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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

Froines v. Valdez Fisheries Development Association, Inc. (01/18/2008) sp-6223, 175 P3d 1234

     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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