STATE EX REL. DOT v. NORMAN INDUS. DEV.

• Decision Date: 18 September 2001
• Docket Number: No. 93,624.,93,624.
• Citation: 2001 OK 72,41 P.3d 960
• Parties: STATE of Oklahoma ex rel. DEPARTMENT OF TRANSPORTATION, Appellant, v. NORMAN INDUSTRIAL DEVELOPMENT CORPORATION; John R. Law, Jr., and Mildred D. Law, husband and wife, Appellees, and The Cleveland County Treasurer, Defendant.
• Court: Oklahoma Supreme Court

41 P.3d 960

2001 OK 72

STATE of Oklahoma ex rel. DEPARTMENT OF TRANSPORTATION, Appellant, v. NORMAN INDUSTRIAL DEVELOPMENT CORPORATION; John R. Law, Jr., and Mildred D. Law, husband and wife, Appellees, and The Cleveland County Treasurer, Defendant.

No. 93,624.

Supreme Court of Oklahoma.

September 18, 2001.

Rehearing Denied January 14, 2002.

Kelly F. Monaghan, Lori Gilliard, Tulsa, OK, for Appellant.

Philip W. Redwine, James L. Bintz, John H. Stout, Norman, OK, for Appellees.

KAUGER, J.:

¶ 1 Certiorari was granted to consider a single issue¹ of first impression:² whether the language of 27 O.S.1991 § 11³ — providing for an award of attorney fees "actually incurred" — prohibits the addition of an incentive or bonus fee to the attorney fees' award in a condemnation proceeding in which the fee obligation is governed by contract. We determine that it does.

RELEVANT FACTS⁴

¶ 2 The district court appointed a panel of commissioners who recommended that the appellant, Department of Transportation (DOT), pay $77,550 to the appellees, Norman Industrial Development Corporation, John R. Law, Jr. and Mildred D. Law (collectively, owners), in a condemnation proceeding. The owners rejected the offer and sought a jury trial. On February 6, 1997, the jury awarded $353,435.17 for the property allowing for the addition of pre-judgment interest of $24,126.56.

¶ 3 Relying on 27 O.S.1991 § 11 — providing for the recovery of attorney fees and costs in condemnation proceedings in which the jury award exceeds the court appointed commissioners' recommendation by more than ten percent, the owners filed an application for attorney, expert and appraiser fees and costs on June 12, 1997.⁵ Attached to the application is the contingent fee agreement entered between the owners and their attorneys dated March 9, 1995. The contract provides that if the case is tried to a jury and a verdict in excess of ten percent of the court-appointed commissioners' award is recovered, the attorney is entitled to the larger of: 1) hours expended times an hourly rate of $125.00; or 2) forty percent of the difference between the amount of the verdict plus interest and the amount of the DOT's final offer.⁶ ¶ 4 On August 19, 1999, the trial judge, Honorable Tom A. Lucas, entered judgment for $338,986.82 in attorney fees and costs. The award was premised on hours expended multiplied by the hourly rate. In addition, based on factors outlined in State ex rel. Burk v. City of Oklahoma City, 1979 OK 115, ¶ 8, 598 P.2d 659,⁷ the attorney fees award included a twenty-five percent bonus above the amount the owners were contractually obligated to pay. In an opinion promulgated on September 26, 2000, the Court of Civil Appeals affirmed in part and reversed in part determining that an incentive fee could not be awarded under 27 O.S.1991 § 11. The owners' petition for rehearing on the incentive fee issue was denied on April 16, 2001. Both parties filed petitions for certiorari. On June 18, 2001, we denied certiorari to the DOT and granted the owner's petition for certiorari on the single issue of the award of a bonus or incentive fee under 27 O.S.1991 § 11.

¶ 5 THE LANGUAGE OF 27 OS.1991 § 11 — PROVIDING FOR AN AWARD OF ATTORNEY FEES "ACTUALLY INCURRED" — PROHIBITS THE ADDITION OF AN INCENTIVE OR BONUS FEE TO THE ATTORNEY FEES AWARD IN A CONDEMNATION PROCEEDING WHEN THE FEE OBLIGATION IS CONTRACTUALLY SET.

¶ 6 The owners contend that the trial court had authority to assess a bonus or incentive fee through consideration of the factors outlined in State ex rel. Burk v. City of Oklahoma City, supra.⁸ However, we agree with DOT's assertion that the plain language of 27 O.S.1991 § 11 prohibits the award of a fee larger than the sum the owners are contractually obligated to pay.

¶ 7 Oklahoma courts are committed to the American Rule — every litigant is responsible for its own litigation expenses except to the extent that the rule has been modified by statute or contractual provision.⁹ In derogation of the American Rule, 27 O.S.1991 § 11 shifts the attorney fee obligation to the government if a jury awards the property owner an amount exceeding the court appointed commissioners' recommendation by ten percent. In such cases, § 11 provides that property owners are entitled to recover reasonable attorney fees "actually incurred" due to the condemnation proceedings. At issue here, is whether the Legislature's use of the language "actually incurred" in the statutory provision limits recovery to an amount the landowner is contractually obligated to pay its legal representative.

¶ 8 The owners rely primarily on three cases — Oklahoma Turnpike Auth. v. Horn, 1993 OK 123, ¶ 7, 861 P.2d 304,Morgan v. Galilean Health Enterprises, Inc., 1998 OK 130, ¶ 16, 977 P.2d 357, and Corbell v. State ex rel. Dept. of Transportation, 1993 OK CIV APP 45, ¶ 47, 856 P.2d 575 — for the proposition that the determination of reasonable attorney fees in a condemnation proceeding should be computed in the context of the Burk factors allowing for the award of an incentive or bonus fee. We agree that generally the correct procedure for calculating a reasonable fee is to: 1) determine the compensation based on an hourly rate; and 2) to enhance the fee by adding an amount through application of the Burk factors.¹⁰ Nevertheless, Burk applies in determining a reasonable attorney's fee in absence of a contract or statute.¹¹ Here, there is a contract entered between the owners and their attorneys settling a definite amount — determinable through calculating the hours worked multiplied by the hourly rate of $125.00¹² — as the owners' fee obligation. Additionally, there is statutory language limiting recovery of attorney fees to those "actually incurred."

¶ 9 Further, Horn, Morgan and Corbell are distinguishable. None of the three opinions addresses the precise issue presented here — whether an award of an incentive or a bonus fee not encompassed within the contractual obligation between the landowner and counsel may be recovered under 27 O.S. 1991 § 11. Neither the facts of Horn nor Morgan indicate that the attorney fees amount at issue was governed by contract or that any incentive or bonus was included in the trial court's award. Rather, the Burk factors were considered in both cases to test whether the fee awarded was reasonable. Although the fee-shifting statute at issue in Morgan provided for the award of "reasonable attorney fees incurred",¹³ the case did not involve a condemnation proceeding or legislative language limiting the fee to that "actually incurred."

¶ 10 Corbell v. State ex rel. Dept. of Transportation, 1993 OK CIV APP 45, ¶ 47, 856 P.2d 575¹⁴ is the only Oklahoma case addressing the issue of whether an incentive or bonus fee may be awarded pursuant to 27 O.S.1991 § 11. Because in Corbell no contract existed setting the amount of the fee obligation, the case differs from the facts presented here. In Corbell, the Court of Civil Appeals allowed the addition of an incentive fee under § 11 based on reasoning that the reference to a "reasonable" fee in the statute necessarily involved consideration of the Burk factors where the amount of the fee obligation was not set by contract or statute. The Court of Civil Appeals determined that because incentive fees or bonuses are allowable under Burk, it is the fee calculated under these factors which is "actually incurred" within the meaning of § 11. We need not determine whether, if presented with facts similar to those of Corbell, this Court would reach the same conclusion. Rather, we explore whether the award of an incentive or bonus fee above the contractual obligation of the owners falls within fees "actually incurred" under 27 O.S.1991 § 11.

¶ 11 Two of our decisions are instructive. Root v. Kamo Electric Coop., Inc., 1985 OK 8, ¶ 48, 699 P.2d 1083, involved condemnation proceedings instituted by a cooperative. Having recovered a verdict in excess of ten percent of the amount offered in settlement, the landowners sought attorney fees and costs under 66 O.S.1981 § 55 (D). Section 55(D) uses language identical to that found in 27 O.S.1991 § 11 allowing for the recovery of reasonable attorney fees "actually incurred" in the condemnation proceeding.¹⁵ In considering the attorney fee issue, the Kamo Court rejected an argument that fees not yet paid were not "actually incurred" within the meaning of the statute. In doing so, the Court defined "incur" as "to become liable or subject to."¹⁶ Because the landowner bore the ultimate liability for the attorney fees debt pursuant to a contingent fee contract, the Court determined that the fees were "actually incurred" within the meaning of the statute. Under the reasoning of Kamo, the Legislature's use of "actually incurred" in both 66 O.S.1981 § 55 (D) and in 27 O.S.1991 § 11 — each of which relate to condemnation proceedings¹⁷ — encompasses those fees for which the landowner is contractually liable.

¶ 12 In Oklahoma Turnpike Auth. v. New Life Pentecostal Church of Jenks, 1994 OK 9, ¶ 11, 870 P.2d 762, relying on Kamo, supra, we acknowledged two tasks a court must undertake when considering the appropriate attorney fees to impose pursuant to 27 O.S. 1991 § 11. The first is to determine the extent of the landowner's contractual obligation to its counsel. The second is to consider whether the quantum of the fee obligation is reasonable. If the fee obligation is not excessive, the landowners' contractual counsel-fee obligation shifts to the condemnor.¹⁸

¶ 13 New Life also explains the distinction between a contract-based fee claim, as presented here, and one premised merely on prevailing party status in a condemnation action:

". . . In [a contract-based fee claim], the condemnor must pay the landowner's obligation to its lawyer to the extent that the obligation is reasonable and legally enforceable.. . . In [a prevailing-party situation], the lawyer's quest for the court's fee approval depends not on

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