Oliver's Sports Center, Inc. v. National Standard Ins. Co.

• Decision Date: 29 July 1980
• Docket Number: No. 53299,53299
• Citation: 615 P.2d 291,1980 OK 120
• Parties: OLIVER'S SPORTS CENTER, INC., a corporation, Appellee, v. NATIONAL STANDARD INSURANCE COMPANY, Appellant.
• Court: Oklahoma Supreme Court

Page 291

615 P.2d 291

1980 OK 120

OLIVER'S SPORTS CENTER, INC., a corporation, Appellee, v. NATIONAL STANDARD INSURANCE COMPANY, Appellant.

No. 53299.

Supreme Court of Oklahoma.

July 29, 1980.

Appeal from the District Court of Pontotoc County; Ronald L. Jones, judge.

Appellant appeals from the imposition of an attorney fee set pursuant to 36 O.S.Supp.1977 § 3629(B) which it asserts is unreasonable and an abuse of the trial court's discretion.

AFFIRMED.

Deaton Gassaway & Davison, Inc. by Austin R. Deaton, Jr., Ada, for appellee.

Green & James by Clarence P. Green, Oklahoma City, for appellant.

HODGES, Justice.

The only issue presented on appeal is the correctness of the trial court in awarding attorney fees pursuant to 36 O.S.Supp.1977 § 3629(B). ¹ The insured, Oliver's Sports Center, Inc. (appellee) was awarded $160,000.00, the total amount of a fire insurance policy, on its business. The jury also awarded $20,000.00 compensatory damages for the bad faith of the insurer, National Standard Insurance Company (National), (appellant), for denying the claim.

The sporting goods business in Ada, Oklahoma, owned by Oliver's Sports Center, Inc., burned on January 16, 1978. On April 7, 1978, the insured was advised that its proof of loss would be rejected and its claim denied unless there was an agreement to compromise the claim. The insured refused to compromise. The insurer rejected the proof of loss and denied the claim. The insured filed suit to recover on the policy. The insured alleged that: the insurer had refused in bad faith to honor its contractual obligation; the refusal was wilful and malicious without just cause or reason, caused the insured to suffer financial losses, and destroyed all prospects for the resumption of its business. An award of attorney's fee under 36 O.S.Supp.1977 § 3629(B) was also requested because of the appellant's failure to submit a written offer of settlement. After the jury verdict, the trial court conducted a hearing to determine a reasonable attorney's fee pursuant to § 3629(B).

The trial court awarded attorney fees in the amount of $60,000.00 because of the failure of the insurer to submit a written offer of settlement as required by the statute.

I

The insurer asserts the court awarded attorney fees by calculating the amount normally derived from a contingent fee contract. It is contended where the court has the duty to set a reasonable attorney fee many factors must be considered, and it is unreasonable to base the award solely on customary contingent fee contracts. The insured counters by arguing that the $60,000 fee was a reasonable and proper fee; that it was determined on a variety of criteria; and that the fee was not based merely on a contingent fee calculation. ² The insurer's primary thrust is that it was the attorney's testimony that he spent 345.5 hours on the case which reflects an hourly rate of $173.66. It is contended that the hourly rate should have been from $60.00 to $76.00 per hour which would have resulted in a fee of from $20,730.00 to $25,912.50. There is no argument or dispute raised by the insurer concerning the time spent by the insured's attorney.

The general agreement in all jurisdictions is that the time and labor spent by the attorney in performing services for which compensation is sought is an important factor to be considered in setting a reasonable fee. However, it is also commonly agreed that the time element must be considered in connection with other factors. Fees cannot fairly be awarded on the basis of time alone. The use of time as the sole criterion is of dubious value because economy of time could cease to be a virtue; and inexperience, inefficiency, and incompetence may be rewarded to the detriment of expeditious disposition of litigation. ³ The litigation risk factor must be considered. Although the court initially looks to the hourly rate for comparable representation where compensation is guaranteed, it must adjust the basic hourly rate where compensation is contingent by assessing the likelihood of success at the outset of the representation. ⁴

The criteria for the awarding of a reasonable attorney's fee in the absence of a contract or a statute fixing the amount were clearly delineated in State ex rel. Burk v. City of Oklahoma City, 598 P.2d 659, 661 (Okl.1979). ⁵ This Court held that the proper procedure to be followed by trial courts in establishing a reasonable attorney fee is to determine the hourly compensation on an hourly rate basis and to add an additional amount based on the following guidelines. ⁶

"1. Time and labor required.

2. The novelty and difficulty of the questions.

3. The skill requisite to perform the legal service properly.

4. The preclusion of other employment by the attorney due to acceptance of the case.

5. The customary fee.

6. Whether the fee is fixed or contingent.

7. Time limitations imposed by the client or the circumstances.

8. The amount involved and the results obtained.

9. The experience, reputation and ability of the attorneys.

10. The 'undesirability' of the case. (i. e. risk of non-recovery)

11. The nature and length of the professional relationship with the client.

12. Awards in similar cases."

In Burk, this Court established that after the date of promulgation, January 24, 1979, attorneys would be required to present detailed time records to the court and to offer evidence of the reasonable value for the services performed, predicated on the standards within the local legal community.

Although the trial court did not follow the rationale of National Ass'n. of Reg. Med. Prog., Inc. v. Weinberger, 396 F.Supp. 842 (D.C.1975), ⁷ cited in the Burk opinion, which requires the computations of a strict hourly fee, we find that under the law as it existed at the time of the hearing on January 9, 1979, the court properly exercised its discretion when it considered various factors in arriving at the amount of attorney fee. ⁸

The jury found the insurer to have substantially breached its duty to deal fairly and reasonably with the insured or to act in good faith in handling the claim. The time and effort required to properly prepare for and try this case and to obtain and present the difficult and technical evidence and testimony is reflected by the numerous depositions, interrogatories, involved legal questions and pleadings reflected in the record. The transcript of the evidence offered at the hearing to determine the amount of the attorney's fee to be awarded to the insured's attorney reveals that these facts were known by the two attorneys who testified for the insured; and that the trial judge who entered the order determining the fee was aware of the difficulties and complexities of the case, as well as the amount of time involved. We, therefore, find no error of the court in setting the fee.

AFFIRMED.

All the Justices concur.

OPALA, Justice, concurring:

In an action against the insurer to recover for loss by fire the jury's verdict in favor of the insured was for $160,000.00, the maximum coverage under the policy, and for $20,000.00 in damages for bad-faith denial of the claim. In a post-verdict proceeding before the judge sitting without a jury the insured was allowed under 36 O.S.Supp.1977 § 3629B an additional recovery in counsel fees of $60,000.00. The appeal seeks corrective relief from the judge's allowance of counsel fees. The record presented for review does not include a transcript of trial proceedings which culminated in the jury verdict. The intensity of the forensic combat waged between these adversaries in pre-verdict stages is almost totally obscured from our judicial view.

The statute under which recovery of counsel fee was effected 36 O.S.Supp.1977 § 3629B (a) provides that upon a judgment in favor of the "prevailing party" in an action to collect upon a rejected proof-of-loss claim "costs and attorney fees shall be allowable" and (b) defines the term "prevailing party".

Whenever in a common-law action triable to a jury the statute authorizes counsel fee to be awarded to the prevailing party, either as an additional element of recoverable damage or as a taxable item of costs, the amount of the fee so to be allowed is a question of fact for submission to the trier in the same manner as any other fact arising in the case. ¹ This principle, first announced by the Kansas court in Merrill, ² was expressly adopted by this court in Holland Banking Co. v. Dicks. ³ It governs here. The counsel-fee issue was one for the jury. Since by its voluntary submission to the court, the parties either as a conscious strategy choice or otherwise waived their right to trial by jury, the case stands before us for review by the standards applicable to common-law proceedings in error. ⁴

Whenever a jury is waived and a cause, or an issue, is tried to the court, the trial court's resolution of facts has the very same force and effect as that which is to be accorded a verdict of a properly-instructed jury. If the resolution is effected by a general finding, that finding will be deemed to comprise within it a favorable decision upon all the essential elements necessary to support it. The trial judge's verdict so rendered, which is conclusive in law upon the Supreme Court with respect to all disputed issues of fact resolved in the case, may not be disturbed on review if there is any competent evidence which reasonably tends to support it. ⁵

The verdict upon the amount of counsel fee is not without support in competent evidence. It is also free from error of law as it was presumably rendered by a properly-instructed jury. The standard by which to gauge the correctness of the decision is neither "abuse of discretion" nor "reasonableness". The verdict must stand or fall on whether it is "excessive" or supported by competent evidence. No one contends that there is an absence of competent proof to justify the judge's verdict. Rather, the argument, as I divine it, is that the...