Burrow v. Arce

An explosion at a chemical plant killed 23 workers and injured hundreds of others. A number of wrongful-death and personal-injury lawsuits were filed, including one in which Carol Arce (plaintiff), along with 125 other plaintiffs, was represented by the five attorneys in the firm of Umphrey, Burrow, Reaud, Williams & Bailey (defendants). The case settled for $190 million, of which $60 million was paid to the attorneys as a contingent fee. Following the settlement, 49 of the plaintiffs sued the attorneys, alleging, among other claims, that the attorneys had breached their fiduciary duty by charging a higher contingency fee than was promised and by settling the claims in the aggregate while failing to individually assess or account for each plaintiff’s injury. As a consequence of this alleged breach, the plaintiffs requested forfeiture of the attorneys’ fees. The defendant attorneys claimed that no fiduciary breach had occurred, but they also contended that, even if a breach had occurred, the plaintiffs were not entitled to a forfeiture of the fees because all of the plaintiffs had been fairly compensated in the settlement and therefore had suffered no actual harm as a result of the alleged breach. The district court granted summary judgment for the defendant attorneys, agreeing that because the plaintiffs had all received fair settlements, no actual harm had occurred. Further, absent actual harm, the plaintiffs were not entitled to forfeiture of any attorneys’ fees. The plaintiffs appealed, and the court of appeals reversed. The defendant attorneys appealed.