Attorney fees under fire
by Michelle Lore Associate Editor
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More: Attorney fees awards: The text of the proposed legislation
The legislation could impact any claim for which there is a statutory fee-shifting provision, including cases involving:
Debt collection
Landlord-tenant disputes
Civil rights
Discrimination
Whistleblowers
Overtime and minimum wage
Failure to pay wages
A bill that could limit the amount of attorney fees awarded in fee-shifting cases has riled plaintiffs’ attorneys.The legislation could impact any claim for which there is a statutory fee-shifting provision, including cases involving:
Debt collection
Landlord-tenant disputes
Civil rights
Discrimination
Whistleblowers
Overtime and minimum wage
Failure to pay wages
The legislation, introduced earlier this month, would require that where a statute provides for the award of attorney fees to a successful litigant, judges must take into consideration the reasonableness of the fees sought in relation to the amount of damages awarded to the prevailing party.
The bill also contains a provision mandating that if a plaintiff claiming an award of attorney fees rejected a Rule 68 offer of judgment and failed to obtain a verdict in excess of the offer, the plaintiff will not get any fees after the date of the offer.
Opponents of the bill are concerned it will cause attorneys to refuse cases where the amount in dispute is minimal, like some landlord-tenant matters or debt collection cases.
“If you won’t get paid for what you put into it, why do it? Who’s going to do it?” questioned Waite Park attorney Michael Bryant, president-elect of the Minnesota Association for Justice. “To me that’s the problem.”
Minneapolis civil rights attorney Justin Cummins agreed that it’s going to be much more difficult to get the private bar involved if attorney fees are contingent on actual damages awarded.
But defense attorneys counter that the actual impact of the bill could be minimal.
“The statute only requires a court to take the damage award into consideration,” said Minneapolis employment defense lawyer Robert Boisvert. “The court may decide the [entire requested] fee award is still appropriate.”
Private AG principle
The legislation, S.F. 1023 and H.F. 1410, has the potential to impact any claim for which there is a statutory fee-shifting provision, including some consumer protection and landlord-tenant matters, civil rights, discrimination and whistleblower cases, overtime and minimum wage disputes and failure-to-page wage claims.
Plaintiffs’ attorneys contend that statutes allowing the recovery of attorney fees exist so that consumers will pursue legal remedies when they’ve been wronged and private attorneys can afford to assist them.
These statutes further the “private attorney general principle,” according to Cummins. “The attorney general … can’t bring all the cases that need to be brought to ensure that the law is completely and comprehensively respected. So the private bar needs to be involved in helping with law enforcement.”
An example, according to consumer law attorney Samuel Glover, is a tenant who is unlawfully locked out of his or her home. While the landlord is liable for $500 under Minn. Stat. sec. 504B.231, many tenants can’t afford to pay a lawyer to recover the money, and lawyers can’t afford to work on a contingency fee in such a case.
The Legislature, wanting to ensure that tenants could actually sue their landlords for locking them out, decided to make the landlord pay the tenant’s lawyer, Glover explained.
“This makes a small damages award into a meaningful consumer protection law,” he wrote on caveatemptorblog.com shortly after the bills were introduced. “The tenant can bring the case with a lawyer’s help, and the landlord has a strong incentive to pay up for clear violations.”
But if the landlord is stubborn and decides to fight — wasting the court’s time, the client’s time and the attorney’s time — the defendant should pay for it by paying the plaintiff’s attorney fees, said Glover. “This bill would nullify the attorney fee provision by saying attorney fees also have to be proportional to the amount that you recover.”
The bill essentially relieves defendants of having to pay a penalty if they are found to have intentionally prolonged a case knowing that the plaintiff isn’t going to recover much, said Bryant.
“It limits liability in a way that doesn’t seem to make sense,” he said. “If the court finds that the time was justified and the time was appropriate, it seems to me that [the fee award] should be what it is.”
Plaintiffs’ attorneys are particularly surprised to see the bill introduced at a time when people are struggling in a bad economy.
“It’s a little shocking to see blatantly anti-consumer legislation being introduced right now,” said Glover. “If there was ever a time when we didn’t need that, it’s now.”
Cummins agreed, explaining that with state agencies facing severe budget cuts, this is precisely the time when more involvement from the private bar is necessary to enforce the rule of law.
“This [bill] would seem to be going backwards,” he said.
Threatening fees?
Practitioners believe that the results in some consumer litigation — small damage recoveries but large attorney fees awards — are most likely what’s driving the legislation.
According to Glover, another aspect may be the unwarranted and “sensationalized fear” that plaintiffs’ attorneys are churning their fees.
Courts examine attorney fee requests and cut out the fees that aren’t justified, he said. “Judges do not let attorneys churn their fees under the law that exists right now.”
Defense attorneys like the bill and expect it will eliminate the perceived problem of plaintiffs’ attorneys refusing to settle smaller cases and instead threatening to go to trial because they will be awarded their fees.
St. Paul attorney Richard Thomas, co-chair of the Minnesota Defense Lawyers Association Law Improvement Committee, said that defendants in some minor consumer rights or debt collection cases are paying $10,000-$15,000 more than the amount in controversy because of the threat of paying the plaintiffs’ attorney fees.
“This [bill] will help remove that as a problem,” said Thomas. “The client can get paid what they are owed, the attorney can make reasonable compensation up to the time of resolution, and you can’t artificially use the costs associated with trial to inflate the settlement.”
Rule 68 revisions
Defense lawyers also like the Rule 68 provision contained in the proposed legislation.
Under this bill, Thomas explained, defendants can stop the flow of attorney fees if they make an offer that ends up being more than the plaintiff recovers at trial.
“It’s a powerful settlement tool,” he said. “We think it’s a good idea and we really favor it.”
But Cummins said the Rule 68 provision could lead to an absurd result — a plaintiff could be successful at trial and still not get her attorney fees.
“In any state statute that provides for attorney fees, the manifest legislative intent as expressed by that statutory language ... would seem to be thwarted by this provision,” he said.
Glover questioned whether it’s even proper for the Legislature to be rewriting the rules of civil procedure through a statute, and opined that the bill is simply an effort to prevent small damages cases from going forward.
“I thought this was supposed to be the time to re-examine regulation and put smart, effective regulations into place,” he said. “And this is neither smart nor effective.”
