Title: CLINE v. ROCKY MT., INC.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

CLINE v. ROCKY MT., INC.2000 WY 41998 P.2d 946Case Number: 99-38, 99-39Decided: 03/06/2000Supreme Court of Wyoming
 
MIKE CLINE and BRENDA 
CLINE, Appellants (Plaintiffs), v.ROCKY MOUNTAIN, INC., d/b/a CHINOOK LOG HOMES, Appellee 
(Defendant). ROCKY MOUNTAIN, INC., d/b/a CHINOOK LOG HOMES, Appellant 
(Defendant), v. MIKE CLINE and BRENDA CLINE, Appellees (Plaintiffs).

Appeals from the District 
Court of Park County, The Honorable Hunter Patrick, 
Judge.

Andrea L. 
Richard of Rothgerber Johnson & Lyons LLP, Cheyenne, Wyoming, 
representing Mike Cline and Brenda Cline.Stephen L. Simonton of 
Simonton & Simonton, Cody, Wyoming, representing Rocky Mountain, 
Inc.

Before 
LEHMAN, C.J.; MACY, GOLDEN & HILL, JJ.; and JERE RYCKMAN, 
D.J.

MACY, 
Justice.

[¶1] In Case No. 
99-38, Mike Cline (Mike) and Brenda Cline (Brenda) appeal from the district 
court's order granting, in part, Rocky Mountain, Inc. d/b/a Chinook Log Homes' 
(Chinook) request for reimbursement of its attorneys' fees and costs. In Case 
No. 99-39, Chinook appeals from the portion of the district court's order which 
denied it part of its attorneys' fees and costs and from the order denying its 
motion for a new trial.

[¶2] We affirm 
the district court's decisions in both cases.

ISSUES

[¶3] The Clines 
phrase the issues in Case No. 99-38 as follows:

I. Did the District Court 
Err in Awarding Attorney's Fees to Chinook Without Any Legal 
Basis?

II. Even If the District 
Court Had Legal Authority to Award Attorney's Fees, Did it Err in Awarding 
Improper and Unreasonable Fees?

[¶4] In Case No. 
99-39, Chinook frames the issues on appeal as follows:

I. Does Wyoming law 
enforce contractual "fee shifting" provisions as written?

II. Alternatively, does 
Wyoming recognize the generally accepted rule that attorneys fees need not be 
apportioned between claims arising from a common core of facts or related legal 
theories?

FACTS

[¶5] In 1992, 
the Clines decided to build a commercial log building in Cody to house a gift 
shop. They purchased drawings from a drafting company which depicted a proposed 
floor plan for the building. The parties refer to these drawings as the 
"Lankford drawings."

[¶6] 
Subcontractors, who were not involved in this case, performed the excavation 
work and erected the foundation for the log building. The foundation actually 
constructed was significantly different from the foundation depicted in the 
Lankford drawings. Chinook erected a log shell over the foundation pursuant to a 
contract executed by it and Mike in March 1993. A second contract, which was 
dated November 17, 1993, called for Chinook to complete the building. In 
February 1994, Chinook finished the work that was contemplated by the second 
contract. Mike and Chinook entered into a third contract, dated February 20, 
1994, under which Chinook constructed two lofts inside the building. 

[¶7] On February 
20, 1996, Mike filed a lawsuit against Chinook and its chief officer, J. Nichols 
Patrick, claiming, in relevant part, that the November 1993 contract 
incorporated the Lankford drawings and Chinook had not constructed the log 
building in accordance with those drawings. Chinook and Patrick employed the 
same law firm to represent them in the case. Brenda was subsequently joined as a 
party plaintiff in the case. The district court granted a summary judgment in 
favor of Patrick on September 10, 1997. The court subsequently granted a summary 
judgment in favor of Chinook on the grounds that the Clines could not prove they 
had suffered damages.

[¶8] Chinook 
maintained that it was entitled to reimbursement from the Clines for its 
attorneys' fees and litigation expenses under the November 1993 contract's 
fee-shifting provision and requested that the district court award it over 
$93,000 in attorneys' fees and more than $14,000 in costs. The district court 
determined that, under the contract, Chinook was entitled to be awarded its 
attorneys' fees but Patrick was not entitled to be reimbursed for his attorneys' 
fees. The district court also found that Chinook could not be reimbursed for any 
fees it incurred prior to Patrick's dismissal from the lawsuit on September 10, 
1997, because the attorneys had not separated the fees attributable to Patrick's 
defense from the fees attributable to Chinook's defense. The district court, 
therefore, awarded Chinook $62,535.13 to reimburse it for the attorneys' fees 
and costs it expended in defending the lawsuit after Patrick was 
dismissed.

[¶9] The Clines 
appealed to the Wyoming Supreme Court. Chinook filed a cross-appeal after the 
district court denied its motion for a new trial on the portion of the court's 
order which denied it reimbursement for the attorneys' fees and costs it 
incurred prior to September 10, 1997.

DISCUSSION CASE NO. 
99-38

[¶10] The Clines 
maintain, in their first issue, that the district court erred when it awarded 
Chinook attorneys' fees and costs pursuant to the November 1993 contract. 
Chinook argues that the district court correctly determined that the contract 
entitled it to receive the award. We agree with Chinook.

[¶11] Wyoming 
subscribes to the American rule regarding recovery of attorneys' fees. Board of 
County Commissioners of County of Platte v. State ex rel. Yeadon, 971 P.2d 129, 
132 (Wyo. 1998). Under the American rule, each party is generally responsible 
for his own attorneys' fees. 971 P.2d  at 132-33. A prevailing party may, 
however, be reimbursed for his attorneys' fees when express statutory or 
contractual authorization exists for such an award. Id.

[¶12] The 
district court determined that the November 1993 contract allowed for the award 
of attorneys' fees in this case. Paragraph 17 of the contract stated in 
pertinent part: "Except as otherwise provided in this agreement, in the event of 
any dispute concerning this agreement, the prevailing party shall be entitled to 
all reasonable costs and expenses incurred to settle the matter, including 
reasonable attorney's fees." The Clines insist that, because the district court 
repeatedly stated that the November 1993 contract did not apply to the dispute, 
it erred when it ruled that the fee-shifting provision set out in Paragraph 17 
required the Clines to reimburse Chinook for its attorneys' fees and costs. We 
do not agree with the Clines' reading of the record or their interpretation of 
the contractual language.

[¶13] This 
Court's role in interpreting contractual fee-shifting provisions is to discern 
the intent of the contracting parties. See DeWitt v. Balben, 718 P.2d 854, 863 
(Wyo. 1986). We utilize our traditional rules of contract interpretation to 
accomplish that result. Id. In discerning the meaning of a contract, our initial 
inquiry focuses on whether the language of the contract is clear or ambiguous. 
See Treemont, Inc. v. Hawley, 886 P.2d 589, 592 (Wyo. 1994). "Courts make that 
determination as a matter of law." Wolter v. Equitable Resources Energy Company, 
Western Region, 979 P.2d 948, 951 (Wyo. 1999); see also Svalina v. Split Rock 
Land and Cattle Company, 816 P.2d 878, 881 (Wyo. 1991). This Court looks at the 
plain meaning of the words expressed within the four corners of a clear and 
unambiguous contract to determine the parties' intent. Wolter, 979 P.2d  at 951. 
Of course, we are always cognizant of the necessity of giving a reasonable 
construction to the contract language. Fremont Homes, Inc. v. Elmer, 974 P.2d 952, 956 (Wyo. 1999).

[¶14] The claims 
set out in the Clines' complaint against Chinook were based upon the November 
1993 contract. Paragraph 17 allowed fee shifting for "any dispute concerning 
this agreement." The fee-shifting language was clear and unambiguous. The plain 
language of Paragraph 17 obligated the losing party in any dispute concerning 
the agreement to pay the attorneys' fees of the prevailing 
party.

[¶15] The 
district court stated that the November 1993 contract was obviously intended to 
reduce a prior oral or implied agreement between the parties to writing because 
Chinook had performed significant work on the building before the contract was 
actually executed. Contrary to the Clines' assertion, the district court did not 
state that the November 1993 contract did not apply to the parties' dispute. 
Instead, it stated that the Clines could not prove their claims because they did 
not designate a witness who could testify as to their damages. Regardless of the 
fact that the district court found the Clines could not prevail on their claims 
under the contract, they were still obligated to pay Chinook's attorneys' fees 
pursuant to the plain language of Paragraph 17. The district court did not err 
by awarding attorneys' fees to Chinook under the November 1993 
contract.

[¶16] In their 
second issue, the Clines maintain that the district court abused its discretion 
when it awarded Chinook more than $62,000 in attorneys' fees and costs. Before 
we address the issue of the propriety of the amount of the attorneys' fees 
award, we must address two collateral matters.

[¶17] The 
attorneys' fees award in this case included a substantial amount for paralegal 
expenses. This Court has never directly addressed the issue of whether or not 
paralegal expenses are properly included within an award of attorneys' fees. The 
parties did not discuss this issue in their briefs, apparently assuming that 
paralegal expenses may be included in an attorneys' fees award. We believe, 
however, that the issue should be discussed in this decision because it is a 
matter of first impression in this jurisdiction.

[¶18] Our 
research has revealed a split of authority as to whether or not paralegal 
expenses should be included in an attorneys' fees award. For example, the 
Florida courts do not include paralegal expenses in attorneys' fees awards 
because they believe that such awards should include only fees for work actually 
performed by attorneys. See, e.g., ABD Management Corporation v. Robert L. 
Turchin, Inc., 490 So. 2d 202 (Fla. Dist. Ct. App. 1986) (per curiam); Bill 
Rivers Trailers, Inc. v. Miller, 489 So. 2d 1139 (Fla. Dist. Ct. App. 1986). 
Other states do allow paralegal fees to be included in attorneys' fees awards. 
See, e.g., Salton Bay Marina, Inc. v. Imperial Irrigation District, 218 Cal. Rptr. 839 (Cal. Ct. App. 1985); Continental Townhouses East Unit One 
Association v. Brockbank, 733 P.2d 1120 (Ariz. Ct. App. 1986); First N.H. Banks 
Granite State v. Scarborough, 615 A.2d 248 (Me. 1992). The rationale for 
allowing paralegal expenses is to mitigate the costs associated with litigation 
and to improve the efficiency of the attorneys. Continental Townhouses East Unit 
One Association, 733 P.2d  at 1127. The Maine Supreme Judicial Court stated that 
it would not adopt a "talismanic formula with regard to the inclusion of 
paralegal fees" in attorneys' fees awards. First N.H. Banks Granite State, 615 A.2d  at 251. That court held that it would review each case to determine whether 
the trial court abused its discretion by ascertaining whether the fees awarded 
for all legal services were fair and reasonable. Id.

[¶19] We believe 
that the Arizona and Maine courts have articulated the correct way to resolve 
the issue. By allowing reasonable paralegal expenses to be included in 
attorneys' fees awards in appropriate cases, we encourage efficient and 
cost-effective legal services and give the trial courts greater discretion in 
fashioning reasonable awards. We will, therefore, review reasonableness of 
attorneys' fees awards, including amounts allowed for paralegal expenses, on a 
case-by-case basis.

[¶20] Another 
issue raised by the Clines is whether or not it was proper for the district 
court to include, in an attorneys' fees award, expenses paid for paralegal 
services provided by an unlicensed attorney. Chinook's law firm employed an 
unlicensed attorney to act as a paralegal in this case. The Clines maintain that 
the employment relationship between the unlicensed attorney and Chinook's law 
firm violated Rule 8.4(g) of Wyoming's Rules of Professional Conduct for 
Attorneys at Law1 because the unlicensed attorney 
resigned from the California State Bar while client complaints were pending 
against him. Apparently, this matter was brought to the attention of the Wyoming 
State Bar Counsel, and he stated that Rule 8.4(g) pertains to disbarred and 
suspended attorneys but does not apply to attorneys who have resigned from the 
practice of law. The issue concerning the correct interpretation of the 
disciplinary rule is not before this Court. See Scott v. McTiernan, 974 P.2d 966, 974 n.5 (Wyo. 1999). We will, therefore, leave this matter to the Wyoming 
State Bar until such time as it is properly presented to this 
Court.

[¶21] We turn 
now to our analysis of the reasonableness of the attorneys' fees 
award.

[¶22] We review 
an award of attorney's fees under an abuse of discretion standard. A court 
abuses its discretion only when it acts in a manner which exceeds the bounds of 
reason under the circumstances. The burden is placed upon the party who is 
attacking the trial court's ruling to establish an abuse of discretion, and the 
ultimate issue is whether the court could reasonably conclude as it 
did.

[¶23] Johnston 
v. Stephenson, 938 P.2d 861, 862 (Wyo. 1997) (citations omitted). Wyoming 
employs the federal lodestar test to determine whether an attorneys' fees award 
was reasonable. Id.; see also Wyo. Stat. Ann. § 1-14-126(b) (LEXIS 1999). The 
two factors which are examined under the lodestar test are: "(1) whether the fee 
charged represents the product of reasonable hours times a reasonable rate; and 
(2) whether other factors of discretionary application should be considered to 
adjust the fee either upward or downward." Johnston, 938 P.2d  at 
862-63.

[¶24] At first 
blush, an award of more than $62,000 for attorneys' fees and costs does seem 
somewhat excessive for a matter that ended in a summary judgment. The record 
reflects, however, that a substantial amount of legal work was performed before 
the matter was finally resolved by a summary judgment which was granted just two 
days before the trial was scheduled to begin. Chinook presented the district 
court with extensive documentation supporting its request for attorneys' fees 
and costs, including: (1) detailed itemized billing statements; (2) explanatory 
affidavits from Stephen Simonton, the supervising attorney; and (3) an affidavit 
from C. Edward Webster II, a Cody attorney and municipal court judge, who stated 
that the amount was reasonable in light of the complexity of the case and the 
adversarial nature of the parties.

[¶25] The 
district court was in the best position to review the details of Chinook's fee 
application. The considerable court file and the documentation Chinook filed in 
support of its request for attorneys' fees and costs constituted ample evidence 
to support the district court's decision. The district court did not abuse its 
discretion when it fashioned the attorneys' fees award in this case.2

CASE NO. 
99-39

[¶26] In Case 
No. 99-39, Chinook alleges that the district court erred when it refused to 
reimburse it for the attorneys' fees and costs it incurred prior to Patrick's 
dismissal from the lawsuit on September 10, 1997. Chinook maintains in its first 
issue that the language of Paragraph 17 was sufficiently broad to allow the 
district court to award Chinook all of its legal expenses, including those the 
corporation paid on behalf of Patrick. The Clines argue that the contractual 
language cannot be extended to cover the expenses of Patrick's defense. We agree 
with the Clines.

[¶27] We will 
apply the traditional rules for interpreting contracts that we recited earlier 
in this decision to resolve this issue. By its very nature, the November 1993 
contract applied to only the contracting parties: Chinook and Mike. Patrick was 
not a party to the contract, and the contract language did not specifically 
provide for payment of Patrick's attorneys' fees. This Court has stated: "In 
order to recover attorney's fees under a contract, the agreement must 
unequivocally provide for such recovery.'" Cowardin v. Finnerty, No. 98-292, 
slip op. at 4 (Wyo. Dec. 28, 1999) (quoting Coulter v. City of Rawlins, 662 P.2d 888, 904 (Wyo. 1983)). Chinook's broad interpretation of the contract language 
unreasonably expands the coverage of the fee-shifting provision beyond what its 
plain language suggests the parties intended when they executed the contract. 
The district court properly determined that the contract did not obligate the 
Clines to reimburse Chinook for Patrick's legal expenses.

[¶28] In its 
second issue, Chinook contends that the Clines should be required to pay for the 
legal expenses it amassed prior to Patrick's dismissal from the case on 
September 10, 1997, because its attorneys were working on claims which were 
asserted against both defendants and involved a common core of facts and/or 
related legal theories. The Clines argue that the district court correctly 
determined that Chinook could not recover those fees because its attorneys did 
not segregate the fees attributable to Patrick's defense from the fees 
attributable to its defense. We agree with the Clines.

[¶29] This Court 
has repeatedly held that segregation of fees between multiple clients and/or 
multiple claims is required when it is possible. See, e.g., Rocky Mountain 
Helicopters, Inc. v. Air Freight, Inc., 773 P.2d 911, 925 (Wyo. 1989); Miles v. 
CEC Homes, Inc., 753 P.2d 1021, 1027 (Wyo. 1988). Chinook points out that other 
jurisdictions have recognized an exception to the duty to segregate fees which 
operates when the attorneys generated fees by working on claims which arose out 
of the same transaction and were so interrelated that their prosecution or 
defense necessarily involved proof or refutation of essentially the same facts. 
See, e.g., San Dieguito Partnership, L.P. v. San Dieguito River Valley Regional 
Open Space Park Joint Powers Authority, 72 Cal. Rptr. 2d 91, 96 (Cal. Ct. App. 
1998); Duchscherer v. W.W. Wallwork, Inc., 534 N.W.2d 13, 17-18 (N.D. 1995); 
DeSpiegelaere v. Killion, 947 P.2d 1039 (Kan. Ct. App. 
1997).

[¶30] The case 
at bar is not a proper case for this Court to decide whether or not Wyoming will 
adopt the rule that attorneys' fees do not need to be segregated between 
multiple parties or claims when the claims are sufficiently interrelated. 
Chinook has not convinced us that it was impossible for the attorneys to 
segregate their fees between the two clients. In light of the fact that Chinook 
did not clearly establish that the attorneys could not separate the fees 
attributable to it from the fees attributable to Patrick, we are reluctant to 
diverge from the general rule that each party must pay its own fees. The 
district court properly determined that Chinook was not entitled to be 
reimbursed for the fees generated by its attorneys prior to Patrick's dismissal 
from the lawsuit because the attorneys did not segregate the fees between the 
defendants. 

A. Attorneys' Fees on 
Appeal

[¶31] Chinook 
argues that the attorneys' fees provision of the contract entitles it to recover 
its attorneys' fees and litigation costs on appeal. In Ahearn v. Tri-County 
Federal Savings Bank, 954 P.2d 1371, 1373 (Wyo. 1998) (quoting Shoup v. 
Mayerson, 454 P.2d 666, 670 (Okla. 1969)), this Court adopted the general rule 
that "[a] contract for a reasonable attorney's fee in enforcing its provisions 
embraces an allowance for legal services rendered upon appeal as well as during 
the trial.'" See also DeWitt, 718 P.2d  at 864-66. The fee-shifting language in 
the November 1993 contract was broad, and, consequently, we read it as granting 
the prevailing party the right to be reimbursed for the attorneys' fees it paid 
to prosecute and/or defend on appeal.

[¶32] Chinook 
is, therefore, entitled to be awarded its attorneys' fees and costs on appeal in 
Case No. 99-38 because it is the prevailing party in that case. Chinook is not, 
however, entitled to be reimbursed for the litigation expenses that were 
generated in prosecuting its cross-appeal in Case No. 99-39 because it is not 
the prevailing party in that case.3 Generally, the appellate court, 
rather than the trial court, determines the proper amount of fees to be awarded 
for the legal work on appeal. Ahearn, 954 P.2d  at 1373; DeWitt, 718 P.2d  at 866. 
We will, therefore, calculate Chinook's attorneys' fees award after it presents 
proper documentation to us.

[¶33] 
Affirmed.

Footnotes

1 Rule 8.4(g) of the Rules 
of Professional Conduct for Attorneys at Law states:

It is professional 
misconduct for a lawyer to:

. . 
.

(g) knowingly employ or 
continue to employ or contract with any person in the practice of law who has 
been disbarred or is under suspension from the practice of law by any 
jurisdiction. The prohibition of this rule extends to the employment of or 
contracting for the services of such disbarred or suspended person in any 
position or capacity (including but not limited to as an employee, independent 
contractor, paralegal, secretary, investigator or consultant) which is directly 
or indirectly related to the practice of law as defined by Rule 11(a) of the 
Rules of the Supreme Court of Wyoming Providing for the Organization and 
Government of the Bar Association and Attorneys at Law of the State of Wyoming, 
whether or not compensation is paid.

2 The Clines also make 
numerous alternative arguments in support of their claim that the district 
court's ruling was in error. Those arguments do not have merit and will not be 
addressed individually in this decision.

3 The Clines did not 
request that we order Chinook to reimburse them for the attorneys' fees and 
costs they paid to defend against Chinook's appeal in Case No. 
99-39.