31 N.Y.2d 862
When an explicit agreement on a contingency fee is lacking, courts must determine a reasonable attorney’s fee based on quantum meruit, considering factors like customary charges, the lawyer’s skill, and the risk assumed, but cannot solely rely on local contingency fee practices without evidence of the client’s agreement.
Summary
De Graff, Foy, Conway & Holt-Harris sought to establish their legal fees after successfully representing McKesson & Robbins in a land appropriation case. The central dispute revolved around whether a contingent fee agreement existed. The lawyers claimed they discussed a contingent fee, but no specific percentage was agreed upon. After a favorable judgment, the firm billed McKesson a percentage of the recovery above the state’s initial offer, which McKesson disputed, insisting on a time-based fee. The Court of Appeals held that in the absence of a clear agreement, the fee must be determined based on quantum meruit, considering various factors, including customary charges, but not solely on local contingent fee practices without evidence of the client’s explicit agreement to a contingency fee.
Facts
1. McKesson & Robbins retained De Graff, Foy, Conway & Holt-Harris to represent them in an appropriation case by the State of New York.
2. The De Graff firm discussed a contingent fee arrangement with McKesson’s representatives, but no specific percentage was finalized.
3. The State initially offered $420,000; the De Graff firm secured a significantly higher award of $626,250.
4. After the successful judgment, the De Graff firm billed McKesson a fee based on 25% of the recovery exceeding the State’s initial offer ($51,560).
5. McKesson refused to pay this amount, asserting the fee should be calculated on a time-basis rather than a contingency basis.
6. The law firm then petitioned the court to fix the fee under Section 475 of the Judiciary Law.
Procedural History
1. The Court of Claims fixed the fee at $51,560, the amount the De Graff firm had billed, noting the customary practice of contingent fees in the Albany area.
2. McKesson appealed, arguing no explicit agreement for a contingent fee existed.
3. The Appellate Division affirmed the Court of Claims decision without issuing a separate opinion.
4. McKesson appealed to the New York Court of Appeals.
Issue(s)
1. Whether, in the absence of an explicit agreement for a contingent fee, the court can determine a reasonable attorney’s fee based on local custom and practice of contingent fees.
2. Whether the fee should be determined based on quantum meruit, considering factors such as the attorney’s skill, time spent, and the results achieved.
Holding
1. No, because absent an explicit agreement for a contingent fee, the court cannot solely rely on local custom but must determine the fee based on quantum meruit.
Court’s Reasoning
The court emphasized that a contingent fee arrangement requires an explicit agreement between the attorney and the client. In the absence of such an agreement, the court must determine a reasonable fee based on quantum meruit. The dissenting opinion articulates comprehensive principles for determining attorney’s fees when a clear contingency agreement is absent.
Specifically, the dissent highlighted that a contingent fee is distinct from a fee determined by the reasonable value of services. A contingent fee, dependent on a successful outcome, should substantially exceed a fee calculated with certainty of payment because of the risk the lawyer assumes. If a client agrees to a contingent fee, that contingency is a proper consideration. However, the dissenting opinion underscores that “[a]n agreement for a contingent fee can never be implied but must be a matter expressly contracted for between the attorney and the client.”
The court stated, “When the parties to a contract have not agreed with respect to a term which is essential to the determination of the rights and duties of the parties, a term which is reasonable in the circumstances is supplied by the court.”
Factors to be considered in determining quantum meruit include:
1. The time expended.
2. The novelty of the legal question.
3. The likelihood that acceptance of the particular employment would preclude other employment.
4. The amount in issue and the recovery obtained.
5. Time limitations imposed by the client.
6. The length of the professional relationship.
7. The experience and reputation of the lawyer (citing Code of Professional Responsibility, DR 2-106).
The dissenting judge criticized the lower courts for emphasizing the local custom of contingent fees without a clear finding of an agreement between the law firm and McKesson. The dissent concluded that the case should be remanded to the Court of Claims to make new findings on whether an agreement for a contingent fee existed and, if not, to determine a fee based on quantum meruit, considering all relevant factors.