A recent Daily Report story, “Justices Say That Fee Shifting Can’t Rest Solely on Contingency Fee,” reports that how much in attorney fees to a plaintiff under Georgia’s offer of judgment statute cannot be based solely on a contingency agreement the plaintiff has with a lawyer, the Georgia Supreme Court ruled Monday.  Less than $100,000 in fees were at stake in the case decided by the justices, but both sides of the civil bar were watching it closely.

Holland & Knight partner Laurie Webb Daniel of Atlanta, cheered the decision, saying it means a plaintiff seeking fees under the offer of judgment statute will not be able to rely on a contingency agreement alone.  “In general,” said Daniel, “I think people seeking fees under this statute need to submit evidence of the time they invested in the case during the relevant time period.”

Daniel’s opponent in that case William Stone of Boone & Stone, disputed how much evidence the court would require under the ruling to justify fees.  “I don’t think we have to demonstrate hours,” Stone said, adding that lawyers could prove the value of their services though expert testimony and other means.  He said plaintiff’s lawyers nonetheless may start tracking their time—and making offers of settlement early in their cases.  He said the decision would “spawn a whole lot of arguments before we get to the bottom of it and figure out what it really means,” said Stone.

The offer of judgment statute says that a party who rejects a settlement offer, then doesn’t do much better when the case is decided in court, may have to pay the other side’s fees from when the offer is rejected through the entry of the case.  The law, adopted by the Legislature in 2005 is supposed to deter frivolous suits and encourage settlements.  Some plaintiffs lawyers spoke out against the rule when it was passed and when it was challenged, unsuccessfully, as unconstitutional.

But plaintiffs and their lawyers have discovered that they can benefit from the rule, too, especially if the fees are based on a large verdict.  In the case Daniel and Stone are litigating, Stone’s client won a $40 million verdict and was awarded attorney fees based on Stone’s one-third contingency fee agreement with his client.

In the case decided by the justices Monday, however, the plaintiff would have fared better had the attorney fee award been based on the hours his lawyers put into the case.  The issue came to the high court because the defendant, the state of Georgia, objected to any payment of attorney fees.

Walker State Court Judge Charles Peppers awarded $49,542, the equivalent of a full contingency fee based on the total recovery of $123,855, which includes the verdict, post-judgment interest and court costs.  He also added more than $4,700 in expenses.

In Monday’s 33-page opinion (pdf) for the unanimous high court, Justice David Nahmias said the trial judge had erred in that the record provided no indication he had relied on the time records submitted by the plaintiff’s lawyers.  “While certainly a guidepost to the reasonable value of the services the lawyer performed, the contingency fee agreement is not conclusive, and it cannot bind the court in determining that reasonable value, nor should it bind the opposing party required to pay the attorney fees, who had no role in negotiating them,” wrote Nahmias.  He rejected the notion that Couch could obtain the entire contingency fee because he did not incur any fees until entry of judgment, Nahmias saying that Couch’s lawyers were performing services on his behalf from the start of the lawsuit, if not before.