Opinion ID: 2636626
Heading Depth: 5
Heading Rank: 1

Heading: The modified contingent-fee agreement is valid under Compton.

Text: The clients argue the modified fee agreement is an impermissible hybrid agreement under Compton because they believe it gave BPK control over the decision to engage in further substantial litigation. The superior court disagreed. The fee agreement in this case, and the circumstances under which the parties modified it, differ from the fee contract and circumstances in Compton. There, we held impermissible a fee agreement that used the client's decision to settle as the trigger for converting from contingent to hourly fees and that operated retroactively to encompass all work performed from the inception of the case. [6] Before agreeing to undertake the representation, the attorney in Compton presented his clients with a proposed fee agreement under which he would receive thirty-three percent of any recovery. [7] But the agreement also provided that if the clients settled for an amount that yielded a fee equal to less than $175 per hour for the time the attorney invested, he would be paid an amount over and above the 33% to compensate [him] at the rate of $175.00 per hour. [8] After representation was underway, the attorney received a settlement offer for $25,000, including costs and attorney's fees. [9] He communicated the settlement offer to the clients and informed them that because his hourly fees for work performed to that date already exceeded $30,000, accepting the offer would mean no recovery for the clients. [10] The clients rejected the offer, and although the attorney later revised the fee agreement to omit the fee-conversion clause, the defendant made no further offers and the clients lost on all claims at trial. [11] We held the Compton fee agreement invalid because it both impeded the clients' right to control the decision to settle and imposed a `springing' obligation to pay for work already performed but never before chargeable to the client[s]. [12] We reasoned: Because the potential cost of a future obligation of this kind and the potential value of the right the client is asked to forego to avoid the obligation are both largely incalculable at the inception of the attorney-client relationship, when the fee agreement is signed, we conclude that the fee-conversion provision at issue here impermissibly burdens the client's right to settle a case.[ [13] ] The modified contingent-fee agreement here is significantly different: it did not base BPK's compensation on the clients' decision to settle. Rather, under the original agreement, BPK was to receive twenty-five percent of a recovery reached before filing a complaint, thirty-three percent after filing a complaint, and forty percent after filing an appeal. [14] The parties modified their agreement because the clients requested that BPK reduce its fees in the event of an early settlement. They made this request after having had the opportunity to review BPK's detailed assessment of the case's potential value and the risks of trial. Further, the modified fee agreement based BPK's compensation not on whether the clients agreed to make the settlement offer  they already had  but instead on whether the insurer accepted the offer early in the case. Nor did BPK control whether further substantial litigation would ensue; the early settlement offer was not successful because Katmai Lodge and Sarp did not accept it. BPK had a duty to prepare for trial. The record shows the clients wanted to continue pursuing their claims for at least the policy limits, knew BPK was doing so at their direction, and did not ask BPK to stop litigating their claims. Indeed, BPK's billing entries show BPK and the clients had numerous teleconferences throughout the case, particularly from the time Katmai Lodge and Sarp rejected the policy limits settlement offer in May 2006 until the time the case settled in January 2007. Compton is also distinguishable because the modified fee agreement here did not retroactively impose a fee obligation the clients would not otherwise have been charged. [15] The clients here would have paid BPK a flat fee of $250,000 plus costs if an early settlement had occurred. If the case did not settle at an early stage and substantial litigation ensued, the clients were obligated to pay BPK thirty-three percent of any recovery plus costs, per the original agreement. In either scenario the clients had to pay if they received a recovery; neither scenario imposed fees otherwise not chargeable. Because the parties' modified fee agreement did not impermissibly burden the clients' right to control the decision to settle or impose fees otherwise not chargeable, we conclude it is valid under Compton.