Karesa Rivera v. Westgate Resorts, LTD., L.P.

04/27/2018

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

January 18, 2018 Session

KARESA RIVERA ET AL. v. WESTGATE RESORTS, LTD., L.P. ET AL.

Appeal from the Chancery Court for Sevier County

No. 15-1-002 Telford E. Forgety, Jr., Chancellor

No. E2017-01113-COA-R3-CV

The plaintiffs accepted an offer of judgment from the defendant company, which

included payment of the plaintiffs’ reasonable attorney’s fees and expenses in an amount

to be determined by the trial court. The trial court awarded attorney’s fees and expenses

to the plaintiffs in the amount of $56,423.24, expressly determining such amount to be

reasonable. The defendant company has appealed. Inasmuch as the trial court failed to

consider the factors listed in Tennessee Supreme Court Rule 8, Rule of Professional

Conduct 1.5 (“RPC 1.5”) when making its determination regarding a reasonable award of

attorney’s fees, we vacate the trial court’s fee award and remand this matter for further

proceedings concerning this issue. We accordingly decline to award fees to the plaintiffs

on appeal.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Vacated; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which CHARLES D.

SUSANO, JR., and JOHN W. MCCLARTY, JJ., joined.

Gregory C. Logue and Robert L. Vance, Knoxville, Tennessee, for the appellant,

Westgate Resorts, Ltd., L.P.

John O. Belcher, Nashville, Tennessee, and Richard T. Wallace, Sevierville, Tennessee,

for the appellees, Karesa Rivera and Gabriel Rivera.

OPINION

I. Factual and Procedural Background

On January 5, 2015, the plaintiffs, Karesa and Gabriel Rivera, filed a complaint in

the Sevier County Chancery Court against Westgate Resorts, Ltd., L.P., a/k/a Westgate

Resorts, Ltd. (“Westgate”); Stephen A. Wilson; James Z. Brown; and Michael W. Lewis

(collectively, “Defendants”). In this complaint, the Riveras stated that in May 2014, they

traveled to Pigeon Forge, Tennessee, for a family vacation, where they were approached

by an employee of Westgate. According to the Riveras, this employee asked the Riveras

to attend a time-share sales presentation in exchange for receiving free breakfast and

show tickets. The Riveras attended the time-share sales presentation on May 29, 2014,

and were solicited to purchase a time-share interest at the Westgate Resort in Gatlinburg.

The Riveras claimed that Mr. Wilson, Mr. Brown, and Mr. Lewis talked with the

Riveras during the time-share sales presentation and made various representations and

promises regarding the purchase of a time-share interest, including that Westgate would

“buy [the time-share interest] back” if the Riveras were not satisfied with their purchase.

Although the Riveras did eventually agree to purchase a time-share interest, they later

asserted that they were pressured to sign documents that they were not given sufficient

opportunity to review and did not understand. According to the Riveras, within two to

three weeks following their execution of the purchase agreement for a time-share interest,

they began to contact Westgate to ascertain whether Westgate would “buy it back.” The

Riveras stated that following repeated refusals by Westgate to relieve the Riveras of their

obligations, the Riveras consulted with counsel and filed the instant action.

The Riveras averred that Defendants violated the Tennessee Time-Share Act,

violated the Tennessee Consumer Protection Act, and made negligent and fraudulent

misrepresentations. The Riveras sought to rescind the contract and have their purchase

money refunded. The Riveras also sought damages, including treble and punitive

damages, as well as attorney’s fees.

The record reflects that on October 12, 2016, the Riveras filed a notice of

acceptance of Westgate’s offer of judgment, dated October 11, 2016. The parties agreed

that the Riveras would be allowed to rescind the contract and that all obligations between

the parties would be cancelled. The parties further agreed that all claims would be

released and that Westgate would pay to the Riveras (1) their purchase funds of

$3,587.20; (2) additional damages of $8,000.00; and (3) an award of “reasonable

attorneys’ fees and expenses in an amount to be set by the Court.” In addition, the

Riveras’ claims against the other defendants would be dismissed with prejudice.

Westgate’s offer of judgment was attached as an exhibit. The Riveras affirmed that they

had accepted the offer of judgment. They asked the trial court to determine the amount

of attorney’s fees and expenses and enter judgment accordingly.

The Riveras subsequently submitted a motion requesting that the trial court set the

amount of attorney’s fees, with an attached affidavit from their counsel. The Riveras

sought attorney’s fees and expenses in the amount of $56,423.24. Westgate filed a

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response in opposition to the Riveras’ motion regarding attorney’s fees, asserting that the

amount sought was unreasonable. Westgate argued that the court should consider the

factors listed in Tennessee Supreme Court Rule 8, RPC 1.5 when making its

determination regarding a reasonable award of attorney’s fees.

Westgate further claimed that an offer to rescind the purchase agreement and

refund the monies paid by the Riveras had been extended to the Riveras by Westgate on

January 21, 2015, approximately two weeks following the filing of the Riveras’

complaint. According to Westgate, it made another written offer of settlement on April

15, 2016, which included rescission, a full refund, and compensation for “reasonable”

damages and attorney’s fees. The Riveras failed to accept either of these previous offers,

and litigation continued. Westgate contended that the vast majority of fees and expenses

were incurred after these offers were made. Westgate attached an affidavit executed by

defense counsel, detailing the terms of the prior offers of settlement.

The Riveras filed a reply to Westgate’s opposing response, stating that the prior

offers made by Westgate contained no offer of damages beyond refund of the purchase

monies and reasonable attorney’s fees, despite the Riveras’ claim for punitive and treble

damages. The Riveras reiterated that the fee award they were seeking was reasonable.

The trial court entered a final order on May 10, 2017, stating in pertinent part:

On March 3, 2017, this Court held a hearing on Plaintiffs’ Motion to

Set Amount of Attorney’s Fees and Expenses (the “Motion”) to determine a

reasonable amount of attorneys’ fees and expenses to be awarded to

Plaintiffs.

Having considered the Offer of Judgment and the Notice of

Acceptance thereof; the Motion; Defendants’ Response thereto; the

Plaintiffs’ Reply; all materials filed in support of and in response to the

Motion; the oral argument of counsel on the issue of the award of

attorneys’ fees and expenses; and the record as a whole, the Court finds that

the Motion should be granted, that the Plaintiffs should receive an award of

reasonable attorneys’ fees in the amount of $51,866.75 and expenses in the

amount of $4,556.49, for a total award of fees and expenses in the amount

of $56,423.24, and that judgment should be entered pursuant to Tenn. R.

Civ. P. 68.

Pursuant to the terms of the offer of judgment, the trial court also dismissed the Riveras’

claims against Mr. Wilson, Mr. Brown, and Mr. Lewis with prejudice. Westgate, as the

sole remaining defendant, timely appealed.

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II. Issues Presented

Westgate has presented three issues on appeal, which we have restated slightly:

1. Whether the trial court erred by failing to apply the factors set forth

in Tennessee Supreme Court Rule 8, RPC 1.5 when setting the

reasonable amount of attorney’s fees to be awarded to the Riveras.

2. Whether the trial court erred by setting an award of attorney’s fees

and expenses that is unreasonable pursuant to the factors listed in

RPC 1.5.

3. Whether the trial court erred by declining to limit the amount of

recovery to the terms of Westgate’s reasonable offer of settlement

pursuant to Tennessee Code Annotated § 47-18-109(c)(4).

The Riveras present the following additional issue, which we have also restated slightly:

4. Whether the Riveras are entitled to an award of reasonable attorney’s fees

and expenses incurred on appeal.

III. Standard of Review

As our Supreme Court has previously explained with regard to an award of

attorney’s fees by the trial court:

The trial court’s determination of a reasonable attorney’s fee is “a

subjective judgment based on evidence and the experience of the trier of

facts,” United Med. Corp. of Tenn., Inc. v. Hohenwald Bank & Trust Co.,

703 S.W.2d 133, 137 (Tenn. 1986), and Tennessee has “no fixed

mathematical rule” for determining what a reasonable fee is. Killingsworth

v. Ted Russell Ford, Inc., 104 S.W.3d 530, 534 (Tenn. Ct. App. 2002).

Accordingly, a determination of attorney’s fees is within the discretion of

the trial court and will be upheld unless the trial court abuses its discretion.

Kline v. Eyrich, 69 S.W.3d 197, 203 (Tenn. 2002); Shamblin v. Sylvester,

304 S.W.3d 320, 331 (Tenn. Ct. App. 2009). We presume that the trial

court’s discretionary decision is correct, and we consider the evidence in

the light most favorable to the decision. Henderson v. SAIA, Inc., 318

S.W.3d 328, 335 (Tenn. 2010); Keisling v. Keisling, 196 S.W.3d 703, 726

(Tenn. Ct. App. 2005). The abuse of discretion standard does not allow the

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appellate court to substitute its judgment for that of the trial court, Williams

v. Baptist Mem’l Hosp., 193 S.W.3d 545, 551 (Tenn. 2006); Myint v.

Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998), and we will find an

abuse of discretion only if the court “applied incorrect legal standards,

reached an illogical conclusion, based its decision on a clearly erroneous

assessment of the evidence, or employ[ed] reasoning that causes an

injustice to the complaining party.” Konvalinka v. Chattanooga-Hamilton

Cnty. Hosp. Auth., 249 S.W.3d 346, 358 (Tenn. 2008); see also Lee Med.,

Inc. v. Beecher, 312 S.W.3d 515, 524 (Tenn. 2010).

Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011).

IV. Propriety of the Trial Court’s Fee Award

Westgate asserts that the trial court erred by failing to apply the factors listed in

Tennessee Supreme Court Rule 8, RPC 1.5 when making its determination regarding the

amount of a reasonable attorney’s fee award. Westgate further asserts that if the factors

were properly considered, the amount awarded would be deemed unreasonable.

The Riveras contend that the offer of judgment they accepted was conclusive,

pursuant to Tennessee Rule of Civil Procedure 68, and that no right of appeal lies

therefrom unless specifically preserved in the offer. Rule 68 provides:

At any time more than 10 days before the trial begins, a party

defending against a claim may serve upon the adverse party an offer to

allow judgment to be taken against the defending party for the money or

property, or to the effect specified in the offer, with costs then accrued.

Likewise a party prosecuting a claim may serve upon the adverse party an

offer to allow judgment to be taken against that adverse party for the money

or property or to the effect specified in the offer with costs then accrued. If

within 10 days after service of the offer the adverse party serves written

notice that the offer is accepted, either party may file the offer and notice of

acceptance, together with proof of service thereof, with the court and

thereupon judgment shall be rendered accordingly. An offer not accepted

shall be deemed withdrawn and evidence thereof is not admissible except in

a proceeding to determine costs. If the judgment finally obtained by the

offeree is not more favorable than the offer, the offeree shall pay all costs

accruing after the making of the offer. The fact that an offer is made but

not accepted does not preclude a subsequent offer.

As this Court has previously elucidated regarding a Rule 68 offer of judgment:

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Rule 68 judgments are akin to consent orders, which are “conclusive

upon the consenting parties, and can neither be amended nor in any way

varied without like consent; nor can it be reheard, appealed from or

reviewed upon writ of error.” Nance v. Pankey, 880 S.W.2d 944, 946

(Tenn. Ct. App. 1993). However, a party may appeal from a consent order

upon a claim of lack of actual consent, fraud in its procurement, mistake, or

lack of the court’s jurisdiction to enter the judgment. Swift & Co. v. United

States, 276 U.S. 311, 323-24, 48 S.Ct. 311, 72 L.Ed. 587 (1928). “A

judgment by consent is in substance a contract of record made by the

parties and approved by the court.” 49 C.J.S Judgments § 227. The

cardinal rule of contract interpretation is that the court “must attempt to

ascertain and give effect to the intent of the parties.” Christenberry v.

Tipton, 160 S.W.3d 487, 494 (Tenn. 2005). In attempting to ascertain the

intent of the parties, the court must examine the language of the contract,

giving each word its usual, natural, and ordinary meaning. See Wilson v.

Moore, 929 S.W.2d 367, 373 (Tenn. Ct. App. 1996). The “court’s initial

task in construing a contract is to determine whether the language of the

contract is ambiguous.” Planters Gin Co. v. Fed. Compress & Warehouse

Co., 78 S.W.3d 885, 889-90 (Tenn. 2002). Where the language of a

contract is clear and unambiguous, its literal meaning controls the outcome

of the dispute. Id. at 890.

Jackson v. Purdy Bros. Trucking Co., Inc., No. E2011-00119-COA-R3-CV, 2011 WL

4824198, at *3 (Tenn. Ct. App. Oct. 12, 2011).

In the case at bar, the offer of judgment accepted by the Riveras provided that they

would receive an award of “reasonable attorneys’ fees and expenses in an amount to be

set by the Court.” This language expressly requires the trial court to determine a

“reasonable” amount of attorney’s fees and expenses to be awarded. Such determination

regarding the reasonableness of the amount awarded would inherently require the court to

consider the factors listed in Tennessee Supreme Court Rule 8, RPC 1.5. See First

Peoples Bank of Tenn. v. Hill, 340 S.W.3d 398, 410 (Tenn. Ct. App. 2010) (determining

that a fee award made pursuant to a contractual provision must be reasonable and must

take into consideration the appropriate factors). Therefore, if the trial court failed to

properly consider those factors, thereby potentially setting an unreasonable fee, Westgate

should clearly have the ability to appeal that decision because an unreasonable award

would be in violation of the parties’ contractual agreement.

Concerning the reasonableness of a fee award, Tennessee Supreme Court Rule 8,

RPC 1.5 states in pertinent part:

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(a) A lawyer shall not make an agreement for, charge, or collect an

unreasonable fee or an unreasonable amount for expenses. The

factors to be considered in determining the reasonableness of a fee

include the following:

(1) the time and labor required, the novelty and difficulty

of the questions involved, and the skill requisite to

perform the legal service properly;

(2) the likelihood, if apparent to the client, that the

acceptance of the particular employment will preclude

other employment by the lawyer;

(3) the fee customarily charged in the locality for similar

legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the

circumstances;

(6) the nature and length of the professional relationship

with the client;

(7) the experience, reputation, and ability of the lawyer or

lawyers performing the services;

(8) whether the fee is fixed or contingent;

(9) prior advertisements or statements by the lawyer with

respect to the fees the lawyer charges; and

(10) whether the fee agreement is in writing.

The trial court’s final judgment does not expressly discuss or analyze the above-

listed factors. Moreover, in the trial court’s memorandum opinion attached to and

incorporated into the final judgment, the court also failed to analyze or discuss the above

factors.

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Westgate maintains that this Court has previously vacated an award of attorney’s

fees when the trial court failed to consider the RPC 1.5 factors. For example, in

Southwind Prop. Assoc., Inc. v. Ford, No. W2016-01169-COA-R3-CV, 2017 WL

991108, at *13 (Tenn. Ct. App. Mar. 14, 2017), this Court recently stated:

From our review, the trial court’s ruling makes no mention of many

of the factors outlined under Rule 1.5. While the trial court’s order states

that the trial court “is aware” of the “amount involved” in this case, the trial

court provides no specific explanation for the large attorney’s fee award

relative to the small recovery by the Association in this case. Tenn. Sup.

Ct. R. 8, RPC 1.5(4). Additionally, although the invoices contained in the

record on appeal reflect charges up to $300.00 per hour, the trial court made

no finding as to “the fee customarily charged in the locality for similar legal

services[.]” Tenn. Sup. Ct. R. 8, RPC 1.5(3). Most importantly, neither the

trial court’s oral ruling, nor its written order, contains any finding that the

award is reasonable under the circumstances. As we have explained:

When the trial court has exercised its discretion in light of the

appropriate factors and found the fee to be reasonable, we

simply review for abuse of discretion. . . . Where, however,

there is no finding that the fee is reasonable, and no way to

ascertain whether the court made the award in light of the

appropriate factors, there is no way for us to accord the

normal deference to the trial court.

First Peoples Bank [v. Hill], 340 S.W.3d [398,] 410 [(Tenn. Ct. App.

2010)]. Where this Court is unable to discern whether the trial court

actually evaluated the amount of the fee to see if it is reasonable in light of

the appropriate factors, the correct approach is to vacate the award and

“remand [the] case to the trial court for a new determination of an

attorney’s fee award under [Supreme Court Rule 8, RPC 1.8] and the

applicable case law.” Ferguson Harbour Inc. v. Flash Market, Inc., 124

S.W.3d 541, 553 (Tenn. Ct. App. 2003). Because the trial court’s oral and

written rulings provide this Court with no illumination as to whether it

considered the reasonableness of the requested fee in light of the factors

outlined in Rule 1.5, we must likewise vacate and remand this case with

instructions to consider the reasonableness of the fee awarded under the

circumstances of this case and the applicable factors.

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See also First Peoples Bank of Tenn., 340 S.W.3d at 410 (“[W]e will vacate the award of

attorney’s fees and, rather than try to make a determination in the first instance, remand

to the trial court for determination of a reasonable fee.”).

Similarly, in the case at bar, the trial court failed to properly consider the RPC 1.5

factors when making its determination regarding a “reasonable” award of attorney’s fees.

As such, the issue of a reasonable award of attorney’s fees and expenses must be

remanded to the trial court for determination pursuant to the applicable factors. See

Southwind, 2017 WL 991108, at *13 (holding that where this Court is “unable to discern

whether the trial court actually evaluated the amount of the fee to see if it is reasonable in

light of the appropriate factors, the correct approach is to vacate the award” and remand

the issue to the trial court for determination).

V. Consideration of Prior Settlement Offers

Westgate posits that because it communicated prior settlement offers to the

Riveras that were not accepted and because one of those prior offers included attorney’s

fees and other damages aimed at “making the Riveras whole,” any attorney’s fees

incurred by the Riveras following that offer should not be awarded. Westgate bases this

argument on the language of Tennessee Code Annotated § 47-18-109(c)(4), a provision

contained within the Tennessee Consumer Protection Act, which states:

In any private action commenced under this section, the court may, upon

the introduction of proof that the person against whom the action is filed

has made a written, reasonable offer of settlement which has been

communicated to the affected party, limit the amount of recovery to the

terms of the offer of settlement.

We recognize that this statutory subsection has been utilized in other cases to limit the

amount of fees awarded following transmittal of a reasonable, written settlement offer

that was not accepted. See Scott v. Noland Co., No. 03A01-9502-CV-00072, 1995 WL

440375, at *6 (Tenn. Ct. App. July 26, 1995).

In the case at bar, however, the trial court addressed Westgate’s argument

regarding the prior settlement offers at great length in its memorandum opinion, wherein

the court ultimately determined that the prior settlement offer that included attorney’s

fees was not for a discrete amount and did not specifically address the Riveras’ claims for

treble or punitive damage claims. The settlement offer communicated in April 2016

stated in pertinent part:

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With depositions on the horizon, I wanted to recommunicate

Westgate’s offer to rescind the contract between Plaintiffs and Westgate, as

well as Westgate’s willingness to make Plaintiffs whole for their alleged

losses resulting from the transaction, including reasonable attorneys’ fees. I

would like to point out that Westgate’s initial offer to rescind the contract

was communicated to Plaintiffs on June 21, 2015, just 16 days after

Plaintiffs filed their Complaint, which was Westgate’s first notice that

Plaintiffs even wanted to rescind. In response to Westgate’s offer to

rescind, on February 16, 2015, Plaintiffs demanded a payment of $90,000

from Westgate. This demand did not include even an allegation that

Plaintiffs had actually sustained $90,000 in damages, much less support for

such a claim.

Since Plaintiffs’ demand of $90,000, Plaintiffs have confirmed in

written discovery that their total alleged compensatory damages are

$3,974.80. Westgate is willing to reimburse Plaintiffs this amount. If

Plaintiffs claim they have suffered additional compensatory damages,

please let me know those amounts, and to the extent they are reasonable,

Westgate will also agree to pay those amounts. In addition, Plaintiffs

objected to Westgate’s request that they disclose the amount of attorneys’

fees they have paid. Please provide those, and to the extent they are

reasonable, Westgate will also agree to reimburse Plaintiffs for those fees.

As the trial court explained in its memorandum opinion:

I don’t think what we had at that time constituted a concrete offer of

settlement. It wasn’t a concrete—it wasn’t an offer of settlement that could

have been accepted. Let’s say as to the ultimate offer of judgment . . . it

was concrete in terms of dollar amounts. It was concrete, and it was

accepted when it became concrete in terms of dollar amount. It didn’t get

that way until October 11, 2016.

Moreover, the Riveras contend that the offer they accepted was the only offer that

contained any specific amount of additional damages over and above a simple refund of

their purchase monies. Upon our review of the prior settlement offers, we agree. To the

extent that the Riveras sought payment of more than compensatory damages, the October

11, 2016 offer of judgment was the first offer to pay such damages. We further agree

with the trial court that the prior offer made in April 2016 was not sufficiently definite to

be accepted without further negotiation. In addition, the Riveras’ claims also implicated

the Tennessee Time-Share Act and alleged negligent and fraudulent misrepresentations

by Westgate, and thus the claims were not solely based in the Consumer Protection Act.

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We therefore affirm the trial court’s determination that attorney’s fees should not be

limited to the amount incurred prior to the previous settlement offer pursuant to

Tennessee Code Annotated § 47-18-109(c)(4).

VI. Attorney’s Fees on Appeal

The Riveras seek an award of attorney’s fees on appeal pursuant to the Tennessee

Consumer Protection Act and the Tennessee Time-Share Act. Inasmuch as Westgate has

prevailed with regard to an issue on appeal, however, we determine that an award of

attorney’s fees on appeal to the Riveras is not warranted.

VII. Conclusion

For the foregoing reasons, we vacate the trial court’s award of attorney’s fees and

expenses and remand this issue to the trial court for further proceedings consistent with

this opinion. We decline to award the Riveras additional attorney’s fees incurred on

appeal. Costs on appeal are assessed one-half to the Riveras and one-half to Westgate.

_________________________________

THOMAS R. FRIERSON, II, JUDGE

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