Contingency Fees – Size Matters
March 17, 2016
While the Court of Appeals last year upheld the validity of contingency fee agreements in estate matters, especially in litigation, where it approved contingency fees of over forty million dollars when the actual time spent was a fraction of that value (see Matter of Lawrence 24 NY3d 320 ), a recent New York County Surrogate’s Court case, Estate of Fanny Goldfarb, NYLJ, Oct. 14, 2015, p.22 col.2, confirms that the size of an estate can still be a major factor in determining the reasonableness of a contingent fee, even though the services rendered and the result achieved were exemplary.
In Goldfarb, litigation counsel was retained by the executor to pursue a SCPA 2103 turnover proceeding to recover a co-op apartment that had been transferred to the decedent’s cousin prior to her death. The fee arrangement was formalized in a written retainer agreement which provided for a contingent fee of one-third of any recovery relating to the transfer of the apartment. The attorney commenced the proceeding on behalf of executor, and within six months a settlement was reached, whereby the coop apartment was returned to the estate plus $75,000 cash, waiver of a $100,000 bequest, and $6,163 in purported commissions relating to other transfers discovered to have been made to the respondent, which had not yet been brought before the court.
The attorney sought a contingent fee of $251,995, representing one-third of the value of the apartment plus the other monies and waivers recovered. The Attorney General opposed the fee, arguing that it was “extremely excessive.”
Relying primarily on the “size of the estate” criteria enunciated a Matter of Potts, 213 AD 59 (4th Dept 1925), aff’d 241 NY 593 (1925), the court reduced the contingent fee to $115,000, and ordered the attorney to refund the excess without interest. The court concluded that “such allowance recognizes that the value of respondent’s services outweighs the time he spent in the matter, yet also recognizes that the other factors discussed above do not support a fee that, as the Attorney General notes, would make respondent ‘in effect the major beneficiary of the estate.’”
Fee cases are fact specific. However, contingency fee arrangements are particularly important for smaller estates where a fiduciary may be unable to find counsel who would handle the matter on an hourly basis, and without whom there might be no recovery.