A recent Law 360 story by Y. Peter Kang, “Fees Too Low in $18M Plane Crash Suit Deal, Court Says,” reports that a California appellate panel published an opinion holding that a trial judge’s decision to grant just 10 percent attorneys' fees in an $18.1 million settlement of a wrongful death suit over a plane crash was too low and unreasonable given a much higher contingency fee agreement.

A three-judge Court of Appeal panel for the Second District reversed a trial judge’s decision to award attorneys' fees of 10 percent to Herzog Yuhas Ehrlich & Ardell APC after the firm successfully negotiated a settlement of product liability and other claims made against Cessna Aircraft Co. and others stemming from a 2012 plane crash in Germany that killed California-based entrepreneur Rainer Schulz and four others.

At issue is what constitutes reasonable attorneys’ fees for cases involving minors under California court rules, which require a judge’s approval of such settlements.  Herzog had asked the court to allocate 65 percent of the settlement to Silke Schulz and 35 percent to her four minor children and award the firm 31 percent of the $18.1 million.  But the judge allocated all of the money to the four minor children, except for $1 for Silke Schulz, and awarded Herzog just 10 percent fees, saying the firm did a good job litigating the case but did not have to go to trial and failed to notify Rainer Schulz’s two adult children from a previous marriage about the suit.

However, the panel said a 10 percent fee award was unreasonable, as the judge gave too little consideration to a court rule requiring the judge to account for the firm’s contingency fee agreement with the family.  The parties had agreed to a 31 percent contingency fee if the case was settled more than 30 days before trial and 40 percent if it settled within 30 days of trial; Herzog later agreed to a 31 percent fee even though the case settled just days before trial.

“Instead of balancing the relevant factors, the court gave overwhelming weight to a single concern, the expense of the children’s extensive medical needs,” the panel said in a 17-page opinion.  Three of the four minor children are triplets who were born prematurely, and two have permanent disabilities, according to the opinion.  “We accept that a child’s needs are a relevant and important factor in determining a reasonable attorney fee … This single factor, however, cannot overwhelm all other considerations,” the panel said.

The appeals court added that allowing a judge to overemphasize a child’s medical needs when deciding attorneys’ fees could have a chilling effect on an attorney’s willingness to take on cases involving disabled minors.  “If attorneys know that courts are likely to drastically reduce their contingency fee awards irrespective of the other considerations in California Rules of Court ... it will be difficult or impossible for those most in need to find qualified attorneys to handle their cases,” the opinion states.

In addition, the panel said Herzog took on “significant risk” in accepting the case on a contingency basis when no other attorneys consulted by Silke Schulz would do so, and the firm spent a considerable amount of out-of-pocket expenses litigating the case.  However, the appeals court denied Herzog’s request to determine the proper fees amount, saying it should go back to the trial judge for reconsideration.

The case is Schulz v. Herzog Yuhas Ehrlich & Ardell APC, case number B277493, in the Court of Appeal of the State of California, Second Appellate District.