Obtaining a great result for your client is no guarantee you won’t get sued for malpractice.
Just ask the defendants in an ongoing Connecticut case. There, lawyers at one of the state’s most prominent firms are defending a lawsuit that alleges, among other things, that they took an excessive fee after winning the largest med-mal verdict in state history.
In 2011, a jury handed down an award of $58.6 million to the parents of a child who sustained severe brain damage during birth at a Stamford hospital. The verdict made headlines. It is touted on a web banner on the firm’s website.
After trial, the parties settled for $25 million to forego an appeal. From that sum, the lawyers paid themselves a 28 percent contingency fee – around $7 million, plus $600,000 in costs. The parents say the firm was entitled to a much lower fee.
Sliding Scale for Fees
At issue was Connecticut’s tort reform statute, enacted in 1986. That law capped contingent fees according to a sliding scale. It allows lawyers to claim 33 percent of the first $300,000 in damages, 25 percent of the next $300,000, 20 percent of the next $300,000, 15 percent of the next $300,000 and 10 percent of any amount in excess of $1,200,000.
Under the statute, the firm would have gotten a fee of approximately $2.65 million.
When representation commenced in 2003 the parties signed a retainer agreement that referenced the fee cap statute and provided that “if that statute is not in effect at the time money is to be distributed to the client, [firm] shall receive fees of 28% of the total recovered.”
In 2005, two years after the retainer was executed, the Connecticut legislature amended the statute to allow parties to negotiate contingent fees up to 33 percent.
The firm contends the 2005 amendment rendered the statute “not in effect” and that it is entitled to 28 percent of the $25 million dollar settlement. The plaintiffs say the “not in effect” provision came into play only if the statute were repealed.
In addition to filing a lawsuit, the plaintiffs brought ethics charges against their former lawyers. The Connecticut Chief Disciplinary Counsel submitted to the Statewide Grievance Panel that the firm failed “to inform and explain the terms of the . . . fee agreement and any claimed changes to it in order to permit the client to make informed decisions regarding the representation.”
It is important to note that the lawyers have not yet been found to have taken an excessive fee.
But in retrospect, it appears a great deal of misery could have been avoided through:
- Client communication, and
What if the lawyers had called the clients into the office to discuss how the 2005 fee cap amendment affected the retainer agreement? What if they had explained that their contingent share was now 28 percent, not the lower amount provided by statute? What if they had followed up this meeting with a letter confirming these points?
“Regardless of the substantive merits of the dispute as to whether the changes made to the statute by the legislature rendered the previous version of the statute obsolete, this dispute highlights the importance of client communication,” writes Professional Liability Matters. “Even though a fee agreement may be explicitly detailed within the retainer, and even though that fee agreement may specifically illustrate each and every detail of how and when fees may be collected by the attorney, special care should be taken to alert each client as to any changes in the agreement, or to when certain fee schedules take effect. Though there is little, if nothing, that can be done to completely erase the possibility of a fee dispute, making the fee recovery as transparent, open and informed as possible can only help eliminate headaches for both client and attorney during the life of the case.”
- Connecticut Law Tribune http://www.ctlawtribune.com/id=1202748520743/MultimillionDollar-Fee-Controversy-Heads-to-Statewide-Grievance-Hearing?mcode=0&curindex=0
- Professional Liability Matters http://professionalliabilitymatters.com/2016/03/02/fee-dispute-arises-from-largest-med-mal-verdict-in-ct/