Williams, Bax & Saltzman, P.C. v. Boley International (H.K.) Ltd
2015 U.S. App. LEXIS 19353
7th Cir.2015Background
- Five-year-old Cole Goesel was injured; his parents retained Williams, Bax & Saltzman under a contingent-fee retainer: one-third of the gross recovery to the firm; clients pay litigation expenses; no recovery, no fees/expenses.
- After nearly four years of litigation with extensive discovery and many experts, the parties settled for $687,500; firm’s one‑third of gross = $229,166.67; expenses = $172,949.19; net to Goesels ≈ $285,384.14 (~42%).
- Federal court approval was required because Cole was a minor; the district judge sua sponte modified the allocation: required expenses be deducted before calculating the contingency fee and disallowed nearly $10,000 in Westlaw charges.
- District court awarded reduced fees and increased the minor’s share (judge invoked "fairness and right reason" and expressed concerns about bargaining power/adhesion and the firm’s comment on pain-and-suffering valuation).
- Firm appealed; Goesels declined to participate; an amicus supported the district court. The Seventh Circuit reversed, holding the district court abused its discretion.
Issues
| Issue | Plaintiff's Argument (Firm) | Defendant's Argument (District Court / Goesels) | Held |
|---|---|---|---|
| Whether a court may require litigation expenses be deducted before calculating a contingent one‑third fee | The retainer is reasonable and customary; one‑third of gross is market‑consistent and justified by lodestar comparison | Court asserted fairness required deducting expenses first to increase the minor’s share | Court held district abused discretion; retainer reasonable and market‑aligned, so court may not rewrite it absent good reason |
| Whether computerized legal research (Westlaw) is recoverable as a separate litigation expense | Firm sought ~$10,000 as reimbursable expense | Court excluded computerized research as subsumed in contingent fee | Held: Consistent with Illinois rule and Seventh Circuit precedent, computerized research is not separately recoverable in contingent/fixed‑fee cases; exclusion proper |
| Whether the retainer was an unenforceable contract of adhesion or procedurally/substantively unconscionable | Firm: Agreement was negotiated, customary, and not procedurally unconscionable; fee reasonable | Court characterized the retainer as adhesive and worried about bargaining power and fairness | Held: No evidence of coercion, ambiguity, or procedural unconscionability; adhesion label insufficient to justify rewriting the agreement |
| Governing law and standard for review of minor‑settlement fee approval | Firm: Reasonableness standard (market/lode‑star/Rule 1.5 factors) controls; Illinois substantive law applies | Amicus/District Court: Broad discretionary power to protect minors, invoking public‑policy concerns | Held: Illinois substantive law governs; courts have substantial but not boundless discretion—must justify departures from reasonable contingent contracts with sound legal grounds; here discretion abused |
Key Cases Cited
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (establishes state substantive law governs in diversity)
- Arpin v. United States, 521 F.3d 769 (7th Cir.) (damages rules and related payments are substantive)
- Pickett v. Sheridan Health Care Ctr., 664 F.3d 632 (7th Cir.) (highly deferential abuse‑of‑discretion standard for fee awards)
- Palm v. 2800 Lake Shore Drive Condo. Ass'n, 988 N.E.2d 75 (Ill. 2013) (use prevailing market rate in determining reasonable attorney fees)
- Leonard C. Arnold, Ltd. v. N. Trust Co., 506 N.E.2d 1279 (Ill. 1987) (court’s duty to protect minors and caution in enforcing contingent‑fee agreements for minors)
- Montgomery v. Aetna Plywood, Inc., 231 F.3d 399 (7th Cir.) (distinguishes recoverability of computerized research under lodestar vs percentage methods)
- Johnson v. Thomas, 794 N.E.2d 919 (Ill. App. Ct.) (explains rationale for treating computerized research as recoverable in lodestar but not in fixed/contingent‑fee cases)