Court Opinion

ID: 9473289
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:25:22.266661+00
Date Added: 2024-06-11T17:43:26.080287
License: Public Domain

GIBBONS, Circuit Judge,
concurring:
I join in the decision vacating the judgment of the district court and remanding for further proceedings. I write separately, however, out of concern over the implications of several of the majority’s rulings.
The majority holds, and I agree, that in litigation over the amount of an attorney’s fee, the burden of establishing the reasonableness of the fee rests on the attorney, even in circumstances in which the client is required to initiate the action. Since the trial court improperly allocated the burden of proof by requiring the client to prove the unreasonableness of the fee, a remand for reconsideration is required.
The majority also holds that in a dispute over fees claimed to be due under a contingent fee agreement, the “clearly excessive” standard for violation of Disciplinary Rule 2-106(A) of the American Bar Association Model Code of Professional Responsibility is not the appropriate standard for determining the reasonableness of the fee. Instead, the majority lays down an “equity and fairness” standard which, in addition, is to be applied by considering not only the circumstances at the time of the contract, but also the circumstances as they existed at the time of the attorney-client dispute.
This is not a case such as Schlesinger v. Teitelbaum, 475 F.2d 137 (3d Cir.), cert. denied, 414 U.S. 1111, 94 S.Ct. 840, 38 L.Ed.2d 738 (1973), in which the court is asked to exercise supervision over the fees charged to persons regarded as wards of the court. Nor is this a fund-in-court case such as Dunn v. H.K. Porter, Inc., 602 F.2d 1105 (3d Cir.1979), in which class members with whom no contractual arrangements were made may be affected by the enforcement of a contingent fee agreement between a class representative and certain class members. Rather, this case involves an arm’s-length agreement between a sophisticated businessperson and an attorney who offered to undertake the representation at issue on a non-contingent basis. My concern is that by rejecting the “clearly excessive” standard of Disciplinary Rule 2-106(A) and by focusing the inquiry upon the circumstances existing after a successful result has been achieved, the court will invite litigation over most contingent fee arrangements. The common law of the Virgin Islands and of most American jurisdictions recognizes that competent persons are free to contract for legal services on terms that are mutually satisfactory to the client and the lawyer, including terms in which the attorney’s compensation depends upon a successful outcome. No responsible member of the profession would, I believe, contend that such contractual arrangements are beyond *103the reach of judicial scrutiny. The difficulty lies in determining a degree of judicial scrutiny which will strike the appropriate balance between competing interests. One one hand, judicial control over attorney-client fee contracts is required for the preservation of public confidence in the legal profession, and to prevent abuse of the Bar’s monopoly in the practice of law. On the other hand, a degree of scrutiny which subjected every fee contract to an after-the-event examination by the court would, I fear, limit the undoubted utility of contingent fee arrangements, by substituting a court-determined fee for that which was bargained for by the parties.
In fund-in-court cases and those involving wards of the court, judicial scrutiny is undoubtedly required. But ease law growing out of those unique situations tells us little or nothing about an appropriate level of scrutiny which ought to apply when the client is a competent contracting adult.
The majority’s distinction between a common law standard of reasonableness and the “clearly excessive” standard of the Code of Professional Responsibility is plausible. Conceivably, courts will be reluctant to set aside a contingent fee contract when the consequence is to brand the attorney as a violator of the governing rules of professional responsibility, and who would be liable to sanction by an appropriate disciplinary organization. But the “equity and fairness” standard is one which for me is so imprecise as to invite an attempt to obtain a judicial determination of the fee in almost every instance of a successful outcome. If that vague standard were to be applied by examining the circumstances known to the parties at the time of the agreement, it would probably be tolerable. However, so vague a standard, applied with the benefit of hindsight following a successful outcome, seems likely to open a Pandora’s box of new attorney fee disputes. In statutory fee cases, fund-in-court cases, and eases involving wards of the court, we have developed a significant body of case law dealing with fee disputes. The “equity and fairness” standard here adopted will in all likelihood be given content by reference to the standards of reasonableness developed in those different contexts.
The legislature of the Virgin Islands, and perhaps the Courts of the Virgin Islands, could impose restraints upon the freedom of lawyers to contract for contingent fees. See, e.g., N.J. Court Rule 1:21-7. Absent such legislative restraints, however, fixing contingent fees should be left primarily to contract. I would enforce such a contractual arrangement if, based on the circumstances known to the parties when it was made, the fee does not exceed the outer limits of reasonableness. That is certainly close to, if not the same as, the standard in Disciplinary Rule 2-106(A).