Freeman & Mills, Inc. v. Belcher Oil Co.,

11 Cal.4th 85 (1995)

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Nature of the Case

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Facts

Belcher (D) retained the law firm of Morgan to defend it in a Florida lawsuit. There was a letter of understanding between D and Morgan that D was to pay for costs incurred on its behalf, including fees for accountants. Morgan hired Freeman (P) to provide a financial analysis and litigation support for D. An engagement letter was signed by both Morgan and P. D's original counsel left, and the new counsel became dissatisfied with Morgan's efforts, and the lawyers were discharged. D asked Morgan for a summary of the work performed by P and, at the same time, directed P to stop their work for D. P's final statement was for $70,042.50 in fees, plus $7,495.63 for costs, a total of $77,538.13. P billed Morgan, but no payment was forthcoming. P then billed D directly and, for about a year, sent monthly statements and regularly called but no payment was forthcoming. D complained that it had not been consulted about the extent of P's services and suggesting P should look to Morgan for payment of whatever amounts were claimed due. P sued D, alleging breach of contract, 'bad faith denial of contract,' and quantum meruit. The jury found that D had authorized Morgan to retain P on D's behalf, that P had performed its obligations under the contract, that D had breached the contract, and that the amount of damages suffered by P was $25,000. The jury also answered affirmatively the questions about whether D had denied the existence of the contract and had acted with oppression, fraud, or malice. Thereafter, the jury returned its verdict awarding $477,538.13 in punitive damages and judgment was entered consistent with the jury's verdict. Post-trial motions resulted in a judgment of $131,614.93 in compensatory damages and $400,000 in punitive damages. The Court of Appeal reversed the judgment and remanded the case to the trial court for a retrial limited to the issue of damages under P's breach of contract cause of action because it found no justification for a tort recovery.