Clark Fergus v. Joseph A. Songer, __Cal.Rptr.3d___, 150 Cal.App.4th 552, 2007 WL 1290238 (Cal. App. 2 Dist. 2007)
Brief Summary
The court upheld the voiding of a personal injury contingent fee agreement but reinstated the jury’s award of a $1.2 million “reasonable fee.”
Complete Summary
Joseph Songer retained Clark Fergus to represent him in pursuing a personal injury claim against Lawrence Bordan, the owner of the Pismo Beach Hotel. The written fee agreement between Mr. Songer and Mr. Fergus provided for a 45 percent contingent fee but failed to include the statement required by Cal. Bus. & Prof. Code §6147(a)(4) that the fee was subject to negotiation and not set by law. Id. at *1.
Mr. Songer obtained a judgment in 1982 against Mr. Bordan for $308,000. Mr. Bordan managed to avoid paying the judgment, and by 2001 the amount had increased to $1,189,558.01. Id. at *2. In discussions between Mr. Fergus and Mr. Songer, the plan emerged that Mr. Songer should use his judgment to purchase the Pismo Beach Hotel. Mr. Songer, however, had only $15,000 in the bank and could not afford to refurbish the hotel as needed to re-sell it. Mr. Fergus and his wife then lent Mr. Songer $133,494 for refurbishment. Id. at *2.
In 2001, Mr. Fergus wrote to Mr. Songer regarding “a novation” of the original contingency fee agreement and purported to increase the fee from 45 percent to 50 percent. After that, Mr. Fergus wrote to Mr. Songer and stated his understanding that the contingent fee had been increased from 45 percent to 50 percent and that pursuant to an oral partnership agreement, Mr. Songer and the Ferguses would each own 50 percent of “what we get from the Bordan properties. You hold title to any property that is in trust one-half for yourself and one-half for me. Any monies that either of us advances toward the properties and on going businesses will be paid back first and then we split the monies thereafter.” Id. at *3. The hotel was ultimately sold for $4.8 million. At this point, Mr. Songer refused to share the proceeds with Mr. and Mrs. Fergus. Id. at *3.
Prior to the sale, Mr. Fergus and his wife sued Mr. Songer for his failure to abide by the original contingent fee agreement, the orally modified fee agreement or the oral partnership agreement. In the alternative, they sought the reasonable value of Mr. Fergus’ legal services. Id. at *3.
The trial court held that the contingent fee agreement and modifications were unenforceable for failing to meet the requirements of the Business and Professions Code and Rules of Professional Conduct or of the California RPC 3-300, which requires written consent to modification of the fee agreement. The trial court also excluded any evidence of the oral partnership with Mrs. Fergus because it was too intertwined with the legal services provided by Mr. Fergus. Id. at *3. The trial court further held that Mr. Fergus’ recovery had to be limited to “quantum meruit based upon a reasonable hourly rate for hours actually worked.” No testimony regarding the contingent fee recovery was allowed, however Mr. Fergus was allowed to testify that he had a contingent fee arrangement with Mr. Songer and that is why he did not keep thorough records of the time he spent on the case. Id. at *4.
A jury awarded Mr. Fergus reasonable attorney fees of $1.2 million and ordered repayment of the $133,494 loan. Id. at *4. The trial court, however, ordered a new trial on the damage issue. The trial court was concerned that the jury had simply awarded fees of 25 percent of Mr. Songer’s recovery and that an actual reasonable computation of the reasonable fees would have been in the $600,000 range on the basis of Mr. Fergus’ normal hourly rate plus the number of recorded hours. Id. at *5.
On appeal, the court addressed only whether the jury verdict was unsupported by any substantial evidence. Id. at *8. The court concluded that the substantial evidence did support the jury’s finding that Mr. Fergus was entitled to reasonable attorney’s fees of $1.2 million based on the nine factors in the jury instruction for calculating a reasonable fee which included 1) the amount of the fee in proportion to the value of the services, 2) the novelty and difficulty of the questions involved and skill necessary to perform the services, 3) the likelihood, if apparent to the client, that the acceptance of the employment would preclude other employment by the attorney, 4) the amount involved and the results obtained, 5) the time limits imposed by the client or the circumstances, 6) the nature and length of the professional relationship, 7) the experience, reputation, and ability of the attorney providing the services, 8) the time and labor required and 9) the informed consent of the client to the fee. Id. at *4.
The court noted that Mr. Fergus’ normal hourly rate was $320, but that his services here were not normal. In quoting from Mr. Fergus’ expert, Bruce Hogan, “[T]he result of the judgment enforcement portion of the (contingency fee) agreement was spectacular. The $308,000 judgment that (respondent) had obtained back in 1982 turned into a $4.8 million jackpot for him when the hotel was finally sold in 2004. All of these matters required a huge amount of work by Mr. Fergus.” Id. at *9. Although a computer printout could only substantiate 1,826 hours of work, the jury could have found based on the 24 banker’s boxes of work product on the case that substantially more work was required and noted the extraordinary number of pleadings, hearings and trials in which Mr. Fergus was involved. Id. at *10.
The court also reinstated Mrs. Fergus’ oral partnership claim against Mr. Songer. Mrs. Fergus knew the only way her husband would get compensated for the vast amount of time he expended in the case was to assist Mr. Songer with the hotel refurbishments so that it could be sold. She was not a lawyer and therefore not bound to the Business and Professions Code. She gave valuable consideration by putting her home at risk to obtain the loan, and Mr. Songer accepted the benefits of the bargain. There was no evidence the agreement was the result of undue influence by an attorney. Id. at *15. The court added, however, that her award should not exceed $1.2 million, lest her husband and she be unjustly enriched.
Significance of Case
The attorney and his wife wound up doing reasonably well. Nonetheless, it cannot be doubted that they both would have been well advised to make sure that all of the requirements for attorney fee agreements and modifications thereto had been met and, perhaps, to make sure that Mr. Songer also had the benefit of independent counsel.
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