“Reasonable Attorney’s Fees” Awarded On a Missouri Merchandising Practices Act Claim May Not Be Limited By a Plaintiff’s Contingency Fee Agreement With CounselJanuary 5, 2018 | Robert Chandler
In Selleck v. Keith M. Evans Insurance, Inc., the Missouri Court of Appeals for the Eastern District remanded a case back to the trial court for further consideration on the reasonableness of an award of attorney’s fees, under the Missouri Merchandising Practices Act. The trial court ruling limiting plaintiff’s fees based upon his contingency fee agreement with his attorney was overturned.
Plaintiff sued his former employer in state Circuit Court for wrongful discharge, unpaid commissions under the MMPA, unjust enrichment and breach of contract. The litigation was “contentious” and “antagonistic”, with numerous discovery disputes. At trial, plaintiff requested damages for wrongful discharge in the amount of $160,000 and lost commissions in the amount of $11,709. Plaintiff presented evidence at trial that he had hired counsel on a contingency fee basis. The jury ruled for Defendant on the wrongful discharge claim, but awarded Plaintiff $10,000 for lost commissions on his MMPA claim.
Plaintiff’s counsel filed a post-trial motion seeking attorney’s fees in the amount of $221,292 under § 407.193, which states that a trial court “may award reasonable attorney’s fees and costs to the prevailing party.” Plaintiff’s counsel represented that they billed 788 hours by attorneys with hourly billing rates of $280 and $450. Noting that Plaintiff has entered into a one-third contingency fee agreement with counsel, the Court ruled that Plaintiff was entitled to reasonable attorney’s fees and awarded $3,333.33, or one-third of the $10,000 recovery. The Court found that the $221,292 claimed by plaintiff’s counsel was not reasonable and extremely excessive for the type of case involved. Plaintiff appealed.
Contingency Fee Agreement Does Not Serve as a Cap on MMPA Attorney’s Fees
Plaintiff’s single point on appeal was that the trial court erred in utilizing the contingency fee agreement to determine the award of attorneys’ fees under the MMPA. The Court of Appeals agreed. Although Missouri law does not prohibit consideration of a contingency fee agreement in making a reasonable-fee determination, it is only one of many factors that must be considered. However, the agreement cannot be used to impose an automatic ceiling on reasonable fees to be awarded. The Court must also consider other factors, including a determination of a “lodestar” amount – determined by multiplying the reasonable number of hours for the type of case by a reasonable hourly rate determined by rates customarily charged by the attorneys involved as well as other attorneys in the community offering similar services.
Concluding that the Circuit Court had used the contingency fee agreement to determine a cap on reasonable fees for Plaintiff’s counsel, the Court of Appeals reversed, and remanded the matter to the trial court for a determination of a reasonable fee based upon not only the contingency fee agreement, but also:
-the number of hours reasonably expended on the case,
-the nature and character of the services rendered,
-the degree of professional ability required,
-the nature and importance of the matter,
-the amount involved or the results obtained, and
-the vigor of the opposition.
Conclusion - Guidance for the Future
Although a contingency fee agreement may be considered in determining reasonable attorney’s fees under the MMPA, it is but one of many factors for the trial court to assess. The contingency fee provided for in the agreement cannot be used as a “cap” on MMPA attorney’s fees.
In Shallow v. Follwell, the Missouri Court of Appeals for the Eastern District of Missouri reversed and remanded a jury’s verdict for defendant Dr. Follwell, holding the trial court improperly allowed cumulative expert witness testimony that imperiled the jury’s ability to fairly consider the quality and quantity of expert witness opinions.
The case involved a surgical mesh procedure to repair decedent’s hernia. After the doctor twice within 24 hours discharged the patient from the hospital, she returned to the hospital a third time, where she was diagnosed with a severe infection in her abdominal cavity, caused by leakage of toxic and infectious bowel contents into her abdomen. She died soon thereafter.
At trial, Dr. Follwell – designated as a fact and expert witness on his own behalf – did not dispute that decedent’s bowel was perforated, leaked, and caused the septic condition that led to her death. He denied that he caused the hole in her bowel, however, and presented his alternative theory that decedent suffered from undiagnosed atrial fibrillation, which caused a blood clot to form, restricted the blood flow to that section of decedent’s bowel, and ultimately weakened and perforated the bowel wall. Four other retained experts testified for Dr. Follwell: (1) a critical care specialist; (2) a cardiologist and internist; (3) a vascular surgeon; and (4) a colorectal surgeon.
While there is no “bright line” rule as to how many expert witnesses a party may utilize to prove or defend its case, Missouri trial courts are charged with admitting evidence that is both logically and legally relevant. The concept of legal relevance includes whether the evidence may, among other things, pose a danger of unfair prejudice, be a waste of time, and amount to the needless presentation of cumulative evidence. Missouri courts have expressed concern that excessive cumulative evidence risks invading the jury’s ability to resolve the case on the merits and evaluate the quality and credibility of expert opinions. Cumulative expert opinions may instead result in the jury simply “counting heads.” The Shallow v. Follwell court held that the trial court abused its discretion in failing to properly determine when cumulative evidence should stop.
It was not just the number of defendant’s experts that caused the Court of Appeals to reach its conclusion. Rejecting the defendant’s claim that each expert’s testimony was limited to his own area of medical expertise - cardiology, internal medicine, critical care, the vascular system, and the gastrointestinal system - the Court of Appeals ruled that what actually happened was that each expert presented his expert opinion in his own area of expertise, but also repeated the sum and substance of the defense’s alternative theory of causation, in testimony that extended beyond the expert’s specialty. The jury therefore heard the same opinions multiple times – essentially a “chorus of the same ultimate opinions” – which impeded its duty and ability to fairly weigh the evidence on each side.
In returning the case to the Circuit Court for a new trial, the Court of Appeals chastised the trial court for “ignoring its duty to properly assess whether the testimony was needed,” and reminded the trial court “to adhere to the principles and standards set forth in this opinion and elsewhere in Missouri law for determining the admissibility of cumulative evidence.”
Candy manufacturers nationwide are increasingly finding themselves in Missouri state court, facing class action allegations that their use of over-sized packaging misleads consumers into believing the package contains more product than is actually present. A recent Eighth Circuit decision in a “slack-fill” case suggests that when a corporate defendant removes to federal court under the Class Action Fairness Act (CAFA), it may face a stiff challenge when the plaintiffs move to remand the case to state court, on the grounds that the value of their claims total less than $5 million.
In Waters v. Ferrara Candy Co., people who bought Red Hot candies initiated claims against the candy company for violation of the Missouri Merchandising Practices Act (“MMPA”) based on under-filled or “slack-filled” cardboard boxes of the candies. The consumers filed suit in the City of St. Louis Circuit Court. Presumably seeking a less plaintiff-friendly venue, the candy company removed the case to the federal court for the Eastern District of Missouri, under CAFA, arguing that the total value of the consumers’ claims exceeded $5 million, the minimum amount required for the district court’s jurisdiction under that statute. The candy company based its calculation on what the consumers could potentially recover as compensatory damages (total sales in Missouri for the past five years), attorney’s fees (at 40% of compensatory damages), and punitive damages (at 5 times compensatory and punitive damages), and the cost of changing its packaging processes to eliminate slack-fill.
The consumers moved to remand the case back to the City of St. Louis, arguing that the $5 million threshold was not met. In opposition, the candy company submitted affidavits from executives attesting to the total retail sales of all Red Hots products for the previous five years and how much it would cost to change its packaging processes to eliminate slack-fill, if it were compelled to do so.
The district court considered each category of potential recovery by the consumers and concluded that taken together or separately, the value of the consumers’ claims did not meet the $5 million threshold and ordered the case back to the City of St. Louis. The court concluded that compensatory damages and attorney’s fees added up to less than $1 million, and that punitive damages should not be included in the calculation, because the consumers had not adequately pled punitive damages in their petition and, therefore, punitive damages would not be recoverable in this case. That left the value of injunctive relief. In deciding how to calculate the value of injunctive relief, the court followed “longstanding Eighth Circuit tradition” and looked at it from the consumers’ point of view, rejecting the “either viewpoint” test, which compares the value of injunctive relief to consumers to the cost to the manufacturer and taking the more expensive of the two. The candy company urged adoption of the “either viewpoint” test but presented no evidence of the value of injunctive relief from the consumers’ point of view, so the court disregarded this factor as well.
The court went on to criticize the efficacy of the candy company’s affidavits to establish the cost of injunctive relief from the manufacturer’s point of view. The CEO’s affidavit addressed the cost of changing its packaging to eliminate slack-fill based on an estimated cost to upgrade its packing equipment. The court found this to be speculative because it did not specify what injunctive relief would actually require the manufacturer to do -- add more candy to the existing package size, shrink the package size to more closely fit the current weight of actual candy, or modify every Red Hots candy production line. As a result, the court found the proposed cost to be too speculative to allow the consumers’ to rebut it.
The candy company appealed this decision, challenging (among other things) the district court’s adoption of the “plaintiff’s viewpoint” test. The Eighth Circuit Court of Appeals was unmoved. The appeals court found it unnecessary to rule on whether the district court should have applied the “plaintiff’s viewpoint” or the “either viewpoint” test, because it found that under either standard, the candy company failed to prove by a preponderance of the evidence that the amount in controversy exceeded $5 million. The appeals court agreed with the district court that the two affidavits did not adequately quantify what it would cost the company to comply with an injunction.
Given another chance, the Eighth Circuit might decide that the “plaintiff’s viewpoint” test determines the value of injunctive relief for establishing the jurisdictional amount under CAFA. Thus, a reasonable and conservative strategy to keep a slack-fill class action in federal court would be to present evidence from the consumers’ point of view and be as specific as possible about the method and cost of eliminating slack-fill. This is a calculus that can be accomplished before deciding to remove, and if neither of these amounts can be supported with specific evidence to establish a finding of at least $5 million, it might be more cost effective to just stay in state court.
Counsel should also keep in mind that in cases where plaintiffs have adequately pled punitive damages in their state court petition (which did not occur in the Waters case), it is not uncommon for punitive damages to total up to 10 times the amount of compensatory damages, and this can be a critically important factor in determining whether the CAFA threshold has been met.
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