Opinion ID: 901280
Heading Depth: 1
Heading Rank: 4

Heading: Factors in Determining Reasonableness of Attorney Fees

Text: [¶ 14.] In addition to the Rules, this Court has set forth a number of factors for judges to consider in determining the reasonableness of attorney fees. In Tappe we established a two-pronged test for court appointed attorney fees. First, the billed services must be reasonably necessary and second, the amount must be reasonably valued. 326 N.W.2d at 894. We noted, however, in Tappe that rates for representing indigent clients are generally below the market rates charged to non-indigent clients. Id. at 894-95. We recognize that the per hour fee as currently established is still below the hourly rate attorneys charge. Duffy is not challenging the per hour rate of $69 effective at the time of the assigned cases. The lower court made no adjustments to the per hour rate. [¶ 15.] The factors, as established in Tappe, that a court must consider when determining reasonableness are as follows: time spent and services rendered, the attorney's skills and experience, the complexity of the case, the attorney's overhead costs, and the character and importance of the litigation. Id. at 895. The Tappe Court noted the factors were not exclusive. Id. Since deciding Tappe, we have listed additional factors for a trial court to consider in determining what constitutes reasonable attorney fees. Some of the factors stem from the Model Rules of Professional Conduct. City of Sioux Falls v. Kelley, 513 N.W.2d 97, 111 (S.D.1994). The factors which are in addition to those enumerated in Tappe and are relevant to court appointments are: the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; the fee customarily charged in the locality for similar legal services; the time limitations imposed by the client or by the circumstances; and the experience, reputation, and ability of the lawyer or lawyers performing the services. City of Sioux Falls v. Johnson, 2003 SD 115, ¶ 8, 670 N.W.2d 360, 362 (citing Kelley, 513 N.W.2d at 111) (quoting Model Rules of Professional Conduct, Rule 1.5). Another factor relevant to criminal cases and considered by other courts is the possible punishment involved. Hulse v. Wilfvat, 306 N.W.2d 707, 711 (Iowa 1981). [¶ 16.] Based on the factors set forth in prior cases and the Model Rules of Professional Conduct, we conclude that when reviewing the reasonableness of court appointed attorney fees, a trial court must consider the following factors: (1) the time spent and services rendered; (2) the complexity of the case and difficulty of the questions involved; (3) the character and importance of the litigation; (4) the skill required to perform the legal service properly; (5) the time limitations imposed by the client or by the circumstances; (6) the fee customarily charged in the locality for similar legal services; (7) the experience, reputation, and ability of the lawyer performing the services; and (8) the possible punishment involved. We gave further direction in Kelley on how to consider the factors starting by considering the time spent on the case. We said that no single factor should control: The fee should not be based on any one single factor but all of these matters should be taken into consideration. The only requirement is that the fee which the court fixes in each case must be reasonable for the services rendered. Kelley, 513 N.W.2d at 111 (citing City of Bismarck v. Thom, 261 N.W.2d 640, 642 (N.D.1977) (quoting Morton County Board of Park Comm'nrs v. Wetsch, 136 N.W.2d 158 (N.D.1965))). We directed in Kelley that calculation of the fees must start with multiplying the attorney's hours and the typical hourly fees but explained: We are not under the illusion that a `just and adequate' fee can necessarily be ascertained by merely multiplying attorney's hours and typical hourly fees. However, we are convinced that this simple mathematical exercise is the only legitimate starting point for analysis. It is only after such a calculation that other, less objective factors, can be introduced into the calculus. Kelley, 513 N.W.2d at 112. [¶ 17.] Additionally, the trial court is entitled to look at the case as a whole in light of the calculations and factors. The trial court in using its independent judgment must acknowledge the high standard of diligence and preparation which is demanded of counsel in criminal cases. Hulse, 306 N.W.2d at 710. Although a court has the benefit of hindsight, it should not overlook the attorney's perspective in preparing for the case. Id. at 709. Trial Court Required to Explain Reasons for Reducing Fees [¶ 18.] The trial court is required by rule to explain, either orally or in writing, the reasons for change or modification of the statement or voucher submitted by counsel. Supra at n. 9. In other attorney fees cases, we have required the trial court to make specific findings based on the factors. Hoffman v. Olsen, 2003 SD 26, ¶ 10, 658 N.W.2d 790, 793; Ridley v. Lawrence County Com'n, 2000 SD 143, ¶ 13, 619 N.W.2d 254, 259; Michlitsch v. Meyer, 1999 SD 69, ¶ 20, 594 N.W.2d 731, 735; Pengra v. Pengra, 429 N.W.2d 754, 757 (S.D.1988). Counsel is responsible for providing an itemized statement in order for the courts to review the charges; the court, in turn, should articulate its rationale for reducing the fee either by specific findings or a clear explanation addressing each of the reasonableness factors. [10] See State v. Sidney, 66 Wis.2d 602, 225 N.W.2d 438 (1975). Whether the Court Applied the Correct Legal Standard in Reducing Fees [¶ 19.] Therefore, in determining whether a trial court has regularly pursued its authority, we examine if the court applied an incorrect legal standard or whether the court abused its discretion to the extent that it acted illegally in setting the amount. The attorney is entitled to just and reasonable compensation. The judge determines whether it is just and reasonable. In applying the correct legal standard, the court is required to explain orally or in writing the reasons for modifying the attorney's submitted voucher considering the factors enumerated in this opinion. The attorney has the burden of proof to show that the trial court applied the incorrect legal standard or acted illegally in setting the amount. [¶ 20.] In two of Duffy's court appointed cases, her client, Kathryn Little was charged with two counts of felony child abuse. The two cases were assigned to Judge Kern. Little was also named as the respondent in an Abuse and Neglect petition over which Judge Davis presided. Little was severely mentally ill with severe borderline personality disorder and severe depression and had been diagnosed with an advanced stage of breast cancer. She attempted suicide and was committed to Human Services Center three times during Duffy's representation. Duffy's affidavit indicated that the State refused to plea bargain the criminal charges. As part of the defense preparation, Duffy claimed that several evidentiary and substantive issues arose which required research, briefing and interviewing of an expert. [¶ 21.] Duffy was appointed to represent the defendant Lucas Wilson in two cases. In the one case, Wilson was charged with felony possession of methamphetamine, ingesting, possession of marijuana and drug paraphernalia which was assigned to Judge Kern. In the other case, Wilson was charged with Driving While Under the Influence (DUI) and felony Possession of Methamphetamine which was assigned to Judge Tice. Duffy claims that because of the time spent in preparation, she was able to obtain a favorable plea agreement wherein the State dismissed the felony charge and reduced the DUI to reckless driving, thus eliminating the need for a jury trial. [¶ 22.] Duffy submitted itemized bills for each case which included expenses and the time spent on specific tasks billed at the authorized per hour rate. Judge Kern wrote Duffy a letter informing her that she had reduced the billings for the four cases involving clients Little and Wilson. In the letter, the judge indicated that the bills were too high. The judge acknowledged that the clients were difficult to work with and also recognized the skills and abilities of counsel. The entire content of the letter to Duffy is as follows: Enclosed please find copies of the front page of your claims filed against Pennington County for provision of services as Court-appointed legal counsel for Ms. Little and Mr. Wilson. I have reduced your bills as indicated. I'm enclosing for your review the Rules of Compensation for Court-appointed Attorneys. If you are dissatisfied with the amount of compensation allowed you may request that all of the Judges in the Circuit review the Claim for Compensation and hold a hearing thereon. A decision by the majority of the Judges shall become the amount of fees and costs authorized. I realize that both of these clients have been difficult but Mr. Wilson's case did not proceed to trial and fees in the excess of $7,000.00 are simply too high. Similarly, Kathryn Littles' case has not yet proceeded to trial and the bills are in excess of $5,000.00. I have the greatest personal respect for your abilities and the vigor with which you represent your clients. However, we have a limited budget for Court-appointed attorney's fees and the Court bears the duty and obligation of monitoring the fees expended. Please do not hesitate to contact me further. Sincerely, Janine M. Kern Circuit Court Judge Judge Kern's explanation did not address the factors to be used in determining whether the fees were reasonable or how those factors entered into her decision to reduce Duffy's fees. It is apparent from the letter that the county's budget for court appointments played some part in her determination to cut the fees. Although understanding the sensitivity to county budgets, the courts have not recognized this as a factor in determining a reasonable attorney fee. The presiding judges have set the hourly fee paid to court appointed counsel below the amount an attorney would charge to private clients. Consequently, the fees paid for court appointments are already discounted by that reduced hourly charge. [¶ 23.] Upon Duffy's request, the judge provided her with a marked-up version of two of her submitted fees; no explanation accompanied the reduced fees. Judge Kern had struck at least 50 itemized charges by either crossing out the charge completely or by entering a lower figure. For example, Duffy billed 4 hours and 10 minutes for preparation for child competency hearing; attended hearing; brief meeting with client after meeting. The hearing, which had been noticed by the State, lasted 2 hours 40 minutes. Judge Kern highlighted the services, crossed out the fee of $282.90 which was based on the charge of $69 an hour for 4.1 hours and wrote in $138 (representing $69 an hour for 2 hours), thus allowing reimbursement for less time than the attorney spent at the hearing and none for preparation and meeting with her client. For the services phone call from Matt Brown [State Attorney's Office] regarding a plea agreement; phone call to client regarding the same, Duffy billed $34.50 for one-half hour. This item was completely disallowed. Whether the reductions relate to any of the reasonableness factors is not apparent. Disallowing full compensation for a court hearing or for communications with one's own client is questionable since an attorney's professional responsibility would require it. For the fees pertaining to the Wilson files, the judge merely drew a line through the total amount and reduced it. [¶ 24.] Judge Kern's explanation for the reductions in the fees was not based upon the factors nor did the judge explain the reasons for the cuts adequately for any of the files. One of the bills the judge reduced was actually presided over by Judge Tice. [11] Another of the cases was handled by Judge Davis. Judge Tice and Judge Davis would have been in a better position to determine the reasonableness of the fees in those cases. [¶ 25.] A trial judge is required to explain the cuts based upon the reasonableness factors. Initially, all that Duffy received was the letter from Judge Kern indicating that the bills were too high. After requesting further explanation, Duffy received copies of the four vouchers all with the total claimed amount reduced. Two vouchers showed total or partial reductions of specific hourly charges. There were no communications in the record from either Judge Tice or Judge Davis prior to the panel's review concerning the reductions. [¶ 26.] The judge who presides over the case and determines that an attorney's fees are unreasonable has an obligation to apply the correct legal standard when making that decision. The judge is also required to explain the reasons for reducing the fees based upon that standard. The legal standard is based upon the factors that this Court has addressed in prior cases. This does not mean, of course, that judges must explain a reduction of fees by counter-itemizing each line in an attorney's bill. Judges may examine the bill as a whole and provide an explanation using the required factors. This was not done. Duffy asked for more explanation in order to present her justification to the review panel. Receiving only the Kern letter and reduced vouchers, Duffy attempted to present her justification to the panel. The only further explanation received by Duffy was the letter she received from the reviewing panel after the hearing. Without the explanation prior to the hearing, Duffy was placed in a position of guessing at the rationale of the reductions. This is not the procedure contemplated by Tappe nor established by the Rules. [¶ 27.] Nonetheless, Duffy provided the panel with evidence and explanation. Duffy explained, in detail, the necessity and justification for the time spent and her reasons for defending the cases in the manner she did. She submitted documents from the cases relevant to the bills, and she provided affidavits from practicing attorneys who were of the opinion that the time and activities she performed were reasonable. She was allowed a short oral argument to the panel. She pointed out in her appeal that she was at a disadvantage because without an explanation or rationale for the cuts, she was unclear what she needed to justify. [¶ 28.] The panel of judges, consisting of Judge Kern, Judge Tice, Judge Davis and Judge Trimble, affirmed the fee reduction and wrote a letter. In its review of the cases, the panel recognized the Tappe decision and the factors listed therein. The panel explained in its letter to Duffy why the reductions were appropriate. This is the first time that Duffy actually received a specific explanation for the reductions. [¶ 29.] The panel determined that as to one of the Wilson cases, [t]he case was neither unusually complex nor difficult. The defendant received a probationary sentence similar to that uniformly obtained by Defendants of this age in these circumstances. The panel further concluded Duffy spent too much time and effort on suppression issues. The panel recognized that the judge presiding over the case should have been the one to review the bill; however, the panel concluded that Judge Tice had reviewed Judge Kern's reductions and agreed to them. Although the panel appears to have considered the complexity of the cases, it failed to take into consideration the other factors in determining the reasonableness of the fee. The panel stated that it used its collective legal experience and its review of other court appointed bills to find that Judge Kern did not abuse her discretion. [¶ 30.] As to the criminal case against Little, the panel found the case not to be extremely complicated with straight forward issues that are standard in any criminal cases. The panel concluded as follows: Judge Kern provided you with a highlighted copy of your bill showing line items reduced or deleted from your bill. You have now submitted detailed explanations for each entry. Even after reviewing your explanations we feel the changes, when reviewed in their totality, are unreasonably high. We do not doubt that you worked the hours reported but we find that the number of hours spent on the tasks accomplished are excessive. We believe you to be a very competent and conscientious attorney. There will always be additional work that can be done in any case. The Court bears the burden and responsibility of monitoring court appointed fees while at the same time assuring constitutionally sufficient representation for indigent Defendants. Although the panel attempted generally to address some of the reasonableness factors in Tappe, it did not address all of the factors or require the judges assigned to the cases to do so either. [¶ 31.] This rule setting forth the procedure of reviewing court appointed attorney fees is a relatively new procedure and standard and one which this Court has not previously addressed. Therefore, the lower court did not have the benefit of our direction prior to the Duffy matter being raised. It is apparent that the judges in good faith attempted to follow the rule. However, there are several things about the process they used which do not meet the standard as set forth in this opinion. [¶ 32.] The process used was flawed in several respects. First, the judge presiding over the cases, in the first instance, should have given the appointed attorney the explanation for the reductions specifically addressing the reasonableness factors. Secondly, the panel required Duffy to justify her bills without Duffy knowing why they were being denied. The panel should have required each judge who presided over the case to give Duffy an explanation based upon the factors before conducting the review hearing. With those explanations, Duffy would have been able to address the factors and reductions in an attempt to justify her charges.