Alice Lawrence had timely paid $18 million over 22 years to Graubard Miller in a lengthy dispute over her husband’s estate. The law firm had billed her on an hourly basis—until there was a $60 million settlement offer on the table, at which point it suddenly renegotiated its retainer agreement to be a 40% “contingent fee”, though there was obviously nothing contingent about the award, and the firm wasn’t offering to repay the money it had already billed. Five months later, there was a $105 million settlement—and Graubard Miller claimed as its fee for the five months of work $42 million of the $45 million additional money that it had negotiated, for a total of $60 million for the case. Lawrence asked the New York courts to protect her, but a 4-1 majority of the Appellate Division upheld the decision (via Lattman). The New York Times article (not to mention Bizarro-Overlawyered, which unsurprisingly doesn’t care much about fraud and rip-offs when they’re occasioned by attorneys against widows) doesn’t even begin to mention the fact that the “contingent fee” didn’t provide any risk for the law firm: the retainer agreement had a floor whereby Graubard Miller got to charge an hourly rate for the first year of trial even if it didn’t collect anything, guaranteeing it another $1.2 million on top of the $18 million it had already collected. The best coverage in the New York Law Journal, which notes that Graubard Miller schnorred another $7.8 million in gifts and gift taxes from Lawrence, whose total payment thus totaled nearly $68 million. (Anthony Lin, “Late 40 Percent Retainer Pact Survives Widow’s Dismissal Bid”, Nov. 29; Anthony Lin, “Widow’s Suit Seeks Return of $50M in ‘Excessive’ Fees and Gifts”, Sep. 16, 2005).

Unfortunately for Lawrence’s case, she did negotiate the Graubard Miller firm down from its original 50% (!) contingent-fee proposal, so in one sense she wasn’t completely the unwitting pawn of the firm, even though Graubard Miller failed to suggest that she consult independent counsel about the multi-million dollar negotiation. The question becomes whether the attorney-client relationship is at all fiduciary, or whether it’s purely contractual—in which case, one wonders why there is such an elaborate screening mechanism to permit prospective attorneys to participate in the guild in the first place.

It’s nice that the New York courts are so respectful of contracts that they dismiss cases at an early stage of the litigation. One hopes that they do that in situations other than those involving the fiduciary duties of attorneys.

Correction, December 12: the posture of the case was an interlocutory appeal of the denial of Lawrence’s motion for summary judgment. As most jurisdictions do not permit such interlocutory appeals, I had mistakenly thought from press coverage that the appeal was from a final judgment where the law firm had definitively prevailed. Rather, the case is merely remanded for trial. My criticism of the decision stems from the fact that I mistakenly thought Lawrence was precluded from recovery; since this is not so, it’s not clear to me that the decision is wrong, since the law firm has some shred of an argument (if not an entirely sympathetic one) that the contract was an arms-length negotiation, and reflected Lawrence’s desire to cap her hourly fees.

It is also worth clarifying (as I note in the comments to Walter’s followup) the distinction between honoring a contract negotiated at arms-length between pre-existing strangers, and a renegotiation of an existing contract between an attorney and a client, where one has a fiduciary duty to the other.

Filed under: contingent fee, ethics, feeing frenzy