5.1.11

Business and Professions Code §6147:  Client Fee Agreements

Case:

Stroud v. Tunzi (2008) 160 Cal.App.4th 377

Issue:

Are purported modifications to a contingency fee agreement increasing the percentage of the attorney’s recovery enforceable where the modifications:  (1) were not signed by the attorney; (2) did not state the contingency rate and did not discuss costs; and (3) did not state that the attorneys’ fees were negotiable and not established by law, but where the original fee agreement complied with all three of these requirements of Business and Professions Code section 6147?

Holding:

No.  Under Business and Professions Code 6147:  “(a) An attorney who contracts to represent a client on a contingency fee basis shall, at the time the contract is entered into, provide a duplicate copy of the contract, signed by both the attorney and the client, or the client’s guardian or representative, to the plaintiff. . . .”  The contract must be in writing and include: (1) a statement of the agreed contingency fee rate; (2) a statement about how disbursement and costs related to the prosecution or settlement of the action will affect the contingency fee rate and the client’s recovery; (3) a statement about the extent to which the client could be obligated to pay the attorney for related matters arising out of their relationship but not covered by the contract, such as amounts collected for the plaintiff by the attorney; and (4) unless subject to 6146, a statement that the fee is negotiable and not set by law.  

The Court rejected the argument that the modifications did not have to comply with 6147 because the original agreement between the attorney and client did.  The Court relied on Fergus v. Songer (2007) 150 Cal.App.4th 552 (EQ 4.2.9), which held that a client could void a letter agreement between the attorney and a client that purported to increase the attorney’s recovery from 45% to 50% where the letter agreement did not comply with 6147.  (Stroud v. Tunzi, 160 Cal.App.4th at 382.) 

The Court also relied on Mitchell v. American Fair Credit Assn. (2002) 99 Cal.App.4th 1345, which interpreted the Credit Services Act, which the Court called “another consumer protection statute,” to hold that it was not enough that the original credit service agreement complied with the Act.  Instead, the Court in that case held that the statute’s mandate that “every contract” comply with its provisions included all modifications to the original contract because modifications “produced in essence a new contract.”  (Stroud v. Tunzi, 160 Cal.App.4th at 383, discussing Mitchell.)

The Stroud Court rejected the attorney’s attempt to distinguish the language of the Credit Services Act from 6147.  “If an amendment essentially creates a new ‘contract’ according to Mitchell, it follows that an amendment is a contract ‘entered into’ under section 6147.  We also reject [the attorney’s] constricted interpretation of section 6147’s scope for more fundamental reasons of public policy:  it would too easily allow an attorney to frustrate the statute’s purpose. . . .  Hearing Mitchell’s call (without implying any bad motives to the attorney-appellants), we conclude that material changes to a contingency fee agreement must comply with section 6147.”  (Id. at 383.)

Note:

The Court rejected as unsupported by any authority the attorney’s argument that if the modifications were not binding then the original contract also must be invalidated, entitling the attorney to quantum meruit recovery of his reasonable fees under section 6147(b).  (Id. at 385.)