Gabelmann v. NFO, INC., 98-924.

Citation606 N.W.2d 339
Decision Date16 February 2000
Docket NumberNo. 98-924.,98-924.
PartiesKarl GABELMANN, Appellant, v. NFO, INC., Appellee.
CourtUnited States State Supreme Court of Iowa

Stephen N. Greenleaf of Lynch, Greenleaf & Michael, L.L.P., Iowa City, for appellant.

Gayla R. Harrison, Ottumwa, for appellee.

Considered by McGIVERIN, C.J., and CARTER, LAVORATO, NEUMAN, and TERNUS, JJ.

NEUMAN, Justice.

This is the second chapter in a controversy over defendant NFO, Inc.'s refusal to pay its employee, plaintiff Karl Gabelmann, a promised housing allowance. The controversy extended over the life of Gabelmann's tenure with the company— twenty years—resulting in a jury verdict for $22,000. In an earlier opinion, this court affirmed the jury's finding of employer liability but remanded for entry of a reduced judgment in recognition of the two-year statute of limitations for wage payment disputes. Gabelmann v. NFO, Inc., 571 N.W.2d 476, 484 (Iowa 1997) [hereinafter Gabelmann I]. We returned the case to district court for further proceedings on the question of liquidated damages and attorney fees to which Gabelmann might be entitled under Iowa Code chapter 91A. Id.

On remand, the parties stipulated that Gabelmann's unpaid wages for the two-year period preceding commencement of this suit were $1200. The district court then rejected Gabelmann's claim for liquidated damages, concluding NFO's conduct was not "intentional." See Iowa Code § 91A.8 (under Wage Payment Collection Law, employer liable for liquidated damages, costs, and attorney fees incurred in recovering wages intentionally unpaid). The court also pared Gabelmann's attorney fees from $29,195.50 to $3500. In reducing the award, the court characterized Gabelmann's suit as "simple" and akin to a small claims action from the start. The court also rejected Gabelmann's request to compel production of billing records for NFO's attorneys. Gabelmann had claimed they were a relevant measure of the "usual and necessary" fees for recovering his wages.

Gabelmann appealed. We transferred the case to our court of appeals. That court found Gabelmann entitled to liquidated damages as a matter of law. It also ruled the billing records of NFO's attorneys were relevant on the question of Gabelmann's attorney fee claim. It remanded the case for further discovery and a new hearing on trial and appellate attorney fees.

On NFO's application, we granted further review. NFO no longer contests the judgment for $1200 in liquidated damages, but it seeks reversal of the order to divulge its own counsels' billing records. It also resists remand on the question of attorney fees.

We conclude on our review that the trial court showed no abuse of discretion when it refused to compel production of NFO's attorney fee records, but its arbitrary reduction in Gabelmann's request for fees has no support in the record and must be reversed. With considerable reluctance, we therefore reverse and remand for yet another hearing on the question of attorney fees.

I. Scope of Review.

Because this case was tried at law, our review on appeal is limited to the correction of legal error. Audus v. Sabre Communications Corp., 554 N.W.2d 868, 871 (Iowa 1996). On both of the issues raised on appeal—the discovery of opposing counsel's billing records and assessment of attorney fees—the trial court is vested with broad, but not unlimited, discretion. Pierce v. Nelson, 509 N.W.2d 471, 473 (Iowa 1993) (discovery); Mississippi Valley Broad., Inc. v. Mitchell, 503 N.W.2d 617, 619 (Iowa App.1993) (attorney fees). Reversal is warranted only when the court rests its discretionary ruling on grounds that are clearly unreasonable or untenable. Pierce, 509 N.W.2d at 473; Mississippi Valley, 503 N.W.2d at 619.

II. Issues on Appeal.

When an employee prevails on a wage claim under Iowa Code chapter 91A, the district court is required to assess attorney fees and costs against the employer. Audus, 554 N.W.2d at 874. By statute, the court shall base its assessment on the expense "incurred in recovering the unpaid wages and determined to have been usual and necessary." Iowa Code § 91A.8 (emphasis added). The questions here are (1) whether the court abused its discretion when it found opposing counsels' fees irrelevant to this assessment, and (2) whether the court's fee award satisfies the statute's "usual and necessary" standard. We shall consider the arguments in turn.

A. Discovery. At the hearing on attorney fees, Gabelmann's counsel submitted a twenty-nine page statement itemizing 484 hours of attorney, law clerk, and paralegal time devoted to this case from late 1993 through mid-1997. He supported the claim with the affidavits of several experienced trial attorneys and the deposition testimony of another seasoned trial attorney. These attorneys attested to the reasonableness of the hourly rates charged during this time period ($95—$110 for lawyer, $50 for paralegal, $35 for law clerk) and the number of hours necessarily devoted to research, discovery, pre-trial motions, trial preparation, post-trial motions, appellate brief preparation, oral argument, and further review. The deposed attorney offered the opinion that it costs $15,000 to mount a jury trial in even the simplest of cases.

Pertinent to this appeal, Gabelmann's counsel also asked the court to consider the billing records of the two attorneys employed by NFO to defend this litigation. NFO resisted production of the records on the ground they were privileged and irrelevant. The court concluded the records were irrelevant and refused to compel NFO to produce them for its consideration. Gabelmann contends the court's ruling constitutes an abuse of discretion warranting reversal.

There are no Iowa cases directly on point. Confronted with a similar question, however, the federal court in Iowa has concluded that opposing counsel's time and hourly rates devoted to the case—to the extent those items reflect "the prevailing market rates in the relevant community"— are relevant to a plaintiff's statutory attorney fee claim. Murray v. Stuckey's, Inc., 153 F.R.D. 151, 153 (N.D.Iowa 1993). Whether the production of such fee statements should be compelled, however, is a decision customarily left to the informed discretion of the court. Id. (citing In re Fine Paper Antitrust Litigation, 751 F.2d 562, 587 (3d Cir.1984)). That decision will logically turn on the nature of the objections posed by defendant to the request. Id.

Here, NFO's counsel conceded the reasonableness of the hourly rates charged by Gabelmann's attorney. She merely contested the number of hours spent to ultimately recover only $1200. Her contention that her own time records are irrelevant boils down to a claim that what NFO must pay its attorneys to defend Gabelmann's claim has no bearing on his cost to pursue it.

On balance, we are not convinced that NFO's attorney billing records would be irrelevant to the question whether Gabelmann's fee claim represents the usual and necessary expense of pursuing a suit for unpaid wages. But neither can we say the court abused its discretion when it refused to consider them. The court had before it a concession concerning the reasonableness of counsel's hourly rate, and substantial evidence concerning the hours devoted to pursuing the claim, supported by expert testimony on the usual and necessary cost of doing so. Given this record, the court was well within its discretion to limit the introduction of further, potentially duplicative, evidence.1 In other words, the court could make a fair determination whether Gabelmann's fees were "usual and necessary" without access to NFO's billing records. No ground for reversal appears.

B. Usual and Necessary Expense. The crucial question is whether the trial court abused its discretion when it entered a fee award roughly one-eighth of the amount claimed by Gabelmann. Plainly the court believed the modest sum eventually recovered by Gabelmann did not justify the time and expense devoted to securing it. Gabelmann challenges this reasoning on appeal, insisting the court's meager award undermines the remedial purpose of chapter 91A. We are inclined to agree.

As already noted, Iowa Code section 91A.8 makes the award of attorney fees mandatory in successful wage claim litigation, irrespective of whether the employer's conduct was intentional. Audus, 554 N.W.2d at 874. The purpose of the statute is to reimburse the employee for the expenses incurred in suing for back wages. Maday v. Elview-Stewart Sys. Co., 324 N.W.2d 467, 470 (Iowa 1982). Such reimbursement is not unlimited, however. Section 91A.8 limits the employer's liability to attorney fees deemed "usual and necessary" to recover the unpaid wages. On that question, the trial judge has presumed expertise. Maday, 324 N.W.2d at 470.

In other contexts, we have recited the following factors as bearing on the determination of an appropriate award of statutory attorney fees:

the time necessarily spent, the nature and extent of the service, the amount involved, the difficulty of handling and importance of the issues, the responsibility assumed and results obtained, the standing and experience of the attorney in
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