Contingency Fee Agreement Cannot Be Sole Basis For Attorney Fee Claim

The Georgia Supreme Court recently issued an opinion which clarifies how trial courts should calculate the amount of attorney fees owed to a plaintiff after an offer of settlement has been rejected.  The case is Georgia Dept. of Corrections v. Couch.

O.C.G.A. § 9-11-68, commonly referred to as the “offer of settlement” statute, provides for attorney’s fees to parties whose settlement offers are rejected.  When a defendant makes an offer to settle pursuant to the statute which is then rejected by the plaintiff, the defendant can recover attorney fees from the date of rejection if the verdict obtained by the plaintiff is less than 75% of the offer.  For example, if a defendant offers to settle the case for $100,000, then the plaintiff must obtain a verdict of at least $75,000 to avoid paying the defendant’s attorney’s fees.  Conversely, a plaintiff may also take advantage of the offer of settlement statute and recover attorney fees if the verdict amounts to more than 125% of the rejected offer amount.  Using the previous example, if a plaintiff’s offer to settle the case for $100,000 is rejected, then the plaintiff can recover its attorney’s fees with a verdict of more than $125,000.

A defendant’s attorney’s fees are easily calculated, as defense attorneys are typically paid by an hourly rate.  However, a plaintiff’s attorney is usually paid on a contingency arrangement, meaning the attorney receives an agreed-upon percentage of the amount recovered at trial as the fee.  Until the decision in Couch, it was unclear how the trial court should calculate attorney fees for a plaintiff whose offer pursuant to the statute was rejected.

In Couch, the plaintiff was entitled to attorney’s fees after the jury returned a verdict greater than 125% of his prior settlement offer.  The trial court determined that the fees should be awarded based on the contingency fee agreement between Couch and his attorneys – 40% of Couch’s ultimate recovery.

Instead, the Supreme Court found that the award of attorney fees could not be based solely on the contingency fee agreement.  Rather, the trial court should have considered evidence of the reasonable value of the work Couch’s attorneys performed, such as evidence of the amount of hours worked and testimony regarding the hourly rate for attorneys with similar experience.

More importantly, the Supreme Court held that Couch was not entitled to recover all of his attorney fees – only the amount of fees incurred from the date of the rejection of the offer through the entry of judgment.  This decision is particularly helpful for defendants.  Defendants facing a potential attorney fees award for a rejected settlement offer will not necessarily be bound by the contingency agreement between the plaintiff and the attorney.  Defendants also will not be responsible for all of the plaintiff’s attorney fees incurred from the very beginning of the case.

If you have any questions or would like a copy of this opinion, please let us know.

No Duty to Defend Owed by Insurer in Teacher Abuse Case

On Monday April 7, 2014 Judge Thomas Thrash of the United States District Court for the Northern District of Georgia ruled in favor of our client, National Casualty Company (“National Casualty”) in a declaratory judgment action arising out of extreme claims of teacher abuse. David Sawyer and I represent National Casualty. National Casualty Company v. Melanie Pickens, et al.

RP was a student at Hopewell Middle School in Atlanta from 2004-2007. She had been diagnosed with Down syndrome and suffered from other medical ailments. Melanie Pickens was her special education teacher. RP and her parents filed suit against Pickens asserting various state law claims and civil rights violations and alleged that Pickens had committed multiple shocking and offensive acts, such as:

  • Screaming at RP and the other children on a daily basis;
  • Burping in the faces of RP and the other children;
  • Shaking her breasts and pressing them on the faces of RP and the other children;
  • Pressing her buttocks into the faces of the faces of RP and the other children and passing gas;
  • Cursing at RP and the other children;
  • Often using vulgarities in front of RP and the other children;
  • Spraying RP with Lysol and putting her out in the hallway after RP passed gas in class.

RP alleged that those acts were committed “with deliberate indifference towards the rights of [RP] and with specific intent to injure her.”

National Casualty was an insurer for the Professional Association for Georgia Educators and defended this lawsuit under a reservation of rights. We filed a declaratory judgment action on behalf of National Casualty seeking a ruling that, based upon the allegations of the complaint, there was no requirement that National Casualty defend or indemnify Ms. Pickens. Specifically, three exclusions in the insurance contract relieve National Casualty from any liability: the intentional acts exclusion, the criminal acts exclusion, and the sexual misconduct exclusion. Ms. Pickens did not answer the Complaint. RP opposed our motion for summary judgment on the coverage issues.

Judge Thrash restated the general principles of Georgia law which provide that an insurer’s duty to defend turns on the language of the insurance contract and the allegations of the complaint asserted against the insured.  “Although the provisions of an insurance policy will be construed against the insurer when a part is susceptible of two constructions . . . if the language is unambiguous and but one reasonable construction is possible, the Court will enforce the contract as written. To excuse the duty to defend, the [lawsuit] must unambiguously exclude coverage under the policy . . . and thus, the duty to defend exists if the claim potentially comes within the policy.”

Judge Thrash found that the “intentional acts” exclusion of National Casualty policy relieved it of liability for all of the acts alleged by RP. The acts which gave rise to RP’s lawsuit were deliberate.  Even though RP also asserted a negligence claim against Pickens, Judge Thrash held this claim nonetheless arose from Pickens intentional acts.

RP argued, among other things, that the criminal acts exclusion of the policy does not apply because Pickens was found to be immune from criminal liability. Even if this were true, according to Judge Thrash, the intentional acts exclusion still relieved National Casualty of any liability in connection with RP’s lawsuit. Therefore, National Casualty had no duty to defend Pickens and no duty to indemnify her for any liability that may arise from RP’s lawsuit.

We expect this ruling to be appealed to the 11th Circuit Court of Appeals. Please let me know if you would like a copy of the opinion.

Court of Appeals Further Clarifies Law on Apportionment of Fault to Non-Parties

The Georgia Court of Appeals recently issued a decision which clarifies the amount of evidence needed for juries to consider the fault of someone who is not a party to the lawsuit.  Through a pleading known as a notice of non-party fault, a defendant can ask the jury to apportion a percentage of fault to a non-party.  Until the Double View Ventures, LLC v. Polite decision issued on March 26, 2014, it was not clear how much evidence of the non-party’s fault was required in order to put that non-party on the verdict form.

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A Win in a Construction Site Accident Case

On March 27, 2014 the Georgia Court of Appeals ruled for our client, RFM Development Company (“RFM”), in a lawsuit in which the Plaintiff was severely injured when he fell through an uncovered hole on a construction site where he was working. Seimer et al vs. RFM Development Co. et al. Nicole Leet and I represent RFM and were successful in obtaining summary judgment in the State Court of Cobb County on behalf of RFM. The Plaintiff appealed and the Court of Appeals agreed that summary judgment for RFM was appropriate.

Plaintiff Steve Pickelsimer was a temporary worker employed by Bradford Building Company (“Bradford”), a general contractor building a Walgreens Pharmacy in a shopping center being developed by RFM (the property was owned by our client and co-defendant RFM Bremen, LLC which also was granted summary judgment). RFM hired Bradford and signed a standard American Institute of Archictects (AIA) contract which contained general provisions regarding the owner’s right to stop work. The same contract indicated that Bradford would be solely responsible for, and have control over, construction means, methods, techniques, etc. Bradford was tasked with maintaining and supervising all safety precautions and programs in connection with the performance of the work. Under the contract, Bradford was required to take reasonable precautions for the safety of employees on the worksite. In his deposition, the president of RFM testified that RFM had the right to “direct” the work but that Bradford controlled it. He stated “we paid for it, but we didn’t control it.”

Mr. Pickelsimer was injured in August of 2008 when he stepped through a hole which was usually covered with an unsecured, unmarked forty pound piece of plywood. Mr. Pickelsimer fell twenty-five feet suffering a brain injury. He had no recollection of the accident or the events leading up to it.

In his lawsuit against RFM, Plaintiff contended that by contract RFM had retained sufficient control over the property so as to make it liable for this injury. The trial court found that summary judgment was appropriate because undisputed evidence, including the contract, showed that RFM had not retained any control over Bradford’s method of work; RFM had not expressly assumed responsibility for compliance with OSHA regulations; and RFM was not a “controlling employer” for purposes of the so called “multi-employer doctrine.”

The Court of Appeals agreed, finding that a property owner who surrenders possession and control of its property to an independent contractor generally is not liable for injuries sustained by the contractor’s employees on the property due to unsafe conditions. The Court of
Appeals ruled that RFM did not retain the right to direct the time, manner, methods and means of execution of the work but only contractually retained the right to insist that Bradford perform the work pursuant to the contract. Nothing in the AIA contract relied on by the Plaintiff created sufficient “control” over the work on behalf of RFM. Undisputed evidence showed that the RFM officer supervising the progress of the construction project stopped by the site infrequently and usually did not even get out of his car. Even if RFM retained the right to enter the premises for the limited purpose of checking on the progress of the work, RFM did not retain the right of supervision and Bradford was entirely free to do the work in its own way.

As to Plaintiffs argument that OSHA’s multi-employer doctrine applied and RFM was a “controlling employer” the Court of Appeals found that the Plaintiff had not provided sufficient legal argument on this issue. Although not cited by the Court of Appeals, we retained a former OSHA director as an expert who testified that RFM was not, in fact, a “controlling employer” and the multi-employer doctrine did not apply.

Please let us know if you would like a copy of this opinion.

Ford Punished for Failure to Disclose Insurance Coverage

On February 24, 2014 in Ford Motor Co. v. Conley the Georgia Supreme Court ruled that Plaintiffs who filed a product liability lawsuit against Ford were entitled to a new trial even though a jury had found in favor of Ford and the Plaintiffs had not appealed the verdict. Ford will be faced with a retrial because it failed to disclose all available insurance coverage for jury selection and represented to the Court and the Plaintiff that it was “self-insured.”

Jordan and Renee Conley filed a product liability lawsuit against Ford in the State Court of Cobb County based on a rollover accident that occurred in April of 2006. After nearly two years of pretrial discovery the case went to trial in November of 2009. The jury, which was not qualified as to relationships with any of Ford’s insurers, returned a verdict in favor of Ford on November 19, 2009. The trial court entered judgment on the verdict in late November 2009 and the Conleys did not appeal.
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Plaintiff’s Complaint Dismissed With Prejudice and Attorneys’ Fees Awarded for Discovery Abuse

Recently, Chris Ziegler, Debbie Haan, and I successfully represented our client, the owner of a building in DeKalb County, in a lawsuit brought by a former tenant who claimed that roof leaks had substantially damaged its property and cost it millions of dollars in lost business.  At the close of discovery, we filed a motion to dismiss the Plaintiff’s complaint for withholding relevant documents until the very end of discovery and violation of a prior Order from the court.  After several hearings, Judge Stacey Hydrick of the State Court of DeKalb County granted our motion and dismissed the Complaint with prejudice.  She subsequently also awarded our client attorneys’ fees and expenses in the amount of $37,000.

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Hospitals Allowed to Assert Liens for Amounts Over and Above What Health Insurers Pay

On November 22, 2013, in MCG Health, Inc. v. Kight the Georgia Court of Appeals established that a hospital may assert a lien in a personal injury case for amounts over and above what it receives from the health insurer for the personal injury plaintiff even if the health insurer has a contract with the hospital indicating that the amounts paid by the insurer represents “payment in full.”

MCG Health, Inc. operates MCG Medical Center (“MCG”).  Kight was a passenger in a car driven by an allegedly intoxicated driver (the tortfeasor) and MCG furnished care to Kight pursuant to a contract with Kight’s managed health care insurer, Blue Cross/Blue Shield (Blue Cross).  The contract between MCG and Blue Cross provided that MCG agreed to discount its billed charges for covered hospital care and accept the discounted amount as “payment in full” for the covered care provided to Blue Cross members such as Kight.  The contract allowed MCG to bill Kight directly for deductibles and co-pays but MCG agreed under the contract not to balance-bill for the difference between MCG’s billed charges and the discounted amount due under the contract.

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Does Common Law Contribution and Indemnity Still Exist?

Recently, the Georgia Court of Appeals again faced the question of whether claims of common law contribution and indemnity are still viable under Georgia law and has decided that, in cases where liability is going to be apportioned, they are not.

The opinion of District Owners Assoc., Inc. v. AMEC Environmental & Infrastructure, Inc. arose out of a premises liability lawsuit brought by Richard Corbett. On January 18, 2010, Mr. Corbett was jogging on a sidewalk through Atlantic Station in Atlanta, Georgia. On the other side of the wall next to the sidewalk was a parking deck. Mr. Corbett believed he could jump over this wall to continue jogging through the parking deck. Unfortunately, Mr. Corbett did not realize until after he jumped over the wall that there was a 30 foot drop-off to the ground floor of the parking deck.  Having suffered serious injuries from the fall, Mr. Corbett filed suit against the property owner, District Owners Association, and the management company.

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Fine Print Dooms Limitation-of-Liability Clause

The Georgia Court of Appeals has affirmed a 9 million dollar verdict against a home security company that a homeowner had paid to monitor her security system when the homeowner was sexually assaulted by an intruder.  The security company argued that its liability was limited, pursuant to its agreement with the homeowner, to $250.00.  The Court of Appeals agreed with the trial court that the clause was unenforceable.

Plaintiff was sexually assaulted by an intruder who broke into her home while she was at work and remained there during the day despite triggering her home’s security system alarm numerous times.  Plaintiff sued Monitronics International, Inc., the company she paid to monitor her security system, for negligence in failing to get in touch with her personally to alert her of numerous alarms going off in her home.

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Under Limited Circumstances, Right of Contribution Still Exists Under Georgia’s Apportionment Law

By Christopher Ziegler and Michael J. Rust

Prior to 2005, the law in Georgia allowed a plaintiff to recover all of his damages against any joint-tortfeasor.  Thus, if a joint-tortfeasor was only 1% negligent, the plaintiff could recover the entire judgment against that minimally-liable defendant.  The 1% at-fault defendant could then pursue contribution against the other joint-tortfeasor defendant(s).

The law as it existed was great for plaintiffs who were injured by tortfeasors who had little or no insurance or assets.  As long as the plaintiff could somehow make an argument that a different defendant with deep pockets was at least slightly at fault, then the plaintiff could recover his entire verdict against the deep pocket defendant.  Although that defendant could pursue a right of contribution against the other defendants, often the other defendants had little or no insurance or assets, meaning the 1% defendant in our example took the hit for the entire verdict.

In 2005, Georgia’s general assembly enacted certain tort reforms, including reform of the above joint tortfeasor system. With the enactment of O.C.G.A. §51-12-33, defendants are now responsible for only their own proportionate share of liability.  The apportionment statute effectively did away with the old rules of joint-tortfeasor liability.  Thus, the 1% at-fault defendant is now responsible to pay only his 1% fair share.

In the 2012 case of McReynolds v. Krebs, 290 Ga. 850 (2012), the Georgia Supreme Court held that a defendant has no right of contribution against his other co-defendants under the new apportionment law.  The court in Krebs recognized that the apportionment statute itself “flatly states that apportioned damages shall not be subject to any right of contribution.”  At first glance, this case and the apportionment statute would seem to do away with a defendant’s right of contribution against a co-defendant.  However, as we have just learned, apportionment is still alive in certain circumstances according to a case released on March 28, 2013.

In Zurich American Ins. Co. v. Heard, — S.E.2d —-, 2013 WL 1245359 (2013), the Georgia Court of Appeals held that the right of contribution is extinguished only where the “trier of fact” apportions the damages, meaning that parties who settle before trial are still subject to a claim for contribution.  When parties settle, there is no “trier of fact”, i.e. a  jury, to apportion damages.  In the Zurich case, John Heard was an architect whose firm, JHA, provided certain design services relating to construction of a hotel.  During and after construction, mold and mildew were discovered in the hotel.  The general contractor settled with the hotel owners for several million dollars. Months later, Heard and his firm JHA settled with the owners for $100,000.

Thereafter, the insurers for the general contractor brought suit against Heard, JHA and other entities asserting several claims, including claims for indemnity and contribution. Heard and JHA argued that the claims for contribution and indemnity fail because “joint tortfeasors can no longer assert these claims following the enactment of the apportionment statute….”  The Court of Appeals framed the issue as follows:  “We first consider whether claims for contribution between joint tortfeasors who have settled with the plaintiff still exist following the enactment of the apportionment statute…”

The Court recognized that the apportionment statute states as follows:

Damages apportioned by the trier of fact as provided in this Code section shall be the liability of each person against whom they are awarded, shall not be a joint liability among the persons liable, and shall not be subject to any right of contribution.  (emphasis added).

Based on the literal language of the statute, the Court of Appeals was quick to find that the right of contribution is extinguished under the apportionment statute only where the trier of fact apportions damages.  Typically, the trier of fact is the jury.  Thus, where parties settle voluntarily, the trier of fact (jury) does not apportion damages, and accordingly, the right of contribution still exists.  Thus, the Court of Appeals held,

Based upon the plain language of this statute, the right of contribution between joint tortfeasors has not been completely abolished by the Legislature’s enactment of OCGA § 51–12–33(b), and the trial court erred by holding otherwise.

This case offers an important lesson to defendants in multi-party cases.  A defendant who settles a claim with the plaintiff continues to face potential claims for contribution from co-defendants, and the settlement with the plaintiff does not necessarily end the case for the settling defendant.  The only way to ensure an absolute end to litigation in a multi-defendant case would be to obtain non-contribution agreements with all co-defendants and an agreement from the plaintiff that he will not sue other parties at a later time.

If you would like a copy of the Zurich case please let us know and we will be happy to send it to you.

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