Appeal from the District Court for the Virgin Islands (St. Thomas) Civil No. 80-0061.
BEFORE SEIZE, HIGGINBOTHAM, and ROSENN, Circuit Judges.
The primary issue presented by the this appeal is whether a one-third contingent fee agreement between the plaintiff and his attorney, which the plaintiff readily concedes was reasonable when entered into, nevertheless became unreasonable at some point thereafter. We conclude that the district court did not abuse its discretion in finding that on this record nothing occurred after the fee agreement that rendered it unreasonable, and we therefore affirm the judgment of the district court.
The facts in this case have been extensively detailed in our prior opinion in McKenzie Constr., Inc. v. Maynard, 758 F.2d 97 (3d Cir. 1985) [McKenzie I], and for the most part we need not repeat them here. For our purposes, it is sufficient that this point merely to note that the plaintiff, McKenzie Construction, Inc. (McKenzie), through its president James H. King, is appealing from a district court's judgment on remand from McKenzie I, which refuses to set aside as unreasonable a contingent attorney fee agreement with the defendant, attorney Desmond L. Maynard. The agreement provided that plaintiff retained defendant "to prosecute on its behalf . . . an action for debt and/or breach of contract" arising out of plaintiff's construction contract with the Government of the Virgin Islands, and that plaintiff would pay a contingent fee of one-third of any recovery from judgment or settlement. Thus, after reaching a settlement on McKenzie's behalf of $195,887.46, together with $5,000 towards his attorney's fees. Maynard received $65,295, which converts to approximately $790 per hour. If Maynard had charged his regular hourly rat of $60, he would have been paid between $4,000 and $5,000.
After a bench trial in McKenzie I, the district court concluded in a memorandum opinion dated September 14, 1983, that although it was uncomfortable with the $65,295 fee due under the contingent fee agreement, the plaintiff had failed to demonstrate that the fee was "clearly excessive" viewed at the time Maynard accepted employment. This analysis was based in part upon Model Code of Professional Responsibility DR 106(A) and (B). We vacated and remanded, concluding that the showing required in a civil action to reduce a fee is not necessarily the same as the showing required to prove an ethical violation. We therefore directed the district court to consider the following:
(1) An attorney bears the burden of proof to demonstrate that his or her fee is reasonable, whether the action is initiated by the attorney or client.
(2) The applicable standard in an attorney fee dispute is the reasonableness of the fee, applying principles of equity and fairness.
(3) Consideration should be given to circumstances existing at the time the arrangement is entered into, and thereafter, to the quality of the work performed, the results obtained, and whether the attorney's efforts substantially contributed to the result.
(4) Although reasonableness at the time of contracting is relevant, consideration should also be given to whether events occurred after the fee arrangement was made which rendered a contract fair at the time unfair in its enforcement.
See McKenzie I, 758 F.2d at 99-101.
courts should be reluctant to disturb contingent fee arrangements freely entered into by knowledgeable and competent parties. Further, a prompt and efficient attorney who achieves a fair settlement without litigation serves both his client and the interests of justice. It should therefore be the unusual circumstance that a court refuses to enforce a contractual contingent attorney's fee arrangement because of events arising after the contract's negotiation. Nevertheless, the district court must be alert to ...