David Welch Co. v. Erskine & Tulley

Following a court trial, defendants Erskine & Tulley (E&T) and Michael Carroll appeal from a judgment entered against them and in favor of David Welch Co. (Welch). The trial court held that E&T, a law corporation, and Attorney Carroll had breached their fiduciary duty towards Welch, their former client, and had received a benefit of $350,000, which defendants were deemed to hold in constructive trust for Welch. Defendants were ordered to disgorge that benefit to Welch. Welch cross-appeals from that portion of the judgment providing that its recovery shall be only from those defendants, and only in the amount of $350,000.

This controversy arises from the fact that after E&T and Welch terminated their attorney-client relationship in December 1980, E&T gradually acquired the collection business activities formerly performed by Welch in behalf of several employee benefit trust funds. The basic issue in the trial court was whether, in doing so, the law firm or any of its attorneys breached a fiduciary duty towards their former client.

I. Facts

Welch is a licensed collection agency which, over several years, developed a highly profitable specialty in collecting delinquent…