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U.S. v. Oakland Livingston Legal Aid

United States District Court, E.D. Michigan
May 5, 2000
Civil Action No. 91-CV-72422-DT (E.D. Mich. May. 5, 2000)

Opinion

Civil Action No. 91-CV-72422-DT.

May 5, 2000.


MEMORANDUM OPINION AND ORDER


This matter has come before the Court on remand from the United States Court of Appeals for the Sixth Circuit. Upon motion by intervenor, Frank D. McAlpine, for an order determining attorney's fees and costs to be awarded him for representation of plaintiff Stewart Frank, this Court awarded an attorney fee in the amount of $27,581.17. The Sixth Circuit reversed this Court's award, holding that the "court's order [was] not the "clear and concise explanation" of the award as required" by Hensley v. Eckerhart, 461 U.S. 424 (1983). Consequently, this Court has revised its original fee award to conform to the order of the circuit court.

BACKGROUND

At the instance of Stewart Frank, the United States brought an action pursuant to the Federal False Claims Act ("FCA"), 31 U.S.C. § 3730 et seq., against Oakland Livingston Legal Aid ("OLLA"), Sarah Frank, Paula Zimmer, Kay Johnson and Carol Schmidt. Stewart Frank alleged that the OLLA had misused federal funds by representing Sarah Frank in her divorce proceedings against Mr. Frank, who claimed that her income was too high for Legal Aid representation. The FCA provides that the "relator" of an incident of fraud or misuse is entitled to receive up to 30% of the recovery after a successful lawsuit and the United States receives the remainder of the recovery. Ultimately, the parties settled the case on the second day of trial. OLLA, Paula Zimmer, Kay Johnson and Carol Schmidt were to pay $35,000 in damages. From this portion of the settlement, the United States was to receive $20,000, and $15,000 was allocated for attorney fees. Sarah Frank, Plaintiff Frank's ex-wife, was to forgive $13,000 in past due alimony from Frank, and their lifetime alimony agreement was modified to a term of only six years, but at a higher rate.

Stewart Frank had originally hired Frank McAlpine to pursue this claim in April, 1991. Mr. McAlpine had continued in that capacity until June 30, 1993, when Mr. McAlpine was terminated by his client because of a breakdown in the relationship. Two attorneys, Victoria Abdella and Steven Jamieson, were then hired to replace McAlpine as counsel for Frank. Prior to his withdrawal as Mr. Frank's counsel, Mr. McAlpine filed a motion for an attorney's fee lien in the amount of $35,000. This Court did not rule on this motion because the parties stipulated to an order. That order provided that if the parties were not "able to agree on the amount of the attorney's lien, then the dispute [would] be submitted to the Court for resolution upon the filing of a motion and briefs by the respective parties." After settlement of the lawsuit, the parties were not able to reach an agreement on the amount of the attorney's fees and, in accordance with the stipulation, this Court awarded an attorney's fee to Mr. McAlpine. Originally, this Court calculated the amount that was due to Mr. McAlpine based on the theory of quantum meruit and concluded that he was entitled to a fee of $27,581.17. The Sixth Circuit reversed this Court's award, holding that the Court's order was not "clear and concise," and that Mr. McAlpine was not entitled to all of the attorneys fees awarded, as "such a conclusion would deny attorneys Jamieson and Abdella any benefit of their labor." The Court of Appeals further held that the attorneys may also be entitled to a percentage of the "net recovery" which includes the forgiven spousal support and the support modification. The parties having provided extensive briefs and the Court having heard oral arguments, the fee is hereby ordered to be distributed as discussed below.

DISCUSSION

Each of the attorneys have submitted itemized bills. Mr. McAlpine has alleged that he devoted "174.5 hours to the resolution" of Mr. Frank's lawsuit; Ms. Abdella and Mr. Jamieson have alleged that they devoted 747.8 hours. Under normal circumstances, in a district court's award of attorney's fees, the uniform application of lodestar equations is preferred over an unpredictable system in which different trial judges devise their own subjective, spontaneous formulas. United States of America. et al., v. General Electric Company, 41 F.3d 1032 (6th Cir. 1994). "However, the district judge may make modifications to account for unreasonable and excessive hours or when unique circumstances justify adjustments to hourly rates." Id. at 1049. This case warrants such a departure; the traditional formula would result in Mr. McAlpine receiving approximately one-fifth of the available attorney fees in this case, a result that is far from equitable. In its opinion, the Court of Appeals suggests that the Court divide the recovery in this case on a pro rata basis between all of the attorneys. However, this Court is not required to make a pro rata distribution of the attorney fees if there are findings of fact which enable the appellate court to review the reasonableness of the award. Id. at 1049-1050. Moreover, in determining fees, "although the actual amount requested may be considered, it is not, in and of itself controlling. The burden of proof with regard to reasonableness rests on the party claiming a right to compensation." Green. et al., v. Nevers, et al., 111 F.3d 1295 (6th Cir. 1997). Each attorney in this case has briefed and argued his or her respective position regarding the division of the attorney fees. Mr. McAlpine has asserted that he is entitled to "80% of the attorney fees recovered and 80%" of the funds obtained under his original contingency agreement, with the remainder being shared between Mr. Jamieson and Ms. Abdella. Mr. Jamieson and Ms. Abdella assert that the attorneys should "total the time spent in pursuing this case and divide the . . . $15,000 pro rata among McAlpine, on the one hand, and Jamieson and Abdella, on the other." However, in deciding the reasonable value of an attorney's services, Michigan courts generally apply the factors enumerated in Rule 1.5(A) of the Michigan Rules of Professional Conduct, which provides in pertinent part:

The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputations, and ability of the lawyer or lawyers performing the services;

(8) whether the fee is fixed or contingent.

MRPC 1.5(A).

The Court will apply the foregoing factors in determining the amount of the fees to be paid to attorneys McAlpine, Abdella and Jamieson in this case.

A. Time and Labor Required

Mr. McAlpine has alleged that he devoted "174.5 hours to the resolution" of Mr. Frank's lawsuit; Ms. Abdella and Mr. Jamieson have alleged that they devoted 747.8 hours. All of the attorneys involved obviously expended considerable time and resources on the resolution of this matter. It should be noted that the representation provided by Mr. McAlpine and the joint representation of Ms. Abdella and Mr. Jamieson, each lasted for approximately two years, respectively. In reviewing the court's docket of this matter, the Court notes that Mr. McAlpine not only initiated the lawsuit but successfully briefed and argued against all of the summary judgment motions in this case. Additionally, Mr. McAlpine deposed witnesses and conducted a significant amount of discovery. Moreover, while Ms. Abdella and Mr. Jamieson did notice and depose the balance of the witnesses in this case, the bulk of their representation was devoted to tactical difficulties and discovery disputes; the record is replete with adjournments and objections during Ms. Abdella and Mr. Jamieson' s years of representation

B. Novelty and Difficulty of the Questions Involved

The novelty/difficulty inquiry focuses on the legal questions presented by the case. Mr. Jamieson and Ms. Abdella's briefs are silent on this issue. However, Mr. McAlpine's brief states, in pertinent part: "This [is] not a complicated case . . . The true facts in this case were never in dispute." Mr. McAlpine bases this assertion on the determination by Legal Services Corporation that Oakland Livingston Legal Aid had submitted false claims for payment and had required OLLA to reimburse the fraudulent payments. This determination, which forms the factual basis for this case, was made prior to the filing of the lawsuit. It was Mr. McAlpine who had filed the lawsuit and successfully defended the legal theories involved.

C. Skill Requisite to Perform Legal Service Properly

The Court finds that each of these attorneys possesses the requisite skills necessary to successfully litigate this case through jury verdict. However. Mr. McAlpine is clearly the superior legal technician of the group. Neither side has offered other evidence of their legal skills.

D. Preclusion of Other Employment

The attorneys have not alleged that their involvement with this case significantly impacted their practices.

E. The Amount Involved and the Results Obtained

As discussed above, Mr. McAlpine successfully briefed and argued each of the motions for summary judgment presented in this case, forging the opportunity for Mr. Jamieson and Ms. Abdella to negotiate a lucrative settlement for Mr. Frank. The Court finds that each of the attorneys devoted substantial time and resources to the settlement obtained.

Plaintiff's complaint asserts that the amount involved exceeded $50,000.00. This is congruent with the settlement obtained.

F. Fees Sought and the Fees Customarily Charged in the Locality for Similar Services

Each attorney in this case has briefed and argued their respective positions regarding the division of the $15,000 allocated in attorney's fees by the settlement. Mr. McAlpine has asserted that he is entitled to "80% of the attorney fees recovered." Mr. Jamieson and Ms. Abdella assert that the attorneys should "total the time spent in pursuing this case and divide the . . . $15,000 pro rata among McAlpine, on the one hand, and Jamieson and Abdella, on the other." However, when discussing the changes in Mr. Frank's alimony payments as a recovery, all three of the attorneys argue for a distribution of fees based upon Mr. McAlpine's contingency fee agreement with Mr. Frank. Ms. Abdella and Mr. Jamieson further argue that the attorney fee recovered based upon the contingency fee agreement should be divided between the attorneys pro rata, based upon the hours worked. However, Mr. McAlpine was the only attorney to execute a contingency agreement with Mr. Frank; this fact was considered in the Sixth Circuit's opinion. The Sixth Circuit did hold that Ms. Abdella and Mr. Jamieson were entitled to share in the $15,000 allotted for attorney's fees; however, when discussing the modifications to Mr. Frank's alimony payments as a source for attorney's fees, the Court of Appeals iterated that this Court "might award it all to McAlpine or award him only part and Abdella and Jamieson the other part."

With respect to fees for similar actions in the community, none of the attorneys have produced any evidence of the customarily charged fee in this area for similar services.

G. Time Limitations Imposed By the Client or the Circumstances

The Court is not aware of any time limitations imposed by the client or the circumstances. In fact, Mr. Frank seemed devoted to extending the prosecution of his case as long as possible.

H. The Nature and Length of the Professional Relationship with the Client

As discussed above, the representation provided by Mr. McAlpine and the joint representation of Ms. Abdella and Mr. Jamieson, each lasted for approximately two years, respectively. It is noteworthy that, although McAlpine placed his hours of work in the record at the time of his withdrawal, the affidavit of the later attorneys was not presented until after the court of appeals decision of August, 1998.

I. Experience, Reputation and Ability of the Lawyers

All three of these attorneys are experienced lawyers.

As set forth above, each of these attorneys devoted a considerable amount of time to the resolution of this case. Moreover, both Mr. McAlpine and the joint representation provided by Ms. Abdella and Mr. Jamieson, substantially contributed to the settlement reached in this case. Accordingly, the recoveries obtained shall be divided equally between Mr. McAlpine and the team of Ms. Abdella and Mr. Jamieson. Further, relying upon the stipulation of the attorneys which determined that this Court would resolve any dispute regarding the attorney's fees in this case, the Court will construe the contingency agreement as being applicable to all of Mr. Frank's lawyers. Accordingly, Mr. McAlpine and the team of Ms. Abdella and Mr. Jamieson will share equally in the recoveries based upon the forgiven spousal support and the support modification. The Court, however, retains no jurisdiction over the division of Ms. Abdella and Mr. Jamieson's aggregate 50% share between them.

* * *

There are three sources for an attorney's fee award in this case: 1) the $15,000 allocated in attorney's fees by the settlement; 2) the $13,000 in forgiven spousal support; and 3) the alimony modification.

A. The Sum of $ 15,000 Allotted by Settlement

Before addressing the division of the attorney's fees, the Court must resolve the matter of costs incurred. Mr. Jamieson and Ms. Abdella have claimed costs in the amount of $7,783.37. However, they have included costs for Angus Goetz and Gerald Hanson in the amounts of $2,520.00 and $343.64, respectively. Mr. Jamieson and Ms. Abdella have merely presented invoices for the "professional services" of Mr. Goetz and Mr. Hanson. Without an itemization of the "professional services" those gentlemen provided, the Court cannot determine if these fees are warranted or if they are applicable to Mr. Frank. Accordingly, these fees are disallowed and the Court will reduce Mr. Jamieson and Ms. Abdella's allowable costs to a combined total of $4,919.73. Mr. McAlpine has alleged costs in the amount of $1,391.17. However, Plaintiff has asserted that Mr. McAlpine was paid $1,000.00 for costs during his tenure of representation. As Mr. McAlpine has not disputed this asserted payment, the Court will credit this payment against the costs alleged by Mr. McAlpine. Accordingly, Mr. McAlpine's remaining costs ($391.17) plus the costs allowed for Mr. Jamieson and Ms. Abdella equal $5,310.90. After payment of these costs, the remaining $9,689.10 is to be divided equally between Mr. McAlpine and the team of Ms. Abdella and Mr. Jamieson. This division is reflected as follows: $4,844.55 to Mr. McAlpine and $4,844.55 to Mr. Jamieson and Ms. Abdella.

B. $13,000 in Forgiven Spousal Support

The fee arrangement between Mr. McAlpine and Mr. Frank stated that McAlpine was to receive 30% of any net recovery. As the forgiven spousal support qualifies as a recovery, the attorneys in this case are entitled to an attorney fee of $3,900. As discussed above, the recovery in this case will be divided equally between the attorneys. Accordingly, the $3,900 will be divided as follows: $1,950. to Mr. McAlpine and $1,950. to Mr. Jamieson and Ms. Abdella.

C. Alimony Modification

Finally, Mr. Frank received a spousal support modification which reduced his alimony obligation from lifetime to six years. This Court must, accordingly, determine the value of the reduction in alimony payments. As the record before the Court is silent as to whose life is to govern the term of Mr. Frank's obligation to make alimony payments, the Court must make this determination. Plaintiff has argued that his life expectancy, not Sarah Frank's, should guide this Court in its determination of the value of this recovery. However, if there is no provision to the contrary, the death of the party paying spousal support does not terminate the obligation; it may be enforced against the payor's estate. Easley v. John Hancock Mutual Life Insurance Co., 403 Mich. 521 (1978). Thus, this Court will determine the value of the alimony modification based upon Sarah Frank's life expectancy. Additionally, Mr. Frank has argued that he would be entitled to a 50% decrease in his support payments upon his "retirement." However, it is a matter of record that Mr. Frank is the owner of an ongoing accounting business. As the owner of such an enterprise, there is no evidence that he is subject to the traditional framework surrounding retirement; Mr. Frank's ownership interest in his business may well continue to accumulate value long beyond the year he has submitted as his "anticipated date of retirement." Accordingly, the Court cannot assume that Mr. Frank would be entitled to a decrease or modification of his support payments.

At the time the settlement in this case was reached, Sarah Frank was 57 years of age. In accordance with the resources presented to the Court, Mrs. Frank had a life expectancy of an additional 23 years. The Court's calculation of the value of the modified support payments considered the following factors: 1) the life expectancy of Sarah Frank; 2) the increase in Mr. Frank's payments for the first six years, pursuant to the settlement agreement in this case; and 3) an overall discount rate of 7% (compounded annually). Accordingly, the Court finds the value of the modified alimony payments to be $88,417.14. These calculations are represented in the table below.

The settlement was "entered on the record" on September 4, 1996. However, the parties agreement reflects that Mr. Frank's modified support obligation commenced on September 9, 1996.

Life expectancy is from "Statistical Abstract of the United States-1998" Table 130.

The 30 year U.S. Treasury Rate for September, 1996 was 6.84% and the October, 1996 rate was 7.03%. As the order of dismissal in this case was entered on September 30, 1996, the Court used a 7% discount rate.

$258,336.00 $109,200.00 $149,136.00 $130,225.14 ($41,808.00)

Year Originally Modified Difference Discount Overpayment Scheduled Payments Rate Payments 7.00% 9/9/97 $11,232.00 $18,200.00 ($6,968.00) $11,232.00 ($6,968.00) 9/9/98 $11,232.00 $18,200.00 ($6,968.00) $10,445.76 ($6,968.00) 9/9/99 $11,232.00 $18,200.00 ($6,968.00) $9,714.56 ($6,968.00) 9/9/00 $11,232.00 $18,200.00 ($6,968.00) $9,034.54 ($6,968.00) 9/9/01 $11,232.00 $18,200.00 ($6,968.00) $8,402.12 ($6,968.00) 9/9/02 $11,232.00 $18,200.00 ($6,968.00) $7,813.97 ($6,968.00) 9/9/03 $11,232.00 0 $11,232.00 $7,266.99 0 9/9/04 $11,232.00 0 $11,232.00 $6,758.30 0 9/9/05 $11,232.00 0 $11,232.00 $6,285.22 0 9/9/06 $11,232.00 0 $11,232.00 $5,845.26 0 9/9/07 $11,232.00 0 $11,232.00 $5,436.09 0 9/9/08 $11,232.00 0 $11,232.00 $5,055.56 0 9/9/09 $11,232.00 0 $11,232.00 $4,701.67 0 9/9/10 $11,232.00 0 $11,232.00 $4,372.56 0 9/9/11 $11,232.00 0 $11,232.00 $4,066.48 0 9/9/12 $11,232.00 0 $11,232.00 $3,781.82 0 9/9/13 $11,232.00 0 $11,232.00 $3,517.10 0 9/9/14 $11,232.00 0 $11,232.00 $3,270.90 0 9/9/15 $11,232.00 0 $11,232.00 $3,041.94 0 9/9/16 $11,232.00 0 $11,232.00 $2,829.00 0 9/9/17 $11,232.00 0 $11,232.00 $2,630.97 0 9/9/18 $11,232.00 0 $11,232.00 $2,446.80 0 9/9/19 $11,232.00 0 $11,232.00 $2,275.53 0 Total Value of Support Modification $88,417.14 ==========

The fee arrangement between Mr. McAlpine and Mr. Frank allows for 30% of any net recovery. As the alimony modification qualifies as a recovery, in addition to the sums previously discussed, the attorneys in this case are entitled to an attorney fee of $26,525.14. As discussed above, the recovery in this case will be divided equally between the attorneys and, accordingly, this amount will be divided as follows: $13,262.57 to Mr. McAlpine and $13,262.57 to Mr. Jamieson and Ms. Abdella.

Now therefore, for the reasons stated in this Opinion and Order,

IT IS HEREBY ORDERED that judgment shall be entered in favor of attorneys Frank McAlpine, Victoria Abdella and Steven Jamieson the following amounts:

Costs Total Attorney Fees Total Frank McAlpine $391.17 $20,057.12 $20,448.29 Victoria Abdella $4,919.73 $20,057.12 $24,976.85 Steven Jamieson __________ $45,425.14

IT IS SO ORDERED.


Summaries of

U.S. v. Oakland Livingston Legal Aid

United States District Court, E.D. Michigan
May 5, 2000
Civil Action No. 91-CV-72422-DT (E.D. Mich. May. 5, 2000)
Case details for

U.S. v. Oakland Livingston Legal Aid

Case Details

Full title:UNITED STATES OF AMERICA, ex. rel., STEWART D. FRANK, Plaintiffs, vs…

Court:United States District Court, E.D. Michigan

Date published: May 5, 2000

Citations

Civil Action No. 91-CV-72422-DT (E.D. Mich. May. 5, 2000)