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When an Attorney Quit on a Matter with a Contingency Fee Arrangement, Does the Client Owe the Attorney Fees?

April 10, 2013

Posted in Litigation Strategies, Uncategorized

A contingency fee arrangement is a payment made to an attorney for legal services that is contingent upon the recovery in the case; the recovery is defined as either a settlement or an award that is given by the court or jury. When there is a recovery, the payment is a percentage of the total amount recovered. For example, if all parties agree to settle the case for $100,000, and assuming that the client agreed to pay the attorney 25% of the recovery, then the client would pay the attorney $25,000. On the other hand, if the attorney lost the trial and did not recover any amount for the client, then there would be no payment to the attorney. A contingency fee arrangement is often used in civil matters, especially in personal injury cases, but is rarely used in commercial litigation. In these circumstances, the client pays the attorney hourly or uses a hybrid contingency arrangement, which is partly based on an hourly rate and partly based on a percentage of the recovery.

When a client hires an attorney to pursue or defend a case, either the client or the editor is entitled to end their relationship. During the course of the litigation and depending on the bond between the client and the attorney, the client sometimes comes to the conclusion that their objectives and needs can be better served by a different attorney; sometimes the attorney wants to quit because of a diminished financial incentive to complete the case, a conflict of interest with existing or formal clients, or a disagreement with the client as to litigation strategies.

What happens when the client decides to change the attorney or when the attorney quits the case before there is a recovery? Is the client responsible to pay the attorney for the services rendered? Is the attorney entitled to compensation for the hours of work that he or she put into the case? The answer is that it depends on how the client and the attorney ended their relationship.

If the client decides to change their attorney, then at the conclusion of the case when there is a recovery, that attorney is generally entitled to some compensation for the time they spent on the case prior to the client’s retention of a new attorney. The amount of compensation to the prior attorney can be agreed upon and is often based on a percentage of the payment of fees to the new attorney. However, if the parties are not able to amicably agree on the issue, the parties will ask the court to intervene. In that event, the court will make the determination based on the nature of the case, the hours spent, the reasonable hourly rate for an attorney of similar experience, knowledge, etc.

If the attorney quits the case prior to any recovery, then the attorney may not be entitled to any fees even if the client agreed to the change of attorney. In that situation, the court will examine the reasons for terminating the relationship and whether the termination of the attorney client relationship is based on permissible reasons, such as a financial reason, a personality conflict with the client, or a mandatory reason such as a conflict of interest with the attorney’s existing or past clients.

In the case of Rus, Miliband & Smith v. Conkle & Olesten (2003) 113 Cal.App.4th 656, an attorney under a contingency fee agreement was allowed to withdraw without compulsion, meaning that the attorney had to withdraw from the case to avoid an ethical issue, and still seek fees from any future recovery, which will create an unreasonable burden for the new attorney who is willing to spend their time, effort, and risk of obtaining the recovery. Thus, the attorney who quits a case without a compelling reason will not be entitled to fees. In other words, if the prior contingency fee lawyer quit, then the fee interest of the quitting attorney is not preserved. Hensel v. Cohen (1983) 155 Cal. App.3d 563.

If you have a situation where you are considering changing your attorney on a contingency fee matter, you need an experienced civil trial attorney to guide you through the issues or even take on your case. Call the Law Offices of Tony T. Liu at (714) 415-2007 today.