Professional Documents
Culture Documents
McKenzie Construction, Inc. v. Desmond L. Maynard, 823 F.2d 43, 3rd Cir. (1987)
McKenzie Construction, Inc. v. Desmond L. Maynard, 823 F.2d 43, 3rd Cir. (1987)
McKenzie Construction, Inc. v. Desmond L. Maynard, 823 F.2d 43, 3rd Cir. (1987)
2d 43
I.
2
The facts in this case have been extensively detailed in our prior opinion in
McKenzie Constr., Inc. v. Maynard, 758 F.2d 97 (3d Cir.1985) [McKenzie I ],
and for the most part we need not repeat them here. For our purposes, it is
sufficient at this point merely to note that the plaintiff, McKenzie Construction,
4 An attorney bears the burden of proof to demonstrate that his or her fee is
(1)
reasonable, whether the action is initiated by the attorney or client.
5 The applicable standard in an attorney fee dispute is the reasonableness of the
(2)
fee, applying principles of equity and fairness.
6 Consideration should be given to circumstances existing at the time the
(3)
arrangement is entered into, and thereafter, to the quality of the work performed, the
results obtained, and whether the attorney's efforts substantially contributed to the
result.
7 Although reasonableness at the time of contracting is relevant, consideration
(4)
should also be given to whether events occurred after the fee arrangement was made
which rendered a contract fair at the time unfair in its enforcement.
8
courts should be reluctant to disturb contingent fee arrangements freely entered into
9
by knowledgeable and competent parties. Further, a prompt and efficient attorney
who achieves a fair settlement without litigation serves both his client and the
interests of justice. It should therefore be the unusual circumstance that a court
refuses to enforce a contractual contingent attorney's fee arrangement because of
events arising after the contract's negotiation. Nevertheless, the district court must
be alert to fees where "the lawyer's retention of it would be unjustified and would
expose him to the reproach of oppression and overreaching."
10
11
12
We begin by considering, seriatim, whether Maynard's fee should have been set
aside based on events occurring after the arrangement was entered into, the
result obtained, the quality of the work performed, or Maynard's lack of
contribution to the result.
A.
13
McKenzie asserts that although fair in the first instance, its contingent fee
arrangement with Maynard became unfair in its enforcement as a result of an
increase in the total amount of debt McKenzie claimed it owed to its creditors,
from $129,402.27 at the time of the fee arrangement to $161,516.57 at the time
of the settlement. According to McKenzie, Maynard's $65,295 fee left an
insufficient amount of money remaining from the gross $195,887.46 settlement
for McKenzie to pay its alleged $161,516.57 debt, let alone to make a profit.
McKenzie does nothing, however, to dispel the district court's reasonable
finding of fact that the alleged increase in debt, if any, was "significantly
exaggerated." The court stated:
14
[McKenzie's
president, King,] admitted that of the estimated forty-four creditors he
claimed were owed money from the hospital job, very few of them filed any law suit
seeking debt recovery. This fact, combined with our dim view of Mr. King's
credibility, leads us to believe that the list of creditors and the amount of the claims
was significantly exaggerated. It also appears that many of the subcontractors
McKenzie claimed as creditors were probably paid by the government or
McKenzie's successor on the job.
***
15
***
16
17
We believe that King kept puffing up the claims of creditors to obtain a larger
settlement from the government. He then used the same figures to argue against
Maynard's fee of one third of the recovery, claiming it would negate the ability
of McKenzie to pay off all creditors' claims. Other than the list of creditors and
amounts allegedly owed which was prepared by King, McKenzie submitted
virtually no corroboration in support of most creditor's claims.
18
We do not accept the McKenzie claim that Maynard's fee negated the ability to
pay creditors, and we do not find that there were any changed circumstances
after the fee arrangement was agreed upon which would cause us to alter the
reasonable contingent fee.
19
B.
20
McKenzie asserts that Maynard's fee should be set aside as unreasonable based
on the result obtained, because it hired Maynard to achieve reinstatement of the
terminated contract, or in the alternative to recover lost profits, and in the end
Maynard obtained very little beyond what the government had offered from the
beginning. This assertion, however, ignores the government's offer to allow
McKenzie to complete the job; King rejected the offer of reinstatement on the
original terms, and required a large increase in the contract price as a condition
of resuming work. Therefore, it can hardly be said that Maynard failed to
achieve reinstatement of the terminated contract.
21
$5,000 in attorney's fees. The government had previously paid for only 34% of
the work, and although the government conceded that McKenzie had
completed 45-50% of the work, the government showed no intention of paying
more than 34% and had even hinted it might sue McKenzie. "[A] prompt and
efficient attorney who achieves a fair settlement without litigation serves both
his client and the interests of justice."2 McKenzie I, 758 F.2d at 101-02.
C.
22
McKenzie next asserts that Maynard's fee should be set aside as unfair and
inequitable based on the unexceptional quality of the work Maynard performed.
According to McKenzie, Maynard merely carried out "mundane legal chores"
involving nothing more than "debt collection" in a case the government was
"desperate to settle." As the course of the fourteen month long negotiations
indicate, however, the government was far from desperate to settle. Indeed, as
the district court specifically found:
23
Despite counsel's insistence that this was a mere collection case, the evidence
indicates that the possibility of collecting any money for McKenzie would
require overcoming the government's strong resistance. Not to be overlooked is
the further fact that McKenzie's president had antagonized the architect and
various government officials in his approach to their complaints.
24
D.
25
26
[A]fter
a year of prodding and wheedling, he obtained a settlement satisfactory to
McKenzie.
***
27
***
28
He substantially contributed to that result for one very important reason: he knew
29
that he would have to patiently negotiate with the government without going to
court, and without appearing to be anxious to settle.... In this regard, Maynard
pushed the government to the logical settlement limits.
30
Mem.Op. at 5, 8.
31
III.
32
33
conclusion that there was no other possible means of payment, we hold that a
contingent fee was not inappropriate per se.5
IV.
34
Prior to the hearing on remand, McKenzie's counsel took George F.S. Harris's
video deposition for use at trial. Harris apparently testified that certain meetings
in Washington, D.C., which Maynard claimed on his time sheets, never took
place. This put in question both 24 of Maynard's claimed 83 hours and
Maynard's credibility in general. However, the deposition was taken after the
time the district court had set for discovery, and without the presence of
Maynard's counsel. Accordingly, the district court refused to allow the
videotaped deposition to be received into evidence, a decision which McKenzie
does not contest.
35
Rather, McKenzie asserts that "the real issue is whether the trial court abused
its discretion in refusing to grant a continuance...." In support of its argument
that the court did abuse its discretion, McKenzie points to both the importance
of the testimony, and McKenzie's alleged failure to receive notice of the motion
or order prohibiting use of the deposition testimony prior to the January 13
hearing. This argument, however, ignores the district court's finding that
McKenzie failed to offer any valid reason for ignoring the order setting the
time for discovery, and suggestion that the excuses offered were untrue. On
appeal, McKenzie still provides no explanation for failing to earlier depose
Harris.
36
As the district court noted, "[e]quity and fairness is a two-way street.... Equity
and fairness dictate that both sides comply with the order of the court." Had
McKenzie timely deposed Harris, no continuance would have been required.
Further, McKenzie's apparent lack of effort to obtain Mr. Harris's "crucial"
testimony either in connection with the original trial or in the discovery period
ordered prior to the supplemental hearing suggests to us that Harris's testimony
may not have been quite as "crucial" as McKenzie claims. Accordingly, we
perceive no abuse of discretion in the district court's refusal to grant a
continuance.
V.
37
grant a continuance so that the plaintiff could present George F.S. Harris's
testimony.
38
Accordingly, the judgment of the district court will be affirmed.6 Each side will
bear its own costs.
Although not argued separately, McKenzie also suggests that one of the reasons
that Maynard's fee "cannot be tolerated" is that it is "thirteen times the
lodestar." Lodestar analysis, however, does not apply to a contractual
contingent fee agreement. See Dunn v. H.K. Porter Co., 602 F.2d 1105, 111112 (3d Cir.1979). We therefore reject any lodestar analysis as inapplicable
Again, we do not reach the issue of whether the particular contingent fee
arrangement involved in this case was reasonable, as we deem the
reasonableness, ab initio, of the particular contingent fee in this case to have
been conceded