Opinion ID: 1719447
Heading Depth: 1
Heading Rank: 2

Heading: Amount of the fees. On the second basic issue we again encounter legal and factual problems.

Text: A. Parties to a contract for services may of course specify the compensation which is to be paid. Attorneys can contract to handle certain litigation for a specified lump percentage (in some cases) or sum, or at a specified rate per hour or day, or in accordance with some other measure. In the absence of specification, a person who performs services pursuant to request is entitled to the reasonable value of the services. Drake v. Block, 247 Iowa 517, 522, 74 N.W.2d 577, 580 (1956); 17 Am.Jur.2d Contracts § 344 (1964) (Where a contract makes no statement as to the price to be paid, the law invokes the standard of reasonableness, and the fair value of the services or property is recoverable.); 98 C.J.S. Work & Labor § 66(2) (1957). In the case of an attorney's services, reasonable value is not ascertained by a single factor such as time expended. The fact finder looks at the totality of the circumstances including the nature and extent of the services, the difficulty and complexity of the questions presented, the amount involved, the time expended, the responsibility assumed, the customary charge for similar services, the result obtained, and the experience of the attorney. In re Marriage of Jennerjohn, 203 N.W.2d 237, 245 (Iowa 1972). The fact finder then determines the amount of money which the services are reasonably worth. B. In this case the trial court employed the principle just stated. As to the factor of the amount of time expended, Attorney-Accountant Sidney B. Smith audited Heningers' time records. The court adopted that audit as correct. As to the value Heningers placed on the time of the three attorneys who worked on the case, the court, acting as an expert itself, Gabel v. Gabel, 254 Iowa 248, 250, 117 N.W.2d 501, 503 (1962); In re Dehner's Estate, 230 Iowa 490, 494, 298 N.W. 656, 658 (1941), substantially discounted the value of the time of the junior partner and discounted the value of an associate's time even more. Thus proceeding, the court determined that all of the services rendered were reasonably worth $131,304, plus cash advanced of $12,634.25, for a total of $143,938.25. The court then deducted $131,633.20 which the corporation had paid, leaving $12,305.05 for the executors to pay. In the process the court disallowed anything for Heningers' withdrawal fee of $4,174.89. The executors vigorously attack the court's findings as to the reasonable value of the services. Among their contentions they argue that Heningers overstated the time expended. The court, however, did not adopt Heningers' statement. It used Smith's audit, which constituted substantial evidence. Similarly the executors argue that Heningers valued the time of all of its three lawyers at the scale of the senior partner. But the court did not adopt Heningers' estimates of value of time. It substantially discounted the time of the junior partner and the associate. This discount accounts in material part for the court's reduction in the amount of Heningers' claims. The executors also argue, as we understand them, that Heninger had no right to use the junior partner and associate. The Code of Professional Responsibility does not prohibit division of a fee with a partner or associate. DR 2-107. Palmer must have known when he employed Heninger that Heninger would use his firm attorneys. For Heninger to perform all the work personally would have resulted in substantial inefficiencyuse of a senior partner's time to perform functions that could be done at about half the cost by use of other attorneys in the firm. We find no analogy in the different situation involving fees under section 815.7 of the Iowa Code. See Hulse v. Wifvat, 306 N.W.2d 707 (Iowa 1981). We do not uphold the contentions of the executors as to the value of the services. C. We do find merit, however, in one issue raised by the executors. Heningers billed the corporation for $5158.95 as part of its expenses, and the corporation paid the bill. The fact developed that this item was for Professor Neuhauser's opinion on Heningers' ethical question. When a client retains an attorney, the responsibility is on the attorney himself to ascertain whether he has a conflict of interest or other ethical impediment to acceptance of the employment; the responsibility is not on the client to investigate and decide that question for the attorney. Absent an explicit agreement by the client to pay for an opinion on a problem of the attorney's ethical responsibilityand that would be a most unusual casewe hold the cost of an outside opinion is on the attorney if he choses to obtain one. No such agreement by Palmer appears here. The court should have reduced its allowance of $12,305.05 by $5158.95 to $7146.10. III. Ethical considerations. The executors argue that Heningers cannot recover because it violated professional ethics in representing Palmer in the first place and also in suing for the balance of its fees and charging excessive fees. We will assume without deciding that these alleged ethical violations, if established, would bar Heningers from recovering and, as to the charge of unethical representation, that a violation would require Heningers to refund the fees it received as the executors contend in their counterclaim. A. The executors' argument that Heningers violated professional ethics in representing Palmer at all is predicated on the contention that from the outset Heninger knew, or the fact was obvious, he would be called as a witness for Palmer to uphold the 1943 antenuptial contract. Initially we note that this is not a case in which an attorney remained in the case after he was told his testimony would be necessary for his client. Heninger did withdraw at that time, although he thought the contention he would have to testify was not true. In this case the argument is Heninger should not have accepted the case in the first place. Apparently a bitter controversy rages between Heninger and Braunstein as to whether Heninger was in fact to be called as a witness for Palmer. Heninger contends this was a ruse to get him out of the case so that Braunstein could maintain client control; the dissolution case was in fact subsequently settled and Heninger never was called as a witness for Palmer. Braunstein contends that Heninger's presence as both attorney and witness in the dissolution lawsuit would have hurt Palmer's case if that lawsuit had gone to trial. For reasons which will appear, we find no necessity to resolve this controversy. We will assume without deciding that Braunstein's version is the fact: as the dissolution case progressed, the necessity of calling Heninger as a witness for Palmer became manifest. As the executors' argument is predicated on the claim that Heninger wrongfully accepted the employment initially, the applicable standard under the Iowa Code of Professional Responsibility is DR 5-101(C): A lawyer shall not accept employment in contemplated or pending litigation if he knows or it is obvious that he or a lawyer in his firm ought to be called as a witness, except that he may undertake the employment and he or a lawyer in his firm may testify [regarding an uncontested matter, a formality believed to be unopposed, the nature and value of legal services, or any matter if refusal will work substantial hardship on the client because of the lawyer's distinctive value in the case]. (Emphasis added.) Ethical Considerations 5-9 and 5-10 state with reference to this standard: Occasionally a lawyer is called upon to decide in a particular case whether he will be a witness or an advocate. If a lawyer is both counsel and witness, he becomes more easily impeachable for interest and thus may be a less effective witness. Conversely the opposing counsel may be handicapped in challenging the credibility of the lawyer when the lawyer also appears as an advocate in the case. An advocate who becomes a witness is in the unseemly and ineffective position of arguing his own credibility. The roles of an advocate and of a witness are inconsistent; the function of an advocate is to advance or argue the cause of another, while that of a witness is to state facts objectively. Problems incident to the lawyer-witness relationship arise at different stages; they relate either to whether a lawyer should accept employment or should withdraw from employment. Regardless of when the problem arises, his decision is to be governed by the same basic considerations. It is not objectionable for a lawyer who is a potential witness to be an advocate if it is unlikely that he will be called as a witness because his testimony would be merely cumulative or if his testimony will relate only to an uncontested issue. In the exceptional situation where it will be manifestly unfair to the client for the lawyer to refuse employment or to withdraw when he will likely be a witness on a contested issue, he may serve as advocate even though he may be a witness. In making such decision, he should determine the personal or financial sacrifice of the client that may result from his refusal of employment or withdrawal therefrom, the materiality of his testimony, and the effectiveness of his representation in view of his personal involvement. In weighing these factors, it should be clear that refusal or withdrawal will impose an unreasonable hardship upon the client before the lawyer accepts or continues the employment. Where the question arises, doubts should be resolved in favor of the lawyer testifying and against his becoming or continuing as an advocate. See 81 Am.Jur.2d Witnesses § 98 (1976); 7 C.J.S. Attorney & Client § 50b (1980); 7A C.J.S. § 136 (1980). In determining whether Heninger should have accepted the employment in the first place, the crucial question is whether at that time he knew or the fact was obvious that he would have to testify. The trial court did not find an ethical violation by Heninger. Several considerations support a finding of his good faith. First, the situation is not uncommon in which an attorney is involved on one side of a transaction or occurrence, the subject matter of the transaction or occurrence subsequently goes to litigation, and the attorney is asked to represent the same client in the litigation. The circumstances in a particular case may cause the attorney to know he will be a witness in the litigation or may make that fact obvious. On the other hand, many situations may exist in which the opposite is true; the attorney's previous participation does not per se indicate he will have to give testimony. The circumstances in each situation are thus determinative. In this case the antenuptial contract was made some thirty years previously. When Palmer asked Heninger to represent him, nothing indicated to Heninger that the contract was in dispute as to execution, content, or otherwise. Braunstein himself, who as executor is now challenging Heninger's ethics in accepting the employment, participated with Palmer in employing Heninger. Palmer, whom Heninger had served successfully in previous years, was distraught and wanted Heninger's help. We hold that Heninger did not commit an ethical violation in initially accepting employment on Palmer's behalf. B. The executors also cite the ethics rules in arguing that Heningers should not have sued for its fee and that it asked an excessive fee. As to Heningers' bringing suit, Ethical Consideration 2-25 states: A lawyer should be zealous in his efforts to avoid controversies over fees with clients and should attempt to resolve amicably any difference on the subject. He should not sue a client for a fee unless necessary to prevent fraud or gross imposition by the client. Heninger's understanding of the fee arrangement was that the corporation would pay the major share and Palmer would pay a minor share. Heningers billed accordingly. During his lifetime Palmer did not pay the share he was billed. After Palmer's death Heningers could either write off the balance of their fees in favor of the devisees, or it could press its claims against the executors who refused to allow them. We do not think Heningers can be justly criticized for believing that a fee writeoff would constitute a gross imposition. Attorneys should endeavor to resolve fee questions amicably, but they should not be left helpless when they render valuable service and confront an alternative of a write-off or a suit. We agree with the trial court that no ethical violation occurred. As to the amount of Heningers' fee, Disciplinary Rule 2-106(A) states that an attorney shall not charge an illegal or clearly excessive fee. Ethical Consideration 2-19 states: The determination of a proper fee requires consideration of the interests of both client and lawyer. A lawyer should not charge more than a reasonable fee, for excessive cost of legal service would deter laymen from utilizing the legal system in protection of their rights. Furthermore, an excessive charge abuses the professional relationship between lawyer and client. On the other hand, adequate compensation is necessary in order to enable the lawyer to serve his client effectively and to preserve the integrity and independence of the profession. The question here is whether the fee asked was clearly excessive so as that Heningers was unethical in charging it, either because of the hours, the rate, or otherwise. The trial court reduced the amount allowed, but we do not think this establishes the fee was per se clearly excessive and therefore unethical. Otherwise an attorney who has a fee reduced in the judicial process would automatically lose his entire fee because he asked a greater amount than he was allowed. Rather, the circumstances again control. While the district court reduced the claim substantially, it could have allowed more under the Jennerjohn factors. Complex legal questions of corporate and tax law were involved on which Heningers could provide expertisein addition to domestic relations law. The stakes were very high in terms of the amounts involved. This was reflected in other fees. Attorneys who represented Mrs. Palmer during the dissolution litigation, after Lane & Waterman withdrew, received nearly $400,000, and the executors as such were allowed interim fees of $1.9 million for services in the Palmer estate. The trial court did not err in finding that Heningers' fee asking was not unethical. IV. Disposition and costs. We thus uphold the trial court's allowance of fees to Heningers to the extent of $7146.10 and interest, and we approve the trial court's denial of the executors' counterclaim except to the extent we have disallowed Heningers recovery for the Neuhauser fee and reduced Heningers' allowance to $7146.10. We also affirm as to Heningers' cross appeal. The trial court divided the costs in district court equally between Heningers and the executors, and acted within its authority in doing so. Iowa Code § 625.3. We assess the costs in this court to the executors. MODIFIED AND AFFIRMED.