Utah Bar Journal

If this seems unlikely, take note that our appellate courts recently approved such discrimination on the basis of “trial court discretion.” Before getting to the specific case referred to above, let me provide some appropriate background. The sole issue on appeal was the reasonableness of attorney fees. I was the attorney involved, and so I will relate the case from my point of view. I readily acknowledge from the outset that I may not be fully objective. I will, however, attempt to the best of my ability to relate the facts and the exact statements made by the trial court and the Court of Appeals who reviewed the trial court’s ruling.

Since my attorney fees are at issue in this article, I will provide my credentials and background. My career as an attorney began late in life. I first obtained in 1964 a degree in physics and math from the University of Utah. After working four years as a geophysicist for Shell Oil, I earned an MBA degree from the Harvard Business School. After working in various businesses in New York, New Jersey, and Massachusetts for more than 20 years, I again returned to graduate school. This time, I attended the Boston College Law School. Immediately following law school, I moved back to Utah and began practicing law as a solo practitioner.

Since 1995, I have been counsel in numerous cases where attorney fees were approved by a trial court. In most if not all of those cases, I found that the amount of attorney fees approved was highly dependent on the particular trial court. Some courts seemed to take a rather passive role while others seemed highly critical of attorney fees. Some of them actually appeared to make disparaging comments about awarding any attorney fees.

For example, in one case the trial court reduced my fees by reducing my hourly rate to $50 for all legal research. It opined that law school students could have done the research at that lower hourly rate. This struck me as the court attempting to micro-manage my law practice. In another case, the trial court awarded only $3,000 for attorney fees when they were actually more than $30,000. The court opined that the parties should have settled the case earlier despite the intransigence of one party.

As a reminder, attorney fees in the State of Utah are available to a prevailing party in litigation only if provided by statute or contract. When fees are available, the trial court must approve them as “reasonable,” although the term “reasonable” is undefined. Perhaps because of the vagueness surrounding the term “reasonable,” there is a plethora of appellate cases in which at least one issue has been the amount of attorney fees awarded by a trial court. I have personally been involved in at least three of those cases. One was a divorce case and two were from the same contract dispute case.

I suggested in one of my appellate briefs that the general “system” for determining reasonable attorney fees is broken. I also suggested one solution for helping fix the system: begin with the presumption that attorney fees are reasonable and should only be reduced on a finding that they are unreasonable. I will address this possible solution later.

I will now return to the specific case where the trial court made an express distinction between solo practitioners and attorneys in large law firms. The case began in 2000 by plaintiffs who brought four causes of action for breach of contract against defendants. I represented the defendants. Three of the defendants were quickly dismissed from the case based on the doctrine of res judicata. Since the contract provided attorney fees to the prevailing party, the trial court awarded $1,330 in attorney fees. I supported those fees by affidavit in which I stated my billing rate as $175 per hour at that time. The trial court approved those fees as “reasonable.”

Over the next year and a half, the remaining defendants prevailed on each cause of action and were also awarded attorney fees. In my affidavit in support of fees, I stated that my billing rate began at $175 per hour but had increased to $185 per hour as of September 2001. In granting summary judgment in early 2002, the trial court requested me to prepare a final order that was to also include an award of attorney fees.

The order that I submitted, along with my affidavit of attorney fees, requested $11,538 in attorney fees at billing rates of $175-$185 per hour. The final order entered by the trial court stated the following:

. . . and after reviewing the affidavit of attorney fees submitted by Defendants and finding such fees to be reasonable, orders and . . .

In effect, the trial court found that my fees were “reasonable.” And this was consistent with the trial court’s earlier approval of attorney fees it awarded for dismissing three of the defendants. However, the trial court then inexplicably reduced the amount of fees from the $11,538 sought to a mere $6,050. No explanation was given by the trial court.

It is important to note that the trial court did not simply rubber stamp my draft of the final order. Rather, the trial court made several handwritten changes to the order, showing that it carefully read the form of the order. But the trial court made no changes to the language that related to the reasonableness of attorney fees. Hereinafter, the 2002 judgment will be referred to as “Judgment I.”

As requested by defendants, I appealed Judgment I. The Court of Appeals reversed the trial court and also awarded attorney fees on appeal. See Blevins v. Custom, 2004 UT App 265. The Court of Appeals also instructed the trial court to enter “findings of fact” consistent with its decision on Judgment I. On remand, the trial court took more than nine months to render its ruling on the amount of attorney fees, referred to herein as Judgment II.

In Judgment II, the trial court awarded attorney fees for (a) the trial phase, i.e., for Judgment I; (b) the appeal of Judgment I; and (c) during remand, i.e., for Judgment II. The total fees awarded in Judgment II for all three phases of the litigation were a mere $11,665 compared with more than $28,000 sought. The amounts in Judgment I and Judgment II are curiously similar. While the amount of attorney fees awarded by the trial court was quite naturally disappointing, the most disturbing part of the trial court’s lengthy ruling was its substantial departure from well-established case law.

Dixie State Bank v. Bracken, 764 P.2d 985 (Utah 1988) is the seminal case in Utah on determining whether attorney fees are reasonable. In Dixie, the Utah Supreme Court cited Cabrera v. Cottrell, 694 P.2d 622 (Utah 1983), and then added four discrete questions that trial courts should answer in determining the reasonableness of attorney fees:

1. What legal work was actually performed?

2. How much of the work performed was reasonably necessary to adequately prosecute the matter?

3. Is the attorney’s billing rate consistent with the rates customarily charged in the locality for similar services?

4. Are there circumstances which require consideration of additional factors, including those listed in the Code of Professional Responsibility?

Dixie, 764 P.2d at 990. The Court of Appeals cited Dixie and instructed the trial court as follows:

Accordingly, we remand for the entry of findings of fact consistent with this decision, and if appropriate, for an adjustment in the amount of attorney fees awarded to Defendants by the trial court.

While the trial court never made any “findings of fact,” it made what it termed as determinations. The trial court examined the four questions posed in Dixie. It first undertook to set a billing rate in accordance with the third question from Dixie: “Is the attorney’s billing rate consistent with the rates customarily charged in the locality for similar services?” However, the trial court substituted the term “similar services” for a new factor: “similar situations.” In so doing, the trial court substantially departed from well-established law. It also created discrimination against solo practitioners.

This came about in a curious and inexplicable way. On remand, the trial court issued to the parties the following order by way of a minute entry:

One factor to be considered is whether the billing rate is consistent with the rates customarily charged in the locality for similar services. The Court directs the parties to submit . . . , affidavits from other attorneys that establish the billing rates for attorneys with four years of practice to nine years of practice in the areas of breach of contract and collection matters.

Even though the trial court had on two prior occasions in this case approved as reasonable my billing rate of $175 per hour, it ordered the parties to take a poll of billing rates in the local community. In response to the trial court’s order, the opposing party submitted two affidavits from solo practitioners in which they stated that they charge $125 per hour, mostly for divorce work. One attorney stated that he charged $175 per hour for court work, including preparation for court appearances.

Since the trial court appeared not to know what attorneys were charging in the local area, I thought it best to obtain a large sample of billing rates. So, I obtained three affidavits from partners of three large law firms in Salt Lake City. Two of the three are local firms, and one firm has offices in two or more states. Those affidavits represented many attorneys with the requisite range of experience as directed by the trial court. The billing rates from one of these law firms ranged from $170 per hour for four years experience to $210 per hour for nine years experience. The rates from another ranged from $190 to $240 for the same range of experience. The third affidavit, from a senior partner in a local firm, contained a review of my billing rates and the content of the work I had performed in the case. The affidavit strongly supported my billing rates as being consistent with the rates charged by the attorneys in that large law firm.

Notwithstanding that the large law firms represented scores of attorneys in comparison with the two solo practitioners, the trial court rejected all affidavits from the large law firms by stating in its ruling the following:

There is no question that the billing rates contained in the affidavits submitted by Mr. Jensen must be viewed in light of the organization of the offices which submitted them. Large law firms, and especially national law firms, have large overhead/expenses. Mr. Jensen would not have such expenses. As noted in his filings, he worked out of his home.

The trial court’s statement was a shock. First, there was no evidence in the record about any overhead expenses. Second, there was no evidence in the record that I worked out of my home. In fact, I have since 1995 always maintained an office on Main Street in Salt Lake City. Third, it is quite possible that my overhead expenses are greater than those for each attorney in a large law firm. After all, large law firms should enjoy some economies of scale.

Nonetheless, this is the first time that any case has used overhead expenses as a factor in determining billing rates. Recall the question from Dixie: “Is the attorney’s billing rate consistent with the rates customarily charged in the locality for similar services? To my knowledge, there has never been any notion that overhead expenses should be considered. Moreover, Rule 1.5 of the Rules of Professional Conduct, governing fees, is completely void of overhead expenses.

The trial court ruling, now sanctioned by the Court of Appeals and the Utah Supreme Court (certiorari was denied), has now introduced this new factor of overhead expenses in determining reasonable attorney fees. After rejecting all three affidavits from large law firms, the trial court then entered in its ruling the following:

The Court determines that the rates charged by the solo practitioners are consistent with the rates customarily charged for similar services and by attorneys in similar situations, and therefore awards Mr. Jensen $125 an hour for non-court time and $175 an hour for court time.

The trial court also introduced the notion of “similar situations” rather than sticking with “similar services.”

The trial court then proceeded to estimate the amount of time that should have been billed for each pleading or group of pleadings. For example, I billed 5.8 hours on a motion for summary judgment on the first cause of action. The motion included a meeting with another attorney who had knowledge and documents from a bankruptcy proceeding that was relevant to the cause of action. It also included the drafting of an affidavit for that attorney. The trial court “determined” that only 1.5 hours was appropriate for such motion for summary judgment and awarded a mere $183. A similar pattern followed for each pleading during the trial phase. In sum, the trial court awarded $11,665 against the more than $28,000 billed and sought.

In the second appeal on Judgment II, the Court of Appeals seems to have gotten it wrong. See Blevins v. Custom, 2006 UT App 182. The Court of Appeals stated that:

Here, where Defendant’s attorney worked from his home, we cannot conclude that the trial court abused its discretion in relying on the hourly rate used by a sole practitioner.

First, as indicated above, there is no evidence in the record that I worked from my home. Despite my pointing out this flaw, the Court of Appeals seems to have adopted without question the trial court’s error. Second, the Court of Appeals has now sanctioned a new factor in determining reasonable fees. That is, the Court of Appeals is now allowing a trial court to examine billing rates for attorneys in “similar situations” rather than for “similar services.”

In effect, the Court of Appeals now allows comparisons of billing rates between classes of attorneys, i.e., solo practitioners and large law firms. The approach taken by the trial court and sanctioned by the Court of Appeals takes us down a very slippery slope. Further, it is against public policy. This change in the “law” will now allow higher billing rates for large law firms or for any attorney who can show that his or her overhead expenses are greater than a solo practitioner. Without any showing of how much overhead expenses a solo practitioner actually has, this new ruling could also impose lower billing rates on solo practitioners than their colleagues in large law firms who provide similar services. The entire fee shifting principle supporting an award of attorney fees is undermined when a trial court reduces those fees, especially when the reduction is substantial. The prevailing party is not restored to its position prior to such litigation.

Let me now return to a possible solution. Utah Rule of Civil Procedure 73 should be amended to include a statement that attorney fees are presumed to be reasonable and are to be reduced only if deemed unreasonable. This would be consistent with the statement made by the Court of Appeals in its opinion in Endrody v. Endrody, 914 P.2d 1166, 1171 (Utah App. 1996):

The court abuses its discretion in awarding less than the amount [of attorney fees] requested unless the reduction is warranted” by one or more of the above factors.

If so amended, Rule 73 would shift the burden from showing that fees are reasonable to showing them to be unreasonable. While the results could be the same, the mindset and presumption are different. It may also remove some of the subjectivity now frequently found in disputes over attorney fees. All too often trial courts expend more energy in reducing attorney fees than do opposing counsel.

The case under discussion also raises the issues addressed in the proposed amendment to Utah Rule of Civil Procedure 63 – an amendment that was never implemented. That amendment would provide for a change in the trial court on remand after a successful appeal. It would eliminate any appearance of bias against the successful appellant.

In conclusion, I hope this article serves as a warning for solo practitioners to be alert to possible discrimination concerning attorney fees. I also urge the Utah Supreme Court to review Rules 63 and 73 of the Utah Rules of Civil Procedure, and Rule 1.5 of the Rules of Professional Conduct. In particular, I urge the Supreme Court to (a) implement the previously proposed amendment to Rule 63 that would allow a change of trial court on remand at the request of the prevailing appellant; (b) implement additional language to Rule 73 that would require trial courts to more objectively review attorney fees with the presumption that they are reasonable; and (c) add clarifying language to Rule 1.5 that would prohibit discriminatory fees between solo practitioners and attorneys in large law firms.