Attorney Obtained Substantial Pretrial Attachment, But He Did Not Obtain Substantial Interest On Delinquent Fees Because No Interest Provision Was Present In The Retainer Agreement.
Pech v. Morgan, Case No. B300524 (2d Dist., Div. 3 Mar. 11, 2021) (published) is an instructive decision indicating how enforceable, compliant fee agreements are dealt with in pretrial attachment/merit situations and also providing some tips on some provisions to include in retainer agreements.
This case involved an attorney suing clients for a pretty large attorney’s fees receivable where there was a retainer agreement compliant under B&P § 6148 (the provision which sets forth what needs to be contained in non-contingency retainer agreements) and work on the same basis for some other matters on the same terms. The retainer agreement did contain a provision requesting the clients to object to any invoices, which clients did selectively to only four statements over a number of years. The retainer agreement did not contain a provision indicating the attorney could charge interest.
The attorney sued based on the retainer agreement and an implied-in-fact agreement that further work was encompassed within the retainer terms (the latter theory permissible under section 6148(d)(2)). Attorney sought a pretrial attachment against certain assets of clients, seeking $821,000 in fees and accrued interest in excess of $298,000. Clients opposed on the basis that the fees being claimed were not reasonable under a lodestar analysis (despite the existence of a retainer contract with specified rates). The trial judge, after rejecting the clients’ expert analysis on the reasonableness of the work effort, granted the delinquent fee request but did not award interest based on the lack of an interest provision in the retainer agreement.
The 2/3 DCA affirmed.
After observing there was an analytical gap on the measure of recovery for B&P noncompliant agreements (quantum meruit) versus enforceable fee agreements (one would presume contractual, but with no published decisions addressing), the Court of Appeal—giving deference to a 1993 advisory by the State Bar’s Committee on Mandatory Fee Arbitration—decided that enforceable, compliant fee agreements should be enforced by their terms, not quantum meruit, as long as the fees were not unconscionable under Rules of Professional Conduct Rule 1.5. So, in essence, the contractual terms prevailed unless the fees were unconscionable, which was not the case. This made sense because lodestar analysis is really aimed at what an opponent would pay to a prevailing party such that different reasonableness concerns enter into the picture. With respect to the attorney’s performance under the retainer agreement, that was governed by a reasonableness standard—but nothing showed that the attorney did subpar work. The pretrial attachment order was affirmed.
But there are two additional takeaways from this opinion. First, retainer agreements should contain a provision requesting the client to object to any invoices—this one here had no time limits and there were some objections which apparently were resolved, which aided the courts at both levels in determining that the attorney’s conduct was reasonable. Second, if you want interest (and keep in mind attorney here “lost” about $300,000 in potential interest), make sure you have a retainer provision indicating interest will be charged (see State Bar’s Standing Comm. on Professional Responsibility and Conduct Formal Opn. No. 1980-53).
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