In terms of compensation and morality, how much money is too much money? When is a lawyer’s recovery “unconscionable”? When does any person’s income “shock the conscience”? How much money should a lawyer be able to make on a contingent fee case before he is publicly punished for taking too much money from a client?
Peoples’ attitudes about money, merit, need vs. want, greed, generosity etc. are entirely subjective, often self-serving, opaque, and irrational.
And it is not surprising that lawyers who earn their living based on contingent fees, which can result in stunning recoveries or financial disasters for the lawyers, often face both outrage and fee fights. (Regular Minnesota Litigator readers will recall Zimmerman v. Zimmerman.)
Late last year, the Supreme Court issued a public reprimand to a contingent fee lawyer for his efforts to recover more money than he deserved (at least according to the Board of Professional Responsibility).
Minnesota Ethics God, Bill Wernz, recently published insightful analysis on the case. Wernz’s bottom line: “Nokes is a quantum leap in Minnesota disciplinary regulation of contingent fees.” (Here, linked, is the Minnesota Supreme Court’s order on Nokes.)
S&V’s sloppiness made the case easy for Hennepin County Judge Thomas Sipkins and for the Court of Appeals that affirmed Sipkins’ decision, largely in M&S’s favor. S&V failed to document their contingent fee/fee-sharing arrangement in a writing disclosed to and signed by the client. So the courts threw out S&V’s claim against M&S for the most part (allowing a claim for “quantum meruit” of about $20,000). Because contingent fee agreements are so dicey, so susceptible to over-reaching, and so susceptible to after-the-fact challenge, it makes a lot of sense to require that the contingent fee agreement (and the fee-sharing agreement) be in writing and be signed by the client, as is required by the Minnesota rules for lawyers’ professional conduct.
A more interesting question to me which the courts did not address and were not asked to address in S&V v M&S is whether M&S’s recovery on the case (one third of $6,350,000 (or $2,095,500)) was an “excessive” contingent fee recovery.
How can anyone possibly determine that?
M&S trial lawyer John Sheehy tried the case to verdict. (Tragically, Mr. Sheehy later died at the age of 57 of a staph infection.)
Let’s say, hypothetically, Sheehy spent 2,000 hours on the case. This would have worked out to $1,047.75/hour. Is the Minnesota Board of Professional Responsibility okay with that?
Let’s say he spend 200 hours on the case. This would be $10,477.50/hour. Is the Minnesota Board of Professional Responsibility okay with that?
Is M&S recovery “excessive” depending on how much or how little time Sheehy and other M&S lawyers spent on the case?
Does it matter if the M&S lawyers, at the same time, had a handful of cases go south so that the hourly rate for lawyer time, spread across all of the cases, would be a small fraction of what otherwise might be called an “excessive” hourly rate?
The linchpins, the cruxes of the morality of a contingent fee agreement, are (1) clear, conspicuous, and complete disclosure, and (2) the free market.
Minnesotans with potentially valuable contingent fee claims should be made aware by responsible Minnesota lawyers that, in a contingent fee case, their claims are assets. When they shop for an attorney, they are, in a sense, selling a piece of the action. They can and should shop for lawyer; they should consult with more than one lawyer. They might be able to negotiate a more favorable contingent fee arrangement.
And, in my opinion, the bottom line is that the Minnesota Board of Professional Responsibility should not get involved in deciding when it thinks that lawyers make too much money because, frankly, they do not have a clue.