Seamus Culhane, Turbak Law Office, P.C., Thomas Dickson and Dickson Law Office v. Bill Trovson

Watertown, South Dakota, lawyers represented the parties in a declaratory judgement actions.

Bill Thovson, a South Dakota resident, contacted attorney Seamus
Culhane, a South Dakota attorney, following the tragic death of Thovson’s wife,
Paula, as a result of a car accident in North Dakota on July 28, 2020. Culhane
agreed to represent Thovson and his minor daughter in relation to Paula’s death
and the parties signed a legal services agreement establishing a one-third
contingent fee. Shortly thereafter, Culhane recruited Thomas Dickson, a North
Dakota trial attorney, to assist. The parties signed a second legal services
agreement establishing that the one-third contingent fee would be split equally
between Culhane and Dickson (collectively Attorneys). Both agreements permitted
Attorneys to withdraw from representation and file a lien for the full amount of
their contingent fee in the event that Thovson refused to accept a settlement offer
that Attorneys considered reasonable.

Within one month of Paula’s death, the at-fault driver’s and vehicle
owner’s insurer tendered the policy limits on both policies for a total of $500,000.
With the hope of recovering a larger sum, Attorneys and Thovson continued to look
for additional assets and potential sources of recovery but were ultimately
unsuccessful. Attorneys advised Thovson in November 2020 that settlement was
the best option. Thovson declined to accept the settlement at that time. Attorneys
provided notice of their withdrawal in January 2021 and filed an attorney’s lien in
the amount of $170,049.81 representing one-third of the $500,000 settlement offer,
plus costs. Eighteen months later, in July 2022, Thovson accepted the insurer’s
settlement offer and Attorneys brought suit against Thovson, seeking a declaratory
judgment enforcing their attorney’s lien and alleging breach of contract. Thovson
counterclaimed for fraud, recission, breach of fiduciary duty, breach of contract, and
deceit, relying in part on North Dakota law.

* * *

As an initial matter, we note that “parties may agree to be bound by
the law of a particular state” through a choice of law provision in a contract. Dunes
Hosp., L.L.C. v. Country Kitchen Int’l, Inc., 2001 S.D. 36, ¶ 10, 623 N.W.2d 484, 488 (citing State ex rel Meierhenry v. Spiegel, Inc., 277 N.W.2d 298, 299 (S.D. 1979)).
See also Restatement (Second) Conflict of L. § 187 (1971) (generally “[t]he law of the
state chosen by the parties to govern their contractual rights and duties will be
applied”). Here, neither LSA 1 nor LSA 2 contain such a choice of law provision
manifesting the parties’ intent to be bound by the laws of a particular jurisdiction,
nor do the agreements indicate the place of performance. Accordingly, we must
apply choice of law principles to determine which state’s law applies.

The parties disagreed about the appropriate choice of law standard to
apply.

ttorneys maintain that the choice of law is governed by the most
significant relationship test first applied by the Court in Chambers v. Dakotah
Charter, Inc., 488 N.W.2d 63 (S.D. 1992). We explained in Chambers that under the
most significant relationship test, we evaluate the relevant contacts with the forum,
including: “(a) the place where the injury occurred, (b) the place where the conduct
causing the injury occurred, (c) the domicil[e], residence, nationality, place of
incorporation and place of business of the parties, and (d) the place where the
relationship, if any, between the parties is centered.” Id. at 68 (quoting
estatement (Second) of Conflict of L. § 145 (1971)). Attorneys maintain that under
this test, South Dakota law applies because “[a]ll four contacts to be considered in
determining which state had the most significant relationship to the occurrence and
the parties favor applying South Dakota law.”

Thovson reached an agreement with Farmers Union and accepted the $500,000
settlement offer.

In determining whether Attorneys should recover their contingent fee,
we also consider the nature of contingent fees, which have the potential to “create
potential conflicts of interest between the lawyer and the client with respect to
settlement.” Douglas R. Richmond, Turns of the Contingent Fee Key to the
Courthouse Door, 65 Buff. L. Rev. 915, 922 (2017). Contingent fee arrangements
involve a unique allocation of the benefits and risks to the attorney and client. A
contingent fee arrangement benefits the client because it “enable[s] persons who
could not otherwise afford an attorney to assert their rights” by insulating them
against the risk of paying for substantial attorney fees if their claims are ultimately
unsuccessful. See Bell & Marra, pllc v. Sullivan, 6 P.3d 965, 970 (Mont. 2000).

Additionally, because the attorney’s compensation is dependent on the client’s
recovery, the attorney has a greater “incentive to seek the best result for their
clients and to encourage only those clients having a substantial likelihood of
succeeding.” Id. An attorney benefits by charging a higher fee to account for the
risk they assume and can use the recovery of a fee in a successful case to insure
themselves and their other clients against the cost of losing. Id. “Put another way,
the lawyer is entitled to premium compensation for assuming what is in most cases
the real risk of receiving no fee for her efforts.” Richmond, supra at 931. And the
higher fee “compensates the lawyer for the delay between the performance of legal
services and the payment for them.” Id.

But both attorney and client must accept the drawbacks of a
contingent fee arrangement and the associated risks. A client in a successful case
may be contractually obligated to pay a higher fee than what would be owed under
an hourly fee arrangement. Of course, the attorney must accept the risk of
recovering nothing for their client and, therefore, receiving no payment for their
services. This includes the inherent risk “that a client will make a disappointing
settlement decision[.]”

Summary judgment in favor of the Plaintiffs.

Affirmed in part, reversed in part, and remanded for further
proceedings consistent with this opinion.