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State v. Krause

Supreme Court of Minnesota

March 20, 2019

State of Minnesota, by its Commissioner of Transportation, Respondent,
v.
Roger D. Krause, et al., Respondents Below, Douglas Smith, Appellant.

         Court of Appeals Office of Appellate Courts

          Keith 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.

         SYLLABUS

         1. 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 contingent-fee agreement.

         2. The 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.

         Affirmed.

          OPINION

          LILLEHAUG, Justice.

         The 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

         The 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.

         Pursuant 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.

         Using 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."

         The 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 sufficiently ...


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