## Facts

- Plaintiff V.W. retained defendant J.B., an attorney, in July 1992 to represent her in a matrimonial (divorce) matter under a written hourly-fee retainer based on time spent times an hourly rate.
- The original retainer was with defendant’s then-law firm; when defendant left the firm in January 1993, she continued to represent plaintiff in her own practice by oral agreement on the same hourly-fee basis.
- Negotiations with plaintiff’s husband lasted more than two years and ended in a settlement in which the husband agreed to pay plaintiff more than 20 times his initial offer.
- Plaintiff signed the separation agreement in New York on August 18, 1994; the agreement was sent to the husband in California, and he signed on August 19, 1994. Judgment of divorce was entered on August 30, 1994.
- On August 18, 1994—allegedly after plaintiff executed the separation agreement—plaintiff and defendant signed a separate “Performance Fee Agreement” (PFA) stating that, “in light of the results achieved,” plaintiff agreed to pay defendant a $2,000,000 “performance fee” in three installments.
- Defendant (and her former firm) had already been paid about $300,000 in hourly fees, and defendant agreed in the PFA to waive an outstanding bill of roughly $41,000 for fees and expenses.
- The first $1,000,000 installment under the PFA was due upon transfer to plaintiff of an equitable-distribution payment provided for in the separation agreement; plaintiff paid that $1,000,000 on August 29, 1994.
- In early January 1995, plaintiff retained new counsel, refused to pay the next installment (due January 15), demanded return of the $1,000,000 already paid, and filed suit in New York Supreme Court seeking rescission of the PFA and restitution.
- Defendant counterclaimed for the unpaid balance of the $2,000,000 performance fee.
- The decision addresses plaintiff’s motion for summary judgment on her rescission claim (the fifth cause of action).

## Issues

1. Is a post-retainer “performance fee” bonus in a matrimonial matter—tied to results and payable from settlement proceeds—enforceable, or is it voidable as an improper contingent-style and/or excessive fee arrangement between attorney and client?
2. On the undisputed record, is the client entitled to summary judgment rescinding the performance-fee agreement and recovering the $1,000,000 already paid?

## Decision

- The court granted plaintiff’s motion for summary judgment on the rescission claim.
- The court held the $2,000,000 Performance Fee Agreement unenforceable and ordered rescission, entitling plaintiff to restitution of the $1,000,000 paid under the PFA.
- Because the PFA was rescinded, defendant’s effort to collect the remaining performance-fee balance could not stand on that agreement.

## Legal Principles

- Attorney–client fee agreements made during an ongoing attorney–client relationship are subject to close judicial review because the attorney is a fiduciary and bears a heavy burden to show fairness and freedom from overreaching.
- In domestic-relations matters, New York ethics rules restrict contingent-fee-type arrangements; a fee labeled a “bonus” or “performance fee” may be treated according to its substance when it is tied to the outcome or to recovery in the matrimonial case.
- A fee that is excessive under New York’s professional-responsibility standards is unenforceable; courts may rescind such agreements and require return of amounts paid.
- Rescission and restitution are available remedies where a challenged fee agreement between lawyer and client is improper in form or unreasonable in amount, especially where it is negotiated at the end of representation when the client may feel pressure to reward counsel for results.

## Conclusion

In *V.W. v. J.B.*, the New York Supreme Court (New York County) ruled on a client’s summary-judgment motion seeking to rescind a $2 million “performance fee” agreement signed with her divorce lawyer after a successful settlement. Although the lawyer had already been paid substantial hourly fees, the PFA promised an additional multi-million-dollar bonus tied to the results achieved and payable in installments linked to settlement payments. Applying strict scrutiny to an attorney’s transaction with a current client and treating the agreement as an improper contingent-style and excessive fee arrangement in a matrimonial matter, the court rescinded the PFA and awarded restitution of the $1 million installment the client had already paid.


V.W. v. J.B., 165 Misc. 2d 767, 629 N.Y.S.2d 971 (1995)