Fee-sharing or breach of duty? Court to decide

A Missouri appeals court is considering whether a St. Joseph law firm chose the right vehicle for its claims against a partner it alleges failed to fully disclose the value of cases as he left the firm.

On June 17, the Missouri Court of Appeals Western District heard arguments in the case of Stephen W. Holaday, a solo practitioner in St. Joseph who in 2015 withdrew from the firm then known as Tieman, Spencer, Holaday & Hicks.

Holaday is appealing a February 2019 judgment against him in Buchanan County Circuit Court. Following a bench trial, Roger M. Prokes, a 4th Circuit judge presiding over the matter, held that Holaday was liable for breach of fiduciary duty and tortious interference after finding Holaday misrepresented the value of two contingency-fee cases when leaving the firm.

Prokes ordered Holaday to pay $427,777 in damages to his former firm partners Lee C. Tieman and John M. Spencer. Prokes said he based the amount of damages on the reasonable value of services provided by the law firm prior to Holaday’s withdrawal from the firm.

In May 2019, Prokes overruled Holaday’s motion for a new trial, prompting Holaday’s appeal.

During arguments, Holaday’s attorney, Mark Kempton of Kempton & Russell in Sedalia, asserted that the case is a fee-sharing case, not a breach of fiduciary duty case.

“It is a claim for a share of fees from two clients for whom the Tieman Spencer firm did no work,” he said. “The individuals remaining in the firm did no work before Steve withdrew from their law firm, and they did no work for these clients after his withdrawal from this law firm.”

Judge Cynthia L. Martin said one aspect of the case that troubled her was that Holaday’s argument, taken to its logical conclusion, “would encourage a lack of candor or dishonesty among members of a firm at a point in time when they’re preparing to no longer be members of the same firm.”

She asked why it shouldn’t concern the court that an attorney with a case file of high value would not disclose it to other partners as part of a firm dissolution or departure from a firm.

Kempton agreed that it would be a valid concern, but he added that under the 2007 Matter of Cupples case, there are mutual duties owed between departing lawyers and their firms.

He also noted that Holaday disclosed the clients in the cases at issue and gave their contact information to his former partners as required.

“So the question is how long do these mutual duties and this fiduciary duty continue?” he said.

Ed Murphy of Murphy, Taylor, Siemens & Elliott in St. Joseph is representing Tieman, Spencer & Hicks. He said the problem with Holaday’s argument “is that it would undermine the very fabric that binds law firms together.”

“As someone who’s practiced in a law firm for 40 years now, I can say with the upmost confidence that the absence of fiduciary duties of loyalty, trust, shared opportunity and honesty — if those fiduciary duties are compromised, there is nothing that binds that firm together any longer.”

The case is Holaday et al. v. Tieman, Spencer & Hicks, WD 82792