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Law School Case Brief

Matter of Lawrence - 24 N.Y.3d 320

Rule:

An unconscionable contract is generally defined as one which is so grossly unreasonable as to be unenforceable according to its literal terms because of an absence of meaningful choice on the part of one of the parties -- procedural unconscionability -- together with contract terms which are unreasonably favorable to the other party -- substantive unconscionability.

Facts:

Beginning in 1983, defendant law firm Graubard Miller (Graubard or the law firm) represented Alice Lawrence (Lawrence) and her three children in litigation arising from the death of her husband and their father, Sylvan Lawrence (decedent), a real estate developer. At the time of decedent's death in 1981, his company owned commercial real estate in New York City valued at an estimated $1 billion. After over two decades, the estate litigation came to an abrupt and unexpected end following a settlement. There quickly followed, though, the dispute between Lawrence and the defendantGraubard with respect to the law firm's fee, and the validity of certain gifts made by Lawrence to three Graubard partners in 1998. The court ruled in favor of the defendant law firm. Lawrence appealed.

Issue:

Is a retainer agreement involving a large fee unconscionable?

Answer:

No.

Conclusion:

The court held that the agreement was not substantively unconscionable, despite the large fee, because the law firm was subject to a real risk that the client would terminate the litigation or fire the law firm or that litigation would continue for several more years. A revised retainer agreement was not procedurally unconscionable because the client fully understood it, the mathematical calculations required to understand the fee were not complicated, particularly for a sophisticated businesswoman like the client, and there was no evidence that the client was not in full command of her faculties when she signed the agreement.

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