Recently, Anon Moose, LLC. and NOYB, Inc.* had a $23,000 contract dispute that early negotiations failed to settle. In an effort to bring about an amicable solution for both parties, Anon’s attorney suggested involving a mutually agreeable neutral, for a set fee, to initially mediate the dispute and, if necessary, resolve the conflict via binding decision. The attorney argued that no advocate-driven process – not court, arbitration or even mediation – could deliver any semblance of real economic justice to either side in light of the modest stakes. So he suggested the lawyers would essentially step aside, except as advisors, to enable a fair and economically rational solution instead of consuming the stakes in legal fees. NOYB’s attorney refused to recommend this process or even early mediation to his client. One year later, the parties had each spent well over $30,000 in legal fees alone (>$60,000 in all) on court pleadings, rounds of written discovery, stop-and-go negotiations, countless scheduling communications, mandatory status conferences, contentious legal briefing, and a mediation that ultimately led to a compromise settlement.
We can all agree this didn’t make sense and strongly suggests poor, if not self-interested judgment on the part of an attorney. But is there more to it than that? Did the attorney who refused a practical alternative process violate an ethical duty?
We believe the short answer is almost certainly “Yes!” Whether or not we tell this to our clients, lawyers have an ethical duty to charge reasonable fees that are proportional to what is at stake and to the “value” we deliver. See, for example, California’s Rules of Professional Conduct 3-110 and 4-200, and ABA Model Rules 1.5 and 2.1. Here, legal fees dwarfed the stakes and whatever monies were saved or received in settlement. It’s highly unlikely that the case involved some non-economic over-riding value, key principle or precedent, because it never went to trial. Moreover, such values are the client’s call, not the lawyer’s. Finally, while the attorney who recommended a practical process may have had little choice but to litigate once it was refused (and therefore arguably delivered value justifying his fees), the other attorney had no such argument.
So it’s not just client-centric lawyers who should offer to step aside in situations like this, it’s the ethical duty of every lawyer.
*Company names have been changed to respect requests to remain anonymous