Alberta law firm owes First Nation $8.5m as judge slashes 'unreasonable' contingency fee by 74 per cent
Rath & Company’s actual billings on Tallcree First Nation’s file amounted to less than $400,000
A southern Alberta law firm must refund a First Nation band $8.5 million after a judge cut its fee by nearly three quarters, from $11.5 million to $3 million.
Foothills, Alta. lawyer Jeffrey Rath and his firm Rath & Company collected the $11.5 million fee back in February 2018 – based on a 20-per-cent contingency fee agreement (CFA) – after helping the Tallcree First Nation secure a $57.5-million settlement with the federal government over agricultural benefits.
A provincial review officer initially upheld the firm’s fee, but Alberta Court of Queen’s Bench Justice Donald Lee concluded the assessment was flawed and that the CFA was unreasonable. Noting that the firm’s actual time charges on the file amounted to around $392,000, the judge went on to substitute his own award of $3-million.
“The $3 million dollar award to Rath will be inclusive of all disbursements that Rath may have incurred in this matter,” Justice Lee wrote in the March 26 decision. “Rath is directed to refund the difference of $8,518,075 dollars it received as fees [$11,518,075 minus $8,518.075 = $3,000,000] to Tallcree immediately, and in any event within 30 days of these Reasons.”
According to Justice Lee’s ruling, the review officer applied the wrong standard to approve the law firm’s fee when he concluded that it was not “unexpectedly unfair” or “clearly unreasonable.”
The review officer also erred by setting 20-per-cent as a reasonable low-end contingency fee without any evidence or case law to support the conclusion, Justice Lee ruled.
Although Tallcree had a draft version of the contingency fee agreement in its possession for a year before the parties executed it in October 2015, the judge found that the First Nation never sought independent legal counsel.
In addition, the judge found that Tallcree was anticipating a potential recovery of between $50 million and $100 million at the time the CFA was signed, but believed the whole process would take years. In fact, a settlement was reached in just 18 months, aided by the favourable stance of the new federal government led by Prime Minister Justin Trudeau.
“Tallcree was essentially unaware of how strong their claims to agricultural benefits were. However, Rath knew that there was a strong chance that the federal government would change following the scheduled 2015 general election, and that the new administration would respond positively to agricultural benefits claims,” Justice Lee wrote.
The judge was not convinced by Rath’s arguments that the firm had undertaken great risk pursuant to the CFA.
“While I appreciate that Treaty claims litigation can be very complex, and take years, if not decades to complete, there is no indication from the Record or in his submissions that Rath had ever undertaken such complex proceedings in the 20 years the firm had existed from 1995 to the time of the CFA. Rath’s reported cases seem to only involve fee disputes with other First Nations, and one can reasonably question if Rath could have ever undertaken complex Treaty litigation,” Justice Lee wrote. “At the end of the day, Rath & Company was a small six-member firm established in 1995 operating in Priddis, Alberta, that received over $11.5 million dollars in legal fees for eight to 10 months of activity pursuant to the CFA.”
Justice Lee eschewed the factors normally used to set a reasonable fee under r.10 of the province’s Rules of Court because of the unique circumstances of the case, finding that the result was “largely based on political representations,” as opposed to legal services performed by lawyers.
Instead, for comparators, the judge looked to realtor commissions and the annual remuneration of lawyers and judges noting that the original $11.5-million fee “would be the equivalent of the total earnings of a Judge and top earning lawyer over his/her entire combined working career of between 30 to 40 years.”
“A $3 million dollar fee payable to Rath would amount to approximately eight years of total annual compensation paid to a top producing 75th percentile Canadian lawyer, or 10 years of total compensation paid to a Federally appointed judge,” Justice Lee added.
Follow us on Twitter @CourtReportCA
Story tips or comments to CourtReportCanada@gmail.com
In the year of the first Sept 30, historic day of grief for 1st Nations' Truth & Reconciliation, MMIWCS to see lawyers feasting on the long delayed justice & compensation in various class actions is more than disheartening & perhaps I might say a disgrace to the profession. Greed may well destroy our profession. Hamoody Hassan, BA LLB, LSO 1979, Senior Counsel & Mediator