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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Weiner v. Burr, Pease & Kurtz, P.C. (11/13/2009) sp-6433

Weiner v. Burr, Pease & Kurtz, P.C. (11/13/2009) sp-6433

     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
                                             
HOWARD WEINER and KATHERINE )
A. GARRISON, )
) Supreme Court No. S- 13214
Appellants,)
) Superior Court No. 3AN-07- 9860 CI
v. )
) O P I N I O N
BURR, PEASE & KURTZ, P.C., an )
Alaska Professional Corporation, ) No. 6433 - November 13, 2009
)
Appellee.)
)
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Jack Smith, Judge.

          Appearances: Charles E. Tulin, Anchorage, for
          Appellants.  Richard A. Helm, Bookman & Helm,
          LLP, Anchorage, for Appellee.

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

          CHRISTEN, Justice.

I.   INTRODUCTION
          I.   This appeal involves a dispute over the modification of
a   law  firms  contingent-fee  agreement.   The  main  questions
presented  are whether the modified contingent-fee  agreement  is
valid  and  whether  the court erred in construing  the  disputed
phrase  further substantial litigation  to mean more than just in-
court   proceedings  and  filings.   Because  the  modified   fee
agreement  is  valid  and the superior courts  interpretation  of
further  substantial litigation was not erroneous, we affirm  the
grant  of summary judgment for the law firm.  The issue of  costs
was  not  before  the  superior court; it  did  not  err  by  not
addressing  costs.  Finally, the courts Civil Rule 68  fee  award
was not an abuse of discretion.
II.  FACTS AND PROCEEDINGS

     A.   Facts
          
          In  September 2004 Howard Weiner and Katherine Garrison
(collectively  the clients) retained Burr, Pease  &  Kurtz,  P.C.
(BPK)  to  represent  them in a personal injury  lawsuit  against
Katmai Lodge, Ltd. and its owner Anthony Sarp.  The facts of  the
underlying lawsuit are undisputed: the clients sustained injuries
when  the  stairs  to  their respective  rooms  at  Katmai  Lodge
collapsed.   Per the legal services contract, the clients  agreed
to pay BPK 25% if a resolution of the claim is made before filing
a  complaint; 33% if a resolution of the claim is made after  the
filing  of a complaint; 40% if a resolution of the claim is  made
after the filing of an appeal.
          BPK  filed  the  complaint on  behalf  of  the  clients
against  Katmai  Lodge and Sarp in June 2005.   By  then,  Katmai
Lodge  had  filed  for  bankruptcy.  BPK sought  funds  from  the
bankruptcy  estate on behalf of the clients and hired counsel  in
Washington   to   represent  the  clients   in   the   bankruptcy
proceedings.  BPK treated this expense as a client cost.
          In  August 2005 BPK sent the clients a letter  advising
them  to  agree  to make a policy limits settlement  offer.   BPK
warned the clients that your expectations about the value of your
case  may not translate well to an Anchorage jury.  BPK estimated
that if the insurer agreed to settle for policy limits, the total
recovery  for  the  clients  would  be  $1,122,109.85,  including
prejudgment interest, costs (estimated at $3,222.35) and fees.
          The  clients responded that month by offering to  agree
to  settle their claims for policy limits, on the condition  that
the insurer pay within sixty days.  They also asked BPK to reduce
its  fees if this policy limits settlement occurred, stating  the
clients  were  proposing that [BPK] accepts a total  of  $250,000
legal fees plus any remaining unpaid costs.
          In  a  series  of written communications,  the  parties
negotiated  the clients request that BPK reduce  its  fees.   BPK
proposed   the  following  modifications  to  the  contingent-fee
agreement:
          After  consulting  with the  firms  executive
          committee  we  have agreed to your  proposal.
          We   will  try  to  obtain  a  policy  limits
          settlement of your claims.  Should we succeed
          without    requiring   further    substantial
          litigation  we  will be paid 1)  our  out-of-
          pocket costs and 2) $250,000.
          
          If  our efforts at an early settlement do not
          succeed  and it becomes necessary to litigate
          the  matter  in a substantive  way,  we  will
          revert  back  to  our  previous  written  fee
          agreement and the percentages written there.
          
          Two  days later the clients replied by e-mail that they
agree[d]  to  the  fees as outlined by BPK.  By  this  time,  the
clients  had  also  agreed to make the policy  limits  settlement
offer.  The parties did not reduce the modified fee agreement  to
one  comprehensive writing, define its terms,  or  establish  any
procedures for revert[ing] back to the original fee agreement.
          BPK  made  a policy limits demand on October 27,  2005.
Katmai  and  Sarp rejected it on May 10, 2006.  Both  before  and
after  the  settlement offer was rejected, BPK was preparing  for
trial,  scheduled for February 2007.  BPK also prepared  for  and
participated  in  a  December 2006 mediation.   In  November  and
December  2006 BPK again informed the clients of the  stages  and
risks  of  trial,  and the reasons for pursuing a  policy  limits
settlement.   BPK  listed  hypothetical recoveries  if  the  case
settled for policy limits, if it went to a jury trial, and if  it
was  appealed.   In  each  of these hypothetical  scenarios,  BPK
listed  what  the  distribution of the recovery  would  be  after
deducting fees and costs.  Each scenario reflected BPKs  fees  as
thirty-three  percent  of the recovery and estimated  its  costs,
including the Washington bankruptcy attorneys fees, as  being  at
least  $35,000.   For  instance, in a letter dated  November  17,
2006,  BPK  predicted that if the case settled for policy  limits
without going to trial, the distribution would be as follows:
          Gross Settlement or award:    $1,000,000
          Attorneys fee (33%)         $333,333
                                      $666,667
          Medical Liens (less 33% fee):      $55,666
          Costs advanced by BPK:             $35,000
          Net to clients:                  $576,001
          
BPK  calculated  its fees as being thirty-three  percent  of  the
total   recovery   five  times,  in  five  different   settlement
scenarios.  The clients did not raise any objection to  BPKs  use
of a thirty-three percent contingency fee in these scenarios.
          In  January 2007 the underlying case settled for policy
limits, which amounted to $1,231,025.31.  BPK sent the clients  a
letter  showing  how  the funds would be  distributed.   In  this
letter,  BPK again calculated its fee as thirty-three percent  of
the  recovery, or $406,238.34.  The next day the clients sent BPK
an e-mail objecting to the contingency fee.  They complained that
they  understood  that under the modified fee agreement,  if  the
case settled for policy limits at any point, BPK would receive  a
flat fee of $250,000 plus costs.  In the following days and weeks
BPK expressed its disagreement with the clients understanding  of
the  fee  contract  and  placed the  settlement  proceeds  in  an
interest-bearing  trust  account  until  resolution  of  the  fee
dispute.
          In   February  2007  BPK  and  the  clients  agreed  to
distribute the undisputed settlement funds but keep the  disputed
fees  ($156,238.34)  in the trust account.   BPK  then  sent  the
clients  a letter with calculations for disbursing the settlement
funds   including the clients recovery after deducting BPKs total
disputed  and  undisputed fees ($406,238.34) and  costs  advanced
($40,679.43).  BPK also clarified it did not intend to pay  [its]
costs  advanced until it received permission to do  so  from  the
clients,  included a print-out of costs, and invited the  clients
to express any concern over those costs.
     B.   Proceedings
          
          In  September  2007 the clients filed a  complaint  for
recovery of the disputed attorneys fees, and several months later
moved  for summary judgment.  The clients argued that the parties
did  not dispute the facts surrounding contract modification  and
that   the   only   question  presented  was  one   of   contract
interpretation.  On that issue, the clients argued  that  further
substantial  litigation should be interpreted as meaning  that  a
flat  fee  of $250,000 would be paid to [BPK] unless the  parties
engaged  in  a  considerable  amount  of  in  court  filings  and
proceedings  after October 19, 2005. According  to  the  clients,
[b]ecause the parties did not engage in any court proceedings  or
considerable  in court filings after that date, but prepared  for
and participated in mediation and an out of court settlement, the
further  substantial litigation provision was not  triggered  and
defendants are bound by the $250,000 flat fee agreement.
          In  a  cross-motion  for summary judgment  and  in  its
opposition to the clients summary judgment motion, BPK quoted the
language of the fee proposal to which the clients had agreed:  If
our  efforts at an early settlement do not succeed and it becomes
necessary  to litigate the matter in a substantive way,  we  will
revert  back  to  our  previous written  fee  agreement  and  the
percentages  written there.  It argued litigation  includes  more
than  in-court proceedings and filings, and that as a  matter  of
law,  the  case was litigated in a substantive way following  the
amendment to the [fee] contract and thus, it is entitled  to  its
full 33% contingent fee.
          After oral argument, the court issued an oral ruling on
the  record.   Because the parties did not dispute any  extrinsic
evidence, the court addressed only the legal question of contract
interpretation.   The court looked to dictionary  definitions  of
the   relevant   terms   further,  substantial,  litigation,   to
litigate,  and  early.  Based  on these  definitions,  the  court
interpreted  further substantial litigation  to  mean  additional
considerable  efforts  in carrying on the  legal  contest.    The
court construed the parties modified fee agreement as follows:
          [S]hould  the  firm succeed in obtaining  the
          policy  limits without undergoing  additional
          considerable efforts in carrying on the legal
          contest, the firm will be paid out of  pocket
          expenses and a flat fee of $250,000.  And  if
          efforts  of the settlement near the beginning
          of  the  process of litigation do not succeed
          and   it  becomes  necessary  to  engage   in
          additional  considerable efforts in  carrying
          on the legal contest, the parties will revert
          to the previous written agreement.
          
          Applying  this interpretation to the undisputed  facts,
the  court concluded  that BPK had engaged in further substantial
litigation,  entitling it to a thirty-three  percent  contingency
fee  under the original fee agreements.  The court also found the
case  law  cited  by  the clients to be distinguishable  and  not
persuasive and that the clients argued the costs claimed were the
same whether the fees were a flat $250,000 or 33 percent.
          The  court granted summary judgment to BPK on its claim
for  attorneys fees, noting that neither party raised  the  costs
being  claimed by [BPK] as at issue in the complaint  or  answer.
The  clients  moved  for reconsideration,  asserting  that  costs
incurred  in  the  underlying lawsuit, including  the  Washington
bankruptcy  attorneys  fees, were at issue  in  the  fee-contract
dispute.   BPK  opposed  the  motion and  the  court  denied  it,
accepting BPKs revised judgment, which made no reference to those
costs.
          In August 2008 BPK moved for attorneys fees under Civil
Rule  82  and  costs incurred in defending the fee dispute.   BPK
argued  for fees under Rule 82 or, alternatively, under  Rule  68
because  it  had  served offers of judgment  on  the  clients  in
September of 2007.  The court first concluded that Rule 82(b)(2)1
applied.   The clients opposed awarding fees under Rule  82(b)(2)
and argued that any award should be reduced under Rule 82(b)(3).2
The  court  later changed course and awarded fees under  Rule  68
only, explaining payments under [Civil Rules] 68 and 82 cannot be
combined.   In September 2008 the court awarded BPK the  disputed
portion  of  its fees ($156,230.34) plus interest;  $2,387.21  in
costs  incurred  in the fee-contract dispute;  and  $8,395.95  in
attorneys fees under Rule 68.
          The clients appeal.
III. STANDARD OF REVIEW
          When  there are no genuine issues of material fact  and
the  question presented involves only the legal one  of  contract
interpretation,  we review the superior courts grant  of  summary
judgment  de  novo.3   We  will affirm if the  undisputed  facts,
viewed  in the light most favorable to the non-prevailing  party,
entitle the prevailing party to judgment as a matter of law.4
IV.  DISCUSSION

     A.   The  Superior  Court  Did Not Err in  Granting  Summary
          Judgment for BPK.
          
          The  clients argue that we should reverse the  superior
courts grant of summary judgment for three main reasons: (1)  the
fee  agreement is invalid under Compton v. Kittleson5  and Alaska
Rule  of  Professional Conduct 1.5(c); (2) the  court  failed  to
construe  the attorney-client contract against BPK and improperly
interpreted the term further substantial litigation; and  (3)  it
was  error  to  find  that  BPK engaged  in  further  substantial
litigation.

          1.   The modified contingent-fee agreement is valid under Compton
               and Alaska Rule of Professional Conduct 1.5(c).
               
               a.   The modified contingent-fee agreement is valid under
                    Compton.
                    
          The  clients  argue the modified fee  agreement  is  an
impermissible hybrid agreement under Compton because they believe
it  gave  BPK  control  over the decision to  engage  in  further
          substantial litigation.  The superior court disagreed.
          The  fee  agreement in this case, and the circumstances
under which the parties modified it, differ from the fee contract
and circumstances in Compton.  There, we held impermissible a fee
agreement that used the clients decision to settle as the trigger
for  converting from contingent to hourly fees and that  operated
retroactively to encompass all work performed from the  inception
of  the  case.6  Before agreeing to undertake the representation,
the attorney in Compton presented his clients with a proposed fee
agreement  under which he would receive thirty-three  percent  of
any  recovery.7   But  the agreement also provided  that  if  the
clients  settled for an amount that yielded a fee equal  to  less
than  $175 per hour for the time the attorney invested, he  would
be  paid an amount over and above the 33% to compensate [him]  at
the rate of $175.00 per hour.8
          After    representation  was  underway,  the   attorney
received  a  settlement offer for $25,000,  including  costs  and
attorneys  fees.9  He communicated the settlement  offer  to  the
clients  and informed them that because his hourly fees for  work
performed  to  that date already exceeded $30,000, accepting  the
offer  would  mean  no recovery for the clients.10   The  clients
rejected  the offer, and although the attorney later revised  the
fee  agreement  to omit the fee-conversion clause, the  defendant
made  no  further offers and the clients lost on  all  claims  at
trial.11
          We  held  the Compton fee agreement invalid because  it
both  impeded the clients right to control the decision to settle
and  imposed  a   springing obligation to pay  for  work  already
performed  but  never before chargeable to the  client[s].12   We
reasoned:
          Because  the  potential  cost  of  a   future
          obligation  of  this kind and  the  potential
          value  of  the right the client is  asked  to
          forego  to  avoid  the  obligation  are  both
          largely incalculable at the inception of  the
          attorney-client relationship,  when  the  fee
          agreement is signed, we conclude that the fee-
          conversion    provision   at    issue    here
          impermissibly  burdens the clients  right  to
          settle a case.[13]
          
          The   modified   contingent-fee   agreement   here   is
significantly  different:  it did not base BPKs  compensation  on
the  clients  decision  to settle.  Rather,  under  the  original
agreement,  BPK was to receive twenty-five percent of a  recovery
reached  before  filing a complaint, thirty-three  percent  after
filing  a  complaint, and forty percent after filing an appeal.14
The   parties  modified  their  agreement  because  the   clients
requested  that  BPK reduce its fees in the  event  of  an  early
settlement.   They  made  this  request  after  having  had   the
opportunity  to  review  BPKs detailed assessment  of  the  cases
potential  value and the risks of trial.  Further,  the  modified
fee  agreement based BPKs compensation not on whether the clients
agreed  to  make  the  settlement offer  they  already  had   but
          instead on whether the insurer accepted the offer early in the
case.
          Nor   did   BPK  control  whether  further  substantial
litigation  would  ensue;   the early settlement  offer  was  not
successful because Katmai Lodge and Sarp did not accept it.   BPK
had  a  duty to prepare for trial.  The record shows the  clients
wanted  to continue pursuing their claims for at least the policy
limits, knew BPK was doing so at their direction, and did not ask
BPK  to  stop  litigating  their claims.   Indeed,  BPKs  billing
entries  show  BPK  and the clients had numerous  teleconferences
throughout the case, particularly from the time Katmai Lodge  and
Sarp  rejected  the policy limits settlement offer  in  May  2006
until the time the case settled in January 2007.
          Compton  is  also distinguishable because the  modified
fee  agreement here did not retroactively impose a fee obligation
the clients would not otherwise have been charged.15  The clients
here would have paid BPK a flat fee of $250,000 plus costs if  an
early settlement had occurred.  If the case did not settle at  an
early  stage and substantial litigation ensued, the clients  were
obligated  to  pay BPK thirty-three percent of any recovery  plus
costs,  per  the  original agreement.   In  either  scenario  the
clients  had to pay if they received a recovery; neither scenario
imposed fees otherwise not chargeable.
          Because  the  parties modified fee  agreement  did  not
impermissibly burden the clients right to control the decision to
settle or impose fees otherwise not chargeable, we conclude it is
valid under Compton.
               b.   The parties writings described how to determine BPKs fee.
                    
          a.   The clients argue that the modified fee agreement is invalid
under  Alaska Rule of Professional Conduct 1.5(c), which  states:
[a] fee agreement that is in whole or part contingent shall be in
writing  and  shall state the method by which the fee  is  to  be
determined,  including the percentage or percentages  that  shall
accrue to the lawyer in the event of settlement, trial or appeal.16
          The parties modified their written fee agreement over a
series  of  letters  and e-mails; the clients  concede  that  the
modified  fee  agreement met the writing  requirement.   But  the
clients  argue  the modified fee agreement fails to  comply  with
Rule  1.5(c) because there was no evidence in writing  that  [the
clients] agreed to return to the 33% contingent contract, or that
[the   clients]  agreed  that  BPK  could  engage   in   further,
substantial litigation thus triggering the reversion.
          We  agree  it would have been preferable to acknowledge
in   writing  the  point  at  which  the  substantial  litigation
threshold  had been reached, but the letters that  BPK  sent  the
clients   after  the  fee  agreement  was  modified  and   before
settlement   occurred  communicated  that   BPK   was   investing
significant effort in pursuit of the clients legal claims and, by
November 2006, made clear that BPK believed it was entitled to  a
thirty-three  percent  contingency  fee.   The  clients   neither
objected to the thirty-three percent contingency fee until  after
a tentative settlement had been reached nor instructed BPK not to
pursue their claims.  And the record shows BPK had numerous phone
          calls and teleconferences with the clients, indicating the
clients  must  have  known BPK was engaging in substantial  work.
BPK  did  not leave the clients in the dark about the  extent  to
which it was pursuing their claims or the fee it believed it  was
owed.   Under  the  circumstances of this case,  any  failure  to
announce  that  the  substantial litigation  threshold  had  been
reached did not prejudice the clients.
          2.   The superior courts interpretation of the modified
               contingent-fee agreement was not erroneous.
               
          1.   The clients complain the courts interpretation of the
modified  fee agreement was erroneous and that they were entitled
to  summary  judgment.   They  argue  the  court  (1)  improperly
interpreted  the  contract in favor of BPK  and  (2)  erroneously
construed further substantial litigation to include more than in-
court proceedings and filings.
          Because   the   parties  agree   on   the   facts   and
circumstances  surrounding modification of the fee agreement  and
the  agreements language, and because neither party argues  there
are  genuine issues of material fact, this dispute presents  only
the legal question of contract interpretation.17
               a.   The superior court properly construed the contract against
                    BPK.
                    
          The clients contend that the modified fee agreement was
ambiguous,  requiring the court to construe it against  BPK,  and
that  the court improperly interpreted the agreement in favor  of
the  law  firm.18  This argument is not persuasive.  The superior
court  both acknowledged the principle of construing attorney-fee
contracts  against  attorneys  and  construed  the  modified  fee
agreement against BPK.

               b.   The superior court properly interpreted the phrase further
                    substantial litigation to include more than in-court proceedings
                    and filings.
                    
          The   clients  argue  the  phrase  further  substantial
litigation means only in-court proceedings and filings,  such  as
appearing in trial before a court or jury, but not preparing  for
or participating in mediation.
          The   trial   court  interpreted  further   substantial
litigation as meaning additional considerable efforts in carrying
on   the  legal  contest.   It  reasoned  that  limiting  further
substantial  litigation to in-court proceedings  and  filings  is
unrealistic as litigation and court proceedings are more like  an
iceberg: 90 percent of the activity involved in litigation is not
in court, but in preparing the case for the various court filings
and  proceedings, including trial.  In reaching  its  conclusion,
the  court  considered dictionary definitions  for  the  disputed
terms, defining (1) further as additional, (2) to litigate as  to
carry  on a legal contest by judicial process, (3) litigation  as
the  process of carrying on a lawsuit or a legal proceeding of  a
civil   kind,  (4)  substantial  as  considerable  in   quantity;
significantly  great, and (5) early as near the  beginning  of  a
course  [of] process; or occurring in a near future.   The  court
          applied these definitions to the modified fee agreement:
          Putting   the   definitions  together,   even
          construing  the contractual language  against
          [BPK],  a  reasonable person would understand
          that should the firm succeed in obtaining the
          policy  limits without undergoing  additional
          considerable efforts in carrying on the legal
          contest, the firm will be paid out of  pocket
          expenses and a flat fee of $250,000.  And  if
          efforts  of the settlement near the beginning
          of  the  process of litigation do not succeed
          and   it  becomes  necessary  to  engage   in
          additional  considerable efforts in  carrying
          on the legal contest, the parties will revert
          to the previous written agreement.
          
          We  agree  with the courts interpretation and  conclude
reasonable  persons in the clients circumstances would  not  have
expected  further substantial litigation to mean purely  in-court
proceedings  and  filings  to  the  exclusion  of  work  done  in
preparation for mediation or trial.
          As  the  superior court noted, we have not  articulated
standards   for   interpreting   attorney-fee   contracts.    The
Restatement (Third) of the Law Governing Lawyers provides helpful
guidance,  and  we  adopt  its general rule:  A  tribunal  should
construe  a  contract between client and lawyer as  a  reasonable
person  in  the circumstances of the client would have  construed
it.19   In  addition to this principle, attorney-client contracts
are to be construed as any other contract, using general rules of
contract interpretation.20
          Typically, in resolving disputes concerning the meaning
of  an agreement, [we] begin[] by viewing the contract as a whole
and  the  extrinsic evidence surrounding the disputed  terms,  in
order to determine if those terms are ambiguous  that is, if they
are  reasonably subject to differing interpretation,  21  and  if
those  differing  interpretations are both reasonable.22   If  we
conclude  an  ambiguity  exists, we  resolve  that  ambiguity  by
determining   the  reasonable  expectations  of  the  contracting
parties  in  light  of  the language of any disputed  provisions,
other  provisions,  relevant extrinsic  evidence,  and  case  law
interpreting  similar  provisions. 23  Ambiguities  in  attorney-
client contacts are construed against the attorney.24
          We  begin by determining what reasonable persons in the
clients  circumstances would have understood further  substantial
litigation  to  mean.  To do so, we analyze the language  of  the
contract  as  a  whole,25  turning to non-legal  dictionaries  to
determine  the  meaning which the recipient of the  communication
might reasonably have given the disputed terms.26

          The modified fee agreement we must interpret is:
          We   will  try  to  obtain  a  policy  limits
          settlement of your claims.  Should we succeed
          without    requiring   further    substantial
          litigation  we  will be paid 1)  our  out-of-
          pocket costs and 2) $250,000.
          If  our efforts at an early settlement do not
          succeed  and it becomes necessary to litigate
          the  matter  in a substantive  way,  we  will
          revert  back  to  our  previous  written  fee
          agreement and the percentages written there.
          
          The  clients  do not dispute the courts definitions  of
further or substantial, but they argue that BPK did not engage in
further  substantial  litigation based on the  undisputed  facts.
Thus,  the term at the core of this dispute is litigation,  which
the modified fee  agreement does not define.  But the clients and
BPK  refer  us  to the same definition: A lawsuit. Legal  action,
including all proceedings therein. Contest in a court of law  for
the purpose of enforcing a right or seeking a remedy.  A judicial
contest,  a  judicial controversy, a suit of law.   The  superior
court  defined  to  litigate as to carry on a  legal  contest  by
judicial process, and litigation as the process of carrying on  a
lawsuit or a legal proceeding of a civil kind.
          These  definitions  construe  litigation  broadly,   as
encompassing  both  the  in-court  and  out-of-court  aspects  of
pursuing  a  lawsuit  and  providing  legal  representation.   We
conclude  that  reasonable persons in the  clients  circumstances
that  is,  clients with business acumen27  would understand  that
litigation  includes not only in-court proceedings  and  filings,
but  also the acts necessary to carry out a lawsuit or to  pursue
legal  claims.  As the superior court explained, [a] case  doesnt
arrive  at the courthouse on the day of trial without substantial
preparations.  The clients interpretation of the term  litigation
as  meaning  only  in-court appearances  and  filings  is  not  a
reasonable construction of the term.28
          We  are not persuaded by the clients argument that  the
parties  agreed the  thirty-three percent contingency  fee  would
not  apply  if  the  case settled before  trial.   This  argument
focuses  on  the  phrase further substantial litigation,  without
regard  to  the  surrounding  provisions.   The  superior   court
properly   looked  to  the  surrounding  contractual  provisions,
identifying the other relevant terms as further, substantial, and
early settlement, and turning to a non-legal dictionary to define
those terms.
               c.   Extrinsic evidence supports the trial courts interpretation
                    of the fee agreement.
          The relevant undisputed extrinsic evidence consists  of
(1) the clients August 2005 letter asking BPK to reduce its fees,
and (2) BPKs September 2005 letter responding to that request.
          The clients asked BPK to agree to a reduced flat fee if
a  policy limits settlement could be achieved in the early stages
of  the  case,  reasoning  this would result  in  curtailment  of
further legal representation.  Their August 2005 letter also says
the reduced fee would be justified if settlement occurred because
this  eliminates the need for preparation and presentation  of  a
jury  trial.  These statements reinforce the courts finding  that
          the clients reasonably understood that legal representation
includes preparation for trial.
          BPKs September 2005 response communicated that it would
not  agree to a reduced fee if it had to invest significant  time
and effort to resolve the case.  BPK wrote:
          [I]t  is  likely [the firm] would approve  of
          [the  proposed modification] if the firm does
          not have to expend much more of an investment
          towards the case.  At this point, the expense
          has  been  kept to a minimum as no  discovery
          has   yet   begun.   However,  if  the   case
          continues on, and the firm has to invest more
          substantial time and expenses, it is unlikely
          that the firm can accept the 25%.
          
Given  this response, reasonable persons in the clients  position
would not have understood that BPK intended to be paid a flat fee
if  it invested fifteen additional months of time and effort into
the case.
          Based on this undisputed extrinsic evidence, reasonable
persons  in the clients circumstances would understand that  they
were  obligated  to pay a thirty-three percent  fee  even  though
their  attorney  did not appear before a court  or  jury.29   The
language  of  the  modified fee agreement  as  a  whole  and  the
undisputed extrinsic evidence support the courts interpretation.
          3.   Viewing the undisputed facts in the light most favorable to
               the clients, BPK engaged in further substantial litigation.
               
          The  clients contend that BPK did not engage in further
substantial  litigation and is not entitled to  the  thirty-three
percent  contingency  fee because they claim  BPKs  efforts  were
toward mediation, not trial.
            BPK submitted billing records to show the work it did
to  prepare for mediation and trial.  The clients do not  dispute
that  BPK performed this work; they argue that this work did  not
qualify   as   further  substantial  litigation.   The   question
presented to us is whether, viewing the undisputed facts  in  the
light  most  favorable  to  the  clients,  the  court  erred   in
concluding  that  BPK engaged in further substantial  litigation.
We conclude it did not.
          Only substantial work done on the lawsuit after efforts
at an early settlement failed would entitle BPK to a thirty-three
percent  contingency fee, so we look to the steps BPK took  after
it  made the initial settlement offer in October 2005 and  before
settlement occurred in January 2007.  In that time, the  superior
court  found that BPK prepared the case for trial and  mediation,
both  of which the trial court found to be elements of litigation
or  a  legal  contest  between parties.  It  reasoned  that  BPKs
preparations for mediation and for trial constituted  substantial
litigation  because  the  efforts were considerable  and  because
litigation includes more than in-court proceedings and filings.
          We  agree.    After  the  parties  modified  their  fee
agreement,  BPK attended the depositions of Weiner and  Garrison;
traveled to Washington to depose Sarp; moved for summary judgment
          on liability; prepared for and participated in a mediation; hired
and interviewed an expert witness on stair construction; met with
and   talked  to  physicians;  prepared  discovery  requests  and
responses;  prepared  for  and attended  an  independent  medical
evaluation   in   Seattle;  researched  relevant  legal   issues;
participated  in several teleconferences; and generally  prepared
for  trial, including talking to experts on damages and preparing
trial  exhibits.  Based on these undisputed facts,  it  is  clear
that  BPK  engaged  in further substantial litigation  after  the
early settlement effort failed.
     B.   Costs  Advanced in the Underlying Lawsuit Were  Not  at
          Issue in the Fee-Contract Dispute.
          
          The  clients  argue the court erred by concluding  that
the  costs  BPK advanced in the underlying lawsuit  were  not  at
issue in the fee-contract dispute.  They claim they timely raised
the  issue  and that the costs advanced improperly included  fees
for outside bankruptcy counsel.
          The  court  did  not award any costs  advanced  in  the
underlying  lawsuit.  The only costs awarded were those  incurred
in litigating the dispute over the modified fee agreement.  In an
oral ruling on the record, the court noted that:
          [N]either   party  raised  the  costs   being
          claimed  by  defendants  [in  the  underlying
          lawsuit]  as  at  issue in the  complaint  or
          answer.   [The  clients] counsel  argued  the
          costs claimed were the same whether the  fees
          were a flat $250,000 or 33 percent.
          
          The  clients  raised the issue of costs for  the  first
time  in their motion for reconsideration; therefore, they waived
this issue.30  Even if they had raised it in a timely manner, our
outcome  would not change because the clients asserted  in  their
memoranda and in the superior court hearing that costs  were  not
at  issue and that BPK was entitled to them.  The court  did  not
err in concluding the issue was not before it.31

     C.   The  Civil Rule 68 Attorneys Fee Award to BPK  Did  Not
          Constitute an Abuse of Discretion.
          
          The  clients argue that the superior court  abused  its
discretion  by  not reducing BPKs award of attorneys  fees  under
Rule  82(b)(3)(A)  (complexity  of  litigation)  and  (K)  (other
equitable factors).32
          Without  addressing  whether any fee  award  should  be
reduced  under Rule 82(b)(3), the court awarded BPK $8,395.95  in
attorneys  fees under Civil Rule 68,33 relying on the  offers  of
judgment BPK had timely served on the clients and reasoning  that
Rule 68 and Rule 82 fee awards cannot be combined.
          We  review  an  award of attorneys fees  for  abuse  of
discretion.34  The clients do not challenge BPKs offer of judgment
or  the courts Rule 68 fee calculation, and the fee award was not
manifestly unjust.35  The court did not abuse its discretion when
it awarded fees under Rule 68 without modification.
V.   CONCLUSION
          For  the  above reasons, we AFFIRM the superior  courts
judgment in all respects.

_______________________________
     1     Civil  Rule  82(b)(2) governs attorney fee  awards  in
cases not involving money judgments.

     2     Civil Rule 82(b)(3) permits courts to deviate from the
fee  schedules in (b)(1) and (b)(2) if the court determines  that
any of eleven factors justifies such a deviation.

     3     Compton v. Kittleson, 171 P.3d 172, 176 (Alaska  2007)
(citing In re K.A.H., 967 P.2d 91, 93 (Alaska 1998)) (Because the
parties  have  stipulated that there are  no  genuine  issues  of
material fact, their [contract interpretation] dispute presents a
question of law, which we review independently, adopting the rule
of law that is most persuasive in light of precedent, reason, and
policy. (alteration added)).

     4     Law  Offices  of Steven D. Smith, P.C. v.  Borg-Warner
Sec. Corp., 993 P.2d 436, 443 (Alaska 1999); see also Rockstad v.
Erikson, 113 P.3d 1215, 1219 (Alaska 2005).

     5    171 P.3d 172.

     6    Compton, 171 P.3d at 176.

     7    Id. at 174.

     8    Id. (alteration added).

     9    Id.

     10    Id. at 174-75.

     11    Id.

     12    Id. at 179.

     13    Id.

     14     In their reply brief the clients appear to argue  the
original  fee  agreement  is  also  impermissible  under  Compton
because  it  provides  for  higher fee percentages  depending  on
whether  a  complaint or an appeal has been filed.  Because  they
did  not  raise this argument in their opening brief, the clients
waived  it.   See Sumner v. Eagle Nest Hotel, 894 P.2d  628,  632
(Alaska 1995); Alaska R. App. P. 212(c)(3).

     15    See Compton, 171 P.3d at 179.

     16    Alaska R. Prof. Conduct 1.5(c).

     17      See  Compton v. Kittleson, 171 P.3d 172, 176 (Alaska
2007) (citing In re K.A.H., 967 P.2d 91, 93 (Alaska 1998)).

          In their reply brief the clients appear to contend that
there  are  genuine  issues of material fact as  to  the  parties
intent in modifying the fee agreement.  But they again failed  to
raise  this  argument  in their opening brief,  and  we  consider
arguments  first raised in a reply brief waived.  See  Sumner  v.
Eagle Nest Hotel, 894 P.2d 628, 632 (Alaska 1995); Alaska R. App.
P. 212(c)(3).

     18     [A]mbiguity exists only where the disputed terms  are
reasonably subject to differing interpretation after viewing  the
contract  as  a whole and the extrinsic evidence surrounding  the
disputed  terms.  N. Pac. Processors, Inc. v. City &  Borough  of
Yakutat,  113  P.3d 575, 579 (Alaska 2005) (quoting  Wessells  v.
State, Dept of Hwys, 562 P.2d 1042, 1046 (Alaska 1977)) (internal
quotation marks omitted).

     19    Restatement (Third) of the Law Governing Lawyers  18(2)
&  cmt.  h  (2000) (explaining three reasons for this  principle:
lawyers  usually  write fee contracts, are more able  to  discern
deficiencies  and to correct them, and consider it  important  to
inform   clients   about  risks  that  may   occur   during   the
representation).

     20     See  id.  (explaining the principle of construing  an
attorney-fee  contract  as a reasonable  client  would  does  not
preclude  the  reliance  on  the usual resources  of  contractual
interpretation  such  as  the  language  of  the  contract,   the
circumstances   in   which  it  was   made,   and   the   clients
sophistication  and  experience  in  retaining  and  compensating
lawyers  or the lack thereof); id.  38 cmt. a (stating  that  [a]
fee contract must meet the usual requirements of contract law  as
well as the special rules governing client-lawyer contracts); cf.
D.N.  Corp. v. Hammond, 685 P.2d 1225, 1231 (Alaska 1984)  ([T]he
modification  of an existing agreement is governed  by  the  same
principles  regarding proof and enforceability  as  the  original
contract.).

     21     Hartley  v. Hartley, 205 P.3d 342, 347 (Alaska  2009)
(quoting Zito v. Zito, 969 P.2d 1144, 1147 n.4 (Alaska 1998)).

     22    Rockstad v. Erikson, 113 P.3d 1215, 1222 (Alaska 2005)
(quoting  McMillan v. Anchorage Cmty. Hosp., 646  P.2d  857,  863
(Alaska 1982)).

     23    Hartley, 205 P.3d at 347 (quoting Keffer v. Keffer, 852
P.2d 394, 397 (Alaska 1993)).

     24     See 23 Samuel Williston & Richard A. Lord, A Treatise
on  the Law of Contracts  62:4 (4th ed. 2002) (In supervising and
interpreting [contingent-fee agreements], the courts are  adamant
in  construing any ambiguity against the attorney  who  drew  the
agreement and liberally in favor of the client.).

     25     See Monzingo v. Alaska Air Group, Inc., 112 P.3d 655,
660 (Alaska 2005) (Courts look to the language of the contract as
a  whole,  the objects sought to be accomplished by the contract,
the   circumstances  surrounding  its  adoption,  and  case   law
interpreting   its   provisions  to  ascertain   the   reasonable
expectations of the parties. (citing Craig Taylor Equip.  Co.  v.
Pettibone Corp., 659 P.2d 594, 597 (Alaska 1983))).

     26     See Day v. A&G Constr. Co., 528 P.2d 440, 445 (Alaska
1974);  see also id. at 445-47 (turning to a non-legal dictionary
to  determine  the  non-technical meaning the contract  recipient
would have given the contractual term).

     27     Weiner testified in a deposition that he is the  Vice
President  of  Casino Marketing for The Venetian Resort  Hotel  &
Casino in Las Vegas; Garrison stated in a deposition that she  is
a Casino Marketing Executive for The Venetian.

     28     Even if this phrase could be construed as having  two
interpretations, it would not be ambiguous, as the clients argue,
because   interpreting  litigation  to  include   only   in-court
proceedings and filings is not a reasonable construction  of  the
term.   See  Rockstad  v. Erikson, 113 P.3d  1215,  1222  (Alaska
2005).    Nor   does   the   parties   disagreement   about   the
interpretation of this phrase render it ambiguous under our  case
law.  See  N. Pac. Processors, Inc. v. City & Borough of Yakutat,
113 P.3d 575, 579 (Alaska 2005) (Disagreement between the parties
regarding  the  interpretation  of  a  contract  term  does   not
necessarily create ambiguity.) (citing Wessells v. State, Dept of
Hwys, 562 P.2d 1042, 1046 (Alaska 1977)).

     29     The clients claim BPK never disclosed to them what it
meant  by  the terms further substantial litigation, specifically
that  the phrase included work done in preparation for mediation,
and  that this violated the firms fiduciary duties.  BPK did  not
expressly define the scope of further substantial litigation, but
its  correspondence communicated that it would  not  agree  to  a
reduced flat fee if it invested substantial time and work on  the
case.

     30    See Clemensen v. Providence Alaska Med. Ctr., 203 P.3d
1148, 1155 (Alaska 2009).

     31     In  reaching this result we do not mean to condone  a
contingent-fee   attorney  treating  outside  counsel   fees   as
litigation  costs  payable by the client in  the  absence  of  an
express  agreement  by  the  client.   Bar  Rule  35(c)  requires
contingency  fee  agreements to be in writing and  to  state  the
litigation expenses to be deducted from the recovery.  Of course,
even an express agreement between an attorney and client must  be
reasonable,  as  required by Bar Rule 35(a) and  Alaska  Rule  of
Professional Conduct 1.5(c).

     32     Civil  Rule  82(b)(3) permits a  court  to  vary  the
prevailing  party  fee  schedules  if  the  court  determines   a
variation is warranted based on eleven factors, including (A) the
complexity of the litigation, and (K) other equitable factors.

     33    Civil Rule 68(a) states, in pertinent part:

          At  any  time  more than 10 days  before  the
          trial begins, either the party making a claim
          or  the  party defending against a claim  may
          serve  upon  the adverse party  an  offer  to
          allow  judgment  to  be entered  in  complete
          satisfaction  of the claim for the  money  or
          property  or to the effect specified  in  the
          offer, with costs then accrued.
          
     34     Cook  Schuhmann & Groseclose, Inc. v. Brown  &  Root,
Inc., 116 P.3d 592, 597 (Alaska 2005).

     35    See Rhodes v. Erion, 189 P.3d 1051, 1054 (Alaska 2008)
(holding  no abuse of discretion to refuse to reduce  a  Rule  68
award  under Rule 82(b)(3)(K) when appellant failed to  meet  the
manifestly unjust standard).

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