Midland National Life Insurance Company v. Johnson-Marin et al

Filing 110

MEMORANDUM AND ORDER granting in part and denying in part 102 Motion for Attorney Fees; granting in part and denying in part 106 Motion for Attorney Fees. See order for details. Signed by District Judge Monti L. Belot on 8/8/2012. (aa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

MIDLAND NATIONAL LIFE
INSURANCE COMPANY,
Plaintiff,
v.
QUANETT JOHNSON-MARIN, et al.,
Defendants.

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CIVIL ACTION
No.

08-1367-MLB

MEMORANDUM AND ORDER REGARDING ATTORNEY FEES
Before the court are the following:
1.

Attorney Larry Ehrlich’s motion for
attorney fees and expenses (Doc. 102);

2.

Motion to determine attorney’s lien (Doc. 106); and

3.

Attorney’s lien (Doc. 107).

The court held a hearing on July 9, 2012.

approval

of

For the following

reasons, Mr. Ehrlich’s motion for fees is granted, in part.

His

motion for expenses is granted in its entirety.
Counsel are familiar with the somewhat protracted course of this
case; therefore, a summary will suffice.

A reader not familiar with

the case should review the court’s memorandum decision of January 9,
2012 (Doc. 98).
This case was filed as an interpleader action on November 19,
2008.

However, as Mr. Ehrlich explained at the hearing and as shown

by his time sheets, Mr. Ehrlich’s involvement began in February 2008,
when he first learned that Quanett Johnson had sold the annuities to
Henderson.

Mr.

Ehrlich

tried,

without

success,

to

enlist

the

assistance

of

the

Sedgwick

District

Attorney.

He

also

began

discussions with various persons, including counsel for Midland, which
eventually filed the interpleader. Mr. Ehrlich entered his appearance
along with counsel for the other parties and the case began moving
through the discovery process.
In August 2009, Mr. Ehrlich began settlement discussions.

Mr.

Ehrlich’s time entry of August 21, 2009 states: “Conversation Kraft
[one of Henderson’s lawyers] Re: settlement offer of even split.” Mr.
Ehrlich’s time sheets reflect additional settlement conversations and
conferences during September and October, 2009.

However, when the

settlement was presented to the court for approval on October 19,
2009, the court declined to approve it.1
1

The proposed settlement, Doc. 31, provided:
These two defendants [Ramirez and Henderson] will
equally divide the accrued annuity payments held
in trust by plaintiff [Midland].
Plaintiff will make all future monthly annuity
payments to defendant Henderson. Defendant
Henderson will then forward a payment to
defendant Ramirez equal to one half of the
monthly annuity payment received from plaintiff.
This arrangement will continue for the life of
the annuities.
Defendant Henderson will pay $5,500.00
plaintiff for attorney fees and expenses.
Plaintiff will forgo their claim
remaining attorney fees and expenses.

for

to
the

Evidence will be presented at the hearing of this motion in
order for the Court to make its independent evaluation of
whether the settlement is reasonable, fair and in the best
interests of the minors. The evidence will also include a
request for an allowance of reasonable attorney fees and
reasonable expenses advanced by attorneys for defendant Ramirez
to be paid from one-half of the accrued annuity payments
received by defendant Ramirez.
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There followed additional discovery and proceedings before the
magistrate judge.

The parties filed motions for summary judgment

(Docs. 52-62) which the court denied on October 1, 2010 (Doc. 63).
The pretrial order was filed on February 8, 2011 (Doc. 71) and a bench
trial was conducted on August 2 and 31, 2011.

After additional

briefing, the court filed its memorandum decision on January 9, 2012
(Doc. 98).

Henderson sought reconsideration which the court denied

on February 7, 2012 (Doc. 103).
appeal, but it did not do so.

The court waited for Henderson to

On April 13, 2012, the court appointed

attorney JoLynn Oakman as guardian ad litem for the Hernandez children
(Doc. 105).

By letter of May 3, 2012, counsel for Midland announced

that it will forego any interest in the funds it deposited with the
clerk, which currently total $114,205.08.
The first order of business is to resolve the matter of Mr.
Ehrlich’s fees and then, with Ms. Oakman’s assistance, develop a plan
for disbursing the remainder of the funds (less Ms. Oakman’s fee) for
the benefit of the children, who currently reside in Mexico with their
mother.
Mr. Ehrlich has supported his claim by two methods: (1) his
contingent fee agreement with Rito Duque Ramirez (Doc. 107, Ex. A) and
(2) his time sheets.

Applying the 40% contingent fee agreement, Mr.

Ehrlich’s calculated fees (not including expenses) are $45,069.40
(Doc. 107).

Using the time sheets, the fees (not including expenses)

are $40,600.
Mr. Ehrlich cites two cases for the proposition contingent fee

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contracts on behalf of a minor are legal in Kansas so long as they are
reasonable: Grayson v. Pyles, 184 Kan. 116, 334 P.2d 341 (1959) and
Baugh and Baugh, 25 Kan. App. 2d 871, 973 P.2d 202 (1999).

Grayson

involved a contingent fee agreement in an action to collect child
support payments.

Baugh concerned a contingent fee agreement in an

action involving the wrongful death of a child.

Although the factual

situations in Grayson and Baugh differ from this case, both support
the legality of Mr. Ehrlich’s contingent fee agreement and this court
has no reason to find otherwise.

The key factor, as Mr. Ehrlich

observes, is the reasonableness of the fee, which is the same factor
the court notes in Baugh.

25 Kan. App. 2d at 877.

The Kansas Supreme Court has established a standard methodology
for determining reasonableness.

In Johnson v. Westhoff Sand Co., 281

Kan. 930, 135 P.3d 1127 (2006), the court stated:
In determining the reasonableness of an attorney fee, e.g.,
as set forth in K.S.A. 40–256, the factors in Rule 1.5(a)
(2005 Kan. Ct. R. Annot. 397) of the Kansas Rules of
Professional Conduct should be considered. City of Wichita
v. BG Products, Inc., 252 Kan. 367, 374, 845 P.2d 649
(1993). The rule provides:
“(a) A lawyer's fee shall be reasonable. 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; and
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(8) whether the fee is fixed or contingent.” (2005
Kan. Ct. R. Annot. 397.) (Emphasis added.)
(28 Kan. at 940-41).

The court also observed that the amount of the

fee is discretionary and that although the KRPC 1.5(a) factors must
be considered, no one factor controls.

A fee agreement must be

considered but it is not dispositive of a reasonable fee.

The

methodology set out in Johnson has been the law in Kansas for a long
time.

See Hall v. Hamilton, 233 Kan. 880, 886, 667 P.2d 350 (1983)

and Barnes v. Mid-Continent Casualty Co., 192 Kan. 401, 405, 388 P.2d
642 (1964).

The Tenth Circuit recognized the Kansas methodology in

Beck v. Northern Natural Gas Co., 170 F.3d 1018, 1025 (10th Cir.
1999).
The court will now consider each of the Rule 1.5(a) factors.
(1) Mr. Ehrlich’s time sheets show a total of 209.65 hours spent
on the case between February 2008 and May 2012.

The court has

carefully reviewed the entries and generally finds the time expended
to be reasonable.

This was a novel case in several respects, e.g.,

the legal issues surrounding Johnson’s sale of the annuities to
Henderson and the validity of Henderson’s claims to the annuities.
The court’s rejection of the settlement resulted in substantial
additional work.

Mr. Ehrlich is a seasoned attorney which he

demonstrated in the skill he exercised in handling the case.

The

court has no reason to believe any other lawyer could have done
better.
(2) There is no evidence that Mr. Ehrlich’s involvement precluded
his employment in any other case.
(3) Mr. Ehrlich’s initial hourly fee of $150 was raised to $200

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in December 2008.
raising the fee.

Mr. Ehrlich has not explained his reason for
As a result, the majority of his work, 183 hours,

was billed at $200 per hour. Based on the court’s knowledge of hourly
fees in Wichita for work in federal court, both hourly rates are
reasonable.
(4) The “amount involved and results obtained” factor is somewhat
difficult to apply in this case.

To the extent Mr. Ehrlich supports

his claim by the contingent fee agreement, this was not a “usual”
contingent fee case in comparison with a medical negligence or a
products liability case where the plaintiff is required to prove both
liability and damages and, in some cases, run the risk of Kansas’
comparative fault law which can reduce or eliminate even stipulated
damages. Mr. Ehrlich was not required to advance substantial sums for
investigation, to locate and retain expert witnesses and to engage in
deposition discovery.

The “amount” of maximum recovery was the sum

remaining to be paid out by Midland.2
Consideration of the “results obtained” factor likewise places
the court in a somewhat difficult situation.
court

has

nothing

but

praise

for

the

On the one hand, the

overall

way

Mr.

Ehrlich

prosecuted this case. However, the “results obtained,” i.e., recovery
of all the remaining value of the annuities, cannot be attributed
solely to the positions advanced by Mr. Ehrlich, e.g., Henderson’s
claimed violation of Kansas’ Structured Settlement Protection Act,
2

On March 1, 2012, Quanett Marin a.k.a. Johnson-Marin was charged
in this court with mail fraud and money laundering (Case No. 6:12-CR10047-JTM).
She pled guilty on June 26 and will be sentenced on
September 13, 2012. Presumably restitution will be ordered but the
amount has not been determined. Whether restitution will be paid is,
of course, quite another matter.
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K.S.A. 60-461 2008 Supp.

See, also, the court’s comments regarding

Rito Duque Ramirez’s position set forth in the memorandum decision
(Doc. 98 at 17-18).
(5) No time limitations were imposed other than those which are
customarily imposed by the court.
(6) The length of Mr. Ehrlich’s relationship with Ramirez has
been noted.

The nature of the relationship does not seem especially

relevant except that the court is well aware that Ramirez, at times,
has been difficult to deal with.
(7) Mr. Ehrlich’s experience, reputation and ability already have
been commented upon.
(8) Finally, Mr. Ehrlich responsibly kept track of his time in
addition to the contingent fee contract.

The court attaches no

particular significance to the fact that the claimed fees under the
contingency fee agreement and time expended/hourly rate calculation
are similar.
Applying these factors, there is no question that Mr. Ehrlich has
earned a substantial fee for his services.

Although payment of his

fee will reduce the amount of money available for the children, it is
certainly arguable that without Mr. Ehrlich’s efforts, the children
would be receiving nothing at all.
But there are additional factors which are unique to this case.
First, the settlement funds were intended for the benefit of the minor
children

and

the

reasonableness

of

Mr.

Ehrlich’s

fee

must

be

considered in light of the funds ultimately available to the children.
Cases note the special role of the courts in matters involving minors.
For example, in Salmeron v. U.S., 724 F.2d 1357, 1363 (9th Cir. 1983),
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the court observed:
It has long been established that the court in which a
minor's claims are being litigated has a duty to protect
the minor's interests. See, e.g., Thompson v. Maxwell Land
Grant and Railway Co., 168 U.S. 451, 463, 18 S.Ct. 121,
125, 42 L.Ed. 539 (1897); United States v. Reilly, 385 F.2d
225, 228 (10th Cir. 1967) (“With the interests of minors at
stake, the trial judge had a special obligation to see that
they were properly represented, not only by their own
representatives but also by the court itself.”). Thus, a
court must independently investigate and evaluate any
compromise or settlement of a minor's claims to assure
itself that the minor's interests are protected, e.g.,
Glover v. Bradley, 233 F. 721, 727 (4th Cir. 1916), even if
the settlement has been recommended or negotiated by the
minor's parent or guardian ad litem. See Thompson v.
Maxwell Land Grant and Railway Co., 168 U.S. at 463, 18 S.
Ct. at 125; Glover v. Bradley, 233 F. at 727. (Emphasis
added).
The same duty of judicial investigation was found to exist in a
more recent case, In re Abrams & Abrams, P.A., 605 F.3d 238, 293 (4th
Cir. 2010)3:
3

In remanding for a reasonableness analysis, the Abrams court
admonished the district court to “look at the twelve factors first set
forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 71719 (5th Cir. 1974). Abrams was decided on May 18, 2010. On August
16, 2010, the Tenth Circuit decided Anchonodo v. Anderson, Crenshaw
& Associates, 616 F.3d 1098. The court observed at pages 1103-04:
The Supreme Court's very recent decision in Perdue [v.
Kenny A. ex. rel. Winn, 130 S. Ct. 1662, 1673 (2010)] only
confirms our reluctance to disturb a presumptively valid
lodestar fee determination on the basis of a conclusory
objection that Johnson factors were not discussed. In
Perdue the Court appears to significantly marginalize the
twelve-factor Johnson analysis, which it discounts as just
“[o]ne possible method” that “gave very little actual
guidance” and, due to its “series of sometimes subjective
factors[,] ... produced disparate results.” 130 S. Ct. at
1671-72 (quotation omitted). The Perdue Court clearly
embraces
the
lodestar
approach
as
the
preferable
alternative to the Johnson analysis, noting that the
lodestar approach “achieved dominance in the federal courts
after ... Hensley, Gisbrecht v. Barnhart, 535 U.S. 789,
801[, 122 S. Ct. 1817, 152 L. Ed. 2d 996] ... (2002),” and
has “become the guiding light of our fee-shifting
jurisprudence.” 130 S. Ct. at 1672 (also noting that
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The simpler standard of “reasonableness” is one that
Congress and many courts have adopted. For instance, in the
fee-shifting context under 42 U.S.C. § 1988(b), which
applies to certain civil rights suits, a “court, in its
discretion, may allow the prevailing party, other than the
United States, a reasonable attorney's fee.” 42 U.S.C. §
1988(b) (emphasis added). See also Barber v. Kimbrell's,
Inc., 577 F.2d 216, 226 (4th Cir. 1978) (evaluating
fee-shifting attorney fee for reasonableness). Nor is the
reasonableness standard limited to the fee-shifting
context. As we noted in Bergstrom v. Dalkon Shield Trust
(In re A.H. Robins Co.), “the law of this circuit has long
been clear that federal district courts have inherent power
and an obligation to limit attorneys' fees to a reasonable
amount.” 86 F.3d 364, 373 (4th Cir. 1996). In particular,
“[t]he district courts' supervisory jurisdiction over
contingent fee contracts for services rendered in cases
before them is well-established.” Allen v. U.S., 606 F.2d
432, 435 (4th Cir. 1979). Here too the review of fee
arrangements is for reasonableness.
Indeed, it is difficult to imagine why any different
standard would be warranted. In a case like this involving
a minor or disabled individual, a district court plainly
enjoys discretion to protect those who come in front of it.
In general, “infant[s] and other incompetent parties are
wards of any court called upon to measure and weigh their
interests.” Dacanay v. Mendoza, 573 F.2d 1075, 1079 (9th
Cir. 1978). As a result, “[i]t has long been established
that the court in which a minor's claims are being
litigated has a duty to protect the minor's interests.”
Salmeron v. U.S., 724 F.2d 1357, 1363 (9th Cir.1983). This
duty is intended to protect those who may be especially
vulnerable to manipulation or who may be unable to protect
themselves. Id.

“unlike the Johnson approach, the lodestar calculation is
objective” and hence “produces reasonably predictable
results”) (quotations omitted). We do not suggest that the
Johnson factors have become irrelevant; Perdue did not
overrule Hensley's allowance that under appropriate
circumstances they may be useful in determining subsequent
ad hoc adjustments to the lodestar, see Hensley, 461 U.S.
at 434 & n. 9, 103 S. Ct. 1933 (also noting, however, “that
many of [the Johnson] factors usually are [already]
subsumed within the initial calculation of hours reasonably
expended at a reasonable hourly rate”). But, after Perdue,
it has only become clearer that the lodestar determination
is primary and that the propriety of such a determination
is not automatically called into doubt merely because the
trial court did not expressly discuss the Johnson factors.
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Integral to this protective judicial role is ascertaining
whether attorney fee agreements involving minors or
incompetents are reasonable. “Independent investigation by
the court as to the fairness and reasonableness of a fee to
be charged against a minor's estate or interest is
required.” Dean v. Holiday Inns, Inc., 860 F.2d 670, 673
(6th Cir. 1988); Cappel v. Adams, 434 F.2d 1278, 1280 (5th
Cir. 1970) (same; noting “the obvious possibilities of
unfair advantage”). Moreover, the public reputation of the
profession would deservedly suffer if attorneys were seen
to be gouging those least able to fend for themselves.
Consistent with this charge, the local rules of the Eastern
District of North Carolina state that in approving a
settlement, “the court shall approve or fix the amount of
the fee to be paid to counsel for the minor or incompetent
parties.” E.D.N.C.L.R. 17.1(c).
Second, as Ms. Oakman noted at the hearing, the funds available
to the children already have been reduced by the $27,969 fee awarded
to the lawyers who handled the workers compensation case in North
Carolina.
Taking all these matters into consideration, the court concludes
that a reasonable fee for Mr. Ehrlich’s services is $ 28,000 plus his
expenses of $1,534.58 for a total of $29,534.58.

Ms. Oakman, the

guardian ad litem, has been consulted and concurs.

IT IS SO ORDERED
Dated this

8th

day of August 2012, at Wichita, Kansas.

s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE

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