Would Allow For Fraudulent Billing, But Appellate Court Did Not Say A Longer Period For Review Might Pass Muster.
We have seen numerous attorney-client retainer agreements where there is a clause that says if a client does not dispute a billing entry within 10 or 15 days of receipt, all of the entries are acknowledged as being correct or accurate as between attorney and client. Lawyers likely assume that these clauses are enforceable, but the 4/3 DCA in a 3-0 opinion by Justice Fybel, relying on precedent, recently disabused that notion.
In Cannon & Nelms, APC v. St. Andrews Development Corp., Case No. G052813 (4th Dist., Div. 3 Nov. 23, 2016) (unpublished), a law firm used a 15-day “review or be damned” clause to obtain summary adjudication on a contract count against a client, obtaining a judgment of $394,155.87 in damages and $57,003.31 in prejudgment interest.
All of that went away on appeal because the fees clause was found to be unenforceable based on the reasoning of Charnay v. Cobert, 145 Cal.App.4th 170, 182-183, which found that this would allow a lawyer to fraudulently bill and then be improperly immunized from liability based on the wording of the clause.
However, the 4/3 DCA panel did hinge its result on the fact a 15-day period was too short to comport with fiduciary standards between attorney and client. “We do not address whether a much lengthier period of time in which to dispute attorney invoices might be enforceable.” (Slip Op. at 9-10.) Also, the appellate court strongly suggested that an expert witness might be advisable on remand to assist the court in determining the amount of attorney fees. (See Donahue v. Donahue, 182 Cal.App.4th 259, 276.)
NOTE: Retainer agreements are also the subject of yesterday’s post about the MCLE article, “Ensure that your clients pay your fees” – an article also discussing a dispute waiver provision and Charnay v. Colbert.