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Fee reduction imposed for discovery abuse

Curley

“The trial court properly considered whether the costs could have been avoided by a reasonable and prudent effort.”

Hon. Patricia S. Curley Wisconsin Court of Appeals

Where a prevailing plaintiff in an action entitling her to fee shifting failed to comply with a local rule requiring all documents to be submitted 10 days prior to the hearing, the trial court acted within its discretion in refusing to consider the plaintiff’s itemization, a divided Wisconsin Court of Appeals held on July 22.

The court further held that the court was within its discretion in reducing attorney fees based on the recommendation of a discovery referee.

On March 30, 1994, Tammy Kolupar traded in her 1993 Pontiac Sunbird for a 1985 Mercedes Benz 190E at Wilde Pontiac Cadillac, Inc. Nine months earlier, Kolupar had purchased the Sunbird from Wilde.

Kolupar still owed $10,300 on a loan for the Sunbird. Wilde offered Kolupar $8,995 for the Sunbird, and she paid off the balance of her debt for the Sunbird in cash.

Kolupar then financed $8,600, the purchase price of the Mercedes, with another loan from a local lender. Randall Thompson was her salesman for all transactions.

The Mercedes had not actually been owned by Wilde, however, but by Thompson personally. Although the Mercedes was on Wilde’s lot, Thompson had purchased the vehicle from Wilde approximately six months earlier for a little over $5,700. Wilde did not prohibit salesmen from selling their personally-owned vehicles on its lot.

Kolupar soon found that the Mercedes had a number of mechanical problems, including starting, stalling, and odometer problems. The odometer operated only intermittently, resulting in an inaccurate mileage display. Kolupar sold the Mercedes late in the summer of 1994 for only $2,000.

On March 29, 2000, Kolupar sued Wilde and Thompson, alleging fraud, violations of federal and state odometer laws, breach of express and implied warranties, and violations of Wisconsin’s motor vehicle statute, sec. 218.01(9)(b)[currently sec. 218.0163(2)].

Milwaukee County Circuit Court Judge Thomas R. Cooper appointed former judge Frank T. Crivello as special discovery referee to oversee any discovery disputes if they should arise. Eventually, in December, 2001, the parties settled the case, with Kolupar accepting $6,600 plus costs and attorney fees.

The court scheduled the case for a hearing on costs and fees, and on May 10, 2002, Kolupar submitted her itemization to Wilde, amounting to roughly $41,000 in attorney’s fees and $12,000 in costs.

Judge Cooper refused to accept this document into evidence, however, concluding that its submission did not comply with Milwaukee County Local Rule 365(a), which states: “If a movant desires to file a brief, affidavit, or other documents in support of a motion other than one for summary judgment or dismissal, such motion and supporting materials shall be received by all counsel of record and/or parties not represented by counsel of record and filed with the deputy court clerk of the assigned judge no later than ten (10) calendar days (including Saturdays, Sundays and holidays) before the time specified for the hearing.”

However, the court also stated that it did not dispute the amount of time spent on the case, stating, “I want to make it [] perfectly clear [that] I am absolutely certain that counsel put in exactly the amount of time on this case that he says. That is not in doubt. … I am satisfied counsel put in every second that he said he put in on this case.”

Of the $53,000 requested, the court awarded only $15,000, adopting the recommendation of the discovery referee.

Fine

“The trial court here never considered on the record any of the factors. Rather, it deferred to the off-hand assessment of the former judge who, as the Majority notes, was only appointed to be a discovery master. The trial court’s abdication of its responsibility was palpable.”

Hon. Ralph Adam Fine
in dissent

Crivello, who was on the case for four months of the two years it was pending, testified as follows: “I conducted three formal discovery hearings in this case. … Between those hearings I also dealt with a flurry of correspondence and telephone calls from counsel regarding the wording of orders following those hearings. … In thirty years in [the] practice of law, as well as fifteen years as a circuit judge myself[,] I have never seen a $6,000 case grow barnacles the way this one has. … I have served as special master in cases on numerous occasions here in Milwau-kee County since leaving the bench. The only case that I have seen that app-roached this magnitude was … a multi-million dollar insurance case with fifteen defendants, including one British defendant. So without … going through every page of the several thousand pages I have in my possession, I recall three or four instances where I sanctioned [Kolupar’s attorney] myself by barring the presentation of testimony, or documents, or witnesses. … Having examined the case in terms of discovery and evidence over the course of three hearings and months of correspondence, I think that the discovery and evidentiary issues in this case were grossly inflated. This was a two-person transaction for an automobile. … So I would … adopt the offer in judgment and award the plaintiff the $6,600, which apparently she has accepted, and I would award $15,000 from the defendant to the plaintiff in fees. And that is how I would dispose of this case if I were asked to. I am troubled — and I don’t mean to be offensive to these lawyers, who[m] I have a great deal of professional respect for. … And I don’t think this case is worth much more than [$]15,000 in fees. Although I know both sides spent a lot more time than that. When lawyers decide to do that, then they bear the onus of that decision.”

Judge Cooper agreed the matter was over-tried, and adopted the recommendation. Kolupar appealed, but the court of appeals affirmed in a decision written by Judge Patricia S. Curley, and joined by Judge Ted E. Wedemeyer. Judge Ralph Adam Fine wrote a scathing dissent.

Local Rule

The court first held that the trial judge acted within his discretion in refusing to consider the plaintiff’s itemization as untimely.

The court rejected Kolupar’s argument that the rule only applies to motion hearings, and that the request for attorney fees was not a motion within the rule.

The court reasoned, “A ‘motion’ has been defined as an ‘application for an order.’ State ex rel. Webster Mfg. Co. v. Reid, 177 Wis. 612, 616, 188 N.W. 67 (1922).

Thus, we conclude that the trial court properly applied Local Rule 365 because Kolupar’s May 10, 2002 petition for attorney fees was a motion seeking a court order requiring Wilde to pay her attorney’s fees. Thus, no error occurred in refusing to consider the invoice. Furthermore, the implicit rationale of the local rule supports the trial court’s decision. The rule attempts to insure that the parties are completely prepared to argue their positions prior to the hearing and guards against the possibility that one side will be ‘ambushed’ by new material.”

The court added that, even if it was error to not admit the invoice, it was harmless, because the trial judge did not dispute that the invoice was accurate, only whether the fees claimed were reasonable.

Attorney’s Fees

The court next held that the trial court did not err in relying on the referee’s recommendation on attorney’s fees, rejecting Kolupar’s arguments that the referee had only limited familiarity with the proceedings and used flawed reasoning.

The court cited sec. 805.17, which provides, “the findings of a referee may be adopted in whole or part as the findings of the court…”

What the court held

Case: Tammy Kolupar v. Wilde Pontiac Cadillac, Inc., No. 02-1915.

Issue: Is a request for an evidentiary hearing on attorney’s fees, pursuant to a fee-shifting statute, a “motion” for which all supporting materials must be submitted 10 days in advance, as required by Milwaukee County Local Rule 365?

Did a trial court properly exercise its discretion in reducing attorney’s fees for over-litigation based on the recommendation of a discovery referee?

Holding: Yes. A “motion” is an “application for an order,” which encompasses a request for attorney’s fees.

Yes. Where the trial court considered many of the relevant factors, and whether the costs could have been avoided by reasonable effort, it acted within its discret
ion.

Counsel: Paul M. Erspamer, Waukesha, for appellant; Kathryn S. Gutenkunst, Waukesha; Philip J. Atinsky, Milwaukee, for respondent.

The court also cited Aspen Servs., Inc. v. IT Corp., 220 Wis.2d 491, 499, 583 N.W.2d 849 (Ct.App.1998), in which the court held, “in awarding only reasonable fees, the court may consider whether costs could have been avoided by a reasonable and prudent effort,” and, “This premise has been interpreted to mean that [a] plaintiff may not unnecessarily run up its legal bill in the expectation that the breaching party will ultimately pick up the entire tab.”

The court listed the eight factors in SCR 20:1.5(a) for determining the reasonableness of a fee: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.

The court concluded that the trial judge “properly applied many of the relevant factors,” quoting the trial judge as follows: “There is no formula — kind of thumbnail or formula that I operate under…. [T]he state legislature clearly intended in a number of different areas for fee-shifting statutes to cover those situations where a little guy can take on the big guy. And this is one of those cases where the fee-shifting statute comes into play and creates [an] obligation on behalf of Wilde Pontiac. There is no question [that] this case was over-tried. Discovery was over — well over-done. It was over-[pled] right from the get-go on the complaint. There was the shotgun pleading where everything was [pled] against Wilde short of conquering Europe during World War II. … [T]he daunting discovery mountain was created right from the get-go. … I am satisfied that … the majority of [the discovery deadlines that were missed] were missed by plaintiff’s counsel. I think that is what [the discovery referee] intimated in his discussions and his recommendation. … I am persuaded that the state legislature wants the little guy to be able to … go against the big guys, but at the same time that statute doesn’t create a blank check where whatever is spent must be covered by the wrongdoer. … [T]his matter was over-tried. … [I] appreciate [the discovery referee’s] recommendation. I think it’s appropriate. I happen to concur with it. … Reasonable attorney’s fees in my mind [are] $15,000. I am ordering $15,000 … for attorney’s fees and costs.”

From this, the court of appeals concluded, “Thus, the trial court properly considered many of the relevant factors, including the time and labor required, the novelty and difficulty of the questions involved, the skill requisite to perform the legal service properly, the amount involved, and the results obtained. The trial court also properly considered whether the costs could have been avoided by a reasonable and prudent effort.”

Accordingly, the court affirmed.

The Dissent

Judge Fine dissented, beginning, “Wilde Pontiac Cadillac, Inc., and its employee Randall Thompson not only took advantage of an eighteen-year-old woman but they also delayed and obfuscated the litigation process. Indeed, from my review of the record, I believe that they pursued a scorched-earth Rambo-litigation policy that has no place in our justice system (footnote omitted).”

Fine noted that, of the $53,000 requested, $12,000 was for costs, and $3,600 of that was for mediation expenses and payment to the discovery referee that the court ordered.

Fine dismissed the majority’s reasoning as deference “to the unfocused musings by both a former judge, appointed to oversee a small part of the discovery disputes in this case, and the trial court.”

Fine warned, “If the Majority’s decision is allowed to stand, persons like Kolupar will justifiably not only pause with trepidation at the courthouse entrance but, indeed, only the most stalwart will not turn and go away. Thus, despite what they have done, Wilde and Thompson and those like them will have won.”

Fine placed responsibility for the over-litigation squarely on Wilde and Thompson, stating that the case was over-litigated, “because Wilde and Thompson threw obstacles in Kolupar’s path that would make James Bond and his nails- and oil-disgorging Astin-Martin green with envy.”

Links

Wisconsin Court of Appeals

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Case Analysis

As examples, he listed the following: Wilde made no counteroffer prior to the suit being filed; Wilde moved to dismiss on the grounds that the suit was frivolous; Wilde moved to change venue on the basis that Waukesha County jury verdicts are less generous than those in Milwaukee County, even though Kolupar did not even request a jury; Wilde denied that Kolupar was a manager, and then not only refused to turn over his employment file during discovery, but falsely represented to the court that it had done so when it had not; Wilde deposed Kolupar’s friends about Kolupar’s employment as a topless dancer and her desire to have breast-augmentation surgery; Wilde unsuccessfully moved for summary judgment; and Wilde made no offer whatsoever at the first mediation hearing.

Fine wrote, “It is true, of course, that an award of attorneys fees is within the trial court’s discretion, but that discretion ‘must, in fact, be exercised.’ This was not done here. The trial court here never considered on the record any of the factors. Rather, it deferred to the off-hand assessment of the former judge who, as the Majority notes, was only appointed to be a discovery master. The trial court’s abdication of its responsibility was palpable (cite omitted).”

Fine also disagreed with the majority decision upholding the trial judge’s refusal to consider Kolupar’s invoice, stating, “The rule … governs ‘motions’; it does not apply to exhibits offered at trials or evidentiary hearings.”

Fine noted that Kolupar never moved for attorney’s fees, but only demanded them in her complaint, as the statute permits. Instead, the trial court sua sponte set the hearing.

In conclusion, Fine warned that the majority decision will “gut the fee-shifting statutes,” and stated, “In my view, the trial court not only erroneously exercised its discretion in setting the attorneys fees and related costs at $15,000, it did not exercise any discretion. Neither the former judge nor the trial court pointed to anything that Kolupar’s lawyer did that was not justified by the case — beyond their imbricating hunches. The law requires more (emphasis in original).”

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David Ziemer can be reached by email.

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