IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
DAVID A. ALEXANDER and ) FOR PUBLICATION
MACLIN P. DAVIS, JR., )
) FILED: JUNE 22, 1998
Plaintiffs-Appellees )
) DAVIDSON COUNTY
v. )
) HON. ROBERT S. BRANDT,
JULIA ANN WHITE INMAN ) CHANCELLOR
)
Defendant-Appellant ) NO. 01-S-01-9705-CH-00103
FILED
June 22, 1998
For Appellant: For Appellees:
Cecil W. Crowson
HARLAN DODSON, III Appellate Court Clerk WARD DEWITT, JR.
ANNE C. MARTIN Nashville, TN
Nashville, TN
OPINION
REVERSED BIRCH, J.
We granted permission to appeal under Tenn. R. App. P. 11
to the appellant, Julia Ann White Inman, in order to determine the
amount of attorneys’ fees, if any, that the appellees, attorneys
David A. Alexander1 and Maclin P. Davis, Jr., are entitled to
recover from Inman, their former client, pursuant to a written fee
agreement.
Under the circumstances presented herein, we conclude
that (1) the agreement is not a contingent fee arrangement; (2) the
attorneys and Inman shared the same understanding of the agreement;
and (3) the fee charged is reasonable. Consequently, we hold that
the attorneys have satisfied their high fiduciary duty of good
faith in the formation of the agreement. We conclude also that the
attorneys did not violate the terms of the agreement. Accordingly,
we hold that the agreement is enforceable, and the attorneys are
entitled to recover the full amount requested. Finally, the
attorneys are not entitled to prejudgment interest.
I
After releasing her first attorneys, Inman engaged Davis
and Alexander on September 6, 1988, to represent her in a fiercely
contested divorce action which had already been set for trial on
October 5, 1988. During the September 6 meeting between Alexander
and Inman, Alexander requested a $10,000 retainer but did not
discuss any other billing arrangements. He also recommended
associating Davis to assist with the representation, and Inman
1
Mr. Alexander died after the first trial of this case.
2
agreed.2 Because the attorneys were engaged only one month before
the trial date, they obtained a continuance, and the trial was
reset for November 15, 1988. Once the trial was reset,
approximately eight weeks were available to prepare for trial.
The parties entered into the fee agreement in dispute on
September 22, 1988. Neither Alexander nor Davis explained the
agreement to Inman, although she admitted at trial to having read
the agreement before signing it. The agreement provides:
The amount of the final fee to
be paid by Client for legal services
of Attorneys and lawyers and clerks
under their supervision shall be a
reasonable amount taking into
consideration the time and labor
required, the novelty and difficulty
of the questions involved, the skill
required to perform the services
properly, the amount involved and
results obtained, and other relevant
factors. Said final fee shall not
exceed 15% of the total sum (in
money and property) awarded to
Client after commencement of the
trial of said action for divorce for
alimony in solido, for five years of
alimony in futuro, and distribution
and division of property, or 10% of
such total sum awarded to Client by
settlement prior to the commencement
of such trial, provided that said
fee shall in no event be less than
(a) $10,000; or (b) the total amount
on a time basis for work of
Attorneys and other attorneys and
clerks under their supervision at
their usual hourly charges for work.
Said retainer feel [sic] shall
be credited toward the total charges
to Client. If the charges for work
exceed $10,000, Attorneys shall bill
2
In addition, Alexander’s partner, attorney Ernest W.
Williams, contributed substantially to the representation.
Williams is not a party to this suit.
3
Client for said excess charges
within a reasonable time.
In the days before the trial, the attorneys examined the
files from Inman’s previous attorneys, subpoenaed bank records,
amended the pleadings, and assembled the necessary evidence. They
also requested the court to re-open discovery and to order Inman’s
spouse to answer several interrogatories propounded by her previous
attorneys.
Because Inman suspected that her spouse had not been
honest about the existence and value of all marital assets, a great
deal of time was devoted to identification and re-evaluation of the
marital estate. The trial court declined to re-open discovery, so
an extensive search of various documents and bank records became
necessary. With Inman’s assistance, they located at least one
undisclosed asset and proved that the value of the marital estate
was approximately $1,666,000 more than Inman’s spouse had
estimated. The attorneys testified that they toiled many evenings
and weekends to prepare for trial and that they devoted
considerable time to meeting or talking with Inman.
The trial was conducted on November 15, 16, and 17, 1988.
In December 1988, the trial court found that the value of the
marital estate was approximately $8,000,000 and entered an order
awarding the divorce to Inman’s spouse on the grounds of cruel and
inhuman treatment. Additionally, the court awarded Inman
$2,300,200 of the marital estate. In January 1989, Inman received
partial payment of the judgment; with it she paid the attorneys
4
$149,000 in fees and approximately $16,000 in expenses. She did
not ask for an explanation of how the fee was calculated or what
services were included.
The attorneys continued to represent Inman on the
appellate level. On October 18, 1989, the Court of Appeals
reversed the trial court’s judgment and held that Inman was
entitled to: (1) the divorce, on grounds of adultery, (2) an
additional $1,043,230 of the marital estate, (3) $5,000 in alimony
per month, and (4) 50% of her attorneys’ fees accruing at trial and
75% of her attorneys’ fees accruing on appeal. The Court of
Appeals also removed $850,000 from her spouse’s separate property
and added it to the marital estate, for a total marital estate of
$8,850,000.
Inman’s spouse then applied for permission to appeal to
this Court, and we granted his application. On April 22, 1991, the
Court reversed the Court of Appeal’s award of alimony and
attorneys’ fees, affirmed the award of the divorce to Inman and the
$1,043,230 increase of her share of the marital property, and
remanded the cause to the trial court for further proceedings. On
July 1, 1991, the Court denied Inman’s petition to rehear.
On remand, the attorneys continued to represent Inman, at
least at first. They requested the trial court to award interest
and income from certain real estate, stocks, bonds, and other
property that had been awarded to Inman yet remained in her
spouse’s possession. On August 16, 1991, the trial court dismissed
the motion, and the attorneys advised Inman to appeal this ruling.
5
Meanwhile, Davis had written a letter to Inman on July
10, 1991, explaining that the attorneys’ fee would be 15% of her
$3,343,430 award, a total of $501,514.50. Because she had already
paid $159,000,3 the attorneys requested the balance of $342,514.50.
Although Inman was distressed by the amount requested, she waited
until late August 1991 to respond that she was unwilling to pay it.
Consequently, the attorney-client relationship was severed, and
Inman retained other counsel to represent her in all subsequent
proceedings.
The attorneys sued Inman for the unpaid fee on December
13, 1991. Inman, alleging that the fee agreement was unenforceable
and the fee was clearly excessive, counterclaimed for a portion of
the $159,000 she had already paid. On March 3, 1993, following a
three-day trial, the jury returned a verdict for the attorneys in
the amount of $263,985, to be paid in addition to the $159,000
already paid.
Inman appealed the verdict, and on February 8, 1995, the
Court of Appeals reversed and remanded for another trial.
Alexander v. Inman, 903 S.W.2d 686 (Tenn. Ct. App. 1995). The
Court of Appeals opinion provided comprehensive guidance to the
trial court on evidentiary issues, jury instructions, and the law
relating to contingent fees in domestic relations cases. On
remand, the parties agreed to a bench trial on the record of the
original trial.
3
This figure consists of the original $10,000 retainer fee,
plus the $149,000 paid after the divorce trial was concluded.
6
A bench trial ensued, and on January 29, 1996, the trial
court ruled that the attorneys had violated the fee agreement by
failing to bill Inman within a reasonable time and that $501,514.50
is an unreasonable fee under the circumstances presented. Upon
analyzing the factors determining reasonableness, the trial court
concluded that $300,000 is a reasonable fee and awarded the
attorneys the unpaid portion of this amount--$141,000. The trial
court also denied the attorneys’ request for prejudgment interest.
Inman appealed this ruling, and the cause came before the Court of
Appeals for the second time.
The Court of Appeals held that the fee agreement is
contingent and unenforceable. However, because the court found
that the fee requested was not “clearly excessive,” the attorneys
were allowed to recover in quantum meruit for the reasonable value
of their services. The Court of Appeals determined that the
reasonable value of their services was $280,757.25. Since Inman
had already paid $159,000, the attorneys were awarded $121,757.25
plus interest, to begin accruing February 13, 1996, the date of
entry of the trial court’s judgment on remand. Judge Koch
dissented from the Court of Appeals decision, noting that the
appropriate fee as determined by the majority, $280,757.25, was
merely an average of the highest and lowest fees suggested by
expert witnesses. Koch found the value of the attorney’s services
to be $166,252.50, which, after credit for the $159,000 already
paid, would result in a judgment of $7,252.50.
Before this Court, Inman contends that the requested
$501,514.50 fee is a clearly excessive contingent fee and, under
7
White v. McBride, 937 S.W.2d 796 (Tenn. 1996), the attorneys are
not entitled to recover any fee at all. Rather, she insists that
she is entitled to recover the $159,000 already paid.
Alternatively, she urges that a reasonable fee in this case is
$60,000 and that she is entitled to recover $99,000 from the
attorneys. The attorneys assert that the fee agreement is
enforceable, that the fee requested is reasonable, and that they
are entitled to an award of prejudgment interest.
In our view of the cause, we find the dispositive issues
to be: (1) whether the fee provided for in the agreement is a
contingent fee; (2) whether the attorneys satisfied their fiduciary
duty of good faith with respect to the formation of the fee
agreement; (3) whether the attorneys violated the terms of the
agreement; and (4) whether the attorneys are entitled to
prejudgment interest. Our review of all findings of law will be de
novo, with no presumption of correctness. Any findings of fact
will be afforded a presumption of correctness, unless the
preponderance of the evidence is otherwise. Tenn. R. App. P.
13(d); Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn.
1996).
II
As a general rule, contingent fee agreements are
begrudgingly permitted in domestic relations cases. Because public
policy favors marriage and discourages attorneys from promoting
bitter divorce battles for financial gain, contingent fees are
subjected to enhanced scrutiny and rarely are found to be
8
justified. As a matter of fact, so unsavory are contingent fees in
domestic relations cases that a higher quantum of proof is
necessary to enforce a contingent fee. Alexander, 903 S.W.2d at
698-99.4 Thus, our initial task is to determine whether the fee
agreement before us describes a contingent fee. The Court of
Appeals found the fee to be one based upon a contingency. Upon
careful analysis, however, we find otherwise.
In Eckell v. Wilson, 597 A.2d 696 (Pa. Super. Ct. 1991),
appeal denied, 607 A.2d 253 (Pa. 1992), a Pennsylvania court
analyzed whether a fee based upon the “reasonable value” of
attorney services, with a minimum fee calculated at an hourly rate,
was contingent. The court found that the fee was not truly
contingent because the attorneys were guaranteed payment regardless
of the outcome of the litigation. In contrast, “[a] contingency
fee agreement carries a risk that an attorney will not be paid if
the outcome of the litigation is unsuccessful. No such risk is
found here.” Id. at 700-01. Other courts have similarly defined
“contingent fee”:
4
According to the Court of Appeals, the attorney whose fee in
a divorce case is based on a contingency must demonstrate, in
addition to the requirements for all attorney fee agreements:
(1) that the client is currently or will be unable to pay
a reasonable fixed fee, or that the opposing party cannot
pay reasonable pendente lite attorneys’ fees or an award
for attorneys’ fees at the conclusion of the case;
(2) that the attorney has explained all relevant
considerations to the client, including the availability
of other fee or payment arrangements and the client’s
right to seek independent legal advice; and
(3) that the attorney has agreed to credit any court-
awarded fees against his or her final fee.
See Alexander, 903 S.W.2d at 699.
9
A contingent fee contract by
definition is one that provides that
a fee is to be paid to the attorney
for his services only in case he
wins, that is, a fee which is made
to depend upon the success or
failure to enforce a supposed right,
and which fee is generally paid out
of the recovery for the client.
Pocius v. Halvorsen, 195 N.E. 137, 139 (Ill. 1964) (emphasis
added). “The usual meaning of ‘contingent fee’ is that the
attorney will be paid only if the case is won.” V.W. v. J.B., 629
N.Y.S.2d 971, 973 (N.Y. Sup. Ct. 1995)(emphasis added).5
The fee agreement in the instant case closely parallels
the agreement in Eckell, in that both use the term “reasonable” in
describing the fee, and both state a minimum fee to be charged. In
addition to these common elements, the agreement in the instant
case states a maximum fee to be charged. This addition, however,
does not alter our analysis, for under the terms of the agreement
between Inman and the attorneys, there is no question that they
would be paid regardless of the outcome of the case. Payment
itself is certain; only the exact amount of payment is uncertain.
The percentage of the total award merely marks the upward limit for
the fee to be charged, and it is not the sole basis for the fee.
Therefore, we find that this arrangement is not a contingent one,
and any enhanced considerations applicable to contingent fees are
5
But see State ex rel. Oklahoma Bar Assn, v. Fagin, 848 P.2d
11 (Okla. 1992) (because state rules prohibit any fee which has
some aspect of a contingency involved, any enhancement of a fee
based on a favorable result is contingent); Salerno v. Salerno, 575
A.2d 532, 533 (N.J. Super. Ct. Ch. Div. 1990) (an agreement for an
hourly rate plus a bonus based on a percentage of the award is a
contingent fee).
10
not relevant here.6 Rather, the criteria generally applicable to
attorney fee agreements must be employed.
III
We move now to the second issue: whether the attorneys
satisfied their duty of good faith when they entered into the
agreement in dispute. The relationship of attorney and client is
“extremely delicate and fiduciary”; therefore, attorneys must deal
with their clients in utmost good faith. This level of good faith
is significantly higher than that required in other business
transactions where the parties are dealing at arm’s length. Cooper
& Keys v. Bell, 127 Tenn. 142, 150, 153 S.W. 844, 846 (1913);
Alexander, 903 S.W.2d at 693. The client must be able to trust the
attorney to deal fairly at all times, including during the
negotiation of the attorney’s terms of employment. Cummings v.
Patterson, 59 Tenn. App. 536, 541, 442 S.W.2d 640, 643 (1968).
In this context, this Court has long held that an
attorney is entitled to compensation in the amount agreed upon by
contract, provided that the contract is fair at its inception and
entered into in good faith. Peoples Nat’l Bank of Washington v.
King, 697 S.W.2d 344, 346 (Tenn. 1985). In order to prove such
good faith and fairness, an attorney seeking to enforce a contract
for attorney’s fees must show:
6
In addition, because we find that the fee is not contingent,
the recent case White v. McBride, 937 S.W.2d at 803, is
inapplicable to this case.
11
(1) the client fully understood the
contract’s meaning and effect,
(2) the attorney and client shared
the same understanding of the
contract, and
(3) the terms of the contract are
just and reasonable.
Cooper & Keys, 153 S.W. at 846 (citing Planters’ Bank of Tennessee
v. Hornberger, 44 Tenn. 531, 573 (1867)).
We will analyze the first two criteria together. Our
analysis begins with the inescapable and obvious conclusion that
the attorneys, as authors of the agreement, understood it to allow
them to charge up to fifteen percent of Inman’s total award. The
dispositive question, then, is whether Inman had the same
understanding of the agreement’s meaning and effect. In her
testimony, Inman admitted that she read the agreement before
signing it. She testified also that she was unable to recall
whether she understood it at that time. Yet, the language of the
agreement plainly stated that the fee could be as much as fifteen
percent of the total award.
Additionally, the record reveals that Inman is an
experienced realtor, well-acquainted with contracts of varying
complexity and their interpretation. Indeed, from the record
before us we easily conclude that she is a highly intelligent,
self-reliant person who possesses acumen and tenacity in such
measure as to enable her to succeed in the extraordinarily
competitive field of real estate. As an example of her financial
sophistication, Inman refused, on at least one occasion, to follow
12
her attorneys’ advice that she accept cash equivalents in lieu of
property. She was also actively involved in the management of her
divorce case, helping the attorneys to uncover valuable assets
belonging to the marital estate. Moreover, the record contains no
suggestion of undue influence or fraud. Thus, we discern no
plausible basis for concluding that Inman did not understand the
words “Said final fee shall not exceed 15% of the total sum (in
money and property) awarded to Client” when she read them.
Inman places a great deal of reliance upon the fact that
the attorneys did not “walk her through” the fee agreement in
detail and explain its terms and conditions to her. This omission,
Inman argues, prevents the attorneys from demonstrating that she
understood the agreement. However, this position is not well-
taken. If we were to accept her argument, then nothing would be
gained by reducing fee agreements to writing. This is true because
a client could make a prima facie case of breach of fiduciary duty
by simply denying that the attorney explained the agreement before
the client signed it. See Maksym v. Loesch, 937 F.2d 1237, 1243
(7th Cir. 1991).
In Maksym, a client attempted to defend against her
attorney’s claim for fees by alleging fraud in the inducement.
Because her claim of fraud was not supported by the proof, the
client argued that all contracts between lawyers and clients are
presumptively fraudulent if the lawyer benefits from the contract.
Id. at 1241. While Inman has not resorted to the use of the term
“fraud,” her argument is strikingly similar. Because the attorneys
did not explain the fee agreement to her, Inman claims that they
13
cannot prove she understood it, which under applicable case law
would mean that the attorneys violated their fiduciary duty of good
faith towards their client. See Cooper & Keys, 127 Tenn. at 150-
51, 153 S.W. at 846.
Yet, the failure of one party to explain the terms of a
written contract to the other is not alone a violation of the
fiduciary obligation of good faith, even if the contract is between
attorney and client. The argument that a fee agreement is
unenforceable unless verbally explained to the client would
effectively create a presumption that all attorney’s fee contracts
are unenforceable. See Maksym, 937 F.2d at 1241-43. We do not
find such a presumption appropriate.
Certainly, an attorney should reach a clear agreement
about fees with the client and should explain the reasons for
preferring one arrangement over another. Ethical Consideration 2-
19, Tenn. S. Ct. R. 8. Nothing, however, suggests that a written
retainer agreement cannot satisfy this ethical consideration. In
fact, reducing the agreement to writing is ideal. Here, the
attorneys amply demonstrated that Inman understood the agreement
she signed and that the attorneys shared the same understanding;
Inman adduced no evidence to suggest otherwise. Therefore, we find
that the attorneys have satisfied the first and second criteria of
Cooper & Keys for showing good faith in dealings between attorney
and client.
Under the third and last criterion for an attorney
seeking to enforce a contract for fees, the terms of the contract
14
must be just and reasonable. Cooper & Keys, 127 Tenn. at 150, 153
S.W. at 846. On its face, the agreement between Inman and the
attorneys requires a reasonable fee, based upon expressed factors.
In general, an agreement which utilizes broad terms and does not
fix an exact fee is still acceptable. This Court has allowed a law
firm to enforce a promissory note created pursuant to a similarly
worded fee agreement. See Waller, Lansden, Dortch, & Davis v.
Haney, 851 S.W.2d 131, 132 (Tenn. 1992) (the retainer agreement
provided that the firm be paid a reasonable fee based on the amount
involved, the time expended, the novelty of the transaction, and
the deadlines imposed upon counsel). Moreover, the agreement here
is just and reasonable because it provides for a minimum and
maximum fee to be charged. Indeed, the maximum fee provided a
protection to Inman by defining the limit beyond which the fee
could not rise.
Of course, the use of the word “reasonable” and the
provision of a minimum and maximum fee will not alone make the
agreement enforceable. We must also determine whether the fee
ultimately charged was a reasonable fee, as is required by the
terms of the agreement and by case law. We begin by noting that,
as a practical matter, no court can divine from the range of
reasonable fees the one that is “most reasonable.” Indeed, those
who have already opined a reasonable fee in this case have arrived
at different figures. There is no need to second-guess the
reasonable fees proposed because we hold that, under the
circumstances, $501,514.50 is within the range of reasonableness.
We reach this conclusion upon a careful analysis of the factors
determining the reasonableness of an attorney’s fee.
15
Pursuant to the fee agreement, the factors to be
considered in determining the reasonableness of a fee are “the time
and labor required, the novelty and difficulty of the questions
involved, the skill required to perform the services properly, the
amount involved and results obtained, and other relevant factors.”
These factors essentially mirror those enumerated by this Court in
Connors v. Connors, 594 S.W.2d 672, 676 (Tenn. 1980). Additional
factors relevant to reasonableness of a fee include: the time
limitations imposed by the circumstances, the fee customarily
charged in the locality for similar legal services, and the
experience, reputation, and ability of the lawyer performing the
legal service. Id.
In our consideration of what is a “reasonable fee,” we
have relied on the trial court’s findings of fact. First, with
respect to time and labor devoted to Inman’s representation, we
agree with the trial court that considerable amounts of each were
expended. While divorce cases are more often disposed of without
a contested trial, Inman’s case required a three-day trial, an
appeal to the intermediate court, and an appeal to this Court. The
appeal to the intermediate court was based on factual issues, and
the preparation of a brief in such a case is a time-consuming task,
in that bits and pieces of evidence adduced during the three-day
trial had to be organized and restated understandably and
persuasively. In sum, this was no ordinary divorce case in terms
of the time required of the attorneys.7
7
With respect to time and labor, we disregard the attempted
reconstruction of the attorneys’ time records and the allegations
of over-staffing and duplicative services. There is no need to
reconstruct the exact hours spent on the case, because the fee was
16
As an added consideration, the fact that Inman retained
the attorneys a scant month before the initial trial court date
imposed a severe burden on them. They were able to obtain a
continuance to November 15, 1988, but even so, they had precious
little time--two months--to prepare for trial. Because the
attorneys came into the case so late, they had to prepare more
intensely than they would have, had they been representing her from
the beginning.
We move now to a consideration of the novelty and
difficulty of the questions involved and the skill required to
render effective representation. According to the trial court,
there was nothing novel or difficult about the issues raised in
this divorce case. The trial court further explained that divorce
cases are not particularly difficult compared to other types of
cases, because they usually involve factual situations with which
the trier of fact is familiar. Yet, the time constraints, the
number of issues, and the value of the marital estate significantly
increased the difficulty of this case. Based upon a consideration
of those factors, it is clear to us that only those attorneys with
extraordinary skill and specialized experience would have been able
to properly represent Inman and manage her case.
not controlled by the attorneys’ hourly rates. Rather, the parties
clearly intended some leeway beyond the hourly rates. The time
devoted to the case is but one of several factors determining the
overall reasonableness of the fee charged. Because it is clear
that the attorneys put innumerable hours into Inman’s case, the
time and labor factor suggests that the $501,514.50 fee is
reasonable. Of course, as this case illustrates, it is preferable
for an attorney to maintain reliable time records, regardless of
the kind of fee arrangement the attorney has with the client.
17
Furthermore, considering the criteria of experience,
reputation, and ability of the attorneys, we do not hesitate to
conclude that these attorneys were exceptionally well-qualified to
handle such a difficult case. The quality of their representation
is evidenced by their unflagging persistence and consummate skill.
Expert witnesses testified that each of Inman’s attorneys possessed
an extraordinary degree of expertise and enjoyed an excellent
reputation in the area of domestic relations. The trial judge, on
remand, agreed that Inman’s attorneys were “veteran trial lawyers
with reputations for tenacity and competence.” Furthermore, there
is an abundance of proof in the record that the attorneys
represented Inman to the best of their skills and abilities. This
was what she expected of them, and, indeed, this is what she
received.
With respect to the results obtained by the attorneys,
the trial court concluded that the results were not particularly
good. On this point, we differ. Admittedly, Inman’s objection to
the fee charged stems from a dissatisfaction with the results. She
insists that the results obtained were not favorable because she
was awarded much less than fifty percent of the marital estate, the
amount to which she considered herself entitled. Yet, the
attorneys managed to convince the Court of Appeals to reverse the
trial court ruling which awarded the divorce to her spouse--no
small feat. Even more important, the Court of Appeals
substantially increased the amount awarded to Inman by the trial
court. In addition to having been advanced to the position of the
prevailing party in this bitter divorce action, Inman was also
awarded an additional $1,043,230 of the marital estate, increasing
18
her total award to $3,343,430--approximately thirty-eight percent
of the marital estate. This increase is particularly impressive in
light of the fact that she was not shown by the evidence to be the
primary wage-earner.8 See Inman v. Inman, 811 S.W.2d 870, 870-71
(Tenn. 1991). Moreover, the dollar amount of marital assets is
also a significant factor in the fee-determination process.
Because the essence of the dispute concerned the distribution of an
almost nine million dollar estate, Inman’s attorneys are entitled
to a proportionally larger fee.
There is countervailing proof regarding the
reasonableness of the fee. Evidence of the smaller fee charged by
the attorney for Inman’s spouse and the expert testimony of one
witness, taken together, permit the inference that for similar
services other attorneys have charged or may charge less. That
inference notwithstanding, just as no two cases are the same, no
two lawyers are the same, and unless the legal profession decides
to operate under a “uniform fee” system, no two fees will be the
same. Thus, the fact that other lawyers may have performed similar
services for less does not undermine the reasonableness of the fee
charged by Inman’s attorneys.
While no single factor determines reasonableness, on
balance we conclude that the fee of $501,514.50 is reasonable. In
sum, because the fee agreement provided both a minimum fee and a
8
In the instant case, Inman’s own expert, Rose Palermo, a
lawyer who handles divorce cases involving large estates, testified
that in such cases the spouse who was not the primary wage-earner
typically receives approximately thirty-five to forty percent of
the marital estate.
19
protective cap on the fee, and because the fee ultimately charged
was based on the reasonable value of services rendered, the
attorneys have satisfied the third criterion of Cooper & Keys, that
the terms of the agreement be just and reasonable. The fee
agreement thus conforms to case law and the code of professional
responsibility. To conclude, with all three Cooper & Keys criteria
satisfied, the attorneys have shown that they fulfilled their high
fiduciary duty of good faith toward Inman in the formation of the
fee agreement between them.
IV
We need not dwell at length on the third issue: whether
the attorneys violated the terms of the fee agreement. The
attorneys waited until the entry of the final judgment of this
Court, in July 1991, to send Inman the bill. According to the
trial court, this delay violated the fee agreement, which required
“If the charges for the work exceed $10,000, Attorneys shall bill
Client for said excess charges within a reasonable time.”
Clearly, this agreement does not require periodic or
interim billing, which is the customary method when the fee is
calculated solely on a per-hour basis. Further, Inman never
inquired about the lack of billing during the three years the
appellees represented her. Even when the attorneys requested a
payment of $149,000 in attorneys’ fees after the trial, she did not
request an accounting or explanation of the fees. Because neither
the language of the agreement nor the conduct of the parties
indicated a need for interim billing, we conclude that no such
20
requirement existed. The fee was ultimately based upon Inman’s
total award. This amount could not be ascertained before final
judgment. Because the bill was sent promptly upon entry of the
final judgment of this Court, we conclude that such billing was
accomplished within a reasonable time. Thus, the attorneys
fulfilled their obligations under the agreement.
V
The final issue is whether the attorneys are entitled to
prejudgment interest. The attorneys insist that interest should
begin accruing on the date they first requested payment of their
fees, July 10, 1991. The trial court declined to award prejudgment
interest in this case, reasoning that
Alexander and Davis seem to have
been the major cause for their
failure to be timely paid. Their
contract is vague and, most
importantly, they did not follow it
themselves, particularly the part
that required them to bill Inman
within a reasonable time.
The Court of Appeals did not disturb this ruling, but allowed
interest to begin accruing from the date the judgment of the trial
court was entered on remand, February 13, 1996.
Pursuant to Tenn. Code Ann. § 47-14-123, prejudgment
interest may be awarded in accordance with the principles of
equity.9 In reaching an equitable decision, a court must keep in
9
Tennessee Code Annotated § 47-14-123 (1988) provides:
21
mind that the purpose of prejudgment interest is to fully
compensate a plaintiff for the loss of the use of funds, not to
penalize a defendant. Moreover, if a plaintiff’s right to recovery
and the amount of such recovery are not disputed on reasonable
grounds, an award of prejudgment interest is more likely to be
equitable. Myint v. Allstate Insurance Co., ___ S.W.2d ____ (Tenn.
1998), 1998 W.L. 276184.
The trial court’s decision to award or deny prejudgment
interest may be overturned only upon a finding of a “manifest and
palpable abuse of discretion.” Under this deferential standard, an
appellate court may not substitute its judgment for that of the
trial court. Rather, an abuse of discretion occurs only when the
evidence does not support the trial court’s decision. Id.
We have concluded, contrary to the trial court’s ruling,
that Inman’s refusal to pay the attorneys’ fees is not attributable
to the attorneys’ conduct. Nevertheless, the trial court’s denial
of prejudgment interest is not a manifest and palpable abuse of
discretion. We reach this conclusion because an additional factor
supports the trial court’s decision: both the right to recover the
fees and the amount of such fees were quite reasonably disputed.
This fact is amply demonstrated by the sound, yet widely differing,
conclusions reached by the several jurists who have analyzed this
Pre-judgment interest, i.e., interest as an element
of, or in the nature of, damages, as permitted by the
statutory and common laws of the state as of April 1,
1979, may be awarded by courts or juries in accordance
with the principles of equity at any rate not in excess
of a maximum effective rate of ten percent (10%) per
annum; . . . .
22
case. In light of the extreme uncertainty of the final disposition
of this case, we conclude that an award of prejudgment interest
would not serve to compensate the attorneys for loss of the use of
funds. Rather, such an award would amount to a windfall.
Accordingly, the attorneys’ request for prejudgment interest is
denied.
VI
In conclusion, we recognize that the agreement at issue
could have been more clearly drafted. Although language of the
agreement is not ambiguous, a more carefully crafted document may
have spared the parties protracted litigation. Yet, under the
facts and circumstances presented, we find that Inman nevertheless
fully understood the agreement and had the same understanding as
the appellees. Further, the agreement was fair and reasonable, as
was the fee ultimately charged. Inman does not allege fraud or
undue influence in the formation of the fee agreement, and there is
no evidence of such bad faith conduct. Therefore, the attorneys
satisfied their high fiduciary duty of good faith towards Inman in
the formation of the fee agreement. Further, the attorneys did not
violate the terms of the agreement by postponing the billing until
the case was concluded. Finally, the attorneys are not entitled to
an award of prejudgment interest.
Accordingly, the judgment of the Court of Appeals is
reversed. The fee agreement is enforceable, and the appellees are
entitled to the full amount requested, $501,514.50. Because Inman
has already paid $159,000 in attorneys’ fees, judgment for the
23
appellees is hereby entered in the amount of $342,514.50, with
interest accruing on and after February 13, 1996, pursuant to the
opinion of the Court of Appeals. Costs of the appeal are taxed to
the appellant, for which execution may issue if necessary.
__________________________________
ADOLPHO A. BIRCH, JR., Justice
CONCUR:
Anderson, C.J.
Drowota, Holder, JJ.
Reid, S.J.
24
Alexander v. Inman
Combined Opinion