Skip to Content

Attorney Gambles Chasing Fees and Loses Big

As lawyers often advise their clients, any litigation involves some element of risk, and there is no such thing as a slam dunk. A recent California case illustrates that when attorney fees are on the line, the stakes are increased and litigants—and their counsel—need to evaluate carefully the risks before going all-in.

In Nemecek & Cole v. Hornthe California Second District Court of Appeal affirmed an attorney fees award, concluding a string of cases that started with a lot boundary line dispute between neighbors. By the end, the attorney at the center of these cases was more than $600,000 in debt after being ordered to pay attorney fees three separate times—once by an arbitrator and twice by two different trial court judges.

Attorneys Pursuing Unpaid Fees Risk More Than Just Losing the Case

Attorney Steven Horn was initially retained to represent a couple in a lot line dispute against their neighbors. Horn's clients' lost and failed to pay Horns invoice. Horn then sued his clients for unpaid fees. They counterclaimed for fraud.

Its almost universally the case that when attorneys sue clients over fees, the clients think of something they didnt like that their attorneys did, and they counterclaim, observes Betsy P. Collins, Mobile, AL, cochair of the ABA Section of Litigations Pretrial Practice and Discovery Committee. Then you have a malpractice claim instead of just a fee claim, adds Collins.

Many attorneys and law firms are reticent to enter into fee disputes because of the danger to their reputations—if not to their financial well-being—from the counterclaims, notes Thomas J. Donlon, Stamford, cochair of the Section of Litigations Appellate Practice Committee. Even if the counterclaim is unsuccessful, the negative publicity that arises from allegations of fraud, malpractice, or malfeasance is more damaging than the amount recovered, explains Donlon.

Horn retained Nemecek & Cole to represent him in the litigation against his former clients. The case resulted in Horn being awarded $42,282.56 on his fee claim and a matching award for his former clients on their fraud counterclaim. These awards offset, resulting in a net judgment of zero dollars. Horns former clients, however, sought and were ultimately awarded $380,000 in attorney fees because they were the prevailing defendants on the complaint. Horn settled the case for $250,000 while it was on appeal.

Know When to Fold When Attorney Fees Are in Play

Horn, undeterred by his loss to his former clients or the hefty fee award, made another litigation gamble. This time Horn initiated arbitration against his former counsel, Nemecek, asserting that the firms negligence was the cause of the disastrous results in the litigation with his former clients. Nemecek counterclaimed for unpaid attorney fees that Horned owed to the firm.

Having lost that first case so substantially, to then turn around and sue his next lawyer, really indicates that he didnt analyze his situation very closely, concludes Donlon. When professionals are going to sue over fees, they better decide carefully what their risk is, Collins warns. When youre not prevailing in a variety of forums, you are usually better off finding a different battle to spend your time on, adds Bruce A. Rubin, Portland, OR, cochair of the Sections Alternative Dispute Resolution Committee.

Horn and Nemecek were awarded nothing on their respective claims asserted in the arbitration. The arbitrator, however, found that Nemecek was entitled to $289,028.95 in attorney fees and denied any offset claimed by Horn, finding that “Nemecek was the prevailing party since they were granted virtually all the relief they sought on Horns claim.

Know When to Run From a Fee Dispute

Horn, still determined despite his mounting losses, pressed on and filed a petition to vacate the arbitration award and to oppose Nemeceks confirmation petition. The arbitration award was confirmed and, for the third time, Horn was ordered to pay fees. This time, he was required to pay his opponents reasonable attorneys fees in connection with the confirmation proceedings in the amount of $42,207.31.

After losing at arbitration and in the confirmation case, Horn played his last card and appealed the confirmation decision. He argued that the trial court abused its discretion because the fee award from the confirmation proceedings was more than double the amount actually incurred and the fee award should have been capped at the amount actually incurred. The appellate court disagreed, affirmed the trial courts judgment, and permitted Nemecek to recover its costs for the appeal from Horn, which made Horn a four-time loser in litigation that all began with a lot boundary line dispute between neighbors.

While this case is exceptional, it teaches litigants fundamental lessons to keep in mind when attorney fees are on the table. You need to talk to your client whether youre on the plaintiffs side or the defense side about the risk of being exposed to an attorney fee award to the other side. Thats a discussion that Im not sure happens as often as it should, says Edward A. Salanga, Phoenix, cochair of the Sections Expert Witnesses Committee.

Its not as simple as, well if we dont win, my client doesnt recover anything and maybe I dont get paid if Im on a contingency fee agreement. In some cases, there is an additional ramification actually exposing your client to a fee award, explains Salanga. When attorney fees are in play, recognize, evaluate, and know the risks before gambling on litigation.

This article was originally published in Litigation News, American Bar Association (November 2012).

Related Resources

Reprinted with permission by the NALFA

Authored By
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.