Right to Contract Extends into the Courtroom

The Court in Bacow v. Master Beat, Inc., 2015 Mich. App. LEXIS 2032, *1, touched on a topic near and dear to most corporations’ hearts, the freedom to contract. More specifically, the ability to enter agreements with consultants aiding with legal defense strategies. At issue in this case was whether or not the fee arrangement between the corporation and its consultant contravened public policy.

In Bacow, Defendant MasterBeat hired Plaintiff as a consultant for a lawsuit it was pursuing against Defendant’s former band manager. Plaintiff was hired by Defendant due to his extensive experience and expertise in the music industry, along with his familiarity with the legal system. Plaintiff agreed to act as a consultant for Defendant in exchange for a portion of any award Defendant recovered in the lawsuit (specifically, Plaintiff was to receive 20% of the gross proceeds, 20% of any recovery of property, and 20% of the future gross publishing and songwriting royalties received by the band for music written during the period from 1977 – 1988).

The lower court held that the parties’ fee arrangement constituted a contingency agreement which depended upon the outcome of the suit. It found that Plaintiff was acting as a middle man for litigation, and that the large fee agreement violated public policy. The Court of Appeals then responded with a more thorough analysis which focused on the fact that Plaintiff was neither an attorney nor expert witness. His role as a manager of affairs could not be viewed as perversion of jurisprudence, as he was a third party, no different than an employee doing “leg-work” for the benefit of an employer. The parties were free to contract as they deemed fit. Moreover, the Court stated, “public policy must be explicit, well-defined, and adopted by the public through our various legal processes; it is not enough to find that disregarding a contract would serve a social good.”

The rules of professional conduct for attorneys did not apply, as Plaintiff did not hold himself out to be a legal practitioner. He took a gamble at working to advise Defendant in obtaining representation for a suit that could have left him empty-handed. Plaintiff was not an expert witness whose testimony could directly benefit him. He was an outside party, free to contract and negotiate whichever fee he deemed fit. Defendant was also free to deny his proposal.

This article was written by Nezar Habhab, Law Clerk.



Tags: , , , , , ,