Opinion ID: 1060409
Heading Depth: 1
Heading Rank: 7

Heading: reasonableness of the fees taken from the common fund

Text: Finally, counsel for the appellant argues that the Court of Appeals erred in examining the reasonableness of the fee awarded by the trial court, which amounted to one-third of the entire settlement proceeds. Instead, counsel asserts that because no one in this action argues that one-third contingency fee contracts are unreasonable, the intermediate court erred in remanding the case to determine the proper fee. We find no evidence that the trial court abused its discretion in awarding the appellant's attorney a fee of one-third of the common fund, and we agree with counsel that a remand for another determination of the proper fee is unnecessary. As we have noted above, the original or lead attorney in a common fund action may seek a fee from the passive beneficiaries of the common funda fee in addition to that obtained from the clientto prevent the unjust enrichment of those beneficiaries. However, the case law in this state has not been clear as to how to determine the proper fee amount awarded from the other beneficiaries. As one standard, the appellant's attorney here has proposed that the percentage fee amount in his contract with the surviving spouse should also govern the percentage fee amount taken from the children's share of the settlement. We disagree that the contract with the lead or original plaintiff should invariably govern the fees to be paid by the passive beneficiaries of a common fund. Admittedly, this Court has had few occasions in which to address whether the attorney's contingency fee contract with the lead or original plaintiff should also determine the percentage fee that the attorney may recover from the entire common fund itself. However, in one case involving an insurance subrogation claim, we held that the insurer, as a passive beneficiary to the settlement proceeds, was not bound by the terms of the agreement regarding compensation between the plaintiff and the attorney. See Boston, Bates & Holt v. Tennessee Farmers Mut. Ins. Co., 857 S.W.2d 32, 35 (Tenn.1993). Instead, we remanded the case to the trial court to determine the amount of compensation that was reasonable under the circumstances. [10] Other courts addressing this issue have also concluded that the contract with the lead or original plaintiff should not govern the fee to be paid by the passive beneficiaries. For example, the Supreme Court of Florida has recognized that if the [trial] court allowed the written fee agreements to control the fee to be awarded from the common fund, it would be enforcing fee agreements to which the vast majority of class members did not consent. Thus, the fact that class counsel and the named parties agreed that attorney fees would be calculated on a percentage basis cannot control what approach the court should use in exercising its inherent power to determine reasonable attorney fees to be paid from the common fund. Kuhnlein v. Department of Revenue, 662 So.2d 309, 314 (Fla.1995). The Maryland Court of Appeals has also acknowledged that the percentage of a contingent fee in the contract between counsel for the Plaintiffs and the named Plaintiffs is not controlling. See United Cable Television of Baltimore Ltd. P'ship v. Burch, 354 Md. 658, 732 A.2d 887, 903 (1999). We agree with these authorities and hold that although the fee contract with the lead or original plaintiff is relevant to the inquiry, the contract is not determinative of the appropriate fee to be paid by the passive, noncontracting beneficiaries. Instead, trial courts should base any fee award from these beneficiaries upon the reasonable value of the attorney's services provided to them. Accord In re Polybutylene Plumbing Litig., 23 S.W.3d 428, 438 (Tex.App.2000) (An attorney's compensation from noncontracting plaintiffs under the common fund doctrine is limited to the reasonable value of the attorney's services benefitting them. (emphasis in original)). In determining a reasonable fee amount, the trial court should look to the guidelines outlined in Connors v. Connors, 594 S.W.2d 672, 677 (Tenn.1980) and to the factors listed in Tennessee Supreme Court Rule 8, DR 2-106. [11] Examining the record in this case, we note that while the trial court found a one-third contingency fee from the children's portion of the settlement to be reasonable, it did not expressly consider the Connors guidelines or the factors listed in DR 2-106. In part because of the absence of these considerations, a majority of the Court of Appeals remanded the case for a redetermination of the fee. However, reversal of a fee award is not required merely because the record does not contain proof establishing the reasonableness of the fee. See Kahn v. Kahn, 756 S.W.2d 685 (Tenn.1988). We have expressly acknowledged that a trial judge may fix the fees of lawyers in causes pending or which have been determined by the court, with or without expert testimony of lawyers and with or without a prima facie showing by plaintiffs of what a reasonable fee would be. Wilson Mgmt. Co. v. Star Distribs. Co., 745 S.W.2d 870, 873 (Tenn.1988). Should a dispute arise as to the reasonableness of the fee awarded, then in the absence of any proof on the issue of reasonableness, it is incumbent upon the [party challenging the fee] to pursue the correction of that error in the trial court by insisting upon a hearing upon that issue. See id. (emphasis added). Although the children in this case disputed that they should pay any of the appellant's attorney's fees from their share of the settlement, they did not seek to challenge the reasonableness of those fees in the event that the award was confirmed. Consequently, the record contains no proof that the trial court abused its discretion awarding the appellant's attorney a one-third contingency fee from their portion of the settlement. By upholding the fee award here, we do not necessarily approve of similar awards in future cases, but we reaffirm the principle that the record must contain some evidence showing that an award of attorneys' fees is unreasonable under the circumstances before a reversal of that fee is warranted. Accordingly, we hold that because the record contains no evidence to show that the trial court abused its discretion in awarding fees to the appellant's attorney, the Court of Appeals improperly remanded this case for another determination of the fee.