In common parlance, a “squatter” is a person who takes possession of property without any rightful claim. In my mind’s eye, I picture a modern-day pirate, moving into your home and declaring “This is MY house now!”
In my 25 years of eviction and property litigation, I’ve actually never dealt with a squatter. I’ve certainly never perceived it to be a problem that justified special legislative attention.
Effective July 1, 2024, we now have Tenn. Code Ann. § 29-18-135, titled “Limited alternative remedy to remove unauthorized persons from residential real property.” This statute is added to the end of Title 29, Chapter 18, which are the eviction and detainer statutes.
This new statute creates a process by which a property owner can, by filling out a checklist form, direct the Sheriff to remove an “unauthorized person” from the property, without a court proceeding.
By its clear text, “a property owner…may request from the sheriff of the county in which the property is located the immediate removal of any person unlawfully occupying a residential dwelling pursuant to this section if…[a]n unauthorized person has unlawfully entered and remains on the property owner’s [residential] property” and “[t]he unauthorized person is not a current or former tenant…” (this is heavily paraphrased, so be sure to look at subpart (d) in full).
The word “squatter” isn’t in this statute. Instead, the statute deals with “any person unlawfully occupying a residential dwelling” who “has unlawfully entered and remains or continues to reside” on the property and who “is not a current or former tenant…” and “is not an immediate family member of the property owner.”
That’s a pretty broad definition, and it seems to include persons not routinely labelled “squatters.” For instance, wouldn’t a foreclosed homeowner be subject to this statute? They are no longer the “owner,” they aren’t a “current or former tenant,” and if they stay at the property after the foreclosure deed is recorded, the possession is “unlawful.”
In my experience, “squatters” simply haven’t been a bane to Tennessee property owners’ existence. I’m not saying it never happens (and I’m sure that all it takes is one years’ long fight with a squatter to change my mind), but it seems like the existing statutes provide a good remedy, and, at best, this statute puts an awkward amount of judicial discretion into the hands of the local sheriff (who probably would rather all this be decided by a judge).
I was shocked to see–on the national news–that Graceland was facing foreclosure. A few days later, it all just…went away and explained as a hoax. I was surprised, but not totally surprised by these strange turn of events. It rarely happens, but foreclosures in Tennessee are ripe for exploitation by bad actors.
At its most simple, Tenn. Code Ann. § 35-5-101 requires a lender to: (1) publish a notice of the sale 3 times in a local newspaper; and (2) send a copy of the notice to the property owner by certified mail. With just a bit of paperwork, voilà, you can sell somebody’s property.
It’s a cost efficient process for legitimate lenders, but it can be exploited by fraudsters and and paper terrorists, who present bogus claims and hope that their efforts will be ignored or not challenged.
Once a foreclosure is started, there are limited ways for a property owner to stop it, short of filing bankruptcy or filing a lawsuit to obtain an injunction pursuant to Tenn. Code Ann. § 29-23-201 (which is as complicated as it sounds–Graceland’s lawyers filed a 61 document to stop this sale).
When I saw the news about Graceland’s foreclosure, I immediately looked up the Notice of Foreclosure Sale published by Naussany Investments and Private Lending LLC, and noticed red flags. The Deed of Trust had been not been recorded; the lender didn’t have an attorney; and the Notice of Sale lacked the level of detail a typical lender foreclosing on a historic, world-famous property would include.
As bizarre as all this was, here’s the scary part: This could happen to anybody in a non-judicial foreclosure state. Here, the fraudsters were simply too ambitious, picking a famous property owned by a deep-pocketed and litigious owner.
What about properties by people who don’t understand the process, don’t read the newspaper and/or sign for certified mail, don’t have access to lawyers, or don’t have the money to fight? There are no official safeguards in the system to protect homeowners.
The newspaper doesn’t question the validity of the lender’s claims in submitted advertisements. The mailman doesn’t either. Once the sale is over, the local Register of Deeds just checks for valid notary stamps and payment of the transfer taxes. In some cases, by the time the owner discovers the fraud, there’s already a new deed recorded.
In 2016, I wrote an article for the Nashville Bar Journal titled, “Is your Potential Client a Nigerian King?” As part of that, I learned something wild about the email scammers’ unique business model: They expect to fail 99% of the time. They aren’t bothered by that fail rate, though, because they know that the upside to a single victory justifies all the work.
Sure, these scammers failed to foreclose on Graceland, but how many other times have they succeeded? And how many more times are they going to try?
As a creditor lawyer, one of my greatest fears is that one of the many judgments that I’ve taken over the past 10 years is set to expire and I have forgotten about it.
It is so easy to renew judgments under Tenn. R. Civ. P. 69.04, but it’s also easy to forget about those old files. If a law firm forgets, it could get sued for malpractice. It’s a big deal.
In the case, after the 10 year period expired on an old judgment, the judgment creditor client sued its former lawyers, alleging that the law firm “had failed to inform Plaintiff that the judgment would expire after ten years or that it needed to seek to extend the judgment prior to its expiration.”
The trial court dismissed the claims against the law firm, because the client failed to have filed the lawsuit within the one-year attorney malpractice statute of limitations. The opinion doesn’t really focus on the renewal issue; the real analysis is on issues of recusal and the different standards under Tenn. R. Civ. P. 59.04 and 60.02.
But, back to creditor rights. Is this is victory for the law firm? Not really, because lawyers don’t like being sued for malpractice in the first place.
Since starting my firm nearly 4 years ago, I’ve opened 639 new cases. Before that, I handled a similarly busy caseload at my old firm. In the past 10 years, I’ve taken 100s of judgments.
It would be a cold comfort to me to know that, if my client sues me for malpractice, I could possibly defend the case on a technicality.
Having said that, how can lawyers mitigate that risk? The answer is in a Court of Appeals decision I wrote about in 2019. There, the malpractice claims turned on whether the law firm warned the client, at any point, that the judgment needed to be renewed in ten years. Because the law firm had previously warned the client about the 10 year expiration, the client had knowledge of the possible malpractice claims that accrued at the time of non-renewal (and not a later date).
Look at the text of the John Doe case: the client alleged that the law firm “had failed to inform Plaintiff that the judgment would expire after ten years or that it needed to seek to extend the judgment prior to its expiration.”
If you’re like me, a busy lawyer with many judgments, remember my advice from 2019: “A good practice is to make sure that the client understands that it has a responsibility in ten years to notify you that it wants you to take this action.”
In a perfect world, my advice is to calendar judgments and simply avoid this issue altogether.
A separate safeguard could be, in that initial congratulatory email, sending a copy of the judgment to the client, to always include text that clearly discusses the validity and expiration of the Judgment in terms that the client can understand.
I’ve heard from a number of lawyers that it’s what they’ve always done, but, nevertheless, it’s nice to have a bit of judicial reassurance.
Back in September 2023, immediately after a trial in Sumner County, I was racing to get the new judgment recorded on land that the judgment debtor had under contract for sale.
As soon as the Judge signed my order, I asked to make a certified copy. Cautiously, because I’ve had judges and court clerks admonish me in the past for even asking for a certified copy of a brand new judgment.
In my case, I had no time to spare.
My Register of Deeds visit was where the real fun started. Within minutes of being handed my certified copy, I was at the Register of Deeds’ front counter.
While I was sitting in the Register’s waiting area, I overheard them discussing a problem they had to deal with.
A Big Law Firm had mailed in a document for recording for the third time, and, once again, the “payee” name on the check was wrong. I don’t know what was written on the check, but it did not say “Sumner County Register of Deeds” (or, I assume, anything close to that).
Twice already, the Register of Deeds had rejected the filing and mailed it back.
As I was sitting there, they were discussing what to do about this third time.
How on Earth does this happen three times? As it turns out, the year before, this AmLaw 200 Big Law Firm had purchased (or, as the marketing people say, “combined with”) a local law firm and checks were no longer written in Nashville or anywhere in Tennessee.
Instead, the checks were written 600 miles away by someone who has probably never heard of “Sumner County” or a “Register of Deeds Office,” and who probably has never met the lawyer (or client) who desperately wanted whatever was being rejected to be recorded.
I have no idea if the third recording got accepted that day, or if the Clerks ever just called the Big Firm to sort it out. I got my recorded judgment lien on the property and left; the rest was not my problem.
So what’s the point of the story? To be clear, I was very amused by it all.
Sometimes, when I am writing my own checks or driving to record my own documents, I miss the old law firm days when I had a person who did all that for me. But, I’m also a control freak who takes his job very seriously, and I would have lost my mind if I had lost weeks trying to record something that kept getting rejected.
Most articles about law firm acquisitions /combinations have the narrative that “bigger is better,” and usually mention “broader reach,” “expanded networks” and “new markets.”
Sitting there that day, with sweaty palms, watching the clock, hoping to get my document recorded before the land could be sold…I was glad to be the guy writing my own checks.
We’re one step closer to answering one of Tennessee collection law’s greatest mysteries: Can a judgment creditor record a copy of its judgment as soon as it is signed by the Judge, or must the creditor wait 30 days?
The question arises under Tenn. R. Civ. P. 62.01, which says that “…no execution shall issue upon a judgment, nor shall proceedings be taken for its enforcement until the expiration of 30 days after its entry…”
For starters, what’s the statutory authority for recording a judgment lien? I look at Tennessee Rule of Civil Procedure 69, which is titled “Execution on Judgments,” and includes all the different ways you can “execute” on judgments (garnishments, levies, sheriff’s sales, liens). This list includes Tenn. R. Civ. P. 69.07(2), “Execution on Realty,” which provides the exact process to record a judgment lien against the judgment debtor’s realty.
And let’s be honest; why would you record a judgment in the first place? Under Tennessee law, the recording of a judgment with the register’s office creates a lien on real property, meaning that the debtor can’t sell, refinance, or transfer the property without dealing with the judgment. It’s a pretty powerful tool to get paid. That’s why you’d record it, and as fast as possible.
If the point is to get paid–and as soon as possible–that looks a lot like enforcement, right? But is that “execution”? Should we also throw around terms like “collection” or “attachment” too?
It’s been a mess because the statutes and rules all seem to use these different terms interchangeably, except when they aren’tinterchangeable.
Faced with this exact issue, the Davidson County Chancery Court had to make sense of these competing terms and concepts. In an Order from February 2, 2024, the Court found the mere act of recording a judgment during the Rule 62.01 stay period “was not premature ….because the filing of judgment lien is not an act of enforcement.”
In doing so, the Court referenced the pleadings filed in the matter, which drew reasoning from Tenn. Code Ann. § 25-5-101(b)(1) and the competing concepts of “final” judgments found in Tenn. R. Civ. P. 54 and 62.01. Further, given the Court’s brief, but specific, factual finding, the Court seems to agree with the opposing brief’s distinction between the acts of recording a lien versus enforcing a lien, arguing that only the latter would violate Rule 62.01. The full Order is attached below.
It’s an important issue that has long vexed creditor rights lawyers, debtor’s counsel, and even court clerks. I’ve had court clerks only begrudgingly provide me with a certified copy of a judgment on the day of entry (and reminding me that I “can’t do anything with it for 30 days”).
This Order and the related reasoning may provide a roadmap for future arguments on this issue, which comes up far more frequently than you’d think.
I watched these trial court proceedings pretty closely, and I’m glad to see a creditor-friendly result. The underlying initial pleadings are also attached below.
A few months ago, I got an unexpected call from a local Sheriff’s Office, late on a Friday afternoon. (Hardly ever always a good thing.)
This Sheriff and I had done a real property “sheriff’s sale” a few years ago that was very successful, and he had one scheduled for Monday that he needed my help on.
“Can a Sheriff’s Execution Sale of Real Property be Continued?” he asked.
The attorneys for the creditor and the judgment debtor were trying to work out a deal, but they were running out of time, but the Sheriff didn’t think he could give them more time.
I wasn’t sure either, so I went with my default answer: “It depends. Let’s talk this out.”
In the end, my advice was: “Under existing Tennessee execution law, he couldn’t: He had to proceed, or the judgment creditor had to call it off. There was no in between.”
Back then, unless the text of a deed of trust expressly authorized a foreclosure postponement, trustees weren’t sure if they could continue a sale. Some trustees included language in their sale notices allowing continuances, making it seem like it was no big deal (but if you if you pressed them on the authority to postpone a sale, they’d usually admit that there was none).
Back then, if a deed of trust was silent on continuance, most prudent lenders tended to proceed with a sale, regardless of whether the parties were negotiating potential resolutions. Tenn. Code Ann. § 35-5-101(f) was enacted to avoid those harsh results and help parties who were trying, in good faith, to resolve disputes and save their homes. It gave them some relief to work out a deal.
So, back to our Sheriff’s Sale. The analogy to foreclosures is apt, because the sheriff’s sale statutes track the foreclosure statutes. If you at Tenn. Code Ann. § 26-5-101, et. seq.–it’s nearly the exact same text. In short, a Sheriff’s Sale is, basically, the same thing as a foreclosure sale, but done by the sheriff.
But, for this blog post, I’ll point out a big difference: There’s no § 26-5-101 “(f)” — the part about the continuances. It’s the same text, except for that section.
Uh oh.
And, of course, there’s never going to be any sort of contract to fall back on, because there’s hardly ever going to be any sort of contract between a judgment creditor and judgment debtor providing any sale terms (as a deed of trust would between a borrower and lender).
Separately, there’s nothing in any other Tennessee statutes–talking about execution, sheriff sales, Tennessee Rule of Civil Procedure 69 or elsewhere–about continuances.
Finally, in talking to the Sheriff, I asked him–in a last ditch effort to see if I could help the parties on his sale get some more time to reach a resolution–whether their case’s Sale Order or Notice of Sheriff’s Sale said anything about ability to continue or postpone the sale? There was nothing at all they could point to.
In a perfect world, we’d have a statute that allows continuances in sheriff’s sales. In a less perfect world, the Court’s Sale Order would allow a continuance. In an even less perfect situation, we’d have a Notice of Sheriff’s Sale that would allow a continuance.
Some of it can be chalked up to schadenfreude: The restaurant was the site of a fairly salacious political scandal involving some of Tennessee’s least likeable politicians in recent memory. Whether it’s echoes of that scandal or its location in the party-centric Gulch, Party Fowl tends to get a bad rap from locals.
The reactions also reveal common misconceptions about how Chapter 11 works. Sure, if a company files a Chapter 11 bankruptcy, something has gone terribly wrong, but it doesn’t necessarily mean the end of the company.
The goal in Chapter 11 is rarely to simply shut down, but, instead, it’s to reorganize and stay in business. This generally involves freezing payments to creditors (unless it’s post-bankruptcy vendor payments), restructuring the company’s debts (i.e. extending the payment terms and, sometimes, paying only a fraction of the amounts owed), rejecting leases (i.e. undoing bad business decisions), and, generally, cut operations and expenses going forward (i.e. downsizing).
At the end of this process, a chapter 11 debtor will propose a plan of reorganization (based on a realistic budget it can handle) to keep its business alive and pay creditors over time.
Most companies continue operations after filing Chapter 11, and the customers will never notice any difference. Party Fowl filed bankruptcy nearly ten days ago, but they’ve been selling hot chicken continuously over the past two weeks.
Party Fowl appears to have some good reasons for filing. Based on their Company Profile (copy below), the debtor told the Bankruptcy Court that COVID was a big disruption with awful timing: They started a bold expansion in March 2020, and those new locations have struggled and drained resources, impaired cash flow, and led them to take out some fairly onerous and high interest merchant lender loans to bridge the gap. The bankruptcy filing allows the debtor stop paying those sky-high rate loans and use the income to right-size the business.
This is a Creditors Rights blog, written by a creditor rights lawyer, so please don’t think I’m going soft here. Based on the pretty extreme “Party Fowl, we hardly knew thee” reactions, I thought a little bit of background could be useful.
And, don’t worry, I’ve got lots of criticisms about the chapter 11 process, but I’ll save those for a later post. (Just wait until I tell you the story about the mega-bankruptcy case that paid the lawyers $100s of millions of dollars in legal fees and costs over 5 years, and the check my client received last month for 1.04% of his claim…)
Yesterday, the Tennessee Court of Appeals issued a new opinion on this topic, which is a must read for sessions lawyers.
The case, Mary Bradley v. Catherine A. Pesce, W2023-00583-COA-R3-CV (Tenn. Ct. Ap. Dec. 19, 2023)(full copy here), involves a lawsuit against two defendants, filed in general sessions court in 2020. Plaintiff served one defendant, but never got the other served. After taking a judgment in June 2022 against the served defendant, plaintiff nonsuited the claims against the never-served defendant in January 2023.
Using the date of the dismissal, the judgment defendant filed an appeal of the June 2022 judgment. The issue, of course, was whether her appeal was timely under Tenn. Code. Ann. § 27-5-108, which provides “[a]ny party may appeal from a decision of the general sessions court to the circuit court of the county within a period of ten (10) days.”
Wasn’t the defendant required to appeal within 10 days of the June 2022 judgment?
Looking to Tenn. R. App. P. 3(a), the Court of Appeals first asked whether a ruling in a matter is “final” where other claims (like a cross-claim) are still pending. The Court noted that the “finality rule” is applicable even in general sessions cases, citing other opinions that “the time for filing a notice of appeal [does] not begin to run until every claim raised in the general sessions court [is] adjudicated.” Further, the Court considered the 2018 amendments to Tenn. Code Ann. § 27-5-108, which provide that one party’s timely appeal takes all issues to the circuit court, even when other claims remain pending.
In the end, the Court concluded that because “the general sessions court action …was against two parties: Appellant and Ms. Weaver,” then “[t]he judgment against Appellant was not final and appealable until all the claims of all the parties were adjudicated,” and “[t]his occurred on or about January 5, 2023.” As a result, the appeal of the June 2022 ruling was not a final order until the dismissal order was signed.
In short, the concepts behind Rule 54.02 apply in Tennessee General Sessions Court, and litigants should keep this opinion in their mind any time a case involves multiple claims and parties.
Here, it seems like the judgment debtor acted out of necessity (and not by design). Frankly, the safest course of action would have been to file the appeal in June 2022 and be entirely certain that the appeal was timely (which would have, by operation of Tenn. Code Ann. § 27-5-108, taken the entire matter to circuit court).
On the other side of the aisle, an experienced plaintiff’s lawyer knows the incredible challenges that an evading or difficult-to-serve defendant presents, and that lawyer should take precaution to make any partial judgment final (and executable) as soon as possible.
This could be done in a few easy ways. The plaintiff could ask for text in the sessions judgment that tracks the language of Rule 54.02, making it clear that the order is a final order. The plaintiff could, at the time of the entry of the initial judgment, dismiss the other claims and parties. Or, if the other claims and parties were simply too crucial, the plaintiff could delay all relief or, at worst, live with a bit of ambiguity as to the finality of the partial judgment.
The appellate court’s reasoning is sound, but a savvy plaintiff has a number of ways to protect their client.
A more pressing question is this: If the “partial” sessions judgment isn’t final in a situation like this, then shouldn’t the Court Clerk refuse to issue execution? (Spoiler: Most will issue execution, but, based on this case, they shouldn’t.)
It’s holiday party season for lawyers, and, man-o-man, have I spent a bit too much time around tipsy lawyers over the past few weeks (disclaimer: I’ve been to 2 parties).
It’s also the time of year for: all-nighter transaction work; squeezing files for extra billable hours; year end bonuses; meetings with compensation committees; and polishing up resumes for when all of the above go wrong.
Long story short, these are stressful, uncertain times, and I seem to be answering a lot of the same questions about leaving Big Law and starting a law firm.
So, for those of you who have stressed-out lawyers in your lives, I offer these suggestions as my 2023 Gift Guide for Disgruntled Lawyers.
Want to start your own firm, but have no idea where to start? Buy your lawyer a year subscription to Clio, a comprehensive online practice management platform that offers everything needed to run a law firm: time tracking; billing; online payments; document management; contacts; case and matter management; and everything else. Clio integrates with hundreds of third-party apps, and it’s designed to be the central hub through which all operations run. It’s awesome and costs about $1,000 per year. And, of course, it’s fully online (and secure), so there’s no need for that $25,000 on-site server that makes those strange buzzing noises behind the locked door at the old law firm.
What about everything else? That’s where an annual subscription to Microsoft365 comes in. For about $150, you get e-mail (Outlook), Word, Excel, Powerpoint, Teams, OneDrive, Sharepoint, and about 25 other programs that you’ve never heard of, but are awesome and useful (Bookings has changed my life). Plus, unless you’ve been living under a rock, you probably know that Microsoft is an industry leader on AI research, and you’ll get to be on the frontlines of Microsoft Copilot. That weird picture at the top of this post? It was AI generated by Microsoft Designer.
I haven’t seen anything about phones yet. Here, you’ve got two good options. The industry standard for video communications, Zoom, is now offering VoIP phone services (with pricing starting at $120 annually). Since you will have to get Zoom (all of the remote court appearances and conferences are on Zoom), this is worth looking into. (I use Ringcentral for phone, fax, and business texting, and it’s a bit wonky, but it works).
What about copies, printing and scanning? Most lawyers probably use some high-capacity printer, which is rented from a third party service (and the firm pays a monthly fee and a per page quota each month). You don’t need that. Find a good, mid-quality print/copy/scan machine from HP, which will cost you about $500.
What about the fancy offices? Don’t sign a 5 or 10 year lease for commercial office space. Instead, call one of the 5-7 fancy coworking spaces that have opened in Nashville. I use WeWork, which has been awesome (and has accommodated me in Austin, Chicago, and Seoul). Other options on Music Row include Ampersand Studios, Industrious, Kennect, and e-spaces. These spaces are all “turn key,” meaning they offer printing, internet, limited staffing, and package handling for a low monthly membership fee, generally ranging from $200 to $350.
What about websites and marketing? Some lawyers do this themselves. I don’t recommend that because branding is too important. For all of my various iterations of my own law firm, I’ve used Huckleberry Branding. They’ve designed my logos, helped with color schemes, designed a custom website, helped with content, and also all the incidentals that come with it all (including letterhead, envelopes, and business cards). While I’m embarrassed to have done this 3 times, I’d hire them again if there were a 4th time. They are awesome, and getting started with good branding is too important to do on your own.
What about staffing? You may wonder about who will do all the “little things” to keep the new firm running. (At my old firm, there was a person dedicated to making sure there were cold Cokes at all the meetings.) At a small firm, the lawyer will do all these little things, as well as the medium and big things. To make it a little easier, I’d recommend hiring a phone answering service. I use Abby Connect, a 24/7 answering service whose goal is serve as an extension of my own firm. I’ve used others (Posh) in the past, and the main differentiating factor tends to be pricing and frequency of use. These services cost range from $200 to $500 per month.
What about everything else? Stamps.com for everyday mail. Simple Certified Mail for certified mail. Simplifile to record documents (state-wide) with Register of Deeds’ offices. Lawpay to accept credit card payments (and, yes, Clio offers Clio Payments). If you’ve got lots of documents and need to super-charge document management, the biggest player in the market is NetDocuments (which I use) and is about $75.00 per user per month. I use Minnesota Lawyers Mutual Insurance as my malpractice carrier, and I can’t tell you if they are any good because I hope to never call them ever (about $150.00 a month for robust coverage).
What if this is still too complicated? Buy them a one-hour “Ask an Expert” call with Adriana Linares, of Law Tech Partners, a lawyer-turned-legal-technology consultant who takes a no-nonsense approach to coaching up entrepreneurs on making the early-firm decisions, as well as the late-firm decisions (I had a call with Adriana a few weeks ago).
It’s wild to think that you can run a fully functioning law firm for under $1,000 a month, but it’s entirely possible. It’s also lots of fun to explore all the innovations in legal technology. It’s an unprecedented time for growth in legal tech, and a lawyer with an entrepreneurial spirit has more options now than ever before in how she can practice law.
If there’s a lawyer in your life who believes her law firm isn’t giving her the freedom to nurture that entrepreneurial spirit, I hope this Gift Guide is the first step to a fruitful and lucrative 2024.
If any of you are thinking about making this jump, reach out with any questions, fears, or complaints. I’m happy to help. If I’ve left anything out or if you have any other questions, let me know, and I’ll respond.
Many collections lawyers handle cases on a contingency basis. They don’t bill by the hour, but, instead, they keep some percentage (usually 33%) of the money they actually collect for the clients. Sounds fair, right?
A recent study showed that a Nashville lawyer’s average rate exceeds $500 per hour, and that adds up pretty quick. With lawyers being so expensive, it makes sense that some clients would ask their attorney to share in the success (or, maybe, frustration) of the collection process.
(As a quick disclaimer, I rarely take collections cases on a contingency and, when I do, I’ve done my advance homework and am confident that, candidly, we’re all going to make a lot of money.)
Because the contingency fee attorney is not sending bills that track every minute of his time, a down-side is that he may not have a clear measure of how much in fees he has expended on a case. This is important in breach of contract cases, when the lawyer asks the judge to add an award of attorney fees to the creditor’s judgment. Under Tennessee law, a trial court must consider whether the fees requested are “reasonable,” using very specific guidelines established by the Tennessee Supreme Court.
If the lawyer hasn’t kept track of her work, then what amount does the attorney ask for? Generally, contingency-fee lawyers simply ask for their contingency-fee amount to be added to the judgment. That is generally allowed.
In that case, after they were awarded $50,000 on their breach of contract claim, the plaintiffs asked for attorney’s fees “in the amount of one-third of the total Judgment, or sixteen thousand six hundred and sixty-six dollars and sixty-six cents ($16,666.66).” See Fulmer v. SARCO, GP, No. M202201479COAR3CV, 2023 WL 5787082, at *2 (Tenn. Ct. App. Sept. 7, 2023).
In questioning the attorney fees, the Court of Appeals wrote that “[w]hile a one-third fee may have been what [plaintiffs] agreed to pay their counsel, it is not what [defendants] agreed to pay in the Note” (which only referenced “reasonable attorney fees”). Id. The defendants were not party to the contingency fee agreement, and “what [plaintiffs] agreed to pay their own attorney is not dispositive of what constitutes a reasonable fee under the circumstances of this case.” Id.
Instead, the trial court must have some proof substantiating the fees and services provided, consistent with the factors listed in Tennessee Supreme Court Rule 8, RPC 1.5. Id.
I understand the reasoning here, but I disagree with the general premise that a contingency fee is, per se, not reasonable.
As an example, consider my practice. If I accept one of my no-brainer, “we’re all going to make a lot of money” contingency fee cases mentioned above (and my homework is correct), I could possibly make a $333,333.33 fee on a lawsuit that lasts two months. Does that the fact that I got the matter resolved quickly and efficiently necessarily mean that my fee violates the Tennessee standards for reasonableness? This opinion suggests it might.
In my limited contingency practice, I lean really heavily on my skills, expertise, and homework (i.e. the “novelty and difficulty” referenced in the Rule) in picking my cases. In short, on those cases where I hit a grand slam, it can occasionally look easy, but a lot goes into that. It’s like the ship repairman, who charged $2.00 for tapping the engine with a hammer one time and $9,998.00 for knowing where to tap. He is worth every penny.
In the end, the Court of Appeals remanded the question back to the trial court, and there’s some chance that the plaintiffs make these same arguments in defense of their contingency fee.
Creditors Rights 101 