No lodestar determination needed where fee agreement establishes attorney's fee. . .
In affirmance, Second District holds that when an attorney sues a client for breach of a valid and enforceable fee agreement the amount recoverable is determined by the terms of the agreement (even if it exceeds what would otherwise be considered reasonable under lodestar analysis).
Pech v. Morgan
(March 11, 2021)
California Court of Appeal 2 Civil B300524 (Div 3) 61 Cal.App.5th 841, 276 Cal.Rptr.3d 97, 2021 FA 1976, per Egerton, J (Edmon, PJ, and Dhanidina, J, concurring). Los Angeles County: Strobel, J, affirmed. For appellants: Joshua Furman, CLMS, (818) 646-4300. For respondent: Richard Pech, (310) 277-7324. CFLP §A.65.6.1.
Attorney Richard Pech represented Juanita Springs Associates LP and Covina Hills MHC LP and one of their principals, Thomas Morgan III, in investing in commercial properties, including a trailer park. After representing them for a long period of time, Pech withdrew and filed suit for breach of contractual fee agreements, seeking to recover unpaid fees. His complaint concerned four cases, two of which were covered by written retainer agreements; the other two were alleged to be covered by an implied in fact contract based on Pech's history of representing the defendants and their understanding that his fees would be billed at the same rate as usual.
Pech also filed applications for attachment orders against the assets of the entities owned by the defendants. In support of the applications, he submitted a 92-page declaration, plus voluminous exhibits of his billing statements, retainer agreements, and correspondence with opposing counsel. Each billing statement contained an advisement in large letters that the defendants should email or fax any objections to its contents. The defendants objected to four of the final statements. Unpaid fees for those totaled $821,000 and accrued interest totaled $298,000. In opposition, the defendants presented a declaration by an expert attorney, who admitted that he had not thoroughly reviewed the invoices constituting the bulk of Pech's claims but opined that his statements were difficult to understand and overstated the value of his services by at least 20%.
After a hearing, the trial court granted Pech's applications, finding that his retainer agreements were valid and enforceable, per Bus. & Prof.C. §6148, and that there were implied in fact agreements for the two matters not covered by written retainer agreements. The trial court determined that Pech had established the probable validity of his fee claims, except for the interest charges, which the retainer agreements had ruled out. The lower court concluded that the fee rates were not subject to a lodestar calculation but rather determined by the terms of the contractual fee agreement. The court entered right to attach orders and orders for issuing writs of attachment.
The defendants appealed, but the Second District affirmed.
It says here. . .
The justices began by explaining that per Bus. & Prof.C. §6148, an attorney is entitled to a reasonable fee for services rendered where there was no written retainer agreement or implied in fact contract. However, they continued, there is no similar statutory provision for determining a proper fee award where an attorney who sues for fees has a valid and enforceable written retainer agreement. Acknowledging that fact, the State Bar's Committee on Mandatory Fee Arbitration analyzed the issue with an eye toward establishing a standard for determining a reasonable fee that arbitrators should apply in such cases. The justices thought that the standard they came up with should guide the trial court making a similar determination in a non-arbitration case. The court, the panel reasoned, should first determine that the fee stated in the retainer agreement is not unconscionable and then evaluate the attorney's performance under the terms of the agreement (consistent with the implied covenant of good faith and fair dealing). The panel found that a lodestar determination is not required where the attorney's fee is established in the fee agreement.
He did what he had to do. . .
The justices noted that it was undisputed that the fee agreements in this case were valid and the rates were not unconscionable. The remaining issue was whether substantial evidence supported the lower court's determination that Pech's claims have probable value. The panel reasoned that a claim has such value if it is more likely that not that the plaintiff will obtain a favorable judgment on it. Moreover, sufficient evidence supported the trial court's finding that Pech had reasonably performed his obligation under the retainer agreement. The justices were not convinced that, as the defendants argued, the lower court was compelled to rule in their favor because they alone had offered a declaration by an expert in support of their opposition. The justices pointed out that the trial court has discretion to determine the existence or nonexistence of reasonable legal services; it makes its own determination and is not compelled by other factors to rule a certain way. Summing up, the justices held that the amount of recoverable fees in an attorney's suit for unpaid fees under a written retainer agreement is the amount specified in the agreement, even if it is more that would be recoverable under the lodestar method.
Readers may wonder why the trial court rejected Pech's claim for interest on his unpaid fees. In a footnote, the justices tell us that the lower court adopted the reasoning in State Bar Formal Opinion No. 1980-53, which opined that an attorney must advise the client in advance of any interest that will be charged on unpaid fees and the client must give informed consent to the interest charge. Here, the panel found, the fee agreement was silent as to interest charges and the required consent was absent.
Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group) ¶¶ 1:205 et seq.
1 Witkin, Summary of Cal. Law (11th ed. 2020) Attorneys, § 156