Firm Owes Co-Counsel in $26M Case Despite Claimed Lack of Profit
The word “recovery” in an engagement contract between a Texas law firm and the Arizona firm it retained to help pursue an environmental class action meant gross, rather than net recovery, the San Francisco-based 9th U.S. Circuit Court of Appeals ruled yesterday in a breach-of-contract case filed over the fee agreement.
And that means Houston-based John M. O’Quinn & Associates owes money to Phoenix-based Brown & Bain, even though the Quinn firm claims it is taking a loss while its former co-counsel—which departed from the case while it was still ongoing—gets an unfair windfall, reports the Metropolitan News-Enterprise.
O’Quinn contended in a counterclaim that Brown & Bain repudiated the contract by withdrawing, but the 9th Circuit said there was no evidence that clients were unduly burdened by the Arizona firm’s withdrawal, with notice, as well as an arrangement for substitute counsel to take its place.
The Arizona Rules of Professional Conduct prohibit an attorney from charging a client an unreasonable attorney fees, but it is up to counsel to decide between themselves the terms of fee-splitting arrangements, the appellate panel also explains in its written opinion.
Although the O’Quinn firm retained more than $10 million of the $26 million settlement obtained from Motorola in the class action, it says it has suffered a net loss of more than $3 million because of what it paid to litigate the case. Brown & Bain reportedly is claiming that it should be paid a total of $6.2 million.
“When a hired hand walks off the job and then comes back years later after the boss loses money, can he really expect a bonus? That can’t be what the contract meant,” says Neil McCabe, who represented O’Quinn.
“The court said a contract is a contract and it doesn’t matter to this case that we may have lost money. I think it’s an unfortunate way of reading the contract,” he tells the Los Angeles newspaper. “The question now is if we try for a rehearing or a rehearing en banc. Those are possibilities.”