Kline v. Eyrich

• Decision Date: 01 March 2002
• Docket Number: No. E2000-01890-SC-R11-CV.,E2000-01890-SC-R11-CV.
• Citation: 69 S.W.3d 197
• Parties: Tammy L.M. KLINE, for herself and for the use and benefit of Lori Michelle Kline, Kristy Laine Kline, and Diana Marie Kline, v. Daniel P. EYRICH, et al.
• Court: Tennessee Supreme Court

69 S.W.3d 197

Tammy L.M. KLINE, for herself and for the use and benefit of Lori Michelle Kline, Kristy Laine Kline, and Diana Marie Kline, v. Daniel P. EYRICH, et al.

No. E2000-01890-SC-R11-CV.

Supreme Court of Tennessee, at Knoxville.

March 1, 2002.

Jerry A. Farmer and Bradley A. Farmer, Knoxville, Tennessee, for the appellant, Tammy L.M. Kline.

Thomas S. Scott and Christopher T. Cain, Knoxville, Tennessee, and Paul G. Beers, Roanoke, Virginia, for the appellees, Lori Michelle Kline, Kristy Laine Kline, and Diana Marie Kline, by their next friend, mother, and natural guardian, Marcia Kline Newcomb.

OPINION

WILLIAM M. BARKER, J., delivered the opinion of the court, in which FRANK F. DROWOTA, III, C.J., and E. RILEY ANDERSON, ADOLPHO A. BIRCH, JR., and JANICE M. HOLDER, JJ., joined.

The primary issue in this case is whether a trial court may use the common fund doctrine in a wrongful death action to spread attorneys' fees equitably among the surviving beneficiaries of the action. The trial court consolidated two wrongful death actions, which were brought by the surviving spouse and children of the decedent, and it gave the surviving spouse control of the consolidated action. After the suit was settled, the trial court awarded the surviving spouse's attorney one-third of the settlement proceeds as a fee. On appeal, the children argued that the trial court improperly awarded fees to the surviving spouse's attorney from their share of the settlement because they possessed no contract with that attorney. A majority of the Court of Appeals held that although the award of fees could be proper under the common fund doctrine, the case should be remanded to resolve factual ambiguities in the record. We granted permission to appeal and hold that a trial court has the discretion to apply the common fund doctrine to the proceeds of a wrongful death action, thereby obliging the beneficiaries of that action to pay a reasonable fee to the attorney procuring the judgment or settlement. We also hold that the record contains no evidence showing that the trial court abused its discretion in awarding fees to the surviving spouse's attorney. The judgment of the Court of Appeals is affirmed in part and reversed in part.

FACTUAL BACKGROUND

On April 10, 1999, Richard Kline was killed when a car driven by Daniel Eyrich struck his motorcycle. He was survived by his wife, appellant Tammy L.M. Kline, and by his three children of a former marriage, appellees Lori Michelle Kline, Kristy Laine Kline, and Diana Marie Kline. Shortly after this accident, the children contacted the appellant about filing a wrongful death action against Mr. Eyrich, but they received no response from her. Consequently, on April 30, 1999, the children sued Mr. Eyrich in the Knox County Circuit Court for the wrongful death of their father. Less than three weeks later, however, the appellant filed a separate wrongful death action in the same court, claiming preemptive rights to sue as the surviving spouse and demanding damages for herself and for the three children.¹

The trial court initially consolidated the two cases, allowing each party to proceed independently with pre-trial discovery,² but on April 19, 2000, it issued an order clarifying the roles of the parties. In this order, the court held that the appellant was the "proper party ... to prosecute the singular cause of action for the wrongful death of Richard E. Kline in all respects," and that she "was empowered to enter into a bona fide settlement of the claim," which would be binding on the children. The trial court also held that the appellant's attorney had the right to conduct all aspects of the proof at trial, but it reserved the right to permit the children to establish their own damages for loss of consortium.

Within two weeks of the court's order, the appellant's attorney negotiated a settlement with Mr. Eyrich for $1,100,000.00. On May 8, 2000, the children filed a motion to have their statutory share of the settlement paid directly to them.³ In response to this motion, the appellant's attorney asserted that he was entitled to receive $244,444.44 as a fee from the children's portion of the settlement. After a hearing on this issue on May 23, 2000, the trial court concluded that the appellant's attorney was entitled to a one-third contingency fee from the entire settlement before any distribution of the proceeds to the parties. The court also stated that the children's attorneys did not help to bring about the settlement and that their participation was unnecessary to effect the resolution of the case. A final order distributing the settlement funds was entered on June 23, 2000.

The children appealed to the Court of Appeals, arguing that the trial court improperly awarded fees to the appellant's attorney from their share of the settlement. A majority of the intermediate court held that the settlement funds formed a common fund from which the appellant's attorney could seek his fees. However, the majority also found that the record did not support the trial court's finding that the children's attorneys failed to contribute to procuring the settlement. Instead, the court concluded that if these attorneys did contribute to obtaining the settlement with Mr. Eyrich, then they would also be entitled to take their fees from the common fund. Consequently, the court remanded the case for an evidentiary hearing on the issues of whether the children's attorneys contributed to procuring the settlement and as to "what the reasonable fee would be under all the circumstances of this case."

Dissenting from the court's decision to remand the case for an evidentiary hearing, Judge Susano wrote that the record fully supported the trial court's findings. He concluded that because the statutes precluded the children from participating in the appellant's wrongful death action, their attorneys had no right

to prepare this case for trial with the expectation that their efforts would or could position their counsel to share in the contingent fee due for pursuing this claim. That fee belongs to counsel representing the individual who had the right to pursue and the responsibility for pursuing the claim; in other words, counsel for the widow.

Judge Susano also concluded that because no party argued that a one-third contingency fee contract was unreasonable under these circumstances, the appellant's attorney was entitled to recover his one-third contingency fee from the proceeds of the entire settlement.

We then granted the appellant's application for permission to appeal on the issue of whether the Court of Appeals erred in applying the common fund doctrine to the settlement proceeds of a wrongful death action. For the reasons given herein, we hold that the intermediate court was correct to apply the common fund doctrine to the settlement proceeds in this case. However, we also hold that because the children are deemed, as a matter of law, to be passive beneficiaries of the action, the court should not have remanded this case to determine whether the children's attorneys participated in procuring the settlement. Finally, we conclude that the record contains no evidence showing that the trial court abused its discretion in awarding the appellant's attorney a one-third contingency fee from the common fund. Accordingly, the judgment of the Court of Appeals is affirmed in part and reversed in part.

STANDARD OF APPELLATE REVIEW

Any issue as to whether the common fund doctrine applies to spread an attorney's fee among various parties is a question of law. See Kindred v. City of Omaha Employees' Ret. Sys., 252 Neb. 658, 564 N.W.2d 592, 595 (1997). Accordingly, our standard of review on this issue is de novo, according no presumption of correctness to the trial court's conclusions of law. See, e.g., Doyle v. Frost, 49 S.W.3d 853, 856 (Tenn.2001). However, upon finding that the common fund doctrine is applicable, "[t]he allowance of attorney's fees is [then] largely in the discretion of the trial court." Cf. Aaron v. Aaron, 909 S.W.2d 408, 411 (Tenn.1995). Consequently, we will uphold a trial court's award of fees unless it has abused its discretion, see Fell v. Rambo, 36 S.W.3d 837, 853 (Tenn.Ct App.2000), meaning that it either applied an incorrect legal standard or reached a clearly unreasonable decision, thereby causing an injustice to the aggrieved party, see Clinard v. Blackwood, 46 S.W.3d 177, 182 (Tenn.2001) (citing State v. Shirley, 6 S.W.3d 243, 247 (Tenn.1999)).

THE COMMON FUND DOCTRINE

Before discussing the precise issues presented in this case, it may be helpful to first review the relevant aspects of the common fund doctrine. In the absence of a statute or contract providing for the payment of attorneys' fees, attorneys in Tennessee must generally look only to their own client for their fees. See Remco Equip. Sales, Inc. v. Manz, 952 S.W.2d 437, 439 (Tenn.Ct.App.1997). This principle usually follows even when the work of the attorney proves useful to persons other than the client. See Boston, Bates & Holt v. Tennessee Farmers Mut. Ins. Co., 857 S.W.2d 32, 34-35 (Tenn.1993). However, an exception to this rule arises when the attorney "has succeeded in securing, augmenting, or preserving property or a fund of money in which other people are entitled to share in common." Travelers Ins. Co. v. Williams, 541 S.W.2d 587, 589-90 (Tenn.1976). In such a case, the attorney may oblige the beneficiaries of the fund or property to contribute to his or her fee by assessing that fee directly against the fund or property itself. See id.

Known as the "common fund doctrine," this doctrine is designed to spread attorneys' fees among various beneficiaries to a fund, and it is supported by two primary rationales. First, the doctrine prevents the beneficiaries of legal services from being unjustly enriched by requiring them to pay for those services according to the benefit received. See Pennington v. Divney, 182 Tenn....