Friday, December 9, 2016

Attorney's fees in contingency cases

In William E. Weaner & Associates v. 369 West First Street the Second District was asked to reduce a fee award on the grounds that the award exceeded the amount that would have been paid to the law firm under its contingency fee agreement. It declined to do so.
The court (correctly, in my view) wrote that while the existence of a contingency fee was one factor to take into account in calculating the reasonableness of a fee application, it wasn't the only factor to consider. It ultimately placed more emphasis on the lodestar amount and affirmed the award of roughly $60,000, which is nearly triple the actual damages awarded. (The contingency rate is not addressed in the opinion, but the attorney fee award would be roughly eight times a one-third contingency, and roughly seven times a 40% contingency.) The court was particularly influenced by the fact that what should have been a relatively simple and straightforward dispute had ballooned into six years of litigation.

That's all well and good, but what I'd like to know is whether a different result would have obtained if there was evidence that in fact the law firm's clients had paid only the contingent amount. In other words, when the firm and its client agree to a seven or eight thousand dollar fee, but the court awards $60,000, who gets the surplus fifty-two or -three thousand? If the law firm gets the surplus, then all would seem to be OK; the client is fully compensated for its injury, and the law firm receives reasonable compensation for the effort expended. But if the client gets the surplus, that would seem to constitute a windfall, as it would walk away from the litigation with a stack of cash more than twice the size of its injury. That might bring this case into conflict with cases like Landis v. William Fannin Builders, Inc. To be sure, the holding of Landis relates to a windfall of compensatory damages rather than a windfall of attorney's fees. And it's also true that an award of attorney's fees is usually treated as an award of costs rather than damages (at least where a statute authorizes the award) and so Landis and similar cases proscribing windfall damages may not apply.

Alas, the record here (or at least the opinion) is silent as to precisely what had happened, so that question may have to await another case.

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