Panel overrules judge who cut attorney fees in wrongful death settlement

A superior court judge erred when he slashed a victorious attorney's fees from 31 to 10 percent in the settlement of a wrongful death lawsuit, an appeals panel ruled.

Ian Herzog of Herzog, Yuhas, Ehrlich & Ardell APC argued before a 2nd District Court of Appeal panel on June 26 that Los Angeles County Judge William F. Fahey unreasonably cut his fees, using California Rules of Court 7.955, which grants judges wide latitude to tailor fees payable from awards for the benefit of minors.

Herzog settled a case in which a plane accident killed a pilot and the father of two adult and four minor children, two of whom were disabled from birth. The mother of the four minors, Silke Schulz, negotiated a contingency agreement with Herzog that would split the recovery between her and her children with a 31 percent fee.

Fahey, in his statement of decision, allotted $1 to the widow which was subject to the agreement and the remainder of the $18.1 million to the children and cut the attorneys' percentage to 10, citing the children's future medical needs.

In the unpublished opinion, Justice Frances Rothschild wrote that one factor was not enough to justify the low fees when taking into account the difficulty of the case and the arms-length good faith nature of the contingency agreement.

"This single factor, however, cannot overwhelm all other considerations. Indeed, an overly strong emphasis on the client's medical needs when determining attorney fees could have the perverse effect of reducing access to the courts to the neediest," Rothschild wrote in the opinion, released Wednesday.

"If attorneys know that courts are likely to drastically reduce their contingency fee awards irrespective of the other considerations in California Rules of Court, Rule 7.955, it will be difficult or impossible for those most in need to find qualified attorneys to handle their cases," the justice wrote.

Justices Jeffrey W. Johnson and Helen I. Bendix joined Rothschild in the decision.

"It would be nice for lawyers to know that they can feel they will be fairly compensated, to encourage good lawyers to take tough cases on behalf of minors and disabled adults, for them to know that the rules and the courts will respect fairly entered into contingency agreements," said Herzog. "Without that, the courthouse doors are locked."

Herzog said that he intends to challenge Fahey on remand, and get the case in front of a different judge. Despite the original agreement with his client laying out a 40 percent fee, he said he will adhere to the 31 percent he agreed to when the case settled.

2nd District Court of Appeal Justice Frances Rothschild

"I made a commitment before all this happened with Fahey that I would reduce it to 31 percent, and I will abide by that. I want the court to do the same," he said.

Herzog also pointed out, as did the appellate panel, that the case was turned away by "high-profile, competent, prestigious" lawyers, and that he alone saw merit in it.

Plaintiffs' attorneys have said fee slashing under Rule 7.955 is a pervasive issue. They attribute it to misguided judges who do not understand the business realities and risks under which contingency fee lawyers work.

"[Fahey] looked at one issue, how profoundly injured the children were and what their future needs were and he dipped into the attorney fees to give more to the children, thinking that was his responsibility," said Bruce Brusavich of Agnew Brusavich. "It's extremely dangerous in sending a signal to lawyers not to take an injured child's case over an adult's because you don't know what the reward is going to be."

The opinion also notes, as Herzog did in his arguments, that the contingency agreement's legitimacy is further bolstered by the fact it was negotiated with the children's mother, who was aided by attorneys.

"The justices conceded that the retention agreement was exceedingly fair, negotiated at arms length and reasonable," Brusavich commented.

Brusavich is a past president of the Consumer Attorneys of California, which submitted an amicus brief in support of Herzog. The brief was authored by attorney Gretchen Nelson.

Paul R. Kiesel of Kiesel Law, who also submitted a brief supporting Herzog, joined Herzog and Brusavich in saying the opinion provides valuable guidance on the application of Rule 7.955 and should have been published. "It's helpful and instructive. The court needs to look at the lawyer, their experience, the nature of the contingency contract entered into with the client, and that it's a contingency so there is risk associated with it," he said.

"There's no doubt that the court plays an important role between the minor or incapacitated adult and the attorney to make sure it's a fair and appropriate agreement, but what was being charged here was a commercially responsible rate. It was a case that was full of risk, so this really affirms that plaintiff attorneys can be comfortable taking the risks they do in contingency cases," he said.

Harry W.R. Chamberlain II of Buchalter argued against Herzog on behalf of Silke Schulz and her children, and did not respond to a request for comment.