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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-0438-PSF-OES TIMOTHY C. HOILES, Plaintiff and Counterclaim Defendant, v. JOSEPH M. ALIOTO, Defendant and Counterclaim Plaintiff. PLAINTIFF AND COUNTERCLAIM DEFENDANT TIMOTHY C. HOILES'S BRIEF IN RESPONSE TO THE COURT'S ORDER OF JUNE 6, 2005 Plaintiff and Counterclaim Defendant Timothy C. Hoiles ("Hoiles") files this Brief in Response to the Court's Order of June 6, 2005. I. As a Matter of Law, The Fee Agreement Does Not Substantially Comply With The Compulsory Provisions of Chapter 23.3 of The Colorado Rules of Civil Procedure.
The contingent fee agreement at issue (the "Fee Agreement")1 is unenforceable, because it does not substantially comply with Chapter 23.3 of the Colorado Rules of Civil Procedure. See C.R.C.P. Ch. 23.3, Rule 6 (stating that "no contingent fee agreement shall be enforceable by the involved attorney unless there has been substantial compliance with all of the provisions of this chapter") (emphasis added); Mullens v. Hansel-Henderson, 65 P.3d 992, 995 (Colo. 2002). "In essence, chapter 23.3 is self-enforcing; the sanction for noncompliance by attorneys is the inability to enforce payment by clients." Elliott v. Joyce, 889 P.2d 43, 45 (Colo. 1994).
The Fee Agreement is the only written communication or disclosure regarding the attorney-client relationship between Hoiles and Joseph M. Alioto ("Alioto"). A copy of it is attached as Exhibit 1.
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1.
The Policy Behind Chapter 23.3.
The Colorado Supreme Court in 1979 adopted Chapter 23.3 for the specific purpose of governing every contingent fee agreement. The court acted under "its general supervisory power over attorneys in order to regulate the conduct of attorneys in the attorney-client relationship and to protect the public." Elliott, 889 P.2d at 45. The Committee Comment to Chapter 23.3 explained that "[t]he Rules contained in this Chapter 23.3 set forth the minimum requirements of all enforceable fee agreements in Colorado. The Rules do not prohibit additional terms, provided that such terms are not inconsistent with these Rules or the Colorado Rules of Professional Conduct." (emphasis added) Attorneys bear the burden of compliance with the strict requirements of Chapter 23.3. One Colorado court explained this public benefit as follows: [t]he strict requirements for the creation of a valid contingent fee agreement, and the unenforceability of invalid contingent fee arrangements, while necessary and beneficial to clients, are to be carefully regulated. Placing the burden on the attorney reflects the overriding policy in attorney-client relations to hold the attorney responsible for advising the client of the nature of the relationship. Mullens v. Hansel-Henderson, 39 P.3d 1200, 1202 (Colo.App. 2001), rev'd on other grounds, 65 P.3d 992 (Colo. 2002) (emphasis added). The architecture of Chapter 23.3 is to provide substantial certainty for a client at the beginning of his relationship with the lawyer. Specific elements shall be included to eliminate uncertainty. Specific, written disclosures shall be made. Everything must be in writing. No oral understandings are tolerated, or even contemplated. Rule 6 provides the sanction for lack of substantial compliance. Reasonable compliance, partial compliance or good faith compliance will not avoid this sanction. If a lawyer fails to meet this substantial compliance burden, any and all claims for a contingent fee are unenforceable. The standard for substantial compliance with
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all the provisions is contained within Chapter 23.3: Rule 7 contains forms that substantially comply. As shown below, the Fee Agreement not only does not provide that substantial
certainty for Hoiles, but uses contingent fee terms that on their face expose the client to a substantial lack of certainty. Alioto chose these terms, not Hoiles. The Fee Agreement is the antithesis of the Rule 7 forms. The fact that Alioto asserts that parol evidence must be included to give his Fee Agreement a fair and accurate appraisal is a fatal admission of his failure substantially to comply with Chapter 23.3. There is only one result possible, the sanction of unenforceability of the Fee Agreement. 2. Rule 1 Defines "Contingent Fee Agreement."
Rule 1 defines a contingent fee agreement as a "written agreement for legal services of an attorney or attorneys (including any associated counsel), under which compensation is to be contingent in whole or in part upon the successful accomplishment or disposition of the subject matter of the agreement." The Fee Agreement in this case squarely falls within this definition and is subject to all provisions of Chapter 23.3. 3. The Fee Agreement Fails Substantially to Comply With Rule 3.
Rule 3 of Chapter 23.3, entitled "Prohibitions," provides in part that "no contingent fee agreement shall be made ... d) if it is unconscionable, unreasonable and unfair."2 Hoiles
contends that the Fee Agreement contains illegal terms and the enforcement of same would be unconscionable, unreasonable and unfair.
2
Subsections (a)-(c) deal with criminal, divorce, and other legal proceedings.
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a.
Illegal Terms.
The Fee Agreement contains illegal terms. First, the Fee Agreement required Hoiles to pay Alioto a "$500,000.00 non-deductible non-refundable retainer." Such a provision is expressly prohibited by Rule of Professional Conduct 1.5(g) ("Nonrefundable fees and nonrefundable retainers are prohibited").3 It is undisputed that this amount was paid by Hoiles and is retained by Alioto to this very day. Second, Alioto's construction of the Fee Agreement renders it unenforceable. Alioto argues that the Fee Agreement, which is subject to no time limitations, entitles him to at least 15% of "anything recovered," regardless of litigation, settlement, judgment, conveyance, sale, exchange or any other occurrence. More precisely, Alioto actually has claimed a minimum 15% fee in every Freedom Communications, Inc. ("Freedom") related asset owned by Hoiles, any other entity related to Hoiles, Hoiles's former wife and their two daughters, any entity related to either the former wife or the two daughters, including stock or partnership interests, whether or not actually received, so long as the opportunity to receive consideration was available. This overreaching claim of an ownership interest is prohibited by Rule of Professional Conduct 1.8(j).4 All in all, under Alioto's interpretation, the Fee Agreement is nothing more than an intention to create an open-ended conveyance of undefined assets belonging to Hoiles or entities holding those assets for his benefit, and an opportunity to argue for additional asset bases (Hoiles's former wife and two daughters), to Alioto disguised as a contingent fee claim with a
Rule 1.5(g) is the codification of the Colorado Supreme Court's holding in In re Sather, 3 P.3d 403, 414 (Colo. 2003). Rule 1.8(j) states that "[a] lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may: (1) acquire a lien granted by law to secure the lawyer's fee or expenses; and (2) contract with a client for a reasonable contingent fee in a civil case."
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$500,000 guaranteed "kicker." There can be no question that such a contract is prohibited under Colorado law. Certainly the drafters of Colorado law, at a minimum, intended to prevent its citizens from being subjected to overreaching fee demands like Alioto's. b. Alioto's Evolving Fee Unreasonable and Unfair. Demands Are Unconscionable,
The enforcement of the Fee Agreement under the facts of this case would be unconscionable. Alioto provided legal services, but did not earn any contingent fee; i.e., Alioto did not "recover" a settlement or judgment for Hoiles. See, e.g., In re Sather, 3 P.3d 403, 413 (Colo. 2000) (explaining that attorney's fees must be earned); Dudding v. Norton Frickey & Assocs., 11 P.3d 441 (Colo. 2000) (holding no recovery absent substantial performance under contingent fee contract). Alioto legal services ultimately were unrelated to the complex
refinancing of Freedom that included an offer by a third party to redeem Freedom stock from every Freedom shareholder. As such, Alioto did not perform substantially under the Fee
Agreement and the contemplated contingency did not occur. Similarly, the fee demanded in this case is grossly unreasonable and unfair. Alioto's fee demands have been inconsistent, but have never dropped below $21,293,170.00.5 The disparities between the "legal services" rendered and the various fee demands are shocking. Even though Alioto intentionally kept no time records, Alioto under oath "estimates" he worked 1350 hours for Hoiles over a two year period while maintaining a docket of 23 other cases.6 Alioto's most conservative claim among the various fees he has asserted would pay him $15,732.71 per hour
5
Alioto has demanded a fee of $28,400,000.00 pursuant to an alleged oral modification of the Fee Agreement.
Exhibit 2, p. 2; Exhibit 3, p. 18. Alioto calculates 1350 hours by estimating that he worked on average 5 hours per day for 270 days based upon a review of the documents produced in this case. Exhibit 2, p. 2.
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worked, on top of the "$500,000 non-deductible non-refundable" retainer and all "first class" expenses paid. There is no case in the history of American jurisprudence that has allowed an attorney to recover a no-risk "contingent fee" of this magnitude, especially where there was no settlement or judgment of the client's claims. In fact, Colorado case law dictates that the Fee Agreement is grossly unreasonable. The Colorado Supreme Court dealt with a contingent fee claim similar to this case, but on a substantially smaller scale, in Brillhart v. Hudson, 455 P.2d 878 (Colo. 1969). That case involved two lawyers seeking to enforce a 25% contingent fee for assisting a client with a threatened forcible entry and detainer suit and securing an offer to sell the client's leasehold rights in a pool hall and related equipment. Id. at 880-81. Just like this case, no litigation occurred, but the attorneys did secure an offer for the sale of the client's leasehold interest and equipment in the amount of $60,000.00. Id. at 880. In reviewing the case, the Colorado Supreme Court found the contingent fee agreement was "grossly unreasonable" and likened the attorney's services to those that "are ordinarily performed by a business chance broker." Id. (emphasis added) The court held that "in the exercise of supervisory powers over attorneys as officers of this court, we cannot approve--under the guise of a `contingent fee' contract for legal services--the payment of what in fact amounts to a broker's commission of 25% of the purchase price of the leasehold interest which formed the subject matter of this controversy." Id. at 881. The court thus reversed and remanded the cause "with directions to determine the attorneys' fees to be awarded, if any, based upon the reasonable value of any services rendered by the attorneys." Id.
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Perhaps the most instructive Colorado case construing the reasonableness of contingent fee agreements is People v. Nutt, 696 P.2d 242 (Colo. 1984). That case involved a disciplinary action against an attorney for, among other things, entering into a contingent fee agreement with his clients that would pay the attorney a percentage of oil and gas royalties for handling "all of his clients' legal problems." Id. at 248. In reviewing the contingent fee agreement at issue, the Colorado Supreme Court made several comments that are directly applicable to this case. The court pointed out that "contingent fee agreements have long been recognized as a potential source of a conflict of interests for the attorney and, thus, attorneys may enter into such agreements `only in those instances where the arrangement will be beneficial to the client.'" Id. The court thus concluded that it has the duty to "scrutinize contingent fee agreements and determine the reasonableness of their terms." Id. The Colorado Supreme Court set forth the test to make that determination: A court reviewing such an agreement will test the contract against a quantum meruit standard and determine from all the facts and circumstances the amount of time spent, the novelty of the questions of law, and the risk of nonrecovery to the client and attorney. Bryant v. Hand, 404 P.2d 521 (Colo. 1965). The lawyer bears the burden of proving that the services to be performed were reasonably worth the amount stated in the agreement. Id.7 (emphasis added) In applying Colorado law, the Nutt court had no problem determining that the contingent fee agreement was unreasonable and unenforceable due to the clearly excessive fees sought. The court found that the attorney's "own inflated records" revealed that he had billed legal services over an eight month period valued at $18,272.78, yet that attorney was "ready to accept" as
The court further instructed that a contingent fee agreement "should not be fixed so high that `it ceases to be to measure of due compensation for professional services, and makes . . . [the lawyer] a partner or proprietor in the lawsuit.'" Id.
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much as $200,000.00 in compensation. Id. Faced with these facts, the Colorado Supreme Court held as follows: It is clear that the fee agreement was not intended as compensation for legal services, but was designed to buy the [attorney] a stake in the speculative returns of the oil and gas discovery, much like the purchase of a lottery ticket. Any fee he might have received from such a royalty-sharing agreement would not have been indicative of the time, labor, and skill invested by the [lawyer] and, therefore, this fee agreement, is forbidden by the provisions of DR2-106 because it authorized the collection of clearly excessive fees. Id. The fee demand by Alioto in this case is twice as egregious as the fee sought in Nutt. Even taking Alioto's "estimate" of 1350 hours and applying an "inflated" rate of $1000.00 per hour, Alioto's fee demand in excess of $21,000,000.00 is approximately a 20 to 1 ratio of any possible reasonable valuation of his services; the Nutt ratio ($18,272.78 value versus claimed fee of $200,000.00) was approximately 10 to 1. There is no way Alioto can meet his burden to prove that his fee demand is reasonable. It is that simple. The Nutt court warned that contingent fee agreements should not make the attorney a "partner or proprietor" in litigation and should not be treated as a "lottery ticket." Id. at 248. Hoiles submits that is precisely Alioto's position, and it must be rejected. Colorado law is clear. The Fee Agreement is prohibited/illegal under Nutt, because Alioto's fee demand is not "indicative of the time, labor, and skill" invested by Alioto or by those upon whom he relied to deliver representation of Hoiles. Id. 4. The Fee Agreement Fails Substantially to Comply With Rule 4.
Rule 4 of Chapter 23.3, entitled "Procedure," establishes minimum written disclosures that must be made to the client before any contingent fee agreement is executed. It is undisputed
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that the only written disclosures Alioto made to Hoiles are contained in the Fee Agreement. Those disclosures fail substantially to comply with Rule 4's requirements: (a) Before a contingent fee agreement is entered into the attorney shall disclose to the prospective client in writing: (1) (2) (3) the nature of other types of fee arrangements; the nature of specially awarded attorney fees; the nature of expenses and the estimated amount of expenses to handle the matter to conclusion; the potential for an award of costs and attorneys' fees to the opposing party; what is meant by "associated counsel;" and what is meant by "subrogation" and effect of any subrogation interest or lien.
(4)
(5) (6)
(emphasis added) These disclosures are critical to a client's understanding of the risks and potential financial obligations related to the litigation. See, e.g., Elliot v. Joyce, 857 P.2d 549, 552 (Colo.App. 1993), aff'd, 889 P.2d 43 (Colo. 1994) (stating that "one of the principal purposes of the rules respecting contingency fee agreement is to assure that a client is fully advised at the time such agreement is executed of all of the financial obligations that such client is assuming by the establishment of the attorney client relationship"). It is undisputed that Alioto did not disclose in writing even one of the following to Hoiles:8 · the nature of other types of fee agreements;
As previously mentioned, the Fee Agreement was the only written disclosure made by Alioto to Hoiles before the Fee Agreement was executed; therefore, if the written disclosure is not in the Fee Agreement, it does not exist.
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· · · · ·
the nature of specially awarded attorneys fees; the estimated amount of expenses to handle the matter to conclusion; the potential for an award of costs and attorneys' fees to the opposing party; what is meant by "associated counsel;" and what is meant by "subrogation" and effect of any subrogation interest or lien.
See generally Exhibit 1. The absence of these disclosures alone should render the Fee Agreement unenforceable under Chapter 23.3. 5. The Fee Agreement Fails Substantially to Comply With Rule 5.
Rule 5 of Chapter 23.3, entitled "Contents," requires contingent fee agreements to contain the following terms at a minimum: (a) (b) (c) the name and mail address of each client; the name and mail address of the attorney or attorneys to be retained; a statement of the nature of the claim, controversy and other matters with reference to which the services are to be performed; a statement of the contingency upon which the client is to be liable to pay compensation otherwise than from amounts collected for him by the attorney; a statement of the precise percentage to be charged subject to the limitations of Rule 3(d); and a stipulation that the client, except as permitted by the Rules of Professional Conduct, including Rule 1.8(e), is to be liable for expenses, such stipulation including an estimate of such expenses, authority of the attorney to incur the expenses and make disbursements, a maximum limitation not to be exceeded without the client's further written authority.
(d)
(e)
(f)
The Fee Agreement fails substantially to comply with Rule 5(c), because it does not state the nature of the claim, controversy and other matters with reference to which Alioto's services were to be performed. Alioto used the undefined term "Freedom Communications matter."
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Alioto, as the draftsman of the Fee Agreement, decided to be no more specific. He relied on the body of the Fee Agreement to explain what would become the core of any contingent fee claim. The context of the Fee Agreement refers only to litigation services and settlement. Alioto referred to litigation activities 19 times and ended the Fee Agreement with a personal summary of his contemplated task: "It will be an honor and privilege to represent you in this important litigation." See Exhibit 1 (emphasis added). What is not contained in the Fee Agreement is revealing and relevant to a Rule 5(c) analysis. There are no references to liquidity, ownership of stock, number of shares of stock, sale of stock, trusts, or partnerships. The Fee Agreement never states nor implies that achieving liquidity for Hoiles's stock (or the sale to some unidentified third party) was the purpose or within the scope of the Fee Agreement. Alioto omitted these things. Put simply, there is no language, term, or provision in Alioto's Fee Agreement that could suggest or support a finding that the Rule5(c) requirement was met. The Fee Agreement also fails substantially to comply with Rule 5(d) that requires a statement of the contingency upon which the client is to be liable to pay compensation otherwise than from amounts collected for him by the attorney. The Colorado Supreme Court has
interpreted this provision to mean that "[i]f the client is to be required to pay the attorney from monies not obtained for the client by the attorney through settlement or judgment, the fee agreement must contain a statement giving the client notice of such a possibility." Mullens v. Hansel-Henderson, 65 P.3d 992, 996 (Colo. 2002) (emphasis added). It is undisputed that neither settlement nor judgment occurred here; there was no "recovery." The Fee Agreement contains no statement that a third party's redemption of Hoiles's trusts' Freedom stock, the
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purchase of his partnership interests, or the sale of Freedom shares belonging to Hoiles's former wife and his daughters are contingencies upon which Hoiles is to be liable to pay a fee to Alioto.9 The failure to include such a statement or contingency violates Rule 5(d) and should render the Fee Agreement unenforceable as a matter of law. See Dudding v. Norton Frickey & Assocs., 11 P.3d 441, 443-44 (Colo. 2000) (contingent fee agreement unenforceable where it failed to set out that attorney could recover one-third of the client's salary in the event the client was reinstated at his job). Rule 5(e) requires a statement of the precise percentage to be charged subject to the limitations of Rule 3(d), which prohibits a fee that is unconscionable, unreasonable and unfair. The Fee Agreement does state precise percentages to be charged; however, they are keyed to settlement and litigation events. In addition, the fees demanded by Alioto are unconscionable, unreasonable and unfair under Colorado law. See supra pp. 3-8. Rule 5(f) requires a stipulation that the client, except as permitted by the Rules of Professional Conduct, including 1.8(e),10 is to be liable for expenses, such stipulation including an estimate of such expenses, authority of the attorney to incur the expenses and make disbursements, a maximum limitation not to be exceeded without the client's further written authority. It is unquestioned that the Fee Agreement does not contain an estimate of expenses or a maximum limitation not be exceeded without Hoiles's further written consent.
Clearly, money paid for the assets of Hoiles's former wife and his daughters could never be money collected for Hoiles by Alioto. Rule 1.8(e) involves an attorney advancing expenses of litigation. This rule is not at issue, because Hoiles paid all expenses as they were incurred.
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6.
Rule 6 Requires Substantial Compliance With All Provisions of Chapter 23.3.
Rule 6, ominously entitled "Sanction for Non-Compliance," mandates that "[n]o contingent fee agreement shall be enforceable by the involved attorney unless there has been substantial compliance with all of the provisions of this chapter." (emphasis added) Reasonable compliance, partial compliance, or good faith compliance is insufficient to avoid the sanction imposed by Rule 6. If a lawyer fails to meet this substantial compliance burden, any and all claims for a contingent fee are unenforceable. The Fee Agreement does not comply with Chapter 23.3 in the following respects: · · · it violates Rule 3(d), because it contains illegal terms and requires payment of an unconscionable, unreasonable, and unfair fee; it violates Rule 4, because virtually none of the required written disclosures is present; it violates Rule 5(c), because the term "Freedom Communications matter" does not adequately state the claim, controversy and other matters with reference to which Alioto's services were to be performed; it violates Rule 5(d), because it does not state that a third party's redemption of Hoiles's Freedom stock is a contingency upon which Hoiles is to be liable to pay a fee to Alioto; it violates Rule 5(e), because the fee runs afoul of the limitations contained in Rule 3(d), which prohibits an unconscionable, unreasonable, and unfair fee; and it violates Rule 5(f), because it does not include an estimate of expenses or a maximum limitation not to be exceeded without Hoiles's further written authority.
·
·
·
In sum, the Fee Agreement, prepared by Alioto, contains almost none of Chapter 23.3's requirements. If Colorado's strong public policy of strict requirements for contingent fee
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agreements and the enforceability of same is to be meaningful, then Alioto's Fee Agreement must be struck down as unenforceable. Alioto's failure to comply with Chapter 23.3, including his failure to set forth a third party's redemption of Freedom stock as a contingency, is mirrored in what occurred in Dudding v. Norton Frickey & Assocs. In that case, Dudding retained a lawyer to prosecute a wrongful termination claim on his behalf. 11 P.3d 441, 443 (Colo. 2000). The parties entered a contingent fee agreement, but did not address what would happen in the event that Dudding accepted an alternative to the recovery of damages through settlement or judgment. Id. The attorney filed a complaint, but Dudding took action not specifically included in the written fee agreement. Dudding negotiated a comparable job position with the employer-defendant at the same salary. Id.11 The attorney subsequently filed an attorney's fee lien in the underlying suit seeking onethird (the amount of the contingency) of Dudding's first year salary, and filed a separate lawsuit seeking arbitration of the fee dispute. Id. The reasoning and ruling of the trial court in the lawsuit seeking arbitration is directly applicable to this case. The trial court, relying on well-established Colorado law, exercised its general supervisory powers to scrutinize the contingent fee agreement at issue to determine its reasonableness. Exhibit 4, pp. 10-11 (citing Bryant v. Head, 404 P.2d 521, 523 (Colo. 1965) and Anderson v. Kenelly, 547 P.2d 260, 261 (Colo.App. 1975)).12 The trial court found that the
Hoiles, like Dudding, took action himself separate and apart from his attorney. Hoiles voted with the majority of Freedom shareholders to restructure and to refinance the company, resulting in an opportunity for all shareholders to tender shares at a set price on a prorated basis. Alioto had no control or involvement in the voting process or setting the redemption terms/price for the Freedom stock. Exhibit 4 is a certified copy of Colorado court of appeals' opinion in Dudding. Attached as an exhibit to the opinion is a copy of the contingent fee agreement in dispute.
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attorney failed to disclose in writing the nature of other types of fee arrangements, the nature of expenses, the potential for an award of costs and attorneys' fees to the opposing party, what is meant by associated counsel, what is meant by subrogation, and that the attorney could recover one-third of Dudding's salary in the event Dudding was reinstated at his job. Exhibit 4, p. 11. Based on those findings, the trial court held as a matter of law that the contingent fee agreement did not substantially comply with Chapter 23.3, and was void. Exhibit 4, p. 11. Not surprisingly, the issue of substantial compliance was not raised by the parties on appeal. See Exhibit 4. Alioto's Fee Agreement suffers from more defects than the void contingent fee agreement in Dudding. For purposes of Rule 5(d), both agreements failed to include the
contingencies that ultimately were the outcomes in those matters. Like the attorney in Dudding, Alioto did not, and could not, set forth that an unforeseen third party's redemption of Hoiles's Freedom stock for values far beyond the original contemplation of the parties would be a contingency upon which Hoiles would be liable to pay a contingent fee to Alioto. In addition, the issues of basing a contingent fee on the repurchase of partnership interests, the redemption of stock owned by Hoiles's former wife and his two daughters and their trusts, as well as their partnership interest, render the failures in the Fee Agreement even more egregious. None of those "contingencies" is in Alioto's Fee Agreement; therefore, the Court should reach the same conclusion as in Dudding, and hold that the Fee Agreement is unenforceable and void on its face as a matter of law.
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II.
Parol Evidence is Not Admissible to Determine Whether The Fee Agreement Substantially Complies With Chapter 23.3 of The Colorado Rules of Civil Procedure.
Whether the Fee Agreement substantially complies with Chapter 23.3 is not a matter of contract interpretation; thus, parol evidence is not admissible.13 The Fee Agreement must stand or fall on its contents. This is evident by the Rule 1 requirement that a contingent fee agreement be in writing. Everything must be in writing so that substantial certainty for a client is No oral understandings are
established at the beginning of his relationship with the lawyer.
tolerated, or even contemplated. The written requirement, along with Chapter 23.3's other written required contents, reflects Colorado's policy to protect the public by carefully regulating contingent fee agreements to assure that a client is fully advised of all the financial obligations he is assuming by entering such a relationship. See Mullens v. Hansel-Henderson, 39 P.3d 1200, 1202 (Colo.App. 2001), rev'd on other grounds, 65 P.3d 992 (Colo. 2002); Elliot, 857 P.2d at 522, aff'd, 889 P.2d 43 (Colo. 1994). Parol evidence is a rule of substantive law. See In re Continental Resources Corp., 799 F.2d 622, 626 (10th Cir. 1986). It is evidence that explains or supplements the terms of an ambiguous agreement. See Cheyenne Mountain School Dist. No. 12 v. Thompson, 861 P.2d 711, 715 (Colo. 1993). Unlike parol evidence admitted to explain ambiguities in an agreement, Hoiles is unaware of any Colorado case that would support Alioto's request to offer parol
Hoiles has always assumed and believed that the question of substantial compliance with Chapter 23.3 is a question of law, just as the Court determined in its Order dated November 15, 2004. Hoiles v. Alioto, 345 F.Supp.2d 1178, 1185 (D.Colo. 2004) (holding that the absence of a written contingent fee agreement signed by the Davison Defendants "renders it unenforceable against them as a matter of law"). The trial court in Dudding reached the same conclusion. Exhibit 4, p. 11.
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evidence to determine that the Fee Agreement substantially complies with Chapter 23.3.14 Indeed, it would be completely contrary to Colorado policy to allow an attorney to "re-write" or "supplement" a contingent fee agreement that on its face fails to comply with Chapter 23.3. Alioto's request to offer parol evidence should be seen for what it is--a direct attack on Colorado policy concerning contingent fee agreements through a disguised effort to "get around" Chapter 23.3's strict requirements. III. The Fee Agreement is Unambiguous.
Hoiles asserts that the Fee Agreement can be construed as a matter of law, which renders parol evidence inadmissible. The term "anything recovered" requires Alioto to "recover"
something for Hoiles. In litigation this occurs only through settlement or judgment. There is no other reasonable meaning. The meaning of "Freedom Communications matter" is unambiguous when read in context with all provisions in the Fee Agreement (which refers to litigations activities 19 times): Alioto was to perform litigation services for Hoiles and would be compensated only if those services resulted in a recovery for Hoiles through settlement or judgment. Neither precedent happened. Alioto's arguments that parol evidence must be
considered to explain the contract is an argument for ambiguity and uncertainty within the document; that position actually is an argument for the failure of the Fee Agreement to substantially comply with the strict requirements of Chapter 23.3. In the event the Court finds these terms ambiguous, however, it is the jury's role to interpret and give meaning to these terms.
In the event the Court determines there is an ambiguity that is relevant to whether the Fee Agreement substantially complies with Chapter 23.3, Colorado law requires that such an ambiguity be construed in favor of Hoiles. Elliott, 889 P.2d at 46 (stating that "[t]o the extent a fee agreement is ambiguous, it should be construed in favor of the client"). That rule of construction again emphasizes Colorado's policy to carefully regulate contingent fee agreements.
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1.
The Court Must Determine Whether The Fee Agreement is Ambiguous.
The primary goal of contract interpretation is to determine and to give effect to the intention of the parties. See USI Properties East, Inc. v. Simpson, 938 P.2d 168, 173 (Colo. 1997); see also Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1314 (Colo. 1984). The intent of the parties is to be determined primarily from the language of the instrument itself. See KN Energy, Inc. v. Great Western Sugar Co., 698 P.2d 769 (Colo. 1985), cert. denied, 472 U.S. 1022 (1985). It is axiomatic that courts should not rewrite the provisions of an unambiguous contract, but must enforce it in accordance with the plain and ordinary meaning of its terms. Simpson, 938 P.2d at 173. Written contracts that are complete and free from ambiguity will be found to express the intention of the parties and will be enforced according to their plain language. Union Rural Elec. Ass'n v. PUC, 661 P.2d 247, 251 (Colo. 1983). Absent ambiguity, a court will not look beyond the four corners of the agreement to determine the meaning intended by the parties. Pepcol Mfg. Co., 687 P.2d at 1314. The parties' different opinions regarding the interpretation of the contract do not create an ambiguity. Simpson, 938 P.2d at 173. Whether ambiguity exists in a contract is a matter of law for the court to determine. KN Energy, Inc., 698 P.2d at 776. Ambiguity exists when "a contract provision is reasonably and fairly susceptible of more than one meaning." Geralanes B.V. v. City of Greenwood Village, 583 F.Supp. 830, 838 (D.Colo. 1984) citing Union Rural Elec. Ass'n., Inc. v. Public Utilities Com'n of State, 661 P.2d 247, 251 (Colo. 1983). To ascertain whether the contractual terms are ambiguous, "the language used therein must be examined and construed in harmony with the plain and generally accepted meaning of the words employed and by reference to all the parts and provisions of the agreement and the nature of the transaction which forms its subject matter."
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Cheyenne Mountain School Dist. No. 12 v. Thompson, 861 P.2d 711, 715 (Colo. 1993). Extraneous evidence is only admissible to prove intent where there is an ambiguity in the terms of the contract. Simpson, 938 P.2d at 173. Parol evidence is a type of extrinsic evidence that explains or supplements the terms of an ambiguous agreement. See Thompson, 861 P.2d at 715. 2. "Anything Recovered" Does Not Mean "Anything Received."
The Fee Agreement is a contingent fee agreement that references litigation activities 19 times. When construed in that context, along with its plain meaning, the term "anything
recovered" is unambiguous. That term required Alioto to recover for Hoiles through Alioto's performance of litigation services. Any other construction would be unreasonable; e.g., Alioto is paid even if he does nothing. Alioto selected the term "recovered" in anticipation of collecting a contingent fee for his litigation services. It was apparently clear enough in its ordinary meaning for Alioto, since he did not further define any other basis for his contingent fee claim. What is the ordinary meaning of "recovered?" Black's Law Dictionary defines "recover" as follows: 2. 3. 4. To obtain by a judgment or other legal process. To obtain a judgment in one's favor. To obtain damages or other relief; to succeed in a lawsuit or other legal proceeding.
BLACK'S LAW DICTIONARY 1280 (7th ed. 1999).15 Each definition connotes acts or action. Similar definitions exist in Webster's Third New International Dictionary:
The first definition of recover is "[t]o get back or regain in full or in equivalence." BLACK'S LAW DICTIONARY 1280 (7th ed. 1999). This definition is not relevant in a contingent fee agreement context, where the contract is based on action by the attorney and the results he obtains.
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4b.
To gain by legal process