New York Court of Appeals Upholds Large Contingency Fee in Estate Dispute Representation

Posted on January 21st, 2015 by Legal Fee Advisors

On October 28, 2014, The New York Court of Appeals reversed an appellate court’s ruling that a contingent fee agreement was “unconscionable when made” thereby ordering the firm’s payout be paid in an hourly rate thereby significantly reducing their reward.[1]

Since 1983, Alice Lawrence, the widow of commercial real estate tycoon, Sylvan Lawrence, had been in a battle with the executor of her husband’s estate. Her attorney, Graubard Miller, had originally been charging on an hourly basis and, according to the New York Court of Appeals, by 2004 he had received “approximately $18 million in legal fees on an hourly basis.”[2] However, after further developments in the case a contingency agreement was executed in which Ms. Lawrence agreed to paying Graubard 40% of any future recovery. Subsequently, the case was settled for more than $100 million after it was exposed that the executor did appear to have engaged in “egregious self-dealing.”[3] Thus, Graubard’s payment was to be $44 million, which Ms. Lawrence successfully disputed at the appellate court level when the court found the contingency agreement unconscionable and reduced Graubard’s fees to an hourly rate rather than a percentage.[4] The New York Court of Appeals disagreed with the lower court’s “hindsight analysis” and warned of the danger of basing its decision merely on the fact that “the fee seems too high to be fair.” The Court also noted that Ms. Lawrence is an astute business woman and entered into the agreement with her business judgment.[5]

This illustrates that regardless of the apparent exorbitant nature of the fees payment borne out of a contingency agreement, these agreements will be upheld if the courts decide that the parties entered into it with reasonable business judgment. It would flow from that logic that the courts would protect an individual where circumstances show they possess little business savvy when entering into such large fee payment agreements with their attorney.

Dawn Guglielmo, Esq.

In re Lawrence, 24 N.Y.3d 320, 23 N.E.3d 965 (2014), reargument denied, 24 N.Y.3d 1215, 28 N.E.3d 32 (2015)
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[1] Ellen Rose, Small New York Firm Wins Epic Fee Fight: Business of Law, Bloomberg, http://www.bloomberg.com/news/2014-10-30/small-new-york-firm-wins-epic-fee-fight-business-of-law.html (October 30, 2014).

[2] Id.

[3] Id.

[4] Id.

[5] Id.