We’re continuing to discuss the Howard S. Davis article in the New York Law Journal on April 17, 2009.  How does the written attorney retainer agreement relate to an attorney malpractice case?  Is the attorney responsible for handling an appeal, a wrongful death proceeding in Surrogate’s Court, a supplemental trust?   Is a fee earned when there is a successful appeal after an adverse outcome?

Davis writes: "The leading case in New York on the interpretation of attorney retainer agreements is Shaw v. Manufacturers Hanover Trust, 68 N.Y.2d 172, 499 N.E.2d 864, 507 N.Y.S.2d 610 (Oct. 14, 1986). In Shaw, the plaintiff’s attorney had a signed retainer agreement that provided for a contingent fee for prosecuting or settling a claim for personal injury, but was silent regarding appeals. After a trial and a defendant’s verdict, the attorney sought litigation expenses for an appeal, which the plaintiff refused to advance. The attorney was replaced, and an appeal was taken, resulting in a reversal and remand for a new trial. On the retrial, the case was settled for $1.5 million, against which the original attorney sought to collect a fee.

The client objected to the fee application on two grounds: first, that the retainer had ended with the adverse verdict; second, that the attorney had breached the agreement by refusing to proceed with the appeal except on new terms. The New York State Court of Appeals agreed that both arguments were reasonable and denied the fee request.

The Court said, "The importance of an attorney’s clear agreement with a client as to the essential terms of representation cannot be overstated. The client should be fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements . . . an agreement between client and attorney [must] be construed most favorably for the client . . . . Had the client maintained that the retainer agreement required respondent’s representation through conclusion of the matter . . . that would have been the mandated interpretation. But where, as here, the client has asserted that the contract terminated upon entry of an adverse judgment we hold that the agreement must be construed so to provide."

In Friedman v. Park Cake, 34 A.D.3d 286, 825 N.Y.S.2d 11 (1st Dept. 2006), the Appellate Division upheld Supreme Court’s denial of an application by the plaintiff to deny counsel fees to his attorney after his personal injury case was settled with his consent for $90,000, because allegedly the attorney failed to inform the client of a medical lien that reduced his share of the recovery. The attorney had not only a signed retainer agreement but also a form titled "General Instructions to Our Clients," which discussed plaintiffs’ responsibility for liens and said that liens would be deducted from any recovery. Accordingly, the court held that the attorney had not breached any identifiable duty to instruct the client about liens and was entitled to his entire fee.

From an attorney’s standpoint, the lesson taught by these cases is that a contingent fee retainer agreement should contain clear language stating that the legal services to be provided in prosecuting or adjusting a personal injury claim does not include legal services relative to the negotiation or litigation of any Medicaid lien under Ahlborn. In fact, to be safe, the retainer should list all those legal services the attorney will not provide – appeals, settlement or litigation of liens, creation and administration of supplemental needs trusts or guardianships, Surrogate’s Court proceedings, collection and enforcement of judgments, withdrawal of funds deposited pursuant to an Infant Compromise Order, etc. – limited only by the Appellate Division’s rules."