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holding that the fee-shifting phrase "[s]uccessful plaintiffs are allowed costs and reasonable attorney fees" plainly and unambiguously does not mandate an award
Summary of this case from Crandall v. City of DenverOpinion
No. 94SC521
Decided April 1, 1996
Certiorari to the Colorado Court of Appeals
JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS
Kathryn L. Schroeder, Denver, Colorado, Attorney for Petitioner.
Kevin B. Pratt, Castle Rock, Colorado, Attorney for Respondents.
We granted certiorari in Cerveny v. City of Wheat Ridge, 888 P.2d 339 (Colo.App. 1994). The petitioner, the City of Wheat Ridge (Wheat Ridge), seeks our review of the court of appeals' decision reversing the trial court's denial of an award of attorney fees to taxpayers Carl Cerveny, George J. Langdon, and Kenneth K. Siler, the respondents. The issues before us are: (1) whether an award of attorney fees is mandated under article X, section 20(1) of the Colorado Constitution (Amendment 1); (2) the propriety of the court of appeals' standard of review of the trial court's determination; (3) the applicability of rule requirements to contingent fee agreements in awarding attorney fees; and (4) whether parties who do not incur attorney fees and costs are nonetheless eligible to receive an award. We reverse the judgment of the court of appeals and return the case to that court with instructions to remand to the trial court for proceedings consistent with this opinion.
Amendment 1 imposes procedural limitations on governmental entities with respect to revenue, spending, and debt.
We granted certiorari on the following issues:
1. Whether the court of appeals erred in its interpretation of the language of Colorado Constitution, art. X, sec. 20, cl. 1, in determining that an award of attorney fees to successful plaintiffs is mandated in all actions pursuant to that constitutional provision.
2. Whether the court of appeals erred in its interpretation of the language of Colorado Constitution, art. X, sec. 20, cl. 1, in determining that such provision is constitutional where only one party is entitled to attorney fees.
3. Whether the court of appeals erred in its statement of, and application of, the standard on appeal for review of the trial court decision.
4. Whether the court of appeals erred by overlooking previous precedent in determining that a trial judge may not apply statutory requirements for contingent fee agreements in determining whether to award attorney fees.
5. Whether the court of appeals erred by a decision which will result in a windfall to plaintiffs who have not incurred attorney fees and costs, but will receive an award for such fees and costs.
The second issue, the constitutionality of the attorney fees provision, was conceded by Wheat Ridge during oral argument. Accordingly, we do not address that issue.
I.
In March 1993, the respondents filed a civil action seeking to enjoin Wheat Ridge from proceeding with a special election on a ballot issue prior to November 1993. The respondents contended that the special election contravened the terms of Amendment 1, specifically, article X, section 20, clause 3(a) of the Colorado Constitution. The respondents sought declaratory and injunctive relief and prevailed at the trial court level. Wheat Ridge did not appeal that determination. Thereafter, the respondents sought an award of attorney fees and costs as permitted under Amendment 1 which provides that "[s]uccessful plaintiffs are allowed costs and reasonable attorney fees."
Article X, section 20(3)(a) provides in relevant part that:
Ballot issues shall be decided in a state general election, biennial local district election, or on the first Tuesday in November of odd-numbered years.
The trial court denied the respondents' motion. In doing so, the trial court relied on its finding that the respondents were "nominal" plaintiffs, i.e., they had been solicited by Douglas Bruce and the TABOR Committee, because of their status as Wheat Ridge residents and taxpayers. The trial court noted that the respondents had no personal financial stake in the litigation and that all attorney costs were being incurred by Douglas Bruce and the TABOR Committee. Further, Douglas Bruce and the TABOR Committee could not be adjudged "successful plaintiffs" under Amendment 1. Finally, the trial court commented on the impropriety of the contingent fee agreement between the respondents and their attorney.
Douglas Bruce was the main proponent of Amendment 1. The TABOR Committee vigorously supported the enactment of Amendment 1. "TABOR" is an acronym for the Taxpayer's Bill of Rights, another name for Amendment 1.
Douglas Bruce and the TABOR Committee were not residents of Wheat Ridge and, therefore, could not have fulfilled the necessary jurisdictional requirements for instituting the action.
In its oral findings of fact and conclusions of law, the trial court made the following statements:
[T]he three plaintiffs at no time incurred any obligation to make payment to Mr. Pratt [their attorney] for attorney's fees or to reimburse him or his actual clients, Mr. Bruce and the Tabor Committee, for any fees and costs that they might incur.
. . . .
The Court notes — and again, it's undisputed that this complaint was filed in this Court on March 2, 1993; that each of the letters which were sent by Mr. Pratt to the nominal plaintiffs in this case is dated March 4, 1993, which advises them of what the fee arrangement is — and that is that it is a contingent fee, and he collects only if he's successful, and that is against the governmental body, that being the City of Wheat Ridge, the defendant; and that they have no obligation for fees whether he's successful or not.
The trial court then determined that a grant of attorney fees under such circumstances was contrary to the purpose of Amendment 1, i.e., to encourage citizens to enforce the provisions of Amendment 1. Hence, the trial court concluded that the respondents' attorney was not entitled to any compensation from the court.
The court of appeals reversed the decision of the trial court and held that:
[W]e do not interpret the provision authorizing awards in favor of "successful plaintiffs" to include a limitation solely to plaintiffs who incurred an obligation to pay or actually paid attorney fees and costs. The plain meaning of this phrase connotes that a plaintiff who prevails is entitled to an award of costs and reasonable attorney fees for litigation undertaken to enforce the amendment's substantive provisions.
Cerveny, 888 P.2d at 341. The court of appeals rejected the trial court's finding that Douglas Bruce was the real party in interest in the underlying litigation and ultimately concluded that "the denial of an award of reasonable attorney fees and costs requested by [the respondents] cannot stand." Id.
II.
The dispositive issue before us is whether the court of appeals correctly construed the language of Amendment 1. Specifically, we must determine whether the clause "[s]uccessful plaintiffs are allowed costs and reasonable attorney fees" mandates an award of attorney fees to victorious plaintiffs. Hence, we address the interpretation question first.
Amendment 1 was adopted by popular vote on November 3, 1992. When interpreting a constitutional amendment such as Amendment 1, "we should ascertain and give effect to the intent of those who adopted it." Urbish v. Lamm, 761 P.2d 756, 760 (Colo. 1988); see also Bolt v. Arapahoe County Sch. Dist. Six, 898 P.2d 525, 532 (Colo. 1995). It is our responsibility to ensure that we effect what the voters "believed the amendment to mean when they accepted it as their fundamental law." Urbish, 761 P.2d at 760. This means that words used in our Constitution must be given their "natural and popular meaning usually understood by the people who adopted them." Id. Guided by these principles, we hold that the fee-shifting phrase "[s]uccessful plaintiffs are allowed costs and reasonable attorney fees" is plain and unambiguous. A court is "allowed" to award attorney fees but is not required to do so. Therefore, we reject the court of appeals' conclusion that Amendment 1's fee-shifting language mandates an award whenever a plaintiff prevails under that amendment.
Our analysis starts with the "American Rule," long-established in our jurisprudence, which precludes the award of attorney fees to the prevailing litigant, Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975), "absent a specific contractual, statutory, or procedural rule providing otherwise," Buder v. Sartore, 774 P.2d 1383, 1390 (Colo. 1989). Hence, we should not construe a fee-shifting provision as mandatory unless the directive is specific and clear on that score. That is not the case here. The word "allow" is not a specific directive compelling an award of fees.
Dictionary definitions of the common usage of "allow," as relevant in the Amendment 1 context, are synonymous with the word "permit." See, e.g., Webster's Third New International Dictionary 58 (3d ed. 1986); Random House Webster's College Dictionary 38 (1992). Notably, Webster's Third New International Dictionary includes a definition of "allow" as "to give or recognize as a right" which squares with the respondents' proposed interpretation. Webster's Third New International Dictionary. However, that definition is provided under the heading "obsolete." Id. According to Webster's explanatory notes, an "obsolete" definition signifies that "no evidence of standard use since 1755 has been found or is likely to be found." Id. at 16a (Explanatory Notes). Therefore, the respondents' interpretation of the relevant Amendment 1 language harkens to an outdated usage and cannot be adopted by this court if we remain true to our responsibility to give words used in our constitution their "natural and popular meaning usually understood by the people who adopted them." Urbish, 761 P.2d at 760. The voters cannot have intended that Amendment 1 would be given the obscure, archaic interpretation propounded by the respondents.
Amendment 1 does not employ the same language which is found in our mandatory fee-shifting statutes. See, e.g., § 38-12-103(3)(a), 16A C.R.S. (1982) ("The willful retention of a security deposit in violation of this section shall render the landlord liable for treble the amount of that portion of the security deposit wrongfully withheld from the tenant, together with reasonable attorneys' fees and court costs") (emphasis supplied); § 8-4-114, 3B C.R.S. (1986) ("Whenever it is necessary for an employee to commence a civil action for the recovery or collection of wages and penalties due . . . the judgment in such action shall include a reasonable attorney fee in favor of the winning party") (emphasis supplied).
When the word "allow" is used in fee-shifting statutes, it is combined with either "shall" or "may." Compare § 10-3-1005, 4A C.R.S. (1994) ("the court may allow to the plaintiff a reasonable attorney fee" in an action against an unauthorized foreign or alien insurer); § 24-34-505.6(6)(a), 10A C.R.S. (1995 Supp.) ("The court, in its discretion, may allow a prevailing party reasonable attorney fees and costs" for a civil action relating to discriminatory housing practice or breach) with § 12-13-106, 5A C.R.S. (1991) ("The court shall, as part of the costs, allow reasonable attorney fees for each claimant who is a party to the action [under the Life Care Institutions statute]."); section 38-27-103, 16A C.R.S. (1982) ("the court shall allow a reasonable attorney's fee for the collection and enforcement of [a hospital] lien"). These verb combinations suggest that "allow," standing alone, has not been understood as mandating the award of attorney fees.
Although not dispositive, we note that the attorney fees contracts signed by the respondents and their attorney states that the attorney fees "of successful plaintiffs may be ordered paid by the defendant." (Emphasis added). The entire paragraph is quoted infra text at p. 14.
The language at issue here merely states that "[s]uccessful plaintiffs are allowed costs and reasonable attorneys fees." The key words are "are allowed." As applied, Amendment 1 means that courts "are allowed" to award attorney fees to successful plaintiffs.
Finally, there is nothing in the underlying purpose of Amendment 1 that compels us to accept the respondents' arguments. Amendment 1 circumscribes the revenue, spending, and debt powers of state and local governments. It creates a series of procedural requirements and nothing more; it does not create any fundamental rights. Bickel v. City of Boulder, 885 P.2d 215 (Colo. 1994), cert. denied, ___ U.S. ___, 115 S.Ct. 1112 (1995). Further, the official history of the amendment lends no support to the respondents' arguments. We note that the attorney fees provision of Amendment 1 was not mentioned in the amendment's title, ballot title and submission clause, or summary. Nor was it discussed in the Legislative Council's analysis of Amendment 1 in the 1992 ballot issues. See Legislative Council of the State of Colorado General Assembly, Research Pub. No. 369, An Analysis of 1992 Ballot Proposals 6-8 (1992).
A holding that a victorious Amendment 1 litigant must recover attorney fees is antithetical to Amendment 1's overarching goal of limiting government spending. Cf. Bolt v. Arapahoe County Sch. Dist. Six, 898 P.2d 525, 532 (Colo. 1995) ("a construction which harmonizes different constitutional provisions is favored over one that creates conflict between the provisions"). Mandatory awards of attorney fees necessarily increase government spending. Therefore, short of a clear directive that attorney fees shall be awarded to a successful plaintiff, we cannot conclude that the voters intended to impose such costs on themselves.
Thus, we hold that Amendment 1 does not create a mandatory fee-shifting device when a plaintiff taxpayer litigant is successful under Amendment 1. Rather, the determination if a plaintiff should be allowed to recover attorney fees is discretionary with the trial court and the proper standard on review is abuse of discretion.
III.
Next we will address the standards to be applied by the trial court in deciding whether to award attorney fees. After discussing the applicable general principles, we will consider the three specific contentions raised by Wheat Ridge regarding the court of appeals' attorney fees analysis.
A.
In assessing whether to award attorney fees, the trial court must consider a number of factors and reach its conclusion based on the totality of the circumstances. Most importantly, the trial court must evaluate the significance of the litigation, and its outcome, in furthering the goals of Amendment 1. This evaluation must include the nature of the claims raised and the significance of the issues on which the plaintiff prevailed in comparison to the litigation as a whole. Among others, it is also appropriate for the trial court to consider the factors it would weigh in adjudging what "reasonable" attorney fees would be if fees were awarded. We have set forth these factors in Mau v. E.H.P. Corp., 638 P.2d 777, 779 (Colo. 1981), 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 for 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.
(8) Whether the fee is fixed or contingent."
Id. (quoting Colorado Code of Professional Responsibility, C.R.C.P. DR 2-106(B)). Other factors may be appropriate to consider in a particular case.
In the case now before us, the respondents asserted two claims. The first was the substantive claim attacking Wheat Ridge's special election. The respondents prevailed on that issue in the trial court and Wheat Ridge did not appeal. Thus, we express no opinion on the merits of the trial court's ruling because it is not before us. We note, however, that two parallel cases were appealed to the court of appeals and we have granted certiorari to review one of the cases. The resolution of that case may be relevant to the trial court's evaluation of the significance of this litigation.
See Zaner v. City of Brighton, 899 P.2d 263 (Colo.App. 1994); Stecher v. City of Northglenn, No. 93CA817 (Colo.App. Dec. 1, 1994) (not selected for official publication). In Zaner, the court of appeals held that special elections were permissible under Amendment 1. Zaner is pending on certiorari before this court. Zaner v. City of Brighton, No. 95SC123 (Colo. June 30, 1995). In Stecher, the court of appeals affirmed the trial court's dismissal for mootness because "[a] declaratory judgment as to the validity of Northglenn's special election under TABOR's election provisions would have no practical legal effect because the measure was not enacted." Stecher, No. 93CA817, slip op. at 3.
The respondents' second claim was that the trial court was required to award attorney fees to a prevailing plaintiff in an Amendment 1 case. Although we are remanding the case for the trial court to reconsider its discretionary decision to deny attorney fees, the respondents have not prevailed on that issue. In a case like this, where the Amendment 1 plaintiff has had only partial success, the court must exclude the time and effort expended on losing issues if it chooses to award attorney fees. See Hensley v. Eckerhart, 461 U.S. 424 (1983) (holding in the civil rights context that if claims are separate and distinct and the plaintiff prevails on one claim but not the other, the court should treat the two claims as two separate lawsuits for purposes of awarding attorney fees, i.e., award fees only for work performed in relation to the successful claim).
We now address the remaining three issues raised by Wheat Ridge.
B.
Wheat Ridge contends that the court of appeals improperly rejected the trial court's findings of fact and thus, failed to accord the trial court due deference. In particular, Wheat Ridge asserts that the court of appeals rejected the trial court's finding that Douglas Bruce was the real party in interest in the underlying litigation.
We agree that the trial court's conclusion — that the respondents were nominal plaintiffs and the real parties in interest were Douglas Bruce and the TABOR Committee — constitutes a factual determination. However, the ultimate conclusion that the trial court drew from that fact — that the respondents therefore were not successful plaintiffs for purposes of attorney fees — constitutes a legal conclusion. See Coski v. City and County of Denver, 795 P.2d 1364, 1367 (Colo.App. 1990) ("An appellate court may, however, draw its own conclusions from facts found by the lower court tribunal."). Although the court of appeals may have erred in expressing its result as a rejection of the trial court's underlying fact findings, the court of appeals appropriately reviewed the legal conclusion drawn by the trial court, in part, from that finding. Further, we agree with the court of appeals that the respondents are not disqualified from eligibility for attorney fees because others were found to be the real parties in interest.
C.
Wheat Ridge next contends that the court of appeals accorded the respondents a windfall gain by awarding them attorney fees when they have incurred no fees and costs.
The contingent fee agreement between each of the respondents and their attorney provided as follows:
I am representing you for the purpose of bringing a test case, and an enforcement action under the new amendment to the Colorado Constitution, the Taxpayer's Bill of Rights. I have agreed to undertake the case on a contingent fee basis. Under the Constitutional provision, the attorney's fees and costs of successful plaintiffs may be ordered paid by the defendant, the City of Wheat Ridge here. If the court awards attorneys fees, I [attorney] will receive payment of those fees from the City of Wheat Ridge. If the court denies attorneys fees to [the respondents], I will treat the case as pro bono, which means that I have handled the case for free. In either event . . . [the respondents] will not be responsible for paying me any attorney's fees.
The court of appeals correctly determined that "a party need not be obligated to pay attorney fees to be entitled to such an award authorized by a statute." Cerveny, 888 P.2d at 341. See 1 Robert L. Rossi, Attorneys' Fees § 7:14 at 387 (2d ed. 1995) ("awarding fees even where the legal services are provided at no cost promotes the policies that generally underlie fee statutes: encouragement of private enforcement of the law and the deterrence of improper conduct" and "[c]ourts have also reached the same result where a party incurs no legal expense because its fees are paid by another") (footnotes and cases cited therein omitted).
The court's task in assessing reasonable attorney fees under the circumstances of the case is not linked to the nature of compensation negotiated between the party and his or her attorney. In Blanchard v. Bergeron, 489 U.S. 87 (1989), the Supreme Court considered whether, on a motion for attorney fees in a civil rights case brought under 42 U.S.C. § 1988 (1988 Supp. V 1994), an attorney was limited to compensation as set forth pursuant to a contingent fee agreement. The Supreme Court held that the attorney fees award was not so circumscribed and rejected the argument that the attorney would receive a windfall recovery. In doing so, the Supreme Court noted that properly calculated attorney fees are reasonable under the circumstances of the case. The Supreme Court explained, however, that the nature of the agreed-upon compensation was a factor that could be considered in determining what constitutes reasonable attorney fees. See also In re Marriage of Swink, 807 P.2d 1245, 1248 (Colo.App. 1991) (holding that under the Uniform Dissolution of Marriage Act, the trial court was allowed to "enter an order requiring a party to pay a reasonable sum for legal services rendered to the other party by a pro bono attorney in dissolution of marriage proceedings").
Nevertheless, in our view, the quantum of financial risk (as well as any other risks) undertaken by the respondents can and should be considered by the trial court in assessing whether or not to grant attorney fees. Furthermore, if on remand the trial court determines that attorney fees are warranted, it can consider the nature of the compensation arrangement between the respondents and their attorney in determining what a reasonable award would be under the circumstances of the case.
Here, the trial court denied attorney fees based predominantly on its interpretation that Amendment 1 authorizes attorney fees only to plaintiffs who personally incur an obligation to pay or actually do pay attorney fees and costs. While the trial court did not improperly consider this fact, it is but one consideration among many. Therefore, the trial court abused its discretion in failing to evaluate other factors, including, most importantly, the significance of the action in effectuating the purposes of Amendment 1.
D.
Last, Wheat Ridge asserts that the court of appeals erred in determining that the trial court could not apply statutory requirements governing contingent fee agreements in the context of an attorney fees application.
The trial court found that the contingent fee agreements between the respondents and their attorney violated the intent and spirit of C.R.C.P. Chapter 23.3 of the Rules Governing Contingent Fees:
The Court notes — and again, it's undisputed that this complaint was filed in this Court on March 2, 1993; that each of the [contingent fee agreement] letters which were sent by Mr. Pratt to the nominal plaintiffs in this case is dated March 4, 1993, which advises them of what the fee arrangement is — and that is that it is a contingent fee, and he collects it only if he's successful, and that is against the governmental body, that being the City of Wheat Ridge, the defendant; and that they have no obligation for fees whether he's successful or not.
First of all, I don't find that this complies with Chapter 23.3, the intent, spirit or letter of that chapter, that particular rule, as read along with the Code of Professional Conduct. I don't think it complies at all. But I can understand why it was done this way because there was no obligation on the part of the plaintiffs, so therefore I guess there was a feeling that there was no necessity to explain to them what their alternative arrangements could be.
Also, the evidence discloses that some of the fees and costs have, in fact, been paid by either Mr. Bruce or the Tabor Committee or both, those being reimbursed to Mr. Pratt.
Given this set of facts, I think it's incumbent on the Court, first, to make an analysis of the language of the Amendment before reaching the determination of whether or not the fees requested are reasonable and necessary.
The court of appeals held that only the parties to the attorney-client contract have standing to challenge its validity. Here, it found that the challenge was initiated improperly by Wheat Ridge, a third party.
Generally, the parties to an attorney-client contract are free to litigate the terms of their agreement as with any other contract. The court's power, absent a challenge by one of the contracting parties, lies dormant. In re Marriage of Nichols, 38 Colo. App. 82, 84, 553 P.2d 77, 79 (1976); see also Hayden v. Bowen, 404 F.2d 682, 686 (5th Cir. 1968) (holding in the context of a fee award that "[t]he contractual arrangements between employees and their counsel are their concern and the employer has no standing to seek the disruption of those arrangements") (footnote omitted). In the present case, the respondents did not challenge the arrangement with their attorney.
Wheat Ridge maintains that the court of appeals overlooked a body of law which provides an exception to the general rule announced in Nichols. Specifically, when the agreement is a contingent arrangement, additional court scrutiny is warranted. In support, Wheat Ridge cites two cases in which the court invoked its general supervisory powers over attorneys as officers of the court in order to review their contingent arrangements, Bryant v. Hand, 158 Colo. 56, 60, 404 P.2d 521, 523 (1965) and Anderson v. Kenelly, 37 Colo. App. 217, 218, 547 P.2d 260, 261 (1975).
In Bryant, an action brought by an attorney against his client to enforce the terms of a contingent fee agreement, we held that courts can exercise general supervisory powers over attorneys as officers of the court. In addition, courts could "determine from all the facts and circumstances the amount of time spent, the novelty of the questions of law, and the risks of non-return to the client and to the attorney in the situation" what a reasonable fee would be under a quantum meruit analysis. Bryant, 158 Colo. at 60, 404 P.2d at 523. However, we also noted that courts should not attempt to rewrite contingent fee contracts. Id. Subsequently, in Anderson, an action brought by a client against her attorney, the Colorado Court of Appeals, following our lead, held that a court should scrutinize a contingent fee agreement in order to determine its reasonableness. Anderson, 37 Colo. App. at 218, 547 P.2d at 261.
Bryant and Anderson are inapposite here insofar as each of these cases was brought by one of the parties to the contingent fee contract. The resolution of the issue presently before us turns on whether a court may scrutinize contingent fee agreements in the context of an application for the discretionary award of attorney fees. As noted above, the trial court is not constrained or bound by the terms of the contingent fee agreement in determining what constitutes a reasonable award.
However, the contingent nature of the agreement can be considered by the trial court in evaluating whether or not to grant attorney fees. The attorney fees provision of Amendment 1 apparently was intended to enable citizens of ordinary means to enforce Amendment 1. To the extent that the named plaintiff bears no risk and the benefit of such an award will accrue to others, the appropriateness of awarding attorney fees is diminished. Further, in the event the court decides to grant attorney fees, it can consider the deficiencies of the agreement in determining the amount of the award. Therefore, while Wheat Ridge has no standing to challenge the arrangement on the respondents' behalf, it has standing to raise perceived improprieties with the contingent fee agreement for the purpose of disputing an award of attorney fees. A finding of deviation from rule requirements and/or professional standards on the part of the attorney, who stands to reap the benefits of an award, reflects adversely on the quality of the representation. In addition, an attorney who deviates from rule requirements and/or professional standards may not merit an award regardless of a successful outcome.
IV.
For the foregoing reasons, we reverse the judgment of the court of appeals. We remand the case to that court to be returned to the trial court to apply the standards set forth in this opinion and to determine whether attorney fees are warranted in this case.
JUSTICE ERICKSON specially concurs. JUSTICE LOHR dissents, and JUSTICE KIRSHBAUM and JUSTICE SCOTT join in the dissent.
JUSTICE SCOTT dissents.