Atlanta—A Fulton County Superior Court jury awarded a prominent Atlanta law firm nearly $750,000 in damages for unpaid attorney’s fees in a suit brought against clients it represented in an eminent domain case, despite never having a signed fee agreement with the clients. Chamberlain, Hrdlicka, White, Williams & Aughtry v. Elie Karam et al. (2014CV242261)
Prior to 2005, the defendants in the case owned two parcels of property at the intersection of Memorial Drive and I-285 in DeKalb County. In addition, one of the defendants, Elie Karam, had operated a discount clothing store, D&K Suit City, at the location for several years. The Department of Transportation filed a condemnation proceeding in 2005 and valued the property at approximately $4.4 million, which did not include any amount for the loss of value of the business.
The defendants were dissatisfied with the DOT’s valuation of the property and hired Chamberlain, Hrdlicka to represent them. More than seven years later, the law firm reached a settlement with the DOT for an additional $4.1 million. This amount included over $2.3 million for the loss of value of the business, which relocated in a shopping mall across Memorial Drive from its former location. The business was much less successful in the new location.
At issue in the current litigation was the amount of attorney’s fees owed the law firm for its work in the condemnation case. The law firm contended that a June 23, 2006, letter sent to Karam contained the terms of the agreement. That letter provided for an hourly fee of $250 an hour, to remain frozen for the duration of the litigation, plus a contingency fee. Under the contingency fee, if the firm was successful in obtaining an eventual award in excess of 10% more than the DOT’s original valuation, the firm would also receive 20% of the excess amount over the initial 10% added recovery. Based on the size of the ultimate recovery, Chamberlain, Hrdlicka would be entitled to an additional $749,776.29 in fees under the terms in the June 2006 letter. The parties agreed that neither Karam nor any of the other defendants signed that letter or any other written fee agreement.
Richard Hubert, one of the two Chamberlain, Hrdlicka attorneys who handled the case, testified that when he first met Karam, he gave Karam two alternatives for paying the firm’s fees, either an hourly fee of $375 (the firm’s then standard rate) or a 33 percent contingent fee. Despite not having a signed agreement, Hubert went to work on the defendants’ case because the DOT was taking steps to force the defendants to vacate the property immediately. Shortly before drafting the June 2006 letter, Hubert said he met with Karam and discussed numerous aspects of the case, including the firm’s fees.
Hubert stated that Karam agreed to the fee arrangement as outlined in the letter, so he drafted the letter, which also contained a summary of the other matters discussed in the meeting, and sent it to Karam for signature. He never received a signed letter or heard anything from Karam indicating he had any objections or disagreements with the letter. Instead, when asked, Karam indicated he would get to it when he could. As the case proceeded, the law firm periodically billed the defendants $250 an hour for ongoing services, and the invoices were paid.
Elie Karam was called to testify on cross examination by the plaintiff. He contended that he had several conversations with Hubert in which he said he would not pay the firm a contingency fee. He admitted getting the June 2006 letter, but said he initially read only the first page. Four or five days later, Charles Karam, the company’s financial officer (and Elie Karam’s cousin) directed Elie to read the entire letter. When he did, Elie said he called Hubert and objected to the contingency.
Elie Karam further testified that he and Hubert then agreed during the telephone conversation to the $250 hourly fee without any contingency fee. When Hubert did not discuss the matter further, Karam assumed they had an agreement at the $250 rate and did not discuss the fees again until the eventual dispute arose.
The defense did not recall Karam to the stand or call any other witnesses. Instead, in his closing statement, defense attorney David Anton stated that Karam had never agreed to a contingency fee. Instead, he felt that he should receive a lower hourly rate that the firm’s standard because the firm knew there would be extensive work involved in the case. Anton likened the reduced hourly rate to a bulk discount.
Anton added that paying an hourly rate plus a contingency did not make sense. “Why would he do a contingency and hourly? That doesn’t make any sense. You either do a contingency or hourly. You don’t do both. $250 an hour is a lot of money to be paying on a monthly basis then still have to pay in this case upwards of $750,000 on the recovery.”
According to Anton, the fact that Karam didn’t agree to the contingency is evidenced by the fact he didn’t sign the June 2006 letter. “Most people that I’ve met, including myself, when you don’t sign something you don’t expect to get sued for it. Conversely, when you sign something you expect to get sued… Signatures matter in society, signatures matter in life, they matter in the law.” Anton concluded that if anyone was to blame for any misunderstanding, it was the law firm: “This is this weird sort of yeah we did a good job and we screwed this up and we didn’t get you to sign it and we didn’t notice it for seven years and that’s now your fault. We’re not going to take any blame, any responsibility for it whatsoever. That’s just not right.”
In his closing statement, plaintiff’s attorney Howell Hollis noted the lack of a signed document, but told the jury that the defendants could have accepted the agreement in other ways, including by accepting its benefits. He asked the jury to consider Karam’s claim that Hubert agreed to the drop the provision for the contingency merely because Karam asked. “Mr Karam’s testimony apparently is … after I got this letter, I called him and on the phone he collapsed. He gave up the contingency. He said, ‘Sure Elie, I’ll be glad to do it for $250 an hour. Please ignore my certain conditions I put in my letter. Forever, freeze my rate and never raise it.’”
Hollis also said that, while “bulk discounting” might be a common practice in some businesses, law firms did not offer such terms. “When you drop your rate in the legal field, unless you are pyramiding this with lowly paid people, it is not making a profit for the partner to drop his rate. That’s reducing the profit, not increasing the profit. Volume isn’t a good thing in the legal profession unless you can leverage it. This is not a leveraging situation where Mr. Karam is buying wholesale.”
Hollis also questioned why the defense did not call any witnesses, especially Charles Karam, who first received the June 2006 letter, and why they did not ask Elie Karam any questions. Hollis continued, ”We brought evidence; Mr. Karam brought argument; we brought truth. That’s what Judge [Craig] Schwall told us all in the courtroom on day one. That’s what we’re looking for is the truth. We brought truth; they brought nothing.”
In its verdict, the jury found that the parties did in fact have a contractual agreement under the terms of the June 23, 2006, letter and awarded plaintiff $749,776.29 damages.
Representatives for the parties were unavailable for comment prior to the publication of this article. Steve Silver can be reached at [email protected]
Attorneys involved in the case include Howell Hollis of Atlanta's Smith Moore Leatherwood for plaintiff and David A. Anton of Alpharetta for the defense.
Watch on-demand video of the trial as soon as it becomes available.