X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The New York Court of Appeals has been asked to resolve uncertainty over the state of the law on client ratification of allegedly unconscionable attorney fee arrangements. In a case involving a fight between a former member of the rock band Lynyrd Skynyrd and his attorney, the 2nd U.S. Circuit Court of Appeals has asked the state’s highest court to resolve several questions, including whether it is even possible for a client to ratify an unconscionable fee agreement. The dispute in King v. Fox, 04-0815-cv, has its origins in 1975, when band member Edward King left the group during a concert tour and then consulted a New York attorney about obtaining his royalties for songs he co-wrote as well as his artist’s royalties. Attorney Allen Grubman secured an advance on some of King’s writer’s royalties and then referred King to his former law school classmate, Lawrence A. Fox, a litigator who specialized in personal injury cases. With King telling the attorney he was in “dire financial straits and had no money for a retainer,” Fox arranged for contingency fee representation. The nub of the dispute is that Fox believed he was entitled to one-third of all of King’s past and future royalties and King believed the arrangement only covered past royalties. Once a tentative settlement on the royalty issue was reached in 1978, King said he was “shocked and surprised” to learn that attorney fees would be deducted from future royalty payments. Nonetheless, he claimed he went along with the arrangement under pressure from Fox and because he badly needed the money. Fox went on to represent King in other matters, including a dispute in the late 1980s between the estates of former band members in federal court in Atlanta. He also represented King in a matter in New York, settled in 1989, with MCA Records Inc. over artists’ royalties on songs to which King contributed guitar parts before he formally joined the band in 1971 — royalties that both King and Fox agreed were covered by the original retainer agreement. King claims the lawyer told him in 1986 that a court order issued in the lawsuit obligated King to pay a one-third contingency fee, an allegation denied by Fox. All told, Fox collected $527,000 in fees. Over $104,000 of this amount were fee payments from the two settlements, with $368,000 coming from King’s artist’s royalties and $55,000 from his writer’s royalties. King sued in 1997 claiming the fee arrangement was unconscionable. He also claimed breach of fiduciary duty, unjust enrichment, undue influence, conversion and attorney misconduct. Fox counterclaimed for artist’s royalties withheld by King since 1995. A district court granted summary judgment against King in 1999. While his appeal was pending, a trial was held before a magistrate judge on Fox’s counterclaim. King prevailed on the counterclaim. He also had reason for optimism when the 2nd Circuit vacated and remanded the district court’s 1999 summary judgment ruling, But on remand, the district court again granted summary judgment, finding that King had ratified the agreement and also finding that his claim was barred by laches. The judge also rejected King’s argument that the fee arrangement was unconscionable. His appeal was decided by a panel of Southern District of New York Judge Michael Mukasey, sitting by designation, and 2nd Circuit Judges Guido Calabresi and Barrington D. Parker. Writing for the court, Mukasey said King had claimed he could not have ratified the fee agreement because Fox had lied to him when he said the contingency fee agreement was mandated by court order. Mukasey said it was up to the circuit to decide whether King ratified the fee agreement, “either before or after the alleged fraud occurred.” FEE AGREEMENT STANDARDS “If this were a typical contract case, King’s eight years of acquiescence in the agreement with full knowledge of its terms between 1978 and 1986 would be enough under New York law to show he ratified the agreement,” Mukasey said. “However, attorney’s fees agreements have been held to different, and often higher, standards than ordinary contracts.” Mukasey said that under the “continuous representation doctrine, the statute of limitations for a client’s malpractice suit against his attorney is tolled until the attorney-client relationship is completed.” But New York courts, he said, “have not spoken definitively on whether a client may ratify an attorney-client agreement during a period of continuous representation, either generally, or if fraud has occurred during that period.” Here, he said, the circuit has already held that there was an attorney-client relationship in effect until at least 1991, “if not later,” and King “alleges that he did not learn of Fox’s misconduct until 1997 when he consulted with a new attorney. King filed this action less than four months after learning that Fox could not have been telling the truth about the alleged court order.” The problem, Mukasey said, was that “at least one court has held that an attorney’s fee agreement, even when induced by fraud, may be ratified when the client accepts benefits under that agreement.” This left the 2nd Circuit to ask the state Court of Appeals to resolve its first question: “Is it possible for a client to ratify an attorney’s fee agreement during a period of continuous representation?” Next, the circuit asked, “Is it possible for a client to ratify an attorney’s fee agreement during a period of continuous representation if attorney misconduct has occurred during that period? If so, can ratification occur before the attorney has committed the misconduct?” The third question — “Is it possible for a client to ratify an unconscionable attorney’s fee agreement?” — arose because of ambiguity and conflicts in the case law. While “several old New York state cases indicate that an unconscionable or otherwise voidable agreement may be ratified,” Mukasey said, “none of the above cases concern attorney-client agreements, and other courts have held that unconscionability voids an agreement, making ratification impossible, especially in the attorney-client or fiduciary context.” If the Court of Appeals chooses to accept the certified questions, it will be the fourth case this year in which it has done so. Fred R. Profetta Jr. of Profetta & Eisenstein represented King. Richard M. Maltz represented Fox.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.