Kuhn v. State, s. 95SA291

• Decision Date: 23 September 1996
• Docket Number: 96SA205,Nos. 95SA291,s. 95SA291
• Citation: 924 P.2d 1053
• Parties: Wendell Speer KUHN, Jr.; Francis E. Becker, Jr.; Bruce C. Derenthal; Julian Russell Dracon; Jacqueline Farrar; Robert J. Flor; Edward N. Gootee, Jr.; David S. Harrigan; Jerry D. Jacks; Joe B. Mohorn; Richard C. Poyns; Donald L. Tatterson; Drew Charles Weyland; Richard W. Zolman; and all others similarly situated, Plaintiffs-Appellants, and Coghill & Goodspeed, P.C., and Sparks Dix, P.C., on behalf of themselves individually and as class counsel, Attorneys-Appellants, v. STATE of Colorado; The Department of Revenue of the State of Colorado; and John J. Tipton, in his capacity as Executive Director of The Department of Revenue of the State of Colorado, Defendants-Appellees.
• Court: Colorado Supreme Court

Page 1053

924 P.2d 1053

Wendell Speer KUHN, Jr.; Francis E. Becker, Jr.; Bruce C.

Derenthal; Julian Russell Dracon; Jacqueline Farrar;

Robert J. Flor; Edward N. Gootee, Jr.; David S. Harrigan;

Jerry D. Jacks; Joe B. Mohorn; Richard C. Poyns; Donald

L. Tatterson; Drew Charles Weyland; Richard W. Zolman;

and all others similarly situated, Plaintiffs-Appellants,

and

Coghill & Goodspeed, P.C., and Sparks Dix, P.C., on behalf

of themselves individually and as class counsel, Attorneys-Appellants, v. STATE of Colorado; The Department of Revenue of the State

of Colorado; and John J. Tipton, in his capacity as

Executive Director of The Department of Revenue of the State

of Colorado, Defendants-Appellees.

Nos. 95SA291, 96SA205.

Supreme Court of Colorado,

En Banc.

Sept. 23, 1996.

Coghill & Goodspeed, P.C., G. Stephen Long, David J. Richman, Martin D. Beier, Denver, Sparks Dix, P.C., Timothy V. Dix, R. Kenneth Sparks, Colorado Springs, for Plaintiffs-Appellants/Attorneys-Appellants.

Gale A. Norton, Attorney General, Stephen K. ErkenBrack, Chief Deputy Attorney General, Timothy M. Tymkovich, Solicitor General, Paul Farley, Deputy Attorney General, Larry A. Williams, First Assistant Attorney General, Thomas D. Fears, Assistant Attorney General, State Services Section, Denver, for Defendants-Appellees.

Justice KOURLIS delivered the Opinion of the Court.

We accepted transfer of this case under C.A.R. 50 prior to judgment of the court of appeals in order to review the District Court's application of section 13-17-203, 6A C.R.S. (1996 Supp.), to class counsel's request for an attorney fees award in Kuhn v. Colorado, No. 89CV9164, pending in Denver District Court. Because we find that class counsel's right to the fee had vested prior to the passage of section 13-17-203, we reverse the trial court's ruling and remand this case for further proceedings consistent with this opinion.

Plaintiffs-Appellants Wendel Speer Kuhn, Jr. et al., individually and as representatives of a class of federal military retirees (appellants), and Attorneys-Appellants Coghill & Goodspeed P.C. and Sparks Dix P.C., individually and as class counsel (class counsel), appeal from the Denver District Court's decision to apply a statutory cap to attorney fees awarded to class counsel in this case. The District Court order was entered on July 7, 1995. Notice of Appeal was filed, and by joint motion, the appellants and the State of Colorado, the Department of Revenue, and John J. Tipton as executive director of the Department of Revenue (appellees) requested certification of the issues to this court, which request was granted on August 31, 1995. ¹

I.

The underlying lawsuit which forms the basis for class counsel's request for fees was filed in June of 1989. The appellants sought to overturn as unconstitutional the state income taxation scheme contained in section 39-22-104(4)(g), 16B C.R.S. (1994), which they claimed discriminated against military retirees. Appellants claimed that all military retirees who were unconstitutionally taxed in tax years 1984 through 1988 were entitled to a refund of the amount of tax illegally collected.

Class counsel entered into a contingent fee agreement with the class representatives pursuant to which they agreed to undertake the litigation for a reasonable fee to be determined by the court if the litigation ultimately proved successful. ²

On September 16, 1989, the trial court denied appellants' motion for class certification. On June 8, 1990, the trial court granted appellants' motion for summary judgment declaring the statute unconstitutional and providing that all military retirees who had timely filed returns were entitled to refunds. Appellees appealed the trial court order and appellants cross-appealed the denial of class certification. On September 16, 1991, in Kuhn v. State Department of Revenue, 817 P.2d 101 (Colo.1991), this court held that the tax provision was unconstitutional and that the affected taxpayers were entitled to a refund of any tax illegally collected. We further determined that the trial court had erred in denying class certification and we remanded for a determination of whether the proposed class action would satisfy the requirements of C.R.C.P. 23(b).

Following remand, the appellees began making the refunds to military retirees who had timely filed refund claims. Appellants then sought to include in the class those retirees who had not timely filed refund claims, and those who had not filed at all. On October 6, 1993, the trial court granted the class certification, and identified the class as all military retirees who had paid state income tax on military retirement pay in excess of $2,000 in one or more of tax years 1984 through 1988. ³ Class counsel then began the task of compiling the list of class members and calculating the refunds due to those individuals. In November of 1994, the trial court appointed Arthur Andersen & Co. as Class Administrator for the subgroup known as non-filers, and in January, 1995, extended that appointment for the benefit of the untimely filers as well.

In March of 1995, class counsel filed the list of untimely filers with the court, together with the calculation of refunds and interest due to them. The petition requested a tax refund plus interest through May 3, 1995, in the amount of $2,245,000, with interest thereafter accumulating at 9% per annum. Class counsel simultaneously filed a motion for a preliminary award of attorney fees in the amount of 25% of the refunds to be issued. A hearing was held in April and May on the two motions. Appellees opposed the fee sought on the grounds that it was statutorily prohibited by section 13-17-203. The trial court approved the class distribution. However, by order dated July 7, 1995, the trial court held that section 13-17-203 capped the allowable attorney fees at $250,000, and that the statute was constitutional. The trial court further concluded that class counsel's right to attorney fees had not vested prior to entry of a judgment awarding compensation. The trial court ordered payment of $250,000 in fees to class counsel pursuant to the statutory cap. ⁴

The statute at issue, section 13-17-203, reads as follows:

Limitation on attorney fees in class action litigation against public entities. If the plaintiffs prevail in any class action litigation brought against any public entity, as defined in section 24-10-103(5), C.R.S., the amount of attorney fees which the plaintiffs' attorney is entitled to receive out of any award to the plaintiffs shall be determined by the court; except that such amount shall not exceed two hundred fifty thousand dollars. Such limitation shall apply where the public entity pays the attorney fees directly to the plaintiffs' attorneys or where the public entity is required to pay the attorney fees indirectly through any program it administers by reducing the benefits or amounts due to the individual plaintiffs.

§ 13-17-203, 6A C.R.S. (1996 Supp.). This section was enacted in April of 1992 and became effective immediately.

II.

We are called upon to determine whether the trial court appropriately applied section 13-17-203 to class counsel in this case so as to cap the attorney fees award at $250,000.

Appellants make various arguments in opposition to application of the statute. First, they argue that the statute is an unconstitutional bill of attainder enacted specifically to punish class counsel in this case. They further argue that the cap interferes with vested rights under the contingent fee contract; that it operates as an unconstitutional taking of private property without a public purpose or just compensation; and that it impairs the contract between class counsel and their clients. They argue that the statute deprives class action litigants of equal protection of the law and equal access to the courts. Lastly, they posit that the trial court should not have applied the statute because the State was not paying the fees "directly" and the State did not "administer" the refunds ordered to be made to class members.

We find that this court's September 1991 ruling that the plaintiffs were entitled to a tax refund created a monetary damage award from which the attorneys' unliquidated right to compensation immediately arose. Thus, the right to attorney fees vested before the enactment of section 13-27-203, making the statute inapplicable to the present case.

III.

A statute that is retrospective in its operation violates Article II, Section 11 of the Colorado Constitution. ⁵ It is important, however, to distinguish between a retrospective application of a statute and a retroactive application of a statute. Legislation is applied retroactively when it operates on transactions or rights and obligations that occurred or existed before its effective date. Ficarra v. Department of Regulatory Agencies, 849 P.2d 6, 11 (Colo.1993). Retroactive application of a statute is not necessarily unconstitutional. Id. Retroactive application is permitted where the statute effects a change that is merely procedural or remedial in nature. Continental Title Co. v. District Court, 645 P.2d 1310, 1315 (Colo.1982). This is because a change in remedy does not constitute the impairment of a vested right, "for there is no such thing as a vested right in remedies." Id. (citations omitted). We distinguish legislation that is merely retroactive from legislation that is also retrospective by applying the term retrospective only to legislation whose retroactive effect "impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past." Ficarra, 849 P.2d at 15 (citations omitted) (emphasis added).

The district court found that although section 13-17-203 was enacted after the proceedings in this case had begun, it nevertheless could be applied to the case, precluding an award of more than...