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Ambiguous Contingency Fee Agreement Could Cost Lawyers

December 23, 2013 | Posted in : Contingency Fees / POF, Expenses / Costs, Fee Agreement, Fee Issues on Appeal, Fee Reduction

A recent The Legal Intelligencer story, “Flawed Notice of Contingency Terms Cuts Attorney Fees,” reports that the Pennsylvania Superior Court has ruled that a law firm’s contingency fee agreement was ambiguous because it failed to expressly state whether the fee would be calculated based on the gross proceeds from the settlement or on the net proceeds after the litigation costs and medical expenses were deducted.

In an unreported opinion in Nguyen v. O’Neill, a three-judge panel of the court unanimously upheld a Philadelphia trial judge’s ruling reduced Philadelphia-based personal injury firm Simon & Simon’s cut of an $86,300 settlement in a motor vehicle accident case from about $32,000 to just under $20,000.

Writing for the court, Senior Judge William Platt agreed with Philadelphia Court of Common Pleas Judge Annette Rizzo that Simon & Simon’s fee agreement was unclear as to how the attorney fees would be calculated was therefore in violation of Rule 1.5(c) of the Rules of Professional Conduct.  Rule 1.5(c) requires fee agreements to “state the method by which the fee is to be determined, including…litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingency fee is calculated.”

“After review, we agree with the trial court’s determination that the contingent fee agreement is ambiguous, and that appellant’s failure to specify whether it would deduct litigation and medical expenses from the recovery before calculating its attorney fee is in contravention of the clear directive set forth in Rule 1.5(c),” Senior Judge William Platt said.  “This ambiguity in the contingent fee agreement must be construed against appellate as contract drafter, and the court correctly determined that the attorney fee must be calculated based on the net settlement recovery, after deduction of expenses.”