Petition for Writ of Certiorari — Cadle Co. II, Inc. v. Chasteen

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JUL 16 1998

OFFICE LU: [HE CLERK

—

ans

NO.

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1993

THE CADLE II COMPANY, INC., Petitioner,

Ve

CHARLES R. CHASTEEN,

BILL M. CARTER,

JIMMY J. HOLMES,

AND LINDELL D. ROBERTS, Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE TENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

BRUCE F. KLEIN

ATTORNEY FOR PETITIONER

205 N.W. 63RD, SUITE 160

OKLAHOMA CITY, OKLAHOMA 73116

(405) 848-8842

Si MATS SIS

AEA SI Ab eh Raat tam38 rid, es ;

QUESTIONS PRESENTED FOR REVIEW

A. Whether the United States

Magistrate and the United States Court of

Appeals for the Tenth Circuit erred by

finding that an award of attorney’s fees

for Respondents’ counsel of $62.50 per

hour was unreasonable when Respondents’

counsel agreed to accept the sum of

$62.50 per hour as compensation during

the pending litigation?

B. Whether 12 0.S. § 936 which

provides that the “prevailing party"

shall be allowed a reasonable attorney’s

fee to be set by the court and to be

taxed and collected as costs in any civil

action to recover on a Note requires an

imposition of an award of attorney’s fees

to the prevailing party to reimburse the

prevailing party for only the amount of

attorney’s fees the prevailing party has

incurred?

Cc. If the Court does award $125.00

as the only reasonable attorney fee, do

the Respondents get to keep the extra

$62.50 and only pay $62.50 to the

attorney or does the attorney get twice

his fee?

ii

LISTED PARTIES TO THE PROCEEDINGS IN THE

COURT BELOW

The caption of the case in this

Court contains the names of all of the

parties to the proceeding in the United

States Court of Appeals for the Tenth

Cireuit.

TABLE OF CONTENTS

PAGE

Question Presented for Review ..... i

List of Parties to the Proceedings

eS” re © ot

Ee

Statement of Jurisdiction ....... 2

Constitutional Provisions, Treaties,

Statutes, Rules and Regulations

DT URS 6 6 « 6 6 + 6s ts ew ew e 8

El |

Reasons for Granting Writ ...... 10

iii

COIR 6 6 sk ke et th leh we ee 29

BempenGist «os tt KK 6 MRO eC aS

TABLE OF AUTHORITIES

STATUTES

a ee ae es en er rere

26 G.8.6. S$ 293900) ea A Oe ee

196.8. 3 906 Ac wn we ee Se

CASES

Blum v. Stenson, 465 U.S. 886, 893-94,

104 S.Ct. 1541, 1546, 79 L.Ed. 2d 891,

895 (1984) ° . 2s 2 6 © £ €5:8 av, ae

Pennsylvania v. Delaware Valley Citizens’

Counsel For Clean Air, 478 U.S. 546, 106

S.Ct. 3088, 92 L.Ed. 2d 439

(1986) (Delaware Valley I) ..... . 14

Vanegas v. Mitchell, 110 S. Ct. 1679,

1663, 1684 (1990) . . «+» sss 28; 23

Johnson v. Georgia Highway Express, 488

F.26 7id, 7Fi® (3G Cites 2976) « 4 os 15

Save Our Cumberland Mountains, Inc. v.

Hodel, 857 F.2d 1516, 1528-30

(®.C. Cir. 1988)

ote 6 6 -e -o et e eee > ee © Pee 5 ee 2) ee

Florida Rock Industries, Inc. v. United

States, 9 Cl. Ct. 285, 288, 290 (1985)

a Se a See ee Ras 235 290 Bes OO

iv

TF

IN THE SUPREME COURT OF THE UNITED STATE

OCTOBER TERM, 1993

THE CADLE II COMPANY, INC., Petitioner,

Vv.

CHARLES R. CHASTEEN,

BILL M. CARTER,

JIMMY J. HOLMES,

AND LINDELL D. ROBERTS, Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE TENTH CIRCUIT

The Cadle Compary II, Inc., the

Petitioner herein, respectfully prays

that a writ of certiorari issue to review

the judgment of the United States Court

of Appeals for the Tenth Circuit, entered

in the above-entitled case on March 29,

1993.

OPINIONS BELOW

The Opinion of the United States

Court of Appeals for the Tenth Circuit,

whose Judgment is herein sought to be

reviewed, was rendered on March 29, 1993,

and entered on March 29, 1993, in Case

Number 92-6318, is unreported and is

reprinted in the Appendix hereto, infra,

pages 1-10. The prior Order of the United

States Magistrate Judge of the United

States District Court for the Western

District of Oklahoma, in Case Number CIV-

90-1270-R, entered on August 26, 1993, is

unreported and is reprinted in the

Appendix hereto, infra, pages 1-16.

STATEMENT OF JURISDICTION

The Judgment of the Court of Appeals

was entered on March 29, 1993. The

Petitioner, The Cadle Company II, Inc.,

timely filed its Petition For Rehearing

on April 12, 1993. The United States

eT |

Court of Appeals denied the Petitioner’s

Petition For Rehearing on April 19, 1993.

The jurisdiction of this Court is invoked

pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISIONS, TREATIES,

STATUTES, RULES AND REGULATIONS INVOLVED

12 0.8. § 936

ATTORNEY’S FEES TAXED AS COSTS IN ACTION

ON CERTAIN

ACCOUNTS, BILLS AND CONTRACTS.

In any civil action to recover on an

open account, a statement of account,

account stated, note, bill, negotiable

instrument, or contract relating to the

purchase or sale of goods, wares, or

merchandise, or for labor or services,

unless otherwise provided by law or the

contract which is the subject to! the

action, the prevailing party shall be

™to" should be "of",

3

allowed a reasonable attorney fee to be '

set by the court, to be taxed and

collected as costs.

STATEMENT OF THE CASE

The Petitioner, The Cadle Company,

II, Inc. ("Petitioner") brought this

action in the United States District

Court for the Western District of

Oklahoma on August 7, 1990, invoking the

jurisdiction of the District Court

pursuant to 28 U.S.C. § 1332(a)(1), as

the amount in controversy exceeded

$50,000.00 and there was diversity of

citizenship between the Petitioner and

Respondents.

The Petitioner sought to enforce

payment of the balance of a promissory

note executed and delivered by a

corporate debtor, Dayspring Church, Inc.,

to the Oklahoma National Bank & Trust

Company from the four Respondents. (The

eo

corporate debtor, Dayspring Church is not

a party to the litigation.) A jury trial

was held in the above-styled matter

beginning March 18, 1991, continuing on

March 21, 1991, and concluding on March

22, 1991. The jury returned a verdict

for the Respondents, and awarded the

Petitioner nothing on its Complaint.

(The Petitioner timely appealed the jury

verdict. The Court of Appeals affirmed

the jury’s verdict on January 23, 1992.)

Sometime during the pendency of the

District Court proceedings, Respondents

and their attorney agreed to a reduction

in the hourly rate charged. The

agreement for a reduction to $62.50 per

hour was retroactive to the beginning of

the case. After Respondents were

Successful at trial, Respondents’

attorney requested attorney’s fees at the

rate of $125.00 per hour.

|

On April 8, 1991, the Respondents

filed their Application To Tax Attorney’s

Fees Against The Plaintiff. The

Petitioner filed its Objection To The

Defendants’ Application To Tax Attorney’s

Fees Against Plaintiff on April 23, 1991.

Petitioner argued that Defendants were

not entitled to attorney’s fees because

guaranty agreements were not within the

Class of contracts that 12 0.S. § 936

authorized an award of attorney’s fees to

the prevailing party. Petitioner further

argued that the Court should be limited

to the rate of $62.50 per hour in

computing a reasonable attorney’s fee

because that was the hourly rate charged

by Respondents’ counsel pursuant to an

agreement reached between Respondents and

their attorney.

On May 17, 1991, the Honorable Judge

David L. Russell issued an order

determining that the Respondents were

entitled to attorney fees pursuant to 12

O.S. § 936. Appellant appealed the Order

of May 17, 1991, by Notice of Appeal

filed on June 17, 1991. It was later

determined that the Notice of Appeal

filed on June 17, 1991, was premature and

Petitioner filed a Motion To Dismiss for

lack of appellate jurisdiction.

On January 23, 1992, counsel were

advised that the Judgment in favor of the

Respondents was affirmed by the Court of

Appeals. On February 5, 1992, the

Respondents filed their Motion To Tax

Attorney’s Fees And Costs combined with

their Motion To Refer Attorney’s Fee

Requested To The District Court and Brief

In Support in the United States Court of

Appeals for the Tenth Circuit. The Court

of Appeals for the Tenth Circuit by Order

iin aii iad is

filed on February 27, 1992, granted the

Respondents’ Motion For Attorney’s Fees

on appeal and remanded the matter to the

District Court for a determination of

reasonable attorney’s fees.

On March 19, 1992, the Respondents

submitted their Renewed And Supplemented

Application To Tax Attorney’s Fees

Against The Plaintiff. Petitioner filed

its Objection To Respondents’ Renewed And

Supplemented Application To Tax

Attorney’s Fees Against The Plaintiff on

April 7, 1992. Respondents filed an

~ Addendum to their Renewed And

Supplemented Application To Tax

Attorney’s Fees Against The Plaintiff on

June i8, 1992.

On July 17, 1992, the attorneys for

the parties executed a consent to proceed

before the United States Magistrate

respecting the Defendants’ Renewed And

ee Ee

Supplemented Application To Tax

Attorney’s Fees Against The Plaintiff

filed March 19, 1992. A hearing was held

on August 18, 1992, before Magistrate

Doyle W. Argo. The issue before the

Court was the reasonable hourly rate for

Respondents’ attorney. By order of

August 26, 1992, Magistrate Doyle W. Argo

found the Respondents were entitled to

attorney’s fees in the sum of $19,425.00.

The Magistrate Judge determined that a

“reasonable hourly rate" for Respondents’

attorney is $125.00 per hour. On

September 18, 1992, the Petitioner timely

filed its Notice of Appeal. On March 29,

1993, the Court of Appeals affirmed the

Magistrate Judge’s decision determining

that a reasonable hourly rate for

Respondents’ counsel was $125.00 per

hour. The Petitioner timely filed its

Petition For Rehearing, and by Order

entered on April 19, 1993, the Court of

Appeals denied Petitioner’s Petition For

Rehearing. The Petitioner timely files

its Petition For a Writ of Certiorari to

the United States Court of Appeals for

the Tenth Circuit.

REASONS FOR GRANTING THE WRIT

Certiorari should be granted because

the District Court and the Court of

Appeals have departed far from the

accepted and usual course of judicial

proceedings in determining that

Respondents’ should be awarded attorney’s

fees at the rate of $125.00 per hour.

The issue in this case is whether an

attorney who agreed to reduce his

attorney’s fee during the pendency oi an

action may, after prevailing at trial,

seek to obtain an award of attorney’s fee

based upon an hourly rate twice what he

charged his clients.

10

Ny

The Oklahoma Statute which provides

the basis for an entry of award of

attorney’s fees both in Federal Court and

State Court provides that "the prevailing

party is entitled to reasonable

attorney’s fees...." The attorney’s fees

paid by the Respondents to their counsel

were based upon an agreed hourly rate of

$62.50 per hour. The Respondents’

counsel indicates that this is "a

hardship reduction." This reduction to

$62.50 per hour by Respondents’ counsel

continued through the trial of this

matter. After the jury returned with a

verdict in favor of the Respondents, a

Motion For Attorney’s Fees was filed by

Respondents’ counsel requesting

attorney’s fees in the amount of $125.00

per hour. The District Court relied on

Save Our Cumberland Mountains, Inc. vy.

Hodel, 857 F.2d 1516 (D.c. Cir. 1988).

11

In distinguishing Florida Rock

Industries, Inc. v. United States, 9 Cl.

Ct. 285 (1985), the Court stated, "(h)ere

Plaintiff cannot seriously argue that the

prevailing rate of an attorney of Mr.

Tobin’s experience and qualifications is

$62.50 per hour." While the Petitioner

does not dispute a reasonable hourly rate

for Respondents’ counsel under most

circumstances would be $125.00 per hour,

Petitioner submits that the District

Court should have relied on Florida Rock.

Florida Rock determined that a "market

rate" for attorney’s services was the

primary standard in determining a

reasonable hourly rate. The Florida Rock

Court found that since the attorney and

his client had agreed to a particular

hourly rate, the market had spoken.

Florida Rock, 9 Cl. Ct. 288, 290.

12

The Court of Appeals consistent with

the lower court, found the case of Save

Our Cumberland Mountains, Inc. v. Hodel

to be more persuasive then Florida Rock.

The Court of Appeals determined that

there was no Oklahoma law which addressed

the issue of whether a court should

enforce an agreement between an attorney

and his client for a reduced hourly rate

against a non-prevailing party. The

Court of Appeals then determined that it

would have to "predict" how the Oklahoma

courts would rule on the issue. The

Court of Appeals incorrectly determined

that the reasonable hourly rate should be

based upon Respondents’ counsel’s normal

hourly rate of $125.00 per hour.

The Court of Appeals and the lower

court have failed to consider the express

Statutory language 12 0.S. § 936 which

provides that "the prevailing party" is

13

entitled to an award of reasonable

attorney’s fees. The Statute does not

refer to the prevailing party’s attorney,

but refers specifically to the prevailing

party. The Oklahoma Statute is similar

to the Congressional Mandate for

Attorney’s Fees in the Relocation Act

which is the subject of the Florida Rock

case. The language of the Relocation Act |

provides that a successful plaintiff

shall be "reimbursed" for attorney’s fees

and other expenses. Such is the

philosophy behind an award of attorney’s

fees to the prevailing party. An award

of attorney’s fees enables a successful

party to be reimbursed for his "out-of-

pocket" attorney’s fees while allowing a

private party to obtain legal

representation for the prosecution or

defense of lawsuits. See Pennsylvania v.

Delaware Valley Citizens’ Counsel For

14

ee oe

Clean Air, 478 U.S. 546, 106 S.Ct. 3088,

92 L.Ed. 2d 439 (1986) (Delaware Valley

I); Save Our Cumberland Mountains, Inc.

v. Hodel, 857 F.2d 1516, 1528 (D.C. Cir.

1988) (Justice Starr, dissenting).

The attorney’s fees awarded in cases

should be adequate to attract competent

counsel, but should be reflective of an

amount which does not produce windfalls

to attorneys. Blum v. Stenson, 465 U.S.

886, 893-94, 104 S.Ct. 1541, 1546, 79

L.Ed. 2d 891, 895 (1984). As the court

in Johnson v. Georgia Highway Express,

488 F.2d 714 (5th Cir. 1974) noted "[i}

in no event, ...should the litigant be

awarded a fee greater than he is

contractually bound to take, if indeed,

the attorneys have contracted to an

amount." Johnson v. Georgia Highway

Express, 488 F.2d 714, 718 (5th Cir.

1974). The existence of a market

15

arrangement, whereby an attorney agrees

to perform certain work and the client

agrees to make certain payments, would

seem to establish with a fair degree of

accuracy the reasonable attorney’s fees

and expenses incurred by plaintiff in

this litigation. Florida Rock, 9 Cl.Ct.

at 288. The reason for an award of

attorney’s fees is to enable a prevailing

party to be made whole for the expenses

incurred in achieving victory. An

attorney should not be awarded a windfall

on the basis of the result achieved,

litigation risk or other consideration.

Florida Rock, 9 Cl.Ct. at 290.

Justice Starr, in his dissenting

opinion in Hodel succinctly summed up the

reasons why an award of attorney’s fees

should be based upon the hourly rate as

agreed between attorney and client:

16

eT F

"The same theme was evident in

Delaware Valley II. There,

again speaking through Justice

White, a plurality of the Court

articulated the enablement goal

in rejecting ‘enhancement for

risk of loss’ for successful

plaintiffs. "[A]} Fundamental

aim of [(fee-shifting] statutes

is to make it possible for

those who cannot pay a lawyer

for his time and effort to

obtain competent counsel, this

by providing lawyers with

reasonable fees to be paid by

the losing defendants." The

Court has re-articulated the

enablement theme time and

again, and enablement, as the

Supreme Court has described it,

is a minimalist test. It does

17

not mean access to F. Lee

Bailey, Gerry Spence,

"Racehorse" Haynes or the

leading trial lawyer ina

particular locale. It means as

the Court put it in Hensley v.

Eckerhart, ‘Effective access to

the judicial process.’ The

idea is to permit plaintiffs to

secure the services of a

competent lawyer. Indeed, that

is the very language used in

the legislative history to

describe the three cases.

‘These cases have resulted in

fees which are adequate to

attract competent counsel, but

which do not produce windfalls

to attorneys.’ ‘Adequacy’ and

‘competency’ are the key words

that give life to the

18

TT P

‘enablements’ theory. Laffey

itself captured the enablement

goal in the following passage:

The ‘windfall’

Congress sought to

avoid is the awarding

of fees in excess of

the rate at which

qualified counsel

would be willing to

represent civil

rights claimants who

have legitimate

grievances. The

congressionally-

mandated inquiry is

thus not into the

‘true value’ or worth

of an attorney’s

services. Instead,

the trial court must

19

ascertain the fee at

which competent

counsel would be

willing to accept

meritorious civil

rights cases. As

this Court recently

stated in Murray v.

Weinberger, ‘the

purpose of the

statute ... is to

benefit meritorious

claimants - not to

subsidize the legal

profession.’

But, be that as it may,

enablement ‘should be tested

systematically, not on whether

a particular attorney, no

matter how able and

distinguished, will see fit to

20

take on a particular

representation. As the

Delaware I Court put it so

succinctly: "[(I]jf plaintiffs,

such as Delaware Valley, find

it possible to engage a lawyer

based on a statutory assurance

that he will be paid a

‘reasonable fee’, the purpose

behind the fee-shifting statute

has been satisfied." It is ‘a

lawyer’, not the lawyer of

choice, that the statute seeks

to provide." [Citations

omitted. }

Hodel, 857 F.2d at 1528-30 (Justice

Starr, dissenting).

It is also important to afford the

Respondents’ counsel the benefit of his

bargain. In reaching the agreement, the

attorney and the clients have already

21

considered and weighed all of the

relevant factors. Florida Rock, 9 Cl.Ct.

at 290. Certainly, the fact that

Respondents’ counsel reduced his fee is

evident of the "enablement theme" which

requires access not to the greatest trial

lawyers in the United States, but

effective access to the judicial process.

The Respondents, by having their day in

court, had the effective access to the

judicial process that is consistent

throughout the opinions of this Court.

This Court, in Vanegas v. Mitchell,

110 S. Ct. 1679 (1990), noted that "it is

the party who is...eligible for an award

of attorney’s fees." Statutory awards of

attorney’s fees may also co-exist with

private fee arrangements. Just as a

party is entitled to receive the fees in

an appropriate case, this Court has

recognized that it is a party’s right to

22

ee

waive, settle or negotiate the

eligibility for fees. Vanegas, 110 S.

Ct. at 1683. This Court, in Vanegas,

distinguished Blanchard v. Bergeron by

noting "Blanchard did not address

contractual obligations of plaintiffs to

their attorneys;...." This Court paid

deference to the contract between

attorney and client and held the

agreement to be valid. Vanegas, 110 S.

Ct. at 1684.

In Blum, this Court rejected a 50%

“enhancement bonus" requested by the

attorneys for the prevailing party. The

Court determined that a 50% enhancement

was unnecessary and that the fee or

hourly rate charged by each attorney

multiplied by the number of hours for

each attorney fully compensated the

attorneys. Blum is similar to the

instant case in that the Respondents’

a3

counsel is seeking a 50% "enhancement

bonus" from the amount he charged his

client. He seeks this "bonus" only

because his clients prevailed at trial.

The $62.50 hourly rate charged by

Respondents’ counsel fully compensates

Respondents’ counsel. This is the hourly

rate that he agreed to accept from the

Respondents and such a rate would have

been fully compensatory in the event that

the Respondents did not prevail. If

there is to be one fee paid by

Respondents to their attorney if they

lose and another fee to be paid by

Petitioner to Respondents’ Attorney if

Respondents prevail, the additional fee

is in the form of an "enhancement bonus"

from the amount Respondents’ counsel

charged his clients. To provide

Respondents’ counsel with an increased

hourly rate would provide the windfall

24

|

sought to be avoided when awarding

attorney’s fees in excess of the rate at

which qualified counsel would be willing

to represent parties with legitimate

grievances. Hodel, 857 F.2d at 528-30

(Justice Starr dissenting).

The underlying action was an action

by the successor in interest to the

Federal Deposit Insurance Corporation

(hereinafter referred to as "FDIC")

against four guarantors, seeking payment

of the balance due of a note executed by

a corporate debtor. While the amount

sought by Petitioner at trial was nearly

$400,000.00, it is doubtful that the

Respondents could satisfy a judgment if

one had been entered. Typically, ina

case such as this, the debtor is unable

to pay the judgment, much less pay

attorney’s fees to the plaintiff’s

counsel. In that instance, the fees

25

would remain unpaid, or might even be

discharged in bankruptcy.

However, if a solvent creditor

actively pursues a judgment against

debtors and is the non-prevailing party,

the creditor, at least in Oklahoma, will

likely be required to pay debtor’s

attorney’s fees. In that case, an award

of attorney’s fees in excess of that

which the debtors contracted for

essentially punishes the creditor for

pursuing the debtor. An award of

attorney’s fees in excess of $62.50 per

hour serves as a deterrent to creditors

seeking effective access to the judicial

system.

Because of his agreement with his

clients, Respondents’ attorney is not

able to seek additional fees from his

clicnts. His request, for fees in excess

of what he contracted for, rises to a |

26

li aerieaeeemiaianiiii in

request for a 50% "enhancement bonus"

from the Petitioner as a result of

prevailing at trial. The entry of such

an award serves to discourage a

creditor’s access to effective judicial

process. An award of attorney’s fees in

excess of that which Respondents

contracted for punishes rather than

reimburses.

The banking system and the FDIC are

the back-bone of this Country. The

Petitioner is a part of the process which

provides that the FDIC shall liquidate

failed institutions and sell their assets

to replenish the deposit insurance. An

award of attorney’s fees in excess of

what the Respondents’ attorney contracted

for not only unjustly enriches

Respondents’ attorney, but acts as a

deterrent to those similarly situated to

the Petitioner from seeking redress of a

27

guarantor’s promise to pay the debt of

another. The entry of award of

attorney’s fees in excess of that which

the Respondents are required to pay to

their attorney serves as a deterrent to

Petitioner’s access to the judicial

system, thereby rendering the process

ineffective.

The incorrectness of this award of

attorney’s fees is further amplified by

the express language of 12 0.S. § 936

which provides that the prevailing party,

not his attorney, shall be awarded

reasonable attorney’s fees. The logical

extension of this Statute is that 12 O.S.

§ 936 is designed to reimburse, not

unjustly enrich. A prevailing party,

according to 12 0.S. § 936, is reimbursed

for its "out-of-pocket" attorney’s fees.

To do otherwise unjustly enriches the

28

prevailing party’s attorney and serves to

subsidize the legal profession.

CONCLUSION

WHEREFORE, Petitioner respectfully

prays that a writ of certiorari be

granted.

ylly submitted,

UCE F. KLEIN, OBA #11389

205 N.W. 63rd, Suite 160

Oklahoma City, OK 73116

(405) 848-8842

Dated July 16, 1993

she3: Pet\Chasteen.cer

29

APPENDIX

A. ORDER AND JUDGMENT OF THE UNITED

STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

THE CADLE COMPANY,

II, INC.

)

)

)

Plaintiff-Appellant, )

)

Vv. ) No. 92-6318

) (D.C. No. CIV-

CHARLES R. CHASTEEN; )

BILLY M. CARTER; )

)

)

)

)

BILLY M. HOLMES; and

LENDELL D. ROBERTS,

90-1270-R)

W. D. Okla.

Defendants-Appellees.

ORDER AND JUDGMENT®'

Before LOGAN, MOORE and BRORBY, Circuit

Judges. |

'This order and judgment has no

precedential value and shall not be cited,

or used by any court within the Tenth

Circuit, except for purposes of

establishing the doctrines of the law of

the case, res judicata, or collateral

estoppel. 10th Cir. R. 36.3.

1

After examining the brief and

appellate record, this panel has

determined unanimously that oral argument

would not materially assist the

determination of this appeal. See Fed. R.

aoe. PF 3418) 3- 200A: Cit: Ri 34.369. The

cause is therefore ordered submitted

without oral argument.

This case is founded upon diversity

jurisdiction and presents for appeal the

issue of whether prevailing counsel should

be awarded attorney fees based upon a

reasonable hourly rate or the agreed upon

rate. The district court applied the

reasonable hourly rate and we affirm.

The significant matters are not

disputed. Appellee prevailed in federal

district court. As this was a diversity

suit, the trial court applied the law of

the forum (Oklahoma) and awarded Appellee

reasonable attorney fees.

The problem arises in that during the

litigation Appellee’s counsel

retroactively reduced his fees from $125

per hour to $62.50 per hour, due to his

client’s poor financial condition.

Appellant does not challenge whether $125

per hour is a reasonable hourly rate for

Appellee’s attorney, but instead asserts

that Appellee’s attorney should have been

awarded $62.50 per hour, the amount he

actually charged the client. The facts

leading up to the reduced billing and the

district court’s rationale were succinctly

stated as follows:

There is no questions that

the hourly rate Mr. Tobin

eventually agreed to with his

clients was not a_ reasonable

hourly rate for his services,

nor was it the market rate.

Because he had some sympathy

with his’ clients’ financial

position and reduced his hourly

rates does not in my opinion

entitle the Plaintiff, as the

nonprevailing party, to the

benefit of that bargain.... The

a eT

key factor is the prevailing

market rate for the services of

attorney of comparable

experience and qualifications.

I see no reason why the same

determination should not apply

when an attorney, because of

financial concern for his/her

client, has charged the client a

rate below a "reasonable" hourly

rate.

The trial court concluded the key

factor to be the prevailing market rate

for the services of the attorney rather

than the agreed reduced rate that resulted

from the attorney’s financial concern for

his client.

Appellant asserts, as its only issue,

that the trial court erred by awarding the

reasonable rate rather than the agreed

upon rate. Appellant accepts all factual

findings of the trial court.

The parties agree we review the trial

court’s

award of attorney fees to

determine if the trial court abused its

discretion. Iqbal v. Golf Course

Superintendents Ass’n of America, 900 F.2d

227, 228 (10th car. 1990). The

establishment of hourly rates in awarding

° ~<

attorney fees is within the discretion of

the trial judge. Gurule v. Wilson, 635

F.2d 782, 794 (10th Cir. 1980), overruled

on other grounds sub nom. Cox v. Flood,

683 F.2d 330, 331 (10th Cir. 1982).

"Under the abuse of discretion standard, a

trial court’s decision will not be

disturbed unless the appellate court has a

definite and firm conviction that the

lower court made a clear error of judgment

or exceeded the bounds of permissible

choice in the circumstances." McEwen v.

City of Norman, 926 F.2d 1539, 1553-54

(10th Cir. 1991).

AS we are applying the law of the

forum, we first look to Oklahoma law.

Okla. Stat. Ann. titl. 12, § 936 (West

1988) provides: "(T]he prevailing party

shall be allowed a reasonable attorney fee

to be set by the court." Oklahoma cases

hold that a court, in fixing the value of

a reasonable attorney fee, should consider

every fact or circumstance "bearing on

fair compensation for the professional

services rendered." Walls v. Russell, 519

P.2d 936, 938 (Okla. Ct. App. 1974),

overruled on other grounds sub nom. Russel

v. Flanagan, 544 P.2d 510, 512 (Okla.

1975). A reading of the Oklahoma cases,

however,reveals no cases directly on

point. When there is no law directly on

point, our task is to attempt to predict

how the Oklahoma courts would decide the

issue.

If there is a common thread running

through attorney fee cases, it is that of

reasonable compensation in light of all

the circumstances. The fee agreement

existing between an attorney and client is

but one of the circumstances to be

considered. If the fee agreement fails to

provide for reasonable compensation, then

the fee agreement along should not be

determinative in an action against a

nonparty to the agreement for a

"reasonable attorney’s fee." This

principle was enunciated in Blanchard v.

Bergeron, 489 U.S. 87 (1989), when

considering whether a litigant could

recover an attorney fee in excess of the

fee agreement. There the Supreme Court

stated:

As we understand [42

U.S.C.} § 1988’s provision for

allowing a "reasonable

attorney’s fee," it contemplates

reasonable compensation, in

light of all of the

circumstances, for the time and

effort expended by the attorney

for the prevailing plaintiff, no

more and no less. Should a fee

agreement provide less than a

reasonable fee calculated in

this manner, the defendant

should nevertheless be required

to pay the higher amount.

Id. at 93.

In the case before us, Oklahoma law

mandates "a reasonable attorney fee"; it

does not mandate the agreed upon fee

arrangement.

Appellant argues this result would

unjustly enrich the prevailing party’s

counsel and result in a windfall.

Appellant cites Florida Rock Indus., Inc.

v. United States, 9 Cl. Ct. 285 (1985), as

Supporting its position that the attorney

fee should be limited to the amount fixed

by the attorney-client contract. In

Florida Rock, the Claims Court held that

"where there is a bona fide contractual

arrangement whereby the client has

committed to pay the amount billed by the

attorneys, --. the court should not

second-guess the workings of the market in

determining the reasonableness or

appropriateness of the fees." Id. at 288.

However, market value, as indicated by a

fee arrangement, does not reflect what is

? "reasonable attorney ' fee" if the

attorney reduces the fee rate because of a

client’s poor financial condition.

Instead, market value is but one of the

factors to be considered in determining

reasonableness.

Nor are we persuaded by Appellant’s

"windfall" argument. Attorneys who reduce

their hourly rates for poor clients should

not be penalized for so doing. Save Our

Cumberland Mountains, Inc. v. Hodel, 857

_F.2d 1516 (D.C. Cir. 1988) (en banc).

Based upon the facts of this case, we

cannot hold the trial court abused its

discretion in awarding reasonable attorney

fees in lieu of the agreed rate.

The judgment is AFFIRMED.

Entered for the Court:

WADE BRORBY

Circuit Judge

ENTERED MARCH 29, 1993

10

APPENDIX

B. ORDER OF THE COURT

IN THE UNITED STATES DISTRICT COURT FOR

THE WESTERN DISTRICT OF OKLAHOMA

THE CADLE COMPANY

Ii, INC.,

Plaintiff,

CHARLES R. CHASTEEN,

ET AL.,

)

)

)

)

Vv ) CIV-90-1270-R

)

)

)

)

Defendants. )

O R DER

On the 18th day of August, 1992, this

matter came on for hearing on the

Defendants’ Application and Supplemented

Application to Tax Attorney Fees. The

Plaintiff appeared by counsel Bruce F.

Klein and the Defendants appeared by

counsel Paul K. Tobin. The parties have

consented to magistrate judge jurisdiction

pursuant to 28 v.6.¢. §636(Cc), for

purposes of a ruling on the attorney fee

application. Having considered the

evidence presented, the briefs of the

Fe

parties, and the arguments of counsel, the

following order is entered.

PROCEDURAL HISTORY

This diversity action was instituted

by the Plaintiff seeking to collect from

the Defendants as guarantors, the balance

owed under a promissory note. The matter

was tried to a jury and the jury found in

favor of the Defendants and against the

Plaintiff. A Judgment in accordance with

the jury verdict was entered by the Court

on March 25, 1991. Thereafter, on April

8, 1991, the Defendants filed their

initial applications for attorney fees,

seeking an attorney fee award of

$16,150.00 based upon 129.2 hours expended

by Defendants’ attorney at $125.00 per

hour. Plaintiff timely objected to the

application, but by an order dated May 17,

1991, United States District Judge David

L. Russell found that the Defendants were

entitled to a reasonable attorney fee.

Judge Russell ordered the parties to

confer in an attempt to agree upon the

amount of attorney fees to be awarded, but

the parties were unable to reach such an

agreement. On March 19, 1992, Defendants

filed their supplemented application for

attorney fees, seeking a total attorney

fee award of $20,787.50 based upon 166.3

hours at $125.00 per _ hour. In the

supplemented application, Defendants

advised the Court that the Tenth Circuit

had recently affirmed the judgment on

appeal, and had found that the Defendants

were entitled to attorney fees for the

appeal, with this Court to determine the

amount of fees to award. On April 7,

Plaintiff filed its objection to the

supplemented application, contending that

the hours claimed by the Defendants were

excessive as was the hourly rate. On June

18, 1992, Defendants filed an addendum to

the supplemented application showing that

the Plaintiff’s attorney expended over 100

hours more on this case than did the

Defendants’ attorney. On July 17, the

parties consented to magistrate judge

jurisdiction and the matter was then

referred to the undersigned Magistrate

Judge for disposition of the attorney fee

application.

ISSUE

The sole issue before the court is to

determine a reasonable fee as Defendants’

entitlement to an attorney fee award has

already been established by Judge

Russell’s order of May 17, 1991, and by

the Tenth Circuit’s order of February 27,

1992.

DISCUSSION

The most useful starting point in

determining the amount of a reasonable

attorney fee is to take the number of

hours reasonably expended in the

litigation and multiply the hours by a

reasonable hourly rate. Cooper v. Utah,

894 F.2d 1169, 1171 (10th Cir. 1990);

Brown v. Phillips Petroleum Company, 838

F.2¢0 451, 453 (19th Cir. 19868), cert.

denied, 488 U.S. 822 (1988), quoting from

Hensley v. Eckerhart, 461 U.S. 424, 433

(1983).

Although Plaintiff objected in its

brief to the number of hours Defendants’

counsel expended in the case, Plaintif‘*’’s

counsel admitted at the hearing that the

Plaintiff does not seriously challenge

this. Further, as noted earlier,

Plaintiff’s counsel expended over 100

hours more in the prosecution of this

action than the Defendants’ attorney did

in defending it. Having reviewed the

application and the detailed time records

¢

5

,

i

f

i

g

f

|

|

|

,

t

provided by Defendants’ counsel, the Court

is of the opinion that all of the hours

expended by counsel were reasonably spent

in defense of this lawsuit, with the

exception of the 10.9 hours discussed

below.

Defendants’ attorney seeks

reimbursement for 10.9 hours spent in

sutkteneat discussions with the Plaintiff

prior to the lawsuit being filed. The

clear wording of the Oklahoma statute

under which Defendants are entitled to an

attorney fee award, (12 Okla. Stat. §936),

appears to limit the fee award to the time

Spent after the lawsuit was filed. Absent

any citation by Defendants of case or

other controlling law to the contrary, the

Court finds that the Defendants are not

entitled to a fee award for the 10.9 hours

spent in settlement discussions prior to

the filing of the lawsuit. Accordingly,

the Court finds that the number of hours

reasonably expended by the Defendants’

attorney in this litigation was 155.4

hours, which is the number cf hours

claimed by Defendants’ counsel less the

10.9 hours discussed above.

As noted, the second element in

determining a reasonable attorney fee is

to determine a reasonable hourly rate.

Mr. Tobin seeks compensation at $125.00

per hour, which is his normal hourly rate.

However, although Mr. Tobin initially

billed his clients in this case at this

normal hourly rate, he later agreed to

reduce his’ rate to $62.50 per _ hour

retroactively to the beginning of this

litigation, due to his clients’ financial

condition. Plaintiff therefore contends

that Mr. Tobin should be limited to the

$62.50 as a reasonable hourly rate.

—

The Court is familiar with Mr.

Tobin’s qualifications and in an

application filed by him in another

lawsuit, I found that a reasonable hourly

rate for his services was $125.00 per

hour. In my opinion, a different result

is not required here, just because Mr.

Tobin reduced his hourly rates for the

benefit of his clients. Further, the

Court is generally familiar with the

hourly rates charged by attorneys in the

Oklahoma City area, and I find that the

hourly rate sought by Mr. Tobin is in line

with hourly rates charged by attorneys of

Similar experience.

It is clear from Tenth Circuit case

law that in calculating a _ reasonable

hourly rate, the district courts are to

consider the prevailing market rates in

the area for an attorney of like

experience and qualifications. See, e.g.,

|

Lucero v. City of Trinidad, 815 F.2d 1384,

1385 (10th Cir. 1987). The customary

hourly rate of a lawyer is relevant but

not conclusive in determining the hourly

rate. ig. Further, any fee agreement

between the client and the attorney is

relevant, but not conclusive. As U.S.

District Judge Robin J. Couthron noted in

an article published in the Oklahoma Bar

Journal:

Many attorneys spend considerable

time and effort proving, both in

support of claims for fees and in

defense thereto, the contract or

agreement for payment between the

claiming attorney and his client.

Generally, this exercise is seldom

worth the effort. The fee is not

limited or set by counsel’s contract

with the client, rather it is the

court’s obligation to find and award

a reasonable fee calculated in the

usual way.

Robin J. Cauthron, "Proving Attorney’s

Fees in Federal Court," 61 Oklahoma Bar

Journal 2813, 2815 (1990).

Neither counsel has shown that’ the

Oklahoma courts would apply any different

standard in establishing a "lodestar" fee.

There is no question that the hourly

rate Mr. Tobin eventually agreed to with

his clients was not a reasonable hourly

rate for his services, nor was it the

market rate. Because he had some sympathy

with his clients’ financial position and

reduced his hourly rates does not in my

opinion entitle the Plaintiff, as the

nonprevailing party, to the benefit of

that bargain. As Judge Cauthron noted in

her article, in determining a reasonable

hourly rate, the Court considers the

attorney’s agreement with his/her client

and considers that attorney’s_ normal

hourly rate, but these factors are

relatively unimportant in the final

determination. The key factor is the

prevailing market rate for the services of

10

an attorney of comparable experience and

qualifications. I see no reason why the

same determination should not apply when

an attorney, because of financial concern

for his/her client, has charged the client

a rate below a "reasonable" hourly rate.

Plaintiff cites to the case of

Flerida Rock Industries, Inc. v. United

States, 9 Cl. Ct. 285 (1985) in support of

its position that Defendants’ attorney is

limited to the hourly rate agreed to

between him and his clients. However, in

that case, the Court agreed that a "market

rate" for the attorney’s services was the

primary standard in determining a

reasonable hourly rate, but the Court

found that since the attorney and his

clients had agreed to the particular fee,

the market had spoken. ia. oat. 266,. 290:

Here, Plaintiff cannot seriously argue

that the prevailing rate of an attorney of

11

Mr. Tobin’s experience and qualifications

is $62.50 per hour. The Court finds that

the case of Save Our Cumberland Mountains,

inc. v. Hodel, 857 F.2d 1516 (D.c. Cir.

1988), to be more persuasive. In Hodel,

the court noted that attorneys who reduced

their hourly rates for poorer clients

should not be penalized when seeking

attorney fees as a prevailing party, by

being limited to the reduced hourly rate

charged the client. Rather, the

prevailing market rate is the proper

Standard to apply. Id. The Court further

rejects Plaintiff’s contention that

compensating Defendants’ attorney at a

higher hourly rate than the contract he

had with his clients results in a

"windfall." Awarding Mr. Tobin an

attorney fee award calculated on the

number of hours he reasonably expended in

the litigation times a reasonable hourly

12

ee

rate, by definition, necessarily cannot

produce a windfall.

As note, Defendants’ entitlement to

an attorney fee award arises under an

Oklahoma statute, but the wording of that

statute appears consistent with this

analysis as it allows the Court to award

"a reasonable attorney fee." i2 OKla.

Stat. §936.

Under federal law, the lodestar fee

once calculated will normally produce a

reasonable attorney fee. See Cooper v.

Utah, 894 F.2d at 1171. In fact, recent

Supreme Court and Tenth Circuit opinions

have recognized that most of the factors

federal courts use to consider in

determining whether a bonus or enhancement

waS appropriate, are subsumed into the

lodestar calculation. See, S.@.,

Pennsylvania v. Delaware Valley Citizens’

Counsel for Clean Air, 478 U.S. 546, 565

13

(1986); see also, City of Burlington v.

Dague, 112 S.Ct. 2638 (1992); Homeward

Bound, Inc. v. Hissom Memorial Center, 963

F.2d 1352 (10th Cir. 1992). However, as

the Court’s jurisdiction is based upon

diversity of citizenship, we apply

Oklahoma law with respect to an attorney

fee award. et. Clark Drilling

Contractors, Inc. v. Schramn, ne... $35

F.2d 1306, 1309 ra0chn. Cir. 1987). Under

Oklahoma law, once a reasonable attorney

fee is determined based on an hours times

rate basis, the Court is to determine

whether or not a bonus or enhancement is

appropriate based on the following

factors:

(a) time and labor required;

(b) novelty and difficulty of the

questions;

(c) the skill requisite to perform

the legal services properly;

(d) the preclusion of other

employment by the attorney due

to acceptance of the case;

(e) the customary fee;

14

(f) whether the fee is fixed or

contingent;

(g) time limitations imposed by the

client or the circumstances;

(h) the amount involved and the

results obtained;

(i) the experience, reputation and

ability of the attorney;

(j) the undesirability of the case;

(kK) the nature and length of the

professional relationship with

the client; and

(1) awards in similar cases.

Oliver’s Sports Center, Inc. Vv.

National Standard Insurance Company, 615

P.2d 291, 295 (Okla. 1980); State ex rel.

Burk v. City of Oklahoma City, 598 P.2d

659, 661 (OKla. 1979). The Defendants

here do not seek an enhancement or bonus

award and they have not presented any

justification for such bonus under the

above-cited factors. - Thus, I find that

the factors justifying a bonus or enhanced

fee are not present in this case. I

further find that an hourly rate for the

hours reasonably expended appears to fully

compensate counsel.

a

Accordingly, the Court finds that a

reasonable attorney fee award in favor of

the Defendants and against the Plaintiff

is $19,425.00 calculated at 155.4 hours

times $125.00 per hour. It is therefore

ordered, adjudged and decreed that the

Defendants have and recover judgment in

the amount of $19,425.00 against the

Plaintiff as a reasonable attorney fee.

Appropriate interest pursuant to 28 U.S.C.

§1961 shall accrue from the date of

judgment.

IT IS SO ORDERED this 26th day of

August 1992.

s/ Doyle W. Argo

DOYLE W. ARGO

UNITED STATES MAGISTRATE JUDGE

16

APPENDIX

C. ORDER DENYING PETITION FOR

REHEARING

ENTERED APRIL 19, 1993

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

THE CADLE COMPANY

Ai, iRC.,

Plaintiff-Appellant,

)

)

)

)

)

Vv. ) No. 92-6318

) (D.C. #CIV-90-

CHARLES R. CHASTEEN, )

BILLY M.HOLMES, )

)

)

)

LENDELL D. ROBERTS,

1270-R)

Defendants-Appellees.

ORDER

Entered April 19, 1993

Before LOGAN, MOORE and BRORBY, Circuit

Judges.

This matter comes on for

consideration of appellant’s petition for

rehearing.

Upon consideration whereof, the

petition for rehearing is denied.

Entered for the Court

ROBERT L. HOECKER, Clerk

s/Patrick Fisher

By Patrick Fisher

Chief Deputy Clerk