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Category: Fees & Withdrawing / Terminated

NFL Player’s First Law Firm Entitled to Half Contingency Fee

September 11, 2023

A recent Law 360 story by PJ D’Annunzio, “NFL Player’s 1st Firm Entitled to Half Contingency Fees”, reports that an Atlanta law firm representing an NFL player who eventually replaced it with another firm is entitled to half the original contingency fee agreed to from the outset of the litigation, a Pennsylvania federal judge has ruled.  U.S. Magistrate Judge David R. Strawbridge held that the player, identified as R.B., will have to pay Pope McGlamry PC a 10% contingency fee while paying his current firm, Collins & Truett, the remainder of the funds withheld for attorney fees. Dollar amounts were not listed in the opinion.

Judge Strawbridge relied on the Third Circuit's ruling in McKenzie Construction v. Maynard to determine the reasonableness of the contingency fee agreement between R.B. and Pope McGlamry, with factors including the quality of the work done and the result obtained.  The firm, which represented R.B. from 2011 to 2016, did not represent him when he became eligible to participate in the NFL concussion settlement claims process in 2022.  However, Judge Strawbridge said he was in a position to participate in that settlement program because of the work done by the firm.

Judge Strawbridge was skeptical of R.B.'s claim that Pope McGlamry did not adequately represent him before 2016.  "We view these assertions with some suspicion, as Pope McGlamry provided substantiation for its observation that player's withdrawal was part of a wave of such changes in representation by [settlement class members] as other firms offered more competitive fees," Judge Strawbridge said.

The judge said Pope McGlamry reviewed R.B.'s medical records, filed a complaint on his behalf, kept him updated on litigation and eventual settlement discussions, and counseled him about opting in to the settlement.  But Judge Strawbridge said he also needed to consider the impact of the representation, noting that because it was terminated, Pope McGlamry was not in a position to register R.B. for the settlement program and set up the necessary medical testing to determine the amount of his compensation.

All that, the judge said, "occurred during a time that he was represented by neither firm. Collins & Truett then carried the case to a conclusion in 2022 when it filed player's claim and saw him past the appeal period and into what we presume has been a distribution of his award."  Judge Strawbridge said the combined efforts of both firms were worth 15% of R.B.'s recovery.

Appeals Court: Law Firms Must Share Fees With Ex-Attorney

June 1, 2023

A recent Law 360 story by James Mills, “Appeals Court Says Calif. Firm Must Share Fees With Ex-Atty,” reports that a California state appellate panel held that an attorney's fee sharing agreement with her former law firm was enforceable.  The panel ruled the memorandum of understanding between Los Angeles litigator Ibiere Seck and The Cochran Firm in Los Angeles was enforceable since it clearly spelled out a fee sharing agreement about cases she had worked that would remain with the firm upon her departure.  The firm had contended the MOU was not definitive enough to be enforced, despite the fact the firm had no issues with the fee sharing agreement regarding five other cases covered by the MOU.

"The material terms of the fee sharing agreement between the parties can be readily ascertained from the MOU. The Cochran Firm was required to pay Seck 25 percent of the net attorney fees for a specified list of cases," the three judges on the Second Appellate District wrote in their non-published opinion.  "We are provided with no reasonable explanation why The Cochran Firm contends that the MOU was not sufficiently definite given that it performed under the terms of the agreement on five separate occasions without incident."

Seck worked at The Cochran Firm for 10 years, departing at the end of 2018 to start her own firm, Seck Law, in downtown Los Angeles, according to her LinkedIn profile.  She represents plaintiffs in civil litigation, including catastrophic injury, wrongful death, traumatic brain injury and civil rights cases.  The MOU included a list of specific cases that Seck had worked on that were remaining with The Cochran Firm for which she would receive 25% of the attorney fees.  The court ruling detailed that in 2019, the firm paid her 25% of five cases covered by the MOU.

However, in October 2019, the John Reddick v. Los Angeles County Metropolitan Transportation Authority personal injury case settled for $5 million.  When Cochran did not share the money with Seck, she asserted a lien for 25% of the attorney fees.  Seck had started with that case in 2017, and it was specifically covered by the MOU.  The Cochran Firm filed a complaint against Seck regarding the Reddick case saying the MOU did not cover it as Reddick did not consent in writing to the fee agreement.  The Cochran Firm also sought to have the court declare that Seck had no legal right to assert a lien on the firm.  However, a trial court ruled in Seck's favor in July 2020.

After that ruling, Seck made a formal demand for payment in the Reddick case but The Cochran Firm rejected the demand. In October 2020, Seck filed a cross complaint for breach of contract for The Cochran Firm's refusal to pay her 25%.  Seck moved for summary judgment on the breach of contract claim and in April 2022, the trial court granted the motion, finding the MOU created a valid fee sharing agreement between the two parties.

In May 2022, the trial court entered a judgment in favor of Seck and awarded her $500,000, which was her 25% share of the Reddick case attorney fees plus interest.  The trial court also ruled she was entitled to receive court costs.  At the same time, the court stated that The Cochran Firm's complaint against Seck was resolved and therefore moot.  But The Cochran Firm appealed, contending that the MOU was unenforceable because it was not sufficiently definite.

In addition to ruling in Seck's favor regarding the enforceability of the MOU, the appellate court also dismissed The Cochran Firm's contention that the MOU was unenforceable because it violated the Rules of Professional Conduct, rule 1.5.1, which prohibits lawyers who are not in the same law firm from dividing a fee for legal services, unless certain conditions are met including written consent from the client.  The court noted that Seck was still employed at The Cochran Firm when the MOU was enacted, thus the fee sharing agreement was not subject to rule 1.5.1.  The appellate court further ruled the amount of time Seck spent working on any of the cases on the MOU, including the Reddick case, was irrelevant.  If a specific case was listed on the MOU, she should be paid the 25% agreed to.

Company Held in Contempt For Failing to Pay Attorney Fees

May 11, 2023

A recent Law 360 by Emily Sawicki, “Co. Held in Contempt For Failing To Pay $1M Atty Fee,” reports that a New Jersey federal judge has issued a contempt order against an India-based supplement company for failing to pay discovery misconduct fees and blocked its legal counsel from withdrawing, a year after the company was ordered to pay more than $1 million to opposing counsel following patent infringement claims dating back to 2015.  U.S. District Judge Robert B. Kugler found Prakruti Products Pvt. Ltd. in civil contempt, citing the $994,803.29 in discovery misconduct fees Prakruti still owed to Sabinsa Corp.

Judge Kugler issued an order on April 12 giving Prakruti until April 18 to issue payment.  As of oral argument on May 1, Prakruti had paid just $8,671 of what had been more than $1 million in outstanding fees toward Sabinsa, in order for the plaintiff to pay back $878,548.56 in ArentFox Schiff LLP law firm fees, $15,120 in "Indian-law counsel fees," $96,750.50 in Saiber LLC law firm fees and $13,035.23 in costs.

Judge Kugler ordered the clerk of the District of New Jersey's Camden Vicinage to enter default against Prakruti on Sabinsa's claim that Prakruti violated a 2015 settlement agreement between the two entities, and converted a summary judgment briefing, set to take place in May, into a briefing on Prakruti's default judgment.

In his order, Judge Kugler specified that, although Prakruti's attorneys, Gregory A. Krauss and James T. Wilson of Davidson Berquist Jackson & Gowdey LLP and Jason B. Lattimore of the Law Office of Jason B. Lattimore, would not be permitted to withdraw, "Prakruti's attorneys are not held jointly or severally liable with Prakruti for the remainder of the discovery misconduct fees."

The three had filed a motion to withdraw from their representation on April 14 and Lattimore provided reasoning in a letter dated April 25, saying, "a conflict of interest has arisen between Prakruti, on the one hand, and its current counsel, on the other," citing a pro se, ex parte letter entered into the docket by a Prakruti company director.  "It appears that Prakruti intends to shift blame for its current predicament from itself to its counsel for their supposed failure to provide 'proper representation,'" Lattimore wrote of the company's letter.

The fee amount itself was a point of contention, after then-U.S. Magistrate Judge Karen M. Williams calculated an initial award of about $879,724 to the ArentFox Schiff lawyers in November 2021, recalculated to $878,548 by U.S. Magistrate Judge Sharon A. King, in April 2022.  The award stems from an underlying patent infringement case brought by New Jersey-based Sabinsa, which claimed Prakruti was violating its patent by selling a turmeric supplement.

During a "contentious" discovery process, Judge Williams found that "Prakruti had withheld certain information from Sabinsa and also spoliated pertinent evidence," according to court documents.  The judge sanctioned Prakruti with an adverse inference, finding that Sabinsa's legal efforts to prove Prakruti's misconduct warranted an award of attorney fees against Prakruti.

ABA Issues New Guidelines on Prepaid Attorney Fees

May 5, 2023

A recent Law 360 by Aaron West, “ABA Stresses Client Protections in New Prepaid Fees Guidance,” reports that a committee of the American Bar Association issued new guidance on the ethical obligations surrounding retainers and prepaid attorney fees, offering guardrails to protect clients from paying non-refundable fees for unearned legal work.  The opinion from the Standing Committee on Ethics and Professional Responsibility spells out how lawyers should handle advance non-contingent fees paid by clients for single-issue matters like divorce, defense of criminal charges and certain civil litigation, among others.

"[ABA Rule 1.15] requires that fees paid in advance must be held in a trust account until the services for which the fees will be paid are actually rendered, thereby allocating various risks to lawyer and client," the opinion says, referring to the flat fee rule at issue in the guidance.

According to the ABA's Formal Opinion 505, the problem it seeks to clarify stems from flat fees being classified as retainers, which are often nonrefundable. Attorneys shouldn't consider retainers as a "payment for the performance of services, but rather is compensation for the lawyer's promise of availability," according to the opinion.

"Given the rarity and unusual nature of a general retainer, and the fact that very few clients would actually need or benefit from one, the nature of the fee and lawyer's obligations and client's benefits under such an agreement must be explained clearly and in detail," the opinion states.  When it comes to handling upfront fees, the committee suggested that attorneys use "plain language."

"Instead of 'retainer' say 'advance' and explain that it is a 'deposit for fees,'" the opinion says.  "Explain that the sum deposited will be applied to the balance owed for work on the matter, and how and when this will happen."  The committee also stressed that "an advance fee paid by a client to a lawyer for legal services to be provided in the future cannot be non-refundable."

"Any unearned portion must be returned to the client," the opinion says. "Labeling a fee paid in advance for work to be done in the future as 'earned upon receipt' or 'nonrefundable' does not make it so."  The ethics committee periodically issues opinions to guide lawyers, courts and the public in interpreting and applying ABA model ethics rules to specific issues of legal practice, client-lawyer relationships and judicial behavior.

Although the ABA Model Rules provide guidance that U.S. legal jurisdictions can adopt, many states have their own rules that aren't necessarily in line with the ABA model.  In the case of ABA Rule 1.15, multiple jurisdictions have rules on the books that don't align with the new guidelines.

For instance, California and Oregon have their own model rules that clarify and outline how flat fees paid in advance of legal services should be deposited or labeled.  The ABA in its opinion acknowledges the jurisdictional discrepancy but also says that the approach "departs from the safekeeping policy of the Model Rules" and "creates unnecessary risks for the client."  While it's important to safeguard client payments from being considered non-refundable when an attorney hasn't yet earned them, too broad of an approach also risks preventing states from creating their own legal regulatory rules.

Former Client Fights Law Firm’s $1.9M Attorney Fee Lien

May 3, 2022

A recent Law 360 story by Matthew Santoni, “Ex-Client Fights Buchanan Ingersoll’s $1.9M Fee Lien” reports that a former client of Buchanan Ingersoll & Rooney PC has said the firm isn't entitled to $1.9 million from a settlement in a patent dispute, but it offered to put a smaller amount aside while the parties litigate whether the firm overcharged for its work.  Best Medical International Inc. opposed Buchanan Ingersoll's motion for an attorney's lien on its settlement with Varian Medical Systems Inc., arguing in a brief to a Pennsylvania federal court that its former firm wasn't as instrumental as it claimed in securing the settlement and couldn't seek fees for the work while the reasonableness of those fees was at the heart of the current lawsuit.

"BIR has produced no evidence whatsoever that any settlement discussions began because of the quality of or the quantity of BIR's work," Best's reply brief said.  "Settlement discussions which resulted in an actual settlement did not result until after a substantial amount of additional work was done by other law firms once BIR withdrew from, or were substituted as to, representation of BMI in the Varian case."  Best urged the federal court to deny Buchanan Ingersoll's motion to enforce the $1.9 million lien and offered to put $700,000 in escrow with the court "as a good faith gesture, and without admitting liability in any amount."

Best had sued Buchanan Ingersoll in July 2020, alleging the Pittsburgh-based firm had overcharged for representing the medical device maker in a pair of patent disputes, including the fight with Varian.  Best broke off its relationship with Buchanan Ingersoll in March 2020.  Best and Varian announced a settlement in Delaware federal court April 18, and Buchanan Ingersoll filed a motion with the Pennsylvania court to enforce a lien on the settlement proceeds April 26, expressing concern that its former client would spend or otherwise dispose of the funds before the firm could claim its share.

Although the law firm claimed its engagement contract with Best included a clause saying it would be governed by Virginia law, Best argued that the Federal Rules of Civil Procedure regarding liens superseded the choice of law provision and that the law of the state where the lien was brought should apply.  And under Pennsylvania law, Best claimed that Buchanan Ingersoll had failed to make the necessary showing that its work contributed substantially to the settlement it sought the lien against.

Buchanan Ingersoll said it did most of the work on the Varian case in Delaware and on six "inter partes review" challenges that Varian had filed with the U.S. Patent and Trademark Office.  But Best countered that more was done by the successor law firms, including a "substantial amount of discovery, the taking and defending of depositions, significant briefing and oral argument before the USPTO … and appeals of the IPR final decisions to and currently pending in the U.S. Court of Appeals for the Federal Circuit."

"It is this substantial work by others, not BIR, that ultimately led to the Varian case settlement more than two years after BIR's representation was terminated," Best's reply said.  Even if the court agreed with Buchanan Ingersoll that Virginia law applied, the firm had not given all parties to the settlement — including Varian — that state's required notice that a lien might be applied to the settlement proceeds, Best said.

Moreover, Best said that Virginia law required Buchanan Ingersoll to show that the fees it sought to recover were reasonable, and the current lawsuit contended that they were not.  Best cited the Virginia Supreme Court's 1997 ruling in Seyfarth Shaw Fairweather & Geraldson v. Lake Fairfax Seven Limited Partnership to support its argument.

"Similar to issues in the instant case, the issues in Seyfarth involved the law firm expending an unreasonable amount of time in the performance of legal services and, therefore, the total amount of legal fees charged was unreasonable," Best's reply said.  "Any fees recoverable must be reasonable and … the party claiming legal fees has the burden of proving prima facie that the fees are reasonable and necessary.  Clearly, BIR has not met its burden of proof, nor has there been any adjudication, that the fees in dispute allegedly owed BIR were reasonable and necessary."