Attorney Properly Rejects Attorney Fee Arbitration Award by Filing a Small Claims Action

Posted on September 29, 2011 by David J. McMahon

In Giorgianni v. Crowley, the California Court of Appeal for the Sixth District decided a novel question arising under the California Mandatory Fee Arbitration Act for attorney fees disputes. 

An attorney, John Crowley (“Crowley”), represented Carrie Giorgianni (“Giorgianni”) in family law proceedings. Crowley was retained to enforce a judgment against her former husband. He billed Giorgianni over $77,000 for those efforts. Giorgianni paid over $69,000, and then requested fee arbitration, claiming that she had been overcharged. Crowley claimed that she owed him $11,000. After a hearing, the arbitrators awarded Giorgianni $29,714 in fees previously paid.

Thereafter, Crowley filed a small claims court action against Giorgianni, seeking an amount “not to exceed $5,000” in unpaid fees and costs. Giorgianni filed a petition in the superior court to confirm the award, asserting that more than 30 days had passed since the mailing of the award and no party had filed a proper rejection. In response, Crowley argued that the award had rejected by the filing of the small claims court action. The trial court disagreed with Crowley and approved the arbitration award.

The court of appeal reversed the trial court’s decision. Pursuant to the provisions of the Mandatory Fee Arbitration Act, arbitration of fee disputes is mandatory for an attorney if commenced by a client. If mutually agreed, the arbitration is binding. A party dissatisfied with the arbitration award must make a timely rejection by filing a de novo request. If no action is pending, the losing party must initiate a new action.

The court of appeal noted that the amount claimed by Crowley in small claims court was an amount “not to exceed $5,000.” Thus, the small claims court had jurisdiction. For these reasons, the court of appeal concluded that Crowley made a timely rejection of the arbitration award by requesting a small claims trial.

Attorney/Spouse Exception Allows Civil Rights Plaintiff to Obtain Fees

Posted on September 28, 2011 by David J. McMahon

In Rickley v. County of Los Angeles, 2011 DJDAR 12634 (2011), the U.S. Court of Appeal for the Ninth Circuit held that a successful civil rights plaintiff may recover a reasonable attorney fee, even when represented by a spouse.

The plaintiff, Rebecca Rickley, and her attorney, Natasha Roit, were legally married and owned property where they both resided. Commencing in 2001, the couple jointly initiated complaints to the County of Los Angeles regarding their neighbors’ improper land use. A permanent injunction was eventually issued against the neighbors. However, the couple continued to complain to the County, which allegedly did not take further action.

Later, Ms. Rickley, as the sole plaintiff, filed a federal civil rights action under 42 U.S.C. Section 1983 against the County. She was represented by her spouse, Ms. Roit, and another lawyer. The suit alleged that the County had harassed Ms. Rickley because of the complaints she made about the County’s failure to enforce building codes and ordinances. The parties eventually settled. As the prevailing party, Ms. Rickley moved to recover attorney fees under the Civil Rights Attorney’s Fees Awards Act.

Although the district court granted the request for attorney fees with respect to co‑counsel, it denied the request with respect to the attorney spouse. The trial court concluded that an attorney fee award under Section 1988 of the Act was proper only if an “independent, emotionally detached counsel performed services.”

The Ninth Circuit partially reversed the trial court’s decision. 

The Ninth Circuit noted that Section 1988 clearly does not allow an award of attorney fees to pro per plaintiffs, who are attorneys and represent themselves in civil rights cases. This is consistent with the general rule throughout the United States. However, the Ninth Circuit clarified that case law does not “automatically” bar a successful civil rights plaintiff from recovering attorney fees, even if represented by a spouse.

Although married couples may have emotional bonds, there is no reason to presume that attorney‑spouses are “unable to provide independent, dispassionate legal advice.” The Ninth Circuit vacated the order of the district court. It remanded the case for further proceedings.

(Edited and corrected on October 7, 2011)

Ninth Circuit Finds Insufficient Basis for Large Attorney Fee Award

Posted on September 26, 2011 by David J. McMahon

In Jones v. GN Netcom Inc., 2011 DJDAR 12668 (2011), the U.S. Court of Appeal for the Ninth Circuit decided an issue that frequently arises in class action litigation. That issue relates to the often minimal benefits paid to class members while plaintiffs’ class counsel fees are often very high.

The case arose when numerous products liability class actions were fled against defendant Motorola Inc. The lawsuits alleged that Motorola purposefully failed to disclose the risk of hearing impairments caused by the use of Bluetooth headsets. The parties participated in mediation which resulted in a settlement. Motorola agreed to pay $100,000 in cy pres awards. The agreement also carved out up to $800,000 for fees to class counsel, and $12,000 for the class representative.

Certain class members objected to the fee award. Despite the objections, the district court approved the settlement and awarded $850,000 to class counsel for fees and costs based on the lodestar method. The trial court made the award despite the fact that the fees awarded were eight times more than the class recovery. The class objectors argued that the settlement was not fair and reasonable. They claimed the fee award advanced the interests of class counsel over the class itself.

The Ninth Circuit reversed the attorney fee award, noting that the trial court had an independent obligation to ensure that an award is reasonable. Because the record in the trial court did not contain an explicit calculation of the method utilized to calculate the lodestar amount, the Ninth Circuit found the award deficient. The Ninth Circuit found the record was not sufficient to support the award. Specifically, the Appellate Court found no comparison between the settlement’s attorney fee award and the benefit to the class, or degree of success in litigation. As such, there was an insufficient basis for determining the reasonableness of the award.

 

New ABA Formal Opinion Allows Counsel to "Change Horses Midstream"

Posted on September 21, 2011 by Gary A. Bresee

What if a client requests that the lawyer switch from being compensated by the hour to accepting a contingency fee instead?  How would the lawyer avoid any conflicts, fulfill her duties of disclosure and avoid any other ethical violations to make that change, and how would this be done in a way to maximize its enforceability?

The American Bar Association (ABA) issued a new formal opinion (11-458, Changing Fee Arrangements During Representation, Aug. 4, 2011) which may help answer that question.  11-458 clarifies the circumstances wherein a lawyer may modify an existing fee agreement during the representation, or "change horses midstream."  

Generally, modifications of fee arrangements are permissible under the Model Rules, but the lawyer must show any modification was (1) reasonable under the circumstances [ABA Model Rule 1.5(a), hereinafter "Rule"], (2) communicated and explained to the client [Rule 1.4 and 1.5(b)], and (3) accepted by the client. 

Being a contract between two parties, fee arrangements are generally governed by simple rules of contract law.  However, counsel has special burdens due to the lawyer's fiduciary duty to the client.  Thus, any changes in the arrangement will be initially regarded as suspect, and lawyers are not free to change the existing relationship by only giving notice to the client.  First and foremost, the new arrangement must be fair and reasonable for the client in light of the circumstances, under Rule 1.5(a).      

  • For example, many firms increase their hourly billing rates annually without negotiating every rate increase with the client.  If clearly communicated to the client this may be permissible, so long as (1) the client is informed, (2) the client consents, and (3) the increase is reasonable under the circumstances;   
     
  • A lawyer and client also may agree to change an hourly fee agreement to a contingent fee agreement, or vice-versa, provided that the lawyer complies with Rule 1.5(c) (requirements for a contingent fee agreement include a writing signed by the client);
     
  • However, a lawyer may not unilaterally impose a "success fee" on a client, in essence altering the arrangement from an hourly rate to a contingency fee, without the client's informed consent; and
     
  • An attorney may request new security for a fee, provided that Rule 1.8(a) is complied with (disclosure and consent requirements of doing business with a current client).

Consequently, it is possible to change horses midstream, but the jump from one horse to the other should be done carefully, and with both eyes wide open.