Contingency agreement not basis for fee award

A federal court awarded attorneys’ fees to plaintiff’s counsel in a case stemming from a disagreement between two attorneys.

But the court rejected the plaintiff’s proposal to award fees based on a contingency agreement, instead awarding them based on an independent inquiry of their reasonableness.

“This Court has previously found that where a plaintiff has entered into a contingency fee agreement with its counsel, ‘the Court must still evaluate the reasonableness of the claimed fees,’” U.S. District Judge Leonie M. Brinkema wrote, quoting the 2012 decision in Airlines Reporting Corp. v. Acad. Travel Servs.

Here, “the Court agrees with defendants that an independent inquiry into reasonableness is required, the starting point of which is the lodestar,” the judge said.

Brinkema authored the opinion in McKoy v. Lankford (VLW 023-3-503) for the U.S. District Court for the Eastern District of Virginia’s Alexandria division.

Background

Attorneys John C. West Jr. and Thomas Lankford worked together for more than 15 years on obtaining compensation for Americans who were taken hostage at the U.S. Embassy in Tehran during the 1979 Iran hostage crisis.

The pair’s efforts resulted in the 2015 passage of the Justice for United States Victims of State Sponsored Terrorism Act. Under the act, the former hostages and their families were eligible to receive “up to $270 million” from the newly established fund; lawyers working on the claimants’ behalf were eligible to receive “up to 25% of the payments distributed to the claimants as legal fees.”

Per the opinion, Lankford’s and West’s firms reached a settlement agreement in 2017. West was entitled to 8.33% of the legal fees owed to Lankford’s firm by the claimants from distributions from the fund.

Lankford never paid West his share of the legal fees from nine distributions made from 2019 to 2021. West died in March 2020.

In March 2023, a jury trial was held after West’s estate filed suit. The central issue was whether West “orally waived both the Settlement Agreement’s requirement that any waiver must be in writing and his claim to [8.33%] of legal fee payments.”

The jury returned a verdict in favor of the plaintiffs, awarding West’s estate $566,157.01 in damages — 8.33% of the legal fees received by Lankford — with no prejudgment interest.

Starting point

“The parties do not dispute that the touchstone of the Court’s fee-award determination is reasonableness, but they disagree as to the method by which the Court should determine the reasonableness of the fee,” Brinkema noted.

The plaintiffs said the starting point for the court’s analysis was the contingency fee that was agreed to in their retainer agreement with their counsel, Washington, D.C. attorney Timonthy Clinton. Per the opinion, the plaintiffs requested attorneys’ fees of $220,801.23 — a 39% contingency fee on the damage award — as well as a 39% contingency fee added to any future payments should more distributions be given to the former hostages.

“This civil action is substantially different from the aforementioned cases because plaintiffs seek to shift their responsibility for a fee payment pursuant to a private contingency fee agreement onto defendants who were not a party to that private agreement. Ultimately, a contingency fee agreement is between a client and his or her counsel.”

— Judge Leonie M. Brinkema

The defendants countered that the proper starting point was the lodestar — the reasonable hours counsel spent on this matter multiplied by a reasonable hourly rate. Under this formula, attorneys’ fees would be calculated based on Clinton’s hourly rate of $600.

“Although plaintiffs do not seek to recover the contractual contingency fee of 65% and have reduced their request to 39%, the Court agrees with defendants that an independent inquiry into reasonableness is required, the starting point of which is the lodestar,” Brinkema wrote.

The judge added that the plaintiffs “have not pointed to any authority that supports their position that an attorneys’ fee award in a fee-shifting case may be determined solely by reference to a contingency percentage.”

And while the plaintiffs cited several cases to support their position, Brinkema pointed out that this “civil action is substantially different from the aforementioned cases because plaintiffs seek to shift their responsibility for a fee payment pursuant to a private contingency fee agreement onto defendants who were not a party to that private agreement. Ultimately, a contingency fee agreement is between a client and his or her counsel.”

Brinkema therefore applied the lodestar method, adjusting the fee amount for reasonableness.

Reasonable fee

Clinton said he worked 249 hours on the case at a $600 hourly rate, totaling to $149,400. The hourly rate was deemed reasonable by Brinkema, who noted the rate falls in the range of attorneys with Clinton’s experience.

Brinkema agreed with the defendants’ contention that the proper number of hours worked is lower than 249. She reduced the number to 227.5, removing hours spend on a claim that was voluntarily dismissed, which produced a lodestar of $136,500.

Looking to Barber v. Kimbrell’s Inc., the judge added that no further reduction was needed, citing Kimbrell’s factor 6: “the attorney’s expectations at the outset of the litigation.”

“Clinton maintains that it was difficult to predict the success of plaintiffs’ suit at the onset of litigation because of the ‘daunting task of prosecuting a lawsuit without the benefit of its key (and generally sole) witness to the relevant events at issue: decedent Jack West, Jr. himself,’” Brinkema wrote.

The judge said the $136,500 figure fairly compensates Clinton for his work on the case despite being “substantially lower” than the fee amount the plaintiffs sought.

“An award of the lodestar with no reduction for unsuccessful claims is reasonable and fairly compensates counsel for his work on this litigation,” Brinkema said.

Additionally, the judge determined that the request of an ongoing fee award of 39% of any future distributions of legal fees from the fund has no merit.

“Future distributions from the Fund by definition have not been paid to defendants, therefore defendants have not breached their obligation to pay plaintiffs the [8.33%] of the legal fees received from distributions which have not yet occurred,” Brinkema wrote.

The judge also awarded $11,215 in costs to the plaintiffs, approximately halving an expert witness fee that was disputed by the defendants but keeping the remainder of requested fees as is.