PEACHTREE LAW - ATLANTA ATTORNEY - Estate and Probate Lawyer

Perils and Pitfalls
Getting Court Approval of Contingency Fee Contracts When Representing Minors

Atlanta Probate Attorney Sharon Rowen, has given many seminars to Georgia estate and probate attorneys. Her lectures cover many Georgia probate attorney and Georgia estate attorney topics. The following excerpts from a September 15, 2006 Guardianship seminar, presented in Atlanta, at the State Bar of Georgia, titled, “Attorney Contingency Fee Contracts When Representing Minors”, may be helpful to the Atlanta probate attorney and Georgia probate lawyers as a whole where there is a contingency fee related minors. In 2005, Rowen v. Hughley clarified the current Georgia probate law on attorney contingency fee contracts with regard to minor children. Sharon has made these materials available to those Atlanta probate attorneys able to attend this seminar and she would like to make this material available to Georgia probate attorneys statewide through this website.

It is hornbook law that the Probate Court has the right and duty to review and approve all payments made from the estate of minors, and this includes a review of payments of attorney fees for the reasonableness of the fee to be paid to counsel for the children. The Georgia Constitution of 1983, Art. VI, Sec. III, Par. I, provides that "[p]robate courts shall have such jurisdiction as now or hereafter provided by law..." Probate Courts have "original, exclusive, and general jurisdiction" over the appointment and removal of guardians, controversies as to the right of guardianship, and “all other matters and things” relating to minors and to persons who are otherwise incompetent. The Probate Court, (in addition to the judges of the state or superior court where a case is brought, if different), is responsible for approving the reasonableness of attorneys fees in settlements of lawsuits based upon the best interest of the minor. This is true whether the underlying action is fully litigated to its final conclusion or settled at some point along the way. The right and duty of the Court where an action is brought on behalf of a minor is brought is to review for reasonableness payments entered into on behalf of a ward. This includes the reasonableness of contracts for payment of attorney’s fees. Gnann v. Woodall, 511 SE2d 188, 270 Ga. 516 (1999); Rowen v Estate of Hughley et al. 272 Ga.App.55; 611 SE2d 735 (2005).

The 2005 case of Rowen v Estate of Hughley, id., clarified the court’s powers and responsibilities when a contingency fee contract is entered into with the natural guardian (mother) on behalf of her minor children. Subsequent to a decision by the decedent’s estate that they would not contest that the minor children were heirs of the decedent, there was an objection to the contingency fee contract by the guardian ad litem and the minor children’s grandmother’s guardian. The Court’s order, listing the 8 factors of Rule 1.5 of the Georgia Rules of Professional Conduct to use in determining the reasonableness of a fee, ordered an additional hearing “to accept evidence bearing on the amount which might be approved in light of the listed factors.”

At the hearing, Rowen presented evidence on the reasonableness of the contingent fee contract from expert witness Frank Beltran, Esq., who testified that in his opinion, the contingent fee contract was exceptionally reasonable in light of the 8 factors of Rule 1.5, specifically in light of the fact that the contract was a contingency fee contract, which cannot be looked at in hindsight as to the reasonableness of the fees in terms of the actual hours worked. The Court found that the contingency fee was not reasonable and reduced it based on what the Court believed was the quantum meruit value of the legal services. Rowen appealed on her own behalf to clarify the standards the Court should use in order to evaluate the reasonableness of a contingency fee contract entered into with minor children. The specific question Rowen asked the appeals court to clarify was whether the Probate Court could use a “hindsight” analysis and grant attorneys fees on a quantum meruit basis, after the case was completed, based on the hours of services performed, or whether a contingency fee agreement must be evaluated in light of the risk taken at the time the contract was entered into.

Rowen’s argument is summarized in the following portion of appellant’s brief:
“While evidence must be presented as to the reasonableness of lawyer’s fees to authorize their award or approval under a contract in many situations, see eg Liberty Mutual Life Insurance Company v. Kirkland, 156 Ga. App 576, 275 SE2d 152 (1980), “Sufficient evidence to support an award of attorney's fees would not necessarily have to consist of the man hours devoted to the case but might only consist of an opinion of an expert?as to what a reasonable fee would be for the services rendered. The expert's opinion as to what a reasonable fee might be could depend on a number of factors other than the actual man hours spent representing the claimant.” Even in cases legitimately involving quantum meruit recovery, it has been acknowledged that the hours expended by counsel are not necessarily the lodestone of reasonableness. As Judge Evans wrote in Dodd v. Newton, 122 Ga. App. 720, 178 SE2d 567 (1970) as he allowed admission of the contingent-fee schedule of the local bar in a quantum meruit action for attorney‘s fees:

[E]ven though this lawsuit is bottomed on quantum meruit, it is still. affected by the contingency of the recovery. It is axiomatic that the value of an attorney's services for losing a case are quite different from the value of those services in winning a case, and no one knows this better than the client who must pay the lawyer. Thus, in my opinion, admission of the evidence as to the contingent contract, while not governing and controlling the fee to be awarded, was still. proper subject matter for consideration by the jury. Here we have a case where there was a recovery; and the plaintiff, an attorney, sets up his claim for the reasonable worth of his services in helping to effect that recovery. Black's Law Dictionary defines quantum meruit as: 'As much as he deserved; in pleading, the common count in an action for assumpsit for work and labor founded on an implied assumpsit or promise on the part of the defendant to pay the plaintiff as much as he reasonably deserved to have for his labor.' Can it be doubted that a laborer is entitled to more for his services for a successful project than for an unsuccessful one? Of course, other elements may be properly considered by the jury also, including the time, work, and inconvenience suffered by the lawyer. Suppose, for instance, this case had been lost, and this suit had been brought for attorneys fees for quantum meruit-can it be doubted that the defendant would have come forth with his contention that the services were not very valuable in that they did not accomplish the desired result?

The correct perspective from which to assess the reasonableness of a contingent fee is, then, the perspective of the time of its making – that is, the risks involved and the benefit to the client of being able to retain counsel to get them before the Court.

Trial courts across this state – State, Superior and Probate Courts -- are regularly called upon to approve contingent fee contracts signed on behalf of a minor child. The number of hours expended in the case is sometimes a part of the evidence adduced; more usually it is not. See, e.g., Maddox v. Prescott, 449 S.E.2d 163, 449 S.E.2d 163 (1994), Till.ett v. Patel, 383 S.E.2d 622, 383 S.E.2d 622 (1989). There is routine approval, for example, of a contingency fee of 33% to 40% whether a personal injury case is litigated to verdict or settled prior to any litigation whatsoever. In those cases, it is usual and customary in the profession in metropolitan Atlanta, the State of Georgia, to charge such contingency fees, (T-12, ll.. 7 ff). To allow the Court in this case to alter the basis of compensation as well as the scope of the fund from which payment is to be made in order to reach a particular dollar amount which is based exclusively on probable hours expended would affect how all judges in this state look at any case involving minors or incompetents, whether the case was resolved by settlement or verdict…

The matter of monies to be paid to, by, and for minor children is a serious matter and the possibility of their being taken advantage of is not to be taken lightly. However, the matter of the Children possibly being entirely bereft of their rightful inheritance as a result of being unable to secure counsel is also not to be dismissed out of hand. And if the standard provided by the law and Rule 1.5 is to be ignored, then the discretion of the courts is essentially unfettered to, as here, simply change the scope of representation and the basis of agreement between attorney and client. Such a state of affairs leads not only to confusion and fostering discontent between attorney and client, but also leads to attorneys becoming even more unwilling than they are presently to take such cases. The guardian, in his Answer and Brief, states that, despite diligent inquiry, he could not find an attorney practicing in the probate area who would have taken this case on a contingency fee basis under any circumstances. (R-54) To allow the trial court’s ruling to stand would be even more discouraging to attorneys taking a case such as this on a contingency fee, and would lead to many minors’ valid claims being unrepresented in Georgia’s courts.”

The Court of Appeals, however, disagreed, refused to rule on the “hindsight vs. time of contract” issue, and affirmed the trial court’s decision on the basis that that the standard of review was “abuse of discretion”, and under that standard, they found no abuse of discretion in the trial court’s order. The Court of Appeals stated that “…while we acknowledge the importance of contingency fee arrangements to provide representation in cases such as this one, the special circumstances of the probate court's responsibility to the children, especially when coupled with Rowen's direct submission of the agreement for approval, justified the court's scrutiny of the fee arrangement in this case….And we find no abuse of discretion in the probate court's reliance upon the factors under Rule 1.5 as a standard to evaluate the reasonableness of the contingency fee in this case. See Hoffert v. Gen. Motors Corp., 656 F.2d at 166 (holding that it would be an abuse of discretion for trial court to award fees without carefully considering similar factors found in the ABA Code of Professional Responsibility). Based upon its analysis of these factors, the probate court found that the contingency agreement, even as modified, was unreasonable in light of the services performed by Rowen, and gave the parties an opportunity to present evidence of what a reasonable fee would be under Rule 1.5. Although the rule sets forth eight separate factors, Rowen did not present evidence addressing all the factors. Rather, she only presented evidence regarding her contingency arrangement. She did not, for example, proffer evidence of the time and labor required for the case, the novelty of the questions involved, or the skill required.

In the one Georgia case we found approving a contingency fee contract entered into by a guardian on behalf of a minor, the lawyer made only a slight showing beyond evidence of the reasonableness of the contingency fee contract to support his fee recovery. In Tillett v. Patel, 192 Ga.App. at 61(3), 383 S.E.2d 622, this Court upheld the superior court's order awarding attorney fees to a minor's Georgia counsel in the amount of one-half of the wrongful death settlement and one-half of the attorney's expenses. In that case, the trial court held a hearing on the issue of attorney fees, which the child's out-of-state attorney declined to attend. The Georgia attorney presented evidence showing both that the contingency agreement was reasonable and the amount expended by counsel on the child's case. The court noted that "[w]hile [the minors'] new counsel might have demanded stricter proof had they been present, it cannot be said that there was no evidence supporting the trial court's approval of the ... order disbursing attorney's fees to appellants' Georgia counsel." Id. at 61(3), 383 S.E.2d 622. We note that the Tillett case was heard before a superior court, which is not charged with the same special duties over a minor's estate as is a probate court, and thus does not directly address the situation here.

We find that the probate court could properly require additional proof beyond evidence of the reasonableness of the contingency agreement in assessing the fee. For example, this Court has previously held that merely showing the reasonableness of a contingency fee agreement would not be sufficient to support attorney fees awarded pursuant to statutory authority. Instead, we have required proof that the contingency fee "was a valid indicator of the value of the professional services rendered." (Citation and punctuation omitted.) Home Depot U.S.A. v. Tvrdeich, 268 Ga.App. 579, 584(2), 602 S.E.2d 297 (2004). Accordingly, it is not enough merely to assert that a contingency fee is "reasonable" without additional evidence of the value of the services provided by the attorney:

A court may consider a contingent fee agreement and the amount it would have generated as evidence of usual and customary fees in determining both the reasonableness and the amount of an award of attorney fees. But, evidence of the existence of a contingent fee contract, without more, is not sufficient to support the award of attorney fees. An attorney cannot recover for professional services without proof of the value of those services. A naked assertion that the fees are "reasonable," without any evidence of hours, rates, or other indication of the value of the professional services actually rendered is inadequate. (Citations and punctuation omitted.) Brandenburg v. All-Fleet Refinishing, 252 Ga.App. 40, 43(5), 555 S.E.2d 508 (2001). See also Patton v. Turnage, 260 Ga.App. 744, 748(2), 580 S.E.2d 604 (2003).

Therefore, pretermitting the issue of whether the contingency arrangement should be viewed in hindsight or from the date of its inception, the probate court could properly require Rowen to prove the value of the services she provided to her clients. The probate court correctly found that Rowen failed to establish the value of her services and thus that she failed to prove that the contingency agreement provided for a reasonable fee.

There are no subsequent cases which address this holding. This leaves the law in a state of confusion for attorneys representing minors on contingency fee agreements, even in routine personal injury cases, as to exactly what they must prove to gain court approval for their contingent fee contracts.

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