Established 1958 ~ Hardball Business Litigation & Complex Negotiations

Philadelphia Business Lawyers: Rainbow Apparel Legal Fees Lawsuit

Recently, the named partner of a small law firm, Michael Kimm, and co-plaintiff Rainbow Apparel, brought a lawsuit against KCC Trading, Inc. and several individual defendants, alleging that defendants failed to pay them rightfully earned legal fees. The trial court dismissed Kimm’s case, and the appellate court affirmed, on grounds that requiring clients to pay their attorney to sue themselves constitutes as unlawful fee shifting.

KCC and Rainbow Apparel had entered into a multi-million-dollar business venture together. KCC was to supply the financing for Rainbow’s business ventures. In October 2009, KCC retained Kimm’s law firm. They agreed upon a rate of $400 per hour for work performed by Kimm himself, and $250 an hour for work performed by Kimm’s associates. In addition to these fees set forth in the retainer agreement, KCC also agreed to pay the Kimm Law Firm $15,000 a month on a rolling basis, beginning on October 15, 2009. The contract setting forth the fee arrangement also included indemnification and termination clauses.

KCC fired Kimm in April 2010. Kimm then sent KCC the billing statements from October 2009 through March 2010, which totaled nearly $50,000. Then, several months later, Kimm sent KCC a second bill, charging the company over thirty thousand dollars for hours expended litigating against KCC to collect the unpaid legal fees.

An Unenforceable Clause

Kimm sued KCC on grounds that they had breached their contract. They also sued for quantum meruit (reasonable value of services), payment on the basis of account stated, and unjust enrichment. Kimm moved for summary judgment, but the trial court denied his motion. The trial court judge dismissed Kimm’s claim for the $30,000 incurred as a result of the fee litigation. The court reasoned that the indemnification clause was unenforceable because it violated public policy. The trial court also reduced the $50,000 sought by Kimm, finding that the bill was unreasonably high.

Kimm appealed, but the appellate court affirmed the trial court’s dismissal regarding the $30,000 fee. The court noted that requiring clients to pay their attorney to sue themselves constitutes unlawful fee shifting. The appellate court also upheld the reduction of the $50,000 fee as unreasonable.

Philadelphia Business Lawyers at Sidkoff, Pincus & Green Have Experience Litigating Indemnification Clauses and Breach of Contract

If you are involved in a contractual dispute, the Philadelphia business lawyers at Sidkoff, Pincus & Green has the experience to handle your case swiftly and effectively. To schedule a consultation with one of our reputable attorneys, call us at 215-574-0600 or contact us online today.