IN THE MATTER OF THE ESTATE OF DANE RICHARD EUBANKS, DECEASED: KATHY MAY HUBER, AS PARENT AND LEGAL GUARDIAN FOR AND ON BEHALF OF DAVID RANDALL EUBANKS, JR.
CECILIA EUBANKS, INDIVIDUALLY AND AS ADMINISTRATRIX OF THE ESTATE OF DANE RICHARD EUBANKS, DECEASED
DATE OF JUDGMENT: 11/22/2011
JACKSON COUNTY CHANCERY COURT, HON. JAYE A. BRADLEY
TRIAL COURT ATTORNEYS: VINCENT J. CASTIGLIOLA, JR. DAVID E. KIHYET WILLIAM C. GRIFFIN AMANDA QUAVE
ATTORNEYS FOR APPELLANT: TREVOR BRUCE ROCKSTAD MATTHEW STEPHEN LOTT
ATTORNEYS FOR APPELLEE: VINCENT J. CASTIGLIOLA, JR. BETTY CAROLINE CASTIGLIOLA
ON WRIT OF CERTIORARI
DICKINSON, PRESIDING JUSTICE
¶1. Attorneys representing the administratrix of an estate settled wrongful-death claims under two insurance policies without filing a wrongful-death lawsuit. The proceeds of the settlement of the first policy were distributed equally to the wrongful-death beneficiaries. The attorneys submitted the proceeds of the second policy to the chancery court and moved for an unequal distribution, arguing that two half-siblings should recover nothing or, if allowed to recover, less than the three other claimants.
¶2. The chancellor determined that the half-siblings were entitled to recover, and that she had no authority to apportion the wrongful-death settlement proceeds unequally. She divided the proceeds equally among the wrongful-death beneficiaries after awarding attorneys' fees of forty percent of the amount of recovery. Two of the beneficiaries argued that they should not be required to pay attorneys' fees because the attorneys had made numerous attempts, first to exclude them from any recovery, and then to reduce their share.
¶3. The Court of Appeals affirmed the chancellor's determination that the half-siblings were entitled to an equal distribution but remanded for factual findings on the amount of attorneys' fees they should be required to pay. We agree with the Court of Appeals and the trial court that the proceeds must be equally divided. On the issue of attorney fees, four justices on this Court would hold that, because the attorneys had an actual conflict of interest with the half-siblings and acted adverse to their interests; and because they could not satisfy the requirements for quantum meruit, they were not entitled to recover any attorneys' fees from the half-siblings shares. Four justices would affirm the Court of Appeals.
FACTS AND PROCEDURAL BACKGROUND
¶4. The facts necessary to adjudicate the issues presented are not in material dispute. In 2006, sixteen-year-old Dane Eubanks was killed in an automobile accident. His mother, Cecilia Borries, contracted with David E. Kihyet Sr. to:
provide legal services in connection with a Wrongful Death occurring on February 28, 2006 in Jackson County Mississippi, Law Firm shall provide those legal services reasonably required to represent Client . . . .
Cecilia agreed to pay Kihyet a $5, 000 retainer and $150 per hour and, should additional insurance be found, "forty-percent (40%) of all monies or equivalent collected in the event of settlement or trial" in lieu of the hourly rate. The contract between Cecilia and Kihyet did not purport to grant Kihyet the authority to represent anyone other than "Client"-defined in the contract as Cecilia Borries.
¶5. After she was appointed administratrix of Dane's estate, Cecilia petitioned the chancery court to approve "the Legal Contract between the Petitioner [Cecilia, as "Administratrix of the Estate of DANE RICHARD EUBANKS"] and the Honorable DAVID E. KIHYET, SR." No mention was made of the wrongful-death beneficiaries.
¶6. At the time of his death, Dane was unmarried and had no children, so any distribution of the statutory wrongful-death damages must be distributed in equal shares to the second tier of statutory wrongful-death beneficiaries, which includes his mother, father, sisters and brothers, including half-blood siblings. Because Dane's father had played no role in Dane's life, Kihyet filed a motion seeking to terminate his parental rights and to preclude him from sharing in the wrongful-death benefits.
¶7. On August 7, 2008, the chancellor granted the motion, declaring that David's parental rights were terminated, and that he was "precluded, enjoined[, ] and restrained from being a beneficiary of any Wrongful Death proceeds that may be recovered due to the wrongful death of DANE RICHARD EUBANKS." Because no appeal was taken from this ruling, we shall not address it.
¶8. At this point, Cecilia and Kihyet learned of the possibility that Dane's father had fathered two children-David Eubanks Jr. and Allison Eubanks-with Kathy May Huber. On December 12, 2008, Huber made an appearance in the chancery court proceedings through counsel, Jane Perry, on behalf of David Jr. and Allison. A DNA test confirmed that David Jr. and Allison were David Sr.'s children and Dane's half-siblings.
¶9. So Dane's statutory wrongful-death beneficiaries at the time of his death were his mother, Cecilia, his father, David Eubanks (whom the chancellor had precluded from recovery), a brother, Seth, a maternal half-brother, Aiden Borries, and a paternal half-brother, David Eubanks Jr. and half-sister, Allison Eubanks.
¶10. On March 11, 2009-after obtaining a chancery-court determination of Dane's wrongful-death beneficiaries (Cecilia, Seth, Aiden, David Jr., and Allison), but before filing a wrongful-death lawsuit-Kihyet reached a settlement in the amount of $100, 000 with Allstate Insurance Company, the tortfeasor's liability insurance carrier. This settlement was approved by the chancellor on September 29, 2009. From the $100, 000 proceeds, Kihyet received $40, 000 in attorney fees, and the remaining funds, after payment of expenses, were equally distributed to Dane's wrongful-death beneficiaries, as determined in the chancellor's March 11, 2009 order. The distribution of these settlement proceeds is not at issue in the case before us.
¶11. Meanwhile, Cecilia- who was married to Dane's stepfather, Kenneth Borries- filed an uninsured-motorist claim against her husband's commercial-vehicle insurance carrier, Allstate, claiming that Dane was covered as a "foster child" under that policy. Allstate disagreed and filed a declaratory-judgment action in the United States District Court for the Southern District of Mississippi, asking the court to declare that no uninsured-motorist coverage existed for Dane under Borries's Allstate policy. The Estate and Cecilia filed a counterclaim arguing that Dane was covered by Borries's policy and that he was entitled to uninsured/underinsured-motorist insurance coverage.
¶12. Kihyet associated Vincent Castigliola Jr. as cocounsel to assist with the uninsured-motorist litigation against Allstate. Kihyet shared with Castigliola the $40, 000 fee already collected under the $100, 000 policy and agreed to split future attorneys' fees. The matter proceeded in federal court, with the Allstate attorneys battling Kihyet and Castigliola. We think it important to point out that Cecilia's attorneys never claim ed to be representing David Jr.'s or Allison's interests. During a later argument before the chancellor, Castigliola stated:
I represented as co-counsel with M r. Kihyet the administratrix of the estate and Cecilia was sued individually and the pleadings are attached more than once as exhibits. My representation dealt with the defense of the declaratory judgment action and the counterclaim directly asserted against Allstate Indemnity Company . . . .
¶13. Cecilia and Allstate eventually agreed to settle the matter for $250, 000. But when the settlement was referred to the chancery court for approval and distribution of proceeds, Cecilia's attorneys strenuously objected to an equal distribution of the proceeds.
¶14. First, they argued that the DNA test results had been presented too late to satisfy Section 91-1-15's statute of limitations to establish paternity. The chancellor, later finding the statute was satisfied because David Sr. was listed as the father on David Jr.'s and Allison's birth certificates, rejected this argument.
¶15. Next, they argued that the matter in federal court was not related to a wrongful-death claim, and that the proceeds of the settlement were not for a wrongful-death claim. In representing to the chancellor that he did not recall the settlement being a wrongful-death settlement, Mr. Castigliola stated:
Nor do I recall any discussion regarding a settlement of any and all claims. W hat we[were] there to settle was simply what was the relief sought. This was a declaratory judgment action, it named only Cecilia Eubanks, individually and as an administratrix of the estate. It did not refer to her as a wrongful death representative. And it just is what it is.
¶16. Next, realizing the chancery court previously had adjudicated David Jr. and Allison to be wrongful-death heirs in connection with the $100, 000 settlement, Castigliola filed a motion to set aside the previous adjudication of wrongful-death heirs and exclude David Jr. and Allison. Castigliola also took the position that, even if David Jr. and Allison were wrongful-death beneficiaries, all of the proceeds should go to the estate, which would exclude David Jr. and Allison, who, even if they were wrongful-death beneficiaries, were not heirs to the estate.
¶17. In advancing these positions, Cecilia and the Estate sought clarification from the federal court as to what claims the federal court case and settlement encompassed. The federal court found that there was a valid meeting of the minds to settle "all of the claims by the Estate which included a later division by the Estate to the five adjudicated heirs and wrongful death beneficiaries." It further found that "how the proceeds are divided within the Estate is left to be determined by the Chancery Court."
¶18. Castigliola then urged the chancery court to recognize and adjudicate claims for Cecilia, Seth, and Aiden for loss of society and companionship. This would result in a larger distribution for them at the expense of David Jr. and Allison.
¶19. The chancellor rejected all of these arguments and divided the settlement proceeds equally among Cecilia, Seth, Aiden, Allison, and David Jr. The chancellor held that any attempt by the chancery court to divide the settlement unequally "would remove this matter from the purview of the Chancery Court as such matters are 'as the jury may determine . . . .'"
¶20. The chancellor also found that, while David Jr. and Allison were not bound by the contingency fee contract, they had benefitted from the attorneys' work on the settlement. She determined the amount of attorneys' fees that David Jr. and Allison would owe Kihyet and Castigliola based upon quantum meruit would greatly exceed the forty-percent contingency fee, so she held that a forty-percent fee was "reasonable and more beneficial to the children than a quantum meruit based calculation."
¶21. Huber appealed the award of attorneys' fees against D avid Jr. and Allison, and Cecilia and the Estate cross-appealed, arguing that the chancellor erred by dividing the settlement equally between the wrongful-death beneficiaries. The Court of Appeals affirmed the chancery court's decision to divide the settlement equally between the wrongful-death beneficiaries, but reversed the chancellor on the issue of attorneys' fees, and remanded for further proceedings for the chancellor to determine entitlement to the claimed fee and to provide express findings in support thereof. The Court of Appeals further held that any award should also be supported by findings sufficiently distinguishing the legal costs incurred ...