Five-year-old Cole Goesel was injured when a toy robot shattered and punctured the lens of his right eye. Cole's parents retained the law firm of Williams, Bax & Saltxman, P.C., to sue the manufacturer and distributor on Cole's behalf. The retainer agreement was a contingency-fee contract that stipulated the law firm would receive one-third of any gross judgment or settlement and the Goesels would be responsible for litigation expenses. The contingency-fee agreement provided that in the event of no recovery the Goesels were not responsible for paying attorney's fees or expenses. The case included extensive discovery and the retention of multiple expert witnesses. After nearly four years of contentious litigation, the parties settled on the eve of trial. The defendants agreed to pay $687,500. Under the contingency-fee arrangement, the law firm's one-third of the gross settlement was $229,166, and litigation expenses totaled $172,949, leaving the Goesels with $285,384, or roughly 42 percent of the total recovery. The U.S. district court judge found that the contingency-fee agreement was not fair or reasonable and refused to approve the settlement unless litigation expenses were deducted off the top and one-third of the net settlement was allocated to the law firm. The law firm appealed.

Issue

Language of the Court There was nothing unreasonable about the fee as calculated under the terms of the retainer agreement. Contingent-fee contracts play a vital role in our legal system. Declining to enforce these arrangements would uproot the contingent-fee mechanisms with disastrous consequences for those unable to pay lawyers upfront. There is no indication that the Goesels felt that they could not negotiate the terms of their contract with the law firm or shop their case to other firms in search of a better deal.

Decision The U.S. court of appeals held that the district court should not have modified the contingency-fee agreement and reversed the district court's judgment.

Critical Legal Thinking Questions

Was the contingency-fee agreement enforceable as written? How does a contingent-fee arrangement work? What would be the consequences if contingent-fee agreements were not permitted?