Wednesday, October 16, 2002
C.A. Limits Lawyer to Fees Authorized by Voided Contract
By a MetNews Staff Writer
A lawyer who entered into an unenforceable oral agreement with a family law client is limited to the hourly rate specified by that agreement, the Court of Appeal for this district ruled yesterday.
Div. Seven, in an unpublished opinion by Justice Dennis Perluss, affirmed a judgment awarding $55,000 to Beverly Hills attorney David S. Karton and rejected Karton’s claim he is entitled to an additional $70,000 to reflect the reasonable value of his services to Nanette Mooney.
Mooney is the ex-wife of an Air New Zealand employee. In the underlying divorce action, initiated in 1992, Karton obtained a division of property including an order requiring Mooney’s husband to pay nearly $24,000 in equalization and more than $21,000 to satisfy student loan obligations for which Mooney had accepted personal liability.
At the time of the judgment, Karton had billed approximately $60,000 in fees, at the rate of $250 per hour, pursuant to an oral agreement. About $50,000 of that remained unpaid.
The case turned complicated in 1995 when Mooney transferred to a position in New Zealand and stopped making payments. Karton obtained an earnings withholding order, but Air New Zealand insisted that New Zealand law—which does not recognize wage garnishments—applied and did not withhold earnings.
Karton then joined the airline as a party to the divorce proceedings and proceeded to litigate the choice-of-law issue. In the course of the litigation, which turned quite complex, he obtained two interim awards for fees and costs totaling more than $77,000.
Eventually, the airline paid the interim awards and agreed to settle the entire claim for another $72,500, including attorney fees and costs incurred subsequent to the second interim award. But Mooney, who claimed that Karton was pressing the litigation for his own benefit rather than hers, fired him and hired a new lawyer to finalize the settlement.
Karton sued Mooney in 1999, claiming she still owed him more than $53,000 in attorney fees. Mooney responded that, among other defenses, the oral agreement was invalid because none of the exceptions to the State Bar Act’s requirement of a written agreement applied.
Karton then amended the complaint, increasing the amount of his claim to nearly $124,000. He testified at trial before Los Angeles Superior Court Judge James Endman that the increased claim reflected an increase in his normal hourly billing rate from $250 to $350 in 1997, and presented expert testimony that his services were worth between $350 and $400 an hour, based on the rates charged by attorneys of comparable skill and experience.
Endman found that Karton spent more than 500 hours on the litigation, and agreed that “the norm” for an attorney of comparable skill engaged in similarly complex litigation would be at least $350 an hour. But he said it would be “unconscionable” to allow the attorney to collect fees well in excess of those orally agreed to.
On appeal, Perluss said the request for higher fees was not unconscionable, but that limiting the fees to the quoted rates was reasonable given the totality of the circumstances.
He noted that the rate originally agreed to was Karton’s normal rate at the time, rather than a discounted rate; that Karton never notified Mooney he intended to charge a higher rate and continually billed her at the quoted rate, even after he was fired; and that Karton had originally pled the reasonable value of his services as being slightly more than $53,000.
“A fiduciary who violates his obligation to obtain a written fee agreement with his client cannot stand in a better position than one who honors that responsibility, particularly when asserting a claim against his former client based on notions of equity and fairness,” the justice wrote.
“It was, of course, precisely this concern for fundamental fairness arising from Mooney’s lack of knowledge of, or consent to, Karton’s post hoc attempt to raise his hourly rate that led the trial court to limit Karton’s recovery to the original $250 hourly figure. Although we disagree with the trial court’s rationale, we affirm its ultimate conclusion.”
A higher fee award might be in order, Perluss went on to suggest, had Karton obtained a better result for his client. As it turned out, the justice noted, the lawyer billed a total of $143,000—not counting the additional $70,000 he was seeking by way of the amended complaint and the appeal—of which $60,000 was for the post-judgment litigation that ultimately produced no more than $25,000 for Mooney.
Attorneys on appeal were David B. Bloom, Shelley M. Gould and James E. Adler of the Law Offices of David B. Bloom for Karton and Ada P. Sands and Vincent S. Gannuscio of Sands & Associates for Mooney.
The case is Law Offices of David S. Karton v. Mooney, B154064.
Copyright 2002, Metropolitan News Company