Legal Profession Blog

When You Wish Upon A (Lode) Star

Headnote summary of a decision issued today by the New Jersey Supreme Court.

The facts

In the context of legal fee awards, a “lodestar” is the number of hours reasonably expended multiplied by the reasonable hourly rate. In this appeal, the Court considers the trial court’s reduction of the lodestar calculation proposed by plaintiff Harold Hansen in seeking attorney’s fees and costs after prevailing against his former employer, defendant Rite Aid Corp., on a claim for discrimination based on sexual orientation contrary to the Law Against Discrimination (LAD). The Court also considers the trial court’s denial of legal fees incurred on appeal under Rule 2:11 4 and its assessment of the contingency enhancement of the lodestar at 20%.

After his employment was terminated in May 2008, plaintiff brought claims against Rite Aid and other defendants alleging age discrimination, sexual orientation discrimination, and gender discrimination in violation of the LAD, as well as several common law claims. After three trials, a jury returned a verdict in plaintiff’s favor on his LAD sexual orientation discrimination claim and awarded him a total of $420,500 in compensatory and punitive damages.

Plaintiff moved for an award of counsel fees and costs. In plaintiff’s initial submission, he asked the trial court to determine that a reasonable hourly rate for his lead counsel and the attorney who assisted in the first of the three trials was $725, and that a reasonable number of hours spent on this matter was 3,252. He requested that the trial court determine the lodestar to be $2,355,892.50, and that the court apply a one hundred percent enhancement to the lodestar. Plaintiff also sought an award of costs. In total, plaintiff requested an award of $5,035,773.50.

In support of plaintiff’s fee application, his lead counsel submitted a certification. Plaintiff’s counsel attributed the large number of hours billed to erroneous rulings by the trial judges. She attached to her certification an invoice setting forth time entries reflecting claimed billable hours, and enumerating the disbursements included in the proposed award of costs. Defendants opposed the application, challenging the $725 hourly rate as well as aspects of the records submitted by plaintiff’s counsel.

The trial court issued a seventy-three-page decision with a fifty-four-page spreadsheet reflecting its analysis of the time entries and disbursements set forth in plaintiff’s invoice. The court ruled that a reasonable hourly rate for plaintiff’s lead counsel in this case was $375 per hour and a reasonable hourly rate for the assistant attorney was $325 per hour.

The trial court also found that the total number of hours for which plaintiff sought an award of fees was unreasonable. The court identified several categories of legal work improperly included in plaintiff’s fee application, including work on unrelated matters. The trial court also excluded all time entries reflecting plaintiff’s counsel’s representation of plaintiff in the Appellate Division and in this Court; in the trial court’s view, it could award no fees for appellate work because plaintiff did not seek an award in either appellate court under Rule 2:11-4. The trial court cited plaintiff’s counsel’s multiple entries claiming that more than twenty-four hours of legal work had been performed in a single day. It stated that unwarranted hours were billed for certain tasks and ruled that counsel had spent an excessive amount of time on the fee application itself.

The court also rejected many of plaintiff’s claims for costs incurred in disbursements to vendors, finding the request to be replete with errors and duplicate entries and inadequately supported with vendor receipts. Noting that plaintiff was successful on only one claim and that plaintiff’s lead counsel performed tasks that should have been assigned to a junior attorney or a paralegal, the trial court reduced the lodestar by twenty percent.

The trial court then considered plaintiff’s request for a one hundred percent enhancement of the lodestar because plaintiff’s counsel represented plaintiff on a contingent fee. Noting the complex procedural history of the case, counsel’s confidence in the strength of plaintiff’s claims as reflected by the settlement demands she made on plaintiff’s behalf, and the attorney’s risk of nonpayment, the trial court awarded a twenty percent enhancement of the lodestar.

The trial court awarded $741,387.97 in fees and costs. The Appellate Division affirmed, and the Court granted certification. 250 N.J. 353 (2022).

The court affirmed the hourly rate but remanded on two points

The Court reverses the Appellate Division’s judgment in two respects. First, the Court holds that when an appellate court reverses a judgment and remands for further proceedings, and the plaintiff is not yet a prevailing party when the appeal concludes, Rule 2:11-4 sets an unworkable and unfair deadline for applications for legal fees incurred on appeal. The Court vacates the trial court’s denial of all appellate legal fees and remands for a detailed review of plaintiff’s application for those appellate fees under the principles stated in Rendine v. Pantzer, 141 N.J. 292 (1995), and Walker v. Giuffre, 209 N.J. 124 (2012). Second, the Court reverses the Appellate Division’s judgment affirming the trial court’s assessment of the contingency enhancement of the lodestar at twenty percent. This appeal is a typical discrimination case warranting a contingency enhancement between 20 and 35%, but the attorney’s risk of nonpayment in this protracted proceeding justifies an enhancement within that range that is higher than 20%.

Oral argument linked here. (Mike Frisch)

The Out-Of-Towners

In a matter involving innocent defendants suing for civil rights violations arising from their wrongful convictions, the United States Court of Appeals for the Fourth Circuit upheld the award of attorneys fees

Finally, the defendants challenge as unreasonable the amount of attorneys fees that the district court awarded. The court awarded $6,002,433.12 in fees and $140,187.36 in costs to Hogan Lovells US LLP; $24,272.50 in fees to Cheshire Parker Schneider, PLLC; and $95,257.50 in guardian ad litem fees to Tarlton Polk PLLC, for a total of approximately $6.25 million.

The defendants contend first that plaintiffs’ counsel should not have been permitted to bill out-of-town rates because the plaintiffs did not make a sufficient showing that equivalently competent in-town representation was unavailable. They argue that the plaintiffs failed both prongs of National Wildlife Federation v. Hanson, which requires a court to determine (1) whether adequate local counsel was genuinely unavailable and, if so, (2) whether the plaintiffs chose unreasonably expensive counsel from elsewhere. 859 F.2d 313, 317–18 (4th Cir. 1988). The district court, however, gave consideration to both prongs and found that the plaintiffs had satisfied them. And the court was especially well positioned to make this determination, having a deep understanding of the case’s complexity and knowledge of the local availability of counsel able to handle and staff such a case. Accordingly, we reject this argument.

The defendants also contend that the plaintiffs’ counsel assigned too much work to associates rather than to partners. This argument is somewhat peculiar given that in assigning work to associates, the cost of the work likely became cheaper on an hourly basis. This would reduce the overall cost unless the defendants were able to demonstrate that partners’ performance would have been so much more efficient than associates’ that it would nevertheless have been more cost-effective for partners to have done the work. But the defendants have not made such a showing. Accordingly, we also reject that argument.

Finally, the defendants contend that there was too much block billing and too much time spent on specific assignments. The district court, however, considered each of the defendants’ claims and rejected them after reasoned consideration, although it did make some adjustments and deny the plaintiffs’ reimbursement for expert fees. The court’s work was neither perfunctory nor a rubberstamp of the plaintiffs’ motion.

Awards of attorneys fees are reviewed for abuse of discretion, and they “must not be overturned unless [they are] clearly wrong.” Berry v. Schulman, 807 F.3d 600, 617 (4th Cir. 2015) (quoting Plyler v. Evatt, 902 F.2d 273, 278 (4th Cir. 1990)). Our review is, therefore, “sharply circumscribed.” Id. (quoting Plyler, 902 F.2d at 278). Recognizing the court’s role and perspective, as well as its careful consideration of the defendants’ challenges, we conclude that the court’s awards fell well within its discretion. Accordingly, we affirm the court’s award of fees and costs.

Notably, the North Carolina State Bar brought misconduct charges against an attorney who had represented the two defendants which led to a five year suspension that is subject to an appeal.

NC Policy Watch reported that the state Court of Appeals affirmed the suspension.(Mike Frisch)

9/11 Fee Fight Litigation May Proceed

The United States District Court for the District of Columbia (judge Randolph Moss) granted and denied in part a motion to dismiss claims

In this breach of contract action, Plaintiff John M. Quinn (“Quinn”) alleges that Defendants Kreindler & Kreindler, LLP and James P. Kreindler (collectively, “K&K”) have failed to pay him the compensation that he is due for assisting with K&K’s representation of family members and representatives of the victims of the September 11, 2001 terrorist attacks. Quinn alleges that he was engaged to assist K&K in obtaining compensation for K&K’s clients by, among other things, helping to remove barriers posed by foreign sovereign immunity to the K&K plaintiffs’ ability to recover damages from “the Kingdom of Saudi Arabia and other nation states,” Dkt. 19 at 5-6 (Am. Compl. ¶ 19); ensuring that K&K’s clients would have access to the Victims of State Sponsored Terrorism Fund (“VSSTF”), id. at 13 (Am. Compl. ¶ 45); and resisting “efforts on the part of the Government of Sudan and the Department of State to . . . include[] in the Sudan Claims Resolution Act . . . language that would [have] effectively erase[d] the 9/11 families’ claims against Sudan,” id. at 13 (Am. Compl. ¶ 44).

The parties’ agreements regarding what Quinn characterizes as “eight years [spent] laboring on legal, political and media activities,” id. at 10 (Am. Compl. ¶ 38), are remarkably scant. Their first agreement, which they entered in June 2013, barely occupies half a page and is four sentences long. Dkt. 19-1 at 2 (Am. Compl. Ex. 1). Roughly a year later, they entered into a second agreement, which is a comparatively robust six sentences long. Dkt. 19-2 at 2 (Am. Compl. Ex. 2). Those agreements were superseded by two agreements in May 2017, one of which governs services rendered to K&K relating to the firm’s representation of clients who had “filed cases in the litigation as of” July 10, 2014, Dkt. 19-3 at 2 (Am. Compl. Ex. 3), and one of which governs services rendered to K&K relating to the firm’s representation of clients who “filed claims on or after July 10, 2014 or with respect to” certain other claims or proceedings, Dkt. 19-4 at 2 (Am. Compl. Ex. 4). Finally, in August 2017, the parties amended the May 2017 agreements by, among other things, providing that Quinn is entitled to compensation relating to recoveries by those K&K clients who filed claims and by those who did “not file[] [claims] in the litigation but who have retained K&K to assist in recovering compensation whether through the filing of claims or otherwise and who in fact receive a recovery.” Dkt. 19-5 at 2 (Am. Compl. Ex. 5).

The crux of the dispute between Quinn and K&K, at least at this point, is one of timing. K&K does not dispute that Quinn is entitled to compensation for the services he provided, but it maintains that Quinn’s demand for payment is premature because each iteration of the retainer agreement bases Quinn’s compensation on the “net recovery” that K&K receives, and because the 9/11 litigation is ongoing and K&K thus continues to accrue costs, rendering the amount of its “net recovery” inchoate. Dkt. 21-1 at 6. Quinn disagrees and maintains that K&K has received fees for portions of its work, and it is obligated to share those fees with him. Dkt. 22 at 5.

Quinn’s complaint contains six counts: (I) Breach of Contract – 2013/2014 Agreements; (II) Breach of Contract – 2017 Agreements; (III) Breach of Duty of Good Faith and Fair Dealing; (IV) Accounting; (V) Quantum Meruit; and (VI) Constructive Trust. See Dkt. 19 (Am. Compl.). K&K moves to dismiss all but Claim II, which it concedes survives the motion to dismiss stage. See Dkt. 21-1 at 7-8. Quinn opposes the motion to dismiss in its entirety. Dkt. 22 at 9. For the reasons explained below, the Court is unpersuaded by K&K’s arguments respecting Counts I, III, and V, but is persuaded by its arguments respecting Counts IV and VI.

The Court will, accordingly, GRANT in part and DENY in part Defendants’ Motion to Partially Dismiss the First Amended Complaint.

The litigation involves legal fees arising from the September 11 attacks

On September 11, 2001, al-Qaeda launched a series of coordinated terrorist attacks on the United States. Dkt. 19 at 4 (Am. Compl. ¶ 13). The attacks “immediately resulted in 2,977 fatalities and, to date, tens of thousands of injuries.” Id. at 5 (Am. Compl. ¶ 14). K&K represents family members whose relatives were killed or injured in these attacks, the estates of the deceased, and first responders and others who were injured. Id. at 5 (Am. Compl. ¶ 15). As part of this effort, K&K has served as counsel for a large group of plaintiffs in the consolidated multi-district litigation in the Southern District of New York for almost two decades. See In re: Terrorist Attacks on Sept. 11, 2001, 392 F. Supp. 2d 539, 546 (S.D.N.Y. 2005); Dkt. 19 at 7, 15-17 (Am. Compl. ¶¶ 24, 51-69)

The plaintiffs in the 9/11 litigation faced significant legal hurdles, including the doctrine of sovereign immunity, which, at the time of the attacks, barred suits against foreign nations that were not “‘state sponsors’ of terrorism.” Dkt. 19 at 5 (Am. Compl. ¶ 17). To help address some of these legal issues, K&K sought Quinn’s assistance. Id. at 6 (Am. Compl. ¶ 21). Quinn is a D.C. resident and attorney whose career has spanned government, private practice, and public affairs work. Id. at 3-4 (Am. Compl. ¶ 10).

(Mike Frisch)

Disgorgement Of Legal Fee Affirmed

The Idaho Supreme Court affirmed an order that, among other things, disgorged a legal fee paid out of funds subject to the trial court oral ruling

This appeal arises from an order of contempt entered against Jeff Katseanes (“Jeff”) and an order of disgorgement entered against his attorney, Justin Oleson. As part of a divorce agreement between Judy Katseanes, now Judy Yancey (“Judy”), and Jeff, Jeff was required to pay Judy spousal support. Following several years of insufficient payments, Judy filed a lawsuit to seek enforcement of spousal support. During the proceedings, the district court orally granted Judy’s request for a Qualified Domestic Relations Order (“QDRO”) assigning Judy 100% of Jeff’s 401k plan. After the court orally issued its order in open court, but before the district court signed a written order reflecting the oral ruling, Jeff withdrew all of the funds from the 401k. The district court ordered Jeff to return the funds and provide an accounting. When the accounting was not timely provided, the district court held Jeff in criminal contempt and sentenced him to five days in jail. The court also granted an order of disgorgement against his attorney, Oleson, after discovering Jeff’s attorney fees had been paid with funds from the 401k. Jeff now appeals to this Court, arguing the order of contempt and order of disgorgement were improper because the QDRO did not become effective until the written order was signed by the court. We affirm.

The transfer of funds

The day after the district court granted the QDRO on January 6, but before the court signed a written order on January 27, Jeff called Rudd & Company, the third-party retirement plan administrator for his 401k. Jeff told a Rudd & Company employee, Erin Dupree, that his attorney informed him things were resolved, there was no QDRO, and he could access his funds. Dupree and the company’s CPA, Christian Zollinger, followed up with Oleson, on January 13, 2021, to verify that there was no QDRO. According to Dupree, Oleson told her, while using “some profanity,” that there was not a QDRO in place, and that “[Judy’s attorney] would not get his hands on the money.” Relying on Oleson’s statement, Dupree allowed Jeff to withdraw all of the funds in his 401k, which after fees and federal withholding, totaled $61,946.91.

Then it was Judy's turn to cry foul

After learning that Jeff’s attorney fees were paid with funds Jeff had taken from the 401k, Judy filed a motion for an order of disgorgement of fees. At a hearing on the motion, Oleson argued that the money was legally Jeff’s and the circumstances were not nefarious since the QDRO was not signed and entered by the district court until January 27, 2021. As a result, Oleson argued he had no duty to disgorge those funds. Judy’s attorney argued that Oleson had falsely misrepresented the district court’s order to the 401k plan administrator, and that the funds would not have been distributed if she had been properly informed by Oleson.

The court on appeal held the oral ruling was effective

The legitimacy of oral rulings, even if not later memorialized in writing, has been confirmed by the Third, Ninth, and Eleventh circuits.

The contempt was affirmed even if it was pursuant to advice of counsel

Oleson was representing Jeff when he filed the April 1 letter informing the court Jeff would not be complying with the court’s order. Jeff has not asserted on appeal that Oleson failed to consult with Jeff prior to Oleson sending a letter to the district court advising that he would not be producing the accounting. Idaho Rules of Professional Conduct 1.4(a)(1), (a)(2) required Oleson to promptly inform Jeff of any decision or circumstance with respect to which Jeff’s informed consent was required, and also to reasonably consult with Jeff about the means by which Jeff’s objectives were to be accomplished. Idaho Rule of Professional Conduct 1.0(e) defines “informed consent” as denoting an “agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” Thus, no matter if the failure to comply was done at Oleson’s behest, or was a decision Jeff made on his own, as the litigant, Jeff ultimately bore the burden of complying with the court’s order. Jeff failed to do so. The district court’s order of contempt is supported by substantial and competent evidence in the record. Thus, it is affirmed.

The court also affirmed disgorgement and awarded fees and costs of the appeal. (Mike Frisch)

D.C. Proposes Advance Fees Rule And Comment Revisions

Since the District of Columbia Court of Appeals decided In re Mance in 2009, the court has issued a number of decisions sanctioning attorneys for mishandling advanced fees.

The Bar has now responded

December 15, 2022

The D.C. Bar Rules of Professional Conduct Review Committee is seeking public comment on a proposal to amend D.C. Rule of Professional Conduct 1.15(e) and related commentary. Comments are due by close of business on January 31, 2023.

Before submission to the Bar’s Board of Governors, the committee requests comment on the proposed amendments summarized below. The Board, in turn, may then recommend changes to the D.C. Court of Appeals, which promulgates the D.C. Rules.

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The Rules Review Committee proposes that Rule 1.15(e) be amended to expressly state: (1) that a flat or fixed fee is an advance fee subject to entrustment consistent with the District of Columbia Court of Appeals holding in In re Mance, 980 A.2d 1196 (D.C. Ct. App. 2009), as amended (Oct. 29, 2009); and (2) that informed consent to waive entrustment of advance fees pursuant to Rule 1.15(e) must be “confirmed in writing” consistent with the court’s holding in In re Ponds, 279 A.3d 357 (D.C. Ct. App. 2022).

Additionally, the committee proposes (1) the adoption of additional explanatory language in existing Comment [9] to Rule 1.15 regarding flat or fixed fees, and (2) that a new Comment [10] be adopted that clarifies the requirements for informed consent to waive entrustment of advance fees under Rule 1.15(e), including the five factors delineated by the Court of Appeals in In re Mance.

The committee’s draft report can be found at here.

Key point

To avoid the specter of future discipline for District lawyers unaware of disciplinary decisions of the D.C. Court of Appeals that, in effect, amend the text of the ethics rules, the subcommittee recommends swift revisions to Rule 1.15(e) and its Comments to codify the requirements of Rule 1.15 as interpreted by the Court of Appeals in In re Mance and In re Ponds. The subcommittee does not think it is realistic to expect that all lawyers read decisions of the Court of Appeals on disciplinary issues, but it is reasonable to expect lawyers to be familiar with the Rules of Professional Conduct and their Comments. Many discipline cases involve the misuse of client trust funds and clarifying the Rule to reflect Mance’s writing and five-factor requirements for informed consent will reduce such violations. Further, the proposed Rule amendment will help avoid the uncertainty that Mance/Ponds create by implying that whenever informed consent is required by the Rules, it must be in writing. Such an expansion of the requirement of informed consent would result in additional Rule violations by lawyers who are unaware of such a requirement and assume, based on the text of the Rules, that informed consent does not have to be in writing unless the Rule specifically requires it. The proposed Rule amendment avoids this risk by stating that Rule 1.15(e)’s writing requirement is limited to Rule 1.15

The ABA Model Rules require that "informed consent" be confirmed in writing in waiving a conflict of interest (see ABA Model Rule 1.7(a)(3); the District of Columbia does not.

Requiring a writing to show informed consent simply means that one need not take an attorney at her or his word that the required disclosures have been made.

That has real world consequences and does nothing but make enforcement more difficult in both a disciplinary and civil context.

 While they are at it, that Rule should be amended as well.

Whenever the D.C. Rules depart from the ABA Model Rules, it's a safe bet that it is to benefit lawyers and make it harder for clients. (Mike Frisch)

Public Importance Standing

The South Carolina Supreme Court reversed and remanded a complaint filed by the South Carolina Public Interest Foundation against the state Attorney General challenging contingent fee agreements with private law firms

South Carolina Attorney General Alan Wilson retained Respondents Willoughby & Hoefer, P.A., and Davidson, Wren & DeMasters, P.A., (collectively, the Law Firms) to represent the State in litigation against the United States Department of Energy (DOE). Wilson and the Law Firms executed a litigation retention agreement, which provided that the Law Firms were hired on a contingent fee basis. When the State settled its claims with the DOE for $600 million, Wilson transferred $75 million in attorneys' fees to the Law Firms. Appellants challenged the transfer, claiming it was unconstitutional and unreasonable. The circuit court dismissed Appellants' claims for lack of standing, and we certified the case for review of the standing issue. The merits of the underlying case are not before us.

Standing

Appellants' complaint presents a threshold issue of the Attorney General's statutory authority to enter contingency fee agreements with private law firms. This issue will inevitably arise again in the future because Wilson has seven other litigation retention agreements with private attorneys. These agreements are currently listed on the Attorney General's website, and five contain contingency fee provisions. Although the agreements differ in some respects, all contingency fee provisions persist. For example, Wilson recently announced a $300 million settlement with opioid distributors. The litigation retention agreement in that case contains a contingency fee provision identical to the one here. There is a need for future guidance as to whether subsection 1-7-150(B) authorizes the Attorney General to enter into contingency fee agreements. We therefore hold Appellants have public importance standing.

Thus a remand to address the merits. (Mike Frisch)

Dammed If You Do

The Tennessee Court of Appeals affirmed a judgment against a former law firm client for unpaid fees

In 2005, Appellant Richardson M. Roberts constructed a large dam on his property in Humphreys County, Tennessee. The dam impounded the waters of Snake Creek, which flowed into Tumbling Creek and the Duck River. Mr. Roberts built the dam without obtaining permits for its construction. Following construction, Mr. Roberts faced substantial legal challenges concerning the environmental impact of the dam and his alleged violations of environmental laws.

The law firm was retained to defend him 

Of note, Luna Law represented Mr. Roberts, inter alia, in both a federal criminal investigation and a federal civil enforcement action, discussed at length infra. After October 2010, Mr. Roberts ceased paying Luna Law’s invoices despite the firm’s continued representation of him. By June 2011, Mr. Roberts owed Luna Law $136,283.28.

The court rejected statute of limitations and laches defense.

Reasonable fees

In its very thorough final order, the trial court delineated numerous findings of fact to support its conclusion that Luna Law’s attorney’s fees were reasonable. As an initial matter, the trial court found, and it is undisputed, that Mr. Luna and Mr. Pearigen were highly respected attorneys with extensive knowledge of environmental and regulatory laws. Although it is also undisputed that Mr. Roberts’ defense was complex and very technical, a review of its intricacies is integral to determining whether the trial court erred when it concluded that Luna Law’s attorneys’ fees were reasonable.

They were

The record shows that, when Mr. Roberts complained of these fees and requested a discount, Mr. Luna attempted to cooperate with him, reducing the number of hours he personally billed, cutting his bills in half, offering to meet with Mr. Roberts to discuss individual billing entries, and even offering to settle for $100,000.00. Mr. Roberts accepted none of these compromises. The record shows that despite the fact that Mr. Roberts demanded (and received) high-quality representation from Luna Law, he simply did not want to pay for these services. For the many reasons discussed above, we conclude that Mr. Roberts is responsible for paying the outstanding $136,283.28 in attorney’s fees, and we affirm the trial court’s conclusion that Luna Law is entitled to same.

(Mike Frisch)

Under The Banner Of Hope

The Iowa Supreme Court has affirmed  and reversed in part and remanded a fee fight among attorneys but split 4-3 on whether the firm that received the funds had converted them by violating the ethical rule on safekeeping disputed funds

The Hope Law Firm agreed to represent a client in a contingent-fee case. Lawyer James Larew had an of-counsel arrangement with the Hope Law Firm and agreed to work on the client’s case in exchange for a portion of the firm’s fee. But during the course of the case, Larew’s relationship with Andrew Hope (the Hope Law Firm’s owner) soured, and Larew and the firm ended the of-counsel arrangement. Larew nonetheless continued to work on the case, ultimately winning a large judgment at trial. Litigation ensued over the disposition of the fee. In this appeal, we address a bevy of claims in “the lawsuit after the lawsuit” between dueling lawyers.

The complicated history of the fee situation is set forth at length

We recognize, as an initial matter, that this appeal presents a civil action and not an attorney disciplinary case, and for that reason our analysis concentrates on the legal issues that the parties have brought before us. But we would be remiss in failing to note—indeed, to underscore—that Iowa Rule of Professional Conduct 32:1.4(b) imposes an unequivocal duty on lawyers to explain matters to their clients “to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” Both Larew and Hope failed to inform Anderson of Larew’s separation from the Hope Law Firm, either when it happened or in the many months after and through the trial. Had Larew or Hope actually fulfilled this ethical duty, the client would have been permitted to decide with whom and on what terms it would continue the representation—consistent with the client’s role and right. The clarification in responsibilities and compensation that likely would have flowed from that required disclosure (lawyer ethics rules operating, as they often do, to the benefit of both lawyer and client) almost certainly would have avoided many of the disputed issues over which they’ve battled in this case.

The court upheld the lower court's fee calculation but reversed the finding that the Hope firm successor is not liable

We...reverse the district court’s ruling and hold that Hope Law Firm & Associates, P.C., is a successor entity to Hope Law Firm, P.L.C., and liable for the judgment entered in this case.

Larew claimed conversion, relying on Rule 1.15, a contention the court majority rejected

Assuming (without deciding) that an argument creating a property interest based on rule 32:1.15 has been preserved, consideration of a different ethics rule, rule 32:1.5, supports the district court’s rejection of Larew’s conversion claim. That rule restricts lawyers’ ability to divide fees on a case when they are not in the same firm. Iowa R. Prof’l Conduct 32:1.5(e). Fees divided among lawyers in different firms must be split “in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation,” and the client must “agree[] to the arrangement, including the share each lawyer will receive” with that agreement “confirmed in writing.” Id. Larew unquestionably operated as of-counsel within the Hope Law Firm while the of-counsel agreement remained in effect, thus making a separate fee agreement between Larew and the client unnecessary under the rule. Larew and Hope, in other words, were not serving under the banners of separate firms but were working on the case as members of one firm: the Hope Law Firm. Plenty of evidence in the record supports this, including the of-counsel agreement itself, Larew’s inclusion on the Hope Law Firm’s letterhead and website, and the agreement to split fees untied to the actual amount of work that each lawyer would actually perform on the case (e.g., Larew would be doing the lion’s share but receiving less than half (40%) of any recovery).

When Larew and Hope ended the of-counsel arrangement, neither one contacted the client to set up a new arrangement that would split their fee between two different firms. We must construe an attorney’s conduct as consistent (not inconsistent) with the requirements of our ethics rules unless proved otherwise.

Dissent in part by Justice Waterman

I join the majority opinion except as to part IV and on the issue of the availability of punitive damages. In my view, Iowa Rule of Professional Conduct 32:1.15 required Andrew Hope and his law firm not to take into income—but instead to disburse—funds that were indisputably owed to a separate law firm, James Larew’s firm. The breach of that duty could support a conversion claim for which punitive damages are allowed. The district court erred by failing to apply that rule. I would reverse the district court ruling on Larew’s conversion and punitive damages claims and remand the case to apply the proper standard.

Application of Rule 1.15

Every court to reach the issue has held this rule applies to fee disputes between co-counsel in separate firms.

...Hope can’t avoid rule 32:1.15 by arguing Larew was like an associate in the Hope Law Firm. For one thing, by the time the funds were paid to Hope, the parties had already terminated the of-counsel agreement and clearly were in separate firms. Even while the of-counsel agreement was in effect, Larew was never an employee of Hope Law Firm, and his compensation was specific to each case on which the parties worked together and based only on the receipts for that case. Moreover, the majority can’t consistently say that Hope and Larew had an ethical duty to inform the client of their fee-splitting arrangement and then maintain elsewhere in the opinion that Hope and Larew were part of the same firm.

Hope offered no valid reason for failing to keep the disputed funds separate as required by the rule. Hope admitted Larew was entitled to $130,000 to $150,000. Instead of promptly paying Larew what he owed as required by rule 32:1.15(d), or escrowing the disputed funds until the dispute was resolved as required under rule 32:1.15(e), Hope wrongfully diverted and then retained Larew’s share in the firm’s general account.

Rule 32:1.15 effectively provides Larew with a security interest in his share of the funds recovered in the lawsuit. Hope can’t avoid conversion liability by commingling the lawsuit proceeds in his general account to argue the money is no longer identifiable. We can follow the money to which Larew’s interest attached under rule 32:1.15.

Chief Justice Christensen and Justice Mansfield  joined the concurrence in part and dissent in part. (Mike Frisch)

"Scant Heed To Reality"

The Delaware Supreme Court has held that Skadden's billings as a court-appointed custodian in a bitter corporate deadlock that has been the subject of extensive litigation were properly paid.

Broadly speaking, these authorities allow Pincus and his advisers to request reasonable reimbursements related to the custodianship, but the parties disagree bitterly about the operation and reach of each provision.

The litigation

In 2014, Elizabeth Elting, a co-founder of TransPerfect Global, Inc. (“TPG” or “the Company”), asked the Court of Chancery to appoint a custodian to sell the Company because of a hopeless deadlock between Elting and fellow co-founder, Philip R. Shawe. More than eight years later, Elting has sold her shares to Shawe, who won a court-ordered auction supervised by Robert B. Pincus, a custodian duly appointed by the Court of Chancery under 8 Del. C. § 226. The parties executed the sale agreement (the “SPA”) in November 2017. Although this might have ended the stalemate between Elting and Shawe, it sparked a new series of conflicts that we are asked to resolve here.

With Elting cashed out, the contentious relationship between Shawe and Pincus took center stage. Aside from a brief détente when he won the auction, Shawe has been—to be charitable—unsupportive of Pincus’s court-mandated role with TPG. The result has been seemingly endless litigation in Delaware, New York, and Nevada, millions in contested legal fees, and an inability to agree on any material aspect of Pincus’s tenure as Custodian, up to and including his discharge. All of this occurred while Pincus was finishing a small number of post-closing tasks and attempting to wind-down his custodianship.

This case consolidates three challenges brought by Shawe and TPG to orders of the Court of Chancery. Each of the issues raised on appeal implicates Pincus’s right to petition the trial court for reimbursement of fees and expenses under the SPA and various court orders, including its August 13, 2015 Order appointing Pincus as Custodian (the “Appointment Order”) and its February 15, 2018 Order approving the sale of Elting’s shares to Shawe (the “Final Order”).

The bills

We turn next to the claim that “Skadden’s attorneys billed at outrageous rates[.]” In determining the appropriate amount of fees to award, the trial court found that Skadden’s rates were reasonable. We review this for an abuse of discretion. As an initial matter, the evidence discussed above regarding the rates charged by comparable firms in other cases runs contrary to the claim that Skadden’s rates in this matter were “outrageous.” Moreover, although Shawe and TPG retained an expert to challenge Skadden’s fees, the trial court observed that the expert focused primarily on only one of the eight non-exhaustive factors articulated by Rule 1.5(a), “the fee customarily charged in the locality for similar legal services[.]” Consistent with our guidance, the court considered other Rule 1.5(a) factors, including “the amount involved and the results obtained” and “the novelty and difficulty of the questions involved[.]” The court concluded that Pincus and Skadden faced a complex task and navigated significant obstacles, further justifying the hourly rates charged.  In our view, the court’s reasonableness determination was adequately supported.

Shawe and TPG also assert that Skadden should have discounted its rates. As above, this claim is undercut by the trial court’s finding that Skadden’s rates were similar to what it and peer firms charged in other matters. In any case, Shawe and TPG cite no controlling authority that requires a “reasonable client” discount. In fact, in In re RegO, Chancellor Allen awarded fees to a court-appointed guardian ad litem and explained that the “position that work of this sort is a quasi-public service that deserves to be paid at a discount is without authority.” We agree and conclude that none of Shawe’s and TPG’s challenges to Skadden’s hourly rates has merit.

Another rejected claim

Next, Shawe and TPG allege that Skadden billed improperly by producing vague entries and charging in full for overstaffed matters and simple research tasks. The trial court considered and rejected these challenges in calculating the overall fee award. Thus, once again, we review for an abuse of discretion. We reject these objections.

...Our own review of the record confirms that the Court of Chancery correctly dismissed this objection. For example, in the Omnibus Objection, Shawe and TPG attacked Skadden “for researching ‘indemnity rights’” for seven hours. Of course, Pincus’s right to indemnification was a hotly contested issue in this case, so the suggestion that Skadden’s research into the matter constituted an overreach pays scant heed to reality. We conclude that Shawe’s and TPG’s challenges to Skadden’s billing practices lack merit. 

Bottom line

we affirm the April 30, 2021 Fee Order awarding Pincus $3,242,251 in fees, subject to the qualification that TransPerfect Global, Inc. is the only party liable for the $1,148,291 Contempt Sanction.

(Mike Frisch)

Get It In Writing

An attorney who had represented a now-deceased client in divorce and return of seized property matters failed to prove that he had a contingent fee agreement with the client.

On November 11, 2013, Patsy Glover Bonifield (“Decedent”) hired Appellant David W. Camp to represent her in a divorce action against her husband, Glenn R. Bonifield (“Husband”). Decedent filed for divorce on November 25, 2013. In April 2016, while the divorce action was pending, agents with the drug task force raided Husband’s pharmacy. As a result of the raid, on May 4, 2016, the State of Tennessee (the “State”) seized several of Decedent and Husband’s marital assets, including: (1) a coin collection; (2) silver bars; (3) $13,280.74 in currency; and (4) the full value of Husband’s VOYA retirement account. Thereafter, Decedent allegedly asked Appellant to represent her in challenging the State’s seizure of these marital assets.

His claim for legal fees against the client's estate based on the alleged agreement failed as a result, according to a decision of the Tennessee Court of Appeals in affirming a trial court decision

The May 6, 2016 letter bears Appellant’s signature only. On review, there is no document signed by Decedent that could form the basis of a contingency fee agreement between Appellant and Decedent. See Tenn. Sup. Ct. R. 8, RPC 1.5(c). As such, we affirm the trial court’s finding that Appellant and Decedent never entered into a contingency fee agreement. Because Appellant and Decedent never entered into such agreement, there is no basis for Appellant to recover a 1/3 contingency fee from the Estate under Claim 1.

The attorney also sought review of a modest fee award 

In determining the reasonable value of Appellant’s services, it appears the trial court turned to the only proof in the record of Appellant’s legal fees, i.e., the invoice for $3,847.51 that was attached to Claim 2. The invoice is for legal services rendered from May 2017 through July 2018 and shows that Appellant billed 13.2 hours during this time period. The invoice also shows expenses (filing fees and postage) of $383.49 and appears to carry forward balances owed for previous invoices totaling $2,643.55. Although Claim 2 and the attached invoice may relate to Appellant’s representation as Decedent’s divorce attorney, it is the only proof of Appellant’s legal fees that he presented to the trial court. Accordingly, the record demonstrates that Appellant is entitled to no more than $3,847.51 for his services. Although Appellant argues that this amount is insufficient for the work performed, Appellant was provided the opportunity to prove the value of his services in the seizure challenge and, for the reasons outlined above, he failed to do so.

A Persuasive Professor

A Florida attorney who sued his clients for alleged unpaid fees ended up with a decision disgorging payments he had already received from the Tennessee Court of Appeals.

It is undisputed that the McMichaels paid Mr. Harris a total of $41,500 and that Mr. Harris demanded an additional $30,000 under the Third Agreement. Prior to the hearing in the instant case, Mr. Harris tendered a statement alleging that the McMichaels owed a balance of $40,027.50, comprised of 50.2 hours of work by Mr. Harris and 33.3 hours of work by a paralegal from August 7, 2014, though October 24, 2014.

The attorney was found to have breached fiduciary duties to the clients with respect to billing and a series of retainer agreements

The McMichaels called University of Tennessee College of Law Professor Paula Schaefer, whom the trial court qualified as an expert in the area of legal ethics. Professor Schaefer testified that: (1) an attorney has the ethical obligation to “make sure that their fee agreements are fair, fully explained, and easily understandable”; (2) “liens must be fair and explained to the client, and there is a presumption that they are voidable”; and (3) “[n]on-refundable retainers still must be earned and are therefore problematic.” Professor Schaefer opined that Mr. Harris breached his fiduciary duty to his clients. The trial court found “this witness to be the most credible of all of the witnesses as she had no financial interest in the outcome of case as well as [due to] her credential[s].”

The breach

Contrary to Mr. Harris’ assertion, the trial court did not hold that Mr. Harris breached his fiduciary duty due to his failure to abide by any Florida rule that required contemporaneous billing; rather, the court held “that [Mr. Harris’] failure to comply with the provisions of his fee agreement was a breach of his duty under the rules of professional conduct.” (Emphasis added). We agree. All three fee agreements provide, “Time billed shall be in increments of one quarter of an hour.”

As to the second and third retainer agreements, the trial court observed

[Mr. Harris] waited for deadlines to be close, at which time he demanded additional funds and promised, but never fully delivered, the representation that he convinced [the McMichaels] that [he] could perform. This created a situation for [the McMichaels] that put them in an unmanageable position after already having been put in a problematic position by [their previous counsel].

The attorney did not keep contemporaneous records

Mr. Harris testified that he: (1) prepared these [detailed billing] statements just prior to the hearing; (2) had not submitted them when he sent the “skinny bills” to the McMichaels; and (3) submitted the detailed bills to the McMichaels shortly before the hearing. This belated and ad hoc compliance with the billing provisions of the parties’ agreements simply does not reflect the promptness, diligence or appropriate communication required of a Florida attorney, or any other attorney. We conclude that the trial court did not err in holding that Mr. Harris’ failure to comply with the terms of his fee agreement constitute a breach of the fiduciary duty he owed to the McMichaels.

Disgorgement

The trial court’s equitable solution was to allow Mr. Harris $5,000, the amount contemplated in the First Agreement, and to disgorge him of the remainder of the fees paid him. Under the specific facts of this case, the trial court’s decision constitutes an acceptable resolution, see Lee Med., Inc., 312 S.W.3d at 524; as such, we conclude that the trial court did not abuse its discretion or otherwise err in allowing Mr. Harris to retain only $5,000.00.

(Mike Frisch)

"A Disturbing Confluence"

A recent recommendation for disbarment from the Massachusetts Board of Bar Overseers

By fraudulently inflating case expenses, the respondent intentionally deprived several clients of their money from personal injury settlements. A hearing committee has recommended the respondent’s disbarment. Finding no error of fact or law (with one minor exception, see footnote 8), we agree with the recommendation.

Admitted to the bar in 1991, the respondent, Abby R. Williams, focused her practice on plaintiffs’ personal injury cases, in particular medical malpractice. Since 1996 or 1997, she has owned her own practice, employing other lawyers and paraprofessionals. In 2007, the respondent hired Ross Annenberg as an associate; he remained employed until 2013 when he was allowed to resign in lieu of being fired. In 2015, the Supreme Judicial Court disbarred Annenberg for misuse of client funds while employed by the respondent. In 2018, Annenberg pleaded guilty to criminal charges arising out of the same conduct. Bar counsel’s investigation into Annenberg found no basis to file a petition for discipline against the respondent, since she had no involvement in Annenberg’s theft of funds. In a disturbing confluence of misconduct, the respondent and Annenberg independently stole money from different clients. In this case, the hearing committee rejected the respondent’s attempts to blame Annenberg for her defalcations (as well as her related argument that Annenberg altered the firm’s computer records to conceal his theft). Among other facts, the committee noted: Annenberg had no access to the firm’s accounting software (Quickbooks); the respondent signed all of the relevant checks; and the respondent offered no evidence that the stolen funds ended up in Annenberg’s possession. The committee found that the respondent was responsible for allocating costs in medical malpractice cases, while Annenberg was responsible for allocating costs in non-medical personal injury cases. (Hearing Report, para. 48). It also rejected as not credible the respondent’s defenses that the clients’ losses resulted from her inattention to the details of case finances (rather than intentional conduct) as well as her attempt to pin the blame on the law firm’s computer system (claiming that the system inexplicably lost backup records that would have substantiated the higher costs charged to clients). The committee found that the respondent’s law firm suffered financial challenges during the time in question, furnishing an unambiguous motive for her thefts. The hearing committee traced some of the stolen funds to the law firm’s operating accounts for the payment of salaries. The committee also traced client funds to the respondent’s personal accounts.

The board sustained the hearing committee's finding as supported by the evidence.

An aggravating factor

Lastly, the committee found that the respondent was untruthful in her hearing testimony. We see no reason to disturb these findings. With regard to the latter two factors, we generally are reticent to penalize a lawyer for defending herself at trial. However, our indulgence is limited. Where, as here, the record is replete with blatant lies, obfuscations, and evasions, we will not hesitate to consider this in aggravation.

Proposed sanction

The presumptive sanction for intentional misuse of client funds with deprivation is indefinite suspension or disbarment. Matter of Schoepfer, 426 Mass. 183,187, 13 Mass. Att’y 13 Disc. R. 6769, 685 (1997); Matter of Discipline of an Attorney, 392 Mass.827, 836, 4 Mass. Att’y Disc. R. 155, 166 (1984). Because the respondent has not made restitution, we recommend her disbarment.

It appears that the board's web page now posts their reports prior to final court action.

Bravo transparency. (Mike Frisch)

Pre-Approval Required

The Mississippi Supreme Court affirmed a reduced award of attorneys fees sought in an estate matter

To collect attorney’s fees from an estate, court approval is required.  So if an attorney is paid from an estate without court approval, he “takes the fee subject to the peril of having it disapproved later by the chancellor.”  That is what happened here. Obert Law Group collected more than $180,000 in attorney’s fees from Dr. Edwin Holt’s estate. But it did so without first seeking court approval. After a two-day hearing, the chancellor determined only $96,951 of the attorney’s fees in the estate matter were reasonable. So he ordered Obert Law Group reimburse the estate $84,945.

The story

At the time of his death, Dr. Holt was finalizing a divorce in Texas and seeking to have his dental license reinstated in Mississippi. Dr. Holt had hired first-year attorney Joshua Stretch to represent him in the dental-licensure matter. Due to his inexperience, Stretch associated more seasoned attorneys at Obert Law Group, Keith Obert and William Brown. When Dr. Holt died, Stretch still held $73,000 as a yet-to-be-earned retainer on the licensure issue.

Dr. Holt died tragically by his own hand at age forty-five. He left five minor children. Stretch drove Dr. Holt’s mother, Janet Holt, to the funeral. According to Janet, on the way back from the funeral, Stretch approached her “about the estate.” Two days later, Stretch emailed Janet, who became the estate’s executrix. He told her he wanted to handle the matter but he would need to bring in Obert for his expertise in estate matters. Stretch, Obert, and occasionally Brown began working immediately on estate matters. Their efforts included locating and protecting estate assets and dealing with Dr. Holt’s ex-wife, who strenuously asserted the divorce was never finalized so she was Dr. Holt’s heir and not her five minor children.

Stretch did not return the remainder of the prior dental-licensure retainer to Dr. Holt’s estate. Instead, he submitted this money to Obert Law Group, which in turn used this money to pay its first $73,000 in bills to the estate. After exhausting this money, Obert Law Group billed the executrix. The attorneys did not seek prior court approval of their attorney’s fees. Nor did they advise the executrix the bills should be court-approved before she paid them. Instead, because Janet believed she had no reason to question the invoices, she simply wrote checks from the estate to pay the invoices submitted to her—totaling $110,800. In seventeen months of representing the estate, Obert Law Group collected $181,896 in attorney’s fees.

Their representation of the estate ended when Janet petitioned the court to replace Stretch, Obert, and Brown with new counsel. At this point, their motion for final accounting and attorney’s fees had yet to be approved by the court. And before approval, the trustee of the revocable trust established by Dr. Holt, to which he had bequeathed the residuary of his estate for the benefit of his family, petitioned the court for the return of all the fees they had collected. The trustee asserted Obert Law Group had never sought preapproval of its attorney’s fees and had never advised Janet of her duty to first seek court approval before paying Obert Law Group with estate assets. The trustee also alleged Obert Law Group padded its bills and mismanaged the estate.

The court found that the trial court had fairly evaluated the reasonableness of the fees under Rule 1.5.

The chancellor entered a detailed order in which he considered the factors set forth in Mississippi Rule of Professional Conduct 1.5 for reasonable attorney’s fees.

Advice

Had Obert Law Group’s bills been submitted to the court for prior approval, this fight would have without question been largely tempered. The lawyers would have discovered quickly that the chancellor took a much more frugal view as to the time and labor required and the reasonableness of the charged fees than the attorneys did.

Dissent

Because I find the chancellor has not made this award with clarity and consistency with the lodestar method, I respectfully dissent. The chancellor’s order should clearly set forth and allow this Court to discern the chancellor’s rationale that $96,951 was a reasonable amount for attorneys’ fees and that $84,945 was unreasonable. It did not.

(Mike Frisch)

Fee Flee Leaves Law Firm Stuck

The South Carolina Court of Appeals affirmed the dismissal of a suit brought by a law firm alleging that the Workers Compensation Commission had failed to protect its fee interest

In its complaint, KCC alleged the following set of facts. On July 31, 2007, Bruce Nadolny retained KCC to represent him in a worker's compensation claim against AVX Corporation and Liberty Mutual Insurance Company. KCC, on behalf of Nadolny, entered into mediation on his claim. From that mediation, Nadolny agreed to accept a $120,000 settlement. The day after mediation, Nadolny informed KCC he no longer needed its representation, and KCC was relieved as counsel. KCC informed Nadolny that it had expended multiple hours and expenses working on his case and would file a claim for attorney's fees.

The law firm alleged that it notified the workers compensation commission of its claim but nonetheless

On November 3, 2016, the Commission approved the settlement to Nadolny's widow without notifying KCC of the hearing. KCC alleged Nadolny's widow moved out of South Carolina after receiving the settlement. 

KCC asserts the Commission was negligent, reckless, and willful...

In response the Commission asserted governmental immunity.

The circuit court agreed and here

KCC argues the circuit court erred in finding the Commission was immune under the Act. KCC asserts the Commission's failure to notify KCC of the hearing was a ministerial act and therefore neither the Act nor judicial immunity immunized the Commission. We find the issue of whether the Commission's alleged action or inaction was ministerial is not preserved for appellate review.

In its response to the Commission's motion to dismiss, KCC asserted the Commission was not immune because the Commission's act was not a judicial or quasi-judicial act because it was simple negligence. KCC did not raise the issue of whether the Commission's act was a ministerial act—and thus an exception to the Act's immunity—until its Rule 59(e), SCRCP, motion.

Thus waiving that issue on appeal.

The court further rejected the law firm's claimed due process violations. (Mike Frisch)

Utah On Flat Fees And Safe Harbors

A significant opinion of the Utah Supreme Court confirmed and reversed in part the district court's denial of summary judgment to an attorney who had accepted flat fees treated as earned on receipt.

The court found the attorney had violated Rule 1.15(c) in two instances but that a third such arrangement was protected by a Safe Harbor provision in Utah's disciplinary  rules.

The Safe Harbor against disciplinary prosecution is a provision that protects an attorney whose conduct complies with an in-force ethics advisory opinion.

The case - which does not seem amenable  to cut-and-paste - extensively interprets prior Utah disciplinary and ethics opinions on the subject of flat/advanced fees and will be required reading for every lawyer practicing in the Beehive State.

To better understand [the attorney's] arguments. it helps to consider how the law surrounding flat fee agreements has developed. This requires us to examine two rules, two ethics opinions and one Utah Supreme Court case.

 Ethics Opinion 136 addressed the circumstances under which a retainer could be earned on receipt.

The court decision in the Jardine case considered that opinion

But while one hand giveth, the other taketh away. Although we acknowledged that Opinion 136 could be read to support Jardine's argument, we rejected that reading.

The second ethics opinion came in the wake of the Jardine decision.

There are two concurring and dissenting opinions.

Chief Justice Durrant would apply the rule of lenity and give safe harbor here with notice to the Bar going forward.

Associate Chief Justice Lee would find the violation in all three instances. (Mike Frisch)

Fee Dispute May Proceed

A convicted defendant cannot pursue a malpractice claim against his post-conviction attorney so long as the underlying conviction remains in force and effect.

Absent reversal, such claims are unripe, according to a decision of the Connecticut Appellate Court.

However, the defendant may pursue a claim involving fees

We are persuaded that the policy and practical considerations behind the requirement that an action that necessarily implies the invalidity of a conviction must be dismissed if the underlying conviction has not been invalidated do not apply to the fee dispute allegations in the present case. As the court in Bird noted, in a fee dispute, the criminally convicted plaintiff is not seeking to shift the responsibility for and consequences of his criminal acts to his former counsel, nor is the client’s own criminal act the ultimate source of his predicament. Id., 428. Moreover, a judgment for a criminally convicted plaintiff in a fee dispute is not inconsistent with the judgment of his criminal conviction. Id. If a criminally convicted plaintiff could challenge defense counsel’s excessive or unlawful fees only if he or she is able to prove the invalidity of the underlying conviction, then ‘‘guilty clients could never seek redress against even the most unscrupulous attorneys.’’ (Internal quotation marks omitted.) Id., 431. We agree with the court in Bird that there is ‘‘no rational basis for affording criminal defense attorneys a virtually impregnable shield against suits to recover excessive or unlawful fees. Nor can we find any rational basis for affording civil litigants, no matter how morally blameworthy they may be, a remedy for exactly the same unlawful conduct, double-billing, inflating hours, etc., for which most criminal litigants are denied a remedy.’’ Id. Accordingly, we conclude that the allegations that the plaintiff makes in support of his fraud claim that merely constitute a fee dispute and that do not implicate the validity of his underlying conviction are not controlled by Taylor, and that dismissal of his fraud claim was unwarranted.

(Mike Frisch)

Irreconcilable Differences

A law firm that withdrew from representation due to irreconcilable differences with the client nonetheless retained its right to a lien on the subsequent settlement, as held by the New York Appellate Division for the Second Judicial Department

In May 2013, the plaintiffs in these related actions retained nonparty Greenberg & Wilner, LLP (hereinafter Greenberg), to represent them, inter alia, to recover damages for breach of contract against their former employer. The plaintiffs each entered into a separate retainer agreement pursuant to which they each agreed to pay Greenberg a contingency fee of 35% of the sum recovered, plus disbursements. In January 2018, after the matters were scheduled for trial, Greenberg moved for leave to withdraw as the plaintiffs’ counsel based upon undisclosed “irreconcilable differences.” The motion was granted unopposed. Greenberg requested that the matter be adjourned to allow the plaintiffs an opportunity to obtain new counsel. In March 2018, the plaintiffs retained the services of new counsel for an hourly fee. After one day of trial, the actions were settled for an undisclosed amount.

Crucial to the holding

Here, the plaintiffs’ contention that Greenberg withdrew without sufficient cause is not supported by the record. The evidence at the hearing demonstrated that Greenberg’s request to withdraw was based on irreconcilable differences regarding the appropriate course to be taken in the actions and a breakdown in the attorney-client relationship (see Robinson v Friedman Mgt. Corp., 49 AD3d 436, 437; Winters v Rise Steel Erection Corp., 231 AD2d 626, 626-627; Generale Bank, New York Branch v Wassel, 1992 WL 42168, 1992 US Dist LEXIS 2001 [SD NY, 91 Civ 176 (PKL)]). Therefore, Greenberg maintained its right to enforce its statutory lien.

The lien consists of 95% of the fee. (Mike Frisch)

Strong Medicine: Pay The Shekles

The Massachusetts Supreme Judicial Court upheld the ability of an Israeli law firm to enforce a judgment secured in Israel for unpaid legal fees

After the defendant, Amy Diamond, failed to pay the plaintiff, the Israeli law firm Cassouto-Noff & Co., its agreed-upon fees, an Israeli court held her liable for the debt. The plaintiff then initiated the current action in the Superior Court to recognize the Israeli judgment under the Massachusetts Uniform Foreign Money-Judgments Recognition Act, G. L. c. 235, § 23A (recognition act), a statute governing the enforcement of foreign money-judgments. Following a bench trial, the judge recognized the judgment, allowing it to be enforced. The defendant appealed, and we transferred the case to this court sua sponte. Although the defendant argues otherwise, we hold that the recognition act does not require compliance with Mass. R. Civ. P. 4 (d), as amended, 370 Mass. 918 (1976), and the  Israeli judgment does not offend public policy. We thus affirm.

The representation

In 2012 and 2013, the defendant held executive-level positions in business organizations collectively called the Bandel Group. After a venture launched by the Bandel Group in Israel encountered legal issues, the defendant contacted the plaintiff. Acting on behalf of the Bandel Group, the defendant entered into a written fee agreement for legal services with the plaintiff. The final provision specified that the agreement was
governed exclusively by Israeli law and that Israeli courts would have sole jurisdiction over disputes arising from the agreement. In addition to signing the agreement, the defendant repeatedly declared that "She was Bandel," and agreed, albeit orally, to be personally responsible for paying the fees.

The courts found that the defendant had evaded service and that "repugnancy" did not prevent enforcement

Repugnancy is strong medicine, best administered sparingly. A judgment will offend public policy when "the original claim is repugnant to fundamental notions of what is decent and just in the State where enforcement is sought." Restatement (Second) of Conflict of Laws § 117 comment c (1971).

...The Israeli judgment is not repugnant. This judgment was premised on the plaintiff asking the Israeli court to pierce the Bandel Group's corporate veil and hold the defendant personally liable.  As both the Superior Court judge and other courts have noted, Israeli courts take corporate veil piercing seriously.

Thus

The defendant should have argued in Israel against holding her personally liable, not in Massachusetts. See Ohno v. Yasuma, 723 F.3d 984, 1003 (9th Cir. 2013) ("Foreign judgments are not to be 'tried afresh' in [United States] courts, applying domestic concepts")

(Mike Frisch)

Unpaid Fee Lost

The Rhode Island Supreme Court affirmed the denial of relief to an attorney seeking post-mortem payment of the bills to a client

The trial testimony reveals that in 1991, plaintiff, a practicing attorney, met David F. LaRoche (David F.), who had been referred to plaintiff by another attorney for representation connected to an involuntary bankruptcy case. The plaintiff represented David F. for the entirety of that bankruptcy action and, later, another bankruptcy action. The plaintiff received some compensation for this representation; however, he did not receive all that he had billed. As a result, David F. owed plaintiff approximately $160,000 for his representation. No payments were ever made as to that amount.

In the summer of 2001, plaintiff and David F. entered into an agreement, memorialized in a promissory note, wherein the sum due to plaintiff was reduced to $140,000, and terms were established for that sum to be paid. The promissory note was due on October 10, 2006. According to plaintiff, he never received any payments from David F. on this note.

At some point, David F. informed plaintiff that he was gravely ill. Upon receiving this information, plaintiff determined that he would not take action against David F. while he was dealing with his illness. David F. died on February 26, 2009.

After his informal efforts to collect failed, the attorney filed suit in June 2010. The matter was tried in September 2014.

The trial court issued its decision in July 2019, rejecting unjust enrichment claims against a slew of individual and business defendants associated with the deceased.

The record contains no explanation for the seemingly unreasonable nearly five-year delay between the filing of posttrial memoranda and the issuance of the trial justice’s decision. We remind all judicial officers of their obligation to dispose of court business promptly and diligently.

Here, he appealed the failure to order a constructive trust

As no claims survived under the trial justice’s decision—and, on appeal, the plaintiff did not contest the trial justice’s decisions as to those claims—there is no surviving claim for which a constructive-trust remedy might be imposed.

(Mike Frisch)

Upson Downs: D.C. Approves Attorney's Fee Awards To Self-Representing Law Firms

A law firm may recover attorney's fees for self-representation in enforcing an arbitration award for unpaid fees, according to a decision of the District of Columbia Court of Appeals

Relying on the Supreme Court’s reasoning in Kay, a number of courts have held, under various statutes, that law firms can recover attorney’s fees when they are represented by a member or employee of the firm. See, e.g., Treasurer, Trs. of Drury Indus., Inc. Health Care Plan & Tr. v. Goding, 692 F.3d 888, 898 (8th Cir. 2012) (noting that there is attorney-client relationship between self-represented law firm and particular firm attorney who is representing firm; citing cases); Baker & Hostetler LLP v. U.S. Dep’t of Com., 473 F.3d 312, 325 (D.C. Cir. 2006) (although law-firm member may be “interested in the affairs of the entity, [the member] would not be so emotionally involved in the issues of the case so as to distort the rationality and competence that comes from independent representation”) (internal quotation marks omitted). We are persuaded by those decisions, and we reach the same conclusion in the context of the fee provision in D.C. Code § 16-4425(c).

The facts

Quinn Emanuel represented Dr. Nwaneri in a lawsuit but later withdrew from that representation. A dispute arose about the payment of attorney’s fees to Quinn Emanuel for the representation, and the matter went to arbitration.

On January 12, 2018, after a hearing, a panel of arbitrators from JAMS (an organization that provides arbitration services) issued an award of approximately $90,000 in favor of Quinn Emanuel.

The former client fought a Superior Court action to enforce the award and had sought to remove the case to federal court.

In April 2019, Dr. Nwaneri removed the case to federal court. The District Court for the District of Columbia promptly remanded the case to Superior Court, concluding that the removal was “patently improper.” The District Court also ordered Dr. Nwaneri to pay Quinn Emanuel’s costs and expenses, including attorney’s fees. The district court left calculation of the amount of attorney’s fees to the Superior Court.

Following the remand from the district court, the Superior Court ordered Dr. Nwaneri to pay approximately $23,000 in attorney’s fees arising from the removal proceedings. In calculating that amount, the Superior Court reduced the hourly rate claimed by Quinn Emanuel, instead applying the so-called Laffey matrix to determine the hourly rate.

The court's prior Upson decision had denied attorneys fees to a pro se lawyer in a domestic relations case.

Responding to the dissent

We agree with a number of points in the concurring and dissenting opinion. We respectfully differ, however, on several points. First, our holding in this case does not result in a “special rule just for law firms.” Post at 17. Rather, our holding would logically apply to other organizational litigants as well. Second, we disagree that the Supreme Court’s statement in Kay about the differences between individual and organizational litigants was “tailored to the particular statute at issue.” Id. at 20. The Supreme Court’s statement about those differences is worded in general terms. As we have noted, federal courts have relied on that statement in a number of different statutory contexts. Supra at 9. Third, the concurring and dissenting opinion appears to take the view that Upson should be read broadly to apply without regard to the factual distinction between Upson and this case, whereas Kay and Saxon should be read narrowly as limited to the specific context of those cases. Our decision in Saxon has already declined to read Upson as being broadly applicable to cases presenting materially different circumstances. Saxon, 97 A.3d at 577. We take the same approach in this case.

Associate Judge Easterly

I cannot critique my colleagues for wanting to limit the reach of Upson. Its holding that attorneys who represent themselves are ineligible to receive attorney’s fee awards is hardly intuitive. The court reasoned in Upson that the language of Superior Court Domestic Relations Rule 11 “presupposes a paying attorney-client relationship,” 3 A.3d at 1167, but all the rule (like the statute in this case) said was that the fees must be “incurred.” Id. at 1165 n.33. An individual who chooses not to pay another to do work they are educated and licensed to do themselves nonetheless incurs her own fees in the form of the lost opportunity cost to represent other clients. See McReady, 618 A.2d at 624 (Ferren, J., dissenting). The court also suggested that the pro se attorney and the pro se layperson were indistinguishable. 3 A.3d at 1167–68. But it makes sense that the latter group would not be included in a provision that authorizes “attorney’s fees” since they, being neither educated nor licensed in the law, are not “attorneys.”

Further, the court’s reliance in Upson—a case where a defendant was seeking attorney’s fees—on Kay and McReady—cases where a pro se civil rights plaintiff and a FOIA plaintiff, respectively, were seeking fees—is questionable. As the Supreme Court in Kay explained, the “specific purpose” of the attorney’s fee statute in that case “was to enable potential plaintiffs to obtain the assistance of competent counsel in vindicating their rights.” 499 U.S. at 436; see also supra note 2. But that is clearly not the objective of a sanctions provision like Domestic Relations Rule 11, especially not when the sanctions are sought, as in Upson, by the defendant.

Law firms representing themselves pro se should be eligible for attorney’s fee awards under D.C. Code § 16-4425(c). Individual pro se attorneys should also be eligible for fee awards under this provision. But Upson is an obstacle to both of these propositions. Because I disagree that there is sufficient justification for carving out a special rule for pro se law firms, and creating an asymmetry between individual and institutional litigants, en banc review is the only solution.

Associate Judge McLeese authored the opinion, joined by Associate Judge Deahl. (Mike Frisch)