THIBAUT v. Smith and Loveless

576 So. 2d 532, 1990 WL 211346
CourtLouisiana Court of Appeal
DecidedDecember 18, 1990
DocketCA 89 1514
StatusPublished
Cited by12 cases

This text of 576 So. 2d 532 (THIBAUT v. Smith and Loveless) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
THIBAUT v. Smith and Loveless, 576 So. 2d 532, 1990 WL 211346 (La. Ct. App. 1990).

Opinion

576 So.2d 532 (1990)

THIBAUT, THIBAUT, GARRETT AND BACOT
v.
SMITH AND LOVELESS, INC.

No. CA 89 1514.

Court of Appeal of Louisiana, First Circuit.

December 18, 1990.
Rehearings Granted in Part and Denied in Part March 27, 1991.
Writ Denied May 24, 1991.

*533 John Tharp, Baton Rouge, for plaintiff-appellee, Thibaut, Thibaut, Garrett & Bacot.

Jack M. Alltmont, New Orleans, for defendant-appellant, Smith and Loveless, Inc.

Before COVINGTON, C.J., LANIER, J., and VIAL LEMMON,[*] J. Pro Tem.

MARY ANN VIAL LEMMON, Judge Pro Tem.

This appeal involves a dispute between plaintiff attorneys and their client over attorneys' fees.

Smith and Loveless, Inc. (the client) had supplied materials to the general contractor on a public works contract. When the general contractor defaulted, Smith and Loveless employed Thibaut, Thibaut, Garrett and Bacot (the plaintiff attorneys) to represent it in collecting $243,360 from the general contractor's surety.

The attorneys' version of the agreement was that they were employed under a tenpercent contingency fee contract, with a $2,500 retainer and a $125 hourly rate to be credited toward the contingency fee. The client's version was that the employment contract was simply for $125 per hour with no contingency fee agreement, and that the $2,500 was an advance on that hourly fee.

When the surety made the initial payment of $179,883.60, the attorneys deposited the entire amount into their account and remitted ninety percent to the client, retaining a fee of ten percent or $17,988.36. The surety subsequently paid the balance of $63,476.40 and the attorneys remitted the entire amount to the client.

The attorneys then filed suit to recover ten percent of the final payment. The client's reconventional demand requested refund of the amounts originally retained and a judgment limiting the attorneys' fees *534 to $125 per hour for the twenty-six hours the parties concede were spent by the attorneys on the case.

The original trial judge determined that the attorneys had proved the existence of a contingency fee contract by a preponderance of the evidence and were entitled to a fee of $24,336. He rendered judgment in the attorneys' favor for $6,347.64, the difference between the amount initially withheld by the attorneys and ten percent of the total amount of recovery.

On appeal this court held that a fee of $24,336 was "clearly excessive for these professional services" and remanded the case to the trial court with instructions to conduct an evidentiary hearing to determine a reasonable fee. 517 So.2d 222 (1987). The court of appeal did not reach the issue of whether a contingency fee contract had been proved.

On remand, the successor trial judge accepted the original trial judge's credibility determination that the parties had agreed on a contingency fee contract and evaluated the reasonableness of the fee on that basis. He found a fee of $17,988.36 was reasonable.

In order to properly review the trial court's decision it is first necessary to determine whether the contract was for a fixed fee or a contingency fee.[1] Code of Professional Responsibility, DR 2-106(B)(8) specifically mandates a consideration of whether a fee is fixed or contingent. Reasonableness under a contingency fee contract may be different than reasonableness under a fixed fee contract. When the parties have contracted for the method of payment of attorneys' fees, deference must be given to the decision of the parties in exercising contractual freedom, subject to scrutiny of the courts to determine the excessiveness of the contract for attorneys' fees.

A complete evaluation of the dealings between the parties is necessary in order to determine whether the trial court committed manifest error in finding the contract was a contingency fee contract.

When the general contractor defaulted on its obligation to Smith and Loveless, another creditor on the job referred Smith and Loveless to the plaintiff attorneys. The referring creditor had employed these same attorneys at a flat rate of $100 per hour.

On February 28, 1984 Smith and Loveless's representative, Ron Schumacher, spoke to Randy Garrett, the attorney in plaintiff attorneys' firm who was handling the referring creditor's claim. Garrett requested documentation of invoices and sales agreements for his review and evaluation of the case. No fee contract was discussed at this time. Bill Woods, the client's employee, sent the documentation on March 2.

In the first discussion of fee on March 28, 1984 Garrett told Woods about the tenpercent statutory limitation on fees in public *535 works contracts and of the necessity for substantiation of reasonableness.[2] Woods made the following memo of that conversation:

"Mr. Garrett further advised that his firm's fees for handling this matter would be $125.00 per hour and that he would require a $2,500.00 retainer to be returned with the requested affidavit [for the proof of claim form.] I told Randy [Garrett] I would consider the fee arrangement and get back with him."

Woods wrote to Garrett that same day and agreed to employ the firm, forwarding a check for the $2,500.00 retainer and confirming "that your hourly rate for handling this type of legal effort is $125 per hour." Without any further communication to the clients, the attorneys deposited the retainer and began performing legal services.

On April 24, Garrett and Bacot, another attorney in the firm, met with Woods and advised him to withhold filing suit and to consider foregoing interest because "attorneys fees and other costs could far exceed the amount of any interest that would be collected." Bacot and Garrett testified that at this meeting they clearly explained to Woods that they intended to charge a ten percent fee. However, there was no written documentation of such an agreement and Woods flatly denies any such agreement took place and asserts he would have not been authorized to enter into such an agreement because his company's policy was to hire attorneys only on an hourly basis.

The attorneys enjoyed a superior position in insuring the terms of the fee agreement were clearly understood. They could have executed a formal written contract or simply confirmed by letter what agreement had been reached.[3] When they undertook representation after receipt of the March 28 written documentation of an hourly fee without a written disclaimer thereof, they tacitly accepted the hourly rate.

The debt that the attorneys were employed to collect was secured by the bond furnished by the general contractor. The client agreed to waive interest and furnished a completed proof of claim form to the attorneys, who forwarded it to the surety. Immediately upon receipt of the form, the surety approved payment of the entire principal amount, after the client further agreed to defer payment of a portion of the principal ($63,476.90) for one *536 month. The attorneys conceded at trial that "we never anticipated ... that there would be no recovery. The major effort here was the speed of the recovery." The surety's attorney testified that the claim was routine. There are no indications this was the type of employment which traditionally would be subject to a contingency contract. There was no risk undertaken by the attorneys that no recovery would be made.

This record clearly establishes there was not a contingency contract but a contract for a fixed hourly fee.

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Cite This Page — Counsel Stack

Bluebook (online)
576 So. 2d 532, 1990 WL 211346, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thibaut-v-smith-and-loveless-lactapp-1990.