Kuhnlein v. Department of Revenue

• Decision Date: 12 October 1995
• Docket Number: No. 85618,85618
• Citation: 662 So.2d 309
• Parties: , 20 Fla. L. Weekly S526 David KUHNLEIN, et al., Appellants, v. DEPARTMENT OF REVENUE, et al., Appellees.
• Court: Florida Supreme Court

Page 309

662 So.2d 309

64 USLW 2299, 20 Fla. L. Weekly S526

David KUHNLEIN, et al., Appellants, v. DEPARTMENT OF REVENUE, et al., Appellees.

No. 85618.

Supreme Court of Florida.

Oct. 12, 1995.

Christopher K. Kay and Michael J. Beaudine of Foley & Lardner, Orlando; W. Gordon Dobie, Bruce R. Barun and Jennifer J. Demmon of Winston & Strawn, Chicago, IL; and Raymond Ehrlich of Holland & Knight, Jacksonville, for Appellants on behalf of Class Plaintiffs.

Robert A. Butterworth, Attorney General; Eric J. Taylor, Assistant Attorney General, Tax Section, and George L. Waas, Assistant Attorney General, Civil Section, Tallahassee, for Appellees on behalf of the Department of Revenue.

Andrew Kayton, Legal Director, Miami, Amicus Curiae on behalf of American Civil Liberties Union Foundation of Florida, Inc.

WELLS, Justice.

We have on appeal a final order on class counsel's petition for fees and expenses and a final order on class counsel's motion for distribution of residual funds. The trial court held a hearing and issued orders on these motions within the time prescribed by our decision in Kuhnlein v. Department of Revenue, 659 So.2d 248 (Fla.1995) (Kuhnlein II ). In that case we decided the issues pertaining to interest owed to class members and relinquished jurisdiction to the trial court to consider applications for and enter orders on attorney fees and costs. We also reserved jurisdiction to review the court's orders on fees and costs if any party petitioned this Court for review within ten days of their entry. Additionally, we reserved jurisdiction to take such further action as necessary to implement the circuit court's refund plan. We therefore have jurisdiction pursuant to article V, section 3(b)(5) of the Florida Constitution based upon our reservation of jurisdiction in Kuhnlein II.

In a common-fund case like the one before us, the defendant pays a specified sum for the benefit of class members. The class attorneys can then petition the court to obtain fees from the fund although contingency fee agreements were entered by only a small number of class members. In their petition for fees and expenses in the instant case, class plaintiffs' counsel requested an award of fees based on a percentage of the entire common fund created when we held section 319.231, Florida Statutes (1991), violative of the Commerce Clause of the United States Constitution. See Department of Revenue v. Kuhnlein, 646 So.2d 717 (Fla.1994) (Kuhnlein I ), clarified by Department of Revenue v. Kuhnlein, 646 So.2d 717 (Fla.1994), cert. denied, --- U.S. ----, 115 S.Ct. 2608, 132 L.Ed.2d 853 (1995). Class counsel further alleged that 14 percent of the common fund provided for a reasonable fee. The Attorney General, on behalf of the Department of Revenue argued that class counsel's request for fees failed to take into account the hours reasonably expended as well as other lodestar factors that should be considered in awarding fees from a common fund.

The trial court found that the percentage method of calculating fees was appropriate and awarded class counsel 10 percent of the common fund, which was estimated at $188.1 million. ¹ The court held that this fee was reasonable in light of the risks involved in the case and the magnitude of the benefit counsel conferred on the class. The court also determined that the factors enumerated in Camden I Condominium Ass'n v. Dunkle, 946 F.2d 768 (11th Cir.1991), ² demonstrated that 10 percent was an appropriate fee for the results achieved.

In a separate order responding to class counsel's motion for distribution of residual funds, the court directed that unclaimed fees be divided among class members in a second distribution to offset or partially offset the fees and costs awarded to class counsel. Class counsel would then receive the remaining funds up to 10 percent of the entire residual fund. Finally, the court ordered that the State receive any remaining funds.

The Attorney General timely filed a petition with this Court for review of the trial court's orders awarding class counsel attorney fees and funds not claimed by absent class members. In response, class plaintiffs' counsel filed a motion to dismiss the State's appeal. As grounds for dismissal, class counsel alleged that the issues presented did not merit review by this Court, the need to expedite the refund process, and the State's lack of standing to contest the reasonableness of the attorney fees awarded. We reject class counsel's grounds for dismissal because we expressly provided for our review of these orders in Kuhnlein II.

Furthermore, as the trial court did, we reject class counsel's contention that the State, through the Attorney General, lacks standing in this case. In class actions that result in the creation of a common fund the interest of class counsel in obtaining fees is adverse to interests of the class. See Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513 (6th Cir.1993). Class counsel's role in these cases essentially changes from one of fiduciary for the class to claimant against the clients' fund created for the clients' benefit. Court Awarded Attorney Fees, Report of the Third Circuit Task Force, 108 F.R.D. 237 (1985). Accordingly, class counsel is not in a position to effectively represent the interests of the class in respect to the assessment of attorney fees and costs.

It is self-evident, however, that the State has an interest in protecting its citizens from excessive fees or costs which would diminish the amount of the tax refund they are entitled to receive from the common fund in this case. We conclude that this interest provides an adequate basis for standing and that the Attorney General is the proper representative of that interest. See Art. IV, Sec. 4, Fla. Const.; Sec. 16.01(4), Fla.Stat. (1993).

The question we must now answer is whether the trial court erred in this common-fund case by awarding fees using a percentage approach rather than the lodestar approach which must be applied in statutory fee-shifting cases pursuant to our decisions in Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla.1985), and Standard Guaranty Insurance Co. v. Quanstrom, 555 So.2d 828 (Fla.1990). ³ We find, as we did in In re Estate of Platt, 586 So.2d 328 (Fla.1991), that the decision as to which approach is to be used is an issue of law. We conclude that the court made an error of law in applying the percentage rather than the lodestar approach and reverse the attorney-fee award. ⁴

In the instant case, the trial court found that to determine a reasonable fee in common-fund cases, courts apply the "percentage" approach, in which a reasonable fee is calculated as a percentage of the common fund. The percentage is first chosen by the trial court and then applied to the fund in order to calculate the fees to be awarded. In support of this conclusion, the trial court cited to Camden I, in which the United States Court of Appeals for the Eleventh Circuit mandated the percentage approach in all common-fund cases. 946 F.2d at 774. We note, however, that the Camden I approach is not uniformly accepted in the federal courts. Rather, a number of federal courts continue to use the federal lodestar analysis to determine the amount of attorney fees which are reasonable under the circumstances of a particular case. See Florin v. Nationsbank of Georgia, N.A., 34 F.3d 560 (7th Cir.1994); Rawlings, 9 F.3d at 517; Longden v. Sunderman, 979 F.2d 1095 (5th Cir.1992); Harman v. Lyphomed, Inc., 945 F.2d 969 (7th Cir.1991); Florida v. Dunne, 915 F.2d 542 (9th Cir.1990); In re Agent Orange Product Liability Litigation, 818 F.2d 226 (2d Cir.1987); City of Detroit v. Grinnell Corp., 560 F.2d 1093 (2d Cir.1977).

We have carefully considered the reasons stated by the Camden I court for adopting the percentage approach. We find, however, that our decisions in Rowe and Quanstrom, which employ the factors enumerated in the Florida Bar Code of Professional Responsibility as an initial basis for determining reasonable attorney fees, ⁵ provide a more consistent and objective structure for determining reasonable fees in common-fund as well as fee-shifting cases. As we stated in Platt, " '[r]easonable' also means that the fee should be consistent with other fees set in similar cases." 586 So.2d at 336.

We conclude that objectivity and consistency in setting fees are best achieved by beginning the attorney-fee analysis with a lodestar amount based on the hours expended on legal services and rates charged for similar services. As we stated in Rowe:

[P]artially because of the substantial increase in the number of matters in which courts have been directed by statute to set attorney fees, great concern has been focused on a perceived lack of objectivity and uniformity in court-determined reasonable attorney fees. Some time ago, this Court recognized the impact of attorneys' fees on the credibility of the court system and the legal profession when we stated:

There is but little analogy between the elements that control the determination of a lawyer's fee and those which determine the compensation of skilled craftsmen in other fields. Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that. It brings the court into disrepute and destroys its power to perform adequately the function of its creation.

Baruch v. Giblin, 122 Fla. 59, 63, 164 So. 831, 833 (1935).

Although the amount of an attorney fee award must be determined on the facts of each case, we believe that it is incumbent upon this Court to articulate...