Certainly Uncertain

The Iowa Supreme Court enforced a contingent fee  agreement, concluding that it was reasonably when entered into

The only certainty about litigation is uncertainty. Depending on how the litigation unfolds, a contingency fee contract is a gamble for both attorney and client. A contingency fee contract allots to the attorney the risk of much work with little reward and allots to the client the risk of little work with substantial fees. The question presented in this case is whether we will reevaluate the risk of a contingency fee contract from a position of hindsight.

After a severe car accident with a city bus left a motorist in critical condition, the motorist’s family sought legal representation. A Sioux City law firm agreed to represent the motorist’s interests. Pursuant to this agreement, a contingency fee contract required the motorist to pay onethird of the recovery, if any, to the law firm for attorney fees. Sixteen months later, the city suggested mediating the case. The motorist was offered $7.5 million to settle the case. This offer was accepted.

When the motorist failed to pay the one-third contingency fee, the law firm filed a petition to enforce its payment under the contingency fee contract. The motorist argued the one-third contingency fee was in violation of Iowa Rule of Professional Conduct 32.1.5(a), which prohibits a lawyer from collecting an unreasonable fee. The district court disagreed with the motorist, finding the one third-contingency fee was reasonable at the time of its inception. Judgment was ordered against the motorist for one-third of the recovery plus interest.

The motorist appealed, and we retained the appeal. On our review, we conclude the one-third contingency fee contract was reasonable at the time of its inception. Consistent with our existing caselaw, we will not use the noncontingency fee factors under rule 32:1.5(a) to reevaluate this contingency fee contract from a position of hindsight. This case does not fall within the narrow exceptions to that general rule.

The case involved a collision that caused serious injury. The defendant eventually conceded liability and a mediation led to a $7.5 million settlement.

A typical one-third contingency fee contract, when the success of litigation to be pursued is very uncertain or far from a sure thing, is presumptively reasonable. See id. A contingency fee contract up to 50 % will be reasonable when the chance of success is little and the complexity of the case is great…

We will not, in this case, review the Plantes’ one-third contingency contract from a position of hindsight under rule 32:1.5(a). Unlike Hoffman, it is reasonable to assume Munger’s appearance as the attorney of record, effort, work, and negotiating skills greatly contributed to Sioux City’s settlement offer and the Plantes’ ultimate $7.5 million recovery. The district court found Munger is a highly rated attorney and is very knowledgeable regarding personal injury. There is no doubt that Munger’s reputation and knowledge played a crucial role in Sioux City’s offer. Expert witness testimony indicated Munger’s “reputation is that of an experienced, talented and aggressive trial lawyer with a lengthy and varied track record of winning cases.” Three other witnesses described Munger’s reputation as being “a very tenacious advocate for plaintiffs.”

The briefs and oral argument can be accessed here. (Mike Frisch)