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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Compton v. Kittleson (11/09/2007) sp-6197
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| LARRY D. COMPTON, Trustee in | ) |
| Bankruptcy for Danilo and Angelita | ) Supreme Court No. S-12175 |
| Nelvis, | ) |
| ) Superior Court No. 3AN-04-7687 CI | |
| Appellant, | ) |
| ) | |
| v. | ) O P I N I O N |
| ) | |
| NICHOLAS KITTLESON, | ) No. 6197 November 9, 2007 |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the
Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Sen K. Tan,
Judge.
Appearances: Mark A. Sandberg, Sandberg,
Wuestenfeld & Corey, Anchorage, for
Appellant. Brewster H. Jamieson and Andrea
E. Girolamo-Welp, Lane Powell LLC, Anchorage,
for Appellee.
Before: Matthews, Eastaugh, Bryner, and
Carpeneti, Justices. [Fabe, Chief Justice,
not participating.]
BRYNER, Justice.
I. INTRODUCTION
Attorney Nicholas Kittleson filed a consumer protection
action against an Anchorage used car dealership on behalf of
Danilo and Angelita Nelvis. Kittleson represented the Nelvises
under a hybrid fee agreement that called for Kittleson to receive
a contingent fee unless the Nelvises settled the case for an
amount that will pay less than $175.00 per hour for the time
[Kittleson] invest[ed] in the case; in that event, the Nelvises
would be required to pay Kittleson a fee based on the $175 hourly
rate. Before trial the Nelvises turned down a $25,000 settlement
offer. They lost at trial, and the superior court entered a
judgment ordering them to pay costs and attorneys fees totaling
almost $100,000. The Nelvises then petitioned for bankruptcy,
and the bankruptcy trustee sued Kittleson to recover their
losses, alleging that Kittleson committed legal malpractice
because his fee agreement violated the Alaska Rules of
Professional Conduct. The sole question raised in this appeal is
whether the type of hybrid-fee agreement at issue here is barred
as a matter of law. We hold that Alaska law prohibits a fee
agreement that uses a clients decision to settle as a trigger to
convert contingent-fee representation into an obligation to pay
hourly fees because a hybrid agreement of this kind impermissibly
burdens the clients exclusive right to settle a case.
II. FACTS AND PROCEEDINGS
In October 1999 Danilo and Angelita Nelvis bought a
used SUV in Anchorage from Cream Puff Auto, Inc. The SUV soon
developed serious engine problems and, by December 1999, had
stopped running completely. Dissatisfied with Cream Puffs
response to their complaints, the couple sought help from
Kittleson, contending that Cream Puff had misrepresented the
condition of the SUV and had failed to honor their extended care
warranty.
After an initial consultation, Kittleson sent the
Nelvises a proposed fee agreement along with a letter estimating
that their case had a seventy percent chance of success.
Kittleson noted that if they won, the Alaska Consumer Protection
Act could entitle them to recover treble damages. Kittleson also
advised that if they lost, they would be responsible for a
percentage of Cream Puffs attorneys fees and costs; he pointed
out that the potential cost could reach $10,000 or more. The
letter then told the Nelvises that Kittleson would be honored to
fight for your rights in obtaining a fair settlement/judgment in
this case, that he was attaching a proposed fee agreement, and
that the Nelvises could begin the process of bringing a lawsuit
by executing the agreement and fulfilling its conditions.
The fee agreement attached to Kittlesons letter
proposed a hybrid arrangement that would start with a contingent-
fee arrangement entitling Kittleson to thirty-three percent of
any amounts recovered from all defendants plus any award of
attorney fees; under the contingent-fee arrangement, the
agreement explained, [i]f there is no recovery for you, there
will be no fee. But the agreement would automatically convert to
hourly-fee representation at the rate of $175 per hour if the
Nelvises decide[d] to drop the case. Specifically, while noting
that the Nelvises retained final discretion to settle this case,
the agreement provided: If you agree to settle this case for an
amount that will pay less than $175.00 per hour for the time I
invest, then I shall receive an amount over and above the 33% to
compensate me at the rate of $175.00 per hour before you receive
your portion of the settlement. The basis of Kittlesons
compensation thus hinged on whether the Nelvises agreed to
settle, the amount of the agreed settlement, and the number of
hours Kittleson had invested in the case at the time the case
settled.
The Nelvises signed the proposed agreement,
establishing an attorney-client relationship with Kittleson.
Kittleson then filed a complaint against Cream Puff in the
superior court in Anchorage. The complaint alleged that Cream
Puff had committed fraud and breach of warranty, and had violated
the Consumer Protection Act and various Federal Trade Commission
regulations.
While the Nelvises case was pending in the superior
court, a similar hybrid-fee agreement that Kittleson had used in
an unrelated consumer protection case came under scrutiny by a
federal judge in an Anchorage bankruptcy case.1 Prompted by
questions raised in the bankruptcy matter, Kittleson wrote to the
Alaska Bar Association, requesting an informal ethics opinion on
his use of the hybrid-fee agreement. Bar counsel issued an
informal opinion concluding that the fee agreement raised several
ethical concerns, including the agreements potential to
significantly inhibit the clients exercise of his or her right to
settle a matter. Bar counsel also stated that he believed that a
fee arbitration panel adjudicating a fee dispute under the fee
agreement would find impermissible pressure on the clients right
to settle or not settle a matter and would reduce the fee to
thirty-three percent and might possibly refer the matter for
investigation.
Less than a week after the bar issued its ethics
opinion, Cream Puff sent Kittleson an offer of judgment for
$25,000, including costs and attorneys fees. In a letter
informing the Nelvises of Cream Puffs offer, Kittleson disclosed
that, when calculated at the rate of $175 per hour, his hourly
fees for time worked on the case to date already exceeded
$30,000; thus, Kittleson observed, acceptance of this offer would
mean no recovery for you, as it would be less than the amount
already incurred for my actual attorney fees. Kittleson
nonetheless offered to compromise my fee arrangement to the
amount of $22,000.00, pointing out that [t]his would then mean
that you would receive a total of $3,000. Kittleson also
attached a copy of the bar associations ethics opinion and
advised the Nelvises they could accept Cream Puffs offer and
pursue fee arbitration against him through the bar association.
Despite the availability of these options, in his final
analysis Kittleson urged the Nelvises to reject Cream Puffs
offer, stating that [i]t is my professional opinion that your
recovery will be much greater than this at trial. Furthermore,
if you win the Consumer Protection Act claims, which I think are
your strongest claims, then [Cream Puff] would be required to pay
full attorney fees. In keeping with Kittlesons recommendation,
the Nelvises rejected Cream Puffs offer.
Two months later, in response to the bar associations
opinion and the current status of the case, Kittleson revised his
fee agreement with the Nelvises. The new agreement omitted the
fee-conversion clause and called for Kittleson to be paid a pure
one-third contingency fee from any recovery. But Cream Puff
evidently extended no further offers of judgment.
In May 2003 the Nelvises case went to trial. Cream
Puff prevailed on all claims. Given the Nelvises rejection of
its pretrial offer, the dealership moved for an award of costs
and enhanced attorneys fees under Civil Rule 68 and AS 09.30.065.
The court granted the motion and entered judgment against the
Nelvises for fees and costs totaling $99,169.19.
The judgment forced the Nelvises to file for
bankruptcy. Bankruptcy Trustee Larry D. Compton then sued
Kittleson in superior court for legal malpractice in connection
with his use of the convertible fee agreement. The parties
stipulated that no issues of fact existed and that the only issue
presented was whether the disputed fee agreements conversion
clause is prohibited by Alaska law; Compton then filed a motion
for summary judgment and Kittleson filed an opening brief seeking
dismissal of the action.
After hearing oral argument on the point, Superior
Court Judge Sen K. Tan concluded that the agreement as written,
on its face, leaves the decision to settle with the client and
does not impinge on the clients right to make that decision. On
this basis the court determined that the plain language of the
agreement does not violate Alaska law. While recognizing that
the agreement might be invalid if it resulted in an unreasonable
fee, the court observed that [t]he reasonableness of the fees
charged to a client is a question of fact and not before this
court. Accordingly, given the parties stipulation, the court
denied Comptons motion for summary judgment and dismissed the
complaint.
Compton appeals.
III. DISCUSSION
On appeal, the parties address the single point of law
raised before the superior court: whether the specific fee-
conversion provision at issue here violates Alaska law more
particularly, the Alaska Rules of Professional Conduct by
impermissibly burdening a clients right to control settlement.
Compton argues that Kittlesons convertible fee
agreement interferes with a clients right to settle a case in
violation of the Rules of Professional Conduct. He insists that
asking a client to agree at the outset of a case to convert a
pure contingent-fee arrangement to an hourly fee upon settlement
penalizes the client for settling and imposes an intolerable
restriction on the clients right to decide whether and when to
settle. Compton suggests that the conversion clauses restrictive
effect is deliberate, rather than incidental, emphasizing that
Kittlesons use of the clause in small-dollar consumer protection
cases reflects his desire to maximize his prospects of winning
full statutory attorneys fees under the Consumer Protection Act,
a right that attaches only when a claimant prevails at trial.2
In response, Kittleson acknowledges that clients
generally retain primary control over settlement decisions and
have the right to settle without the intervention, knowledge, or
consent of their attorneys. But he maintains that an attorney-
client agreement does not violate the Rules of Professional
Conduct unless it expressly restricts a clients right to accept
or reject a settlement offer a restriction that, in Kittlesons
view, the disputed conversion clause did not contain.
Because the parties have stipulated that there are no
genuine issues of material fact, their dispute presents a
question of law, which we review independently, adopting the rule
of law that is most persuasive in light of precedent, reason, and
policy.3
In ruling that Kittlesons fee agreement was
permissible, the superior court focused largely on whether the
Alaska Rules of Professional Conduct categorically prohibit the
use of agreements providing for hybrid fees. The court concluded
that hybrid-fee agreements do not violate the professional
conduct rules per se, as long as the fee ultimately charged
complies with Rule 1.5s directive that a lawyers fee shall be
reasonable.4 As a general matter, this conclusion is
unassailable. The plain language of Rule 1.5, which regulates
attorneys fees, implicitly recognizes that hybrid-fee agreements
are not categorically barred: A fee agreement which is in whole
or in part contingent shall be in writing and shall state the
method by which the fee is to be determined . . . .5
Moreover, even though we have never squarely upheld the
validity of hybrid-fee agreements under Alaska law, we have
tacitly condoned their use on at least one occasion by upholding
a hybrid agreement against a challenge directed at the
reasonableness of the particular fee at issue in the appeal,
noting that [a]lthough the combined hourly and contingent fee
arrangement was unconventional, it was not unreasonable.6 Our
recognition that hybrid agreements may properly be used in some
situations appears to reflect the prevailing view in other
jurisdictions.7 We thus conclude that an attorneys use of a
hybrid-fee agreement does not necessarily breach the Alaska Rules
of Professional Conduct.
Yet the conclusion that hybrid agreements may sometimes
be properly used hardly establishes that such agreements are
always facially valid or that the particular type of hybrid
agreement used by Kittleson was permissible as a matter of law.
Here, the hybrid agreement combines two active ingredients into a
potent mix: first, it uses the clients decision to settle as the
trigger for converting from contingent to hourly fees; then, once
the conversion is triggered, it operates retroactively to
encompass all work performed from the inception of the case.
Whether Alaska law prohibits this type of hybrid-fee arrangement
presents a question of law that cannot be decided without
assessing the combined effects of these features in light of
requirements imposed by the Alaska Rules of Professional Conduct
and other relevant provisions of Alaska law.
Alaskas Rules of Professional Conduct follow the
mainstream in recognizing that clients, and not attorneys,
possess the right to decide whether to settle or drop a case.
Because this right is personal to the client, an attorney cannot
demand relinquishment of the right as a condition of
representation. Rule 1.2(a) provides that [a] lawyer shall abide
by a clients decision whether to accept an offer of settlement of
a matter. Other authorities support this strict view that the
right belongs to the client alone. The American Bar Associations
Annotated Model Rules of Professional Conduct emphasize that [a]
lawyer has no inherent power, by virtue of the fact that he or
she represents a client, to settle the clients claim.8 The
Restatement (Third) of the Law Governing Lawyers explains that
the decision to settle is reserved to the client because a
settlement definitively disposes of client rights.9 And Charles
W. Wolframs treatise, Modern Legal Ethics, notes that a lawyer
may, at times, have a duty to encourage a client to settle, but
the decision whether or not to settle is for the client to make.10
Applying these principles, courts have consistently
declined to enforce fee agreement provisions that give attorneys
control over settlement by requiring the attorneys approval or by
requiring the client to accept an offer that the attorney
considers favorable.11 Because these cases rest their outcomes on
the personal nature of the right to settle, they do not consider
it relevant to inquire into how clients choices might affect the
economic interests of their attorneys. For example, in Mattioni,
Mattioni & Mattioni, Ltd. v. Ecological Shipping Corp., a law
firm sued a former client based on a provision in its fee
agreement stating that the client agrees not to compromise its
suit without its attorneys consent after the client negotiated a
settlement without the firms involvement.12 The United States
District Court held that despite the firms reasonable expectation
of a very substantial fee for its work on the clients behalf, the
consent provision of the fee agreement violated public policy and
could not support the firms claims against its former client.13
The court went on to observe that if the clients actions unfairly
deprived the attorney of a reasonable expectation of
compensation, the attorneys proper remedy would not be to enforce
the void fee agreement but rather to seek recovery of the
reasonable value of services rendered under a theory of quantum
meruit.14
Also relevant are cases declining to enforce fee
agreements that interfere with the clients analogous right to end
the attorney-client relationship.15 In confirming that this right
belongs exclusively to the client, courts have invalidated not
only agreements that directly restrict the clients ability to
exercise the right, but also agreements that use mechanisms such
as nonrefundable retainers16 to discourage exercise of the right
by burdening it indirectly.17 As the New York Court of Appeals
stated in In re Cooperman, an attorney disciplinary case, the
problem with special nonrefundable retainers is that they alter[]
and economically chill[] the clients unbridled prerogative to
walk away from the lawyer.18 The court added that to answer that
the client can technically still terminate misses the reality of
the economic coercion that pervades such matters.19
In their treatise, The Law of Lawyering, professors
Geoffrey C. Hazard, Jr. and W. William Hodes conclude that the
pressure inherent in convertible fee agreements makes them
unacceptable. Describing an analogous fee-conversion provision,
albeit one triggered by a clients decision to reject a settlement
offer, they write:
Even if an adequately counseled client had
agreed in advance to such an arrangement, it
probably could not stand in the face of Model
Rule 1.2(a) and Restatement 22, which
allocate decisions as to settlement to the
client . . . . Although a lawyer can and
should forcefully argue against rejection of
an offer that ought to be accepted, she
cannot use this form of economic coercion to
force the issue.[20]
A number of bar association ethics opinions support
this view, ruling that conversion agreements are invalid if they
change contingent fees to hourly fees when a client wishes to
accept a settlement that the attorney thinks is inadequate. The
State Bar Professional Ethics Committee of Wisconsin has written,
after describing such an agreement:
In that situation, it would be improper
for the lawyer to attempt to charge on an
hourly basis. If the lawyer were permitted
to charge on an hourly basis, the client, to
some extent, loses control of his case as he
or she would face the choice of a lawyers
bill he cannot afford and a lawsuit which he
or she doesnt want to pursue. Moreover, the
large attorneys fees which are generated by
the contingent fee can only be justified
because of the risks the lawyers must bear of
not making an adequate recovery to cover his
or her time in certain cases. The clients
desire to accept a less than satisfactory
settlement offer is an inherent part of that
risk. To suggest a lawyer can have it both
ways with the use of the proposed clause is
not acceptable to the committee.
Therefore, to include the proposed
language in the contingent fee contract so as
to permit charging a client on an hourly
basis if the lawyer deems a settlement offer
inadequate, is, in the opinion of the
committee, overreaching and, therefore,
unethical.[21]
The Nebraska State Bar Associations ethics committee
reached a similar conclusion:
It is the opinion of the Committee that
a contractual agreement whereby a client
electing to settle a case for an amount less
than the amount which the attorney believes
is the reasonable value of the case, may be
charged an hourly fee, instead of the
contingent fee otherwise agreed upon, unduly
restricts the clients ability to accept
settlement offers and may result in excessive
charges. Such a contractual provision is not
permissible.[22]
And the Ethics Committee of the Colorado Bar
Association has similarly indicated that a contingent fee
agreement that converts to an alternate fee if the client settles
a claim (or refuses to accept a settlement) contrary to the
attorneys advice is void.23
The case at bar exemplifies the tensions created by the
structure of hybrid agreements like the one used by Kittleson.
Under a pure contingent-fee agreement, the Nelvises would have
recovered approximately $15,000 from Cream Puffs $25,000 offer
only slightly less than the price they paid for the used car.
But under the fee-conversion provision, Kittlesons fees, when
calculated at the agreements hourly rate, exceeded the amount of
Cream Puffs offer, leaving the Nelvises with less than nothing:
under the hybrid agreement, accepting the offer would have
triggered the conversion from contingent to hourly fees, thus
obliging the Nelvises to pay Kittleson more than $30,000 in fees
while giving them only $25,000 to satisfy the new obligation.24
The impact of this fee surprise is compounded by the
predictable difficulty of forecasting the effects of the fee-
conversion provision. Given the number of variables involved
the merit and strength of the clients claims, the probable timing
and size of a settlement offer, and the work required to achieve
settlement it seems unrealistic to expect that prospective
clients like the Nelvises would be able to appreciate the risks
and benefits of the disputed fee provision. It seems unlikely,
too, that the attorney-client agreement between Kittleson and the
Nelvises, with a single sentence devoted to the fee-conversion
provision, satisfies an attorneys duty to fully explain the terms
of a fee agreement in such a way that the client can understand.25
In defense of his agreement, Kittleson argues that
attorneys fees are a constant pressure in almost any litigation
and quite often influence settlement decisions. Kittleson also
contends that the Nelvises would have been in exactly the same
position had they entered into a traditional hourly fee
agreement. While it is true that the costs of litigation often
influence strategy, Kittlesons response ignores a key distinction
between a convertible fee agreement and one based on straight
hourly fees: the delayed impact of actuating a springing
obligation to pay for work already performed but never before
chargeable to the client. Because the potential cost of a future
obligation of this kind and the potential value of the right the
client is asked to forgo to avoid the obligation are both largely
incalculable at the inception of the attorney-client
relationship, when the fee agreement is signed, we conclude that
the fee-conversion provision at issue here impermissibly burdens
the clients right to settle a case.
Kittleson nonetheless defends the convertible fee
agreement as justified on public policy grounds. He notes that
Alaskas consumer protection laws are designed to encourage the
use of private damages actions as a means of curtailing unfair
trade practices.26 He further notes that, to encourage attorneys
to handle such cases, Alaska law also authorizes an award of full
reasonable attorney fees at the prevailing reasonable rate when
the client wins a claim at trial.27 According to Kittleson, then,
to give full effect to the legislative intent, the attorney must
be allowed to include an hourly component to a standard
contingent-fee agreement in order to promote the attorneys
ability to earn full fees. It is not the law or an ethical canon
that an attorney must work for free, Kittleson reasons, and
because the Legislature wants to encourage private enforcement
and representation . . . it is imperative that attorneys in the
consumer protection arena be allowed to utilize fee agreements
that lead to adequate compensation.
Moreover, Kittleson alleges systematic abuses in such
cases by defendants who use a divide and conquer strategy that
aims to encourage early settlement by clients for modest sums,
while driving up unrecoverable costs to their attorneys.
Kittleson suggests that a hybrid hourly fee provision like the
one he uses is justified as a response to these abuses; he
asserts that as matters currently stand, it is difficult for
consumers like the Nelvises to find attorneys willing to handle
small unfair practices claims.
Although Kittleson offers no support for his claim that
a shortage of willing attorneys exists, we readily accept his
premise that the attorneys fees provisions of Alaskas consumer
protection laws were designed to encourage attorneys to handle
consumer protection complaints, even when they are small. Yet
the policy of encouraging attorneys to participate in these cases
subserves the Consumer Protection Acts overarching goal of
encouraging small consumer protection claims. It hardly follows
that this broader policy goal would be served by a fee agreement
enabling attorneys to compromise the procedural rights of their
clients the parties whose rights the law ultimately strives to
promote. To the contrary, it would seem anomalous to encourage
the successful resolution of consumer rights claims by adopting a
practice designed to penalize the claimant for accepting a
reasonable offer to settle. In light of the ethical and
practical dangers posed by the hybrid agreement, then, we think
that Kittlesons policy arguments lack merit.
IV. CONCLUSION
We conclude that the type of hybrid-fee agreement
disputed here is prohibited under the Alaska Rules of
Professional Conduct and other provisions of Alaska law because
of its potential to restrict a clients exclusive right to accept
or reject an offer of judgment. We therefore REVERSE the
superior courts order dismissing Comptons complaint and REMAND
for entry of summary judgment in favor of Compton.
_______________________________
1 In response to questions raised by the judge and the
opposing counsel in the bankruptcy matter, Kittleson explained
that he had added the fee-conversion provision to his standard
contingent-fee agreement after a client in an earlier consumer
protection case had decided to settle before trial, thus
preventing Kittleson from recovering a statutory award of
attorneys fees under the Consumer Protection Act. While the
settlement left his client satisfied, Kittleson noted, the
contingent-fee share of the recovery yielded just $2,500 for a
case in which Kittleson had invested roughly $16,000 worth of his
time. The bankruptcy judge authorized the trustee in bankruptcy
to enter into the fee agreement with Kittleson, noting that
actual fees would have to be approved by the court at the time of
any settlement.
2 See AS 45.50.537.
3 In re K.A.H., 967 P.2d 91, 93 (Alaska 1998) (citing
Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979)).
4 See Alaska R. Prof. Conduct 1.5(a).
5 Alaska R. Prof. Conduct 1.5(c) (emphasis added).
6 State, Pub. Employees Ret. Bd. v. Cacioppo, 813 P.2d
679, 685 n.14 (Alaska 1991).
7 See, e.g., City of Burlington v. Dague, 505 U.S. 557,
560 (1992) (Fees for legal services in litigation may be either
certain or contingent (or some hybrid of the two).); Gilbert v.
Evan, 822 So. 2d 42, 46 (La. App. 2002) (There is no law
prohibiting this hybrid contingency fee contract nor has any
court declared such contracts invalid because they are against
public policy.). But cf. Neal v. Bavarian Motors, Inc., 882 A.2d
1022, 1032 n.12 (Pa. Super. 2005) (The absence of any provision
in the [Pennsylvania Rules of Professional Conduct] for hybrid
agreements suggests that such agreements, while perhaps
permissible, should be closely scrutinized.).
8 Ann. Model Rules of Profl Conduct R. 1.2 legal
background at 16 (4th ed. 1999).
9 Restatement (Third) of the Law Governing Lawyers 22
cmt. d (2000).
10 Charles W. Wolfram, Modern Legal Ethics 4.6.2 (1986).
11 See, e.g., Mattioni, Mattioni & Mattioni, Ltd. v.
Ecological Shipping Corp., 530 F. Supp. 910, 913 (E.D. Pa. 1982);
In re Lansky, 678 N.E.2d 1114, 1116 (Ind. 1997); Parents Against
Drunk Drivers v. Graystone Pines Homeowners Assn, 789 P.2d 52, 55
(Utah App. 1990); Butler v. Young, 2 S.E.2d 250, 251 (W.Va.
1939). But see Ramirez v. Sturdevant, 26 Cal. Rptr. 2d 554, 561
(Cal. App. 1994) (holding that term in supplemental retainer
agreement requiring client to accept settlement offer of $150,000
or more did not breach attorneys fiduciary duty to client).
12 Mattioni, 530 F. Supp. at 912.
13 Id. at 912-14.
14 Id. at 914.
15 Alaska R. Prof. Conduct 1.16(a)(3); Restatement (Third)
of the Law Governing Lawyers 31 cmt. d (A client and lawyer
cannot validly enter a contract forbidding the client to
discharge the lawyer.).
16 Some courts refer to such agreements as special
retainers to distinguish them from generally permissible
nonrefundable fees that are paid in exchange for an attorneys
promise to be available to perform legal services during a
specified period of time. See Wong v. Michael Kennedy, P.C., 853
F. Supp. 73, 79-80 (E.D.N.Y. 1994); In re Cooperman, 633 N.E.2d
1069, 1070 (N.Y. 1994); Cuyahoga County Bar Assn v. Okocha, 697
N.E.2d 594, 597 (Ohio 1998) (nonrefundable retainers appropriate
only when used to make lawyer available or preclude lawyer from
providing services to clients competitor).
17 See, e.g., Wong, 853 F. Supp. at 79-80 (nonrefundable
retainer requiring client to pay $225,000 for specified services
invalid); AFLAC, Inc. v. Williams, 444 S.E.2d 314, 316-17 (Ga.
1994) (damages clause of retainer agreement providing monetary
penalty in event that client prematurely terminated multi-year
retainer invalid as unreasonable infringement on clients right to
discharge attorney); In re Cooperman, 633 N.E.2d at 1072-73
(divorce lawyer disciplined for routinely charging $5,000
nonrefundable retainer).
18 In re Cooperman, 633 N.E.2d at 1072.
19 Id.
20 1 Geoffrey C. Hazard, Jr. & W. William Hodes, The Law
of Lawyering 8.15 (3d ed. Supp. 2003). We note that this
discussion of convertible fee agreements did not appear in the
edition of Hazard and Hodes that was in circulation at the time
that the fee agreement in this case was made.
21 Wis. State Bar Profl Ethics Comm., Formal Op. E-82-5
(1982).
22 Neb. State Bar Assn Lawyers Advisory Comm., Formal Op.
95-1 (1995).
23 Colo. Bar Assn Ethics Comm., Formal Op. 100 (1997).
24 While Kittleson did offer to reduce his fees to
$22,000, allowing the Nelvises to recover $1,500 after repayment
of costs, this limited, post-offer-of-judgment concession does
not alter the analysis of whether the hybrid agreement was
legally valid at the time it was made.
25 See Restatement (Third) of the Law Governing Lawyers
18 cmt. d. (In entering a contract at the outset of a
representation, the lawyer must explain the basis and rate of the
fee . . . and advise the client of such matters as conflicts of
interest, the scope of the representation, and the contracts
implications for the client . . . .) (emphasis added).
26 See AS 45.50.531.
27 AS 45.50.537.
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