Client’s Fee/Costs Recovery of $688,634 Goes POOF! For Now.
In Fleischman v. Law Office of Paul Stanton, Case No. B216898 (2d Dist., Div. 8 June 12, 2014) (unpublished), which involved nasty conservatorship/elder abuse claims among trust beneficiaries with respect to a deceased trustee, client was able to invalidate a retainer agreement which placed two restrictions on his right to terminate his attorney, namely, (1) elimination of an hourly rate discount and restoring the normal hourly rate if attorney was discharged before the litigation ended, and (2) clarification that a bad faith termination of services prior to acceptance of settlement would result in fees being owed at the “greater of” value of fees owed under the agreement (hourly and hybrid contingency) or fees at a value of double the hourly rates. Client, however, lost malpractice and fiduciary breach claims against attorney. Nonetheless, based on the retainer agreement invalidation, the lower court ordered attorney to disgorge all fees received ($400,775 plus interest of $318,043.97). Then, the lower court also awarded client attorney’s fees/costs of $688,624 based on a fees clause in the retainer agreement under Civil Code section 1717. Attorney appealed.
The appellate court reversed and remanded because it found that the in toto disgorgement order was infirm as too much of a forfeiture. The record showed that, during the litigation, the attorney did not attempt to enforce the unlawful provisions such that they could effectively be severed out and did not taint the hourly fees actually paid given the client did concede obtaining services from attorney and never complained about the services until later (around $113,000 in fees). However, there were some procedural irregularities in some portions of the disgorgement order so it had to go back for a “re-do.”
With this happening, one can probably predict what then occurred with respect to the fee award. Civil Code section 1717 requires a “prevailing party,” with the legal landscape changing with the reversal of the disgorgement order which involved two-thirds of the client’s net monetary recovery in the first place. So, until a remand determined what recovery occurred in the future, the trial court had to wait for the future results for purposes of determining a prevailing party, if any, and the amount of fees after the “litigation dust” settled later on.