With the ubiquity of multi-jurisdictional practice, it is not uncommon for Colorado attorneys to have out-of-state clients. Nor is it uncommon to litigate a case for that client outside the state. But what happens when a disagreement over fees turns into litigation? Can that out-of-state client, with out-of-state litigation, be sued in Colorado for unpaid fees? A recent Colorado Court of Appeals case dives into this issue.1
A Fee Dispute with an Out-of-State Client Turns into a Personal Jurisdiction Fight
The case involved a Pennsylvania-based company, which had an intellectual property issue with a competitor. And the CEO of this company just happened to have gone to college with a partner at a Denver law firm specializing in intellectual property matters. So, the CEO called up his friend and asked for help suing this competitor. The Company and the law firm entered into a fee agreement and the law firm filed the lawsuit in federal court in Virginia.
The litigation progressed, and, as litigation often goes, it got expensive. While the law firm had originally estimated $300-400,000 for the litigation, the attorney fees alone ended up north of $700,000. The Company decided to stop paying the bills with nearly a $400,000 balance, despite the fact that the fee agreement warned the Company that estimates were not a guarantee of the cost of the litigation. (We note in passing that while such a discrepancy between the estimate and the reality may be an error in judgment, or even an intentionally low estimate, it may equally well reflect that opposing counsel put up a scorched-earth fight, or that the client wished to leave no stone unturned, which likely cannot be predicted in the fee estimate.)
Unable to resolve the issue with its client, the law firm filed suit against the Company for the unpaid legal fees in Denver District Court. The Company balked, claiming that Colorado had no personal jurisdiction over it. The trial court disagreed, and ultimately a jury found in favor of the law firm.
On appeal, the Company challenged the trial court’s ruling on personal jurisdiction. The question remained: does Colorado have personal jurisdiction over an out-of-state client when the client retains a Colorado law firm to assist with litigation in another state?
The District Court Had Personal Jurisdiction
Here, a panel of the Colorado Court of Appeals answered that question in the affirmative. The court began by outlining the general law of personal jurisdiction in Colorado. Colorado’s long arm statute goes as far as constitutionally possible. This means that a party desiring to bring an out-of-state defendant into court has to show the defendant has minimum contacts with Colorado, and that requiring the defendant to face suit in Colorado doesn’t offend traditional notions of fair play and substantial justice.
Considering those factors in this case, the appellate court quickly concluded that the out-of-state client had sufficient minimum contacts with Colorado. The client had reached out to a Colorado attorney with whom he had a personal relationship. The fee agreement was entered into in Colorado. The retainer check was sent here. Colorado attorneys performed the work. And, the client communicated (almost daily) with Colorado attorneys in Colorado. Based on the totality of these facts, the court found the contacts sufficient.
Turning to whether forcing the client to litigate a suit in Colorado offended traditional notions of fair play and substantial justice, the appellate court was similarly unconvinced by the client’s arguments that being sued in Colorado was unreasonable. The appellate court pointed out that the trial was relatively short and straightforward. And, given the undisputed interest of Colorado in resolving the dispute over a “Colorado-centric” contract, it was fair to have the out-of-state client face suit here.
More Than Just Retaining a Colorado Lawyer
The appellate court’s opinion also spent a good deal of ink distinguishing cases from other jurisdictions on this subject. The Company had argued that “all it did was retain a Colorado lawyer, and that alone doesn’t subject it to personal jurisdiction in Colorado.”2 But the cases cited by the Company were unpersuasive. They either relied on cases that were arguably no longer good law, or had distinguishable facts. For example, in a case out of Maryland that held the court lacked jurisdiction over a nonresident client, the court pointed out that the client had simply hired the lawyer because she was on a list of lawyers willing to perform the sought-out services, not because she was a Maryland lawyer. In contrast, here, the record demonstrated that the Company sought out the Colorado lawyers because of a personal connection and also because their fees would be lower than attorneys in Washington D.C.
In this case, the court was not impressed by the out-of-state client’s attempt to get out of court in Colorado. Ultimately, the client’s contacts with Colorado and concepts of fairness allowed personal jurisdiction. Notably, the case did not discuss whether the parties’ fee agreement addressed personal jurisdiction in the event of litigation over fees. Presumably, if it had, the issue might have been a bit easier, and this is something to consider for an engagement letter. While the best course is to not end up in a fee dispute in the first place, in the unfortunate circumstance it happens, this case is a helpful reminder of what it takes to pull a nonresident client into court.
1 Dorsey & Whitney LLP v. RegScan, Inc., 2018 COA 21.
2 Id. at ¶ 22.
Featured Image: "Unnamed" by Kait Herzog on Unsplash.
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