Lawrence v. Graubard Miller, 11 N.Y.3d 588 (2008)
A contingent fee agreement, even if not unconscionable at its inception, may be deemed unenforceable if, in retrospect, the fee is disproportionate to the value of the services rendered.
Summary
This case concerns a dispute over legal fees between Alice Lawrence and her attorneys, Graubard Miller. After a 22-year relationship where the firm billed over $18 million, a revised retainer agreement stipulated a 40% contingent fee for any additional distributions from Lawrence’s husband’s estate. A subsequent settlement yielded over $100 million, resulting in a $40 million legal fee. Lawrence refused to pay, arguing the fee was unconscionable. The New York Court of Appeals held that while the agreement’s initial unconscionability couldn’t be determined on a motion to dismiss, a court could invalidate the agreement if the fee was disproportionate to the services rendered, even if the agreement was initially fair. The case was remanded for further factual development.
Facts
Alice Lawrence retained Graubard Miller in 1983 to represent her in matters related to her deceased husband’s estate. Over 21 years, the firm billed her over $18 million in legal fees. In 2005, facing escalating legal bills, Lawrence entered a revised retainer agreement with the firm, stipulating a flat quarterly fee of $300,000 (capped at $1.2 million annually) and a 40% contingent fee on any additional distributions from the estate. Five months later, a settlement resulted in a $104.8 million payment to the estate, leading to a legal bill exceeding $40 million. Lawrence refused to pay, prompting Graubard Miller to sue for enforcement of the agreement.
Procedural History
Graubard Miller commenced a proceeding in Surrogate’s Court to compel payment of its legal fees. Lawrence sued in Supreme Court seeking rescission of the revised retainer agreement. The Supreme Court removed Lawrence’s action to Surrogate’s Court. The Referee recommended denying motions to dismiss Graubard’s petition. The Surrogate Court granted motions to confirm the Referee’s report. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.
Issue(s)
Whether the revised retainer agreement is unenforceable because it was unconscionable when entered into, or became so in retrospect, warranting dismissal of the firm’s petition to compel payment of legal fees.
Holding
No, because the facts and circumstances surrounding the revised retainer agreement have not been sufficiently developed to determine whether the agreement was unconscionable at the time it was made; even if not unconscionable at inception, the agreement may be deemed unenforceable if the fee is disproportionate to the services rendered.
Court’s Reasoning
The Court of Appeals affirmed the Appellate Division’s decision, emphasizing the standard of review applicable to motions to dismiss. The court stated that on a motion to dismiss a petition, the facts alleged in the petition must be accepted as true, and the petitioner must be afforded every possible favorable inference. CPLR 3211 requires that affidavits submitted by a respondent establish conclusively that petitioner has no claim. The court reiterated the definition of an unconscionable contract as one that is