September 29, 2011
Today, the Indiana Supreme Court suspended an attorney's license for 4 months without the possibility of automatic reinstatement for collecting a clearly unreasonable and exploitive fee from a vulnerable client in
In re Powell, ___ N.E.2d ___ (Ind. 2011), Cause No. 49S00-0919-DI-426. This case demonstrates that we have a duty to adjust a contingency fee if it appears that it will not be truly "earned."
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The client in this case was represented by an Attorney Ross in a personal injury action. The proceeds from that action ($42,500) were put into a special needs trust, with Ross named as trustee, to preserve the client's eligibility for public assistance and to prevent rapid depletion of the funds. The client soon began demanding the money and was not happy when Ross advised her that this may not be in her best interests.
The client then consulted with Powell, who agreed to represent her for a third of whatever was in the trust. The following day, Powell contacted Ross and told him about the client's dissatisfaction. Ross told Powell that he would be happy to step down as trustee and have Powell take his place. Powell then prepared a short document, which Ross signed. Powell prepared an accounting that paid him $14,815.55 for this work and distributed the remaining 2/3 of the trust to the client.
The Court acknowledged that Powell was justified in entering into a contingency agreement at the outset, because he could have reasonably believed that Ross may contest his removal as trustee. "But within two or three days, ... he knew the case did not involve any complex issues, prolonged time commitment, risk of no recovery, or even any opposition."
We do not suggest that a contingent fee must be reduced every time a case turns out to be easier or more lucrative than contemplated by the parties at the outset. But collection of a fee under the original agreement is unreasonable when it gives the attorney an unconscionable windfall under the totality of the circumstances. On the evidence before us in this case, we conclude that Respondent violated the
Indiana Professional Conduct Rule 1.5(a) by collecting an fee that was clearly excessive and unreasonable under the totality of the circumstances.
When reaching this conclusion, the Court rejected Powell's argument that his conduct was justified because of "red flags" raised by this client. The Court rejected this argument.
Even if "red flags" that a client may be difficult to deal with could justify a higher fee than would be reasonable otherwise, we reject any suggestion that an attorney's concern that he may be committing legal malpractice in representing a client justifies charging the client a higher fee.
The Indiana Supreme Court punished Powell by suspending him for 120 days without automatic reinstatement.
Lessons:
- An attorney who accepts a contingency fee may be subject to discipline if the fee constitutes an unconscionable windfall under the totality of the circumstances.
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