July 19, 2019

Ben Aisenberg: Reasonableness of a Contingent Fee – A Prospective or Retrospective Approach

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.

Ben Aisenberg: Attorney Discipline and the First Amendment

Pro se attorney litigant entitled to full First Amendment procedural and substantive rights, undaunted by attorney’s professional duties under the Colorado Rules of Professional Conduct, in zealously advancing his or her litigation.  In Matter of Foster, 10SA89 (Colo. 5-23-11).

In a case of first impression, the Colorado Supreme Court held that a pro se attorney litigant cannot be denied or limited, on the basis of the professional duties imposed on attorneys by the Colorado Rules of Professional Conduct, the First Amendment’s full procedural and substantive protections to litigate his or her pro se case zealously, but that litigation conduct which is both 1) objectively baseless, and 2) pursued for a subjectively improper purpose, is not protected by the First Amendment.

After hearing, attorney Foster was found to have violated Colo. RPC 3.1 (bringing a frivolous action) and 8.4(d) (engaging in conduct prejudicial to the administration of justice) in pursuing, pro se, lengthy and numerous post-dissolution of marriage related litigation and appeals against his ex-wife, Nunn.  Foster’s pre-hearing motion for summary judgment, which asserted that his litigation against Nunn was protected by his First Amendment rights to petition through the courts for legal redress, was denied.  Although finding the vast majority of his actions were either not frivolous or not proven to be frivolous, and in fact in some instances were partially successful, the Board also found that one of his appeals was partially frivolous because it duplicated claims previously litigated and lost, and that in the aggregate his lengthy and numerous actions reflected his desire to “vex and harass” Nunn notwithstanding his genuine belief that his arguments had a legitimate basis to obtain favorable relief.  In so finding, the Board rejected Foster’s First Amendment defense, holding that his rights to freedom of speech and access to the courts do not immunize him from the professional duties imposed on him by the Colorado Rules of Professional Conduct.

On appeal, the Colorado Supreme Court “categorically reject[ed]” the Hearing Board’s intimation that attorneys may be disciplined for engaging in conduct protected by the First Amendment, citing NAACP v. Button, 371 U.S. 415 (1963) [“a State may not, under the guise of prohibiting professional misconduct, ignore constitutional rights.”].  The Court reasoned that the First Amendment, which provides that “Congress shall make no law . . . abridging . . . the right of the people . . . to petition the Government for a redress of grievances” cannot be infringed by state government [14th Amendment to the Constitution], and that access to the courts, i.e., litigation, is one of the “essential mechanisms” by which citizens may exercise their right to petition.  Citing numerous United States Supreme Court decisions, the Court concluded that a “subjectively improper motive” alone is not sufficient to hold that litigation is a misuse of the First Amendment right to petition and thus not within its protections, but that such litigation must also be “objectively baseless,” i.e., “a mere sham,” to constitute such a misuse in the context of a state’s regulation of petitioning activity, and that attorneys are entitled to the same level of First Amendment protections as non-attorneys.

The Supreme Court held that the procedural due process protections it had articulated in Protect Our Mountain Environment v. District Court, 677 P. 2d 1361 (Colo. 1984) (POME) for civil litigants, to ensure the viability of the First Amendment right to petition through the courts against indiscriminate assertions that such litigation is a mere sham and thus not protected, apply as well to attorney disciplinary proceedings involving pro se attorney litigation conduct, and give the litigant a right to file a pre-trial motion to assert a First Amendment defense thereupon shifting the burden to the other side to show a reasonable basis for the trial court (or PDJ) to conclude that the litigant’s conduct in advancing his or her position in the underlying litigation was not protected by the First Amendment.

The Supreme Court concluded that as to Foster’s aggregate conduct throughout the litigation, inasmuch as the Hearing Board determined there was insufficient evidence to conclude it was frivolous, such conduct was not “objectively baseless” and therefore was protected by the First Amendment without consideration of his subjective motivation for the lengthy and bitter course of litigation, and that the board’s findings in any event did not support a conclusion of improper motive.

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 July 15, 2011.