Friday, September 10, 2021

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)

September 10, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Thursday, September 2, 2021

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)

September 2, 2021 in Bar Discipline & Process, Billable Hours, Clients, Current Affairs | Permalink | Comments (0)

Monday, July 26, 2021

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)

July 26, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, July 7, 2021

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)

July 7, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Tuesday, July 6, 2021

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)

July 6, 2021 in Billable Hours | Permalink | Comments (1)

Friday, June 11, 2021

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)

June 11, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Thursday, May 20, 2021

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)

May 20, 2021 in Billable Hours | Permalink | Comments (0)

Thursday, April 29, 2021

No Privity, No Recovery, When Law Firm Seeks Payment From Client's Insurer

A law firm may not recover its legal fees from its client's insurer according to a decision of the New York Appellate Division for the First Judicial Department 

Plaintiff law firm lacks standing to recover its legal fees under the insurance policy, to which it is not a named party (Miller & Wrubel, P.C. v Todtman, Nachamie, Spizz & Johns, P.C., 106 AD3d 446 [1st Dept 2013]). Plaintiff was merely an "incidental beneficiary to its client's malpractice insurance policy" (id.). Thus, the motion court properly found that plaintiff's sole recourse was against the insured, its client, and not its client's insurance provider.

Plaintiff's argument that it had a direct contract with defendant on account of the various correspondence between itself and one of defendant's employees also fails. Indeed, these letters merely confirm, consistent with the policy's requirement that the insurer's consent of the insured's choice of counsel not be "unreasonably withheld," that defendant consented to the insured's continued retention of plaintiff.

The motion court also properly dismissed plaintiff's claim for unjust enrichment, which required a showing, among other things, that defendant was enriched (Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011]). It is undisputed that defendant will pay the full limit of the policy to reimburse the insured for its defense and settlement costs of the covered claims, regardless of whether those costs were incurred by plaintiff or the other lawyers that the insured retained. Further, the retainer agreements between plaintiff and the insured govern this dispute, which provides a further basis for affirming the order (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]).

(Mike Frisch)

April 29, 2021 in Billable Hours | Permalink | Comments (0)

Thursday, April 15, 2021

Remand In Fee Dispute Between Attorneys

The Washington State Court of Appeals Division One remanded a fee dispute between two attorneys

Two attorneys, Harish Bharti and Stephen Teller, associated to represent Ruhul Kayshel on a discrimination case and a wage and contract class action case against Kayshel’s employer. Bharti and Teller entered into a one-page, handwritten fee division agreement. Teller withdrew prior to the class case reaching settlement. After the class case settled, Bharti and Teller disputed how to share their portion of the court-approved contingency fees in the class case. The trial court disagreed with Bharti that Teller should receive nothing and awarded Teller a percentage of the fees based on the fee division agreement and Bharti’s promises to Teller that Bharti would honor that agreement. Because the fee division agreement fails to satisfy the requirements of the Rules of Professional Conduct (RPC) 1.5(e)(1)(ii), we reverse and remand.

The court

As the Preamble to the RPCs states, one of the purposes of the RPCs is to regulate attorney conduct in order to protect public interest. And, the purpose of RPC 1.5(e)(1)(ii)’s requirement that the client confirm the agreement in writing is to ensure “the client received a reasonable and fair disclosure of material elements of the fee agreement.” RPC 1.5(11). Nothing in the record supports a finding that Kayshel agreed in writing to the Bharti/Teller Agreement despite Bharti’s assurances that he would obtain Kayshel’s agreement in writing. Thus, the Bharti/Teller Agreement violates public policy, is unenforceable as a matter of law, and cannot be the trial court’s basis for determining what fees to award Teller.

However, unlike in Belli where Tonkoff, Goldstein, and the client entered into a new contingency fee agreement completely excluding Belli, here, Kayshel approved in writing the Bharti/Friedman Rubin Agreement that would award Teller fees out of Bharti’s 35 percent of the contingency award. 98 Wn.2d at 571- 72. It is for the trial court to determine what that provision of the Bharti/Friedman Rubin Agreement allows.

We reverse and remand to the trial court to consider the parties’ legal theories and evidence in determining an equitable resolution in light of our ruling.

(Mike Frisch)

April 15, 2021 in Billable Hours | Permalink | Comments (0)

Friday, March 26, 2021

Cause Matters

A law firm's claim for quantum meruit recovery against a contingency fee client who had terminated representation depends on whether the discharge was or was not "for cause," according to a decision of the New York Appellate Division for the First Judicial Department

Defendant made a prima facie showing that she discharged plaintiff for cause after plaintiff settled her claim, allegedly without her authorization. Plaintiff merely raises an issue of fact as to defendant's credibility and motive. The fact that defendant's implied legal malpractice claim failed on causation or damages did not dispose of the issue of whether plaintiff was discharged for cause (e.g. Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 12-13 [1st Dept 2008]). The issue of whether plaintiff was discharged for cause prior to the completion of legal services cannot be determined on this record and a hearing is required (id. at 13; see Hee Jun Cheon Lee v Garcia, 80 AD3d 541, 541 [1st Dept 2011]). Should it be determined that defendant discharged plaintiff without cause, then plaintiff's remedy would be the fair and reasonable value of its services as computed on a quantum meruit basis (see Nabi v Sells, 70 AD3d 252, 253-254 [1st Dept 2009])

(Mike Frisch)

March 26, 2021 in Billable Hours | Permalink | Comments (0)

Friday, March 5, 2021

Second Remand In Billing Litigation

The Tennessee Court of Appeals affirmed and reversed in part a judgment in favor of an attorney in a suit brought by a former client

This appeal involves a fraud claim filed against an attorney by his former client. The attorney conceded that the client had been double-billed for some charges and repaid the client for those matters prior to trial. However, the client, now pro se, continued to pursue his claim for fraudulent billing, insisting that fraud extended to the entire invoice. He also claimed that the attorney had charged a higher hourly rate than agreed. After a bench trial, the trial court found that the client failed to demonstrate that the attorney intentionally misrepresented the amounts owed by the client and failed to present sufficient evidence of fraud. As such, the trial court dismissed the claim and granted the attorney’s request for discretionary costs. The client appeals. We affirm in part, reverse in part, and remand for further proceedings.

The attorney had represented the client in a divorce.

The client filed a bar complaint, which was dismissed.

The court had earlier remanded the case after the attorney was granted judgment based on res judicata of the dismissed bar complaint

We held that it did not, for two reasons. First, the Board was not a court of competent jurisdiction within the meaning of the res judicata analysis. Id. Secondly, the same claim was not asserted in both suits because the Board proceeding did not consider whether Vazeen should be awarded damages on his fraudulent billing claim...As such, this Court vacated the entry of summary judgment on the fraudulent billing claim and remanded for further proceedings. 

Trial was held at which only the client and the attorney testified.

The trial court found the attorney credible and granted judgment in his favor.

Here, the court found that fraud had not been proven but as to allegation that the retainer agreement had been forged

Finally, Vazeen maintains that one of the ways he was defrauded was by Sir’s “scheme” to charge $100 more per hour than Vazeen had agreed to pay. As proof of this alleged scheme, Vazeen points to his own testimony about his understanding of the fee agreement, his handwritten note evidencing that he spoke with other attorneys who were charging $250 per hour, and the invoices showing that he was charged $250 per hour for the first two months. The trial court found that “[t]he contract between [Vazeen] and [Sir] set [Sir’s] compensation rate at $375 per hour and his associate’s compensation rate at $350 per hour.” The trial court noted Vazeen’s allegation of forgery but found that he had “no proof thereof.”

The court

In our view, however, this case does not involve a simple allegation of forgery. It involves an allegation of fraud in connection with an attorney-client fee agreement. As a result, additional considerations come into play. “‘An attorney-client agreement [] is subject to a higher level of scrutiny by the courts.’” 

And so another remand

In light of the lack of findings and the lack of evidence regarding the relevant factors, we deem it necessary to remand this limited issue regarding the hourly rate to the trial court for further proceedings to include consideration of the Alexander criteria.

The Alexander criteria

In order to prove such good faith and fairness, an attorney seeking to enforce a contract for attorney’s fees must show:
(1) the client fully understood the contract’s meaning and effect,
(2) the attorney and client shared the same understanding of the contract, and
(3) the terms of the contract are just and reasonable

The court concluded that the factors must be considered even though the litigation did not involve a suit for legal fees. (Mike Frisch)

March 5, 2021 in Billable Hours, Clients | Permalink | Comments (0)

Monday, December 21, 2020

Duty To Explain Arbitration Provision In Retainer Agreement

A significant decision of the New Jersey Supreme Court on retainer provisions that mandate arbitration of fee disputes and legal malpractice claims.

For an arbitration provision in a retainer agreement to be enforceable, an attorney must generally explain to a client the benefits and disadvantages of arbitrating a prospective dispute between the attorney and client. Such an explanation is necessary because, to make an informed decision, the client must have a basic understanding of the fundamental differences between an arbitral forum and a judicial forum in resolving a future fee dispute or malpractice action. See RPC 1.4(c). That information can be conveyed in an oral dialogue or in writing, or by both, depending on how the attorney chooses best to communicate it. The Court refers the issues raised in this opinion to the Advisory Committee on Professional Ethics, which may propose further guidance on the scope of an attorney’s disclosure requirements. The new mandate will apply prospectively, except as to [former client] Delaney, who must be allowed to proceed with his malpractice action in the Law Division.

The court's opinion notes that the lawyer-client relationship is fiduciary.

The client is a sophisticated businessman who was presented with a four-page retainer agreement.

The retainer agreement stated that any dispute about the firm’s legal services or fees would be determined by arbitration and that, by agreeing to arbitration, Delaney waived his right to trial by jury. The agreement also advised Delaney that the arbitral result would be final and non-appealable. The one-page attachment indicated that the arbitration proceeding would remain confidential and would be conducted through a private arbitration and mediation organization called JAMS pursuant to its rules and procedures. The attachment, moreover, contained a hyperlink to thirty-three pages of JAMS rules governing the arbitral forum.

When the relationship terminated, the firm invoked the arbitration process to collect unpaid fees. 

As so often happens, the client then sued for malpractice.

The Chancery Court upheld the arbitration provision; the Appellate Division reversed. 

Here   

We now hold that, for an arbitration provision in a retainer agreement to be enforceable, an attorney must generally explain to a client the benefits and disadvantages of arbitrating a prospective dispute between the attorney and client. Such an explanation is necessary because, to make an informed decision, the client must have a basic understanding of the fundamental differences between an arbitral forum and a judicial forum in resolving a future fee dispute or malpractice action. See RPC 1.4(c).

An arbitration provision in a retainer agreement is an acknowledgement that the lawyer and client may be future adversaries. That the retainer agreement envisions a potential future adverse relationship between the attorney and client -- and seeks to control the dispute-resolution forum and its procedures -- raises the specter of conflicting interests. An arbitral forum and judicial forum, and their accompanying procedures, are significantly different.

Oral argument (quite interesting if you have 2+ hours to spare) linked here. (Mike Frisch)

December 21, 2020 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, December 9, 2020

Lien Gives Way

The New Jersey Appellate Division has held that an attorney's lien acknowledged when the law firm withdrew from representation of a divorce client gave way to the interests of the opposing client

To be sure, as [law firm] Donahue emphasizes, the judge recognized [former client] Tobia's theoretical entitlement to half the marital assets in making his equitable distribution findings, but, because of Tobia's failure to comply with his support obligations and other directives, the judge concluded Lisa was entitled to all assets, including the fund in question.

The court took away $20,000 that the trial court had awarded to the firm.

we must also reverse that part of the order that allowed Donahue to receive $20,000 from the fund. The judge provided a brief explanation for that ruling  that seems untethered to his analysis of the equities and linked only to a feeling of sympathy for Tobia's former attorney that should have played no role in his considerations.

As Willy Wonka might say, you get nothing!

The law firm's former client had behaved badly

Even assuming Tobia obtained an actual award or judgment – not just a momentary acknowledgement of his potential right to half a marital asset ultimately awarded to Lisa – Donahue's assertion of a lien gave it no greater rights than Lisa, only an opportunity to argue that it should have a priority over Lisa to the fund. The judge correctly viewed the undertaking in this way and reached the appropriate conclusion that Lisa clearly possessed a higher priority than her adversary or his attorney, much like the plaintiff in B.B. v. Mell, __ N.J. Super. __, __ (App. Div.Nov. 23, 2020) (slip op. at 7-10). As the victim of Tobia's contumacious conduct, coupled with his continuing unwillingness to voluntarily pay his support obligations despite his significant earning capacity, Lisa stands on much higher equitable ground than Tobia's former attorneys. Indeed, to rule otherwise would inequitably shift a portion of Tobia's fees to Lisa's side of the ledger – a ruling wholly inconsistent with the disposition of this matrimonial action.

(Mike Frisch)

December 9, 2020 in Billable Hours | Permalink | Comments (0)

Monday, November 23, 2020

No Rights Superior To Victim

The New Jersey Appellate Division has held that attached funds should not be released to finance the defense of subject of the attachment 

In this interlocutory appeal, we consider whether or to what extent defense counsel in a civil action is entitled to be paid from funds that were the subject of a prejudgment attachment. Concluding that the statutes and rules governing attachments and equitable principles do not support the payment of fees from the attached funds, we reverse the orders under review.

In putting this issue in perspective, we note that there is no dispute that, over the course of five months from July to December 2017, defendant S. Bradley Mell engaged in sexual relations with plaintiff B.B., who was then fifteen-years old. That illicit and unlawful relationship was eventually discovered and led to Mell's arrest in May 2018; a year later, Mell pleaded guilty to state and federal crimes arising from his victimization of B.B., and he is presently serving a seven-year federal prison term in Pennsylvania.

B.B. commenced this civil action for damages in October 2019 and quickly sought a prejudgment writ of attachment of Mell's assets.

The trial court's order was reversed

And, so, we decline the invitation to find for Mell a legal or equitable right to the payment of his counsel fees – incurred in a civil action brought by his victim – from funds that have been attached for his victim's benefit. In reversing, we conclude that B.B. has a higher priority to the attached funds than Mell or [attorney] Lomurro, that nothing in the statutes or rules governing attachment actions creates an exception from attachment for a defendant's counsel fees, and that neither Mell nor Lomurro has demonstrated an equitable right to the attached funds greater than B.B.'s right to the security provided by the attachment.

 My Central Jersey reported on the case.  (Mike Frisch)

November 23, 2020 in Billable Hours | Permalink | Comments (0)

Tuesday, November 10, 2020

Making An Impression

The Wisconsin Supreme  Court ordered a two-year suspension of an attorney

Attorney Scholz's misconduct reflects a callous disregard for the rights of the opposing party, and his fundamental obligation as an officer of the court to honor and obey circuit court orders. He lied to opposing counsel, the mediator, the circuit court judge, a court-appointed special master and to the OLR, all in an effort to conceal his conversion. He fabricated documents that he submitted to the court to try to conceal his misconduct. Considering the precedent cited by the OLR, coupled with a number of aggravating factors, including his prior discipline, we have no difficulty concluding that a suspension of two years is appropriate. Indeed, a lengthy suspension is necessary to impress upon Attorney Scholz and other lawyers in this state the seriousness of the professional misconduct at issue here, and to protect the public from similar misconduct in the future.

The court asked for supplemental briefing on res titution. (Mike Frisch)

November 10, 2020 in Billable Hours | Permalink | Comments (0)

Wednesday, September 16, 2020

Finders Weepers

The New York Appellate Division for the Second Judicial Department affirmed the grant of summary judgment to a law firm sued for a referral fee

The plaintiff commenced this action to recover attorneys’ fees from the defendant law firm for a client referral made by the plaintiff’s decedent, George Moss, who was an attorney. The Supreme Court granted the defendant’s motion for summary judgment dismissing the complaint and denied the plaintiff’s cross motion for summary judgment on the complaint. Thereafter, the court entered a judgment in favor of the defendant and against the plaintiff dismissing the complaint. The plaintiff appeals.

The defendant established its prima face entitlement to judgment as a matter of law by submitting evidence that there was no written agreement between George Moss and the defendant to share fees in the underlying medical malpractice case. Furthermore, even assuming that there was a fee-sharing agreement in place, an attorney who seeks a share of the fee pursuant to such an agreement must have contributed some work, labor, or service toward the earning of the fee (see Benjamin v Koeppel, 85 NY2d 549, 556; Krug v Offerman, Fallon, Mahoney &Cassano, 214 AD2d 889; Grasso v Kubis, 198 AD2d 811). Here, the record establishes that George Moss’s role was merely that of a finder, who referred the plaintiff in the underlying action to the defendant. In order to be entitled to a portion of the fee, more is required of the forwarding attorney than the mere recommendation of a lawyer (see Nicholson v Nason & Cohen, P.C., 192 AD2d 473). The plaintiff failed to raise a triable issue of fact in opposition.

(Mike Frisch)

September 16, 2020 in Billable Hours | Permalink | Comments (0)

Wednesday, July 29, 2020

Class Counsel Fee Reduction Reversed

A reduction of class counsel attorneys fees was reversed by the New Jersey Appellate Division

Here, to support the fee application, Class Counsel submitted certifications by the lead attorneys, both highly experienced in class action consumer protection litigation, attesting that the hourly rates were consistent with their standard hourly rates and had been previously approved in several New Jersey state and federal cases. In addition, Class Counsel submitted certifications from three experienced unaffiliated practitioners who also certified that the hourly rates billed by the attorneys working on the litigation were reasonable and consistent with rates charged in the community by lawyers of comparable seniority and experience. In that regard, other than referring to the hourly rate of one of defendants' attorneys, defense counsel's certification did not dispute Class Counsel's submissions. Indeed, the judge even commented that "[d]efendants could have facilitated the analysis by providing certifications as to what the local or customary fee [was]."

Class Counsel's undisputed submissions mirrored the certifications deemed acceptable in Rendine. In rejecting Class Counsel's submissions and reducing the hourly rate for all the attorneys and the paralegal, the judge relied on her personal experience in private practice, a methodology rejected in Walker, 209 N.J. at 146, and considered four unpublished decisions. See Brundage v. Estate of Carambio, 195 N.J. 575, 592-93 (2008) (acknowledging that Rule 1:36-3 "provides that '[n]o unpublished opinion shall constitute precedent or be binding upon any court.'" (alteration in original) (quoting R. 1:36-3)). Under these circumstances, we are persuaded that the judge's reduction of the hourly rates was based upon consideration of inappropriate factors, and thus reflects a mistaken exercise of discretion. Accordingly, we are constrained to reverse and remand for reconsideration of the counsel fee award.

(Mike Frisch)

July 29, 2020 in Billable Hours | Permalink | Comments (0)

Friday, July 24, 2020

Notice Of Arbitration Rights Must Proceed Suit For Fees

The New York Appellate Division for the First Judicial Department affirmed the dismissal of a claim for legal fees where the attorney had failed to provide timely notice to the former clients of their arbitration rights

In this appeal we are called upon to determine whether Supreme Court correctly found that plaintiff's failure to serve, pursuant to Part 137 of the Rules of the Chief Administrative Judge, a notice of right to arbitrate within two years of rendering legal services barred his contract action for unpaid fees.

Facts

In June 2010, defendants retained plaintiff to provide legal services for the benefit of 1885-93 7 Avenue HDFC, a cooperative corporation of which all defendants were shareholders. The agreed upon scope of services were representation concerning issues of proper governance of the cooperative corporation, improper acts by members of the board of directors, and invalid acts or resolutions of said board of directors. It was contemplated that the services provided would [*2]include litigation. The retainer agreement also included a provision that defendants may have the right to arbitration of a dispute concerning attorney's fees.

It is undisputed that plaintiff continued the representation until 2015. At that time, defendants ceased paying plaintiff. It is undisputed that the last day on which plaintiff rendered legal services was June 2, 2015.

The attorney sent the notice to arbitrate more than three years later to the Joint Committee on Fee Disputes and Conciliation

The Committee subsequently denied arbitration of the claim. By letter dated August 30, 2018, the Committee noted that the last day plaintiff rendered legal services was more than two years earlier. As such, under its own rules, it denied the request to arbitrate.

Arbitration is the client's right

Fee arbitration is mandatory if requested by a client or a former client. It is a right of the client. Where, as in this case, an attorney, through their own delay deprives the client of that right, the attorney cannot in good faith claim compliance with the procedures of Part 137. Not only would this effectively give counsel the option of whether to arbitrate, because counsel could control whether the dispute began in two years or less, it would also be directly contrary to the rules, which provide that it is the client's choice.

Thus the fee claim was properly dismissed

The loss of the right to arbitrate that resulted from plaintiff's delay sufficiently supported the defense of laches (see Matter of Linker, 23 AD3d 186, 189 [1st Dept 2005]). Finally, by the aforementioned conduct, we find that plaintiff waived his right to initiate an action in court (Jefpaul Garage Corp. v Presbyterian Hosp. in City of N.Y., 61 NY2d 442, 446 [1984]).

Accordingly, the order of Supreme Court, New York County (Andrew Borrok, J.), entered on or about May 28, 2019, which, inter alia, denied plaintiff's motion to strike affirmative defenses and granted defendants' cross motion to dismiss the complaint should be affirmed, without costs.

(Mike Frisch)

July 24, 2020 in Billable Hours | Permalink | Comments (0)

Friday, May 22, 2020

Loyalty And Fee Forfeiture

The Alaska Supreme Court upheld a contingent fee forfeiture as a result of ethics issues in the representation. 

If the link does not work, the case is Kenneth P. Jacobus, P.C. and Kenneth P. Jacobus v. Uwe Kalenka, Personal Representative of the Estate of Eric Wayne Kalenka, decided today. 

The court sets out the story

After a conflict of interest between an attorney and a long-time client arose during settlement negotiations, the attorney filed a confidential motion with the superior court criticizing his client. The client discharged the attorney and hired new counsel. But the attorney continued to control the settlement funds and disbursed himself his fee, even though the amount was disputed by the client. The court found that the attorney’s actions had violated the rules of professional conduct and ordered forfeiture of most of his attorney’s fees. We affirm the holding of the superior court.

Kenneth Jacobus represented the estate of Eric Kalenka for over a decade after Eric Kalenka was murdered in 2004.  Eric’s divorced parents, Uwe Kalenka and Dorcas Teall, were the estate’s beneficiaries; Uwe Kalenka was the personal representative. Uwe Kalenka retained Jacobus to represent him in the administration of his deceased son’s estate and to bring claims against insurance companies and third parties. Kalenka agreed to pay Jacobus’s fees by a combination of an hourly rate for work relating to the administration of the estate and a share of any recovery from the claims against insurance companies and third parties.

Three cases arose fromEric’s murder: a criminal case in which Jack Morell was convicted of second-degree murder;  a civil suit against an automobile insurer;  and a civil suit for wrongful death against the bar that had served alcohol to Morell (the Jadon litigation). Jacobus prevailed in reversing summary judgment for the bar in the Jadon litigation and entered into settlement negotiations.

In 2015 Jacobus filed an ex parte “Confidential Status Report” with the superior court. In it he stated that although the Jadon litigation appeared to be near settlement, he was concerned that Kalenka was unable “to reasonably evaluate any settlement offer.” Jacobus believed that Kalenka’s emotional state and desire for revenge would lead him to “refus[e] to accept a reasonable settlement offer,” and result in a trial with a “substantial chance of a defense verdict.” Jacobus believed that refusing to settle would be contrary to the best interests of the estate and the estate’s other beneficiary, Teall. Jacobus was also concerned he would not collect his fee given the low likelihood of success at trial. He therefore concluded that he could no longer assist Kalenka.

The trial judge ordered disclosure of the report to the client and held a hearing

The hearing was held in September 2015. Jacobus and Kalenka were present; Kalenka had retained a new attorney, Alfred Clayton. The court ordered the substitution of counsel, replacing Jacobus with Clayton. The next day Jacobus filed an attorney’s lien on funds related to his representation of Kalenka.

Kalenka, represented by Clayton, then settled the Jadon litigation. Following the settlement Clayton wrote Jacobus. This October 2015 letter advised Jacobus that “[t]he settlement check should soon be delivered to [Jacobus’s] office” and authorized him “to deposit [it] into [Jacobus’s] trust account.” The letter also stated that Jacobus was “not authorized to disburse any of the settlement funds from trust until disputes relating to [his] claim for fees and costs are resolved.”

Clayton’s letter then addressed Jacobus’s “claim for a . . . contingent fee from the settlement.” The letter listed events that had occurred since “the confidential probate filing” and stated that as a result “it is . . . Kalenka’s position you are entitled only to a fee in the amount of $83,333.33” rather than the $112,500 Jacobus claimed he was owed.

Clayton sought an accounting but

Jacobus responded a few days later in a lengthy letter with a number of attachments. The letter informed Clayton that Jacobus had already acted regarding the settlement proceeds and had created a new trust account, the “Kalenka Settlement Proceeds Trust,” with himself as trustee. Attached to the letter were an ethics opinion from the Alaska Bar Association and the Declaration of Trust for the newly established trust. The Declaration stated that the trust was created because “it appears necessary to protect the interests of all people who are involved with . . . Kalenka.” The trust’s purposes included protecting Teall’s share of the inheritance and Jacobus’s and Clayton’s fees and costs from interference by Kalenka.

On November 23 Clayton responded to Jacobus’s “astonishing letter.” He again requested the formal accounting of Jacobus’s costs and fees he had sought in his first letter. He then objected to Jacobus’s “extraordinary” actions in creating a new trust, unilaterally determining its purposes, and declaring himself its sole trustee, serving without bond. He accused Jacobus of “usurp[ing] the role of [the judge] who actually presides over the Probate proceeding.” Clayton described as “[e]ven more astonishing” Jacobus’s declaration that the “first thing” he intended to do was “communicate with . . . Teall” after the court had expressly denied his request for permission to do so.

Then

A month after receiving Clayton’s letter, Jacobus filed a “Notice of Intent to Violate Court Order,” asserting that Alaska Rule of Professional Conduct 1.15(d) required him to violate the August order that forbade him from disclosing any confidential information to Teall without Kalenka’s permission. Jacobus claimed that he was ethically required both to promptly notify Teall that he had received funds and to distribute the amount to which Teall was entitled as a beneficiary of the estate.

The superior court ruled against the attorney

Jacobus appeals the superior court’s orders prohibiting him from revealing confidential information to Teall; its findings that he violated his duties to his client; and the order forfeiting the majority of his fees.

Here as to the superior court order

But Jacobus misinterprets both Rule 1.15(d) and the court’s order regarding communication with Teall. Rule 1.15(d) directs an attorney to promptly notify a client or third party upon receipt of funds or property in which the client or third party has an interest. The order prohibiting Jacobus from speaking with Teall only proscribed the “disclos[ure of] any confidential information.” Jacobus could thus have complied with both the order and Rule 1.15(d)’s directive simply by notifying Teall of the existence of settlement funds.

And contrary to Jacobus’s arguments, the December 2015 order made clear he was permitted to communicate with Teall or others. This order reiterated that Jacobus was ordered in August to refrain only from disclosing confidential information unless authorized by Kalenka; it did not prohibit Jacobus from revealing non-confidential information. Noting that the Jadon file was not confidential, the court stated that nothing in its August order prevented Jacobus from sharing information with Teall that a settlement had been reached.

And as to loyalty

The superior court found that Jacobus “continually violated” the duty of loyalty to his client, Kalenka. Jacobus filed pleadings that were directly adverse to Kalenka, ignored Kalenka’s instructions, and urged the court to take actions that were contrary to the instructions he had received from Kalenka.

And disbursement

The superior court did not err by concluding that Jacobus violated his duty to Kalenka when he disbursed funds to himself. Clayton’s October 2015 letter explicitly directed Jacobus to refrain from disbursing funds because of the ongoing dispute over the amount to which he was entitled. Jacobus therefore violated his duty of loyalty by paying himself $83,333.33. By filing pleadings and requesting authorization to take actions that were contrary to Kalenka’s interests and instructions to him, Jacobus also violated his duty of loyalty to his client. Further, by creating a trust for the specific purpose of protecting himself and third parties from his client after his client discharged him, and by paying himself from the trust funds despite an ongoing dispute over fees, Jacobus committed additional violations of his duty of loyalty to Kalenka. The superior court did not err by concluding that Jacobus had committed “egregious” violations of his ethical duties.

The court upheld forfeiture of the contingent fee. (MIke Frisch)

May 22, 2020 in Billable Hours, Clients | Permalink | Comments (0)

Monday, May 18, 2020

A Third

The Delaware Superior Court affirmed a Court of Chancery decision finding in favor of a defendant law firm in a contingency fee dispute

Appellant had been involved in a multi-vehicle accident. Appellant eventually retained the law firm of Pratcher Krayer, LLC to represent him in a claim against one of the other drivers. Appellant exhausted his PIP benefits (including some loss of wages benefits) under his own insurance policy, Travelers Insurance (“Travelers”). The retainer agreement that Appellant signed provided for the firm to represent him against the other driver, who was represented by GEICO Insurance (“GEICO”). The retainer agreement stated that the attorney’s fee would be one-third of Appellant’s total award.  A mediation was held and GEICO, that day, offered a settlement of $60,000. Appellee explained the settlement offer and the approximate sum of money that Appellant would receive after payment of the attorney’s fee, expenses, etc. Thereupon, Appellant signed the settlement agreement. Shortly thereafter, GEICO sent a $60,000 check and a release to Appellee’s office. However, Appellant refused to sign the release because he believed that he was owed additional lost wages (which he calculated to be $25,000), that $25,000 should first be given to him from the settlement, and that Appellee’s one-third fee should be determined from the remainder. As such, Appellant contended that Appellee was only entitled to one-third of $35,000. Appellant sued the law firm in the Court of Common Pleas. The Court of Common Pleas decided in favor of the law firm, finding that Appellant did not meet his burden of proof. Appellant now appeals that judgment.

The appeal

In his Notice of Appeal, Appellant contends that he did not receive a fair and just trial, Attorney Pratcher fabricated stories and manipulated Appellant’s subpoenaed witness, and Appellant was denied his out-of-work wages of $25,000 that was agreed upon by Appellee.

Result

Appellant appears to argue that the Court of Common Pleas’ decision is contrary to the evidence and should be reversed. Appellant also asserts that the decision should be reversed because his attorney-client privilege was violated, Attorney Pratcher manipulated Appellant’s witness, and Appellant was denied his rights to appeal the settlement agreement or to sue the other driver.

A careful review of the record and the parties’ submissions reflect that the Court of Common Pleas’ factual findings are supported by the record and are the product of an orderly and logical reasoning process. Additionally, it did not commit legal error in holding that Appellant did not meet his burden of proof.

The Court of Common Pleas held that Appellee was entitled to one-third of the entire settlement agreement amount of $60,000. It made this finding after reviewing all of the  Appellee was entitled to one-third of the total settlement amount...

While it is understandable that Appellant would like to receive more money for his loss of wages, Appellant did not prove his case.

(Mike Frisch)

May 18, 2020 in Billable Hours | Permalink | Comments (0)