The danger and beauty of contingent fee arrangements is that this method of risk allocation recognizes that while the attorney may make a large sum of money, there is the attendant risk that there will be no fee at all. For the client, as has been well-recognized over the years, this arrangement allows for representation where the client cannot afford an attorney. The rub comes when there is a good or very good result, and the client feels that there is no longer a reasonable link between effort and fees.
Cohen v Hack 2017 NY Slip Op 30070(U) January 9, 2017 Supreme Court, New York County Docket Number: 159052/12 Judge: Gerald Lebovits is a perfect example. Client wanted to get his disability insurance paid, but when he succeeded, he thought, why should the attorneys get 1/3 of my money for the rest of my life?
“Plaintiff alleges that on April 23, 2008, he met with Evan Schwartz, a member of the law firm of Quadrino & Schwartz, P.C. (the law firm), and that he and Schwartz, on the law firm’s behalf, executed a retainer agreement (the initial retainer) to represent him in connection with filing long-term disability claims against Guardian Life Insurance Company of America (Guardian) and New York Life Insurance Company (NY Life) (plaintiff affidavit, 1, 2; plaintiff EBT at 26-28). ”
“Plaintiff contends that he provided the necessary financial documentation to the law firm to enable it to prosecute his claim (plaintiff affidavit, 3). Plaintiff states that in May 2009, he was advised that Guardian had denied his claim for disability benefits, that he was not advised of an appeal procedure, but that he was told that if he did not pay the then-outstanding balance of accrued legal fees of approximately $17,000, the law firm would withdraw from representing him (id., 7-9; plaintiff EBT at 29, 34-37, 42-43). Plaintiff further states that on July 24, 2009, he was advised that the only way to contest Guardian’s denial of his claim was to commence a lawsuit against it and that this required a new retainer agreement (the lawsuit retainer) (plaintiff affidavit, 10-11; plaintiff EBT at 35-37, 51-54). On July 24, 2009, plaintiff and Schwartz, on the law firm’s behalf, executed the lawsuit retainer (plaintiff affidavit, 11-14 ). ”
“On August 5, 2009, the law firm electronically filed a summons and complaint in Supreme Court, New York County, under index number 111342/2009: Brian Cohen v The Guardian Life Insurance Company of America (the lawsuit). In November 2009, the lawsuit was settled and, under the terms of the settlement, plaintiff received a monthly disability payment of $5, 181. He contends that the one-third contingency fee owing to the law firm under the lawsuit retainer is excessive. ”
“Plaintiffs cross-motion for summary judgment seeking rescission of the lawsuit retainer is denied because plaintiff has not shown “by clear and convincing evidence” (Executive Risk, 56 AD3d at 206) “a unilateral mistake where the enforcement of the contract would be unconscionable” (William E. McClain Realty, 144 AD2d at 218) or a “mutual mistake” (Silver, 7 AD3d at 781 ). Also, plaintiff has offered no reason to vary from “the general rule … that a party may not obtain summary judgement on an unpleaded cause of action” (Pludeman, 106 AD3d at 616, quoting Weinstock, 254 AD2d at 166). Plaintiff contends that the law firm has engaged in excessive and improper billing and, thus, was not entitled to the outstanding balance or the one-third contingency fee. But “[a]bsent incompetence, deception or overreaching, contingent fee agreements that are not void at the time of inception should be enforced as written [and] ‘the power to invalidate fee agreements with hindsight should be exercised only with great caution”‘ (Matter of Lawrence, 24 NY3d at 339, quoting Lawrence v Graubard Miller, 11 NY3d 588, 596 n 4 ). ”
“The contingent-fee arrangement of one-third of the recovery under the terms of the lawsuit retainer has not been shown to be unreasonabie and the court notes that plaintiff had executed similar contingency-fee agreements providing for a one-third recovery in other lawsuits (id. at 18-23). For a court to engage in “hindsight analysis of contingent fee agreements not unconscionable when made is a dangerous business, especially when a [court’s] determination of unconscionability is made solely on the basis that the size of the fee seems [in retrospect to be] too high to be fair” (Matter of Lawrence, 24 NY3d at 340). Defendants have shown that they acted according to the terms of the initial retainer, the la~suit retainer, and the addendum. A court should “enforce clear and complete documents, like [these agreements] according to their terms” (see id at 341 ). Defendants’ motion to dismiss plaintiffs remaining breach-of-contract cause of action, and this action, is granted. ”