Beware! Your Fee Agreement May Not Be As Clear To Clients As You May Think

In West v. Chrisman, 2014 WL 4683182, a Florida District Court affirmed the Bankruptcy Court’s Order finding that West, as Co-Trustee and attorney for the trust administration, owed a non-dischargeable debt to the trust in the amount of $212,478.00, because his fee agreement was missing essential terms to form a valid contract.

Following the death of E. Boyer Chrisman (“Decedent”), Aleta Chrisman and Decedent’s attorney, John West, became Co-Trustees of Decedent’s Trust worth approximately $23 million dollars. On May 19, 2014, West and Aleta held a meeting to determine how the trust would be administered. At this meeting, Aleta testified there was no discussion of attorneys’ fees and she was merely handed an unsigned copy of a fee agreement. On June 2nd, West and Aleta signed the fee agreement which proposed fees to be calculated “pursuant to the provisions of Florida Statutes § 733.6171 and § 737.2041” but failed to include a calculation of the fees. Not until July 17th did West provide Aleta with an attachment to the Fee Agreement of a calculation of the fees to be paid. West told Aleta his $355,887 fee (paid in 3 installments) was set by Florida Statute and law and that Decedent allegedly agreed to the fee schedule.

In late July, a disagreement arose on how trust assets should be invested. After months of opposition, West resigned as Co-Trustee but remained the attorney for the Trust and Aleta paid West 2 out of the 3 installments for his fees. In November, Aleta fired West and brought suit against him seeking return of the fees already paid. While this case was pending, West petitioned for bankruptcy.

During the bankruptcy proceedings, the Bankruptcy Court held that Aleta could not have understood the fee agreement until the fee schedule was provided. The amount of the fee was the “most important material provision.” Thus, due to this fraudulent representation (that the fee was set by Florida law and decedent had known about it) and lack of information (the fee schedule was not provided until after she signed) the Bankruptcy Court held that West owed Aleta the fees already paid to him and this debt would not be dischargeable in West’s bankruptcy proceedings. West appealed and the District Court affirmed.

The District Court held that “Amount of Fee” is an essential term to the contract, and if an essential term is absent, ambiguous or open for negotiation, the contract is unenforceable. West’s provision stating the fee is based on “value of inventory and assets held in trust” did not resolve the ambiguity. Further, § 733.6171 and § 737.2041 do not set forth a “definite proposition” to fees and the fee schedule is “presumed to be reasonable.” West’s calculations were not reasonable and a more definitive amount should have been discussed with Aleta.

Advice:

Take a moment to review your fee agreement and ensure your terms and conditions are carefully explained, especially when discussing how your fees will be paid. Also, have your legal assistant or paralegal read it to make sure a non-lawyer would understand its terms and conditions.