Liquidated Damages in Attorney Retention Agreement May Not Be Per Se Unenforceable
Until yesterday, I was under the mistaken impression that a lawyer could be terminated without collecting damages – other than for work already performed. I was wrong -- at least in Oklahoma. In McQueen, Rains, & Tresh, LLP v. Citgo Petroleum Corporation, the Supreme Court of Oklahoma ruled that – under certain circumstances – a liquidated damages provision may be enforced; it is not per se unenforceable.
The court was careful to limit its holding to the facts presented – a fixed term agreement, a large sophisticated corporate client who was represented by a skilled negotiator, an unambiguous liquidated damages provision, detrimental reliance by the law firm, and a recognition in the contract that there would be additional costs incurred by the law firm to meet the terms of the contract. On remand, the District Court found that a question of fact was present regarding the reasonableness of the liquidated damages.
I doubt that advocates of alternative billing arrangements really give much thought to this sort of a problem or event. In the long run, bringing a case like this probably has a more negative impact on the outside lawyer – win or lose.
