Wednesday, October 26, 2011

The legislature and legal fees

One of the bills being considered in the legislature's special session is AB 12. It would place certain limits on the ability of state courts to award attorneys' fees in cases in which some other law, say, a consumer protection statute or the open meetings law, provides for an award of fees. It specifies factors that a court ought to consider in approving a fee request and that part of the law is a good development and ought to be uncontroversial.

The more challenging issue is AB 12's cap on an award of fees at three times compensatory damages. The cap would be presumptive in cases in which compensatory damages are combined with some other form of relief (say an injunction or declaratory judgment) and mandatory in cases where only compensatory relief is to be granted.

The poster child for the bill was a case involving a dealership in Racine. The issue was whether the plaintiff had authorized $ 5000 in repairs. The plaintiff claimed that he did not, thinking that the work was covered under warranty. The dealership said that he did and made some legal arguments regarding whether the plaintiff could recover even if the repairs were not authorized. The dealership won at the trial court on these legal arguments but the case was reversed by the Court of Appeals. Shortly before trial, the dealership settled for a payment of $12500 in damages and interest and over $ 150,000 in attorneys' fees plus a bit over $5000 in costs.

That's a pretty unreasonable and wasteful outcome. Part of the reason for it was the parties' insistence on litigating a legal issue through the Court of Appeals, but even that shouldn't explain such a ridiculous result. I can't say it who it was but someone (or someones) did not cover themselves in glory here. (For my conservative friends, you ought to wonder why the dealer agreed to pay the fees in that amount. Not a good sign.)

Still it makes sense that a litigant's behavior be disciplined by economic reality. Requiring some connection between the amount at issue and fees is a good idea and, even prior to AB 12, courts making awards of fees under the Consumer Protection Act were to consider it. This bill tightens that up.

Still, in may go just a bit too far. I can imagine circumstances in which fees in excess of three times compensatories might be warranted either because of the litigation behavior of one side or the need to resolve some uncertain point of law. I always tell clients that once you have commenced litigation, you lose a great deal of control. It is a thing that goes of itself and you can't command the extent to which the other side might make you work.

I'd make the "three times compensatory" rule only presumptive in all cases, including those in which only compensatory relief is sought. I think we can trust our circuit court judges to handle that properly.

Thumbs down, however, for Rep. Gary Hebl (D-Sun Prairie) for suggesting that the bill was occasioned by the dealer's campaign constributions to Republicans. This is just ad hominem garbage. The issue is a real one and the bill won't save the dealer one penny.

A friend of mine takes great umbrage at another bill that will limit prejudgment interest in only certain types of cases. I can't get excited about it but I also can't see any reason to have a different rate in different types of cases.


Brew City Brawler said...

I thought this post was going to be about the $400 K in legal fees reaped by Troupis et al for redistricting

Tom said...

Post judgment interest, isn't it?

My problem with the issue of any mandatory grant of attorney fees for one prevailing party but a prohibition of attorney fees for the other prevailing party (say, in landlord tenant law, where the landlord cannot even shift attorney fees via the lease), is this.

Proponents say that if plaintiffs can't get attorney fees, then they will be denied access to the courts because some of them can't afford to pay an attorney hourly fees to take their cases. But they ignore that the opposite is true - the risk of having to pay enormous attorney fees in case of even a small loss in court means that some defendants are denied access to the courts because THEY can't afford to pay both the other side's hourly attorney fees and their own attorney's fees.

This is especially glaring in landlord tenant law, where there are a lot of landlords who are middle class home owners renting out a room, a duplex, or their home they can't sell in this market.

I would eliminate all mandatory attorney award grants in the law that discriminate against people based on their position in whatever transaction is alleged to have gone sour. Maybe we could make grants of attorney fees contingent on a finding of indigency.

Otherwise, I would support ways to increase access, such as simplifying and expanding small claims (which Walker has already done), or lowering the cost of attorneys (perhaps allowing attorneys to get a license to practice a certain area of the law through a one-year technical law degree in that area).

Or we could abolish the American rule and make awards of attorney fees available to any prevailing party.

Anonymous said...

It is postjudgment interest (prejudgment interest, too, if an offer of judgment is made and rejected). And Sen. Zipperer, the principal proponent of the bill, has now amended it to provide for prime plus one (adjusted every six months) in all classes of cases, not just tort cases and consumer protection law cases. As amended the bill will face much less opposition.

Rick Esenberg said...

Anon & Tom are right and the amendment is a good one. Good for Rep. Zipperer.

Tom said...

I kinda like it at 12% just to keep the math easy...

Anonymous said...

I do as well. But 12% is too high in today's economy. A 6% fixed rate, half a percent a month, would also be easy to calculate; but the bill's proponents prefer a variable rate.

Tom said...

Variable = too complicated for attorneys = more employment for CPAs!

Dad29 said...

If I read it correctly, there's also a "judge's option" regarding the fee issue; a judge may allow more fee dollars under certain circumstances.

Regardless, Boots/Sabers tells us that Vince Megna will no longer represent Republican clientele.

He didn't mention Conservatives, so I suppose he'd still take me on. Besides, I know the guy.

John said...

The dealership even admitted that the reason the legal fees were so high was because they pushed for not only a trial but a prolonged appeal process. A reasonable person would never have allowed it to get that far and the plaintiffs did not want it to go as far as it did.