Fees Due for ‘Unauthorized’ Settlement Signed After Firing

Friday, January 9, 2026

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Court of Appeal:

Fees Due for ‘Unauthorized’ Settlement Signed After Firing

Opinion Says Client’s Signature on Agreement, Negotiated by Firm Without Client’s Consent, After Hiring New Counsel, Entitled First Lawyers to More Than $2.7 Million as Agreed-Upon 45% of Recovery

By Kimber Cooley, associate editor

Div. Five of this district’s Court of Appeal held yesterday that a law firm was properly granted summary judgment as to its entitlement to receive more than $2.7 million in fees—under a retainer contract providing the attorneys with the right to 45% of any recovery—after it negotiated, without the client’s express authorization, a settlement of more than $6 million, which the party only signed after firing the lawyers and hiring new counsel.

Rejecting the assertion that the client had raised a triable issue of material fact by claiming that he signed the settlement proposal because he was left with “no choice but to agree to move forward to finalize the settlement” after it had been negotiated, the court said the fact that he could have demanded to go to trial on his claims gutted his allegation that his signature was involuntarily obtained even if a favorable recovery after trial was unlikely.

Presiding Justice Brian M. Hoffstadt authored yesterday’s opinion, joined in by Justice Carl H. Moor and retired Los Angeles Superior Court Judge Sanjay Kumar, sitting by assignment, declaring:

“If a [client] ratifies an unauthorized settlement after terminating the [attorney], does that ratification obligate the [client] to pay the attorney their previously agreed-upon contingency fee?...Because the client…had the option of rescinding the settlement agreement due to lack of consent, and…did not have to…execute…to avoid a loss, the client did not carry his burden on summary judgment of raising any triable issues of material fact as to whether his ratification of the settlement agreement was truly voluntary.”

Freeway Collision

The question arose after Christopher Chong engaged the Los Angeles-based personal injury law firm of Mardirossian Akaragian LLP to represent him in a lawsuit arising out of a May 6, 2016 incident in which Chong, while under the influence of benzodiazepines and amphetamines, stopped his Porsche 911 in the fast lane of the 134 Freeway in Burbank at 4:20 a.m., put his car in park, and fell asleep. He was struck by a truck less than 10 minutes later.

He suffered catastrophic injuries, including severe brain damage. Acting through his mother and stepfather, Harry Sloan, he filed a complaint in May 2018.asserting strict liability claims against Porsche AG as well as negligence causes of action against the truck driver, Jose Guzman Figueroa, and his employer, Sharpe Interior Systems Inc.

Chong’s retainer agreement with the law firm provided that the attorneys would represent the plaintiff only until “settlement or judgment is reached” and provided for a contingency fee of 45% of the plaintiff’s gross recovery.

By May 2022, Porsche had been dismissed as a defendant and liens, filed by insurers to secure payment for medical bills, totaled over $2.8 million. After mediation between the parties was unsuccessful, the firm continued to negotiate with Sharpe to try to obtain a settlement.

Lawyers’ Agreement

On May 19, 2022, lawyers for Sharpe agreed in principle to resolve the case for just over $6 million. Although the plaintiff had earlier offered to settle for that amount, he did not specifically authorize the settlement at that time.

Sloan asked Eric George of the Los Angeles office of Ellis George LLP to look over the proposal, and he recommended that the plaintiff not sign because, after the payment of outstanding liens and the contingency fee, the residual amount left “does precious little” for the family. In July 2022, Chong sent the firm a letter terminating the attorney-client relationship, and George was substituted in as his lawyer on the case.

The following month, the plaintiff accepted the settlement agreement after Sharpe and the driver filed a motion to enforce it or continue the trial. On April 4, 2023, Chong filed suit against the firm, the insurers, and others, seeking a judicial determination as to what portion of the settlement the defendants were entitled to receive.

Mardirossian Akaragian LLP filed cross-complaints seeking the full amount of the contingency fee.

The insurers agreed to settle the liens for an aggregate recovery of approximately $580,964. On March 26, 2024, Los Angeles Superior Court Judge Bruce G. Iwasaki granted summary judgment in favor of Mardirossian Akaragian, awarding the firm more than $2.7 million in attorney fees plus $522,770.90 in prejudgment interest, leaving the plaintiff with about $2.15 million of the funds from the settlement.

Ratification of Unauthorized Act

Hoffstadt said:

“A principal’s ratification of his agent’s prior, unauthorized act not only binds the principal to the legal consequences of that act vis-à-vis third parties who relied on the agent’s act, but can also exonerate the agent from liability to the principal for the agent’s breach of duty in engaging in the unauthorized act in the first place. Ratification exonerates the agent from liability only when that ratification is ‘truly voluntary’—that is, when the principal, having ‘complete knowledge of the transaction [and] the power to rescind,’ nevertheless ‘fail[s]’ to rescind and thereby ‘full[y] accept[s]’ the prior act as his own.”

Applying those principles, the jurist opined:

“[T]he firm bore the initial burden of establishing a ‘truly voluntary’ ratification that would exonerate it of liability for its unauthorized act of entering into the settlement agreement with Sharpe. The firm carried this burden. It is undisputed that plaintiff in August 2022 expressly and explicitly adopted the settlement agreement. It is also undisputed that plaintiff, at that time and with the assistance of able counsel, knew that he could oppose Sharpe’s motion to enforce the settlement agreement and thereby rescind it, failed to do so, and instead opted to fully accept the agreement’s benefit of a more than $6 million payout.”

Triable Issue

Saying that the “burden thus shifted to the plaintiff to adduce evidence raising a triable issue of material fact,” he remarked that the party’s “conclusory” declaration that he had “no realistic alternative” but to approve the settlement was “insufficient.” He opined:

“[P]laintiff argues that the firm wrongfully refused to take his case to trial in violation of the retainer. But even if we ignore that the evidence in the record shows that the firm, prior to being discharged by plaintiff, urged plaintiff to accept the settlement but at no point explicitly stated it would not represent him at trial (and at worst declined to state whether it would repudiate the retainer by declining to represent him at trial), plaintiff’s argument at most establishes that the firm ‘threaten[ed] nonperformance of [its] contract[ual]’ duty…for which plaintiff retained the adequate legal remedy of rescission, neither of which is enough to constitute duress.”

Hoffstadt added:

“Nor did plaintiff accept the settlement agreement to minimize the losses caused by the firm’s unauthorized act. The unauthorized settlement agreement did not cause plaintiff any loss that needed to be minimized; it conferred upon him a $6 million-plus gain.”

The case is Chong v. Mardirossian Akaragian LLP, 2025 S.O.S. 101.

Chong was represented on appeal by George and by Russell F. Wolpert, Keith Joseph Wesley, David Junxiong Carroll, and Alice Holley Gilbert of Ellis George LLP. Acting for Mardirossian Akaragian were lawyers ion that firm—Garo Mardirossian, Armen Akaragian, and Adam Feit—as well as Jeffrey I. Ehrlich of Claremont-based Erlich Law Firm.