Today a Superior Court in Rhode Island held the State of Rhode Island must reimburse almost $250,000 to the paint companies it sued for creating a public nuisance by selling lead paint years ago. State of Rhode Island v. Lead Industries Ass'n, No. PB/99-5226 (R.I. Super. Jan. 22, 2009).
News article here.
The expenses consisted of $218,270.64 that the defendants paid to "Co-Examiners" for studying implementation of an abatement remedy plus $15,554.75 in transcript fees and $8,295.82 in "conference call fees". The court had required the defendants to advance those costs pending exhaustion of the defendants' post-trial motions and appeals.
The court concluded:
Here, where the Rhode Island Supreme Court has overturned the jury verdict against the Defendants and vacated the judgment of abatement, it would be inappropriate to continue holding the Defendants liable for any portion of the Co-Examiner expenses.
State of Rhode Island v. Lead Industries Ass'n, slip op. at 21.
Possibly softening the blow to the State, the court observed, in a footnote, that the State's lawyers just might have to shoulder the expense burden:
According to the fee agreement between Motley Rice and the State, Motley Rice agreed to bear "all costs and expenses of prosecuting" this case. (See Contingent Fee Agreement and Contingent Fee Addendum). The costs incident to the co-examiners and remedy portion of this case imposed here under Rule 53 could potentially be covered under that agreement. However, this is not a matter that the Court will address at the present time. Thus, a determination by the Court that the State is obligated to pay the Co-Examiner fees and expenses in no way speaks to the issue of whether Motley Rice will ultimately bear responsibility for these expenses.
Id., slip op. at 21 n.10.
Yikes! In 1999, when Motley Rice filed the case for the State, the firm no doubt didn't plan on spending 10 years litigating it, suffering a mistrial, and winning the retrial only to lose the favorable judgment in the Rhode Island Supreme Court. This latest twist heaps hot coals on the firm's head.
Could Motley Rice have protected itself? And, more important, can you?
Blawgletter can't say what Motley Rice could (or even should) have done to avoid potential liability for this unusual set of circumstances. At the time the firm inked the contingent fee agreement with the State of Rhode Island, Motley Rice may have had no choice but to accept responsibility for "all costs and expenses of prosecuting", apparently without exception.
But the prudent contingent fee lawyer ought at least to think about what sorts of expenses he or she might have to advance and consider carve outs and limitations. These could include:
- Confining expense-advancement to "reasonable and necessary" costs or those those that the firm, in its reasonable judgment, approves;
- Capping the firm's obligation at a specific dollar amount; and
- Carving out particular kinds of fees and expenses, such as (a) awards of attorneys' fees; (b) bonds for injunctive and other extraordinary relief; (c) appeal bonds; (d) fees and costs of mediators, examiners, special masters, and other adjuncts to court proceedings; and (e) awards of sanctions against the client.
As you, dear reader, well know, litigation on a contingent fee basis has grown only riskier over the last decade or so. That may go double for commercial litigation, whose cost in lawyer time and out-of-pocket expense leaps every time courts or legislatures add a layer of procedural complexity. Think Twombly, Daubert, Celotex, Rule 23(f), and the Procrustean impulses of courts in class (especially securities and antitrust) actions.
