Miami firm Irons Law Group has appealed a decision by U.S. Bankruptcy Judge Laurel M. Isicoff, who dissolved a charging lien the firm had filed against a former client, finding its 50% contingency fee agreement was excessive and in violation of Florida Bar rules.

The client, Miami Development & Holdings LLC, was a creditor in a South Florida bankruptcy case. It retained Irons Law Group to file a proof of claim against debtor Miami Beverly LLC and four affiliated companies in March 2018. The firm filed a notice of appearance, a complaint, nine lis pendens and attended a status conference before withdrawing as counsel about four months later in July.

Miami Development principal Gadi Shushan hired a new attorney, and the litigation continued over a contract involving the purchase of equity and real estate — but not without issue.

A dispute arose because the fee agreement Shushan had signed onto with Irons Law Group said the firm was entitled to 50% of the accumulative amount of any recovery in the case, even if they switched counsel.

"If a new attorney successfully obtains a recovery on the judgment, the percentage of the recovery owed to the firm per section 2 of this agreement will continue to be owed to the firm as if the firm had collected the full amount of the claim," the agreement said.

|

'Double recovery'

The new attorneys for Miami Development & Holdings—Michael S. Hoffman of Hoffman, Larin & Agnetti in North Miami Beach and Theodore D'Apuzzo of the D'Apuzzo Law Firm in Fort Lauderdale—ultimately reached a $225,000 settlement with the debtors through the bankruptcy estate.

Eric Irons of Irons Law Group then moved to collect 50% of that, or $112,500. But that charging lien was invalid, according to Isicoff, who ruled that the fee agreement was "clearly excessive" and void, because its agreement clause and penalty provisions ran afoul of Florida Bar rules.

Under Rule 4-1.5(a) of the Rules Regulating The Florida Bar, contingency fees agreed without prior court approval are capped at 40% for recoveries less than $1 million, 30% for recoveries between $1 million and $2 million, and 20% for more than that.

"Fifty percent far exceeds any of the fee caps allowed by the ethics rules, and it is undisputed that no court approved the 50% fee, so the contingency fee agreement is presumed to be excessive," Isicoff wrote.

Isicoff also took issue with provisions that said in addition to paying the contingency fee, Shushan would have to immediately pay fees to Irons upon hiring new attorneys.

"This is double recovery," Isicoff wrote. "Moreover, requiring payment of a contingency fee based on full recovery, to a prior attorney restricts a client's ability to retain new counsel."

Irons declined to comment. But according to Isicoff's ruling, he argued that the case was particularly difficult and undesirable, as evidenced by the fact it took Shushan nearly three years to find a lawyer willing to take it on.

At a hearing, Irons also pointed out that his work included more than just a few court filings, as he'd tried to find investors and put together sale opportunities and various other business resolutions.

But Isicoff disagreed, finding the settlement proceeds "are not the fruits of Irons' labor," as he was gone six months before settlement discussions began.

The ruling was precisely what Hoffman and D'Apuzzo had asked for in their motion to strike the charging lien.

"It's an unusually high contingency fee that the judge found to be excessive, and it just would have consumed too much of the recovery, so it would have made the case not profitable for the client," Hoffman said.

Irons missed the 14-day appeal deadline by two weeks, so it remains to be seen whether the court will accept the late filing.

U.S. District Judge Robert Scola will preside over the appeal.

Read more: