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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Froines v. Valdez Fisheries Development Association, Inc. (01/18/2008) sp-6223
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, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| CHRIS FROINES, | ) |
| ) Supreme Court No. S- 12137 | |
| Appellant, | ) |
| ) Superior Court No. 3VA-00-00080 CI | |
| v. | ) |
| ) O P I N I O N | |
| VALDEZ FISHERIES | ) |
| DEVELOPMENT ASSOCIATION, | ) No. 6223 January 18, 2008 |
| INC., | ) |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Valdez,
Joel H. Bolger, Judge.
Appearances: Jeffrey J. Jarvi, Law Office of
Michael Stehle, P.C., Anchorage, for
Appellant. Stephen McAlpine, Law Offices of
Stephen McAlpine, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
FABE, Chief Justice.
EASTAUGH, Justice, dissenting.
I. INTRODUCTION
Chris Froines appeals the superior courts order
limiting his award of Alaska Civil Rule 68 attorneys fees to
$10,000. Because the factors relied upon by the superior court
do not justify this limit, we reverse.
II. FACTS AND PROCEEDINGS
This appeal represents the second time that this case
has come before us.1
We recount here only those facts and proceedings necessary to
understand and resolve the current dispute.
In 2000 Chris Froines, a commercial fisherman, filed
suit against Valdez Fisheries Development Association (VFDA) for
breach of contract. In 2001 the superior court granted summary
judgment against Froines. Froines appealed and we reversed,
holding that genuine issues of fact precluded summary judgment.2
On remand, Froines made an offer of judgment to VFDA in
the amount of $15,000.00 inclusive of all costs, interest and
attorneys fees. VFDA rejected the offer and the case proceeded
to trial.
Following a five-day trial in Valdez in August 2005,
the jury awarded Froines $10,000. Taking into account
prejudgment interest, fees, and costs, this award exceeded
Froiness $15,000 offer of judgment by at least five percent.
Consequently, in September, Froines filed a motion pursuant to
Rule 68(b)(2)3 for fifty percent of his reasonable and actual
attorneys fees incurred from the date of his offer of judgment
through the end of proceedings in the trial court. In support of
this motion, Froines filed itemized time sheets detailing the
work performed and services provided by his counsel. At the time
of this filing, Froines calculated his attorneys fees award under
Rule 68(b)(2) to be $37,197.25. This total represented half of
his attorneys regular hourly rates multiplied by the number of
hours they worked.
VFDA opposed Froiness motion and argued that Froines
was generally not entitled to an award based upon his attorneys
hourly rates or hours worked because his attorneys had actually
worked on a contingent fee basis. It further argued that the
requested award was neither actual nor reasonable.
Froines responded about a week later, arguing that
contingent fee arrangements have no effect on awards of attorneys
fees under Rule 68 and that the requested award was reasonable.
Froines also increased the amount he was seeking to $39,676.25 as
a result of the additional time his lawyers had worked on the
case since he had originally moved for attorneys fees.
On October 14, 2005, the superior court entered an
order granting Rule 68 attorneys fees. Analogizing to our case
law regarding Rule 82, the superior court reasoned that awards of
attorneys fees under Rule 68 must be based upon the reasonable
value of the attorneys services, not what the client actually
pays.4 Nonetheless, the superior court then went on to award
Froines only $10,000 in attorneys fees because a full reasonable
fee should not have exceeded $20,000. Although the superior
court did not detail exactly how it arrived at this number, it
noted several factors from Rule 1.5 of the Rules of Professional
Conduct, including the lack of novelty of the issues, the
moderate time and labor that should have been required, the
modest probable recovery, the minimal verdict, the lack of any
serious time limitations and the contingent nature of the fee.
Froines now appeals.
III. STANDARD OF REVIEW
We review a trial courts fact-based determinations
regarding whether attorneys fees are reasonable for an abuse of
discretion.5 However, the proper interpretation of Alaska Civil
Rule 68 is a question of law that we review de novo.6
IV. DISCUSSION
On appeal, Froines claims that the superior courts
order limiting Froiness reasonable attorneys fees was
unjustified. In assessing the reasonable value of the services
provided by Froiness attorneys, the superior court looked to Rule
1.5 of the Rules of Professional Conduct, which lists a number of
factors relevant to determining the reasonableness of an
attorneys fee. According to the superior court, [t]he most
important [Rule 1.5] factors in this case include the lack of
novelty of the issues, the moderate time and labor that should
have been required, the modest probable recovery, the minimal
verdict, the lack of any serious time limitations and the
contingent nature of the fee. On the basis of these factors, the
superior court concluded that a full reasonable fee in this case
should not have exceeded $20,000. It therefore awarded Froines
only $10,000 in attorneys fees.
On appeal, Froines characterizes the superior courts
award as arbitrary and insists that he should have been awarded
the full $39,676.25 the amount produced by multiplying his
attorneys regular hourly rates with the amount of hours they
worked. VFDA disagrees and maintains that the superior court
properly relied on Rule 1.5 to limit the award to a reasonable
amount.
Although we have previously relied upon Rule 1.5
factors to limit awards of Rule 82 attorneys fees,7 several of
these factors lose their probative value in the context of Rule
68 attorneys fees. Unlike Rule 82, the purpose of Rule 68 is not
merely to partially compensate a prevailing party8 for its
reasonable expenses; rather, the purpose of Rule 68 is to
encourage pretrial settlement so as to save both the litigants
and the state from the time and expense of a trial.9 It works
towards this purpose by subjecting litigants who reject pretrial
offers of judgment to the risk of paying a percentage of their
opponents attorneys fees. As we have previously explained:
Offers of judgment force both the offeror and
the offeree to evaluate the risks and costs
of litigation, and to balance them against
the likelihood of success upon trial on the
merits. The penalties of Rule 68 raise the
cost of litigation in the offerees risk-
benefit analysis, thus making settlement more
attractive.[10]
In the context of Rule 82, three of the Rule 1.5
factors noted by the superior court a lack of novel issues of
law, a modest probable recovery, and a minimal verdict are
probative only as to whether the prevailing party litigated its
claim in an unreasonable manner, dedicating excessive time and
money to a relatively simple or minor case. When considered in
the context of Rule 82, these factors weigh in favor of reducing
an award of attorneys fees. In the context of Rule 68, however,
these factors cut both ways; although still probative as to
whether the prevailing party litigated its claim unreasonably,
these factors also tend to demonstrate that the case was
particularly amenable to an offer of judgment. That a case
involved no novel issues of law suggests that the parties should
have been able to reasonably assess the merits of their claims
and arrive at a settlement. That a case involved only a modest
probable recovery suggests that the parties should have had the
incentive to avoid the costs of trial. And that a case
ultimately concluded with a minimal verdict only slightly higher
than the prevailing partys offer of judgment suggests that the
prevailing party made a reasonable offer that should have been
accepted. Stated more simply, the fact that a case was
relatively simple, involved relatively modest sums of money, and
resulted in a relatively minor verdict is just as likely to be
evidence of the losing partys unreasonableness in rejecting an
offer of judgment as it is to be evidence of the prevailing
partys unreasonableness in dedicating substantial resources to
the case. Given that these three factors cut both ways in the
context of Rule 68, the mere existence of these factors is not
sufficient to limit a Rule 68 award and cannot, standing alone,
justify such a limited award.
We turn now to consider whether any of the other
factors cited by the superior court can justify limiting Froiness
attorneys fees. In addition to the three factors already
discussed, the superior court also cited the lack of any serious
time limitations, the contingent nature of Froiness fees, and the
moderate amount of time and labor that the case should have
required as factors militating in favor of limiting Froiness
award. However, the lack of time limitations and the contingent
nature of the attorneys fees have little relation to the
reasonableness of Froiness attorneys fees. And although the
moderate amount of time and labor required to litigate this case
certainly is relevant to the reasonableness of Froiness attorneys
fees, we are unable to determine if the superior court would have
limited Froiness award so severely on this basis alone.
Consequently, we remand this case to the superior court for
recalculation of reasonable attorneys fees in light of this
opinion.11
V. CONCLUSION
For the reasons detailed above, we REVERSE the superior
courts award of attorneys fees and REMAND for a recalculation in
accordance with this decision.
EASTAUGH, Justice, dissenting.
Todays opinion erroneously prevents trial courts
evaluating the reasonableness of a prevailing partys attorneys
fees under Alaska Civil Rule 68 from considering the most
relevant evidence. It consequently remands for a determination
that cannot rationally be made without considering the now-
precluded factors. It does so after confusing the two separate
determinations the prevailing party determination and the
reasonableness determination that Rule 68 requires of trial
courts. Because the superior court committed no legal error and
did not abuse its discretion in awarding attorneys fees to the
appellant, I would affirm its award. I therefore respectfully
dissent.
The first question is whether the superior court
committed any legal error in choosing to consider factors listed
in Alaska Rule of Professional Conduct 1.5. Conduct Rule 1.5(a)
states that a lawyers fee shall be reasonable. It sets out eight
non-exclusive factors to be considered in determining the
reasonableness of a fee:
(1) the time and labor required, the
novelty and difficulty of the questions
involved, and the skill requisite to perform
the legal service properly;
(2) the likelihood that the acceptance
of the particular employment will preclude
other employment by the lawyer;
(3) the fee customarily charged in the
locality for similar legal services;
(4) the amount involved and the results
obtained;
(5) the time limitations imposed by the
client or by the circumstances;
(6) the nature and length of the
professional relationship with the client;
(7) the experience, reputation, and
ability of the lawyer or lawyers performing
the services; and
(8) whether the fee is fixed or
contingent.
The superior court, in looking to the pertinent factors listed in
that rule, did so in reliance on what we said in Gamble v.
Northstore Partnership,1 and cited Gamble in support. We
explained in that case, in holding that full reasonable fees for
an earlier appeal should not have exceeded $18,000, that we were
considering the various components determining a reasonable fee
expressed in Rule 1.5 of the Rules of Professional Conduct, most
importantly the lack of novelty of the issues, the nature of the
controversy, the result obtained, and the time and labor that
should have been required.2
The superior court here paraphrased the considerations
we said were relevant in Gamble and added these considerations:
the modest probable recovery, the minimal verdict, the lack of
any serious time limitations, and the contingent nature of the
fee. All of these factors originated in Rule 1.5. The superior
court therefore followed the methodology that we have approved in
a comparable context in which the same issue was before the
court: the reasonableness of incurred attorneys fees.
Todays opinion, however, contends that awards under
Civil Rule 68 raise different questions than awards under Civil
Rule 82. It therefore implicitly distinguishes Gamble, which
involved a Rule 82 award rather than a Rule 68 award.3 Todays
opinion does so on the theory that the purpose of Rule 68, unlike
that of Rule 82, is not merely to partially compensate the
prevailing party, but to encourage pretrial settlement.4 It
reasons that three of the Rule 1.5 factors relied on by the
superior court lack of novel issues of law, modest probable
recovery, and minimal verdict cut both ways.5 It thinks these
three factors could suggest not only that the incurred fees might
not have been reasonable, but also that the offeree acted
unreasonably in rejecting an offer of judgment that proved to be
successful.6 It therefore seems to conclude that these three
factors do not apply under Rule 68; it holds that the superior
court reversibly erred by relying on them.7
Before discussing the logical error, I want to discuss
its consequences. Most significantly, it forecloses
consideration of the three factors when trial courts are
determining the reasonableness of the prevailing partys attorneys
fees. Certainly these three factors are relevant to the
reasonableness determination. Even as it holds that relying on
them was error, the courts opinion acknowledges that they are
relevant to the issue of reasonableness. Thus, the opinion
states that these factors are still probative as to whether the
prevailing party litigated its claim unreasonably.8 But these
three factors are more than merely relevant; they are highly
relevant. What could be more germane to the reasonableness of
incurred fees than whether the dispute turned on established
legal principles, would probably produce only a modest recovery,
and indeed produced only a minimal recovery? That these factors
are always highly relevant is confirmed by considering what
happens as the issues become less obvious, the probable recovery
becomes less modest, and the actual recovery increases. At what
point on the sliding scale would this court again permit trial
courts to consider these three factors? There is no rationally
identifiable point, yet it is undeniable that the factors are
highly, or even uniquely, relevant.
The courts rationale for precluding consideration of
the three factors is not that they are irrelevant, but that they
are too relevant, i.e., that they are relevant not just to the
reasonableness of the incurred fees, but also to the
unreasonableness of the offeree in failing to accept the
successful offer of judgment.9
The court assumes the inferences cancel out. But to
the extent these three factors permit inferences on these two
different issues, the inferences are much stronger on the topic
of fee reasonableness than on the topic of offeree
unreasonableness. Therefore, the detriment to the truth-finding
process resulting from the inability to consider these factors
when determining fee reasonableness far outweighs any possible
benefit that might result from preventing unreasonable offerees
from inappropriately limiting fee awards.
In my view, the factors listed in Rule 1.5(a) are all
potentially relevant, even when Rule 68 is involved. The
reasonable-fee determination is inescapably fact specific. The
trial court is invariably in the best position to determine
globally the maximum fee that would have been reasonable; the
factors help the court make that determination. Likewise, the
trial court is in the best position to decide the extent to which
the offerees litigation approach justified greater post-offer
efforts by the offeror. And certainly it is capable of
determining whether, for example, the lack of novelty of issues
demonstrates that the offeror engaged in undue litigation efforts
or demonstrates that the offeree was unreasonable. The superior
court here had ample opportunity to make that determination and
to draw its own assessment about the reasonableness of the fees
and effort given the amount at stake.10
Now we return briefly to the public policy underlying
the offer of judgment rule. The approach of the opinion today
confuses the policy of encouraging settlement (and discouraging
unreasonable litigation conduct) with the reasonable-fee
determination. The settlement-encouragement policy is fully
satisfied by the prevailing party determination. That
determination turns only on whether the offeree beat the offer, a
mathematical comparison that decides whether the offer exceeds
the final verdict. It does not turn on a subjective assessment
of whether the successful offer was reasonable and it does not
decide that the offeree was unreasonable.
Furthermore, that an offer of judgment is successful
can be a matter of happenstance. Similar cases can result in
dissimilar verdicts. The success of the offer should not
foreclose trial courts from using the appropriate tools to assess
the reasonableness of the offerors fees. That assessment can
best be achieved by looking to the factors the superior court
relied on here.
Finally, the court remands, apparently so the superior
court can recalculate reasonable attorneys fees by applying one
factor: the moderate amount of time and labor that the case
should have required.11 But it seems to me that in determining
what amount of time and labor the case should have required, the
superior court almost certainly should look at the three factors
which this court now says cannot be considered. How can a court
say what amount of time should have been required without looking
at the novelty of the issues, the (modest) probable recovery, and
the actual recovery?
_______________________________
1 Froines v. Valdez Fisheries Dev. Assn, Inc., 75 P.3d 83
(Alaska 2003).
2 Id. at 90.
3 Rule 68(b)(2) provides:
(b) If the judgment finally rendered by
the court is at least 5 percent less
favorable to the offeree than the offer, . .
. the offeree, whether the party making the
claim or defending against the claim, shall
pay all costs as allowed under the Civil
Rules and shall pay reasonable actual
attorneys fees incurred by the offeror from
the date the offer was made as follows:
. . . .
(2) if the offer was served more than
60 days after the date established in the
pretrial order for initial disclosures
required by Civil Rule 26 but more than 90
days before the trial began, the offeree
shall pay 50 percent of the offerors
reasonable actual attorneys fees . . . .
4 United Servs. Auto. Assn v. Pruitt, 38 P.3d 528, 534
(Alaska 2001). We note that neither Froines nor VFDA appears to
dispute this conclusion on appeal.
5 Marron v. Stromstad, 123 P.3d 992, 998 (Alaska 2005).
6 Cook Schuhmann & Groseclose, Inc. v. Brown & Root,
Inc., 116 P.3d 592, 597 (Alaska 2005).
7 Gamble v. Northstore P-ship, 28 P.3d 286, 293 (Alaska
2001).
8 State v. Native Village of Nunapitchuk, 156 P.3d 389,
398 (Alaska 2007) (Rule 82s primary purpose is to partially
compensate a prevailing party.).
9 Mapco Exp., Inc v. Faulk, 24 P.3d 531, 542-43 (Alaska
2001).
10 Mackie v. Chizmar, 965 P.2d 1202, 1205 (Alaska 1998)
(internal quotations and citations omitted).
11 Because we remand this case, we need not address
Froiness argument that his attorneys fees are reasonable. But we
do note that just a trial lasting five full trial days, with an
equal number of days for final trial preparation, could exceed
100 hours per attorney. It is difficult to reconcile the fact of
a week-long trial with the trial courts conclusion that a full
reasonable fee should not have exceeded $20,000.
1 Gamble v. Northstore Pship, 28 P.3d 286, 293 (Alaska
2001).
2 Id.
3 Slip Op. at 5.
4 Id.
5 Slip Op. at 6.
6 Id.
7 Although it does not expressly say so, the courts
opinion apparently considers the three factors irrelevant for
Rule 68 purposes, and, again without expressly saying so,
apparently intends the superior court on remand to conduct its
recalculation without regard to these three factors. Slip Op. at
6-7.
The opinion also finds the contingent nature of the fee
irrelevant. That factor is probably relevant because it implies
the client has no practical interest in limiting or monitoring
the hours the attorney is spending.
8 Slip Op. at 6.
9 Id.
10 Although the court reverses on the basis of what it
characterizes as a legal error, it is hard to avoid thinking that
the courts real objection is dissatisfaction with the trial
courts finding that the reasonable fee should not have exceeded
$20,000. Slip Op. at 7 n.11. Thus, this court thinks it is
difficult to reconcile the week-long trial with the trial courts
$20,000 finding. Id. Of course, the trial court may well have
concluded that a week-long trial was unjustified, and that
Froines was responsible for prolonging it. We owe deference to
trial courts making such determinations. Nothing here makes it
difficult to reconcile the trial length with the $20,000 finding.
11 Slip Op. at 7.
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