Contingent-fee agreement between lawyers enforceable

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Where appellant lawyer engaged appellee, a lawyer who appellant supervised at the firm where they both worked, to represent him in a civil matter, the parties’ contingent-fee agreement is enforceable.

Statement of the case

“Appellant Stephen Moncrieffe hired appellee Adam J. Deno to represent him in a civil litigation matter. Moncrieffe signed a contingent-fee agreement under which Deno would be paid one-third of any recovery obtained by settlement and 40% if the case were tried.

“After Deno settled the case and Moncrieffe refused to pay the fee, this litigation ensued. Moncrieffe appeals the circuit court’s judgment for Deno.

“He claims, among other things, that Deno failed to prove that the one-third contingency fee was reasonable. Both parties also challenge aspects of the circuit court’s award of prejudgment and post-judgment interest.

“Finding the evidence sufficient to support the judgment, however, we affirm. …

“Eight of Moncrieffe’s assignments of error attack the circuit court’s decision to award a one-third contingency fee. We agree with Moncrieffe that Deno bore the burden of proving the reasonableness of the fee.

“But we find there was enough evidence for the trial court to conclude that Deno carried his burden, and we reject Moncrieffe’s remaining contract defenses.”

Reasonable fee

“We agree with Moncrieffe that a lawyer who sues his client to enforce a contingent-fee contract is generally not entitled to a presumption that the percentage charged is reasonable. …

“We disagree with Moncrieffe’s suggestion, however, that the circuit court favored Deno with the presumption that his one-third percentage was reasonable.

“The trial transcript does not corroborate that claim. Deno never requested such a presumption. And we find nothing in the record to suggest that the circuit court relieved Deno of his burden of proof.”

Deno’s fee was reasonable.

“First, Deno testified that Moncrieffe himself proposed the one-third share, a claim corroborated by Deno’s email to Moncrieffe after the fee dispute arose. Of course, the fact that the client proposed the percentage does not automatically make it reasonable. …

“But Moncrieffe was both a practicing Virginia lawyer and Deno’s work supervisor. When the client is a sophisticated provider or purchaser of legal services who negotiates from a position of strength when hiring counsel – like Moncrieffe – courts should be loath to second-guess the reasonableness of the contingent fee they agreed upon.

“Second, both Moncrieffe and Deno thought that Moncrieffe’s case was weak. Deno testified that Moncrieffe offered to pay more than the 7.5% percentage used in their prior dealings because this new case was ‘crap.’ The case had been pending for nearly a year and was about to be dismissed. By contrast, the previous case in which Deno had charged only 7.5% ‘was much stronger’ and had a ‘much higher degree of recovery.’

“Third, Deno testified about the efforts he put into the case to achieve a confidential settlement. Those efforts enabled Deno to negotiate a settlement before the then-pending complaint had to be served on the opposing party.

“Finally, the circumstances here do not resemble those cases in which the Restatement [(Third) of the Law Governing Lawyers] has warned that a contingent fee would be unreasonable: ‘those in which there was a high likelihood of substantial recovery by trial or settlement, so that the lawyer bore little risk of nonpayment; and those in which the client’s recovery was likely to be so large that the lawyer’s fee would clearly exceed the sum appropriate to pay for services performed and risks assumed.’ …

“Given that Moncrieffe and Deno both thought that the case was hard to win, a one-third fee of a $27,000 recovery involves neither a disproportionate numerator nor an oversized denominator.”

Rule 1.5

“Two of Moncrieffe’s assignments of error claim that the circuit court should not have enforced the contingent-fee agreement because Deno violated Rule 1.5 of the Virginia Rules of Professional Conduct. … [W]e ultimately decline to resolve it because the matter has not been adequately briefed. …

“Moncrieffe does not persuade us that Deno’s noncompliance with [Rule 1.5’s] requirements renders the contingent fee unenforceable.

“For one thing, Moncrieffe does not claim that Deno improperly calculated his one-third fee. More importantly, Moncrieffe has failed to cite any authority that noncompliance with the procedural requirements of Rule 1.5(c) renders the contingent-fee contract void, voidable, or otherwise unenforceable.”

Other defenses

“We find no merit to Moncrieffe’s remaining contract defenses. We reject his claim … that Deno could not bring suit for breach of contract because Deno ‘never issued an invoice.’” Deno’s engagement letter did not mention an invoice.

“We see no basis to foreclose Deno’s lawsuit because he did not send a formal invoice to demand payment when Moncrieffe had already refused to pay.”

Deno did not waive his one-third contingency fee. “True, Deno’s October 28 email mentioned that ‘[a]n attorney with a contingency contract is entitled to quantum meruit compensation after withdrawing under the same circumstances in which I withdrew.’

“But far from waiving his contingent-fee claim, Deno’s email threatened to sue on it if Moncrieffe failed to pay. Deno maintained that Moncrieffe ‘refused to pay the contingency fee,’ and Deno offered to settle for an amount consistent with his one-third contingent-fee demand.

“The email contains no express waiver. And the full email, read in context, fails to establish an implied waiver either. In short, Moncrieffe failed to prove by clear and convincing evidence that Deno knowingly and intentionally relinquished his contingent-fee claim.”

The trial court properly awarded prejudgment and post-judgment interest. “Moncrieffe and Deno raise separate objections under Code § 8.01-382 to using the April 19, 2021 date for prejudgment interest. …

“We find no abuse of discretion in the date picked by the circuit court. The court could have withheld prejudgment interest altogether. …

“But having decided to award it, the court chose a rational start-date. The court explained that April 19, 2021 was the date Moncrieffe was served with the warrant-in-debt. By that date, Moncrieffe was plainly on notice of Deno’s fee claim.”

Deno has not preserved his claim that he was entitled to 10 percent interest instead of the six percent judgment interest rate because he did not raise this claim in the trial court.

Affirmed.

Moncrieffe v. Deno, Record No. 0342-22-2, Jan. 24, 2023. CAV (published opinion) (Raphael). From the Circuit Court of Hanover County (Harris). Stephen B. Moncrieffe, pro se. Adam J. Deno, on brief, pro se. VLW 023-7-034, 16 pp.