Colorado: Determining the Reasonableness of Fee Agreements.

Berra v Springer and Steinberg PC, 2010 Colo. App. LEXIS 1167.
Case Opinion Link: http://www.courts.state.co.us/Courts/Court_of_Appeals/opinion/2010/08CA2503.pdf.
Alternate Link (includes links to cited cases): http://scholar.google.com/scholar_case?case=17242722455507956809&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Springer and Steinberg P.C. and Jeffrey Springer (S&S, collectively) appealed the trial court’s ruling in favor of Cathy Berra which resulted in a refund of a portion of a contingency fee. Judgment affirmed.

Cathy Berra hired S&S on a contingency fee agreement to represent her in the collection of a judgment against George Wilkinson that she was awarded in a personal injury case. S&S was unsuccessful in collecting anything from Wilkinson, and they failed to revive Berra’s judgment lien on Wilkinson’s property in Pitkin County, losing first position and requiring a new lien to be filed. Years later, Wilkinson was diagnosed with a terminal illness and sold his property to Pitkin County for an amount large enough to cover Berra’s judgment plus interest. S&S received thirty percent of the judgment plus interest in accordance with the contingency fee agreement.

Berra, believing the fee to be excessive, brought action against S&S, filing claims for declaratory judgment, unjust enrichment, and breach of contract. The trial court, applying the criteria in Chapter 23.3 of the Colorado Rules of Civil Procedure and Rule 1.5 of the Colorado Rules of Professional Conduct to the facts of the case, found that the fees were indeed unreasonable and excessive. The trial court then, using quantum meruit analysis, calculated the reasonable fee amount that S&S was entitled to, based on the number of hours worked, the hourly rate, and the level of risk involved.

The trial court found the contingency fee agreement unreasonable and excessive based on the following facts: (1) although a contingency fee was appropriate due to the risk involved in Berra’s case, a 30% contingency fee was not typical for the collection of a pre-existing judgment, and, in retrospect, the risk to Berra and S&S was minimal given the actual value of Wilkinson’s property (Rule 1.5[a][3]); (2) the resolution of the case was not brought about by the efforts and/or skills of S&S, but by Wilkinson’s fortuitous decision to sell his property for a price that would cover the judgment plus interest (Rule 1.5[a][1]; and (3) collections cases are not overly difficult as they are “governed by very clear rules, statutes, and case law,” therefore the case did not require a high level of skill (Rule 1.5[a][1]).

In their appeal, S&S claimed that the trial court erred in applying quantum meruit analysis without first finding the contingency fee agreement invalid and unenforceable. The appellate court disagreed, saying that the invalidity and unenforceability of the agreement was implied by both the circumstances of the case and from the trial court’s finding that the fees were unreasonable and excessive.

S&S also took issue with the trial court’s analysis of the enforceability of the fee agreement, claiming that the trial court erred when they retrospectively evaluated the risk and difficult of the case instead of basing the evaluation solely on the risk and difficulty of the case as understood at the time of the contract. The appellate court disagreed again, stating that the court could consider the “amount of time spent, the novelty of the questions of law, and the risk of non-recovery to the client and attorney” when evaluating the enforceability of the agreement. People v. Nutt, 696 P.2d 242, 248 (Colo. 1984).

This case offers a detailed look into how the courts evaluate the reasonableness of contingency fee agreements based on the criteria in Rule 1.5. It also serves as a reminder to attorneys that their fees need to be earned, not just enjoyed.