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Fees for Defending Fees – Post-Asarco Cases

December 4, 2017

A recent article by Benjamin Feder, “Fees for Defending Fees – Recent Rulings Permit Contractual Circumvention of Supreme Court’s Baker Botts v. Asarco Decision,” reports on post-Asarco cases.  This article was posted with permission.  The article reads:

The Supreme Court two years ago ruled in Baker Botts v. Asarco that bankruptcy professionals entitled to compensation from a debtor’s bankruptcy estate had no statutory right to be compensated for time spent defending against objections to their fee applications.  Since then, “estate professionals,” i.e., those retained in a bankruptcy case by a trustee, debtor in possession or an official committee of creditors, have sought ways to limit the potentially harsh impact of that decision.  A subsequent opinion in a Delaware bankruptcy case, In re Boomerang Tube, declined to allow Baker Botts to be circumvented by contract.  However, decisions in another Delaware case, Nortel Networks, and more recently in a New Mexico case, Hungry Horse LLC, have distinguished Boomerang Tube and permitted contractual provisions that allow payment for the defense of fees.  The pragmatic approach taken in Hungry Horse in particular offers a template that other courts will likely be urged to adopt.

In every bankruptcy case, the retention of estate professionals must be approved by the bankruptcy court. Their fees and expenses are paid out of the debtor’s bankruptcy estate and are subject to review and approval by the bankruptcy court pursuant to Section 330 of the Bankruptcy Code.  Objections from other parties have always been a recognized hazard for such professionals.  Prior to Baker Botts a majority of courts permitted the recovery of fees incurred in defending against such challenges.

The Court’s analysis in Baker Botts was straight-forward.  Under American jurisprudence, each side in a litigated dispute bears its own attorneys’ fees unless there is an applicable statute or agreement that provides otherwise.  Section 330(a)(1) of the Bankruptcy Code states: “After notice to the parties in interest and . . . a hearing . . . the court may award to . . . a professional person . . . reasonable compensation for actual, necessary services[.]”  The Court ruled that the plain text of Section 330(a) does not support a deviation from the “American Rule” regarding attorneys’ fees.  The Court’s majority stated, “[t]he word ‘services’ ordinarily refers to ‘labor performed for another.’”  Since Baker Botts was litigating to defend its own fees, the Court reasoned that it was not providing an “actual, necessary service” to the bankruptcy estate and therefore was not entitled to compensation for such time.

Baker Botts makes clear that the Bankruptcy Code does not provide a statutory exception to the American Rule.  The question remaining is whether estate professionals can sidestep it by contract.

In Boomerang Tube, Judge Mary Walrath answered that question in the negative.  The law firm chosen in that case to represent the official committee of unsecured creditors, in its application to the bankruptcy court, asked for the approval order to include a provision that would entitle it to be compensated from Boomerang Tube’s bankruptcy estate for fees incurred in defending its fees against any challenges.  The firm pointed to Section 328 of the Bankruptcy Code, which allows for the retention of estate professionals “on any reasonable terms and conditions.”  It argued that the Supreme Court in Baker Botts had noted that parties could and regularly did contract around the American Rule.

Judge Walrath denied the request. She first held that Section 328 does not create a statutory exception to the American Rule, as it makes no mention of awarding fees or costs in the context of an adversarial proceeding. She observed in contrast that several discrete Bankruptcy Code provisions do contain express language providing for payment of fees to a prevailing party.  She next rejected the law firm’s argument that Section 328 permitted a contractual agreement for the payment of defense fees.  The retention agreement was between the law firm and the official creditors’ committee, but it would be Boomerang Tube’s bankruptcy estate, a non-party to such agreement, that would bear the costs.  Finally, she determined that the proposed fee shifting provisions were simply not “reasonable” terms of employment of professionals with the meaning of Section 328.

In view of the extent to which challenges to estate professionals’ fees (or at least the threat of doing so) are ingrained in chapter 11 practice, it was unlikely that Boomerang Tube would be the last word on this issue.  Recent decisions in two cases, Nortel Networks and Hungry Horse, have distinguished Boomerang Tube.

Judge Kevin Gross, a Delaware colleague of Judge Walrath, ruled in Nortel Networks that Baker Botts and Boomerang Tube did not apply to a fee dispute between an indenture trustee and certain bondholders, and permitted the trustee to recover its attorneys’ fees for defending against the challenge.  Although this case is not directly on point as it did not involve an estate professional, and Judge Gross was not opining on whether Section 328 would permit such an agreement, he held that the bond indenture qualified as a contractual exception to the American Rule, noting that, unlike the retention agreement in Boomerang Tube, it was an agreement directly between the debtor and the trustee.

In Hungry Horse New Mexico Bankruptcy Judge David Thuma looked to Nortel Networks for support in holding that a retention agreement in a chapter 11 case between proposed debtor’s counsel and the debtor could pass muster under Section 328, thereby permitting a contractual work-around to Baker Botts.  Judge Thuma first determined that nothing in Baker Botts prevented a bankruptcy court from finding a fee defense provision in a retention agreement to be “reasonable” within the meaning of Section 328.  In his reading of Baker Botts, the Court simply limited the compensation an estate professional could receive under Section 330 to fees for services to the client, rather than on its own behalf, and noted that Section 328 had no applicability to that issue.

He then considered various other provisions typical of retention agreements, and observed that several were “reasonable” under Section 328 even if they were intended to favor the professional, rather than the client. He pointed to provisions, among other things, setting out retainer requirements, permitting an attorney to withdraw under certain conditions, and granting a lien on certain recoveries.  “A typical employment agreement between a lawyer and a client has many terms; some benefit the client, while others benefit the lawyer.  Considered together, they may be reasonable.”  The overall effect, he noted, is that “the client obtains the services of needed, able professionals.”

Judge Thuma concluded that Section 328 therefore can permit contractual exceptions to the American Rule, and outlined the terms of a fee defense provision in a retention agreement that he believed was “reasonable” and “violat[ed] neither the letter nor spirit of [Baker Botts].”  He stated that, among other things, it needed to be agreed to by the bankruptcy estate, in order to avoid the issue highlighted by Judge Walrath in Boomerang Tube, and provided also that it extended to the creditors’ committee’s professionals, in order to “level the playing field.”  He suggested sample language that he believed could be acceptable under Section 328:

The Client agrees to pay all reasonable legal fees and expenses incurred by the Firm, and also by any counsel retained by the unsecured creditors’ committee (if one is formed in the Client’s bankruptcy case) for successfully defending their respective fee applications. The bankruptcy court must approve all of such fees as reasonable. The Client will have no obligation to pay for any fees or expenses the Firm incurs defending fees that are not allowed.

Disputes over payment of estate professionals’ fees will invariably remain part of the bankruptcy landscape. Estate professionals in chapter 11 cases are likely to ask bankruptcy judges in other jurisdictions to follow the pragmatic approach of Judge Thuma in Hungry Horse in order to blunt the detrimental impact of Baker Botts.

Benjamin Feder is Special Counsel at Kelley Drye & Warren LLP in New York.

4 Reasons to Get Help on a Fee Requests

November 24, 2017

A recent CEBblog article by Julie Brook, “4 Reasons to Get Help on a Fee Motion,” reports on attorney fee requests.  This article was posted with permission.  The article reads:

Just because you successfully handled the merits of a case doesn’t mean that you should take on a large or complex fee motion that arises from it.  It may be time to bring in someone with fee motion expertise.

Here are four reasons to bring in outside counsel for a fee motion:

  1. The expertise required for fee motions may make it more efficient or effective to hire an experienced fee litigator.
  2. Trial counsel’s credibility or skill is often a major issue, and an outside attorney adds objectivity to the presentation.
  3. Fee applications can become very time-consuming, and trial counsel’s efforts might be better spent on matters more within his or her areas of expertise.
  4. The cost to trial counsel (“fees on fees”) can be claimed from the opponent  (see Serrano v Unruh (Serrano IV) (1982) 32 C3d 621 (prevailing party is entitled to fees for time spent preparing and litigating fee application)).

On the other hand, there might be reasons for handling fee motions “in-house” in some cases, particularly if the law firm or program seeking the fees has an attorney with sufficient expertise.  Keep in mind that, just because outside counsel potentially can recover his or her fees (“fees on fees”) from the opponent doesn’t mean it will happen—there’s a risk that the court will deny the motion for fees or refuse to award all of the fees sought, leaving your firm on the hook.

Regardless of whether you decide to use outside counsel, make sure that your law firm designates one of its attorneys to be primarily responsible for maximizing attorney fee recoveries.  Otherwise, the firm is likely to miss deadlines or make mistakes early in the case that even the best outside counsel will be unable to remedy.  This is particularly critical if you represent low-income clients in certain civil rights, employment, or public interest cases and statutory attorney fees are your only source of payment if you win.

Florida Supreme Court Rules on Fee Issue in Insurance Coverage Litigation

October 24, 2017

A recent FC&S Legal article by Steven Meyerowitz, “The Florida Supreme Court Just Made It Easier for Insureds’ Attorneys to get Big Fee Awards,” reports on a recent decision by the Florida Supreme Court in Joyce v. Federated National Ins. Co.  The article reads:

The Florida Supreme Court, in an insurance coverage dispute, has rejected appellate court rulings that trial courts may apply a contingency fee multiplier to an award of legal fees to a prevailing party only in “rare” and “exceptional” circumstances.

The Case

William and Judith Joyce, an elderly retired couple, filed a claim for insurance benefits with their homeowners’ insurance carrier, Federated National Insurance Company, following water damage to their home. Federated National denied coverage on the basis of alleged material misrepresentations made by the Joyces in the application process – namely, that the Joyces had failed to disclose certain losses they had with their previous carrier.

The Joyces hired an attorney on a contingency fee basis and sued Federated National, alleging that the insurer had wrongfully denied their claim. After months of litigation, Federated National finally agreed to settle.  The parties stipulated that the Joyces were entitled to recover reasonable legal fees under Florida Statutes Section 627.428.

At the fee hearing, the trial court heard testimony from the Joyces’ attorney and fee expert and Federated National’s fee expert.  The trial court also examined certain evidence exhibits, including time records for the Joyces’ attorney and a copy of the contingency fee agreement.

After the hearing, the trial court awarded the Joyces $76,300 in attorneys’ fees, using a two-step process.  First, the court calculated the “lodestar” amount – the number of hours reasonably incurred by the Joyces’ attorney, multiplied by a reasonable hourly rate – as being $38,150, or 109 hours reasonably expended at a reasonable hourly rate of $350.  Second, the trial court applied a contingency fee multiplier of 2.0 to the lodestar amount.

Federated National appealed both the trial court’s calculation of the lodestar amount and its use of the contingency fee multiplier.  The appellate court affirmed the lodestar amount but reversed the trial court’s use of a contingency fee multiplier, concluding that the lodestar approach included a “strong presumption” that the lodestar represented the “reasonable fee.”

Florida Law

Section 627.428, Florida Statutes provides:

(1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.

The Florida Supreme Court’s Decision

The court quashed the appellate court’s decision.  First, the court reviewed its precedent regarding contingency fee multipliers and declared that it was “clear” that it had “never limited the use of contingency fee multipliers to only ‘rare’ and ‘exceptional’ circumstances.”

In fact, the court said, it had recognized “the importance of contingency fee multipliers to those in need of legal counsel” and it had made clear that trial courts “could consider contingency fee multipliers any time the requirements for a multiplier were met.”

In the court’s opinion, the contingency fee multiplier provided trial courts with the “flexibility” to ensure that lawyers who took a difficult case on a contingency fee basis were “adequately compensated.”The court rejected the argument that a contingency fee multiplier encouraged “nonmeritorious claims” and said, instead, that solely because a case was “difficult” or “complicated” did not mean that the case was nonmeritorious.  “Indeed, without the option of a contingency fee multiplier, those with difficult and complicated cases will likely be unable or find it difficult to obtain counsel willing to represent them,” the court said.

The court then disagreed that the possibility of receiving a contingency fee multiplier amounted to a “windfall.”  The court concluded that there was not a “rare” and “exceptional” circumstances requirement before a contingency fee multiplier could be applied.  It decided that the trial court’s findings, “which properly considered the complexity of these types of cases and this case in particular,” were not in error, and it ordered the appellate court to reinstate the reinstate the attorneys’ fees award.

Mootness Attorney Fee Awards

October 16, 2017

A recent New York Law Journal article by David F. Wertheimer and Justine S. Brenner, “Mootness Attorney Fee Awards: Will New York Prove Friendly Than Delaware?,reports on mootness attorney fee awards.  This article was posted with permission.  Reprinted with permission from the September 29, 2017 edition of the New York Law Journal © 2017 ALM Media Properties, LLC. All rights reserved.  The article reads:

Mootness attorney fee awards are an established fixture of Delaware's fee-shifting rules available to plaintiffs in corporate governance litigation.  That is not true of New York law, but the legal landscape may change.  Over the past few years, there has been a marked trend of corporate governance litigation involving Delaware corporations being filed outside of Delaware's Court of Chancery.  New York is seeing its share of that exodus.  Whether that share expands may depend, at least partly, on whether New York law on the award of mootness fees evolves to be more or less favorable than Delaware law.  Moreover, it is New York law that matters because in corporate governance litigation, even though claims of director misconduct are determined by the law of a company's state of incorporation, New York law governs the award to plaintiffs of their legal fees.  Central Laborers' Pension Fund v. Blankfein, 111 A.D.3d 40, 45 n.8, (1st Dep't 2013).

Delaware, like New York, follows the "American Rule," under which each party bears its own legal fees and expenses, subject to certain exceptions.  One such exception Delaware recognizes under its Court of Chancery's broad equity jurisdiction is in corporate governance actions, when a plaintiff's efforts have yielded a "corporate benefit."  Tandycrafts v. Initio Partners, 562 A.2d 1162, 1164-65 (Del. 1989).  Mootness fees, which are within the scope of that exception along with attorney fee awards arising from settlements and judgments, are triggered by a defendant acting to "moot" a plaintiff's claim.  Such fee awards can arise in various settings, such as a class action challenging the adequacy of merger disclosures when the target voluntarily amends its proxy to include new disclosures or a derivative action contesting supposedly excessive executive compensation that the company later reduces.

Under Delaware law, mootness fee awards are available in class and derivative corporate governance actions upon a showing of three elements: (1) the litigation was "meritorious when filed;" (2) the defendant took action which rendered the litigation moot and produced "the same or a similar benefit" as sought by the litigation; and (3) there exists "a causal relationship between the litigation and the action taken producing the benefit." Dover Historical Soc'y v. City of Dover Planning Comm'n, 902 A.2d 1084, 1092 (Del. 2006).

Unlike Delaware, New York's fee-shifting rules applicable to corporate governance actions are rooted in statute: §626(e) of the Business Corporation Law (BCL) governs the award of attorney fees in derivative actions; C.P.L.R. Rule 909 controls the award of fees in class actions.  Neither rule explicitly references fee awards in mooted cases nor have mootness fee awards been the subject of much New York case law development.  What few decisions that have been reported, however, suggest that New York's rules will be as stringent as those Delaware applies, if not tougher.

Awards in Derivative Actions

Less than a handful of reported decisions by New York courts have considered a mootness fee award in a derivative action under BCL §626(e) and none have approved such an award.  From these decisions, two rules governing potential mootness fee awards can be gleaned, both of which are similar to the standard Delaware employs.  What New York might say about the other elements of Delaware's rule remains the open question.

Turning first to the overlapping elements, under New York law, a plaintiff must establish that his pleadings properly alleged that he had standing to assert a derivative claim consistent with the substantive law of the state in which the corporation was organized.  Blankfein, 111 A.D.3d at 45-46.  Delaware imposes the same requirement. See Grimes v. Donald, 791 A.2d 818, 822-23 (Del. Ch. 2000), aff'd, 784 A.2d 1080 (Del. 2001).

Second, as with all fee awards under BCL §626(e), the plaintiff must show that he achieved a "substantial benefit," which may include a "common fund" or meaningful "corporate therapeutics." Sardis v. Sardis, 56 Misc. 3d 727, 739-40 (Sup. Ct. 2017); accord Seinfeld v. Robinson, 246 A.D.2d 291, 294-98 (1st Dep't 1998).  Again, Delaware law requires the same. Tandycrafts, 562 A.2d at 1164-65.

Turning to the open issues, the first is Delaware's requirement that plaintiff establish that his complaint was "meritorious when filed," meaning that it could withstand a motion to dismiss. Chrysler v. Dann, 223 A.2d 384, 387 (Del. 1966).  There is good reason to expect that New York courts would impose a similar requirement.  Courts applying BCL §626(e) have refused to approve the award of attorney fees in settlements of derivative actions when the actions lacked merit. See, e.g., Montro v. Bishop, 6 A.D.2d 787, 787 (1st Dep't 1958), Kaplan v. Rand, 192 F.3d 60, 72 (2d Cir. 1999). Moreover, Delaware adopted its "meritorious when filed" requirement as a bulwark to deter "baseless litigation." Allied Artists Pictures v. Baron, 413 A.2d 876, 879 (Del. 1980). New York courts have acknowledged a similar goal of deterring strike suits and recognized that various features of derivative litigation—including the requirements for standing and demonstrating that a "substantial benefit" was achieved as a predicate for a fee award—are intended, at least in part, to achieve that goal. See Bansbach v. Zinn, 1 N.Y.3d 1, 9, 7 (2003) (standing); Freedman v. Braddock, No. 24708/92, 1997 WL 34850128 (N.Y. Sup. Ct. June 27, 1997) (substantial benefit). Accordingly, precedent and policy favor construing BCL §626(e) as imposing a "meritorious when filed" requirement.

A second open issue is the requirement of demonstrating a causal nexus between the plaintiff's litigation and the defendant's action mooting the suit. Under Delaware law, a plaintiff receives a rebuttable presumption that its lawsuit caused the defendant's action, imposing on the defendant the burden of showing that the lawsuit "did not in any way cause their action." Allied Artists, 413 A.2d at 880. Delaware adopted its rule on the pragmatic grounds that the defendant is in the best position to know the reasons for its own actions. Id.

It is far from certain, however, that New York courts would adopt Delaware's burden-shifting rule. For example, whereas Delaware applies its presumption to fee award requests in both the settlement and mootness contexts, id., New York courts, in the settlement context, have not employed a burden-shifting rule but instead require a showing that "plaintiffs achieved a 'substantial benefit.'" Seinfeld, 246 A.D.2d at 294; Seinfeld v. Robinson, No. 22304/90, 2001 WL 36023241 (N.Y. Sup. Ct. March 8, 2001) (burden rests on plaintiff to show entitlement to fees), aff'd, 300 A.D.2d 208 (1st Dep't 2002).

There is even less reason to apply a burden-shifting rule in mootness fee cases. As courts have observed, in contrast to settlements, fee awards in mootness cases can present a "particularly nettlesome task" of identifying the benefit obtained and its relation to the litigation. See In re First Interstate Bancorp Consol. S'holder Litig., 756 A.2d 353, 357 (Del. Ch. 1999), aff'd, 755 A.2d 388 (Del. 2000); cf. Blankfein, 111 A.D.2d at 49 (describing "causation of a substantial benefit" as a "complex issue" that is "likely to lead to protracted litigation"). Allowing a plaintiff to streamline that inquiry by presuming that chronology is equivalent to causation enshrines in doctrine what would otherwise be rejected as the logical fallacy post hoc ergo propter hoc. While Delaware has adopted such a rebuttable presumption on pragmatic grounds, its use comes at the price of enabling plaintiff to more easily claim an entitlement to fees. It thus undermines New York's policy of deterring "unwarranted litigation" by imposing on plaintiff the burden of "demonstrating that the action has caused a substantial benefit." Blankfein, 111 A.D.3d at 49 (in a mootness fee case, observing, in dicta, that plaintiff must demonstrate causation). New York courts may find Delaware's rebuttable presumption too steep a price to pay to simplify the fee award process, just as other courts have concluded. See, e.g., Lansky v. NWA, 471 N.W.2d 713, 714 (Minn. Ct. App. 1991) (rejecting presumption because it could encourage strike suits by failing to consider the facts of each case).

Awards in Class Actions

There is reason to believe that New York courts would assess mootness fee applications in class actions far differently than they might in derivative actions. Indeed, such fee awards may be unavailable in class actions.

That potentially differing treatment is due to the difference in the applicable statutory terms. Whereas BCL §626(e) permits a fee award if a derivative action "was successful, in whole or part," C.P.L.R. Rule 909 conditions the award of fees on a "judgment" having been "rendered in favor of the class." Accordingly, while a mooted derivative suit might be considered "successful" if it achieved a "substantial benefit," a mooted class action would not result in a "judgment" favorable to the class—even if, as consequence of the action having been filed, a "substantial benefit" was achieved. Thus, a strict construction of the statute might preclude the award of a mootness fee.

There does not appear to be any reported New York court decision directly addressing a mootness fee award in the class action context. Insight into the possible treatment of such an application, however, can be gleaned from the decision in La. Mun. Emps.' Ret. Sys. v. Cablevision Sys., 74 A.D.3d 1291 (2d Dep't 2010). That case arose from purported class actions brought on behalf of minority shareholders of Cablevision Systems, challenging a proposed stockholder buy-out by the controlling stockholders. The litigation settled once the offering price was increased, but the settlement was aborted because the acquisition never closed. At that point, the class actions essentially were moot. Despite the settlement's termination, class plaintiffs sought an award of counsel fees, which the trial court granted after finding that plaintiffs' efforts had yielded a substantial benefit. The Second Department reversed the fee award based on its finding that "the plaintiffs clearly did not obtain a judgment in favor of the class within the meaning of CPLR 909." Id. at 1293.

Although one decision does not necessarily sound the death knell on mootness fee awards in class actions, it illustrates New York courts' strict adherence to the American Rule in the absence of a recognized exception. See generally Flemming v. Barnwell Nursing Home and Health Facilities, 15 N.Y.3d 375, 379-80 (2010) (narrowly construing prior version of C.P.L.R. Rule 909).

Conclusion

When forum shopping, plaintiffs must consider not only whether the forum will be hospitable to the merits of their claims, but also to their counsel's fee requests. In corporate governance actions, plaintiffs should expect that New York's courts will evaluate mootness fee applications in derivative actions under standards at least as stringent as those in Delaware and may deny such applications entirely in class actions. Applying such standards should help prevent New York from becoming a second home for strike suits fleeing Delaware.

David F. Wertheimer is a partner at Hogan Lovells in New York. His practice includes private federal securities class actions and corporate governance litigation. Justin S. Brenner is a senior associate at the firm.

Know the Statutory Limits on Attorney Fees

October 5, 2017

A recent CEB blog article, “Know the Limits on Attorney Fees” by Julie Brook explores the statutory limits on attorney fees in California and federal statutes.  This article was posted with permission.  The article reads:

Attorneys can’t always get what they want in attorney fees.  There are statutory limitations, fees subject to court approval, and fee agreements that violate public policy.

Statutory Limitations on Fees. In many instances the ability to negotiate attorney fees is prohibited or limited by statute.  For example:

  • Probate proceedings. Attorney fees in a probate proceeding are strictly statutory and don’t arise from contract.  See Prob C §§10800, 10810, 13660.  An attorney can’t charge more than the statutorily-permitted amount, but may agree to charge or receive less than that amount.
  • Indigent defendants. Attorney fees for counsel assigned to represent indigent criminal defendants are set by the trial court (Pen C §987.2) or by the court of appeals in appellate matters (Pen C §1241).
  • Judicial foreclosures. Attorney fees in judicial foreclosure matters are set by the trial court, regardless of any contrary provision in the mortgage or deed of trust. CCP §730.
  • Workers’ compensation. Attorney fees for representation in Workers’ Compensation Appeals Board matters are set by the Appeals Board (Lab C §5801) and by a court or Appeals Board in third-party matters (Lab C §3860(f)).  But fee agreements for a reasonable amount will be enforced if the amount agreed on coincides with the Appeals Board’s determination of a reasonable fee. Lab C §4906.
  • Contingent fees under federal law. An attorney-client agreement with a plaintiff under the Federal Tort Claims Act calling for a contingent fee in excess of 20 percent of any compromise, award, or settlement, or more than 25 percent of any judgment is not only void, but is an offense punishable by a fine of $2000, or 1 year in jail. 28 USC §2678. See also 42 USC §406 (maximum fee for representing plaintiff in Social Security Administration proceedings is 25 percent of past due benefits; attempt to collect fee in excess of maximum is misdemeanor).
  • Contingent fees in medical malpractice cases. Maximum fee limits have been set under Bus & P C §6146.

This is just a sampling—many statutes limit attorney fees.  When you take on a matter in an unfamiliar area of law, investigate possible limitations on the ability to negotiate fees.

Fees Subject to Court Approval. Court approval of fee agreements is required in some instances. For example:

  • fees for the compromise of the claim of a minor or a person with a disability (Prob C §3601(a));
  • fees for representing a special administrator (Prob C §8547); and
  • fee agreement in workers’ compensation third-party actions (Lab C §3860(f)).

Agreements Violating Public Policy or Ethical Standards. Attorney-client fee agreements that are contrary to public policy, even if not explicitly in violation of an ethical canon or rule, won’t be enforced.  Similarly, fee agreements that violate California Rules of Professional Conduct aren’t enforceable.  The Rules include prohibitions against charging an unconscionable fee (Cal Rules of Prof Cond 4–200), agreeing to share fees between an attorney and a nonattorney (Cal Rules of Prof Cond 1–320), and nonrefundable retainer fees that fail to meet the classification of a “true retainer fee which is paid solely for the purpose of ensuring the availability of the [Bar] member for the matter” (Cal Rules of Prof Cond 3–700(D)(2)).

National Law Journal Cites NALFA Program

September 11, 2017

A recent NLJ article by Amanda Bronstad, “Judges Look to Profs in Awarding Lower Percentage Fees in Biggest Class Actions,” quotes NALFA’s CLE program, “View From the Bench: Awarding Attorney...

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