Legal Malpractice Lawsuit Seeking Repayment of a Retainer Fee*

This is a review of a legal malpractice lawsuit brought by a former client against her attorney. The case centered on the client's contention that she had overpaid for her attorney's services. 

The attorney in question had in fact resolved the client's legal dispute, a contested divorce, to the client's satisfaction, but the client felt the hours billed overstated the actual amount of work the attorney put into the case.

The client filed a small claims court lawsuit against her attorney in which she asked the court to award her the amount of what she considered to be overcharged and an additional amount for her emotional distress.

Statement of Facts...

The legal services that were at the core of the legal malpractice lawsuit began on April 6th, 2011. On that date Charlotte Grace Hanson retained attorney Peter Yaro to represent her in a divorce action against her husband, Jonathan Scott. The marriage had become insupportable because of discord which destroyed the legitimate ends of the marriage relationship. Hanson and Scott separated almost three months before.

At the time of the filing of the divorce action Scott was employed as a manager at a branch of a national chain of office supply stores. He worked for them for the last 10 years and earned an annual salary of $46,000.

Meanwhile, Hanson was employed as a waitress at a franchised national chain restaurant. She had worked there for the last eight months. Hanson was paid minimum wage and shared her tips with the other waitresses on her shift. She earned an average of approximately $300 per week.

Hanson and Scott had earlier agreed to retain the assets each one had in their possession. They also agreed Scott would remain in the apartment and be responsible for the monthly rent. Hanson had decided she was going to move back in with her parents.

Although they attempted to come to an equitable distribution of the marital debts, their efforts were futile. Of late, their discussions about the debts had degenerated into acrimonious arguments. Unable to come to an agreement of the debt with Scott, Hanson filed suit against him.

At the time of the divorce the marital debt was:

• $ 7,500 to American Express;
• $ 5,200 to Visa
• $ 4,700 to a Local Furniture Store

When Hanson first met with Yaro, she fully expected to pay $750 for her divorce. During her initial office consultation with Yaro, he explained the amount of $750 was for an uncontested divorce. He explained because she and Hanson were unable to resolve the debt issues, the divorce would need to be undertaken on an hourly basis of $150.00. 

To that end, Yaro required Hanson to pay a retainer of $3,500. He informed her he would work against that amount and would refund to her any balance at the conclusion of the divorce.

The divorce ensued. Scott decided to represent himself. Yaro quickly scheduled Scott's deposition. At Hanson's suggestion, Yaro questioned Scott about what Hanson came to believe was a "secret" bank account. Fearful of perjuring himself, Scott admitted for the last three years he had secreted away into his father's bank account approximately $11,500. Scott also admitted he was involved in a paternity suit with another woman.

Hanson had no savings and lived paycheck to paycheck. Since the separation, her parents from time to time helped her with her expenses.

At the deposition Yaro explained to Scott what Hanson believed to be a fair settlement. Yaro explained Hanson could either accept the agreement, or, as Yaro explained, "gear up for trial." The settlement Yaro presented was:

Scott would assume:

• $ 7,500 for the American Express Bill;
• $ 5,200 for the Visa Bill; and
• $ 2,500 of the Furniture Bill

Hanson would assume:

• $ 2,200 of The Furniture Bill

Not wanting to go through a trial, Hanson agreed to the settlement proposal. Yaro then prepared the Divorce Decree, and three days after the deposition both sides signed the Final Decree. The next day Yaro and Hanson went to the courthouse and "proved up" the divorce. The Judge signed the decree and Yaro filed the original with the Court Clerk.

Several days later Hanson received an invoice from Yaro indicating Yaro spent 24 hours working on the divorce. The invoice listed the specific work accomplished and the amount of time expended on each matter. 

Hanson recounted the amount of time she spent with Yaro in his office, on the telephone, at the deposition, and during the prove-up of the divorce. She estimated that time to be approximately 15 hours, or $2,250. Yaro explained to Hanson that his time spent reviewing her file, doing legal research, and drafting the divorce documents exceeded 14 hours. In fact, in Yaro's opinion, the total time spent exceeded the 24 hours for which he billed Hanson.

The Hearing...

Unhappy with Yaro's response, Hanson filed a pro se small claims legal malpractice lawsuit against him in the amount of $1,250. She asked the Court to award her an extra $2,500 for the emotional distress she stated Yaro's "over-billing" caused her. At trial she testified against Yaro, stating she talked with some of her friends who also went through divorces, and their attorneys only charged them about $1,000, to $1,500.

Yaro responded by entering into evidence copies of Hanson's entire file. The file contained sensitive matters which Hanson thought could not be published under the attorney-client privilege. Yaro then introduced in the legal malpractice lawsuit his intra-office notes and transcripts of sensitive recorded conversations about private matters Hanson shared with him. He also introduced his original billing invoice and explained each action he took in the divorce and the specific amount of time he expended on each matter.

Hanson was livid. She couldn't believe Yaro spoke openly in court about sensitive private matters she discussed with him.

Outcome...

After reviewing the evidence admitted in this legal malpractice lawsuit and hearing the arguments of both sides the court ruled:

"I must admonish the Defendant for not having prepared a written fee agreement for the plaintiff. As a result I must find there exists a possibility for there to be confusion regarding the billing of the Plaintiff. The Plaintiff would have the Court believe this matter is one of breach of contract. I find it is not.

Instead, this is a fee dispute issue which should not be reviewed by the Court, but rather by the State Bar's Fee Dispute Committee. 

I must also admonish the Plaintiff before she seeks further remedies against the Defendant for releasing what the Plaintiff believes to be privileged attorney-client information, she should understand when a client sees fit to attack her attorney in an adversarial hearing the client immediately loses her right to confidentiality. 

Otherwise it would place the attorney at a substantial and unfair disadvantage having to defend himself against accusations which might only be confronted with the information which was made known to the attorney under privileged communications.

I therefore dismiss the Plaintiff's case with prejudice and suggest to her if she desires to pursue the matter further the proper venue would be with the State Bar's Fee Dispute Committee."