940 N.W.2d 361
Iowa2020Background
- On Nov. 15, 2016 Chad Plante was critically injured in a collision with a Sioux City bus; his wife Roseanne (an attorney) retained Stanley Munger of MRD the next day.
- Roseanne signed a contingency-fee contract with MRD providing 33 1/3% of any recovery (higher percentages for appeals/retrials) and 1% per month simple interest on past-due fees. MRD offered alternative fee arrangements which the Plantes declined.
- About 18 months after the accident, Sioux City (for mediation only) offered $7.5 million, which the Plantes accepted.
- The Plantes did not pay the one-third fee; MRD sued to enforce the contract. The district court granted summary judgment for MRD, awarding one-third of the recovery plus interest.
- On appeal the central question was whether the contingency fee was "unreasonable" under Iowa Rule of Professional Conduct 32:1.5(a) and whether the Rule’s noncontingent-fee factors may be used to reassess a contingency fee in hindsight.
- The Iowa Supreme Court affirmed: the fee was reasonable at inception, the court will not generally reevaluate contingency fees using noncontingent factors in hindsight, Hoffman’s narrow exception did not apply, and the interest-rate challenge was not preserved.
Issues
| Issue | Plantes' Argument | MRD's Argument | Held |
|---|---|---|---|
| Whether the 33 1/3% contingency fee was "unreasonable" under Iowa R. Prof. Conduct 32:1.5(a) | The contingency fee is unreasonable as-applied and Rule 32:1.5(a) requires a hindsight reasonableness review using its listed factors | The fee was reasonable when made; contingent fees are evaluated at inception and noncontingent factors are not to be applied retroactively | Fee was reasonable at inception; court will not reevaluate contingency fees in hindsight using the noncontingent factors here |
| Whether the court may reassess a contingency fee from a position of hindsight (i.e., "reasonable in operation") | Rule 32:1.5(a) factors mandate a post-recovery review comparing time/effort to result | Precedent presumes contingency fees valid if reasonable when made; only narrow exceptions permit hindsight invalidation | Rejection of routine hindsight review; only narrow exception (where attorney’s work did not cause recovery, e.g., Hoffman) permits post-hoc invalidation |
| Whether the 1% per month interest on unpaid fees is unreasonable | The 1%/month interest provision is unreasonable as applied | The contract set 1%/month; district court corrected APR to 12% and MRD moved to amend | Interest-rate challenge not preserved for appeal; issue waived |
Key Cases Cited
- Comm. on Prof’l Ethics & Conduct v. McCullough, 468 N.W.2d 458 (Iowa 1991) (contingent-fee agreements should be judged for reasonableness at inception; do not reexamine with hindsight factors after successful litigation)
- Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Hoffman, 572 N.W.2d 904 (Iowa 1997) (narrow exception: contingency fee may be invalidated post hoc where recovery was produced independent of the attorney’s work)
- Wunschel Law Firm, P.C. v. Clabaugh, 291 N.W.2d 331 (Iowa 1980) (recognition and enforceability of contingent-fee contracts)
- King v. Armstrong, 518 N.W.2d 336 (Iowa 1994) (higher contingency percentages can be reasonable in complex cases with low chances of success)
- In re Abrams & Abrams, P.A., 605 F.3d 238 (4th Cir. 2010) (contingency fees promote access to counsel and align lawyer-client incentives)