In March 2013, Ms. Maldonado agreed to retain Larry Rothstein to represent her and Mr. Maldonado and, through Mr. Rothstein, she discharged Dunnion.

Mr. Rothstein a lawsuit in May 2013 on behalf of the Maldonados, seeking damages for Mr. Maldonado's personal injuries and Ms. Maldonado's loss of consortium. Dunnion filed a notice of lien in the action for reasonable attorneys' fees and costs based on the agreement for legal services that Ms. Maldonado had signed on her husband's behalf.

Mr. Rothstein settled the Maldonados' claims against the Giblins for $1 million, the limits of two insurance policies issued by the California State Automobile Association ("CSAA"). In February 2014, he sought judicial approval of the settlement.

The trial court, relying on case law grounded on decisions dating back to a time when husbands had exclusive management and control of community property, denied Dunnion's claims for a lien and for recovery in quantum meruit, concluding that there was no evidence of agency that would have authorized Ms. Maldonado to sign the agreement for Dunnion's legal services on her husband's behalf. Dunnion, therefore, had no reasonable expectation of compensation.

The trial court reasoned in part that "Dunnion failed to prove the existence of a direct contractual relationship with Richard. Richard did not sign the subject retainer agreement, and there is no evidence showing that the signatory – Richard's wife – was authorized to execute the agreement on Richard's behalf and bind him thereto. . . . Dunnion, therefore, does not have a valid attorney's lien against Richard's settlement funds."

The trial court also rejected Dunnion's reliance on the principle of quantum meruit, explaining that "the claimant must show that services were rendered at the request of the person to be charged. . . . There is no evidence in this case of Richard, or any person legally authorized to act on his behalf, requesting services from Dunnion. As such, Dunnion cannot recover fees and costs from Richard under a quantum meruit theory."

The court awarded Mr. Rothstein fees of $169,835.81 and costs of $20,042.37 out of Mr. Maldonado's recovery of $700,000.

Dunnion appealed.

The Dunnion Retainer Agreement

The retainer agreement signed by Ms. Maldonado provided that the

Client

would pay 39 percent:

of any and all total amounts received by compromise, if the case is settled without mediation or the filing of a lawsuit

or 45 percent of:

all total amounts received after the filing of a lawsuit or demand for arbitration or mediation.

It also provided that:

In the event that the services of [Dunnion] herein are terminated prior to the settlement, arbitration, or adjudication of this matter, [Dunnion] shall be compensated for attorney services at the rate of $485.00 per hour, plus all costs incurred, with case analyst time billable at the rate of $150.00 per hour plus all costs incurred, both hourly rates having a minimum billable time increments of .33 hours per activity. Client agrees that the "quantum meruit" or the reasonable value of services of attorneys shall be calculated at time of settlement or judgment of this claim at either: (a) the hourly rates as stated above; or (b) a reasonable percentage of the total ATTORNEY'S fees, plus costs, upon settlement, if no settlement offer has been tendered to attorney; or (c) the percentage, the percentage as agreed to in paragraph 3 above, of the last offer of settlement to client; or the greater of either (a), (b), or (c) at the option of [Dunnion]. . . .

[Dunnion is] hereby given a first priority lien upon the proceeds of any recovery, whether by settlement or judgment, for professional fees stated in Paragraph 4 together with all costs incurred or paid out in connection with the prosecution of Client's claim. . . .

In the event Client is married, Client's spouse may have a claim for damages resulting from the spouse's loss of marital rights such as the care, comfort, society and affection of client as a result of client's personal injury. The lawyer refers to this type of claim as one for "loss of consortium." . . . [Dunnion] will accept the representation of said spouse and/or loved ones relative to such claim(s) only upon consultation with said spouse and/or loved ones and upon the signing of a separate written 'Agreement for Legal Services' by both said spouse and/or loved ones and [Dunnion]. Absent such an agreement, [Dunnion] shall have no responsibility for prosecuting such claim(s) and Client agrees to indemnify and hold [Dunnion] harmless for failing to make such claim(s).

The Court of Appeal's Decision

The court of appeal reversed the order denying Dunnion's lien.

In its decision, the appellate court explained that the trial court "understandably relied on recent appellate opinions" holding that the marital relationship did not automatically establish agency. Those opinions, the appellate court continued, followed precedent developed when husbands had exclusive management and control of community property.

The appellate court said, however, that those "outdated" opinions did not consider the significance of the "[d]ramatic statutory changes to a wife's authority to make a contract affecting community property" that took effect in 1975 and under which wives gained an equal interest in the management and control of community property.

The appellate court then held that each spouse was a statutory agent of the other spouse for the purpose of entering a contract for legal services to recover for a spouse's personal injuries during the marriage. It added that, under the current statutes, Mr. Maldonado's "undisputed lack of legal capacity" did not affect Ms. Maldonado's right to manage and control community property, including money "to be received" pursuant to a settlement or compromise of a claim for personal injuries suffered by a married person during the marriage.

The "ancient rule" that agency could not be presumed from the mere existence of a spousal relationship did not survive unmodified the 1975 statutory changes creating equal rights in both spouses to manage and control community property and to enter into contracts binding the community, the appellate court said. In that role, it added, "each spouse is the statutory agent of the other absent circumstances that restrict authority to enter into a contract."

Ms. Maldonado, the appellate court held, was authorized to retain an attorney to represent her incapacitated spouse without producing additional evidence of agency, thereby establishing a basis for the attorney's lien.

Accordingly, the appellate court reversed the order denying Dunnion's lien.

The case is Maldonado v. Giblin, No. H041417 (Cal. Ct.App. Dec. 27, 2017).