Many lawyers (with this notable exception) believe that the 1/3 contingency fee is reasonable and that any fee agreed to between a willing client and an attorney is also reasonable. But in this recent story, Attorney’s 9/11 Fee Called “Shocking, Unconscionable” (law.com 8/28/06), lawyer Tom Troiano had a valid retainer agreement that provided for 1/3 contingency fee for settlement of his client’s 9-11 claim. Yet many lawyers, including Ken Feinberg, Master of the 9/11 fund, have vocally criticized Troiano’s fee as unreasonable.
Here are the details behind the story. When Laura Balemian’s husband was killed in the World Trade Center attack, she called Tom Troiano, a lawyer and trusted family friend for assistance. Troiano claims he took charge of the family’s numerous legal affairs, without seeking compensation. But he did have Balemian sign a retainer agreement on Oct. 15, 2001 with respect to representation of her claims in the 9-11 fund. Eventually, Troiano recovered over $6 million for Balemian, double the $3 million cap. And in February 2004, per the terms of the retainer, he collected his 1/3 share of the amount recovered.
Fast forward to 2006, in the probate proceeding over Balemian’s husband’s estate. A guardian appointed by the court challenged Troiano’s fee as excessive and not in the best interests of Ms. Balemian’s four children. In response, Troiano brought an action for declaratory judgment approving his fees.
Troiano argues that he deserves the fee because the client agreed and his extraordinary results justified his $2 million fee. Kenneth Feinberg, Special Master of the 9-11 Fund, commented that the fee was excessive; the fund recommended that attorneys collect no more than 5 percent. Feinberg also stated in an affidavit that:
I find it difficult to understand how any lawyer can request a 30 percent fee for simply filing a claim with the 9/11 fund,” he said. “It’s a non-adversarial process where the special master was working with families and family lawyers to find a way to legitimately give them this money.”
Hearings that led to higher awards were a routine part of the process, said Mr. Feinberg. In his affidavit, he noted that 68 percent of the claims involving deaths had a hearing at which evidence was presented.
One key question that was not addressed by the article, is why Troiano’s client waited to challenge the fees. According to the article, Balemian now argues that Troiano collected too much. But Balemian paid the fees in January 2004 and apparently, nothing was mentioned about them until March 2005 when the guardian first took issue with the fees on behalf of Balemian’s children. (see order here) To me, the answer to that question dictates the appropriate result. If Troiano told Balemian what other attorneys recovering for 9-11 litigation, explained that the risk of loss was low and that the fund had recommended a 5 percent fee and Balemian still agreed to pay 1/3, then I’d have to say that the fee is reasonable and Balemian should be stuck with the result. If, on the other hand (and what I suspect is the case), Troiano portrayed the 9-11 litigation as a standard contingency case and never told Balemian how other lawyers were handling the matter – and Balemian never figured that out until the guardian raised the issue – then, in my view, Troiano doesn’t deserve a fee at all, because he breached his fiduciary duty to his client. In my view, the end result Troiano achieved does not justify the means if he did not fully disclose to Balemian all of her other options.
So readers, what do you think about this one? And how would you have handled the situation?