State Court of Appeals provides guidance on civil rights retainer agreements

It all starts with the retainer agreement. Clients walks into lawyer's office and convinces the lawyer that she has a great case. Lawyer drafts a retainer agreement. That agreement has to be clear and understandable to a non-lawyer. If the plaintiff wins and a lot of money is a stake, the attorney-client relationship can collapse and they end up in court against each other. That happened in this case.

The case is Albunio v. City of New York, decided on April 3 by the New York Court of Appeals. Attorney Dorman represented Albunio and another plaintiff in a civil rights case against the City, winning nearly $1 million in damages. The City appealed but Dorman won the appeal for her clients. Under the fee-shifting provisions under the City Human Rights Law, Dorman recovered about $530,000 in attorneys fees. The question then became how much money Dorman was able to take from the overall judgment.

The first retainer agreement covered trial. It said that Dorman got one-third of the sum recovered. It did not make reference to attorneys' fees or the method by which the contingency fee would be calculated if Dorman got fees. Dorman says the one-third contingency fee should be calculated based on the total value of the attorneys fees plus the jury award. If Dorman is correct, she gets a lot more money than just one-third of the jury award, as the counsel fees are huge.

The Court of Appeals disagrees with Dorman's argument, finding that this agreement is ambiguous on that point, and that unclear attorney-client contracts are always construed against the lawyer. As the Court sees it, most clients would not interpret their "recovery" to include attorneys fees, only the jury award or the amount of settlement. And the retainer agreement does not even mention attorneys fees. The general rule in other jurisdictions says that "absent an explicit agreement to the contrary, statutory [attorneys] fees are not considered part of the total recovery for purposes of determining the contingency fee, and counsel is generally entitled to the greater of the two." In this case, as the retainer agreement does not address statutory attorneys fees, Dorman gets "the more generous alternative of either one third of the jury award of the statutory award for her trial work."

The appellate retainer agreement did make reference to counsel fees. It said that if Dorman succeeded on appeal and the court for some reason would not award her attorneys fees (or if she got less than $20,000 in fees), then the client would pay her $20,000 for her work, or the difference between the fees awarded and $20,000. Dorman is entitled to money under that calculation. Albunio and her co-plaintiff argue, however, that the statutory awards for both trial work and appellate work should offset the contingency fee owed to Dorman under the trial retainer agreement. The Court of Appeals does not see it that way. Attorneys and their clients can negotiate a separate retainer for appellate work. So that while appeals are the logical extension of the trial work, if there is a separate retainer for the appellate work, that fact alone does not obligate the attorney on appeal to the terms of the trial retainer.