Schenck v. K.E David, Ltd. 446 Pa.Super. 94, 666 A.2d 327 (1995)
PA Underlying Settlement paid by lawyer on behalf of client
Student Contributor: Maninder (Meena) Saini
Facts: Plaintiff/attorney, Schenk claimed that defendant/client, K.E. David, Ltd. was unjustly enriched when he refused to reimburse the plaintiff with $32,000 that the defendant owed to satisfy a settlement agreement between the defendant and the Commonwealth. Plaintiff represented defendant and negotiated a settlement amounting to $82,000. In the agreement, the Commonwealth was to collect $32,000 from another settling defendant, who owed the defendant that amount. Unfortunately, the settling defendant died before paying the debt. So, the law firm advanced the outstanding amount to the Commonwealth on behalf of the client. The client/defendant then refused to reimburse the law firm. So, the law firm sued for reimbursement. The defendant counterclaimed for legal malpractice because the plaintiff failed to explain that the defendant would have to pay the $32,000 if the other defendant was unable to pay. The jury found that plaintiff did not commit malpractice and held the client/defendant had been unjustly enriched. The defendant then appealed.
Issue: Was the lawyer entitled to get back what he paid on behalf of the client in view of the clients not understanding the ramifications of the settlement agreement?
Ruling: The appellate court found that it was unjust for the defendant to retain the benefits of the law firm’s payment to the Commonwealth, especially after the plaintiff/lawyer obtained successful results for the defendant.
The law will find that a quasi-contract exists when unjust enrichment is found. The beneficiary will be required to pay the plaintiff the value of the benefit conferred.
The elements of unjust enrichment are:
• Benefits conferred on defendant;
• Appreciation of such benefits by defendant; and
• Acceptance and retention of such benefits under circumstances that make it inequitable for defendant to retain the benefit without payment of value.
Lesson: The lawyer’s work was successful for the client. What if the underlying matters were not successful because the lawyer was negligent? Would the lawyer be entitled to reimbursement of the monies he advanced? In applying the “unjust enrichment” doctrine, one must focus on whether the enrichment of the defendant is unjust and not on the intention of the parties. Accordingly, an attorney should consider using the theory of “unjust enrichments” to seek full compensation for work performed.
Posted in: Pennsylvania