The dark side of alternative fee agreements

Alternative fee agreements have received a lot of favorable press in recent years, with the praise usually coming in tandem with criticism of the billable hour.

However, there is a dark side to alternative fee agreements.  Because a law firm's obligations to its clients extend beyond mere contractual duties, the law firm which undertakes matters under an alternative fee agreement can be exposed to wildly disproportionate risks. 

Some of these risks are illustrated by the recent decision in Cunningham & Associates v. ARAG, LLC, No. 11-1983 (D.D.C. Jan. 31, 2012), in which a law firm brought suit against an insurance company providing pre-paid legal services. As recounted by the District Court, the law firm alleged that under its agreement with ARAG, it undertook the legal representation of four of the defendants' insureds in four different matters which collectively demanded over 900 hours of attorney time, but for which the defendants allegedly only paid $2,300.00 to date.  The defendants then terminated their contract with the plaintiff law firm, which termination was in the law firm's view due to defendants refusal to reimburse the firm for reasonable fees and expenses incurred.

The law firm recently filed suit against the defendants, alleging fraud, negligent misrepresentation, breach of the implied contractual duty of good faith and fair dealing, quantum meruit, unjust enrichment, and violations of the D.C. Consumer Protection Act.  In its complaint, the law firm sought damages of $140,715.00 in compensatory damages plus interests and costs, $422,145.00 in compensatory and treble damages under the consumer protection statute, attorney's fees, and $500,000 in punitive damages.  The attachments to the complaint included the ARAG Attorney Network Application, the ARAG Attorney Agreement, and the ARAG North America, Inc. Attorney Reimbursement Fee Schedule (which are all available through PACER for anyone interested).

In its opinion, the District Court granted the defendants' motion to compel mediation, and stayed the action for 45 days so that mediation could take place.  The contract between the parties required four hours of non-binding mediation in Des Moines, Iowa.


Recap of Pacer -- what's the point?

I read about Recap, and of course immediately downloaded it to try it out.  In case you haven't heard, it is the Firefox plug-in that comes alive when you use Pacer, and sends a copy of any filing you download to the Internet Archive to improve public access.  Recap already has its fans and its detractors.

A couple of points should be mentioned.  The first is that the Recap plug-in only works if you log in to Pacer.  If you log in through the ECF system as a filing attorney, and download a pleading that way, no Recap copy is sent to the Internet Archive.  The second is that the Recap plug-in only works if you log in to Pacer using Firefox.  The third is that usually you do not have to download copies of your own filings, since you uploaded them and had to have the pdfs to do it.  All obvious, practical points, which lead to me to the conclusion that to "Recap" a pleading is usually going to be a conscious decision for somebody.  That is, someone has to conclude that the case filings have importance or public interest, and should have easier public availability, and then log in to Pacer using Firefox with the Recap plug-in.  I don't think it is likely that run-of-the-mill pleadings are going to be "Recapped" by accident.  For that reason, I think the privacy concerns are overblown. 

Now after using it, however, I'm wondering what's the point of it?  Or to put it bluntly, what's in it for me, or for my clients? 

The thing is, you can't go to the Internet Archive and do a text search of a law library of Pacer downloads.  That's deliberate, as the "Recap Repository" makes clear here

Okay, so if I want to run a search, I've got to use Pacer, and I guess that means I would have to go to each individual Pacer site, log in, and run the search.  And maybe then I might see some Recap icons on the docket sheets that would tell me that there is a free copy available.  That makes no sense from a time management point of view.  

Anyway, I get this uneasy feeling that all Recap would accomplish is to allow other counsel in federal cases to get free copies of pleadings I download.  That's not a very compelling reason to use it.

One suggested benefit of Recap is that it would allow an attorney to view a document through Pacer a second time without having to pay the per page fee again.  I have to agree that that could be a benefit; however, usually it is just as easy to save a copy of the pdf on your own hard drive for future reference.  In complex, multi-party litigation, use of Recap could effectively create a cost-free pleadings archive for the litigants, organized by the Pacer docket sheet itself. Maybe all counsel could come to an agreement to download pleadings through Pacer-Recap.  I can't see that anyone would undertake it on their own.

To the extent one's client could view even public filings on Pacer as sensitive, the client would probably object to the pleadings being copied wholesale to the Internet Archive.  Even though Pacer is open to the public, the requirement to have a Pacer account and pay the 8 cents a page viewing fee, discourages casual access.  All those $2.40 fees add up.

Journalists, political "opposition research" operatives, and other gadflys will be glad to get free access to court pleadings through Recap, but the people paying the bills probably will not like it.

DC Bar's Virtual Law Library - Law of Lawyering

The DC Bar's website is sporting a "Virtual Library" these days.  Most significantly, it includes a lengthy treatise on the Law of Lawyering, courtesy of the law firm of Covington & Burling, described as follows:

This publication, written by D.C. Bar member David B. Isbell, is a comprehensive analysis of the D.C. Rules of Professional Conduct, which governs the ethical practice of law in the District of Columbia, as well as the attorney discipline system upholding those rules. Published 2004. Updated in part, March 2007, following amendments to the Model Rules in 2002 and 2003 and the D.C. Rules of Professional Conduct effective February 1, 2007.

This reference should be among those consulted by any D.C. lawyer researching an ethical issue.

"[T]he litigatory equivalent of road rage."

In Campbell v. Lake Hallowell Homeowner's Association, an owner of a townhouse got to feuding with his homeowners' association.

It's easy to understand how this can happen, as in this area a townhouse can be quite expensive, and the bundle of property rights that comes with a townhouse is missing a few sticks. It's hard to accept that some faceless committee of the Homeowners' Association can dictate where you park, what sort of play equipment your kids can have, or even what color you can paint your front door. But they can, and townhouse owners should be aware that if they fight the Homeowners' Association on some trivial issue, the Association might well recover its attorneys fees, and that can be real money. So don't do what the plaintiff in this case did.

Here, the Homeowners' Association told the plaintiff that because he was a resident, he could not park his car in the visitors' overflow lot. (After much litigation, this turned out not to be quite true -- in fact, he could park there, as long as he moved his vehicle once a week. So it is fair to say that the Association's erroneous application of its own rules was partly to blame for poisoning the relationship.)

So the plaintiff began parking his car in front of his townhouse. But this was a fire lane, and the Association ordered him in writing to "park your car on your property." The plaintiff then began to park his car on his townhouse lawn. At around that time the plaintiff also put up a portable basketball hoop for his kids, again on his front lawn. The Association told the plaintiff to remove both his car and the basketball hoop from his front lawn. When the plaintiff did not do so, a variety of administrative and legal actions were commenced by both sides. The Association got an injunction, after which the plaintiff began parking his vehicle in his backyard.

The Court of Special Appeals aptly summed up the ensuing legal proceedings like this:

"Their quarrel, which began over a basketball hoop and a parking space, has resulted in at least four separate actions, with an intimation of more to come. At a loss as to why so little has generated so much conflict, we can only surmise that we are in the middle of what may be the litigatory equivalent of road rage. The number of actions, the sheer ferocity with which they have been pursued, and the inconsequential nature of what has been sought offer us little hope that we are wrong in this assessment."

Continue reading ""[T]he litigatory equivalent of road rage."" »

Fourth Circuit Rejects Absolute Immunity of PTO Investigators, Including A Staff Attorney, Involved In Attorney Disciplinary Investigation

Richard W. Goldstein, a patent lawyer, appeals an award of absolute immunity accorded certain officials of the Patent and Trademark Office for their conduct in an attorney disciplinary investigation. Goldstein also appeals the denial of his challenge to a certification on the scope of defendant David Purol’s employment and the denial of discovery on the certification. Because defendants Harry Moatz, Lawrence Anderson, and James Toupin are not absolutely immune from Goldstein’s Bivens claim for damages,1 and because the district court did not separately consider whether the defendants are immune from suit for declaratory relief, we vacate and remand on those aspects of this appeal. . . .

Goldstein v. Moatz, et al.

Judge Motz dissented, stating in part that:

But the OED’s "issuance of the RFIs" to Goldstein simply does not provide the basis for any cause of action against OED. In fact, almost half a century ago, the Supreme Court considered and expressly rejected a contention very similar to Goldstein’s. See Hannah v. Larche, 363 U.S. 420, 424 (1960). In Hannah, the plaintiffs complained, inter alia, of the "315 written interrogatories" sent to them by a commission in the course of an investigation. The Court upheld the constitutionality of all of the commission’s procedures, including its issuance of the assertedly burdensome and irrelevant interrogatories and its refusal to furnish the targets of the investigation with the names of the complainants and contents of the complaints. Id. at 424, 451. The Court explained that the commission had engaged in "purely investigatory and factfinding" activities, which might "subsequently be used as the basis for legislative or executive action," but which did not in themselves "affect an individual’s legal rights." Id. at 441. To impose in this context the constitutional procedures appropriate when "governmental agencies adjudicate or make binding determinations which directly affect the legal rights of individuals" would, the Court concluded, "make a shambles of the investigation and stifle the agency in its gathering of facts." Id. at 442-44. So it is here. . . .

Man Bites Dog story -- D.C. Law Firm's Default Judgment Against Former Client for Unpaid Legal Fees Is Upheld

Even in D.C., sometimes (but rarely) default judgments are upheld. In a recent case, a law firm's default judgment against a former client for roughly $55,000 in legal fees was upheld.

Generally, law firms are well advised not to bring suit to collect unpaid fees, because more often than not, there follows a counterclaim for legal malpractice. On the other hand, sometimes law firms decide that if the word on the street is that they will not sue to collect their fee, the problem of uncollected receivables will get out of hand. It probably is an issue that is debated from time to time in most firms.

ABA Links To State Ethics Rules Governing Lawyer Advertising

Jerry Lawson's Internet Tools for Lawyers site has a nice collection of links concerning the legal ethics rules involved in lawyer websites, and among them he has a link to an ABA sponsored page collecting links to state ethics rules governing lawyer advertising. The latter even has an interactive map of the US that shows which States still follow the Model Code, which States follow the Model Rules, and which States have unique rules.