Kia Franklin

Civil Justice… to Fee or Not to Fee?

A 40 percent contingency fee negotiated by a Manhattan law firm retained by the widow of a real estate developer involved in a multimillion-dollar estate dispute was not “unconscionable on its face,” an appeals court ruled yesterday.

The court said that “at first blush,” the 40 percent fee — worth about $42 million — that was claimed by the law firm, Graubard Miller, from Alice Lawrence, the 83-year-old widow of the real estate developer Sylvan Lawrence, “might arguably seem excessive and invite skepticism.” (Quoted from today's New York Times )

But also quoted from the Times,

“What the courts recognize is that a fee agreement is not unconscionable simply because it can produce a big fee,” Mr. Zauderer said. “You have to look at the value rendered to the client.”

Without knowing more, I can't weigh in. The average contingency fee is somewhere around 30%. I want to know more: about the client, Mrs. Lawrence, her financial situation at the time the arrangement was made, whether it's possible she could have been taken advantage of, how much work was involved for the lawyers, the level of complexity of the issues at hand, how long they estimated the whole thing would take, chances of winning, etc., etc., etc. The new lawyers for Mrs. Lawrence say they will probably continue to challenge the old lawyers' fee, so perhaps they'll have an opportunity to get into these details.

Some more general questions for us to explore: For those who oppose the fee: is it exorbitant/unconscionable because it's 40%, or because it amounts to $40 million for the lawyers? What if the case had a 10 percent chance of success? What should be the determining factor in an attorneys fee's unconscionability? For the proponents of the fee: at what point is enough enough, no matter how complex the issues, no matter how much time the case will take, no matter how many lawyers are working on the case? Is there a contingency, percentage-wise, that is just too high, regardless of the details at hand?

Scanning the blogosphere for others' thoughts, this blawger shares his/her insights about contingencies generally:

"America awards risk and hard work. When an attorney takes personal resources, time and money, and invests in a case, the attorney deserves to be paid exactly what the employer (client) agreed to pay him. This is especially true if the employer (client) is making a large amount of money as well as a result of the attorney’s efforts."

As an aside, I wish there were a way to measure and compare the level of disdain for high attorneys' fees for plaintiffs' lawyers against disdain for the more uniform and predictable, and less risky high salaries of in-house lawyers and lawyers who work at corporate defense firms. (Disclaimer: I summered--interned--at 2 big private sector firms and really enjoyed my time there. This isn't to disparage those in that field. I'm just sayin'.)

Hmmm...I wonder what kind of arrangement Mrs. Lawrence has with her new lawyers?

Kia Franklin: Author Bio | Other Posts
Posted at 10:17 AM, Nov 30, 2007 in Attorneys' Fees | Civil Justice
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You should be aware that the real controversy is not the 40 percent but the fact that the contingent fee was negotiated a few months before settlement by a firm that had worked on an hourly basis for 22 years, collecting $18M.

This NYLJ story has a lot more detail.

Posted by: Anonymous | November 30, 2007 4:52 PM

You missed an import question: Would she have gotten as big a settlement if she had gone with an attorney who charged her 30% or an hourly fee? Obviously Mrs. Lawrence had some reason for picking the attorneys she did, and for agreeing to the settlement that she did. That she paid her attorneys $40 million to obtain for her an additional $5 million above the $60 million she had been offered, may not look like much benefit, but she may very well have had other reasons for what she was doing.

Posted by: NIck Slade | November 30, 2007 4:53 PM

Or Not

It is not unusual for attorneys to talk unsophisticated clients into unfavorable fee agreement

Rule of Thumb #1

HONEST attorneys who use contingency fee arrangements use a sliding scale in which the % fee slides DOWNWARD as the size of the recovery increases. This agreement bespeaks a law firm wih the ethics of Jack the Ripper

Posted by: Paul W Dennis | December 2, 2007 3:00 PM

I came to this post late, but I'll take a crack at your question. What's outrageous about the fee in this case is (1) it represents double recovery. The P had already paid her lawyers $18 million in fees, which resulted in a $60 million settlement. The lawyers then renegotiated the fee agreement to give themselves a 40 percent cut of TOTAL proceeds received. That gives them 40 percent of the $60 million that they'd already been paid for. Second, the client came away with NOTHING for the renegotiation. 5 months later, the lawyers settled for $100 million; they took $40 million leaving P the $60 million on the table at the beginning. If they'd worked hourly for 5 months, they'd have charged much less, so she'd have gotten more.
Do I think lawyers shouldn't be paid? Not at all. The lawyers should have gotten 40 percent (or even 50 percent) of any amount recovered above $60 million - so 40 percent of $40 million. They'd get a nice payday and most importantly, the client would get money.

Posted by: Carolyn Elefant | December 7, 2007 2:00 PM