7th Circuit Rejects Former Employee’s Bid for More Money

by David Cosgrove

A plaintiff’s attorney who works on a contingent matter on behalf of a law firm shouldn’t expect to receive a portion of case fees after he or she leaves the firm. At least not unless an employment agreement explicitly provides for such payments. So said the United States Court of Appeals for the Seventh Circuit in Hess v. Bresney, No. 14-1921 (May 4, 2015).

Plaintiff Lawrence Hess worked on several medical malpractice cases for a law firm that ultimately terminated him. Some of those cases were resolved after his termination. According to the Court, “Hess did not see a penny from the settlements. Hess felt cheated. So he sued under his employment agreement…He also advanced claims of tortious interference, wrongful discharge, unjust enrichment, and quantum merit.” The federal district court dismissed all of his claims.

Why was this attorney not entitled to post-termination settlements? Because the employment contract provided for just that result.

There was a debate between the parties for the reason behind the termination. The firm asserted it was for economic reasons. Hess claimed it was a strategic discharge intended to deny him his share of the economic benefits of his work. To be specific, the firm was anticipating revenues from 170 breast-implant cases stemming from a nationwide settlement with Dow Corning.

One key fact in Hess’ favor was that, at the time of his termination, there was no work left to be done on the cases. This, however, was of no import to the Court. Because the revenues arrived after even a 30-day post-termination notice window the firm had breached. The Court rejected Hess’ novel theory that he remained an employee of the firm ad finitum due to the violation of the contract’s termination notice provision.

Regardless of these equitable arguments/theories, the Court grounded its opinion in two seminal contract provisions. Hess tried to assign separate meaning to the contract terms “generated” and “received.” But he failed to provide any contractual or even extrinsic evidence to substantiate such a definition.

There are a few lessons for both employees and employers can take away from this decision. As always, contracts should be drafted with an eye toward future greed and its resulting conflict. Most employees do not have the benefit of a written contract. If the employee has the opportunity to obtain such a contract, he or she should make sure that the contract is drafted to be a beneficial shield, rather than a sword. So—make sure an attorney drafts or at least reviews your employment or independent contractor contract.