Usually, lawyers and judges go to law school because they hate doing math. Unless he practices tax law, an attorney usually leaves number crunching and mathematical calculations to the guys with calculator watches and pocket protectors. However, the Supreme Court of Georgia recently called for a different formula.
Georgia’s “Offer of Settlement” Statute, O.C.G.A. § 9-11-68, allows a plaintiff or defendant, to present the other side with an offer to settle the case for a fixed amount, let’s call it x, and if that offer is rejected, the offering party is entitled to reasonable attorney fees and expenses from the date of rejection through entry of judgment. If a plaintiff rejects a defendant’s settlement offer, and at trial, the jury returns either a defense verdict or awards plaintiff less than 75% of x, the defendant can recover his attorney’s fees and expenses. Conversely, if a defendant rejects a plaintiff’s offer and the plaintiff is awarded more than 125% of x at trial, the plaintiff can recover his attorney fees and expenses.
The question that the Georgia Supreme Court recently addressed was what happens to a plaintiff that is allowed to recover under the statute but has a contingency fee agreement with his attorney. It may seem that a mathematical shortcut would be to use the contingency fee agreement to calculate the award. But the Supreme Court says otherwise; it requires that all attorneys, like algebra students, must show their work to get credit and to recover under the statute. It held a plaintiff’s contingency fee agreement is neither an ipso facto showing of reasonableness, nor the proper measure of attorney fees to be awarded. Ga. Dept. of Corr. v. Couch, Case No. S13G1555 (Sup. Ct. Ga. June 16, 2014).
In the Couch case, the Department of Corrections defended a tort suit filed by Couch for injuries suffered while on prison work detail. Before trial, Couch made an offer of settlement for $24,000 which the Department rejected. The case went to trial and the jury awarded Couch $105,417. The trial court also ordered the Department to pay Couch $49,542 in attorney’s fees based on Couch’s 40% contingency fee agreement with his attorney including post-judgment interest. The Georgia Court of Appeals affirmed the award, but the Supreme Court reversed and remanded the case instructing the trial court to re-calculate the attorney’s fees award.
The Supreme Court explained that any fees awarded under the statute must be reasonable, and while proof of a contingency fee agreement might be a factor in evaluating reasonableness, it is not conclusive. Thus, even plaintiff’s attorneys have to show their work if the form “evidence of hours, rates, or other customary indication regarding the value of the attorney’s professional services actually rendered.” Id. at p.29 (emphasis added).
The second error by the trial court was a failure to separate Couch’s attorney fees incurred prior to the Department’s rejection of Couch’s offer from those incurred after rejection. Since a party may only recover fees and expenses incurred from the date of the rejection through entry of final judgment, all parties must show that the fees and expenses sought were actually incurred after the other side rejected the settlement offer. This holding makes the timing of an offer of settlement critical to the overall recovery. The earlier an offer is made and rejected, the more litigation fees and expenses can be recovered.
The unfortunate irony for the Department of Corrections is the law of unintended consequences. By winning their attorney fees argument on appeal, the Department may end up paying an even larger attorney fee award to Couch if Couch’s attorneys can show that their fees totaling $92,475 (from the date of the rejection of Couch’s offer through final judgment) are reasonable. Of course, to get credit, they and the trial court will have to show their work.
by Matt G. Moffett & Rishi D. Pattni
