State of Minnesota, by its Commissioner of Transportation, Respondent,
Roger D. Krause, et al., Respondents Below, Douglas Smith, Appellant.
of Appeals Office of Appellate Courts
Ellison, Attorney General, Jeffery S. Thompson, Assistant
Attorney General, Saint Paul, Minnesota, for respondent.
Bradley J. Gunn, Patrick B. Steinhoff, Malkerson Gunn Martin
LLP, Minneapolis, Minnesota, for appellant.
Based on a framework established by the United States Supreme
Court, Minnesota has adopted and applied the
"lodestar" method for awarding statutory attorney
fees. Under that method, the lodestar amount may not be
enhanced for the risk of non-recovery inherent in a
district court's enhanced attorney-fee award, made
without factual findings and based in part on the risk of
non-recovery inherent in a contingent-fee agreement, was an
abuse of discretion.
sole issue in this condemnation case is the award of
statutory attorney fees. The district court awarded $168,
009.12 in attorney fees to the landowner under the
condemnation fee-shifting statute, Minn. Stat. §
117.031(a) (2018). The court of appeals reversed.
Comm'r of Transp. v. Krause, No.
A17-1362, 2018 WL 2187043 (Minn.App. May 14, 2018). We
granted review to decide whether the award was reasonable
under the lodestar method. Because the district court
misinterpreted and misapplied our lodestar precedent, we
affirm the decision of the court of appeals and remand to the
district court to recalculate the attorney-fee award.
facts in this case are not in dispute. In 2008, the Minnesota
Department of Transportation (the State) condemned
approximately 44 acres of appellant Douglas Smith's
property. The State offered to compensate Smith in the amount
of $361, 200. Smith rejected the offer. In July 2015, an
updated appraisal that the State obtained concluded that the
property was worth $1, 081, 000. Two months later, Smith
accepted an award in the amount of the updated appraisal and
the condemnation case settled.
to Minn. Stat. § 117.031(a), Smith moved for $168,
009.12 in attorney fees, the amount that he had paid to his
counsel under a "hybrid" fee agreement. The hybrid
fee consisted of a reduced hourly rate (half of counsel's
normal hourly rate), plus a contingency fee of 16.5 percent
of the total amount received over the State's last offer.
the lodestar method, the district court awarded Smith the
amount that he requested: $168, 009.12 for 82 hours of work
by Smith's counsel, or over $2, 000 per hour. The record
shows that counsel's regular hourly rate was $350 to
$430. Although not the "controlling factor," one
factor the district court considered was the contingent-fee
agreement: "[T]he fee agreement is a good indication of
the risk for the attorney when taking a condemnation
case." The court opined that the landowner had
"paid what he considers to be fair market value for the
services rendered by" his attorney. In addition to the
contingent-fee agreement, the court considered the factors
of: "the hours reasonably expended and the reasonable
hourly rate; the time and labor required; the nature and
difficulty of the responsibility assumed; the amount involved
and the results obtained; the fees customarily charged for
similar legal services; and the experience, reputation, and
ability of counsel."
State appealed. In an unpublished decision, the court of
appeals reversed the award because the district court failed
to begin its calculation with the presumptive lodestar amount
of $34, 133, which is the product of a reasonable hourly rate
multiplied by the number of hours reasonably expended.
Comm'r of Transp., 2018 WL 2187043, at *1. The
court of appeals also held that the district court did not