Allard v. First Interstate Bank of Washington, N.A.

773 P.2d 420, 112 Wash. 2d 145, 1989 WL 56295

• Court: Washington Supreme Court
• Decided: May 26, 1989
• Docket: 55087-5
• Status: Published

Opinions

Callow, C.J.

First Interstate Bank (Bank) challenges the trial court's award of attorneys' fees to plaintiffs. The Bank contends that the trial court erred by relying on the terms set forth in a contingent fee agreement between plaintiffs and their attorney and erred by awarding fees based on an hourly rate in addition to those based on the contingent fee agreement. We uphold the trial court's award.

I

In 1979, the plaintiffs brought suit against Pacific National Bank, defendant's predecessor, alleging a breach of the Bank's fiduciary duty in the management of two trusts. Plaintiffs contended that the Bank failed to obtain a reasonable price when it sold property in downtown Seattle owned by one of the trusts. The Bank prevailed at trial, and the plaintiffs appealed. This court reversed, in Allard v. Pacific Nat'l Bank, 99 Wn.2d 394, 663 P.2d 104 (1983), and remanded the case to the trial court for a determination of damages and attorneys' fees.

On remand, the trial court awarded approximately $2.5 million in damages to the plaintiffs. The court also awarded approximately $1 million in attorneys' fees. These fees included an award of approximately $225,000 to the firm of Oles, Morrison & Rinker, et al, which handled the initial trial and appeal. Additionally, the court awarded approximately $750,000 in attorneys' fees for the second trial. These fees included a contingent fee of $596,646 to the firms of Paul Luvera and Associates and Mullavey, Prout, Grenley, Sonkin & Foe, plus $80,000 in fees payable based on an hourly rate to the firm of Edwards & Barbieri for the services of Charles Wiggins and $65,000 in fees to the guardian ad litem.

The Bank has paid all of the attorneys' fees assessed against it with the exception of the $596,646 contingent fee. The Bank asserts that the trial court erred in giving consideration to the contingent fee agreement between plaintiffs and Mr. Luvera when awarding attorneys' fees. Additionally, the Bank contends that the $80,000 paid to Edwards & Barbieri should be deducted from this figure. The Bank appealed the award of attorneys' fees to the Court of Appeals, which certified the following questions to this court:

1. Whether the trial court may rely on a contingent fee agreement between the prevailing party and its attorney in computing and awarding a reasonable attorney fee?

2. Whether the trial court may award attorney fees charged at an hourly rate in addition to the fees awarded based on a contingent fee agreement?

II

Both the Bank and the Court of Appeals have framed the issues in terms of the propriety of the trial court's reliance on the contingent fee agreement and the award of hourly fees in addition to those awarded under the agreement. However, the issue should be framed as to whether the trial court's award of attorneys' fees, as a whole, was reasonable.

RCW 4.84.020 provides that, "in all other cases in which attorneys' fees are allowed, the amount thereof shall be fixed by the court at such sum as the court shall deem reasonable ..." (Italics ours.) See also Singleton v. Frost, 108 Wn.2d 723, 727, 742 P.2d 1224 (1987); Key v. Cascade Packing, Inc., 19 Wn. App. 579, 585, 576 P.2d 929 (1978). The reasonableness of an award is subject to appellate review. Key, at 585. However, the trial court's determination of what constitutes a reasonable award will not be reversed absent an abuse of discretion. Boeing Co. v. Sierracin Corp., 108 Wn.2d 38, 64, 738 P.2d 665 (1987); Meyer v. UW, 105 Wn.2d 847, 856, 719 P.2d 98 (1986); Allard v. Pacific Nat'l Bank, 99 Wn.2d 394, 407, 663 P.2d 104 (1983). "A trial court abuses its discretion when its exercise of discretion is manifestly unreasonable or based upon untenable grounds or reasons." Davis v. Globe Mach. Mfg. Co., 102 Wn.2d 68, 77, 684 P.2d 692 (1984). Also, " [a]n abuse of discretion exists only where no reasonable person would take the position adopted by the trial court." Singleton, at 730 (quoting Wilkinson v. Smith, 31 Wn. App. 1, 14, 639 P.2d 768 (1982)).

In this case, the trial court considered three primary factors in determining the amount of attorneys' fees to be awarded: (1) RPC 1.5(a), (2) the contingent fee agreement between plaintiffs and their attorney, and (3) the court's belief that the plaintiffs should be made whole. A finding of fact states:

The court has reviewed the fees and costs incurred and the contingent fee arrangements in light of the factors in RPC 1.5(a). The court has also observed Mr. Luvera's conduct of the case as lead counsel, the result obtained, and the beneficiaries' financial inability to retain counsel on an hourly fee arrangement, and finds $596,646 to be a reasonable award for attorney's fees and costs.

In addition, during oral ruling, the trial court stated:

Consequently, this court rules that the Allards and the Orkneys are to be made whole and will award attorneys fees to compensate them for all of the amount of money they have paid and owed to Mr. Oles [plaintiffs' counsel during the initial trial and appeal] and all of the amount of money they owe to Mr. Luvera.

The trial court acted reasonably when it considered the factors set forth in RPC 1.5(a) in determining the amount of attorneys' fees to be awarded. These factors include:

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

(2) The likelihood, 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 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.

RPC 1.5(a). We have recognized that the factors set forth in CPR DR 2-106(B), the predecessor to RPC 1.5(a), may be used as a guideline for determining reasonable attorneys' fees. See Singleton, at 731, Kimball v. PUD 1, 64 Wn.2d 252, 257, 391 P.2d 205 (1964); see also Informal Op. 88-1, Contingent Fee Agreements in Cases Where the Court Sets a Reasonable Attorney's Fee, Wash. State Bar News 23 (Feb. 1988).

Furthermore, the trial court also acted reasonably when it considered the contingent fee agreement between plaintiffs and their attorney in making its award. RPC 1.5(a) specifically authorizes consideration of whether the fee was fixed or contingent. See RPC 1.5(a)(4), (8). Pennsylvania v. Delaware Vly. Citizens' Coun. for Clean Air, 483 U.S. 711, 97 L. Ed. 2d 585, 596, 107 S. Ct. 3078 (1987) (Delaware II), impliedly authorized the consideration of contingent fee agreements in making an award of attorneys' fees. In dicta, the Supreme Court noted,

the contingency factor was meant to focus judicial scrutiny solely on the existence of any contract for attorney's fees which may have been executed between the party and his attorney. "The fee quoted to the client or the percentage of the recovery agreed to is helpful in demonstrating that attorney's fee expectations when he accepted the case."

Delaware II, at 723 (quoting Johnson v. Georgia Hwy. Express, Inc., 488 F.2d 714, 718 (5th Cir. 1974)).

A trial court may consider the existence of a contingent fee agreement in making its award of attorneys' fees, but should not rely solely on the terms of such an agreement in determining the amount. See Leubsdorf, Recovering Attorney Fees as Damages, 38 Rutgers L. Rev. 439, 476 (1986); Note, Attorney's Fees — Computing a "Reasonable Attorney's Fee" Under the Civil Rights Attorney's Fees Awards Act — Cooper v. Singer, 33 U. Kan. L. Rev. 367, 388 (1985). The court must independently decide what constitutes a reasonable award. In a case involving condemnation proceedings, the trial court awarded attorneys' fees totaling 15 percent of the difference between the City's offer and the jury verdict, the same amount provided for in a contingent fee agreement between the condemnees and their attorneys. See Seattle v. Seattle-First Nat'l Bank, 79 Wn.2d 490, 487 P.2d 777 (1971). We upheld the award, stating, "The [trial] court determined that, independently of the contract between the respondents and their attorneys, a fee of 15 per cent of the difference between the city's offer and the jury's verdict was reasonable.'' Seattle, at 493. Key v. Cascade Packing, Inc., supra, stated in reference to a contingent fee arrangement:

Such an arrangement is perfectly valid, but it should not control the size of the burden placed on a defendant. The existence of a contingent fee arrangement between an attorney and client says nothing about the reasonableness of an award of attorney's fee granted to a plaintiff against a defendant. The attorney's fee awarded should be neither enhanced nor diminished by the presence of such an arrangement.

Key, at 586. The existence of a contingent fee agreement may be considered as one of several factors in making an award of attorneys' fees, but it alone is not determinative.

In this case, the trial court did not apply the contingent fee agreement mechanically to determine the amount of attorneys' fees to be awarded to the plaintiffs. The court also considered the factors set forth in RPC 1.5(a) and its intent to make the plaintiffs whole. Because the court considered several factors in making its award, we cannot say that its award of $596,646 according to the contingent fee agreement constituted an abuse of discretion.

Finally, the trial court stated its intention to make the plaintiffs whole in fashioning its award of attorneys' fees. In this case, attorneys' fees were awarded as a matter of equity, based on the Bank's breach of its fiduciary duty. The trial court stated in its conclusions of law:

This court, sitting in equity, has given due consideration to the egregious nature of the bank’s breach in determining the actual amount of damages.

In order to place the trusts in the same position as if defendant bank had never breached its fiduciary duties, judgment should be entered against the defendant bank

Furthermore, when we initially concluded that plaintiffs were entitled to recover attorneys' fees, we stated that "plaintiffs should be granted their request to recover all attorney fees expended at both the trial and on appeal ...” (Italics ours.) Allard, at 407-08. For these reasons, it was within the trial court's discretion to consider making plaintiffs whole as a factor in reaching its decision.

The trial court did not abuse its discretion by considering the factors set forth in RPC 1.5(a), the contingent fee agreement, and making plaintiffs whole in making its award of attorneys' fees.

III

The Bank also contends that the trial court abused its discretion by awarding $80,000 in hourly fees for the services of Mr. Wiggins in addition to the $596,646 awarded under the contingent fee agreement. The Bank asserts that had Mr. Luvera chosen to associate someone from the Mullavey firm, the fees awarded to that attorney would have been covered by the contingent fee agreement. Instead, by going outside the firm, the Bank has been required to pay the entire 25 percent contingent fee plus an additional $80,000 to Mr. Wiggins.

The contingent fee agreement provided that outside counsel might be required, and that such counsel would be paid on an hourly basis in addition to payment of the contingent fee. Paragraph 4 of the agreement states:

Paul [Luvera] also felt that there might be a requirement that we hire other counsel to help us as the case progresses and if that is the case, those costs would be considered expenses that would be paid by you at the time that the expenses are incurred. As an example, if we were assigned an Iranian Judge, Paul might want to hire an Iranian attorney to argue a particular motion to the Iranian Judge, and that would be an expense that would be paid by you. I recognize that this is a far fetched example, but I hope it illustrates the thought that Paul had.

The Bank argues that this paragraph refers to hiring outside counsel for a specific, narrowly defined purpose. In this case, Mr. Wiggins handled a large portion of the trial, and therefore, arguably, did not fall within the "Iranian counsel" exception.

As noted, the primary consideration in determining an appropriate award is reasonableness. Thus, it should not be improper per se to award fees charged at an hourly rate in addition to those incurred under a contingent fee agreement. If such an award is reasonable under the circumstances, it should be upheld. There was evidence that the plaintiffs had originally agreed to pay Mr. Luvera a 33 Vs percent contingent fee. This fee was reduced to 25 percent in consideration of the fact that outside counsel might have to be appointed. The plaintiffs assert that as a result of this reduction, the Bank saved $120,000 in fees. In addition, there was evidence that Mr. Wiggins' role was limited to research, briefing, and motions practice during much of the litigation, and his role expanded only when the Bank noted last-minute depositions of the plaintiffs' experts and made last-minute disclosures of its own expert witnesses. The plaintiffs should not have to bear the burden of the Bank's late-hour tactics, especially in light of the purpose of making plaintiffs whole. We cannot say that the trial court's award of $80,000 for fees to Edwards & Barbieri constituted an abuse of discretion.

Finally, Mr. Wiggins and the guardian ad litem have requested attorneys' fees for services rendered during this appeal. Mr. Wiggins and the guardian ad litem have complied with the requirements of RAP 18.1 by making a request for attorneys' fees in their brief. In addition, Mr. Wiggins timely filed his affidavit for attorneys' fees and is entitled to recover attorneys' fees in the amount of $23,663.30 for the work he has done on appeal, pursuant to RAP 18.1. We also award the guardian ad litem attorneys' fees of $2,970.

IV

In fashioning the award of attorneys' fees, the trial court considered the factors set forth in RPC 1.5(a), the contingent fee agreement between the plaintiffs and their attorney, and the court's stated intent to make plaintiffs whole. The Bank challenges the award of fees based on the contingent fee agreement and the additional $80,000 awarded to Charles Wiggins. We conclude that this award is not unreasonable and did not constitute an abuse of discretion. We uphold the award of attorneys' fees.

Brachtenbach, Dolliver, Pearson, Andersen, and Durham, JJ., and Cunningham and Hamilton, JJ. Pro Tern., concur.