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Estate of Stewart Eric Brandon, Jr. (8/18/95), 902 P 2d 1299
<![CDATA[
THE SUPREME COURT OF THE STATE OF ALASKA
In the matter of the ESTATE OF )
STEWART ERIC BRANDON, JR., ) Supreme Court No. S-5366
___________________________________)
)
CATRINA CRUME BRANDON, through her ) Superior Court No.
Guardian Ad Litem, DONNA C. ) 3KN-91-83 PR-MS
WILLARD, )
)
Appellant and ) O R D E R
Cross-Appellee, )
)
v. )
)
HEDLAND, FLEISCHER, FRIEDMAN & )
COOKE, )
)
Appellee and )
Cross-Appellant, )
)
and )
)
ESTATE OF STEWART ERIC )
BRANDON, JR., JOSEPH L. KASHI, )
HELEN CARTER and ERIC STEWART )
BRANDON, SR., )
)
Appellees, )
___________________________________)
)
HELLN & ACCINELLI, a professional ) Supreme Court No. S-5382
corporation, )
)
Appellant and )
Cross-Appellee, )
)
v. )
)
HEDLAND, FLEISCHER, FRIEDMAN & )
COOKE, )
)
Appellee and )
Cross-Appellant, )
)
and )
)
JOSEPH L. KASHI and ROBERT M. )
COWAN, )
)
Appellees, )
)
___________________________________)
HEDLAND, FLEISCHER, FRIEDMAN & ) Supreme Court No. S-5383
COOKE, )
)
Cross-Appellant )
and Appellee, )
)
v. )
)
HELLN & ACCINELLI, a professional )
corporation, and CATRINA CRUME )
BRANDON, through her Guardian Ad )
Litem, DONNA C. WILLARD, )
)
Cross-Appellees )
and Appellants. )
___________________________________)
Before: Moore, Chief Justice, Rabinowitz, Compton, and
Eastaugh, Justices. [Matthews, Justice, not
participating.]
IT IS ORDERED:
1. Hedland, Fleischer, Friedman, Brennan & Cooke's
petition for rehearing, filed on June 12, 1995, is DENIED.
2. Joseph L. Kashi's petition for rehearing, filed
on June 12, 1995, is GRANTED in part, DENIED in part. The
opinion will be reissued with the amendments to page 29 of the
opinion (additions underlined, deletions bracketed):
[The only] No facts bearing on paternity
were offered to the trial court at the
September 4, 1990 [evidentiary] hearing until
[,] after the court had already approved the
proposed settlement agreement. [All t] The
only [known] facts produced at the September
4, 1990 evidentiary hearing supported
Catrina's paternity claim, and consequently
were inconsistent with paying anything to
Carter or Brandon.
3. Opinion No. 4216 published on June 2, 1995, is
WITHDRAWN.
4. Opinion No. 4240 is issued on this date in its
place.
Entered by direction of the Court at Anchorage, Alaska,
on August 18, 1995.
CLERK OF THE SUPREME
COURT
___________________________
JAN HANSEN
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, telephone (907) 264-0607, fax (907) 276-
5808.
THE SUPREME COURT OF THE STATE OF ALASKA
In the matter of the ESTATE OF )
STEWART ERIC BRANDON, JR., ) Supreme Court No. S-5366
___________________________________)
)
CATRINA CRUME BRANDON, through her ) Superior Court No.
Guardian Ad Litem, DONNA C. ) 3KN-91-83 PR-MS
WILLARD, )
)
Appellant and ) O P I N I O N
Cross-Appellee, )
) [No. 4240 - August 18,
1995]
v. )
)
HEDLAND, FLEISCHER, FRIEDMAN & )
COOKE, )
)
Appellee and )
Cross-Appellant, )
)
and )
)
ESTATE OF STEWART ERIC )
BRANDON, JR., JOSEPH L. KASHI, )
HELEN CARTER and ERIC STEWART )
BRANDON, SR., )
)
Appellees, )
___________________________________)
)
HELLN & ACCINELLI, a professional ) Supreme Court No. S-5382
corporation, )
)
Appellant and )
Cross-Appellee, )
)
v. )
)
HEDLAND, FLEISCHER, FRIEDMAN & )
COOKE, )
)
Appellee and )
Cross-Appellant, )
)
and )
)
JOSEPH L. KASHI and ROBERT M. )
COWAN, )
)
Appellees, )
)
___________________________________)
)
HEDLAND, FLEISCHER, FRIEDMAN & ) Supreme Court No. S-5383
COOKE, )
)
Cross-Appellant )
and Appellee, )
)
v. )
)
HELLN & ACCINELLI, a professional )
corporation, and CATRINA CRUME )
BRANDON, through her Guardian Ad )
Litem, DONNA C. WILLARD, )
)
Cross-Appellees )
and Appellants. )
___________________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Kenai,
Jonathan H. Link,
Judge.
Appearances: Donna C. Willard, Law
Offices of Donna C. Willard, Anchorage,
Guardian Ad Litem for Catrina Crume Brandon.
Roger F. Holmes, Biss & Holmes, Anchorage,
for Hell‚n & Accinelli, P.C. James R. Blair,
Bliss Riordan, Fairbanks, for Hedland,
Fleischer, Friedman, Brennan & Cooke.
Kenneth P. Jacobus, Kenneth P. Jacobus, P.C.,
Anchorage, for Joseph L. Kashi. Michael W.
Flanigan, Walther & Flanigan, Anchorage, for
Robert M. Cowan. Paul L. Davis, Law Offices
of Paul L. Davis and Associates, Anchorage,
for Stewart Eric Brandon, Sr. Hugh G. Wade,
Wade & De Young, Anchorage, for Helen Carter.
Before: Moore, Chief Justice,
Rabinowitz, Compton and Eastaugh, Justices.
[Matthews, Justice, not participating.]
EASTAUGH, Justice.
I. INTRODUCTION
These consolidated appeals raise issues regarding
the allocation of proceeds of a wrongful death lawsuit brought
after Stewart Eric Brandon, Jr., (Eric) died in an air crash.
The disputants are Eric's minor daughter, Eric's non-dependent
parents, and various attorneys claiming attorney's fees.
We reverse the superior court's allocation because
it failed to satisfy the requirements of Alaska Rule of Civil
Procedure 90.2.
II. FACTS AND PROCEEDINGS
A. Eric's Survivors
Eric Brandon was killed in November 1987 when
the Ryan Air Service commuter aircraft in which he was a
passenger crashed on approach to landing at Homer. He was twenty-
three years old and died intestate.
Catrina Crume was born about two years before
Eric's death. Christy Crume is Catrina's mother. Catrina's
paternity was never formally established during Eric's lifetime,
but he admitted to Christy and others he was Catrina's father.
Eric's divorced parents, Stewart Eric Brandon, Sr., (Brandon),
and Helen Carter (Carter), were both aware of Catrina's existence
after her birth. Christy and Eric never married.
B. The Lawsuits
Carter lived in Pennsylvania. Soon after the crash,
she contacted Philadelphia attorney Jeffrey Voluck who asked
Anchorage attorney John Hedland, of the firm of Hedland,
Fleischer, Friedman, Brennan & Cooke (collectively "Hedland"), to
bring a wrongful death action in Carter's behalf. Hedland agreed
to represent Carter on a contingent fee basis.
Brandon, who lived in the Kenai/Soldotna area, retained
Soldotna attorney Joseph Kashi to represent him. In February
1988 Brandon, through Kashi, filed Case No. 3KN-88-22PR in Kenai
and asked the superior court to appoint him personal
representative of his son's estate; apparently simultaneously,
Brandon began Case No. 3HO-88-53 Civil in Homer by filing a
wrongful death complaint that alleged he was the "custodian and
personal representative of the estate of the decedent." In
neither case did Brandon mention the possibility Eric had left a
minor child, although Brandon was allegedly "well aware" of a
possible child.
In early 1988 Carter, through Hedland, filed Case No.
3AN-88-1988 PR in Anchorage and asked the superior court to
appoint her personal representative of her son's estate. In
April 1988 Carter opposed Brandon's application to be appointed
personal representative and asserted that there was a possibility
Eric had left a child.
In late 1987 Christy Crume, Catrina's mother,
approached attorney Robert Cowan about asserting a claim on
behalf of Catrina as a result of Eric's death. Learning later of
the lawsuits filed by Brandon and Carter, and having contacted
their attorneys, Cowan asked attorney Olof Hell‚n, then at
Hell‚n, Partnow & Condon, to help represent Catrina's interests.
In December 1988 Superior Court Judge Charles K.
Cranston appointed Carter and Brandon co-personal representatives
of the estate in Case No. 3KN-88-22PR; Judge Cranston noted
Catrina was Eric's purported minor child and charged Carter and
Brandon with the duty of ascertaining Eric's heirs.
In January 1989 Christy Crume retained Hell‚n and Cowan
to represent Catrina's interests on a contingent fee basis.
Hell‚n and Cowan agreed to share responsibility and split the fee
equally.
In February 1989 Catrina, through Hell‚n, filed Case
No. 3KN-89-149 Civil, a suit against the co-personal
representatives, seeking a declaration that Eric was Catrina's
father.
It was later alleged that Carter and Brandon
"vigorously contested"Catrina's efforts to resolve the paternity
question and "every aspect"of her paternity case, moved to
dismiss the claim, and resisted her application to test their
blood, claimed someone else was actually Catrina's father, and
failed to seek out Eric's heirs.1 It was also alleged that
Hedland and Kashi assisted Carter and Brandon, respectively, in
their efforts to contest Catrina's paternity claim. Blood
testing of Brandon and Carter was not completed until February
1990.
In August 1989 Hedland and Kashi agreed to represent
the estate on a contingent fee basis. Carter and Brandon signed
the contingent fee agreement for the estate. Carter and Brandon
then filed Case No. 3HO-89-204 Civil, a wrongful death action
against Ryan Air; it was consolidated with Case No. 3HO-88-53
Civil, the wrongful death suit previously brought by Brandon.
In June 1990 results of the genetic blood testing were
provided to Hedland; they established to a very high probability
that Catrina was Eric's daughter.2
The paternity trial was to begin September 4, 1990.
The wrongful death trial was to begin October 29, 1990.
C. The 1990 Paternity Settlement
On September 4, 1990, the parties in the paternity suit
presented Judge Cranston with a "Stipulation for Settlement."
The stipulation had been executed by the parties' attorneys,
Hell‚n, Hedland and Kashi. No motion or explanatory memorandum
accompanied the proposed agreement. Per the agreement, (1)
Carter and Brandon would withdraw their opposition to Catrina's
paternity claim; (2) Christy, Brandon, and Carter would become co-
personal representatives of Eric's estate in the wrongful death
action, and would participate and cooperate fully in prosecuting
that claim against Ryan Air; (3) Christy would "endeavor to
facilitate a reasonable and enduring relationship" between
Catrina and her grandparents, Carter and Brandon; (4) the parties
would bear their own costs and attorney's fees incurred in the
probate and paternity actions; and (5) any wrongful death
proceeds (net of expenses) would be divided as follows: (a)
Catrina would receive 66-2/3% subject to the rights of attorneys
Hell‚n and Cowan; (b) Carter and Brandon would jointly receive
33-1/3% subject to the rights of their attorneys; (c) Hedland
would remain as active co-counsel, subject, however, to being
discharged by Catrina, and would receive "additional
compensation" of 5% of net proceeds exceeding $612,000 (the
amount of Ryan Air's last offer).
Before approving the settlement, Judge Cranston briefly
discussed Alaska Civil Rule 90.2 with Hell‚n, Kashi and Hedland;
Hedland told the court that Rule 90.2's minor settlement
procedure did not apply to the September 4 agreement, but that
court approval would be required for any future settlement with
Ryan Air and for disbursement of any proceeds of the wrongful
death suit. Kashi and Hell‚n did not dispute Hedland's advice.
They acknowledged the court would have to approve any future
settlement. The court stated that the agreement did not excuse
the parties' duty to obtain approval of a future minor settlement
or the court's duty to approve a subsequent minor settlement and
any award of attorney's fees. Hedland asserted that the
substance of the September 4 agreement would not be open for
reconsideration during any future minor settlement hearing, and
the court responded, "No, I don't think it is . . . . [I]f there
is a settlement in the [wrongful death] case, then that phase of
the case has to be subject to a minor settlement."
The proposed order approving the stipulation stated it
was "entered as a final order and judgment." Judge Cranston
signed the order on September 4, 1990.
After signing the order, the court heard evidence
supporting Catrina's claim that Eric was her father.3 No
opposing evidence was offered. The appellate record contains no
facts that might have overcome the great weight of evidence
supporting Catrina's paternity claim.4 At the conclusion of the
paternity hearing, Judge Cranston found the evidence sufficient
to declare paternity.
D. The Ryan Air Wrongful Death Settlement
Following the paternity hearing, attorneys Hell‚n and
Hedland prepared for the wrongful death trial against Ryan Air.
Ryan Air's liability had been established as a matter of law
before trial; the National Transportation Safety Board had
determined that the cause of the crash was overloading and
improper loading. The trial began in November 1990. The jury
awarded the estate damages of $2,800,000 against Ryan Air. With
costs, attorney's fees and prejudgment interest, the total
judgment was $4,627,885.
Ryan Air appealed the judgment to this court.
In late November 1991, while Ryan Air's appeal was
pending, Ryan Air and the estate negotiated a proposed settlement
of $4.25 million; with post-judgment interest, the judgment then
totalled approximately $5.1 million.
In December 1991 the estate's personal representatives
(Carter, Brandon, and Christy) petitioned the superior court
under Civil Rule 90.2 for approval of the proposed settlement
with Ryan Air. They filed the petition in a new action brought
for that purpose, Case No. 3KN-91-83 PR-MS (minor settlement
action). The memorandum supporting the petition stated that the
proposed Ryan Air settlement was in accordance with Alaska law
"since the minor child, Catrina Crume is the only statutory
beneficiary"of the decedent. Petitioners noted that in 1990 the
court had approved an agreement allocating one-third of the net
recovery to Carter and Brandon. On December 5, 1991, after
conducting a hearing, Judge Cranston approved the estate's
proposed settlement with Ryan Air but stated that there would be
no disbursements until further order.
E. Allocation of the Settlement Proceeds
Soon after, Hell‚n asked the court in the minor
settlement action to allocate from the Ryan Air settlement
proceeds $1,252,655 for Catrina, $1,259,762 for attorney's fees
for Hell‚n and Cowan, and $114,466 for litigation costs. Hell‚n
in part justified the proposed fee by the substantial time spent
litigating paternity. Hedland, Kashi, and Paul Davis
("independent counsel"brought in by Brandon and Christy) opposed
Hell‚n's request, arguing in part that Hell‚n's proposed fees
would be excessive and that Hedland's 5% "additional
compensation" should be deducted from Hell‚n's fee, not from
Catrina's portion. Hedland noted that under Hell‚n's proposal,
the child would receive approximately 30% of the net Ryan Air
settlement proceeds, about $7,100 less than the amount Hell‚n and
Cowan, the child's attorneys, would receive. Hedland instead
proposed that Catrina receive approximately $2,709,163, between
$498,486 and $548,334 of which would be paid to Hell‚n and Cowan.
Hedland then asked the court to make the following
additional disbursements from the Ryan Air settlement proceeds,
in accordance with the September 4, 1990 order: (1) payment to
Hedland of "additional compensation"of $181,9005; (2) payment of
$81,355 to Hedland and $14,944 to Kashi to reimburse costs; (3)
payment of 21-1/6% of the net proceeds jointly to Carter and her
attorneys, and 12-1/6% of the net proceeds jointly to Brandon and
his attorney. Hedland did not specify the fees Hedland, Voluck
and Kashi would receive from their contingent fee agreements with
Carter and Brandon, but Hell‚n calculated those fees to total
$674,700, not including Hedland's 5% "additional compensation"
fee. As calculated by Hell‚n, Hedland's fee per his agreement
with Carter should have been $398,400. The total sought for
Brandon, Carter, Hedland and Kashi was approximately $1,600,000.
As of February 1992 no party contended that Carter and
Brandon should take anything less than the amounts calculated per
the September 1990 order.
Soon after, Superior Court Judge Jonathan H. Link
appointed Donna C. Willard guardian ad litem (GAL) to represent
Catrina's interests in No. 3KN-91-83 PR-MS and commented that,
"[T]hroughout all these proceedings the infant . . . has been
represented by attorneys employed by her mother . . . . At no
time has Catrina . . . been represented by anyone solely
responsive to her interests."
The GAL filed a report that proposed attorney's fees
allocations that would have left Catrina a net recovery of
$2,160,153. Among other things, the GAL noted that (1) Ryan
Air's liability had been established as a matter of law prior to
the wrongful death trial; (2) the fees requested by the attorneys
totaled $2,129,660.43, approximately 50% of the gross recovery;
(3) Carter and Brandon, although no longer beneficiaries of
Eric's estate given Catrina's paternity, claimed an additional
$679,402.56; (4) Catrina's ultimate recovery would be $1,367,515,
only 32% of the gross recovery, if all the fees and costs
requested by the attorneys were paid; (5) Hedland benefitted not
only from the "additional compensation" term of the 1990
settlement agreement, but also from Brandon's agreement to cede
part of his share to Carter; (6) there was a dispute about
whether Hedland's "5% bonus"should come from Catrina's net
recovery or from Hell‚n's share and whether it should be based on
the gross recovery of $4,250,000 or the net recovery of
$4,076,578; and (7) Brandon and Christy Crume objected to paying
any "bonus"to Hedland because they had not known of or agreed to
any "additional compensation."
The GAL also criticized the manner in which Carter and
Brandon carried out their responsibilities as co-personal
representatives of the estate. Specifically, she alleged in her
report that conflicts of interest potentially existed between the
estate's original personal representatives (Carter and Brandon)
and Catrina, who was identified early as potentially the only
statutory beneficiary; that Carter and Brandon apparently had
attempted to defeat Catrina's paternity claim and resisted
Christy Crume's attempts to be appointed personal representative;
and that as of September 4, 1990, Carter and Brandon had demanded
a share of the recovery, and their demands were supported by
Brandon's threat not to produce witnesses or evidence needed for
a substantial award at the wrongful death trial unless he
received a share of the proceeds.
Claiming that various attorneys had violated their
ethical responsibilities, the GAL also alleged that Hedland, the
estate's lead attorney in the claim against Ryan Air, had
threatened to withdraw from the Ryan Air suit and be
uncooperative if he were not given a "bonus"; that Hedland and
Kashi had substantial conflicts of interest because they
represented both Eric's estate (of which Catrina was a potential
beneficiary) and Carter and Brandon (who had opposed Catrina's
paternity claim); and that there were at least three instances of
fee splitting between attorneys, in potential violation of Alaska
Disciplinary Rule (DR) 2-107.
The GAL noted that Civil Rule 90.2 applied to
disbursement of the settlement proceeds and argued that the court
was entitled to review the "efficacy of the original September 4,
1990 settlement." The GAL recommended that (1) Catrina receive
$2,160,153; (2) the total attorney's fees be $1,416,525, one-
third of the gross settlement proceeds;6 and (3) Brandon and
Carter equally share $500,000, on the theory that but for
Catrina's presence in the lawsuit, the approximate gross value of
the claim would have been $800,000, of which the parents would
have equally shared about $533,360 after costs and fees.
Hedland and Cowan vigorously disputed the GAL's factual
assertions and recommendations. Hedland asserted that the only
reason for the "turmoil"was the Hell‚n/Cowan attempt to charge
an "exorbitant fee." Hedland accused the GAL of doing something
Hell‚n could not in "good conscience"do: an "attempt to renege
on the paternity settlement"and an "attempt to void"the Hell‚n-
Cowan agreement. Hedland denied any wrongdoing.
Cowan argued that the settlement agreement which gave a
portion of the funds to Carter and Brandon was unenforceable as
against public policy given Catrina's paternity and her resulting
entitlement to all the proceeds. Cowan also argued theories that
might have been an alternative ground for refusing to enforce the
1990 agreement. In affidavits, Brandon and Christy stated they
would not have agreed to pay Hedland's "bonus"out of Catrina's
share.
The GAL and Cowan each seemed to argue that the
September 4, 1990 settlement agreement was not binding on the
parties with respect to distribution in the present case; Hedland
and Kashi each seemed to argue that the September 1990 order was
final and controlling.
At an August 1992 hearing, Judge Link unsuccessfully
encouraged the disputants to settle their differences. He noted
that Catrina "got something"from the 1990 settlement agreement,
including the benefit of preparation for the wrongful death case.
The court also stated it was convinced the parties in September
1990 did not feel that the expert testimony resolved all issues
of paternity; it noted that the parties to the 1990 agreement
were represented by counsel, and it presumed that they had
consulted counsel and acquiesced in the agreement.
I do think I have the authority to
disturb that agreement. And I have that
authority under 90.2 and -- in the case law.
But, factually, I believe that that agreement
was entered into in good faith at the time.
And I intend to give to Brandon, Sr. and
Carter the substantial benefit that they
bargained for in that agreement and, as well,
Katrina [sic].
The court also stated that it had not considered any possible
ethical violations by the various lawyers except to the extent
they affected the reasonableness of the fees charged.
The court then announced a proposed allocation. It
proposed giving Brandon $387,274 and Carter $292,127, the amounts
they "bargained for in the September 1990 agreement." The court
proposed giving Catrina, "the subject matter of all this
litigation,"$1,839,877, approximately 43% of the gross recovery.
The court acknowledged that it was "in some agreement"with the
GAL's assertion Catrina's recovery "seems quite low." The court
continued: "It is a function, however, of the September 1990
agreement, the agreement which I've indicated under the
circumstances, I don't think it would be appropriate to disturb."
The court also proposed that the attorney's fees total
$1,557,298, and suggested specific allocations to the attorneys
and firms. The court further noted that Hedland and Kashi should
apportion fees between themselves, and Hell‚n and Cowan should
apportion fees between themselves.
The GAL stated that although Catrina was willing to
accept the court's proposal to settle the allocation issues, if
other parties appealed, the GAL would consider all issues open on
appeal. Hedland and Hell‚n filed extensive objections to the
allocation proposed by the trial court at the August hearing.
In September 1992 the trial court entered an Order
Distributing Settlement Proceeds and a Final Order of
Distribution of Minor Settlement Proceeds. The Final Order
stated:
Strictly speaking, the court's and
counsel's observation [at the September 1990
hearing] that a minor settlement hearing was
not necessary to approve the September 1990
agreement between the parties was not
accurate. However, the September 4, 1990
hearing was in many respects a minor
settlement hearing and all parties have
treated the September 1990 settlement
agreement as binding since that time.
The trial court characterized the 1990 order as a
ratification of the proposed two-thirds/one-third "split"between
Catrina and Eric's parents, and announced it was treating the
1990 ratification as a binding order.
Judge Link recognized that Carter and Brandon must have
realized there was a substantial probability they would be
entitled to recover nothing if Catrina prevailed in the paternity
action and Catrina and her attorneys chose to "cut them out."
The court called Brandon's ability to share in the recovery
"fortuitous." The court stated that much of the "consideration"
offered by Carter and Brandon to the 1990 settlement was the
preparedness, availability, and ability of "their attorneys" to
prosecute the wrongful death action without delay; the court also
noted the grandparents' apparent desire to establish a bond with
Catrina and the desire of Catrina's mother to cultivate that
bond. "Therefore, Brandon and Carter are entitled to the benefit
of their bargain."
Judge Link noted the attorneys had requested fees
totalling more than 50% of the gross recovery. Recognizing the
total sought was clearly excessive, Judge Link decided to award
total fees of $1,557,298.02, about 38% of the net recovery.7 The
Final Order allocated the $4.25 million settlement proceeds as
follows:
Costs $
173,421.59
Attorneys Fees:
Hell‚n $ 754,214.23
Hedland 694,375.03
Kashi 108,708.76
Total: 1,5
57,298.02
Catrina (in trust) 1,8
39,850.65
Brandon 387,274.95
Carter 292,154.798
The Final Order did not discuss the GAL's allegations
that attorneys had violated their ethical obligations and that
Catrina had accepted the 1990 settlement out of duress.
Hell‚n, Catrina, and Hedland appealed. We consolidated
the three appeals. Partial distributions have been made to
Catrina and the attorneys; nothing has yet been distributed to
Carter or Brandon.
III. DISCUSSION
A. Standard of Review
We exercise our independent judgment in
deciding whether Civil Rule 90.2 applies to particular aspects of
a settlement potentially affecting a minor's interests, and if
so, whether the proceedings satisfy that rule. Cf. Cedergreen v.
Cedergreen, 811 P.2d 784, 786 n.2 (Alaska 1991) (exercising our
independent judgment when reviewing questions involving the legal
interpretation of child custody agreement). We review the trial
court's findings of fact under a clearly erroneous standard.
Alaska R. Civ. P. 52(a). We apply an abuse of discretion
standard in reviewing a trial court order approving a settlement
of a minor's claims and distributing proceeds of a minor's
settlement under Civil Rule 90.2. Cf. Barber v. Barber, 837 P.2d
714, 716 n.2 (Alaska 1992) (applying the abuse of discretion
standard in reviewing trial court's approval of a settlement
stipulation). We apply an abuse of discretion standard in
reviewing the trial court's allocation of a total fee award among
the attorneys sharing it. AS 09.55.580(a); In re Soldotna Air
Crash Litigation, 835 P.2d 1215, 1222 n.10 (Alaska 1992).
B. The Allocation of Wrongful Death Proceeds
These appeals arise out of the September 1992 orders
allocating the Ryan Air wrongful death settlement proceeds. Our
decision turns on whether that allocation satisfied the
requirements for settling the claims of a minor. As we will see,
it did not.
Catrina argues that the 1992 orders erroneously relied
on the September 1990 settlement, that the court never approved
the 1990 settlement as required by Civil Rule 90.2, that Carter
and Brandon should have received nothing, and that the attorney's
fees to be paid from the settlement proceeds must be reconsidered
and reduced.
Hell‚n argues that the 1992 allocation erred in
awarding insufficient fees jointly to Hell‚n and Cowan, equal
fees to Cowan and Hell‚n, and excessive fees and costs to Hedland
and Kashi.
Hedland argues that the 1992 orders erroneously
allocated to Hell‚n and Cowan $55,000 which should have been paid
to Hedland, and thus failed to implement the September 4, 1990
settlement agreement.
Cowan argues that the court erred in allocating any
part of the settlement proceeds to Brandon and Carter, in basing
any part of the allocations to Kashi, Hedland and Voluck on their
contingency contracts with Carter and Brandon, and in reducing
the fees Hell‚n and Cowan should have received jointly per their
contingent fee agreement with Catrina's mother.
Carter and Brandon argue that the allocation was
essentially appropriate. Kashi argues that his allotted fee
should be left undisturbed.
1.
Civil Rule 90.2 and minor settlements
Alaska Civil Rule 90.2 sets out the requirements for
compromising the claims of a minor.9 A person claiming on behalf
of a minor against another person has the power to execute "a
full release or covenant not to sue, or . . . a stipulation for
entry of judgment on such claim." Alaska R. Civ. P. 90.2(a)(1).
Before that document is effective, however, "it must be approved"
by the court. Id.
A person seeking approval must file a petition or
motion with the court. Id. Among other things, the petition or
motion must "state . . . the basis for determining that the
settlement is fair and reasonable." Alaska R. Civ. P.
90.2(a)(2). If the settlement arises out of the wrongful death
"of another person, the petition or motion must describe the
relationship between the other person and the minor and state
whether the amount of the settlement is consistent with
applicable state law." Id.
The court must approve any attorneys' fees and costs to
be paid from the settlement proceeds. Alaska R. Civ. P.
90.2(a)(3). The court must conduct a hearing before approving a
settlement if the net proceeds exceed $25,000. Alaska R. Civ. P.
90.2(a)(4).
Although Civil Rule 45(e) gives parties the power to
compel the presence of witnesses at hearings, Civil Rule
90.2(a)(4) gives the court authority to compel any person with
information "concerning the minor's claim, the fairness of the
settlement or any related matter" to attend the settlement
hearing. By giving the court authority to require sua sponte the
presence of persons whose knowledge may bear on the "fairness"of
the settlement, Rule 90.2(a)(4) allows the court to take an
active and independent role in the approval process and adduce
facts the parties themselves may fail or choose not to produce.
Thus, the rule makes it clear that the trial court
cannot approve a proposed minor settlement without first
determining that it is "fair and reasonable." Alaska R. Civ. P.
90.2(a)(2). The court may conduct its own investigation of the
facts in making that determination and must exercise its
independent judgment.
Even in the absence of such a rule, it has long been
recognized that proposed settlements affecting the interests of
minor claimants must be judicially approved to be effective. See
Salmeron v. United States, 724 F.2d 1357, 1363 (9th Cir. 1983)
("It has long been established that the court in which a minor's
claims are being litigated has a duty to protect the minor's
interests. . . . Thus, a court must independently investigate
and evaluate any compromise or settlement of a minor's claims to
assure itself that the minor's interests are protected . . . .")
(citations omitted); Dearing v. Speedway Realty Co., 40 N.E.2d
414, 418-19 (Ind. App. 1942); O'Neil v. O'Neil, 155 S.E.2d 495,
500 (N.C. 1967).
In Dean v. Holiday Inns, Inc., 860 F.2d 670 (6th Cir.
1988), the Sixth Circuit reversed a trial court award of
contingent fees to attorneys representing a minor claimant in an
action against Holiday Inns. The court noted that a minor is not
necessarily bound by a parent's agreement to a contingent fee
contract. Id. at 673. It also noted that under Michigan law and
the "general rule,""settlement of a minor's claim or agreements
or waivers affecting a minor's rights or interests are always
subject to approval or amendment by the court with jurisdiction
to pass on such agreements or actions." Id. (citing 43 C.J.S.
Infants 237-38). "Independent investigation by the court as
to the fairness and reasonableness of a fee to be charged against
a minor's estate or interest is required." Id. (citation
omitted). The court approvingly quoted from Dacanay v. Mendoza,
573 F.2d 1075, 1079 (9th Cir. 1978):
It is an ancient precept of Anglo-
American jurisprudence that infant and other
incompetent parties are wards of any court
called upon to measure and weigh their
interests.
While the infant sues or is
defended by a guardian ad litem or next
friend, every step in the proceeding occurs
under the aegis of the court.
Dean, 860 F.2d at 673. The Sixth Circuit continued:
The interest of an attorney seeking
to be awarded a fee from the settlement
proceeds effectuated for a minor must always,
by the nature of the relationship and the
dependency of the minor, be in tension. When
a court is called upon to approve the
settlement as is in the best interest of the
minor, it must consider and then determine
what constitutes fair and reasonable
compensation to the attorney regardless of
any agreement specifying an amount, whether
contingent or otherwise.
Id. (footnote omitted). The court suggested that "perhaps" the
contingent fee agreed upon might be considered "the upper limit
of an award." Id. at 673 n.3.
Civil Rule 90.2 carries out these principles. It
requires judicial approval of any proposed settlement that
compromises the minor's interests. The court must determine that
the terms on which a minor's claim will be compromised are fair
and reasonable. That means the court must determine whether the
benefit the minor receives is commensurate with what the minor
gives up, and must take into account all consideration to be
given or received by the minor. When a minor proposes to
relinquish a claim, the process of assessing the consideration
necessarily requires the court to evaluate the risks and benefits
of prosecuting the claim to completion.
2. The 1992 orders allocating settlement proceeds
The court entered the September 1992
orders allocating the settlement proceeds in Case No. 3KN-91-83
PR-MS. That action was filed under Civil Rule 90.2 specifically
to approve the proposed Ryan Air settlement and to distribute the
settlement proceeds. All parties recognize, at least tacitly,
that the estate's 1991 settlement with Ryan Air and the
distribution of the settlement proceeds could not be effective
without satisfying Rule 90.2 and obtaining court approval.10
Judge Cranston recognized in September 1990 that court approval
would ultimately be required, at least with respect to division
of Catrina's share of the proceeds. Judge Cranston's December
1991 order approving the Ryan Air settlement stated that "there
shall be no disbursements from the settlement proceeds until
further order of this court."
As will be seen, the 1992 allocation was founded
on and enforced key features of the 1990 settlement agreement.
Because the trial court did not independently review those
features in 1992, we must first decide whether the 1990
proceedings satisfied Rule 90.2.
3. The 1990 hearing and agreement
The parties to the September 1990 proposed settlement
agreement stipulated "to the full, final and complete settlement
of the subject matter of this litigation. . . ." (Emphasis
added.) The paternity suit was the "litigation"in which the
stipulation was offered.
If the stipulation had simply eased Catrina's burden of
establishing paternity, Civil Rule 90.2 probably would have been
inapplicable. Catrina would have relinquished nothing of value;
she could only have benefitted from the procedure which allowed
her to establish paternity unopposed by Carter or Brandon.
The 1990 agreement, however, was not limited to the
paternity issue. Although it was filed in the paternity case,
the 1990 agreement purported to allocate to Carter and Brandon
one-third of any recovery the estate might receive in the pending
and separate wrongful death suit. The agreement consequently
relinquished Catrina's potential claim to receive, as Eric's sole
statutory beneficiary, all proceeds in the wrongful death case
(subject to claims for fees and costs). AS 09.55.580.11 See In
re Pushruk, 562 P.2d 329, 331 (Alaska 1977) ("[I]f the decedent
is survived by a spouse, child or dependent the [wrongful death]
action is brought on behalf of the statutory beneficiary and
damages are measured by the loss to the survivors.").
When a minor's paternity is in dispute, and that
dispute may determine whether the minor receives anything from
wrongful death proceeds, the court, before approving a complete
or partial relinquishment of the minor's claims to those
proceeds, must meaningfully assess the minor's chances of
prevailing on the paternity issue. If paternity is virtually
certain, the court should not normally permit any distribution
that compromises the minor's interests. If, as Catrina argues,
Catrina's paternity could not be successfully challenged as of
September 4, 1990, the court in 1990 could not allow Carter and
Brandon to receive anything; as the sole statutory beneficiary,
Catrina would have been entitled to all the wrongful death
proceeds.12 AS 09.55.580(a); In re Soldotna Air Crash Litigation,
835 P.2d 1215, 1220 (Alaska 1992).
On September 4, 1990, the paternity action was on the
eve of trial; the parties disputing that issue previously had
ample opportunity to investigate and discover the controlling
facts. Rule 90.2 required the parties who proposed to divert
estate proceeds from the child -- potentially the estate's only
beneficiary -- to produce facts sufficient to permit meaningful
judicial assessment of the paternity dispute. The parties failed
to do so. They filed no memorandum explaining the factual and
legal basis for the proposed settlement. They did not discuss in
the stipulation or at the hearing any reason which might have
justified court approval of a settlement diverting settlement
proceeds from Catrina. Carter and Brandon offered no facts
casting doubt on Catrina's paternity. No facts bearing on
paternity were offered to the trial court at the September 4,
1990 hearing until after the court had already approved the
proposed settlement agreement. The only facts produced at the
September 4, 1990 evidentiary hearing supported Catrina's
paternity claim, and consequently were inconsistent with paying
anything to Carter or Brandon.13 Assuming there was any genuine
dispute about paternity, one would expect that the parties could
have given the trial court a candid and possibly confidential
assessment of the issue without revealing evidence that would
have subsequently aided Ryan Air in defending against the
estate's damages claim in the wrongful death action.
The agreement relinquished another claim of potential
value to Catrina. Each party agreed in the stipulation to bear
its own costs and attorney's fees incurred in the probate and
paternity actions. Had she successfully litigated her paternity
suit to completion, Catrina might have recovered attorney's fees
and costs from Carter and Brandon. Alaska R. Civ. P. 79 & 82(a).
Such an award might have been substantial, considering that
Hell‚n later asserted that Hell‚n lawyers and paralegals spent
1,589.5 hours and incurred $24,163 in costs in connection with
the paternity proceeding. If, as Catrina argues, paternity was
essentially indisputable, and any defense to that claim was
frivolous, Catrina might have recovered actual fees. Van Dort v.
Culliton, 797 P.2d 642, 644 (Alaska 1990) (providing that under
Civil Rule 82, the court may award actual fees where the losing
party's claim or defense was "frivolous, vexatious or devoid of
good faith"). The court was not advised of the potential value
of Catrina's claim for costs and fees.
The 1990 agreement also provided that Carter's attorney
(Hedland) would receive additional compensation equal to 5% of
the net recovery over $612,000. The 5% figure was potentially
objectionable because, taken in conjunction with whatever
contingent fee contract governed Hell‚n's and Cowan's attorney's
fees, the court could not have known in 1990 whether the total
fees charged to Catrina might eventually prove to be excessive.
The court was not told of the terms of Hell‚n's contingent fee
agreement. Consequently, in 1990 the court could not approve in
the abstract the 5% rate for Hedland's further services.
Moreover, the actual value of Hedland's prospective
services was then unknown, both quantitatively and qualitatively.
Approving a specific contingent fee percentage in 1990
potentially overcompensated Hedland if there were a large
recovery, or if his further services were less extensive or
valuable than proposed. The court did not know how much would be
recovered from Ryan Air; it seems likely no one anticipated
collecting $4.25 million. The verdict was roughly twice what the
estate asked from the jury.
Further, notwithstanding the seeming simplicity of the
1990 agreement, it is doubtful the parties themselves fully
understood how it might affect attorney's fees awards. To ensure
that a child's interests are not unfairly compromised in such a
case, the trial court must make careful and rigorous inquiry even
when experienced and capable attorneys are involved.
The trial court may have found that the agreement --
which obliged Christy to "endeavor to facilitate a reasonable and
enduring relationship" between Catrina and her grandparents,
Carter and Brandon -- gave Catrina something of value. Given a
proper fact showing, a court might determine that such an
undertaking is sufficiently valuable to justify a minor's
relinquishment of a valuable claim. In this case, however, the
parties did not offer the facts necessary to permit such a
determination.14
Because the proposed 1990 settlement resolved or
compromised claims of potential value to Catrina, the parties
were required to satisfy Rule 90.2 when they sought judicial
approval in 1990. They failed to do so. Their total failure to
discuss any factual basis for determining that the settlement was
"fair and reasonable"deprived the court of the facts necessary
to decide whether to approve the proposed settlement. Alaska R.
Civ. P. 90.2(a)(2).
The circumstances at the time of the 1990 settlement
help explain why the court did not follow Rule 90.2 or conduct
the required hearing. No attorney suggested that the court do
so, and no party made the motion and factual showing required by
Rule 90.2. The proposal was submitted on the eve of the
scheduled paternity trial without any substantive explanation,
and during the short hearing, the attorneys did nothing to
correct the court's erroneous belief that Rule 90.2 did not apply
to the proposed agreement.15
The court did not remedy the parties' failure, nor did
the 1990 hearing substantially satisfy Rule 90.2. There is no
indication the court considered the substance of the proposed
settlement terms in 1990. In sum, the September 4, 1990 order
cannot be considered the substantive judicial approval
contemplated by Rule 90.2.
4. The 1992 proceedings
The 1992 allocations fundamentally relied on the 1990
agreement in calculating the distributions to Carter and Brandon
and to attorneys whose services benefitted them. In 1992 the
court did not independently review any of the matters that should
have been considered before the September 1990 agreement was
approved. Although the trial court correctly recognized in 1992
that the attorneys and the court had erred in 1990 in thinking
that no hearing was required to approve the 1990 agreement, it
nonetheless decided that the 1990 hearing was "in many respects"
a minor settlement hearing and that all parties had treated the
settlement as binding since that time. Consequently, it gave
Brandon and Carter the benefit of their 1990 bargain. It also
gave effect to other aspects of the 1990 agreement, particularly
the term giving Hedland additional compensation.
However, as seen above, the 1990 hearing did not
satisfy Rule 90.2 and did not remedy the deficiencies in the
procedure followed by the parties.
Contrary to the assertion of some parties, the parties'
treatment of the 1990 settlement as "binding"until 1992 could
not obviate its infirmity. The failure to observe the
requirements of Rule 90.2 disposes of these assertions.
Independent judicial scrutiny is required precisely because of
the possibility that a settlement agreement will not be in a
minor's best interests, notwithstanding the active involvement of
capable and responsible counsel and representatives, and their
approval of a proposed settlement. Consequently, the active
involvement of Christy Crume and Hell‚n in the 1990 settlement
cannot excuse the failure to follow Rule 90.2 in 1990 or to
consider the 1990 settlement terms in 1992. Further, the
allocation issues did not arise until the estate settled with
Ryan Air in December 1991, and until the GAL was appointed in
1992, there were no changes in the parties and representatives
who had found the terms acceptable in September 1990.
The 1992 proceedings did not independently satisfy Rule
90.2. The court never considered in 1992 whether the 1990
agreement was valid. Nor did it consider the fundamental
question of whether Carter and Brandon were entitled to receive
anything, given the high probability in 1990 that Catrina was the
estate's only statutory beneficiary. The court did not determine
the proper value to be placed on any amount Carter and Brandon
were to receive, assuming they could receive anything. It did
not consider the wisdom of other terms of the 1990 agreement,
such as Catrina's relinquishment of any claim for attorney's fees
or costs she incurred in the paternity suit.
The parties did not provide Judge Link with the facts
necessary to justify sharing the proceeds with the parents. They
produced no evidence that would have permitted the court in 1992
to decide either that Catrina's paternity was in genuine dispute
in 1990 or that the one-third share allocated to Brandon and
Carter fairly reflected the value of avoiding trial on paternity.16
To the extent the court in 1992 discussed any facts
bearing on the settlement, those facts do not necessarily justify
approval of the 1990 settlement terms or the 1992 allocation.
For example, comments in the 1992 allocation order about the
frailty of Carter's and Brandon's claims tend to support a
conclusion that it was improvident to agree to give them one-
third of any recovery. The allocation order also noted that the
strength of the parents' claim to a share of the proceeds lay in
"the preparedness, availability and ability of their attorneys
(particularly the Hedland Firm) to prosecute the wrongful death
action without delay." These factors support the GAL's
objections to the allocations because the attorneys' cooperation
was ethically required and could not justify diverting part of
the proceeds to persons potentially entitled to receive nothing.
See infra discussion at part 5 a. Nor could Carter and Brandon,
the estate's co-personal representatives, properly do anything
(such as encouraging Hedland to withdraw) to prejudice the
estate's claim against Ryan Air. See Alaska Bar Association
Ethics Opinion 91-2 (1991) at 2 ("A personal representative in
Alaska is under a duty to settle and distribute the estate of the
decedent in accordance with the . . . applicable statutes . . .
as is consistent with the best interests of the estate. The
authority conferred by the statutes and court orders must be used
by the personal representative for the best interests of the
successors of the estate."). See also infra note 21.
In sum, the court in 1992 did not make the inquiry or
fact findings required to determine whether the 1992 allocations
were fair and reasonable. The court could have done so only by
considering the substance and effect of all aspects of the
September 1990 agreement which potentially disadvantaged Catrina.
Because the 1990 agreement never received the scrutiny required
by rule, the court erred in relying on that agreement to
calculate the final distribution of the Ryan Air settlement
proceeds in 1992. We must consequently reverse and remand.
It will be necessary on remand to decide whether Carter
and Brandon should receive any settlement proceeds.17 If the
trial court concludes on remand that as of September 4, 1990,
Carter and Brandon had no hope of defeating Catrina's paternity
claim, they would not be entitled to share in the Ryan Air
recovery unless they also agreed to contribute valuable
consideration to the September 1990 settlement. If the trial
court concludes that Carter and Brandon could have demonstrated
that they had a more-than-negligible chance of defeating
Catrina's paternity claim, it should attempt to quantify the
value of that chance in assessing the fairness of the 1990
proposed allocation.18
5. Additional concerns identified in 1992
In 1992 some parties raised additional
concerns (possible ethical and fiduciary violations, fee
splitting and duress) that might have affected the allocation.
The court did not give them substantive consideration. It should
do so on remand. By remanding, we are not holding that any
attorney or party engaged in impropriety or breached ethical or
fiduciary duties. Because the allegations raising these concerns
were not patently insufficient, the trial court should have
considered them when allocating the settlement proceeds, and must
do so on remand.
a. Alleged ethical violations and conflicts
Carter retained Hedland and Brandon retained Kashi to
bring claims resulting from Eric's death. When Carter and
Brandon became the estate's co-personal representatives, Hedland
and Kashi jointly represented the estate in the wrongful death
action. When Catrina filed her paternity claim against Carter
and Brandon, Carter retained Hedland and Brandon retained Kashi
to respond to Catrina's claim.
The GAL and Hell‚n argue on appeal that Hedland and
Kashi had two conflicting duties: (1) as attorneys for the
estate, they had a duty to act in the best interests of the
estate's ultimate beneficiary, whomever it might prove to be; but
(2) as attorneys for Carter and Brandon in the paternity action,
they had a duty to represent Carter and Brandon as defendants in
Catrina's paternity suit. The GAL and Hell‚n claim Kashi and
Hedland were in a conflict position because establishment of
Catrina's paternity would also establish the ineligibility of
Brandon and Carter to receive any part of the Ryan Air damages.
The GAL and Hell‚n also note that in 1988 the court imposed a
duty on Carter and Brandon, as co-personal representatives of the
estate, to determine Eric's heirs and Catrina's paternity. The
GAL and Hell‚n assert that if we conclude that there was a
conflict of interest which should have disqualified Hedland and
Kashi from representing the estate, Hedland and Kashi should be
denied any fees. Hedland vigorously argues that there was no
breach and that, moreover, the GAL's allegations of impropriety
were factually unsupported.
Judge Link did not consider the effect of any possible
ethical violations except to the extent they might have affected
the reasonableness of fees charged.
Disciplinary Rule 5-105, in effect at the time of the
litigation, provided in part:
(A) A lawyer shall decline proffered
employment if the exercise of his independent
professional judgment in behalf of a client
will be or is likely to be adversely affected
by the acceptance of the proffered
employment, except to the extent permitted
under DR 5-105(C).
(B) A lawyer shall not continue
multiple employment if the exercise of his
independent professional judgment in behalf
of a client will be or is likely to be
adversely affected by his representation of
another client, except to the extent
permitted under DR 5-105(C).
(C) In the situations covered by DR 5-
105(A) and (B), a lawyer may represent
multiple clients if it is obvious that he can
adequately represent the interest of each and
if each consents to the representation after
full disclosure of the possible effect of
such representation on the exercise of his
independent professional judgment on behalf
of each.
Ethical Consideration (EC) 5-14, also in effect when the
paternity and wrongful death actions were proceeding, prohibits a
lawyer from representing "two or more clients who may have
differing interests, whether such interests be conflicting,
inconsistent, diverse, or otherwise discordant." When
considering whether multiple clients have differing interests,
the lawyer must "resolve all doubts against the propriety of the
representation." EC 5-15. If a lawyer accepts representation
where multiple clients have potentially differing interests, when
the interests actually become differing, the lawyer "would have
to withdraw from employment." Id.
Although this court has not previously decided whether
representation of both the beneficiary and the personal
representative of the estate constitutes an impermissible
conflict of interest, the Oregon Court of Appeals addressed the
issue in Kidney Association of Oregon, Inc. v. Ferguson, 775 P.2d
1383 (Or. App. 1989), modified on reconsideration, 786 P.2d 754
(Or. App. 1990). In Kidney Association, the appellate court
concluded that although there was no actual conflict between the
interests of the beneficiary and the interests of the personal
representative and no reasonable expectation of a divergence of
interests when representation began, the parties' interests later
diverged. 775 P.2d at 1386; 786 P.2d at 756. The court held
that when the interests diverged, the attorney "was under an
ethical obligation to notify [the beneficiary] and the estate of
a likely conflict of interest and obtain their consents to his
continued representation of them." 786 P.2d at 757. By failing
to do so, the attorney "breached his fiduciary duty to [the
beneficiary]." 775 P.2d at 1386. Such a breach potentially
impacts an attorney's right to fees. Moses v. McGarvey, 614 P.2d
1363, 1372 (Alaska 1980).
The GAL and Hell‚n correctly assert that Hedland and
Kashi's dual responsibilities were in potential conflict. It
appears Carter and Brandon knew from the outset that there was
potentially a minor heir. The record before us supports a claim
that no later than mid-April 1988, Hedland and Kashi knew that a
minor child might be Eric's only heir, and that the child's
paternity would make Carter and Brandon ineligible to receive any
wrongful death proceeds. If so, Hedland and Kashi should have
recognized that Carter and Brandon had interests potentially at
odds with those of the minor child, and that Carter and Brandon,
as representatives of the estate, might have a personal interest
in failing to perform their duty to ascertain the estate's heirs
per Judge Cranston's December 1988 order. Carter and Brandon
bargained for settlement terms in 1990 that were potentially
disadvantageous to Catrina. The personal representatives of the
estate thus arguably benefitted at the expense of the person who
was probably the sole beneficiary of the estate. Consequently,
we cannot say as a matter of law that no conflict of interest
existed.
When an attorney undertakes to perform legal services
for a client who is acting in a fiduciary capacity, the attorney
has a duty not to affect adversely the interests of the intended
beneficiary. Fickett v. Superior Court of Pima County, 558 P.2d
988, 990 (Ariz. App. 1977); see also Jenkins v. Wheeler, 316
S.E.2d 354, 357 (N.C. App. 1984) ("When a client merely
represents a class of beneficiaries, the attorney should consider
the beneficiaries' interests, without undue concern for the
interests of the legal representative.").
Hedland argues that Alaska Bar Ethics Opinion 91-2
refutes any argument that Hedland and Kashi engaged in unethical
conduct. Ethics Opinion 91-2 holds that an attorney who
represents the personal representative in the probate of an
estate is not per se precluded from also representing the
personal representative in a contest with other heirs if the
attorney has gained no relevant confidential information from the
other heirs while acting for the personal representative. Id. at
2.
Ethics Opinion 91-2 would not excuse the attorneys'
alleged actions in this case. While acting as attorneys for the
estate, Hedland and Kashi allegedly gained a valuable advantage
over Catrina because they were intimately familiar with the
wrongful death action and were the only attorneys adequately
prepared to try that case as of September 1990. They and Carter
and Brandon had allegedly prevented Catrina's mother from
becoming an additional co-personal representative and resisted
efforts by Catrina's attorney, Hell‚n, to relieve them or take an
active role in the wrongful death case in time to prepare
sufficiently to try that case on the scheduled date. The GAL
alleged that Hedland and Kashi used that advantage against
Catrina in negotiating a settlement that was favorable to Carter,
Brandon, and themselves. Ethics Opinion 91-2 consequently does
not apply here.
The trial court never considered whether there were
ethical violations and, if there were, whether they affected the
settlement. The record is consequently incomplete. As a result,
we are unable to say as a matter of law that there was no
conflict or that Catrina's interests were not harmed. Given the
possibility that a conflict disadvantaged Catrina, the trial
court on remand must decide whether Hedland and Kashi entered
into a conflict position and if so, whether they did so
intentionally. The court must also consider whether they used
their positions as attorneys for the estate to disadvantage
Catrina during negotiation of the 1990 settlement terms.
In Alaska, the general rule has been that once a
conflict of interest or other ethical violation has been
established, the attorney is prohibited from collecting fees for
his or her services. Moses, 614 P.2d at 1372 ("It is well
established that an attorney, disqualified on conflict-of-
interest grounds, generally is barred as a matter of public
policy from receiving any fee from either of the opposed
interests."). However, in Kidney Association, the Oregon court
expressly rejected the "majority"view articulated in Moses.
Kidney Association, 775 P.2d at 1386-87. It instead favored a
"case-by-case approach"that would weigh all relevant factors in
determining whether attorneys are entitled to the reasonable
value of their services. Id. at 1387. In a case-by-case
determination, the court is to consider, among other factors,
whether the breach was intentional and whether the attorney's
conduct prejudiced the client. Id.19
Given the incomplete record, the absence of findings,
and the apparent presence of genuine fact disputes, it is
premature to decide whether we should apply the general rule
expressed in Moses. On remand, if the trial court finds that an
attorney was in a conflict of interest, it should apply Alaska
law when allocating attorney's fees. However, it should also
make alternative fact findings under Kidney Association to reduce
the chances of a second remand following any further appeal.
Unless the trial court concludes that Hedland and Kashi
are prohibited from receiving fees earned by them, the court
should also consider, when allocating attorney's fees, whether
Hedland and Kashi, by contesting the paternity issue for Carter
and Brandon or allegedly prolonging that dispute (1) caused
Catrina and the estate to incur needless litigation expense; or
(2) inappropriately prevented Hell‚n and Cowan from participating
in the wrongful death action in time for them to have become the
exclusive attorneys for the estate after September 4, 1990.
Additionally, the superior court should consider that Hedland and
Kashi, through their diligence and advocacy, greatly contributed
to the ultimate success of the wrongful death action, and to
collection of a post-judgment settlement substantially exceeding
Ryan Air's insurance limits.20
b. Fee splitting
Fee-splitting agreements existed between Hell‚n and
Cowan, between Kashi and Hedland, and between Hedland and Voluck.
The GAL argues that these agreements may have diverted settlement
proceeds from Catrina to attorneys who did not earn their fees.
Hell‚n also argues that Judge Link erred in not resolving the fee-
splitting issue, and that Hell‚n is entitled to a greater share
of the fee than Cowan, who allegedly did not perform an equal
share of the work.
Alaska Disciplinary Rule 2-107(A), which was in effect
at the time of the litigation, provides:
(A) A lawyer shall not divide a fee for
legal services with another lawyer who is not
a partner in or associate of his law firm or
law office, unless:
(1) The client consents to employment
of the other lawyer after a full disclosure
that a division of fees will be made.
(2) The division is made in
proportion to the services performed and
responsibility assumed by each.
(3) The total fee of the lawyers does
not clearly exceed reasonable compensation
for all legal services they rendered the
client.
DR 2-107(A). Similarly, Ethical Consideration 2-22 provides in
part:
A fee may properly be divided between
lawyers properly associated if the division
is in proportion to the services performed
and the responsibility assumed by each lawyer
and if the total fee is reasonable.
In context of a minor settlement involving multiple
attorneys, a fee-splitting division can overcompensate an
attorney whose share exceeds the reasonable compensation for the
attorney's services. Such overcompensation is potentially at the
minor's expense. A court reviewing a minor settlement under Rule
90.2 must consequently confirm that a fee-splitting agreement
does not lead to an excessive fee award. Alaska R. Civ. P.
90.2(a)(3). The court must first determine that the services
performed by each attorney were in proportion to the agreed
division and that the total fee does not clearly exceed
reasonable compensation for the services rendered. DR 2-
107(A)(2), (3). If so, the court should divide the fees
accordingly.
The record does not contain sufficient evidence for us
to resolve any question about the propriety of the fee-splitting
agreements or divisions made pursuant to them. On remand, the
trial court must consider the fee-splitting agreements to
determine that they have not resulted in diverting settlement
proceeds inappropriately from Catrina. McNeary v. American
Cyanamid Co., 712 P.2d 845, 848 (Wash. 1986) (providing the trial
court is the appropriate place to resolve a dispute between two
firms regarding the division of a contingency fee).
c. Duress
The GAL alleged in 1992 that she had "been advised"
that Hedland, during the discussions that led to the September 4,
1990 agreement, threatened to withdraw from the wrongful death
case (at a time when he was the only attorney arguably prepared
to be lead trial counsel in that case) unless Catrina agreed to
pay him additional compensation beyond his share of Carter's
recovery. The GAL supported that assertion with her own
affidavit, but it does not appear that the GAL was speaking from
first-hand knowledge. Attorney Cowan filed an affidavit,
potentially based on first-hand knowledge, in which he affied
that he could "confirm the conduct cited by the [GAL] in the
report in regard to threats to not cooperate and threats to
appeal and drop out the paternity litigation. . . ." Christy
Crume offered an affidavit which asserted that she had been under
no duress. Hedland denied making any threat.21
Judge Link did not consider whether the September 1990
agreement was the result of duress or whether Hedland made any
threat to withdraw. Instead, the court tacitly recognized that
Catrina was potentially faced with trying the wrongful death
action without the assistance of Hedland: "I am cognizant of the
fact that much of the 'consideration' Carter and Brandon had to
offer in that agreement was the preparedness, availability and
ability of their attorneys (particularly the Hedland Firm) to
prosecute the wrongful death action without delay."
Consequently, the court concluded that Carter and Brandon were
"entitled to the benefit of their bargain."
Given the record, we cannot say as a matter of law that
the claim of duress is without merit. On remand, the court
should consider the duress claim. If it finds Catrina acted out
of duress, the court would be compelled to conclude that the 1990
agreement did not satisfy Rule 90.2. Duress would also render
that agreement unenforceable apart from any Rule 90.2
determination. "If a contract or term thereof is unconscionable
at the time the contract is made a court may refuse to enforce
the contract . . . ." Vockner v. Erickson, 712 P.2d 379, 381
(Alaska 1986) (quoting Restatement (Second) Contracts 208
(1981)).
6. Potentially excessive fees
In 1990, the trial court did not consider whether the
September 1990 agreement and the existing contingent fee
agreements might lead to excessive fees. In 1992, Judge Link
recognized that the total fees requested by all the attorneys,
exclusive of costs, were clearly excessive because they exceeded
50% of the gross recovery. Judge Link consequently calculated a
total fee of $1,557,298. See note 7, supra. That total was
approximately 38% of the net recovery.
Civil Rule 90.2(a)(3) requires judicial approval of
attorney's fees and costs to be paid from a minor's settlement
proceeds. The potential for excessive fees is greater when
several attorneys, each operating under a separate contingent fee
agreement, ask the court to order the minor to pay attorney's
fees based on those agreements. Generally, an attorney's fees
calculation is addressed to the discretion of the trial court.
Hickel v. Southeast Conference, 868 P.2d 919, 924 (Alaska 1994)
(affirming Rule 82 award). The total fee to be charged against a
minor's recovery is likewise addressed to the discretion of the
trial court.
In our view, the total fee award is potentially
excessive given all the circumstances presented here. Because
the general failure to comply with Civil Rule 90.2 requires
remand and recalculation of all the allocations, the issue of
excessive fees may not resurface, and the factors which make the
fee total appear excessive may not be repeated.
If Catrina were the only recipient of the damages
distribution, the fees total would potentially be within the
discretion accorded the trial court.22 As a result of the
allocation to Carter and Brandon, however, Catrina's net recovery
($1,839,850) was only 45% of the net settlement proceeds
($4,076,578), and the fees total calculated by the court in 1992
($1,557,298) was 89% of the net amount Catrina was to receive. A
considered conclusion on remand that Carter and Brandon had a
legitimate claim to a portion of the proceeds would permissibly
alter the portion available for distribution to Catrina, as well
as the amount available to compensate the attorneys whose
services benefitted her. If Carter and Brandon share in the
proceeds on remand, they must fairly contribute to the amount
available to compensate attorneys whose efforts mutually
benefitted all the plaintiffs.23
C. Procedural Issues
Hedland, Kashi and Brandon argue, in essence,
that we cannot review the terms of the 1990 settlement because
the 1990 order was a final, negotiated settlement that was never
appealed and because the GAL never moved to set it aside under
Civil Rule 60(b).
There is no procedural impediment to reaching the
issues previously discussed in this opinion. The 1990 settlement
could not be a final judgment with respect to allocation issues
because it was not the final order of distribution, and
consequently, could not terminate the child's interests. See
Alaska R. Civ. P. 90.2(a)(5) ("No instrument executed under this
rule is effective to terminate a minor's interests until such
funds are paid as directed by the court."). Because the 1990
order was not a final judgment as to any issue other than
paternity, the doctrine of res judicata did not prevent the trial
court from considering the allocations issue afresh in 1992, or
require it to apply and enforce all terms of the 1990 agreement.
Likewise, without a final judgment, we are not precluded when
considering the 1992 allocations from reviewing the 1990
settlement enforced by the 1992 orders. The 1990 agreement
purported to do much more than resolve the paternity dispute
which was the real subject of that lawsuit. It also allocated
the potential, unliquidated proceeds of a totally separate
lawsuit which was still in progress. The requirements of Rule
90.2 cannot be circumvented by enforcing the terms of an
agreement reached previously but never subjected to judicial
scrutiny.
D. Attorneys' Appeals
Hell‚n argues on appeal that the trial court
erred in awarding $754,214 to Hell‚n and Cowan, 28% of their
client's net recovery, rather than $1,087,087.58, the 40% fee
specified in their contingent fee contract. Hell‚n and Cowan
also argue that the trial court granted excessive fees to
Hedland, Kashi and Voluck. Hedland also appeals from the fee
award and argues that he was undercompensated by $55,000.00
because the trial court did not fully enforce the 5% provision in
the 1990 settlement.
Given our resolution of the issues previously
discussed, and the probability that the amounts allocated will
change following remand, it is unnecessary for us to decide
whether the trial court erred in calculating the 1992 allocations
for the various attorneys.
IV. CONCLUSION
Because the 1992 orders allocating the Ryan Air
settlement proceeds did not give the scrutiny required by Civil
Rule 90.2 to all aspects of the settlement potentially affecting
Catrina, and instead fundamentally relied on 1990 settlement
terms which never received the scrutiny required by Civil Rule
90.2, the judgment of the superior court is REVERSED. The
superior court is directed on remand to conduct further
proceedings consistent with this opinion.24
_______________________________
1 Carter denied disputing Catrina's paternity.
2 Ryan Air had filed for Chapter 11 bankruptcy. Eric's
estate was one of Ryan Air's creditors. Through Hedland, Carter
filed Catrina's genetic blood testing report in Ryan Air's
bankruptcy proceeding to demonstrate the value of the estate's
claim against Ryan Air. The accompanying June 14, 1990 affidavit
of Hedland attorney Sara Heideman stated that the firm conducting
the genetic testing had determined there was a "99.99%
likelihood" that Eric was Catrina's father. Hedland himself
affied in 1992 that the attorneys for Carter and Brandon in the
paternity case had concluded after receiving the genetic testing
results in June 1990 that it was a "virtual certainty"Christy's
mother would prevail in the paternity case based on the genetic
test results then available. Independent tests conducted for
Brandon and Carter later confirmed the results of the tests
conducted for Catrina.
3 The evidence supporting Catrina's paternity claim was
substantial. Christy Crume testified that (1) she had frequent
sexual relations with Eric and no other man during the time
Catrina was conceived; (2) Eric, on learning of the pregnancy,
admitted to her the child was his; (3) Eric accompanied her to
the hospital when she went into labor; (4) she named Eric as the
father in a standard news release following the birth and on the
card bearing the baby's footprints; (5) after she went home, Eric
was around; (6) photographs depicted Eric holding Catrina; (7)
Eric referred to himself as Catrina's "papa," held her
frequently, changed her diapers, and bought her a Christmas
present; (8) Eric gave Christy cash to pay utilities on the
trailer where she lived.
Six witnesses testified under oath that Eric had
acknowledged that he was Catrina's father. Three testified he
had done other things consistent with fatherhood. One witness
testified that she had seen Eric buying food, diapers, an outfit
and a rattle inscribed "My Girl." Another testified that Eric
referred to Catrina as "daddy's little girl." Another testified
that "just about everybody you talked to that knew him knew it
was his."
Dr. Geyer, a clinical immunologist, testified that he
is associated with a laboratory that conducts tests in disputed
paternity cases across the country and around the world. He
explained the testing which had been conducted at his direction
and the nature of blood testing and DNA profiling. He testified
that the rarity of the blood groups permits a calculation of the
combined paternity index, which states as a probability that the
decedent is the true father of the child based strictly on the
scientific evidence. He testified that as calculated, the
probability was 99.99% that Eric was Catrina's father, and based
on the scientific studies, he believed there was "a reasonable
scientific certainty"Eric was Catrina's true biological father.
Catrina's attorney was prepared to call a second expert, Dr.
Beaver, to discuss the scientific reliability of the test when
applied to Catrina's paternity, but the court appeared to
indicate Dr. Geyer's testimony was sufficient.
4 The appellate record discusses several circumstances
that, if proven by competent evidence, might have supported a
conclusion Eric was not Catrina's father. Christy Crume on one
occasion may have prepared a document naming someone other than
Eric as Catrina's father; the birth certificate did not name Eric
as the father; Eric had refused a blood test; Eric had denied
paternity when the State of Alaska inquired about child support
based on Christy Crume's assertion he was Catrina's father.
Additionally, Kashi submitted an affidavit in 1992 which
described several circumstances that, if proven, might have
raised a genuine fact dispute about Catrina's paternity claim.
Despite these possibilities, the record contains no evidence
(documents, testimony, affidavits based on personal knowledge)
submitted to either Judge Cranston in 1990 or Judge Link in 1992
that would have created a genuine dispute about paternity.
5 For continuing to participate in the wrongful death
suit, Hedland's "additional compensation"was to be, per the
September 4, 1990 agreement, 5% of the difference between the net
settlement proceeds and $612,000, the last amount offered by Ryan
Air as of September 4, 1990.
6 The GAL proposed this fees allocation:
Attorney Time Expended Percentage Amount
Hell‚n 3,303.8 hours .40 $566,610
Hedland 3,628.8 .44 623,271
Kashi 693.8 .08 113,322
Cowan 693.8 .08 113,322
7 Judge Link calculated the total by allowing contingent
fees of 33-1/3% on the first $1,100,000 (the amount of the
available insurance limits) and 40% on the remaining amount
($2,976,578.41) of the net settlement. The court justified the
enhanced percentage by the difficulty of obtaining and enforcing
the judgment.
8 The court in 1992 allocated a total of one-third of the
net proceeds of the Ryan Air settlement to Carter and Brandon and
their attorneys, in accordance with the 1990 settlement
agreement. Net of the fees allocated to their attorneys, Carter
and Brandon were to receive a total of approximately $679,429.
The remainder of their one-third share of the net settlement
proceeds was to be distributed to their attorneys.
Hell‚n and Cowan were to share the amount allocated to
Hell‚n; Hedland and Voluck were to share the amount allocated to
Hedland.
9 Civil Rule 90.2(a) provides:
(a) Approval of Settlement of
Claims on Behalf of Minors.
(1) Approval. A parent or guardian
of a minor who has a claim against another
person has the power to execute a full
release or a covenant not to sue, or to
execute a stipulation for entry of judgment
on such claim. However, before such a
document is effective, it must be approved by
the court upon the filing of a petition or
motion.
(2) Petition or Motion. A petition
or motion for court approval of a minor's
settlement under this rule must state the
date of birth of the minor, the relationship
between the moving party and the minor, the
circumstances giving rise to the claim, the
amount of any applicable liability insurance,
and the basis for determining the settlement
is fair and reasonable. If the settlement
arises from personal injuries to the minor,
the petition or motion must describe the
extent of the injuries, the medical treatment
provided and the probable future course of
treatment. If the settlement arises from the
wrongful death or injury of another person,
the petition or motion must describe the
relationship between the other person and the
minor and state whether the amount of the
settlement is consistent with applicable
state law.
(3) Attorneys' Fees and Costs. The
court shall approve any attorneys' fees and
costs that are to be paid from the settlement
proceeds when the minor claimant is
represented by counsel.
(4) Hearing. The court may approve
the minor's settlement without a hearing if
the settlement proceeds, after attorney's
fees and costs are deducted, do not exceed
$25,000. When a hearing on the petition or
motion is held, the court may require the
presence of any person that has information
concerning the minor's claim and the fairness
of the settlement or any related matter.
(5) Termination of Minor's
Rights. No instrument executed under this
rule is effective to terminate a minor's
interests until such funds are paid as
directed by the court.
Civil Rule 90.2 became effective August 1, 1987. It is
similar to a practice adopted by the superior court judges for
the Third Judicial District on October 31, 1972. Supreme Court
Order No. 835, which adopted Civil Rule 90.2 for Alaska,
expressly superseded the 1972 special order adopted for the Third
Judicial District. SCO No. 835 2. An equivalent practice had
also been followed in the First Judicial District before Rule
90.2 was adopted. Letter from Judge Thomas E. Schulz, First
Judicial District (Nov. 29, 1982) (on file with court rules
attorney).
10 The memorandum seeking court approval of the proposed
Ryan Air-estate settlement in 1991 satisfied Rule 90.2. After
conducting a hearing at which counsel explained the reasons for
the settlement, Judge Cranston approved that settlement on
December 5, 1991, permitting the estate to receive $4.25 million.
No one suggests the 1991 Ryan Air settlement did not satisfy Rule
90.2.
11 AS 09.55.580(a) provides:
When the death of a person is caused by
the wrongful act or omission of another, the
personal representatives of the former may
maintain an action therefor against the
latter, if the former might have maintained
an action, had the person lived, against the
latter for an injury done by the same act or
omission. The action shall be commenced
within two years after the death, and the
damages therein shall be the damages the
court or jury may consider fair and just.
The amount recovered, if any, shall be
exclusively for the benefit of the decedent's
spouse and children when the decedent is
survived by a spouse or children, or other
dependents. When the decedent is survived by
no spouse or children or other dependents,
the amount recovered shall be administered as
other personal property of the decedent but
shall be limited to pecuniary loss. When the
plaintiff prevails, the trial court shall
determine the allowable costs and expenses of
the action and may, in its discretion,
require notice and hearing thereon. The
amount recovered shall be distributed only
after payment of all costs and expenses of
suit and debts and expenses of
administration.
12 In cases in which the issue of paternity is in doubt,
the decedent's parents and the minor claiming to be the
decedent's child might well reach a compromise which would fairly
and reasonably give the parents a significant or even predominant
portion of the estate proceeds. In appropriate circumstances, a
court might approve such a compromise after first determining
that it is fair and reasonable.
13 The blood test results potentially created a
presumption of paternity that could have been rebutted only by
clear and convincing evidence. See AS 25.20.050(d) ("The results
of a blood test . . . shall be admitted and weighed in
conjunction with other evidence in determining the statistical
probability that the putative parent is a legal parent of the
child in question. However, a scientifically accepted procedure
that establishes a probability of parentage at 95% or higher
creates a presumption of parentage that may be rebutted only by
clear and convincing evidence"); see also Smith v. Smith, 845
P.2d 1090, 1092 (Alaska 1993) (attaching presumption of paternity
where blood test indicated 99.59% of likelihood that the husband
was the child's father). Neither the parties nor the court
discussed AS 25.20.050(d) or the clear and convincing standard of
proof in the 1990 stipulation or hearing. At the hearing, the
court did not discuss whether the test results (based on blood
samples from Catrina and Carter and Brandon, rather than Catrina
and Eric) satisfied the statute and gave rise to the presumption.
14 Although in 1992 the court seemed to consider this
element of the 1990 agreement to be valuable consideration to
Catrina, we note that it imposes a unilateral obligation on
Catrina's mother and imposes no express duty on Carter and
Brandon.
In assessing this settlement term, a trial court might
consider whether love and affection can be negotiated and
purchased, or whether, assuming Carter and Brandon were genuinely
able to provide love and affection to Catrina, the consideration
to be given by Catrina was equitable.
15 On appeal, Hedland asserts that the 1990 proposed
agreement was presented to court for its review and approval
"pursuant to Civil Rule 90.2." That assertion is incorrect, and
is also contrary to the position Hedland took at the 1990
hearing. At that hearing, Hedland advised the court that he did
not believe a minor settlement procedure was necessary for the
agreement then proposed to Judge Cranston, although the attorneys
and the court all contemplated that any future settlement of the
minor's claims would be subject to a Rule 90.2 approval. Hedland
also stated that the "substance of this agreement wouldn't be
open for consideration"at any subsequent proceeding.
16 Several attorneys submitted affidavits and memoranda in
1992 alleging some facts potentially bearing on paternity. See
note 4, supra. Those submissions provided only hearsay accounts
of the circumstances alleged and could not rebut the strong
evidence of paternity admitted at the September 4, 1990 hearing.
Given the inadmissibility of the submissions, they would not have
justified a conclusion in 1992 that Catrina's paternity was in
genuine dispute in 1990.
17 We recognize the dilemma faced by the parties to the
paternity action in September 1990. If Catrina's paternity
remained unestablished, the damages potentially recoverable in
the wrongful death action would have been relatively modest, and
almost certainly within the insurance limits. Finding that Eric
was Catrina's father would maximize the claim against Ryan Air,
but would be inconsistent with a recovery by Carter and Brandon.
The parties attempted to resolve this dilemma on September 4,
1990, and under the circumstances, the fairness of that agreement
must be considered in light of the information then available.
The record suggests that the evidence of paternity was
overwhelming in 1990. Although Carter and Brandon may have made
a tactical choice to offer no contrary evidence at the paternity
hearing, the 1992 allocation disputes provided the parents ample
opportunity to memorialize any evidence of non-paternity to
support a conclusion it was fair to give Carter and Brandon a
share of the proceeds. Significantly, the record contains no
admissible evidence that would provide any substantial rebuttal
to the strong evidence of paternity. See notes 4, 16.
18 For example, if the court concludes Carter and Brandon
had a legitimate 20% chance of defeating Catrina's paternity
claim, and the probable recovery for the estate was $800,000 in
the absence of any statutory beneficiary such as Catrina, the
total value of the parents' contingent claim would be $160,000.
Because a larger recovery from Ryan Air would necessarily require
evidence of a statutory beneficiary (i.e., proof of Catrina's
paternity), and because that evidence would also render Carter
and Brandon ineligible to share in the proceeds calculated on an
assumption Catrina was Eric's heir, the parents would not be
entitled to any contingent part of the larger recovery.
This type of calculation will assist the court in
determining whether the parents received more than they should
have for their contingent claim. Note that Ryan Air's highest
offer was $612,000 as of September 4, 1990, and that Carter and
Brandon had indicated a willingness to settle for $820,000 at a
time when paternity had not yet been resolved by settlement or
court order. The court on remand may have to calculate the
probable value of the wrongful death claim if prosecuted for the
sole benefit of the parents.
19 In Garrick v. Weaver, 888 F.2d 687 (10th Cir. 1989),
Roberta Garrick was driving one of the automobiles involved in a
collision. Littlepage, a passenger in Garrick's car, was killed.
The attorney represented Garrick and her two minor children as
well as the estate of Littlepage in their suit against the other
driver. There was a conflict between the interests of the
Garricks and the Littlepage estate because Garrick was
potentially liable to the estate. The attorney informed Garrick
and the representatives of the estate of the conflict of
interest, but inadequately outlined to Garrick the ramifications
of the conflict. Following recovery of damages, the magistrate
did not altogether deny fees to the attorney, but based the fees
on the value of the services rather than on the contingent fee
contract. On appeal, the Tenth Circuit held that it could not
say the magistrate abused his discretion in so ruling. Id. at
691.
20 The parties have frequently remarked on the excellent
result the attorneys achieved for the estate. Judge Link
properly recognized the "magnificent" legal efforts which
maximized the estate's recovery, especially considering the
modest insurance limits and Ryan Air's financial condition. The
estate's success may be measured by comparing its $4.25 million
net recovery with the amount allegedly recovered by the estate of
another passenger with two dependent surviving children:
$900,000. Nonetheless, the quality and success of that
representation cannot justify affirmance of awards that have not
been given the scrutiny required by Rule 90.2 and that may have
treated Catrina unfairly and unreasonably.
21 Threatening to withdraw from a wrongful death case
shortly before trial would potentially violate DR 2-110(A)(2).
Such a violation could have a bearing on attorney's fees. DR 2-
110(A)(2) provides:
(A) In general.
. . . .
(2) In any event, a lawyer shall
not withdraw from employment until he [or
she] has taken reasonable steps to avoid
foreseeable prejudice to the rights of his
[or her] client, including giving due notice
to his client, allowing time for employment
of other counsel, delivering to the client
all papers or property to which the client is
entitled, and complying with applicable laws
and rules.
22 A court could conclude that there was no reason in this
case for an additional incentive beyond the base contingent rate,
because the attorneys would not need the incentive of an
incremental increase in the contingency rate to pursue a recovery
exceeding the insurance limits. (Although Catrina's mother
agreed to pay Hell‚n and Cowan a 40% contingent fee for services
through trial, the estate agreed to pay Hedland and Kashi a 30%
contingent fee.) A court could conclude that the typical one-
third contingent fee arrangement provides ample incentive to
motivate diligent and skilled attorneys to maximize their
clients' recoveries.
23 On remand, the court could choose to apply the "common
fund doctrine"to calculate the attorney's fees to be paid by the
recipients of the settlement proceeds. Vincent v. Hughes Air W.,
Inc., 557 F.2d 759, 769-70 (9th Cir. 1977).
The common fund doctrine provides that a
private plaintiff, or his [or her] attorney,
whose efforts create, discover, increase or
preserve a fund to which others also have a
claim is entitled to recover from the fund
the costs of [] litigation, including
attorney's fees.
. . . .
[T]he doctrine is designed to spread
litigation costs proportionately among all
the beneficiaries so that the active
beneficiary does not bear the entire burden
alone and the "stranger"beneficiaries do not
receive their benefits at no cost to
themselves.
Id. at 769.
24 The only element of the September 4, 1990 settlement
that does not require judicial review is the establishment of
paternity. Resolving that dispute in favor of paternity did not
disadvantage the child; the parents, as adults, are properly
foreclosed from raising that issue. The proper course on remand
will give them the consideration to which they are entitled for
conceding the paternity issue. Assuming the court does not find
they are barred by their failure to offer admissible evidence in
1992, they may offer evidence of non-paternity on remand, not to
set aside the 1990 paternity finding, but to satisfy Rule 90.2 by
demonstrating the value of the claim they relinquished.
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Note: For later proceedings in this case, see Order Approving Settlement.
