City of Seattle v. Okeson, No. 56698-9-1 (Wash. App. 3/26/2007)
| Decision Date | 26 March 2007 |
| Docket Number | No. 56698-9-1,Linked w/ No. 56699-7-1,56698-9-1 |
| Parties | CITY OF SEATTLE, Appellant/Cross-Respondent, v. RUD OKESON, DORIS BURNS, WALTER T. WILLIAMS and ARTHUR T. LANE, Respondents/Cross-Appellants. CITY OF SEATTLE, Appellant/Cross-Respondent, v. ARTHUR T. LANE, KENNETH GOROHOFF, and WALTER L. WILLIAMS, Respondents/Cross-Appellants. |
| Court | Washington Court of Appeals |
Appeal from King County Superior Court. Docket No. 02-2-05774-8. Judgment or order under review. Date filed: 05/21/2004. Judge signing: Honorable Sharon Armstrong.
Counsel for Appellant(s), William Howard Patton, Foster Pepper PLLC, 1111 3rd Ave Ste 3400, Seattle, WA, 98101-3299.
Suzanne Lieberman Smith, Seattle City Attorneys Office, Po Box 94769, Seattle, WA, 98124-4769.
Counsel for Respondent(s), David Florian Jurca, Helsell Fetterman LLP, 1001 4th Ave Ste 4200, Seattle, WA, 98154-1154.
Richard Stephen White, Helsell Fetterman LLP, 1001 4th Ave Ste 4200, Seattle, WA, 98154-1154.
Connie K. Haslam, Helsell Fetterman LLP, 1001 4th Ave Ste 4200, Seattle, WA, 98154-1154.
In this class action litigation, the trial court awarded attorney fees and costs based on the well-established common fund doctrine. After the City of Seattle rescinded its agreement to contribute $ 21.5 million in ratepayer utility funds to the Central Puget Sound Transit Authority (Sound Transit) and reinstated Sound Transit's obligation to pay utility relocation costs, the trial court dismissed the ratepayers' Sound Transit claim as moot. Because litigation of the Sound Transit claim preserved $21.5 million in ratepayers funds, the court awarded approximately $1.4 million in attorney fees, costs, and incentives under the common fund doctrine. On appeal, the City contends the court erred in awarding attorney fees and costs under the common fund doctrine. In the alternative, the City argues substantial evidence does not support the trial court's findings. On cross appeal, the ratepayers challenge the amount the court awarded and the court's failure to enter findings to support that amount. We affirm the trial court's decision to award attorney fees and costs based on the common fund doctrine and conclude substantial evidence supports the court's decision. But because the court did not state the reasons for deviating from the percentage typically used in awarding attorney fees, we remand.
The City of Seattle (the City) is a municipal corporation that owns and operates Seattle City Light (City Light). Seattle Public Utilities (SPU) is a water, wastewater, and solid waste utility owned and operated by the City. The City operates City Light and SPU as a proprietary and business function of government for the benefit of their customers, the ratepayers, rather than the general public.1 City Light and SPU revenues and expenses are maintained separately from the City's general fund.
On February 14, 2002, Rud Okeson, Doris Burns, Walter L. Williams, and Arthur T. Lane (collectively "Okeson") filed a class action lawsuit against the City on behalf of City Light ratepayers. The lawsuit alleged the City did not have the authority to charge City Light for general fund expenses including streetlight costs, art, and technology. The court certified the class on behalf of City Light ratepayers. In 2003, the Washington Supreme Court held that the City improperly charged City Light ratepayers for streetlight costs, a general fund expense.2
In February 2004, Okeson filed an amended complaint alleging that a 2002 agreement between the City and Sound Transit also unlawfully diverted City Light revenues to the City. In the 2002 "Community Development Fund Agreement" (CDF Agreement), the City agreed to contribute $42.8 million to the Sound Transit "Transit Oriented Community Development Fund" (TOCDF). The $42.8 million included $21.3 million in direct monetary support from the City together with $17.5 million in unreimbursed utility support work from City Light and $4 million from SPU. The City also agreed to waive Sound Transit's obligation under a previous right-of-way agreement (ROW Agreement) to pay the City utilities for the relocation costs necessitated by the construction or operation of the Sound P.2d 793 (1987). Transit light rail project.3
At the City's request, the court stayed discovery on the Sound Transit allegations pending the already scheduled trial on Okeson's claim that the City improperly charged the City Light ratepayers for general fund expenses, including art and technology. At the conclusion of the trial, the court ruled that the City improperly used City Light ratepayer revenues for a number of art projects and some other expenditures.4 The court also ruled on the streetlight refund issues. The court awarded the ratepayers approximately $3.5 million in attorney fees, costs and incentives under the common fund doctrine.5
After the trial, Okeson filed a motion to lift the stay on discovery of the Sound Transit claim alleged in the amended complaint. In December 2004, the court granted Okeson's motion to amend the complaint and lift the stay on discovery of the Sound Transit claim.
On March 1, 2005, Arthur T. Lane, Kenneth Gorohoff and Walter L. Williams (collectively "Lane") filed a class action lawsuit against the City on behalf of the SPU ratepayers. In the complaint, Lane alleged the City improperly used SPU revenues for general fund purposes. Lane also alleged the 2002 CDF Agreement between the City and Sound Transit unlawfully diverted SPU revenues.
On March 28, 2005, the City and Sound Transit entered into a substitute CDF Agreement (Substitute CDF Agreement). Under the Substitute CDF Agreement, the City replaced the $21.5 million contribution from City Light and SPU with block grant funds and reinstated Sound Transit's obligation to reimburse the utilities for relocation costs. Section 4.1 of the Substitute CDF provides:
. . . Sound Transit's obligation to reimburse Seattle's utilities for costs related to Sound Transit construction is fully reinstated. Sound Transit therefore remains obligated under Subsections 3.5 of the Non-Exclusive Transit Way Agreement . . . The City ordinance authorizing the Substitute CDF agreement also explains:
. . . [a]s a consequence of providing this more flexible fund source to the Fund, Seattle's utilities will be reimbursed for all costs created by the Sound Transit project, excluding betterments.
After adopting the Substitute CDF Agreement, the City filed a motion to dismiss the ratepayers' Sound Transit claim as moot. Over the ratepayers' objection, the court dismissed the claim as moot but "without prejudice to plaintiffs' right to file suit again if Seattle adopt[ed] or enter[ed] into an allegedly improper funding mechanism for the Community Development Fund." After dismissal of the claim, Okeson and Lane filed a motion requesting an award of attorney fees for 25 percent of the $21.5 million preserved by the litigation under the common fund doctrine.
On July 19, 2005, the court entered two orders. In the Lane case, the court entered an order certifying the class on behalf of SPU ratepayers. In a separate order, the court awarded the Okeson and Lane ratepayers attorney fees, costs, and incentives of approximately $1.4 million under the common fund doctrine. The City appeals the trial court's decision to award attorney fees, costs, and incentives. On cross appeal, Okeson and Lane challenge the amount the court awarded and the failure to enter findings justifying the amount awarded.
The City contends the trial court erred in awarding attorney fees and costs under the common fund doctrine. In the alternative, the City argues substantial evidence does not support the trial court's decision.
Washington follows the American rule. Under the American rule, attorney fees are not awarded unless authorized by contract, statute, or a recognized equitable principal. City of Seattle v. McCready, 131 Wn.2d 266, 273-74, 931 P.2d 156 (1997). Whether an award of attorney fees is authorized by a recognized equitable exception is a legal question. Tradewell Group, Inc. v. Mavis, 71 Wn. App. 120, 126, 857 P.2d 1053 (1993). In McCready, the Washington Supreme Court held that the common fund doctrine is one of the recognized equitable exceptions to the American rule.6 McCready, 131 Wn.2d at 274.
The well established equitable common fund doctrine authorizes an award of attorney fees when a litigant brings an action that preserves or creates a common fund for the benefit of the litigant and others. Bowles v. Dep't of Retirement Sys., 121 Wn.2d 52, 70-71, 847 P.2d 440 (1993). Unlike a lodestar approach, the award of fees under the common fund doctrine is borne by the prevailing party and the court uses a percentage of recovery rather than actual hours expended in computing attorney fees. Bowles, 121 Wn.2d at 71.7
Here, the trial court granted the City's motion to dismiss the Sound Transit claim because the court concluded "the 2005 substitute CDF funding agreement rendered plaintiffs' Sound Transit claim moot by providing essentially all of the relief that would have been available to plaintiffs on their claim." But the court concluded the ratepayers were entitled to an award of attorney fees, costs, and incentives under the common fund doctrine because the "initiation and prosecution" of the Sound Transit claim prevented the City from contributing $21.5 million in utility ratepayer funds to Sound Transit.
[T]he court finds that plaintiffs and their attorneys have conferred substantial benefits on City Light ratepayers and SPU ratepayers by preserving the Light Fund and the SPU combined utilities fund to the extent of $17.5 million for the Light Fund and $4 individual to litigation, misconduct or bad faith by a party, and the dissolution of wrongfully issued temporary restraining orders or injunctions. McCready, 131 Wn.2d at 274 million for...
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