U.S. Court of Appeals Reverses Judge’s Refusal to Allow Law Firm in Personal Injury of a Minor to Receive One-Third of the Gross Settlement

The law firm of Williams, Bax & Saltzman, P.C. represented Cole Goesel and his parents in a personal injury lawsuit that settled before trial. Because Cole was a minor, the law firm needed judicial approval to finalize the settlement. The parties’ contingent-fee agreement entitled the law firm to one-third of the gross settlement, while all litigation expenses would be covered by the Goesels’ share.

The U.S. District Court judge refused to approve the settlement unless litigation expenses were deducted off the top and one-third of the net settlement was allocated to the firm. The judge also rejected the firm’s attempt to count the cost of computerized legal research as a separately compensable litigation expense rather than rolling it into the fee recovery. The law firm appealed the judge’s order limiting its fees. The Goesels declined to participate.

The U.S. Court of Appeals reversed the district court judge’s decision. The appeals panel stated that although the district court enjoys substantial discretion to safeguard the interests of minors in the settlement of litigation, this discretion is not boundless. In this instance, the trial judge criticized aspects of the firm’s contingent-fee agreement that have received the expressed blessing of Illinois courts. The trial judge’s analysis of what the Goesels would receive, that being 51% of the gross settlement amount rather than 42%, was insufficient to justify discarding a reasonable contingent-fee agreement.

In 2007, Cole Goesel, then 5, was injured when a toy robot shattered and punctured the lens of his right eye. Cole’s parents, Andrew and Christine, retained the law firm of Williams, Bax & Saltzman, P.C. to sue on their son’s behalf. The attorney-client agreement was standard in that it provided for attorney fees of 1/3 off the top of any gross settlement or judgment and that the Goesels would be responsible for expenses associated with the litigation. In the event there was no recovery, the Goesels were to pay nothing for either the expenses or attorney fees.

In 2009, the lawsuit was filed in Illinois state court, which the defendants removed to federal court based on diversity jurisdiction. Nearly four years of contentious litigation ensued. The litigants also conducted expensive discovery, including depositions in seven states and video conferences with deponents in Hong Kong.

The parties settled on the eve of trial. The defendants agreed to pay $687,500. Under the retainer agreement, the firm’s 1/3 of the gross settlement amount was $229,166.67 and litigation expenses totaled $172,949.19, leaving the Goesels with $285,384.14 or roughly 42% of the total recovery.

Because Cole was a minor at the time of the litigation, the federal court’s local rules and the Illinois Probate Act required court approval before the settlement could be finalized. At a hearing to determine whether to place the settlement details under seal, the district judge launched sua sponte (on his own) into his objections to the contingent-fee agreement. He noted first that the case required “a very large amount of out-of-pocket expenditure,” and those costs were “certainly expended reasonably here.” He also acknowledged that the law firm had done “a terrific job for the client.” But the judge was “very troubled” by the clients’ bottom line, specifically that the Goesels would “end up with something like 40% of the total recovery,” the rest having been eaten up by litigation costs and the law firm’s fee.

The judge authorized fees and costs, aggressively reducing the fees and expended costs resulting in Cole to be compensated in the amount of $349,490.94. The law firm appealed in its own right. On appeal, the court first measured the objective reasonableness of the arrangement for attorney fees as being consistent with the prevailing market rate. No one contends that the firm’s fee exceeded the market value of its services. The law firm had 1,194 hours billed at the rate of $300 for partners and $180 for associates. The relevant lodestar comparator would have been calculated at $283,554. Based on the attorney fees, one-third fee agreement, it was entitled to receive $229,166.67 in fees. Based on that analysis, the firm’s fee easily passes muster. The appellate court also said that to depart from the terms of a retainer agreement, it would occur only with good reason. There was no factual reason for abrogating the retainer agreement and rewriting the terms of the representation after the fact.

Finally, there was no overreaching or anything unconscionable about the retainer agreement reached in this difficult case.

Applying these rules, it was held that it was error to exclude the firm’s computerized-research costs or to rewrite the attorney-client agreement other than what was agreed upon. Thus, the district court’s order is reversed and the case is remanded for further proceedings consistent with this opinion.

Goesel v. Boley International (H.K.), Ltd., et al., No. 13-2434, U.S. Court of Appeals for the 7th Cir. (Nov. 5, 2015).

Kreisman Law Offices has been handling catastrophic injury cases, product liability injury cases and nursing home abuse cases for individuals and families who have been injured or killed by the negligence of another for more than 38 years, in and around Chicago, Cook County and its surrounding areas including, Deerfield, Arlington Heights, Tinley Park, Bensenville, Schiller Park, Joliet, Calumet City, Blue Island, Worth, Alsip, South Holland, Glencoe, Buffalo Grove, Winnetka, Wilmette, Evanston and Niles, Ill.

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