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Judges side with St. Joseph law firm on contingency fees

The Missouri Court of Appeals Western District has affirmed a $427,777 damages award against a St. Joseph attorney accused by his former partners of failing to fully disclose the value of two contingency-fee cases when he left the firm.

On July 7, a three-judge panel of the court upheld a judgment against Stephen W. Holaday, who appealed a February 2019 judgment against him in Buchanan County Circuit Court.

Following a bench trial, 4th Circuit Judge Roger M. Prokes found Holaday liable for breach of fiduciary duty and tortious interference after misrepresenting the value of two cases when leaving his prior firm, then known as Tieman, Spencer, Holaday & Hicks, in 2015.

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

Holaday argued that Missouri Supreme Court Rule 4-1.5(e) prohibits lawyers from splitting fees with other lawyers who are not members of the same firm. He also asserted it prohibits splitting fees with his former firm, now known as Tieman, Spencer & Hicks, because the fees at issue were earned after he withdrew.

Writing for the panel, Judge Lisa White Hardwick said the firm’s allegations of deception and non-disclosure against Holaday put the case in a different posture than most claims arising from Rule 4-1.5(e). She pointed to an official comment that states the rule does not prohibit or regulate the division of fees to be received in the future for work done when lawyers were previously associated in a law firm.

While the calculation of damages relates to the fees he ultimately received, the damages are not a “division” of fees as contemplated in the rule, Hardwick said.

While Supreme Court precedent makes clear that the client’s choice of attorneys in civil cases is “near absolute,” Hardwick wrote, that doesn’t give partners “carte blanche to violate the fiduciary duties they owe one another.”

Additionally, she said the Missouri Supreme Court has recognized that a violation of an attorney’s fiduciary duty to his or her firm may give rise to civil as well as disciplinary liability. Chief Judge Cynthia L. Martin and Judge Thomas N. Chapman agreed.

R. Edward Murphy of Murphy, Taylor, Siemens & Elliott in St. Joseph, who represented the Tieman firm, said he and his clients were pleased with the decision.

Holaday’s attorney, Mark T. Kempton of Kempton & Russell in Sedalia, did not respond to a request for comment.

The case is Stephen W. Holaday P.C. et al. v. Tieman, Spencer & Hicks LLC, WD82792.