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Colorado Court of Appeals: Error to Award Attorney Fees for Post-Filing Attorney Conduct

February 8, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in SRS, Inc. v. Southward on February 2, 2012.

Attorney Fees—C.R.C.P. 11—Applies Only to Pre-Filing Conduct

Steven G. Francis, an attorney, appealed the district court’s order awarding attorney fees to Stanton B. Southward. The order was vacated.

Francis was the attorney for SRS, Inc., which operated an automotive service business. Southward was a co-owner and employee of SRS. On SRS’s behalf, Francis filed a complaint in August 2008 alleging that Southward had converted to his own use a number of company vehicles and violated his employment contract.

By May 7, 2010, Southward had disclosed two documents that proved that one of the vehicles, a van, had not been converted but had been sold to a customer. The trial court first ruled that the disclosure was too close to trial and therefore inadmissible. The trial was continued and Southward filed a motion for reconsideration of the motion, which was granted, rendering the documents admissible.

On August 22, 2010, three days before trial, SRS withdrew its conversion claim concerning the van. At trial, Southward argued that SRS’s witnesses should not be believed with respect to the remaining claims because of the delay in the withdrawal of the claim concerning the van. In rebuttal, Francis argued that the blame for failure to withdraw the claim lay with him, not the witnesses. The jury awarded damages to SRS on its conversion claim and returned a verdict for SRS on the breach of contract claim, but awarded no damages.

After trial, Southward moved for sanctions against Francis, alleging that the failure to promptly withdraw the claim was a violation of C.R.C.P. 11, entitling Southward to an award of fees and costs incurred from May 2010 through August 22, 2010. The court entered judgment in favor of Southward and against Francis for $2,858.65.

On appeal, Francis argued it was error to award Southward attorney fees under C.R.C.P. 11. The Court of Appeals agreed. The Court held that Colorado’s Rule 11 is not as broad as its federal counterpart and only focuses on pre-filing and pre-pleading behavior of the attorney; it does not reach post-filing attorney conduct. Because the sanction was imposed based on post-filing conduct, the court’s award of fees and costs was vacated.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on February 2, 2012, can be found here.

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Colorado Court of Appeals: Bad Faith Breach of Insurance Contract by Public Entity and the Colorado Governmental Immunity Act

February 7, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Colorado Special Districts Property and Liability Pool v. Lyons III on February 2, 2012.

Bad-Faith Breach of Insurance Contract—Public Entity—Colorado Governmental Immunity Act—Tort—Discovery—Attorney Fees

Defendants William S. Lyons, Jr. and William S. Lyons III (collectively, Lyonses) appealed the district court’s order, pursuant to C.R.C.P. 12(b)(1), dismissing their claim for bad-faith breach of insurance contract against plaintiff Colorado Special Districts Property and Liability Pool (Pool) and third-party defendant County Technical Services, Inc. (CTSI), on the ground that the Pool and CTSI are immune from liability under the Colorado Governmental Immunity Act (CGIA). The order was affirmed and the case was remanded with directions.

In early 2006, several banks purchased bonds issued by Lincoln Creek Metropolitan District (District), a quasi-municipal corporation in Douglas County. The District issued the bonds to finance construction of a proposed master-planned residential community called Lincoln Creek Village. The Lyonses were members of the District’s board of directors and LCV, LLC, the developer’s board of directors. The banks brought an action (the underlying lawsuit) against LCV and the Lyonses, alleging claims for damages arising from the offering and sale of the bonds issued by the District. The Pool claimed it had no duty to defend or indemnify the Lyonses in the underlying lawsuit because the Lyonses were not covered under the insurance policy and the banks in the underlying lawsuit did not name the District as a defendant or sue the Lyonses in their capacity as members of the District’s board of directors. The trial court found that the Pool and CTSI were both “public entities” and, therefore, immune under the CGIA. It dismissed the Lyonses’ bad-faith claim against these entities.

The Lyonses contended that the district court erred in dismissing their claim for bad-faith breach of insurance contract under the CGIA. The CGIA provides a public entity the defense of sovereign immunity against actions for tort injuries and does not apply to actions grounded in contract. Here, the Lyonses’ bad faith breach of contract claim against the Pool and CTSI was a tort claim that existed independently of the Lyonses’ underlying contract claim against the Pool. Accordingly, the district court did not err in concluding that the CGIA applied to that claim.

The Lyonses next contended that the district court erred in determining that CTSI was a “public entity” within the meaning of the CGIA and, therefore, not immune under the CGIA. The definition of “public entity” includes any “separate entity created by intergovernmental contract or cooperation” composed only of entities that are themselves public entities under the statutory definition. Here, the Pool is a “separate entity created by intergovernmental contract or cooperation” among special districts. Because CTSI is a public corporation, is governmental in nature, and serves as an intermediary to the Pool, CTSI is an “instrumentality” of the Pool and, thus, a “public entity” under the CGIA. CTSI also is a public entity under CRS § 24-10-103(5) because, like the Pool, it is a separate entity created by intergovernmental cooperation between or among other public entities.

The Lyonses next contended that the district court abused its discretion by implicitly rejecting their request to conduct discovery on whether the Pool and CTSI waived their immunity. However, by their own admission, the Lyonses chose not to conduct discovery on the immunity issue because of a perceived need to maintain consistency between their positions in this case and the underlying lawsuit.

Finally, the Pool and CTSI requested an award of attorney fees for defending against the Lyonses’ bad faith claim on appeal. CTSI was entitled to its attorney fees on appeal because the only claim asserted against it was dismissed before trial under C.R.C.P. 12(b)(1). The Pool, however, was not entitled to attorney fees on appeal because the Lyonses’ breach of contract claim was stayed in the district court and had not been dismissed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on February 2, 2012, can be found here.

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Colorado Court of Appeals: Petitioner Entitled to Attorney Fees and Costs for Piercing the Corporate Veil

February 7, 2012 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Swinerton Builders v. Nassi on February 2, 2012.

Attorney Fees—Breach of Contract—Pierce Corporate Veil

Plaintiff Swinerton Builders (Swinerton) appealed the district court’s order denying its motion to recover the attorney fees and costs that it incurred in successfully piercing Beauvallon Corporation’s (Beauvallon) corporate veil. The order was reversed and the case was remanded.

Swinerton entered into a construction contract with Beauvallon in 2001 that contained an arbitration clause and fee-shifting provision. After the construction project was completed, Swinerton filed a demand for arbitration, asserting breach of contract claims against Beauvallon and its president, defendant Craig Nassi, and an unjust enrichment claim against Beauvallon. Ultimately, the arbitrators ordered Beauvallon to pay Swinerton more than $1 million in damages, interest, attorney fees, and costs, and the district court confirmed this award. Thereafter, the district court ruled in favor of Swinerton, concluding that Swinerton could pierce Beauvallon’s corporate veil and hold Nassi personally liable for the arbitration award against Beauvallon.

Swinerton contended that the district court erred in refusing to award it the attorney fees and costs that it incurred in its successful veil-piercing action. A party who prevails in an action to pierce the corporate veil of a corporation may recover the attorney fees and costs incurred in that action if (1) the action was brought to enforce a breach of contract judgment against the corporation; and (2) the contract underlying the judgment authorized an award of fees and costs for enforcing the judgment against the corporation.

Here, Swinerton’s action to pierce the corporate veil was not a separate and independent claim. Rather, it was a procedural mechanism to enforce the arbitration award against Beauvallon in the underlying breach of contract action. Thus, the veil-piercing lawsuit was, in effect, an enforcement action against Beauvallon. When the district court determined that Swinerton could pierce Beauvallon’s corporate veil, Nassi became liable for, among other things, Beauvallon’s contractual obligations under the fee-shifting provision. Accordingly, Swinerton was entitled to recover the reasonable attorney fees and costs incurred in the veil-piercing action. The case was remanded to the district court for a determination and award of the appropriate amount of such fees.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on February 2, 2012, can be found here.

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Coach’s Corner: How Do You Increase Revenues?

January 4, 2012 by Leave a Comment

Law is a business and planning is the first responsibility of a business owner. Business revenues will not increase without a plan to identify the desired outcome and define what is necessary to achieve it. A law firm that does not plan for how to increase its revenues will wind up a practice reflecting whatever walks in the door. It is doubtful that serendipity and whim are the best paths to revenue growth. Taking any or all of these steps offers far greater likelihood of success.

  1. Emphasize Collections. Stipulating payment rates and terms in the engagement agreement and then enforcing them is the best way to maintain and increase revenues.

  2. Hire Laterals. This enables the firm to add revenue from experienced practitioners who have specifically desired skills and a strong book of business to enhance revenues immediately.

  3. Leverage Technology. By making the practice of law more efficient through time savings and efficiency at routine tasks, computer technology reduces costs, enhancing volume and revenue.

  4. Rethink Compensation. A compensation model that ties base compensation to involving other firm lawyers in legal service teams allows for blended rates that maximize profits and revenue.

  5. Outsource Functions. Engaging outside suppliers for transcription, research, document review, data entry and billing reduces cost and frees resources to focus on revenue-generating services.

  6. Raise Rates. There is no prohibition against raising rates at any time, the only ethical obligation is that legal fees be “reasonable.” A firm’s growth history, professional reputation and success, the difficulty of the matter and the sophistication of the client are among the factors that are considered in determining whether a fee is reasonable.

  7. Reduce Overhead. Money spent for space and staffing may be hard to cut, but the best way to do it is throughout the business cycle rather than waiting until income slows.

  8. Stop Discounts. Lawyers should resist client requests to discount any fee specified in the engagement agreement, and should never propose a discount themselves.

  9. Target Clients. Firms can increase revenue notably by focusing on demographics, occupation, location, financials and other characteristics of clients who provide the most desirable work.

  10. Unbundle Services. Structure a laundry list of unbundled services and fixed prices/fees to create a flexible fee structure. It’s the same model used by the airlines to enhance income.

Ed Poll is a nationally recognized coach, law firm management consultant, and author who has coached and consulted with lawyers and law firms in strategic planning, profitability analysis, and practice development for over twenty years. Ed has practiced law on all sides of the table and he now helps attorneys and law firms increase their profitability and peace of mind. He writes the LawBiz® Tips E-zine, where this post originally appeared on August 30, 2011.
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Colorado Court of Appeals: Constitutional Claims Sufficiently Substantial to Warrant Award of Attorney Fees

December 12, 2011 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Beaver Creek Property Owners Ass’n, Inc. v. Bachelor Gulch Metro. Dist. on December 8, 2011.

42 U.S.C. § 1988—Attorney Fees—State Law Claims—Relation Back Doctrine.

Defendant Bachelor Gulch Metropolitan District (Bachelor Gulch) appealed the district court’s orders awarding attorney fees and costs under 42 U.S.C. § 1988 to two groups of plaintiffs, namely, Beaver Creek Property Owners Association, Inc. (Beaver Creek) and Strawberry Park at Beaver Creek Property Owners Association, Inc. and certain of its owners (collectively, Strawberry Park). The order was affirmed in part and reversed in part.

When Vail/Arrowhead, Inc. (Vail) began developing the Strawberry Park subdivision, it agreed not to route any of its construction traffic through the Beaver Creek subdivision. Instead, Vail sent all of its construction traffic over a road in the neighboring community of Bachelor Gulch. In April 2006, Bachelor Gulch enacted a road regulation that effectively banned Strawberry Park subdivision construction traffic from its roads.

On appeal, Bachelor Gulch argued that the district court erred in awarding Strawberry Park its attorney fees, because Strawberry Park’s constitutional claims were not sufficiently “substantial.” When a party joins state law and constitutional claims but prevails only on the state law claims without deciding the constitutional claims, a court still may award attorney fees under 42 U.S.C. § 1988 if the constitutional claim was substantial and the state law claim arose from a common nucleus of operative facts. Here, Strawberry Park was required to establish that the traffic regulation at issue and the classification that it allegedly established lacked a rational relationship to a legitimate governmental purpose. There was a substantial evidentiary record in which both sides presented evidence tending to support their respective positions. In light of this record, and fully recognizing that a plaintiff seeking to invalidate a regulation on rational basis grounds faces an uphill battle, it is not apparent that Strawberry Park’s constitutional claims were “obviously without merit,” as Bachelor Gulch contended. Accordingly, Strawberry Park’s constitutional claims were sufficiently substantial to warrant an award of attorney fees under § 1988.

Bachelor Gulch also contended that the district court erred in awarding attorney fees to Beaver Creek because Beaver Creek did not add its § 1983 claims until after the district court had granted partial summary judgment for plaintiffs. The relation back doctrine may not be used to create a post hoc basis for an award of attorney fees under § 1988. Therefore, Beaver Creek improperly relied on the relation back doctrine to establish, after the fact, a basis for seeking attorney fees. Accordingly, the district court erred in awarding Beaver Creek attorney fees in connection with constitutional claims that were filed after the court granted partial summary judgment for plaintiffs. This judgment was reversed.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on December 8, 2011, can be found here.

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Colorado Court of Appeals: Award of Attorney Fees Pursuant to CORA Mandatory If Denial of Inspection Was Improper and Party Seeking Disclosure of Records Prevailed

November 14, 2011 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Colorado Republican Party v. Benefield, State Representative on November 10, 2011.

Colorado Open Records Act—Confidential Constituent Communications—Prevailing Applicant—Attorney Fees.

In this Colorado Open Records Act (CORA) matter, petitioner Colorado Republican Party (CRP) appealed the trial court’s order denying its Motion for Reasonable Costs and Attorney Fees against respondents Colorado State Representatives Debbie Benefield, Bernie Buescher, Morgan Carroll, Gwyn Green, Mary Hodge, Liane “Buffie” McFadyen, Wes McKinley, Michael Merrifield, James Riesberg, and Judy Solano (collectively, Representatives) under CRS §24-72-204(5). The order was reversed and the case was remanded.

Representatives denied access to surveys requested by CRP based on the confidential communication exception of CORA. The court, following an in camera review, ordered the Representatives to produce the completed surveys to CRP, concluding that they were public records subject to disclosure under CORA. A division of the Court of Appeals held that some of the surveys were excepted from disclosure as confidential constituent communications. After remand, the trial court found that Representatives disclosed all non-confidential constituent communications and denied CRP’s request for attorney fees.

CRP argued that the trial court erred in denying its request for attorney fees and costs pursuant to CORA. First, the law of the case doctrine does not apply to the court’s 2007 order awarding attorney fees and costs to CRP. The trial court later reversed the 2007 award after the case was remanded to the trial court from the first appeal. Additionally, unless a statutory exception applies, an award of attorney fees pursuant to CORA is mandatory if: (1) the custodian’s denial of the right of inspection was not “proper”; and (2) the party seeking disclosure is the “prevailing applicant.” If a document whose production is required under CORA was withheld, the denial of the right of inspection of such document was not proper.

Here, the Representatives appear to have acknowledged as much when, after the trial court’s initial order to produce documents, but before filing of the Representatives’ opening brief in the first appeal, they produced 742 surveys to CRP. As to those records, as well as the 183 surveys they disclosed after remand, the right of inspection was improperly denied.

Further, a prevailing applicant is any party who brings a CRS §24-72-204(5) action against a public records custodian and obtains any improperly withheld public record as a result of such action. Here, CRP prevailed by obtaining production of 742 of the surveys pursuant to court order.

Finally, CORA’s costs and attorney fees provision does not afford the trial court discretion. Because the Representatives were required by the Court of Appeals’ ruling to produce at least one document, CRP prevailed. Further, because the Representatives never asserted that they were “unable, in good faith, after exercising reasonable diligence, and after reasonable inquiry, to determine if disclosure of the [records] was prohibited,” they were not shielded by the safe harbor against attorney fees award under CRS §24-72-204(6)(a). The order was reversed and the case was remanded for the trial court to determine the reasonableness of attorney fees to be awarded to CRP.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on November 10, 2011, can be found here.

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Colorado Court of Appeals: Court Has No Discretion to Modify Interest Rate and Compounding Period to Apply to Child Support Arrearages

November 14, 2011 by Leave a Comment

The Colorado Court of Appeals issued its opinion in In re the Marriage of Tognoni on November 10, 2011.

Child Support—Arrearages—Interest—Attorney Fees.

In this post-dissolution of marriage matter, husband appealed the judgment awarding wife child support arrearages, interest, and attorney fees. Wife cross-appealed the attorney fees amount. The arrearages and interest judgment were affirmed, the attorney fees award was vacated, and the case was remanded for further proceedings.

Husband contended that the trial court erred by entering summary judgment on the arrearages and interest amount. The arrearages amounts determined by the parties differed by $14.24, and the trial court used husband’s expert’s calculation when entering judgment. There were no material disputed factual issues concerning the arrearages amount. Accordingly, the trial court did not err by entering summary judgment on this issue.

Husband also contended that the trial court erred in finding that it lacked discretion under CRS §14-14-106 to determine the appropriate interest rate and compounding period to apply to the child support arrearages. The right to interest, absent an agreement to pay it, is determined by statute. A court has no discretion to modify the interest rate or to determine the compounding period, although such interest may be waived by the judgment creditor.

Husband further contended that the trial court abused its discretion by awarding wife one half of her attorney fees without providing him an opportunity to respond to the allegation that his position lacked substantial justification. Because the trial court granted summary judgment without a hearing, husband had no opportunity to respond to wife’s allegation that his position lacked substantial justification or to present evidence concerning the factors outlined in CRS §13-17-103(1). Accordingly, the attorney fees award was vacated.

Wife also sought attorney fees she incurred on appeal under CRS §13-17-102, contending that the appeal was substantially frivolous. Because husband raised a plausible interpretation of the interest statute and the attorney fees award was vacated, husband’s appeal was not frivolous. Therefore, wife’s request for attorney fees was denied.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on November 10, 2011, can be found here.

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Colorado Court of Appeals: Trial Court Failed to Reduce Attorney Fees Award Proportionately

November 1, 2011 by Leave a Comment

The Colorado Court of Appeals issued its opinion in Planning Partners Int’l, LLC v. QED, Inc. on October 27, 2011.

Breach of Contract—Attorney Fees—Counterclaims.

In this breach of contract case, defendant QED, Inc. (QED) appealed the trial court’s judgment awarding $188,748.80 in attorney fees to plaintiff Planning Partners International, LLC (PPI). The judgment was reversed and the case was remanded with directions.

QED, an electrical supply company, decided to host a Mediterranean cruise for its employees and customers. QED hired PPI to plan and coordinate the air travel from Colorado to Spain. PPI entered into a standard charter agreement with Omni Air International, Inc. (Omni), a charter flight company. Three days before the scheduled departure, Omni informed PPI that it was assessing a fuel surcharge of $122,428 and threatened to delay service until it received payment pursuant to the charter agreement. PPI agreed to pay it on QED’s behalf if QED signed a promissory note and loan agreement (Agreement), which it did. In July 2008, PPI filed this lawsuit alleging that QED had refused to repay PPI. QED filed counterclaims against PPI for breach of contract relating to the letter of agreement, breach of fiduciary duty, and negligence. The jury returned a verdict awarding PPI $137,725 on its breach of contract claim and awarding QED $58,535 on its breach of contract counterclaim, for a net judgment to PPI of $79,190.

QED argued that a significant portion of PPI’s attorney fees were incurred in defending all of its counterclaims, including the ancillary ones, and that the trial court erred as a matter of law in refusing to apportion the fees on that basis. The attorney fee provision at issue here shifts the burden of fees to the borrower (QED), regardless of which party prevails. Where reasonable attorney fees are provided for in a promissory note or contract and the judgment based on the note or contract has been reduced by a counterclaim arising out of the transaction, an apportionment of attorney fees is required in proportion to the amount recovered on the note less the amount recovered on the counterclaim. The trial court found that PPI incurred reasonable and necessary attorney fees of $188,748.80, but it erred in failing to reduce PPI’s award proportionately. The judgment was reversed and the case was remanded for correction of the award of attorney fees.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on October 27, 2011, can be found here.

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Joe Lusk: Explore New Practice Areas with Co-Counseling Agreements

September 12, 2011 by Leave a Comment

A co-counseling arrangement can allow a solo or small firm lawyer to explore new and complex areas of law.  Co-counseling agreements may also allow a lawyer to take on matters that he or she might not otherwise feel comfortable taking on.  The co-counseling arrangement does all of this, while significantly reducing the danger of committing malpractice. Consider the following situations:

  1. You are an experienced civil litigator and would like to branch out into criminal defense work.  A potential client who has been charged with a serious felony approaches you and you don’t feel comfortable taking this on alone as your first criminal case.
  2. You are an experienced criminal defense lawyer, but have never taken on a divorce matter.  A potential client approaches you with a new matter involving complex issues concerning the children and division of assets.  There are child abuse allegations on both sides, and the husband owns his own business that is worth several million dollars.
  3. You are an experienced civil litigator, who is approached with a multimillion dollar medical malpractice case.  Although you have litigated many personal injury cases, you have never even seen a medical malpractice case, and you have no medical background.

In the above scenarios, would you be inclined to take on these cases?  Would you have reservations about your ability to effectively represent your client?  If your answer to both of these questions is yes, you may want to consider a co-counseling arrangement with another lawyer who has experience in the areas of concern.  In fact, you may be required to do so – see Goff v. People, 35 P.3d 487 (Colo. O.P.D.J. 2000).

The two important written documents for the co-counseling arrangements are your fee agreement, which must authorize a co-counseling arrangement, and a co-counseling agreement with your co-counsel.

The fee agreement with the client should include not only your client’s authorization to hire co-counsel but also an authorization concerning the critical terms of the co-counseling agreement, including, perhaps most importantly, the fees for each of the lawyers.

The co-counseling agreement should be specific as to each lawyer’s role in the matter.  Specifically, the co-counseling agreement should identify which lawyer is the lead counsel (especially in the event of litigation); the fee arrangement for each lawyer; who is responsible for collecting fees; and the procedure for lawyers consulting with each other.  It is important to note that before entering into any co-counseling arrangement, both lawyers should have malpractice insurance in effect.  The representation of the same party should be reflected in the written co-counseling agreement.

In any type of litigation, the co-counseling agreement should identify whether each lawyer should review the pleadings for final approval before they are filed.

A co-counseling agreement can add variety to your practice, increase your number of colleagues, and allow you to see whether you might want to delve more into a new practice area.

Joe Lusk is an attorney with Boatright & Ripp, LLC in Wheat Ridge, Colorado. His practice includes emphases in personal injury and criminal defense. Joe chairs the Solo/Small Firm Section of the Colorado Bar Association and contributes to the CBA’s SOLO in COLO blog, where this post originally appeared on August 30, 2011.
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Ben Aisenberg: Reasonableness of a Contingent Fee – A Prospective or Retrospective Approach

September 2, 2011 by Leave a Comment

In assessing the reasonableness of a contingent fee on completion of the contingency, must the reasonableness of the fee be judged as of the time the contingency fee agreement was entered into, pursuant to ABA Formal Opinion 94-389, or does the attorney have the obligation to take a retrospective approach to determine whether the fee is reasonable?  See ABA Formal Opinion 94-389 and Contingent Fee Agreements, Bennett S. Aisenberg, Colorado Lawyer, July, 1996 at pg. 65.

In what would appear to be the most definitive appellate declaration to date as to whether the reasonableness of a contingent fee should be determined prospectively or retrospectively, the Colorado Court of Appeals in Berra v. Springer & Steinberg, 251 P.3d 567 (Colo. App. 2010) held that it is incumbent for a reviewing Court to scrutinize a contingent fee agreement to determine its enforceability.  The Appellate Court found that the reasonableness of a contingent fee agreement is subject to a retrospective approach, i.e. it must be assessed not only in light of the circumstances which existed at the time the agreement was entered into, but also retrospectively as to whether the services were reasonably worth the percentage amount set forth in the agreement, in effect, a quantum meruit approach using the factors set out in Colo. RPC 1.5(a).  The approach followed by the Court in affirming the trial court was to multiply the number of hours plaintiff’s counsel reasonably spent, times his hourly rate, and then multiply that figure by, in this case, 2.5, pursuant to Colo. RPC 1.5(a)(8), the fact that it was a contingency and the potential risk this involved.  The multiplier approach is consistent with Brody v. Hellman, 167 P.3d 192 (Colo. App. 2007) (multiplier of 2.3 times lodestar amount permitted in a common fund case).

It is noteworthy that the trial court and the Appellate Court only considered counsel’s contemporaneously documented hours and rejected some 50 to 100 additional hours to which plaintiff’s counsel testified, but which were not documented.  The final result was the contingent fee was cut by more than half.  The Supreme Court denied certiorari.  If there is a message to be learned from Berra v. Springer & Steinberg, it is to keep contemporaneous timesheets.

Berra was essentially a collection case which went on for six years.  In 2006, when the judgment debtor discovered he had terminal cancer, he decided to sell all his assets and pay his debts.  The Court of Appeals further held that it was this fortuitous circumstance that brought about the payment of the judgment to the exclusion of Springer & Steinberg’s efforts to collect it.  Query, will the holding in Berra open a floodgate of litigation whereby a contingent fee pursuant to a settlement is contested, based on the fact that other circumstances played into the defendant’s decision to settle the case?  Does this put the contingent fee attorney in a situation similar to a real estate broker, where the broker must be the “procuring cause” of the transaction?

Bennett S. Aisenberg practices law in Denver. He has served as a member of the Colorado Bar Association Ethics Committee since 1986. In 2003, he received the Denver Bar Association Award of Merit. Ben is a past president of the Colorado Bar Association, the Denver Bar Association, and the Colorado Trial Lawyers Association. He blogs at coloradoethics, where this post originally appeared on August 22, 2011.
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American Bar Association Issues Formal Ethics Opinion Regarding Fee Arrangements

August 31, 2011 by Leave a Comment

On August 4, 2011, the ABA released an ethics opinion, Formal Opinion 11-458, which discusses Changing Fee Arrangements During Representation:

Modification of an existing fee agreement is permissible under the Model Rules, but the lawyer must show that any modification was reasonable under the circumstances at the time of the modification as well as communicated to and accepted by the client. Periodic, incremental increases in a lawyer’s regular hourly billing rates are generally permissible if such practice is communicated clearly to and accepted by the client at the commencement of the client-lawyer relationship and any periodic increases are reasonable under the circumstances. Modifications sought by a lawyer that change the basic nature of a fee arrangement or significantly increase the lawyer’s compensation absent an unanticipated change in circumstances ordinarily will be unreasonable. Changes in fee arrangements that involve a lawyer acquiring an interest in the client’s business, real estate, or other non-monetary property will ordinarily require compliance with Rule 1.8(a).

Comment [16] to Rule 1.8 advises that when a lawyer acquires by contract a security interest in property other than that recovered through the lawyer’s efforts in litigation (e.g., a contingent fee agreement), such an acquisition is a business or financial transaction with a client and is governed by the requirements of Rule 1.8(a). When it applies, Rule 1.8(a) requires that:

  1. the terms of the transaction are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client;
  2. the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent counsel; and
  3. the client gives informed consent to the essential terms of the transaction and the lawyer’s role in the transaction in a writing signed by the client.

Compliance with Rule 1.8(a) is appropriate in such situations to protect clients from potential overreaching by lawyers. When the client takes advantage of the advice to consult independent counsel, it also provides an opportunity for a neutral evaluation of the reasonableness of a fee that may be paid or secured by non-monetary property.

Click here to read the full opinion.

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John Grimley: Your Legal Business Development Plan Should Fit on a Single Sheet of Paper

August 31, 2011 by Leave a Comment

A successful legal business development plan – whether for a solo practitioner, a legal practice group, a global law firm, a regional mid-size law firm, a senior level partner seeking to grow a 7 figure book of business into an 8 figure book of business – or anyone else who practices law – can be outlined on a single sheet of paper, and it would look like this:

  1. Focus on sales.  The most direct avenue from you to your prospective client – is the best avenue to take.
  2. Focus on expanding the number of prospective clients you are selling to every day.
  3. Identify and contact new prospective clients every day
  4. Work on advancing the ball with each prospective client on a daily basis.
  5. Review your lead list every day, update it, and begin selling again the next day.
  6. Be flexible when pricing your services.
  7. Offer services that meet the commercial needs of clients.  Update your service offer to meet the market.
  8. Be persistent, patient – and over time, your practice and income will grow beyond your expectations.
John Grimley specializes in assisting lawyers and other professional service providers create and implement comprehensive domestic and international business development initiatives. A licensed American lawyer, Mr. Grimley formerly served as a writer in the Executive Office of the President in the White House. He blogs at legalbusinessdevelopment, where this post originally appeared on August 26, 2011.
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