Contingency Agreement Provided Client Would Pay For All Costs, With Quantum Meruit Equitable Principles Bolstering The Conclusion.
Henry M. Lee Law Corp. v. Chang, Case No. B288895 (2d Dist., Div. 3 Nov. 29, 2021) (unpublished) was quite an odyssey. Law firm agreed to represent client in a wage/hour case under a 50% contingency agreement under which client agreed to reimburse all costs advanced by the firm. There also was a severability clause in the retainer agreement. Unfortunately, the retainer agreement did not have “negotiability” language required under Business and Professions Code section 6147(c). Plaintiff client received a jury verdict of $62,000 plus an award of attorney’s fees in the amount of $300,000 under Labor Code sections 226(e) and 1194(a), with the fees ultimately held to go to the law firm rather than the client. [BLOG NOTE—This shows how many wage/hour cases can result in substantial fees where the compensatory recovery is much less.] But there was more bad news to come—the appellate court reversed the jury compensatory verdict and fee award in a subsequent opinion.
So, the battle turned to litigation costs advanced by law firm in representing the ex-client who terminated the firm along the way. Client properly voided the fee agreement under section 6147(c), such that quantum meruit was the basis for fee recovery, which was a moot issue given the earlier appellate reversal. A jury awarded law firm $28,250 in a collection suit against ex-client to collect the advanced litigation costs. The issue presented in the appeal was whether section 6147(c) invalidated attorney’s attempt to recoup advanced litigation costs from client.
The appellate court found that the section only applied to fee recovery and did not impact recovery of litigation costs which were to be borne by the client ultimately. Nothing in the statutory provision applied to litigation costs, and quantum meruit equitable principles demonstrated it would be unfair to deny those expenses to client’s law firm.
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