Law firm is sued for legal malpractice.  May they deduct their unearned contingent fee from the malpractice award?  On the one hand, it seems that plaintiff may have a windfall.  It would never have walked away with 100% of the verdict had defendants been successful.  On the other hand, why should the defendant earn a hypothetical fee when it  was negligent and failed?

In NY the rule is that there is no deduction.  Here is a report from Texas on the same issue.

"If a firm is hit with a malpractice jury verdict, is it entitled to subtract a portion of the damages award if it handled its former client’s case on a partial contingent-fee basis?

That was the issue of first impression Akin Gump Strauss Hauer & Feld presented to Dallas’ 5th Court of Appeals recently after a jury found Akin Gump negligent in a legal malpractice suit and hit the firm with a $922,631 verdict. On appeal, the firm argued in its brief that attorney fees the former client paid Akin Gump should not have been part of the jury’s verdict, because only judges can order disgorgement.

Akin Gump also argued that the award should have been reduced by 10 percent, because the firm had a partial contingent-fee arrangement with the client: Lawyers worked at a reduced billing rate but were entitled to take 10 percent of National Development Research Corp.’s recovery. According to its brief, Akin Gump’s theory was that its former client should not be allowed to recover more money in a malpractice suit than it would have recovered from its client if the firm had successfully represented the client.

In its Aug. 29 opinion in Akin Gump Strauss Hauer & Feld v. National Development Research Corp., et al. the 5th Court ruled that the attorney fees former client NDR paid to the allegedly negligent firm "are not recoverable as an element of damages" in a legal malpractice suit against a firm. The holding conflicts with rulings from Texarkana’s 6th Court of Appeals and Eastland’s 10th Court of Appeals.

But the 5th Court rejected the firm’s contingent-fee argument, saying the former client "should not be forced to pay a contingency fee that Akin Gump never earned." It also noted the client had to hire a second set of lawyers to "be in the same position it would have been absent Akin Gump’s negligence "