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01/25/85 Popham, Haik, Schnobrich, v. Newcomb Securities Company

January 25, 1985





Appeal from the United States District Court for the District of Columbia (Civil Action No. 82-02897).


Wright and Mikva, Circuit Judges, and MacKinnon, Senior Circuit Judge. Opinion for the Court filed by Circuit Judge Mikva.


This case is the aftermath of an unhappy relationship between a law firm and its client. The Newcomb companies ("Newcomb") -- two partnerships and five corporations offering a variety of financial services -- hired Popham, Haik, Schnobrich, Kaufman & Doty ("Popham Haik") in early 1981 to provide continuing legal services on commodities and securities issues. The parties agreed that Newcomb would be billed monthly for fees calculated on an hourly basis. All went smoothly until November 1981, when the companies began to fall behind in their payments.

Popham Haik continued to provide services through July 1982. In October 1982, the invoices for February through July were still unpaid, and Popham Haik sued for breach of contract and fraud. Filing counterclaims for fraud, unreasonable fees, and malpractice, the defendants denied liability for their outstanding balance and sought a partial refund of past payments. The district court granted Popham Haik summary judgment on the firm's contract claim and on all three counterclaims. We now vacate the summary judgment order and remand the case to the district court for trial. I. CONTRACT, FRAUD AND UNREASONABLE FEES

Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is to be ordered only if "there is no genuine issue as to any material fact." Any doubt is to be resolved against the moving party. Abraham v. Graphic Arts International Union, 212 U.S. App. D.C. 412, 660 F.2d 811, 814 (D.C. Cir. 1981). Still, a party opposing summary judgment may not simply rest on its pleadings; it must offer some support for its version of the facts. Fed. R. Civ. P. 56(e).

Newcomb bases much of its defense, as well as its counterclaims for fraud and unreasonable fees, on its contention that Popham Haik overbilled by charging for hours that either were not worked or were largely wasted. To support this claim, Newcomb submitted discovery answers from Popham Haik and an offer of expert testimony concerning the amount of time various tasks performed by the firm could reasonably have required. Those submissions may well have fallen short of clear and convincing proof, but they certainly sufficed to create a genuine factual issue material both to Popham Haik's contract claim and to Newcomb's counterclaims for fraud and unreasonable fees.

The evidentiary value of Popham Haik's discovery responses lies in their apparent inconsistency with internal firm records used to prepare Newcomb's bills. In interrogatories, Newcomb asked Popham Haik how much time attorneys at the firm spent preparing fifty-four documents listed in the complaint as examples of work done for Newcomb. Popham Haik at first balked at the request, arguing that the internal billing records it had already disclosed enabled Newcomb to answer the interrogatories as easily as the firm. App.55. The firm complied with a subsequent court order to provide "as complete an answer as now possible" to the interrogatories, App. 62, but it qualified its response by noting that the nature of its billing records limited the precision with which time could be allocated to particular tasks.

Newcomb later deposed Charles Seeger, a senior attorney at Popham Haik, regarding the firm's answers to Newcomb's interrogatories. Seeger testified that he had spent over fifteen hours preparing the answers from the internal billing records, and he expressed confidence that the firm had not underestimated the time devoted to the documents. For example, Popham Haik had allocated four hours to documents collectively identified in the interrogatories as item R, which included "memorandum or documents relating to discussions of Amendments to Newcomb Arbitrage Fund I, efforts with First Bank of Michigan regarding the Pool Offering, change in fee structure of the Fund, amendments to the Limited Partnership Agreement, and the Customer Agreement between Bank of New York and Newcomb Commodities Corporation." App. 47-48. When deposed about these documents, Seeger emphatically rejected the suggestion that the interrogatory answers might have omitted some of the hours that the firm's billing records allotted to item R:

Q: Is it possible that in addition to the entries that you so identified, there are a great many more entries which you were unable to identify just because of the ambiguity of the words used, and so you may have put in a great deal more than four hours simply on the amendments to the limited partnership agreement alone?

A: No, I don't believe that is possible.

Q: May it be that in your printouts there are a great many entries, the meaning of which, due to the passage of time and other factors, is no longer clear to you so that although you can identify a total of four hours of entries that relate to item R, the volume of unidentifiable entries is sufficiently large so that those unidentifiable entries may have been in large measure spent on item R and you have spent many more than four hours on item R?

A: No. That's easy. The vast majority or all of the entries which I could identify to these specific documents reflect that the vast majority of the work that I did for the Newcomb Commodities was not ...

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