Karl L. Mulvaney
Tammy C. Wilson
ATTORNEY FOR APPELLEE
Thomas F. Macke
ATTORNEY FOR APPELLEE
Candace L. Sage
LYONS & TRUITT
James L. Sullivan
Karl L. Mulvaney
Tammy C. Wilson
ATTORNEY FOR APPELLEE
Thomas F. Macke
ATTORNEY FOR APPELLEE
the case settled or went to trial plus an additional 10% if the case was appealed. The
agreement made no reference to compensating Lyons for its apparently significant role in the
case. When Galanis met with Truitt to obtain Brown's file, Truitt explained to Galanis that
his firm had taken the case under the 1/3 contingent fee arrangement provided in the written
agreement between Brown and her first lawyer.
Approximately four months after Galanis assumed the case, Brown was successful at trial and a jury awarded her $250,000. The case was then settled for $200,000. Shortly after settlement, Lyons sent Galanis an itemized list of its hours worked and expenses incurred on Brown's case, but requested no specific fee. Galanis communicated with Brown and Lyons on several occasions. Ultimately, Brown (through Galanis) offered Lyons $4,000 to settle the fee dispute and Lyons requested 1/3 of 1/3 of the recovery or $22,200. The parties could not reach an agreement.
Nearly two years after its first demand for payment, Lyons filed a complaint for declaratory judgment against Brown requesting that the trial court determine Brown's obligations under the two contingent fee agreements. Brown filed a cross-claim against Galanis asserting that Galanis, not Brown, was responsible for any fee owing to Lyons. Galanis filed a motion for summary judgment as to his exposure for Lyons's fees. The trial court held that Lyons was entitled to a reasonable fee, which was determined to be commensurate with the hourly rate charged by an attorney in a similar case, and that Galanis was responsible for paying that fee.
Galanis appealed the trial court's holding that he was responsible for paying the fee
and Lyons appealed the trial court's ruling on the reasonable value of its services. The Court
of Appeals affirmed the trial court, holding that (1) under quantum meruit
Lyons is entitled
to the reasonable value of its services rendered and (2) Galanis is responsible for paying the
Lyons's fees because holding Brown responsible for both would chill her right to discharge
her lawyer. It affirmed without discussion the trial court's ruling that Lyons's fee should be
commensurate with a standard hourly rate. Galanis v. Lyons & Truitt, 698 N.E.2d 368
(Ind. Ct. App. 1998). We granted Galanis' petition to transfer.
contingent fee for less than a full work load.
Similarly, however, allowing a full contingency to a successor may be unreasonable. If the former lawyer has contributed significantly to the result but the successor receives a full contingent fee, either the first lawyer remains uncompensated for that contribution or the client pays more than a full contingent fee. In either case, the successor gets a windfall in the form of being relieved of the effort contributed by the first lawyer but nonetheless receives a full contingent fee. None of these results is the desired default setting the law should provide in the absence of a contract spelling out exactly who pays how much under these circumstances.
factual determination for the trial court. The trial court in this case held that the reasonable
value of Lyons's work should be determined commensurate with the hourly rate of a
community attorney charging for similar services.
Judge Staton, dissenting in the Court of
Appeals in this case, read this as requiring a fee equal [to] 'the hourly rate of a community
attorney. . . .' Galanis v. Lyons & Truitt, 698 N.E.2d 368, 374 (Ind. Ct. App. 1998) (Staton,
J., dissenting). The parties apparently make the same assumption. Lyons challenges this
method of calculating the reasonable value of the firm's work. If a fee agreement provides
for an hourly rate in the event of a pre-contingency termination, it is presumptively
enforceable, subject to the ordinary requirement of reasonableness. See Indiana Professional
Conduct Rule 1.5.
We agree with Lyons that, in the absence of such an agreement, the value
of a discharged lawyer's work on a case is not always equal to a standard rate multiplied by
the number of hours of work on the case. Where the lawyers have agreed to work on
contingent fees and there is no contractual provision governing payment in the event of
discharge, compensating the predecessor lawyer on a standard hourly fee could produce
either too little or too much, depending on how the total hourly efforts of all lawyers
compare to the contingent fee.
To illustrate the point, consider the lawyer who is terminated (or dies) while the jury is deliberating before returning a verdict that produces a contingent fee that is twice the hourly rate for the work expended. Where the successor is needed only to defend an appeal, it would be quite unreasonable to measure the discharged lawyer's contribution solely by the number of hours multiplied by a standard rate. The first lawyer accepted the risk of a loss
and the second boarded the train when victory was in sight and when at least some recovery
by a negotiated settlement was a high probability. At the other end of the spectrum, one can
easily imagine scenarios where the predecessor has generated a vast amount of hourly
charges but accomplished little or nothing, leaving the entire case development to the
In the context of valuing a terminated predecessor's services, as is generally true, [i]n determining the reasonable value of the legal services rendered, the time expended by the attorney alone is not a controlling factor. Among other things, consideration may be given to the general quality of the effort expended by the attorney. Kizer v. Davis, 369 N.E.2d 439, 446 n.9 (Ind. Ct. App. 1977) (citation omitted). In this context, because both lawyers in this scenario accepted the risk of failure, in addition to the quality of work, each is entitled to consideration of that risk in determining the fair value of his services. Prof. Cond. R. 1.5(a)(8). And, because the underlying theory of payment is quantum meruit, if there is no fault to be attributed to either the client or the lawyer, as seems to be the case here, the measure of the benefit conferred is what is received by the client, not what is expended by the lawyer. Cf. Restatement of Restitution § 155 (1937). That amount is the portion of contingent fee equal to the total effort expended to achieve the contingency that is attributable to the predecessor's work. Nonetheless, we agree that the relative amount of hourly time charges incurred by the predecessor and successor, adjusted for any unproductive or unnecessary efforts by either, is a likely candidate as a presumptive measure of the relative contribution of the two lawyers. If both lawyers agree that the time spent by
each was productive, that will provide an easy resolution of the issue.
We are uncertain whether the trial court intended to award Lyons a fee equal to the hourly charges for the work performed or whether it was merely recognizing, as we do, that the relative hourly charges of the lawyers are relevant to apportioning the contingent fee. If the fee was to be equal to the time charges, it is unclear whether the trial court thought this was a required formula, or whether the same amount was determined to be a fair evaluation of Lyons' contribution in light of all relevant factors. Adherence to time charges is not required, but the latter determination by the trial court would be within its discretion in arriving at a reasonable fee. Remand to the trial court is required for a determination of the value of Lyons's contribution to Brown's case if the lawyers are unable to reach an agreement in light of this opinion.
Supreme Court's approach to fees for successive lawyers employed under contingent fee
[O]nly one contingency fee should be paid by the client, the amount of the fee to be determined according to the highest ethical contingency percentage to which the client contractually agreed [and] . . . that fee should in turn be allocated between or among the various attorneys involved in handling the claim in question . . . .
Saucier v. Hayes Dairy Products, Inc., 373 So.2d 102, 118 (La. 1979).
The fee should be
apportioned according to the respective services and contributions of the lawyers based on
the work each performed. Id.
In a system of professional responsibility that stresses clients' rights, it is incumbent upon the lawyer who enters a contingent fee contract with knowledge of a previous lawyer's work to explain fully any obligation of the client to pay a previous lawyer and explicitly contract away liability for those fees. If this is not done the successor assumes the obligation to pay the first lawyer's fee out of his or her contingent fee. Galanis was in the best position to evaluate and to reach an agreement as to a reasonable fee for the value of the work already done in Brown's case. Lawyers almost always possess the more sophisticated understanding of fee arrangements. It is therefore appropriate to place the balance of the burden of fair dealing and the allotment of risk in the hands of the lawyer in regard to fee arrangements with clients. In the Matter of Myers, 663 N.E.2d 771, 774-75 (Ind. 1996). Galanis also had the option to discuss with Brown the need for someone to pay Lyons's fee and to refuse to accept the case if Brown could not resolve any open issues with Lyons. He
neither advised her of the need to pay the fee nor contracted away that responsibility for
himself. Under these circumstances, Galanis, not Brown, should bear the burden of his
Accordingly, Lyons is entitled to recover the compensation due it from Galanis'
For the same reasons we reject the approach taken by some states that would require the client to pay fees to both lawyers and then attempt to recover the amount paid to the first from the second. See 1 Geoffrey C. Hazard, Jr. & W William hodes, The Law of Lawyering § 1.16:602 n.7 (1990 & Supp. 1998) (discussing Plunkett & Cooney P.C. v. Capitol Bancorp Ltd., 536 N.W.2d 886 (Mich. Ct. App. 1995)). Lawyers, as professionals, should be able to resolve these issues by agreement. If they cannot, they, not the client, should bear the cost of resolving a dispute over their relative contributions.
may take their factual dispute to a trial court. And, like any other litigant, if they do not spell
out the arrangement in a written agreement, they take their chances on the deal the trial court
will cut for them. Here, for the reasons given, the subsequent lawyer's fee, not the client,
should be the source of payment of the predecessor.
The decision of the trial court is affirmed in part. This case is remanded for proceedings not inconsistent with this opinion.
SHEPARD, C.J., and DICKSON, SULLIVAN and SELBY, JJ., concur.
in opposition to transfer she stated that Galanis withheld 40% of the settlement as a fee.
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