Discharged attorneys denied fee award

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Where the regular hourly fee of an attorney hired on a contingency basis, multiplied by the hours expended, exceeds the amount of the contingency fee, a previously discharged attorney is not entitled to any fees.

In so holding on April 28, U.S. District Judge Lynn S. Adelman denied an award of any fees to the attorney initially hired by Steven A. Avery to prosecute his civil rights claim against Manitowoc County.

Avery was convicted of sexual assault and spent 18 years in prison before DNA testing revealed his innocence, leading to his release.

Avery later hired two separate groups of attorneys to represent him, on the same day in October 2003. He signed a 40 percent contingency fee agreement with the law firm of Gingras, Cates and Luebke (GCL), and also engaged Attorney Walter F. Kelly on a 33-1/3 percent basis, with the understanding that Attorney Stephen M. Glynn would assist Kelly.

Shortly thereafter, Avery decided he wanted Kelly to represent him, and discharged GCL. Kelly and Glynn then brought a 42 U.S.C. 1983 action on Avery’s behalf in federal court.

In November, 2005, Avery was arrested and charged with homicide and sexual assault of a different victim. The Section 1983 action settled in February 2006 for $400,000, and Judge Adelman directed Kelly to retain forty percent ($160,000) in his trust account, pending resolution of the fee issue.

Applying the leading Wisconsin case on the subject, Tonn v. Reuter, 6 Wis.2d 498 (1959), Adelman held that Kelly and Glynn were entitled to the entire fee, and that GCL was entitled to nothing.

In Tonn, the Wisconsin Supreme Court held that the proper measure of compensation for a lawyer who has been retained under a contingency fee agreement, and then discharged without cause, is the amount of the settlement or judgment, less a fair allowance for the services and expenses the lawyer would have expended performing the balance of the representation.

Adelman found that Kelly and Glynn incurred more than $28,000 in out-of-pocket expenses, and spent 1,050 hours on the case. Their hourly billing rates are $300 and $350, respectively, resulting in $328,000 worth of legal services. Adelman found that both the rates and the hours expended were reasonable.

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Applying Tonn to these facts, Adelman concluded, “GCL is entitled to a forty percent contingency fee on the settlement of $400,000 ($160,000) less a fair allowance for the services and expenses which it necessarily would have expended in performing the balance of the contract. The best measure of the services and expenses which GCL necessarily would have expended in performing the balance of the contract is the amount that Kelly and Glynn actually expended. This is so because Kelly and Glynn expended a reasonable number of hours and charge reasonable rates. Kelly and Glynn expended $328,000 in services and $28,000 in costs. Thus, a fair allowance for the services and expenses that GCL necessarily would have expended exceeds the $160,000 that its forty percent contingency fee would have produced.”

As a result, Adelman held that GCL is not entitled to any fee.

Defending the result, he wrote, “This result is not inequitable because … plaintiff discharged GCL before it commenced work on the case. Kelly and Glynn are entitled to whatever they agreed to with plaintiff. If their entitlement is less than $160,000 (which seems not to be the case), plaintiff is entitled to the balance.”

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David Ziemer can be reached by email.