DANIEL ADAIR V STATE OF MICHIGAN (Authored Opinion)
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STATE OF MICHIGAN
COURT OF APPEALS
DANIEL ADAIR, et al.,
FOR PUBLICATION
July 9, 2013
9:05 a.m.
Plaintiffs,
v
No. 230858
STATE OF MICHIGAN et al.,
Defendants.
ON FOURTH REMAND
Before: TALBOT, P.J., and SAAD and FORT HOOD, JJ.
TALBOT, P.J.
This original action to enforce the Headlee Amendment returns to us by virtue of our
Supreme Court’s May 24, 2013 order to articulate on the record our specific factual findings
regarding the amount of attorney fees that are properly compensable for Phase II of these
proceedings and to enter an award in favor of plaintiffs consistent with our findings. Adair v
Michigan, ___ Mich ___; ___ NW2d ___ (2013). After our review of the record, the report of
the special master, the objections of the parties and the applicable case law, we direct plaintiffs to
submit an amended statement of attorney fees that conforms to our decision.
REASONABLE ATTORNEY FEES
As we observed in Adair v Michigan (On Third Remand), 298 Mich App 383, 391; 827
NW2d 740 (2012), rev’d in part ___ Mich ___ (2013):
The party requesting an award of attorney fees bears the burden of proving
the reasonableness of the fees requested. Smith[ v Khouri,] 481 Mich [519] at
528[; 751 NW2d 472 (2008) (opinion by Taylor, C.J.).] Smith establishes an
analytical framework to guide the lower courts in determining what constitutes a
“reasonable fee.” In general terms, the Smith framework requires a trial judge to
determine a baseline reasonable hourly or daily fee rate derived from “reliable
surveys or other credible evidence” showing the fee customarily charged in the
locality for similar legal services. Id. at 530-531, 537. Once the trial judge has
determined this hourly rate, the judge must multiply this rate by the reasonable
number of hours expended in the case. The product of this calculation serves as
the “starting point for calculating a reasonable attorney fee.” Id. at 531, 537.
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Finally, the trial judge may make up-or-down adjustments to the fee after
considering certain factors enumerated in Rule 1.5(a) of the Michigan Rules of
Professional Conduct and Wood v DAIIE, 413 Mich 573; 321 NW2d 653 (1982),
and any additional relevant factors. Smith, 481 Mich at 529-531, 537 (opinion by
Taylor, C.J.).
Because the instant case is one to enforce the provisions of the Headlee Amendment, we
also take into consideration the intent of § 32, which is to reimburse the taxpayer for the costs of
maintaining the suit, Macomb Co Taxpayers Ass’n v L’Anse Creuse Public Schools, 455 Mich 1,
8-10; 564 NW2d 457 (1997), and the balancing of the need to reimburse the taxpayer who
brought suit against the potential harm to state taxpayers that must pay the costs awarded, Durant
v State of Michigan, 456 Mich 175, 213; 566 NW2d 272 (1997).
Finally, we take guidance from the admonition in Smith that the analytical framework it
established “is not designed to provide a form of economic relief to improve the financial lot of
attorneys or to produce windfalls. Rather, it only permits an award of a reasonable fee, i.e., a fee
similar to that customarily charged in the locality for similar legal services, which, of course,
may differ from the actual fee charged or the highest rate the attorney might otherwise
command.” Smith, 481 Mich at 519 (opinion of Taylor, C.J.) (footnotes omitted; italics in
original). “[R]easonable fees ‘are different from the prices charged to well-to-do clients by the
most noted lawyers and renowned firms in a region.’” Id. at 528, quoting Coulter v Tennessee,
805 F2d 146, 148 (CA 6, 1986).
A REASONABLE HOURLY RATE
The Smith Court offered the following guidance with regard to determining the hourly
rate customarily charged:
The reasonable hourly rate represents the fee customarily charged in the
locality for similar legal services, which is reflected by the market rate for the
attorney’s work. “The market rate is the rate that lawyers of similar ability and
experience in the community normally charge their paying clients for the type of
work in question.” Eddleman v Switchcraft, Inc, 965 F2d 422, 424 (CA 7, 1992)
(citation and quotation omitted). We emphasize that “the burden is on the fee
applicant to produce satisfactory evidence – in addition to the attorney’s own
affidavit – that the requested rates are in line with those prevailing in the
community for similar services by lawyers of reasonably comparable skill,
experience and reputation.” Blum v Stenson, 465 US 886, 895 n 11; 104 S Ct
1541; 79 L Ed 2d 891 (1984). The fees customarily charged in the locality for
similar legal services can be established by testimony or empirical data found in
surveys and other reliable reports. But we caution that the fee applicant must
present something more than anecdotal statements to establish the customary fee
for the locality. Both the parties and the trial courts of this state should avail
themselves of the most relevant available data. For example, as noted earlier, in
this case defendant submitted an article from the Michigan Bar Journal regarding
the economic status of attorneys in Michigan. [Smith, 481 Mich at 531-532
(opinion by Taylor, C.J.) (footnote omitted).]
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Plaintiffs presented the testimony of Fred M. Mester, a retired Oakland Circuit judge, to
establish a baseline reasonable hourly rate of compensation for each attorney seeking to recover
a reasonable fee in this matter. According to Mester, consistent with Smith, he began by
determining the customary fee charged in the locality for similar legal services. To make this
determination, he looked to the Economics of Law surveys published by the State Bar of
Michigan in 2000, 2003, 2007 and 2010 to determine the market rate for the attorneys’ work in
this case. Mester disregarded the 2000 study as irrelevant because the survey was published
before this case commenced and because the data contained in the survey “look[ed] backwards.”
He did consider the 2003 and 2007 surveys, but found the 2010 survey most useful and, thus,
gave more weight to the 2010 survey to guide his calculations because the 2010 survey results
were based on a larger sampling of lawyers and law firms. Nevertheless, he used the results of
the 2003 and 2007 surveys to lower his baseline hourly rate calculation. Next, Mester concluded
that the applicable area of practice for calculating a market rate was appellate practice
. . . because appellate law is basically what this case is all about. The case of
original jurisdiction was in the appellate courts. The matter was before the
Supreme Court on at least three different occasions. We know that all appellate
matters have another basic foundation in law that has to start the case at the trial
level, but this matter dealt basically with appeals and argument before the Court
of Appeals and Supreme Court of the State of Michigan.
After deciding that the appellate practice was the applicable area of practice, he reviewed the
2010 survey and learned that the mean hourly rate for the appellate field of practice was $259,
that the mean hourly rate for Oakland County, where the offices of plaintiffs’ attorneys were
located, was $254, that the mean hourly rate for law firms located in Oakland County south of
M-59 was $260 and that the mean hourly rate for law firms of a comparable size was $292. He
averaged these means and arrived at an average mean hourly rate of $266. After he made these
calculations, Mester concluded that a $250-an-hour rate would be an appropriate hourly base rate
for all eight attorneys who billed hours in this case.
Mester did not determine the reasonableness of the hours billed, however, which is the
second step of the Smith framework, because he was not asked to do so by plaintiffs and because
he “didn’t see that as my responsibility.” Rather, he proceeded to the third step of the Smith
framework. Mester concluded that there were numerous considerations that warranted an
upward adjustment of the hourly rate for Dennis Pollard, Richard Kroopnick and William P.
Hampton, attorneys for plaintiffs. These considerations included the outstanding quality of work
exhibited by these attorneys in this case and other cases over the course of their respective
careers, the professional standing of these attorneys, the reputation of Pollard and Kroopnick as
pertains to Headlee matters, the length and complexity of the case, the extensive discovery and
briefing needed, the obtainment of a declaratory judgment that resulted in a $25 million
appropriation by the Legislature, the incurring of $200,000 in costs that the attorneys “carried,1”
1
Attorney Pollard testified before the special master that the costs were billed to and paid by
plaintiff school districts.
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and the length of the attorneys’ relationship with the school districts, which dated back to the
1970s. With these considerations in mind, Mester adjusted the $250 hourly rate upward to $450
an hour for Pollard, Kroopnick and Hampton. He made no adjustment to the $250 hourly rate
for the remaining five attorneys who assisted Pollard and Kroopnick: Kari Costanza, Mark
Roberts, Daniel Villaire, Robert Schindler and Matthew Drake.
We find the testimony of Mester to be unhelpful, as did the special master, and, therefore,
we disregard his testimony. As observed in Smith, the market rate for an attorney’s work is the
rate that lawyers of similar ability and experience in the community normally charge their paying
clients for the type of work in question. Smith, 481 Mich at 531 (opinion of Taylor, C.J.). Smith
directs that the market rate for an attorney’s work be determined separately for each attorney
who seeks to recover a reasonable fee. Id. at 534; see also Augustine v Allstate Ins Co, 292 Mich
App 408, 439; 807 NW2d 77 (2011). In the present case, Mester concluded that a base rate of
$250 was appropriate for all eight attorneys seeking to recover their respective reasonable fees.
Mester treated Pollard, who has been in practice for 42 years, has over three decades of
experience in Headlee Amendment litigation, and has been lead counsel in this case, as having a
similar ability and experience in the community as Schindler, who has been in practice since
2007 and has little experience in matters concerning the Headlee Amendment. This decision to
treat each attorney as having equal ability and experience unequivocally establishes that Mester
failed to correctly apply the Smith methodology. His conclusions about what constitutes a
reasonable rate of hourly compensation for each attorney are inconsistent with the strictures of
Smith and, therefore, are both unreliable and unhelpful. See Van Elslander v Thomas Sebold &
Associates, Inc, 297 Mich App 204, 232-233; 493 NW2d 871 (2012) (testimony that relies on
subjective, self-serving and anecdotal-like evidence is inconsistent with the strictures of Smith
and unhelpful). Plaintiffs’ assertion to the contrary notwithstanding, the mere fact that the State
presented no witnesses to contradict the calculations of Mester does not require that we accept
those calculations.
Likewise, we place no import on the testimony of Pollard that an hourly rate of $450
constituted reasonable compensation for himself and Kroopnick. His testimony reflects nothing
more than a ratification of Mester’s discredited opinion testimony. For this same reason, we
disregard the testimony of Pollard that an hourly rate of $250 would be reasonable compensation
for Roberts, Villaire, Schindler and Drake.
Instead, we find relevant to our determination of a reasonable hourly rate the fact that
plaintiffs and their attorneys entered into a fee agreement in 2000 pursuant to which the school
districts agreed to compensate all attorneys providing services in this case at an hourly rate of
$175. The hourly rate actually paid by plaintiffs, although “clearly not dispositive of what
constitutes a reasonable fee, is a factor to be considered in determining market place value as
reflective of competition within the community for business and typical fees demanded for
similar work.” Van Elslander, 297 Mich App at 234. We also find relevant the following
surveys published by the State Bar of Michigan: The 2000 Desktop Reference on the Economics
of Law Practice in Michigan; Economics of Law Practice (2003); 2007 Economics of Law
Practice Summary Report; and 2010 Economics of Law Practice, Attorney Income and Billing
Rate Summary Report. These surveys provide some reliable empirical evidence of market rates.
Smith, 481 Mich at 530, 532 (opinion of Taylor, C.J.).
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We begin our analysis of what constitutes a reasonable hourly rate of compensation for
each of plaintiffs’ attorneys by acknowledging that plaintiffs rely heavily on data generated by
the State Bar pertaining to the appellate area of practice and that the special master relies,
instead, on the data pertaining to the municipal law area of practice. We also acknowledge,
however, that actions to enforce the Headlee Amendment, like this one, are sui generis. Such
actions, if originally brought in this Court, are part appellate proceeding and, to the extent that
the services of a special master are employed, they are also part trial proceeding in that they
involve discovery, motion practice and litigation. The practice areas listed and surveyed by the
State Bar do not fully reflect the hybrid nature of these proceedings or the limited and specialized
market for attorneys who are familiar with the operation of the Headlee Amendment. Thus, any
attempt on our part to shoehorn this matter into one of the areas of practice identified in the
various surveys of the State Bar serves no useful purpose. “The reasonable hourly rate
represents the fee customarily charged in the locality for similar legal services, which is reflected
by the market rate for the attorney’s work.” Smith, 481 Mich at 531 (opinion of Taylor, C.J.).
The market for other areas of legal practice with broader client bases and greater demand provide
no probative information regarding what constitutes the proper market for the provision of the
specialized legal services associated with the enforcement of the Headlee Amendment.
Smith clearly contemplates that the trier of fact must independently review these State
Bar surveys and determine what information contained in those surveys is most relevant and
helpful to a determining of the market rate for each attorney for whom a reasonable attorney fee
is sought. Smith, 481 Mich at 530-532, 537 (opinion of Taylor, C.J.). Because this Court sits as
the trial court in this action, we exercise that power of independent review and reject any reliance
on the data associated with the areas of practice surveys. Instead, we rely on the data collected
statewide with regard to years in practice. We do so because plaintiffs’ attorneys represent
school districts and taxpayers located throughout the state and because plaintiffs chose this
Court, which has statewide jurisdiction, as the court in which to commence their original action,
rather than a circuit court with limited territorial jurisdiction, as allowed by MCL 600.308a(1).
We also do so because the number of years in practice is reflective of how experience and
demand may be compensated on an hourly basis. Finally, we observe that, in 2003, the median
hourly billing rates for attorneys with the same years in practice as the two lead counsels in this
case, Pollard and Kroopnick [$175 an hour for Pollard and $180 an hour for Kroopnick], were
consistent with the $175-an-hour rate plaintiffs’ attorneys were charging plaintiffs at that time.
As we previously observed, “the actual fees charged . . . is a factor to be considered in
determining market place value as it is reflective of competition within the community for
business and typical fees demanded for similar work.” Van Elslander, 297 Mich App at 234.
For these reasons, we conclude that the data reported in the 2003, 2007 and 2010 surveys
regarding the years in practice is the “most relevant available data.” Smith, 481 Mich at 532
(opinion of Taylor, C.J.).
Based on our review of the 2003, 2007 and 2010 surveys and the years of practice for
each of plaintiffs’ six attorneys2, we find that a reasonable hourly rate for Pollard and Kroopnick
2
We do not calculate a reasonable hourly rate for attorneys Hampton and Roberts because
plaintiffs incurred their fees in Phase III of these proceedings. Plaintiffs also sought a reasonable
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is $210, that a reasonable hourly rate for Schindler, Villaire and Drake is the contract hourly rate
of $175, and that a reasonable hourly rate for Costanza is her actual billing rate of $140.
REASONABLE NUMBER OF HOURS EXPENDED
The special master found the number of hours expended by plaintiffs’ attorneys during
the Phase II prosecution of the record keeping claim to have been reasonable and necessary with
the following exceptions:
During Phase II, Plaintiffs’ attorneys expended some time on tasks that
were not related to litigating the record keeping claim, including preparing a
motion for reconsideration relating to only plaintiffs’ other 20 claims; preparing
unsuccessful strategic motions to disqualify Michigan Supreme Court Justices;
preparing a petition for costs that was not filed; preparing for the possibility of an
argument before the Supreme Court that was never scheduled; and expending
time on other Headlee matters. (Defendants’ Exhibit B.) Therefore, Plaintiffs
shall remove from their database of hours expended the following, per the revised
Defendants’ Exhibit B:
All hours related to possible motion for reconsideration of
2004 MSC decision (Defendants’ Exhibit B, p. 1)
All hours related to motion to disqualify MSC Justices (Id,
pp. 2-4)
All hours related to possible motion for reconsideration re:
recusal motion (Id, p. 5)
Other duplicative or unrelated time as set forth below from
Defendants’ Exhibit B, p 8:
11/09/07 broadcast email entry –reduce hours expended by
½
11/12/07 broadcast email entry – reduce hours expended by
½
11/13/07 broadcast email entry – reduce hours expended by
½
02/29/08 fee petition – reduce hours expended to 0
attorney fee for Sidney Klinger and an attorney identified only by the surname Zaremba.
However, plaintiffs failed to present evidence from which a market rate for their respective
services could be reasonably determined. Consequently, we disallow any recovery for the work
performed by these attorneys.
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03/07/08 fee petition – reduce hours expended to 0
08/20/08 fee petition – reduce hours expended to 0
08/22/08 fee petition – reduce hours expended to 0
09/22/08 – 10/15/09 all 7 entries in this time frame –
reduce hours expended to 0.
Plaintiffs do not need to remove their attorney time for working with
putative expert Sneed in that, while Sneed did not testify at trial, she did provide a
significant benefit to Plaintiffs by way of a stipulation that negated Defendants’
position that the record keeping was required by state law rather than by the
federal NCLB legislation3.
During Phase II, Plaintiffs’ counsel also spent an unreasonable number of
hours performing other tasks on the case. Especially given Mr. Pollard’s and Mr.
Kroopnick’s vast experience in Headlee Amendment matters, a review of their
hours expended spreadsheet demonstrates that the attorneys spent an unreasonable
number of hours briefing, preparing for oral argument and performing other tasks.
(Defendants’ Exhibit C.) Plaintiffs have not sustained their burden of proving the
Phase II hours expended by Messrs. Pollard and Kroopnick that have been
challenged by Defendants in Defendants’ Exhibit C are objectively reasonable.
Those Phase II hours on Defendant’s Exhibit C therefore shall be reduced by 20
percent, and Plaintiffs’ database of hours expended reduced accordingly. This
will result in a reduction in Mr. Pollard’s 834.6 challenged hours of 166.92 hours
and in Mr. Kroopnick’s 731.6 challenged hours of 146.32 hours.
We adopt these findings of the special master as our own. As we observed in our opinion
on third remand, the motion for reconsideration of our Supreme Court’s first decision, the motion
to disqualify two justices of our Supreme Court and the motion for reconsideration of the
decision of the justices not to recuse themselves were not reasonable and necessary to the
maintenance of the record keeping claim. Adair, 298 Mich App at 403. Consequently, the hours
expended by plaintiffs’ attorneys on those motions are not compensable. For this same reason,
the hours expended in preparation for possible oral argument before the Supreme Court that was
never scheduled are not compensable. Likewise, the hours spent by plaintiffs’ attorneys in
preparation of a petition for costs that was never filed are unreasonable and not compensable.
The hours devoted by plaintiffs’ attorneys to composing certain “broadcast emails” used by
plaintiffs’ attorneys to update plaintiffs are unreasonable. Pollard candidly admitted that the
November 2007 broadcast emails included a “history of the Headlee Amendment cases” and a
discussion of Owczarek v Michigan, 276 Mich App 602; 742 NW2d 380 (2007), a decision
3
The special master’s representation to the contrary notwithstanding, defendant asserted that the
recordkeeping requirements were imposed upon the state by the federal No Child Left Behind
Act.
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Pollard acknowledged had no relevance to a determination of the merits of the record keeping
claim. Finally, our review of the hours expended by plaintiffs’ attorneys in conjunction with
briefing, preparing for oral arguments and other related matters leads us to conclude that number
of hours billed is not commensurate with the amount of work performed, especially in light of
the years of experience possessed by plaintiffs’ attorneys and the inability of Pollard to justify
the hours expended by identifying with any degree of specificity what activities had been
performed.
FEE ENHANCEMENT
The special master declined to adjust upward the baseline hourly rate he assigned to
Pollard and Kroopnick. We likewise decline to do so.
We acknowledge that these proceedings involved complex issues of first impression and
required extensive presentation and preparation. We also acknowledge that plaintiffs’ attorneys
obtained a favorable result for plaintiffs on their recordkeeping claim that resulted in legislative
appropriations of tens of millions of dollars. However, it must be observed that plaintiffs only
prevailed on one of the twenty-one claims pleaded in their complaint. Moreover, although
plaintiffs’ attorneys have represented school districts for decades in Headlee enforcement
actions, we find this long-term attorney-client relationship to be a double-edged sword. We find
none of the expected efficiencies that should have been generated by the length of this attorneyclient relationship present in this case. Augustine, 292 Mich App at 437-438. Indeed, as
observed by the special master, a review of plaintiffs’ “hours expended spreadsheet demonstrates
that the attorneys spent an unreasonable number of hours briefing, preparing for oral argument
and performing other tasks,” which needlessly extended the time this matter spent before both of
the special masters involved in the Phase II litigation and this Court. Additionally, on both
remands to the special masters, plaintiffs failed to act with all deliberate dispatch to ensure an
expeditious resolution of those proceedings. Finally, plaintiff school districts have paid the costs
of this proceeding and an attorney fee based on an hourly rate less that the baseline hourly rate
we set in this opinion. Our balancing of these fee-consideration factors leads us to conclude that
an award of enhanced fees in this case would be directly contrary to the admonition in Smith that
the analytical framework it created “is not designed to provide a form of economic relief to
improve the financial lot of attorneys or to produce windfalls,” Smith, 481 Mich at 528 (opinion
of Taylor, C.J.), and to the intent of those who ratified the Headlee Amendment that the costs
awarded under § 32 are to be in an amount sufficient to provide the average taxpayer with the
financial wherewithal to exercise the taxpayer’s right to bring suit, Durant, 186 Mich App at
118.
Likewise, on the record before us, we conclude that the special master correctly declined
to make an upward adjustment to the baseline hourly rate of plaintiffs’ remaining attorneys.
None of those attorneys testified before the special master. Neither Pollard nor Kroopnick
testified in any detail as to the contributions made by these attorneys to the successful
prosecution of the case. We have reviewed plaintiffs’ exhibits detailing the qualifications and
experience of each of these attorney and, after consideration of the factors enumerated in MRPC
1.5(a) and Wood and the limited record, we conclude that plaintiffs have failed to present proofs
sufficient to justify an upward adjustment of the respective hourly rates of Schindler, Villaire,
Drake and Costanza.
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CONCLUSION
Plaintiffs shall submit an amended statement of attorney fees that conforms to our
opinion. An order awarding attorneys in the revised amount will thereafter enter. We retain
jurisdiction.
/s/ Michael J. Talbot
/s/ Henry William Saad
/s/ Karen M. Fort Hood
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