Hensel v. DAPCPA RPO LLC

• Docket Number: S-23-0028
• Decision Date: 24 August 2023
• Citation: 2023 WY 84
• Parties: DARYL A. HENSEL, Appellant (Respondent), v. DAPCPA RPO LLC, Appellee (Petitioner).
• Court: Wyoming Supreme Court

1

2023 WY 84

DARYL A. HENSEL, Appellant (Respondent),
v.
DAPCPA RPO LLC, Appellee (Petitioner).

No. S-23-0028

Supreme Court of Wyoming

August 24, 2023

Appeal from the District Court of Laramie County The Honorable Thomas T.C. Campbell, Judge

Representing Appellant: Cassie Craven, Longhorn Law LLC, Cheyenne, Wyoming.

Representing Appellee: Jeffrey S. Pope, Isaac N. Sutphin, Holland & Hart LLP, Cheyenne, Wyoming.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

2

KAUTZ, Justice.

[¶1] Daryl A. Hensel appeals from the district court's award of $21,643.65 in attorney fees and costs to DAPCPA RPO LLC (DAPCPA RPO). We affirm.

ISSUES

[¶2] Mr. Hensel raises two issues which we re-state as follows:

1. Did the district court err by concluding the attorney fee-shifting provision of the relevant contracts allowed for an award of attorney fees and costs to DAPCPA RPO

2. Did the district court abuse its discretion by awarding attorney fees and costs to DAPCPA RPO?

FACTS

[¶3] In January 2019, DAPCPA, a full-service public accounting firm, purchased the goodwill, clients, and personal property of RPO Associates CPAs, LLC (RPO) pursuant to a Purchase and Sale Agreement (PSA) and formed DAPCPA RPO. At the time of the purchase, Mr. Hensel, a certified public accountant, was a minority owner and employee of RPO and Maria Sanchez, an accredited tax preparer, was RPO's office manager. Relevant here, the PSA contained a non-compete provision in which Mr. Hensel agreed "not to directly or indirectly solicit or provide any services" to any former RPO client for a period of five years unless pursuant to a contract and for the direct benefit of DAPCPA RPO. In the event he breached this provision, Mr. Hensel agreed to pay DAPCPA RPO money damages for each client he improperly solicited or served. The PSA also required Mr. Hensel to notify DAPCPA RPO within ten days if he violated the non-compete provision or pay DAPCPA RPO $5,000 for each time he failed to give notification.

[¶4] Mr. Hensel and Ms. Sanchez accepted employment with DAPCPA RPO. As a condition of his employment with DAPCPA RPO, Mr. Hensel executed a "Covenant Not to Solicit/Accept" (hereinafter "Covenant Not to Solicit"), in which he agreed "not to directly or indirectly" solicit or provide accounting services for any of DAPCPA RPO's clients for two years after leaving DAPCPA RPO's employ and to notify DAPCPA RPO of a breach within ten days. Similar to the PSA, he agreed to pay DAPCPA RPO money damages for each client he improperly solicited or served and $5,000 for each failure to notify.

[¶5] Soon after starting their employment with DAPCPA RPO, Mr. Hensel and Ms. Sanchez began forming their own accounting firms, including searching for and obtaining office space for their new firms and ordering business cards. Upon learning of these activities, DAPCPA RPO terminated their employment. Subsequently, Mr. Hensel formed

3

"Daryl A. Hensel, CPA, LLC," and Ms. Sanchez created "Best Accounting Solutions LLC" (BAS). Through his new firm, Mr. Hensel provided accounting services to former RPO clients and to DAPCPA RPO clients; he also referred former RPO clients and DAPCPA RPO clients to Ms. Sanchez/BAS for accounting services. He did not report any of these services or referrals to DAPCPA RPO.

[¶6] DAPCPA RPO filed suit against Mr. Hensel, Ms. Sanchez, and BAS. It alleged the following claims against Mr. Hensel: (1) breach of the PSA's non-compete provision; (2) breach of the Covenant Not to Solicit; (3) breach of the implied covenant of good faith and fair dealing; (4) conversion; (5) intentional misrepresentation; (6) tortious interference with a business expectancy; and (7) slander. DAPCPA RPO asserted claims of conversion, tortious interference with a contract, slander, and tortious interference with a business expectancy against Ms. Sanchez and claims of conversion and tortious interference with a contract against BAS. It also sought a preliminary injunction against both Mr. Hensel and Ms. Sanchez. Mr. Hensel stipulated to the district court's entry of a preliminary injunction, which enjoined him from directly or indirectly soliciting and providing any services to former RPO clients, required him to report to DAPCPA RPO any services performed for former RPO clients, and enjoined him from contacting any DAPCPA RPO clients. DAPCPA RPO eventually voluntarily dismissed or settled its claims against Ms. Sanchez and BAS.

[¶7] DAPCPA RPO filed a motion for partial summary judgment on its claims against Mr. Hensel for breach of the PSA's non-compete provision and breach of the Covenant Not to Solicit. It argued Mr. Hensel breached the agreements by performing accounting services for fifteen former RPO clients, referring twenty-seven former RPO clients to Ms. Sanchez/BAS, referring three DAPCPA RPO clients to Ms. Sanchez/BAS after his termination, and not reporting any of these violations to DAPCPA RPO. DAPCPA RPO sought a total of $252,313.03 in damages on its breach of contract claims. Mr. Hensel opposed the motion, arguing, among other things, that the PSA and Covenant Not to Solicit were invalid and unenforceable contracts and his actions did not constitute a breach.

[¶8] The district court granted DAPCPA RPO's summary judgment motion in part, and denied it in part. It concluded the PSA and Covenant Not to Solicit were valid and enforceable contracts, Mr. Hensel breached them, and DAPCPA RPO was entitled to damages. However, the court did not award damages at that time because it decided there were genuine issues of material fact as to the amount of damages, if any, DAPCPA RPO suffered with respect to two clients. DAPCPA RPO subsequently withdrew its request for damages with respect to these two clients and voluntarily dismissed all of its remaining claims against Mr. Hensel except its claim for breach of the implied covenant of good faith and fair dealing. After a bench trial, the district court found in favor of Mr. Hensel on that claim. It ultimately entered judgment in favor of DAPCPA RPO for $240,126.28 on the breach of contract claims. Mr. Hensel did not appeal from that judgment.

4

[¶9] DAPCPA RPO filed a motion for its attorney fees and costs pursuant to an attorney fee-shifting provision contained in both the PSA and Covenant Not to Solicit. It sought $31,481.50 in attorney fees and $3,969.65 in costs, for a total of $35,451.15. Mr. Hensel argued the fee-shifting provision did not allow for an award of fees and costs to DAPCPA RPO but, even assuming it did, the court should disallow fees and costs altogether because DAPCPA RPO's counsel's hourly rates and the hours expended on certain tasks were unreasonable.

[¶10] The district court decided the fee-shifting provision authorized an award of attorney fees and costs to DAPCPA RPO and the requested costs were reasonable. It concluded, however, that DAPCPA RPO's counsel's hourly rates and the hours billed for eight tasks were unreasonable and reduced them accordingly. In the end, the court awarded DAPCPA RPO $17,674.00 in attorney fees and $3,969.65 in costs, for a total of $21,643.65. Mr. Hensel filed a timely notice of appeal challenging the court's fees and costs award.

DISCUSSION

[¶11] Mr. Hensel argues the district court improperly awarded attorney fees and costs to DAPCPA RPO for two reasons. First, he maintains the plain language of the fee-shifting provision did not authorize an award of fees and costs to DAPCPA RPO. Second, he argues that even if the fee-shifting provision allowed for an award of fees and costs to DAPCPA RPO, the district court should have declined to award any fees or costs because DAPCPA RPO's counsel charged unreasonable hourly rates, failed to exercise billing judgment, and obtained only limited success in the lawsuit. We address each argument in turn.

Fee-Shifting Provision

[¶12] "'Wyoming generally subscribes to the American rule regarding the recovery of attorney fees, under which . . . each party pays his or her own fees. A prevailing party may, however, be reimbursed for attorney fees when provided for by contract or statute.'" Douglas v. Jackson Hole Land Tr., 2020 WY 69, ¶ 20, 464 P.3d 1223, 1229-30 (Wyo. 2020) (quoting Thorkildsen v. Belden, 2012 WY 8, ¶ 10, 269 P.3d 421, 424 (Wyo. 2012)) (other citations omitted). "Whether a contract provides a legal basis to award attorney[] fees is a question of contract interpretation. Contract interpretation is a matter of law which we consider de novo." Circle C Res. v. Hassler, 2023 WY 54, ¶ 9, 530 P.3d 288, 292 (Wyo. 2023) (citations omitted).

[¶13] "[W]hen we interpret contracts, our aim is to determine the intent of the contracting parties." Holding v. Luckinbill, 2022 WY 10, ¶ 14, 503 P.3d 12, 17 (Wyo. 2022).

"[T]he words used in the contract are afforded the plain meaning that a reasonable person would give to them. When the provisions in the contract are clear and unambiguous, the

5

court looks only to the 'four corners' of the document in arriving at the intent of the parties. In the absence of any ambiguity, the contract will be enforced according to its terms because no construction is appropriate."

Ecocards v. Tekstir, Inc., 2020 WY 38, ¶ 18, 459 P.3d 1111, 1118 (Wyo. 2020) (quoting Claman v. Popp, 2012 WY 92, ¶ 26, 279 P.3d 1003, 1013 (Wyo. 2012), and Hunter v. Reece, 2011 WY 97, ¶ 17, 253 P.3d 497, 502 (Wyo. 2011)) (other citations omitted).

[¶14] DAPCPA RPO requested its attorney fees and costs pursuant to a fee-shifting provision contained in both the PSA and Covenant Not to Solicit. The provision states:

In the event either party fails to perform any of its obligations under this Agreement, the party will be deemed in default. The party in default has the right to cure its default within 15 days of notice from the non-defaulting party. Should the defaulting party fail to cure, the

...