PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: ABRAMS & ABRAMS, P.A.;
ST. MARTIN, WILLIAMS AND
BOURQUE,
Appellants.
JERRY PELLEGRIN, Guardian Ad
Litem for Mark Pellegrin,
Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, No. 09-1283
PENNSYLVANIA,
Defendant.
LOUISIANA ASSOCIATION FOR JUSTICE;
AMERICAN ASSOCIATION FOR JUSTICE;
PUBLIC JUSTICE,
Amici Supporting Appellants,
THOMAS SHIPLEY JONES,
Court-Assigned Amicus Counsel.
2 In Re: ABRAMS & ABRAMS
In Re: ABRAMS & ABRAMS, P.A.;
ST. MARTIN, WILLIAMS AND BOURQUE
JERRY PELLEGRIN, Guardian Ad
Litem for Mark Pellegrin,
Plaintiff-Appellant,
v.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH,
PENNSYLVANIA, No. 09-1285
Defendant.
LOUISIANA ASSOCIATION FOR JUSTICE;
AMERICAN ASSOCIATION FOR JUSTICE;
PUBLIC JUSTICE,
Amici Supporting Appellant,
THOMAS SHIPLEY JONES,
Court-Assigned Amicus Counsel.
Appeals from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Terrence W. Boyle, District Judge.
(5:08-cv-00349-BO)
Argued: March 23, 2010
Decided: May 18, 2010
Before TRAXLER, Chief Judge, WILKINSON,
Circuit Judge, and HAMILTON, Senior Circuit Judge.
In Re: ABRAMS & ABRAMS 3
Vacated and remanded by published opinion. Judge Wilkin-
son wrote the opinion, in which Chief Judge Traxler and
Senior Judge Hamilton joined.
COUNSEL
ARGUED: James P. Cooney, III, WOMBLE, CARLYLE,
SANDRIDGE & RICE, PLLC, Charlotte, North Carolina, for
Appellants; John Keating Wiles, CHESHIRE, PARKER,
SCHNEIDER, BRYAN & VITALE, Raleigh, North Carolina,
for Jerry Pellegrin, Guardian Ad Litem for Mark Pellegrin.
Thomas Shipley Jones, JONES DAY, Pittsburgh, Pennsylva-
nia, for Court-Assigned Amicus Counsel. ON BRIEF: Joseph
B. Cheshire, CHESHIRE, PARKER, SCHNEIDER, BRYAN
& VITALE, Raleigh, North Carolina, for Jerry Pellegrin,
Guardian Ad Litem for Mark Pellegrin. Bruce C. Dean, Chair-
man, Amicus Curiae Committee, BRUCE C. DEAN, LLC,
Metairie, Louisiana, for Louisiana Association for Justice,
Amicus Supporting Appellants. Les Weisbrod, President,
AMERICAN ASSOCIATION FOR JUSTICE, Washington,
D.C., Arthur A. Bryant, Executive Director, PUBLIC JUS-
TICE, Washington, D.C., Jeffrey R. White, CENTER FOR
CONSTITUTIONAL LITIGATION, P.C., Washington, D.C.,
for American Association for Justice and Public Justice,
Amici Supporting Appellants. Charles H. Moellenberg,
Stephanie D. Taylor, JONES DAY, Pittsburgh, Pennsylvania,
for Court-Assigned Amicus Counsel.
OPINION
WILKINSON, Circuit Judge:
After winning their disabled client an $18 million personal
injury settlement that will pay for his care for the rest of his
life, the attorneys in this case saw their compensation slashed
4 In Re: ABRAMS & ABRAMS
by the district court from the thirty-three percent provided in
their contingency fee agreement to a mere three percent.
While a district court does possess discretion in approving fee
awards, particularly when its power to protect minors or the
disabled is involved, we hold that the court here abused that
discretion by improperly applying the standards we have
established for determining whether an attorney’s fee is rea-
sonable. As a result, we vacate and remand.
I.
On New Year’s Eve 2005 in Raleigh, North Carolina,
twenty-six year old Mark Pellegrin was struck by a truck
driven by his friend, Kelly McKiernan, who had been drink-
ing. Pellegrin hit his head on the pavement, and paramedics
found him unconscious and unable to breathe as a result of his
injuries. The bleeding, swelling, and lack of oxygen that
resulted caused permanent, severe brain damage. Pellegrin
spent 112 days in the hospital and can no longer walk, talk,
or even roll over. He is completely dependent on others for
feeding, dressing, washing, and toileting. He is, however, par-
tially conscious and can communicate through facial reac-
tions. If Pellegrin lives to full life expectancy, his future care
and medical expenses are estimated to cost approximately $17
million.
At the time of his injury, Mark Pellegrin worked for KCI
Technologies as a crew leader for communications tower
inspections, and McKiernan was one of his crew members.
Because the tower inspections frequently required travel, KCI
provided company trucks to many of its employees, including
McKiernan. KCI had a written policy prohibiting employees
from operating its equipment while intoxicated.
On December 31, 2005, Pellegrin asked McKiernan to
come to his house to check equipment for an upcoming
inspection. McKiernan drove his KCI truck to Pellegrin’s
home. After working for a while, Pellegrin and McKiernan
In Re: ABRAMS & ABRAMS 5
began drinking to celebrate New Year’s Eve. Eventually
McKiernan decided to leave but was prevented by Pellegrin,
who told him he could not drive. When Pellegrin left the
room, however, McKiernan said that he:
took the keys and . . . ran. I was just trying to get out
of there. And that’s when I walked down to the
truck. Basically, I put it in reverse, went to a stop
and put it in drive. Of course I’ve got to mess with
the radio. . . . Why couldn’t I see him? And I—I—
I hit him. I’m sure he was just coming down to tell
me, you know, man, what are you doing. Kelly,
you’re drunk, dude.
McKiernan called 911, and when police arrived he told them
to "just put me in handcuffs. You know, I’m drunk. I acciden-
tally hit my buddy who was just trying to stop me from leav-
ing." Police officers found human hair on the truck’s front
grill. McKiernan later pled guilty to driving while intoxicated
and has never denied that he was responsible for the accident.
Pellegrin’s father, Jerry, was appointed as his son’s General
Guardian in North Carolina some two months after the acci-
dent and remains Pellegrin’s primary caregiver. Because the
Pellegrins are from Louisiana, Jerry Pellegrin retained attor-
ney Charles Bourque of the Louisiana law firm St. Martin,
Williams and Bourque to attempt to recover for his son’s inju-
ries. The retainer agreement Jerry Pellegrin signed agreed to
pay Bourque’s firm thirty-three percent of any gross recovery,
plus litigation expenses.1 With Jerry Pellegrin’s consent,
Bourque then retained the North Carolina firm of Abrams &
Abrams, P.A., agreeing to split any contingency fee equally.
Before Jerry Pellegrin even signed the agreement, KCI’s
insurer, National Union Fire Insurance Company of Pitts-
1
The contract technically provided for a thirty-three and one-third per-
cent fee, but for convenience we will round to the nearest full percent.
6 In Re: ABRAMS & ABRAMS
burgh, Pennsylvania, transmitted a "reservation of rights" let-
ter to McKiernan, denying coverage for the accident.
Although KCI carried $21 million in insurance, National
Union claimed it was not obligated to pay because McKiernan
violated KCI’s internal rules by driving while intoxicated.
The insurance policy, however, did not incorporate KCI’s
internal rules, and Pellegrin’s counsel believed that North
Carolina courts had already rejected a similar defense in
United Services Automobile Association v. Rhodes, 577
S.E.2d 171 (N.C. App. 2003). In that case, an insurance com-
pany was required to cover expenses arising from an accident
involving a rental car driven by an intoxicated driver, even
though the rental agreement prohibited drunk driving. Id. at
173. Pellegrin’s counsel thus filed suit in North Carolina court
against Kelly McKiernan on July 19, 2007, after some six
months of investigation.
National Union not only again disclaimed any coverage but
also refused even to defend McKiernan. Under North Caro-
lina law, if an insurer improperly refuses to defend a claim,
it is estopped from denying coverage and must pay any rea-
sonable settlement—even if it made an honest mistake in its
denial. See Pulte Home Corp. v. Am. S. Ins. Co., 647 S.E.2d
614, 617 (N.C. App. 2007); Bruce-Terminix Co. v. Zurich Ins.
Co., 504 S.E.2d 574, 578 (N.C. App. 1998). Because Pelle-
grin’s counsel drafted their complaint against McKiernan to
state only that McKiernan negligently struck Mark Pellegrin
with a KCI vehicle he was operating with the company’s
"knowledge, consent and permission," the complaint triggered
National Union’s duty to defend the suit, which is based on
facts alleged in pleadings and is broader than the duty to
indemnify. Waste Mgmt. of Carolinas, Inc. v. Peerless Ins.
Co., 340 S.E.2d 374, 377 (N.C. 1986).
Without National Union, McKiernan could not afford coun-
sel and instead defended himself. Several depositions were
taken and a trial date set, but McKiernan did not appear at
In Re: ABRAMS & ABRAMS 7
trial. As a result, the district court entered a $75 million judg-
ment against him. McKiernan obviously lacked the funds to
satisfy such a judgment, and counsel filed a second complaint
against National Union within the thirty day time limit pro-
vided in North Carolina law to alter or amend a judgment.
That complaint contained a description of the McKiernan suit
and attached a copy of the judgment. It sought a declaration
that National Union was liable for the full $75 million judg-
ment against McKiernan because of its insurance coverage
and its failure to defend the earlier suit, and it designated Pel-
legrin as a third-party beneficiary.
At this point, National Union removed the suit to federal
court, invoking federal diversity jurisdiction. A one-day medi-
ation took place on August 28, 2008, at the end of which
National Union agreed to pay $18 million to resolve all
claims. Of that amount, $6 million went into a Special Needs
Trust designed to supplement Pellegrin’s care. The next $6
million purchased a structured annuity that was guaranteed to
make monthly payments for Pellegrin’s support for at least
thirty years and would continue to pay after that point for the
duration of his life. Over the first thirty years, the annuity was
guaranteed to pay $12.1 million, and if Pellegrin lived to 78,
his life expectancy if he were healthy, it would pay $29.9 mil-
lion. The final $6 million was to be paid outright and used to
satisfy the retainer agreement. There is no dispute that the set-
tlement agreement will provide amply for Pellegrin through-
out his life.
Because Pellegrin was incompetent, National Union and
Jerry Pellegrin jointly moved for court approval of the settle-
ment. The district court questioned Pellegrin’s attorneys about
their work, demanding to know how many hours they had
spent on the case. At first, Douglas Abrams of Abrams &
Abrams, P.A. replied that the firm did not keep hourly records
because it only took contingency cases. When pressed, he
guessed that "our firm alone has a thousand hours" and that
Bourque’s firm "has at least a thousand hours." Bourque esti-
8 In Re: ABRAMS & ABRAMS
mated his firm’s time as "something well in excess of a thou-
sand hours." No other evidence about hours was presented.
At the close of the hearing, Pellegrin’s father and guardian
addressed the court. He said:
I’d like to state that I’m not a big fan of lawyers
myself. However, these people Abrams, Chuck
Bourque, have shown me and my son more compas-
sion and help and I do not begrudge them anything.
I think they earned everything. I was proud of them
and we’re all tired and ready for this to be over.
In spite of this request, the district court reduced the lawyers’
compensation from $6 million to $600,000, or from thirty-
three percent down to three percent of the settlement. Pelle-
grin v. Nat’l Union Fire Ins. Co., 598 F. Supp. 2d 724, 730-
31 (E.D.N.C. 2009). The $5.4 million balance reverted to Pel-
legrin. The court reached this number by taking what it
termed counsel’s "pure speculation" as to the number of hours
worked and multiplying it by a $300 per hour rate that it
believed was "a high hourly rate for a similarly-situated law-
yer in North Carolina." Id. at 730. This appeal by Pellegrin’s
counsel followed. We appointed amicus counsel to defend the
district court’s fee decision as National Union had no stake in
the outcome on appeal.2
II.
In this case, "[w]e review a district court’s award of attor-
ney’s fees for abuse of discretion." Grissom v. The Mills
Corp., 549 F.3d 313, 320 (4th Cir. 2008). As an initial matter,
the district court in this case properly noted that courts evalu-
ate attorney’s fees under a reasonableness standard. Pelle-
grin’s lawyers contend that they are entitled to have their
2
The court wishes to extend its thanks to amicus counsel for its able
assistance in this matter.
In Re: ABRAMS & ABRAMS 9
contingency fee agreement enforced unless the resultant fees
are "clearly excessive." As they see it, only agreements that
are so excessive that no ethical attorney could sign them
should be cast aside. That standard presents its problems,
however, because it allows approval of fees that are unreason-
able and excessive just so long as they are not clearly so.
The simpler standard of "reasonableness" is one that Con-
gress and many courts have adopted. For instance, in the fee-
shifting context under 42 U.S.C. § 1988(b), which applies to
certain civil rights suits, a "court, in its discretion, may allow
the prevailing party, other than the United States, a reason-
able attorney’s fee." 42 U.S.C. § 1988(b) (emphasis added).
See also Barber v. Kimbrell’s, Inc., 577 F.2d 216, 226 (4th
Cir. 1978) (evaluating fee-shifting attorney fee for reasonable-
ness). Nor is the reasonableness standard limited to the fee-
shifting context. As we noted in Bergstrom v. Dalkon Shield
Claimants’ Trust (In re A.H. Robins Co.), "the law of this cir-
cuit has long been clear that federal district courts have inher-
ent power and an obligation to limit attorneys’ fees to a
reasonable amount." 86 F.3d 364, 373 (4th Cir. 1996). In par-
ticular, "[t]he district courts’ supervisory jurisdiction over
contingent fee contracts for services rendered in cases before
them is well-established." Allen v. U.S., 606 F.2d 432, 435
(4th Cir. 1979). Here too the review of fee arrangements is for
reasonableness.
Indeed, it is difficult to imagine why any different standard
would be warranted. In a case like this involving a minor or
disabled individual, a district court plainly enjoys discretion
to protect those who come in front of it. In general, "infant[s]
and other incompetent parties are wards of any court called
upon to measure and weigh their interests." Dacanay v. Men-
doza, 573 F.2d 1075, 1079 (9th Cir. 1978). As a result, "[i]t
has long been established that the court in which a minor’s
claims are being litigated has a duty to protect the minor’s
interests." Salmeron v. U.S., 724 F.2d 1357, 1363 (9th Cir.
1983). This duty is intended to protect those who may be
10 In Re: ABRAMS & ABRAMS
especially vulnerable to manipulation or who may be unable
to protect themselves. Id.
Integral to this protective judicial role is ascertaining
whether attorney fee agreements involving minors or incom-
petents are reasonable. "Independent investigation by the
court as to the fairness and reasonableness of a fee to be
charged against a minor’s estate or interest is required." Dean
v. Holiday Inns, Inc., 860 F.2d 670, 673 (6th Cir. 1988); Cap-
pel v. Adams, 434 F.2d 1278, 1280 (5th Cir. 1970) (same; not-
ing "the obvious possibilities of unfair advantage").
Moreover, the public reputation of the profession would
deservedly suffer if attorneys were seen to be gouging those
least able to fend for themselves. Consistent with this charge,
the local rules of the Eastern District of North Carolina state
that in approving a settlement, "the court shall approve or fix
the amount of the fee to be paid to counsel for the minor or
incompetent parties." E.D.N.C.L.R. 17.1(c).
The parties spend a great deal of time and energy debating
whether the review of attorney’s fees is a federal or state
question, whether North Carolina or Louisiana law applies,
and what exactly the laws of each jurisdiction may or may not
be. We are not convinced, however, that the law of either state
is so different from the federal standard as to make a differ-
ence, see Mitzel v. Westinghouse Elec. Corp., 72 F.3d 414,
416-18 (3d Cir. 1995) (ruling that attorney fee determination
in contingency case is federal procedural question but holding
that analysis would be the same even under state substantive
law). And we are persuaded that the virtues of simplicity and
straightforwardness counsel against adopting different stan-
dards with different shades and nuances in different contexts.
The district court therefore did have the discretion to review
the settlement here, including the contingency fee, for reason-
ableness.
III.
The district court’s discretion is by no means unguided,
however. District courts should look at the twelve factors first
In Re: ABRAMS & ABRAMS 11
set forth in Johnson v. Georgia Highway Express, Inc., 488
F.2d 714, 717-19 (5th Cir. 1974), and adopted by this court
in Barber, 577 F.2d at 226, and Allen, 606 F.2d at 436 n.1.
In Allen, we stated the factors as follows:
(1) the time and labor required in the case, (2) the
novelty and difficulty of the questions presented, (3)
the skill required to perform the necessary legal ser-
vices, (4) the preclusion of other employment by the
lawyer due to acceptance of the case, (5) the custom-
ary fee for similar work, (6) the contingency of a fee,
(7) the time pressures imposed in the case, (8) the
award involved and the results obtained, (9) the
experience, reputation, and ability of the lawyer, (10)
the "undesirability" of the case, (11) the nature and
length of the professional relationship between the
lawyer and the client, and (12) the fee awards made
in similar cases.
Id.3 Though Barber upheld an award in a Truth in Lending
Act fee-shifting case under 15 U.S.C. § 1640(a)(3), Allen was
a contingency fee case and noted that "[t]hese factors . . .
apply even where the fee request is based on a private fee
agreement." Allen, 606 F.2d at 435-36.
Although the district court correctly recognized that some
factors may not have much, if anything, to add in a given
case, Pellegrin, 598 F. Supp. 2d at 728 (citing Bergstrom, 86
F.3d at 376), the factors that do apply should be considered.
"We cannot afford effective appellate review unless we have
3
The district court relied upon Barber’s formulation of factor six, which
addresses "the attorney’s expectations at the outset of the litigation." 577
F.2d at 226 n.28. Allen rephrased this factor to address "the contingency
of a fee." 606 F.2d at 436 n.1. While both formulations address the basic
question of how an attorney anticipates being paid, we have recognized
that Allen’s version is superior for cases like the present one "because it
deals with contingent fees and places upon the district court the obligation
to limit such fees to a reasonable amount." Bergstrom, 86 F.3d at 376.
12 In Re: ABRAMS & ABRAMS
before us the district court’s reasons for finding a particular
award appropriate." Barber, 577 F.2d at 226. Particularly
when such a steep and indeed drastic reduction from the fee
provided in the retainer agreement was ordered, some care in
explanation might be expected. The district court here
neglected to consider several critically important factors in its
analysis. For example, it failed to adequately address the con-
tingency of the fee (factor 6), the award involved and the
results obtained (factor 8), and the fee awards made in similar
cases (factor 12). We consider these factors in turn.
A.
The chief error in the district court’s analysis was its failure
to recognize the significance of the contingency fee in this
case. The court obviously knew that a contingency fee was
involved, but it did not give that fact the weight it was due in
the decisional calculus. After quoting language from Allen
stating that contingency agreements are subject to supervision
by courts for reasonableness, 606 F.2d at 435, the court
merely stated that it "must consider the other relevant Barber
factors in order to determine the reasonableness of the contin-
gency fee requested by Plaintiff’s Counsel." Pellegrin, 598 F.
Supp. 2d at 728. It then proceeded to apply an hourly rate cal-
culation based on dubious estimations of the applicable hours
and rates with no further consideration of the relevance of the
contingency fee agreement. Id. at 728-30. Fixing a lodestar
fee in this contingency case was error and threatens to nullify
the considerable advantages of contingency arrangements.
1.
As an initial matter, contingency fees provide access to
counsel for individuals who would otherwise have difficulty
obtaining representation. Sadly, a plaintiff sometimes has lit-
tle to offer a lawyer other than his personal plight. As an
advocate before the Kentucky Supreme Court noted as early
as 1823, in the absence of contingency fees a client "may not
In Re: ABRAMS & ABRAMS 13
have any thing else to give, and without the aid of the matter
in the contest, he can never sue for his right, not having other-
wise the means to employ counsel." Rust v. Larue, 14 Ky. (4
Litt.) 411, 421 (1823) (quoted in Peter Karsten, Enabling the
Poor to Have Their Day in Court: The Sanctioning of Contin-
gency Fee Contracts, A History to 1940, 47 DePaul L. Rev.
231, 238 (1998)).
Nor has that rationale changed with time. The Second Cir-
cuit has explained that, "[m]any claimants . . . cannot afford
to retain counsel at fixed hourly rates . . . yet they are willing
to pay a portion of any recovery they may receive in return
for successful representation. Ignoring reasonable contingent
fee agreements or automatically reducing them would impair
claimants’ ability to secure representation." Wells v. Sullivan,
907 F.2d 367, 371 (2d Cir. 1990). While the various amici in
this case debate whether contingency fees encourage or dis-
courage insubstantial suits where the chance of recovery is
slight, that ongoing argument is beyond the power of this
court to resolve. The point remains that contingency fees are
an acknowledged feature of our legal landscape, approved by
legislative and judicial bodies alike, that help secure for the
impecunious access both to counsel and to court. See, e.g., 28
U.S.C. § 2678 (allowing contingency fees in suits against the
United States under the Federal Tort Claims Act).
"[A]ccepting reasonable contingency agreements . . .
increases the likelihood that a claimant can find an attorney
sufficiently committed and skilled to litigate successfully."
Wells, 907 F.2d at 372.
The facts of this case illustrate precisely the type of situa-
tion in which a contingency fee may be the only way an indi-
vidual can protect his interests. Yet the district court’s
analysis made no mention of the role that contingent compen-
sation played in providing the Pellegrins with access to court.
Mark Pellegrin’s father and guardian, Jerry, faced a tough
financial situation. His son was horribly injured, and he cer-
tainly did not have the estimated $17 million needed over a
14 In Re: ABRAMS & ABRAMS
lifetime of care. At the same time, neither did he have the
resources to retain lawyers on an hourly basis to pursue a
large insurance company in court, especially after National
Union denied any coverage at all. The money to solve the
problems was available in National Union’s $21 million
insurance policies, but it could only be obtained if someone
else was willing to front the funds for attorneys and fees. The
contingency agreement was, as the saying goes, the key to the
courthouse door that allowed Jerry Pellegrin to retain the
attorneys who eventually provided for his son’s ongoing
needs. The district court erred in failing to consider the access
to the legal system that contingency fees like the ones herein
provide.
2.
Nor did the district court consider the related point that
contingency fee agreements transfer a significant portion of
the risk of loss to the attorneys taking a case. Access to the
courts would be difficult to achieve without compensating
attorneys for that risk. The risks a lawyer assumes are not dis-
similar to those undertaken, for example, by a realtor on com-
mission, who accepts the possibility of no sale as well as the
potential reward of a quick transaction. In addition, it may be
necessary to provide a greater return than an hourly fee offers
to induce lawyers to take on representation for which they
might never be paid, and it makes sense to arrange these fees
as a percentage of any recovery. "[M]any attorneys are
unwilling to accept the risk of nonpayment without a guaran-
teed contingency percentage of the recovery." Wells, 907 F.2d
at 371. In other words, plaintiffs may find it difficult to obtain
representation if attorneys know their reward for accepting a
contingency case is merely payment at the same rate they
could obtain risk-free for hourly work, while their downside
is no payment whatsoever.
Conversely, an attorney compensated on a contingency
basis has a strong economic motivation to achieve results for
In Re: ABRAMS & ABRAMS 15
his client, precisely because of the risk accepted. As the Sev-
enth Circuit has explained, "[t]he contingent fee uses private
incentives rather than careful monitoring to align the interests
of lawyer and client. The lawyer gains only to the extent his
client gains." Kirchoff v. Flynn, 786 F.2d 320, 325 (7th Cir.
1986). A contingency fee "automatically handles compensa-
tion for the uncertainty of litigation" because it "rewards
exceptional success, and penalizes failure." Id. at 326.
Because the district court’s ruling failed to recognize that con-
tingency fees provide attorneys due consideration for the risk
they undertake, it reduced counsel’s fee to a level that few
attorneys would have accepted at the outset of litigation, when
success was by no means assured and the size of any settle-
ment or judgment was unpredictable.
Indeed, there were a number of sticky problems with the
present suit when counsel undertook the representation, prob-
lems which Pellegrin’s attorneys managed to overcome. The
difficulties included National Union’s reservation of rights
letter to McKiernan based on his violation of KCI’s alcohol
policy and the prospect of securing a verdict against a
judgment-proof defendant once coverage was denied. Addi-
tionally, North Carolina is a contributory negligence state
where the failure to exercise due care by a plaintiff operates
as a complete bar to recovery. Cameron v. Canady, 577
S.E.2d 700, 701 (N.C. App. 2003). Contributory negligence
was an obvious defense in a case involving an intoxicated
plaintiff who ran in front of a moving vehicle driven by a
friend he knew had also been drinking. See Taylor v. Coats,
636 S.E.2d 581, 582-84 (N.C. App. 2006) (upholding sum-
mary judgment against plaintiff who was passenger with
drunk driver). Finally, Pellegrin’s attorneys faced the task of
triggering coverage under a company insurance policy that
only covered company-authorized travel without transforming
the suit into an exclusive worker’s compensation claim under
the North Carolina co-employee immunity doctrine, which
prevents employees injured during employment from suing
co-workers. See Ragland v. Harris, 566 S.E.2d 827, 829-30
16 In Re: ABRAMS & ABRAMS
(N.C. App. 2002). The district court’s failure to consider such
risks and the fact that contingency fees "are set to account for
the risk of nonrecovery" was error. Hamner v. Rios, 769 F.2d
1404, 1409 (9th Cir. 1985).
B.
The district court also overlooked another important Bar-
ber/Allen factor—"the award involved and the results
obtained." Allen, 606 F.2d at 436 n.1. We have noted that "the
most critical factor in determining the reasonableness of a fee
award is the degree of success obtained." Doe v. Chao, 435
F.3d 492, 506 (4th Cir. 2006) (citation omitted). While that
statement came in a fee-shifting case, there is no reason why
it should be inapplicable in a contingency situation. After all,
the job of an advocate is to achieve beneficial outcomes for
a client, and success is every bit as important to the prevailing
party in a contingency case as under a fee-shifting statute. It
was error therefore for the district court to fail to recognize
that an $18 million settlement served the client well by any
standard and particularly in light of National Union’s $21 mil-
lion policy limit. While amicus argues that the district court
did consider the settlement amount, the fact that it mentioned
the $18 million sum briefly in its statement of the facts, Pelle-
grin, 598 F. Supp. 2d at 727, and again while analyzing a dif-
ferent Barber/Allen factor, id. at 730, does not constitute the
full consideration of the significant results obtained by coun-
sel that Barber/Allen requires.
Notably, Jerry Pellegrin, Mark Pellegrin’s guardian, was
satisfied with the results obtained by the lawyers he retained.
He asked both the district court and this court in no uncertain
terms to uphold the parties’ contingency contract. Indeed,
after the district court’s order created a $5.4 million conflict
between Jerry Pellegrin and his lawyers due to the fact that
Mark Pellegrin would receive any funds not awarded as attor-
ney’s fees, Jerry Pellegrin retained his own counsel to request
reversal of the district court’s fee reduction and reinstatement
In Re: ABRAMS & ABRAMS 17
of the contingency agreement. To be sure, "a court must inde-
pendently investigate and evaluate any compromise or settle-
ment of a minor’s claims to assure itself that the minor’s
interests are protected, even if the settlement has been recom-
mended or negotiated by the minor’s parent or guardian ad
litem." Salmeron, 724 F.2d at 1363 (citation omitted). None-
theless, we cannot ignore the fact that Jerry Pellegrin not only
made no objection to the thirty-three percent contingency fee
but also actively supported it, both as a point of personal
honor and in recognition of the manner in which his son’s
lawyers provided for the lifetime needs of their severely dis-
abled client.
Nor was the district court correct in discounting the obsta-
cles Pellegrin’s attorneys faced and ultimately overcame.
Because the suit against McKiernan was undefended and
because National Union settled quickly once it was sued, the
district court concluded that "[t]he uncontested nature of this
action strongly implies that Plaintiff’s Counsel did not expend
a great deal of time in the handling of this case and that a fee
in the amount Plaintiff’s Counsel seeks would be an unjusti-
fied windfall." Pellegrin, 598 F. Supp. 2d at 730.
That view, however, considers the litigation only from the
point at which National Union awoke to the peril it faced due
to a combination of its own decisions and trial strategy by
Pellegrin’s counsel. Pellegrin’s lawyers should hardly be
penalized for comprehending the strategic implications of
National Union’s decision to refuse to represent McKiernan,
which due to the breadth of the duty to defend under North
Carolina law conceivably left National Union on the hook for
the full amount of the judgment obtained against McKiernan
in National Union’s absence. By the time mediation and set-
tlement occurred, the case may well have appeared open and
shut, but that was only because Pellegrin’s attorneys had spent
almost two years laying the groundwork to secure their cli-
ent’s interests. As noted above, the suit faced potential prob-
lems including the National Union reservation of rights letter,
18 In Re: ABRAMS & ABRAMS
the reality that McKiernan was judgment-proof, the fact that
any contributory negligence on Pellegrin’s part would operate
as a bar to recovery in North Carolina, and the need to obtain
payment from a company insurance plan that provided cover-
age only for company-authorized acts without triggering
worker’s compensation under North Carolina’s co-employee
immunity doctrine. Successful outcomes often make risks
seem less risky in hindsight than they were at the time, and
the court should not have ignored those risks merely because
at some later point in litigation the defendant found it in its
interest to settle.
C.
Finally, the district court did not properly analyze the
twelfth Barber/Allen factor, the customary fee for such work.
See Allen, 606 F.2d at 436 n.1. Its analysis consisted of decid-
ing with no real supporting evidence that $300 per hour was
"a high hourly rate for a similarly-situated lawyer in North
Carolina." Pellegrin, 598 F. Supp. 2d at 730. In doing so, the
district court again overlooked the important fact that this
case was a contingency fee case. The proper question
involved, not some hourly rate in the abstract, but whether
thirty-three percent was an acceptable fee for the contingency-
based personal injury work performed by Pellegrin’s counsel.
In this regard, a number of respected North Carolina and Lou-
isiana lawyers submitted affidavits stating that a thirty-three
percent fee was actually lower than the forty percent they
would have demanded to undertake Pellegrin’s case. If the
affidavits are to be disregarded in favor of contrary evidence,
the trial court must explain why, without disregarding the
contingent nature of the fee. See id. at 731 n.2 (mentioning
affidavits but not their discussion of contingency fees). While
court-appointed amicus attempts to discredit the submissions
by claiming that they are "cookie-cutter affidavits" based on
"conclusory statements," the affidavits properly recognized
that the customary fee for such work is based on contingency
In Re: ABRAMS & ABRAMS 19
agreements. The district court should have based its analysis
on a similar recognition.
IV.
It should be apparent from our discussion of the above facts
and circumstances that the district court’s reduction of attor-
ney’s fees from thirty-three percent to a mere three percent
was much too steep a decrease. Upon remand, the district
court’s discretion must be guided by a more rigorous analysis
of the applicable Barber/Allen factors, and especially by a
recognition of the important role played by contingency fees
in this type of litigation. Because the district court failed to
consider that significant factor as well the other consider-
ations discussed above, the judgment must be vacated and
remanded for further proceedings consistent with this opinion.
VACATED AND REMANDED