Second District, Division 4 Faces Issues of First Impression Under § 6147.
Justice Manella, speaking for a 3-0 panel of the Second District, Divison 4, faced some first impression legal issues with respect to the reach of Business and Professions Code section 6147’s requirements over certain hybrid contingency agreements. In particular, the appellate court zeroed in on the section 6147 requirement that contingency agreements are voidable by the client unless there is a statement that a success fee was not set by law but negotiable between client and attorney.
In Arnall v. Superior Court (Liker), Case No. B225264 (2d Dist., Div. 4 Nov. 22, 2010) (certified for publication), a tax attorney specialist contracted with clients under a contingency arrangement by which he would receive a set stipend fee for a defined number of months plus a “success fee” of either 1-2% of certain specified reductions if he was successful in getting some adjustments to taxable income treatment for the clients. However, his retainer agreement did not have the mandated contingency fee language referenced above under section 6147. Clients moved for summary adjudication on attorney’s contractual claims, arguing the contingency agreements were voidable and attorney was only entitled to seek quantum meruit recovery. The trial court denied the summary adjudication motions, determining that the contingency fee prohibition did not apply “outside the litigation context.”
The Court of Appeal issued a writ, finding that clients’ challenges were indeed correct.
First, the appellate court determined that legislative amendments to section 6147--replacing prior language “plaintiff” with the current “client” verbiage--clearly demonstrated that 6147 applies to both litigation and transactional work by an attorney.
Second, section 6147 was held to apply to “hybrid” contingency agreements like the one involved in the case being decided.
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