Gagnon v. Shoblom

565 N.E.2d 775, 409 Mass. 63

• Court: Massachusetts Supreme Judicial Court
• Decided: January 9, 1991
• Status: Published

Opinions

Nolan, J.

On June 9, 1988, at 1 p.m., a truck operated by Donald Shoblom crashed into a parked trailer, killing Susan J. Thompson and severely injuring Donald Gagnon. Gagnon retained Attorney Alan R. Goodman in pursuit of his claim against Shoblom and Shoblom’s employer, and for his workers’ compensation claim. Gagnon and Mr. Goodman signed a contingent fee agreement in which Gagnon agreed that Mr. Goodman’s compensation would amount to 33’A % of the recovery in his personal injury claim. The entire contingent fee agreement is set forth as an appendix to this opinion.

Mr. Goodman commenced an action and, after extensive discovery and investigation, a structured settlement of $2,925,000 (present cash value) was reached,³ subject to approval by the court under the statute discussed below.

A Superior Court judge conducted a hearing and indicated his approval of the terms of the settlement agreement except the provision for the fee of 33*A% of the settlement, which amounted to $975,000. The judge called this fee unconscionable. There was an evidentiary hearing on the reasonableness of the settlement agreement. Gagnon testified that he voluntarily signed the contingent fee agreement and that he was satisfied that Mr. Goodman had earned his agreed fee. Additionally, a leading member of the bar who specializes in prosecuting personal injury claims for plaintiffs testified as to the reasonableness of the fee. The attorney who defended the action in the case testified as to the impressive work performed by Mr. Goodman. There was no evidence tending to prove that the fee was anything but reasonable.

However, the judge filed a carefully crafted memorandum and order in which he ordered payment of legal fees to Mr. Goodman as follows: “Mr. Goodman handled the case expeditiously and well. He obtained what I consider to be a very fine result. As stated above, he is entitled to handsome compensation.

“Taking those factors into account, as well as Mr. Goodman’s ability and reputation (both of which are good) the demand for his services by others, the time reasonably spent, the expenses reasonably incurred by him and the charges usually made for similar services by others in Western Massachusetts, I am satisfied that the 33VS % maximum rate provided for in his contingent fee agreement should only be applied to the first $300,000.00 of the recovery. A rate of 25 % of the next $1,200,000.00, plus a rate of 20% of all amounts in excess of $1,500,000 would be reasonable. At those rates Mr. Goodman is entitled to an attorney’s fee of $695,000.00, which I consider to be ‘handsome’ compensation. Anything in excess of that amount would be unreasonable and excessive.”

We allowed Mr. Goodman’s request for direct appellate review of the correctness of the judge’s order regarding the fee. We hold that it was error for the judge to disapprove the agreed fee.

In reaching this conclusion, we have examined G. L. c. 152, § 15,⁴ set forth in full in the margin, and S.J.C. Rule 3:05, as appearing in 382 Mass. 762 (1981).

We need not dwell on the validity of the contingent fee agreement per se. It is not an issue; only the amount of the fee is before us and more especially, the authority of the judge in the circumstances of this case to nullify the amount of the fee.

Turning to § 15, we find no support for the judge’s action in this statute. Within the very recent past, and after the judge’s ruling in this case, we spoke to the limits of § 15 in DiMartino v. Quality Indus. Propane, Inc., 407 Mass. 171, 175-176 (1990), where we said that the only purposes of requiring a judge’s approval after a hearing on the merits of the settlement are to make sure that “(1) the employee’s interests referenced in the statute are protected from being disregarded or unfairly dissipated by a settlement entered into by the insurer, and (2) the insurer’s interests referenced in the statute receive similar protection with respect to a settlement entered into by the employee.” DiMartino, supra at 176.

There is nothing in this language which permits a judge to substitute his evaluation of the legal services rendered pursuant to a contingent fee agreement. This case does not involve a dispute between the employee and the insurer arising out of the settlement by the insurer. Nor does this case trench on the insurer’s rights with respect “to a settlement entered into by the employee.” DiMartino controls, and, hence, § 15 does not apply.

Rule 3:05 does not apply because no one is challenging the contingent fee agreement. Gagnon, the client, has intelligently and freely testified that he was satisfied with the amount of the fee.

The courts are not powerless to act in disapproving a fee which exceeds the percentage in the agreement, Matter of Kerlinsky, 406 Mass. 67, 73-74 (1989), a fee to which the client never agreed, see DeSautels, petitioner, 1 Mass. App. 787, 793-795 (1974), or a fee which is plainly unreasonable. On objection by a party entitled to challenge the lawfulness or reasonableness of a fee, a judge has inherent power to act. However, we need not discuss the court’s inherent power in this case because no one is challenging the fee.

Accordingly, an order shall enter approving the entire settlement, including the amount of compensation due to Mr. Goodman under the contingent fee agreement.

So ordered.

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3 The settlement called for immediate cash payment of $800,000 to Gagnon and $50,000 to his self-insured employer to discharge the workers’ compensation lien. The agreement also provides for substantial annual payments to Gagnon for life and deferred payments to Gagnon and his daughter.

4 General Laws c. 152, § 15 (1988 ed.), provides: “Where the injury for which compensation is payable was caused under circumstances creating a legal liability in some person other than the insured to pay damages in respect thereof, the employee shall be entitled, without election, to the compensation and other benefits provided under this chapter. Either the employee or insurer may proceed to enforce the liability of such person, but the insurer may not do so unless compensation has been paid in accordance with sections seven, eight, ten A, eleven C, twelve or nineteen nor until seven months following the date of such injury. The sum recovered shall be for the benefit of the insurer, unless such sum is greater than that paid by it to the employee, in which event the excess shall be retained by or paid to the employee. For the purposes of this section, ‘excess’ shall mean the amount by which the total sum received in payment for the injury, exclusive of interest and costs exceeds the compensation paid under this chapter. The party bringing the action shall be entitled to retain any costs recovered by him. Any interest received in such action shall be apportioned between the insurer and the employee in proportion to the amounts received by them respectively, exclusive of interest and costs. The expense of any attorney’s fees shall be divided between the insurer and the employee in proportion to the amounts received by them respectively under this section. Except in the case of a settlement by agreement by the parties to, and during a trial of, such an action at law, no settlement by agreement shall be made with such other person without the approval of either the board, the reviewing board, or the court in which the action has been commenced after an opportunity has been afforded both the insurer and the employee to be heard on the merits of the settlement and on the amount, if any, to which the insurer is entitled out of such settlement by way of reimbursement, which amount shall be determined at the time of such approval. In the case of a settlement by agreement by the parties to and during a trial of such an action at law, only the justice presiding at the trial shall have and exercise, relative to the approval of such settlement by agreement and to the protection of the rights and interests of the employee, the powers granted in the preceding sentence. Nothing in this section, or in section eighteen or twenty-four shall be construed to bar an action at law for damages for personal injuries or wrongful death by an employee against any person other than the insured person employing such employee and liable for payment of the compensation provided by this chapter for the employee’s personal injury or wrongful death and said insured person’s employees.”