Free Brief in Support of Motion - District Court of Colorado - Colorado

Case 1:04-cv-01164-REB-BNB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-RB-1164 (BNB) SCOTT CHAMBERLAIN, individually; INTREPID, L.L.C., an Arizona limited-liability company; WILLIAM D. BALOUGH, individually; JANICE M. BALOUGH, individually; JEFFERY M. TAYLOR, individually; and TAYLOR RESTAURANT HOLDINGS, L.L.C., an Arizona limited-liability company, Plaintiff(s), v. QUIZNO'S FRANCHISING L.L.C., a Colorado limited-liability company, THE QUIZNOS FRANCHISE COMPANY, a Colorado limited liability company; and THE QUIZNO'S MASTER, L.L.C., a Colorado limited-liability company; Defendant(s). MEMORANDUM IN SUPPORT OF DADY & GARNER'S MOTION TO WITHDRAW This Memorandum is submitted in support of the request of Dady & Garner, P.A. ("Dady & Garner") to withdraw as counsel for Plaintiffs in the above-captioned action. Such withdrawal is based on Plaintiffs' repeated failure to pay counsel in accordance with the fee agreements between the parties. Plaintiffs are jointly and severally liable for fees owed in this matter in the amount of $47,896.75, which are months overdue. Additionally, William and Janice Balough and their limited liability company, Intrepid, LLC, apart from the group, owe Dady & Garner $223.00 for legal services performed, and Scott Chamberlain, individually, owes $190.06 in fees that are past due.

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FACTS In or around April, 2004, Scott Chamberlain; William and Janice Balough, individually and on behalf of Intrepid, L.L.C.; and Jeffery M. Taylor, individually and on behalf of Taylor Restaurant Holdings, L.L.C., (collectively "Plaintiffs") signed written fee agreements with Dady & Garner. (True and correct copies of the fee agreements are attached as Exhibit A). Plaintiffs are Quizno's franchisees and are members of the "Quizno's Litigation Group," which retained Dady & Garner to represent it in its claims against Quizno's Franchising, L.L.C., The Quiznos Franchise Company, L.L.C. and The Quiznos Master, L.L.C. (collectively "Quizno's"). In pertinent part, the fee agreement sent by Scott Korzenowski, an attorney at Dady & Garner and lead counsel in this matter, required Plaintiffs to: be jointly and severally responsible for paying us for the reasonable value of our legal services rendered (based on the time and labor required, the novelty and difficulty of the questions involved, the skill requisite to perform the legal services properly, the amount involved and the results obtained, the time limitations imposed by the client or the circumstances, and our firm' customary s hourly rates [mine is presently $220 per hour and Michael Dady's is presently $395 per hour]) and costs advanced on your behalf. The fee agreement also required: Consistent with our customary practice, we request that you furnish us with a $3,000 retainer which will be deposited in our firm' trust account to be used to s pay for fees and costs related to the litigation group matter as they are incurred. You will be billed your pro rata portion of the fees and costs incurred on behalf of the litigation group. In the event that total fees and costs incurred in this matter exceed $3,000, you will be responsible for those additional fees and costs as they are incurred. Any fees and costs incurred for services provided on your behalf individually (as opposed to as part of the group) will be billed to you monthly in a separate billing. The costs and fees attributable to individual matters, as opposed as those related to the group as a whole, will not be deducted from the retainer. We reserve the right to ask for an additional retainer when and if the balance of the retainer account becomes less than $500. Reimbursement to our firm for fees and costs is due within 30 days. If your account is not kept current, we reserve the 2

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right to withdraw from further representation of your interests and take any amounts due out of the retainer, and bill you for any additional amounts due. (Emphasis added). Thereafter, Dady & Garner filed a Complaint on behalf of the above-named Plaintiffs and the other members of the Quizno's Litigation Group, including C.K.H., L.L.C., Charlie C. Harris, Kathleen A. Harris (the "Harrises"), Lunch at the Turn, L.L.C., Barbara A. Jefferson, Laurel A. Jefferson, Larry A. Jefferson, and Michael T. Jefferson (the "Jeffersons"), on June 8, 2004. The Complaint against Quizno's alleged violations of the Colorado Consumer Protection Act, Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing and Implied Promises, Negligent and Intentional Misrepresentation, Breach of Fiduciary Duty, Tortious Interference with Present and Prospective Business Advantage, Estoppel, Unjust Enrichment, and Declaratory Judgment. On June 28, 2004, Quizno's moved for summary judgment with respect to the claims of the Harrises and their limited-liability company, C.K.H., L.L.C. (Unlike the other Plaintiffs, the Harrises signed a general release when they sold one of their Quizno's stores). At the same time, Quizno's brought a motion to dismiss the Complaint against all Plaintiffs for failure to state a claim upon which relief could be granted. On March 24, 2005, this Court granted Quizno's Motion for Summary Judgment against C.K.H., L.L.C. and the Harrises. (The Harrises have chosen not to appeal this decision and have paid their portion of the fees incurred in the lawsuit.) This Court also granted Quizno's Motion to Dismiss the case in part, and denied it in part. A majority of the Quizno's Litigation Group's claims were dismissed, with the exceptions of its claims that Quizno's breached the franchise agreement by misusing advertising funds and claims for estoppel and unjust enrichment.

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Because Quizno's never filed an Answer or a Motion for Summary Judgment, the remaining members of the Quizno's Litigation Group filed a Notice of Dismissal Without Prejudice on July 14, 2005. Shortly thereafter, this Court issued an order dismissing the case without prejudice on July 18, 2005. In the meantime, the Jeffersons and their limited liability company, Lunch at the Turn, L.L.C., sold their Quizno's store and entered into a general release with Quizno's, similar to the one that the Harrises had signed, and decided to no longer pursue their claims against Quizno's, pursuant to Dady & Garner's advice, as of March 31, 2005. The remaining members of the Quizno's Litigation Group, consisting of the above-named Plaintiffs, decided to file a Notice of Appeal to the United States Court of Appeals for the Tenth Circuit on August 16, 2005. In response, Quizno's filed a Motion to Dismiss the Appeal on August 31, 2005. The Tenth Circuit, on December 22, 2005 issued an Order stating that because the case had been dismissed without prejudice, the claims remain viable in this Court and are not appealable under 28 U.S.C. § 1291. The Tenth Circuit gave Plaintiffs thirty days from the date of the Order to get an Order from this Court containing a final judgment under Federal Rule of Civil Procedure 54(b). In the process of having Dady & Garner prosecute their claims against Quizno's, Scott Chamberlain and Janice and William Balough (and Intrepid, L.L.C.) have failed to make any payments to Dady & Garner since they paid their initial $3,000 retainer. Jeffery Taylor last made a payment in January, 2005. Together, the Plaintiffs are jointly and severally liable for

$47,896.75 in legal fees and costs owed to Dady & Garner. On more than one occasion, Scott Korzenowski and Erika Donner (an Associate with Dady & Garner) have informed Plaintiffs that 4

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they are jointly and severally liable for the entire amount of fees and costs incurred by the group, but agreed to bill Plaintiffs according to how Plaintiffs asked Dady & Garner to apportion the bill. (Attached as Exhibit B is a true and correct copy of correspondence from Scott

Korzenowski to Plaintiffs explaining joint and several liability). Currently, Scott Chamberlain's portion of the remaining bill is $14,323.29; the Baloughs' (and Intrepid, L.L.C.) portion is $14,323.30; and Jeffery Taylor's portion (Taylor Restaurant Holdings, L.L.C.) is $14,026.07. The Jeffersons also currently owe $5,224,09 for their portion of the bill. Dady & Garner has attempted to make every accommodation possible for Plaintiffs to make good on their financial obligations to the firm. On September 12, 2005, Mr. Korzenowski, on behalf of Dady & Garner, agreed to take the remaining portion of Plaintiffs' case on a contingency-fee basis if Plaintiffs were willing to pay the outstanding portion of their bill to date. Plaintiffs failed to take advantage of that offer. (A true and correct copy of the September 12, 2005, correspondence is attached as Exhibit C). In the meantime, on September 21, 2005, Scott Chamberlain filed for Chapter 13 Bankruptcy in the Bankruptcy Court of the District of Arizona. Likewise, William and Janice Balough also filed for Chapter 13 Bankruptcy in the District of Arizona on October 14, 2005. ARGUMENT Dady & Garner has good cause to withdraw from their representation of Plaintiffs within the meaning of District Court of Colorado Local Civil Rule 83.3(D). As noted above, Dady & Garner has done everything possible to make arrangements so Plaintiffs could meet their financial obligations to the firm, including agreeing to take the case on appeal on a contingencyfee basis if Plaintiffs would pay their outstanding bills. Plaintiffs have been put on notice since 5

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the signing the initial fee agreements that Dady & Garner could withdraw if Plaintiffs failed to pay their bills. This Motion is further sought for good cause, given that Scott Chamberlain and Janice and William Balough have filed for bankruptcy, as bankruptcy laws prevent Plaintiffs from paying pre-petition debt to the advantage of one creditor over another. It is also highly unlikely that they will be able to pay for any legal services going forward. Although Jeffery Taylor has not filed for bankruptcy, he has not met his financial obligations to Dady & Garner and does not appear to have the ability to do so in the future. Dady & Garner respectfully seeks to end the significant revenue drain that Plaintiffs have put on the firm's resources. Given the current status of the case (30 days to get a Rule 54(b) Certification), Dady & Garner respectfully asks this Court to rule on its Motion expeditiously, so Plaintiffs can hire new counsel if they choose to follow through with the appeal, assuming this Court grants Dady & Garner's Motion to Withdraw. Dady & Garner affirmatively states that a copy of this Motion has been delivered to Plaintiffs at their last known address. For all the foregoing reasons, Dady & Garner respectfully requests an order from this Court permitting withdrawal in this case. Dated this 30th day of December, 2005. By s/ Scott E. Korzenowski Scott E. Korzenowski Dady & Garner, P.A. 4000 IDS Center, 80 South Eighth Street Minneapolis, MN 55402 PH: 612-359-9000 FX: 612-359-3507 Email: [email protected] Attorneys for Plaintiffs 6