Rules on contingency fee agreements serve as consumer protection legislation: court
The Ontario Superior Court of Justice has reduced a law firm's legal fee in a medical malpractice case from the requested $4.1 million to $3.25 million.
The court found that the fee arrangement was neither fair when it was signed nor reasonable in the context of the settlement.
The case arose from a 2009 birth injury that left a child profoundly disabled. His brain was deprived of oxygen during delivery, and he was diagnosed with cerebral palsy a year later. In 2015, the child's family retained Almeda Wallbridge of the law firm of Wallbridge, Wallbridge to pursue a medical malpractice claim against the attending doctor, nurses, and hospital. The lawsuit culminated in a $14 million settlement in 2023, which included compensation for damages and legal costs.
Wallbridge sought court approval for its fee under the 2018 contingency fee agreement (CFA), which entitled it to one-third of the damages recovered, amounting to $4.1 million before taxes. The court reviewed the agreement, given that the injured party was a minor and thus a person under disability.
The Superior Court found that the 2018 CFA failed to meet the legal requirements under Ontario's Solicitors Act and associated regulations. The court noted that the act and the rules governing CFAs serve as a form of consumer protection legislation which requires strict compliance. The court stressed that the regulatory requirements were not just formalities but essential for providing vital information to address the power imbalance between lawyers and clients.
The court found that the agreement lacked essential disclosures, including information about alternative fee arrangements and the client's right to make critical decisions about the case. The omission of these elements created an imbalance in the lawyer-client relationship, mainly as the family was in a vulnerable position due to the child's significant care needs and limited financial resources.
The court also questioned the accuracy of the firm's reconstructed billing records, which claimed over 3,000 hours of work without contemporaneous timekeeping. The court found the figures unconvincing and noted that the settlement fell short of the damages the plaintiffs and defendants initially estimated.
In determining a fair fee, the court considered the time expended by the lawyer, the case's complexity, the result achieved, and the risk assumed by the firm. In its decision, the court stated, "CFAs must be fair and reasonable in the context of each and every case, not in the context of the lawyer's practice as a whole."
Ultimately, the court used a formula that balanced the interests of the clients and the lawyer while ensuring that more settlement funds were available to address the child's lifelong care needs. The court concluded that a fee of $3.25 million is both fair and reasonable in the case circumstances.
