Munger, Reinschmidt & Denne, L.L.P. v. Plante

• Decision Date: 06 March 2020
• Docket Number: No. 19-0519,19-0519
• Parties: MUNGER, REINSCHMIDT & DENNE, L.L.P., Appellee, v. Roseanne M. LIENHARD PLANTE and Chad L. Plante, Appellants.
• Court: Iowa Supreme Court

940 N.W.2d 361

MUNGER, REINSCHMIDT & DENNE, L.L.P., Appellee,

v.Roseanne M. LIENHARD PLANTE and Chad L. Plante, Appellants.

No. 19-0519

Supreme Court of Iowa.

Filed March 6, 2020

Bruce Johnson of Cutler Law Firm, P.C., West Des Moines, for appellants.

Stanley E. Munger of Munger, Reinschmidt & Denne, L.L.P., Sioux City, for appellee.

Joel E. Fenton of Law Offices of Joel E. Fenton, PLC, West Des Moines for amicus curiae Iowa Association for Justice.

CHRISTENSEN, Chief Justice.

The only certainty about litigation is uncertainty. Depending on how the litigation unfolds, a contingency fee contract is a gamble for both attorney and client. A contingency fee contract allots to the attorney the risk of much work with little reward and allots to the client the risk of little work with substantial fees. The question presented in this case is whether we will reevaluate the risk of a contingency fee contract from a position of hindsight.

After a severe car accident with a city bus left a motorist in critical condition, the motorist’s family sought legal representation. A Sioux City law firm agreed to represent the motorist’s interests. Pursuant to this agreement, a contingency fee contract required the motorist to pay one-third of the recovery, if any, to the law firm for attorney fees. Sixteen months later, the city suggested mediating the case. The motorist was offered $7.5 million to settle the case. This offer was accepted.

When the motorist failed to pay the one-third contingency fee, the law firm filed a petition to enforce its payment under the contingency fee contract. The motorist argued the one-third contingency fee was in violation of Iowa Rule of Professional Conduct 32:1.5(a), which prohibits a lawyer from collecting an unreasonable fee. The district court disagreed with the motorist, finding the one-third contingency fee was reasonable at the time of its inception. Judgment was ordered against the motorist for one-third of the recovery plus interest.

The motorist appealed, and we retained the appeal. On our review, we conclude the one-third contingency fee contract was reasonable at the time of its inception. Consistent with our existing caselaw, we will not use the noncontingency fee factors under rule 32:1.5(a) to reevaluate this contingency fee contract from a position of hindsight. This case does not fall within the narrow exceptions to that general rule. Lastly, the motorist did not preserve error for appeal on whether the interest rate applicable to unpaid fees is reasonable. We affirm the judgment of the district court.

I. Background Facts and Proceedings.

We view the record in the light most favorable to the Plantes, against whom the district court granted summary judgment. Phillips v. Covenant Clinic , 625 N.W.2d 714, 717 (Iowa 2001) (en banc). On November 15, 2016, Chad Plante’s vehicle collided with a city bus. The collision left Chad in critical condition. Due to the severity of his injuries, Chad’s wife, Rosanne, sought legal representation the day after the collision. Rosanne, a long-time Iowa attorney with twenty years of experience, chose Stanley Munger of the law firm Munger, Reinschmidt & Denne, L.L.P., (MRD). Munger verbally accepted Rosanne’s request and immediately began to work the case.

Iowa State Trooper Olesen led the investigation of Chad’s accident. Munger, Rosanne, and Trooper Olesen met on December 8 to review Trooper Olesen’s technical collision investigation report. According to his report, Chad was traveling southbound through an intersection on Highway 75 when the northbound Sioux City bus failed to yield the right of way while attempting to make a left-hand turn, colliding with Chad’s vehicle. The report indicated Chad did not act improperly, although Trooper Olesen determined he was traveling approximately 52–53 mph in a 50 mph zone.

After the December 8 meeting, Rosanne was offered and signed a contingency fee contract with MRD for the "[p]ersonal injury suit against the City of Sioux City." Paragraph 3 detailed the contingency fee terms.

3. CONTINGENT FEE. In the event of recovery, Client(s) shall pay Attorney the following fee based on the amount of the recovery: a fee equal to 33 1/3% of the recovery regardless of whether a case is filed; a fee equal to 40% after notice of appeal and before the case is sent back down for re-trial; a fee equal to 45% if the case is re-tried; and a fee equal to 45% if there is a notice of appeal after the re-trial. IN THE EVENT NO RECOVERY IS MADE, ATTORNEY SHALL RECEIVE NO FEE FOR SERVICES PERFORMED UNDER THIS CONTRACT. In the event of a "structured settlement" Attorneys shall receive the above percentage of the present day value of the settlement on the date of the payment of the first installment. In the event the court awards attorney fees, the Attorneys shall recover the greater of: the above percentages applied to the total recovery (which is award plus attorneys fees awarded) or the amount of the court-ordered attorneys fees, whichever is greater. EXPENSES ARE ALL PAID BY CLIENT AND ARE NOT DEDUCTED IN ANY WAY IN FIGURING RECOVERY.

Fees more than thirty days past due were subject to simple interest.

15. INTEREST. Attorney charges simple interest on all past due amounts for fee, expenses and/or advances more than thirty (30) days past due. This is 1% interest per month on all unpaid amounts due, including interest due (12.683% A.P.R.). Client(s) agrees to pay this interest and understands that this paragraph is a vital part of this Attorney Fee Contract.

Prior to filing a suit, Sioux City suggested mediating the case. Mediation took place on May 7, 2018, approximately eighteen months after Chad’s accident and the execution of the contingency fee contract. For the purposes of mediation only, Sioux City accepted fault and offered the Plantes $7.5 million on the first day of mediation. The Plantes accepted the offer from Sioux City and a final agreement was subsequently executed.

Munger’s representation of the Plantes in the underlying case led to the present suit for attorney fees. MRD filed a petition on September 4, 2018, seeking one-third of the Plantes’ recovery in attorney fees and interest owed pursuant to the contingency fee contract. The Plantes counterclaimed, seeking declaratory judgment that the contingency fee contract was unreasonable within the meaning of Iowa Rule of Professional Conduct 32:1.5(a). On March 4, 2019, the district court granted MRD’s motion for summary judgment, finding the contingency fee contract was reasonable at the time of its inception. The district court ordered judgment against the Plantes for $2,179,456.66, together with interest at a rate of 1 % per month or 12 % per annum from October 6, 2018.¹

The Plantes appealed the district court’s grant of summary judgment, and we retained their appeal.

II. Standard of Review.

A ruling on summary judgment is reviewed for correction of errors at law. Slaughter v. Des Moines Univ. , 925 N.W.2d 793, 800 (Iowa 2019). Summary judgment is appropriate when the record shows no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3). The moving party has the burden of proof. Thompson v. Kaczinski , 774 N.W.2d 829, 832 (Iowa 2009).

III. Analysis.

Iowa Rule of Professional Conduct 32:1.5(a) prohibits a lawyer from collecting an "unreasonable fee or an unreasonable amount for expenses." This prohibitive rule lists nonexclusive factors "to be considered" in determining the reasonableness of a fee. Iowa R. Prof'l Conduct 32:1.5(a) & cmt. [1]. Because we presume parties contract in reference to the existing law, see United Suppliers, Inc. v. Hanson , 876 N.W.2d 765, 780 (Iowa 2016), the Plantes’ primary argument is that their contingency fee contract is "unreasonable" and therefore prohibited by rule 32:1.5(a). The Plantes, however, take their argument one step further. They suggest rule 32:1.5(a) and its factors mandate a hindsight evaluation of a contingency fee contract for reasonableness. We disagree. The Plantes overlook the risk allotted to both parties by the contingency fee contract. Instead, we conclude the contingency fee contract at issue was reasonable at the time of its inception. Consistent with our existing caselaw, we will not use rule 32:1.5(a) ’s noncontingency fee factors to reevaluate this contingency fee contract from a position of hindsight. This case does not fall within the narrow exceptions to that general rule.

This court has long recognized the validity of a contingency fee contract generally. Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Hoffman , 572 N.W.2d 904, 908 (Iowa 1997) ("[C]ontingent fee contracts are an accepted and enforceable manner of charging and determining attorney fees."); Wunschel Law Firm, P.C. v. Clabaugh , 291 N.W.2d 331, 333 (Iowa 1980) ("We have long recognized the validity of contingent fee contracts generally."); Stoebe v. Kitley , 249 N.W.2d 667, 669 (Iowa 1977) ("Ordinarily a contract between attorney and client, providing for the payment of a fee for legal services contingent upon the results obtained by the attorney, without more, is not an illegal contract, but one that is enforceable." (quoting In re Sylvester’s Estate , 195 Iowa 1329, 1332–33, 192 N.W. 442, 443 (1923) ); Wallace v. Chi., Milwaukee & St. Paul Ry. , 112 Iowa 565, 567–68, 84 N.W. 662, 663 (1900) (holding a contingency fee contract for "one-half of the amount recovered" was not illegal or void).

A contingency fee contract performs three valuable functions. The Restatement of the Law explains it best.

First, they enable persons who could not otherwise afford counsel to assert their rights, paying their lawyers only if the assertion succeeds. Second, contingent fees give lawyers an additional incentive to seek their clients’ success and to encourage only those clients with claims having a substantial likelihood of succeeding. Third, such fees enable a client to share the risk of losing with a

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