Trial Court Did Not Determine ‘Reasonableness’ Of Requested Attorney Fees
An attorney fee award in this divorce action must be vacated, the Michigan Court of Appeals has ruled, because the trial court did not make a finding as to whether the requested fee was reasonable.
Accordingly, the Court of Appeals remanded the decision in O’Neil v O’Neil (Docket Nos. 359878 and 361857) for an evidentiary hearing to determine the reasonableness of the plaintiff’s requested attorney fee.
“The trial court awarded plaintiff her actual fees, the total amount indicated on her invoices, rather than making a reasonableness determination,” the Court of Appeals said. “This was improper.”
Judges Jane E. Markey, Kathleen Jansen and Kirsten Frank Kelly were on the panel that issued the unpublished opinion.
Background
The plaintiff and the defendant have two daughters together. They entered into a confidential divorce settlement agreement in August 2018.
The agreement included a division of the marital property. In exchange for the plaintiff’s interest in the parties’ company, D&M Truck, Tire and Repair, the defendant was to pay the plaintiff $10,000 a week for 520 weeks, totaling $5,200,000. The parties were each awarded certain real property, as well as several vehicles, including personal automobiles, snowmobiles, boats, jet skis, motor homes, trailers and classic cars. Pursuant to the settlement agreement, the defendant was responsible for all marital debt and the payment of one daughter’s American Express credit card bills. A consent judgment of divorce was entered on September 21, 2018, which incorporated by reference the settlement agreement.
In June 2019, the plaintiff filed several motions with the Macomb County Circuit Court to enforce the property settlement. She alleged the defendant failed to pay the weekly property settlement payments or marital debts, including delinquent property taxes on real estate awarded to the plaintiff and their daughter’s outstanding American Express bills. The plaintiff also asserted the snowmobiles she was awarded were missing from her property and she sought attorney fees under MCR 3.206. The trial court entered a money judgment as agreed to by the parties.
A few months later, the plaintiff filed various motions to hold the defendant in civil contempt for not making the weekly payments. An evidentiary hearing was held and several issues were before the court, including the plaintiff’s request for attorney fees. Both parties testified at the hearing and stipulated the defendant owed $216,000 in outstanding weekly non-payments. The parties agreed to submit written closing arguments.
However, no further action occurred in the case until October 2021, when the plaintiff filed a motion for the entry of orders and production of documents. She claimed the parties entered a private settlement agreement ordering the defendant to pay $216,626.19 for the missed weekly payments and interest. The plaintiff asserted the trial court had asked her attorney to prepare an order requiring the defendant to produce his American Express records at the end of the evidentiary hearing, and when the orders were presented to defense counsel, he did not respond or object. Ultimately, the defendant did not pay or produce the documents. The trial court ordered the parties to submit written summaries of the outstanding issues, updated amounts owed and proposed orders.
On December 20, 2021, the trial court entered an opinion and order, adopting the proposed order submitted by the plaintiff. The trial court found the defendant owed the plaintiff $67,626.19 of the $216,626.19 money judgment and the plaintiff was owed the replacement costs of the missing snowmobiles. The defendant was ordered to pay 1) the outstanding American Express statements, as well as interest the plaintiff had paid and 2) the property taxes outstanding as of the signing of the settlement agreement. The trial court also awarded the plaintiff attorney fees.
The defendant appealed.
Attorney Fee Award
In its analysis, the Court of Appeals pointed out that a trial court’s award of attorney fees is reviewed for an abuse of discretion, pursuant to Smith v Khouri, 481 Mich 519 (2008).
“The general ‘American rule’ is that attorney fees are not ordinarily recoverable unless a statute, court rule, or common-law exception provides the contrary,” the Court of Appeals wrote. “When attorney fees are awarded, the amount is for reasonable attorney fees, not actual fees. … The burden to prove that attorney fees are reasonable rests on the party claiming them.”
When the reasonableness of a requested fee is challenged, “’it is incumbent’ that the trial court conduct an evidentiary hearing to determine what services were actually rendered and the reasonableness of those services,” the Court of Appeals explained. “While there is no precise formula to determine reasonableness, the court must consider the following factors: (1) the skill, time, and labor involved; (2) the likelihood, if apparent to the client, that the acceptance of the employment will preclude other employment by the attorney; (3) the fee customarily charged in that locality for similar services; (4) the amount in question and the results achieved; (5) the expense incurred; (6) the time limitations imposed by the client or the circumstances; (7) the nature and length of the professional relationship with the client; (8) the professional standing and experience of the attorney; and (9) whether the fee is fixed or contingent. … The court should briefly discuss its review of the factors on the record.
Here, when the plaintiff’s attorney addressed fees at the evidentiary hearing in December 2020, “she had sent her bills to defense counsel in case he wanted to object, rather than going through each charge on the record,” the Court of Appeals observed. “The court stated its obligation to determine the hourly rate and reasonableness in order to make an award, and suggested a ‘streamlined’ process for the parties to follow – if the parties could stipulate to an hourly rate, they could exchange bills, redline the charges they disagreed with, and then return to court to discuss only the redlined, challenged bills. Counsel for both sides agreed to this procedure.”
But after the evidentiary hearing concluded on January 14, 2021, “it does not appear that this procedure was followed,” the Court of Appeals said. “It was not until October 5, 2021, that plaintiff moved for the entry of an order, and the parties were ordered to submit supplemental briefs and proposed orders by December 10, 2021. Plaintiff relied on Exhibit 7 admitted at the evidentiary hearing, which contained invoices from plaintiff’s counsel dating back to 2018, totaling $109,602.54.”
Meanwhile, the defendant “asserted in his supplemental brief that plaintiff was not entitled to attorney fees under the provision of the judgment of divorce stating that each party was responsible for their own attorney fees, and that she had no need for attorney fees because he had paid her at least $606,000 in 2021,” the Court of Appeals said. “Although defendant was given an opportunity to object to the amount of attorney fees plaintiff requested in his advisory brief, and he did not specifically assert that the $350 per hour rate was not reasonable, no evidentiary hearing was held to determine the proper hourly rate or assess the reasonableness of the fees. There is no evidence of a direct stipulation by defense counsel that $350 per hour was a reasonable hourly rate. Nor did the trial court make any record regarding the reasonableness of the fees, or consideration of the relevant factors.”
Rather than making a reasonableness determination, the trial court awarded the plaintiff her actual fees, which was the total amount indicated on her invoices, the Court of Appeals explained. “This was improper.”
In addition, the consent judgment of divorce provided that “each party shall be responsible for the payment of their own attorney fees and costs” in connection with the divorce action, the Court of Appeals noted. “The plaintiff filed for divorce on January 9, 2018, and the invoice submitted dates back to January 18, 2018. However, the judgment of divorce was not entered until September 21, 2018. Thus, the trial court erred in awarding plaintiff attorney fees up through the date of entry of the judgment of divorce, which begins on page 16 of 39 of the bill invoices. Again, the court improperly awarded actual costs rather than making a reasonableness determination. The court should consider the language of the consent judgment on remand in determining plaintiff’s eligibility for attorney fees and the proper amount, if any.”
The trial court “erred in awarding plaintiff attorney fees without making a finding of reasonableness,” the Court of Appeals held. “We therefore vacate the award of attorney fees and remand for an evidentiary hearing for the trial court to determine the reasonableness of the fees requested, and what amount, if any, plaintiff is entitled to.”
Other Arguments
The defendant further argued on appeal that the trial court entered the opinion and order in violation of MCR 2.602(B) because it did not follow the seven-day rule.
“We disagree,” the Court of Appeals stated. The defendant’s claim that the trial court violated MCR 2.602(B)(3) “is a misinterpretation of the record,” the appeals court observed. “When the court ordered both parties to submit supplemental briefs and proposed orders, it was not ‘[w]ithin 7 days after the granting of the judgment or order.’ The court had not granted any relief at that point. It made no rulings at the evidentiary hearing. The evidentiary hearing ended with the parties agreeing to submit written closing arguments. Thus, the opinion and order entered on December 20, 2021 more appropriately falls under MCR 2.602(B)(1) because the court signed the order ‘at the time it grant[ed] the relief provided by the judgment or order.’ The court agreed with plaintiff’s position, and adopted the proposed order that she submitted. This does not constitute plain error affecting defendant’s substantial rights.”
The defendant also maintained the trial court wrongly ordered him to pay the outstanding marital debt at the time the judgment of divorce was entered, including outstanding property taxes and his daughter’s credit card bills.
“We disagree,” the Court of Appeals said. “Here, the parties entered the settlement agreement, which was incorporated by reference into the judgment of divorce. The court is bound to uphold such settlements and cannot set them aside absent fraud, duress, or mutual mistake. … The court, however, can clarify ambiguous language provided it does not change the substantive rights of the parties. … Shortly after plaintiff filed for divorce, the court entered the ex parte order to maintain the financial status quo ….”
Despite the “clear and unambiguous language” of the ex parte order and settlement agreement, the defendant claimed that he did not have to pay the delinquent property taxes on the parties’ properties outstanding at the time the judgment of divorce was entered “because within each specific award of property in the settlement agreement, there included the clause that the party awarded that property ‘shall assume and pay all liabilities on the [awarded] property, including … taxes, … and shall indemnify, defend and hold [the other party] harmless therefor,’” the Court of Appeals said. “However, when read in context, this language in each property award referred to any tax liability incurred after the settlement agreement and judgment of divorce was entered.”
Consent judgments of divorce are contracts and are treated as such, the Court of Appeals explained. “Unambiguous contracts must simply be enforced as they are written. … As such, the trial court did not err when it determined that defendant’s interpretation of the settlement agreement was inconsistent with the provision in the judgment of divorce preserving claims for status quo violations, and that defendant should have paid the delinquent property taxes under the status quo order. Therefore, the trial court properly granted plaintiff’s motion to enforce the judgment of divorce by ordering defendant to pay the outstanding property taxes on the real estate awarded to plaintiff in the settlement agreement.”
Regarding the American Express bills, the defendant asserted the trial court erroneously ordered him to pay the outstanding balance because his daughter “is an adult and a third party to the divorce proceedings,” the Court of Appeals said. “However, the settlement agreement unambiguously ordered him to pay off these balances. Moreover, plaintiff testified at the evidentiary hearing that she was paying the accrued interest on the card to prevent damage to her and [her daughter’s] credit scores, which only continued to accrue as a result of defendant’s nonpayment. Therefore, the trial court properly granted plaintiff’s motion to enforce the judgment of divorce by ordering defendant to pay off the outstanding amounts on [the] Amex cards as well as any accrued interest that plaintiff had paid and would continue to pay until the balances were paid off.”
