Hot on the heels of a billionaire who didn’t understand his settlement comes the widow of a fantastically wealthy real estate developer who also didn’t understand her fee agreement or her settlement:
A 40 percent contingency fee negotiated by a Manhattan law firm retained by the widow of a real estate developer involved in a multimillion-dollar estate dispute was not “unconscionable on its face,” an appeals court ruled yesterday.
The court said that “at first blush,” the 40 percent fee — worth about $42 million — that was claimed by the law firm, Graubard Miller, from Alice Lawrence, the 83-year-old widow of the real estate developer Sylvan Lawrence, “might arguably seem excessive and invite skepticism.”
But a majority of the five-member panel of the court, the Appellate Division of State Supreme Court in Manhattan, ruled that whether the fee was reasonable should be determined at a trial, based on a further exploration of the discussions that led to the fee agreement and the difficulty of the case.
Like I said before, plenty of lawyers take advantage of their clients. But who could Ms. Lawrence — who is certainly surrounded by dozens of advisers — not recognize the consequences of a 40% contingent fee agreement and then the subsequent settlement?
Let’s look at how “reasonable” the fee is:
In a dissent, one justice, James M. Catterson, called the fee “exorbitant.” He said that the retainer agreement was signed when a $60 million settlement offer was already on the table.
The estate was settled just five months later for more than $100 million, the judge said, meaning that the law firm’s fee was almost equal to the additional amount it won.
Read that carefully. Apparently, due to the firm’s involvement, Ms. Lawrence will now receive the full amount of the original settlement offer, as opposed to $60 million minus a third or 40% or whatever her original agreement was. Is that unreasonable?
Back to the point: Ms. Lawrence obviously had the funds available to hire a large corporate firm on an hourly (or flat fee) basis, and to pay all costs of the litigation herself upfront. In so doing, she would have borne all the risk of spending enormous sums of money without a guaranteed return. Instead, she contracted with a firm to bear all of that risk; within five months, it had achieved a result with which she was content.
Maybe there’s some mischief not identified by these stories; maybe she’s mentally impaired and the firm took advantage of her. That would be a different story. As it looks now, an extraordinarily wealthy and well-advised businesswoman decided to give up a chunk of her recovery in order to avoid the risk of no (or little) recovery, and now wants more because it turned out the case wasn’t as risky as she thought.