Personal Injury Lawyers Cannot "Stack" Contingency Fees After Being Fired

Important reasons for judgement were released today  by the BC Supreme Court, Vancouver Registry, confirming lawyers working on a contingency basis cannot ‘stack’ contingency fees after being discharged.
In today’s case (Holness Law Group Professional Law Corporation v. Mann) the client was injured in 4 vehicle collisions and retained a lawfirm to advance her claims.  Before conclusion she discharged her initial lawyer and hired new counsel.  The claims were subsequently settled and a contingency fee of 30% was charged.  The client took no issue with the reasonableness of the global fee but a disagreement arose as to how much the first lawyer was entitled to.  That lawyer argued that
“they are not bound by another firm’s contingency fee agreement and that they are entitled to their contractual contingency fee regardless of what may be charged by a subsequent law firm.”
The court disagreed noting the firms cannot ‘stack‘ contingency fees and the single global fee must be split.  In reaching this decision District Registrar Nielsen provided the following reasons:

[20]         If the position of HLG was given effect, it would result in the stacking of contingency fees, and conceivably give rise to a situation where combined contingency fees could consume an entire award of damages. If enough lawyers were dismissed and others retained along the way to the conclusion of the case, the combined contingencies could conceivably amount to100% of any damages awarded. This would be an absurd result and contrary to s. 66 of the LPA.

…

[23]         The Law Society Rules set a maximum fee allowable under a contingency fee agreement and provides that the total fee payable by the client must be reasonable in the circumstances and not exceed 33 1/3% of the amounts recovered in a personal injury claim arising out of the use of a motor vehicle.

[24]         Pursuant to s. 66(6) and (7) of the LPA, a fee in excess of 33 1/3% must be approved by the court, before entering into the contingency fee agreement, otherwise it is void pursuant to s. 66(4) of the LPA.

[25]         If contingency fees were stackable, from firm to firm, not only would the contingency fees potentially exceed the Law Society’s maximum in short order, this would ultimately exploit clients and dissuade them from dismissing a lawyer who the client may no longer wish to represent them. Despite losing confidence in their counsel, a client could be forced to continue to retain that lawyer for fear of escalating fees. This would not be in accord with justice and fair play.

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[33]         In the present case, both law firms participated in the outcome of the same matter, with the same client. Both firms were engaged on a contingency fee basis. Both firms agree their fee would be calculated on a 30% contingency fee basis, given the stage at which the case was settled.

[34]         This is a case where justice and fair play require a single fee to be apportioned between the two firms on a quantum meruit basis, taking into account all the circumstances and factors expressed by s. 71(4) of theLPA. That fee cannot exceed the 33 1/3% limit set by the benchers pursuant to s. 66(2) of the LPA.