No. 89-502
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
THE ASSOCIATION OF UNIT OWNERS OF DEER
LODGE CONDOMINIUM, INC., a Montana corporation,
Plaintiffs, Appellants and Respondents,
and THE BOARD OF DIRECTORS OF THE ASSOCIATION
OF UNIT OWNERS OF DEER LODGE CONDOMINIUM, INC.,
-.
o,
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-- -
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& *
Plaintiff and Respondent, -A .
vs .
BIG SKY OF MONTANA, INC., et al.,
Defendants.
PAGE WELLCOME, P.S.C., a nonparty affected
by the determination in the ~istrictCourt,
Appellant. , . c3
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Madison,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Page Wellcome; Wellcome, Frost & Bartlett, Bozeman
Montana (Class)
Max Hansen, Dillon, Montana (Wellcome)
For Respondent:
J. Robert Planalp; Landoe, Brown, Planalp & Kommers,
Bozeman, Montana (Association, Board)
Michael J. Lilly, Bozeman, Montana
Patrick G. Frank, Missoula, Montana
Submitted on Briefs: January 25, 1990
Decided: April 9, 1990
Filed:
Justice Fred J. Weber delivered the Opinion of the Court.
This class action was the subject of an approved settlement
on July 18, 1988, by the District Court for the Fifth Judicial
District, Madison County. After a hearing on August 5, 1988, the
District Court made its Order fixing attorney fees. Upon motion
by the Association of Unit Owners of Deer Lodge Condominium
(Association) on June 1, 1989, the District Court reduced the
original award of attorney fees. Page Wellcome appeals such
reduction in his fees. We affirm.
The sole issue for our consideration is whether the District
Court erred in reducing Mr. Wellcome's attorney fees?
This case was previously before this Court when it was ordered
to proceed as a class action with the Association and its Board of
Directors acting as representatives. See State ex rel. Boyne USA,
Inc. v. District Court (1987), 228 Mont. 314, 742 P.2d 464. After
an adjustment by the District Court, the plaintiffst Class
received, by way of cash and other property, in excess of six
million dollars. A series of settlement hearings were held on the
Bovne case culminating in an August 5, 1988 hearing on the issue
of attorney fees to be paid to Mr. Wellcome. Mr. Wellcome was
represented by associates of his firm at the hearing.
On August 5, 1988, the District Court ordered attorney fees
to be paid as follows:
[Tlhe attorneys will receive TWO HUNDRED THOUSAND AND
00/100 DOLLARS ($200,000.00) of the cash settlement
proceeds from the initial cash payment. An additional
sum of TWO HUNDRED THOUSAND AND 00/100 DOLLARS
($200,000.00) shall be paid from the first sale proceeds
when the real property owned by the members of the class
and the Deer Lodge Condominium Association or any part
thereof is sold by the association. In addition to the
foregoing the attorneys shall have an interest equal to
TWENTY-FIVE PERCENT (25%) (one-fourth) of the sale price
of the real property which percentage shall be applied
to the sale price of all real property less the TWO
HUNDRED (sic) AND 00/100 DOLLARS ($200,000.00) previously
paid from the land sale proceeds. Such percentage amount
shall then be reduced by any real estate commission paid
on behalf of the association to a Montana licensed real
estate agent in connection with such sale, the amount or
percentage of which commission shall be agreed to (by the
attorneys) prior to the real estate listing. If no
licensed real estate agent is paid by the association
then the TWENTY-FIVE PERCENT (25%) (one-fourth) of the
land sale proceeds shall not be reduced and shall be paid
in full to the attorneys.
In addition to the foregoing, the attorneys shall
also receive the automobile credit attributable to the
two (2) bedroom unit owned by the association.
The initial TWO HUNDRED THOUSAND AND 00/100 DOLLARS
($200,000.00) payment as hereinabove specified shall be
paid to the attorneys for the class on August 12, 1988.
The balance of the attorneys' fees in the additional
amount of TWO HUNDRED THOUSAND AND 00/100 DOLLARS
($200,000.00) together with the TWENTY-FIVE PERCENT (25%)
(one-fourth) interest in the real property shall be paid
to the attorneys when the land is sold and pending such
sale the attorneys shall have a lien and charge against
the real property owned by the Deer Lodge Condominium
Association, and each and every condominium unit in the
Deer Lodge Condominiums, in order to insure payment of
such attorneys' fees as hereinabove specified. . . .
In September 1988, Mr. Wellcome left the country for an
extended world tour. Subsequently the Association obtained new
counsel. On June 1, 1989, the Association, through the Board of
Directors, filed a motion with the District Court asking it to
reconsider its Order granting Page Wellcome in excess of
$794,748.58 in attorney fees. The motion argued that the award
violated Montana law and did not take into account a substantial
amount of attorney fees and costs previously paid to Mr. Wellcome;
that the award was based on the court's presumption that Mr.
Wellcome would continue to represent the plaintiffs, when in fact,
his representation was terminated; that notwithstanding the court's
award, Mr. Wellcome's firm continued to charge on an hourly basis;
and that the attorney fees were extreme in comparison to the
benefits received by the Class members.
On June 30, 1989, after discovering that the record disclosed
matters of which the Court was not previously aware, the Court
entered its Order striking the contingent fee portion of the fee
and reducing the cash balance still owing from $200,0~00 to
$100,000. When Mr. Wellcome returned from his vacation, he pursued
this non-party claim for his attorney fees. In its opinion and
order on the Motion to Reassess, the District Court noted in its
findings that the record before it disclosed matters of which it
was not aware on August 5, 1988, including: (1) Mr. Wellcome had
previously been paid $373,748.58 as fees and reimbursement of
costs; (2) a previous attorney had been paid $135,000; (3) the
value of the property received by the Class was not $1,000,000 as
contemplated; but actually one-half of that sum; and (4) the court
had not been advised of the existing law as to contingent fees in
a class action. The court further noted that there was no evidence
that these matters were misrepresented or withheld from the court.
The court listed in its findings the attorney fees that had been
paid to Mr. Wellcome as of June 13, 1989 as follows:
Payment fees & costs through August 5, 1988 $226,948.11
Payment of August 5, 1988 200,000.00
Payment by Safeco Insurance Company
Credit for Chrysler Automobile
TOTAL
Although the court praised Mr. Wellcome's work on this case, it
concluded that the Itfee as originally approved, and under the
facts, some of which were unknown to the Court, was not an
equitable one1', and the Itfunds on hand and anticipated are not
sufficient to pay the approved fee." Thus, it ordered the
contingent fee portion (the percentage of the sale) stricken and
reduced the cash balance of $200,000 to $100,000. Mr. Wellcome
appeals the amended award. We affirm.
I
Did the District Court err in reducing Mr. Wellcomelsattorney
fees?
Mr. Wellcome maintains that the District Court erred when it
reduced his fees, arguing that the District Court's initial Orders
in 1988, awarding fees to Class counsel, after notice to the Class,
were appropriately entered. He asserts that he followed the same
fee agreement as Mike Coil, the counsel who originally represented
the Association, which provided both an hourly rate to be paid as
the litigation progressed, together with a contingent fee based
upon a declining percentage scale at the conclusion of the
litigation, and that such agreement was acceptable to the
Association. Mr. Wellcome further contends that the District
Court's findings are not supported by the evidence and that the
August 5, 1988, Order was not appealed from, and was therefore
binding, based on lack of an appropriate appeal and laches.
Relying on Western Media, Inc. v. Merrick (1988), 232 Mont.
480, 757 P.2d 1308, the Association urges that an award of attorney
fees consisting of both a contingency fee and an hourly rate is
unreasonable, whether or not the case involves a class action.
In reducing the attorney fees to Mr. Wellcome, the District
Court cited Waters v. City of Chicago (Ill. App. 1981), 420 N.E.2d
599, for the proposition that in a class action an award of
attorney fees is I1contingentupon success, and upon the existence
of a fund from which the fees can be paidf1,
and that the evaluation
of settlement must be "fair, reasonable, and in the best interests
of all affected." We approve and adopt this standard for the
evaluation of attorney fees in a class action.
The question of whether an attorney and client could agree to
pay either an hourly rate or a contingent fee, whichever was
larger, was addressed by this Court in Western Media. In Western
Media, the parties agreed to payment of attorney fees of either a
40% contingent fee of any amount recovered or an hourly rate,
"whichever calculation results in the larger compensation to the
attorney.I1 This Court stated:
The circumstances to be considered in determining the
compensation to be recovered are the amount and character
of the services rendered; the labor, time, and trouble
involved, the character and importance of litigation in
which the services were rendered, the amount of money or
the value of property to be affected, the professional
skill and experience called for, the character and
standing in the profession of the attorneys; the result
secured by the services of the attorneys may be
considered as an important element in determining their
value.
[Tlhe amount fixed as [contingent] attorney fees is
largely discretionarv with the District Court.
Even though attorney's compensation is provided for under
825-10-301, MCA, which allows the amount and manner to
be left to agreement, express or implied this type of
clause takes away the rationality behind contingency fee
contracts. (citations omitted).
Western Media, 757 P.2d at 1310. The result under Western Media
is that the clause allowing a contingent fee or an hourly rate was
not approved but was disapproved.
In its conclusions of law dated June 30, 1989, the District
Court concluded that the previously approved attorney fees must in
law and in equity be amended and adjusted by striking the
contingent fee portion of the approved fee and reducing the cash
balance from $200,000.00 to $100,000.00. The court's rationale
was contained in a memorandum which stated in part as follows:
In the Court's view, the contingent fee portion of the
attorney fee is not only contrary to the law in class
actions, it is under the facts confiscatory. The court
has reviewed the applicable cases, specifically Waters
v. City of Chicaso, 402 N.E.2d 599, 604 (Ill.). . ..
Having made these observations, the court must consider
the equities. The fee as originally approved, and under
the facts, some of which were unknown to the court, was
not an equitable one. The funds on hand and anticipated
are not sufficient to pay the approved fee. Equity
requires the ordered adjustment, e.g., striking the
contingent fee and reducing the further cash payment.
The present case has been an extremely complex and prolonged
example of class litigation. This Court is not in the position to
accurately evaluate the extent of the attorney services provided
and the fees which are reasonable as compensation for such
services. The District Court on the other hand was the court which
handled the complex litigation and under this circumstance is the
court peculiarly qualified to make the attorney fees determination.
We conclude that there is substantial evidence to support the
findings on the part of the District Court and that the District
Court properly applied the law of Montana to the determination of
the fees.
We affirm the fee determination on the part of the District
Court.
We note that both parties raise other issues with regard to
the underlying class litigation. We conclude that the attorney
fees issue is the primary issue addressed by both parties and
therefore do not find it necessary to consider any of the other
matters presented by the parties.
\ '/ Chief Justice
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