Thursday, March 18, 2010

Fee Sharing Agreement Does Not Create Joint Venture

The Maryland Court of Appeals addressed the implications of a fee sharing agreement between two attorneys pursuing a medical malpractice case. Attorney One referred the matter to Attorney Two early in the prosecution of the case. They entered into an arrangement by which the division of fees was based on the "anticipated division of services to be rendered." Attorney Two had primary responsibility and Attorney One was to assist as requested by Attorney Two.

While the claim was in negotiations, Attorney Two advised the clients that they might have a legal malpractice case against Attorney One.  The underlying medical malpractice case then settled for $225,000. Attorney Two paid Attorney One one-half of the fee.

Attorney One then sued Attorney Two on a variety of contract and tort theories alleging breach of good faith, fair dealing and disclosure duties. The circuit court granted summary judgment to Attorney Two. The Court of Special Appeals affirmed. Here, the Court of Appeals agreed, concluding that Attorney Two fulfilled her covenant of good faith and fair dealing by delivering to Attorney One his proportionate share of the fee.

The court held that the fee sharing agreement did not establish a joint venture with the resulting fiduciary obligations that would apply to such ventures. The court agreed that the tort claims failed because, among other things, Attorney Two "could not tortiously interfere with an economic relationship to which she was a party." (Mike Frisch)

March 18, 2010 in Billable Hours, Law & Business | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 9, 2010

Claims Against Referring Firm Reinstated

A law firm that had represented a client sued the client for unpaid fees. The plaintiff firm also sued the law firm that had referred the client, claiming that the defendant law firm had represented that their clients (the Nassers) guaranteed payment of their fees. Plaintiff appealed the dismissal of claims against the referring law firm.

The New York Appellate Division for the First Judicial Department held that the claims were viable:

The complaint alleges that defendants-respondents represented to plaintiff law firm that they had authority from the Nassers to promise payment of $75,000 of the legal fees incurred by plaintiff's client when, in fact, they lacked the authority to bind the Nassers. Thus, the complaint alleges a viable claim for breach of the implied warranty of authority. The complaint also alleges that defendants-respondents falsely represented to plaintiff law firm that they specifically discussed the subject matter of their authority and representations with the Nassers. Thus, the complaint alleges a viable clam for tortious misrepresentation of authority and assurances of payment.

To the extent the motion court relied on the principle of apparent authority, lack of consideration and the statute of frauds to dismiss these causes of action, such was error. The doctrine of apparent authority is irrelevant because the fourth and fifth causes of action are not seeking to hold the principals (the Nassers) liable on the ground that defendants-respondents had apparent authority from the Nassers to make promises of payment. Rather, these causes of action are seeking to hold the agents, defendants-respondents, liable for contracts or representations they purported to make on behalf of the principal (the Nassers) while acting without authority from the principal. Therefore, the fact that the Nassers never manifested to plaintiff law firm that defendants-respondents were authorized to act on the Nassers' behalf has no bearing on the viability of the fourth and fifth causes of action. Moreover, regardless of whether or not there was consideration running to the Nassers, defendants-respondents can still be held liable for their own tortious conduct in making deliberate misrepresentations of fact that they had authority to make the promises that the Nassers would pay $75,000 of the legal fees incurred by plaintiff's client (see Restatement (Third) of Agency §§ 6.10, 7.01 [2006]). In addition, the statute of frauds does not come into play since the fourth and fifth causes of action are not seeking to enforce the unwritten agreement by the Nassers to pay plaintiff's client's legal fees against the Nassers. These causes of action state a claim against the defendants-respondents regardless of whether there is an enforceable contract with the Nassers.

The sixth cause of action against defendants-respondents for tortious interference with defendant Jacques Nasser's contract with plaintiff law firm to pay $37,500 of the legal fees incurred by plaintiff's client was also improperly dismissed by the motion court. In order for there to be a viable claim there must be a valid contract between Jacques Nasser and plaintiff law firm. Pursuant to General Obligations Law § 5-701(a)(2), every agreement, promise or undertaking which is a special promise to answer for the debt of another is void unless it is in writing. Under a long-standing exception to the statute of frauds, however, the promise need not be in writing if it is supported by new consideration moving to the promisor and beneficial to him, and the promisor has become in the intention of the parties a principal debtor primarily [*3]liable (see Martin Roofing v Goldstein, 60 NY2d 262, 264 [1983], cert denied 466 US 905 [1984]; Carey & Assoc. v Ernst, 27 AD3d 261 [2006]). At the very least, the allegations in the complaint raise an issue of fact concerning whether Jacques Nasser agreed to act as a guarantor in the event plaintiff's client did not pay her legal fees, in which case there was no enforceable contract, or whether in seeking to secure the benefit of the cooperation of plaintiff's client in connection with the lawsuit against him by her employer, Jacques Nasser offered to lift the burden of the obligation to pay legal fees from plaintiff's client and pay the law firm directly, in which case the contract would not be barred by the statute of frauds (see Rowan v Brady, 98 AD2d 638, 639 [1983]). Therefore, the sixth cause of action for tortious interference with contract is reinstated.

Finally, the motion court erroneously dismissed the seventh cause of action against defendants-respondents which alleges tortious interference by defendants-respondents with the attorney-client relationship between plaintiff law firm and its client, defendant Srour. Insofar as the complaint alleges that defendants-respondents, knowing that Srour was represented by plaintiff law firm, met with Srour alone, without informing plaintiff law firm of the meeting, and approximately three days later, Srour discharged plaintiff law firm, it is sufficient at this stage of the proceedings, to state a viable claim, and therefore the seventh cause of action is reinstated.

(Mike Frisch)

March 9, 2010 in Billable Hours, Law & Business, Law Firms | Permalink | Comments (0) | TrackBack (0)

Thursday, March 4, 2010

Termination, Not Hints, Triggers Wrongful Discharge Claim

The District of Columbia Court of Appeals affirmed the dismissal of a former law firm associate's claim of failure to accommodate a disability on grounds that the claim was time-barred. However, the court reversed the dismissal of a related claim of wrongful discharge and remanded that claim for trial on the merits.

The associate was hired by the law firm in 2000. While attending a firm trial training program in April 2001, her dominant hand was burned. She suffered extreme pain and medical limits on her activities and took a month leave of absence for treatment. She requested a number of accommodations on her return and alleges that she was told by her supervisor "that if she was still injured, she was 'of no use to anyone.' " After a second leave of several months, she claimed that she was told not to seek substantive billable work until she could work without restrictions. There were further requests for accommodations and performance reviews. The associate attorney received notice of discharge from the firm in late October 2002.

The court here concludes that the statute of limitations for wrongful discharge began to run with the formal termination. Earlier threats or hints of poor performance do not trigger the statute. (Mike Frisch)

March 4, 2010 in Billable Hours, Law & Business, Law Firms | Permalink | Comments (0) | TrackBack (0)

Friday, February 26, 2010

Incoming 93, Outgoing 7

In an action between two attorneys fighting over the division of a contingent fee, the New York Appellate Division for the First Judicial Department affirmed the lower court's 93-7% split:

The client was injured while a passenger in a car that was involved in a one-car, out-of-state accident. Outgoing counsel argues that having performed the work necessary to obtain the $25,000 offer under the driver's policy, which exhausted the limits of the driver's policy, it performed all the preparatory work that was necessary for incoming counsel's $1,470,000 settlement of the underinsured claim under the client's policy. We reject that argument and find ample support in the record for the Special Referee's implicit finding that outgoing counsel's work contributed very little to the underinsured settlement...

While outgoing counsel prepared a summons and complaint against the driver and sent it to a process server, the next day, after the driver's carrier offered its $25,000 policy and confirmed that there was no excess coverage, outgoing counsel instructed the process server not to serve the driver, and advised the client that the offer should not be accepted without first obtaining the underinsured carrier's consent so as not to jeopardize the underinsured claim that outgoing counsel intended to make. It was incoming counsel, however, that contacted the underinsured carrier's adjuster, who had the authority to give such consent, unlike outgoing counsel, that merely contacted the driver's broker. And it was incoming counsel that resolved the adjuster's concern with underinsured coverage issues, such as whether the driver was a member of the client's household and whether there was additional coverage on other vehicles owned by the driver's family, both conditions to obtaining the underinsured carrier's consent to settlement of the claim against the driver.

Furthermore, unlike outgoing counsel's requests for medical records, incoming counsel's requests were effective, and unlike outgoing counsel, incoming counsel substantiated its investigation of the possibility of a products liability case. Although the action commenced by incoming counsel against the driver may not have been necessary, and although incoming counsel initially sought the wrong type of arbitration against the wrong insurer, these do not appear to have involved undue expenditures of time. We note the parties' stipulation that incoming counsel was to have no claim to the one-third contingency fee on the $25,000 offer.

(Mike Frisch)

February 26, 2010 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 9, 2010

Equitable Considerations

The New York Appellate Division for the First Judicial Department held that a law firm was not entitled to interest on an arbitration award and had acted in contravention of duties regarding entrusted funds. The law firm was awarded $30,000 less than it had claimed but did not disburse the balance to the client. The court concluded that the law firm should not benefit from its conduct:

..[law firm] petitioner is not entitled to post-award, pre-judgment interest since it was holding the $310,000 at issue in escrow and chose not to avail itself of the funds when the arbitrators' award of $280,000 became final. Although petitioner asserts that it could not pay itself from the escrowed funds without respondent's consent and also asserts that appellant never gave its consent, the relevant [ethics] rule...does not require client consent under these circumstances. To the contrary, it provides that the lawyer may withdraw the funds being held upon final resolution of the dispute. Nonetheless, when the award became final, petitioner did not pay itself the amount of the award and transmit the balance (approximately $35,000) to respondent. Rather, in addition to seeking respondent's written authorization for payment of the award from the escrow account, petitioner improperly sought to obtain a benefit from its former client by refusing to transmit the balance unless respondent and its principal executed releases. The balance belonged to respondent and petitioner had no legal claim to it. Accordingly, petitioner was required to "promptly pay" to respondent the funds to which it was entitled after the arbitrators' award became final...

In short, petitioner both deprived itself of the use of the funds awarded to it and deprived respondent of the use of the balance of the funds being held in escrow. Under settled law, petitioner's statutory right to interest is far from absolute. To the contrary, as then Justice Bergan stated for a panel of this Court, "[t]he holder of the judgment may be estopped by equitable considerations, or by his own acts, from enforcing the interest which the statute gives him" ...Given the "special and unique duties" petitioner owed to respondent, including "safeguarding client property and honoring the client['s] interests over [its own]"... we think it would be particularly inequitable to require respondent to pay statutory interest to petitioner and thus recompense petitioner for its own failure to pay itself. (citations omitted)

Because petitioner was holding more than the $280,000 it was awarded by the arbitrators on the date the award became payable, March 13, 2007, respondent is entitled to the balance that would have remained in the escrow account after payment of the award on that date, with interest on such balance from that date. In addition, because Supreme Court erred in awarding interest to petitioner and respondent was thereby required to pay an additional sum to petitioner to satisfy the judgment, respondent is entitled to the amount it paid over $280,000 to satisfy the judgment with interest from the date the sum was paid.

(Mike Frisch)

February 9, 2010 in Billable Hours, Clients | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 15, 2009

No Agreement To Arbitrate

An attorney was hired as "of counsel" of another attorney under a one-year employment contract on November 1, 2005. The contract authorized discharge for cause and had an arbitration clause. The employment relationship had "issues" but extended past the fixed term. Eventually, the employed lawyer was discharged with notice given in August 2007. The parties disagree as to the reasons. The employed lawyer sued the employing lawyer on claims that included wrongful discharge. The employing lawyer moved to dismiss, invoking the arbitration clause.

The Washington State Court of Appeals, Division I held that the there was no basis to conclude that the lawyers agreed to extend the arbitration provision beyond the fixed term:

Where a fixed-term employment contract expires and the employee continues to render the same services provided under the previous agreement, a court will presume that the employee is serving under a new, implied contract having the same terms and conditions as contained in the expired contract. However, where it is clear that the implied contract does not have the same terms and conditions as the earlier agreement, there is no basis
to presume that the contracting parties necessarily renewed any specific term of
the prior agreement. Because the evidence in the record and the pleadings
herein establish that Judith Lonnquist and Reba Weiss did not completely renew
the terms of Weiss's written, fixed-term employment contract after Lonnquist
terminated it, there is no basis to presume that the parties subsequently entered
into an implied agreement to arbitrate Weiss's employment-related claims as was provided for in the terminated contract. Inasmuch as a court cannot compel litigants to arbitrate claims unless they agreed to do so, the trial court correctly denied Lonnquist's motion to compel arbitration. Accordingly, we affirm.

(Mike Frisch)

December 15, 2009 in Associates, Billable Hours, Law Firms | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 24, 2009

Bedrock Of Lawyer-Client Relationship

The New Jersey Appellate Division affirmed in part and reversed in part a judgment awarding the plaintiff law firm for reasonable attorneys' fees and expenses arising out of the representation of the defendant former client. The amount of the awrd was remanded to determine which fees and expenses were incurred pursuant to a retention letter exclusive of sums due under a master retainer agreement. The court sets the stage for its decision:

This case focuses on the attorney-client relationship, especially its bedrock, the retainer agreement. It is a unique and extraordinary association. The attorney-client relationship has been a fertile source for authors over the years. It has spawned books, poems, plays, and movies. Literature on this topic includes fiction and non-fiction, tragedies and comedies. To resolve this case, we are obligated to review the long-established statements and principles of law concerning the attorney-client relationship and to analyse, in particular, the attorney's obligation to his potential client in finalizing the retainer agreement.

The law firm was initially contacted by the client for advice about possible ethics violations of opposing counsel, who represented the Bank of America in litigation against the client. The client signed a retainer agreement that made reference to, but did not append, the firm's master retainer agreement. The client did not see that agreement until seven months after signing the retention latter. The terms imposed by the master retainer agreement were at issue here.

The court held that the master retainer agreement was unenforceable and that fees associated with the law firm's pro se representation of itself may not be recoverable. (Mike Frisch)

November 24, 2009 in Billable Hours, Clients | Permalink | Comments (0) | TrackBack (0)

Saturday, November 14, 2009

Modified Fee Agreement Upheld

The Alaska Supreme Court affirmed the grant of summary judgment to a law firm in a dispute over the modification of a fee agreement. The clients were injured when the stairs to their rooms at a resort collapsed. They entered into a contingent fee agreement with the law firm. The agreement provided for a 25% fee if the matter was resolved before a complaint was filed, 33% after the complaint and 40% after the filing of an appeal.

The case was complicated by the bankruptcy of the defendant. The clients and law firm entered into a modified fee agreement and the case eventually settled for slightly over $1.231 million. The clients and law firm had a substantial disagreement over the computation of the fee. As required by ethics rules, the law firm paid the undisputed portion of the client's share and retained the disputed amount in a trust account. The trial court found for the law firm.

Here, the court rejected claims that the amended agreement was improper and violated the rules of professional conduct. The trial court had properly resolved any contract ambiguities against the law firm in awarding judgment and was not clearly erroneous in its interpretation of the phrase "further substantial litigation" in the modified agreement. (Mike Frisch)

November 14, 2009 in Billable Hours | Permalink | Comments (1) | TrackBack (0)

Sunday, November 8, 2009

Too Late To Sue

A plaintiff couple who received a settlement of $829,500 as a share of the settlement of a federal qui tam action paid one-half of the settlement proceeds to the lawyers that had handled the matter pursuant to a contingent fee agreement. The lawyers also were paid $315,000 by the U.S. government. The case settled in May 2004.

In March 2007, the clients brought an action alleging malpractice and other causes of action against the lawyers. The district court concluded that there was no public policy prohibition against the statutory and contingency provisions of the fee agreement. The district court further held that the statute of limitations had run with respect to both claims of malpractice and of concealment regarding the settlement terms. The Montana Supreme Court affirmed the grant of summary judgment to the lawyers concluding that the statute of limitations had expired with respect to each cause of action. (Mike Frisch)

November 8, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Monday, November 2, 2009

Murderer Gets Good Title

The Georgia Supreme Court affirmed a trial court determination that two criminal defense lawyers and their law firm did not engage in conversion by accepting fees for services rendered to a widow later convicted of the murder of her husband.

The suit had been brought by the administrator of the husband's estate based on a Georgia statute that prevents a murderer from financially benefiting from the crime. The court held that the husband passed good title to property inherited by the surviving spouse. The murderer may use what are estate proceeds unless and until there is a judicial condemnation proceeding. The lawyers were properly paid prior to conviction and are not liable to the estate under a conversion theory.

Linked here is an earlier report on charges brought against the attorneys from Also linked here is a report from Trusts&Estates. (Mike Frisch)

November 2, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Saturday, September 19, 2009

Rosh Hashanah Musings on Law and Justice

Posted by Jeff Lipshaw

Once again, I violate the tradition by celebrating the Jewish New Year not in a community (which when I was a member of a conservative congregation in Indianapolis never failed to cheese me off by talking full voice through the services, particularly in the back, something that the more Episcopalian sensibilities of the Reform temple seemed to eliminate) but in this solipsistic morning of musing.  I've pulled up to the front (just behind this one) a post written on Yom Kippur in 2006 (can it be three years?) just after we started this blog, when I was visiting at Tulane. 


The point of the previous post was what I find difficult about religious ritual, which is the reification of the sense of awe, wonder, and mystery of life, being, and consciousness into a set of rules.  (Hence, my appreciation instead for the music.)  That's the tension I described three years ago, between kevah - fixed prayer - and kavanah - inspiration. 

Not unrelated, I've come to think since then, is the relationship between law and justice, articulated (surprisingly as far as I'm concerned) by Derrida, a view I find grounded, sensible, and moderate (that's the surprise).  In a nutshell, law and philosophy are both about the arche, the structure, the polity, the rules, but justice is something else, an-arche, related to a singularity, unreachable, and subject to reification as soon as the sense of justice is embedded in a rule, because rules are not singular but universal.  We can't deal with complete anarchy - law is necessary, but equity (in Derrida's terms) deconstructs it.  I'm indebted here to the book I'm reading this morning - Demythologizing Heidegger - by John Caputo, formerly at Villanova and now at Syracuse.  What Caputo calls Derrida's "scandal" is that Derrida is not wholly without foundational anchor - there is something that is not capable of deconstruction, and that is justice.  Of course, if it can't be deconstructed, then is it an ageless and universal truth?  Well, no, and there's the paradox.  Law is a construct and we can deconstruct it.  But "deconstruction is possible insofar as justice is undeconstructible, for justice is what deconstruction aims at, what it is about, what it is." (Caputo, at 193.)

Not surprisingly, this returns me to the relationship between individual judgment and default to authority, something on which I posted mysteriously a week or so ago.  Let's go straight to the paradigmatic case of judgment and default to authority, the Akedah story, the binding of Isaac, which is the traditional Torah portion on Rosh Hashanah morning, and thus quite appropriate as the text for this morning's sermon.  This was the story that provoked Kierkegaard's Fear and Trembling, of the knife-edge of impossible judgments, caught between conformity to what purports to be authority and what Derrida (through Caputo) describes as "fresh judgment":

What is to be done cannot simply be calculated - it must be judged. Furthermore, a just decision, which is never a merely programmed, calculated application of a rule, is always made in the element of undecidability, must always pass "through the ordeal of the undecidable," in which our respect for the universal trembles before "the unique singularity of the unsubsumable example."

Caputo, at 196, quoting Derrida, "Force of Law: The 'Mystical Foundation of Authority'", 11 Cardozo L. Rev. 919, 961-67 (1990).  That's the leap of faith in judgment, that instant of decision that Kierkegaard calls a madness.  Or as I said in the abstract to the yet unpublished essay:  "Judgments are those things that occur in our minds, privileged to us, beyond authority, external truth-justifications, and power, whether or not we accede, in the solitude of our own minds, to authority, justifications, and power.  Lawyering, or advocacy, is an external appeal to authority. It seeks to use argument, largely of origin rather than validity, to vanquish an opponent. It is a social and inter-subjective exercise. When we make judgments, however, we are completely alone." That's particularly true if the God speaking to you is saying that what is just is to slay your child merely to show your obedience to God.

For more on practical judgment, and in particular, facing up to authority that dictates against one's own sense of justice, see Susan Neiman's account and interpretation of the counter-example of the Akedah story, Abraham's bargaining with God to save Sodom and Gomorrah, in her book Moral Clarity.

September 19, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 12, 2009

Permissible Fee-Sharing Agreement

The New York Appellate Division for the Second Judicial Department affirmed a trial court damage award in a matter involving the alleged breach of a fee-sharing agreement between attorneys:

"It has long been understood that in disputes among attorneys over the enforcement of fee-sharing agreements the courts will not inquire into the precise worth of the services performed by the parties as long as each party actually contributed to the legal work and there is no claim that either refused to contribute more substantially" (Benjamin v Koeppel, 85 NY2d 549, 556 [internal quotation marks omitted]).

As this case was tried without a jury, this Court's authority is as broad as that of the trial court, and this Court "may render the judgment it finds warranted by the facts, taking into account in a close case the fact that the trial judge had the advantage of seeing the witnesses" (Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499 [internal quotation marks omitted]). Since the evidence revealed that the client consented to the fee-sharing agreement and the referring attorney, the plaintiff Weinstein, Chayt & Chase, P.C. (hereinafter WCC), performed some of the work, and there was no claim that the referring attorney refused to contribute more substantially, the Supreme Court properly found that the referring attorney was entitled to enforcement of the terms of the agreement (see Benjamin v Koeppel, 85 NY2d at 556).

Furthermore, viewing the evidence in the light most favorable to WCC (see Jacobs v RJAK Enters., 226 AD2d 679), legally sufficient evidence was presented from which the Supreme Court could rationally conclude that the parties entered into an enforceable fee-sharing agreement pursuant to Code of Professional Responsibility DR 2-107(a) (22 NYCRR 1200.12[a]; see Benjamin v Koeppel, 85 NY2d at 556; Cohen v Hallmark Cards, 45 NY2d 493, 499). We note that since the conduct at issue occurred prior to the effective date of the New York Rules of Professional Conduct, this matter is not governed thereby.

(Mike Frisch)

August 12, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 1, 2009

Boo to Billable Hours

Posted by Jeff Lipshaw

Appellate lawyer and author John Derrick has asked us to put in a link to his book Boo to Billable Hours: A Lawyer's Guide to Better Billing, the contents of which are available on his website for free.  We don't usually do commercial endorsements, but, as far as I can tell, free in this case means free.  So why not?

Here's the blurb:

THE BILLABLE HOUR dominates the legal profession, but is gradually eating away at its soul. It chills the attorney-client relationship. It penalizes efficient lawyers, while rewarding plodding ones. It leads to arbitrary, irrational, and suspect results, in which time is distorted and sometimes invented. It disconnects the amount that is charged from the value delivered. And it fails to produce what it promises, transparency. Its effects are all the worse in law-firm pyramids that impose excessive billing requirements. This straight-talking book critically dissects the practice of billing by the hour, examining how time is actually recorded in a variety of contexts that raise ethical as well as practical concerns. The book is not all about criticism. It also advocates alternatives that shift the focus away from time expended and onto value delivered.

July 1, 2009 in Billable Hours | Permalink | Comments (1) | TrackBack (0)

Friday, May 8, 2009

Pro Bono Attorneys May Receive Attorney's Fees

The Maryland Court of Special Appeals has held that attorney's fees may be awarded in family law cases even though the legal services were performed by a non-profit legal services organization. The court concluded that important policy considerations weigh in favor of such fee awards, here made to the House of Ruth. Relying on language from a Montana case, "the 'principle of providing equal access of justice to all' warrants the award of attorney's fees to persons represented by legal services organizations or a pro bono attorney."

...we hold that a court may, in its discretion and after considering the requisite statutory factors, award reasonable attorney's fees in a case where a party is represented by a non-profit legal services organization, or a pro bono attorney, irrespective of whether a fee agreement exists between the client and the attorney.

(Mike Frisch)

May 8, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 14, 2009

A Reasonable Fee

An attorney was retained by the father of a deceased child to prosecute a wrongful death action. The father and the lawyer agreed to a 1/3 contingency fee. The case was settled for the defendant's insurance policy limit of $300,000. The attorney had recommended a prompt settlement before lab reports were completed that could have had a negative impact on the value of the case. The mother, who had not participated in the representation, objected to the lawyer's fee to be paid from her statutory share of the settlement proceeds.

The Tennessee Court of Appeals affirmed the trial court's conclusion that the fee was a reasonable one and that the mother was obligated to pay as a passive beneficiary of the lawyer's services. The award was not based on the contingency agreement; rather, the trial court had heard conflicting expert testimony concerning a reasonable fee and concluded that 1/3 was reasonable. (Mike Frisch)

April 14, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 7, 2009

Incarceration Reimbursement

A law firm appealed the grant of summary judgment in favor of the State of Missouri in a matter arising out of a drug arrest. The sheriff had seized $4,421 from the defendant at the time of arrest. The state had sought forfeiture of the seized funds. The defendant signed a release that directed that the seized funds be released to the law firm as fees. The defendant pleaded guilty and was sentenced to three years in jail. The State then dismissed the forfeiture petition and sought "incareceration reimbursement" from the funds. The law firm intervened and appealed after summary judment was entered in the State's favor.

The Missouri Supreme Court reversed and remanded. There was an issue of material fact whether the funds were not subject to incarceration reimbursement after assigned to the law firm. The client averred that he entered his plea on the understanding that the State had agreed to release the funds to the law firm. The prosecutor agreed. The client's intent to transfer his rights to the firm was clearly expressed in writing. Thus, the court concludes, there is an isuue whether all or part of the money had been earned as legal fees and exempt from incarceration reimbursement. (Mike Frisch)

April 7, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 11, 2009

Reverse Contingent Fees

A recent opinion of the D.C. Bar Legal Ethics Committee concludes:

A reverse contingent fee is a fee that is based upon the difference between the amount a third party demands from a lawyer’s client, and the amount ultimately obtained from the client, whether by settlement or judgment. The Rules of Professional Conduct (“Rules”) do not prohibit reverse contingent fees, and a fee arrangement of this nature may align the lawyer’s and client’s interests more closely than hourly or fixed fee arrangements. Like all fees, reverse contingent fees must be reasonable. Beyond the requirement of reasonableness, entering into a reverse contingent fee arrangement places increased burdens of disclosure on the lawyer in order to obtain informed consent to such a fee arrangement. The lawyer is in a better position to assess the likely outcome of a dispute than a client is, and the lawyer must fully and fairly communicate that assessment to the client in any discussion concerning a reverse contingent fee. In addition, a lawyer should take particular care in setting the percentage of the reverse contingent fee, because unlike contingent fees based upon a client’s recovery, there is little established practice upon which a client and lawyer can rely. Finally, as with other Rule provisions, the degree and nature of the disclosure required of the lawyer and the ensuing scrutiny of the fee arrangement may vary based upon the experience and sophistication of the client.

There is a partial dissent from three non-lawyer members of the committee, including my friend and colleague David Luban. The final paragraph summarizes the concerns with the majority opinion:

It may well be that RCFs [reverse contingent fees] will mostly be proposed by sophisticated clients who understand quite well—maybe better than the lawyer—how to value cases. An insurer, for example, has extensive data on the settlement value of automobile collision cases. That insurer might well propose a flat fee with an RCF “bonus” to defense counsel who can beat the averages. In such cases, we agree with the Committee’s opinion: when the client proposes the terms of a RCF, the written agreement need say nothing beyond noting that fact. That satisfies the letter of the rule. But when the lawyer proposes a RCF and a baseline for calculating it, a written agreement that includes the baseline value but not even a hint of the method the lawyer used to arrive at that baseline violates the rule and under-protects clients. The Brown & Sturm case that the opinion discusses shows that lawyer overreaching in a RCF is not merely a hypothetical danger to clients.

It's nice to see the non-lawyer members of the committee expressing concern that the opinions of the lawyer members may be overly protective of the profession to the detriment of clients. (Mike Frisch)

March 11, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 10, 2009

Pay The Invoice

A criminal defendant charged with malice murder was convicted and sentenced to death but his habeas petition led to an order for a new trial. New counsel were appointed by the then Director of the Georgia Public Defender Standards Council to handle the second trial. The lawyers were assured that they would be paid out of the Council's funds.

The lawyers submitted periodic bills, which were not paid. When the lawyers completed the representation, they submitted a bill for services to the public defender of slightly less than $69,000. The Council refused to pay them anything, claiming that payment was not under the statutory appointment scheme.

The Georgia Supreme Court rejected the contention and ordered that the lawyers be paid. The financial problems that the Council was experiencing did not justify non-payment.  (Mike Frisch)

March 10, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Saturday, March 7, 2009

Fair and Reasonable Value

In an action brought for unpaid legal fees, the New York Appellate Division for the Second Judicial Department held that the attorney could not recover pursuant to the retainer agreement because that agreement was "susceptible of no interpretation" other than a prohibited contingent fee arrangement in a domestic relations matter. Any recovery must be on a quantum meruit basis:

"If the terms of a retainer agreement are not established, or if a client discharges an attorney without cause, the attorney may recover only in quantum meruit to the extent that the fair and reasonable value of legal services can be established" In order to make out a claim in quantum meruit, a claimant must establish (1) the performance of the services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services'". In support of its motion for summary judgment, the plaintiff established that it performed legal services on the defendant's behalf in good faith, and that the defendant accepted these services. However, the plaintiff failed, on this motion, to establish that it expected compensation for its services, at least insofar as the matrimonial matter was concerned, and failed to establish the reasonable value of its services. Accordingly, the Supreme Court properly denied that branch of the plaintiff's motion which was for summary judgment on the second cause of action, seeking recovery in quantum meruit. The court also properly denied that branch of the defendant's cross motion which was for summary judgment dismissing the second cause of action.

The court's decision does not address the ethical (as opposed to contractual) issue raised by the prohibited fee agreement. (Mike Frisch)


March 7, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)

Friday, March 6, 2009

Remand To Determine Reasonable Fee

An attorney represented a client in a workers' compensation matter under a 1/3 contingency fee agreement. The representation terminated prior to completion and the attorney sought a lien or fees against the settlement payments. The Nebraska Supreme Court held that the attorney was entitled to a reasonable fee for services performed but found the record below insufficient to determine the fee amount. The court remanded for further fact finding consistent with the opinion, instructing the lower court to look to the factors set forth in ethics rules governing Nebraska lawyers. (Mike Frisch)

March 6, 2009 in Billable Hours | Permalink | Comments (0) | TrackBack (0)