In an unusual turn of events, the Alabama Supreme Court has requested further review of a trial court’s order approving the award of attorney’s fees in a personal injury case. Unlike many other states, Alabama currently does not impose a cap on attorney’s fees, largely leaving these rates to be determined by a private agreement between an attorney and a client. The fact that these private agreements might be under attack raises serious concerns for both attorneys and injured people.

Madison County Department of Human Resources v. T.S.

In 2006, a 13-year-old suffered severe burns on her body after being left unattended in a too-hot bath at the group home Agility Plus. The child (referred to as T.S.), who suffered from severe mental retardation and cerebral palsy, was a temporary ward of the Department of Human Resources (DHR). In 2008, the child’s mother decided to take legal action against the group home for her child’s injuries.

The mother entered into a contingency fee arrangement with an attorney, agreeing to pay the attorney 33.3 percent of any damages recovered in her daughter’s case, in addition to litigation expenses. The attorney secured a settlement in the amount of $787,500; $262,500 went to the attorney’s fees and another $29,315.99 went to litigation expenses.

Even though the legal claim did not include DHR, the trial court refused to accept the settlement agreement without DHR’s consent. DHR, however, refused to give its consent on the grounds that the attorney’s fees were excessive and unreasonable. The trial court did not agree with DHR and eventually approved the settlement amount, finding that the attorney’s fees were “just, fair and equitable.”

DHR filed a motion to alter, amend or vacate the judgment with respect to the award of attorney’s fees. DHR argued that the trial court had failed to articulate the reasons for approving the fees, as required by Alabama law. The trial court denied DHR’s motion. DHR then sought review of the trial court’s decision from the Alabama Supreme Court.

Criteria for Determining Reasonableness of Attorney’s Fees

The Alabama Supreme Court agreed with DHR that the trial court order had failed to articulate the reasons for its decision, making it impossible for there to be a meaningful review of the attorney’s fees award as required by state law.

The Supreme Court remanded the case back to the trial court and ordered the court to conduct a meaningful review of the attorney’s fees. As a part of this review, the trial court must take the following 12 criteria into account to determine the reasonableness of the fee award:

• The nature and value of the subject matter of the employment
• The learning, skill and labor requisite to the its proper discharge
• The amount of time consumed
• The professional experience and reputation of the attorney
• The weight of the attorney’s responsibilities
• The measure of the success achieved
• The reasonable expenses incurred
• Whether the fee is fixed or contingent
• The nature and length of the professional relationship
• The fee customarily charged in the locality for similar legal services
• The likelihood that the particular employment may preclude other employment by the attorney
• The time limitations posed by the client or by the circumstances

The Alabama Supreme Court held that it could not make its own determination of whether the attorney’s fees were unreasonable and excessive without an accounting by the trial court of its reasons for approving the fees and calculating the final award.

Importance of Contingency Fee Arrangements

The importance of contingency fee arrangements for attorneys and clients is often overlooked in personal injury actions. These types of cases involve great personal and financial risk for the attorneys who pursue them. They generally require a substantial investment of time by the lawyer, and they are often expensive to prepare and litigate. Moreover, if the attorney is not successful and does not secure a settlement or win a judgment, the attorney will not recover any compensation for the time and expense of the case. Contingency fee arrangements allow attorneys to balance this risk in advance.

Contingency fee arrangements also are advantageous for clients. They allow people who otherwise might be unable to afford an attorney the opportunity to receive valuable legal representation. Such arrangements make legal representation contingent upon the merits of a claim, not an individual’s ability to pay. Without contingency fees, many people will be shut out of the legal system entirely because they cannot afford to pay the costs of litigation upfront.

The final outcome of this case is very important for Alabama attorneys and personal injury victims. Should Alabama courts start dissecting fee arrangements, it may result in fewer attorneys willing to take on risky injury cases. This, in turn, could unfortunately leave many injured people unable to find legal representation for their claims.