Opinion ID: 853798
Heading Depth: 2
Heading Rank: 2

Heading: Determining the Reasonable Value of the First Lawyer's Services

Text: Quantum meruit is an equitable doctrine that prevents unjust enrichment by permitting one to recover the value of work performed or material furnished if used by another and if valuable. 17A C.J.S. Contracts § 440 at 553 (1963). Where there is a successor lawyer, the benefit the client received from the predecessor's work is either retained by the client in the form of obtaining a more favorable fee agreement, or it is transferred to the successor in the form of relieving the successor of the need to expend the same effort. As applied to this case, if Lyons is not compensated for the useful work it performed on Brown's case, either Brown or Galanis is unjustly enriched. The dollar value to offset the unjust enrichment is based on the value conferred on the client, not the effort expended by the lawyer, although the two may be the same in many instances. Arriving at the proper number to place on the predecessor's services is ultimately a factual determination for the trial court. The trial court in this case held that the reasonable value of Lyons's work should be determined commensurate with the hourly rate of a community attorney charging for similar services. Judge Staton, dissenting in the Court of Appeals in this case, read this as requiring a fee equal [to] `the hourly rate of a community attorney....' Galanis v. Lyons & Truitt, 698 N.E.2d 368, 374 (Ind.Ct.App.1998) (Staton, J., dissenting). The parties apparently make the same assumption. Lyons challenges this method of calculating the reasonable value of the firm's work. If a fee agreement provides for an hourly rate in the event of a pre-contingency termination, it is presumptively enforceable, subject to the ordinary requirement of reasonableness. See Indiana Professional Conduct Rule 1.5. We agree with Lyons that, in the absence of such an agreement, the value of a discharged lawyer's work on a case is not always equal to a standard rate multiplied by the number of hours of work on the case. Where the lawyers have agreed to work on contingent fees and there is no contractual provision governing payment in the event of discharge, compensating the predecessor lawyer on a standard hourly fee could produce either too little or too much, depending on how the total hourly efforts of all lawyers compare to the contingent fee. To illustrate the point, consider the lawyer who is terminated (or dies) while the jury is deliberating before returning a verdict that produces a contingent fee that is twice the hourly rate for the work expended. Where the successor is needed only to defend an appeal, it would be quite unreasonable to measure the discharged lawyer's contribution solely by the number of hours multiplied by a standard rate. The first lawyer accepted the risk of a loss and the second boarded the train when victory was in sight and when at least some recovery by a negotiated settlement was a high probability. At the other end of the spectrum, one can easily imagine scenarios where the predecessor has generated a vast amount of hourly charges but accomplished little or nothing, leaving the entire case development to the successor. In the context of valuing a terminated predecessor's services, as is generally true, [i]n determining the reasonable value of the legal services rendered, the time expended by the attorney alone is not a controlling factor. Among other things, consideration may be given to the general quality of the effort expended by the attorney. Kizer v. Davis, 174 Ind.App. 559, 369 N.E.2d 439, 446 n. 9 (1977) (citation omitted). In this context, because both lawyers in this scenario accepted the risk of failure, in addition to the quality of work, each is entitled to consideration of that risk in determining the fair value of his services. Prof. Cond. R. 1.5(a)(8). And, because the underlying theory of payment is quantum meruit, if there is no fault to be attributed to either the client or the lawyer, as seems to be the case here, the measure of the benefit conferred is what is received by the client, not what is expended by the lawyer. Cf. RESTATEMENT OF RESTITUTION § 155 (1937). That amount is the portion of contingent fee equal to the total effort expended to achieve the contingency that is attributable to the predecessor's work. Nonetheless, we agree that the relative amount of hourly time charges incurred by the predecessor and successor, adjusted for any unproductive or unnecessary efforts by either, is a likely candidate as a presumptive measure of the relative contribution of the two lawyers. If both lawyers agree that the time spent by each was productive, that will provide an easy resolution of the issue. We are uncertain whether the trial court intended to award Lyons a fee equal to the hourly charges for the work performed or whether it was merely recognizing, as we do, that the relative hourly charges of the lawyers are relevant to apportioning the contingent fee. If the fee was to be equal to the time charges, it is unclear whether the trial court thought this was a required formula, or whether the same amount was determined to be a fair evaluation of Lyons' contribution in light of all relevant factors. Adherence to time charges is not required, but the latter determination by the trial court would be within its discretion in arriving at a reasonable fee. Remand to the trial court is required for a determination of the value of Lyons's contribution to Brown's case if the lawyers are unable to reach an agreement in light of this opinion.