A recent New York Law Journal story, “Fees Case Draws Support for Contingency Arrangements,” reports that an attorney fee dispute that is making an encore appearance before the Court of Appeals this month could have wide-ranging effect on New York’s contingency fee system, according to lawyers supporting a firm’s fee arrangement.

At the heart of the fee dispute is a contingency fee arrangement between the late Alice Lawrence and Graubard Miller for work the firm did in 2004 and 2005 on the lucrative real estate holdings left by Lawrence’s late husband, Sylvan.  The high court heard the appeal of an Appellate Division, First Department, ruling that imposed an hourly fee approach to Graubard Miller’s payments.

In an amicus brief to the Court of Appeal, the New York State Trial Lawyers Association has urged the court to reinstate the contingency fee and argued that beyond the significant difference in the two calculations—about $3 million in hourly payments for Graubard Million versus $16 million in contingency fees—the case presents an opportunity for the court to acknowledge that contingency fee agreements must be enforced appropriately.

“The contingency fee method of attorney compensation, we submit, eliminates the problem of evaluating the value of the services rendered by the attorney on a time basis,” the trial lawyers’ group said as amicus in Matter of Lawrence, Deceased, 149.  “[The First Department’s] decision upholding substantive and procedural unconscionability threatens the basis of the contingency fee system, which is designed to avoid that very problem.”

The association said Alice Lawrence was a sophisticated client who sought the fee arrangement which turned out to benefit Graubard Miller more than she or even the firm anticipated.  The arrangement, which came after Lawrence had paid Graubard Miller about $22 million through 20 years’ worth of hourly billings, called for the firm to get a 40 percent contingency of recovered funds.

The trial lawyers’ group argued that the firm should not be a victim of its own success, namely that it then secured an unanticipated settlement of $11 million over Sylvan Lawrence’s disputed holdings with his brother, Seymour Cohn, within about five months of reaching the contingency fee arrangement.  But the group also asked the court to view the case in a broader context, such as how contingency fee arrangements provide clients with Alice Lawrence’s financial means to secure expert legal help, especially in medical malpractice and other cases involving injured litigants.

“Apart from enabling clients who are not independently wealthy to hire the very best attorneys in the applicable field of law, the contingent fee retainer provides an attorney with an extra incentive to go the extra mile to maximize the recovery, for it is that recovery that will dicate the amount of their fee," the group said.

It added, however, that the "desirability of the contingency fee from the attorney's perspective is greatly lessened if the entire nature of the contract is retrospectively changed--from recovery-based to hourly-based--in those circumstances in which the attorney's very success makes the first measure much larger than the second."

The contingency fee has been in dispute since Alice Lawrence balked in 2005 at paying $44 million on the $111 million secured on her behalf.  She said the fee was unconscionable.  The $16 million figure is now the amount at issue in the litigation.