Thomas Tidwell (John Disney/Daily Report)
How much is awarded in attorney fees to a plaintiff under Georgia’s offer of judgment statute cannot be based solely on a contingency agreement the plaintiff has with a lawyer, the Georgia Supreme Court ruled Monday.
Less than $100,000 in fees were at stake in the case decided by the justices, but both sides of the civil bar were watching it closely.
Holland & Knight partner Laurie Webb Daniel of Atlanta, who is fighting a fee award of nearly $14 million in another case, cheered the decision, saying it means a plaintiff seeking fees under the offer of judgment statute will not be able to rely on a contingency agreement alone. “In general,” said Daniel, “I think people seeking fees under this statute need to submit evidence of the time they invested in the case during the relevant time period.”
Daniel’s opponent in that case, William Stone of Boone & Stone, disputed how much evidence the court would require under the ruling to justify fees.
“I don’t think we have to demonstrate hours,” Stone said, adding that lawyers could prove the value of their services through expert testimony and other means. He said plaintiff’s lawyers nonetheless may start tracking their time—and making offers of settlement early in their cases. He said the decision would “spawn a whole lot of arguments before we get to the bottom of it and figure out what it really means,” said Stone.
The offer of judgment statute says that a party who rejects a settlement offer, then doesn’t do much better when the case is decided in court, may have to pay the other side’s fees from when the offer is rejected through the entry of judgment in the case. The law, adopted by the Legislature in 2005 as part of a tort reform package, is supposed to deter frivolous lawsuits and encourage settlements. Some plaintiffs lawyers spoke out against the rule when it was passed and when it was challenged, unsuccessfully, as unconstitutional.
But plaintiffs and their lawyers have discovered that they can benefit from the rule, too, especially if the fees are based on a large verdict. In the case Daniel and Stone are litigating, Stone’s client won a $40 million verdict and was awarded attorney fees based on Stone’s one-third contingency fee agreement with his client.
In the case decided by the justices Monday, however, the plaintiff would have fared better had the attorney fee award been based on the hours his lawyers put into the case. The issue came to the high court because the defendant, the state of Georgia, objected to any payment of attorney fees.
The plaintiff is David Lee Couch, an inmate at Walker State Prison. He was injured while working on a painting detail at the warden’s house, which was located across from the prison. According to an appeals court ruling in the case, Couch fell when a dry-rotted joist gave way, and he severed his urethra.
As Couch’s state premises liability claim against the state Department of Corrections proceeded, Couch made a written offer of settlement of $24,000. The state rejected the offer, and a Walker County jury returned a $105,417 verdict, which was affirmed by the Court of Appeals in 2011.
Couch made a motion for attorney fees under the offer of settlement statute, using his lawyers’ hourly rate as a basis instead of their 40 percent contingency fee agreement. An appellate brief filed by those lawyers, Thomas Tidwell of Atlanta and Kevin Elwell of Athens, says that after their offer was rejected, they spent nearly 370 hours, valued at more than $92,000, preparing and trying the case. They said their request was based on a $250 hourly rate.
The state challenged that fee application, saying no attorney fees should be awarded because, although the state had waived its constitutionally provided sovereign immunity as to tort claims through the Georgia Tort Claims Act, it hadn’t waived its immunity as to attorney fees. And if fees were to be awarded, the state contended, they should be calculated as a portion of what the plaintiff’s lawyers were to receive under their contingency fee agreement, not what they would have earned had they billed by the hour.
Walker State Court Judge Charles Peppers Sr. awarded $49,542, the equivalent of a full contingency fee based on the total recovery of $123,855.65, which included the verdict, post-judgment interest and court costs. He also added more than $4,700 in litigation expenses.
The state appealed, and the Court of Appeals affirmed in a June 2013 ruling authored by Judge Anne Elizabeth Barnes and joined by Judges M. Yvette Miller and William Ray II. The panel said Couch was entitled to the full contingency fee, not a prorated amount.
In Monday’s 33-page opinion for the unanimous high court, Justice David Nahmias wrote that the Georgia Tort Claims Act’s waiver of sovereign immunity from tort actions shows that such cases are to proceed under the usual rules applicable to tort cases, subject to specific exceptions in that statute. He said allowing offer of judgment awards against state defendants “should advance the fundamental purpose of sovereign immunity, since it is entirely in the interest of the taxpayers who fund the state treasury that the state act appropriately in litigating tort suits brought against it pursuant to the GTCA, rather than wasting resources in continuing to litigate weak cases after rejecting reasonable settlement offers.”
Nahmias said the trial judge had erred in that the record provided no indication he had relied on the time records submitted by the plaintiff’s lawyers. “While certainly a guidepost to the reasonable value of the services the lawyer performed, the contingency fee agreement is not conclusive, and it cannot bind the court in determining that reasonable value, nor should it bind the opposing party required to pay the attorney fees, who had no role in negotiating them,” wrote Nahmias. He rejected the notion that Couch could obtain the entire contingency fee because he did not incur any fees until entry of judgment, Nahmias saying that Couch’s lawyers were performing services on his behalf from the start of the lawsuit, if not before.
State Solicitor General Nels Peterson said the attorney general’s office, which represented the state in the case, was reviewing the decision. Tidwell, who represents the plaintiff in Monday’s case, said he thinks the same $49,542 fee award will be reissued when the case goes back to the trial court. As for plaintiffs generally, Tidwell said, “I don’t know that it’s favorable or unfavorable … it opens the door for both sides to say whatever they want.”
Tidwell said he will argue on remand that the original fee award was reasonable as backed up by the time records. He said his cocounsel has wondered whether the Supreme Court opinion would allow for an even larger award based on those records, but Tidwell didn’t think that was possible.
“I expect [Nahmias] was writing this opinion with an eye to cases like the Landstar case,” Tidwell added, referring to the battle between Daniel and Stone’s clients.
In Landstar Ranger v. Foster, pending at the state Court of Appeals, a trucking company fighting a $40 million verdict in a wrongful death case also is challenging just under $14 million in legal fees awarded to the plaintiff under the offer of judgment statute. That fee was also predicated on a contingency fee agreement.
Daniel filed an amicus brief in Couch on behalf of the Georgia Defense Lawyers Association, while Stone filed an amicus brief in Couch on behalf of the Georgia Trial Lawyers Association.
Assuming the Court of Appeals affirms the verdict, Stone said he thought the Court of Appeals would send his case back to the trial court for further proceedings on the fee question. He said the trial judge in his case would probably award “a little less” than previously to avoid any suggestion she simply relied on the contingency fee agreement.
Daniel said a Cobb County judge recently had taken an appropriate approach in rejecting the plaintiff’s lawyers’ attempt to rely on their contingency fee agreement in making a fee claim, directing the lawyers to create time records for their work. “I don’t know if there would be an alternative way of doing it,” said Daniel.