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In California, Did You Know You Can Collect Fees for Time Spent Collecting Fees?

February 12, 2018

A recent CEBblog articles by Judy Brook, “Did You Know You Can Collect Fees for Time Spent Collecting Fees?reports on collecting on attorney fee awards and enforcing judgments.  This article was posted with permission.  The article reads:

Collecting attorney fee awards and enforcing judgments can be very time-consuming. Don’t forget to collect attorney fees for time spent chasing down your fees in collection efforts.

Under California law, attorney fees incurred in enforcing a judgment are compensable post-judgment enforcement costs when the judgment includes a fee award based on a contract (see, e.g., Chelios v Kaye (1990) 219 CA3d 75) or a fee-shifting statute (see, e.g., Ketchum v Moses (2001) 24 C4th 1122, 1141 n6). CCP §685.040. This is consistent with the general principle that “reasonable” attorney fees include compensation for time litigating the fee portion of the judgment (see Serrano v Unruh (1982) 32 C3d 621).

Here are a few finer points to know:

  1. Seek collections fees within two years. Fee motions must be filed within two years after the enforcement fees have been incurred. CCP §685.080(a). Keep in mind that the Enforcement of Judgments Law generally doesn’t apply to enforcement actions against governmental entities (CCP §§680.010–724.260).
  2. Consider seeking collections fees from nonsignators. In Cardinale v Miller (2014) 222 CA4th 1020, the court held that under the plain language of CCP §685.040, enforcement fees could be awarded against nonsignator brokers who conspired with the judgment debtor to avoid collection because the judgment included an award of contractual fees. Under this interpretation, the fact that the fees couldn’t have been awarded against the nonsignators under the contractual fee clause was irrelevant; CCP §685.040 authorized fees to the judgment creditor for expenses incurred in enforcing the judgment. 222 CA4th at 1026.
  3. Don’t limit collection fees to trial court activities. In Downen’s Inc. v City of Hawaiian Gardens Redev. Agency (2001) 86 CA4th 856, the court held that the plaintiffs’ entitlement to fees in an inverse condemnation action included fees for bringing a petition for writ of mandate to collect the judgment.
  4. Consider including collection fees for separate actions. In Globalist Internet Technols., Inc. v Reda (2008) 167 CA4th 1267, 1276, the court held that under CCP §685.040, plaintiff was entitled to recover the fees incurred in defending a separate action filed by the defendant/judgment debtor because, if that action had been successful, it would have reduced the judgment collectible by the plaintiff. In Slates v Gorabi (2010) 189 CA4th 1210, 1214, however, the court refused to extend Globalist to defending attacks on a judgment by third parties unrelated to the judgment debtor.
  5. Include collection efforts in bankruptcy court. Actions taken in bankruptcy court to collect a judgment also may be recovered under CCP §685.040. See Chinese Yellow Pages Co. v Chinese Overseas Mktg. Serv. Corp. (2008) 170 CA4th 868, 885; Jaffe v Pacelli (2008) 165 CA4th 927, 929.

The procedure for claiming collection fees is stated in CCP §685.080. You’ll need to file a noticed motion no more than two years after the costs were incurred, supported by a declaration stating, among other things, that the costs were “reasonable and necessary.” CCP §685.080.

Bitcoin for Legal Fees?

December 21, 2017

A recent Law.com story, by Ben Hancock, “What’s Next: Blockchain and Justice; Net Neutrality Fights Brews; Bitcoin for Legal Fees,” reports that the skyrocketing prices for crypto-currencies are making for some interesting legal battles, but they also present another novel question to lawyers: What if my client wants to pay my legal fees in Bitcoin?  In an op-ed, Kaufman Dolowich & Voluck attorney Ian Anderson walks through the ethical and practical considerations of that question — and notes that Bitcoin isn’t treated by the IRS as legal tender.

“Like the country lawyer accepting a bushel of apples for drafting a will, payment in Bitcoin is payment in property,” Anderson writes.  He also notes that payment in crypto-currency raises money laundering concerns, and that if the value of the token goes to zero, it could put the client and attorney in conflict.

Takeaway: “Some attorneys believe … that such flexible payment models attract new clients.  But for cases with minimal fees or attorneys who are not tech-savvy, receiving payment in Bitcoin may be more trouble than it’s worth.”

NJ Appeal Panel: Prior Fee Suit Bars Malpractice Claims

October 20, 2017

A recent Law 360 story by Jeannie O’Sullivan, “Prior Fee Suit Bars Malpractice Claims, NJ Panel Says,” reports that Borrus Goldin Foley Vignuolo Hyman & Stahl dodged a legal malpractice complaint over its representation of a client suing a business partner over allegedly diverted funds, as a New Jersey appeals court affirmed the claims should have been lodged in a prior fee-collection dispute.

The two-judge Appellate Division panel’s decision dealt a blow to Evangelos and Matilde Dimitrakopoulos, agreeing with a trial court’s determination that the couple’s claims against the North Brunswick, New Jersey-based firm over alleged discovery, expert witness and billing gaffes were barred by the entire controversy doctrine.  The doctrine aims to prevent claims arising from the same set of facts from being relitigated.

The panel acknowledged that legal malpractice claims are exempt from the preclusive effect of the entire controversy doctrine, in that they needn’t be asserted in the underlying action that gives rise to the claim.  But the Dimitrakopouloses mistakenly applied the doctrine to the collection action, when the underlying action was actually the couple’s dispute with a former business partner, according to the appeals judges.

By the time the collection action was filed, the couple knew or should have known that their alleged damages were attributable to Borrus Goldin’s alleged professional negligence and could have filed their malpractice claims then, the opinion said.

“Instead, plaintiffs delayed three more years before filing their malpractice complaint.  Our consideration of the facts and equitable factors leads us to conclude that the motion judge correctly determined that the entire controversy doctrine applied here and barred plaintiffs' malpractice complaint,” the opinion said.

The Dimitrakopouloses retained Borrus Goldin in 2009 to assert claims that their business partner in a construction enterprise improperly diverted funds, according to the opinion.  The dispute went to arbitration in December 2010, and Borrus Goldin withdrew as counsel.  The issue was settled in September 2011 after the couple had retained new representation.

Meanwhile, Borrus Goldin had filed a collection action against the Dimitrakopouloses in March 2011 to collect its unpaid legal fees for services rendered in the underlying business dispute, the opinion said.  The court awarded a $121,947.99 judgment in favor of the firm.

The couple filed their malpractice action in September 2015, alleging the firm failed to properly plead claims and obtain consent before agreeing to arbitration, didn’t properly perform discovery and secure expert rebuttal reports, and billed for excessive amounts, the opinion said.  A Middlesex County Superior Court judge dismissed the claims, agreeing with the firm’s argument that the claims were barred by the entire controversy doctrine.

The case is Evangelos Dimitrakopoulos and Matilde Dimitrakopoulos v. Borrus Goldin Foley Vignuolo Hyman & Stahl PC et. al., case no. A-0880-16T3, in the Superior Court of New Jersey, Appellate Division.

Texas Attorney Sues Former Firm Over His Share of Fees

September 18, 2017

A recent Law 360 story by Michelle Casady, “Texas Atty Sues Firm Over Slice of Possible Million Dollar Pie,reports that a Houston-area lawyer has sued his former firm Walne Law PLLC for allegedly violating a fee agreement and denying his right to a share of fees from an underlying contract dispute that could yield millions of dollars in damages.

Andrew Raish, who now works in the legal department for Texas convenience store chain Buc-ee's, alleges in his Sept. 8 petition in Texas court that when he started at Walne Law in August 2013, he entered into an agreement with principal Tracy Walne where Raish would receive 75 percent of the resulting fees if he did the work for clients and 25 percent of the resulting fees if other lawyers at Walne Law or elsewhere did the work.

In September 2014, Raish allegedly brought Charles Dresser IV and Highmark Production Co. LLC to the firm as clients and performed work for them on oil and gas transactional matters and in a commercial dispute.  On the Dresser commercial case, Raish worked closely with Tracy Walne's son, Kelly Walne, and determined Dresser would be better served by teaming up with a larger law firm, Porter Hedges LLP, the petition says.

Raish left Walne Law in July 2015 but was assured by Tracy Walne that the fee agreement would continue to apply to the Dresser case even after his departure, and Walne's son left the firm a few months later to start his own firm, according to the petition.

“Upon information and belief, Kelly Walne negotiated with Tracy Walne for Walne Law to terminate its representation of Dresser on the Dresser matter so Kelly Walne alone could engage and represent Dresser and attempt to secure the anticipated fee from the Dresser matter for himself alone,” the petition alleges.  “To that end, and unbeknownst to Raish, defendant drafted a termination letter.  The termination letter purports to 'confirm' the termination of Dresser as a client of Walne Law and the understanding that Dresser intends to engage Kelly Walne as separate legal counsel to pursue the Dresser matter.”

Raish alleges that once he found out Kelly Walne was handling the Dresser matter, he contacted Walne Law to confirm it intended to honor the agreement to pay Raish 25 percent of any fee collected on the Dresser matter.  The firm indicated it would not and “did not believe Raish had any interest in the Dresser matter," the petition says.

The case is Raish v. Walne Law PLLC, case number 2017-58913, in the 11th Judicial District Court of Harris County, Texas.

Texas High Court to Hear $42M Fee Dispute

March 6, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court to Hear $42M Atty-Client Fee Dispute,” reports that the Texas Supreme Court on granted a request from the owner of a water supply company, who argued a lower court ignored a jury's findings and wrongly granted a new trial to his two former lawyers in a contingency fee dispute lawsuit involving their right to a stake in his company.
In October 2013, a jury rejected the claims of solo practitioners Thomas C. Hall and F. Blake Dietzmann that they were entitled to $42 million in damages under a contingency agreement with Dean Davenport, who won full ownership of a water supply company in an underlying suit.  But about 105 days after rendering judgment, the trial court vacated the judgment and granted the attorneys' request for a new trial.  After an appellate court directed the trial court to provide specific reasons for granting a new trial, it did so in March 2015, holding that the agreement unambiguously provided that fees would be paid out of the ownership in any business recovered, and that the jury's findings weren't supported by the evidence, Davenport told the court.  The high court has scheduled oral arguments in the matter for March 23.

In his petition for writ of mandamus, filed in November 2015, Davenport told the high court it should take the case because the dispute raises the important issue of when a trial court should be allowed to grant a new trial.  In this case, Davenport argued, the trial court disregarded a jury's findings, misstated the record, ignored evidence, credited disputed testimony and “substituted its judgment and credibility decisions for the jury's” in granting his former attorneys' request for a new trial. 

Davenport also argued that the court should weigh in on the “narrow circumstances” under which lawyers and clients can become business partners under contingent fee agreements.  Rule 1.08(a) of the Texas Disciplinary Rules of Professional Conduct allows for that only if the transaction is fair, reasonable and fully disclosed; the client is given a chance to seek advice from outside counsel; and the client consents to it in writing. None of those safeguards were met in this case, Davenport told the court.

“Nonetheless, the trial court concluded as a matter of law — eleven months after a jury verdict in favor of the client (and after the trial court determined the fee agreement was ambiguous) — that the fee agreement was unambiguous and supposedly entitled the lawyers to become partners in businesses the client purchased in settling his lawsuit,” Davenport wrote.  “In so doing, the trial court ignored the plain language of the fee agreement at issue and the special rules and ethical principles underlying the interpretation of attorney-client fee agreements and attorney-client business transactions, as set forth in Levine, Anglo-Dutch, and Rule 1.08.”

In a February 2016 response arguing against granting the mandamus petition, Hall and Dietzmann told the court that Davenport wants the court to “greatly expand Texas law in ways that would substantially reduce the significance and reliability of all written contracts.”  Their agreement with Davenport, the attorneys told the court, “expressly contemplates paying fees out of the recovery of a business ownership.”

“The trial court did not clearly abuse its discretion by granting a new trial for the reasons stated. As it relates to the payment of attorneys’ fees out of the recovery of an ownership of a business, the agreement is unambiguous,” the brief reads.  “Furthermore, the trial court did not abuse its discretion in concluding the evidence was insufficient to support findings that Hall and Dietzmann had waived or should be equitably estopped from asserting their right to be paid under their unambiguous fee agreement with Davenport.”

Hall and Dietzmann filed suit in February 2012, claiming that after the settlements because Davenport was “paid” through his former partners' ownership interests in Water Exploration Co Ltd., they were owed a percentage of the company, instead of the about $400,000 in cash he paid them in December 2009.  They sought about $24.6 million in damages, equivalent to what they said would be the current value of their alleged ownership interest in WECO, plus $18 million in punitive damages.

But the jury found Davenport's contingent fee agreement with the two attorneys did not include a potential ownership stake in WECO, and found the attorneys had waived their rights to seek ownership of WECO and were each estopped from trying to claim a stake in the company.  Jurors also found both attorneys complied with their fiduciary duties to Davenport.

The case is In Re Dean Davenport et al., case number 15-0882, in the Supreme Court of Texas.

Law Firms Seek Unpaid Legal Fees

April 8, 2016

A recent Bloomberg BNA story, “Big Law Docket Scanner: Firms Do Battle Over Unpaid Fees” reports that some law firms use courts to collect unpaid legal fees.  Below is a list of large law firms...

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