Sanna v Polizzotto ;2010 NY Slip Op 51496(U) ;Decided on August 23, 2010 ;Supreme Court, Richmond County ;Minardo, J. discusses several interesting aspects of legal representation, contingent fees, what is unconscionable in contingencies, and legal malpractice.
Plaintiffs and their family were in a dispute over property. Attorneys were retained to represent one of the feuding sides, and successfully concluded the case with a cooperative effort to sell the property and divide the proceeds. All good, so far. The rub occurs when fees come into play. Attorneys: we offered to do this on an hourly basis. Client could not pay, so we went to a contingency. Client: 25% is way too much!
In this decision, the court considered: how large may a contingency be and what must plaintiff do when they enter into a contingent fee arrangement with the attorneys?
"According to the retainer agreement, plaintiffs had agreed to pay defendants as consideration for their legal services "twenty-five (25%) of the property or sum recovered, whether recovered by suit, settlement or otherwise" (see Defendants’ Exhibit "E", emphasis supplied).
On the basis of these facts, plaintiffs commenced this action against the defendants on or about April 22, 2008 asserting causes of action for conversion, breach of contract, fraud, breach of fiduciary duty and punitive damages, each arising out of their retainer agreement with defendants and the amount of the legal fees payable thereunder "
"Attorney-client fee agreements are a matter of special concern to the courts and, while enforceable, are affected by "lofty principles" different from those applicable to commonplace commercial contracts (Law Off of Howard M. File, Esq., PC v. Ostashko, 60 AD3d 643, 644 [2nd Dept 2009] quoting Matter of Cooperman, 83 NY2d 465, 472 [1994]; Malamut v. Doris L. Sassower, PC, 171 AD2d 780 [2nd Dept 1991]). "
"Contingent fee agreements between attorneys and their clients generally operate to allow a client without sufficient financial means to obtain access to the justice system (see Law Office of Howard M. File, Esq., PC v. Ostashko, 60 AD3d at 644). However, for attorneys entering into such arrangements, there is always the risk that their time and resources will be expended in the pursuit of legal endeavors that may ultimately prove fruitless (see King v. Fox, 7 NY3d 181, 192 [2006]). In addition, it is well settled that while the attorney is obligated to comply with the terms of the agreement, the client may unilaterally terminate the contingent fee arrangement at any time, leaving the lawyer with no cause of action for breach of contract and a recovery limited to quantum meruit (id.). Case law also provides that circumstances arising after contract formation can render a contingent fee agreement unenforceable, even though it was not unconscionable [*3]when entered into, e.g., where the agreed percentage of the recovery allocated to legal fees is deemed disproportionate to the value of the services rendered (see Lawrence v. Miller, 11 NY3d 588 [2008]). In this regard, it is not only the agreed-upon percentage of the recovery that can render a contingent fee agreement unconscionable."
"Assuming arguendo that the defendants have demonstrated prima facie that (1) the legal services which they performed on the plaintiffs’ behalf were rendered in good faith; (2) plaintiffs knowingly accepted those services; and (3) they were fully informed of the terms of the contingency, plaintiffs’ present assertion that they did not fully understand its terms is insufficient to generate a triable issue. There is no evidence to indicate the plaintiffs are under some type of disability which would prevent them from understanding a one (1) page retainer agreement which clearly and unambiguously indicated it was a 25% contingency agreement whether recovered in suit, settlement or otherwise."