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Landye Bennett Blumstein, LLP v. Jeffrey S. Mutnick, PC

Court of Appeals of Oregon

April 1, 2015

LANDYE BENNETT BLUMSTEIN, LLP, Plaintiff-Respondent Cross-Appellant,
JEFFREY S. MUTNICK, PC, Defendant-Appellant Cross-Respondent, and Jeffrey S. MUTNICK, Defendant/Cross-Respondent

Argued and Submitted July 8, 2013.

Multnomah County Circuit Court. 071011291. R. William Riggs, Senior Judge.

Robert K. Udziela argued the cause and filed the briefs for appellant-cross-respondent Jeffrey S. Mutnick, PC, and cross-respondent Jeffrey S. Mutnick.

Meagan A. Flynn argued the cause for respondent-cross-appellant. With her on the brief were Preston, Bunnell & Flynn, LLP, and Kim T. Buckley and Esler Stephens & Buckley.

Before Duncan, Presiding Judge, and Haselton, Chief Judge, and Schuman, Senior Judge.[*]


Page 1266

[270 Or.App. 160] DUNCAN, P. J.

This is an appeal from a judgment for plaintiff Landye Bennett Blumstein (LBB), a law partnership, in an action against its former partner, defendant Jeffrey S. Mutnick, PC (Mutnick PC) and Mutnick PC's principal, Jeffrey Mutnick.[1] The dispute arose in the context of Mutnick PC's withdrawal from the firm and the parties' inability to agree on the compensation owed to Mutnick PC upon its withdrawal and a division of attorney fees and costs on Mutnick PC's cases. LBB sought a declaration that, under the parties' partnership agreement, Mutnick PC's cases completed or in progress on the date of Mutnick PC's withdrawal from the firm were firm assets and subject to a lien for attorney fees earned and costs advanced under ORS 87.445.[2] LBB also requested an accounting and foreclosure of its lien. And, LBB alleged that defendants had breached the partnership agreement and their fiduciary duty to the firm, and LBB sought to have them enjoined from further breaches.

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Defendants answered LBB's amended complaint with affirmative defenses and counterclaimed for enforcement of partnership rights, wrongful interference with economic relations, and breach of partnership agreement. Defendants' counterclaim for breach of partnership agreement was based on LBB's failure to pay Mutnick PC a bonus from LBB's " bonus pool" after Mutnick PC's withdrawal from the firm. Defendants sought a judicial determination of a purchase price for Mutnick PC's interest in the partnership, and a bonus as part of Mutnick PC's compensation upon its withdrawal from the firm.

The case was tried to the court,[3] which granted LBB's claims against Mutnick PC for declaratory judgment, [270 Or.App. 161] an accounting, and injunctive relief, but denied its other claims. The court determined that significant portions of fees collected on Mutnick PC cases, for work before Mutnick PC's withdrawal from the firm, belonged to the partnership, and the court allocated those fees accordingly. The court rejected defendants' counterclaims but nonetheless determined that Mutnick PC was entitled to a bonus upon its withdrawal from the firm. Based on the court's allocation of fees on Mutnick PC's cases, offset by the amount the court determined that LBB owed to Mutnick PC as compensation upon its withdrawal from the firm, the court awarded LBB a judgment of $734,298.98. The judgment is stayed pending appeal.

On appeal, Mutnick PC raises three assignments of error,[4] and LBB raises five assignments of error on cross-appeal. We conclude that the trial court erred in two respects in its determination of the compensation owed to Mutnick PC upon its withdrawal from the firm but otherwise affirm.


We summarize the background of the case consistently with the trial court's extensive findings, which are supported by evidence in the record. Sutherlin School Dist. # 130 v. Herrera, 120 Or.App. 86, 91, 851 P.2d 1171 (1993). Jeffrey Mutnick has practiced law since 1972. While working as a civil trial attorney with the law firm of Pozzi, Wilson & Atchison, he developed a practice in personal injury asbestos litigation. In 1998, Mutnick left the Pozzi firm and entered into a nonequity partnership with LBB. As a nonequity partner, Mutnick had no obligation to contribute capital and had no ownership interest in the firm, but he shared in the firm's profits on a limited basis.

[270 Or.App. 162] When Mutnick joined LBB as a nonequity partner, he brought with him approximately 200 clients, many of whom had personal injury claims and almost all of whom were being represented by Mutnick on a contingency-fee basis. The nonequity partnership agreement provided that, if Mutnick were to leave the firm after becoming an equity partner, he would retain an interest in any contingent-fee matters he retained after his departure.

In January 2000, Mutnick PC became an equity partner in LBB, and the parties entered into an equity partnership agreement. Pursuant to that agreement--interpretation of which is at issue in this case--Mutnick PC transferred to LBB all of its interest in ongoing cases, including work in process on contingent fee cases and referral fees on cases referred to outside attorneys; in exchange, Mutnick PC received 10 partnership " points" (each point then having a value of $8,550). A " point" is a unit of ownership of LBB.[5] Points are used to determine the

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amount of capital each equity partner must contribute to the firm per point (point capital)[6] and the division of profits and losses among equity partners per point (point income).[7] The value of a point is determined by dividing the total value of the firm by the total number of points held by the equity partners.

The partnership agreement sets forth the annual distributions to equity partners. Specifically, Section 3 of [270 Or.App. 163] the partnership agreement provides that equity partners " shall receive an annual guaranteed payment paid in equal semi-monthly installments" ; bonuses, as determined by a majority vote of the equity partners, " to adjust guaranteed payments retroactively to compensate extraordinary performance of an Equity Partner relative to such Equity Partner's guaranteed ...

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