Opinion
No. SCBD 4123
Decided: October 21, 1997
¶ 0 A Bar disciplinary proceeding in which Respondents allegedly violated Rule 1.5 of the Rules of Professional Conduct, providing a lawyer's fee shall be reasonable. Respondents were retained to represent a client in a civil rights action. The attorneys retained a forty percent contingency fee and then obtained a court awarded fee in addition to the contingent amount. The resulting fee for the attorneys totaled sixty-three percent of the client's award. The Professional Responsibility Tribunal recommended neither Respondent be disciplined. After our de novo review we find cause for a public reprimand of Respondent, Joseph Weeks, and agree with the tribunal with regard to Respondent, Mark Nation.
PUBLIC REPRIMAND AND COSTS TO RESPONDENT JOSEPH WEEKS ONLY.
Allen J. Welch, Assistant General Counsel, Oklahoma Bar Association, Oklahoma City, Oklahoma, For Complainant
Joseph R. Weeks, Oklahoma City, Oklahoma, Respondent.
Calvin W. Hendrickson, Oklahoma City, Oklahoma, For Respondent Nation.
¶ 1 An Oklahoma Bar Association disciplinary proceeding in which Respondents, Professor Joseph Weeks and Mark Nation, allegedly violated Rule 1.5(a) of the Oklahoma Rules of Professional Conduct, 5 O.S. 1991, ch. 1, App. 3-A, which provides that "[a] lawyer's fee shall be reasonable."
¶ 2 Respondents were employed to represent a client (Client) in a Civil Rights action for wrongful termination. The representation agreement between Client and Respondents provided for a contingency fee of fifty percent (50%) of "any amounts received by [Client], through a court judgment or a settlement agreement between the parties to the dispute[;]" the Parties later agreed to reduce this contingent fee amount to 40%.
After meeting with Professor Weeks regarding the representation and original fee contract, but before signing the contract, the client spoke with Mark Nation about reducing the contingency fee by five percent. The client signed the representation and fee contract with the fifty-percent contingent fee language, based upon the understanding that Nation would cut his portion of the fee by five percent. On November 15, 1993, Nation and the client agreed to cut Nation's take of the fee from twenty-five to twenty percent and reduced this auxiliary agreement to writing. On that same day, November 15, 1993, the client signed the primary representation and fee contract which contained the provisions allowing a fifty-percent contingency and statutory fee combination. It was not until after settlement that Weeks learned of Nation's agreement to reduce Nation's portion of the fee and at that time Weeks likewise agreed to reduce the contingent portion of his fee by five percent, thus creating to a total contingency fee of forty percent, twenty percent for each attorney.
¶ 3 The representation agreement further provided for an assignment of any rights related to court awarded attorney's fees, from Client to Respondents, including the right to waive any court awarded fee. The agreement then stated "that any negotiated or court ordered attorney fee obtained by [Respondents] will be retained by them in addition to the contingent amount and any compensation to which they are otherwise entitled[.]" This fee contract was drafted by Respondent, Professor Weeks. This portion of the primary contract, dealing with the retention of any statutory attorney's fee, was not renegotiated by Client and remained unchanged.
¶ 4 Respondents secured a settlement for Client in the amount of $50,000.00 and subsequently secured a court-awarded $23,417.68 attorney fee pursuant to 42 U.S.C.A. § 1988(b), based on the hours expended on Client's cause at a set hourly rate. This is referred to as the lodestar figure. Respondents gave Client $30,000.00, in accordance with the contingency agreement and retained the remaining $43,417.68 as their fee, $20,000.00 from the contingency agreement and $23,417.68 from the negotiated attorney fee.
¶ 5 Respondents did not inform the trial court of the contingency agreement between themselves and Client. Respondents also failed to inform their Client of the negotiations for the attorney fee pursuant to 42 U.S.C.A. § 1988(b), citing the client's assignment of the right to such fee as the reason and excuse for the failure.
¶ 6 Securing of this attorney's fee, which represents both a contingent and hourly fee, the fact that the trial court was not apprized of the existing contingency agreement, and Respondents' failure to inform their Client of the subsequent negotiations which pertained to the court awarded fee are of particular concern to this Court.
¶ 7 The Professional Responsibility Tribunal, before which the disciplinary proceeding was had, did not recommend discipline, stating that both Respondents felt their action was appropriate and that there was not sufficient guidance with respect to this fact situation to support discipline against Respondents. The Oklahoma Bar Association recommended public censure for both Respondents. For the reasons herein stated, this Court declines to adopt the recommendation of the tribunal with regard to Professor Weeks. This opinion will serve as a public reprimand for his failure to apprise the trial court of the fee arrangement, the failure to adequately and reasonably inform the Client about the status of his case, and for the collection of an unreasonably high fee under the circumstances of the instant case. We decline to publicly censure Nation.
¶ 8 [T]his Court possesses exclusive original jurisdiction" in disciplinary matters relating to the licensing of attorneys. State ex rel. Oklahoma Bar Ass'n v. Meek, 1996 OK 119, 927 P.2d 553, 557; State ex rel. Oklahoma Bar Ass'n v. Holden, 1996 OK 88, 925 P.2d 32, 36; State ex rel. Oklahoma Bar Ass'n v. Prather, 1996 OK 87, 925 P.2d 28, 30; State ex rel. Oklahoma Bar Ass'n v. Braswell, 1983 OK 63, 663 P.2d 1228, 1230; State ex rel. Oklahoma Bar Ass'n v. Raskin, 1982 OK 39, 642 P.2d 262, 265-66. The Supreme Court's review is de novo, the tribunal's findings and conclusions of law, as well as any recommendations for discipline are not binding on the Court. State ex rel. Oklahoma Bar Ass'n v. Holden, 1996 OK 88, 925 P.2d 32, 36. We base our decision in this disciplinary matter exclusively on State law principles.
¶ 9 Respondents asserted repeatedly throughout the disciplinary proceedings that their fee arrangement with Client was reasonable and necessary in order to continue to attract qualified counsel for aggrieved parties in Civil Rights litigation. Professor Weeks primarily relied upon his considerable experience in this legal field and the need to account for the great risks involved in such cases as the justification for the contingency and hourly fee combination. In essence, Respondents' retainer of the $20,000.00 contingency fee was a self-enacted enhancement of the 42 U.S.C.A. § 1988 lodestar figure awarded. Enhancements of such statutory fee awards have been addressed in several important decisions, including Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987) [hereinafter Delaware Valley II] and Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed. 891 (1984).
¶ 10 In Blum, the United States Supreme Court found the trial court could use its discretion to upwardly adjust or enhance attorney's fees for the prevailing party in a civil rights case, where the result was one of exceptional success. Blum, 465 U.S. at 897. The Supreme Court refused to find the enhancement of attorney's fees impermissible in all cases. However, the Blum Court did state that "novelty and complexity of issues" were not appropriate analysis factors to examine in "determining whether to increase the basic fee award." Id. at 898. The complexity and novelty of issues would be reflected in the number of billable hours expended and any special skills of counsel should be accounted for in the reasonable hourly rate used by the court. Id.
¶ 11 It, therefore, may justify an upward adjustment only in the rare case where the fee applicant offers specific evidence to show that the quality of service rendered was superior to that one reasonably should expect in light of the hourly rates charged and that the success was "exceptional."Id. at 898 (citation omitted).
¶ 12 Therefore, Professor Weeks' attempt to enhance the court awarded fee based on the strength and scope of his own experience and the difficulty inherent in civil rights litigation is not generally permissible under Blum.
¶ 13 Several years later, in Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, the Supreme Court again addressed the prospect of multiplying or enhancing the reasonable lodestar fee in the context of the Clean Air Act. The Court determined enhancement of the basic fee award was impermissible as a means of compensating counsel for assuming the risk of loss. Delaware Valley II, 483 U.S. at 719, 107 S.Ct. at 3083-84. The Supreme Court noted several factors that had been used by the lower courts in reaching this conclusion: 1) evaluating risk of loss could require the attorney to expose weaknesses in his client's case, ultimately causing a conflict of interest; 2) the court must engage in the difficult task of "retroactively estimat[ing] the prevailing party's chances for success from the perspective of the attorney when he first considered filing the suit[;]" 3) rewards based on the risk of loss have the effect of penalizing defendants with the strongest and most meritorious defenses and causes these least culpable defendants to subsidize the unsuccessful actions of unrelated parties; 4) "because the contingency bonus cannot be determined with either certainty or accuracy, it cannot be justified on the ground that it provides an appropriate incentive for litigation." Id.
¶ 14 While Respondents' fee enhancement approach of taking the entire contingency fee and adding it to the lodestar fee would remove some of the uncertainty problems for the court's bonus fee analysis, it would not prevent the potential for a conflict of interest with one's client, retroactive analysis of the party's risk, penalty to those defendants with the strongest and best defenses and the double recovery problems discussed in Blum.Delaware Valley II makes clear the U.S. Supreme Court's unwillingness to consider risk of loss for purposes of fee enhancement under the Clean Air Act. The analysis works well in the civil rights context, where the intent of Congress was to have the fees of prevailing parties paid, but not non-prevailing claims. Therefore, the indirect penalty against less culpable defendants is a persuasive argument in the civil rights context, as it is in the clean air context.
¶ 15 The premise of the § 1988 statutory attorney fee is to provide a reasonable fee, not a windfall to the prevailing party or his attorney. See Blum, 465 U.S. at 892, 104 S.Ct. At 1545-46; City of Riverside v. Rivera, 477 U.S. 561, 580, 106 S.Ct. 2686, 2697 (1986) (plurality opinion). In Blum, the United States Supreme Court looked to the legislative history to determine Congress' intent with regard to the award of attorney's fees. "The legislative history explains that `a reasonable attorney's fee' is one that is `adequate to attract competent counsel, but . . . [does] not produce windfalls to attorneys.'" Blum, 465 U.S. at 897, 104 S.Ct. at 1548 (quoting S.Rep. No. 94-10011, p. 6 (1976)). The Supreme Court's effort in Blum was centered around avoiding double recovery of fees and the windfall that would result from such recovery, which is the reason the Court disallowed upward adjustments to the fee simply for the quality of representation and/or the novelty of the issues involved. Id. at 899, 1549. Respondents' double recovery in the instant case is an example of the windfall both Congress and the U.S. Supreme Court specifically tried to remedy.
¶ 16 Respondents' failure to inform their Client of continuing negotiations concerning the statutory attorney's fees also concerns this Court. Client's assignment of rights did not relieve counsel of the obligation to keep Client informed about the status of his case. The record indicates Client was told nothing of ongoing negotiations, even the fact that such negotiations occurred. Regardless whether the fee agreement adequately addressed Client's inability to dictate the actions of his counsel in the attorney fee proceedings, it did not do away with Respondents' obligation to reasonably inform Client about the status of matters in his case. We find Respondents' failure to inform Client in this regard unreasonable.
¶ 17 Of primary concern to this Court is the fact that Respondents did not allow the trial court an opportunity to exercise any discretion or engage in any analysis and simply took it upon themselves to enhance their fee. It is not possible for the district courts to exercise appropriate discretion with regard to attorney's fees without knowledge of the circumstances of the cases before them, including knowledge of fee agreements under which counsel is already scheduled to receive compensation. Respondents' failure to be completely candid with the trial court and inform the trial court of the full nature of their compensation was improper. It is this failure with regard to the candor accorded the trial court that concerns us more than either the failure to adequately inform the client or the fact Respondents secured 63% of this award.
¶ 18 Respondents assert under Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638 (1992) and Davis v. City County of San Francisco, 976 P.2d 1536 (9th Cir. 1992) that the existence of a contingency fee arrangement cannot be considered in setting the hourly rate for computation of the lodestar figure and therefore did not have to inform the trial court of the $20,000.00 already received from Client's settlement. We disagree.
¶ 19 Importantly, neither of these cases state that information regarding the contingency nature of a fee is to be withheld from the court, nor does either case allow for the collection of both the contingent and lodestar fee. Burlington involved the enhancement of a similar statutory fee under the Solid Waste Disposal Act and Clean Air Act. The lodestar figure was enhanced 25% in an effort to compensate the attorneys for the contingent fee nature of the case; this contingency enhancement was reversed by the Supreme Court, stating:
¶ 20 To engraft this feature onto the lodestar model would be to concoct a hybrid scheme that resorts to the contingent-fee model to increase a fee award but not to reduce it.
¶ 21 Even though a court may not maneuver the lodestar to compensate for contingency arrangements, Burlington and Davis offer guidance to the trial court concerning the permissible scope of the court's discretion with regard to setting the lodestar fee. Without appropriate candor to the tribunal, the trial court cannot determine the reasonableness of a fee, including any provisions for offsetting a contingent fee or review of a combination award such as the one taken here by Respondents. Venegas v. Mitchell, 495 U.S. 82, 110 S.Ct. 1679 (1990) (contract provided for an offset of the contingent fee by the amount of any attorney fee awarded). In withholding information regarding the full extent and source of their compensation, Respondents deprived the trial court of the opportunity to determine in its discretion the reasonableness of this fee.
¶ 22 For the reasons herein stated, we find that counsel may not impose self-fashioned fee enhancements or bonuses to the statutory fees allowed under the Civil Rights statute, 42 U.S.C.A. § 1988(b); a client's relinquishing of rights with regard to certain possible fees is not the equivalent of assigning the right to be reasonably informed of the status of one's case; and finally, counsel must inform the court of fee arrangements which could bear on the imposition of a reasonable attorney fee and affect the knowing exercise of the court's discretion.
¶ 23 Complainant's request for discipline is denied with regard to Respondent, Mark Nation. We adopt the Professional Responsibility Tribunal's recommendation of no discipline with regard to Respondent, Mark Nation, due to this Respondent's minimal role in formulating the contract and the fact that Mark Nation reasonably looked to the far more experienced attorney to guide him through this process.
¶ 24 We decline to adopt the tribunal's recommendation with regard to Respondent, Professor Joseph Weeks. For the above stated reasons this opinion is to serve as a public censure for the misconduct of Respondent Weeks and his failure to inform the trial court of the full nature of the attorney compensation, failure to reasonably inform the Client, in violation of Rule 1.4 of the Rules of Professional Conduct and for securing an unreasonably high fee from Client, in violation of Rule 1.5(a) of the Rules of Professional Conduct. Professor Weeks' primary role in drafting the contract and dictating the course of the underlying litigation is the reason for the censure of this Respondent.
¶ 25 The statutory fee awarded under § 1988 does not belong to the attorney, rather it is an entitlement of the party to whom it is awarded. Venega v. Mitchell, 495 U.S. 82, 87-88, 110 S.Ct. 1679, 1682, 109 L.Ed.2d 74 (1990). Respondents cite Venegas as well, but for the proposition that a plaintiff is free to contract with his attorney for a percentage of any money judgment recovered and that Congress did not intend § 1988 to "limit civil rights plaintiffs' freedom to contract with their attorneys." Id. at 86-87 (Plaintiff-Venegas attempted to hold his attorney to a lower lodestar attorney award, despite the fact plaintiff contracted to pay his attorney 40% of the money judgment).
¶ 26 However, the key distinction between Venegas and the case at bar is the fact that the $406,000.00 Venegas attorney fee, though very large, only equaled forty-percent (40%) of the client's recovery. Furthermore, the contract provided the percentage of any gross recovery be offset by any court awarded attorney fee. Id. at 84. The Venegas offset is distinguishable from the instant case, in which no offset occurred and the attorneys here took sixty-three percent (63%) of the recovery. While this Court recognizes that civil rights plaintiffs are free to contract with their attorneys, it does not follow that attorneys have the right to contract for unreasonable fee amounts. The sixty-three percent taken by the attorneys under the facts of this case was in violation of Rule 1.5(a).
¶ 27 Pursuant to Disciplinary Proceedings Rule 6.16, cost of investigation, the record and disciplinary proceedings, in the amount of $1,134.75, are to be paid by Professor Joseph Weeks within ninety days of the effective date of this opinion.
KAUGER, C.J., and SIMMS, OPALA, WILSON, and WATT, JJ., CONCUR.
HARGRAVE, J., CONCURS IN PART, DISSENTS IN PART.
SUMMERS, V.C.J., HODGES, LAVENDER, JJ., DISSENT.
I would order Respondents to disgorge to client the amount of excessive fee received by them.