Legal Profession Blog

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)

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)

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)

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)

 

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)

Get In Line

A law firm represented an insurance company that went into receivership had sought priority of payment in connection with their pre-liquidation legal services. The New Hampshire Supreme Court affirmed a trial court's ruling that general litigation services rendered and payable prior to liquidation do not consitute administration costs:  " [The law firm] does not advance nor do we discern any principled way to distinguish between the fee for [the firm's] pre-liquidation legal representation and the fees of the other pre-liquidation professionals falling within the residual classification of [the law regarding administration costs.] "  (Mike Frisch)

Law Firm Cannot Recover Fees For Representing Itself

In a case arising from a corporate receivership and dissolution action from which a law firm had withdrawn when it had been joined as a defendant, the Nevada Supreme Court held:

These consolidated matters arise from an action in which a law firm sought to recover attorney fees incurred for its representation of a corporation in a separate receivership and dissolution action.  The district court awarded the requested fees; approved the law firm’s garnishment and directed the corporation’s receiver to pay the firm out of the receivership funds; and awarded the firm additional fees under the offer of judgment protocol.  The corporation has appealed from the attorney fees judgment and post-judgment order, and the receiver has appealed from the court’s order on garnishment.

            As a threshold matter, the firm challenges this court’s jurisdiction to consider the receiver’s appeal, asserting that the receiver was not a party below and that he was not aggrieved by the district court’s order on garnishment.  Having considered the parties’ jurisdictional arguments, we conclude that we have jurisdiction over the receiver’s appeal because the court’s order constituted a final judgment in the garnishment proceeding, and since the order was rendered against the receiver, who was the garnishee defendant in that proceeding, he is an aggrieved party entitled to appeal.

            As for the merits of the parties’ appeals, we address whether the failure to pursue a claim under the receivership claims process necessarily precludes the recovery of attorney fees outside of the receivership court.  We also address whether fees are appropriate when a firm represents both the corporation and its majority shareholder and president, as well as whether the firm can recover fees for representing itself in the separate attorney fees action.

            We conclude that claims for attorney fees incurred in a receivership and dissolution action can be liquidated in a separate action.  The court in that separate action, however, has no jurisdiction to levy on receivership funds without the receivership court’s permission.  Accordingly, as we conclude that no conflict of interest barred recovery here, we affirm the district court’s judgment liquidating the firm’s attorney fees.  We reverse, however, the district court’s orders concerning garnishment and disbursement of receivership funds.  Finally, we conclude that a law firm cannot recover fees for representing itself, and we therefore reverse the post-judgment order awarding attorney fees.

(Mike Frisch)

Non-Compliance With New York Retainer Filing Requirement May Negate Fee Claims

The New York Appellate Division for the First Judicial Department recently held that the failure to timely file a retainer agreement, as required by law, is generally fatal to a claim for attorneys fees between lawyers:

With one exception, the motion court properly granted defendants summary judgment to the extent indicated in this fee dispute between attorneys, where plaintiffs failed to file retainer statements in compliance with Rules of the Appellate Division, First Department (22 NYCRR) § a prerequisite to receipt of compensation for legal services" (Rabinowitz v Cousins, 219 AD2d 487, 488 [1995]). Plaintiffs' belated filing of several of the subject retainer statements was insufficient to preserve their right to recover legal fees. Indeed, the record shows that these statements were only filed in response to defendants' motion for summary judgment and plaintiffs did not seek permission to file the statements nunc pro tunc. Nor did plaintiffs offer a reasonable excuse for their failure to timely file (compare Matter of Abreu, 168 Misc 2d 229, 234 [1996]).

However, with respect to the first cause of action relating to the Brooks case, the record indisputably shows that plaintiff Fishkin filed a retainer statement on October 31, 1994, which was 18 months after he was retained, but only seven days after defendants belatedly filed their own retainer statement in the same matter. While the motion court may have been confused by Fishkin's later nunc pro tunc filing of an amended retainer statement in June 2006, we find that, taken together, Fishkin's initial 1994 filing and his 2006 nunc pro tunc filing create a triable issue as to whether there was sufficient compliance with 22 NYCRR 603.7(a)(3) to permit this action to proceed.

(Mike Frisch)

Starbucks Closure List

On the assumption that this relates to billable hours and law practice for many many people, I link the searchable list of Starbucks closures, to be found at the Huffington Post.  [Alan Childress]

Fee Premium Agreement Unenforceable

The New York Appellate Division for the First Judicial Department held that a provision in a fee agreement for a premium and an oral agreement was unenforceable:

The subject "Premium Fee" clause in the parties' retainer agreement provides: "We reserve the right to discuss with you at the conclusion of your matter your payment of a reasonable additional fee to us, in excess of the actual time and disbursements, for exceptional results achieved, time expended, responsiveness accorded, or complexity involved in your case. However, no such fee will be charged to you without your consent." The clause does not satisfy the plain language and specificity requirements of 22 NYCRR 1400.3(8), and defendant's oral agreement to pay plaintiff a premium fee of $150,000 is unenforceable.

An interesting concurring opinion:

I agree that the premium fee clause in issue lacks the specificity required by 22 NYCRR 1400.3(8) because it fails to advise the client beforehand how such fee was to be calculated (e.g., a flat amount or possibly a fixed percentage or a limited range of percentage of the total hourly charges incurred). However, I write separately to emphasize that, to the extent that our affirmance might possibly be construed as a criticism of the proposed bonus agreement, no negative connotation should be read into our decision, particularly where it was left to the client's sole discretion to agree or disagree that a premium fee or bonus was warranted. Indeed, given the ongoing debate regarding the efficacy of hourly charges (see e.g. Turow, THE [*2]BILLABLE HOUR MUST DIE It Rewards Inefficiency. It Makes Clients Suspicious. And It May Be Unethical, 93 ABA 32, [August 2007]), such premium fee or bonus arrangements, when fairly negotiated and properly drafted, should be met with approval by the courts. Attorneys, and particularly matrimonial attorneys, should be encouraged, as much as it is possible within their power, to facilitate the expeditious resolution of marital disputes, whether by negotiation and settlement, mediation, or, when all else fails, litigation.

(Mike Frisch)

A 40 Hour Day

The Illinois ARDC has filed a complaint alleging dishonest billing practices against an attorney who represented indigent respondents in juvenile justice and child protection matters. For the first half of 2006, the accused allegedly sought payments totaling $350,000, claiming he had worked over 20 hours a day on 90 different days. Many days he claimed to have worked more than 24 hours in a single day-- with the most "productive" day being March 15, 2005--a 40 hour day that included 14.5 hours of in-court time. Beware the Ides of March. (Mike Frisch)

No Excess Fee

An attorney who entered into a contract with the public defender to handle a post-conviction matter sought a fee in excess of the agreed-upon amount of $1,500. The public defender appealed the order granting the excess fee. The Iowa Supreme Court reversed, concluding that the contractual agreement limited the fee. The lower court did not have the authority to order the public defender to pay more than the amount set forth in the contract. (Mike Frisch)

Young Lawyers: What Do You Want to Be When You Grow Up? (And Can You Repay the Loans?)

Posted by Jeff Lipshaw

I have, in the past, expressed some disdain toward the victimology advocated in some quarters over the plight of very highly paid young Big Law lawyers.  The only thing yet that has given me pause to reconsider the fervency of that belief is the troubling and puzzling issue why one would incur up to $100,000 in student loan debt without at least some shot at one of those pricey jobs that would provide the basis for repaying the loan.  Nevertheless, my sense is that the Golden (or at least Silver or Bronze) Handcuffs might well be as effective as the debt in tying one to an unsatisfying career in Big Law, but that's merely reflecting my own experience.  The bigger concern is what happens to people who don't get those kinds of jobs, but incur that kind of debt.

Notwithstanding the economic pressures from whatever source, I think we have to acknowledge, however, some personal accountability for what we want to be when we grow up.  On that score, the February 2008 edition of the ABA Journal, freshly delivered to the mailboxes here in Suite 250, has an interesting pair of juxtaposed articles.  One is an excerpt from Making Waves and Riding the Currents, the memoir of Charles Halpern (left), who left the relative security of Arnold & Porter in the 60s to found the Center for Law and Social Policy, and later became the first dean of the CUNY School of Law.  The excerpt describes his decision to leave Arnold & Porter and its lifestyle (although, notably, the question of being saddled with debt does not come up).  The other is a description of a week in the life of Stephen Susman (right), the founder partner of Houston's Susman, Godfrey, and a big-time Big Law lawyer (albeit an entrepreneurial one), replete with early morning personal training and dog walking in Central Park, breakfasts with George Soros, benefits, fancy lunches and dinners at posh NYC restaurants, conference calls, and prep sessions for pending hearings in which he will be up against David Boies.

Do these stories reflect the polar extremes of what we want to be when we grow up?  Is the idea of personal autonomy and accountability - that either career is achievable - a myth that collapses in the face of the present economic reality facing most of today's law students?

Billable Hours

Here's a link to an interesting piece in this month's edition of the California Bar Journal on the effect of billable hour requirements on the legal profession.  (Mike Frisch)

Are BigLaw Firms Deciding to 'Lowball' Holiday Bonuses This Year?

The ABA Journal has this story on the phenomenon, which if it picks up would be quite a retreat from what the firms announced just a month ago with "extra" bonuses.  If so, it just turned the extra ones into "earlier" ones.  But it may be that the latest bonuses will be honored, just pegged more to performance than they had in the past.  [Alan Childress]

"Ambitious, Arrogant, And Overly Driven"

It seems like this may be a day of interesting bar discipline cases. The Illinois Review Board issued a recommendation in a case involving billing misconduct by an attorney in an insurance defense firm. The firm had a minimum billing requirement of 900 hours per six months that gradually increased to 2100 hours per year. The attorney worked ungodly hours--in the office at 6:15 am and returning home at 8 pm or after. He worked every Saturday and Sunday, taking two or three vacations in over 13 years. Needless to say, he met the firm's billing requirements.

Nonetheless, the attorney billed triple time for three cases heard together, billed for court appearences he did not make, depositions he did not attend and other services he had not performed. When discovered, he resigned from the firm and self-reported to the bar. The fraud involved at least $28,000, which the firm refunded to the overcharged clients.

Why did this happen? According to the board:

" Adams testified that his misconduct arose out of his desire to achieve, rather than being motivated by financial gain. Adams stated that he had been ambitious, arrogant, and overly driven and that he thought he had to be 'the number one guy.' He perceived the number of hours billed as the way to achieve. Adams recognized that his behavior was wrong and accepted sole responsibility for his misconduct. He testified that this type of behavior was limited to billing at Williams, Montgomery and did not extend into other aspects of his life

Adams also testified that he had come to understand that being number one was not the key and that being good was much more satisfying. He had learned from the lawyers with whom he shared space that the important thing was not to nickel and dime clients or sneak an hour here or there, but to help people. Adams testified that that was what he was trying to do in his current practice. "

The Board recommends a suspension of 5 1/2 months. A dissent would impose a one year suspension. (Mike Frisch)

Looking for Meaning in Cambridge on Thanksgiving Morning

Posted by Jeff Lipshaw

I wondered this Thanksgiving morning whether there is a blog where the pharmacists who staff the 24 hour CVS in Porter Square (where I filled a prescription), or the baristas who open the Mass. Ave. Starbucks at 6:00 a.m. (where I got some coffee), or the people who work at Kohl's and will be at their stations at 4:30 a.m. tomorrow morning, or the people who drive the T trains all day on the holidays can bitch and moan about their lot in life.  I happened to be reading Paul Gowder's blog post over at Law and Letters about the travails of being an exploited young lawyer, and thought I'd note a couple things.

1.  The "corporate serf" thing or the big firm/do-gooder dichotomy for graduates of the elite schools is just plain wrong.  Thirty years ago, I made a life style decision NOT to go to work at a law firm in New York, opting instead for less money and more lifestyle in Detroit.  That option still exists.

2.  With all the ink spilled about the likely fate of the vast majority of law students, why do they keep going to law school?  Maybe the ones who don't see themselves as victims just don't write about it.

3.  There's an article in the New York Times this morning about the perks that the big law firms offer to their associates in the competitive market for talent.  The list that follows is taken verbatim from the article:  candied apples on everyone's desk from the "happiness committee," milkshakes from Potbelly Sandwich Works, concierge services (pick up theater and sports tickets, dry cleaning, car repair, etc.), top off bonuses, sabbaticals, mortgage guarantees, subsidies for buying hybrid cars, on-site tailoring, personal issues coach and psychotherapists, wine parties (tuna tartare, baby lamb chops), dinner delivered from the Palm Restaurant (on a silver tray), yoga classes, nap rooms, child care, and emergency nanny services.

I return to my thoughts from yesterday about futility.  Very few people in the world are lucky enough to find meaning for their lives in their work.  If you are looking for meaning in your life, and doing your job as a lawyer has as much meaning to you as filling an order for a quad soy latte with extra foam, then you either have to look for meaning elsewhere, or deal with the same cognitive gap of futility in squeezing meaning out of something that is not meaningful.  But lawyers at least have a chance.

When my daughter was born over twenty-three years ago, as we were still basking in the miracle of having created this baby, I remarked to the obstetrician in Ann Arbor (who was about to leave for a post-doc at Duke) how amazing it must be to see babies born every day.  His response was interesting.  He said that the physical act of giving birth had, to him, become routine; the magic and the meaning was in the connection with the people who were his patients.

Practicing law probably falls somewhere between making espressos and delivering babies, but the point is that there's no guarantee that work will make our lives seem important to us, and we need to deal with that either by changing the work or finding another place for meaning.

Happy Thanksgiving!

Pay The Ticket

North Carolina has a statute that allows a trial court to order a defendant insurance company to pay the attorneys fees of an insured plaintiff where the recovery is less than $10,000 and the court concludes that the insurer has engaged in an "unwarranted refusal" to pay the claim. The North Carolina Court of Appeals upheld a trial court order requiring the insurer to pay $25,000 to plaintiff's lawyer under the statute. (Mike Frisch)

Private Payment Permissible

A lawyer retained by the personal representative of a decedent's estate sent monthly bills to the client but did not seek payment, as his retainer agreement provided that he would wait until probate was completed. He would then seek payment from estate funds. The personal representative later discharged the lawyer and paid him out of her own funds. When probate was completed, the trial judge ordered the lawyer to return 25% of the fee because he had been paid without obtaining prior court approval.

The D.C. Courts of Appeals reversed the trial court. Prior approval is required only when the lawyer is paid from estate funds.The applicable statute cannot limit private payment without court supervision as a contrary holding "would abridge the right of competent adults to enter into otherwise-lawful economic transactions with other competent adults..." The court vacated an opinion it had previously issued in the case. (MIke Frisch)

As Rich As Rockefeller

A dispute over, among other things, payment of legal fees in settling the estate of Carolyn Rockefeller was the subject of a decision from the New York Third Department. While it was "a fairly simple estate and the counsel fees were much larger than would be expected" the executor did not breach her fiduciary duty in paying the fees: "[e]very estate decision produced animosity and strife...it is understandable that the estate's counsel were actively and thoroughly involved in every aspect of the estate throughout the course of the estate's administration, thus increasing the legal expenses." However, the court held that it was improper for the executor to pay counsel fees to her former divorce lawyer out of estate funds, as such payments did not benefit the estate. (Mike Frisch)