In Wright v. Wright, No. M2008-01181-SC-Rll-CV (Tenn. March 29, 2011) the Tennessee Supreme Court explains how trial courts should determine a “reasonable” attorney’s fee amount when the attorney represents a minor. Trial courts and lawyers should know:
(1) an evidentiary record should be made in support of an attorney’s fee on behalf of a minor;
(2) an affidavit from the attorney seeking a fee, specifying the amount of time and type of work spent on the case, should be provided to the trial court;
(3) the trial court should enter findings of fact consistent with the non-exclusive factors in RPC 1.5(a) indicating that the trial court appropriately considered the circumstances of the particular case, rather than just the written fee agreement between the attorney and the minor’s next friend;
(4) although time and hourly rates are relevant, they are not paramount;
(5) the risk of non-recovery in a contingency matter is an important consideration, and a successful result in hindsight does not diminish the uncertainty faced by the attorney when initially accepting representation.
Minor was injured in a car accident while passenger in a vehicle driven by her paternal grandmother. Father and Mother shared joint custody of Minor. Father retained Attorney, who filed a lawsuit on behalf of Minor against her grandmother’s Estate. Mother filed a lawsuit on behalf of Minor through a different lawyer two weeks later. The trial court dismissed Mother’s case, citing the involvement of “competing parents,” and appointed a Guardian ad Litem (“GAL”). Attorney helped Father negotiate a settlement at a judicial settlement conference thirteen months after filing suit.
GAL opposed the fee sought by Attorney, which the trial court granted based on the one-third contingency fee agreement entered between Attorney and Father. GAL appealed, and the Court of Appeals reversed and remanded, finding a lack of evidence in the record as to the RPC 1.5(a) factors for determining the reasonableness of a fee. On remand, Attorney submitted an affidavit detailing Attorney’s credentials, work performed on the case, and normal hourly rates. The trial court again awarded Attorney his requested fee over GAL’s objection, and GAL again appealed. The Court of Appeals affirmed, finding evidence in the record and findings of fact to comply with RPC 1.5(a). GAL appealed to the Tennessee Supreme Court.
The Supreme Court held that, whether representation is for an adult or a minor, the factors to determine whether an attorney’s fee is reasonable are found in Tenn. Sup. Ct. R. 8, RPC 1.5:
(a) A lawyer’s fee and charges for expenses shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:
(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) The fee customarily charged in the locality for similar legal services;
(4) The amount involved and the results obtained;
(5) The time limitations imposed by the client or by the circumstances;
(6) The nature and length of the professional relationship with the client;
(7) The experience, reputation, and ability of the lawyer or lawyers performing the services;
(8) Whether the fee is fixed or contingent;
(9) Prior advertisements or statements by the lawyer with respect to the fees the lawyer charges; and
(10) Whether the fee agreement is in writing.
The Court noted that Tennessee’s Disciplinary Rule (“DR”) 2-106(B) contains eight similar factors for determining the reasonableness of a fee.
The Supreme Court made clear throughout its opinion that the reasonableness of a fee depends upon the circumstances of the particular case, and a blanket rule is inconsistent with the law.
GAL, however, argued that courts should use the “lodestar” method for calculating a reasonable fee, multiplying number of hours times a customary hourly rate and deciding whether to apply a percentage multiplier based on the RPC 1.5(a) factors. The Supreme Court disagreed, recognizing that the ability to achieve a skillful and expeditious disposition of litigation with fewer hours may, in fact, produce a greater recovery for the client. In addition, adopting the lodestar method may result in a greater recovery in this case, but set precedent that negatively affects the recovery of other injured minors. The lodestar method creates pressure to accept early, low settlement offers before significant attorney fees have accrued. Likewise, it encourages over-litigating cases to drive up the number of hours in support of an attorney’s fee. Accordingly, the Court declined to make the number of hours and hourly rate the “paramount or exclusive considerations.”
On the other hand, the Supreme Court noted the importance of some evidence regarding the time and labor spent on the case. The Court specifically identified the usefulness of an affidavit like the one submitted in this case – which detailed how much time Attorney spent on the case, what work he accomplished during that time, and when he spent that time. The Supreme Court explained that, “[a]ccordingly, an attorney representing a minor should keep a record of time spent on the minor’s case, even if that attorney does not ordinarily keep track of time as part of the attorney’s practice.”
GAL also proposed a percentage fee cap on contingency fees for minors, such as in medical malpractice or workers’ compensation cases. The Supreme Court rejected this approach, noting that it would depart from the longstanding notion that the reasonableness of a fee depends on the circumstances of the particular case. In the few instances where attorney’s fee caps have been placed, they have been done so legislatively notwithstanding the courts’ recognition that a multi-factor approach is preferred.
The Supreme Court also noted that a “trial court may further consider that, in actions that attorneys accept on contingency, the fee should ordinarily be greater than in cases where the fee is fixed.” Doing so acknowledges the risk of non-recovery, and protects against unreasonably low fee awards that might dissuade attorneys from accepting representation of minors. The Court declined to make a blanket rule applicable to all contingency fee agreements because the next friend cannot bind the minor child to the specific agreement. However, the Court directed that “the trial court must consider the actual risks present in a given case before deciding whether and how much more or less an attorney should receive in a case where a contingent fee would customarily be charged.”
The Court prescribed a procedure for trial courts, including developing an evidentiary record, making findings as to each RPC 1.5(a) factor, and then determining a fee that is reasonable under the particular circumstances of the individual case.
The Supreme Court then undertook to determine whether the fee awarded in this case was “illogical, clearly erroneous, or an injustice” to Minor. The fee determined by the trial court (one-third of the total settlement) for Attorney was more than five times greater than the customary hourly rate for lawyers in the same county. The record demonstrated that Attorney’s legal services were in high demand in the area, that Attorney tried more jury cases than other lawyers, and that Attorney’s own hourly rate was roughly double the customary hourly rate in the community. Attorney in the case obtained a settlement in excess of the liability insurance policy limits. Attorney negotiated a reduction to a health insurance subrogation interest. Attorney’s affidavit demonstrated that he spent more than a year working on the case, preparing for trial if necessary, and seeking and obtaining a recovery from a source beyond the liability insurance. Attorney appeared in a separate case to preserve assets of Grandmother’s estate so that Minor could ultimately recover from them.
While noting the outcome was relatively straightforward and did not require “a high degree of novelty or difficulty,” the Supreme Court acknowledged that none of that was apparent at the outset of the case. The Supreme Court recognized that “[s]uccessful outcomes often make risks seem less risky in hindsight than they were at the time.” (Citation omitted).
The Supreme Court therefore affirmed the fee awarded to Attorney for representing Minor.
Counsel seeking approval of a fee in a personal injury case involving a minor would be well advised to review this opinion early in the representation and certainly well before a fee application is filed.