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Category: Ethics & Professional Responsibility

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)).

When Fee-Splitting Breaks Rules, Who Pays the Price?

September 20, 2017

A recent Legal Intelligencer story by Lizzy McLellan, “When Fee-Splitting Breaks Rules, Who Pays the Price?,” reports that lawyers for a Philadelphia securities litigation firm and a consulting company sparred over who should suffer the losses when a payment arrangement between the two is alleged to be improper.  Arguing before the Pennsylvania Supreme Court in SCF Consulting v. Barrack, Rodos & Bacine, a lawyer for SCF Consulting said his client should not be punished for a fee arrangement if the nonlawyer was unaware of the limitations set by Rule of Professional Conduct 5.4.

"An inquiry needs to be made as to what it is the nonlawyer understands the arrangement to be," said George Bochetto of Bochetto & Lentz, who represented SCF.  He said his client was not aware that the fee arrangement was impermissible.

In a nonprecedential ruling issued last year, a Superior Court panel ruled 2-1 that SCF was not entitled to an allegedly promised cut of the firm's profits from cases it worked on because that type of fee-splitting agreement violates state ethics rules.  In its appeal to the state's highest court, SCF argued that it's entitled to be paid under the alleged agreement even if the agreement violated the Rules of Professional Conduct.

Raymond Quaglia of Ballard Spahr, who represents Barrack, Rodos & Bacine, said they "vigorously dispute there was any deal."  During Bochetto's argument, Justice Christine Donohue pointed out that the case involves a "pure commercial deal" between an attorney and a referred nonlawyer.  In that case, she said, the court should only seek a resolution that protects the client.

Bochetto said other policies are at issue as well.  He said lawyers are bound to be honest in their dealings with laypeople, and therefore should face the consequence if they fail to follow through with a fee agreement.

Justice David Wecht suggested that Disciplinary Board actions could deter lawyer dishonesty, but Bochetto said that may not be enough.  Even if a contract is not found to be valid, he said, the nonlawyer should be entitled to equitable relief.

Quaglia said, even though there was no fee-sharing deal between SCF and Barrack Rodos, a nonlawyer party to such a deal should only be entitled to recovery in "truly extreme occasions."

Despite Quaglia's contention about the alleged agreement, Justice Kevin Dougherty suggested the two firms had consistently conducted business together, and it wasn't until the firm won a major verdict that there was any problem with fees.

At the Superior Court level, Senior Judge James J. Fitzgerald III, writing for the majority, said the alleged arrangement in which Scott C. Freda—SCF Consulting's sole member—was to receive 5 percent of the firm's annual profits generated by cases he assisted with violated Rule 5.4, which bars, with few exceptions, attorneys from sharing legal fees with nonlawyers.

According to the opinion, SCF alleged it was induced by Barrack Rodos to work exclusively on the firm's behalf in securities class actions in exchange for both a fixed annual consulting fee and a 5 percent cut of any profits gained from cases SCF worked on.

SCF alleged that the firm subsequently refused to make the profit-share payments, however, according to the opinion. Following discovery, the firm moved for summary judgment and Philadelphia Court of Common Pleas Administrative Judge Gary S. Glazer granted the motion, finding that the fee-sharing aspect of the alleged payment arrangement ran afoul of Rule 5.4.

Judge Slams Fee Request in Civil Rights Case

September 15, 2017

A recent Legal Intelligencer story by P.J. D’Annunzio, “Judge Slams Lawyer, Equating Fee Request to ‘Attempted Bank Robbery’,” reports that a federal judge has taken Luzerne County attorney Cynthia L. Pollick to task for what the judge called "outlandish" fee requests and "inflammatory conduct" in a civil rights case.  In a lengthy 136-page rebuke, U.S. District Judge Matthew W. Brann of the Middle District of Pennsylvania chastised Pollick over her fee petition for nearly three-quarters of a million dollars in a decade-long case that settled for $25,000.

"Sad to say, after 10 years of protracted and unnecessarily contentious litigation, it appears that all plaintiff's counsel, Cynthia L. Pollick, esquire, has managed to accomplish is disrespecting this court as an institution and embarrassing herself in the eyes of many of its constituents," Brann wrote in his opinion.  But Brann wasn't finished there.  He went on to say Pollick's fee request "felt more like an attempted bank robbery than a genuine effort to recover a reasonable fee bill."

He continued: "Ms. Pollick's fee petition is 'mind boggling' and 'outrageously excessive.'  In fact, it is more than that.  The vast majority of Ms. Pollick's entries are larded with excreta unbecoming of any attorney in this district (and certainly unbillable to a client under any stretch of the imagination)."

Brann said in his opinion that Pollick "has not only failed to live up to her duty as an officer of this court—she has, as on numerous prior occasions, thumbed her nose at it.  Such defiance ceases today."  Specifically, Brann took issue, among other things, with the layout of Pollick's fee request.

"That Ms. Pollick submitted her fee bill without weeding out improper entries is grounds alone to deny it and impose sanctions," he said.  "That shortcoming here is not one that can be ameliorated by careful, line-by-line revisions.  I attempted to give Ms. Pollick the benefit of the doubt and pursue such an approach at first.  However, I soon discovered that this method was fool's errand: Ms. Pollick's entries are so inappropriate, vague, and duplicative that nearly every one of her thousands of entries needs to be eliminated or refined."

Judge Denies Fee Request, Refers Matter to Ethics Board

September 6, 2017

A recent Legal Intelligencer story by Max Mitchell, “Judge Tosses $1M Fee Request, Refers Matter to Ethics Board,” reports that a Scranton attorney who recovered $125,000 for his client in a bad-faith case wanted $1.12 million in fees, costs and interest, but the presiding judge has instead awarded his firm nothing and referred the case to the Disciplinary Board of the Supreme Court of Pennsylvania.

U.S. District Judge Malachy E. Mannion of the Middle District of Pennsylvania issued an order chiding attorneys Michael Pisanchyn and Marsha Lee Albright over their handling of the case Clemens v. New York Central Mutual Fire Insurance, and saying their request for fees and costs was "outrageous and abusively excessive."

Mannion's 100-page opinion went line-by-line through the request, slashing billed fees he deemed vague, duplicative and excessive.  Mannion also took issue with how the firm recreated its timesheets, saying that, while recreating timesheets is allowable if the attorneys did not make them contemporaneously, a number of the entries appeared to be based on guesswork.

Mannion ended his opinion by saying that, "given the conduct of the plaintiff's counsel and the exorbitant request for fees in this case, a copy of this memorandum will be referred to the Disciplinary Board of the Supreme Court of Pennsylvania for their independent determination of whether disciplinary action should be taken against attorney Pisanchyn and/or attorney Albright."

Pisanchyn, the name partner of Pisanchyn Law Firm, said that, while he tried the case, he had not been involved in preparing the attorney fees petition.  However, he said, both he and Albright conducted themselves according to the Rules of Professional Conduct.

"I believe that either no action will be taken, or if a complaint is opened, it will be dismissed," Pisanchyn said.  He added he did not think the fees were unreasonable, since the case had been litigated for nearly nine years.  "The defendants took the position of a scorched earth litigation, and we had to go toe-to-toe with them every step of the way," he said.  "I certainly tried the case to the jury. I didn't try the case to the judge.  The jury obviously liked my presentation and obviously thought it was effective."

According to Mannion, plaintiff Bernie Clemens' bad-faith claims came before a jury in November 2015, and ended with a $100,000 award.  The defendants had settled Clemens' uninsured motorist claim for $25,000.  When it came to the attorney fees, according to Mannion, the plaintiff's attorneys sought $48,050 for their work on the UIM claim, $827,515 for working on the bad-faith claim and $27,090 for preparing the fee petition, for a total of $902,655 in fees.  Except for awarding $4,986 in interest, Mannion denied the requests entirely.

"In addition to the unconscionable number of vague entries which had been billed for (or more accurately guessed about) by the plaintiff's counsel, there also appear to be a number of duplicative entries in the bad faith time logs for which no explanation is provided," Mannion said.  Mannion said one of the most "egregious" requests included billing 562 hours for trial preparation, with the plaintiff's attorneys entering between 20 and 22 hours per day on some days.

"If counsel did nothing else for eight hours a day, every day, this would mean that counsel spent approximately 70 days doing nothing but preparing for the trial in this matter—a trial in which the only issue was whether the defendant had committed bad faith in its handling of the UIM claim; a trial which consisted of a total of four days of substantive testimony; a trial which involved only five witnesses; a trial during which trial counsel had to be repeatedly admonished for not being prepared because he was obviously unfamiliar with the Federal Rules of Evidence, the Federal Rules of Civil Procedure and the rulings of this court," Mannion said.  "For this, the plaintiff's counsel are billing $196,700."

New Jersey Legislation Would Mandate Fee Retainers

August 23, 2017

A recent New Jersey Law Journal story by Michael Booth, “Bill, Spurred by Wray Representation, Would Mandate Retainers,” reports that one of Gov. Chris Christie's most persistent critics in the state Legislature is sponsoring a bill that effectively would have barred Christie's apparent hiring of high-profile lawyer Christopher Wray—now the FBI director—without a written retainer fee agreement.

Assembly Deputy Speaker John Wisniewski, D-Middlesex, has introduced A-5179, which would require retainer fee agreements between any state agency and private counsel to be memorialized in writing within 30 days of the attorney's retention.  The bill, which has not yet been assigned to a committee, would prohibit a firm from being paid with public funds if the 30-day requirement is not met.

Wray, according to reports, was Christie's personal attorney for 11 months during the Bridgegate investigation, and while Christie was gearing up to run for the Republican nomination for president—before Wray and the administration signed a retainer agreement.

Wray, then of the Washington, D.C., office of King & Spalding, began representing Christie in September 2014 but did not sign a retainer agreement until August of the following year.  Ultimately, Wray and other lawyers at the firm, which charged a blended rate of $340 an hour, racked up about $2 million in fees and costs, reports said.

New York public radio station WNYC first reported the arrangement between Wray and Christie on July 24.  A day later, Wisniewski voiced his concern about the lack of a retainer agreement, which he pointed out would have been a document available to the press and public.

"This is highly unusual and raises questions about whether Gov. Christie was trying to hide this cost and legal representation from the public," Wisniewski said in a statement at the time.  "Mr. Wray and his colleagues ended up costing taxpayers $2 million, yet the governor did not even take basic steps to provide public transparency and uphold ethics standards.