SCOVT reverses and enters summary judgment in favor of employee’s attorney, holding that payment by insurer to employee’s attorney as part of settlement of employee's personal-injury lawsuit against employer was not a “common fund,” such that the law of unjust enrichment requires employee’s attorney to contribute to employer’s attorney’s fees incurred in a separate suit concerning insurance coverage for employee’s claim.)

 

WWSAF Special Partners Group, LLC v. Costello, Valente & Gentry, P.C., 2025 VT 40 [7/18/2025]

CARROLL, J.   This case involves a dispute between two law firms over attorney’s fees in separate litigation.  As relevant to this appeal, plaintiff Gravel & Shea PC sued defendant Costello, Valente & Gentry, P.C., claiming defendant was unjustly enriched for receiving attorney’s fees without compensating plaintiff for the work plaintiff did to procure a settlement from which defendant received its fees.  Defendant appeals a trial court order granting summary judgment that defendant contribute to plaintiff’s attorney’s fees under the common-fund doctrine. We agree with defendant that the trial court improperly expanded the common-fund doctrine to apply to this case and thus reverse the court’s order granting summary judgment to plaintiff and remand for the court to enter summary judgment in favor of defendant. 

 

The trial court granted summary judgment to plaintiff because defendant benefited from legal work plaintiff did that led to a settlement from which defendant received its fees, concluding that equities entitled plaintiff to a portion of defendant’s fees under the common-fund doctrine. The court reasoned that although defendant’s client (employee) was not a party to employer’s lawsuit concerning insurance coverage, defendant would not have obtained fees from a settlement with an insurer in a separate suit by the employee but for plaintiff’s attorney’s efforts representing the employer.

 

This Court applied the common-fund doctrine for the first and only time in Guiel v. Allstate Ins. Co., 170 Vt. 464, 468 (2000).In general, the common-fund doctrine allows a prevailing party—whose lawsuit has created a fund that is intended to benefit not only that party but others as well—to recover, either from the fund itself or directly from those others enjoying the benefit, a proportional share of the attorney’s fees and costs incurred in the lawsuit.   Guiel, 170 Vt. at 468

 

The common-fund doctrine arises out of the equitable theory of unjust enrichment. The threshold issue on appeal is whether the common-fund doctrine applies in this case and thus whether the court could award attorney’s fees to plaintiffs under this theory.

 

In Guiel, we held the common fund doctrine may be applied to require an insurer to pay a proportionate share of the attorney’s fees incurred by its insured in obtaining a judgment or settlement that satisfies the insurer’s subrogated interest. We decline to extend the common-fund doctrine beyond the insurance subrogation context to the circumstances before us here because there is no common fund.

 

The common-fund doctrine as an exception to the American Rule in which fees are awarded not, as in a ‘prevailing party’ case, to make the plaintiff whole by shifting all costs to the wrongdoer, but instead to spread the costs among those on whose behalf the case was brought and who benefitted from plaintiff’s efforts. Whether the doctrine applies in a particular case is not determined by a label, but rather by a proper understanding of the doctrine and its limitations. The doctrine is not limited to the context of class actions, insurance subrogation cases, or any type of case.  Guiel, 170 Vt. at 470, 756 A.2d at 781 (noting it depends on whether “it is equitable to do so because of the facts of the particular case at hand” and “the nature and extent of the [beneficiary’s] activities”).

 

The common fund doctrine is limited, however, to cases in which a party has “successfully created a ‘common fund.’”  Robes v. Town of Hartford, 161 Vt. 187,199 (1993).. Savoie v. Merchs. Bank, 84 F.3d 52, 56 (2d Cir. 1996) (The doctrine does not apply if “the fee award would not come from a common fund.”)

 

A common fund, as defined by the Restatement, is a fund that “consists of money or other property in which two or more persons (the ‘beneficiaries’) are entitled to share by reason of their common or parallel interests therein.”  Restatement (Third) of Restitution & Unjust Enrichment § 29(1).

 

Here, plaintiff argues that it should be awarded fees for the work it did for its client in one case, that benefitted the attorney of its client’s adversary in another.  Notwithstanding any benefit conferred on defendant, the common-fund doctrine cannot apply.  The client  on whose behalf plaintiff was acting, was not a beneficiary to the settlement proceeds or the fund from which plaintiff seeks compensation.  Plaintiff’s efforts on behalf of its client have not created a common fund.

 

Accordingly, plaintiff cannot maintain an unjust-enrichment claim as a matter of law under these facts.  We thus reverse the court’s order granting summary judgment to plaintiff and remand for the court to enter summary judgment in favor of defendant.

 

Reversed and remanded for the trial court to enter summary judgment in favor of defendant.