Update (May 4, 2015): The Minnesota Supreme Court heard argument this morning in the Petition for Distribution of Attorney’s Fees between Stowman Law Firm, P.A., and Lori Peterson Law Firm case, which is discussed in earlier posts below. The issue in the case is whether Stowman should get part of a contingent fee award when he did much of the work on the case but he withdrew before the client negotiated a settlement with a successor lawyer. There was nothing in the Stowman contingent fee agreement providing for any such scenario.
Erik Hansen argued for the Stowman Law Firm. Based on the the questions that the hot bench laid on Hansen, I think we can predict that the Stowman law firm will lose. The Court’s concern is that litigants in contingent fee cases will be badly prejudiced if a string of contingent fee lawyers can all make “extracontractual claims” on any ultimate recovery even if such a deal is not set out in the lawyers’ contingent fee agreements (under theories of “quantum meruit” or “unjust enrichment”). Zenas Baer argued for the Lori Peterson Law Firm.
So, it seems to me there might be an easy fix going forward (but no recourse for Stowman, if I am right as to how the Minnesota Supreme Court is leaning). The original contingent fee agreement could set out an express condition that the attorney will be entitled to a fair share of an ultimately recovery in the event the event that the lawyer has to withdraw before final settlement or resolution for any reason. But this might lead to later litigation as to whether any such a contractual provision is too vague to be enforceable. But it would rescue the firm in Stowman’s position who seeks to be paid even when there was no applicable provision in the contingent fee.
Update (January 22, 2015): (under headline: “Attorney Withdrawal From Case Because of Attorney/Client Disconnect Re: Settlement ≠ “Good Cause””): The Minnesota Supreme Court has granted a petition for review in the published Minnesota Court of Appeals’ attorneys’ fee dispute decision described (and called into question) below.
Original post (November 7, 2014): Let’s say a client comes to you with a claim and, based on your experience, you assess the claim to have a value of between $0 and $250,000 and a most likely recovery of less than $100,000 in your best estimate. (Let’s say the range has to do with complications with regard to liability and with regard to claimed damages, as well.)
You take the case on a contingent fee and the defendant offers your client $100,000 in a settlement mediation.
You want your client to take it. Your client wants to hold out.
What are you going to do about it?
One thing you might think about doing is withdrawing from the case. You’re a contingent fee lawyer. Your time is your capital. And this client might be forcing you to invest a lot more than would be rational.
This week’s decision in In Re Petition for Distribution of Attorneys’ Fees between Stowman Law Firm, P.A. and Lori Peterson Law Firm will make the decision to withdraw a little tougher for the contingent fee lawyer.
In a published Minnesota Court of Appeals decision, the Court held that a lawyer who withdraws because of irreconcilable differences of opinion on the desirability of a settlement offer has to walk away from any recovery in the case.
So, it would seem that the following, in theory, could occur:
- A client might reject a settlement offer;
- Then, plaintiff’s lawyer might withdraw from the case out of a concern that the client has unrealistic expectations and that the lawyer would be taking on excess risk taking the case to trial, and
- The client could change her mind, accept the previously rejected settlement offer, and the plaintiff’s lawyer would have surrendered her claim to her contingent fee?
If the rule is taken this far, it seems potentially extremely unfair (and dangerous) to contingent fee lawyers. On the other hand, it certainly has the benefit of clarity and ease of application.
The position of the Stowman Law Firm in the linked decision threatened uncertainty and high cost in determining the fair distribution of fees to which it would have been entitled under a theory of “quantum meruit” (versus the later successful contingent fee lawyers, presumably). The Court of Appeals decision is probably the least expensive solution, at the expense, maybe, of fairness.