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The Court of Appeals of Virginia has affirmed a lower court’s ruling to enforce a contingent-fee agreement between two Virginia attorneys after they disagreed over the percentage of the contingency fee.
The prevailing attorney argued the proper percentage was one-third of any recovery obtained by settlement, while the other attorney claimed that the agreed-upon percentage was 7.5%.
Judge Stuart A. Raphael wrote the court’s opinion in Moncrieffe v. Deno (VLW 023-7-034) and was joined by Court of Appeals Judges Vernida R. Chaney and Dominique A. Callins.
Engagement letter
Stephen Moncrieffe hired Adam Deno to represent him in a civil litigation matter. Moncrieffe and Deno are licensed Virginia attorneys and worked together at the time. Moncrieffe served as Deno’s supervisor.
The pair offered conflicting testimony in the bench trial. The Court of Appeals viewed the facts in light most favorable to Deno, the prevailing party.
In the court opinion’s retelling of the facts, Moncrieffe and Deno signed an engagement letter in April 2020 where Moncrieffe initialed a paragraph stating he agreed “to pay for legal services rendered as follows: … One-third (1/3 or 33.3%) of any recovery by settlement or agreement. 40% of any recovery by court order or final verdict.”
The case resulted in a confidential settlement where Moncrieffe received $27,750. Rather than deposit the settlement check in his trust account and take out his fee first, Deno instructed the opposing party to make the settlement check payable to Moncrieffe, as he was his “supervisor at the time, and a colleague.” Deno delivered the check to Moncrieffe in August 2020.
Moncrieffe refused to pay Deno one-third of the settlement proceedings, claiming he owed a smaller percentage. Moncrieffe pointed to a different matter from the month before, with an identical engagement letter except that the contingent fee was “only 7.5%.” Moncrieffe claimed Deno placed the altered agreement on his desk, in hopes Moncrieffe would not read it and assume it was the same as the last one.
Deno filed a warrant-in-debt in Hanover County General District Court, where he received a judgment against Moncrieffe of $9,157.50 plus 6% interest.
Moncrieffe appealed to the circuit court, which also found for Deno in the same amount. Moncrieffe again filed a timely appeal.
Reasonable fee
On appeal, Moncrieffe raised nine assignments of error, with Deno countering with two assignments of cross-error.
“Their claims fall into two categories: whether Deno could enforce a one-third contingency fee; and whether there was error in the award of prejudgment or post-judgment interest,” Raphael wrote.
Eight of Moncrieffe’s assignments of error disagreed with the court’s decision to award the one-third contingency fee. While Raphael agreed with Moncrieffe’s argument that Deno “bore the burden of proving the reasonableness of the fee,” he found Deno met that burden.
“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 charge is reasonable,” Raphael wrote. “We disagree with Moncrieffe’s suggestion, however, that the circuit court favored Deno with the presumption that his one-third percentage was reasonable.”
Taking the facts in the light most favorable to Deno, Raphael said the evidence showed the one-third contingent fee was reasonable. In fact, Deno testified that Moncrieffe proposed the one-third share and backed up the claim with email evidence.
While acknowledging the fact that a client proposed the percentage doesn’t automatically make it reasonable, Raphael said Moncrieffe’s position changes that analysis.
“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,” Raphael wrote.
The judge also noted that both Deno and Moncrieffe thought the case was weak, with Deno testifying that this was why Moncrieffe proposed to pay more than the 7.5% used in previous dealings.
“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 outsized denominator,” Raphael wrote.
Rule 1.5
Two of Moncrieffe’s assignments of error claimed the circuit court erred in enforcing the contingent-fee agreement because Deno violated Rule 1.5 of the Virginia Rules of Professional Conduct.
Specifically, Moncrieffe alleged a violation of Rule 1.5(c), which states in relevant part that “[u]pon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.”
The judge disagreed.
“Moncrieffe does not persuade us that Deno’s noncompliance with those requirements renders the contingent fee unenforceable,” Raphael wrote. “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.”
Raphael declined to resolve the argument, saying the matter wasn’t sufficiently briefed.
Finally, Moncrieffe’s remaining contract defenses — that Deno could not sue for breach of contract because he “never issued an invoice” and that Deno waived his one-third contingent fee in an email — had no merit, according to the judge.
“[F]ar 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,” Raphael pointed out. “The email contains no express waiver. And the full email, read in context, fails to establish an implied waiver either.”
As such, the trial court made no error in awarding Deno his one-third contingency fee or in its determination of pre- and post-judgment interest.
