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In Augustine, this Court had previously remanded an appeal from an attorney-fee award in favor of the plaintiff for the trial court to follow the procedure set forth by our Supreme Court in Smith, which at the time had just been decided.
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No. 296646.
April 26, 2011 at 9:10 a.m.
Appeal from Oakland Circuit Court, LC No. 2004-056897-NF.
Before: DONOFRIO, P.J., and CAVANAGH and STEPHENS, JJ.
In this first-party, no-fault action, defendant, Allstate Insurance Company, appeals as of right from the trial court's order awarding plaintiff, Shirley Augustine, $327,090.60 for attorney fees and interest. The sole issue on appeal is attorney fees. Defendant maintains that on remand the trial court abused its discretion in awarding attorney fees to plaintiff. Because on remand the trial court failed to follow the directive of this Court, did not comply with the law of the case rule, and did not properly apply Smith v Khouri, 481 Mich 519; 751 NW2d 472 (2008), we vacate the award of attorney fees and remand for rehearing and redetermination in accordance with this opinion.
I. FACTS AND PROCEDURAL HISTORY
This is the second time this matter is before this Court. See Augustine v Allstate Ins Co, unpublished opinion per curiam of the Court of Appeals, issued August 21, 2008 (Docket No. 276537) ( Augustine I). In the first appeal, defendant challenged the trial court's award of attorney fees in the final judgment. Id. at 1. This Court vacated the award and remanded the case for further proceedings in light of Smith v Khouri, 481 Mich 519; 751 NW2d 472 (2008) which was decided after defendant filed its appeal. Augustine I, at 1, 3. The Augustine I Court set out the substantive facts of the case as follows:
Plaintiff was seriously injured in an auto accident and sought first-party, no-fault benefits from her insurer, defendant, to pay for the permanent attendant care that she now requires. Defendant paid the benefits for two years but ceased payments over a dispute regarding plaintiff's refusal to provide more detailed documentation of the nature of her care. Plaintiff brought the instant suit and was victorious, recovering $371,700 of the $929,000 that she sought, plus interest in the amount of $42,254. Plaintiff subsequently sought attorney fees pursuant to MCL 500.3148(1) due to defendant's "unreasonable delay" in making benefit payments. The trial court awarded attorney fees in the amount of $312,625 based upon a finding that plaintiff's attorneys had done 543.75 hours of work at $500 per hour and 51.25 hours at $300 per hour. [ Augustine I, at 1.]
Notwithstanding a contingency fee agreement, plaintiff sought attorney fees on an hourly basis. Of the $312,625 the trial court awarded, $287,250 represented the actual attorney fees ordered. Augustine I, at 1. ("[T]he Court will allow 543.75 hours at $500.00 per hour and 51.25 hours at $300.00 per hour for a total of $287,250.00.").
Defendant appealed the final judgment, challenging the reasonableness of the award of attorney fees. After the briefs were filed, our Supreme Court decided Smith, 481 Mich at 522, which delineated the steps a trial court must take when considering a request for attorney fees. Augustine I, at 2. This Court held that "[i]n light of the procedures set out by the Smith Court, which the trial court naturally did not follow, we must vacate the award of attorney fees and remand to the trial court to apply the procedure outlined in Smith." Id.
In ruling in the first appeal, this Court provided specific instructions for remand, explicitly outlining the procedural steps set out in Smith for determining a reasonable attorney fee award. Augustine I, at 2. This Court explained that "in determining the hourly rate, the focus is on initially finding a reasonable fee, i.e., the `fee customarily charged in the locality for similar legal service.'" Id. at 3, citing Smith, 481 Mich at 530. It further indicated that "if warranted, the court can increase [the] rate based upon the relevant factors under Wood [ v DAIIE, 413 Mich 573, 588; 321 NW2d 653 (1982)] and MRPC 1.5(a)." Id. at 3. This Court vacated the trial court's award of attorney fees, remanding the case for the trial court "to make specific findings, consistent with Smith, on each attorney whose fees plaintiff sought to recover. . . ." Id. It also explicitly instructed that on remand "the trial court should take care in not relying upon previous awards to these attorneys without first determining whether those other awards were for work on cases similar to this one." Id.
A. ON REMAND
On remand, the trial court granted defendant's request for an evidentiary hearing regarding attorney fees. Defendant requested that his expert be given the opportunity to review the entire litigation file that plaintiff's attorneys relied upon in support of their itemization of fees. Defendant argued it needed to see if all the work that was attributed to the attorneys was reflected in the file in order to test the accuracy of the billings against the alleged work product. Plaintiff maintained that the request for the file was going far beyond what was argued on the first appeal and she feared that defendant would publish the contents of the file. Though defendant was willing to accept the file with redactions under a protective order, plaintiff argued it was improper to allow defendant access to the attorneys' work product and privileged communications. Plaintiff countered that the entire file was privileged and without the privileged information there would be nothing left for defendant's expert to review other than the billing summary. The trial court ruled that defendant could not access the litigation file unless it was used at the evidentiary hearing to refresh the recollection of an attorney witness, in which case the file would then be made available.
B. EVIDENTIARY HEARING
On October 9, 2009, the trial court conducted an evidentiary hearing on fees. It was established that the law firm of Liss, Seder Andrews gave plaintiff the option of paying an hourly fee of $500 or entering into a contingency fee arrangement for representation. The $500 hourly fee was based on factors such as the law firm's experience, track record, commitment made to clients, limited resources, and the difficulty of catastrophic no-fault cases. Plaintiff chose to enter into a contingency fee arrangement.
Plaintiff's trial attorney Nicholas Andrews prepared the billing summary as part of trial preparation and completed the summary after trial. Liss, Seder Andrews did not have an "office procedure or methodology" for time keeping on a daily basis. Senior partner Arthur Liss testified he never made his time entries contemporaneously with his work. Andrews testified that he may have utilized an Excel spreadsheet or office notes to assist in the preparation of a billing summary. The minimum time increment for billing was .25 hours. Plaintiff's attorneys indicated that a significant amount of time the firm actually expended on the case was not billed and emphasized that these cases required extensive discussion between the attorneys in the office to strategize. The trial court admitted the firm's billing summary, a listing of dates of service, identification of each of four lawyers providing service, a brief description of the service provided, and a time entry into evidence in support of 625.25 hours. Liss and Andrews testified regarding their expertise, experience, trial results, and other fee awards they had each received. Plaintiff also produced letters from four other attorneys regarding the fees they charged and were awarded in similar cases. Though the trial court recognized them as being self-serving, the trial court admitted the letters into evidence over defendant's objection because they were records kept in the ordinary course of business.
Defense counsel James Borin testified in defense of the matter. The trial court admitted his law firm billing statement which reflected hourly charges totaling 252.8 hours. The trial court also admitted a survey of hourly rates of approximately 208 attorneys authorized to mediate in Oakland County during the relevant time. The trial court also admitted the State Bar of Michigan 2007 Economics of Law Practice survey on hourly billing rates. Defendant also produced Thomas H. Blaske who testified as an attorney expert. Blaske provided testimony on the practice, hourly rates, and excessive charges based on plaintiff's counsel billing summary alone. He also advised that he was unable to provide a complete analysis of the reasonableness of plaintiff's attorneys' services because he did not have plaintiff's litigation file to cross check the services enumerated.
C. OPINION OF THE TRIAL COURT
On December 30, 2009, the trial court issued an opinion and order that was later reduced to judgment. The trial court acknowledged the remand order from this Court and then proceeded to perform an analysis of the evidence submitted. The trial court addressed the reasonableness of the hourly fee and in making that determination relied on the factors set forth in Wood, 413 Mich at 573; Crawley v Schick, 48 Mich App 728, 737; 211 NW2d 217 (1973); and MRPC 1.5 as referenced in Smith, 481 Mich at 529-532. The trial court commented on the attorney and witness testimony and generally on the character of the evidence regarding each party's view of the reasonable local fee that should be utilized. The trial court opined that these cases (the underlying action for attendant care services) are among the most complex civil cases. The trial court observed that Andrews had a long relationship with the client having represented her in a previous attendant care dispute with the same carrier and had obtained good results in both cases. In summary, the trial court held that there was no dispute with regard to the costs incurred and billed; the fee arrangement was contingent; Blaske was well recognized as an expert, but that his opinion on fees in Oakland County from the mediator pool was not credited; the charge of $500 per hour was reasonable; and that the reasonable number of hours was 537.5. Ultimately, the trial court awarded $250,000 in attorney fees. This appeal followed.
II. DISCOVERY
First, defendant argues the trial court reversibly erred by denying defendant's discovery request for plaintiff's entire litigation file. Generally, we review the grant or denial of a discovery motion for an abuse of discretion. Linebaugh v Sheraton Mich Corp, 198 Mich App 335, 343; 497 NW2d 585 (1993). An abuse of discretion is not simply a matter of a difference in judicial opinion, rather it occurs only when the trial court's decision was outside the range of reasonable and principled outcomes. Saffian v Simmons, 477 Mich 8, 12; 727 NW2d 132 (2007).
Whether the attorney-client or work product privilege may be asserted is a question reviewed by this Court de novo. Leibel v Gen Motors Corp, 250 Mich App 229, 236; 646 NW2d 179 (2002); Koster v June's Trucking Inc, 244 Mich App 162l, 168; 625 NW2d 82 (2000). Whether a party has waived a privilege is also a question of law that this Court reviews de novo. Leibel, 250 Mich App at 240. Once the determination is made regarding whether the privilege is applicable, this Court then reviews whether the trial court's order was an abuse of discretion. Reed Dairy Farm v Consumers Power Co, 227 Mich App 614, 618; 576 NW2d 709 (1998).
"It is well settled that Michigan follows an open, broad discovery policy that permits liberal discovery of any matter, not privileged, that is relevant to the subject matter involved in the pending case." Reed Dairy Farm, 227 Mich App at 616, citing MCR 2.302(B)(1). This is true "whether it relates to a claim or defense of the party seeking discovery or to the claim or defense of another party." Cabrera v Ekema, 265 Mich App 402, 407; 695 NW2d 78 (2005), citing MCR 2.302(B)(1). However, "Michigan's commitment to open and far-reaching discovery does not encompass fishing expeditions." VanVorous v Burmeister, 262 Mich App 467, 477; 687 NW2d 132 (2004) (citation omitted). "Allowing discovery on the basis of conjecture would amount to allowing an impermissible fishing expedition." Id.
MCR 2.302(B)(1) limits discovery to matters that are not privileged. "The attorney-client privilege attaches to direct communication between a client and his attorney as well as communications made through their respective agents." Reed Dairy Farm, 227 Mich App at 618. "The scope of the attorney-client privilege is narrow, attaching only to confidential communications by the client to his advisor that are made for the purpose of obtaining legal advice." Id. at 618. "Although either [attorney or client] can assert the privilege, only the client may waive the privilege." Kubiak v Hurr, 143 Mich App 465, 473; 372 NW2d 341 (1985).
This Court has also recognized the common law privilege protecting the disclosure of attorney work product. Messenger v Ingham Co Prosecutor, 232 Mich App 633, 638; 591 NW2d 393 (1998). The work product doctrine protects the notes, working documents, and memoranda that an attorney prepares in anticipation of litigation from discovery. Leibel, 250 Mich App at 244. MCR 2.302(B)(3)(a) provides:
Subject to the provisions of subrule (B)(4), a party may obtain discovery of documents and tangible things otherwise discoverable under subrule (B)(1) and prepared in anticipation of litigation or for trial by or for another party or another party's representative (including an attorney, consultant, surety, indemnitor, insurer or agent) only on a showing that the party seeking discovery has substantial need of the materials in preparation of the case and is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, and opinions, or legal theories of an attorney or other representative of a party concerning the litigation.
"Thus, if a party demonstrates the substantial need and undue hardship necessary to discover work product, that party may discover only factual, not deliberative, work product." Leibel, 250 Mich App at 247 (citation omitted). Like the attorney-client privilege, a party may waive work product protections. Id. at 248.
The trial court did not directly address the issue of privilege in its ruling and defendant acknowledges that it was not seeking information protected by the attorney-client privilege. The trial court simply held that the file was not available to defendant unless a question was asked at the evidentiary hearing and the file was necessary to refresh the attorney witnesses' recollection.
The nature of the request for discovery in a claim such as that presented here for attorney fees allowable pursuant to MCL 500.3148(1) must be carefully scrutinized. A request for discovery that constitutes an attempt to invade the attorney-client relationship or to discover the mental impressions and strategies generally employed by opposing counsel must be rejected. But, the reasonableness of an attorney fee claim cannot be assessed in a vacuum. At the time of the discovery request defendant had been provided a simple, albeit lengthy, billing statement without any corroboration of the time reflected. Defendant knew that plaintiff's law firm did not maintain a time billing procedure and lawyers of the firm did not make contemporaneous time entries. Further, defendant knew that the summary billing statement presented in support of an attorney fee award was a retrospective exercise based on memory and possibly some office notes or Excel spreadsheets. Defendant could only compare dates from its own counsel's billing statement to plaintiff's summary to determine if there was a comparable match. If there were logs, reports, summaries, or spreadsheets that would tend to corroborate the billing statement, such could be provided with the redaction of any impressions or thoughts on future work or strategies. In other words, counsel for plaintiff could provide a copy of the litigation file with all items that include the mental impressions, thoughts, or strategies of counsel broadly and completely redacted. The "sanitized" file would clearly be useful in corroborating and validating time claims to determine a reasonable fee. Carefully redacting the litigation file would assuage the trial court's concern that there was nothing to stop defendant's attorney from obtaining strategy information from the litigation file that could be used in subsequent cases against plaintiff's attorney. The trial court's failure to even entertain such a procedure seems highly unreasonable and therefore an abuse of discretion.
A review of the evidentiary hearing causes concern regarding the likelihood that an honest and fair determination of fees could be awarded on this record. Blaske testified as an expert but he could not offer a complete analysis of the reasonableness of plaintiff's conduct, charges, or time on the billing summary without some materials from which to extrapolate. Starkly, the litigation file was noticeably absent. Notwithstanding the attempt to serve a subpoena for the file by certified mail for the evidentiary hearing, plaintiff refused the mail. During the evidentiary hearing, neither Liss nor Andrews referenced the litigation file and denied having reviewed any of it in preparation for the hearing. As a result, the testimony was replete with speculation, conjecture, and a denial of knowledge. Liss testified at the evidentiary hearing that the billing statement did not refresh his recollection of what he did or the time spent on any listed service. Both of plaintiff's lead counsel lacked any specific memory of time spent on any series of billable events. This is curious. In the end, all that one could reasonably glean from the testimony concerning the summary of billing was that they submitted it, therefore it was correct, and in fact, it was an underestimate of time spent on the matter.
The burden of proving the reasonableness of the request for attorney fees rests with the party requesting them. Smith, 481 Mich at 528-529. Here, in the absence of any meaningful discovery, no genuine inquiry could be made of the party requesting the fees and concomitantly no real challenge could be made by the party opposing the fee request. Under these circumstances, defendant has met its burden of showing the need for review of properly redacted trial preparation materials as contemplated by MCR 2.302(B)(3)(a) where it has demonstrated a substantial need for the material and a lack of other reasonable avenues for obtaining the information. The failure of the trial court to grant discovery when defendant agreed to redacted materials and a protective order as provided in the rule is not a principled outcome because it denied defendant a fair opportunity to be meaningfully heard on the issue.
III. DETERMINATION OF ATTORNEY FEES
Interpreting the meaning of a court order involves questions of law that are reviewed de novo. Silberstein v Pro-Golf of America, Inc, 278 Mich App 446, 460; 750 NW2d 615 (2008). This Court also reviews de novo the question of law whether the trial court followed this Court's ruling on remand. Schumacher v Dep't of Natural Resources, 275 Mich App 121, 127; 737 NW2d 782 (2007). Similarly, this Court reviews de novo the determination of whether the law of the case doctrine applies and to what extent it applies. Kasben v Hoffman, 278 Mich App 466, 470; 751 NW2d 520 (2008).
This Court generally reviews a trial court's decision to award attorney fees and the determination of the reasonableness of the fees for an abuse of discretion. In re Temple Marital Trust, 278 Mich App 122, 128; 748 NW2d 265 (2008); Hines v Volkswagen of America, Inc, 265 Mich App 432, 438; 695 NW2d 84 (2005). Again, an abuse of discretion occurs when the trial court's decision was outside the range of reasonable and principled outcomes. Saffian, 477 Mich at 12.
"[T]he decision whether to admit or exclude evidence is reviewed for an abuse of discretion." Elezovic v Ford Motor Co, 472 Mich 408, 419; 697 NW2d 851 (2005). "Evidentiary errors are not a basis for vacating, modifying, or otherwise disturbing a judgment unless declining to take such action would be inconsistent with substantial justice." Miller v Hensley, 244 Mich App 528, 531; 624 NW2d 582 (2001).
This Court "review[s] the trial court's factual findings for clear error." Brandt v Brandt, 250 Mich App 68, 72; 645 NW2d 327 (2002). There is clear error where there is "no evidentiary support for [the factual findings] or where this is supporting evidence but the reviewing court is nevertheless left with a definite and firm conviction that the trial court made a mistake." Hill v City of Warren, 276 Mich App 299, 308; 740 NW2d 706 (2007). "This Court affords great deference to the special opportunity of the trial court to judge the credibility of the witnesses who appeared before it." Lumley v Bd of Regents for Univ of Mich, 215 Mich App 125, 135; 544 NW2d 692 (1996).
A. Law of the Case Doctrine
Defendant argues that the trial court abused its discretion in awarding attorney fees on remand because it failed to comply with this Court's remand directive. Under the law of the case doctrine, this Court's determination of an issue in a case binds the trial court on remand and this Court in subsequent appeals. Grievance Administrator v Lopatin, 462 Mich 235, 260; 612 NW2d 120 (2000). On remand, the trial court may not take action that is inconsistent with the judgment of this Court. Id. "[T]he trial court is bound to strictly comply with the law of the case, as established by [this Court], according to its true intent and meaning." Kasben, 278 Mich App at 470 (internal quotation and citation omitted). "Thus, a question of law decided by an appellate court will not be decided differently on remand or in a subsequent appeal in the same case." Driver v Hanley (After Remand), 226 Mich App 558, 565; 575 NW2d 31 (1997). "This rule applies without regard to the correctness of the prior determination." Id. "Where the trial court misapprehends the law to be applied, an abuse of discretion occurs." Bynum v ESAB Group, Inc, 467 Mich 280, 283; 651 NW2d 383 (2002).
In remanding the case in the first appeal, this Court explicitly directed "the trial court to make specific findings, consistent with Smith, on each attorney whose fees plaintiff sought to recover. . . ." Augustine I, at 3. This Court clearly ordered the trial court to complete a Smith analysis to determine the award of attorney fees. In Smith, 481 Mich at 537, our Supreme Court outlined very specific steps for determining reasonable attorney fees. First, the trial court should "determine the fee customarily charged in the locality for similar legal services," which shall be made using "reliable surveys or other credible evidence." Id. To establish the customarily charged fee, the fee applicant must present "something more than anecdotal statements." Id. at 532. Next, the trial court "should multiply that amount by the reasonable number of hours expended in the case." Id. at 537. Finally, the trial court "may consider making adjustments up or down to this base number in light of the other factors listed in Wood and MRPC 1.5(a)." Id. The trial court "should briefly indicate its view of each of the factors." Id.
Given the remand directive, the trial court's award of attorney fees was an abuse of discretion under the law of the case doctrine because the trial court failed to make specific findings consistent with Smith. It did not comply with the first step in the Smith analysis, which is to determine the fee customarily charged in the locality for similar legal services. Though the trial court discussed the evidence presented regarding the fee customarily charged in the locality for similar legal services, it did not conclude that $500 per hour was the fee customarily charged. As stated in Smith, 481 Mich at 531-532,
The reasonable hourly rate represents the fee customarily charged in the locality for similar legal services, which is reflected by the market rate for the attorney's work. The market rate is the rate that lawyers of similar ability and experience in the community normally charge their paying clients for the type of work in question. We emphasize that the burden is on the fee applicant to produce satisfactory evidence-in addition to the attorney's own affidavits-that the requested rates are in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation. The fees customarily charged in the locality for similar legal services can be established by testimony or empirical data found in surveys and other reliable reports. But we caution that the fee applicant must preset something more than anecdotal statements to establish the customary fee for the locality. Both the parties and the trial courts of this state should avail themselves of the most relevant available data. For example, as noted earlier, in this case defendant submitted an article from the Michigan Bar Journal regarding the economic status of attorneys in Michigan. [Internal citations, quotations, and footnote omitted.]
In the instant case, the trial court apparently failed to credit the Michigan Bar Journal in its calculus of the appropriate hourly rate. The Michigan Bar Journal article not only ranks fees by percentile, it differentiates fee rates based on locality, years of practice, fields of practice including litigation, personal injury, and transactional litigation. Further, the record was silent in drawing any comparisons between no-fault litigation and other complex areas of litigation. The trial court simply accepted the testimony that the area of the law was complex. This is undoubtedly so, however, the trial court excluded from its analysis evidence of other complex areas of litigation that may rival no-fault litigation in complexity for which a published fee is established. Also, amazingly absent from the testimony, evidence of anecdotal experiences, and other statements was any substantive evidence that real, actual clients have paid $500 per hour in similar circumstances. Ultimately, the language of the trial court's opinion and order indicates that it simply found $500 per hour was a reasonable fee in a first-party no-fault case based on its review of the criteria set forth in Crawley, 48 Mich App at 737, and MRPC 1.5. But, importantly, the trial court did not find that $500 per hour was the fee customarily charged in the locality for similar legal services. The trial court then multiplied the rate of $500 per hour by the reasonable number of hours expended, but did not make the determination whether an upward or downward adjustment was appropriate based on the Wood and MRPC 1.5(a) factors as our Supreme Court discussed in Smith, 481 Mich at 537.
Not only did the trial court fail to make specific findings consistent with Smith generally, but it also failed to make findings regarding each attorney whose fees plaintiff sought to recover. The trial court's opinion and order indicated, "[o]ther attorneys in the office were involved at various time [sic] and they will be discussed later," but the trial court never addressed them later in the opinion. The only attorneys the trial court highlighted were Andrews and Liss. In the first award of attorney fees, the trial court discussed the rate of $300 per hour for attorneys Karen Seder and Jay Schrier. Augustine I, at 1. Presumably these were the "other attorneys." But on remand the trial court failed to reference Seder and Schrier and the trial court quizzically did not include the rate of $300 per hour in its attorney fee calculation. The law of the case doctrine "applies without regard to the correctness of the prior determination," and this Court is bound by the question of law decided by the panel on the first appeal. Driver, 226 Mich App at 565. While plaintiff highlights cases regarding the applicability of Smith and failure to address Smith, these references to no-fault attorney fee cases, interesting as they may be, are wholly irrelevant. Smith is controlling as law of the case, and the trial court was required to follow this Court's remand directive to make findings consistent with Smith. But, even were it not the law of this case as a result of Augustine I, the trial court should have applied Smith, because the framework outlined in Smith is the proper standard to be applied in cases brought pursuant to MCL 500.3148(1) when a party seeks hourly attorney fees. Thus, the trial court abused its discretion because it misapprehended the law to be applied, the award of attorney fees was inconsistent with our remand directive, and the trial court did not properly apply Smith.
We are not unmindful of this Court's opinion in University Rehabilitation Alliance, Inc v Farm Bureau General Ins Co of Michigan, 279 Mich App 691; 760 NW2d 574 (2008) in which this Court rejected the applicability of Smith in the context of an award of attorney fees based on an unreasonable delay in paying no fault benefits. But that case is distinguishable on its facts. While the plaintiff in University Rehab, and plaintiff in the instant case both retained counsel under a contingent fee agreement, only the plaintiff in University Rehab, sought to recover an attorney fee award pursuant to that agreement. Plaintiff here sought recovery of attorney fees on an hourly basis rejecting her own contingency fee agreement. University Rehab rejected the applicability of Smith to contingent fee awards under MCL 500.3148(1) stating that "a reasonable attorney fee is determined by considering the totality of the circumstances. While a contingent fee is neither presumptively reasonable nor presumptively unreasonable, multiplying the reasonable number of hours worked by a reasonable hourly rate is not the preferred method." Id. at 699. Certainly, the Woods and MRPC 1.5(a) factors as reflected in Smith would be considered under the totality of the circumstances in the evaluation of the reasonableness of the fee request on a contingency basis. Unlike Smith, the trial court is not required to first establish a base rate in its analysis of the reasonableness of the fee request on a contingency basis. Here, plaintiff has rejected her contingency fee agreement and seeks to have an hourly rate employed in the determination of a reasonable attorney fee. This is a completely different scenario than the scenario presented in University Rehab. Plaintiff here sought to recover an award of attorney fees on an hourly basis under MCL 500.3148(1). And while we conclude that the Smith, 481 Mich at 537, analysis is controlling and should be applied here because it is the law of the case, we similarly conclude that it is the appropriate analysis and should be applied under these and similar circumstances where plaintiffs seek recovery of attorney fees on an hourly basis pursuant to MCL 500.3148(1).
B. Attorney Letters in Support of Fee Calculation
Defendant also contends that the trial court erred in admitting four letters written by other attorneys who litigated catastrophic no-fault cases regarding their hourly fees over defendant's relevance and hearsay objections. "Hearsay is a statement, other than the one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." MRE 801(c). In Int'l Union, United Auto, Aerospace Agricultural Implement Workers of America v Dorsey, 273 Mich App 26, 41-42; 730 NW2d 17 (2006), citing People v Katt, 468 Mich 272, 290; 662 NW2d 12 (2003), we stated:
[I]n order to be admissible under the exception found in MRE 803(24) `a hearsay statement must (1) demonstrate circumstantial guarantees of trustworthiness equal to the categorical exceptions, (2) be relevant to a material fact, (3) be the most probative evidence of that fact reasonably available, and (4) serve the interests of justice by its admission.' There is no complete list of factors to consider when determining whether a statement has `particularized guarantees of trustworthiness.'
Because there is no complete list of factors to consider when determining whether a statement has particularized guarantees of trustworthiness, the trial court should consider the totality of circumstances. Id. at 42. Any factors that detract from or add to the statement's reliability should be taken into consideration. Id.
At the hearing plaintiff argued that the four letters from other attorneys should be admitted under the "catch-all" exception because they were inherently reliable. Instead of articulating the reason the letters were inherently reliable, plaintiff simply argued:
[Y]our Honor, you're the gatekeeper of evidence. We do not have a juror [sic]. As the gatekeeper of all evidence in any case, you can make the determination both of reliability and what weight to give any particular document. As you said earlier, this is essentially a bench trial, and I think that you can use the catch-all to make that determination.
The trial court responded, "[a]nd that's exactly what I'm going to do. I will accept these in evidence based upon that, the same way I will not entertain any objection to [defendant's Oakland County courthouse compilation of fees for mediators] . . . because I think they fall in the same class. . . ."
The trial court abused its discretion in admitting the letters into evidence because they were not admissible under MRE 803(6) or (24). The letters were hearsay because they contained statements that were not made by any declarant testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted. MRE 801(c). The letters were not admissible under MRE 803(6) because they were not business records. Rather, the letters were nothing more than solicitations by plaintiff's counsel in form and content for use in supporting the demand for an attorney fee of $500 per hour. The attorneys solicited were all prior referring attorneys of similar cases to the instant law firm. Similarly, the letters were not admissible under MRE 803(24) because they did not satisfy the elements of this exception. At the evidentiary hearing, there was no evidence offered to demonstrate the circumstantial guarantees of trustworthiness equal to the categorical exceptions. Considering the totality of circumstances, the letters were not sufficiently trustworthy because they were prepared exclusively for litigation, they were all favorable to plaintiff, the attorneys who wrote the letters had reason to exaggerate because it might benefit their attorney fee awards in the future, and there was no independent evidence presented to support the attorneys' claims that their rates were $500 per hour. Despite the fact the letters tended to establish a material fact, they were not the most probative evidence on the fact that the plaintiff could have produced through reasonable efforts.
C. Hours and Function
Defendant also argues the trial court abused its discretion in assessing the number of hours allowed for the attorney fee calculation. "The fee applicant bears the burden of supporting its claimed hours with evidentiary support." Smith, 481 Mich at 532. "The fee applicant must submit detailed billing records, which the court must examine and opposing parties may contest for reasonableness." Id.
Because of the meager state of the record, the trial court's finding that plaintiff's attorneys expended 537.5 hours instead of the 595 hours claimed is not subject to meaningful review. The evidentiary hearing established only that plaintiff claimed the amount of hours listed. While the billing summary supported the hours plaintiff's attorneys claimed they expended, the testimony provided in its support was so overwhelmingly lacking in substance and description that any statement of hours spent on a particular task is suspect for accuracy. Notably, plaintiff had the burden of supporting the claim for fees. But plaintiff did not demonstrate by document, example, or specific testimony that a billable item was performed in the amount of time listed or for that matter even completed. The billing summary alone did not explain the work that was actually performed by plaintiff's attorneys as evidenced by the fact that the billing summary did not refresh Liss's memory regarding what work he did on a particular entry. While defendant was able to cross-examine plaintiff's attorneys with regard to the time they spent on the case and presented an expert who rendered an opinion on some of the hours expended as they appeared on the face of the document, defendant's cross-examination was substantially limited by the absence of litigation materials.
Our review of the record reveals that plaintiff requested attorney fees in her complaint. Considering the fact that plaintiff's counsel requested attorney fees from the very outset of the underlying claim, we are befuddled by the fact that plaintiff's attorneys claim they had no billing protocol to account for those fees and did not set one up. In today's technological world, it would be but a minute task to set up a spreadsheet detailing the date of the service, the service provided, time expended on the task, and the amount charged for the specific service that could be updated and summed at any time. Indeed, it would seem a handwritten ledger might even do. Plaintiff's attorneys allege that they are top tier attorneys with exceptional experience in their field. We do not challenge this point. But we do find it inconceivable that attorneys of this caliber and experience would be unaware of the requirements of Smith and would not keep adequate records in support of their claims for attorney fees especially considering the amount of time and talent expended on this case. As a result of these deficiencies, plaintiff did not and could not point to any documentary support for the work performed and the amount of time spent on any task in the absence of their file. Consequently, counsel for defendant was effectively handcuffed by the refusal of discovery and plaintiff's strategy of not bringing their file to the evidentiary hearing.
Based on the evidence presented, the trial court made the finding that the billings were unreasonable in certain areas. Indeed, we afford great deference to the special opportunity of the trial court to judge the credibility of the witnesses at the evidentiary hearing. Lumley, 215 Mich App at 135. But so many areas went unexplored and remained undocumented after the hearing, we must conclude that the trial court's finding of the hours expended by plaintiff's attorneys was clearly erroneous. Hill, 276 Mich App at 308. We question the value of an evidentiary hearing where the evidence reviewed was restricted and the areas explored so narrow. A hearing on remand will necessarily require expansion. Because we have found the trial court clearly erred in its assessment of the number of hours allowed for the attorney fee calculation, we conclude that the trial court's calculation of attorney fees on this record was error. See id.
D. Smith, Wood, and MRPC 1.5(a) Factors
The Wood factors and the MRPC 1.5(a) factors utilized for attorney fee awards overlap and are both set forth in Smith, 481 Mich at 530-531. According to Smith, the six factors to be considered in determining a reasonable attorney fee set out in Wood are as follows:
(1) The professional standing and experience of the attorney; (2) the skill, time and labor involved; (3) the amount in question and the results achieved; (4) the difficulty of the case; (5) the expenses incurred; and (6) the nature and length of the professional relationship with the client. [ Smith, 481 Mich at 529, quoting Wood, 413 Mich at 588.]
The Smith Court also set out the eight factors listed in Rule 1.5(a) of the Michigan Rules of Professional Conduct to be considered in determining a reasonable attorney fee as follows:
(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 foe similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent. [ Smith, 481 Mich at 529-530, quoting MRPC 1.5(a).]
In Smith, the Supreme Court endeavored to "fine-tune" the multifaceted and intersecting approach for determining fee awards set out in both Wood and MRPC 1.5(a). Smith, 481 Mich at 530. In order to promote greater consistency in attorney fee awards, Smith directed that a trial court should begin its analysis by first applying factor 3 under MRPC 1.5(a) ("fee customarily charged in the locality for similar legal services") and multiply that number by the reasonable number of hours expended as determined by factor 1 under MRPC 1.5(a) and Wood factor 2 ("the reasonable number of hours expended in the case") in that order. Id. at 530-531. And then, our Supreme Court directs, the trial court should consider the remaining Wood and MRPC factors. Id. at 531. Our Supreme Court reminds trial courts to discuss the Wood and MRPC 1.5(a) factors in a manner sufficient "to aid appellate review." Id.
A meaningful application of the factors is more than a recitation of those factors prefaced by a statement such as "after careful review of the criteria the ultimate finding is as follows. . . ." Similarly, an analysis is not sufficient if it consists merely of the recitation of the factors followed by a conclusory statement that "the trial court has considered the factors and holds as follows . . ." without clearly setting forth a substantive analysis of the factors on the record. The trial court should consider the interplay between the factors and how they relate to the client, the case, and even the larger legal community.
Here, the trial court acknowledged the fee consideration factors, but provided little analysis or insight into the application of those factors to the client or the case. By way of example, the trial court noted that the fee agreement was contingent. MRPC 1.5(a)(8). Aside from the observation, the trial court presented no other information and did not explain the import of the fact that the fee agreement was contingent in the context of its determination of fees. It might be an insightful exercise for a trial court to look at what the fee would have been on such a basis and compare that to the fee actually being sought.
The trial court also commented that the attorney achieved "good" results from this litigation as well as a prior dispute involving the same insurance carrier. In discussion of Wood factor 3 ("the amount in question and the results achieved"), in assessing attorney fees, this Court has stated that a reasonable fee is proportionate to the results achieved. The trial court may in its discretion adjust fees upward or downward. Schellenberg v Rochester Elks, 228 Mich App 20, 44-45; 577 NW2d 163 (1998). Rather than making a blanket announcement that the result of the litigation was "good," the trial court is charged with evaluating the results obtained in the context of the claim presented. For example, in the instant case, plaintiff claimed $929,000 in attendant care services at a rate of $25 per hour. The jury awarded $371,700 for those services. At $929,000 and $25 per hour, the total hours claimed would amount to 37,160 hours. The amount awarded, $371,700, when compared to 37,160 hours produces an effective hourly rate of just over $10 per hour. At the time of termination of benefits when plaintiff refused to update the need and amount of attendant care services required, defendant was paying $18 per hour for attendant care services. While this mathematical review may not necessarily reflect the jury analysis of the case, the jury may have determined a higher rate for services, but fewer hours, such an analysis may be beneficial when determining an attorney fee rate with an upward or downward departure.
The trial court also commented that counsel had a long relationship with the client having represented her in a previous attendant care dispute with the same carrier. The nature and length of the professional relationship with the client is considered in both MRPC 1.5(a)(6), and Wood factor 6. Smith, 481 Mich at 529-530. A long and storied professional relationship has many implications. While we do not endeavor to paint with a broad brush, practicality compels us to point out that knowledge gained in previous litigation involving the same attorney, client, and opposing insurance carrier may result in certain efficiencies. Further, it is not uncommon in the practice to provide discounted fees to repeat business for these same reasons. Fairness dictates that under these and similar circumstances, the trial court may want to consider whether any services performed were unnecessary duplication.
When a trial court entertains a discussion of attorney fee factors and analyzes those factors by way of searching inquiry into the record evidence, the parties benefit by receiving a true and fair attorney fee award. Additionally, in the event of a challenge the appellate process will be enhanced because we will have the opportunity for meaningful review. Our discussion is not exhaustive, and is only provided as representative methodology that trial court's may consider in performing attorney fee analysis in accordance with our Supreme Court's directives in Smith, 481 Mich at 530-531.
IV. CONCLUSION
We conclude that the trial court abused its discretion in failing to provide defendant limited discovery in order to allow a meaningful examination of the issue of an award of attorney fees pursuant to MCL 500.3148(1). The trial court also abused its discretion because it misapprehended the law to be applied and the award of attorney fees was inconsistent with our remand directive. The trial court abused its discretion in admitting the letters into evidence because they were neither admissible under MRE 803(6) nor 803(24). And, the trial court clearly erred in its award of attorney fees because the assessment of the work and the number of hours both fail for want of evidentiary support.
We vacate the trial court's award of attorney fees and remand this case to the trial court for rehearing and redetermination in accordance with this opinion. We direct the trial court to make specific findings, consistent with Smith, for each attorney whose fees plaintiff sought to recover. We refer this matter on remand to the Honorable Nanci J. Grant, the trial judge assigned in this matter, rather than a visiting judge.
Defendant may tax costs as the prevailing party pursuant to MCR 7.219. We do not retain jurisdiction.