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Lawyers Burned By Fee Shifting Clause They Inserted in Engagement Letter

The law firm inserted a fee-shifting clause in its retainer agreement, providing that the “prevailing party” was entitled to attorney fees. The text of the clause is as follows: “”In the event of a dispute between you and the firm regarding any matters relating to the retention . . ., the prevailing party shall be entitled to recover reasonable attorney’s fees” (emphasis added)”

This clause was no doubt intended to allow the lawyers to recover their collection costs in fee litigation. However, because the jury found that they committed malpractice (the opinion does not explain why), the jury awarded plaintiff her attorney fees. The trial court struck the fee award but the Appellate Division reinstated the fee award.

Comment: Lawyers should be cautious before inserting fee-shifting language in fee agreements.

Source: Frankel v. Vernon & Ginsburg, LLP, 2018 NY Slip Op 2577 – NY: Appellate Div., 1st Dept. 2018 – Google Scholar