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Hoffert v. General Motors Corp., 656 F.2d 161

Facts

On August 15, 1978, John Hoffert was severely injured in a car accident involving a 1973 Vega, which his parents alleged was defectively designed. The Hofferts hired Cochrane & Bresnahan, P.A. under a contract that entitled the firm to 40% of any recovery. After filing suit and agreeing to a settlement of $2,500,000, the district court appointed a guardian ad litem to protect John’s interests due to a potential conflict of interest regarding the fee. The court ultimately approved the settlement but limited the law firm's fee to $500,000, leading to the appeal.

On August 15, 1978, the fourteen-year-old John Hoffert was severely injured when the 1973 Vega in which he was a passenger collided with a 1962 Buick at an intersection in El Paso, Texas. The Hofferts alleged that the Vega was not crashworthy because defectively designed and manufactured and that John sustained his injuries because the impact with the Buick dislocated the hood and drove it through the windshield into his head and body.

Issue

Did the district court have jurisdiction to modify the attorney's fees recoverable under the contingency fee agreement, and did it abuse its discretion in reducing the fee?

Did the district court have jurisdiction to modify the amount of attorney's fees recoverable under the contingency fee agreement because it was not presented with a “case” or “controversy” within the meaning of Article III of the United States Constitution?

Rule

The court has the power to supervise the reasonableness of contingent fee contracts and to limit attorney fees based on the circumstances of the case, as established by the Code of Professional Responsibility and relevant case law.

The Code of Professional Responsibility of the American Bar Association imposes stringent limitations upon the ability of lawyers to contract for contingent fees. See DR2-106 and EC2-20.

Analysis

The court determined that it had jurisdiction because Cochrane & Bresnahan invoked the court's equitable power by seeking approval of the settlement agreement. The court examined the reasonableness of the fee in light of the settlement and the factors affecting attorney compensation. It found that the district court's factual findings were supported by the record and that the court acted within its discretion in limiting the fee to $500,000.

Having properly appointed a guardian ad litem to represent the injured minor's interest in this litigation, the district court was thereby vested with broad authority to inquire into the whole range of issues bearing upon the plaintiff's recovery in order to guarantee that the settlement agreement was in accord with his interests.

Conclusion

The court affirmed the district court's decision, concluding that it did not abuse its discretion in limiting the attorney's fee to one-fifth of the settlement proceeds.

Accordingly, we conclude that the district court had jurisdiction to limit the amount of Cochrane & Bresnahan's attorneys' fee recovery from the settlement proceeds in favor of the Hofferts.

Who won?

The Hofferts prevailed in the case as the court upheld the district court's decision to limit the attorney's fees, ensuring that the settlement was fair and reasonable for the injured minor.

The court then directed the First National Bank to pay the entire remainder of the escrow account, including all interest accrued, to the trustees of a trust created for the benefit of John Thomas Hoffert.

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