• October 12, 2012

Update #2 (October 12, 2012):  Green v. BMW of North America, LLC, discussed below, finally got its hearing before the Minnesota Supreme Court earlier this month.  

The key question:  under Minnesota law, in a meritorious consumer rights lawsuit under the state “lemon law statute,” in determining the reasonableness of the meritorious plaintiff’s lawyer’s claimed fees: does the trial court abuse her discretion if she does not consider the dollar amount of recovery against the attorneys’ fees claimed?

If the trial court makes this “proportionality” inquiry, Justice Alan Page asked if that would that leave poor people with relatively low damages (say, a car defect needing $900 in repairs) out of luck when a rich person with  fancy car (say, a luxury car defect of $80,000) would be able to bring a claim and make a recovery?  Does that seem a fair or appropriate way for courts to administer a consumer rights statute?

If not, are we opening up our courts to twisted entrepreneurial ventures where trial lawyers could take on a $5 damages claim and run up a $100,000+ legal bill? Does this seem an a worthwhile use of our justice system?

Can the trial court judge even consider the amount involved in determining “reasonable attorneys’ fees” as one of multiple factors?  Must she?  Important precedents to consider are here and here.

It’s not the value of the recovery, it is only the success of the claim that can and should be considered, plaintiff’s lawyer Todd Gadtke argued.  He finds further support in the federal statute (“Magnuson Moss”) under which he sued, which specifically provides that attorneys’ fees should be determined “based on actual time expended” (and not on the amount of recovery).

At oral argument, it was quite clear that there are divergent views among the justices.  Some are troubled by the risk that claims of low-damage plaintiffs will be lost if plaintiffs’ lawyers must cap their investment in their clients’ claims based on the likely award.  Others seem wary of opportunistic plaintiffs’ lawyers making mountains of money out of molehills.

Minnesota Litigator will go way out on a limb and speculate that the Court will hold that proportionality of award and fee’s claimed is implicit in the concept of “reasonable attorneys’ fees” under the Minnesota consumer rights statute but that it is one of many factors. I predict they will remand the case so that analysis including this factor can be undertaken and the trial court will stand by her original award.

Update (June 14, 2012): The Minnesota Supreme Court oral argument for the important case, described below, was pulled from the court calendar. It had been scheduled for June 4.  The case has not been settled while on appeal.  Apparently, a family loss for one of the lawyers justified postponement of oral argument, which, to date, has not been rescheduled.

Original post (March 8, 2012): Several years ago, someone called me with a lemon law case and it did not take long before someone else referred me to Todd Gadtke, who might be Minnesota’s most well known lemon law lawyer (here is a previous Minnesota Litigator (“ML”) post of a win of his).  Since then, Todd has kindly pitched in and advised several times as I have called him asking for help on a pro bono basis in connection with my volunteer work at the Twin Cities Cardozo Society Minneapolis Urban League Walk-In Clinic.  (THANK YOU!)

Now Gadtke must defend his win for plaintiff Marie D. Green against BMW before the Minnesota Supreme Court, which last week granted BMW’s request for consideration of the Court of Appeals’ decision in Green/Gadtke’s favor (over a dissent by Chief Judge Matthew E. Johnson).

Trial was before Hennepin County Judge Leslie Ann Alton two years ago, nearly to the day (3/12/10).

Chief Judge Johnson concurred in the majority’s decision on everything but the attorneys’ fee claim.  ML readers may dimly recall last week’s post regarding “Squaring the Circle.” This case may be dejà-vu all over again.  Chief Judge Johnson expresses concern that a $27,000 claim would justify $221,000 in legal fees.

But how much do you think BMW’s attorneys’ fees were?  Would that not be a relevant metric to determine the reasonableness of plaintiff’s lawyers fees?  After all, adversarial litigation is to some degree a battle in which the amount one is forced to work is related to the amount the adversary works (and forces you to work).  (If BMW’s attorneys’ fees were substantially less than the amount claimed by Gadtke, that would certainly seem significant.  Why then would it not be significant if BMW’s attorneys’ fees were, say, several times more? Or commensurate?)  (BMW hired a talented Chicago trial lawyer with  expertise for these specific cases.  I would wager that he billed substantially more than plaintiff’s counsel.  He lost the case, of course, but I will also wager that he has been paid in full for over a year.)

Consider arguments BMW made at the Court of Appeals, which had been rejected by the trial court and then unanimously at the Court of Appeals:  (1) Green was not a “consumer” “because she did not personally use the vehicle at least 40 percent of the time and her son’s usage cannot constitute her ‘family’ use;” (2) there was no evidence of “acceleration hesitation” and, in any event, “acceleration hesitation” is not a defect.  If BMW mounts a vigorous defense, plaintiff’s counsel pays for it?

Given recent changes in rules and in case law, class actions are increasingly difficult to maintain.  And now, if legal fees must be commensurate and correlated to relatively low damages claimed, small stakes individual claims will only be viable if taken on pro bono?  Not only would this make meritorious small stakes consumer cases less common.  It would also incentivize plaintiffs’ lawyers to do all they can to inflate claimed damages grossly in order to try to break even?  Is creating these incentives sound policy?

Shouldn’t large corporate defendants in consumer litigation bear the risk that their defenses, if found not to be meritorious, might result in an attorneys’ fee awards disproportionate to a particular consumer’s damages?  Wouldn’t it give commercial wrong-doers reason to settle valid consumer claims when, otherwise, they would have every incentive to wage punishing wars of attrition and out-gun all plaintiffs’ lawyer idealistic and naïve enough to sue them in cases with damages of less than $100,000?

And, finally, isn’t it the trial judge, anyhow, who is in the best position to know whether a trial lawyer’s recorded time and claimed legal fees were warranted by the facts and law in the case?

Post-script: There are extreme cases in which the argument of “fee commensurability” might make sense:  “junk fax” cases, Fair Credit Reporting Act cases, Fair Debt Collection Practices Act cases — cases with truly nominal or, arguably, nonexistent damages — but, even in these cases, it may be defendants vigorous defenses rather than over-reaching plaintiffs’ lawyers who are responsible for gross imbalances between fees and damages.

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