McClure & O'Farrell, P.C. v. Grigsby

• Decision Date: 15 December 2009
• Docket Number: No. 29A05-0907-CV-395.,29A05-0907-CV-395.
• Citation: 918 N.E.2d 335
• Parties: McCLURE & O'FARRELL, P.C., Appellant, v. Patricia A. GRIGSBY, Appellee-Petitioner, v. Charles E. Grigsby, Respondent.
• Court: Indiana Appellate Court

918 N.E.2d 335

McCLURE & O'FARRELL, P.C., Appellant, v. Patricia A. GRIGSBY, Appellee-Petitioner, v. Charles E. Grigsby, Respondent.

No. 29A05-0907-CV-395.

Court of Appeals of Indiana.

December 15, 2009.

Alfred E. McClure, Thomas B. O'Farrell, McClure & O'Farrell, P.C., Westfield, IN, Attorneys for Appellant.

Christopher E. Clark, Beth A. Schenberg, Goodin Abernathy, LLP, Indianapolis, IN, Attorneys for Appellee.

OPINION

BAKER, Chief Judge.

Appellant McClure & O'Farrell, P.C. (the Law Firm), appeals the trial court's order awarding attorney fees to appellee Patricia A. Grigsby. The Law Firm argues that the trial court erred by concluding that the Law Firm had acted unreasonably by opposing Patricia's petition for an accounting of the Law Firm's services to her deceased, estranged husband in their divorce proceeding. Finding that the Law Firm did not act unreasonably, we reverse.

FACTS

This case commenced on April 26, 2007, when Patricia filed a dissolution of marriage petition against her husband, Charles E. Grigsby. Charles hired the Law Firm to represent him in the dissolution proceeding. On June 20, 2007, Charles paid an initial retainer of $1,500 to the Law Firm, and on June 22, 2007, Charles made a second retainer payment of $2,000. Both payments were made via a joint credit card held by Patricia and Charles.

On July 27, 2007, Charles died. When Patricia was sorting through Charles's papers, she found the receipts for the retainer payments. Patricia, and later her attorney, demanded that the Law Firm provide a detailed accounting of its legal services and return any unearned fees. The Law Firm refused Patricia's request to examine its billing records based upon its duty of client confidentiality to Charles, but indicated that if the duty were removed by a court order, it would provide the records, which established that there were no unearned fees to be returned.

On October 12, 2007, Patricia filed — in the divorce court, under the same cause number as the divorce proceeding — a petition for an accounting and a return of any unused retainer, seeking a court order compelling disclosure of the Law Firm's records. In its response, the Law Firm sought protection from Patricia's request because the disclosure of the firm's records could lead to the disclosure of confidential information.

At the April 29, 2008, hearing and in a brief filed with the court, the Law Firm raised four primary arguments in opposition to Patricia's petition: (1) that the divorce court lacked subject matter jurisdiction over the matter following Charles's death; (2) that Patricia lacked standing to request an accounting because she was neither the Law Firm's client nor properly stood in Charles's place as his personal representative; (3) that the trial court had not obtained jurisdiction over the Law Firm, a third party, where there had been no adherence to due process requirements of interpleading, summons, service, and notice; and (4) that the information sought would lead to the disclosure of confidential information. Its arguments were supported by ample authority.

At the hearing, the trial court permitted Patricia to submit testimony regarding her assessment of the amount of work done by the Law Firm on Charles's behalf but the Law Firm was unable to present evidence of its work because no ruling had yet been made on the issue of the confidentiality of the billing records. Thus, the Law Firm, still believing itself bound by its ethical obligations, was unable to rebut the testimony. On May 5, 2008, Patricia requested attorney fees in the amount of $1,935.

On June 4, 2008, the trial court granted Patricia's petition, directing the Law Firm to

provide a verified detailed accounting of services rendered, time expended and/or expenses expended.... Such accounting is deemed confidential and shall be filed under seal. Patricia Grigsby's request for return of attorney fees and/or additional attorney's fees is withheld pending accounting and request from counsel for Patricia Grigsby to rule per Order entered.

Appellant's App. p. 3. The trial court made no findings that the Law Firm's arguments were unreasonable or frivolous.

To confirm its ethical obligations, the Law Firm filed a notice of appeal and requested a stay of execution of the trial court's order. The trial court denied the motion for a stay but extended the time in which the Law Firm might submit its accounting so that it might seek a stay directly from this court. The Law Firm requested a stay from this court, which was denied. The Law Firm then timely complied with the trial court's order and, on July 8, 2008, rendered an accounting of its services to Charles, which showed that there were no unearned fees owed. This court eventually dismissed the Law Firm's appeal as moot.

On September 16, 2008, Patricia filed a second request for attorney's fees, asking for a total amount of $3,157.50. Patricia stated that she incurred those fees as a result of the Law Firm's refusal to provide the accounting of services rendered to Charles. Patricia's petition provided no authority — statutory or otherwise — supporting her request for attorney fees. The Law Firm objected to her request because there is no statutory basis for awarding fees against a non-party in a dissolution. No hearing was held and no evidence was taken.

On March 2, 2009, the trial court summarily granted Patricia's request. In its order, the trial court made no findings or conclusions that the Law Firm had acted unreasonably or frivolously in opposing Patricia's original petition, did not provide any basis for the award of fees, and did not indicate that the award was intended to be a sanction.

On March 27, 2009, the Law Firm filed a motion to correct error, arguing that attorney fees were not authorized for the following reasons: (1) the Law Firm was not a party to the divorce proceedings, therefore the divorce statute did not authorize the award; and (2) Patricia could not receive fees under the "American Rule" because no findings had been made that the Law Firm had acted frivolously or unreasonably.

On April 27, 2009, the trial court entered an order affirming its award of attorney fees to Patricia, finding as follows:

4. That the Court notes that [Patricia] requested only a financial accounting for the services rendered by the law firm. The sole purpose of such accounting was to determine how the retainer fees, which were ultimately paid by [Patricia], were used. [Patricia] did not request any additional information regarding the context of conversations or other documentation that would have been a violation of the attorney-client privilege. In fact, [Patricia] agreed to have the accounting provided only to the Court for in-camera review. The law firm did not cite any case law that would support their position to refuse the giving of an accounting but only cited an ethical rule. The law firm ignored numerous cases that state:

"As a general rule, information regarding a client's attorney fees is not protected by the attorney-client privilege because the payment of fees is not considered a confidential communication between attorney and client." Hueck v. State, 590 N.E.2d 581 (Ind. App. 1 Dist.1992).

5. ... [U]nder the factual situation as presented in this cause, the Court affirms its prior ruling that [Patricia] has standing and the Court retains jurisdiction to permit [Patricia] to request an accounting from the law firm.

6. That the law firm contends that they are not a party, did not have an agreement to pay such fees, that they should not have fees against them. The actions, though, in this case, were taken only by the law firm in that their client was found deceased on July 27, 2007. The law firm did not provide the Court with any legal authority that supports their contention that they did not have to provide an accounting based on attorney-client privilege or that such records were confidential. Finally, concerning the American Rule, the Court finds that such actions were unreasonable and therefore, the assessment of such fees and/or sanction is based upon statute.

Appellant's App. p. 10-11. The Law Firm now appeals.

DISCUSSION AND DECISION

I. Standard of Review

As a general rule, "Indiana follows the `American Rule,' whereby parties are required to pay their own attorney fees absent an agreement between the parties, statutory authority, or other rule to the contrary." Smyth v. Hester, 901 N.E.2d 25, 32 (Ind.Ct.App.2009), trans. denied. Although the trial court never cited to a statutory basis for its award of attorney fees, we infer from its finding that the Law Firm acted unreasonably that it awarded the fees pursuant to Indiana Code section 34-52-1-1. That statute provides, in relevant part, that the trial court

may award attorney's fees as part of the cost to the prevailing party, if the court finds that either party:

(1) brought the action or defense on a claim or defense that is frivolous, unreasonable, or groundless;

(2) continued to litigate the action or defense after the party's claim or defense clearly became frivolous, unreasonable, or groundless, or

(3) litigated the action in bad faith.

I.C. § 34-52-1-1(b).

Appellate review of an award of attorney fees pursuant to Indiana Code section 34-52-1-1 proceeds in three steps. Smyth, 901 N.E.2d at 33. First, we review the trial court's findings of fact under a clearly erroneous standard. We will review only the evidence and reasonable inferences drawn therefrom supporting the trial court's findings and decision, and will reverse on this basis only if we are left with a definite and firm conviction that a mistake has been made. Id.

Second, we review the trial court's legal conclusions de novo. Here, the trial court found that the Law Firm's actions were unreasonable. A claim or defense "is unreasonable if, based on a totality of the circumstances, including the law and facts known at the time of the filing, no reasonable...