Opinion ID: 1036404
Heading Depth: 4
Heading Rank: 1

Heading: Contingency Fee Percentage

Text: The California Supreme Court has yet to address whether a jury may consider a void contingency fee agreement in determining a reasonable attorney fee under § 6147(b). However, the California Court of Appeals has said no: Where, as here, a client exercises his right to void a contingency fee agreement, [§] 6147 does not permit the trier of fact to consider the contingent nature of the fee arrangement in determining a reasonable fee. If the contingency fee agreement is void, there is no contingency fee arrangement. A void contract is no contract at all; it binds no one and is a mere nullity. Consequently, such a contract cannot be enforced. The deterrent and protective purposes of [§] 6147 would be impaired if an attorney who was barred from enforcing a contingency fee agreement would nevertheless be entitled to a percentage of the recovery based on the contingent risk factor. The attorney would in effect be receiving a contingency fee even though the contingency fee agreement had been voided by the client. Fergus, 59 Cal. Rptr. 3d at 290 (citation and quotation marks omitted);16 see also Siciliano v. Singh, Nos. E052352 & E053582, 2012 WL 4748862, at  (Cal. Ct. App. Oct. 5, 2012) 16 In determining how a state court would rule on an issue, we normally look to the most recent decisions of the state’s highest court. “Where the state’s highest court has (continued . . .) - 21 - (unpublished) (“[I]t would be anomalous to allow a client to void a contract on the basis it did not comply with [§] 6147 but to nonetheless allow the attorney who drafted the contract to obtain enforcement of terms favorable to himself.”); Zweig v. Kwon, No. B153064, 2003 WL 150107, at  (Cal. Ct. App. Jan. 22, 2003) (unpublished) (“To provide a remedy that compensates an attorney who violates [§] 6147 at the same rate that the invalid, unenforceable contract would have provided would make [§] 6147 meaningless and would frustrate the public policy it expresses.”); Mesa West, Inc. v. LaMoure, No. G038601, 2009 WL 388992, at  (Cal. Ct. App. 2009) (unpublished) (trial court properly ignored the general rule that a regularly hourly rate does not fairly compensate an attorney hired on a contingent fee basis; because the contingency fee agreement was voided by the client for failing to comply with § 6147, “this is no longer a contingency fee case”).17 not addressed the issue, we . . . follow the state’s intermediate court decisions absent convincing evidence that the highest court would decide otherwise.” See Commonwealth Prop. Advocates, LLC v. Mortg. Elec. Registration Sys., Inc., 680 F.3d 1194, 1204 (10th Cir. 2011) (quotation marks omitted). 17 Alioto says Fergus was wrongly decided in light of previous California cases. He cites a Ninth Circuit case, In re Pac. Far E. Line, Inc., 654 F.2d 664 (9th Cir. 1981), and a case from the Central District of California, Herbold v. Millard, No. CV-02-1639 (C.D. Cal. Aug. 6, 2004). The Ninth Circuit case is not helpful. There, the contingency fee agreement was held unenforceable due to the client’s bankruptcy. The bankruptcy court nevertheless determined a reasonable attorney’s fee under federal bankruptcy standards was $1.5 million, which was the amount the attorney (who happened to be Alioto) would have earned under the contingency fee agreement. 654 F.2d at 670 & n.8. The Ninth Circuit suggested this was error as the reasonableness of the fee should have been determined under state law standards. Id. at 670. In any event, because the attorney had not challenged the reasonableness of the fee, it concluded it need not decide the issue. Id. Herbold is more on point as it at least involved a contingent fee agreement held to be unenforceable because it violated § 6147. However, it was decided prior to Fergus. (continued . . .) - 22 - While not directly on point, Chambers v. Kay supports this conclusion. 56 P.3d 645 (Cal. 2002). There, Chambers and Kay were two attorneys who operated separate law practices. Kay initiated representation of a plaintiff in a sexual harassment action. At Kay’s request, but without the plaintiff’s written consent, Chambers began serving as co-counsel. During the course of the sexual harassment action, Chambers was discharged by Kay. Kay informed Chambers he would be entitled to 16% of Kay’s attorneys’ fees, which were 40% of the plaintiff’s recovery. The sexual harassment action eventually resulted in a substantial jury verdict for the plaintiff and an award of attorneys’ fees. Kay then informed Chambers The other cases cited by Alioto are not helpful. Only two involved contingency fee agreements and all precede Fergus. LuMetta v. U.S. Robotics, Inc., 824 F.2d 768, 770 (9th Cir. 1987) (commission contract); Joost v. Sullivan, 111 Cal. 286, 296, 43 P. 896 (Cal. 1896) (construction contract); Watson v. Wood Dimension, Inc., 209 Cal. App. 3d 1359, 1365, 257 Cal. Rptr. 816 (Cal. Ct. App. 1989) (commission contract); George v. Double-D Foods, Inc., 155 Cal. App. 3d 36, 42, 201 Cal. Rptr. 870 (Cal. Ct. App. 1984) (employment contract); Ferrier v. Commercial Steel Corp., 142 Cal. App. 2d 424, 426-27, 289 P.2d 555 (Cal. Dist. Ct. App. 1956) (service contract); Offeman v. Robertson-Cole Studios, Inc., 80 Cal. App. 1, 13, 251 P. 830 (Cal. Dist. Ct. App. 1926) (employment contract). The two cases that do involve contingency fee agreements are distinguishable. In Cazares v. Saenz, 256 Cal. Rptr. 209, 212-15, at  (Cal. Ct. App. 1989), the fee agreement was unenforceable due to impossibility (the attorney became a judge); in Donfeld, Kelly & Rollman v. Bass, it was unenforceable due to the client discharging the attorney. Nos. B150938 & B152772, 2002 WL 31160867, -6 (Cal. Ct. App. Sept. 30, 2002) (unpublished). Here, the Fee Agreement is void. The distinction is material, because as Fergus points out, allowing a jury to consider a contingency fee percentage void under § 6147 would frustrate the statute’s purpose. Alioto claims that should we reach the question of whether Fergus misapplied settled California law, we should exercise our discretion and certify the question to the California Supreme Court. He did not request certification in the district court because doing so would have been futile. California’s certification rules allow for certification only upon request of “the United States Supreme Court, a United States Court of Appeals, or the court of last resort of any state, territory, or commonwealth.” See California Rules of Court, Rule 8.548(a). In any event, certification is not necessary. - 23 - he would not be receiving 16% of Kay’s fees but rather would be paid an hourly rate. Chambers objected and filed suit for breach of contract. The California Supreme Court held Chambers and Kay’s fee agreement violated Rule 2-200 of the California Rules of Professional Responsibility which prohibited attorneys who were not partners, associates or shareholders from splitting fees without a client’s written consent and therefore Chambers could not recover on the contract. Id. at 656, 658. Turning to quantum meruit, the court further held the quantum meruit award could not be based on the fee the parties negotiated without the client’s consent: In essence, Chambers contends that, notwithstanding the absence of the required written client consent, he should be allowed to accomplish indirectly a division of fees under the guise of a quantum meruit claim. We reject the contention . . . . We perceive no legal or policy justification for finding that the fee the parties negotiated without the client’s consent furnishes a proper basis for a quantum meruit award in this case. Id. at 658. California law precludes consideration of the fee percentage contained in a void contingency fee agreement in determining a reasonable fee under § 6147(b). Alioto was not entitled to an instruction allowing the jury to consider the contingency fee percentage in determining a reasonable fee. There is no need for a new trial.