An article which appeared in The New York Law Journal (coming to me via yesterday's New York Lawyer) revisits an issue near and dear to lawyers' hearts - their fees. The article discusses a fee dispute between a New York law firm and its client over a contingency fee arrangement made not at the beginning of the engagement, but several years into the litigation, after the firm had already received millions in fees calculated hourly and only months before a very lucrative settlement.
In Lawrence v. Graubard Miller et al., the Appellate Division, First Department denied Ms. Lawrence's motion to dismiss Graubard Miller's petition to compel payment of the contingent fee and said further proceedings would be needed to determine the propriety of the arrangement. One dissenting justice felt that the fee was unconscionable on its face, but even that justice noted that his opinion might be different if the agreement had been made at the outset. The fact that the firm had already collected several million in fees on an hourly basis, plus additional millions in 'gifts' prior to entering into the contingent arrangement figured heavily in his dissent.
A referee who had been assigned by the Manhattan Surrogate, former Court of Appeals Judge Howard Levine, had concluded that there was no legal authority for finding a contingent fee unconscionable solely on the basis of its size and without any inquiry into the discussions between client and attorney. The referee's determination was also cited in the decision.
The First Department majority opinion noted that, "before any determination regarding unconscionability can be made, the circumstances underlying the agreement must be fully developed, including any discussions leading to the agreement, as well as the prospects at that time of successfully concluding the litigation in favor of Mrs. Lawrence."(emphasis added)
The main point for me is, once again, that it is important to establish expectations with clients clearly at the outset of the engagement and at any time when substantial changes (particularly changes to the fee agreement) are being made. Here, the court has specifically noted that the fee may be upheld if it can be determined that the discussions between the firm and the client were sufficient.
For more on the decision, see the Wall Street Journal's Law Blog post entitled, "Court: $42 Million Legal Bill Not Unconscionable 'On Its Face.'"
The court is correct in leaving open the judgment of the fee to an analysis of the discussion between attorney and client. If the client was properly advised and had a choice to hire someone else, how can the fee be unconscionable?
What makes a fee unconscionable.. certainly it cannot be a simple comparison to what other lawyers charge....yet some lawyers believe that its exactly that....if the most experienced attorney in town charges X, then it must be unconscionable for a less experienced attorney to charge X+.
That cannot be the measure. If a client has a $100,000 problem and I can solve that problem in 10 seconds, but my fee is $10,000..is that unconscionable? I suggest not as long as there is a market... as long as the client has a choice as to hire me or someone else. But simply because I may have made a lot of money because of my knowledge does not make the fee unconscionable.
Lawyers make a huge mistake in being a slave to the "billable hour." And those who continue to want to measure "consciounability" based on the time spent are in the dark ages.
Ben Glass,
Fairfax, Virginia
Posted by: Ben Glass | December 02, 2007 at 05:17 PM