Court Opinion

ID: 6944545
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:18:06.512592+00
Date Added: 2024-06-11T16:07:50.499972
License: Public Domain

KOZINSKI, Circuit Judge,
dissenting.
Agreements between lawyers allocating fees for services rendered to joint clients are contracts. See Freeman v. Mayer, 95 F.3d 569, 572-74 (7th Cir.1996); Stissi v. Inter*477state & Ocean Transp. Co., 814 F.2d 848, 851-852 (2d Cir.1987); Joye v. Heuer, 813 F.Supp. 1171, 1173 (D.S.C.1993), aff'd, 66 F.3d 316 (4th Cir.1995). As such they require no judicial imprimatur to make them legal.
There are only two situations where judicial intervention is appropriate. First, where the division of fees is grossly disproportionate to the services actually provided, the allocation may represent an illegal payment for something other than services rendered to the client, such as a referral. See, e.g., Prandini v. National Tea Co., 557 F.2d 1015, 1019 (3d Cir.1977), overruled on other grounds, Ashley v. Atlantic Richfield Co., 794 F.2d 128 (3d Cir.1986). We can dispose of this possibility easily. At the time the parties reached their agreement, they were in an adversarial position. Each had made claims to a larger share of the class fee, yet they compromised for the usual reasons: to avoid the uncertainty, cost and delay of having the issue adjudicated. This situation is far different from that contemplated by the rules of professional responsibility, which prohibit cozy agreements between one lawyer who does all the work and another who merely makes a referral. See Model Code of Professional Responsibility DR 2-107(A)(2).
Judicial supervision is also warranted when the agreement sets the total amount of a fee award. This reason for judicial intervention defines its own outer boundaries: An application for attorney’s fees from a common fund has no natural enemies, so judicial oversight is necessary to protect the interests of the class. To the extent an allocation between lawyers would increase the fees taken from the class, or in some other way prejudice class interests, judicial intervention is entirely appropriate. See 7B Charles A. Wright et al., Federal Practice and Procedure § 1797, at 340-41 (1986) (“The purpose of [Fed.R.Civ.P. 23(e) ] is to protect the non-party members of the class from unjust or unfair settlements....”); In re “Agent Orange” Prod. Liab. Litig., 818 F.2d 216, 222 (2d Cir.) (“The ultimate inquiry ..., in examining fee agreements and setting fee awards under the equitable fund doctrine and [Rule] 23(e), is the effect an agreement could have on the rights of a class.”), cert. denied, 484 U.S. 926, 108 S.Ct. 289, 98 L.Ed.2d 249 (1987).
But there is no justification for rewriting a bona fide fee allocation agreement where the contract will have no impact on the interests of the class. I recognize the Second Circuit allows such judicial meddling, see Smiley v. Sincoff, 958 F.2d 498, 501 (2d Cir.1992); Agent Orange, 818 F.2d at 223, but nothing in our own caselaw requires us to follow this unwise course. The only Ninth Circuit case cited by the majority, Class Plaintiffs v. Jaffe & Schlesinger, P.A, 19 F.3d 1306 (9th Cir.1994), concerned an individual lawyer’s application for fees from a common fund, not a contract dividing a pre-set award. Id. at 1308 (“It is well established that an award of attorneys’ fees from a common fund depends on whether the attorneys’ ‘specific services benefitted the fund -(quoting Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 112 (3d Cir.1976))). Jaffe therefore provides no authority for the majority’s rule, which allows district courts to substitute their judgment for that of the contracting parties.
Lawyers, no less than any others, are entitled to arrange their affairs by private contract. This policy is particularly strong where the contract in question memorializes the settlement of a dispute. We generally encourage parties to resolve their differences amicably, as they did here, so there must be very cogent reasons for upsetting an amicable resolution. That the agreement was entered into, as the majority figuratively puts it, “on the courthouse steps,” maj. op. at 474, does not strike me as a compelling reason: Many binding agreements are reached on those steps or even in the courthouse lobby. Proximity to the bench seems to me like a good reason for enforcing these contracts, because it is more likely that parties to such agreements will understand the gravity and consequences of their actions.
Nor is Judge Real’s perception that Chuck did little or no work in the case a sufficient reason for denying enforcement of the contract. The parties to the agreement were wéll aware of the legal and factual basis for their respective positions, and chose to settle *478by giving Chuck almost a fifth of the award. It is inconceivable that experienced lawyers like those of Lieff, Cabraser would give up such a large chunk of their fee unless they thought Chuck might persuade the judge to give her even more. Of course, she reasonably believed the opposite-which is what ensures that the agreement fairly approximates the work actually done by the various lawyers.
This is not an agreement entered into under duress; it is not a contract of adhesion; there was no showing of fraud; the parties were not minors or morons. All were well aware of the facts and law underlying their respective claims; they acted on the advice of counsel. There is no reason for failing to hold the parties to the deal they made. As we have said before, “Wise or not, a deal is a deal.” United Food & Commercial Workers Union v. Lucky Stores, Inc., 806 F.2d 1385, 1386 (9th Cir.1986).