>COTCHETT v.
UNIVERSAL PARAGON CORPORATION







Filed 8/31/10

>

>

>CERTIFIED FOR PUBLICATION



IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



FIRST
APPELLATE DISTRICT



DIVISION
FIVE




>

>COTCHETT, PITRE & MCCARTHY, > Plaintiff and Respondent, >v. >UNIVERSAL PARAGON CORPORATION et al., > Defendant and Appellant.

A126149 ( >San Francisco > County Super. >Ct. > No. CPF-09-509649)

Appellant
Universal Paragon Corporation, formerly known as Tuntex (USA), Inc. (UPC) hired
respondent law firm Cotchett, Pitre and McCarthy (CP&M) to represent it in
complex environmental litigation. After
a settlement in the underlying action was reached, UPC and CP&M were unable
to agree on the amount of fees owned to CP&M under their written fee agreement. The parties proceeded to binding arbitration,
as provided for in the agreement, and the arbitrator awarded CP&M
$7,554,149.13 in attorney fees and expenses.
UPC appeals the superior court judgment confirming the award (Code Civ.
Proc., § 1285 et seq.), arguing that the amount is unconscionable and
violates public policy. We affirm.

I. FACTS
AND PROCEDUAL HISTORY

A. The
Schlage Lock Site and UPC's Development Plans

UPC
is a real estate development firm. In
1989, it purchased real property in the Brisbane
area adjacent to a property owned by the Ingersoll-Rand Corporation
(Ingersoll-Rand), known as the Schlage Lock site. The Schlage Lock site was contaminated with
acid used in metal works and with fuel from railroad operations by the Southern
Pacific Railroad. This contamination was
migrating to UPC's property. UPC wished
to acquire the Schlage Lock site so it could control the environmental clean-up
of that site as well as that of its own property. It planned to develop both properties as part
of a larger project.

In
1996, UPC sued Ingersoll-Rand in federal court, seeking to gain control of the
Schlage Lock site. The parties agreed to
dismiss the case and toll the statute of limitations to see if they could agree
on a joint remediation plan or an arrangement for UPC to purchase the
property. This tolling agreement expired
when UPC's then-counsel (not CP&M) failed to renew it and Ingersoll-Rand
refused to execute a new agreement. In
early 2005, UPC attempted to negotiate the purchase of the Schlage Lock site,
but those talks ceased because Ingersoll-Rand insisted on complete indemnity
for future litigation arising from the contamination, to be secured by a $200
million line of credit.

B. UPC
Retains CP&M as Counsel & Negotiates a Retainer Agreement

In
May 2005, UPC retained CP&M to develop a litigation strategy for acquiring
the Schlage Lock site so that UPC could clean up the property and proceed with
development. UPC initially hired
CP&M on an hourly basis, not to exceed $20,000 in fees and costs, for the
limited purpose of rendering an opinion on the best way to move forward.

Both
UCP and CP&M recognized the risks and extreme difficulties of litigation
against Ingersoll-Rand. UPC wanted to
avoid up-front attorney fees and allocate some of the risk of litigation to
CP&M through a contingency fee agreement.
Because UPC was seeking to acquire the Schlage Lock property, another
concern was determining the value of any settlement that included the
acquisition of that property. CP&M
was concerned that a contingency fee based on the value of the contaminated
property alone would be too low.

Between
May and July of 2005, UPC and CP&M negotiated the details of a contingency
fee retainer agreement designed to
meet the parties' various concerns.
Attorney Phillip Gregory represented CP&M in the negotiation and UPC
was represented by Steve Hanson, its general manager, and attorney Mike
McCracken, its outside counsel. CP&M
initially proposed a hybrid agreement under which CP&M would charge a
reduced hourly rate, plus costs, as well as a 16 percent contingency on any
monies received in the resolution of the case with â€