Tuesday, August 17, 2010

Discharged Firm May Collect Contingency Fee.

In DeLapaz v. Selectbuild Construction, Inc., 394 Ill. App. 3d 969, (1st Dist. 2009), the plaintiff, Rafael DeLapaz, hired law firm Touhy & Touhy, Ltd. (Touhy) on a contingency fee basis to bring a negligence action.

Touhy lawyer James Zouras handled essentially all of the attorney work on the DeLapaz matter until he was terminated by Touhy for unknown reasons. Zouras then started a new firm and took the DeLapaz matter with him. Shortly thereafter, the matter settled and Touhy and Zouras both sought the right to be paid the contingency fee.

The trial court awarded Touhy its contingency fee and allocated a small portion of the fee to Zouras’ new firm on a quantum meruit basis. Zouras appealed.

The appellate court affirmed. The appellate court first cited the general rule that a discharged attorney (i.e., Touhy) normally is NOT entitled to the original contract contingency fee, which terminates upon discharge, but is entitled to be paid on a quantum meruit basis for services rendered prior to the discharge.

However, the appellate court relied on an established exception recognized by the Illinois courts, which holds that a discharged firm is entitled to its contract fee and the successor counsel merely entitled to a fee based on quantum meruit in cases where the overwhelming majority of that work was done at the original firm.

The courts have more discretion in allocating fees between former and successor law firms than I realized. Attorneys seeking fees in these situations should stress the relative contributions of their firm in the pleadings.

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