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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Valdez Fisheries Development Association, Inc. v. Froines (10/16/2009) sp-6424

Valdez Fisheries Development Association, Inc. v. Froines (10/16/2009) sp-6424, 217 P3d 830

     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

VALDEZ FISHERIES DEVELOPMENT )
ASSOCIATION, INC., )
) Supreme Court No. S- 13228
Appellant,)
) Superior Court No. 3VA-00- 080 CI
v. )
) O P I N I O N
CHRIS FROINES, )
) No. 6424 - October 16, 2009
Appellee.)
)
          Appeal  from the Superior Court of the  State
          of  Alaska, Third Judicial District,  Valdez,
          Joel H. Bolger, Judge.

          Appearances: Stephen McAlpine, Law Offices of
          Stephen  McAlpine, Anchorage, for  Appellant.
          Jeffrey J. Jarvi, Michael T. Stehle, Stehle &
          Jarvi, L.L.C., Anchorage, for Appellee.

          Before:    Fabe,  Chief  Justice,   Eastaugh,
          Carpeneti, Winfree, and Christen, Justices.

          CHRISTEN, Justice.
          EASTAUGH, Justice, concurring.

I.   INTRODUCTION
          Valdez Fisheries Development Association, Inc., appeals
an  award  of  attorneys  fees.  It argues  that  the  fee  award
misinterprets this courts earlier opinion reversing and remanding
the original award of attorneys fees in this case.  We agree, and
remand for recalculation of the fee award.
II.  FACTS AND PROCEEDINGS
          In  May  2000  Chris Froines filed suit against  Valdez
Fisheries, seeking damages for breach of contract.1  On  December
15,  2003, Froines made an Alaska Civil Rule 68 offer of judgment
to  settle the dispute if Valdez Fisheries would pay him $15,000.
          Valdez Fisheries refused the offer.2  After a five-day trial, the
jury entered a verdict in Froiness favor, awarding him $10,000 in
damages.3
          Froines  moved  for attorneys fees under  Alaska  Civil
Rule  68(b)(2).4   The motion was supported by an  affidavit  and
billing  records  showing the number of hours Froiness  attorneys
worked and their hourly rates.  The affidavit calculated that the
total  amount of attorneys fees incurred on Froiness  behalf  was
$74,394.50.   Because  of the date of the offer,  Civil  Rule  68
authorized  an  award  of  fifty percent of  Froiness  reasonable
actual  attorneys fees.5  The motion requested an award of  fifty
percent  of the total fees.  Noting that he had incurred fees  of
$74,394.50, Froines sought an award of $37,197.25.  The  superior
court  agreed  that  Froiness jury verdict  entitled  him  to  an
attorneys  fee  award  in  the amount of  fifty  percent  of  his
reasonable actual attorneys fees.  But the superior court  looked
in  part  to the factors of Alaska Professional Conduct Rule  1.5
and  determined  that  reasonable actual  fees  should  not  have
exceeded  $20,000.6  The  superior  court  thus  awarded  Froines
$10,000 in attorneys fees.7
          Froines  appealed, and we reversed.8  Our  decision  in
Froines  II  explained  that  the  fee  award  might  have   been
improperly  based  on  certain  factors  listed  in  Professional
Conduct  Rule  1.5 that were inapplicable or that cut  both  ways
under  the  facts  of this case.9  We remanded for  recalculation
because  we  could not say with certainty that the attorneys  fee
award  would  have been the same had the factors been  considered
properly.10
          On  remand, the superior court interpreted our  opinion
to  require  that reasonable actual attorneys fees be equated  to
the amount of time that an attorney honestly chooses to spend  on
the case.  The superior court articulated that its interpretation
of  Froines II precluded it from exercising its discretion:   [a]
subjective [evaluation] . . . requires this court to approve  the
amount  of  time  actually worked.  The  superior  court  awarded
$42,090.50  in  Rule 68(b)(2) attorneys fees to Froines,  exactly
the  amount  Froiness attorneys sought.11  It  appears  that  the
reasonableness  of  Froiness  attorneys  hourly  rates  was   not
disputed.
          Valdez  Fisheries  appeals, arguing that  the  superior
court  misinterpreted  Froines II  and  that  the  new  award  of
attorneys  fees should be reversed because it includes  fees  for
work that did not advance the litigation.  We reverse and remand.
III. STANDARD OF REVIEW
          We  review  a  trial  courts fact-based  determinations
regarding whether attorneys fees are reasonable for an  abuse  of
discretion.12  We review a trial courts interpretation of  Alaska
Civil Rule 68 . . . de novo.13
IV.  DISCUSSION
     A.   Awards of Attorneys Fees Under Alaska Civil Rule 68
          Trial  courts  have  broad  discretion  in  calculating
awards  of attorneys fees, but that discretion is constrained  by
the court rules that authorize such awards.14  Here,
  fees  were  awarded  under  Rule 68,  which  authorizes  awards
calculated  as  a  percentage  of  a  partys  reasonable   actual
attorneys  fees.15   The  purpose of the  rule  is  to  encourage
settlement and efficient litigation practices.16
          In making an award of attorneys fees under Rule 68, the
trial  courts  primary  task  is  to  determine  the  amount   of
reasonable actual attorneys fees.  The trial court must  exercise
its   discretion  to  determine  whether  the  fees  claimed  are
objectively  reasonable.   There is no  exhaustive  list  of  the
factors  a court may or should consider in this process.   Courts
often  approach  the question by determining whether  the  hourly
rate  charged  was  reasonable and whether the  number  of  hours
worked   was   reasonable.17   This  approach   is   particularly
appropriate  where  the  party  against  whom  fees  are  awarded
requests  an  itemized billing affidavit and objects to  specific
items  in  the  bill  as unnecessary, duplicative,  or  otherwise
unreasonable.   In  such  a  case, the  itemized  billing  record
provides  a starting point because it establishes what fees  were
actually  incurred.18   The  superior  courts  task  is  then  to
determine whether the hourly rate is reasonable, and how many  of
the hours of work billed were reasonably incurred.
          In  this  case,  Froiness attorneys filed  an  itemized
billing  record.  Valdez Fisheries argues here, as it did  before
the  superior  court, that certain activities Froiness  attorneys
engaged in and certain strategies they pursued were unreasonable.
For  example, Valdez Fisheries argues that Froines seeks  payment
for  two  attorneys  presence  at  trial,  when  one  would  have
sufficed.  It also argued that Froiness attorneys billed far more
hours  for  preparing  and conducting the  trial  than  the  case
required.   And  Valdez Fisheries argued that Froiness  attorneys
filed  motions seeking redetermination of legal questions already
resolved  in  the case, and spent time drafting jury instructions
for  claims not raised in the complaint.  Each of these arguments
is  an allegation that certain amounts of time billed by Froiness
attorneys did not reasonably advance the litigation.  It  is  the
task  of the superior court to evaluate these claims, and  claims
like  them,  to  determine whether the hours  Froiness  attorneys
billed were reasonable.  Hours billed for activities that are not
reasonably  intended to advance the litigation, or  hours  billed
for  completing  a  task  in excess of those  that  ought  to  be
required to complete it, are not reasonably incurred.
          The   trial  court  has  discretion  to  resolve   such
questions and determine the amount of reasonable actual attorneys
fees  because  it  has knowledge of the case that  the  reviewing
court  lacks.   The trial courts greater knowledge  of  the  case
makes  it  uniquely  suited  to answer these  questions  quickly,
accurately, and fairly.  The purpose of conferring discretion  on
the trial court to determine reasonable actual attorneys fees  is
to  allow  it to use its greater familiarity with the details  of
the case to perform an objective inquiry into these questions and
their like.
     B.   The Superior Courts Decisions
          We  reversed  the superior courts first award  of  fees
because  of  concerns that the trial court improperly  relied  on
          factors listed in Professional Conduct Rule 1.5.19
We  have never adopted Professional Conduct Rule 1.5 as the  test
for  calculating attorneys fee awards.  In one case  involving  a
contractual  provision for reasonable attorney fees,  this  court
noted  that  several factors listed in Professional Conduct  Rule
1.5   were  helpful  in  its  inquiry.20   But  the  purpose   of
Professional  Conduct Rule 1.5, and its near-identical  parallel,
Alaska  Bar  Rule  35,  is  to aid attorneys  in  determining  an
appropriate  rate  to charge their clients.  When  these  factors
have  a place in a courts calculation of reasonable actual  fees,
it  is most likely in determining whether the hourly rate charged
is reasonable.
          In  this  case,  the hourly rates charged  by  Froiness
attorneys  were  not  disputed.   Because  some  factors  in  the
reasonable  rate inquiry overlap with factors in  the  reasonable
hours  inquiry, Froines II addressed the particular factors  from
Professional  Conduct Rule 1.5 relied on by the  superior  court.
We  explained  that some were inapplicable to the facts  of  this
case,  such as the contingent nature of the fee,21 and that other
factors  may require different treatment in the context  of  this
case.22   And  we  explained  that factors  suggesting  that  the
prevailing  party litigated its claim in an unreasonable  manner,
may  need to be treated differently in the context of Civil  Rule
68,  if  their  weight stems from the premise that the  case  was
particularly amenable to an offer of judgment.23  The  extent  to
which a trial court believes that a case should have settled must
be  considered in light of the fact that the very application  of
Rule  68,  and  the  enhanced fees available  under  it,  already
penalizes  the non-settling party.  By definition, Rule  68  fees
are awarded only after an offer of judgment is rejected, and some
degree  of  continued litigation becomes necessary  in  order  to
resolve  the dispute   despite the offerors  attempt  to  resolve
the  case.   This is why, in the context of Rule  68,  the  trial
courts  opinion that a case should have settled is  not  a  valid
basis for reducing a fee award to the prevailing party.  But this
does  not  mean  that the party that issues a Rule 68  settlement
offer that is rejected has free reign to incur unnecessarily high
fees.   After  designating a prevailing party, the  trial  courts
assessment of fees  under Civil Rule 82 or Civil Rule 68   begins
with  the  prevailing partys actual fees, but  it  does  not  end
there.  The  reasonableness of the actual number of hours billed,
and  the  rate  charged  for  the services,  must  be  separately
evaluated by the court.
          In  Froines II, we could not tell whether the  superior
courts  initial fee award was influenced by a determination  that
Froiness dispute with Valdez Fisheries should have been settled.24
We suggested that, on remand, the superior court should determine
the amount of reasonable actual attorneys fees by considering the
remaining factor cited in its first award: the moderate amount of
time and labor that the case should have required.25
          The  superior courts order on remand expressed  concern
that  its  objective evaluation of the time required to  litigate
this  case  would be considerably colored by the  maximum  likely
recovery, the actual recovery, and the contingent nature  of  the
          fee arrangement.  The trial court concluded that our opinion in
Froines II forbid it from considering these objective factors  to
determine whether the plaintiffs fees are required.   But in  the
same  order,  the  superior  court  demonstrated  that  it  could
evaluate  the reasonableness of the hours billed  by  determining
whether they were required to litigate the claim   independent of
the  possibly  improper factors it claimed colored its  thoughts.
The  superior court stated that Froiness attorneys spent enormous
chunks of time on motions that were patently without merit and on
drafting   jury   instructions  for  claims  that   Froines   was
procedurally barred from pursuing.  The reasonableness of  filing
a  meritless motion or drafting unnecessary jury instructions  is
unrelated  to the nature of the fee agreement between the  lawyer
and  the client, and unrelated to the probable or actual recovery
on  the  claim.   Similarly,  the reasonableness  of  having  two
attorneys  present at trial, or of spending five  days  in  trial
rather  than three, are questions unrelated to the nature of  the
fee agreement between the lawyer and the client and only somewhat
related  to the probable or actual recovery on the claim.   These
questions  depend  much more directly and  substantively  on  the
number and complexity of the legal and factual issues in dispute.
          The  superior courts order awarding attorneys  fees  to
Froines  explicitly states that the award is  not  based  on  the
superior  courts objective evaluation of the amount of reasonable
actual  attorneys fees.  The court read Froines II as  preventing
it  from  using  its discretion to make an objective  evaluation,
and  compelling it to accept the amount of time that an  attorney
honestly chooses to spend on the case.  This was error.  The task
of  determining  the amount of reasonable actual  attorneys  fees
requires  an  objective assessment.  The trial court is  uniquely
suited to make this judgment.
V.   CONCLUSION
          For the reasons stated above, we REVERSE and REMAND for
recalculation  of the award of attorneys fees in accordance  with
this decision.
          





EASTAUGH, Justice, concurring.
          I  agree  with the court that the fees dispute must  be
remanded  for  further proceedings.   But I write  separately  to
repeat  my view, expressed in my dissent when this case was  last
before us, concerning the evidence relevant in Alaska Civil  Rule
68  attorneys fees disputes.1  In my view, the court has unwisely
and  needlessly prevented trial courts from considering  some  of
the  most relevant evidence bearing on the reasonableness of  the
incurred attorneys fees when a party seeks a Rule 68 fees award.
          Because  this is the same case, my continued  adherence
to my dissent is not foreclosed by stare decisis.2
_______________________________
     1     Froines v. Valdez Fisheries Dev. Assn, Inc.,  (Froines
II) 175 P.3d 1234, 1235 (Alaska 2008).

     2    Id.

     3    Id.

     4     Rule  68 authorizes an award of attorneys fees to  the
prevailing party if the prevailing party has made a timely  offer
to  settle  that  the  losing party refused  to  accept  and  the
judgment  is at least five percent less favorable to the  offeree
than  the  offer.   See Alaska R. Civ. P. 68.   Even  though  the
damages the jury awarded Froines were less than the amount of his
settlement  offer, the parties do not dispute that Rule  68  fees
were appropriate because the sum of Froiness damages, costs,  and
prejudgment interest was at least five percent greater  than  the
amount of the settlement offer.  See Froines II, 175 P.3d at 1235-
36.

     5     See  Alaska  R. Civ. P. 68(b)(2) ([I]f 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.).

     6    Froines II, 175 P.3d at 1236.

     7    Id.

     8     We had previously reversed a grant of summary judgment
in  favor of Valdez Fisheries.   Froines v. Valdez Fisheries Dev.
Assn, Inc., (Froines I) 75 P.3d 83 (Alaska 2003).

     9    Froines II, 175 P.3d at 1237.

     10    Id.

     11     This  award  was greater than that Froines  initially
sought  because  it  included  hours  Froiness  attorneys  billed
between the initial request for fees and the decision on remand.

     12    Froines II, 175 P.3d at 1237 (citing Cook Schuhmann  &
Groseclose, Inc. v. Brown & Root, Inc., 116 P.3d 592, 597 (Alaska
2005)).

     13    Id. at 1236 (citing Marron v. Stromstad, 123 P.3d 992,
998 (Alaska 2005)).

     14    See United Servs. Auto. Assn v. Pruitt ex rel. Pruitt,
38  P.3d  528,  531  (Alaska 2001) (The  trial  court  has  broad
discretion in awarding attorneys fees . . . .).

     15    Alaska R. Civ. P. 68.

     16     See Cook Schuhmann, 116 P.3d at 598 (Rule 68 has  the
purpose   of  encouraging  settlements  and  avoiding  protracted
litigation. (citing Fernandes v. Portwine, 56 P.3d 1,  8  (Alaska
2002))).

     17    The factors listed in Alaska Civil Rule 82(b)(3) may be
helpful  in  assessing whether the number  of  hours  claimed  is
reasonable.  The factors listed in Alaska Bar Rule 35(a)  may  be
helpful to assess the reasonableness of counsels requested hourly
rate.

     18     Marron  v.  Stromstad, 123 P.3d 992, 1013-14  (Alaska
2005)  (holding that an attorneys fee award must be based  on  an
itemized billing record where the party paying the attorneys  fee
award requests itemization).

     19    Froines II, 175 P.3d at 1237-38.  In its second order,
the  superior court explained that its first award was also based
on  its  determination that it would not be  reasonable  for  any
party  to  expend attorney fees in excess of the  maximum  likely
recovery.  That assumption was incorrect.  We have never  adopted
such a bright-line rule.  Some cases involve important matters of
principle, or personal liberty, yet offer only a modest  monetary
recovery.  It may be reasonable for attorneys fees in such a case
to  exceed  the maximum likely recovery.  In cases in  which  the
representation is pro bono or under a contingency fee  agreement,
the  logic  of  the  assumption falls apart entirely,  as  it  is
impossible for the attorneys fees actually charged to the  client
to exceed the amount recovered.  Even where a matter of principle
is  not  at stake and the client pays his or her attorney by  the
hour,  the  superior courts determination of the  maximum  likely
recovery  should not become a hard upper limit on the  amount  of
reasonable  actual attorneys fees.  Cf. Magill v. Nelbro  Packing
Co.,  43  P.3d 140, 144-45 (Alaska 2001) (reviewing an  award  of
attorneys fees under Rule 68 and explaining that such an award is
not  improper solely because the amount of actual fees upon which
the  award  is  based  exceeds . . . the  amount  in  controversy
(citing  Joseph  v. Jones, 639 P.2d 1014, 1019  (Alaska  1982)));
Joseph, 639 P.2d at 1019 (affirming a Rule 82 attorneys fee award
of $8,000 to a party who had recovered only $5,000 in damages).

     20     Gamble v. Northstore Pship, 28 P.3d 286, 293  (Alaska
2001).

     21     Froines  II,  175 P.3d at 1237 (explaining  that  the
contingent  nature  of  the attorneys fee  agreement  has  little
relation   to   the  reasonableness  of  [the]   attorneys   fees
requested).    In  past  cases  addressing  the  calculation   of
reasonable  actual  attorneys fees, [w]e have rejected  arguments
that  . . . awards based on [the] attorneys time multiplied by  a
reasonable  hourly rate are impermissible because  the  attorneys
services  were free to the client or because the client  actually
paid  a  fee  different  from the fee as so  calculated.   United
Servs.  Auto.  Assn v. Pruitt ex rel. Pruitt, 38  P.3d  528,  534
(Alaska 2001) (describing Gregory v. Sauser, 574 P.2d 445 (Alaska
1978),  and Fairbanks Corr. Ctr. Inmates v. Williamson, 600  P.2d
743  (Alaska  1979)); see also City of Anchorage v. Gentile,  922
P.2d  248,  263  n.20  (Alaska 1996)  (explaining  that  where  a
prevailing  party was represented under an agreement  that  would
have resulted in the attorney being paid a lower than usual fee .
.  .  the proper approach [to calculating reasonable actual fees]
is to value the attorneys services).

     22    Froines II, 175 P.3d at 1237.

     23    Id.

     24    Froines II, 175 P.3d at 1237.

     25    Id.

     1     Froines v. Valdez Fisheries Dev. Assn, 175 P.3d  1234,
1238 (Alaska 2008) (Eastaugh, J., dissenting).

     2    Cf. Diggins v. Jackson, 164 P.3d 647, 649 (Alaska 2007)
(Matthews, J., concurring) (joining in the courts result  because
the court relied on a recently decided case that now stands as  a
decision of this court and as such . . . has precedential effect.
Todays  opinion is right in holding that it controls the  outcome
of  this case.  Based on the principle of stare decisis I join in
the  result  that  todays opinion reaches even  though  I  remain
convinced that [the recently decided case] was wrongly decided.).

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