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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Weiner v. Burr, Pease & Kurtz, P.C. (11/13/2009) sp-6433
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| HOWARD WEINER and KATHERINE | ) |
| A. GARRISON, | ) |
| ) Supreme Court No. S- 13214 | |
| Appellants, | ) |
| ) Superior Court No. 3AN-07- 9860 CI | |
| v. | ) |
| ) O P I N I O N | |
| BURR, PEASE & KURTZ, P.C., an | ) |
| Alaska Professional Corporation, | ) No. 6433 - November 13, 2009 |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Jack Smith, Judge.
Appearances: Charles E. Tulin, Anchorage, for
Appellants. Richard A. Helm, Bookman & Helm,
LLP, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Eastaugh,
Carpeneti, Winfree, and Christen, Justices.
CHRISTEN, Justice.
I. INTRODUCTION
I. This appeal involves a dispute over the modification of
a law firms contingent-fee agreement. The main questions
presented are whether the modified contingent-fee agreement is
valid and whether the court erred in construing the disputed
phrase further substantial litigation to mean more than just in-
court proceedings and filings. Because the modified fee
agreement is valid and the superior courts interpretation of
further substantial litigation was not erroneous, we affirm the
grant of summary judgment for the law firm. The issue of costs
was not before the superior court; it did not err by not
addressing costs. Finally, the courts Civil Rule 68 fee award
was not an abuse of discretion.
II. FACTS AND PROCEEDINGS
A. Facts
In September 2004 Howard Weiner and Katherine Garrison
(collectively the clients) retained Burr, Pease & Kurtz, P.C.
(BPK) to represent them in a personal injury lawsuit against
Katmai Lodge, Ltd. and its owner Anthony Sarp. The facts of the
underlying lawsuit are undisputed: the clients sustained injuries
when the stairs to their respective rooms at Katmai Lodge
collapsed. Per the legal services contract, the clients agreed
to pay BPK 25% if a resolution of the claim is made before filing
a complaint; 33% if a resolution of the claim is made after the
filing of a complaint; 40% if a resolution of the claim is made
after the filing of an appeal.
BPK filed the complaint on behalf of the clients
against Katmai Lodge and Sarp in June 2005. By then, Katmai
Lodge had filed for bankruptcy. BPK sought funds from the
bankruptcy estate on behalf of the clients and hired counsel in
Washington to represent the clients in the bankruptcy
proceedings. BPK treated this expense as a client cost.
In August 2005 BPK sent the clients a letter advising
them to agree to make a policy limits settlement offer. BPK
warned the clients that your expectations about the value of your
case may not translate well to an Anchorage jury. BPK estimated
that if the insurer agreed to settle for policy limits, the total
recovery for the clients would be $1,122,109.85, including
prejudgment interest, costs (estimated at $3,222.35) and fees.
The clients responded that month by offering to agree
to settle their claims for policy limits, on the condition that
the insurer pay within sixty days. They also asked BPK to reduce
its fees if this policy limits settlement occurred, stating the
clients were proposing that [BPK] accepts a total of $250,000
legal fees plus any remaining unpaid costs.
In a series of written communications, the parties
negotiated the clients request that BPK reduce its fees. BPK
proposed the following modifications to the contingent-fee
agreement:
After consulting with the firms executive
committee we have agreed to your proposal.
We will try to obtain a policy limits
settlement of your claims. Should we succeed
without requiring further substantial
litigation we will be paid 1) our out-of-
pocket costs and 2) $250,000.
If our efforts at an early settlement do not
succeed and it becomes necessary to litigate
the matter in a substantive way, we will
revert back to our previous written fee
agreement and the percentages written there.
Two days later the clients replied by e-mail that they
agree[d] to the fees as outlined by BPK. By this time, the
clients had also agreed to make the policy limits settlement
offer. The parties did not reduce the modified fee agreement to
one comprehensive writing, define its terms, or establish any
procedures for revert[ing] back to the original fee agreement.
BPK made a policy limits demand on October 27, 2005.
Katmai and Sarp rejected it on May 10, 2006. Both before and
after the settlement offer was rejected, BPK was preparing for
trial, scheduled for February 2007. BPK also prepared for and
participated in a December 2006 mediation. In November and
December 2006 BPK again informed the clients of the stages and
risks of trial, and the reasons for pursuing a policy limits
settlement. BPK listed hypothetical recoveries if the case
settled for policy limits, if it went to a jury trial, and if it
was appealed. In each of these hypothetical scenarios, BPK
listed what the distribution of the recovery would be after
deducting fees and costs. Each scenario reflected BPKs fees as
thirty-three percent of the recovery and estimated its costs,
including the Washington bankruptcy attorneys fees, as being at
least $35,000. For instance, in a letter dated November 17,
2006, BPK predicted that if the case settled for policy limits
without going to trial, the distribution would be as follows:
Gross Settlement or award: $1,000,000
Attorneys fee (33%) $333,333
$666,667
Medical Liens (less 33% fee): $55,666
Costs advanced by BPK: $35,000
Net to clients: $576,001
BPK calculated its fees as being thirty-three percent of the
total recovery five times, in five different settlement
scenarios. The clients did not raise any objection to BPKs use
of a thirty-three percent contingency fee in these scenarios.
In January 2007 the underlying case settled for policy
limits, which amounted to $1,231,025.31. BPK sent the clients a
letter showing how the funds would be distributed. In this
letter, BPK again calculated its fee as thirty-three percent of
the recovery, or $406,238.34. The next day the clients sent BPK
an e-mail objecting to the contingency fee. They complained that
they understood that under the modified fee agreement, if the
case settled for policy limits at any point, BPK would receive a
flat fee of $250,000 plus costs. In the following days and weeks
BPK expressed its disagreement with the clients understanding of
the fee contract and placed the settlement proceeds in an
interest-bearing trust account until resolution of the fee
dispute.
In February 2007 BPK and the clients agreed to
distribute the undisputed settlement funds but keep the disputed
fees ($156,238.34) in the trust account. BPK then sent the
clients a letter with calculations for disbursing the settlement
funds including the clients recovery after deducting BPKs total
disputed and undisputed fees ($406,238.34) and costs advanced
($40,679.43). BPK also clarified it did not intend to pay [its]
costs advanced until it received permission to do so from the
clients, included a print-out of costs, and invited the clients
to express any concern over those costs.
B. Proceedings
In September 2007 the clients filed a complaint for
recovery of the disputed attorneys fees, and several months later
moved for summary judgment. The clients argued that the parties
did not dispute the facts surrounding contract modification and
that the only question presented was one of contract
interpretation. On that issue, the clients argued that further
substantial litigation should be interpreted as meaning that a
flat fee of $250,000 would be paid to [BPK] unless the parties
engaged in a considerable amount of in court filings and
proceedings after October 19, 2005. According to the clients,
[b]ecause the parties did not engage in any court proceedings or
considerable in court filings after that date, but prepared for
and participated in mediation and an out of court settlement, the
further substantial litigation provision was not triggered and
defendants are bound by the $250,000 flat fee agreement.
In a cross-motion for summary judgment and in its
opposition to the clients summary judgment motion, BPK quoted the
language of the fee proposal to which the clients had agreed: If
our efforts at an early settlement do not succeed and it becomes
necessary to litigate the matter in a substantive way, we will
revert back to our previous written fee agreement and the
percentages written there. It argued litigation includes more
than in-court proceedings and filings, and that as a matter of
law, the case was litigated in a substantive way following the
amendment to the [fee] contract and thus, it is entitled to its
full 33% contingent fee.
After oral argument, the court issued an oral ruling on
the record. Because the parties did not dispute any extrinsic
evidence, the court addressed only the legal question of contract
interpretation. The court looked to dictionary definitions of
the relevant terms further, substantial, litigation, to
litigate, and early. Based on these definitions, the court
interpreted further substantial litigation to mean additional
considerable efforts in carrying on the legal contest. The
court construed the parties modified fee agreement as follows:
[S]hould the firm succeed in obtaining the
policy limits without undergoing additional
considerable efforts in carrying on the legal
contest, the firm will be paid out of pocket
expenses and a flat fee of $250,000. And if
efforts of the settlement near the beginning
of the process of litigation do not succeed
and it becomes necessary to engage in
additional considerable efforts in carrying
on the legal contest, the parties will revert
to the previous written agreement.
Applying this interpretation to the undisputed facts,
the court concluded that BPK had engaged in further substantial
litigation, entitling it to a thirty-three percent contingency
fee under the original fee agreements. The court also found the
case law cited by the clients to be distinguishable and not
persuasive and that the clients argued the costs claimed were the
same whether the fees were a flat $250,000 or 33 percent.
The court granted summary judgment to BPK on its claim
for attorneys fees, noting that neither party raised the costs
being claimed by [BPK] as at issue in the complaint or answer.
The clients moved for reconsideration, asserting that costs
incurred in the underlying lawsuit, including the Washington
bankruptcy attorneys fees, were at issue in the fee-contract
dispute. BPK opposed the motion and the court denied it,
accepting BPKs revised judgment, which made no reference to those
costs.
In August 2008 BPK moved for attorneys fees under Civil
Rule 82 and costs incurred in defending the fee dispute. BPK
argued for fees under Rule 82 or, alternatively, under Rule 68
because it had served offers of judgment on the clients in
September of 2007. The court first concluded that Rule 82(b)(2)1
applied. The clients opposed awarding fees under Rule 82(b)(2)
and argued that any award should be reduced under Rule 82(b)(3).2
The court later changed course and awarded fees under Rule 68
only, explaining payments under [Civil Rules] 68 and 82 cannot be
combined. In September 2008 the court awarded BPK the disputed
portion of its fees ($156,230.34) plus interest; $2,387.21 in
costs incurred in the fee-contract dispute; and $8,395.95 in
attorneys fees under Rule 68.
The clients appeal.
III. STANDARD OF REVIEW
When there are no genuine issues of material fact and
the question presented involves only the legal one of contract
interpretation, we review the superior courts grant of summary
judgment de novo.3 We will affirm if the undisputed facts,
viewed in the light most favorable to the non-prevailing party,
entitle the prevailing party to judgment as a matter of law.4
IV. DISCUSSION
A. The Superior Court Did Not Err in Granting Summary
Judgment for BPK.
The clients argue that we should reverse the superior
courts grant of summary judgment for three main reasons: (1) the
fee agreement is invalid under Compton v. Kittleson5 and Alaska
Rule of Professional Conduct 1.5(c); (2) the court failed to
construe the attorney-client contract against BPK and improperly
interpreted the term further substantial litigation; and (3) it
was error to find that BPK engaged in further substantial
litigation.
1. The modified contingent-fee agreement is valid under Compton
and Alaska Rule of Professional Conduct 1.5(c).
a. The modified contingent-fee agreement is valid under
Compton.
The clients argue the modified fee agreement is an
impermissible hybrid agreement under Compton because they believe
it gave BPK control over the decision to engage in further
substantial litigation. The superior court disagreed.
The fee agreement in this case, and the circumstances
under which the parties modified it, differ from the fee contract
and circumstances in Compton. There, we held impermissible a fee
agreement that used the clients decision to settle as the trigger
for converting from contingent to hourly fees and that operated
retroactively to encompass all work performed from the inception
of the case.6 Before agreeing to undertake the representation,
the attorney in Compton presented his clients with a proposed fee
agreement under which he would receive thirty-three percent of
any recovery.7 But the agreement also provided that if the
clients settled for an amount that yielded a fee equal to less
than $175 per hour for the time the attorney invested, he would
be paid an amount over and above the 33% to compensate [him] at
the rate of $175.00 per hour.8
After representation was underway, the attorney
received a settlement offer for $25,000, including costs and
attorneys fees.9 He communicated the settlement offer to the
clients and informed them that because his hourly fees for work
performed to that date already exceeded $30,000, accepting the
offer would mean no recovery for the clients.10 The clients
rejected the offer, and although the attorney later revised the
fee agreement to omit the fee-conversion clause, the defendant
made no further offers and the clients lost on all claims at
trial.11
We held the Compton fee agreement invalid because it
both impeded the clients right to control the decision to settle
and imposed a springing obligation to pay for work already
performed but never before chargeable to the client[s].12 We
reasoned:
Because the potential cost of a future
obligation of this kind and the potential
value of the right the client is asked to
forego to avoid the obligation are both
largely incalculable at the inception of the
attorney-client relationship, when the fee
agreement is signed, we conclude that the fee-
conversion provision at issue here
impermissibly burdens the clients right to
settle a case.[13]
The modified contingent-fee agreement here is
significantly different: it did not base BPKs compensation on
the clients decision to settle. Rather, under the original
agreement, BPK was to receive twenty-five percent of a recovery
reached before filing a complaint, thirty-three percent after
filing a complaint, and forty percent after filing an appeal.14
The parties modified their agreement because the clients
requested that BPK reduce its fees in the event of an early
settlement. They made this request after having had the
opportunity to review BPKs detailed assessment of the cases
potential value and the risks of trial. Further, the modified
fee agreement based BPKs compensation not on whether the clients
agreed to make the settlement offer they already had but
instead on whether the insurer accepted the offer early in the
case.
Nor did BPK control whether further substantial
litigation would ensue; the early settlement offer was not
successful because Katmai Lodge and Sarp did not accept it. BPK
had a duty to prepare for trial. The record shows the clients
wanted to continue pursuing their claims for at least the policy
limits, knew BPK was doing so at their direction, and did not ask
BPK to stop litigating their claims. Indeed, BPKs billing
entries show BPK and the clients had numerous teleconferences
throughout the case, particularly from the time Katmai Lodge and
Sarp rejected the policy limits settlement offer in May 2006
until the time the case settled in January 2007.
Compton is also distinguishable because the modified
fee agreement here did not retroactively impose a fee obligation
the clients would not otherwise have been charged.15 The clients
here would have paid BPK a flat fee of $250,000 plus costs if an
early settlement had occurred. If the case did not settle at an
early stage and substantial litigation ensued, the clients were
obligated to pay BPK thirty-three percent of any recovery plus
costs, per the original agreement. In either scenario the
clients had to pay if they received a recovery; neither scenario
imposed fees otherwise not chargeable.
Because the parties modified fee agreement did not
impermissibly burden the clients right to control the decision to
settle or impose fees otherwise not chargeable, we conclude it is
valid under Compton.
b. The parties writings described how to determine BPKs fee.
a. The clients argue that the modified fee agreement is invalid
under Alaska Rule of Professional Conduct 1.5(c), which states:
[a] fee agreement that is in whole or part contingent shall be in
writing and shall state the method by which the fee is to be
determined, including the percentage or percentages that shall
accrue to the lawyer in the event of settlement, trial or appeal.16
The parties modified their written fee agreement over a
series of letters and e-mails; the clients concede that the
modified fee agreement met the writing requirement. But the
clients argue the modified fee agreement fails to comply with
Rule 1.5(c) because there was no evidence in writing that [the
clients] agreed to return to the 33% contingent contract, or that
[the clients] agreed that BPK could engage in further,
substantial litigation thus triggering the reversion.
We agree it would have been preferable to acknowledge
in writing the point at which the substantial litigation
threshold had been reached, but the letters that BPK sent the
clients after the fee agreement was modified and before
settlement occurred communicated that BPK was investing
significant effort in pursuit of the clients legal claims and, by
November 2006, made clear that BPK believed it was entitled to a
thirty-three percent contingency fee. The clients neither
objected to the thirty-three percent contingency fee until after
a tentative settlement had been reached nor instructed BPK not to
pursue their claims. And the record shows BPK had numerous phone
calls and teleconferences with the clients, indicating the
clients must have known BPK was engaging in substantial work.
BPK did not leave the clients in the dark about the extent to
which it was pursuing their claims or the fee it believed it was
owed. Under the circumstances of this case, any failure to
announce that the substantial litigation threshold had been
reached did not prejudice the clients.
2. The superior courts interpretation of the modified
contingent-fee agreement was not erroneous.
1. The clients complain the courts interpretation of the
modified fee agreement was erroneous and that they were entitled
to summary judgment. They argue the court (1) improperly
interpreted the contract in favor of BPK and (2) erroneously
construed further substantial litigation to include more than in-
court proceedings and filings.
Because the parties agree on the facts and
circumstances surrounding modification of the fee agreement and
the agreements language, and because neither party argues there
are genuine issues of material fact, this dispute presents only
the legal question of contract interpretation.17
a. The superior court properly construed the contract against
BPK.
The clients contend that the modified fee agreement was
ambiguous, requiring the court to construe it against BPK, and
that the court improperly interpreted the agreement in favor of
the law firm.18 This argument is not persuasive. The superior
court both acknowledged the principle of construing attorney-fee
contracts against attorneys and construed the modified fee
agreement against BPK.
b. The superior court properly interpreted the phrase further
substantial litigation to include more than in-court proceedings
and filings.
The clients argue the phrase further substantial
litigation means only in-court proceedings and filings, such as
appearing in trial before a court or jury, but not preparing for
or participating in mediation.
The trial court interpreted further substantial
litigation as meaning additional considerable efforts in carrying
on the legal contest. It reasoned that limiting further
substantial litigation to in-court proceedings and filings is
unrealistic as litigation and court proceedings are more like an
iceberg: 90 percent of the activity involved in litigation is not
in court, but in preparing the case for the various court filings
and proceedings, including trial. In reaching its conclusion,
the court considered dictionary definitions for the disputed
terms, defining (1) further as additional, (2) to litigate as to
carry on a legal contest by judicial process, (3) litigation as
the process of carrying on a lawsuit or a legal proceeding of a
civil kind, (4) substantial as considerable in quantity;
significantly great, and (5) early as near the beginning of a
course [of] process; or occurring in a near future. The court
applied these definitions to the modified fee agreement:
Putting the definitions together, even
construing the contractual language against
[BPK], a reasonable person would understand
that should the firm succeed in obtaining the
policy limits without undergoing additional
considerable efforts in carrying on the legal
contest, the firm will be paid out of pocket
expenses and a flat fee of $250,000. And if
efforts of the settlement near the beginning
of the process of litigation do not succeed
and it becomes necessary to engage in
additional considerable efforts in carrying
on the legal contest, the parties will revert
to the previous written agreement.
We agree with the courts interpretation and conclude
reasonable persons in the clients circumstances would not have
expected further substantial litigation to mean purely in-court
proceedings and filings to the exclusion of work done in
preparation for mediation or trial.
As the superior court noted, we have not articulated
standards for interpreting attorney-fee contracts. The
Restatement (Third) of the Law Governing Lawyers provides helpful
guidance, and we adopt its general rule: A tribunal should
construe a contract between client and lawyer as a reasonable
person in the circumstances of the client would have construed
it.19 In addition to this principle, attorney-client contracts
are to be construed as any other contract, using general rules of
contract interpretation.20
Typically, in resolving disputes concerning the meaning
of an agreement, [we] begin[] by viewing the contract as a whole
and the extrinsic evidence surrounding the disputed terms, in
order to determine if those terms are ambiguous that is, if they
are reasonably subject to differing interpretation, 21 and if
those differing interpretations are both reasonable.22 If we
conclude an ambiguity exists, we resolve that ambiguity by
determining the reasonable expectations of the contracting
parties in light of the language of any disputed provisions,
other provisions, relevant extrinsic evidence, and case law
interpreting similar provisions. 23 Ambiguities in attorney-
client contacts are construed against the attorney.24
We begin by determining what reasonable persons in the
clients circumstances would have understood further substantial
litigation to mean. To do so, we analyze the language of the
contract as a whole,25 turning to non-legal dictionaries to
determine the meaning which the recipient of the communication
might reasonably have given the disputed terms.26
The modified fee agreement we must interpret is:
We will try to obtain a policy limits
settlement of your claims. Should we succeed
without requiring further substantial
litigation we will be paid 1) our out-of-
pocket costs and 2) $250,000.
If our efforts at an early settlement do not
succeed and it becomes necessary to litigate
the matter in a substantive way, we will
revert back to our previous written fee
agreement and the percentages written there.
The clients do not dispute the courts definitions of
further or substantial, but they argue that BPK did not engage in
further substantial litigation based on the undisputed facts.
Thus, the term at the core of this dispute is litigation, which
the modified fee agreement does not define. But the clients and
BPK refer us to the same definition: A lawsuit. Legal action,
including all proceedings therein. Contest in a court of law for
the purpose of enforcing a right or seeking a remedy. A judicial
contest, a judicial controversy, a suit of law. The superior
court defined to litigate as to carry on a legal contest by
judicial process, and litigation as the process of carrying on a
lawsuit or a legal proceeding of a civil kind.
These definitions construe litigation broadly, as
encompassing both the in-court and out-of-court aspects of
pursuing a lawsuit and providing legal representation. We
conclude that reasonable persons in the clients circumstances
that is, clients with business acumen27 would understand that
litigation includes not only in-court proceedings and filings,
but also the acts necessary to carry out a lawsuit or to pursue
legal claims. As the superior court explained, [a] case doesnt
arrive at the courthouse on the day of trial without substantial
preparations. The clients interpretation of the term litigation
as meaning only in-court appearances and filings is not a
reasonable construction of the term.28
We are not persuaded by the clients argument that the
parties agreed the thirty-three percent contingency fee would
not apply if the case settled before trial. This argument
focuses on the phrase further substantial litigation, without
regard to the surrounding provisions. The superior court
properly looked to the surrounding contractual provisions,
identifying the other relevant terms as further, substantial, and
early settlement, and turning to a non-legal dictionary to define
those terms.
c. Extrinsic evidence supports the trial courts interpretation
of the fee agreement.
The relevant undisputed extrinsic evidence consists of
(1) the clients August 2005 letter asking BPK to reduce its fees,
and (2) BPKs September 2005 letter responding to that request.
The clients asked BPK to agree to a reduced flat fee if
a policy limits settlement could be achieved in the early stages
of the case, reasoning this would result in curtailment of
further legal representation. Their August 2005 letter also says
the reduced fee would be justified if settlement occurred because
this eliminates the need for preparation and presentation of a
jury trial. These statements reinforce the courts finding that
the clients reasonably understood that legal representation
includes preparation for trial.
BPKs September 2005 response communicated that it would
not agree to a reduced fee if it had to invest significant time
and effort to resolve the case. BPK wrote:
[I]t is likely [the firm] would approve of
[the proposed modification] if the firm does
not have to expend much more of an investment
towards the case. At this point, the expense
has been kept to a minimum as no discovery
has yet begun. However, if the case
continues on, and the firm has to invest more
substantial time and expenses, it is unlikely
that the firm can accept the 25%.
Given this response, reasonable persons in the clients position
would not have understood that BPK intended to be paid a flat fee
if it invested fifteen additional months of time and effort into
the case.
Based on this undisputed extrinsic evidence, reasonable
persons in the clients circumstances would understand that they
were obligated to pay a thirty-three percent fee even though
their attorney did not appear before a court or jury.29 The
language of the modified fee agreement as a whole and the
undisputed extrinsic evidence support the courts interpretation.
3. Viewing the undisputed facts in the light most favorable to
the clients, BPK engaged in further substantial litigation.
The clients contend that BPK did not engage in further
substantial litigation and is not entitled to the thirty-three
percent contingency fee because they claim BPKs efforts were
toward mediation, not trial.
BPK submitted billing records to show the work it did
to prepare for mediation and trial. The clients do not dispute
that BPK performed this work; they argue that this work did not
qualify as further substantial litigation. The question
presented to us is whether, viewing the undisputed facts in the
light most favorable to the clients, the court erred in
concluding that BPK engaged in further substantial litigation.
We conclude it did not.
Only substantial work done on the lawsuit after efforts
at an early settlement failed would entitle BPK to a thirty-three
percent contingency fee, so we look to the steps BPK took after
it made the initial settlement offer in October 2005 and before
settlement occurred in January 2007. In that time, the superior
court found that BPK prepared the case for trial and mediation,
both of which the trial court found to be elements of litigation
or a legal contest between parties. It reasoned that BPKs
preparations for mediation and for trial constituted substantial
litigation because the efforts were considerable and because
litigation includes more than in-court proceedings and filings.
We agree. After the parties modified their fee
agreement, BPK attended the depositions of Weiner and Garrison;
traveled to Washington to depose Sarp; moved for summary judgment
on liability; prepared for and participated in a mediation; hired
and interviewed an expert witness on stair construction; met with
and talked to physicians; prepared discovery requests and
responses; prepared for and attended an independent medical
evaluation in Seattle; researched relevant legal issues;
participated in several teleconferences; and generally prepared
for trial, including talking to experts on damages and preparing
trial exhibits. Based on these undisputed facts, it is clear
that BPK engaged in further substantial litigation after the
early settlement effort failed.
B. Costs Advanced in the Underlying Lawsuit Were Not at
Issue in the Fee-Contract Dispute.
The clients argue the court erred by concluding that
the costs BPK advanced in the underlying lawsuit were not at
issue in the fee-contract dispute. They claim they timely raised
the issue and that the costs advanced improperly included fees
for outside bankruptcy counsel.
The court did not award any costs advanced in the
underlying lawsuit. The only costs awarded were those incurred
in litigating the dispute over the modified fee agreement. In an
oral ruling on the record, the court noted that:
[N]either party raised the costs being
claimed by defendants [in the underlying
lawsuit] as at issue in the complaint or
answer. [The clients] counsel argued the
costs claimed were the same whether the fees
were a flat $250,000 or 33 percent.
The clients raised the issue of costs for the first
time in their motion for reconsideration; therefore, they waived
this issue.30 Even if they had raised it in a timely manner, our
outcome would not change because the clients asserted in their
memoranda and in the superior court hearing that costs were not
at issue and that BPK was entitled to them. The court did not
err in concluding the issue was not before it.31
C. The Civil Rule 68 Attorneys Fee Award to BPK Did Not
Constitute an Abuse of Discretion.
The clients argue that the superior court abused its
discretion by not reducing BPKs award of attorneys fees under
Rule 82(b)(3)(A) (complexity of litigation) and (K) (other
equitable factors).32
Without addressing whether any fee award should be
reduced under Rule 82(b)(3), the court awarded BPK $8,395.95 in
attorneys fees under Civil Rule 68,33 relying on the offers of
judgment BPK had timely served on the clients and reasoning that
Rule 68 and Rule 82 fee awards cannot be combined.
We review an award of attorneys fees for abuse of
discretion.34 The clients do not challenge BPKs offer of judgment
or the courts Rule 68 fee calculation, and the fee award was not
manifestly unjust.35 The court did not abuse its discretion when
it awarded fees under Rule 68 without modification.
V. CONCLUSION
For the above reasons, we AFFIRM the superior courts
judgment in all respects.
_______________________________
1 Civil Rule 82(b)(2) governs attorney fee awards in
cases not involving money judgments.
2 Civil Rule 82(b)(3) permits courts to deviate from the
fee schedules in (b)(1) and (b)(2) if the court determines that
any of eleven factors justifies such a deviation.
3 Compton v. Kittleson, 171 P.3d 172, 176 (Alaska 2007)
(citing In re K.A.H., 967 P.2d 91, 93 (Alaska 1998)) (Because the
parties have stipulated that there are no genuine issues of
material fact, their [contract interpretation] dispute presents a
question of law, which we review independently, adopting the rule
of law that is most persuasive in light of precedent, reason, and
policy. (alteration added)).
4 Law Offices of Steven D. Smith, P.C. v. Borg-Warner
Sec. Corp., 993 P.2d 436, 443 (Alaska 1999); see also Rockstad v.
Erikson, 113 P.3d 1215, 1219 (Alaska 2005).
5 171 P.3d 172.
6 Compton, 171 P.3d at 176.
7 Id. at 174.
8 Id. (alteration added).
9 Id.
10 Id. at 174-75.
11 Id.
12 Id. at 179.
13 Id.
14 In their reply brief the clients appear to argue the
original fee agreement is also impermissible under Compton
because it provides for higher fee percentages depending on
whether a complaint or an appeal has been filed. Because they
did not raise this argument in their opening brief, the clients
waived it. See Sumner v. Eagle Nest Hotel, 894 P.2d 628, 632
(Alaska 1995); Alaska R. App. P. 212(c)(3).
15 See Compton, 171 P.3d at 179.
16 Alaska R. Prof. Conduct 1.5(c).
17 See Compton v. Kittleson, 171 P.3d 172, 176 (Alaska
2007) (citing In re K.A.H., 967 P.2d 91, 93 (Alaska 1998)).
In their reply brief the clients appear to contend that
there are genuine issues of material fact as to the parties
intent in modifying the fee agreement. But they again failed to
raise this argument in their opening brief, and we consider
arguments first raised in a reply brief waived. See Sumner v.
Eagle Nest Hotel, 894 P.2d 628, 632 (Alaska 1995); Alaska R. App.
P. 212(c)(3).
18 [A]mbiguity exists only where the disputed terms are
reasonably subject to differing interpretation after viewing the
contract as a whole and the extrinsic evidence surrounding the
disputed terms. N. Pac. Processors, Inc. v. City & Borough of
Yakutat, 113 P.3d 575, 579 (Alaska 2005) (quoting Wessells v.
State, Dept of Hwys, 562 P.2d 1042, 1046 (Alaska 1977)) (internal
quotation marks omitted).
19 Restatement (Third) of the Law Governing Lawyers 18(2)
& cmt. h (2000) (explaining three reasons for this principle:
lawyers usually write fee contracts, are more able to discern
deficiencies and to correct them, and consider it important to
inform clients about risks that may occur during the
representation).
20 See id. (explaining the principle of construing an
attorney-fee contract as a reasonable client would does not
preclude the reliance on the usual resources of contractual
interpretation such as the language of the contract, the
circumstances in which it was made, and the clients
sophistication and experience in retaining and compensating
lawyers or the lack thereof); id. 38 cmt. a (stating that [a]
fee contract must meet the usual requirements of contract law as
well as the special rules governing client-lawyer contracts); cf.
D.N. Corp. v. Hammond, 685 P.2d 1225, 1231 (Alaska 1984) ([T]he
modification of an existing agreement is governed by the same
principles regarding proof and enforceability as the original
contract.).
21 Hartley v. Hartley, 205 P.3d 342, 347 (Alaska 2009)
(quoting Zito v. Zito, 969 P.2d 1144, 1147 n.4 (Alaska 1998)).
22 Rockstad v. Erikson, 113 P.3d 1215, 1222 (Alaska 2005)
(quoting McMillan v. Anchorage Cmty. Hosp., 646 P.2d 857, 863
(Alaska 1982)).
23 Hartley, 205 P.3d at 347 (quoting Keffer v. Keffer, 852
P.2d 394, 397 (Alaska 1993)).
24 See 23 Samuel Williston & Richard A. Lord, A Treatise
on the Law of Contracts 62:4 (4th ed. 2002) (In supervising and
interpreting [contingent-fee agreements], the courts are adamant
in construing any ambiguity against the attorney who drew the
agreement and liberally in favor of the client.).
25 See Monzingo v. Alaska Air Group, Inc., 112 P.3d 655,
660 (Alaska 2005) (Courts look to the language of the contract as
a whole, the objects sought to be accomplished by the contract,
the circumstances surrounding its adoption, and case law
interpreting its provisions to ascertain the reasonable
expectations of the parties. (citing Craig Taylor Equip. Co. v.
Pettibone Corp., 659 P.2d 594, 597 (Alaska 1983))).
26 See Day v. A&G Constr. Co., 528 P.2d 440, 445 (Alaska
1974); see also id. at 445-47 (turning to a non-legal dictionary
to determine the non-technical meaning the contract recipient
would have given the contractual term).
27 Weiner testified in a deposition that he is the Vice
President of Casino Marketing for The Venetian Resort Hotel &
Casino in Las Vegas; Garrison stated in a deposition that she is
a Casino Marketing Executive for The Venetian.
28 Even if this phrase could be construed as having two
interpretations, it would not be ambiguous, as the clients argue,
because interpreting litigation to include only in-court
proceedings and filings is not a reasonable construction of the
term. See Rockstad v. Erikson, 113 P.3d 1215, 1222 (Alaska
2005). Nor does the parties disagreement about the
interpretation of this phrase render it ambiguous under our case
law. See N. Pac. Processors, Inc. v. City & Borough of Yakutat,
113 P.3d 575, 579 (Alaska 2005) (Disagreement between the parties
regarding the interpretation of a contract term does not
necessarily create ambiguity.) (citing Wessells v. State, Dept of
Hwys, 562 P.2d 1042, 1046 (Alaska 1977)).
29 The clients claim BPK never disclosed to them what it
meant by the terms further substantial litigation, specifically
that the phrase included work done in preparation for mediation,
and that this violated the firms fiduciary duties. BPK did not
expressly define the scope of further substantial litigation, but
its correspondence communicated that it would not agree to a
reduced flat fee if it invested substantial time and work on the
case.
30 See Clemensen v. Providence Alaska Med. Ctr., 203 P.3d
1148, 1155 (Alaska 2009).
31 In reaching this result we do not mean to condone a
contingent-fee attorney treating outside counsel fees as
litigation costs payable by the client in the absence of an
express agreement by the client. Bar Rule 35(c) requires
contingency fee agreements to be in writing and to state the
litigation expenses to be deducted from the recovery. Of course,
even an express agreement between an attorney and client must be
reasonable, as required by Bar Rule 35(a) and Alaska Rule of
Professional Conduct 1.5(c).
32 Civil Rule 82(b)(3) permits a court to vary the
prevailing party fee schedules if the court determines a
variation is warranted based on eleven factors, including (A) the
complexity of the litigation, and (K) other equitable factors.
33 Civil Rule 68(a) states, in pertinent part:
At any time more than 10 days before the
trial begins, either the party making a claim
or the party defending against a claim may
serve upon the adverse party an offer to
allow judgment to be entered in complete
satisfaction of the claim for the money or
property or to the effect specified in the
offer, with costs then accrued.
34 Cook Schuhmann & Groseclose, Inc. v. Brown & Root,
Inc., 116 P.3d 592, 597 (Alaska 2005).
35 See Rhodes v. Erion, 189 P.3d 1051, 1054 (Alaska 2008)
(holding no abuse of discretion to refuse to reduce a Rule 68
award under Rule 82(b)(3)(K) when appellant failed to meet the
manifestly unjust standard).
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