Opinion ID: 3010967
Heading Depth: 3
Heading Rank: 2

Heading: The Meaning of Contingent Fee Agreements

Text: The other basis on which the District Court rested its interpretation of the retainer agreement was its understanding of contingent fee agreements of the sort entered into here. Relying on common-sense and straightforward reasoning about lawyers' incentives, as well as the language of the retainer agreement, the court concluded that the most reasonable reading of the agreement was one that permitted no additional payment to Haltzman for the collection actions. [A]s a matter of common sense the contingent fee cannot be read to exclude collection of the settlement proceeds. We suspect that few lawyers would rest with the hope of 30% of a paper settlement, but not promptly seek collection of the real money that will turn that paper into cash. Indeed, the documents upon which Haltzman seeks to rely notably confirm our suspicion, stating that Haltzman is to receive his fees only on moneys actually recovered or received. Dardovitch, 1998 WL 13271, at . Based on our review of the general law governing the responsibilities of contingent fee representation, we agree with the District Court. While the extant case law in this area supports the proposition that a contingent-fee attorney is not entitled to additional fees for collecting on a judgment, absent substantial indications to the contrary, it is sparse.13 This _________________________________________________________________ 13. The case law on a related issue -- the responsibility of a contingentfee attorney with respect to services to be rendered on appeal -- is much 24 issue is most extensively discussed in L.A. Bradshaw, Annotation, Construction of Contingent Fee Contract as Regards Compensation for Services After Judgment or on Appeal, 13 A.L.R.3d 673 (1968). This annotation discusses a number of cases in which attorneys have attempted to recover additional fees beyond an established contingent fee for collection efforts. These cases establish that, absent some significant evidence that the collection efforts were not within the contemplation of the parties at the time they entered into the contingent fee agreement, no additional fees will be permitted. Those cases in which additional fees have been permitted have involved collection efforts far beyond those which the parties anticipated at the time the representation began. In Barcus v. Gates, 130 F. 364 (E.D. Va.), affd., 136 F. 184 (4th Cir. 1904), for example, parol evidence established that, when the parties entered into a ten-percent contingent fee agreement, they expected the case to settle quickly without even filing a suit. When instead a highly contested suit was required, and the attorney was required to spend an additional month after trial determining what, if anything, could be recovered from the various defendants, the court concluded that the attorney should be entitled to additional fees for these collection efforts. See Barcus, 130 F. at 369-70; see also Serat v. Smith, 15 N.Y.S. 330 (Sup. Ct. 1891) (additional fee permitted where parties did not contemplate that collection would be difficult). Similarly, in Judah v. Trustees of Vincennes Univ., 16 Ind. 56 (1861), discussed in 13 A.L.R.3d at _____, the court permitted _________________________________________________________________ more developed. See, e.g., Quarture v. Allegheny County, 14 A.2d 575 (Pa. Super. Ct. 1940) (attorney working for contingent fee was not entitled to additional fee for prosecuting appeal, even where attorney believed that appeal was unlikely to result in an increased damages award). Other courts have cited this case law without analysis in support of the proposition that contingent fee attorneys may not recover additional fees for collection actions. See, e.g., Goldstein & Price v. Tonkin & Mondl, 974 S.W.2d 543, 548 (Mo. Ct. App. 1998); Mrozinski v. Marinello, 260 N.Y.S.2d 199 (Sup. Ct. 1965). Although it provides some support for the result we reach, we do not find the analogy to Quarture terribly convincing, as prosecuting an appeal involves the same course of representation as the underlying litigation in a more obvious sense than an action to collect on the proceeds of a settlement or judgment. 25 additional fees for collection where the attorney's efforts involved lobbying the state legislature to release funds to pay the judgment. In contrast, where the record reveals that the parties had no reason to believe that collection would require more than minimal effort, attorneys have been permitted no additional fee for collection actions. See, e.g., Mrozinski v. Marinello, 260 N.Y.S.2d 199 (Sup. Ct. 1965); Ellis v. Mitchell, 85 N.Y.S.2d 398 (Sup. Ct. 1948), affd., 88 N.Y.S.2d 903 (Sup. Ct. App. Div. 1949); Emil Nathan & Co. v Halsell, 45 So. 856 (Miss. 1908). This understanding of the responsibility of attorneys in contingent fee cases is, as the District Court pointed out, consonant with the incentives confronting such an attorney. We suspect that few lawyers would rest with the hope of 30% of a paper settlement, but not promptly seek collection of real money that will turn that paper into cash. Dardovitch, 1998 WL 13271, at . The attorney has just as much of an interest in collecting on the judgment as the client, and thus should need no extra incentive in the form of additional fees for doing so. We believe that this reading comports with the general understanding of the community of attorneys. This conclusion is also supported by the reasoning of the court in Goldstein & Price v. Tonkin & Mondl, 974 S.W.2d 543 (Mo. Ct. App. 1998). In that case, the court concluded that, since the fee agreement permitted a fee of1/3 of all monies recovered by judgment or settlement, Goldstein & Price, 974 S.W.2d at 546 -- as opposed to1/3 of any recovery of judgment or settlement -- the attorney was only entitled to a contingent fee from money actually received. See 974 S.W.2d at 548. The language of the fee agreement in the present case is similar: the original agreement permitted Haltzman a fee of 30% of any amount recovered, and later versions permitted a fee out of any recovery received or any amount received. We believe that if an attorney wishes to protect himself, and provide for attorney's fees in the event additional collection efforts are necessary, he should do so explicitly in the retainer agreement. We agree with the District Court that this is the common-sense understanding of contingent-fee agreements. 26 The two pieces of record evidence that Haltzman cites to support his contention that collection efforts were not contemplated as part of the retainer agreement do not alter our conclusion. First, he contends that, at the time of settlement, he did not think that collection efforts would be difficult, as reflected by the fact that he was willing to accept notes from the defendants. But he testified that he accepted notes because the defendants did not have a lot of money; given this concern, one might expect that they would have difficulty paying off the notes as well, and that collection efforts might be necessary. Second, Haltzman points out that Backos wrote to Dardovitch after the settlement indicating that collection efforts might be necessary and that Haltzman would be paid additional fees for them. Both of these submissions share an additional fundamental flaw: they say nothing about what the parties contemplated at the time they entered into the retainer agreement. There is simply no evidence in the record that the parties had any reason to think, or actually did think, that collection efforts following judgment in the RICO litigation would be minimal. Accordingly, we conclude the District Court was correct to conclude that the retainer agreement in this case, as with most contingent fee agreements, permitted no additional fee for collateral collection activities.