Shabbat Parashat Balak 5776

P'ninat Mishpat: Lawyer’s Rights to Full Fees from Reluctant Client – part V

Case: The plaintiff (=pl) is a lawyer (/owner of a law firm) who represented the defendant (=def), a wealthy businessman (/businesses he owned) in many matters, including several multimillion-shekel (attempted) purchases. Def paid pl more than 1.6 million shekels over 4 years, but pl claims that he is still owed more than 2 million shekels.

Issue #6: Pl encouraged def to buy a major property. After months of research and negotiations, led by pl, def wrote that he would pay pl 1,000,000 shekels for the completed deal on the day he would pay for the purchase. Soon thereafter, pl signed a letter of intent for the purchase at 64,000,000 shekels, conditional on a due diligence check and completion of a contract. Pl and def’s representative in Israel found only minor issues in their check, which were thereafter mainly addressed and the contract was almost complete when def suddenly backed out. Pl claims that def did this because of a drop in the dollar (def’s means of pay was in dollars). Def blamed problems with the property and accused pl of improper actions, including making unauthorized changes to the letter of intent and conflict of interest. The sellers sued def for breach of contract, who sued pl for responsibility, and def agreed to a major out-of-court settlement. Pl demands 1,000,000 shekel for finishing the deal; def refuses and is countersuing for causing the settlement.

Ruling: Issue #6: There is strong circumstantial evidence [beyond our scope] that pl represented def properly in this matter. Therefore [based on what we have discussed previously], def owes pl at least for legal work performed.

Does pl deserves full payment for bringing the deal to preliminary agreement? According to Israeli law, which was the basis of def’s interaction with the seller, the signed letter of intent bound def, unless due diligence uncovered weighty issues or the seller acted in bad faith in negotiating a final contract. The drop in the dollar, the apparent issue, is an external matter which would not be a valid legal excuse (halacha apparently agrees, although the matter is not obvious – see Rama, Choshen Mishpat 304:11).

Nevertheless, pl does not deserve full payment. Regarding a shadchan who brings a couple to engagement, there are different practices whether he gets paid immediately or only after the marriage. The main opinion is the latter (Rama, CM 185:10), and he also does not get paid if they break off the engagement (even given financial repercussions). Our case is similar. Pl and def’s agreement’s stipulation of payment when def paid for the purchase implies that this would have been the completion of pl’s job.

Nevertheless, def must pay pl significantly more than his per-hour rate for the following reasons. There was an earlier agreement for pay, for a large but smaller amount of money, which did not link payment to payment for the property. Since it was illegitimate for def to back out, his obligation to pl on the matter on the eve of the letter of intent should be seen, to a certain extent, as a “done deal.” According to the dynamics of the case, pl was more than just a lawyer in this matter, but was involved personally in recommending to each other both sides, with whom he had a working relationship (as def knew but later denied). Backing out of the deal improperly caused a rift between pl and the seller, and this is a factor in determining the level of def’s responsibility. Pl is to receive 350,000 shekels for bringing the deal to the point it reached.

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