Client must reimburse attorney for appraiser’s bills

Listen to this article

Hon. Paul Lundsten

A client is liable to her attorney for the bill of an appraiser retained by the attorney in the client’s action, the Wisconsin Court of Appeals held on March 27.

Attorney Patricia Heim, of Parke O’Flaherty, Ltd., in La Crosse, was retained by Patricia M. Knuth to represent her in a divorce action.

They entered into a retainer agreement, which included the following provision covering expenses related to experts: “If the expert does not ask [Knuth] to execute a separate agreement, but bills the law firm directly, [Knuth] understand[s] that [Knuth] will still be responsible for the payment of the expert’s fees.”

Heim consulted with appraiser Richard Wanke, who gave an estimated fee of between $500 to $700 for appraising each of Knuth’s two businesses, and Knuth hired Wanke.

However, Wanke submitted a bill to Attorney Heim for $2,975. Knuth objected to the amount because she thought it was excessive relative to the estimate. Knuth attempted to settle the bill by instructing Heim to offer a settlement of $1,200 to Wanke.

Wanke rejected the offer and filed suit against Heim in small claims court in Eau Claire County, seeking the originally billed amount, plus interest, for a total of $3,574, plus court costs.

Heim wrote Knuth to inform her that she intended to pay Wanke and sue Knuth for reimbursement, if necessary. Heim stated: “I cannot justify the time that it would take me to defend this law suit and appear in court. I am sure you do not want to pay for all of the fees that will be incurred if I were to defend this suit myself.”

On March 6, 2002, Attorney Erwin Steiner, a different attorney employed by Knuth, faxed a letter informing Heim that Knuth believed a viable defense was available to the small claims lawsuit and offering $1,400 to Heim to resolve the matter “as between Heim and Knuth.”

On March 7, Heim rejected Knuth’s offer, and suggested that Knuth arrange for Steiner, who was situated in Eau Claire, to represent Heim in defense of Wanke’s small claims court action. Heim indicated she found it unacceptable that she, Heim, should pay the full bill yet receive only $1,400.

On March 8, Steiner faxed another letter to Heim. The letter stated “you have a duty to Ms. Knuth to defend against an excessive claim, if you believe it to be excessive.”

The letter also advised Heim that should Heim later seek full reimbursement from Knuth, “I trust you understand … you must prove a case within a case: i.e. the burden will be upon you to prove the existence of an agreement by Ms. Knuth to pay the amount, and the reasonableness.”

The letter also suggested that Heim could limit her litigation expenses by hiring an Eau Claire attorney, but “obviously” not Steiner.

Heim subsequently paid Wanke the full amount sought in the small claims action and filed another small claims action against Knuth, seeking reimbursement. La Crosse County Circuit Court Judge Ramona A. Gonzalez entered judgment in favor of Heim, and Knuth appealed. The court of appeals affirmed in a one-judge decision by Judge Paul Lundsten.

No Agency

The court rejected Knuth’s contention that Heim paid Wanke against Knuth’s wishes and, therefore, as an agent, is liable for the damages Knuth sustained as a result.

The court stated it would be inclined to agree if, in fact, Heim was acting as Knuth’s agent at the time she paid Wanke. Had Heim refused to defend Knuth and paid Wanke instead, despite instructions from Knuth to fight the case, an agency relationship would be present, and Heim would arguably be liable, the court said.

The court concluded, however, that no agency relationship existed at the time Heim paid the bill. When Heim wrote that Knuth would not want to pay all the fees that would be incurred if Heim were to defend the suit, Knuth responded by directing Heim to offer $1,400, less than half the bill, to settle the matter “as between Knuth and Heim.”

After Heim rejected that option and suggested Steiner represent both Heim and Knuth in the action, Steiner responded by saying it was “obvious” that Steiner could not present Heim.

	Links Wisconsin Court of Appeals Related Article Case Analysis

From this, the court concluded, “The only reasonable explanation why it was ‘obvious’ that Steiner could not represent Heim is because Heim and Steiner’s client, Knuth, were adverse parties with regard to Wanke’s bill, and it would be a conflict of interest for Steiner to represent Heim, further demonstrating that Heim and Knuth did not share an agency relationship.”

The court added, “Moreover, Attorney Steiner suggested ways that Heim could reduce her litigation costs, without any indication that Knuth would reimburse Heim for those costs. And Steiner informed Heim that if she sought reimbursement from Knuth for paying the full amount of the bill, Knuth would fight Heim in court on the merits, leaving Heim liable for the portion of the bill that Knuth disputed. This exchange of letters would have informed any reasonable attorney in Heim’s position that she was not authorized to represent Knuth in disputing Wanke’s claim. Indeed, if Heim had traveled to Eau Claire, fought the Wanke lawsuit, and then billed Knuth for her expenses, the letters from Steiner would have rebutted a claim by Heim that Heim incurred the expenses acting as Knuth’s agent.”

The court therefore determined that Knuth had severed the agency relationship, and Heim was not required to defend against the claim. Accordingly, the court affirmed.

Click here for Case Analysis.

David Ziemer can be reached by email.