Dietrich Corp. v. King Resources Co., s. 77-1433

• Decision Date: 06 April 1979
• Docket Number: Nos. 77-1433,77-1434 and 77-1435,s. 77-1433
• Parties: The DIETRICH CORPORATION et al., Plaintiffs, v. KING RESOURCES COMPANY et al., Defendants. Ted J. FIFLIS, Appellant, v. Charles A. BAER, Trustee, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 422

596 F.2d 422

The DIETRICH CORPORATION et al., Plaintiffs, v. KING RESOURCES COMPANY et al., Defendants.

Ted J. FIFLIS, Appellant, v. Charles A. BAER, Trustee, Appellee.

Nos. 77-1433, 77-1434 and 77-1435.

United States Court of Appeals, Tenth Circuit.

April 6, 1979.

Ira C. Rothgerber, Denver, Colo. (Robert S. Slosky, Denver, Colo., with him on the brief), of Rothgerber, Appel & Powers, Denver, Colo., for appellant.

John S. Pfeiffer, Denver, Colo. (Stephen Klein, Denver, Colo., with him on the brief), for appellee.

Before HOLLOWAY, BARRETT and LOGAN, Circuit Judges.

LOGAN, Circuit Judge.

Ted J. Fiflis (Fiflis) appeals from several orders in these consolidated cases which determined his compensation for services rendered as a consultant, notwithstanding that Fiflis was neither a party to the proceedings nor an attorney of record.

The genesis of this appeal lies in the financial downfall of King Resources Company, its affiliates and subsidiaries. As a result, various lawsuits were brought against King Resources Company, its officers, directors and others. By order of the Judicial Panel on Multidistrict Litigation, these cases were consolidated for pretrial proceedings in the United States District Court for the District of Colorado. In re King Resources Company Securities Litigation, 342 F.Supp. 1179 (Jud.Pan.Mult.Lit.1972).

Fiflis, a professor of law at the University of Colorado, and a nationally recognized expert in the field of legal accounting, was employed as a consultant by two law firms which served as lead counsel in the consolidated actions, Saul, Ewing, Remick and Saul (SERS) and Hopper and Kanouff (H&K). His initial agreement with the firms provided for compensation on a straight hourly basis, at the same hourly rate as lead counsel. After some 400 hours of service over a period of two-and-one-half years of the class action litigation, this was changed to a contingent fee arrangement by agreement between Fiflis and the firms. Thereafter an additional 450 hours of service was alleged to have been performed. When the law firms made a "Joint Application of Attorneys for the Dietrich, Gross and Morell Plaintiffs for Attorneys' Fees and Allowance of Expenses" and "Memorandum in Support Thereof" these hours and the contingent nature of the fee arrangement were shown to the court. The application does not reflect that Fiflis served either as counsel of record or as a fee applicant, rather his time was listed in the "consultants time" category. The application separately listed hours spent by the attorneys of record and "paralegal and law student time."

The trustee in bankruptcy objected to that portion of the fee application treating Fiflis' services, contending the services constituted the unauthorized practice of law since Fiflis was not admitted to practice in Colorado. The trustee objected to any award of attorney's fees to Professor Fiflis, quoting certain letters which he contended showed the law firms had not employed Fiflis as a consultant, law clerk or paralegal, but rather "at all times . . . as a practicing lawyer a fortiori, in the area of his specialty, the liability of accountants."

After a hearing the trial court found that Fiflis' "acts connected with this proceeding were made in good faith and violated no ethical canon or state statute." Nevertheless, the court ruled that the contingent agreement, under which Fiflis would receive a specified hourly rate plus a contingent portion of the total recovered for fees, contravened Canon 3 of the Code of Professional Responsibility, as adopted by the Supreme Court of Colorado. This ruling was predicated upon Disciplinary Rule 3-102 which prohibits a lawyer or law firm from sharing legal fees with a nonlawyer. The court found that Fiflis was a nonlawyer in Colorado, hence his status in these cases must be that of an expert. Therefore the court disapproved the contingent fee arrangement between Fiflis and the law firms, and directed that his compensation "be based on the hourly rate initially agreed upon, or as it might have been adjusted upon realizing the enormity of the project." The court specifically stated, "The Court will not itself reform the precise terms of the agreement. However, it should be noted that the award of attorneys fees in this case is made on the understanding that payment by class and plaintiffs' counsel to Mr. Fiflis shall not be made on a contingency basis." The two law firms thereafter submitted a proposal, in which Fiflis concurred, for "a fair fee" of $125 per hour plus "interest at 7% Per annum computed semiannually," including a proviso that Fiflis would accept 5% Of the stock to be received by the firms in lieu of $52,000 cash. When this was presented the court rejected the proposal, finding that the compensation was in excess of the typical hourly rate for attorneys admitted to practice in Colorado. In a later order the court directed that Fiflis be paid at the rate of $75 per hour for 751.5 hours of service, a total sum of $56,362.50, considerably less than he would receive under either the contingent fee arrangement or the renegotiated $125-per-hour plus interest contract.

Prior to this final order Fiflis retained his own counsel to represent his interests in the fee determination. On March 22, 1977, his attorneys entered an appearance on his behalf and requested a conference with the court to discuss Fiflis' fee. On March 23, the day the court entered its order limiting the fee to $75 per hour for 751.5 hours of service, Fiflis filed an affidavit stating that he had provided other consulting services to these law firms amounting to an additional 100.5 hours, and thus should be compensated for a total of 852 hours of time.

On April 4, 1977, Fiflis filed a motion to intervene in the action, and a motion for a new trial and amendment of judgment and for relief from judgment or order. A week later the court denied these motions. Fiflis appeals from the several orders entered March 23 affecting his compensation, denying his request for a conference, denying consideration to the additional hours and refusing to permit him to intervene or to grant a new trial. As grounds for reversal he argues: 1) the district court lacked power to determine his fee; 2) at all times he was a lawyer ethically capable of making a contingent fee agreement with lead counsel; 3) the renegotiated fee contract was beyond the power of the court to set aside; 4) he should have been allowed compensation for an additional 100.5 hours of service; and 5) the court erred in denying his motion to intervene.

I

We hold that Fiflis has a right to appeal the court's determination to this court. Fiflis sought to intervene as a matter of right under the rule of United Airlines, Inc. v. McDonald, 432 U.S. 385, 97 S.Ct. 2464, 53 L.Ed.2d 423 (1977). If we should agree that he has a right to intervene, or the trial court abused its discretion in denying a permissive intervention under Fed.R.Civ.P. 24, we may consider the appeal. Degge v. City of Boulder, 336 F.2d 220, 221 (10th Cir. 1964). See also, Pellegrino v. Nesbit, 203 F.2d 463 (9th Cir. 1953). In view of our disposition of the case we find it unnecessary to determine whether Fiflis' petition to intervene was improperly denied.

The court's order directly affected Fiflis by ordering the law firms to pay him only a certain amount from the fee which it granted to the attorneys for the class, notwithstanding fee agreements entered into between Fiflis and the attorneys which provided a different compensation. Neither of the law firms, SERS and H&K, which previously represented his interests have appealed. Obviously under all of the circumstances Fiflis is an aggrieved party and his property interest can be protected only by recognizing this as one of those extraordinary cases where a nonparty may be allowed to appeal. Commercial Security Bank v. Walker Bank & Trust Company, 456 F.2d 1352, 1354 (10th Cir. 1972); West v. Radio-Keith-Orpheum Corp., 70 F.2d 621, 623-624 (2d Cir. 1934).

II

In the joint application for attorneys' fees and expenses filed December 30, 1975, the amount of $657,718.35 in cash plus 10% Of the $13,000,000 of King Resources' stock was requested as attorneys' fees. Ostensibly, the total sum sought was based upon the number of hours expended by the members of the SERS and H&K law firms, their paralegals and student clerks, and by Messrs. Fiflis, Calhoun, Murray and Gray whom they hired. Although the time spent by each of these individuals and groups was carefully documented and attached to the joint application for fees, it is noteworthy that an hourly rate to be applied to the individuals or groups was not specified. The hourly rate method of computing a fee award for SERS and H&K was observed but not recommended by the attorneys. The court in an order filed December 23, 1976, rejected this method in favor of a percentage fee award: "We could here, of course, begin the hours times rate approach and then increase that amount by some premium to arrive at a just compensation figure. However, it seems more reasonable in this case, to begin with the 15% Fee request and determine its fairness." In that order, the court awarded counsel 15.19% Of the total benefits bestowed upon the class, or $1,688,903.53. This award was for $648,903.53 cash and 10% Of the unsecured class claim valued at $10,400,000.00. The order also contained the court's prohibition of the contingent fee arrangement between Fiflis and his employers, as well as the court's absolution that Fiflis had not violated any ethical canon or...