Fourth District, Division 2 Construes “Recovery” Fee Retainer Language Against Drafting Attorney.
The next decision demonstrates that practitioners need to be careful how they draft retainer agreements. Because the drafter is usually an attorney, any ambiguity will likely be construed in favor of the client. That is what occurred in the next case, involving a discharged contingency fee attorney hoping to get more than a quantum meruit award under a contingency fee agreement. It did not happen.
In Strickland v. Mason, Case No. E044910 (4th Dist., Div. 2 Apr. 10, 2009) (unpublished), attorney entered into a contingency fee arrangement with client to recover loans client had made to her daughter and daughter’s boyfriend between a 5 year period of time. Client agreed to certain contingency arrangements “of any money recovered” at various points of the legal proceedings, with attorney granted a lien on “any recovery [client] may obtain in the court action ….” In the discharge and withdrawal provisions of the retainer agreement, client could discharge attorney at any time, with attorney entitled to the reasonable value of her services at a $200 hourly rate “payable upon any collection of funds in this matter.”
Attorney did obtain a $145,000 judgment in client’s favor. Attorney was able to attach some of daughter’s boyfriend’s record company royalties, keeping a portion of the attached royalties for her fees and expenses. Client then substituted attorney out, filing a full judgment acknowledgment soon thereafter.
Attorney sent a demand to client for payment of $49,269.35 under the contingency agreement, which was 35% of the $140,769.58 judgment balance.
When this demand was apparently rebuffed, former attorney filed a contract/quantum meruit suit against client. The trial court ultimately awarded attorney $22,670.24 in fees under a quantum meruit theory, based on 150 hours of work at $200 per hour minus offsets from the record royalty proceeds that attorney had received.
Attorney appealed, and lost. Presiding Justice Ramirez, writing for a 3-0 panel of the Fourth District, Division 2, found the fee award was not erroneous under either the contingency agreement or California law.
Under the fee contract, the appellate panel determined that the lower court did follow the reasonable fee methodology after attorney’s discharge. The critical factor was that the fee agreement did not define the term “recovery” to explain the intent of the parties—for example, attorney would like it to mean a mere “judgment,” while client would like it to mean “monies actually collected.” Because the ambiguity had to be construed against the drafting attorney (Civ. Code, sec. 1654; Federal National Mortg. Assn. v. Bugna, 57 Cal.App.4th 529, 535 (1997)), the Court of Appeal construed “recovery” in client’s favor such that attorney is entitled to an hourly rate upon discharge rather than a percentage of the judgment.
No different result occurred under California case law.
Fracasse v. Brent, 6 Cal.3d 784 (1972) was the focal decision for consideration. There, the California Supreme Court decided that a contingency fee attorney discharged without cause is entitled to recover the reasonable value of his/her services rendered prior to the discharge, and that a claim based under a contingent fee contract does not accrue until the occurrence of the stated contingency. (Id. at 792.) These principles were fully consonant with the agreement, which allowed for quantum meruit recovery and did not allow attorney to recover the full contingency fee until collection of the judgment was achieved.
Fracasse did not compel the lower court to award the full contingency fee as the equivalent quantum merit yardstick even where attorney obtained a favorable judgment for client. Even though the supreme court did suggest that judgment procurement could justify award of the full contingency fee under the right circumstances, this result was not automatic.
The fee award to attorney was affirmed.
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