Smith v. Consalvo, 93-P-195

Citation37 Mass.App.Ct. 192,638 N.E.2d 501
Decision Date22 August 1994
Docket NumberNo. 93-P-195,93-P-195
CourtAppeals Court of Massachusetts
PartiesLincoln E. SMITH v. Robert W. CONSALVO & another. 1

Paul L. Nevins, Boston (Philip R. Olenick, with him), for plaintiff.

Barbara A.H. Smith & Allen N. David, Boston (Harvey Weiner, with them), for Regina L. Quinlan.


KASS, Justice.

To establish how she would be compensated for representing him in claims against the city of Boston and its director of personnel, Lincoln Smith's lawyer, Ms. Regina L. Quinlan, 2 prepared a contingent fee agreement in the form prescribed by S.J.C. Rule 3:05(7), 382 Mass. 763-765 (1981), specifying a fee of one-third of the recovery, plus disbursements. Highly successful on behalf of her client, Ms. Quinlan secured a jury verdict in favor of Smith against Robert W. Consalvo, the director of personnel, on a civil rights claim and recovered, as part of the judgment on that claim, reasonable counsel fees under 42 U.S.C. § 1988 (1988), in the amount of $41,319.78. As to the city, the trial judge allowed a motion for a directed verdict. If we skip over some detail not immediately pertinent, the next material fact is that Smith and the city ultimately settled for $253,600 (inclusive of the verdict against Consalvo). Ms. Quinlan calculated her contingent fee by deducting from the $253,600 the amount attributable to legal fees, $41,319.78, and multiplying the remainder, $212,280.22, by one-third, a product of $70,760.07, to which was ultimately added $3,922.23 on account of disbursements, a total of $74,682.30. The calculation takes into account that Smith has already received and holds in his account the $41,319.78 awarded for his legal expenses. Consequently, the net contribution which Smith will be making to those expenses out of his own pocket will come to $33,362.52 ($74,682.30 minus $41,319.78). Smith's position is that under the contingent fee agreement, one-third of the recovery represented the upper limit of what would be a reasonable fee, but that when Ms. Quinlan certified to $41,319 as her reasonable fees under § 1988, on the basis of time and customary hourly charges, she was bound by that figure and could not charge the contingent fee based on a percentage. Acting on a summary judgment motion, a judge of the Superior Court determined that Ms. Quinlan was entitled to her percentage fee and ordered entry of a judgment in the amount of $74,682.30, plus interest from August 2, 1991. 3 We affirm.

After underbrush is cleared away, the only significant question that remains is whether a contingent fee agreement made in accordance with rule 3:05 guidelines means a fee limited by "lodestar" standards of time charges, see, e.g., Blanchard v. Bergeron, 489 U.S. 87, 94, 109 S.Ct. 939, 944, 103 L.Ed.2d 67 (1988), or means that the percentage formula in the agreement shall apply. That disputed issue is one of contract interpretation, properly to be undertaken by a court. Robert Indus., Inc. v. Spence, 362 Mass. 751, 755, 291 N.E.2d 407 (1973). USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass.App.Ct. 108, 116, 546 N.E.2d 888 (1989). Material facts are not in dispute, and the case, therefore, was apt for disposition on a motion for summary judgment. See Federal Deposit Ins. Corp. v. Csongor, 391 Mass. 737, 740-741, 464 N.E.2d 942 (1984). Smith does not claim that Ms. Quinlan failed to perform services sufficiently substantial to bring the contingent fee agreement into operation. 4 Nor does Smith challenge the reasonableness of the underlying contingent fee agreement; he challenges what it means. The principle that the reasonableness of a contingent fee agreement presents a jury issue, therefore, is not relevant to this controversy. 5

The contingent fee agreement made by the parties adhered to the text which S.J.C. Rule 3:05(7) provides "shall be sufficient." In pertinent part it said:

"(4) Reasonable compensation on the foregoing contingency is to be paid by the client to the attorney, but such compensation (including that of any associated counsel) is not to exceed the following maximum percentages of the gross amount collected. (Here insert the maximum percentages to be charged in the event of collection. These may be on a flat basis or in a descending scale in relation to the amount collected.) 33 1/3.

(5) The client is in any event to be liable to the attorney for his reasonable expenses and disbursements."

In considering Smith's claim that reasonable compensation under the contingent fee agreement is limited by what has been determined as reasonable under § 1988, it is well to bear in mind that the claimants under the agreement and the statute, respectively, are not the same person. The statute makes the prevailing party, not the lawyer, eligible for an award of legal costs. Evans v. Jeff D., 475 U.S. 717, 730, 106 S.Ct. 1531, 1538, 89 L.Ed.2d 747 (1986). Venegas v. Mitchell, 495 U.S. 82, 90, 110 S.Ct. 1679, 1684, 109 L.Ed.2d 74 (1990). American Trucking Assns. v. Secretary of Admn., 415 Mass. 337, 352 n. 16, 613 N.E.2d 95 (1993). In determining a § 1988 award, courts use time charges as the guiding principle, i.e., the lodestar, although other customary fee-setting factors such as complexity of the problem, ingenuity of the solution, difficulties surmounted, and result achieved may push a fee up or down, as the case may be. See Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565, 106 S.Ct. 3088, 3098, 92 L.Ed.2d 439 (1986); Blanchard v. Bergeron, 489 U.S. at 94, 109 S.Ct. at 944. Courts have gone to some pains to reject a contingent fee approach to determining what shall be paid to the prevailing party under § 1988. Id. at 96, 109 S.Ct. at 946. Venegas v. Mitchell, 495 U.S. at 86-87, 110 S.Ct. at 1682. Burlington v. Dague, 505 U.S. 557, ---- - ----, 112 S.Ct. 2638, 2641-2643, 120 L.Ed.2d 449 (1992). American Trucking Assns. v. Secretary of Admn., 415 Mass. at 352-353, 613 N.E.2d 95. Not the least of the reasons for that rejection is that rights vindicated in cases where a § 1988 award is recoverable may be only in part pecuniary, so that a percentage of the amount recovered may be much less than the value of the services. See Fontaine v. Ebtec Corp., 415 Mass. 309, 326 n. 14, 613 N.E.2d 881 (1993).

When legal expenses are collected from a party other than the one who received the legal services, a degree of conservatism in fee determination is in order. Grimes v. Perkins Sch. for the Blind, 22 Mass.App.Ct. 439, 440, 494 N.E.2d 406 (1986); Price v. Cole, 31 Mass.App.Ct. 1, 7, 574 N.E.2d 403 (1991). Reasonable time multiplied by reasonable hourly rates, in such a case, is a pragmatic approach to not being excessively generous with another's dollars. As between lawyer and client, the case stands differently; courts then are less conservative because the amount of the fee is ordinarily something that has been discussed and agreed upon. See First Natl. Bank v. Brink, 372 Mass. 257, 265-266, 361 N.E.2d 406 (1977). A contingent fee agreement may be necessary to secure the services of a lawyer when a successful result is far from certain, and the client has not the means to compensate a lawyer win, lose, or draw. See Venegas v. Mitchell, 495 U.S. at 89-90, 110 S.Ct. at 1683-84. Section 1988 does not prevent clients from contracting to pay a fee which may exceed the amount determined as reasonable under the statute, and the statute should not be read as insulating those clients from paying the fees they have contracted to pay. Ibid. See also Blanchard v. Bergeron, 489 U.S. at 93-96, 109 S.Ct. at 944-945, which presents the mirror image of the case before us and decided that the § 1988 fee ought not to be limited by a contingent fee agreement. Compare Benalcazar v. Goldsmith, 400 Mass. 111, 113 & n. 9, 507 N.E.2d 1043 (1987).

It remains to ask whether the standard rule 3:05(7) contingent agreement text, which speaks in terms of "[r]easonable compensation ... not to exceed the following maximum percentage of the ... amount collected," limits the fee to a more calibrated measure--such as a time charge--with the percentage factor constituting an "upset" figure. Such an approach would contradict the theory of the contingent fee, which is to exchange the possibility of the client paying no fee should the case turn out badly for the possibility of a generous fee for the lawyer if the case turns out well. Blaisdell v. Ahern, 144 Mass. 393, 395-396, 11 N.E. 681 (1887). Jay, "The Dilemmas of Attorney Contingent Fees," 11 Georgetown Journal of Legal Ethics 813, 814 (1989). Thomason, "Are Attorneys Paid What They're Worth?" 20 Journal of Legal Studies 187 (1991). Posner, "Economic Analysis of Law," § 21.9 at 534-535 (3rd ed. 1986). Judge Posner makes the observation that a "contingent fee compensates the lawyer not only for the legal services [rendered] but for the loan of those services." Application of the agreed upon percentage factor ought presumptively to be regarded as a reasonable fee. See Johnson v. Blacke, 32 Mass.App.Ct. 399, 403, 589 N.E.2d 1248 (1992), in which a contingent fee of 20%, as applied, was well within bounds in a market sense if matched against the criteria contained in S.J.C. Rule 3:07, DR 2-106(B), as amended, 382 Mass. 772 (1981).

That does not mean that a percentage formula in a contingent fee agreement is invulnerable to attack. A client may challenge a fee which is "plainly unreasonable," Gagnon v. Shoblom, 409 Mass. 63, 67, 565 N.E.2d 775 (1991), although as that case illustrates, a percentage factor of 33 1/3% is well within the limit of tolerance, even when the resulting fee is dramatic. See also Venegas v. Mitchell, 495 U.S. at 84, 110 S.Ct. at 1681, contingent fee of 40% approved; Johnson v. Blacke, supra, 20% approved. Contrast Matter of Kerlinsky, 406 Mass. 67, 72-74, 546 N.E.2d 150 (1989), cert. denied, 498 U.S. 1027, 111 S.Ct. 678, 112...

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