Wisconsin Court of Appeals: $5,700 per hour is unreasonable fee.

Byline: David Ziemer

The Wisconsin Court of Appeals on Jan. 23 upheld a trial court's refusal to rubber-stamp a $137,000 contingency fee, after finding the attorney only monitored a class action, and did not contribute to the client's recovery.

According to the court's decision, in 1998, Maynard Steel Casting Company was involved in an antitrust class action against UCAR International. Displeased with a settlement offer it received, it hired attorney Michael T. Sheedy to get UCAR to improve the offer and get a settlement in cash, rather than product.

Sheedy and Maynard Steel agreed that Sheedy would work on a contingency-fee basis, and the attorney forwarded an agreement to Maynard Steel, to that effect. In November 1998, Maynard Steel signed the agreement.

However, in September 1998, Maynard Steel had received notice that UCAR and another defendant had agreed to settle all claims, and Maynard Steel and the other class members were invited to submit claims.

Maynard Steel prepared the claim forms and sent them to Sheedy, who forwarded them.

Maynard Steel recovered more than $500,000, but 15 percent went to class counsel, leaving net proceeds to Maynard Steel of $427,385. Sheedy retained about $137,000 as a one-third contingency fee.

Maynard Steel ultimately brought suit against the attorney for disgorgement, claiming the attorney fees were unreasonable. After a bench trial, Milwaukee County Circuit Judge Richard J. Sankovitz ruled in favor of Maynard Steel, holding that a reasonable attorney fee was only $4,200, and ordering Sheedy to disgorge the difference of $132,800.

He appealed, but the Court of Appeals affirmed in a decision by Judge Daniel P. Anderson.

The court first held that the circuit court had authority to determine the reasonableness of the fee: It is established that courts have the inherent power to determine the reasonableness of attorney's fees and to refuse to enforce any contract that calls for clearly excessive or unreasonable fees, quoting Herro, McAndrews and Porter, S.C. v. Gerhardt, 62 Wis. 2d 179, 182, 214 N.W.2d 401 (1974).

Turning to the merits, the court concluded that, under SCR 20:1.5(a), the contingency fee was unreasonable.

Although the rule lists eight factors, and the circuit court addressed all eight, the Court of Appeals found that only three were needed to support a conclusion that the fee was unreasonable.

First, the court agreed with the circuit court that, because Sheedy had very little experience...