Court Opinion

ID: 9653354
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:44:49.313473+00
Date Added: 2024-06-11T18:12:58.119209
License: Public Domain

John A. Fogleman, Chief Justice. On December 30, 1976, the Chancery Court of Pulaski County entered a decree in an action brought by Frank Henry and others against the mayor and aldermen of North Little Rock and the manager of the North Little Rock Electric Department, holding that the city improperly charged their electrical customers $639,226.24 and ordering a refund, on a pro rata basis. The court denied a request for allowance of attorney’s fees to the attorneys representing the customers in the litigation which resulted in the decree. On February 25,1977, the plaintiffs in the action filed a motion for clarification, stating that the court had misinterpreted their prayer for payment of attorneys’ fees as a prayer for judgment against the defendants for those fees, in addition to the amount of the overcharge, when they had actually requested that these fees be paid from the refunds made to the customers. On March 9, 1977, the chancery court modified its previous decree to require the city to bear all costs of the refund and pay interest on any refunds due but unpaid after April 30, 1977, and retained jurisdiction on the question of allowance of attorneys’ fees to plaintiffs’ attorneys. On April 1, 1977, the chancery court presided over by a chancellor on assignment, ordered the payment of $95,884.31 as attorneys’ fees to John Harmon, Tommy H. Russell and Judith Rogers, who had represented the customers in the litigation. On May 4,1977, the chancery court, with the regular chancellor presiding, set aside this order, but reinstated it on December 27,1978, after a rehearing on the matter. Appellants appeal from this last order or decree, asserting the following points for reversal: I PLAINTIFFS’ ATTORNEYS MAY NOT RECOVER ATTORNEYS’ FEES IN QUANTUM MERUIT, BUT MUST RECOVER ON THEIR CONTRACT WITH PLAINTIFFS. II ACT 822 of 1977 (CODIFIED AS ARK. STATS. ANNO. § 84-4601) IS NOT APPLICABLE TO THE PRESENT CONTROVERSY. III A REASONABLE AMOUNT OF ATTORNEYS’ FEES SHOULD NOT EXCEED 5 PERCENT OF THE TOTAL RECOVERY OF THE TAXPAYERS’ ACTION. We find no reversible error and affirm the decree. I Appellants contend that the attorneys for the plaintiffs in the action were limited to the fee of 25% of the recovery of the original plaintiffs employing them, relying upon Terral v. Poe, 190 Ark. 346, 79 S.W. 2d 69, insofar as it related to a division of attorney’s fees between Terral and Poole. We are unable to see any comparison between that case and this. There Poole, an attorney, accepted employment by Terral as an associate in the trial of two cases for a fee of $100 per cause. When there was a rather large recovery in the two cases, Poole sought to recover $775.62, or 25% of the total fees, on the basis of quantum meruit. We held that Poole was bound by his contract and limited to the fee to which he agreed in the contract. This case might furnish some precedent in a contest between these attorneys and the named rate paying plaintiffs in the litigation. If any of these clients are complaining of the allowance made, it is not reflected by the record. As we understand the record in this case, the action was a class action, which resulted in the recovery of a substantial amount which constituted a common fund. The allowance of attorneys’ fees from a common fund established or augmented through the efforts of the attorneys to whom the fee is allowed is a well recognized practice and is proper. Bradshaw v. Bank of Little Rock, 76 Ark. 501, 89 S.W. 316; Valley Oil Co. v. Ready, 131 Ark. 531, 199 S.W. 915; Marlin v. Marsh, 189 Ark. 1157, 76 S.W. 2d 965. We do not consider that our holding in City of Ft. Smith v. Southwestern Bell Telephone Co., 220 Ark. 70, 247 S.W. 2d 474, is applicable here, or that it is contrary to the holding in the cases just cited. There nine cities sought to have the fees of their attorneys paid for a proceeding in which they successfully protested a telephone rate increase and refunds to subscribers were ordered. The basis of that decision was that these attorneys were representing the cities, not the rate payers. Here the situation is quite different. The attorneys were representing the rate payers in litigation against the city. In arguing this point, appellants complain that it is extremely difficult for the court to determine the value of the service of these attorneys, in view of the fact that they did not keep time records and only provided subjective and self-serving estimates as to the time spent on the case. Appellants then assert that the burden of providing accurate and ascertainable records of time spent on behalf of the plaintiffs should be on these attorneys. This argument, which is only stated, without citation of authority, is not convincing and might well be disposed of under the rule of Dixon v. State, 260 Ark. 857, 545 S.W. 2d 606. It would have been desirable to have had time records, if they were kept, but there is not now, and never has been, any rule of law or procedure in this state that requires submission of time records in support of a request for payment of attorneys’ fees. While the time spent is an important element to be considered in determining the reasonable value of an attorney’s services, it is not the controlling factor and is sometimes a minor one. Love v. U.S. F. & G. Co., 263 Ark. 925, 568 S.W. 2d 746. We have recently had occasion to address our attention to the relationship of time records and the expenditure of time in relation to the allowance of attorney’s fees in Lytle v. Lytle, 266 Ark. 124, 583 S.W. 2d 1 (1979). There we found that other factors were just as important as the time devoted to a case. In Marlin v. Marsh, supra, we pointed out that the amount of the recovery was important and indicated that the trial court properly took into consideration the ability of counsel, the nature and extent of the services rendered and the result obtained. The chancellor who made the allowance here, and whose action was reinstated by the regular chancellor, took these factors into consideration. Although such allowances should not be entirely on a contingent fee basis, they should be such that competent lawyers would not refuse to accept employment in cases of this sort. Old Republic Insurance Co. v. Alexander, 245 Ark. 1029, 436 S.W. 2d 829. Naturally, the uncertainty of ultimate recovery is an element to be considered in accomplishing this purpose. We do not consider that the allowance of 15% of the recovery put the allowance on a contingent fee basis. It was an appropriate means of distributing the burden. II We agree with appellants and appellees that Act 822 of 1977, which was passed, and became effective, after the entry of the original decree in this case, is inapplicable. Furthermore, we do not understand the decree to be based upon the act. Ill Appellants again emphasize the failure of the attorneys to keep detailed time records. They point out that according to their testimony, Harmon estimated that he spent 25 hours per week, Russell estimated 12 hours per week, and Rogers estimated an average of 10 hours per week, during the pend-ency of the cases. Appellants then calculate that multiplying these estimated hours for the period of 16 weeks that the litigation was pending by a factor of $75 per hour, which they say was shown to be reasonable by the attorneys at the hearing, produces a total of $58,800, which is less than two-thirds of the award, but considerably more than the 5% appellants consider reasonable. Although accurate time records would have been helpful in considering the reasonableness of the fee allowance in this case, it is our position that time spent is only one significant factor in such considerations. Lytle v. Lytle, supra. Other factors in this case are at least equal in importance, and may perhaps carry considerably greater weight. Appellants seek to establish a basis for their position that 5% of the refund was a reasonable fee allowance by referring us to cases involving class actions where the fund involved ranged from $137,600 to $7,200,000 and attorneys’ fees were not allowed on a percentage basis. By arithmetical calculation they arrive at percentages ranging from 4% to 5% of the funds involved in those cases, as against 15% allowed in this case. Appellants then somehow translate our reduction from $15,000 to $10,000 of the fee allowed in apartition suit (Cole v. Scott, 264 Ark. 800, 575 S.W. 2d 149) into an expression of this court’s intention that 4% to 5% will constitute the outer perimeters of a chancellor’s discretion in awarding attorneys’ fees from a common fund. We find no language in that opinion indicative of any such intention. As a matter of fact, we are not aware of any recent decision in which this court has passed upon allowances of attorneys’ fees where the percentage of the fund or recovery has been given any significance. We have enumerated pertinent factors on several occasions. See, e.g., Lytle v. Lytle, supra; Robinson v. Champion, 251 Ark. 817, 475 S.W. 2d 677; Equitable Life Assurance Society v. Rummell, 257 Ark. 90, 514 S.W. 2d 224. It seems to us that the assigned chancellor, whose award was reinstated by the regular chancellor, took into consideration many of these factors. He made these findings: 1. There has been a substantial economic benefit bestowed upon the class; 2. There was personal and professional hardship incurred by the attorneys of record; 3. There was a vindication of an economic right; 4. The ligitation was novel; 5. The plaintiffs’ case was difficult and there was substantial time devoted to the case; 6. Counsel possessed extraordinary skill and competence. John Harmon testified about his experience in dealing with utility rates and with class actions and anti-trust proceedings and his previous practice of public utility law generally. He anticipated a harmful effect upon his practice in North Little Rock because he detected an adverse attitude toward him by members of the city council when he appeared before them in connection with his practice after he became engaged in this litigation. He related the necessity for lengthy discovery processes and the protection of confidential sources of information gained from employees of the electric department, and classified the litigation as complex. Expert testimony was given by Messrs. Walter Davidson and Dale Price of the Pulaski County Bar Association. Davidson told of his experience in public utility practice over a period of three to four years, and of the scarcity of attorneys engaged in that type of practice, which he called a “specialty-type” item. He considered a rate of $70 per hour in that work as a conservative figure designed to promote a continuing relationship with a client, but felt that a higher fee basis was appropriate in a case such as this, where the establishment of such a relationship was not a factor. In his opinion, considering the results and the fact that collecting any fee was dependent upon a favorable termination of the litigation, 25% of the recovery was reasonable. He considered the complexity of the case, the experience of the attorneys involved, the results accomplished, the urgency of the case, other business lost, the lack of a continuing client relationship and the contingency of the compensation as pertinent factors in fixing the amount of the fee. Price considered the specialized nature of utility rate cases, the lack of a prospect of a continuing lawyer-client relationship, the urgency of the case, the contingency of the fee and the fact that the suit was against a political entity in arriving at his opinion that a fee of 20 to 25% of the recovery would be reasonable. He expressed the opinion that fees of $75 to $100 per hour, and “even upwards” were a fair hourly rate in the locality, and said that in fixing an hourly rate, the political factor, the potential necessity for discarding other business, and the urgency of the case were important factors in determining whether the hourly rate should be $75, $100, or even more. In view of the record before us, we are unable to say that there was any abuse of discretion in the allowance of attorneys ’ fees in this case, which we should have to do in order to reverse or modify that award. An important factor in our consideration of the fee allowance in this case is the realization that inadequate compensation will cause attorneys who are competent to handle this type of litigation to shun it, or if they accept it, fail to devote sufficient time to adequately prepare or present the case. This is an appropriate consideration in matters of this sort. Old Republic Insurance Co. v. Alexander, 245 Ark. 1029, 436 S.W. 2d 829. The individual rate payer ordinarily cannot afford to employ counsel because attorneys’ fees and other expenses could be expected to exceed his prospective recovery. If attorneys do avoid employment such as that accepted by the attorneys in this case because they cannot expect to be adequately compensated, even if they are successful, there would be few cases where excessive charges would ever be refunded. The fact that no one who is the beneficiary of the recovery is complaining about the award is not without significance. The standing of appellants in this matter is not clear, even though the abstract of the record does not reveal that it was ever challenged in the trial court. The trial court had considerable discretion in making fee allowances. We are unable to say that the fees allowed were indicative of any abuse of the discretion of the chancellors. The decree is affirmed. Hickman, J., not participating. Special Justice A. D. McAllister, Jr., concurs in.part and dissents in part.