Joffe v. Wilson

Freda and John Joffe (plaintiffs) were assessed a deficiency of $83,399.70 on their taxes. The Joffes hired Saul Wilson (defendant), a certified public accountant (CPA), to contest the deficiency before the Internal Revenue Service (IRS). Although the assessment was legal, Wilson believed it was inequitable and that the IRS could be convinced to settle. Wilson unsuccessfully conferred with the IRS office and appealed to the IRS appellate division. While the case was pending, John died and his son, Herbert, began managing the tax matter on the family’s behalf. The appellate division ruled against the Joffes, and the Joffes were then required to pay a portion of the assessment. Wilson advised Herbert that the family should pay the required amount, hire an attorney, and file suit in district court. Herbert agreed with Wilson’s recommendation, and the two signed a contingency-fee agreement, in which Wilson was to be paid $1,000 for his services to date and would receive one-fourth of the difference between the amount of the initial deficiency and the amount ultimately owed. With Herbert’s consent, Wilson hired Irving Labovitz, who Wilson had worked with before, to file suit on the Joffes’ behalf. Wilson provided his evidence to Labovitz, helped him organize the materials, and testified as an expert witness at trial. The trial court ruled against the Joffes. Herbert agreed to appeal the case, and Wilson helped Labovitz file a brief. Around that time, Wilson discovered a recent opinion favorable to the Joffes’ position and negotiated with the IRS to have the deficiency assessment completely withdrawn. Wilson took a fee that totaled one-third of the savings rather than the agreed-on one-fourth. Freda filed a complaint against Wilson on behalf of herself and John’s estate (plaintiff) seeking to rescind the fee agreement, arguing that Wilson had engaged in the unauthorized practice of law. The trial court found that Wilson was entitled to the reasonable value of his services, which the jury calculated to be one-fourth of the Joffes’ savings. Freda appealed, seeking a refund of the entire fee.