State of Minnesota, Respondent, vs. Jamie Lee Hokkanen, Appellant.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (1998).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C9-99-1693

 

In Re the Marriage of:
Elizabeth Soll Brodsky, petitioner,
Respondent,
 
Joseph Alan Brodsky,
Respondent Below,
 
vs.
 
Nancy L. Ponto, Intervenor,
Appellant.

 

Filed July 3, 2000

Reversed and Remanded Huspeni, Judge*

 

Hennepin County District Court

File No. MF212249

 

 

Dan K. Nelson, 871 East Seventh St., St. Paul, MN 55106 (for respondent)

 

Nancy L. Ponto, 1323 Southview Blvd., Suite 203, South St. Paul, MN 55075 (attorney pro se)

 

            Considered and decided by Peterson, Presiding Judge, Halbrooks, Judge, and Huspeni, Judge.

U N P U B L I S H E D   O P I N I O N

HUSPENI, Judge

            In this marital dissolution action, appellant attorney moved to establish and enforce a lien for attorney fees and costs against her client, respondent wife, claiming that respondent incurred approximately $150,000 in fees and costs, of which about $94,000 remained unpaid.  Following an evidentiary hearing, the trial court held that appellant and wife had contractually agreed to limit attorney fees and costs to $50,000 through May 1997.  Because we conclude that appellant was not granted an adequate opportunity at the hearing to present evidence on her contractual agreement with wife, we reverse and remand. 

FACTS

            This case involves a dispute over legal fees between client and attorney in the context of a contentious and lengthy dissolution.  In April 1995, wife commenced dissolution proceedings against her husband of ten years.  Husband was a self-employed attorney.  Wife was a homemaker caring for their three children.  The primary assets of the marital estate were the husband's law practice and about 20 rental properties. 

Wife was initially represented by another attorney.  In August 1995, she retained appellant, who, in turn, retained an expert accountant, who assisted in the law practice valuation and other cash flow analyses. 

From the beginning of their association, appellant and wife experienced serious problems with discovery attempts against the husband.   He failed to disclose documentation that showed that he used his law practice to pay numerous personal expenses.  He repeatedly violated court orders, including one that directed him to notify wife before listing any rental property for sale.  He sold one rental property without any notification.  In most cases, the notification came one day before the closing, and closing papers often included loan repayments to his family members.  Thus, wife was left to scramble to determine if the selling price was reasonable and if the loan repayment was legitimate.

In May 1996, wife moved for an award of attorney fees against husband, citing the discovery nondisclosures and the violations of court orders.  Ruling on the motion was reserved until after the dissolution hearing was held in October and November 1996.  Following that hearing, wife renewed her motion, claiming that she had incurred $127,927.27 in attorney fees and costs and of this amount, $74,822.64 had been incurred as a direct result of husband's discovery and court-order violations.  Appellant submitted a detailed affidavit and chronological narrative that outlined the discovery and order violations, and the additional time and expenses that were necessary to combat these efforts.[1] 

In February 1997, appellant filed liens for her attorney fees and costs on all rental properties and on the homestead. 

In the dissolution decree dated May 2, 1997, the trial court found that wife had incurred $126,131.23 in attorney fees with appellant.  Of this amount, $74,822.64 was incurred as a result of discovery and order violations and these fees were "necessary and reasonable" under the circumstances.  The trial court ordered that "each party shall pay his or her own attorneys' fees and costs incurred," except

[husband] shall pay an additional $62,822.64 [$74,822.64 - $12,000 already paid] of [wife's] attorney's fees as a consequence of his bad faith conduct * * * which resulted in considerable unnecessary delay and expense.

  

Wife was awarded all rental properties and monthly child support. 

Appellant continued to work on the dissolution matter, including overseeing transfer of rental properties to respondent, the partition of properties, docketing the attorney-fee judgment, and responding to husband's motion to amend the decree.  

In September 1998, wife moved for an order "clarifying" that the decree required husband to pay bad-faith fees directly to appellant.  Appellant intervened and cross-moved to establish and enforce her attorney liens against the rental properties, claiming that the incurred attorney fees now totaled almost $150,000, of which $94,000 remained unpaid.  Appellant requested an evidentiary hearing.  Wife amended her motion to request:  (1) an order directing appellant to remove all liens against real property, and (2) an order finding that wife had overpaid appellant, claiming appellant and wife had contractually agreed to limit fees and costs.

At an evidentiary hearing held on November 30, 1998, and February 16, 1999, wife claimed that she and appellant had had an oral agreement since October 1995 that fees and costs would not exceed $50,000 throughout the entire representation.  Wife was allowed to testify at length about the facts and circumstances that she believed supported such an agreement.  She testified that in August 1995, she met with appellant and was presented with a written Representation Agreement.  Wife brought the unsigned agreement home, read the entire agreement, and showed it to several people.  She never signed the agreement, and never informed appellant that she had not signed it, even though she was aware that appellant expected her to sign.  Instead, she just paid the retainer of $10,000. 

Wife testified that on October 20, 1995, she met with appellant and in response to questions about how much the dissolution would cost, appellant responded "it could go as high as $50,000."  Wife understood this to mean that fees and costs would not exceed $50,000 during the entire representation.  However, she admitted that she continued to receive monthly bills from appellant reflecting the hourly work performed, costs incurred, and total amount outstanding, which far exceeded the alleged $50,000 contractual limit; she also received bills directly from the accounting expert.   

Around August 1996, before the dissolution trial, wife told appellant the fees were getting really high and had gone over $50,000.  Appellant responded that wife should not worry because the husband would be paying for the rest and they would "get him in sanctions."  Wife's mother was present for this conversation:  she recalls that her daughter told appellant that "we're getting pretty close to $50,000 here" to which appellant replied, "I fully anticipate that due to his conduct * * * there should be sanctions awarded and he should be paying for the trial." 

At the November 1998-February 1999 hearing, appellant denied that she had agreed to represent wife for a $50,000 maximum contract for fees and costs.  In support of her position, she attempted to offer her own testimony regarding the representation terms, and regarding statements and actions of both parties that tended to show there was no agreement for a $50,000 fees and cost limit.  Shortly after appellant began her testimony, the court stopped her, claiming that "we've already litigated this in the course of the dissolution" and that the trial court had

provided for an award of attorney's fees [in the judgment and decree] which took into account the amount that you had already received from [wife] and an amount ordered to be paid by [husband].  

 

The trial court instructed appellant to narrow her testimony "to the extent that that agreement would cover post-decree fees, and the amount."

Appellant continued to offer testimony tending to refute the claimed $50,000 maximum.  On repeated occasions, the trial court refused to allow testimony from the appellant that would support her position that neither party agreed that the fees and costs would be limited to $50,000 during any portion of the representation, even though wife had already been given ample opportunity to present evidence on the matter.  Wife also objected to any such testimony.  The trial court finally stated: 

You can argue that all you want, [appellant], but I have already determined what were reasonable attorney's fees and who was ordered to pay them.  And I have told you that these evidentiary hearings are for the purpose of establishing post J&D attorney's fees, the basis for same, the amount of same, and the liability of [wife] to pay you for any and all attorney's fees that you believe are due and owing.

 

The trial court stated several times that she would not "relitigate the J&D."

On July 21, 1999, the trial court issued an order on the fee issue, concluding:

(1)       Appellant offered to represent wife pursuant to the terms of the written Representation Agreement, coupled with the oral agreement that the fees and costs would not exceed $50,000, and this offer was accepted by wife through her conduct even though wife did not sign agreement. 

 

(2)       The $50,000 maximum included all fees and costs incurred from October 1995 through May 2, 1997 (J&D). 

 

(3)       Husband must still pay bad-faith attorney fees of $74,822.64 awarded in the J&D directly to appellant. 

 

(4)       Wife must pay attorney fees and costs incurred after May 2, 1997, which total $20,344.84 

 

(5)        The attorney liens against non-homesteaded property can be enforced and foreclosed to the extent necessary to satisfy the outstanding fees and costs of $20,344.84  

 

On July 27, 1999, in response to wife's motion, the trial court amended the J&D to state that husband shall pay bad-faith attorney fees "directly to" appellant.[2] 

D E C I S I O N

I.          Full and Fair Opportunity

Appellant claims that she was not given a full and fair opportunity at the evidentiary hearing to present evidence on the contractual relationship between herself and wife.  We agree. 

This matter came before the trial court in the context of establishing and enforcing a lien for attorney fees under Minn. Stat. § 481.13 (1998).  This statute provides that an attorney has a lien for compensation on the cause of action and on the client's interest in "any money or property involved in or affected by any action or proceeding in which the attorney may have been employed."  Minn. Stat. § 481.13(1).  This protects attorneys whose clients have agreed to pay fees by imposing a lien; it does not create an agreement to pay fees.  Boline v. Doty, 345 N.W.2d 285, 288 (Minn. App. 1984). 

The lien statute permits the attorney to move the court to determine the amount of the lien within the action or proceeding in which the attorney is employed: 

            The liens provided by clauses (1) and (2) may be established, and the amount thereof determined, by the court, summarily, in the action or proceeding, on the application of the lien claimant or of any other person or party interested in the property subject to such lien * * * .

 

Minn. Stat. § 481.13(3).  In determining the "amount" of the lien, the court must assess the fee agreement between attorney and client, as well as the reasonableness and necessity of the claimed fees.  See, e.g., Roehrdanz v. Schlink, 368 N.W.2d 409, 412€‘13 (Minn. App. 1985) (upholding finding that fees already paid were sufficient compensation for legal services rendered, where attorney did not inform client of proper hourly rates, time spent, or charge allocated to particular service, and evidence was insufficient to establish oral fee agreement). 

Although the statute provides that the amount of the lien may be established "summarily," both attorney and client must be given an adequate opportunity to contest the facts regarding the attorney fees.  Boline, 345 N.W.2d at 289.  A lien is a property right, and when deprivation of property is at issue, minimal due process requires that both parties are afforded a meaningful opportunity to be heard.  Id. at 289-90 (holding that amount of lien was not fairly litigated where clients received only two weeks' notice of lien hearing and were not allowed access to files and papers generated on their behalf); Gaughan v. Gaughan, 450 N.W.2d 338, 342-43 (Minn. App. 1990) (holding amount of lien not fairly litigated where client was not allowed to cross-examine attorney on accuracy and validity of timesheets), review denied (Minn. Mar. 16, 1990). 

            In this case, wife contended that she and appellant had orally agreed to limit fees and costs to $50,000 through the entire dissolution proceeding.  But when appellant attempted to present oral and written testimony tending to show that no such oral agreement existed, and that wife had spoken and acted inconsistently with such an alleged agreement, the trial court refused to allow the testimony even though the testimony was directly relevant to whether an agreement existed. 

In support of its refusal to allow the testimony, the trial court claimed that the purpose of the evidentiary hearing on the lien issue was not to relitigate the terms of the decree.  We are unable to understand, however, how a "relitigation" of the decree could be avoided.  The decree specifically stated that wife had incurred more than $126,000 in attorney fees and costs through the date of the decree.  It further stated that husband must pay more than $75,000 of these fees "incurred by wife" as a result of his bad-faith conduct.  Recognition by the trial court in the decree that these fees were, indeed, incurred by wife appears to be in direct conflict with the trial court's conclusion following the lien hearing that appellant and wife had by contract limited wife's incurred fees to $50,000.  At the very least, appellant must be permitted to present evidence tending to show the validity of the decree provision and the weakness of wife's position that fees were limited to $50,000.[3]

While we are reluctant to prolong this already protracted matter, we must remand to allow appellant an adequate opportunity to be heard fully on the circumstances surrounding the contractual agreement between appellant and wife.  Inextricably intertwined with the court's receipt of additional evidence and reconsideration of the contractual relationship is, we believe, the question of the statutory authority on which the court relied in ordering husband to pay $74,822.64 in bad-faith attorney fees.  Whether fees were awarded under Minn. Stat. § 518.14, subd. 1 (1998), or Minn. Stat. § 549.21 (1994),[4] we are unaware of any authority to award fees against one party in the absence of those fees actually having been incurred by another party.  If wife has incurred fees of only $50,000 by reason of her oral contract with appellant, the issue of the amount of bad-faith fees against husband will need to be reexamined.

II.        Collateral Estoppel

Appellant also argues that wife is collaterally estopped from claiming she had an oral agreement with appellant to limit fees and costs to $50,000, where wife represented at the dissolution hearing that she had incurred fees of more than $126,000, and that those fees were reasonable, and where a finding as to amount and reasonableness was adopted by the trial court and incorporated into the decree.

The doctrine of collateral estoppel is not rigidly applied; as a flexible doctrine, the focus is on whether application would work an injustice on the party against whom estoppel is sought.  Johnson v. Consolidated Freightways, Inc., 420 N.W.2d 608, 613€‘14 (Minn. 1988).  The trial court did not address this issue in its order; it should do so as part of the proceedings on remand.

III.       Additional considerations

The complex and acrimonious issue of legal fees has caused and continues to cause these parties to incur additional legal fees (or, in the case of appellant, perhaps to forego earning fees in other cases because of the time and effort consumed in attempting to collect those involved here).  The best interests of all parties, trial court, and this court would have been served if meaningful review had been possible on the record before us.  Unfortunately we cannot do so.  We can, however, suggest guidelines to assist the trial court and parties in clarifying, narrowing, and perhaps even resolving this matter with minimal additional financial and emotional toll.  Upon remand, we request the trial court to:

(1)       Permit appellant to present evidence on her contractual relationship with wife;

(2)       In its discretion, receive additional evidence from either party;

(3)       Address the statutory or other basis on which bad-faith attorney fees were awarded against husband and how those fees would be affected by a determination that wife incurred fees of only $50,000;

(4)       Address appellant's argument that collateral estoppel should be applied against wife based on her testimony at the dissolution hearing regarding the amount and reasonableness of attorney fees incurred by her; and

(5)       Address, in connection with appellant's collateral estoppel argument, the effect, if any, of her request at the November 1998-February 1999 evidentiary hearing that the court establish the amount of the attorney fees lien.

These guidelines are not intended to be exclusive and should not be interpreted by the trial court as in any manner restricting the scope or extent of inquiry on remand.  The court is urged to consider all evidence and arguments that tend to lead to resolution of the complex issue presented to it.

Appellant was not given an adequate opportunity to present evidence on the contractual relationship between herself and wife that would establish and determine the amount of the lien.  We remand for proceedings not inconsistent with this opinion.

Reversed and remanded.

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1]  The supporting papers analyzed all time entries on appellant's legal bills from October 1, 1995 through June 30, 1996, concluding that 62% of fees and costs were directly attributable to husband's nondisclosures and order violations.  The papers then applied the 62% figures to all fees and costs incurred after June 30, 1996. 

[2]  On September 15, 1999, in response to appellant's motion for amended findings and new trial, the trial court amended its July 21, 1999 order on the attorney fee issue to change the fees incurred after the decree from $20,344.84 to $22,386.19.  This amount is not an issue on appeal.

[3]  The trial court found that wife and her mother testified that appellant "stated at the October 1995 meeting that [wife's] legal costs would go no higher than $50,000."  Yet the record indicates the testimony was that appellant stated that legal fees "could go as high as $50,000."  While further evidence may be developed on remand, arguably this statement is insufficient to create an express binding contract for $50,000 maximum in fees and costs.  Express fee contracts for legal services are governed by ordinary rules of contract law.  Holt v. Swenson, 252 Minn. 510, 514-15, 90 N.W.2d 724, 728 (1958).  An offer must be sufficiently definite to form the basis of an express contract.  Id.  If an offer is so indefinite as to make it impossible for a court to decide what it means and "fix exactly the legal liabilities of the parties," its acceptance cannot create an enforceable contract.  Id. at 515, 90 N.W.2d at 728.

[4]  Minn. Stat. § 549.21 (1994) was repealed by 1997 Minn. Laws ch. 213, art. 2, § 6, and essentially recodified at section 549.211 with additional procedural safeguards.  Because the dissolution action arose in April 1995, the fee award should be assessed under section 549.21 (1994).  See Douglas v. Schuette, 607 N.W.2d 142, 148 (Minn. App. 2000), review denied (Minn. May 16, 2000).