New York Law Review

Tag: attorney fees

  • De Graff, Foy, Conway & Holt-Harris v. McKesson & Robbins, Inc., 31 N.Y.2d 862 (1972): Establishing Attorney’s Fees in the Absence of a Clear Contingency Agreement

    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.

  • Matter of Montgomery, 272 N.Y. 323 (1936): Attorney’s Recovery When Discharged Without Cause

    Matter of Montgomery, 272 N.Y. 323 (1936)

    When an attorney is discharged without cause after partially performing a fixed-fee contract, the attorney’s recovery is based on quantum meruit (the reasonable value of services) and is not limited to the contract price.

    Summary

    An attorney, Van Allen, contracted with an executrix, Montgomery, to perform legal services for a $5,000 fixed fee related to settling an estate. After the attorney completed approximately five-sixths of the work, the executrix discharged him without cause and hired another attorney. The Surrogate’s Court determined the discharge was unjustified, but that the attorney’s recovery should be based on quantum meruit. The question was whether the original contract price limited the attorney’s recovery. The New York Court of Appeals held that because the client voluntarily terminated the contract without cause, the attorney’s recovery was not limited by the contract price; instead, the attorney could recover the full reasonable value of the services rendered.

    Facts

    Attorney Van Allen had a pre-existing attorney-client relationship with the deceased, James Montgomery, and held an unliquidated claim for services rendered. After Montgomery’s death, Van Allen prepared a will for the executrix, Marguerite Montgomery, who named him as executor. The executrix agreed to pay Van Allen $5,000 for legal services related to settling the large estate (valued over $600,000). Van Allen performed a substantial portion of the required services, but the executrix refused to cooperate properly and then discharged him without cause before the work was completed.

    Procedural History

    The Surrogate’s Court found that the executrix discharged the attorney without adequate cause. However, the court concluded that the discharge did not breach the contract because a client has the right to discharge an attorney at any time. The Surrogate awarded the attorney recovery based on quantum meruit for the services rendered, but the question remained whether the original contract limited this recovery. The case then went to the New York Court of Appeals.

    Issue(s)

    Whether an attorney’s recovery, when discharged without cause after partially performing a fixed-fee contract, is limited to the original contract price, or whether the attorney can recover the full reasonable value of their services rendered based on quantum meruit.

    Holding

    No, because when a client voluntarily cancels a contract with an attorney without cause, the attorney’s recovery is based on quantum meruit and is not limited by the contract price.

    Court’s Reasoning

    The Court of Appeals reasoned that a client has the right to discharge an attorney at any time, with or without cause. However, the consequences of that discharge differ based on whether it was justified. If the discharge is for cause, the attorney has no right to recovery. If the discharge is without cause, the attorney is entitled to recover the fair and reasonable value of the services rendered based on quantum meruit, regardless of the contract price. The court emphasized that the voluntary cancellation of the contract by the client means the contract’s terms no longer solely dictate the attorney’s compensation. “After cancellation, its [contract] terms no longer serve to establish the sole standard for the attorney’s compensation.” Matter of Tillman, 259 N. Y. 133. The court distinguished situations where the contract is terminated involuntarily (e.g., death or disability of the attorney), in which case recovery is limited by the contract price. The court noted the potential for the rule to benefit both attorneys and clients, depending on the circumstances, and that the Surrogate properly considered the contract price when determining the reasonable value of the services rendered. The court affirmed the Surrogate’s decision.