The Alaska Supreme Court looked last week at the trade off between lawyer and client in contingent fee arrangements. It held that an agreement to revert from a flat fee to the original contingent one didn't unduly burden the clients' right to accept or reject settlement offers.
The case involved a personal injury claim arising from the collapse of stairs at Katmai Lodge. The husband and wife hired a law firm on a contingent fee basis. After filing a complaint against the lodge and its owner, the firm advised the couple to settle for the coverage limits under an insurance policy (around $1.1 million).
The clients said fine so long as the firm agreed to cut its fee to costs plus $250,000. The lawyers went along, and the resulting amendment said that it would apply if the defendants settled for policy limits "without requiring further substantial litigation" but otherwise "will revert to our previous written fee agreement and the percentages written there." The defendants rejected the settlement proposal.
The case moved forward for several months without much happening at the courthouse. Most of the work involved discovery and getting ready for trial.
At length, the defendants and their insurer settled with the husband and wife for policy limits (now up to $1.2 million for some reason).
The clients insisted that the lawyers couldn't receive more than $250,000 as a fee. The law firm begged to differ. A lawsuit ensued. The couple argued that enforcing their agreement to switch back to a contingent fee would authorize lawyers to force clients to accept settlement offers they'd otherwise reject. But the trial court granted summary judgment for the lawyer. The Supreme Court of Alaska affirmed. It held that the reversion of the flat fee to a contingent one after "substantial litigation" didn't put too heavy a burden on the clients' right to approve or reject a settlement. Weiner v. Burr, Pease & Kurtz, P.C., No. S-13214 (Ala. Nov. 13, 2009).