Gagnon v. Shoblom
565 N.E.2d 775, 409 Mass. 63 (1991)
Rule of Law:
A judge lacks statutory authority under G. L. c. 152, § 15 or S.J.C. Rule 3:05, and inherent power in the absence of a challenge by an interested party, to unilaterally reduce an attorney's contingent fee that a client has voluntarily agreed to and is satisfied with, where there is no evidence that the fee is unreasonable.
Facts:
- On June 9, 1988, a truck operated by Donald Shoblom crashed into a parked trailer, killing Susan J. Thompson and severely injuring Donald Gagnon.
- Donald Gagnon retained Attorney Alan R. Goodman to pursue personal injury claims against Shoblom and his employer, and for his workers’ compensation claim.
- Gagnon and Mr. Goodman signed a contingent fee agreement stipulating that Mr. Goodman’s compensation would be 33.33% of the recovery in the personal injury claim.
- After extensive discovery and investigation, a structured settlement of $2,925,000 (present cash value) was reached in Gagnon’s personal injury action.
- Gagnon testified that he voluntarily signed the contingent fee agreement and was satisfied that Mr. Goodman had earned his agreed fee.
- A leading member of the bar specializing in plaintiff personal injury claims and the attorney who defended the action both testified to the reasonableness of the fee and the impressive work performed by Mr. Goodman.
Procedural Posture:
- Attorney Goodman commenced an action (presumably in Superior Court, where the settlement hearing occurred).
- A Superior Court judge conducted a hearing on the structured settlement, which included a provision for Mr. Goodman's 33.33% fee ($975,000).
- The Superior Court judge approved the terms of the settlement agreement but indicated his disapproval of the 33.33% fee, calling it unconscionable.
- The Superior Court judge held an evidentiary hearing on the reasonableness of the settlement agreement.
- The Superior Court judge filed a memorandum and order, ordering a reduced legal fee of $695,000 for Mr. Goodman, calculated with a tiered percentage structure.
- Mr. Goodman requested and was allowed direct appellate review by the Supreme Judicial Court of Massachusetts regarding the correctness of the judge's order concerning the fee.
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Issue:
Does a Superior Court judge have the authority, under G. L. c. 152, § 15 or S.J.C. Rule 3:05, or inherent power, to unilaterally reduce an attorney's contingent fee stipulated in a settlement agreement when the client has voluntarily agreed to the fee and is satisfied with it, and no party challenges its reasonableness?
Opinions:
Majority - Nolan, J.
No, a Superior Court judge does not have the authority to unilaterally reduce an attorney's contingent fee when the client has voluntarily agreed to the fee, is satisfied with it, and no party has challenged its reasonableness. The court found no support for the judge's action in G. L. c. 152, § 15. Citing DiMartino v. Quality Indus. Propane, Inc., the court reiterated that the purposes of requiring a judge's approval under § 15 are limited to protecting the employee's and insurer's interests from being disregarded or unfairly dissipated by a settlement, not to permit a judge to substitute their evaluation of legal services. The court explicitly stated that "There is nothing in this language which permits a judge to substitute his evaluation of the legal services rendered pursuant to a contingent fee agreement." S.J.C. Rule 3:05 also does not apply because the client, Gagnon, intelligently and freely testified that he was satisfied with the amount of the fee and no one was challenging the agreement. While courts possess inherent power to disapprove a fee that exceeds the agreed percentage, was not agreed to by the client, or is plainly unreasonable, this power is exercised only upon objection by a party entitled to challenge the fee. Since no party challenged the fee in this case, the court found the judge's intervention to be an error.
Concurring - Greaney, J.
Yes, a judge does have authority under G. L. c. 152, § 15, to examine attorney's fees when approving a settlement, although Justice Greaney agreed with the majority that the fee in this specific case should not have been reduced. Justice Greaney argued that § 15, which requires a judge to protect "the rights and interests of the employee" during settlement approval, should encompass the power to examine the reasonableness of attorney's fees, especially when they constitute a sizeable portion of the settlement. He viewed the majority's reliance on DiMartino v. Quality Indus. Propane, Inc. as an "unjustified extension" of that decision, as DiMartino primarily addressed an insurer's lien challenge, not attorney's fees. However, Justice Greaney concurred with the outcome because the evidence showed the contingent fee agreement was reasonable at the time it was made, the client Gagnon explicitly expressed satisfaction with the work and the fee, and the one-third percentage has become a standard minimum rate in tort litigation. He further highlighted the trial judge's broader concern that as recovery amounts increase, the fixed percentage fee can become disproportionately large, suggesting a potential need for legislative intervention, similar to G. L. c. 231, § 60I for medical malpractice cases, to establish a better sense of proportion in attorney's fees.
Analysis:
This case significantly curtails a trial court judge's independent authority to reduce an attorney's contingent fee in personal injury settlements where the client affirms satisfaction and no party has formally challenged the fee. It clarifies that judicial oversight under G. L. c. 152, § 15 is narrowly confined to protecting employee and insurer interests, not for sua sponte fee arbitration. The ruling reinforces contractual freedom between attorneys and clients, placing the burden of challenging a fee squarely on an aggrieved party. However, Justice Greaney's concurrence signals a vital ongoing debate about the potential for disproportionate fees in large settlements, suggesting future legislative considerations for tiered fee structures in general tort cases, mirroring existing medical malpractice statutes.
