State Ex Rel. Montana Department of Transportation v. Slack , 305 Mont. 488 ( 2001 )

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No. 00-589
IN THE SUPREME COURT OF THE STATE OF MONTANA
2001 MT 137STATE OF MONTANA, acting by and
through the MONTANA DEPARTMENT
OF TRANSPORTATION,
Plaintiff and Appellant,
v.
JAMES A. SLACK and PATRICIA A. SLACK,
as owners and joint tenants, and FIRST
INTERSTATE BANK OF OREGON, as
mortgagee,
Defendants, Respondents, and
Cross-Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Ted O. Lympus, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
James A. Lewis and Lyle Manley, Montana Dept. of Transportation,
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Helena, Montana
P. Keith Keller, Keller, Reynolds, Drake, Johnson & Gillespie, P.C.,
Helena, Montana
For Respondents and Cross-Appellants:
Dale L. McGarvey, McGarvey, Heberling, Sullivan & McGarvey, P.C.,
Kalispell, Montana
Submitted on Briefs: February 1, 2001
Decided: August 2, 2001
Filed:
__________________________________________
Clerk
Justice Jim Regnier delivered the Opinion of the Court.
¶1 The Montana Department of Transportation ("DOT") appeals from the Findings of
Fact, Conclusions of Law and Judgment issued by the Eleventh Judicial District Court,
Flathead County, awarding litigation expenses, attorney fees, and interest to James and
Patricia Slack. The Slacks cross-appeal. We affirm in part and reverse in part.
¶2 The parties raise the following issues:
¶3 1. Whether the District Court's award of litigation expenses incurred through the
settlement of the condemnation case was excessive.
¶4 2. Whether the District Court erred by awarding the Slacks their attorney fees incurred
in proving the amount of reasonable and necessary attorney fees in the condemnation
action.
¶5 3. Whether the Slacks are entitled to fees for post-trial work and for responding to
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DOT's appeal.
BACKGROUND
¶6 As part of a project to expand U.S. Highway 2 near Kalispell, Montana, into a four-lane
highway, DOT sought to acquire a portion of a tract of land owned by the Slacks. DOT
initially offered the Slacks $45,150. The Slacks refused and, on July 19, 1993, DOT filed a
complaint seeking to condemn their property. The Slacks hired attorney Dale L.
McGarvey to represent them. The Slacks entered into a contingency fee agreement with
McGarvey providing that McGarvey would receive 40% of the entire recovery obtained
by settlement or trial in excess of DOT's initial offer or 50% of the excess obtained on
appeal or retrial.
¶7 The case proceeded toward a condemnation commission hearing scheduled for June 8,
1994. On May 19, 1994, DOT offered the Slacks $168,069 plus interest and necessary
litigation expenses as defined by § 70-30-306, MCA. The Slacks accepted DOT's offer
and judgment was entered. McGarvey submitted an Amended Memorandum of Litigation
Expenses seeking a total of $41,657.03 in necessary litigation expenses incurred in the
condemnation action. DOT filed a motion to retax fees and costs contending that the
Slacks' litigation expenses were excessive, unnecessary, and unreasonable. On January 29,
1997, DOT offered the Slacks $26,000 to settle the Slacks' claim for necessary litigation
expenses. On January 30, 1997, the Slacks filed a supplemental memorandum of litigation
expenses requesting an additional $50,407.84 for expenses incurred in its action for fees.
¶8 The District Court held a total of five days of hearings devoted solely to the issue of the
Slacks' necessary litigation expenses. The court issued its Findings of Fact, Conclusions of
Law and Judgment on February 21, 2000, awarding the Slacks a total of $115,493 in
litigation expenses and interest. With regard to the litigation expenses incurred through the
settlement of the condemnation case, the court awarded the Slacks $46,577. Included in
this amount was $29,483 for attorney and paralegal fees calculated at 1996 rates. The
court also awarded the Slacks the litigation expenses they incurred after the settlement of
the condemnation case in proving their necessary litigation expenses. With regard to their
expenses incurred in the fee litigation, the court awarded the Slacks $62,547. DOT appeals
the District Court's award of litigation expenses. The Slacks cross-appeal seeking fees for
post-trial work and for responding to DOT's appeal.
STANDARD OF REVIEW
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¶9 We review a district court's findings of fact to determine whether they are clearly
erroneous and a district court's conclusions of law to determine whether they are correct.
In re Estate of Silver, 2000 MT 127, ¶ 16, 299 Mont. 506, ¶ 16, 1 P.3d 358, ¶ 16.
ISSUE ONE
¶10 Was the District Court's award of litigation expenses incurred through the settlement
of the condemnation case excessive?
¶11 As part of the settlement, DOT agreed to pay the Slacks' "necessary expenses of
litigation as defined by Section 70-30-306, MCA." Section 70-30-306, MCA, provides in
relevant part:
(1) Necessary expenses of litigation . . . mean reasonable and necessary attorney fees,
expert witness fees, exhibit costs, and court costs.
(2) Reasonable and necessary attorney fees are the customary hourly rates for an attorney's
services in the county in which trial is held. Reasonable and necessary attorney fees shall
be computed on an hourly basis and may not be computed on the basis of any contingent
fee contract entered into after July 1, 1977.
¶12 DOT contends that the District Court's award of necessary expenses of litigation
incurred in the settlement of the condemnation case was excessive because the court
awarded attorney fees that were not reasonable and necessary. With regard to the
settlement of the condemnation case, the District Court awarded the Slacks $29,483 in
attorney and paralegal fees. DOT essentially makes two claims: (1) McGarvey's attorney
and paralegal hours were excessive; and (2) the District Court should have used
McGarvey's hourly rates in effect at the time he rendered services.
A. HOURS
¶13 The District Court found that 151.05 attorney hours expended by Dale L. McGarvey,
3.25 attorney hours expended by John L. Heberling, and 204 paralegal hours expended by
Mary K. Johnson were reasonable and necessary. DOT argues that the District Court
awarded an excessive number of hours given the fact that the case was settled quickly.
DOT observes that the case was settled within nine months of the filing of the complaint
and before the exchange of appraisals or the holding of a condemnation commission
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hearing. DOT contends that the parties merely exchanged a small number of "stock"
discovery requests and that there were no court hearings. DOT also maintains that the
Slacks' claim included attorney and paralegal hours which were duplicative of tasks
performed by expert witnesses and also included paralegal time that duplicated attorney
tasks. DOT refers us to the testimony of its two expert witnesses, attorneys Dan Sullivan
and Gary Christiansen, to demonstrate that McGarvey's fee claim was excessive.
¶14 Mr. Sullivan worked as a lawyer for the Montana Highway Department from 1960 to
1982 and worked in private practice thereafter. Mr. Sullivan testified that he tried 120
condemnation cases to jury. In seven of those cases he represented private landowners. He
represented two private landowners against DOT. One of the two cases in which Mr.
Sullivan represented a private client against a DOT condemnation action went to a
condemnation commission hearing. He was under the impression that eighty attorney
hours were billed in that case to the end of the condemnation commission hearing. The
other case settled before a hearing.
¶15 While working for the Highway Department, Mr. Sullivan undertook a survey of six
or seven lawyers whom he believed were competent, experienced, and had represented
private landowners in condemnation actions. Mr. Sullivan testified that according to his
survey, a competent practitioner should be able to complete a settlement prior to a
condemnation commission hearing in about forty to fifty attorney hours. Based on his
experience and the study he performed, Mr. Sullivan believed that a reasonable amount of
attorney time in the Slack case would have been about 48 hours.
¶16 Mr. Sullivan's testimony is not sufficient to establish that the District Court's
determination of reasonable and necessary attorney hours is clearly erroneous. Mr.
Sullivan's conclusion that McGarvey's fee claim was excessive was based on his personal
experience and an informal survey he conducted. With regard to his experience, Mr.
Sullivan did not have a large amount of experience representing private landowners in
condemnation cases against DOT. Rather, he acquired the vast majority of his
condemnation experience as an attorney for the State. He had only represented two private
landowners in condemnation actions against DOT. With regard to his study, Mr. Sullivan
simply conducted an informal survey in the mid-1970's which consisted of calling some
attorneys he knew and asking them for ballpark estimates of attorney hours.
¶17 DOT also directs our attention to the testimony of Gary Christiansen, an attorney who
has practiced in the Kalispell area for over thirty years. Mr. Christiansen testified that he
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had handled four condemnation cases during his practice. Mr. Christiansen reviewed
McGarvey's Amended Memorandum of Litigation Expenses and some of the briefing in
this case as well as memoranda of litigation expenses in a number of other condemnation
cases handled by McGarvey. In Mr. Christiansen's opinion, McGarvey charged an
excessive number of hours, charged some hours that were duplicative, and the format of
McGarvey's memorandum made it difficult to review because the memorandum contained
insufficient detail to allow a comparison of the time spent with the corresponding task
accomplished.
¶18 In support of Mr. Christiansen's conclusions, DOT observes that Mr. Christiansen
handled a condemnation case for another private property owner on the same highway
project which lasted about the same length of time as the Slacks' case and involved some
similar issues - referred to as the "Jump case." In the Jump case, Mr. Christiansen charged
approximately $2,800 in attorney fees. DOT appears to be implying that the Jump case is
somehow analogous to the instant case and therefore is evidence that McGarvey's fee
claim was excessive. However, we note that Mr. Christiansen also testified that the Jump
case was handled through a "stipulated appraiser approach" in which he and the State
agreed on an appraiser and agreed that the condemnation award would be set by the
appraisal. Undoubtedly, the stipulated appraiser approach is a simple way to quickly
dispose of a condemnation controversy and thus requires less attorney time. The instant
case is not analogous; it was not settled through the stipulated appraiser approach.
¶19 DOT notes that Mr. Christiansen testified that there were inconsistencies between the
times claimed by McGarvey and his paralegal and the time claimed by expert participants
to the same meetings. For instance, DOT observes that McGarvey and his paralegal both
charged 6.3 hours for a helicopter flight when the helicopter bill was for 1.1 hours.
However, the court's determination that these hours were reasonable and necessary is not
clearly erroneous. McGarvey testified that the helicopter flight was necessary to create a
video for trial which showed that the Slacks had access to a shop building prior to the
highway construction project and would not have access after the project. McGarvey
contended that he and his paralegal spent more time than the helicopter service because
they had to mark the Slacks' property and access lines before and after DOT's
condemnation for purposes of the video.
¶20 DOT notes that Mr. Christiansen testified that McGarvey and his paralegal "double-
billed" when the paralegal accompanied McGarvey to meetings or when both charged for
the same task. Once again, we do not believe that the District Court's determination that
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these hours were reasonable and necessary is clearly erroneous. McGarvey testified that it
was imperative to resolve this case before the highway construction season started in order
for the Slacks to be able to continue operating their logging and trucking business out of
their shop building. McGarvey testified that in order to resolve this case quickly, he
needed to have a series of joint meetings with various combinations of experts to show
that the Slacks could lawfully access their shop before the condemnation and to establish
how they would gain access to their shop after the condemnation. McGarvey testified that
his paralegal attended these meetings in order to coordinate the experts' activities by
establishing task lists and time lines.
¶21 We have previously stated:
In the final analysis, the duty of fixing attorney fees in condemnation cases for the
prevailing party falls upon the District Court. The purpose of the evidentiary hearing
on attorney fees, required since Crncevich v. Georgetown Recreation Corporation
(1975), 168 Mont. 113, [120], 541 P.2d 56, 59, is to aid the court in its
determination in exercising its discretion to fix reasonable attorney fees. The court,
as a jury, is not bound absolutely to the testimony of expert witnesses. It can reduce
or increase the figures submitted to it by experts as reasonable attorney fees and as
long as its findings are not clearly erroneous, the determination made in its
discretion will not be disturbed.
State v. Helehan (1980), 189 Mont. 339, 346-47, 615 P.2d 925, 930. We conclude that the District
Court's finding that the number of attorney and paralegal hours claimed by the Slacks were reasonable
and necessary is not clearly erroneous.
B. RATE
¶22 The District Court awarded attorney and paralegal fees at 1996 rates: McGarvey and
Heberling's hourly rates were set at $125 per hour and McGarvey's paralegal rate was set
at $50 per hour. DOT contends that the District Court was without authority to award fees
using 1996 rates. DOT argues that fees must be awarded at the hourly rate in effect at the
time the services were provided. The Slacks argue that the District Court had the authority
to award fees at current rates rather than incurred rates to compensate for delay and
inflation. The Slacks also contend that enhancement for delay has been authorized by the
majority of federal circuits.
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¶23 Whether an award of necessary litigation expenses pursuant to § 70-30-306, MCA,
can be enhanced for delay by using current rather than historic hourly attorney rates is a
matter of first impression. The statute defining the necessary expenses of litigation is silent
with regard to whether a court may adjust the necessary expenses of litigation by awarding
attorney fees at current rates to account for delay in payment. Section 70-30-306(2), MCA,
simply provides that "[r]easonable and necessary attorney fees are the customary hourly
rates for an attorney's services in the county in which trial is held." There are no judicial
decisions allowing or precluding enhancement for delay.
¶24 We see no reason why an enhancement for delay may not be part of a "[r]easonable
and necessary" attorney fee award pursuant to § 70-30-306(2), MCA. We note that 42 U.S.
C. § 1988, the federal provision which allows a court to grant a "reasonable attorney's fee"
to prevailing parties in federal civil rights actions, is also silent with regard to
enhancement of fees for delay. However, the United States Supreme Court has held that an
appropriate enhancement for delay, "whether by the application of current rather than
historic rates or otherwise," is within the contemplation of § 1988. Missouri v. Jenkins
(1989), 491 U.S. 274, 283-84, 109 S.Ct. 2463, 2469, 105 L.Ed.2d 229. As the Supreme
Court observed:
Our cases have repeatedly stressed that attorney's fees awarded under this statute are
to be based on the market rates for the services rendered. . . . Clearly, compensation
received several years after the services were rendered . . . is not equivalent to the
same dollar amount received reasonably promptly as the legal services are
performed, as would normally be the case with private billings.
Jenkins, 491 U.S. at 283, 109 S.Ct. at 2469 (citations omitted).
¶25 Fees awarded pursuant to § 70-30-306, MCA, are also based on market rates. See § 70-
30-306(2), MCA (providing that fees are to be based on "customary hourly rates").
Compensation awarded at historic hourly rates years after the services are provided is not
equivalent to the same amount received reasonably promptly as the services are
performed. Accordingly, we conclude that a district court may award an appropriate
enhancement for delay as part of an award of reasonable and necessary attorney fees.
C. CONTINGENCY FEE
¶26DOT argues that contingent fee agreements violate § 70-30-306(2), MCA. The Slacks
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respond that the statute only precludes the computing of an attorney fee award on the basis
of a contingent fee agreement and does not preclude private landowners from entering into
contingent fee agreements in condemnation cases.
¶27 With regard to contingent fee agreements, § 70-30-306(2), MCA, provides that "[r]
easonable and necessary attorney fees shall be computed on an hourly basis and may not
be computed on the basis of any contingent fee contract entered into after July 1, 1977."
The statute plainly and unambiguously precludes the computation of an award of
reasonable and necessary attorney fees on the basis of a contingent fee contract. The
statute does not preclude condemnees from entering into contingent fee agreements with
their attorneys. The District Court did not compute the Slacks' attorney fees on the basis of
a contingent fee contract. Rather, the court computed the Slacks' reasonable and necessary
attorney fees on an hourly basis. We conclude that the District Court applied the statute
correctly.
ISSUE TWO
¶28 Did the District Court err by awarding the Slacks the attorney fees they incurred
during the fee litigation?
¶29 The District Court determined that DOT did not "thoroughly investigate, nor did it
objectively evaluate, [the Slacks'] claim for litigation expenses . . . [and], instead, without
such investigation or objective evaluation, made an arbitrary offer of $20,200." The court
held that DOT had pursued litigation over the appropriate amount of necessary litigation
expenses in bad faith and, pursuant to § 25-10-711, MCA, the Slacks were entitled to
attorney fees and costs incurred in the litigation over fees.
¶30 DOT argues that an award of fees is precluded as a matter of law. DOT contends that
there cannot be a finding of bad faith when it had a legal duty to defend the action. In this
regard, DOT notes that an award of attorney fees must be based on an evidentiary hearing
allowing for oral testimony and the opportunity to cross-examine. The Slacks respond that
any defense to a fee claim which the DOT has a duty to provide must be consistent with
the requirements of Montana's statutes and constitution.
¶31 We have previously stated that in some circumstances the State may be required to
bear a condemnee's necessary litigation expenses incurred in proving the amount of costs
and fees of the underlying condemnation action. In State v. McGuckin (1990), 242 Mont.
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81, 788 P.2d 926, we concluded that a district court could award the "costs and attorney
fees incurred in proving necessary and reasonable litigation expenses other than attorney
fees." McGuckin, 242 Mont. at 87, 788 P.2d at 930 (emphasis in original). With regard to
awarding attorney fees incurred in proving attorney fees, we stated:
[A]n award of attorney fees incurred in proving the amount of attorney fees incurred
in the litigation is generally not a necessary and reasonable expense of the
landowner. . . . However, in order to achieve an equitable result in extraordinary
circumstances, the District Court in its sound discretion may require the opposing
party to bear this expense. This would be the rare exception and not the rule.
McGuckin, 242 Mont. at 86-87, 788 P.2d at 930. DOT has not provided us with any reason to depart
from McGuckin. Thus, we hold that the District Court had the authority to award the Slacks their
attorney fees incurred in proving fees.
¶32 The question thus becomes whether the instant case presented the "rare exception" in
which "extraordinary circumstances" justified an award of attorney fees incurred in
proving the amount of attorney fees incurred in the underlying litigation. See McGuckin,
242 Mont. at 87, 788 P.2d at 930. In this regard, DOT maintains that it conducted a
reasonable investigation of McGarvey's claim for fees and expenses and did not simply
object to each and every expense item claimed. DOT notes that two of its witnesses
reviewed McGarvey's claim for fees incurred in the underlying litigation and testified that
his claim was excessive, inaccurate, and duplicative. The Slacks argue that we should only
preclude an award of attorney fees for proving the amount of attorney fees incurred in the
underlying litigation in those cases where a district court finds that the amount of fees
claimed in the underlying litigation is inflated and unreasonable. The Slacks note that the
District Court awarded them all of the necessary litigation expenses they had claimed in
the underlying action.
¶33 The Slacks are not entitled to attorney fees incurred in proving attorney fees simply
because the District Court awarded them their entire claim for fees in the underlying
litigation. This is certainly not one of the "extraordinary circumstances" we were referring
to in McGuckin. Rather, we were referring to those circumstances in which the State's
objection to the condemnee's fee claim is unreasonable. See McGuckin, 242 Mont. at 85,
788 P.2d at 929 (observing that allowing fees for proving attorney fees in extraordinary
circumstances prevents the State from simply objecting to every expense claimed even if
all expenses claimed were reasonable). We believe that the District Court abused its
discretion in awarding the Slacks their attorney fees incurred in proving attorney fees.
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DOT's objection to the Slacks' claim for fees was not unreasonable. As DOT notes, an
award of attorney fees must be based on a hearing allowing for oral testimony, the
introduction of exhibits, and the opportunity for a responsible party to cross-examine the
reasonableness of the attorney fees claimed. See Helehan, 189 Mont. at 346, 615 P.2d at
929. At that hearing, DOT presented two qualified expert witnesses who both testified that
McGarvey's fee statement was excessive and duplicative. Although the District Court did
not find that DOT's evidence compelled a reduction in fees, we would be hard-pressed to
characterize DOT's objections as unreasonable. Accordingly, we reverse the District
Court's award of attorney fees incurred in proving the amount of fees.
ISSUE THREE
¶34 Are the Slacks entitled to fees for post-trial work and on appeal?
¶35 The Slacks request that we remand this case to the District Court for the purpose of
awarding them their fees incurred in post-trial work and in responding to DOT's appeal.
We decline to do so. Although the District Court's findings justifying its award of
necessary litigation expenses were not clearly erroneous, the court's fee award was clearly
generous. The District Court granted McGarvey everything he requested despite the fact
that DOT presented two witnesses who testified that McGarvey's claims were excessive
and duplicative. The Slacks' claim for attorney fees incurred in post-trial work and on
appeal is hereby denied.
¶36 Affirmed in part and reversed in part.
/S/ JIM REGNIER
We Concur:
/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
Justice W. William Leaphart concurring in part and dissenting in part.
¶37 I concur in the resolution of issues two and three. I dissent as to the resolution of issue
one: Were the hours expended by the Slacks' attorney and paralegal reasonable?
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¶38 The DOT presented expert testimony from two witnesses, Mr. Dan Sullivan and Mr.
Gary Christiansen. Both Sullivan and Christiansen are very experienced attorneys. Very
few attorneys in the state have more experience in condemnation law than Mr. Sullivan.
Mr. Sullivan has represented both the State and private landowners and has tried 120
condemnation cases to juries. After reviewing the history of this case, which was settled
within nine months of the filing of the complaint and before exchange of appraisals or the
holding of a condemnation commission hearing, he concluded that a reasonable amount of
attorney time would have been approximately 48 hours.
¶39 Mr. Christiansen, an attorney of some 30 years experience, testified that he had tried
four condemnation cases and had handled a condemnation case for another private
property owner (the "Jump" case) on the same highway project. The "Jump" case involved
some of the same issues as the Slack case and was resolved in roughly the same amount of
time. The attorney fees were approximately $2,800. The majority points out that the Jump
case, contrary to the Slack case, was resolved on the basis of the stipulated appraisal
approach. It should be noted, however, that although the Slacks were not proceeding on
the basis of stipulated appraisals, their claim was resolved before the exchange of any
appraisals.
¶40 Christiansen testified that the Slacks' counsel charged for excessive hours, charged
duplicative hours and that he and the paralegal both charged 6.3 hours for a helicopter
flight when the helicopter bill was for 1.1 hours. Christiansen also testified that the Slacks'
counsel and his paralegal both charged for the same task when the paralegal accompanied
Mr. McGarvey to meetings. Mr. McGarvey testified that he had his paralegal accompany
him to these meetings to coordinate the experts' activities.
¶41 The DOT also points out that the paralegal billed for 38 hours of "reviewing the file,"
spent 11.5 hours preparing for a meeting with an appraiser and charged over 20 hours for
preparing drawings which duplicated work done by the Slacks' engineers.
¶42 The Slacks were entitled to "necessary expenses of litigation" as defined by § 70-30-
306, MCA. Section 70-30-306, MCA, provides that necessary expenses of litigation mean
"reasonable and necessary attorney fees, expert witness fees, exhibit costs, and court
costs."
¶43 Although the District Court, in fixing attorney fees in condemnation cases "is not
bound absolutely to the testimony of expert witnesses," State v. Helehan (1980), 189
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Mont. 339, 347, 615 P.2d 925, 930, the District Court here was presented with two
exceptionally well-qualified expert witnesses, one of whom, Mr. Christiansen, resolved a
condemnation claim on the same highway project for 1/10 the fees awarded to the Slacks'
counsel. Both experts concluded that the hours were excessive and their opinions were not
rebutted by any independent expert.
¶44 The District Court's conclusion that the hours were reasonable and necessary was not
supported by substantial evidence. I am left with a definite and firm conviction that the
trial court made a mistake. Yellowstone II Dev. Group v. First Amer. Title Co., 2001 MT
41, ¶ 34, 304 Mont. 223, ¶ 34, 20 P.3d 755, ¶ 34. In my view, the award of $29,483 in
attorney fees in a case which was resolved without a hearing and within nine months of
filing the complaint and which involved a paralegal billing a significant number of hours
for work which was duplicative of work performed by attorneys, engineers and appraisers
was clearly erroneous.
¶45 For the above reasons, I dissent.
/S/ W. WILLIAM LEAPHART
Justice James C. Nelson joins in the concurring and dissenting opinion of Justice Leaphart.
/S/ JAMES C. NELSON
Justice Terry N. Trieweiler concurring in part and dissenting in part.
¶46 I concur with the majority's conclusion that the District Court did not err when it
found the number of hours claimed by Slacks' attorneys reasonable and enhanced fees for
delay by awarding them at the attorney's 1996 rates. While Justice Leaphart's opinion to
the contrary capably sets forth the evidence relied on by the appellants, it ignores the
evidence submitted by Slacks which is the evidence on which the District Court justifiably
based its decision.
¶47 Furthermore, I concur with the majority's conclusion that § 70-30-306(2), MCA, does
not prohibit condemnees from entering into contingent fee agreements with their attorneys.
¶48 However, I dissent from that part of the majority opinion which, in reliance on State v.
McGuckin (1990), 242 Mont. 81, 788 P.2d 926, reverses the District Court's award of fees
incurred to prove Slacks' "necessary expenses of litigation." I conclude first that
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McGuckin does not require reversal of the District Court's award and second that, to the
extent arguably applicable, McGuckin was incorrectly decided because it is logically
inconsistent and based on the false premise that an attorney's efforts to prove the
reasonable value of "necessary expenses of litigation" are for his or her own benefit.
¶49 What is important to note from McGuckin is its recognition that:
The State's power of eminent domain is controlled by Article II, Section 29 of the
Montana Constitution which provides:
"Section 29. Eminent Domain. Private property shall not be taken or damaged for
public use without just compensation to the full extent of the loss having been first
made to or paid into court for the owner. In the event of litigation, just compensation
shall include necessary expenses of litigation to be awarded by the court when the
private property owner prevails."
The policy underlying the constitutional provision is to make the land owner whole
after the State takes his property. This constitutional mandate is further embodied in
the condemnation statutes:
"(1) The condemnor shall, within 30 days after an appeal is perfected from the
commissioner's award or report or not more than 60 days after waiver of
appointment of condemnation commissioners, submit to condemnee a written final
offer of judgment for the property to be condemned, together with the necessary
expenses of condemnee then accrued . . . .
"(2) In the event of litigation and when the private property owner prevails by
receiving an award in excess of the final offer of the condemnor, the court shall
award the necessary expenses of litigation to the condemnee."
Section 70-30-305, MCA. (Emphasis added.) Necessary expenses of litigation are
defined as:
" . . . reasonable and necessary attorney fees, expert witness fees, exhibit costs, and
court costs . . . ."
242 Mont. at 84 and 85.
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¶50 In McGuckin, the State Department of Highways contended that pursuant to § 70-30-
305(1), MCA, the statutory authority for an award of attorney fees to a prevailing
condemnee, a landowner is entitled to only those expenses of litigation accrued before a
settlement is reached. However, the Court correctly disagreed and gave the following
explanation:
For us to strictly construe the terms of the settlement agreement as unequivocally
precluding an award of any expenses incurred after the date of settlement could
result in denying a landowner just compensation in direct contravention of Article I,
Section 29 of the Constitution.
...
If they are precluded from recovering any additional expenses after the date the
initial settlement was reached, there is nothing to deter the State from making such
an unreasonable objection in all cases and hope the Court might agree with them.
The end result could deny the landowner a net recovery. On the other hand, the
landowner and counsel should not be allowed to benefit from making unreasonable
and inflated expense claims that force the State to object and lead to further
litigation upon which a landowner's counsel can claim further fees . . . .
242 Mont. at 85.
¶51 With that much of the McGuckin opinion, I agree. The Constitution requires that
condemnees be made whole when their property is taken. They cannot be made whole
unless they are awarded reasonable costs of litigation when litigation is necessary in order
to recover reasonable compensation for their land. Furthermore, they cannot be made
whole, unless they are awarded additional fees and costs, when additional litigation is
necessary in order to recover the initial costs of litigation. That fact is no more true
because the State acts unreasonably than when the State refuses to pay reasonable
expenses of litigation on some arguably reasonable basis. In either event the attorney's
efforts are necessary to recover the expenses of litigation and unless the claimant is
compensated for those efforts, his or her net recovery is reduced. Therefore, I strongly
disagree with this Court's conclusion in McGuckin ". . . that an award of attorney fees
incurred in proving the amount of attorney fees incurred in the litigation is generally not a
necessary and reasonable expense of the landowner." 242 Mont. at 86. That conclusion is
totally inconsistent with the majority's conclusion in the same case that ". . . in order to
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achieve an equitable result in extraordinary circumstances, the District Court in its sound
discretion may require the opposing party to bear this expense . . . ." 242 Mont. at 87.
There was no equitable authority cited in McGuckin for an award of attorney fees. The
only authority for attorney fees discussed in McGuckin was Article II, Section 29 of the
Montana Constitution and § 70-30-305, MCA. Both require an award of attorney fees to
make the condemnee whole. Neither conditions the award of attorney fees on the nature of
the condemnor's conduct.
¶52 Another example of the majority's logical inconsistency in McGuckin is its conclusion
that:
However, we conclude that costs and attorney fees incurred in proving necessary
and reasonable litigation expenses other than attorney fees are chargeable to the
client and to the other party, taking into consideration the other party's litigation
expenses in defending other costs and attorney fees disallowed or unnecessary and
unreasonable.
242 Mont. at 87.
¶53 Section 70-30-306, MCA, which defines "necessary expenses of litigation" includes
both attorney fees and costs. It makes no distinction between them for purposes of the
condemnee's right to recovery. Nor was there any reason for this court to distinguish
between the circumstances under which costs could be recovered as opposed to attorney
fees. An award of both is necessary to ensure that the condemnee is made whole and when
both are necessarily incurred to prove a property owner's "necessary expenses of
litigation" both should be awarded. The constitution requires no less.
¶54 The only explanation I can find in the McGuckin opinion for this logically inconsistent
result is the mistaken premise that the efforts of an attorney to prove the value of attorney
fees incurred by his client are solely for the attorney's benefit. That opinion states as
follows:
With respect to attorney fees incurred in proving attorney fees, it is apparent that a
landowner's counsel is acting primarily in his own interest rather than for the benefit
of his client. The landowner's condemnation award already secured, the outcome of
the litigation expense hearing becomes important to the attorney as well as the
client, and with respect to attorney fees awarded, any result secured by the services
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of the attorney would be for his benefit rather than the client. See, e.g., Glenview
Park District v. Redemptorists Fathers of Glenview (1980), 89 Ill.App.3d 623, 45,
Ill.Dec. 29, 412 N.E.2d. 162.
242 Mont. at 86.
¶55 Nothing could be more incorrect than the preceding statement and the facts in this
case are a perfect example. Slacks were obligated to pay their attorney a contingent fee
equal to 40% of the amount recovered above DOT's original offer. The majority agrees
that contingent fees are a matter between the attorney and client and are not precluded by
§ 70-30-306(2), MCA.
¶56 In this case the DOT originally offered $45,150. However, due to the efforts of Slacks'
attorney, ultimately agreed to pay $168,069. The fee that Slacks owed their attorney for
recovery of that amount was at least $49,167. 60. That fee was owed regardless of how
much Slacks' attorney was able to recover from the State for his "necessary expenses of
litigation." In other words, when Slacks claimed $41,657 as reasonable expenses and the
State offered $26,000, Slacks' attorney had little personal incentive to litigate the
additional amount recovered. The primary benefit was Slacks' because most of the
additional amount by which they were compensated for expenses, including attorney fees,
increased their net recovery and brought them closer to being made "whole." This Court's
conclusion in McGuckin that an attorney's efforts to see that his client receives the full
amount of his necessary expenses of litigation are for the attorney's benefit rather than the
client's benefit is completely wrong.
¶57 For all these reasons, I would reverse McGuckin and hold that because of the
constitutional obligation that property owners whose land has been condemned be made
whole, property owners are also entitled to an award of those attorney fees incurred to
prove "necessary expenses of litigation" unless those expenses have been claimed
unreasonably. For the same reasons, I dissent from the majority's denial of those fees and
costs incurred in post-trial proceedings and on appeal.
¶58 However, having so concluded, I also disagree that the claim in this case is barred by
McGuckin. The court in McGuckin seemed to be concerned with two extreme situations.
The first, where the State unreasonably objects to every expense item claimed and the
second, where the landowner and counsel make inflated expense claims that force the
State to object. The opinion infers that in the McGuckin case, the landowner's claims were
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unreasonable and the State's objections were reasonable. Here, the landowners' claimed
expenses were not unreasonable. The full amount was awarded by the District Court and
that award has been affirmed by this Court. Therefore, the second extreme with which this
Court was concerned in McGuckin is not present in this case and there is no justification
for applying McGuckin to bar the landowners' claim for those costs and fees incurred to
prove his necessary expenses of litigation.
¶59 For these reasons, I concur in part and dissent in part from the majority opinion.
/S/ TERRY N. TRIEWEILER
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