U.S. Seventh Circuit - The FindLaw 7th Circuit Court of Appeals Opinion Summaries Blog

Attorney Schooled by 7th Cir in 1L Contracts, Fee Disputes

Every practicing attorney will eventually have a fee dispute with a client. Call it the Murphy's Law of client relations. When such a dispute arises, how should one respond?

Do you: (a) Make reasonable attempts to obtain payment from the client? (b) File an allegedly frivolous attorney's lien for more twice what you say that you are owed? or (c) Set fire to the client's car and tell his children that they are dressed funny?

We'd go with the third option. Barry Gomberg, however, reportedly chose the second route. The man with "Over 33 Years Of Success" was retained to represent a client during mediation of a whistle-blower dispute. That agreement provided for a non-refundable retainer of $2,500, plus a ten percent contingency fee on all "monies and items of value that we secure for you ..."

Gomberg immediately placed an attorney’s lien of $70,000 on any settlement, verdict, judgment, or other payout resulting from claims against the employer. He then secured a settlement offer of $375,000.

That offer was not accepted by the client, Anil Goyal.

After the failed settlement negotiations, Gomberg and Goyal went their separate ways. Years later, Goyal reached a $1.3 million settlement with the employer, who then paid Gomberg $34,022.52 pursuant to the existing attorney’s lien.

Was Gomberg entitled to that sum?

Contracts for Dummies

Gomberg argues that he secured the $375,000 for Goyal as soon as the offer was made. The Seventh Circuit responded by citing Williston on Contracts and the Restatement (Second) of Contracts, both of which say, “Duh, there ain’t a contract without acceptance of the offer.” (definitely paraphrasing).

Also, an offer, once rejected, no longer exists. It’s 1L contracts, ladies and gents.

Here’s another simple proposition. The Restatement (Third) of Law Governing Lawyers § 35(2) (2000) states, in part, “when a lawyer has contracted for a contingent fee, the lawyer is entitled to receive the specified fee only when and to the extent the client receives payment.”

Payment? They didn’t even reach an agreement.

Equitable Remedies

As for extra-contractual equitable remedies, statutory fees are only available in Illinois when a fee agreement was not reached. There was one here. As for quantum meruit, it allows Illinois attorneys reasonable fees when they are wrongfully discharged on the brink of settlement or victory.

Gomberg failed to develop this argument in the lower court, and thereby waived it. The court notes, in a footnote, that it would fail anyway, because he apparently didn’t actually do much work (“Gomberg himself appears to have believed that his responsibilities under the retainer agreement required minimal time and effort.”)

Professional Misconduct

You’re probably thinking that this whole “lien” on unearned fees, exercised years after the representation ended, when no agreement was reached, in an amount far exceeding the ten percent contracted for, is a little unethical. The Seventh Circuit is also quite curious about that question. They issued an order to show cause within 14 days as to why they should not impose sanctions and forward the case to the Illinois State Bar.

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