Davis v Kutta [1997] FMSC 38; 8 FSM Intrm. 218 (Chk. 1997) (5 December 1997)

FEDERATED STATES OF MICRONESIA
SUPREME COURT TRIAL DIVISION
Cite as Davis v Kutta, [1997] FMSC 38; 8 FSM Intrm. 218 (Chk. 1997)

MENRY DAVIS,
Plaintiff,

vs.

JIM KUTTA, HALVERSON NIMEISA, RESAUO MARTIN,
ERADIO WILLIAM, FRANCIS RUBEN, JOHNSON SILANDER
and the STATE OF CHUUK,
Defendants.

CIVIL ACTION NO. 1992-1039

ORDER AND MEMORANDUM OF DECISION

Martin Yinug
Associate Justice

Decided: December 5, 1997

APPEARANCES:

For the Plaintiff:
R. Barrie Michelsen, Esq.
Law Offices of R. Barrie Michelsen
P.O. Box 1450
Kolonia, Pohnpei FM 96941

For the Defendants:
Wesley Simina, Esq.
Attorney General
Office of the Chuuk Attorney General
P.O. Box 189
Weno, Chuuk FM 96942

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HEADNOTES

Attorney, Trial Counselor and Client - Fees; Civil Rights
A successful plaintiff under the civil rights statute, 11 F.S.M.C. 701(3), is entitled to an award for costs and reasonable attorney's fees. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 220 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees
The initial estimate of a reasonable attorney's fee is properly calculated by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 220 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees
In determining the amount of attorney's fees to award the prevailing party in a civil rights suit the court should consider United States civil rights decisions without being bound by them. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 221 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees; Civil Rights
An hourly fee is not an arbitrary ceiling with respect to attorney's fees recoverable under an 11 F.S.M.C. 701(3) civil rights action. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 222 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees
A contingency fee, like any attorney's fee, must meet the requirements of Rule 1.5 of the Model Rules of Professional Conduct, which provides that a lawyer's fee shall be reasonable. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 222 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees
A contingent fee agreement shall be in writing and state the method by which the fee is to be determined, and upon conclusion of the matter the lawyer shall provide the client with a written statement stating the outcome and, if there is a recovery, showing the remittance to the client and the method of determination. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 222 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees
Contingency fees are prohibited in both domestic relations and criminal matters. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 222 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees; Civil Rights
When a party has entered into a contingent fee agreement reasonable under FSM MRPC Rule 1.5 and the contingent recovery is more than a fee calculated by an hourly rate times the hours expended, a court, in awarding civil rights attorney's fees, may award a reasonable fee pursuant to the agreement's terms. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 223 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees; Civil Rights
The purpose of the FSM civil rights fee provision is to permit an FSM civil rights litigant to employ reasonably competent counsel to pursue civil rights litigation without cost to him or herself. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 223 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees
A client is free to contract with counsel along any lines reasonable under FSM MRPC Rule 1.5, and such a fee, if it is reasonable, is enforceable against the client regardless of the fee awarded by the court. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 224 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees; Civil Rights
Because the point of departure for determining a reasonable fee in civil rights litigation is to look at the amount of time spent, counsel should maintain careful records of time actually spent, notwithstanding the existence of a contingency fee agreement. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 224 (Chk. 1997).

Attorney, Trial Counselor and Client - Fees; Civil Rights; Costs
Civil rights attorney fee awards and awards of costs may be entered against multiple defendants in the same proportions as those in the original judgment. Davis v. Kutta, [1997] FMSC 38; 8 FSM Intrm. 218, 224 (Chk. 1997).

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COURT'S OPINION

MARTIN YINUG, Associate Justice:

For the reasons set out below, the plaintiff is awarded attorney fees in the amount of $42,900. Of that amount, $26,598 is awarded jointly and severally against Chuuk and the defendant officers; $6,435 is awarded jointly and severally against Chuuk and Chief of Police Eradio William; and $9,867 is awarded jointly and severally against the defendant police officers, Chuuk, and Chief of Police Eradio William.

With respect to costs, $208.97 is awarded jointly and severally against Chuuk and the defendant officers; $50.56 is awarded jointly and severally against Chuuk and Chief of Police Eradio William; and $77.52 is awarded jointly and severally against the defendant officers, Chuuk, and Chief of Police Eradio William.

I. Introduction

Plaintiff is entitled to an award of attorneys fees in this case under 11 F.S.M.C. 701(3), which provides in pertinent part that "[a] person who deprives another of any right or privilege protected under this section shall be civilly liable to the party injured . . . . In an acunder this sect section, the court may award costs and reasonable attorney's fees to the prevailing party." After trial in this cause, the court entered judgment in favor of plaintiff in the sum of $130,000, which constitutes compensatory damages for defendants' violation of plaintiff's civil rights pursuant to 11 F.S.M.C. 701(1). In its finding of facts and conclusions of law, the court directed plaintiff to submit a motion for attorney fees that "shall state in detail the time for each action devoted to the case, what was actually done, the amount of attorney fees and costs requested, and the nature (e.g., contingency, hourly fee, written, oral) of her contract with counsel for services." Davis v. Kutta, [1996] FMSC 25; 7 FSM Intrm. 536, 549 (Chk. 1996). Plaintiff filed her Motion for Award of Attorney's Fees, to which no defendant filed a response, in which plaintiff's counsel recited that "[b]ecause of the contingent nature of the contract, contemporaneous records of time spent was [sic] not kept, and so such records cannot be produced for the Court." The contingency fee agreement, signed by plaintiff, is made part of the record, and provides for a contingency fee of 33%. By this court's calculation, the 33% contingency fee in this case is $42,900. Noting that "the initial estimate of a reasonable attorney's fee is properly calculated by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate," Blum v. Stenson, [1984] USSC 57; 465 U.S. 886, 888[1984] USSC 57; , 104 S. Ct. 1541, 1544, 79 L. Ed. 2d 891, 895 (1984), this court subsequently directed counsel to prepare a reasonable reconstruction of the time spent on the case by looking to the case file and counsel's independent recollection. Plaintiff's counsel filed on October 20, 1997, plaintiff's Supplemental Memorandum Regarding Motion for Award of Attorney's Fees, to which no defendant filed a response. Plaintiff's counsel sets out an estimated total of 111.45 hours as having been spent on the case. The memorandum does not indicate plaintiff's counsel's customary hourly fee.

II. Discussion

Two reported FSM cases have discussed 11 F.S.M.C. 701(3), the attorney fee provision of the FSM civil rights statute. Neither addresses the issue whether a contingency fee is a reasonable attorney's fee under the statute. In Tolenoa v. Kosrae, [1987] FMSC 15; 3 FSM Intrm. 167 (App. 1987), the court noted similarities between the FSM civil rights statute and the United States civil rights statutes, 42 U.S.C. § 1983, and 42 U.S.C67; #160;1988, the latter section, § 1988, providing for a nablenable attorney's fee to the prevailing party in a suit to enforce the former, § 1983. er the FSM nor the Unhe United States statute specifie mann which the fee isee is to be calculated. Both provide for afor a "reasonable" fee. The Tolenoa court observed that it "should der the decisions of the Unhe United States . . . in arrivi a decision, wit, without being bound by them." 3 FSM Intrm. at 170 (citing Alaphonso v. FSM, [1982] FMSC 22; 1 FSM Intrm. 209 (App. 1982)). The court then went on to list criteria - the "Johnson factoafterohnson v. Georgiaorgia High Highway Express, Inc.[1974] USCA5 109; , 488 F.2d 714 (5th Cir. 1974) - which United States courts have considered in determining a reasonable attorney fee under 42 U.S.C. § 1988. Given the way the court focused the issue in Tolenoa, the court decided that for its purposes, only the customary fee criterion was relevant. 3 FSM Intrm. at 171. Among the twelvJohnson factors listed, along with time spent, are the the existence of a contingency fee agreement, and awards in similar cases.

The trial court in Tolenoa (reported at Tolenoa v. Alokoa, [1986] FMSC 16; 2 FSM Intrm. 247 (Kos. 1986)) had determined that in light of the state of economic development in Micronesia, there was no market for attorney fees here, and awarded an hourly fee of $40.00. The appellate court reversed; found that the record did not support the trial court's award of $40.00 an hour for legal services; found that there does exist an established market for legal services in Micronesia; and awarded a fee based on an hourly rate of $100.00, which was what plaintiff's counsel had requested, and was counsel's customary rate. As set out in the trial court decision, the time spent on the case was 289.95 hours. At $100.00 an hour, this resulted in a total fee award on remand of $28,995.00. Thus the fee award was more than twice the judgment amount, which was in the sum of $12,787.50.

Plaintiff's counsel in Tolenoa had, as does counsel in this case, a contingency fee agreement with his client. The terms of the Tolenoa fee agreement provided that if the suit was not successful, there would be no charge. In the event that plaintiff prevailed, counsel would receive a fee of $100.00 an hour. However, because of the large number of hours devoted to the case, the counsel and client later decided that plaintiff's liability for the fee would not exceed one third of the judgment, since as the case developed, plaintiff was facing the likelihood of ending up with nothing if the hourly fee had remained in force. 3 FSM Intrm. at 169. Strict application of the contingency fee agreement as amended by client and counsel in Tolenoa would have worked an inequity, since by this court's calculation counsel's fee would have been $4262.50, and counsel would have been compensated for a fraction of the effort expended.

The result reached by the appellate court in Tolenoa is in accord with Blanchard v. Bergeron, [1989] USSC 19; 489 U.S. 87, 109 S. Ct. 939, 103 L. Ed. 2d 67 (1989). In that civil rights case, the trial court had limited counsel's fee under 42 U.S.C.A. § 1988 to 40% of thgment amou amount, which was $4,000 (40% of $10,000), and which was the fee that plaintiff had contracted to pay counsel. Plaintiff's attorney had sought more t40,000 in fees on an hourly basis. The United States Supremupreme Court held "[t]he attorney's fee provided for in a contingent-fee agreement is not a ceiling upon the fees recoverable under § 1988," id. at 96, 1 9 S. Ct. at 946, 103 L. Ed. 2d at 77, and remanded for a re-determination of a fee.

Plais v. Panuelo, [1992] FMSC 10; 5 FSM Intrm. 319 (Pon. 1992), is the s FSM case which addresses an attorney's fee award under 11 r 11 F.S.M.C. 701(3). Plaintiff's counsel in that case was Micronesian Legal Services Corporation, and the court held that it was entitled, as a government funded legal services agency - and in the same way that private counsel would be - to an award of attorney fees under the statute. No contingency fee agreement figures in the discussion, which is framed in terms of a reasonable hourly rate times the number of hours expended. A fee of $36,512 was awarded, which reflected 365.12 hours expended times the prevailing rate of $100.00 an hour. Per the report of the trial proceedings, Plais v. Panuelo, [1991] FMSC 25; 5 FSM Intrm. 179, 212-13 (Pon. 1991), the total amount of the judgment was $19,800. Thus, in both reported FSM cases under the FSM civil rights statute fee provision, the attorney's fee substantially exceeded the amount of the judgment.

In the case at bar, the issue is whether this court should award attorney's fees in accordance with the contingency fee agreement. That fee, calculated as 33% of the judgment amount, is $42,900. Were this court to award a fee based on the prevailing rate of $100.00 and hour and the time expended, as estimated by counsel, of 111.45 hours, the fee would be $11,145, although this may be a conservative figure, as counsel did not keep a record of time spent and the 111.45 number represents a reconstruction. Thus, the contingency fee exceeds the hourly fee by nearly a factor of four. However, just as the United States Supreme Court has said that a contingency fee is not a ceiling with respect to an attorney's fee in a civil rights action, Blanchard, 489 U.S. at 96, 109 S. Ct. at 946, 103 L. Ed. 2d at 77, so this court concludes that an hourly fee should not be an arbitrary ceiling with respect to attorney's fees recoverable under 11 F.S.M.C. 701(3).

A contingency fee, like any attorney's fee, must meet the requirements of Rule 1.5 of the Model Rules of Professional Conduct, made applicable to attorneys practicing before this court by General Court Order 1983-2. That rule provides that "[a] lawyer's fee shall be reasonable," and then goes on to list eight criteria, the eighth of which is "whether the fee is fixed or contingent." All eight of these criteria are subsumed in the Johnson factors: because the Johnson factors break down the first criterion listed in the Model Rules into three parts, the Johnson factors are essentially the Model Rules factors, plus the two additional criteria of the undesirability of the case, and awards in similar cases. Subparagraph (c) of Rule 1.5 contains further discussion of the contingency fee, and provides as follows:

(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial, or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

Subparagraph (d) of Rule 1.5 places two strictures on the contingency fee: it prohibits contingency fees in both domestic relations and criminal matters.

The contingency fee agreement in this case provides for a fee of 25% in the event that the matter settled within 90 days of filing the complaint, and a 33% fee thereafter; it provides that the client will pay expenses, with any expense over $100 to be approved by the client in advance. Ex. "A" to plaintiff's Motion for Award of Attorney's Fees. These operative terms constitute a reasonable contingency fee agreement, and also constitute, in the circumstances of this case, a reasonable fee under 11 F.S.M.C. 701(3).

Where the parties have entered into a fee agreement reasonable under Rule 1.5 of the Model Rules of Professional Responsibility; where the contingent percentage of the recovery is more than a fee calculated according to an hourly rate times the hours expended; and where counsel prosecutes the action through trial, this court can see no compelling reason not to award a reasonable fee pursuant to the terms of the agreement. By definition, such a fee is a fraction of the amount recovered. When this court looks to results in similar cases where the hourly fee award has been, literally, a multiple of the actual judgment, a contingent fee appears entirely rational.[1] A case may arise where the disparity between the actual time expended and a contingency fee is of a sufficient magnitude that strict application of a contingency fee agreement in computing a fee may result in a windfall to plaintiff's counsel. The example of a claim for a significant percentage of a large recovery obtained early in litigation where counsel has expended relatively little effort comes to mind. Such cases are rare and self-limiting, as such a fee must meet the reasonableness requirement of Rule 1.5. It is not the case here, where the case was prosecuted through trial. This court is disinclined to cast its lot as a matter of course with the United States Supreme Court in this respect which has said that "[i]t is true that in construing § 1988, we have generallned aned away from the contingent-fee model to the lodestar model of hours reasonably expended compensated at reasonable rates."enegas v. Mitchell[1990] USSC 57; , 495 U.S. 82, 87[1990] USSC 57; , 110 S. Ct. 1679, 1682, 109 L. Ed. 2d 74, 82 (1990)1990).

An hourly rate based fee on the facts of this case would not take into sufficient account the important purpose underlying the attorney's fee provision of the FSM civil rights statute. As the United States Supreme Court has noted with respect to 42 U.S.C.A. § 1988, "[tim of this sectionction . .&#160 to enable civil righ rights plaintiffs to employ reasonably competent lawyers without co themselves if they prevail." Venegas, 495 U.S. at 86, 110 S. Ct. at 1682, 109 109 L. Ed. 2d at 82 (emphasis added). The appellate court in Tolenoa noted in referring to the FSM civil rights statute, that "there exists such a similarity with United States statutes that it appears fair to assume that the FSM used those statutes [U.S.C.A. §§ 1988 and 1983] asurce [for [for the FSM civil rights statute, 11 F.S.M.C. 701]." 3 FSM Intrm. at 170. It follows that the purpose of the FSM fee sion is to permit an FSM civil rights litigant to employ reasonably competent counsel to puto pursue civil rights litigation without cost to him or herself. Were the court to award an hourly fee in this case based on counsel's approximation of time spent and at the prevailing rate of $100.00 per hour, that fee would be $11,145.00. Plaintiff would be obliged to pay the remainder of the contingency fee of $42,900.00, which is over $30,000.00, from that money which is meant to compensate her for the serious, permanent injuries which she has sustained as a result of the violation of her civil rights by the defendants. In such an event, this litigation would have had substantial, real cost to the plaintiff. The court concludes that the reasonable contingency fee agreement here may be given effect to achieve the important aim of compensating plaintiff's counsel without requiring Menry Davis to expend funds meant to compensate her. The contingent fee of $42,900 is reasonable attorney's fee both within the meaning of 1.5 of the Model Rules of Professional Conduct, and within the meaning of 11 F.S.M.C. 701(3).

Moreover, the court questions whether strict adherence to an hourly rate fee in civil rights cases would accurately reflect the economic realities of law practice. That reality, when viewed in the cold light of day, is in the aggregate dictated by the providers of legal services, not the consumers; the contingency fee agreement is an integral part of that reality. One reading of comments made by the United States Supreme Court in Venegas, supra, is that a client in a civil rights case will be an informed consumer of legal services. The client, exercising his or her right to contract with whom he or she pleases, and along such lines as he or she decides, may choose to pay the potentially greater contingency fee, as opposed to an hourly fee. Venegas, 495 U.S. at 87, 110 S. Ct. at 1682, 109 L. Ed. 2d at 82. This thinking, it would seem, presupposes that the client has shopped comparatively for legal services; is aware that he or she may be awarded a fee based on an hourly rate; and has made the conscious decision to pay the potentially higher fee regardless of the fee the court may award in order to obtain better skilled counsel. Such a construct may reflect the ideal, but the court is not at all convinced that this reflects the dynamics of the legal services market here in the FSM. Certainly, a client is free to contract with counsel along any lines reasonable under Rule 1.5 of the Model Rules of Professional Conduct, and no question appears to exist that such a fee, if it is reasonable, is enforceable against the client regardless of the fee awarded by the court. Venegas, 495 U.S. at 90, 110 S. Ct. at 1684, 109 L. Ed. 2d at 84: "Section 1988 itself does not interfere with the enforceability of a contingent-fee contract." However, it is more realistic to conclude that a client will sign a contingency fee contract with his or her attorney in a civil rights case because that is the accepted practice in plaintiffs' litigation here and elsewhere. In all likelihood, the client will not have considered in any meaningful way an alternative to the contingency fee agreement as a method of paying for attorney services. These considerations also militate in favor of an attorney's fees in this case based on the contingency fee contract which Menry Davis entered into with her counsel.

The court offers a caveat. Counsel in this case maintained no contemporaneous records of time spent. The point of departure for determining a reasonable fee under 11 F.S.M.C. 701(3) is to look at the amount of time spent. In civil rights litigation brought pursuant to 11 F.S.M.C. 701, counsel should maintain careful records of time actually spent, notwithstanding the existence of any contingency fee agreement.

Counsel has also requested costs in the amount of $337.05. The costs appear reasonable. The request is granted.

III. Conclusion

For the reasons set out above, the court awards plaintiff attorney's fees of $42,900, and costs of $337.05. The awards are entered in the same proportions as the judgment of $130,000 was entered.

As to attorney fees, $26,598 ($80,000/$130,000 X $42,900) is awarded jointly and severally against Chuuk and the defendant officers; $6,435 ($20,000/$130,000 X $42,900) is awarded jointly and severally against Chuuk and Chief of Police Eradio William; and $9,867 ($30,000/$130,000 X $42,900) is awarded jointly and severally against the defendant officers, Chuuk, and Chief of Police Eradio William.

With respect to costs, $208.97 ($80,000/$130,000 X $337.05) is awarded jointly and severally against Chuuk and the defendant officers; $50.56 ($20,000/$130,000 X $42,900) is awarded jointly and severally against Chuuk and Chief of Police Eradio William; and $77.52 ($30,000/$130,000 X $42,900) is awarded jointly and severally against the defendant officers, Chuuk, and Chief of Police Eradio William.

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^[1] In Riverside v. Rivera, [1986] USSC 157; 477 U.S. 561, 106 S. Ct. 2686, 91 L. Ed. 466 (1986), the attorney's fee awarded on an hourly basis was $245,456.25, while plaintiffs recovered only $33,350 in damages. Had the question been put to the defendants in Rivera at the inception of the litigation what their exposure for attorney's fees might be should plaintiffs prevail, one questions whether defendants would have predicted that the fee would exceed the judgment by a factor of more than seven. Contingent fee arrangements have their imperfections; a result like the one in Rivera is not one of them.