Fees
Case Analysis
May
17, 2006
The
decision is important because, although Tonn v. Reuter, 6 Wis.2d 498, 95 N.W.2d
261 (1959), is an old case, there is virtually no subsequent case law, published
or unpublished, applying its holding.
Unfortunately,
the decision contains dicta that is terrible precedent for attorneys.
The
court wrote as follows: “a client may not be penalized for discharging a
lawyer. … [A] client may not be required to pay a combined fee to a discharged
and successor attorney that exceeds the fee to which the client agreed. A contrary
rule would penalize the client for substituting attorneys and reflect poorly on
the legal profession. (citing Joseph M. Perillo, The Law of Lawyers’ Contracts
is Different, 67 Fordham L. Rev. 443, 459 (1998)).”
This
language could work an injustice under many scenarios.
Suppose,
for example, that Avery had settled his case for $4 million, instead of $400,000.
Forty
percent — the contingency fee agreed to with GCL — would equal $1.6
million and 33 1-3 percent — the fee agreed to with Kelly and Glynn —
would equal $1,333,333.
In
this hypothetical, GCL’s damages would be $1.6 million, less $328,000 for
Kelly and Glynn’s legal services, and $28,000 in litigation expenses, leaving
a total damage award of $1,244,000.
Under
the court’s reasoning, however, that would only leave $356,000 in attorney
fees for Kelly and Glynn, because the combined fees may not exceed $1.6 million.
This
may be a great deal for CGL, who would recover more than $1 million, without expending
any time on the case, and for Avery, but it would hardly be equitable for Kelly
and Glynn; it would deprive them of the benefit of their bargain, even though
they performed everything they contracted to do.
It
was Avery who inexplicably contracted with two different law firms to pursue the
same case on the same day, and then had to discharge one of the firms without
cause. Why should Kelly and Glynn suffer the consequences of that action, rather
than Avery himself?
Nevertheless,
Adelman concludes, without citing any Wisconsin authority, that forcing a client
to bear the consequences of his actions in such a situation would “penalize”
him and “reflect poorly on the legal profession.”
On
the contrary, the injustice would be denying an attorney, who has skillfully and
successfully prosecuted his client’s action, his agreed-upon fee, solely
because the client (unbeknownst to the attorney) had retained a different firm
on the same day.
The
far more equitable result would be that Kelly and Glynn would get their roughly
$1.3 million pursuant to the contingency fee agreement, and GCL would be awarded
roughly $1.2 million in contract damages.
Furthermore,
such a result is not only equitable, but it is supported by language in Tonn that
expressly allows for a client who discharges one attorney in favor of another
to pay more than in fees than he would had he stuck with one attorney.
The Supreme
Court wrote, “The trial court’s disposition of the matter gave no recognition
to the fact that there had been a breach of contract by the [client] thereby making
her liable in damages to Bogue and Sanderson [the discharged firm]. A further
error occurred in holding that the [client] should not be required to pay a total
attorney fee in excess of 25 percent of the $14,000 recovered [$3,500]. Unless
[the successor firm] had agreed to such a limitation, the [client] very well may
have obligated herself to a larger fee than this. Judge Wilkie rightly had admonished
the [client] at the time of the hearing with respect to the substitution of attorneys,
that by discharging Bogue and Sanderson and employing other attorneys she might
have to pay a larger total attorney fee than if she had continued the employment.”
Tonn, 95 N.W.2d at 265-266.
This
language is patently inconsistent with the conclusion of Judge Adelman that “a
client may not be required to pay a combined fee to a discharged and successor
attorney that exceeds the fee to which the client agreed [because a] contrary
rule would penalize the client for substituting attorneys and reflect poorly on
the legal profession.”
Accordingly,
attorneys who find themselves fighting for their fair share of a recovery or settlement
in a situation similar to the hypothetical above should vigorously object to the
reasoning in this case, stressing the contrary language in Tonn.
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David Ziemer
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here for Main Story.
David
Ziemer can be reached by email.
