Self-Serving Retainer Agreement Leads to Attorney Withdrawal

A federal court ruling has provided new ethics guidance on contingency fee agreements, holding that when an attorney’s pecuniary benefit comes at the expense of his or her client’s recovery, such an agreement may present an impermissible conflict of interest.

In Gamble v. Kaiser Found. Health Plan, Inc., the U.S. District Court for the Northern District of California considered whether a retainer agreement which (1) characterized client recovery as property of an attorney, (2) expressly assigned negotiation rights for said fees, and (3) required clients to pay twice the attorney’s Lodestar fee if attorney fees were waived as part of settlement, presented an impermissible conflict of interest that runs afoul of California ethics rules.

In response to the defendant’s allegations of ethical impropriety, the plaintiffs in Gamble brought a motion pursuant to Rule 16 and the court’s inherent power to control the conduct of the attorneys that appear before it. As the court described it, the plaintiffs sought an order “dictating in advance the parameters of any settlement negotiations with defendants,” and asking the court to “give its imprimatur to plaintiffs’ counsel’s fee agreement and confirm that it poses no conflict of interest with the named plaintiffs or the class.”