His lawsuit alleges that his lawyers breached their fiduciary duties because they charged him a flat fee of $5 million to defend him on insider trading charges and an additional $20 million to defend him in several related civil suits. The full complaint is linked HERE. The complaint is pretty short on facts relating to the underlying litigation. Mr. Nacchio does not even state how many different civil suits there were. Nor does he allege the scope of the litigation or the time frame. He doesn't really state why the fees were excessive, he just concludes that they were.
If the Nacchio case had happened in Illinois, and if we knew a little bit more about it, we could analyze it under Illinois Rule of Professional Conduct 1.5, which prohibits lawyers from collecting an unreasonable fee or an unreasonable amount for expenses. Under Rule 1.5, the factors to be considered in determining the reasonableness of a fee include the following:
- the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
- the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
- the fee customarily charged in the locality for similar legal services;
- the amount involved and the results obtained;
- the time limitations imposed by the client or by the circumstances;
- the nature and length of the professional relationship with the client;
- the experience, reputation, and ability of the lawyer or lawyers performing the services; and
- whether the fee is fixed or contingent.
In this case, the client signed on the dotted line with a particular lawyer, Herbert J. Stern. Mr. Stern was a federal judge for 13 years. He's a former U.S. Attorney. He charges a lot of money. Clients know that before they call him. I'm guessing Joe Nacchio didn't pick his name out of the yellow pages. I don't see how Mr. Nacchio can now claim that a flat fee to which he already agreed is unreasonable. Sounds like a case of buyer's remorse following his 70 month sentence and $63.6 million in fines and restitution.