Recovery Only Applied To Money Received By Clients, Teaching That Ambiguous Retainer Agreement Language Will Be Construed Against The Drafting Attorney.
Justice Fybel, the author of a 3-0 affirming opinion in Kadin v. ABS Power Brake Inc., Case No. G052734 (4th Dist., Div. 3 July 21, 2017) (unpublished), reminds us practitioners, especially litigators, to specifically define key terms of a retainer agreement relating to compensation which is potentially recoverable for attorney work efforts. Ambiguities will be construed against the attorney, as they were in this case.
Here, a retainer agreement stated that “[c]lient agrees to pay to Attorney a fee of 33-1/3 percent of any recovery. If Attorney is unable to obtain money for Client in this case, then Attorney will receive no Attorney fee at all.” Eventually, in settling a federal trademark lawsuit resulting in a $12.88 million judgment, clients did receive $1.1 million in cash and a satisfaction of the $12.88 million judgment. Attorney claimed he was entitled to one-third of the $12.88 million (about $4.3 million), while clients said no—the one-third recovery language only applied to the $1.1 million “cash received” from the settlement. Both the trial and appellate courts agreed that clients’ position was correct.
First of all, there was extensive parol evidence demonstrating an understanding that “recovery” was to encompass only “cash in hand.” Beyond that, however, the Court of Appeal stressed that retainer agreement ambiguities are construed against the attorney (M’Guiness v. Johnson, 243 Cal.App.4th 602, 617-618 (2015)) and that a contingency fee agreement must define the term “recovery” both broadly and specifically if it is intended to include particular forms of nonmonetary recovery (cf. Beard v. Goodrich, 110 Cal.App.4th 1031, 10333, 1039 (2003)).