Gendron v. Montana University System

2020 MT 82

• Court: Montana Supreme Court
• Decided: April 7, 2020
• Docket: DA 19-0115
• Status: Published

Opinion

DA 19-0115 04/07/2020 IN THE SUPREME COURT OF THE STATE OF MONTANA 2020 MT 82 Case Number: DA 19-0115

WHITNEY ERIN GENDRON, individually and on behalf of all other similarly situated,

Plaintiffs and Appellants,

v.

MONTANA UNIVERSITY SYSTEM, JOHN DOE DEFENDANTS 1-100, and JOHN DOE DEFENDANTS 101-150,

Defendants and Appellees.

APPEAL FROM: District Court of the Eighteenth Judicial District, In and For the County of Gallatin, Cause No. DV-09-953B Honorable Rienne H. McElyea, Presiding Judge

COUNSEL OF RECORD:

For Appellants:

Hillary P. Carls, Blackford Carls, P.C., Bozeman, Montana

Erik B. Thueson, Thueson Law Office, Helena, Montana

Mark J. Luebeck, Angel, Coil & Bartlett, Bozeman, Montana

For Appellee:

Robert C. Lukes, J. Andrew Person, Garlington Lohn & Robinson, PLLP, Missoula, Montana

For Amicus Montana Trial Lawyers Association:

John C. Heenan, Heenan & Cook, Billings, Montana

For Amicus Montana Defense Trial Lawyers:

Matthew B. Hayhurst, Randy J. Tanner, Boone Karlberg P.C., Missoula, Montana

Submitted on Briefs: October 30, 2019

Decided: April 7, 2020

Filed:

r--6ta•--df __________________________________________ Clerk Justice James Jeremiah Shea delivered the Opinion of the Court.

¶1 Whitney Erin Gendron appeals the January 25, 2019 Findings of Fact, Conclusions

of Law, and Order Re: Attorneys’ Fees of the Eighteenth Judicial District Court, Gallatin

County, partially denying her motion for attorney fees. We restate and address the

following issues on appeal:

Issue One: Did the District Court abuse its discretion in its determination of whether the attorney fees awarded to Class Counsel were reasonable?

Issue Two: Is Gendron entitled to interest accrued on the award of attorney fees?

¶2 We affirm the decision of the District Court, but remand the case for a determination

of the interest to which Gendron is entitled.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 In October 2009, Gendron filed individual and class action claims against her

employer, Montana University System (MUS), based on violations of certain provisions of

Montana’s insurance law relating to benefits claims she requested under the MUS group

health plan following an automobile collision.

¶4 In November 2016, the parties reached a partial settlement wherein MUS agreed to

pay class members for certain insurance claims withheld and modify its policy language.

The parties then filed a joint motion for preliminary approval of the settlement, class

certification, and appointment of class counsel. On March 24, 2017, the District Court

granted the motion and appointed Gendron the Class Representative and her attorneys as

Class Counsel. The District Court’s order further provided, “Class Counsel are entitled to

2 an award of reasonable attorneys’ fees and costs, over and above, and separate from, the

amount paid to Class Members.”

¶5 On January 4, 2018, the District Court gave its final approval of the settlement. The

parties were unable to agree to a total attorney fees and costs award. The District Court

held an evidentiary hearing over the course of three different days to determine the amount

of the award. At the hearing, Class Counsel stated they took Gendron’s case on a

contingency fee basis and requested the District Court calculate a fee award based on

33⅓% of the estimated aggregate settlement value of $10,842,000, for a total fee award of

$3,610,386. Class Counsel alternatively requested the District Court award fees based on

hourly rates of $350 and $400, respectively, with application of a multiplier of 4.22 to

account for the additional responsibility and risk of taking on a class action, for a total fee

award of $3,108,013.12. Class Counsel admitted they both retrospectively created their

time records because they took Gendron’s case on a contingency fee basis and typically do

not keep contemporaneous time records for such cases.

¶6 On January 25, 2019, the District Court issued its Findings of Fact, Conclusions of

Law, and Order Re: Attorneys’ Fees, declining to award Class Counsel their requested fees

under a percentage-based calculation. The District Court reasoned that the relief obtained

by Gendron and other class members was primarily “injunctive in nature” and therefore

could not be “easily monetized” or “estimated with reasonable certainty,” nor did the

parties agree on a total settlement value. The District Court instead calculated

Class Counsel’s fee award by multiplying the hours worked on the case by hourly rates of

3 $275 and $375, respectively, finding those rates to be customary of other attorneys in the

area. The District Court did not apply a multiplier to the calculation, concluding it would

have increased each Class Counsel’s hourly rate to over a thousand dollars an hour. The

District Court also reduced Class Counsels’ claimed hours not contemporaneously

recorded by 20%, resulting in a total fee award of $511,463.40. As added support for its

analysis, the District Court cross-checked its fee against a percentage of the actual class

member payout as of October 2018, $1,219,672.76, which would have resulted in a lower

fee award of $406,557.55. The District Court directed MUS to pay Gendron’s fees and

costs within 30 days of the order.

¶7 On February 22, 2019, Gendron filed her notice of appeal of the District Court’s

attorney fee award. Pending appeal, MUS tendered full payment of the attorney fee award

to Class Counsel, but Class Counsel refused to accept the funds. MUS then moved the

District Court to deposit the funds with the Clerk of District Court or in a trust account,

and requested a ruling that it would not have to pay interest on the attorney fee judgment

because Class Counsel refused to accept the funds. Class Counsel subsequently moved to

stay execution of the judgment. On May 17, 2019, the District Court granted

Class Counsel’s motion to stay, but it declined to rule whether interest would accrue on the

judgment and ordered MUS to hold the funds pending resolution of the case on appeal,

stating, “Pursuant to Rule 19(4), [M. R. App. P.], this Court does not have authority to deny

interest on the judgment as requested by MUS. The issue should be raised with the

Montana Supreme Court.”

4 STANDARDS OF REVIEW

¶8 Where legal authority exists to award attorney fees, we will not disturb on appeal

the amount of a party’s fee award absent an abuse of discretion. Davis v. Jefferson Cty.

Election Office, 2018 MT 32, ¶ 8, 390 Mont. 280, 412 P.3d 1048; James Talcott Constr.

Inc. v. P&D Land Enters., 2006 MT 188, ¶¶ 27, 62, 333 Mont. 107, 141 P.3d 1200. An

abuse of discretion occurs when the district court acts arbitrarily, without employment of

conscientious judgment, or in excess of the bounds of reason, resulting in substantial

injustice. Talcott Constr., ¶ 62 (citing Renville v. Farmers Ins. Exchange, 2004 MT 366,

¶ 24, 324 Mont. 509, 105 P.3d 280).

¶9 Whether a party is entitled to post-judgment interest is a conclusion of law which

we review de novo. Healy v. Healy, 2016 MT 154, ¶ 19, 384 Mont. 31, 376 P.3d 99;

In re Marriage of Pfeifer, 2000 MT 100, ¶ 11, 299 Mont. 268, 999 P.2d 340 (citing Tipp v.

Skjelset, 1998 MT 263, ¶ 11, 291 Mont. 288, 967 P.2d 787).

DISCUSSION

¶10 Issue One: Did the District Court abuse its discretion in its determination of whether the attorney fees awarded to Class Counsel were reasonable?

¶11 Montana follows the “American Rule” regarding attorney fees, which generally

requires each party to a dispute pay its own fees regardless of the outcome of the case,

absent contractual or statutory fee-shifting authority. See Abbey/Land v. Glacier Constr.

Partners, LLC, 2019 MT 19, ¶ 63, 394 Mont. 135, 433 P.3d 1230 (citing Goodover v.

Lindey’s, 255 Mont. 430, 445, 843 P.2d 765, 774 (1992)); Folsom v.

Mont. Pub. Emples. Ass’n, 2017 MT 204, ¶ 43, 388 Mont. 307, 400 P.3d 706. When 5 attorney fees are authorized, the controlling standard in all actions, including class actions,

is that the amount of fees awarded be reasonable. See Talcott Constr., ¶ 63; Ass’n of Unit

Owners of Deer Lodge Condominium v. Big Sky, 242 Mont. 358, 362-63, 790 P.2d 967,

970 (1990) (quotations omitted) (“[I]n a class action an award of attorney fees is contingent

upon success, and upon the existence of a fund from which the fees can be paid, and that

the evaluation of settlement must be fair, reasonable, and in the best interests of all

affected.”). The reasonableness of fees depends on the facts of each case. Kenyon-Noble

Lumber Co. v. Dependant Founds., Inc., 2018 MT 308, ¶ 31, 393 Mont. 518, 432 P.3d 133

(citing Houden v. Todd, 2014 MT 113, ¶ 37, 375 Mont. 1, 324 P.3d 1157).

¶12 We recognize two primary methods of calculating reasonable fees: the lodestar

method, which involves “multiplying the number of hours reasonably spent on the case by

an appropriate hourly rate in the community for such work,” Tacke v. Energy West, Inc.,

2010 MT 39, ¶ 32, 355 Mont. 243, 227 P.3d 601 (quoting Saizan v. Delta Concrete Prods.

Co., 448 F.3d 795, 799 (5th Cir. 2006) (per curiam)), and the percentage of the recovery

method, which authorizes fees to be paid from a percentage of a common fund or a

contingency fee agreement, see Buckman v. Montana Deaconess Hosp., 238 Mont. 516,

520, 776 P.2d 1210, 1212 (1989) (quoting Wight v. Hughes Livestock Co., 204 Mont. 98,

110, 664 P.2d 303, 309-10 (1983)) (“Ordinarily, when lawyers undertake a representation

on a contingency basis, they bargain for a percentage of the recovery.”); Mt. W. Farm

Bureau Mut. Ins. Co. v. Hall, 2001 MT 314, ¶ 14, 308 Mont. 29, 38 P.3d 825 (providing

that a party who creates or preserves a common fund benefiting ascertainable,

6 non-participating beneficiaries of the litigation is generally entitled to reimbursement of

his or her attorney fees from that common fund).

¶13 Under the lodestar method, we have identified seven guiding factors to be used in

determining the number of hours counsel reasonably expended:

(1) the amount and character of the services rendered; (2) the labor, time and trouble involved; (3) the character and importance of the litigation in which the services were rendered; (4) the amount of money or the value of the property to be affected; (5) the professional skill and experience called for; (6) the attorneys’ character and standing in their profession; and (7) the results secured by the services of the attorneys.

Talcott Constr., ¶ 63 (citing Plath v. Schonrock, 2003 MT 21, ¶ 36, 314 Mont. 101,

64 P.3d 984); Audit Servs. v. Frontier West, 252 Mont. 142, 153, 827 P.2d 1242,

1250 (1992). These factors are nonexclusive, and a district court may rely on other

considerations in determining reasonableness. Talcott Constr., ¶ 63 (citing Plath, ¶ 36).

The lodestar figure “is presumed to be the reasonable fee to which counsel is entitled.”

Tacke, ¶ 32 (original emphasis omitted) (citing Pennsylvania v. Del. Valley Citizens’

Council for Clean Air, 478 U.S. 546, 564, 106 S. Ct. 3088, 3098 (1986); Laudert v.

Richland Cty. Sheriff’s Dep’t, 2001 MT 287, ¶ 18, 307 Mont. 403, 38 P.3d 790). The

district court may adjust the lodestar figure upward or downward according to other

considerations. Laudert, ¶ 18 (citing Hensley v. Eckerhart, 461 U.S. 424,

103 S. Ct. 1933 (1983), superseded by statute on other grounds); Audit Servs., 252 Mont. at

154, 827 P.2d at 1250 (citing D’Emanuele v. Montgomery Ward & Co., Inc., 904 F.2d

1379, 1383 (9th Cir. 1990)). To assist courts in accurately and fairly arriving at a lodestar 7 figure, we have previously “strongly urge[d] counsel to keep and provide contemporaneous

time records in support of attorneys’ fees requests in fee-shifting cases, and we

encourage[d] district courts to look askance at requests not so supported.” Tacke, ¶ 38.

¶14 We have articulated a similar set of nonexclusive factors typically used to determine

a reasonable fee award under the percentage of the recovery calculation:

(1) The novelty and difficulty of the legal and factual issues involved; (2) The time and labor required to perform the legal service properly; (3) The character and importance of the litigation; (4) The result secured by the attorney; (5) The experience, skill, and reputation of the attorney; (6) The fees customarily charged for similar legal services at the time and place where the services were rendered; (7) The ability of the client to pay for the legal services rendered; and (8) The risk of no recovery.

Stimac v. State, 248 Mont. 412, 417, 812 P.2d 1246, 1249 (1991). See also Kuhr v. City of

Billings, 2007 MT 201, ¶ 41, 338 Mont. 402, 168 P.3d 615 (affirming district court’s

application of Stimac factors to determine whether to award the full amount of a contingent

fee agreement as reasonable attorney fees in wage claim action under § 39-3-214, MCA).

A district court may also consider the contingency fee agreement between an attorney and

client when using a percentage of the recovery calculation, but “[t]he amount fixed as

contingent attorney fees” remains “largely discretionary” with the court. Big Sky,

242 Mont. at 363, 790 P.2d at 970 (quoting Western Media, Inc. v. Merrick, 232 Mont. 480,

484, 757 P.2d 1308, 1311 (1988)). See also Weinberg v. Farmers State Bank,

231 Mont. 10, 36, 752 P.2d 719, 735 (1988), superseded by statute on other grounds

8 (“[A] contingent fee contract does not bind a district court in determining a proper amount

of attorney fees to be awarded under a statute or contract provision.”).

¶15 We have never endorsed the rule that a district court is required to employ one

method of calculation over the other in any particular case. See Head v. Central Reserve

Life Ins. of N. Am. Ins. Co., 256 Mont. 188, 202-05, 845 P.2d 735, 743-45 (1993)

(determining the district court did not abuse its discretion when it calculated fees under the

lodestar approach but relied on a combination of factors, including the Stimac factors, to

increase lodestar amount to achieve a fee equal to the agreed-upon contingency fee in an

ERISA action under 29 U.S.C. § 1132(g)(1)). See also In re Bluetooth Headset Prods.

Liab. Litig., 654 F.3d 935, 942 (9th Cir. 2011) (providing that courts generally

“have discretion to choose which calculation method they use” as long as their discretion

is “exercised so as to achieve a reasonable result.”); Galloway v. Kan. City Landsmen, LLC,

833 F.3d 969, 973-74 (8th Cir. 2016) (quoting Johnston v. Comerica Mortg. Corp.,

83 F.3d 241, 246 (8th Cir. 1996)) (“It is within the discretion of the district court to choose

which method to apply.”); Gascho v. Global Fitness Holdings, LLC, 822 F.3d 269,

280 (6th Cir. 2016) (quoting Moulton v. U.S. Steel Corp., 581 F.3d 344,

352 (6th Cir. 2009)) (“District courts have the discretion to select the particular method of

calculation, but must articulate the ‘reasons for adopting a particular methodology and the

factors considered in arriving at the fee.’”); In re GMC Pick-Up Truck Fuel Tank Prods.

Liab. Litig., 55 F.3d 768, 821 (3rd Cir. 1995) (“[T]he ultimate choice of methodology will

rest within the district court’s sound discretion.”); Florin v. Nationsbank, N.A., 34 F.3d 560,

9 566 (7th Cir. 1994) (“[B]oth the lodestar approach and the percentage approach may be

appropriate in determining attorney’s fee awards, depending on the circumstances. . . .

[T]he decision . . . remains in the discretion of the district court.”). As long the district

court’s decision is supported by an adequate rationale, Head, 256 Mont. at 205, 845 P.2d

at 745, the court maintains broad discretion in its selection of the method of calculation

and consideration of the guiding factors when awarding fees based on the competent

evidence presented, see Talcott Constr., ¶¶ 63-64 (citations and quotations omitted) (“[A]n

award of fees, like any other award, must be based on competent evidence. . . . [E]vidence

elicited through oral testimony, cross examination, and the introduction of exhibits is

competent evidence upon which an attorney’s fee award can be based.”). See also

generally Vintage Constr., Inc. v. Feighner, 2017 MT 109, ¶ 15, 387 Mont. 354, 394 P.3d

179 (providing that a district court is in the best position to hear and weigh the credibility

of testimony and proffered evidence, and this Court will generally defer to the district

court’s resolution of conflicting evidence).

¶16 Gendron argues the District Court erred in reducing Class Counsel’s requested

amount of attorney fees, specifically by failing to consider and apply a multiplier when it

conducted a lodestar calculation. We disagree.

¶17 The District Court held a hearing and expert testimony was presented from both

sides. The District Court issued a detailed order determining the lodestar method was the

most appropriate calculation under the circumstances of the case, particularly given the

structure of the settlement and the lack of a traditional common fund from which

10 Class Counsel could be awarded a percentage. In setting Class Counsel’s hourly rate, the

District Court cited both Stimac and Talcott and applied several of the reasonableness

factors to find the customary rate for similar attorneys in the area was much less than what

Class Counsel requested. The District Court considered adjusting the fee award upward

using the 4.22 multiplier as requested by Class Counsel, but ultimately rejected it, finding

it would have significantly increased Class Counsel’s hourly rate. The District Court then

reduced the number of Class Counsel’s claimed hours by 20% for those hours not

contemporaneously recorded, finding counsel’s approximation of that time years later to

be incredible and inflated. The District Court then cross-checked its lodestar calculation

against the percentage-based calculation to further support its fee amount. The

District Court’s calculation was supported by an adequate rationale at every step, and

Gendron has failed to show the District Court’s decision was arbitrary, decided without

employment of conscientious judgment, or in excess of the bounds of reason under the

circumstances.

¶18 Issue Two: Is Gendron entitled to interest accrued on the award of attorney fees?

¶19 On appeal, MUS argues that Gendron should not be awarded interest on the

attorney fee award because MUS attempted to pay Gendron the award within 30 days as

required by the District Court’s order, but it was prevented from making the payment

because Class Counsel refused to accept the funds and the District Court ordered MUS to

hold the funds pending resolution of the case on appeal.

11 ¶20 MUS relies exclusively on § 27-1-211, MCA, in support of its contention that

Gendron is not entitled to interest on the attorney fee award. MUS’s reliance on

§ 27-1-211, MCA, is misplaced. We have previously held that § 27-1-211, MCA, applies

only to pre-judgment interest, not post-judgment interest. See Tipp, ¶¶ 12-17;

In re Marriage of Mannix, 242 Mont. 137, 140, 788 P.2d 1363, 1365-66 (1990). When

determining a party’s entitlement to post-judgment interest, we look to §§ 25-9-204

and -205, MCA. Tipp, ¶ 17. “Post-judgment interest is not merely awarded in the

discretion of the court, but is a statutory right.” New Hope Lutheran Ministry v. Faith

Lutheran Church of Great Falls, Inc., 2014 MT 69, ¶ 72, 374 Mont. 229,

328 P.3d 586 (citing In re Marriage of Pospisil, 2000 MT 132, ¶ 49, 299 Mont. 527,

1 P.3d 364; § 25-9-205, MCA). A stay of execution of judgment pending appeal does not

affect a party’s statutory right to the post-judgment interest due. In re Marriage of Dalley,

237 Mont. 287, 292, 773 P.2d 295, 298 (1989) (citing Knudson v. Knudson, 191 Mont. 204,

208, 622 P.2d 1025, 1026-27 (1981)).

¶21 The current Rules of Appellate Procedure incorporate these

notions. See Tidyman’s Mgmt. Servs. v. Nat’l Union Fire Ins. Co., 2016 MT 201, ¶¶ 24-25,

384 Mont. 335, 378 P.3d 1182. We explained in Tidyman’s that in cases where “a judgment

for money in a civil case is affirmed,” 19(4), M. R. App. P., requires payment of “whatever

interest is allowed by law” to “be payable from the date the judgment was rendered or made

in the district court.” Tidyman’s, ¶ 25.

12 ¶22 Aside from urging us to apply a statute that we have previously determined to be

inapposite to post-judgment interest, MUS has not substantively argued for an exception

to our established case law regarding the right to post-judgment interest. Therefore, we

conclude Gendron is entitled to post-judgment interest in this case.

CONCLUSION

¶23 The District Court did not abuse its discretion in its determination of whether the

attorney fees awarded to Class Counsel were reasonable. MUS’s reliance on

§ 27-1-211, MCA, as a basis for opposing interest on the attorney fee award is misplaced.

Gendron is entitled to interest in accordance with § 25-9-205, MCA. We remand to the

District Court for a determination as to the interest to which Gendron is entitled.

/S/ JAMES JEREMIAH SHEA

We Concur:

/S/ MIKE McGRATH /S/ JIM RICE /S/ DIRK M. SANDEFUR /S/ INGRID GUSTAFSON