Georgia Supreme Court holds that plaintiffs’ attorney fees under O.C.G.A. § 9-11-68 can’t be based solely on contingent fee agreement
The Georgia Supreme Court on June 16, 2014, in the case of Department of Corrections v. Couch, held that attorney fees awards for plaintiffs under the Officer of Judgment / Offer of Settlement statute (O.C.G.A. § 9-11-68) cannot be based solely upon the plaintiff’s contingent fee agreement. Just what would be sufficient remains somewhat unclear.
The Supreme Court reversed in part a Court of Appeals decision holding that the contingent fee was a sufficient basis for the fee award as no fee was actually incurred until the contingency occurred, that is when the tort recovery is obtained.
However, the Supreme Court held that the trial court and the Court of Appeals erred in calculating the amount of attorney fees award, stating:
“[W]hile the trial court was entitled to consider Couch’s contingency fee agreement with his attorneys and the amount it would have generated as evidence of their usual and customary fees, the court erred in calculating what amount of attorney fees was reasonable based solely, as far as the record reflects, on that agreement rather than on evidence of hours, rates, or other indications regarding the value of the attorneys’ professional services actually rendered.”
Furthermore, the court found that under the statute, “plaintiffs are not entitled to recover all of their attorney fees in the case, only the ‘reasonable attorney fees and expenses of litigation incurred by the plaintiff or on the plaintiff’s behalf from the date of the rejection of the offer of settlement through the entry of judgment.”
The Supreme Court remanded the fee award portion of the judgment so the trial court can recalculate the “reasonable value of the professional services that Couch’s attorneys actually provided during the period” following the Department’s rejection of the settlement offer.
Justice Nahmias did not say that a contingent fee contract could not be considered in the fee award, only that the opposing party is not bound by the contract so the award cannot be based solely upon the contingent fee agreement. The decision explains,
“Entering such a contract is a gamble for both the lawyer and the client, because the value of the professional services actually rendered by the lawyer may be considerably higher or lower than the agreed-upon amount, depending on how the litigation proceeds. 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 the agreement.”
But while attorney and client agree to an allocation of risk in a contingent fee contract, “but they are not required to predict that the opposing party will be unnecessarily litigious or otherwise will fail to follow the law governing civil litigation in a sanctionable way, requiring the lawyer to provide additional services to protect the client from that improper conduct.”
The Court discussed at length the question of whether the fee award can be based upon the entire judgment, which may have involved years of work before the offer of settlement, or only upon work done between the rejection of the offer of settlement and the entry of judgment. The ruling is that O.C.G.A. § 9-11-68 fee award is based on litigation conduct for services after rejection of the offer of settlement.
However, it appears that fee awards under O.C.G.A. § 9-11-68 based upon the defendant’s bad faith in the underlying transaction may still be based upon the entire contingent fee percentage.
The decision concludes with this holding:
“For these reasons, we reverse the portion of the Court of Appeals’ judgment affirming the trial court’s calculation of the attorney fee award to Couch, and remand with direction that the case be remanded to the trial court for recalculation, in accordance with the principles discussed above, of the reasonable value of the professional services that Couch’s attorneys actually provided during the period “from the date of the rejection of the offer of settlement through the entry of judgment.” OCGA § 9-11-68 (b).”
The practical impacts of this decision may include some, all or none of the following:
- Plaintiffs’ attorneys who contemplate using O.C.G.A. § 9-11-68 offers of settlement may start keeping time records. I was liberated from time slips in 95% of my work when I switched from insurance defense to plaintiffs’ practice in the early 1990s. Management consultants tell us we should track time for managerial purposes, but many find it is an unnecessary annoyance. It would be a pain but I will start shopping for a time and billing software package to track this.
- In some cases, plaintiffs’ attorneys may be more inclined to make an early offer of settlement. Some lawyers have done that quite profitably in cases where they knew the defense would reject any settlement, e.g., medical malpractice cases. Others have avoided “initiating the nonsense” because that the statute was designed primarily to intimidate and bully middle class injury victims. I have often resisted the temptation to send an offer of settlement out of apprehension that the other side would reciprocate, and that my clients would have more reason that the insured defendant to feel intimidated. That must be carefully evaluated on a case by case basis.
- There may be more use of attorneys as expert witnesses to testify about the usual and customary valuation of fees in plaintiffs’ cases, in order to explain the risks, uncertainty of getting paid, undesirability of certain categories of cases, and other factors in addition to mere hours.
- Insurers might offer specialized coverage to protect plaintiffs from “offer of judgment” awards. There was talk of this when the code section first passed nine years ago, but I haven’t seen it yet. I doubt it will happen now, but I will keep my eyes and ears open.
- Expert testimony of value of service may include consideration of factors included in some federal fee award cases, sometimes referred to as “lodestar” factors. These have included: (1) the time and labor required; (2) the novelty and difficulty of the questions involved; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and the length of the professional relationship with the client; and (12) awards in similar cases. Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974)
- Plaintiffs’ lawyers may revise fee contracts – even though the contracts are not binding on the other side – to document a clear understanding with the client about such fee petitions. For example, a fee agreement might include something like this:
- If court-awarded attorney fees are sought from the opposing party in addition to the client’s damages for the entire case pursuant to O.C.G.A. § 13-6-11, client agrees to submission to the court of a claim for calculated at the contingent fee percentage stated above.
- If court-awarded attorney fees are sought from the opposing party in addition to the client’s damages under O.C.G.A. § 9-11-68 or other fee shifting rules, client agrees to a base hourly rate of $400 per hour for attorney time and $125 per hour for paralegal time, and when appropriate to petition the court for an enhanced fee award taking into account such additional factors as courts by then approve, including but not limited to what is customary and reasonable in similar cases, contingency, risk, novelty, difficulty, uncertainty of recovery, skill required, time limitations, experience and reputation of attorneys, etc.
There is also the question of whether the fee award should be lumped into the total recovery out of which a contingent fee is calculated, or should be extra compensation to the lawyer, or some hybrid of the two approaches. I will leave that issue for another day.
The other significant part of the Couch decision (taking up the first 24 pages of the very thorough, scholarly opinion by Justice Nahmias) is that the State of Georgia is not immune from fee awards under O.C.G.A. § 9-11-68. I commend the scholarly opinion for study by attorneys struggling with sovereign immunity issues in any context.
Ken Shigley is past president of the State Bar of Georgia (2011-12), double board certified in Civil Trial Advocacy and Civil Pretrial Advocacy by the National Board of Legal Specialty Certification, and lead author ofGeorgia Law of Torts: Trial Preparation and Practice. His Atlanta-based civil trial practice is focused on representation of plaintiffs in cases of castastrophic personal injury and wrongful death. In 2012, he was included in the “short list” of nominees for the Court of Appeals by the Georgia Judicial Nominating Commission.