Tuesday, November 29, 2016
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Court of Appeal Finds Fee Proviso in Retainer Agreement Unenforceable
By a MetNews Staff Writer
The Court of Appeal yesterday reversed a summary judgment in favor of a law firm in an action for unpaid fees, holding invalid a provision in the retainer agreement that charges not disputed within 15 days are deemed acknowledged.
Div. Three of the Fourth District, in an unpublished opinion by Justice Richard D. Fybel, remanded the case to Orange Superior Court Judge Gregory H. Lewis, who granted judgment on a cause of action for breach of contract in favor of the Anaheim law firm of Cannon & Nelms—referred to in the opinion as “C & N”. The judgment was against its former client St. Andrews Development Corporation, in an amount of more than $390,000.
Fybel wrote:
“C & N did not submit declarations qualifying the invoices as business records under Evidence Code section 1271, verifying as accurate the entries in the invoices, or otherwise describing under oath the professional services rendered, the amount of time spent providing those services, and the attorneys’ billing rates. Rather, C & N relied on a provision in the retainer agreement stating that if St. Andrews did not dispute in writing any billing entry within 15 days of receipt of the bill, ‘all such entries shall be acknowledged as correct, as between us.’ Based on that provision, the trial court granted summary adjudication of the breach of contract cause of action. The court denied the motion as moot as to the other causes of action.
“We conclude the retainer agreement’s 15‑day dispute provision is unenforceable and reverse summary adjudication of the breach of contract cause of action.”
A similar proviso was invalidated in Charnay v. Cobert (2006) 145 Cal.App.4th 170, Fybel pointed out.
But that decision, Cannon & Nelms argued, was inapposite because there, a former client was asserting malpractice and breach of fiduciary duty on the part of a law firm. In the case at hand, no such allegation was put forth either by way of a cross complaint or an affirmative defense, the respondent noted.
“This is a distinction without a difference,” Fybel responded. “The relevant point is that C & N is asserting the 15‑day dispute provision against its former client to foreclose any challenge to the invoices or the entries in them.”
A provision “giving a client only 15 days to dispute what might be long and complicated attorney billings does not comport” with applicable “fiduciary standards,” the jurist said. He continued:
“We do not address whether a much lengthier period of time in which to dispute attorney invoices might be enforceable. At a minimum, a client should be given enough time not only to meaningfully review and analyze attorney billing statements for accuracy, but also to determine whether, in light of the overall representation, the services rendered were necessary or reasonable. For instance, litigation events occurring after a 15‑day window period might show that actions taken by counsel were unreasonable, unnecessary, overbilled, or detrimental to the client’s interest.”
After granting summary judgment on the cause of action based on breach of contract, Lewis declared that the causes of action for account stated and for services rendered were moot, and Cannon & Nelms subsequently dropped them.
“We do not address whether the trial court should have granted summary adjudication of the account stated and services rendered causes of action because C & N dismissed them without prejudice,” Fybel wrote.
The case is Cannon & Nelms v. St. Andrews Development Corp., G052813.
Anthony L. Cannon and Debra K. Cook of Cannon & Nelms sought an affirmance and Roy Z. Silva of Theodora Oringher argued for reversal.
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