Stroud v. Tunzi

In Stroud v. Tunzi (2008) 160 Cal.App.4th 377, two attorneys entered into a contingency fee agreement with a client guaranteeing the attorneys a flat fee of $ 75,000 if the lawsuit against a third party settled before trial, or 40 percent of any recovery if the matter went to trial. (Stroud, supra, 160 Cal.App.4th at p. 379.) Before trial, the client settled the suit for $ 600,000. The attorneys demanded that their client pay a 50 percent contingency fee of $ 300,000, because they claimed that the fee agreement had been modified. They relied upon two handwritten documents signed by the client, one of which plainly stated that the client "agreed to pay the attorneys $ 300,00 out of my settlement of $ 600,000," as well as a settlement sheet signed by the client that itemized the anticipated distribution of the settlement proceeds, including the proposed $ 300,000 payment to the attorneys. (Id. at pp. 379-380.) Despite the client's apparently explicit agreement in one of the handwritten documents to pay a 50 percent contingency fee, the appellate court agreed with the trial court that none of the attempts to modify the fee agreement was effective because they did not comply with section 6147. In particular, the documents were not signed by the attorney, did not state the contingency rate and how costs were to be allocated, and did not disclose that the attorney fees were negotiable. (Stroud, supra, 160 Cal.App.4th at p. 382.) The appellate court rejected the attorneys' argument that the modification need not strictly comply with section 6147 so long as the original contingency agreement satisfied the statute, finding that this "would too easily allow an attorney to frustrate the statute's purpose." (Id. at p. 383.) All "material changes" to such an agreement, the court held, must comply with section 6147. (Ibid.)