The importance of a well-drafted and fairly negotiated retainer agreement was recently highlighted in a New York Court of Appeals decision in a case that even Charles Dickens would appreciate. Lawrence v. Graubard Miller is based on a lawsuit commenced by Alice Lawrence and her then law firm Graubard Miller in 1983, the year that saw the release of Cabbage Patch Dolls and Star Wars Episode VI: Return of the Jedi ( (N.Y. Oct. 28, 2014)). Last month, 31 years after Lawrence retained Graubard Miller, the New York Court of Appeals upheld the firm’s $44 million contingency fee. Since the underlying case began, there have been five sitting US presidents, the Berlin Wall fell and the Soviet Union collapsed, and Facebook co-founder Mark Zuckerberg was born.

Prolonged and painful litigation is not a new phenomenon, and it was written about prolifically by Charles Dickens in the 19th century. In his novel Bleak House, Dickens describes the case of Jarndyce and Jarndyce, an obscure, protracted litigation that "became so complicated that no man alive knows what it means." The case spanned lifetimes, inspired hatred that was passed on through generations, and outlived most of the principal parties as it "drag[ged] its dreary length before the court, perennially hopeless."

The facts of the Lawrence case read like a Dickens novel. Alice Lawrence retained Graubard Miller (Graubard) in 1983 in an epic battle for her late husband's $1 billion fortune, which was being managed by Seymour Cohn, her husband's brother, business partner and estate executor. Lawrence, an intelligent and sophisticated businesswoman, was intimately involved in the litigation. She demanded to be the "senior partner" on the case, routinely ignored Graubard's legal advice and often threatened to fire the firm. Before her death in 2008, Lawrence described herself as a force to be reckoned with who never consulted with her attorneys about business matters, kept her own counsel and trusted nobody. A court referee once described her as an aggressive, domineering, vituperative woman who even frightened her adult children.

Like Dickens' Jarndyce and Jarndyce case, Lawrence's case against Cohn stretched through the decades. By 2004, more than 20 years after bringing suit, Lawrence had paid Graubard $18 million in legal fees, all of which were calculated on an hourly fee basis. After a referee issued a devastating ruling on one of her claims, Lawrence complained to Graubard about the amount of legal fees she had incurred and proposed to switch to a contingency fee arrangement. In January 2005, Lawrence and Graubard revised their retainer agreement to provide that instead of charging Lawrence by the hour for legal work, Graubard would be paid 40% of any net recovery in the case.

In May 2005, a mere four months after Graubard agreed to the revised contingency fee arrangement at its client's request, Lawrence's case against Cohn unexpectedly ended when Cohn's estate (Cohn had died by this time) agreed to settle all claims for $100 million, which was twice as much as Graubard had once believed the claims to be worth. The impetus for the settlement was Graubard's smoking gun discovery that Cohn had engaged in egregious self-dealing in connection with the sale of several properties, which the firm claimed was so damaging to Cohn's reputation that Cohn's estate agreed to pay a substantial premium to end the litigation. After Lawrence settled the case against Cohn, she promptly filed suit against Graubard seeking, among other things, rescission of the revised retainer agreement on the ground that it was unconscionable.

On October 28, 2014, more than 31 years after Lawrence retained Graubard in her suit against Cohn and after both Lawrence and Cohn passed away, the New York Court of Appeals held that Graubard's $44 million contingency fee was not unconscionable. The Court of Appeals reiterated the general rule that the courts enforce clear and complete documents, like the revised retainer agreement, according to their terms. The court further found that:

In this bizarre case, the clearly written retainer agreement, which was scrupulously negotiated by sophisticated parties, convinced the court that the law firm's $44 million contingency fee should stand. Practical Law has a host of resources to help lawyers expertly draft and negotiate retainer agreements, including: