Breach of Duty Results in Forfeiture of $7.5 Million Contingency Fee

• Date: 01 January 2022
• Author: Erik A. Christiansen

Published in Litigation News Volume 47, Number 2, Winter 2022. © 20 22 by the American Bar A ssociation. Repro duced with permissio n. All rights reser ved. This informati on or any portion the reof may not be copie d or disseminated in any

form or by any means or sto red in an electronic da tabase or retrieval sy stem without the ex press writt en consent of the Amer ican Bar Associatio n.

n attorney who violated

the rules of professional

conduct by engaging in

improper ex parte com-

munications with a

judicial clerk during trial was denied

a $7.5 million contingency fee on a

$25 million settlement. A state court

of appeals held that the attorney’s

breach of his ethical obligations pre-

cluded recovery of the fee. Counsel

also could not recover under an alter-

native quantum meruit theory because

the attorney did not submit a fee dec-

laration detailing his billable time.

In Vandenberg v. RQM, LLC, while

the jury deliberated, defense counsel

made a $25 million settlement oer.

While the oer was pending, a judi-

cial clerk secretly informed plaintis’

counsel about a jury note implying it

was not going to f‌ind liability. Armed

with this ex parte information, plain-

tis’ counsel quickly accepted the

defendant’s settlement oer. Defense

counsel later learned about the note,

but given the prior accepted settle-

ment, the case was dismissed.

Post-trial, the defendant moved to

set aside the settlement, which the

court granted. The plaintis then f‌ired

their trial counsel and retained new

counsel, who f‌iled a motion to enforce

the settlement. A second assigned

judge reviewed the settlement entered

on the record after disclosure of the

note and held that the “parties freely

settled this case after full disclosure of

all material information concerning the

content and time of publishing the jury

note.” The court then reinstated the

settlement agreement.

After reinstatement, the plaintis

moved to adjudicate prior counsel’s fees

and expenses. The court held that prior

counsel was not entitled to any fee.

On appeal, the Vandenberg court

f‌irst considered the applicability of the

doctrine of quantum meruit. The court

held that, while “relatively uncom-

mon,” the trial judge did not abuse

Breach of Duty Results in Forfeiture

of $7.5 Million Contingency Fee

his discretion when granting no fees

to the plainti’s prior counsel, espe-

cially because counsel had “repeatedly

breached its duty.”

The appellate court noted that it

was not holding that “an attorney dis-

charged for cause may never recover

quantum meruit fees.” Instead, the fact

that plaintis had “clear cause” for ter-

minating their counsel “was certainly a

factor that the circuit court was enti-

tled to consider in awarding quantum

meruit fees.”

The court of appeals also exam-

ined the plaintis’ written fee agree-

ment with prior counsel. While the fee

agreement provided for payment of an

hourly rate should the attorney with-

draw, counsel “failed to provide any

evidence of how much time it spent

working on this case.” Instead, it “sug-

gested, for the f‌irst time at oral argu-

ment, that we should remand to give

the f‌irm an opportunity to document

its hours in this case.” The appellate

court rejected that request because

the “f‌irm had ample opportunity to

provide this information to the circuit

court in support of its fee request and

chose not to.”

“The court got it right,” opines

John M. Barkett, Miami, FL, cochair of

the ABA Litigation Section’s Ethics &

Professionalism Committee. “These

guys were doomed either way. The

lawyer obviously should not have

talked to the clerk.”

“The die was cast at the trial

court level.The decision, in fact, was

restrained, all things considered.The

court let the egregious facts speak

for themselves. The misconduct here

could f‌ill volumes more,” agrees Laura

K. Lin, San Francisco, CA, cochair

of the Litigation Section’s Ethics &

Professionalism Committee.

Section leaders believe that there

are a number of lessons to be learned

from the opinion. “The lawyer should

not have wasted any time when it

came to the settlement. There is an

By Erik A. Christia nsen, Litigation Ne ws Team Editor

obligation to be diligent. The lawyer

should have talked to the client right

away about the settlement oer,”

counsels Barkett.

“The lessons are bountiful,” agrees

Lin. “Do not engage in improper ex

parte communications with the court,

do not withhold nonprivileged infor-

mation from opposing counsel, and

disclose any potential conf‌licts to cli-

ents immediately,” she warns.

Plaintis’ counsel might have

avoided a complete loss of fees by

tracking time. “Plaintis’ counsel

could have prepared appropriate time

records, but those should not be sub-

mitted for the f‌irst time on appeal,”

states Lin. “As an additional practical

tip, this opinion suggests that attorneys

working on contingency should include

a provision, as these plaintis’ counsel

did, expressly contemplating how fees

should be paid even in the event of a

termination for cause,” she counsels.

“This precedent grants courts

broad and considerable discretion to

fashion an appropriate fee award—

including down to nothing—following

a client’s termination of their counsel,”

continues Lin.“Breaches of f‌iduciary

duty by an attorney may qualify as

‘unclean hands’ sucient to bar any

fee award, even following years of

work and a successfully litigated trial.

That’s a harsh outcome, but a just

one,” she concludes.

RESOURCES

Vandenber g v. RQM, LLC, No. 1-19- 0544

(Ill. Ct. App. 2020).

Ange la Foster, “Attorney Sanctione d for

Misconduc t During Trial,” Litigation New s

(Nov. 19, 2014).

Robert De nny, “Severe Attorney Sanc tion

Imposed for A sking Wrong Question ,”

Litigation News (May 19 , 2015).

Geo  A. Gannaway, “Poll of Poten tial

Jurors Resul ts in Six-Figure Sanct ion,”

Litigation News (Oct. 3 , 2018).

8 | LITIGATION SECTIO N

ETHICS STR UGGLES IN THE LEGAL WORLD