Thursday, February 8, 2007

Texas Two Step

The Supreme Court of Texas held that a termination-fee clause in a contingent fee contract was unconscionable and thus contrary to public policy and unenforceable. The clause provided that the client would pay the present value of the contingent fee on termination of the representation. The lawyer had been discharged after a proposed settlement and sought a fee based on the offer. Thereafter, the case settled for far less. A jury had found that the lawyer had not been terminated for cause and that the fee was not unconscionable. The Supreme Court held that the termination provision penalized the client for changing counsel, created an impermissible propriety interest, and "subverted several policies underlying the use of contingent fees." Justice Hecht, joined by two colleagues, dissented. (Mike Frisch)

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