyers would have to share the single

contingency fee. It found that the discharged attorney and the current attorney were each

entitled to recover the value of his services rendered as measured by quantum meruit or

their individual contribution to the ultimate result.

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Quantum meruit analysis was necessitated in Galanis by the lack of an agreement

between the discharged attorney and the settling attorney as to how they would split the

fee. Without such an agreement, the court would have to weigh various factors in an effort

to determine the value of each attorney’s contribution to the final result and to thus reach

a just apportionment. Such weighing is not a scientific process, as the court recognized,

since the general quality of the work and the risk of failure, along with time spent, are

factors to consider in determining how the fee should be split. Id. at 862. However, the high

court also found that the determination of the attorneys’ relative contribution to the result

could be simply resolved on a contractual basis: “If both lawyers agree that the time spent

by each was productive, that will provide an easy resolution of the issue.” Id. (emphasis

added) In other words, the lawyers then would simply split the contingency fee generated

by the judgment based on how many hours each attorney put into the matter to reach a

just apportionment.

Thus, Fitzpatrick is wrong in asserting, “Nowhere in its opinion in Galanis did the

Supreme Court indicate that its holding was in any way based on the fact that the feuding

lawyers did not have a fee-sharing contract.” (Br. at 32). To the contrary, the court signaled

that an agreement between the attorneys would avoid the extensive balancing act

necessitated by a quantum meruit analysis: if the lawyers agreed their time was equally

valuable to the client, they would divide the contigency fee based upon how many hours

each had put in, without worrying about which attorney had achieved more. In this case,

the agreement between the attorneys addresses, and rightfully determined, the just division

of the attorneys fees.

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Here the lawyers agreed to equally split fees generated by both the products liability

and the medical malpractice cases, and separately to split their responsibilities by the case.

(App. 87-88, 90-91) They, too, under the reasoning of Galanis, are entitled to the benefit

of their bargain made with each other. In citing Hofreiter v. Leigh, 124 Ill. App. 3d 1052;

465 N.E.2d 110 (Ill.Ct.App. 1984), Fitzpatrick does not show that Illinois law is any

different. In Hofreiter, the attorneys had agreed to split the fees and the work in a case on

a 50/50 basis, but then one of the lawyers moved to California, and the deal was off. The

court then looked to quantum meruit to determine how the fees should be divided. Because

of the one lawyer’s move, the court recognized the deal could no longer remain. That’s not

the case here.

Galanis addressed “default settings the law supplies in the absence of fee agreements

providing otherwise” and specifically noted that “parties and lawyers are not prevented from

making other reasonable fee arrangements.” Galanis, 715 N.E.2d at 860. Here, the

attorneys specified how they would share attorneys fees, and the clients approved the

attorneys’ agreement, knowing, in any event, the division of those fees would not affect

how much money the Hills themselves received. Nothing in Galanis requires a quantum

meruit analysis by the trial court of numerous intangible factors where the attorneys have

agreed to a simple split of the fee – a split that in no way would affect how much in fees

the client would have to pay.

Furthermore, Galanis addresses the situation where an attorney is fired by the client

before a contingency fee case results in a judgment. Here, Allen & Associates was not, in

fact, terminated before judgment was entered in Hill v. Baxter. This is another fundamental

flaw in Fitzpatrick’s argument that damages must be determined under a quantum meruit

-25-

analysis rather than under the simple terms of the contract

2. The Hills could not amend the contract to fire Allen on the products

case alone.

Fitzpatrick and Allen agreed from the outset that Fitzpatrick would handle the products

case and Allen the medical malpractice case, and equally split the fees from both actions,

with Iseberg’s share coming from Fitzpatrick’s half. This division of responsibility remained

exactly the same after the Hills purported to terminate Allen & Associates from the

products case. Fitzpatrick and Allen continued to work on their respective individual cases

in representing the Hills just as they had agreed to work in the beginning. That Fitzpatrick

was not responsible for prosecution of the medical malpractice action and Allen &

Associates was not responsible for the prosecution of the products liability action does not

undermine their agreement to share fees as to the two actions involving the universe of the

claims of their clients. In Freeman v. Mayer, 95 F.3d 569 (7th Circuit 1996), the court

upheld a fee splitting arrangement even though the Illinois lawyer who referred the action

and participated in other ways did not enter an appearance in the Indiana action.

Because Allen & Associates never had responsibility for prosecuting the products case

portion of its clients’ claims, the supposed termination had no effect on the firm’s work for

the Hills. The Hills retained Allen & Associates as to all their claims, while approving their

attorneys’ agreement to share the fees from the separate cases arising from those claims.

(App. 91) While the Hills remained free under Galanis to terminate Allen & Associates

altogether, they were not free to retain the firm, while amending their global retainer

agreement to simply cut Allen & Associates out of its entitlement to fees in the products

case, which was about to be settled. The law against such one-sided amendment of a

Fitzpatrick never made a record prior to judgment of the amount paid to Lewis, though

5

he subsequently sought to do so in an improper affidavit and exhibits, which Allen moved to

strike. (Supp. App. 94-98) (see discussion below)

-26-

contract is straightforward:

A party to a contract may not make unilateral changes to a contract. While

parties may voluntarily enter into and modify contracts, such modifications,

which are also contracts, require all the elements of a contract. Henthorne

v. Legacy Healthcare, Inc., 764 N.E.2d 751, 759 (Ind. Ct. App. 2002)

Stelko Electric, Inc. v. Taylor Community Schools Building Corporation, 826 N.E.2d

152,159 (Ind. Ct. App. 2005); See also, State ex rel. Court Goldsmith v. Marion County

Superior, 275 Ind. 545, 554 (Ind. 1981). Having not first obtained Allen’s agreement to

divide fees by case rather than share fees equally as to both the medical malpractice and

the products liability cases, neither the Hills nor Fitzpatrick were in a position to unilaterally

impose such a change.

Fitzpatrick has not, and cannot, point to any evidence  showing that after retaining

Allen & Associates for all purposes, the Hills and Allen & Associates reached a new

agreement under which the Hills were free to restrict that representation. Without such an

agreement, the unilateral attempt by the Hills to amend their contract and terminate Allen

& Associates from the products case alone at the cusp of its settlement, was ineffective.

3. Percentage of fees not challenged.

Fitzpatrick does not challenge the total percentage and amount of fees the Hills agreed

to pay in the products case. He can hardly do so since he admits he took the fees, and

distributed half to Iseberg after a settlement share was distributed to Lewis. (Br. 10, 13-14)5

Fitzpatrick simply seeks to avoid having to pay Allen’s share under their contract, arguing

that quantum meruit analysis must apply. But, as discussed, the contract between

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Fitzpatrick and Allen, approved by the Hills, remained valid at the time the products case

was settled since the Hills could not amend it to simply deprive Allen of fees from that

case.

Under these circumstances, aside from issues of default, the trial court must look to

the contract, not to a quantum meruit analysis. “The existence of a valid express contract

for services . . . . precludes implication of a contract covering the same subject matter. The

rights of the parties are controlled by the contract and under such circumstances recovery

cannot be had on the theory of quantum meruit.” Page v. Schrenker, 439 N.E.2d 694, 697

(Ind. Ct. App. 1982) (upholding contracted attorneys’ fees), and quoting Kincaid v. Lazar,

405 N.E.2d 615, 619 (Ind. Ct. App. 1980).

C. Allen & Associates was entitled to the benefit of its bargain.

1. The firm performed under the agreement through the time of breach.

For two years, Allen & Associates lived up to its side of the bargain with Fitzpatrick and

the Hills, aggressively pursuing the medical malpractice litigation and winning an appeal

enabling John Hill to seek multiple capped recoveries in it due to his multiple injuries

involving separate instances of malpractice. Csicsko v. Hill, supra, 822 N.E.2d 968.  While

Fitzpatrick was preparing to settle the products case, Allen & Associates was opposing

transfer of the medical malpractice matter to the Indiana Supreme Court – an effort that

proved successful. Comparing Allen’s efforts to Fitzpatrick’s in pursuing discovery in the

products case would not be a simple task. But no comparison is necessary or appropriate.

The attorneys agreed by contract that they would divide the work by case, and split the

fees from both cases equally. (App. 87-88, 90-91)Because the contract governs, no need

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exists to move to a quantum meruit analysis.

2. Fitzpatrick played wait and see before invoking equitable relief.

Had Fitzpatrick believed the 50/50 contractual split of fees in both the products and the

medical malpractice cases was somehow unfair, he could have sought to change the terms

of the deal long before the products case was about to settle. He did not do so. Instead,

he let Allen work the medical malpractice case during two years of litigation concerning the

critical issue of whether the Hills could recover multiple maximum recoveries allowed under

the Indiana Medical Malpractice Act for the multiple injuries he sustained to organs and

loss of limbs. Then, when the products case was about to settle for an amount of money

far greater than the medical malpractice case was expected to generate, even with multiple

caps, Fitzpatrick tried to persuade Allen to change the terms of their deal, and upon Allen’s

rejection of the proposal, the Hills signed a letter dated the next day purporting to terminate

Allen from the products case alone. (App. 160-166) The timing of the supposed termination

makes suspect Fitzpatrick’s claim that he had nothing to do with it, made in his improperly

filed post-judgment affidavit. (App. 564 ¶

In any case, Fitzpatrick’s decision to let Allen & Associates prosecute the medical

malpractice action for two years under the fee sharing agreement should preclude him

from asserting quantum meruit as the grounds for not having to live up to his end of the

bargain. Quantum meruit is an equitable remedy. Galanis, supra, 715 N.E.2d at 861. It is

not appropriate to apply in a situation where the party invoking it sat on his hands, playing

wait and see, before using it to justify his unilateral decision that he had no duty to live up

to his contract, or for that matter, to obey court orders that he disclose the total amount of

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the settlement. He who seeks equity must do equity, and must come with clean hands.

Wedgewood Cmty. Ass’n v. Nash, 810 N.E.2d 346, 347 (Ind. 2004); Wilt v. Bueter, 186

Ind. 98, 113 (Ind. 1916).

3. Allen & Associates was entitled to share in the products case fees

under contract terms.

Because Allen & Associates remained counsel to the Hills at the time of the settlement

of the products case, the firm was entitled to its share of the fees from that case, even

though Allen subsequently terminated his relationship with the Hills. In Farmer v. Lawson

supra, 855 N.E.2d at 692-693, the agreement between the attorneys to equally share the

contingency fee in a wrongful death case remained in effect at the time of verdict, and, thus

the 50-50 split was given effect, even though one of the attorneys was subsequently

dismissed by the client. The principle of giving force to the agreement on division of fees,

where such exists, rather than imposing a quantum meruit construction by the courts was,

as discussed, approved in Galanis and has long been recognized in Indiana courts. See

Landis v. Brooks, 637 N.E.2d 1365, 1367 (Ind. Ct. App. 1994) (“It has long been the law

that the existence of a valid express contract for services . . . precludes implication of a

contract covering the same subject matter. The rights of the parties are controlled by the

contract and under such circumstances recovery cannot be had on  the theory of quantum

meruit.” quoting Page v. Schrenker, Ind.App., 439 N.E.2d 694, 697 (Ind. Ct. App. 1982),

in turn quoting Kincaid v. Lazar, 405 N.E.2d 615, 619 (Ind. Ct. App. 1980))

That Allen & Associates subsequently withdrew as the Hills’ attorneys does not negate

its right to its 50 percent share of the fees collected by Fitzpatrick and Iseberg. The

contingency causing the fees to be owed had already occurred. Farmer v. Lawson, supra,

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855 N.E.2d at 692-693. Furthermore, as discussed in detail below, Fitzpatrick already had

breached the contract, giving Allen the right vis-a-vis Fitzpatrick to discontinue performance

under it. This is a separate issue from that of whether Allen & Associates properly withdrew

as counsel for the Hills in the medical malpractice case. In fact, given the Hills’s efforts to

unilaterally amend the terms of their contract and deprive Allen of fees in the products case

and their efforts to terminate Allen as to the products and the Lewis actions, the firm was

justified in its subsequent termiantion of its relationship with the Hills.

Thus, under Galanis, Allen & Associates will be entitled to a fee from the medical

malpractice case – and because the firm had no contract regarding division of the fees with

the new attorney accepting the case – the division of fees will be made on a quantum

meruit basis. Under his contract with Allen, Fitzpatrick can then make claim to 50 percent

of those fees paid to Allen & Associates in the medical malpractice case. But, in contrast

to the products case, that is a contingency that has yet to occur. Fitzpatrick already has

collected fees in the products case and, under his contract with Allen & Associates, owes

50 percent to Allen & Associates.

D. Allen’s subsequent withdrawal does not defeat his claim to contractual

damages arising from Fitzpatrick’s prior breach.

Fitzpatrick lacks grounds to deny Allen’s fees in the products case based on Allen &

Associates’s subsequent withdrawal from the medical malpractice case. In contracts law,

it is well established that breach of the contract by one party relieves the other party from

completing its remaining duties. “A party’s material failure of performance, including

defective performance, will act as the non-occurrence of a condition of the other party’s

remaining duties, even if such other party is unaware of the failure.” Salin Bank & Trust Co.

An exception occurs where the only remaining duties of performance are those of the

6

party in breach and are for the payment of money. Id. Since, prior to Fitzpatrick’s breach, Allen

owed continuing duties, this exception is not applicable.

-31-

v. Peden Trust, 715 N.E.2d 1003, 1008 (Ind. Ct. App. 1999), citing RESTATEMENT

(SECOND) OF CONTRACTS § 235 cmt. a, 237 cmt. c. As the Restatement puts it,

it is a condition of each party’s remaining duties to render performances to

be exchanged under an exchange of promises that there be no uncured

material failure by the other party to render any such performance due at an

earlier time.

Id. § 237. Here, Fitzpatrick did not carry out his contractual duty to share the fees in

the products case with Allen & Associates. He repudiated their contract by insisting that

Allen be paid based upon the fees generated by the medical malpractice action, and by

concealing the products case fee despite Fitzpatrick’s agreement with Allen & Associates

and despite repeated court orders that he disclose the amount to Allen. Under these

circumstances, Allen & Associates had no duty to Fitzpatrick to continue representing the

Hills in the medical malpractice case.

By refusing to share the fee in the products case, and by concealing it, Fitzpatrick did

not merely provide defective performance, he repudiated the contract to share fees. Under

Restatement of Contracts § 243 (2), “a breach by non-performance accompanied or

followed by a repudiation gives rise to a claim for damages for total breach.” Applying this

6

principle in the context of insurance, the court explained in Colonial Life & Acci. Ins. Co.

v. Newman, 152 Ind. App. 554, 284 N.E.2d 137 (Ind. Ct. App. 1973):

“Indiana decisional law dictates that where liability has attached under a

contract of insurance, but where liability has been denied by the insurer, the

insured may treat the contract as repudiated and may pursue his remedy to

recover all that is due him in a single suit on a lump-sum basis. Prudence

Life Ins. Co. v. Morgan (1966), 138 Ind. App. 287, 213 N. E. 2d 900; Illinois

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Bankers Life Ass’n. v. Armstrong (1934), 100 Ind. App. 696, 192 N. E. 901.”

….

an action for total future benefits may be maintained where there has been

a total breach of performance. In such instance the contract will be said to

have been repudiated. Corbin, CONTRACTS (1951), § 969. Thus, if the

insurer’s denial of liability goes “to the essence” of the agreement and

amounts to a “frustration of the ends it was expected to subserve,” the

contract may be treated as repudiated, good faith and good intentions of the

insurer notwithstanding. New York Life Ins. Co. v. Viglas (1936), 297 U.S.

672, 56 S. Ct. 615.

Colonial Life, 152 Ind. App. at 561-562, and quoting in part from prior decision at 284

N. E. 2d 137.

Here, the essence of the agreement between Fitzpatrick and Allen & Associates was

the equal sharing of fees from both the products liability and the medical malpractice

actions, along with the division of responsibilities by case. When Fitzpatrick frustrated that

end by concealing the settlement in the products case and not sharing the fees it

generated with Allen & Associates, he was in total breach of the contract, and Allen &

Associates was entitled to the 50 percent of fees to which it was contractually due.

III. Ethical rules do not preclude Allen’s recovery.

The Indiana Rules of Professional Conduct “are not designed to be a basis for civil

liability, but these Rules may be used as non-conclusive evidence that a lawyer has

breached a duty owed to a client.” IRPC Scope.

A. No rules were violated.

The arrangement by Allen & Associates and Fitzpatrick to share fees met the mandate

of INDIANA R.PROF’L CONDUCT 1.5(e) that:

A division of a fee between lawyers who are not in the same firm may be

made only if:

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(1) the division is in proportion to the services performed by each lawyer or

each lawyer assumes joint responsibility for the representation;

(2) the client agrees to the arrangement, including the share each lawyer will

receive, and the agreement is confirmed in writing; and

(3) the total fee is reasonable.

Fitzpatrick does not dispute that the Hills agreed in writing to the  50/50 fee sharing

arrangement. Nor does he dispute the total contingency fees that the Hills agreed to pay

with respect to the products liability and the medical malpractice litigation. Thus, neither

section (e)(2) nor (e)(3) of Professional Conduct Rule 1.5 is at issue.

1. Allen’s fee was proper under the alternative prongs of Rule 1.5(e)(1)

As to first clause of Rule 1.5 section (e)(1), Fitzpatrick has failed to show that the fee

division was not proportional to the attorneys’ work when all the clients’ claims are

considered. By putting on blinders to focus solely on the work done in the products case,

Fitzpatrick seeks to ignore his agreement to divide responsibility but share fees as to both

the products and the medical malpractice cases. Furthermore, the agreement between

Fitzpatrick and Allen & Associates met the second, alternative clause of section (e)(1) in

that each lawyer assumed “joint responsibility for the representation” of the Hills. Here,

Fitzpatrick and Allen & Associates  did exactly that even though they logically split their

responsibilities, with Fitzpatrick responsible for the products case in Illinois and Allen

responsible for the medical malpractice case in Indiana. Fitzpatrick fails to cite any rule or

case prohibiting such division of responsibilities. Rule 1.5(e)(1) does not require that each

lawyer assume joint responsibility for each aspect of the representation, or, for that matter,

each case.  Fitzpatrick builds his argument though ignoring the totality of the

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representation, and focusing solely on the products case.

2. Neither Allen nor Fitzpatrick were required to appear as counsel of

record in the case to be handled by the other.

No rule required Allen’s appearance as an attorney of record in the products case. In

Freeman v. Mayer, supra, 95 F.3d 569, the court upheld the 50/50 split fee sharing

agreement between the referring Illinois attorney and the Indiana counsel who took sole

responsibility for litigating the case. The court noted that William Freeman, the Illinois

attorney who referred the case to Indiana attorney Richard Mayer as Freeman was about

to retire to North Carolina, had conducted an extensive pre-litigation investigation into the

case, and had maintained contact with his clients while the case was pending. Freeman

was not admitted pro hac vice to work the Indiana case with Mayer, who won an $8 million

verdict after extensive litigation in which Freeman did not participate. After a jury verdict

totaling $8 million, Mayer negotiated an about $4.7 million settlement in the underlying

case, but did not notify Freeman of it. After eventually learning of the settlement through

his clients, Freeman inquired, and Mayer sent him a one-third fee. Freeman objected,

Mayer stopped payment on the check and asserted that the fee-sharing arrangement with

Freeman violated Rule 1.5 of the Indiana Rules of Professional Conduct. Freeman filed a

diversity lawsuit in federal court, asserting that Mayer had violated their contact. Mayer

asserted the violation of rule 1.5 as a defense. The district court granted summary

judgment to Freeman, and the Seventh Circuit affirmed, concluding:

Freeman did nothing unusual: he took a case for old friends, he associated

himself with local counsel when it appeared that court proceedings in another

jurisdiction would be required, and he reduced his agreement both with his

client and his co-counsel to writing. Mayer, it appears, simply had second

thoughts when the case came out favorably and tried to improve the terms

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of his arrangement with Freeman ex post. Nothing in the Indiana Rules of

Professional Conduct either required or permitted this behavior.

Id. at 576. Thus, the fact that Freeman was not officially counsel in the Indiana case

did not prevent him from sharing in the fee proceeds as he had agreed with Mayer.

This case is in many respects parallel. Fitzpatrick, like Mayer, agreed to share fees with

co-counsel on a 50-50 basis. There was a rough proportionality of work since Fitzpatrick

and Allen divided up their total responsibilities by case. (In Freeman, the court found that

the division of work might have met the separate proportionality test of Rule 1.5(e)(1),

though noting this was a factual matter not appropriate for summary judgment.) Fitzpatrick,

like Mayer, failed to disclose the $8 million settlement to Allen (and then, in addition,

refused to obey repeated court orders requiring him to disclose it). Fitzpatrick, like Mayer,

argues violations of the ethics rule in an effort to avoid his contractual obligations.

3. The totality of representation must be considered.

Fitzpatrick, like Mayer, also seeks to have the court ignore the attorneys’

representation of their clients as to work done on the totality of their claims. Specifically,

Fitzpatrick argues he is entitled to the entire fee in the products case because Allen &

Associates represented the Hills in the medical malpractice action, not the products case;

but his interpretation assumes the rule requires representation by each attorney in each

case of a client’s total claim. This is an issue the rule does not address, but which

effectively was rejected by the court in Freeman.

B. The ethics rules are not to be used as procedural weapons.

The Seventh Circuit in Freeman cited a preamble/scope provision of the Professional

Conduct Rules, and questioned a lawyer’s standing “to nullify a fee-sharing agreement that

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violated  Rule 1.5(e)(1), since the lawyer-parties to the agreement do not appear to have

interests that are legally protected by this rule.” Freeman, at 575.

Here, too, Fitzpatrick raises this rule that is designed to protect clients in an effort to

defend his own refusal to pay the 50 percent contracted fee that he agreed to pay to Allen

& Associates, not to question the fees that the Hills were obliged to pay the attorneys. This

case is solely about how the agreed upon and undisputed attorneys fees in the products

case are to be divided between the attorneys. The Hills themselves have no financial

interest in the outcome.

As the Indiana Supreme Court explains in the “scope” section of the Professional

Conduct Rules, “the purpose of the Rules can be subverted when they are invoked by

opposing parties as procedural weapons”.  Here, Fitzpatrick seeks to add a non-existent

requirement (that the “representation” must be as to each particular lawsuit rather than the

totality of the client’s case) to Rule 1.5(e)(1) to challenge Allen & Associate’s contractual

right to the agreed upon sharing of fees. But the Professional Conduct Rules were never

meant to be so used.

IV. The trial court properly awarded liquidated damages.

A. No hearing was required.

Under T.R. 55(B) the trial court had the discretion to determine whether a hearing was

needed to make the damages calculation. Where the calculation is simple, no hearing is

necessary. Dundee Cement Co. v. Howard Pipe & Concrete Products, Inc., 722 F.2d 1319,

1323 (7th Cir. Ill. 1983) (no hearing required where the amount claimed is liquidated or

capable of ascertainment from definite figures contained in the documentary evidence);

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Mallard’s Pointe Condo. Ass’n v. L&L Investors Group, LLC, 859 N.E.2d 360, 365 (Ind. Ct.

App. 2006) (no hearing necessary to assess damages respecting default judgment where

plaintiff had notified defendant of monthly water usage rate).

Allen & Associates moved for entry of judgment based on liquidated damages under

the contract, and both sides briefed the issue, with Fitzpatrick submitting a supplement in

addition to his response brief. (App. 471-473), 489-491, 540-543, 547-553). Given the

simplicity of the contract between Fitzpatrick and Allen & Associates as to division of fees,

the trial court did not err in determining that no hearing was necessary and awarding Allen

& Associates $1.35 million, or half the attorneys fees arising from the settlement of the

products case as provided by the contract. (App. 87-88)

B. Fitzpatrick improperly sought after the judgment to raise new evidence

concerning the Lewis settlement and other matters.

Subsequent to that judgment, Fitzpatrick submitted his own affidavit asserting that

Lewis had been paid $600,000 in settlement of his claim, along with additional documents

outside the record that Allen identified. (App. 554-569; Supp. App. 94) No evidence of the

settlement amount with Lewis was before the trial court when it entered judgment on the

contract. (See Br. 13, n. 71, citing only the affidavit at App. 565 ¶ 13 as the evidence of the

settlement.)  Allen moved to strike the affidavit and other non-record evidence Fitzpatrick

sought to introduce in conjunction with his combined T.R. 59 and T.R. 60(B) motion (App.

570; Supp. App.94-98).

To prevail on a motion to correct error based on newly discovered evidence, Fitzpatrick

needed to demonstrate that the evidence could not have been discovered and produced

at trial with reasonable diligence. T.R. 59(A)(1); Matzat v. Matzat, 854 N.E.2d 918, 919

-38-

(Ind.App.2006); Laudig v. Marion County Bd. of Voters Registration, 585 N.E.2d 700, 712

(Ind.Ct.App.1992). This he did not and could not do. Fitzpatrick’s own averments in his

affidavit regarding prior events show the contrary to be the case since he claimed personal

knowledge of the matters. (App. 563-568)

T.R. 59(H)(1) affidavits and other exhibits cannot be used to present evidence that a

party neglected to present during the previous proceedings. Mid-States Aircraft Engines,

Inc. v. Mize Co., Inc., 467 N.E.2d 1242, 1245 (Ind.App.1984); see also; Babinchak v. Town

of Chesterton, 598 N.E.2d 1099 (Ind.App.1992) (trial court properly struck photographs of

sidewalk appended to plaintiff’s motion to correct errors following grant of summary

judgment for town; photographs were not newly discovered evidence and were in existence

before plaintiff’s deposition was taken and well before hearing on summary judgment

motion).  As the court stated in Patton v. State, 537 N.E.2d 513, 516 (Ind. Ct. App. 1989):

T.R. 59(H)(1) allows a party to disclose, on the record matters constituting

a basis for correction of error which occurred during the prior proceedings,

but were not reflected in the record. The provision also permits the disclosure

of newly discovered evidence. It does not, however, allow a party to offer by

affidavit, evidence which he merely neglected to submit at the prior

proceeding.

(citations omitted; emphasis added)

B. Fitzpatrick failed to plead setoff.

Furthermore, while Fitzpatrick’s payment of fees to Lewis in settlement might have

provided him with the affirmative defense of set-off, Fitzpatrick did not plead such a

defense. Setoff is an affirmative defense which must be pled under T.R. 8(C). By failing

to include this affirmative defense in his Answer, Fitzpatrick waived the issue. Cox v. Town

of Rome City, 764 N.E.2d 242, 249 (Ind. Ct. App. 2002) (“Any affirmative defense that a

In the event the Court determines that the payment to Lewis should have been

7

considered, the case could be remanded with instructions to re-enter the judgment, subtracting

one half of that payment from Allen’s recovery. See Landis v. Brooks, supra, 637 N.E.2d at

1368.

-39-

party seeks to assert must be included in the pleadings when a responsive pleading is

necessary. Ind. T.R. 8(C); Paint Shuttle, Inc. v. Continental Cas. Co., 733 N.E.2d 513, 525

(Ind. Ct. App. 2000), trans. denied. Failure to do so results in waiver, even if the affirmative

defense is not listed in those defenses enunciated in T.R. 8(C). Paint Shuttle, Inc., 733

N.E.2d at 513.”)

Had Fitzpatrick not waived the affirmative defense of setoff by failing to raise it in his

answer and failing present evidence of payment to Lewis before judgment, the trial court,

if it agreed that setoff was allowed, could have simply determined the amount of fees Allen

& Associates was due as a matter of liquidated damages under the contract. Separate

payment to Lewis does not create any new rationale for imposing a quantum meruit

analysis over how the remaining fees should be distributed when the terms of the contract

provided that 50 percent should go to Allen & Associates.7

D. Under T.R. 19, Allen is entitled to recovery from Fitzpatrick alone.

Without citing any supporting authority, Fitzpatrick argues that Allen must sue Iseberg

separately for half the money. (Br. 37-39) But Fitzpatrick admits he distributed fees to

Iseberg.(Br. at 10, 13-14) Under the contract as to the products liability case, Allen &

Associates was entitled to 50 percent of the total attorneys fees, and Iseberg and

Fitzpatrick were to share the remaining 50 percent. (App. 87, 88) When he had the

settlement funds in hand, Fitzpatrick was, thus, obliged to distribute half the money to Allen

& Associates. Instead of fulfilling this contractual duty, Fitzpatrick opted to split the fees

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with Fitzpatrick.

Indiana T.R. 19(E)(1) provides:

Joint obligors. Joinder of all the parties to a joint and several obligation and

to a joint obligation, shall not be required, and joint or separate action may

be brought against one or more of such obligors who shall be subject to

permissive joinder as provided in Rule 20. A judgment against fewer than all

does not merge or bar the claim against those not made parties for that

reason.

While the rule contemplates the possibility of a separate action in the event the

judgment cannot be satisfied, it recognizes the validity of the judgment as to a single

obligor. Here, Fitzpatrick, Iseberg and Allen were each bound by the agreement to share

fees. Fitzpatrick breached his obligation in distributing fees due Allen to Iseberg. As a

matter of equity, and in accord with the terms of the fee sharing contract, Allen is entitled

to recover the entirety of his fees from Fitzpatrick. The trial court was correct in concluding

that Iseberg was not a necessary party and that his “presence or absence will not increase

or decrease Allen’s claim to 50% of total fees.” (App. 61)

V. Fitzpatrick’s T.R. 60(B) argument must fail for reasons discussed above and

for failure of evidence of waiver.

A trial court’s grant or denial of a T.R. 60(B) motion is reviewed for abuse of discretion.

Mallard’s Pointe Condo. Ass’n, supra, 859 N.E.2d at 365-366.

Fitzpatrick argues that he presented a meritorious defense on three grounds in his T.R.

60(B) motion for relief from judgment and citing his claims that: 1) applying Galanis and

given the payment to Lewis, the damage award was prima facie excessive; 2) the judgment

without a hearing on damages was prima facie unfair; and 3) liability is prima facie in doubt

because Allen had no entitlement to quantum meruit recovery of fees in the products case,

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and particularly with respect to Allen’s conversion claim. However, Fitzpatrick only includes

his motion rather than his brief seeking T.R. 60(B) relief, and the motion does not detail

these arguments, to which Allen & Associates purportedly did not respond. (App. 570) In

fact, Allen & Associates did address the substantive arguments in his response brief, thus

overcoming any prima facia argument Fitzpatrick may have made. (Supp. App. 79, 88-93)

See Trinity Homes, LLC v. Fang, 848 N.E.2d 1065, 1068 (Ind. 2006) (“When the appellee

has failed to submit an answer brief we need not undertake the burden of developing an

argument on the appellee’s behalf. Rather, we will reverse the trial court’s judgment if the

appellant’s brief presents a case of prima facia error.”)

The issues are addressed above, and are re-adopted by reference in this section so

as to avoid needless repetition. As noted, Allen expressly waived the conversion claim in

oral argument (App. 535), and Judge Alexa stated that conversion was not part of the

default judgment. (App. 539) In fact, the judge simply awarded liquidated damages based

on the contract, and thus, Fitzpatrick’s argument as to conversion (Br. 50-53) is not

relevant.

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CONCLUSION

WHEREFORE, Appellee Kenneth J. Allen & Associates, P.C. requests this court affirm

the decision of the trial court.

Respectfully submitted,

KENNETH J. ALLEN & ASSOCIATES, P.C.

Kenneth J. Allen (3857-45)

William Lazarus (24638-64)

WORD COUNT CERTIFICATE

I verify this brief contains no more than 14,000 words.

_________________________________

William Lazarus (24638-64)

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CERTIFICATE OF SERVICE

The undersigned affirms that the foregoing Appellant’s Brief was served this 23rd day

of April, 2009, on all counsel of record by United States mail with sufficient first-class

postage affixed.

_______________________________

William Lazarus (24638-64)

Brian J. Paul, Esq.

Jenny R. Wright, Esq.

ICE MILLER, LLP

One American Square, Suite 3100

Indianapolis, IN 46282-0200

Kevin E. Steele, Esq.

BURKE COSTANZA & CUPPY LLP

9191 Broadway

Merrillville, IN 46410

: ALLEN LAW BUILDING

1109 Glendale Boulevard

Valparaiso, IN 46383

219.465.6292

G CHASE BANK CENTER

8585 Broadway, 8 Floor

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Merrillville, IN 46410

219.736.6292

G CHARTER ONE BANK

17450 South Halsted St.

Homewood, IL 60430

708.799.6292

G SMURFIT-STONE BUILDING

150 North Michigan Ave.

Chicago, IL 60606

312.236.6292

Refer to Office Indicated