The representative lawyer B of law firm A located in Gangnam, Seoul, recently filed a claim for settlement money against C, the spouse of the chairman of a small business. Until just recently, B was the legal representative for C in the divorce and asset partitioning lawsuit. The Seoul Family Court ruled that C should receive a partitioning of 100 billion won, equivalent to 35% of the couple's assets, effectively delivering a favorable verdict for C.
However, upon the ruling, C's attitude reportedly changed drastically. C questioned the court's dismissal of her alimony claim. Subsequently, she reportedly demanded, "Please reduce the contingency fee compared to what we contracted." Typically, in asset partitioning lawsuits, the contingency fee amounts to 7-10% of the finalized asset partitioning amount. If the partitioning amount from the first trial is finalized by the Supreme Court, the contingency fee B can receive is estimated to be in the range of several hundred million to a maximum of 10 billion won.
B noted, "Even if it goes to trial, it is not a losing business from the client's perspective, so this happens often." This is because the court holds the position that the lawyer's fee should be assessed as conservatively as possible. When cases go to trial, the court often rules that "this is not a complicated case that requires giving a large sum to the lawyer," resulting in lower payments than contracted. Some clients exploit this customary practice in court rulings.
◇ Financial firms and politicians in lawsuits over "I can't pay the fee"
According to the legal community on the 19th, instances where lawyers file lawsuits for non-payment of retainers, contingency fees, and hourly wages from clients are consistently occurring. While there are no official statistics, many lawyers suggest that the prolonged economic downturn and fierce competition for case assignments have led to increased legal disputes over clients trying to pay less than contracted.
A mid-sized law firm, D, received about 30 million won after applying for a fee payment order against a domestic financial firm last year. D had been the legal representative for this financial firm's civil lawsuit, but after the contract was signed, the company's management changed. The new management requested a reduction in the contracted fees, and D considered this an excessive demand and applied for a fee payment order.
There have also been cases where a celebrity was sued for not paying a contingency fee. On the 3rd, the Supreme Court upheld a second trial ruling in a lawsuit filed by law firm ChanJong against Lee Jun-suk, a member of the Reform Party, ordering him to pay a contingency fee of 77 million won. Lee had filed a request for a provisional injunction with the court to prevent the conversion of the party's emergency response committee during his term as the representative of the People Power Party in 2022.
At that time, law firm ChanJong, which represented him, received a retainer of 11 million won, and the contingency fee was set to be negotiated later. The court approved the first provisional injunction request, and later denied or dismissed subsequent requests. After all provisional injunction cases were concluded, law firm ChanJong requested the contingency fee from Lee but filed a lawsuit after not receiving it.
◇ Supreme Court deems criminal contingency fees "invalid"... scrutinizing civil cases as well.
Previously, in 2015, the Supreme Court ruled that "contingency fee agreements in criminal cases are invalid." This was based on the Civil Code's Article 103, which specifies that "contracts that violate good morals or other social order are invalid," seeing this as applicable to criminal contingency fee agreements.
The Supreme Court did not rule that contingency fees are invalid in civil lawsuits. However, it did present a kind of standard for determining whether contingency fees are reasonable. It stated that contingency fees should be determined based on the nature of the case, the relationship with the client, the amount of the retainer, the progress and complexity of the case, the level of effort, the value of the lawsuit, the specific benefits the client stands to gain from winning, and the bar association's regulations on fees.
According to this precedent, there have been first and second trial rulings reducing lawyers' contingency fees in civil cases. The Seoul Central District Court accepted a client's claim that "charging 10% of the inheritance estate as a legal consultation fee is excessive" in a case between a law firm and a client over a succession dispute in January 2023. It determined that "5.1 million won is appropriate, not the contracted fee of 3.4 billion won." The court stated, "There do not appear to be any unique legal issues or complexities that would necessitate special efforts from the lawsuit representative."
Within the legal community, there is debate regarding the court's assessment of the appropriateness of contingency fee amounts. Some view that the practice of lawyers demanding excessively high contingency fees by leveraging a client's desperation to win the case should not take hold in the legal market. Conversely, a lawyer in Seocho-dong stated, "Court arguments, submitted documents, and so forth comprise only a tiny fraction of a lawyer's work," adding, "For judges to comment on the amount of contingency fees from that perspective is a judicial centrism that implies 'since the judge handles the case, why does the lawyer earn so much money?'"