Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Agreements

Forced Sale of Client’s Lamborghini Not a Proper Legal Fee

May 7, 2018

A recent Bloomberg Big Law Business story by Mindy L. Rattan, “Forced Sale of Client’s Lamborghini Not a Proper Legal Fee,” reports that the Florida Supreme Court on May 3 suspended a lawyer for three years for taking an interest in a client’s Lamborghini as a fee and for taking financial interests in his client’s litigation and doing business with a client.  Lawyer Jon Douglas Parrish made a deal to get paid after selling his client’s 1989 Lamborghini sports car.  He also loaned money to property owners his client was suing and had his client subordinate his interests in that property to mortgages Parrish took out to secure his loan. 

This case provides examples of deals with a client that a lawyer should never make.  Parrish represented Spruce River Ventures, LLC and its principal, Benjamin Bergaoui in several matters.  Parrish and Bergaoui signed an agreement giving Parrish a $30,000 security interest in Bergaoui’s Lamborghini, the court said, citing the referee’s findings for all facts.  Bergaoui had 90 days to sell the car to pay Parrish $30,000 in fees.  If he didn’t sell it in that time, Parrish could sell it and either give Bergaoui “a credit for current and future legal fees in the amount of the sale or in the amount of $80,000, at the firm’s discretion,” the court said.  The referee’s report said that Bergaoui sold the car within 90 days and Parrish accepted $42,000 to settle the balance of $54,000 in fees owed.

Parrish also loaned $150,000 to defendants in a dispute over real property he pursued on behalf of Spruce River, the court said.  The defendants were delinquent in paying taxes on parcels of land they purchased, and Parrish testified the entire case could be dismissed if the parcels were subject to forfeiture, the court said.

Parrish was trying to “preserve his client’s claim and protect his interest in his fee, which was now a contingency fee.”  He got the defendants to give him a security interest in the property that Bergaoui was pursuing, and convinced Bergaoui to subordinate his interests in the property to Parrish’s.  Parrish asked a colleague, John White, to prepare the mortgage, the subordination agreement, and the promissory note for the loan, the court said.

Parrish also attempted to enter into a settlement agreement that created a new company owned by Parrish’s firm, his client, and a few of the defendants, the court said.  The new company would join the litigation in the place of its defendant owners.  Parrish and Bergaoui would have equal decision-making authority, the court said.

One of the other defendants moved to disqualify Parrish, who then prepared an affidavit for Bergaoui to sign saying he declined to seek independent counsel, the court said.  Bergaoui wouldn’t sign it so Parrish then claimed White was independent counsel for Spruce River.  Bergaoui then got independent counsel, Brad Bryant, who told Parrish that Bergaoui didn’t want to be business partners with him, the court said.

No Car for Fees

The court agreed with the referee that Parrish violated Rule Regulating the Florida Bar 4-1.8(a), which prohibits transactions with clients unless the terms are fair and reasonable and fully disclosed to the client, the client is advised to seek independent counsel, and the client gives written informed consent.  The court said the comment to the rule explains that this rule doesn’t apply to an “ordinary fee arrangement,” which is covered by Rule 4-1.5. Rule 4-1.5 says all fees must be reasonable and not excessive.

The Lamborghini agreement clearly pertained to legal fees and wasn’t ordinary, the court said.  The referee focused on the forced sale provision and found it didn’t satisfy the requirements of Rule 4-1.8(a).  The agreement gave Parrish an opportunity to collect an indeterminate amount of funds from the sale of his client’s Lamborghini, which “would constitute an excessive fee,” the court said.

The court agreed with the referee that Parrish violated rules 4-1.5(a), 4-1.8(a) and 3-4.3 (“commission by a lawyer of any act that is unlawful or contrary to honesty and justice may constitute a cause for discipline”).

No Loans, No Financial Help

The court agreed with the referee that Parrish violated Rule 4-1.2, which says a lawyer must “abide by a client’s decisions concerning the objectives of representation” and “reasonably consult with the client as to the means by which they are to be pursued.”  Parrish having “co-equal decision-making authority with his client in directing litigation strategy,” violated the rule.

And Parrish again failed to meet the requirements of Rule 4-1.8(a) for entering into the subordination agreement with his client, the court said.  The court deferred to the referee’s determination that Parrish’s and White’s testimony about White being independent counsel for Bergaoui wasn’t credible.

The court also agreed with the referee that Parrish violated Rule 4-1.8(e), which prohibits a lawyer from providing “financial assistance” to a client.  Parrish’s loan to the defendants was a form of financial assistance for the benefit of his client, the court said.

The court agreed that Parrish violated 4-1.8(i), which prohibits a lawyer from acquiring a proprietary interest in a litigation.  The court rejected Parrish’s argument that the mortgage wasn’t a “proprietary interest.”  It also found that he failed to act diligently and competently in another matter.

But the court determined that the referee’s recommendation of a one year suspension wasn’t supported by a “reasonable basis in the case law.”  The court said the other conflict of interest cases the referee relied upon were factually distinguishable.  Unlike in several of those cases, Parrish “engaged in multiple instances of unethical conduct,” that resulted in several rule violations.  Another case the referee cited was over 15 years old and the court has since imposed more severe discipline than in the past, it said.

California: Retainer Agreement Applicable to Particular Matter Can Be Orally Modified to Apply to All Cases

May 2, 2018

A recent Metropolitan News story, “Retainer Agreement Applicable to Particular Matter Can Be Orally Modified to Apply to All Cases- C.A.,” reports that an attorney-client agreement, applicable to a particular dispute, can be orally modified to pertain to all future representation, the Court of Appeal for this district held yesterday, affirming the granting of a motion to compel arbitration pursuant to a provision of the agreement.

Justice Anne H. Egerton of Div. Three wrote the opinion, affirming the decisions by Los Angeles Superior Court Judge Terry Green to send the case to arbitration and, following the arbitration, awarding attorney fees to the plaintiff.

The plaintiff in the case is Los Angeles attorney Ronald S. Caswell, a founding partner of Caswell & Cannon. He sued thoroughbred owner Jerry Jamgotchian for $76,346.54 in unpaid fees based on representation in 11 matters.

In moving to compel arbitration, Caswell relied upon a retainer agreement Jamgotchian signed on Dec. 14, 2005, providing:

“[S]hould any fee dispute arise between us, we mutually agree that such dispute will be subjected to binding arbitration in Los Angeles, California, pursuant to the JAMS/Endispute arbitration program, and that the arbitrator may award reasonable attorneys’ fees to the prevailing party in such proceedings. YOU ACKNOWLEDGE THAT YOU ARE AWARE OF THE FACT THAT BY AGREEING TO ARBITRATION, YOU WAIVE ANY RIGHT YOU HAVE TO A COURT OR JURY TRIAL.”

Green found that when a second matter came up, Jamgotchian “refused to sign...the second retainer agreement” and said: “Let’s make the first one be our retainer.” The judge concluded that “all parties then wanted the initial agreement to cover all future litigation that Mr. Jamgotchian brought, as the client, to Mr. Caswell.”

The arbitrator awarded Caswell $78,154.49 in damages, $28,154.15 in prejudgment interest, $126,406.25 in attorney fees he expended in retaining outside counsel, and $36,681.57 in arbitration costs, totaling $269,396.46.

Green confirmed the arbitrator’s award, adding $11,217.60 in prejudgment interest, bringing the total; to $280,614.60. He also awarded $133,362.50 in fees Caswell paid to attorney Kyle P. Kelley in the trial court, plus $3,417.28 in costs.

“On appeal, Jamgotchian does not dispute outright the trial court’s conclusion that he and Caswell orally agreed to modify the original retainer agreement so that its terms, including the arbitration clause, would apply to all subsequent representation by Caswell. Instead, he argues that written agreements to arbitrate may not be orally modified, and recharacterizes the court’s finding as concluding that the arbitration clause, rather than the retainer agreement, was orally modified.”

Rejecting the contention, she said:

“When Jamgotchian and Caswell orally modified the original retainer agreement so that it would apply to all subsequent representation by Caswell, they did not modify the arbitration clause. That clause remained identical in the second retainer agreement that Jamgotchian refused to sign in favor of applying the original retainer agreement to subsequent cases. Caswell and Jamgotchian orally agreed to modify not the arbitration clause, but ‘the overall contract in which that agreement to arbitrate is contained.’…That clause remained identical in the second retainer agreement that Jamgotchian refused to sign in favor of applying the original retainer agreement to subsequent cases. The unmodified written arbitration clause, as part of the retainer agreement, thus applied to ‘any fee dispute’ in subsequent cases.”

There was a remand to Green for a determination of attorney fees in connection with the appeal.  The case is Caswell v. Jamgotchian, B271389.

Texas Attorney Wins Millions in Fees Despite Invalid Fee Agreement

April 17, 2018

A recent Bloomberg Big Law Business story by Bernie Pazanowski, “Attorney May Get Millions Despite Invalid Fee Agreement,” reports that a Texas attorney may be able to recover millions of dollars in unpaid fees even though the oral contingent-fee agreements he entered into with his client are unenforceable under Texas law, the Texas Supreme Court said April 13.

Texas law requires contingent-fee agreements for legal services to be in writing, the opinion by Justice Paul W. Green said.

But when they’re not, the value of the services rendered may still be recoverable thru an equitable remedy known as “quantum meruit.”

Attorney Gregory Shamoun had four separate agreements with Albert G. Hill Jr., to represent Hill in cases in which Hill was involved. But Hill was also involved in a number of other additional, connected cases involving other members of his family, family trusts, and a number of business entities.

Shamoun soon became entangled in the other cases.

Shamoun and Hill never signed a written agreement for the extra services. Instead, they orally discussed Shamoun getting a bonus based on the amount Shamoun saved Hill through a global settlement of the other cases.

While Hill paid Shamoun for his services under the signed agreements, he refused to pay him the $11.25 million he requested for legal services related to the settlement, which was finalized after Shaoun had been terminated.

Shamoun’s firm sued Hill and a jury said Shouman provided $7.25 million in compensable services. The trial court set aside those findings because of the lack of a written fee agreement.

Shamoun’s quantum meruit suit may proceed, the supreme court said. The top court revived the attorney’s chance to collect but said Shamoun must again prove the value of the services he rendered as the jury’s award wasn’t supported.

Gibson Dunn & Crutcher LLP represented Hill. Alexander Dubose Jefferson & Townsend LLP represented Shamoun.

The case is Hill v. Shamoun & Norman LLP, 2018 BL 130514, Tex., No. 16-0107.

Two Key Provisions for Your Fee Agreement

February 27, 2018

A recent CEBblog article by Julie Brooks, “2 Key Provisions for Your Fee Agreement,” writes about two keep provisions in fee agreement.  This article was posted with permission.  The article reads:

In "The Contract that Binds: Your Fee Agreement", we noted that fee agreements should not be governed by simple boilerplate and formulaic thinking. This is true, but there are exceptions to this general advice: Here are two particular provisions that should be considered and likely added to every fee agreement you draft.

When you’re part of a law firm, your fee agreement should make clear that it’s the firm being retained, not you. Even if you’re likely to perform most or all of the work, this provision will support the firm’s continuing representation of the client and the transferring of responsibilities to another attorney if you die, become disabled, leave the firm, or are otherwise unavailable to handle all or some part of a client matter. Of course, the client will retain the absolute power to discharge the firm at any time, with or without cause.

Here is sample language you might use for this provision (when applicable, the bracketed language at the end may clarify the situation and assure the client):

RETENTION OF FIRM RATHER THAN PARTICULAR ATTORNEY. You are retaining the _ _[name of law firm]_ _, not any particular attorney, and the attorney services to be provided will not necessarily be performed by any particular attorney. _ _[It is anticipated, however, that the services will be performed principally by _ _[insert name(s) of attorney(s)]_ _.]_ _

If you’re being retained as counsel but may delegate performance of some of the services to other attorneys and legal professionals, you need to make that clear to the client at the outset. See California State Bar Formal Opinion No. 2004-165 (if attorney anticipates delegating services to outside contract attorneys, issue should be addressed in fee agreement). Under Cal Rules of Prof Cond 2-200, the client must specifically consent in writing to an attorney’s sharing part of a fee with another attorney who isn’t a partner or associate in the same law firm. An attorney who is “of counsel” to the firm is not considered a partner or associate (i.e., an employee) in the law firm. See California State Bar Formal Opinion No. 1994-138.

Here is sample language you might use for this provision:

DELEGATION OF ATTORNEY AND PARALEGAL SERVICES. You agree that we may delegate to other attorneys and legal professionals, such as contract attorneys and contract paralegals, some of the attorney services to be provided to you. Such services will be billed to you at the same hourly rates that we bill our services, and any such delegation will not affect your obligation to pay attorney fees as provided for in this agreement.

Cities Release Fee Agreements in Opioid Litigation

February 9, 2018

A recent Connecticut Law Tribune story by Robert Storace, “3 Conn. Cities Release Fee Agreements in Opioid Lawsuits,” reports that three Connecticut cities have signed contingency agreements with law firms representing municipalities in suits claiming large pharmaceutical manufacturers are liable for losses related to the statewide and national opioid epidemic.

The fee agreements, which grant approximately a third of any money collected to the firms, charge the communities nothing without a settlement or jury verdict.

Waterbury and Bridgeport have signed agreements with Simmons Hanly Conroy of New York City and Drubner, Hartley & Hellman of Waterbury. New Britain and New Haven are represented by Scott + Scott. New Haven officials declined to release the city’s fee agreement, stating the document “has not been fully executed yet,” but it is expected to be virtually the same as New Britain’s.

The seven-page agreements for Waterbury and Bridgeport are identical, stating that “at a minimum attorneys shall provide the following services: work with city personnel to determine the costs the city has incurred of the over-prescription of opioids, determine the viable causes of action available to the city; and determine which if any manufacturers that should be targeted in a lawsuit. After such identification, and only as authorized by the city, the attorneys will, on behalf of the city, bring a lawsuit against those parties identified by the attorneys and agreed to by the city.” The stated fee in each case is “up to 33 percent” of the settlement or verdict.

The fee agreements also state that resolution through litigation “often takes years to achieve” and that “there is no guarantee or assurances of any kind regarding the likelihood of success” of the claim. The law firms “will use their skill, diligence, and experience to diligently pursue our action.”

The contracts allow the cities to terminate with 10 days’ notice and for the attorneys to terminate “at any time if they determine, at their sole discretion, that the city’s claims lack merit or that it is not worthwhile to pursue the city’s claim further.”

The New Britain fee agreement with Scott + Scott is two pages long and is similar to the  Waterbury and Bridgeport agreements.

If New Britain prevails, the agreement states, in part, “Scott + Scott will also seek reimbursement of any out-of-pocket costs, which we incur on plaintiff’s behalf, from the same (settlement or judgment) fund or directly from the defendant’s by agreement or court order.” Those out-of-pocket costs, which the city does not have to pay back if they do not prevail, include costs related to research, parking and travel and deposition and transcript costs.

Gennaro Bizzarro, New Britain’s corporation counsel, said Thursday that “Scott + Scott is essentially bearing all of the costs of this out-of-pocket at their own risk.”

Bizzarro continued: “We are not paying for any of the legwork. Scott + Scott is working with the city, and a lot goes into that. Right now, they are working with our finance department in collecting raw data for things like changes in the number of opioid-related calls that were placed to our public safety officials like police, fire, first responders and EMS. Down the road, they will be looking at specifics related to changes in department budgets. We will have the burden of showing this has had a direct impact on our finances. We are talking about, potentially, millions of dollars.”

Linda Whibey, Waterbury’s corporation counsel, and Christopher Meyer, Bridgeport’s city attorney, did not respond to requests for comment Thursday.

Paul Hanly Jr., a partner with Simmons Hanly Conroy and co-lead counsel for about 180 government plaintiffs suing pharmaceutical manufacturers through multidistrict litigation in Ohio, said Thursday the firm’s contracts with Waterbury and Bridgeport, and about 20 smaller Connecticut communities, benefit those communities.

“More importantly than the percentage [of settlement], is our law firm will front all of the substantial expenses in litigating the cases,” Hanly said. “We are talking, easily, millions of dollars in Connecticut.”

Among those being sued are Connecticut-based Purdue Pharma.

In a statement emailed Thursday, Purdue spokesman John Puskar said, in part, “We are deeply troubled by the prescription and illicit opioid abuse crisis, and are dedicated to being part of the solution. We vigorously deny these allegations and look forward to the opportunity to present our defense.”

Attorneys Want to Depose NFL Fee Expert

December 22, 2017

A recent Legal Intelligencer story, by Max Mitchell, “Lawyers Want to Depose NFL Fee Expert Over Slashed Attorney Fees,” reports that attorneys from five law firms have asked the court presiding...

Read Full Post