“Licensed to bill?” or “When a fee award won’t hold its worth”

Practicing in the part of the world that I do, I gape with both amazement and jealousy at the hourly rates lawyers are able to charge in much larger metropolitan areas.  I try not to think about the difference in a way that is demeaning; instead, I try (perhaps just for more own sanity) to be rational and remember that you can buy a 3,500 plus square foot home in my part of the world for what a studio apartment in New York City might cost.  So, to some extent, it is all relative.

What is pretty consistent though is that people tend to be willing to really pay some exorbitant amounts in attorney fees — even amounts that seem well out of proportion to the size of their dispute — when they are hopeful that someone else will be the one to ultimately foot the bill.

A high-profile example of this phenomenon can be found in the intellectual property dispute between the Beastie Boys and Monster Energy Drink.  After the Beastie Boys prevailed, they sought to shift some $2.4 million in fees they incurred.  Their effort to offload the full amount of their attorney fees onto Monster Energy Drink was rebuffed because the court considered them to have chosen and paid for a Cadillac Escalade instead of a Honda Civic.  So, the attorney fee award against Monster was reduced to a smidge above $667,000.

Earlier this month, an example closer to home of this phenomenon surfaced when the Tennessee Court of Appeals reversed a trial court’s attorney fee award of over $460,000 as alimony in solido in Holdsworth v. Holdsworth.

The court of appeals, of course, could have simply stopped its opinion after indicating that the award had to be reversed because the recipient, the wife, had not demonstrated financial inability to get counsel (her parents paid in exchange for promissory notes) and because both she and the husband would be equally harmed by having to deplete their marital share to pay the amount.  The judges did not stop there, however.  Instead, the appellate court managed to simultaneously call out, and take it a bit easy, on a prominent domestic attorney in Tennessee for managing to run up more than $460,000 in attorney fees and expenses defending a divorce case in which the total estate was ultimately determined to be worth slightly less than twice that amount:  “We would be remiss if we did not convey our displeasure with the extraordinary amount of attorney’s fees incurred in this case.”  Yet, after then laying out its view that there really was not much in the case for the parties to fight about, the court then opted for rhetoric of the “pox on both houses” variety when simple math would indicate that one side’s lawyer may have run up a bill 9 times higher than the other side:  “Nevertheless, the parties somehow incurred more than half of a million dollars in attorneys’ fees and expenses.”

From an ethics perspective, the key point is, I guess, an obvious one — RPC 1.5(a) imposes a requirement of reasonableness on all attorney fees charged.  It is true that (a)(1) indicates that whether “the fee agreement is in writing” can make it easier to survive a reasonableness challenge when a client has agreed to the fee terms in writing, but there are nine other factors under the rule as well and whether a client is being charged by the hour or on a contingent fee basis, even a fee that a client has agreed to and paid can later cause real problems for the lawyer if it turns out to be unreasonable.  As long as the client is happy, however, it is much less likely to become an issue.  When your client is involved in an effort to shift those fees to someone else though, that same fee becomes much more likely to be scrutinized by the court, and it is worth remembering that none of the factors laid out in RPC 1.5(a) that address what makes a reasonable fee relate to whether or not someone else beside the client would ultimately be on the hook for it.

(P.S.  Apologies for the Bullwinkle-style title, I’m showing my age…”)

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