The Associated Press reported that the settlement of the class-action suit brought by former Wachovia shareholders, concerning the 2008 acquisition by Wells Fargo, will be returned to the lower court for reconsideration of attorneys’ fees. A North Carolina appellate court held that the trial judge had to better explain how the awarded attorneys’ fees were calculated.
While the court rejected almost all of the complaints filed against the 2010 settlement agreement, the court remanded the fee award of $932,000 for further review. In the opinion, Ehrenhaus v. Baker, the appellate court held that the lower court’s decision on attorneys’ fees did not properly consider Rule 1.5 of the North Carolina Rules of Professional Conduct, which governs the reasonableness of attorneys’ fees. The court was primarily concerned with the lower court’s failure to obtain a written fee agreement between the parties. A written fee agreement is not only required by Rule 1.5 but it is also necessary so the court can review the terms for reasonableness. More specifically, Rule 1.5(e) prohibits the use of certain contingency fee agreements. The Class counsel and the Class representative had stipulated that a contingency fee agreement was used, but without reviewing that agreement it would be impossible for the court to know if the contingency fee was allowed by the ethical rules.
Additionally, the appellate court found that attorneys had failed to present contemporaneous records showing the number of hours expended and the hourly rates for the attorneys charged. Without this information the court could not conclude on what was the proper amount of compensation. Due to these deficiencies, the appellate court returned the settlement agreement to the lower court for recalculation of the attorneys’ fees.