STATE OF VERMONT
PROFESSIONAL RESPONSIBILITY BOARD
In Re: Melvin D. Fink, Esq.
PRB File No. 2008.132
Decision No. 130
Respondent is Reprimanded and placed on probation for violation of Rule 1.5(c) and Rule 8.4(a) of the Vermont Rules of Professional Conduct. Respondent violated Rule 1.5(c) by entering into an agreement for a contingent fee without putting the agreement in writing. Respondent violated Rule 8.4(a) by attempting to charge an unreasonable fee, as proscribed by Rule 1.5(a). This matter was heard on July 21, 2009 by Hearing Panel No. 10, consisting of Lon T. McClintock, Esq., Chair, Lawrence Miller, Esq. and Ashley Perry.
Respondent was admitted to the Vermont Bar in 1969. At the time, Respondent was also admitted to the Bar of the Commonwealth of Massachusetts. Respondent has, for the most part, worked as a solo practitioner, handling a variety of matters, including divorce and personal injury matters. Respondent had more than 36 years of experience practicing law in Vermont when the events surrounding this professional conduct matter occurred, making Respondent a seasoned practitioner.
In 2004 the complainant, Eric Cerra, suffered a serious, permanent injury in a trampoline accident, rendering him a quadriplegic. Following the accident, Mr. Cerra and his wife retained Burlington attorney Jerome O’Neill to represent them and pursue whatever personal injury and loss of consortium claims they might have as a result of the injury. In March 2004, both Mr. Cerra and Ms. Cerra signed a written fee agreement with Mr. O’Neill. The fee agreement called for a contingent fee, permitting Mr. O’Neill to retain one-third (1/3rd) of any amount recovered on the Cerras’ claims. Ms. Cerra signed the agreement for her husband, since his injury made it impossible for him to sign his name.
The Cerras’ case was complex, involving several defendants and serious questions about the defendants’ individual and collective liability for Mr. Cerra’s injuries. The risk of no recovery was high. Mr. O’Neill engaged an experienced, out-of-state attorney with expertise in trampoline cases to assist him. Mr. O’Neill and the consulting attorney entered into a written fee-sharing agreement, whereby Mr. O’Neill would pay the consultant one-third (1/3rd) of whatever fee Mr. O’Neill earned for this case. By way of emphasis, Mr. O’Neill’s fee equaled one-third (1/3rd) of the clients’ gross recovery, and the consulting attorney’s fee was one-third (1/3rd) of Mr. O’Neill’s one-third (1/3rd) contingent fee.
On June 6, 2006, Mr. Cerra went to Respondent’s office seeking legal representation because Mr. Cerra’s wife had filed a Petition for Relief from Abuse [RFA] with the Family Court. An RFA hearing was scheduled for the next day, June 7th. Ms. Cerra had also filed for divorce, and the divorce action was pending in the same court. Mr. Cerra asked Respondent to represent him in both the RFA and the divorce matters.
Respondent was experienced in handling divorce matters and accepted Mr. Cerra’s case. Mr. Cerra and Respondent discussed Respondent’s fees. Respondent provided Mr. Cerra with a written fee agreement, which they reviewed together. It was Respondent’s practice in divorce matters to charge $150.00 per hour for his time and to collect a $5,000.00 retainer to assure payment of his fees. Mr. Cerra told Respondent that he did not have any money, but that he did have the personal injury claim and anticipated a large recovery. Respondent agreed to handle Mr. Cerra’s divorce case without requiring Mr. Cerra to pay a retainer.
The RFA and divorce matters involved a significant amount of Respondent’s time and attention. There were numerous conferences and hearings, and the level of acrimony was high throughout the matter. There is no reliable evidence showing that Respondent was inattentive to Mr. Cerra’s case or ineffective as Mr. Cerra’s counsel. To the contrary, Ms. Cerra’s RFA petition was eventually dismissed on the merits, suggesting that Respondent was effective as Mr. Cerra’s counsel. Mr. Cerra, however, was unable to pay Respondent for his services. Mr. Cerra hoped to use the recovery on his personal injury claim to pay Respondent’s fees.
Mr. Cerra consulted with Respondent regularly about the divorce proceedings. During these meetings, Mr. Cerra would also talk with Respondent about the personal injury case, asking Respondent questions about the case. Respondent had experience handling personal injury matters and offered Mr. Cerra some information and advice. Respondent testified that, between June 2006 and February 2007, Respondent facilitated communication between Mr. Cerra and Mr. O’Neill. With Mr. O’Neill’s office in Burlington and Mr. Cerra’s home in a rehabilitation facility in Ludlow, Respondent provided a useful service facilitating communication between Mr. O’Neill and Mr. Cerra. For example, Mr. O’Neill asked Respondent to obtain Mr. Cerra’s signature on a Covenant Not to Sue, settling Mr. Cerra’s claims against one of the defendants. ODC Exhibit B. Respondent met with Mr. Cerra, assisted Mr. Cerra in signing the document, and returned the Covenant to Mr. O’Neill. Id. As another example, Mr. Cerra told Respondent that he was very unhappy with Mr. O’Neill representing both Mr. Cerra and Ms. Cerra in the personal injury case. Mr. Cerra wanted Mr. O’Neill’s undivided loyalty, and he did not want his wife involved in the personal injury case. Mr. Cerra enlisted Respondent’s help in asking Mr. O’Neill to withdraw as his wife’s attorney. Respondent was not compensated for his services for the personal injury matter.
In July 2006, when Respondent mailed Mr. Cerra’s signed Covenant Not To Sue back to Mr. O’Neill, Respondent wrote in the cover letter: Mr. Cerra “wants my representation in the personal injury suit. Would you please call me at your next earliest convenience, so that we may discuss.” ODC Exhibit B. Nothing seems to have come of Respondent’s inquiry.
By February 2007 Respondent was no longer willing to assist Mr. O’Neill and Mr. Cerra with the personal injury matter without being compensated for his time and efforts. Mr. Cerra, Mr. O’Neill and Respondent agreed to meet at the Springfield Health & Rehabilitation Center where Mr. Cerra lived to discuss Mr. Cerra’s case.
Respondent arrived at the February meeting prior to Mr. O’Neill. Respondent met with Mr. Cerra alone and explained that Respondent was not willing to participate in the personal injury matter any further without compensation. Mr. Cerra wanted Respondent to assist him with the personal injury matter. There is conflicting testimony as to why Mr. Cerra wanted Respondent’s help. Mr. Cerra testified that he sought Respondent’s help with the personal injury matter as a way of motivating Respondent to get the divorce matter completed. Respondent testified that Mr. Cerra wanted Respondent’s help because Mr. Cerra was displeased with Mr. O’Neill, due to his representing both Mr. Cerra and his wife. Their respective rationales or motives notwithstanding, Mr. Cerra and Respondent reached an agreement. Respondent agreed to continue assisting Mr. Cerra with the personal injury matter and, in consideration thereof, Mr. Cerra agreed to pay Respondent a contingent fee equal to twelve percent (12%) of Mr. Cerra’s gross recovery. The parties intended the twelve percent contingent fee to cover Respondent’s services in the personal injury matter, only. Respondent would bill for his services in the RFA and divorce matters separately.
Respondent testified that the twelve percent (12%) contingent fee was a “considered” number. Respondent had given thought to both the services he expected to provide, the risk of there being no recovery on Mr. Cerra’s claim, and the challenges that Mr. Cerra posed as a client. Respondent assumed that Respondent would initially serve as a communicator, but that once the summary judgment motions were decided and the case approached trial, Respondent’s participation and responsibilities would significantly increase. Respondent understood that his twelve percent fee was addition to, rather than a portion of, Mr. O’Neill’s one-third contingent fee. Respondent understood that the total fees Mr. Cerra would pay his attorneys, Mr. O’Neill and Respondent, would equal forty-five (45%) of Mr. Cerra’s gross recovery. Respondent did not consider the twelve percent fee unreasonable, in part because he had previously been involved in a case involving a forty-five percent (45%) contingent fee.
Shortly after Mr. Cerra and Respondent reached their agreement, Mr. O’Neill arrived at the meeting. Prior Mr. O’Neill’s arrival, there had been no discussions between Mr. O’Neill and Respondent about Respondent joining Mr. O’Neill’s litigation team. When Respondent set his fee at twelve percent, Respondent had not had any meaningful discussions, or reached any understanding, with Mr. O’Neill about the work Respondent would perform or the role Respondent would play in the personal injury case.
Before describing what occurred next, it is useful to emphasize certain facts that are critical to our decision in this case. There is no dispute that Respondent facilitated communication between Mr. O’Neill and Mr. Cerra for a number of months without compensation. In February 2007, Respondent informed Mr. Cerra that he could not provide services regarding the personal injury matter without compensation. Mr. Cerra and Respondent reached an agreement that Respondent would continue to assist Mr. Cerra with the personal injury matter in consideration of Respondent receiving a twelve percent contingent fee. Mr. Cerra’s and Respondent’s agreement for a contingent fee was reached without Mr. O’Neill’s participation and without Respondent knowing the nature and extent of the work Respondent would be required to perform.
Once Mr. O’Neill joined the meeting with Mr. Cerra and Respondent, the three discussed Mr. O’Neill’s continuing representation of Ms. Cerra. Mr. O’Neill agreed to withdraw as Ms. Cerra’s counsel, in large part due to the contentiousness of the divorce. Respondent then informed Mr. O’Neill that Mr. Cerra had agreed to retain Respondent to assist with the personal injury case. Respondent told Mr. O’Neill about his contingent fee of twelve percent. The three men discussed Respondent’s role in the personal injury litigation. Mr. O’Neill testified that he never offered Respondent a substantive role in the personal injury litigation, nor did he intend to have Respondent participate in the litigation in any significant capacity. Mr. O’Neill’s contemporaneous Case Note corroborates Mr. O’Neill’s testimony, describing the parties’ agreement about the Respondent’s role as follows:
We agreed that I would communicate with [Mr. Cerra] through [Respondent]. The reason is because it is difficult to communicate with [Mr. Cerra] by phone where he is. I was not comfortable in writing to him and have the letters floating around there. [Mr. Cerra] liked the idea of communicating with him through [Respondent].
ODC Exhibit C. Mr. Cerra never changed Mr. O’Neill’s authority to conduct the litigation as Mr. O’Neill deemed appropriate.
Respondent testified that he expected to play a larger role in the litigation, actively participating in the litigation as the case approached trial. Mr. O’Neill testified, however, that Mr. O’Neill had no intention of involving Respondent in the litigation in any way other than to facilitate communication. There is no persuasive evidence that Respondent and Mr. O’Neill ever reached an agreement for Respondent to serve as co-counsel and actively participate in the litigation.
As for the amount of Respondent’s contingent fee, Mr. O’Neill testified that the arrangement between Mr. Cerra and Respondent made Mr. O’Neill very uncomfortable. Mr. O’Neill testified that he thought the twelve percent (12%) contingent fee was unconscionable. Unfortunately, Mr. O’Neill never shared his concerns with Mr. Cerra or Respondent.
Significantly, Mr. Cerra never altered his representation agreement with Mr. O’Neill, or changed Mr. O’Neill’s responsibilities for the personal injury litigation. Mr. Cerra never directed Mr. O’Neill to work with Respondent as co-counsel. Mr. O’Neill remained the attorney principally responsible for the conduct of the litigation, and Mr. O’Neill retained the discretion to conduct the litigation as he deemed appropriate, consistent with the Retainer Agreement Mr. Cerra signed. ODC Exhibit A.
Respondent asked Mr. O’Neill to pen a letter outlining Mr. Cerra’s and Respondent’s contingent fee agreement. Mr. O’Neill refused to write the letter. Mr. O’Neill testified that he refused to write the letter because he did not want to be a party to the transaction.
The weight of the evidence clearly and convincingly establishes that Respondent held the mistaken belief that he would have a much larger role in the litigation as the matter neared trial. The source of Respondent’s mistaken belief likely came from a prior case Respondent and Mr. O’Neill handled together. In the earlier case, Respondent was handling a slip-and-fall matter on a contingent fee basis. Respondent asked Mr. O’Neill to assist Respondent in litigating the case. Respondent fully participated in the case and the attorneys shared Respondent’s contingent fee. Respondent agreed to pay Mr. O’Neill two-third (2/3rd) of the contingent fee earned in the case. Respondent retained one-third (1/3rd) of the fee, or approximately eleven percent (11%) of the client’s gross recovery. This case was Respondent’s responsibility, and Respondent chose to bring Mr. O’Neill into the case to assist Respondent.
Respondent’s slip-and-fall case and Mr. Cerra’s case are not similar. In the slip-and-fall case, Respondent brought Mr. O’Neill into Respondent’s case and sought Mr. O’Neill’s experience, expertise and assistance with the litigation. Respondent defined their respective roles, actively participating in the litigation and working as co-counsel with Mr. O’Neill. In Mr. Cerra’s case, Mr. O’Neill was the primary attorney. Mr. O’Neill did not seek Respondent’s assistance and he did not ask Respondent to co-counsel Mr. Cerra’s case. Mr. O’Neill did not intend, at any time, to have Respondent serve as co-counsel or share litigation responsibilities. In the earlier case, Respondent offered Mr. O’Neill a share of Respondent’s contingent fee, understanding both the work that lay ahead and knowing the role Mr. O’Neill would play in the litigation. In Mr. Cerra’s case, Respondent did not have an agreement with Mr. O’Neill about the legal work Respondent would be expected to perform, and Respondent could not reasonably anticipate the nature or extent of the legal work he would perform. Mr. O’Neill was in control of work assignments in Mr. Cerra’s case. Respondent proposed the twelve percent contingent fee to Mr. Cerra before Respondent had a reasonable basis for predicting either the work that lay ahead or the role that Mr. O’Neill would expect him to play.
Once Mr. Cerra, Mr. O’Neill and Respondent agreed that Respondent would assist in the litigation by facilitating communication, Respondent had an opportunity to adjust his fee to comport with work he would perform. Respondent, however, did not adjust his fee so that the amount of the fee would be commensurate with the work he would perform.
Respondent’s twelve percent contingency fee was only for Respondent’s work facilitating communication in the personal injury matter. Respondent and Mr. Cerra agreed that Respondent would be paid separately, at his hourly rate, for Respondent’s work in the divorce matter.
Respondent did not provide Mr. Cerra with a written contingent fee agreement at any time during or after the meeting in February 2007. Respondent regularly uses a pre-printed contingent fee agreement in personal injury cases. Respondent did not show Mr. Cerra a copy of his pre-printed agreement. Respondent never prepared a contingent fee agreement for Mr. Cerra’s review or records. Respondent never asked Mr. Cerra to sign a written agreement. Respondent testified that he did not prepare a fee agreement for Mr. Cerra because Mr. Cerra was not able to sign documents due to his injuries. Respondent testified that he did not know of anyone who could sign for Mr. Cerra.
Respondent was aware that other individuals had signed documents for Mr. Cerra at Mr. Cerra’s direction in the past. For example, Ms. Cerra signed the fee agreement with Mr. O’Neill on her husband’s behalf, ODC Exhibit A. Respondent himself signed the Covenant Not to Sue on Mr. Cerra’s behalf in July of 2006, indicating on the Covenant that Respondent was signing “at his direction and in his presence.” There was also testimony that members of Mr. Cerra’s family were available to come to Vermont for a day to assist him when necessary. Respondent did not provide Mr. Cerra with a letter or any other document describing the terms of their contingent fee agreement. There is no dispute that Mr. Cerra was able to receive mail at the nursing home where he was living. Likewise, there was no dispute that Mr. Cerra could read documents presented to him.
Respondent knew and understood Rule 1.5(c), requiring attorneys to provide clients with written fee agreements in contingent fee cases. Respondent routinely complied with the Rule by providing clients with written fee agreements in contingent fee cases. Using written fee agreements was common in Respondent’s practice. For example, Respondent went over his Fee Agreement with Mr. Cerra when Mr. Cerra retained Respondent for the RFA and divorce matters.
Between February and July 2007, Respondent did facilitate communication between Mr. O’Neill and Mr. Cerra. No testimony or evidence was presented showing the amount of time Respondent dedicated to assisting communication between Mr. O’Neill and Mr. Cerra. Respondent has not alleged, nor can we find, that Respondent spent a significant amount of time assisting Mr. O’Neill with the personal injury litigation following the February 2007 meeting.
Mr. Cerra became increasingly dissatisfied with Respondent’s services in the divorce case and terminated his representation in July 2007. Respondent filed a motion for leave to withdraw from the divorce case in July 2007. Respondent did not file a motion to withdraw from the personal injury case as he had never entered his appearance in that matter. Respondent did not provide Mr. Cerra with any further assistance. Respondent was not paid for his services in the RFA and divorce. Respondent did not bill Mr. Cerra for his services in the personal injury matter. Respondent has not taken any action to recover his fees from Mr. Cerra since being discharged.
At the time that Respondent proposed the twelve percent contingent fee, the personal injury claim had a potential value of more than two million dollars. The case, however, involved substantial risk that defendants would prevail and that Mr. Cerra’s recovery would be zero. Mr. Cerra eventually reached a settlement with all defendants in the personal injury action, receiving an aggregate settlement of $682,500. Had Respondent collected his twelve percent contingent fee, Respondent would have been paid a fee of $81,900.00 for facilitating communication between Mr. O’Neill and Mr. Cerra.
Conclusions of Law
Rule 1.5(c) – Written Agreements
In February 2007, when Mr. Cerra and Respondent entered into their contingent fee agreement, Rule 1.5(c) of the Vermont Rules of Professional Conduct provided:
A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.
VRPC Rule 1.5(c) (emphasis added). The Rule has three requirements. The agreement must: (1) be in writing; (2) describe the method for calculating the fee; and (3) describe the method for deducting the attorney’s expenses from the recovery. Respondent did not satisfy the requirements of the Rule.
Respondent does not dispute the fact that Respondent did not provide Mr. Cerra with a written fee agreement. Respondent argues that a written agreement was not appropriate in this case because Mr. Cerra was physically unable to sign his name to an agreement. Respondent’s argument is without merit.
Rule 1.5(c) does not provide exceptions to the Rule. The Rule provides that contingent fee agreements “shall” be in writing. The word “shall” operates as a command, requiring written agreements in contingent fee cases. See In re Jones, 2009 VT 113, ¶ 5, 989 A.2d 482, 484 (2009) (“the use of the imperative “shall” throughout that statute operates as a mandate”). Rule 1.5(c) does not permit attorneys the discretion to determine whether the circumstances warrant or lend themselves to a written agreement. The Rule does not provide an exception for clients with physical limitations. Rule 1.5(c) requires all contingent fee agreements to be reduced to writing.
By requiring attorneys to put their contingent fee agreements in writing, abuses and misunderstandings that undermine the public’s confidence in the legal profession can be avoided. See Committee on Legal Ethics of West Virginia State Bar v. Tatterson, 177 W.Va. 356, 363, 352 S.E.2d 107, 114 (W.Va.,1986) (“Contracts for contingent fees, generally having a greater potential for overreaching of clients than a fixed-fee contract . . . . [The need for] close scrutiny arises from the duty of the courts to guard against the collection of a clearly excessive fee, thereby fulfilling the primary purpose of attorney-disciplinary proceedings, specifically, protecting the public and maintaining the integrity of the legal profession.”); see also Redlich v. Lanell, 2006 WL 1000353, 25 (Mass.Super. 2006) (contingency fees raise special considerations and scrutiny because of the potential for excessive fees); Schrader Byrd & Companion, P.L.L.C. v. Marks, 220 W.Va. 502, 510, 648 S.E.2d 8, 16 (W.Va. 2007) (Maynard, J., dissenting) (“courts as a matter of public policy give particular scrutiny to fee arrangements between attorneys and clients, casting the burden on attorneys who have drafted the retainer agreements to show that the contracts are fair, reasonable, and fully known and understood by their clients”) (citing Shaw v. Manufacturers Hanover Trust Co., 68 N.Y.2d 172, 176, 499 N.E.2d 864, 866, 507 N.Y.S.2d 610, 612 (1986)). The purposes served by Rule 1.5(c) are similar to those served by the Statute of Frauds. Cf. Quimby v. Myers, 179 Vt. 611, 614, 895 A.2d 128, 131-32 (2005) (“The evidentiary and cautionary purposes of the statute – to prevent fraud and perjury on the one hand and to ensure that parties are aware of the serious consequences of their actions on the other – are implicated.”); Mason v. Anderson, 146 Vt. 242, 244, 499 A.2d 783, 784 (1985) (“The purpose of the Statute of Frauds is to prevent a party from being compelled, by oral and perhaps false testimony, to be held responsible for an agreement he or she claims was never made.”). As noted in the case Matter of Swartz:
A fee agreement between lawyer and client is not an ordinary business contract. The profession has both an obligation of public service and duties to clients which transcend ordinary business relationships and prohibit the lawyer from taking advantage of the client. Thus, in fixing and collecting fees the profession must remember that it is “a branch of the administration of justice and not a mere money getting trade.” ABA Canons of Professional Ethics, Canon 12.
141 Ariz. 266, 273, 686 P.2d 1236, 1243 (1984).
When Respondent and Mr. Cerra reached their agreement for a contingent fee, Rule 1.5(c) did not require an attorney to obtain the client’s signature; Rule 1.5(c) simply required that the contingent fee agreement be in writing. At that time, some jurisdictions required attorneys to have their clients sign their contingent fee agreements. Compare V.R.P.C. Rule 1.5(c) with OK.R.P.C. Rule 1.5(c). The fact that Mr. Cerra could not sign Respondent’s contingent fee agreement did not create an obstacle to Respondent complying with the Rule. Had Respondent simply put the agreement in writing, either using one of his pre-printed forms or a new form, and sent that agreement to Mr. Cerra, Respondent would have complied with the Rule.
Respondent’s argument cannot be squared with his actions. Respondent did attempt to have his agreement with Mr. Cerra memorialized. Respondent asked Mr. O’Neill to draft a letter outlining the parties’ contingent fee agreement. Once Mr. O’Neill refused to prepare the letter, Respondent should have taken it upon himself to memorialize the parties’ agreement, just as he did as a matter of routine in his other personal injury cases. Respondent did not make any effort to put his agreement in writing once Mr. O’Neill refused to do it for him. This is not a case where Respondent made concerted efforts to comply with the Rule, but was frustrated in his efforts by circumstances beyond his control. Respondent made no effort to reduce his agreement with Mr. Cerra to writing once Mr. O’Neill refused to do so.
Rule 1.5(c) was modified in 2009 and now requires an attorney to obtain the client’s signature to contingent fee agreement. Obtaining a client’s signature may be challenging when the client has serious physical or mental limitations, but the amended Rule does not relieve attorneys from the duty of obtaining the client’s, or the client’s authorized representative’s, signature in contingent fee cases.
The weight of the evidence clearly and convincingly shows Respondent violated Rule 1.5(c) when Respondent entered into a contingent fee agreement and failed to put that agreement in writing. See V.A.O. No. 9(b) (“disciplinary counsel shall have the burden of proving the alleged violations by clear and convincing evidence.”).
Rule 8.4(a) – Attempt to Violate the Rules of Professional Conduct
Rule 1.5 provides: “A lawyer shall not make an agreement for, charge, or collect an unreasonable fee.” V.R.P.C. Rule 1.5(a). Rule 8.4(a) provides that it is unprofessional conduct for a lawyer to “attempt to violate the Rules of Professional Conduct.” Reading Rule 1.5(a) together with Rule 8.4(a), and giving the words of the Rules their plain and ordinary meaning, the Rules prohibit an attorney from attempting to make an agreement for, charge, or collect an unreasonable fee. See In re Sealed Documents, 172 Vt. 152, 157, 772 A.2d 518, 523-24 (2001) (“we are guided by the usual rules of construction, which are designed to discern the legislative intent primarily by reference to the plain and ordinary meaning of the statutory language.”); cf. In re PRB Docket No. 2007-046, 2009 VT 115, ¶ 14, 989 A.2d 523, 528 (2009) (“we presume that the drafters meant every rule to have some meaning.”). Disciplinary Counsel asserts that Respondent violated the Rule 8.4(a) by attempting to charge an unreasonable fee. To determine whether Respondent attempted to violate the Rule 1.5(a) we must determine if Respondent’s contingent fee of twelve percent (12%) was unreasonable.
There are no per se rules that can be applied to determine the reasonableness of a contingent fee. See In re Disciplinary Action Against Dooley, 599 N.W.2d 619, 625 (N.D. 1999) (“[A] 42% contingent fee would not be unreasonable as a matter of law in this case.”); cf. Ross v. Douglas County, Nebraska, 244 F.3d 620, 623 (8th Cir. 2001) (“[I]n view of the difficult issues presented in this case, we provide an exception and approve, in this limited instance, the use of a 50% contingent fee contract.”); In re A.H. Robins Co., Inc., 86 F.3d 364, 377 (4th Cir. 1996) (“[I]n reviewing an attorney's fee for reasonableness, the court must consider the total work performed by the attorney together with the total fee received.”); Premier Networks, Inc. v. Stadheim & Grear, Ltd., 395 Ill.App.3d 629, 634, 918 N.E.2d 1117, 1121-22, 335 Ill.Dec. 304, 308-09 (Ill.App. 1 Dist. 2009) (“A contingent fee agreement of 40% is not automatically invalid or unreasonable.”); Kluenker v. State Department of Transportation, 109 Wis.2d 602, 608, 327 N.W.2d 145, 149 (Wis.App. 1982) (40% fee allowed by the trial court was reasonable “because the case required extensive preparation, resulted in proceedings before the commission and an appeal to the circuit court, and involved complex questions of fact.”).
In King v. Fox, the New York Court of Appeals explained the difficulty of determining the reasonableness of a contingent fee:
It is inherently difficult to determine the unconscionability of contingent fee agreements because at the time of agreement, the precise amount of recovery is still unknown. As such, it is not necessarily the agreed-upon percentage of the recovery due the attorney or the duration of the recovery that makes a contingent fee agreement unconscionable, but rather the facts and circumstances surrounding the agreement, including the parties’ intent and the value of the attorney’s services in proportion to the fees charged, in hindsight.
7 N.Y.3d 181, 192, 851 N.E.2d 1184, 1192, 818 N.Y.S.2d 833, 841 (2006). It must be recognized that the “whole point of contingent fees is to remove from the client's shoulders the risk of being out-of-pocket for attorney's fees upon a zero recovery. Instead, the lawyer assumes that risk, and is compensated for it by charging what is (in retrospect) a premium rate.” City of New Albany v. Cotner, 919 N.E.2d 125, 134-35 (Ind.App. 2009) (emphasis in original) (citing 1 Geoffrey C. Hazard, Jr., W. William Hodes, & Peter R. Jarvis, The Law of Lawyering § 8.6 (3d ed. 2000) and Waxman Industries, Inc. v. Trustco Developement Co., 455 N.E.2d 376, 382 (Ind.Ct.App. 1983)).
Rule 1.5(a) provides criteria for evaluating the reasonableness of a fee:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
V.R.P.C. Rule 1.5(a). Not all of the criteria listed above must be considered to determine the reasonableness of the fee. See Maynard Steel Casting Co. v. Sheedy, 307 Wis.2d 653, 664-65, 746 N.W.2d 816, 821 (Wis.App. 2008). We must, however, review “all the circumstances of the case to determine whether the contingency fee amount is a just and reasonable figure.” Id. (quoting Meyer v. Michigan Mutual Insurance Co., 2000 WI App 53, ¶ 22, 233 Wis.2d 493, 609 N.W.2d 167). “In analyzing these factors, the overriding concern is whether the contingent fee is ‘consistent with the client’s best interests.’” Redlich, 2006 WL 1000353 at 25 (citing ABA Informal Opinion 86-1521).
Disciplinary Counsel argues that we must apply a two-part test to determine the reasonableness of Respondent’s contingent fee. Citing § 41:912 of the ABA/BNA Lawyers’ Manual on Professional Conduct, Disciplinary Counsel argues:
‘[T]he reasonableness of a contingent fee must be judged not only under the circumstances that prevailed at the time the fee agreement was made, but also in light of subsequent events.’ In other words, the fee agreement must be reasonable at the outset and must also be reasonable at the conclusion of the case.”
Office of Disciplinary Counsel, Recommended Conclusions of Law, at 4 (July 9, 2009) (citations omitted). Vermont courts have not previously adopted the prospective/retrospective approach to evaluating the reasonableness of attorney’s fees, but a number of other states have. See In re Swartz, 141 Ariz. 266, 273, 686 P.2d 1236, 1243 (1984) (“We hold . . . that if at the conclusion of a lawyer's services it appears that a fee, which seemed reasonable when agreed upon, has become excessive, the attorney may not stand upon the contract; he must reduce the fee.”); Davidson, Meaux, Sonnier, McElligott and Swift v. Brodhead, 613 So.2d 1038, 1041 (La.App. 3rd Cir. 1993) (“While attorneys may contract with clients to provide legal services for a contingent fee calculated upon the amount recovered or preserved, still the resulting fee must be examined to determine whether it is commensurate with the actual legal services provided; and whether an ordinary prudent attorney would find the fee excessive.”); Brown & Sturm v. Frederick Road Ltd. Partnership, 137 Md.App. 150, 181-86, 768 A.2d 62, 79-82 (Md.App. 2001) (“Instead, courts determine whether a contingent fee is reasonable using two indicia of fairness, both of which must apply. First, the agreement must have been reasonable in principle when the parties entered into it. Second, after the contingency has been met and the fee quantified, the agreement must be reasonable in operation, as tested against the factors set forth in the Maryland Lawyers' Rules of Professional Conduct Rule 1.5(a).”) (citing Attorney Grievance Commission v. Pennington, 355 Md. 61, 74, 733 A.2d 1029 (1999)); Redlich, 2006 WL 1000353 at 26 (“In Massachusetts, courts examine the reasonableness of the contingent agreement both at the inception of the contract and as a matter of hindsight.”) (citing McInerney v. Massasoit Greyhound Association, 359 Mass. 339, 353, 269 N.E.2d 211, 219 (1971); King, 7 N.Y.3d at 192, 851 N.E.2d at 1192, 818 N.Y.S.2d at 841 (“it is not necessarily the agreed-upon percentage of the recovery . . . or the duration of the recovery that makes a contingent fee agreement unconscionable, but rather the facts and circumstances surrounding the agreement, including . . . the value of the attorney’s services in proportion to the fees charged, in hindsight.”); and Committee on Legal Ethics it Patterson, 353 S.E.2d 107, 113-14 (W.Va. 1986).
Several states have refused to adopt the “hindsight” test. See City of New Albany v. Cotner, 919 N.E.2d 125, 135 (Ind.App. 2009) (Contingent fee reasonableness “so long as the fee was reasonable as of the time it was agreed to, rather than with the benefit of hindsight.”) (quoting 1 Hazard, Hodes, & Jarvis, The Law of Lawyering, § 8.6 (3d ed. 2000); State, ex rel. Oklahoma Bar Association v. Flaniken, 85 P.3d 824, 827 (Okla. 2004) (“We reject the proposed ‘hindsight’ test of the Bar Association where a lawyer has lawfully contracted for a percentage of a client’s recovery, and reject the Complainant's recommendation of discipline for the Respondent.”).
In this case, we need not determine whether the “hindsight” test must be applied to measure the reasonableness of the attorney’s fee. The weight of the evidence clearly and convincingly shows that Respondent attempted to charge an unreasonable fee at the time Respondent made his contingent fee agreement with Mr. Cerra.
If we applied the eight criteria listed in Rule 1.5(a) to Mr. O’Neill’s legal team, as a whole, an argument could be made that a substantial contingency fee was reasonable. Mr. Cerra’s case involved a substantial commitment of time and labor, involved difficult legal and factual questions, and required a high degree of skill and experience to achieve a favorable outcome. Mr. Cerra’s case also involved a high degree of risk, as a defendant’s verdict was not unlikely. Looking at the services to be performed by the legal team, as a whole, we would have no hesitation in finding that this complex, high-risk case justified a substantial contingent fee. Respondent, however, was not being compensated for being a part of the legal team. Respondent was retained for a limited purpose, to facilitate communication between attorney and client.
By February 2007, when Respondent made his fee agreement with Mr. Cerra, Mr. O’Neill had done a substantial amount of work on Mr. Cerra’s behalf. Mr. O’Neill had engaged an attorney with special expertise to assist him. Mr. O’Neill had conducted depositions and had filed several lengthy briefs opposing the defendants’ motions for summary judgment. When Respondent entered into his agreement with Mr. Cerra, Mr. O’Neill had no intention of involving Respondent in the substance of the litigation. Mr. Cerra, and not Mr. O’Neill, engaged Respondent’s services. There was no agreement between Mr. O’Neill and Respondent for Respondent to assist in the substance of the litigation. Mr. O’Neil was clear that the scope of Respondent’s work would be limited to facilitating communication. At the time that Respondent set his fee at twelve percent, Respondent had no reasonable basis for believing he would be required to make a substantial commitment of time, energy or expertise to Mr. Cerra’s case.
To determine whether Respondent’s fee was reasonable, we must apply the criteria of Rule 1.5(a) to Respondent’s fee agreement, separate from Mr. O’Neill’s agreement. When Respondent made his agreement with Mr. Cerra, Respondent’s responsibilities – facilitating communication between Mr. O’Neill and Mr. Cerra – Respondent should have anticipated that the time and labor required of him would be very limited. Respondent’s service did not require him to address or solve novel or difficult legal questions. It is unlikely that Respondent’s role would preclude Respondent from accepting other employment. While the potential recovery in Mr. Cerra’s case was substantial – estimated at several million dollars – Respondent was not responsible for performing any of the legal work that would determine the outcome of Mr. Cerra’s case. Similarly, Respondent’s experience, reputation and ability as a lawyer were not critical to the success of Mr. Cerra’s case.
Had Mr. Cerra realized a $2 million recovery, Respondent’s fee would have been $240,000.00. Mr. Cerra ultimately recovered $682,500.00. Had Respondent not been discharged and been paid his contingent fee, the amount of Respondent’s fee would have been $81,900.00. When Respondent set his contingent fee at twelve percent, Respondent’s anticipated contribution facilitating communication, was not critical to the outcome of the case, nor did it require a high degree of skill, expertise or experience. Consequently, Respondent’s limited role did not warrant a substantial fee. See Lawyer Disciplinary Bd. v. Morton, 212 W.Va. 165, 169, 569 S.E.2d 412, 416 (W.Va. 2002) (This “Court has reasoned that ‘a contingent fee is clearly excessive if the skill and labor required of the lawyer are grossly disproportionate to the fee.”) (citing Committee on Legal Ethics v. Gallaher, 180 W.Va. 332, 335, 376 S.E.2d 346, 349 (1988)). To earn a fee of $81,900.00 on an hourly basis, with Respondent charging at his customary rate of $150 per hour, Respondent would have had to work 546 hours on the personal injury litigation. At the time Respondent made his agreement with Mr. Cerra, it was clear that Respondent was not required to make the type of time commitment that would justify a fee in excess of $80,000. See Lawyer Disciplinary Board, 212 W.Va. at 169, 569 S.E.2d at 416 (W.Va. 2002) (“If an attorney's fee is grossly disproportionate to the services rendered and is charged to a client who lacks full information about all of the relevant circumstances, the fee is “clearly excessive” within the meaning of [Rule 1.5 of the Rules of Professional Conduct].”).
The amount of Respondent’s contingent was clearly excessive and unreasonable, given the limited nature of service Mr. Cerra, Mr. O’Neill and Respondent agreed that Respondent would provide. While Respondent would be entitled to a premium for providing his facilitator services on a contingency basis, Respondent was not entitled to the type of windfall that his twelve percent fee was reasonably expected to generate.
There is a second, important reason that Respondent’s fee was unreasonable and violative of Rule 1.5(a). Respondent set his fee at twelve percent (12%) prior to knowing what his role in the litigation would actually be. In February, Respondent first met with Mr. Cerra, and proposed the twelve percent fee assuming he would serve as Mr. O’Neill’s co-counsel, with substantial responsibility for the litigation. In other words, Respondent set his fee without knowing, or having a reasonable basis for predicting, the work he would be required to perform. Respondent did not settle on his role and then set his fee based upon that the expected work. Similarly, Respondent did not reconsider and adjust his twelve percent fee once it was clear that his role would be limited to facilitating communication. It was improper for Respondent to set his fee based upon the substantial work he hoped to perform, rather than on the limited work he agreed to perform.
One additional point requires attention. It could be argued that Mr. Cerra, Mr. O’Neill and Respondent never effectively made a contract because there was no meeting of the minds regarding the services Respondent was expected to provide. See Starr Farm Beach Campowners Association, Inc. v. Boylan, 174 Vt. 503, 505, 811 A.2d 155, 158 (2002) (“An enforceable contract must demonstrate a meeting of the minds of the parties: an offer by one of them and an acceptance of such offer by the other.”) (citing Manley Bros., Inc. v. Bush, 106 Vt. 57, 62, 169 A. 782, 783 (1934)). Disciplinary Counsel has not charged Respondent with making an agreement for an unreasonable fee, as prohibited by Rule 1.5(a), but instead, Disciplinary Counsel has charged Respondent with attempting to violate the Rule 1.5(a), as prohibited by Rule 8.4(a). The making of an agreement is not critical to determining whether Respondent attempted to violate the rule prohibiting unreasonable fee. Here, there is clear and convincing evidence that Respondent attempted to violate Rule 1.5(a) when he negotiated for a contingent fee of twelve percent for the limited work of facilitating communication. While contract analysis is not critical to deciding this case, we have found, by clear and convincing evidence, that Respondent did in fact make an agreement for a twelve percent contingent fee.
The weight of the evidence clearly and convincingly establishes that Respondent’s twelve percent (12%) contingent fee was excessive and unreasonable in the context of Mr. Cerra’s case. Consequently, Respondent violated Rule 8.4(a) by attempting to charge an unreasonable fee, as proscribed by V.R.P.C. Rule 1.5(a).
In determining the appropriate sanction we look to the ABA Standards for Imposing Lawyer Sanctions and Vermont case law. E.g., In re PRB Docket No. 2007-046, 2009 VT 115, 989 A.2d 523, 530 (2009); In re Warren, 167 Vt. 259, 261 (1997); In re Berk, 157 Vt. 524, 532 (1991).
Under the ABA Standards we first arrive at a presumptive sanction, and then look to the presence of aggravating and mitigating factors to determine whether the presumptive sanction should be modified, ABA Standards, § 3.0.
In arriving at the presumptive sanction we must consider the duty violated, the lawyer’s mental state and the actual or potential injury caused by the misconduct.
The Duties Violated
Respondent had a duty to Mr. Cerra to provide him with a written fee agreement. Respondent also had a duty to charge Mr. Cerra a reasonable fee for his services.
Respondent’s Mental State
Respondent’s failure to provide Mr. Cerra with a written fee agreement was intentional. Respondent understood his responsibility to provide clients with a written contingent fee agreement. Respondent had a form agreement he used in personal injury cases like Mr. Cerra’s. Respondent asked Mr. O’Neill to draft the agreement, but Mr. O’Neill refused. Respondent then did nothing. Respondent did not follow the procedure he routinely followed in his other personal injury matters.
The excessive fee Respondent attempted to collect was the result of negligence. Respondent settled upon a twelve percent contingent fee after giving Mr. Cerra’s matter deliberate consideration. Respondent considered some of the usual and customary factors when he decided upon a twelve percent contingency fee. These factors included the complexity of Mr. Cerra’s case and the risk of no recovery. Respondent, however, did not consider the nature or extent of the service he would be asked to provide. Prior to setting the fee at twelve percent, Respondent did not communicate, or reach an understanding, with Mr. O’Neill about Respondent’s role or responsibilities. When Respondent, Mr. Cerra and Mr. O’Neill ultimately agreed on Respondent’s limited role, Respondent did not adjust his fee accordingly. It was incumbent upon Respondent to set a fee that was reasonable in light of all of the relevant factors, including the work Respondent was expected to perform.
Injury or Potential Injury
There was no actual financial injury to Mr. Cerra in this case. Mr. Cerra discharged Respondent prior to settlement of Mr. Cerra’s claims and Respondent did not attempt to collect his contingent fee. There was, however, the potential for injury. If Respondent had not been discharged, and Respondent insisted upon collecting his twelve percent fee, Mr. Cerra would have paid an excessive fee. Respondent’s dismissal from the case did not eliminate the potential for harm. Respondent could have attempted to collect his fee on a quantum meruit basis. Doing so would have subjected Mr. Cerra with the undue burden of defending himself.
There is actual injury to legal profession. Public respect for lawyers and the legal profession are diminished when lawyers charge or attempt to charge excessive and unreasonable fees.
The ABA Standards
The ABA Standards refer us to Section 7, Violation of Duties Owed as a Professional, when considering the reasonableness of an attorney fee. We consider two separate provisions. Section 7.2 provides: “Suspension is generally appropriate when a lawyer knowingly engages in conduct that is a violation of a duty owed as a professional, and causes injury or potential injury to a client, the public, or the legal system.” Section 7.3 provides: “Reprimand is generally appropriate when a lawyer negligently engages in conduct that is a violation of a duty owed as a professional, and causes injury or potential injury to a client, the public, or the legal system.”
In this case, Respondent’s state of mind was knowing, as to Rule 1.5(c), and negligent, as to Rule 8.4(a). The commentary to Sections 7.2 and 7.3 suggest that reprimand may be more appropriate in this case. “Suspension is appropriate, for example, when the lawyer does not mislead a client but engages in a pattern of charging excessive or improper fees.” The commentary to Section 7.3 also states:
Reprimand is the appropriate sanction in most cases of a violation of a duty owed as a professional. Usually there is little or no injury to a client, the public, or the legal system, and the purpose of lawyer discipline will be best served by imposing a public sanction that helps educate the respondent lawyer and deter future violations. A public sanction also informs both the public and other members of the profession that this behavior is improper.
In Respondent’s case, the evidence does not show a pattern of excessive fees. The evidence only shows a single incident of Respondent making a fee agreement without a written agreement, and a single incident of Respondent attempting to charge an unreasonable fee. Under the circumstances of this case, reprimand is the presumptive sanction.
Aggravating & Mitigating Factors
We now turn to the aggravating and mitigating factors to determine whether they are of sufficient weight to require us to alter the presumptive sanction. Most troubling is the vulnerability of Mr. Cerra. ABA Standards § 9.22(h). Mr. Cerra is a man suffering from a catastrophic injury, making him particularly dependent and vulnerable. Respondent did not make a reasonable effort to communicate the fee agreement to him in writing, something Respondent routinely did in all his other contingent fee cases. Throughout the proceedings, Respondent refused to acknowledge the wrongful nature of his conduct. ABA Standards § 9.22(g). This is particularly troubling in the context of Rule 1.5(c), because Respondent knew the Rule and routinely complied with the Rule in other contingent fee cases. Respondent continues to believe that his conduct was appropriate. In addition, Respondent had a selfish motive: that being collecting a fee that was excessive in relation to the services to be rendered. ABA Standards § 9.22(b).
The issue here is not Respondent’s desire to be paid for the services he provided Mr. Cerra, nor Respondent’s right to receive a premium for working on a contingent fee basis. Respondent accepted Mr. Cerra’s divorce case without a retainer, hoping he would be paid if Mr. Cerra was successful in his personal injury case. It is not Respondent’s desire to be paid from the proceeds of the personal injury case that is at issue here, it is both the lack of a written agreement and the unreasonable amount of the fee that Respondent attempted to charge.
Respondent has substantial experience in the practice of law, and Respondent could have structured a reasonable fee arrangement with Mr. Cerra for his work in both cases. Respondent was entitled to something of a premium for his services because there was a substantial risk he would not be paid. Respondent, however, was not entitled to an unreasonable windfall. Respondent’s substantial experience in the practice of law is an aggravating factor in this case. ABA Standards § 9.22(i).
At the hearing Disciplinary Counsel offered evidence under seal of prior discipline for charging of an unreasonable fee. ABA Standards § 9.22(a). Disciplinary Counsel moved to unseal the evidence and Respondent objected. We have granted Disciplinary Counsel’s Motion to Unseal and we consider this evidence, but only in the context of determining an appropriate sanction. Respondent’s prior case was concluded in 1987 and involved an excessive fee in a contingent fee case. Respondent was publicly censured by the Vermont Supreme Court. In re Fink, Entry Order July17, 1987. We give the prior censure no weight on the merits of the charges and slight weight as an aggravating factor. A single violation so remote in time does not qualify as a significant aggravating factor in this case. ABA Standards § 9.32(m).
We now turn to Vermont cases. While there are no cases regarding the failure to obtain a written fee agreement, there are cases on excessive fees. In In re Sinnott, the Supreme Court discussed the situation where the attorney charged a fee without regard to the work done or the value of the work to the client. 2004 VT 16, 176 Vt. 596, 845 A.2d 373. In finding the fee unreasonable, the court stated:
As the panel stated, “the key issue here is whether the attorney is providing services of value to the client for which the attorney is entitled to be paid or whether . . . the lawyer is charging the client for doing nothing.” The panel concluded that the fee violates Vermont Rules of Professional Conduct 1.5 because it was charged without regard to whether the attorney performed any work for the client or whether services provided had any value to the client. In other words, the fee did not account for the “time and labor required," Vt. Rules of Prof'l Conduct 1.5(a)(1), or the "results obtained,” Vt. Rules of Prof'l Conduct 1.5(a)(4).
In Sinnott, no services of value were provided to the client. Here the situation is somewhat similar in that Respondent attempted to charge a fee that was significantly disproportionate to work he was hired to perform. In addition, Respondent charged a twelve percent contingent fee based upon the mistaken belief that he would have substantive responsibilities for Mr. Cerra’s case. Like Attorney Sinnott, Respondent did not fairly and reasonably consider the fee in the context of the work he ultimately agreed to perform.
Having evaluated the aggravating and mitigating factors, the appropriate sanction in this case is a reprimand.
In consideration of the foregoing, Respondent, Melvin Fink is hereby REPRIMANDED for violation of Rules 1.5(c) and 8.4(a) of the Vermont Rules of Professional Conduct and is placed on probation under the following conditions:
1. Respondent is placed on probation as provided in Administrative Order 9, Rule 8A(6), for a minimum term of twelve (12) months, which term may be renewed for an additional period as provided by A.O.9 Rule 8(A)(6)(a). The term of probation shall commence on the date on which this decision becomes final.
2. At the commencement of probation, Respondent shall select a probation monitor acceptable to Disciplinary Counsel as required by A.O.9 Rule 8(A)(6)(b). In the event that the approved probation monitor shall become unavailable during the term of probation, Respondent shall submit an alternate name to the Office of Disciplinary Counsel for approval as a substitute.
3. During the period of probation Respondent shall attend four (4) hours of Continuing Legal Education (CLE) in ethics. This shall be in addition to Respondent’s licensing obligation to obtain 20 hours of CLE credits and 2 hours of ethics credits.
4. The selection of CLE programs shall be subject to the approval of the Probation Monitor.
5. Respondent shall maintain records of his CLE attendance and submit them to the probation monitor.
6. The probation monitor shall file quarterly reports with Disciplinary Counsel detailing Respondent’s compliance with the terms of probation.
7. It shall be Respondent’s responsibility to secure quarterly written reports from the probation monitor detailing compliance with probation and shall provide Disciplinary Counsel with copies of the reports.
8. Probation shall be terminated at any time after the initial twelve-month period or any renewal term thereof upon the filing of an affidavit by Respondent showing compliance with the conditions of probation and an affidavit by the probation monitor stating that probation is no longer necessary and the basis for that conclusion. Such affidavits shall be filed with the Program Administrator of the Professional Responsibility Board with copies to Disciplinary Counsel.
9. The absence of a filing of such affidavits after twelve (12) months shall be considered a recommendation of continued probation by the Probation Monitor.
10. Should the Office of Disciplinary Counsel desire to renew the term of probation for an additional period, it shall notify Respondent via certified mail, return receipt requested. Should Respondent wish to be heard on this issue of renewal of probation, he shall file a request for hearing and serve a copy of the request on the Office of Disciplinary Counsel.
11. Respondent shall bear all costs associated with this probation.
Dated: April 27, 2010 Hearing Panel No: 10
Lon T. McClintock, Esq., Chair
I dissent. I find no violations and would dismiss the complaint.
Respondent is charged with failing to reduce a contingent fee agreement to writing in violation of Rule 1.5 of the Vermont Rules of Professional Conduct and attempting to charge an unreasonable fee in violation of Rule 8.4(a) of the Vermont Rules of Professional Conduct.
"The standard of proof for charges of misconduct is 'clear and convincing evidence.' A.O. 9, Rule 16(C)." In re PRB Docket No. 2006-167, 181 Vt. 625, 626-627, 925 A.2d 1026, 1028 - 1029 (Vt.,2007). See also, In re Hill, 152 Vt. 548, 562, 568 A.2d 361, 368 (Vt.,1989) (charges of misconduct "shall be founded on clear and convincing evidence."). The Bar has the burden of establishing alleged misconduct by clear and convincing evidence and I find the record does not support such a finding.
“Clear and convincing” evidence may be defined as an intermediate standard of proof greater than a preponderance of the evidence, but less than proof beyond a reasonable doubt required in criminal cases. It is that degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the allegations sought to be established, and requires the existence of a fact be highly probable.
Masaki v. General Motors Corp., 71 Haw. 1, 15, 780 P.2d 566, 574 (Hawaii 1989).
At no time was there ever a completed contingency fee agreement with Respondent. At the time Eric Cerra discharged Respondent from the tort case there was not an enforceable and completed fee agreement within the meaning of the Rule 1.5 of the Vermont Rules of Professional Conduct that required that it be reduced to writing. The extent of the legal services that Respondent was going to perform had neither been discussed nor agreed upon. Respondent had not instituted the tort case; he was brought on board and requested by Eric Cerra to participate in it and protect Cerra's interests after Eric Cerra and his wife had a falling out. Respondent never entered his appearance in Eric Cerra's tort suit. The tort suit had been brought by attorney O'Neill for Eric Cerra and his wife. The legal services to be performed by Respondent were essential terms of any fee agreement between him and Eric Cerra but they were never determined nor agreed upon but were left to be discussed if the trial Court denied a pending motion for summary judgment. The only term that had been agreed upon was a 12% fee. For what service? That was never agreed upon nor discussed. That determination was awaiting a favorable ruling on a pending motion for summary judgment. The fee agreement between Respondent and Eric Cerra was a work in progress that would not be certain or completed nor become a final enforceable agreement unless the Court denied the pending motion for summary judgment filed by the defendants in the tort case and further discussions between Eric Cerra, attorney O'Neill and the Respondent regarding the details of Respondent's involvement in the tort case were completed. Agreement of the (1) legal services that Respondent was going to provide and (2) how his expenses would be handled in exchange for the 12% fee was contingent upon a favorable ruling from the trial court on the summary judgment motion after further discussion and agreement. Until all essential terms of an enforceable fee agreement had been discussed and agreed upon there was no completed agreement within the meaning of the Rule 1.5 of the Vermont Rules of Professional Conduct that required that it be reduced to writing. See Evarts v. Forte, 135 Vt. 306, 310, 376 A.2d 766, 768 - 769 (Vt. 1977).
It is never enough that the parties
think they have made a contract; they must express their subjective intent in a
manner that is capable of understanding. Vagueness, indefiniteness and
uncertainty of expression as to any of the essential terms of an agreement have
been held to preclude the creation of an enforceable contract. 1 Corbin on Contracts s 95 (1963).
Attorney O'Neill was representing both Eric Cerra and his wife; Respondent was only going to represent the interests of Eric Cerra in the tort suit. Attorney O'Neill testified that it was possible that the Respondent would assist in the jury selection process and in trial preparing and contacting witnesses. The extent of Respondent's participation in the trial had not yet been discussed or agreed upon. Unless the Court denied the pending motion for summary judgment, there was nothing to consider or discuss about that. Attorney O'Neill testified that he and Respondent had worked together in the past on a case that Respondent had referred to him and it would not have been unreasonable for Respondent to anticipate that his involvement in this case would be along similar lines. It is important to note that Eric Cerra has contacted Respondent to represent his personal interests in the suit attorney O'Neill had brought for Eric Cerra and his wife. The request for representation was not made by attorney O'Neill and was independent of any prior arrangements between attorney O'Neill and Eric Cerra and Cerra's wife. Because Eric Cerra and his wife were getting a divorce, Eric Cerra did not feel comfortable with attorney O'Neill representing both of their interests in his tort suit. Eric Cerra wanted his own attorney and requested Respondent to undertake that representation. The only term discussed and agreed upon between Eric Cerra and Respondent was that Respondent's fee would be 12%. The remaining terms of the undertaking were going to be decided if there was a favorable ruling on a pending motion for summary judgment in the tort suit. Attorney O'Neill testified that this was a difficult and risky tort case and it could be over if the Court granted the defendant's motion for summary judgment. Damages were considerable but liability was very thin and Eric Cerra had made some damaging statements after the trampoline accident.
Before the Court ruled on the pending motion for summary judgment, Eric Cerra changed his mind and notified Respondent that he did not want him to represent his interests in the tort suit, and, as a direct consequence the fee agreement was never concluded. At that time the potential fee agreement was indefinite, vague and uncertain. Other terms needed to be discussed and agreed upon before the potential fee agreement would be complete and legally enforceable. Respondent notified attorney O'Neill of Eric Cerra's decision and did not participate in the tort case. Respondent had not entered an appearance in the suit and it was unnecessary for him to withdraw. At that point in time all that had been agreed upon was a fee of 12%, but the particulars of what the Respondent was supposed to do for the fee and how his expenses would be handled were neither discussed nor agreed upon. Certainty and definiteness were lacking and that prevented the formation of a legally binding fee agreement. Respondent was discharged before a legally binding fee agreement ever came into existence.
Before there is a contract, there must be initial assent to the terms. Milot v. Calkins, 150 Vt. 537, 538, 554 A.2d 260, 261 (1988). Vagueness and indefiniteness as to an essential contract term can preclude formation of an enforceable contract. Evarts v. Forte, 135 Vt. 306, 310, 376 A.2d 766, 769 (1977). Smith v. Osmun, 165 Vt. 545, 546, 676 A.2d 781, 783 - 784 (Vt.,1996).
The Respondent has never attempted to collect a fee from Eric Cerra for the tort case and Eric Cerra has not been damaged by any action on the part of the Respondent. Cerra testified he brought this complaint to the Bar because he speculated he might be sent a bill for services sometime in the future. "Where future harm is at issue, the existence of an actual controversy “ ‘turns on whether the plaintiff is suffering the threat of actual injury to a protected legal interest, or is merely speculating about the impact of some generalized grievance.’ ” In re Boocock, 150 Vt. 422, 424, 553 A.2d 572, 574 (1988) (quoting Town of Cavendish v. Vermont Pub. Power Supply Auth., 141 Vt. 144, 147, 446 A.2d 792, 794 (1982))." In re Young's Tuttle Street Row, 182 Vt. 631, 632, 939 A.2d 521, 522 (Vt.,2007). There was never an "actual controversy" between Eric Cerra and Respondent regarding fees in this case. Cerra was not "suffering the threat of actual injury" when he made his complaint; his subjective fear was derived from mere speculation about what might happen in the future. Cerra testified that he was unhappy with Respondent's handling of his domestic relations matter. Cerra did not feel that Respondent supported his position vigorously enough. Cerra also complained about the judge in the domestic relations matter testifying that during one hearing the judge told him to "shut up and sit down." Thus a substantial component of Cerra's complaint to the Bar can be attributed to "some generalized grievance" on his part.
Basic due process rights regarding notice, an opportunity to anticipate, prepare and present a defense apply in disciplinary proceedings, In re Illuzzi, 160 Vt. 474, 481, 632 A.2d 346, 349 (Vt., 1993), and Respondent should not be charged with aggravating circumstances for defending himself in this proceeding. See, In re Disciplinary Action Against Gherity, 673 N.W.2d 474, 478 (Minn.,2004) ("While disciplinary proceedings are not encumbered by technical rules and formal requirements, this court observes due process in exercising disciplinary jurisdiction. In re Gillard, 271 N.W.2d 785, 808 (Minn.1978). The charges to which an attorney must answer need to be sufficiently clear and specific and the attorney must be afforded an opportunity to anticipate, prepare and present a defense. Id.; In re Peterson, 260 Minn. 339, 345, 110 N.W.2d 9 (1961)."). The Vermont Supreme has acknowledged that constitutional-like protections of procedural due process apply in lawyer disciplinary proceedings. In re Gadbois, 173 Vt. 59, 67-69, 786 A.2d 393, 400 - 401 (Vt.,2001); In re Karpin, 162 Vt. 163, 163, 647 A.2d 700, 700 - 701 (Vt.,1993); In re Illuzzi ,160 Vt. 474, 481, 632 A.2d 346, 349 (Vt.,1993). See also, Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering § 8.1:102, at 923 (2d ed. Supp.1996) (stating that “virtually all courts have concluded that the Supreme Court's characterization [of disciplinary proceedings as quasi-criminal] ... was made in the narrower context of assessing the applicability of procedural Due Process concerns, such as entitlement to notice of the charges”).
Because I find merit in Respondent's defense of the charges against him, I reject the charge that defending against them is an aggravating factor urged by Bar Counsel. I adopt the reasoning and findings of the Washington Supreme Court, en banc, as expressed In re Disciplinary Proceeding Against Marshall , 2009 WL 3134548, 15 (Wash.) (Wash.,2009).
Refusal To Acknowledge Wrongful Nature of Conduct
(ABA Standards std. 9.22(g))
We decline to find that this aggravating factor is supported by substantial evidence. Although Mr. Marshall has shown no penitence for his actions, we do not penalize him for making arguments in his defense.
Substantial evidence is evidence sufficient “ ‘to persuade a fair-minded, rational person of the truth of a declared premise.’ ” (quoting In re Diciplinary Proceedings Against Bonet, 144 Wash.2d 502, 511, 29 P.3d 1242 (2001).
For reasons set forth above without a legally binding agreement of the services Respondent was going to perform in exchange for the 12% fee there is no clear and convincing evidence that Respondent attempted to charge an unreasonable fee for his services.
The majority opinion erroneously applies the 12% figure to the total possible recovery in the tort case, however, Eric Cerra's claim for personal injuries is the only portion of the total recovery to which the agreed upon 12% could apply. It could not apply to his wife's loss of consortium claim since she did not contact Respondent and request that he represent her interests in the tort suit. In contrast to the erroneous example utilized in the majority opinion, if Eric Cerra's personal injury claim is allotted 2/3 of the total recovery and his wife's loss of consortium claim is allotted 1/3 of the total recovery (a reasonable allocation in such cases) then applying 12% to only Eric Cerra's personal injury claim will result in a fee of less than 8% of the total recovery. Loss of consortium for the spouse of a quadriplegic can warrant substantial damages.
No meaningful distinction can be drawn between death and severe injury where the effect on consortium is concerned. Often death is separated from severe injury by mere fortuity; and it would be anomalous to distinguish between the two when the quality of consortium is negatively affected by both. Howard Frank, M.D., P.C. v. Superior Court of State of Ariz., In and For Maricopa County, 150 Ariz. 228, 230, 722 P.2d 955, 957 (Ariz.,1986)
Whether or not 8% is an unreasonable fee would depend upon the extent of services Respondent was going to perform for the fee. Without any evidence of the substance of the agreement of the services Respondent was going to perform for the fee there is no clear and convincing evidence that he was attempting to charge an unreasonable fee.
The goal of attorney discipline is to protect the public. In re Blais, 174 Vt. at 631, 817 A.2d at 1270. Balancing the respondent's conduct in this case against the public protection goals articulated by the Rules of Professional Conduct I find no substantive and sufficient violation of the Rules to warrant sanction. See In re PRB Docket No. 2006-167, 181 Vt. 625, 626, 925 A.2d 1026, 1028 (Vt.,2007) ("We agree with the manner in which the Panel balanced the attorney's conduct in this case against the public protection goals articulated by the Rules of Professional Conduct. In general, the rules are “intended to protect the public from persons unfit to serve as attorneys and to maintain public confidence in the bar.” In re Berk, 157 Vt. 524, 532, 602 A.2d 946, 950 (1991) (per curiam) (although Berk referred particularly to sanctions, it is clear that these are the overarching goals of the rules).").
I find no clear and convincing evidence of a violation of Rule 1.5 of the Vermont Rules of Professional Conduct, or attempting to charge an unreasonable fee in violation of Rule 8.4(a). I would dismiss the complaint.
Date: April 27, 2010
 $ 682,500 x .12 = $81,900
 “As used in statutes, contracts, or the like, this word is generally imperative or mandatory. . . . [T]he term ‘shall’ is a word of command, and one which has always or which must be given a compulsory meaning . . . . It has the invariable significance of excluding the idea of discretion, and has the significance of operating to impose a duty which may be enforced, particularly if public policy is in favor of this meaning.” Black's Law Dictionary 1233 (rev. 5th ed. 1979).
 We note that under the Amendments to the Vermont Rules of Professional Conduct promulgated by the Vermont Supreme Court effective September 1, 2009, Rule 1.5(c) now requires that a contingent fee agreement “shall be in a writing signed by the client.”
 In re Application of Oklahoma Bar Association to Amend Oklahoma Rules of Professional Conduct, 171 P.3d 780, 793 (Okla. 2007) (“A contingent fee agreement shall be in writing signed by the client and shall state the method by which the fee is to be determined.”)
 In this case, we found Respondent and Mr. Cerra entered into a contingent fee agreement and the amount of the fee, twelve percent (12%) of the client’s recovery, was unreasonable. Disciplinary counsel has not charged Respondent with violating Rule 1.5(a) by making an agreement for an unreasonable fee. Consequently, we will not address the question of whether Respondent violated Rule 1.5(a) when he made that fee agreement with Mr. Cerra.
 In support of its analysis the King court cited Matter of Fitzsimons, 174 N.Y. 15, 66 N.E. 554 (1903) (attorney's fee of one half of the recovery does not render the agreement unconscionable); Beatie v. DeLong, 164 A.D.2d 104, 561 N.Y.S.2d 448 (1st Dept. 1990) (contingent fee agreement fair and enforceable where attorney was to receive 30% of revenue generated by patents in futuro); and Gross v. Russo, 47 A.D.2d 655, 364 N.Y.S.2d 184 (2d Dept. 1975).
 ($ 682,500 x .12) / $150/hour = 546 hours
 We have considered cases from other jurisdictions where there was no written fee agreement in a contingency case, but they are not particularly helpful since they arise generally after the case is concluded and the attorney is charged with other violations. See e.g., Florida Bar v. Rood, 633 So.2d 7, (Fla. 1994); Statewide Grievance Committee v. Dixon, 772 A.2d 160 (Conn.Super. 2008).