Department of Transportation v. Randolph

Reilly, J.

Defendants appeal as of right from an opinion and order awarding defendants attorney fees and costs in this condemnation proceeding. We affirm.

Plaintiff initiated a condemnation action to acquire property owned by defendants for the purpose of the relocation of US-27 in Clinton County. Plaintiff made an initial good-faith offer of $1,625,655 pursuant to § 5 of the Uniform Condemnation Procedures Act (UCPA), MCL 213.55; MSA 8.265(5), and paid this amount to defendants. Defendants contested the adequacy of plaintiffs offer, arguing that the property was worth approximately $9 million. Plaintiff then reappraised the property and reduced its offer to $1,071,000. The case proceeded to trial, and a jury returned a verdict awarding just compensation to defendants in the amount of $2,593,931. With interest, the judgment resulted in an award of $2,724,615.

After trial, defendants moved for reimbursement of attorney fees, expert witness fees, and costs pursuant to § 16 of the UCPA, MCL 213.66; MSA 8.265(16), requesting attorney fees in the amount of $375,590.55. This figure was based on a contingent fee agreement in which defendants agreed to pay a fee equal to one-third of the difference between the amount of plaintiff’s initial offer and the amount of the final judgment. Following an evidentiary hearing with regard to defendants’ motion, the trial court issued an opinion and order awarding defendants attorney fees in the amount of $120,153. Rather than award the full amount set forth in the contingent fee agreement, the trial court used the “lodestar” method to determine defendants’ reasonable attorney fees. Under the lodestar method, the appropriate fee is established by multiplying the reasonable number of horns worked by a reasonable hourly rate. See Burlington v Bague, 505 US 557, 559; 112 S Ct 2638; 120 L Ed 2d 449 (1992). In this case, the trial court multiplied 728.2 hours (which was the number of hours indicated on the itemized statement filed with defendants’ request for reimbursement), by a rate of $165 an hour (which was the rate defendants’ attorney indicated she would have charged defendants if she had been retained on an hourly basis).

On appeal, defendants contend that the trial court erred in using the lodestar method to determine defendants’ reasonable attorney fees for reimbursement purposes. We disagree. An award of attorney fees in a condemnation case will be upheld on appeal unless the trial court abused its discretion in determining the reasonableness of the fees. In re Condemnation of Private Property for Hwy Purposes (Dep’t of Transportation v Curis), 221 Mich App 136, 139-140; 561 NW2d 459 (1997). An abuse of discretion occurs when an unprejudiced person, considering the facts upon which the trial court acted, would say that there was no justification or excuse for the trial court’s ruling. Auto Club Ins Ass’n v State Farm Ins Cos, 221 Mich App 154, 167; 561 NW2d 445 (1997).

The ucpa provides for an award of “reasonable” attorney fees subject to a statutory maximum of one-third of the difference between the ultimate award and the agency’s ’written offer. MCL 213.66(3); MSA 8.265(16)(3); Curis, supra at 139. The trial court is required to make an independent review and determine, on the basis of the record in the case, what constitutes a reasonable attorney fee. Curis, supra at 139. This Court in In re Condemnation of Private Property for Hwy Purposes (Dep’t of Transportation v D & T Const Co), 209 Mich App 336, 341-342; 530 NW2d 183 (1995), held that, in determining the reasonableness of a fee award, the trial court must consider the eight factors listed in MRPC 1.5(a):

(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar legal services;

(4) the amount of time involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

The burden of proving the reasonableness of the fee award rests with the party claiming compensation. Curis, supra at 139.

This Court has identified three purposes of the fee-shifting provision of the UCPA:

First, awarding attorney fees will assure that the property owner receives the full amount of the award, placing the owner in as good a position as that occupied before the taking. Second, the fee structure penalizes agents of the condemnor for deliberately low offers because a low offer may result in the condemnor paying the owner’s litigation expenses as well as its own. Third, the fee provision provides a performance incentive to the owner’s attorney, because the fee awarded is directly proportional to the results achieved by counsel. [Curis, supra at 142-143 (citations omitted); see also Dep’t of Transportation v Robinson, 193 Mich App 638, 645; 484 NW2d 777 (1992).]

In some situations, the purposes of the UCPA are better served by a reimbursement award based on the amount of a contingent fee actually paid than by one based on the lodestar method. See Curis, supra at 143. This is so, first, because a reimbursement award based on the lodestar method may not be equal to the amount of attorney fees actually paid by the property owner pursuant to a contingent fee agreement. Where the reimbursement award is less than the actual attorney fees paid, the property owner is not placed in as good a position as that occupied before the taking. See Curis, supra at 143. We note, however, that the Legislature did not elect to provide for reimbursement of actual attorney fees, which would have ensured full compensation in eveiy case. Compare MCL 213.66(3); MSA 8.265(16)(3) (providing for reimbursement of “reasonable attorney fees” in cases where the amount of just compensation exceeds the amount of the initial offer) with MCL 213.66(2); MSA 8.265(16)(2) (providing for reimbursement of “actual reasonable attorney fees” in cases where the acquisition of the property itself is found to be improper). Second, while any award of attorney fees would penalize deliberately low offers resulting in litigation, the size of a reimbursement award based on an actual contingent fee paid would be directly related to the size of the initial offer. Thus, under the “contingency method,” lower initial offers would ultimately result in correspondingly larger penalties. Finally, only a reimbursement award based on a contingency would be directly proportional to the results achieved by counsel. In this regard we note that a reimbursement award based on the lodestar method would not necessarily preclude an attorney from charging a contingent fee. Accordingly, the attorney’s incentive to perform does not necessarily rely on the method utilized to calculate the property owner’s reimbursement award.

While a reimbursement award based on a contingent fee actually paid is warranted in some circumstances, the existence of a contingent fee agreement does not mandate a reimbursement award based on the amount of the contingent fee. See City of Flint v Patel, 198 Mich App 153, 159; 497 NW2d 542 (1993). Consideration of each of the eight specific factors enumerated in MRPC 1.5(a) necessarily precludes reliance on any one particular formula or method to determine the amount of reasonable attorney fees for reimbursement purposes. See D & T Const, supra at 339-342; see also Smolen v Dahlmann Apartments, Ltd, 186 Mich App 292, 296-297; 463 NW2d 261 (1990); Hartman v Associated Truck Lines, 178 Mich App 426, 429-431; 444 NW2d 159 (1989). Thus, a trial court may not rely on the existence of a contingent fee agreement without also considering the extent of services actually performed by the property owner’s attorney. Detroit v Larned Associates, 199 Mich App 36, 43; 501 NW2d 189 (1993). In circumstances where a full one-third contingent fee is unreasonable, lodestar analysis provides a useful starting point for determining a reasonable fee. See Howard v Canteen Corp, 192 Mich App 427, 437; 481 NW2d 718 (1992), cited with approval in Patel, supra at 160; see also Hensley v Eckerhart, 461 US 424, 433; 103 S Ct 1933; 76 L Ed 2d 40 (1983). Therefore, use of the lodestar method to determine a reasonable attorney fee for reimbursement proposes under the ucpa does not necessarily constitute an abuse of discretion.

In this case, considering the amount of hours defendants’ attorney worked on the case, a reimbursement award based solely on the existence of the contingent fee agreement would have required plaintiff to compensate defendant at a rate of more than $515 an hour. Defendants’ attorney stated in an affidavit that she would have charged defendants $165 an hour if she had been retained on an hourly basis. After specifically considering each of the factors enumerated in MRPC 1.5(a), the trial court determined that the amount requested by defendants based on the contingent fee agreement was not “reasonable.” We cannot say that there was no justification or excuse for the trial court’s determination that this amount, which would have produced an hourly rate of pay over three times the amount defendants’ attorney would have charged if she had been retained on an hourly basis, was unreasonably high. Accordingly, we hold that the trial court did not abuse its discretion when it used the lodestar method, with figures supplied by defendants, to determine a reasonable reimbursement award for defendants’ attorney fees.

Affirmed.

Kelly, P.J., concurred.