Contingent Fee: $18,500 per hour?

I continue to struggle to find the motivation to blog.  My malaise bugs me.  Rather than dwell on it, this morning I decided to rid myself of it.  My plan is simple: find an interesting story and figure out a way to tie it Vermont legal ethics and write about them.  Then, do it again a few days later. So, here goes.

Earlier this week, the ABA Journal posted Quinn Emanuel seeks fee amounting to $18,500 per hour; will judge approve it?  Quinn Emanuel is a law firm.  The firm represented a class of health care insurers that sued the federal government.  Bloomberg Law posted the firm’s motion to have its fee approved.  The motion’s introductory paragraph sets the stage better than I can:

  • “In February 2016, Quinn Emanuel became the first firm in the nation to file a lawsuit on behalf of a Qualified Health Plan issuer against the federal government alleging that the government improperly failed to make risk corridor payments in violation of Section 1342 of the Affordable Care Act. Four years later, following round after round of fierce litigation and a loss at the Federal Circuit, eight justices of the Supreme Court adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step, including in the parallel cases that eventually made their way to the Supreme Court. The result? An entire industry was able to collect three years’ worth of unpaid risk corridors amounts they had previously been forced to write off as a total loss—approximately $12 billion. Nearly $4 billion of that recovery will go to the class members in these class actions.”

Cutting to the chase, years ago, the firm notified class members that it would ask a court to approve a fee equal to 5% of any recovery.  Here, 5% of $3.7 billion is $185 million. Per the ABA Journal, that “translates to a whopping hourly fee of about $18,500.”

It’s not my point today to comment on the Quinn Emanuel case.  Rather, I’m using it as click bait to provide a refresher on contingent fee agreements.

Rule 1.5(a) prohibits lawyers from agreeing to, charging, or collecting unreasonable fees and expenses.  Contingent fees, and expenses in contingent fee cases, are subject to the rule.

A contingent fee agreement MUST be in a writing that is signed by the client.  In Vermont, the failure to reduce a contingent fee in writing has resulted in lawyers being reprimanded and admonished.  Tip: do this at the outset of the representation.

In addition, Rule 1.5(c) states that a contingent fee agreement MUST:

  • state the method by which the fee is to be determined, including:
    • the percentage that will accrue to the lawyer in the event of settlement, trial, or appeal;
    • the litigation & other expenses that will be deducted from any recovery; and,
    • whether such expenses will be deducted before or after the contingent fee is calculated.
  • clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party.

Upon the conclusion of a contingent fee matter, a lawyer:

  • MUST provide the client with a written statement showing the outcome of the matter and, if there is a recovery, the remittance to the client and the method by which it was determined.

Lawyers are NOT allowed to agree to, charge, or collect:

  • a contingent fee in a criminal case;
  • a fee that is contingent upon the securing of a divorce; or,
  • a fee that is contingent upon the amount of spousal maintenance or support, or property settlement in lieu thereof, in a domestic relations matter.

However, lawyers may use contingent fees in domestic relations matters that involve the collection of:

  • spousal maintenance or support due AFTER a final judgment has been entered; or,
  • child support and maintenance arrearages due AFTER a final judgment has been entered, provided that the court approves the reasonableness of the fee agreement.

In other words, contingent fees are okay in some POST-JUDGMENT divorce & custody matters.

Finally, two cautionary tales.

First, in this post, I referenced a case in which a contingent fee agreement called for a firm to receive 40% of any recovery.  It also included this provision:

  • “Should [Client] refuse to make any settlement which my attorneys advise me is reasonable and should be taken, then I understand that I am responsible for their fee on the basis of that offer, unless they waive this provision.”

Sure enough, the client rejected a settlement offer that the firm advised the client to accept. The firm withdrew and, pursuant to the clause, sought its fee. The Tennessee Supreme Court publicly reprimanded the lawyers, concluding that the settlement provision chilled the client’s right to decide whether to settle.

Second, the failure to reduce to a fee agreement to writing can result in more than a disciplinary sanction.  As the ABA Journal reported here – in a case in which the client was Johnny Depp – a contract for attorney’s fees can be voided if not reduced to writing.

I’ve blogged.  With that weight lifted, off to do what I never lack the motivation to do: get some miles in on a sunny day.  Enjoy the weekend!

Dollar Sign

One thought on “Contingent Fee: $18,500 per hour?

  1. Mike, should wretched excess be a violation of the rules? If so, this contingent fee ought to qualify. That $ should go to reduce health care costs. I imagine this story will generate more disdain for lawyers and a couple more lawyer jokes.

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