Reasonable Legal Fees?
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I've searched the site, and couldn't find an answer to this, so I apologize if it has already been covered.
I have a current client who is seeking redress via FINRA arbitration from her former broker. 5 different alternative investments (equipment leases, wild catting, golf courses ... the usual). Total principal invested: $500k. All of it is currently 100% illiquid.
He has an attorney, but this guy is a newbie to securities law (bad sign #1). He's managed to rack up $30-40k in expenses thus far, but that does include the FINRA filing fees. (He bills hourly). It seems like he's not too close to arbitration yet, because the panel actually unanimously granted a Motion to Dismiss. I know how uncommon that is (bad sign #2).
His case is very strong, and I have no doubt that with proper representation he will win at least a partial award.
My question: At what point does one say enough-is-enough? The legal fees are turning into a poor business decision.
I understand that it is impossible to give a perfect answer on this, because a lot of detail is needed to value the case. But for arguments sake, let's say he get awarded half the claim ($250k) and 30% of his legal fees. Also, there will be an expert witness reviewing his case and testifying at the arbitration. This guy doesn't work cheap, but I know him to be one of the best, and exceedingly competent. That will add quite a bit of additional expense, but that money is worth it.
As a little further color, I estimate that if a market existed for his investments, he could salvage $230k of his original $500k. As it is, the issuers are locking them up, while continuing to charge a management fee (legal - per the PPM).
He's wondering where does the point hit where he drops the case, because it's just too expensive.
As a side note: Never choose a lawyer because they are a nice person or you like them. Experience in a specific field is worth its weight in gold.
Thanks for any ideas or advice.
I'm confused -- the panel granted a motion to dismiss and the case is still pending? What was dismissed? A suggestion perhaps the client try to negotiate restructuring the fees towards a contingency otherwise the hourly fees will continute to pile up.