Kalyawongsa v. Moffett
| Decision Date | 23 January 1997 |
| Docket Number | No. 96-5045,96-5045 |
| Citation | 105 F.3d 283 |
| Parties | Woralak KALYAWONGSA; Udo Liell, Plaintiffs-Appellants, Philip P. Durand; E. Michael Morris, Attorneys-Appellees, v. Margaret Jean MOFFETT, et al., Defendants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Larry L. Crain (argued and briefed), Long, Seneff & Mellow, Brentwood, TN, for plaintiffs-appellants.
Philip P. Durand, Ambrose, Wilson, Grimm & Durand, Knoxville, TN, E. Michael Morris (argued and briefed), Morris & Doherty, Birmingham, MI, for attorneys-appellees.
Before: ENGEL, MERRITT, and MOORE, Circuit Judges.
This appeal arises from an unfortunate, protracted dispute over legal fees between the plaintiffs in a housing discrimination case and their former counsel. After being forced to withdraw before the housing discrimination claims were settled, the lawyers successfully moved for liens on the property acquired in the underlying litigation. On appeal, the former plaintiffs argue (1) that the district court did not have jurisdiction over the fee dispute, (2) that the dispute is governed by Tennessee law which does not allow the court having jurisdiction to "enforce" such liens by determining their amount, (3) and that even if the court had the power to grant the fees they were excessive and unreasonable and violated the plaintiffs' contracts with the attorneys. The clients also argue that the testimony of a lawyer for the Department of Housing and Urban Development was inadmissible under the attorney-client privilege. For the reasons given below we disagree and affirm the district court's order.
This case began as a fair housing action brought by appellants Udo Liell and Woralak Kalyawongsa, a married couple, against Margaret Leinart, the seller of property in Sevier County, Tennessee. In 1991, Leinart offered After at least one preceding lawyer withdrew from the case, Liell and Kalyawongsa hired Philip Durand of Knoxville to represent them in both a suit filed in federal district court (the instant case) and a specific performance action in Tennessee chancery court. Under their written retainer agreement, Liell and Kalyawongsa were to pay Durand an hourly rate of $175 per hour. Durand estimated, but did not guarantee, that the total representation would cost approximately $25,000. Retainer Agreement (J.A. at 573).
a tract of land for sale through a real estate agent for $235,000. Kalyawongsa offered to purchase the property for $200,000 cash; Leinart counteroffered for $250,000. Kalyawongsa then attempted to accept this counteroffer by responding verbally and by facsimile to both of Leinart's agents. About one and a half hours later, Leinart withdrew her counteroffer. Leinart later explained to one of the agents that she disapproved of a "mixed couple" buying her property. (Mr. Liell was a citizen of Germany; Ms. Kalyawongsa was from Thailand).
Liell and Kalyawongsa assert that Durand received a written settlement offer but failed to communicate it to them and that the trial was continued twice at Durand's request due to his procrastination. They also claim that Durand delayed taking Leinart's deposition despite her failing health. Eventually, Leinart died, and the plaintiffs renewed the suit against her estate through its executrix, Margaret Jean Moffett.
Approximately one year after hiring Durand, Liell and Kalyawongsa decided to engage E. Michael Morris of Birmingham, Michigan, to serve as co-counsel. Durand and Morris say that their clients sought out Morris because they read of a large jury verdict he had obtained in Michigan. The clients assert that they hired Morris to make up for Durand's lack of progress. The price of the litigation increased at that point because they added to their fee agreement with Durand a written agreement with Morris which included a $5000 retainer and a contingent fee of either 25% of any award or a negotiable fee of approximately 18% if the case was settled within two weeks prior to trial.
Morris ultimately performed most of the work of taking depositions and preparing for trial. Because of this extra burden, he later requested and received a new fee arrangement. Under this amendment, he was to receive $75 per hour (one half of his hourly rate) in addition to the original contingent fee. No change was made in Durand's retainer agreement which remained in effect.
After Durand had acted as counsel on the case for slightly more than two years, and Morris for a year, Durand and Morris withdrew. They say that they were forced to withdraw because Liell and Kalyawongsa refused to recant allegations of misconduct. The district court granted Durand and Morris' motion to withdraw and granted them attorneys' liens "on the plaintiffs' files and any recovery in this action as allowed under Tennessee law to ensure payment of outstanding fees and expenses incurred."
In 1994, after hiring their current counsel, at least the fourth lawyer in the case, Liell and Kalyawongsa settled the case in conjunction with a court-supervised mediation. They received the land that they originally sought to buy. The Leinart estate agreed to convey the property to them for $165,000. Because the original contract had been for $250,000, their net benefit was an $85,000 reduction in price plus acquisition of the land.
Although Congress has authorized the district courts to award reasonable attorneys' fees to prevailing parties in civil rights litigation, 42 U.S.C. § 1988 (1996), and in suits under the Fair Housing Act, 42 U.S.C. § 3613(c)(2) (1996), Liell and Kalyawongsa apparently did not seek them here. Durand and Morris assert that this was a strategic move to deprive them of fees.
Liell and Kalyawongsa contend that the district court did not have the power to award either Durand or Morris a judgment for attorneys' fees in the form of an attorneys' lien. First, they argue that the court wrongly exercised supplemental jurisdiction over the attorneys' fees dispute because it arises under state law and is unrelated to the underlying fair housing litigation. Federal courts have the power to exercise supplemental jurisdiction over related claims that form part of the same case or controversy. 28 U.S.C. § 1367(a) (1996). Though part of the Judicial Improvements Act of 1990, § 1367 incorporates the prior doctrines of ancillary and pendent jurisdiction and the cases interpreting and applying them. See Ahearn v. Charter Township of Bloomfield, 100 F.3d 451, 454 (6th Cir.1996).
This circuit has not yet directly addressed whether federal courts have supplemental jurisdiction over fee disputes in cases such as this. Krause v. Rhodes, 640 F.2d 214 (6th Cir.1981), cert. denied, 454 U.S. 836, 102 S.Ct. 140, 70 L.Ed.2d 117 (1981), held that federal district judges have "broad equity power to supervise the collection of attorneys' fees under contingent fee contracts." Id. at 218. But Krause does not fully resolve the instant question for two reasons. First, the contracts in Krause involved only contingent fees, which are especially deserving of judicial supervision. See U.S. ex rel. Taxpayers Against Fraud v. General Electric Co., 41 F.3d 1032, 1047 (6th Cir.1994); McKenzie Const., Inc. v. Maynard, 758 F.2d 97, 101 (3d Cir.1985). The contracts which we must address in the instant case contain a mixture of contingent and hourly fees. Second, Krause involved a fund created by the lawyer seeking fees, and is thus more similar to mass tort and securities cases involving the "common fund" doctrine than the instant case. In common fund cases, the size of the fee lawyers receive often directly influences the percentage of the fund that claimants receive. Often, these cases involve class members who are not in a position to review or question the size of the fees obtained by the lawyers who nominally represent them. Thus, the reasons for retaining jurisdiction are particularly strong in such common fund cases.
Nevertheless, other circuits have allowed supplemental jurisdiction over attorneys' fees disputes that do not involve common funds and that would otherwise fall under state contract law. In Cluett, Peabody & Co. v. CPC Acquisition Co., 863 F.2d 251 (2d Cir.1988), a law firm sought attorneys' fees from a corporate takeover artist. The underlying suit, which arose from the takeover itself, involved an attempt to prevent the target The Ninth Circuit reached a similar result in Curry v. Del Priore, 941 F.2d 730 (9th Cir.1991), a Title VII case:
company from implementing a "poison pill" defensive tactic. The Second Circuit affirmed the district court's...
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