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Trepanier MacGillis Battina P.A. 8000 Flour Exchange Building 310 Fourth Avenue South Minneapolis, MN 55415 612.455.0500

Recovery of Attorney’s Fees Is a Matter for the Jury to Decide

The Minnesota Supreme Court recently held in United Prairie Bank Mountain Lake v. Haugen Nutrition Equipment, LLC, 813 N.W.2d 49 (Minn. 2012) that the Minnesota Constitution grants the right of a jury trial for a claim to recover attorney’s fees based on a contractual provision. The case is important for several reasons. First, the case suggests that in situations involving contractual attorney’s fees provisions, the decision of whether to award attorney’s fees (and the amount of fees to be awarded) rests with the jury and not the judge under the framework of Minnesota General Rule of Practice 119. Second, the case makes it more likely that parties will seek discovery of information regarding attorney’s fees and costs (e.g., legal invoices) during the discovery phase of the litigation rather than waiting until a prevailing party makes a fee application under General Rule of Practice 119.

The United Prairie Decision
In United Prairie, the plaintiff was a community bank and the defendant owned and operated a feed mill business. The defendant took out a business loan from the plaintiff. The promissory note signed in connection with the loan provided that “if [the plaintiff] hire[d] an attorney to collect this note, [the defendant] will pay attorney’s fees plus court costs.” United Prairie, 813 N.W.2d at 52. The defendant later defaulted on the promissory note and the plaintiff sued to recover the unpaid balance of the loan along with its legal fees.

The trial court denied the defendant’s request for a jury trial on the issue of the plaintiff’s attorney’s fees. The Minnesota Court of Appeals agreed with the trial court and the defendant appealed the case to the Minnesota Supreme Court.

On appeal, the defendant argued that the Minnesota Constitution’s right to a jury trial extends to claims involving the award of attorney’s fees under a contractual attorney’s fees shifting clause. The Minnesota Supreme Court held that the defendant was entitled to a jury trial and reversed the Minnesota Court of Appeals and the trial court.

According to the Minnesota Supreme Court, “Article I, Section 4 of the Minnesota Constitution states that ‘[t]he right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy.'” Id. at 53 (quoting Minn. Const. art. I, § 4) (emphasis added). The relevant inquiry for the court was whether a claim for contractual attorney’s fees was a case “at law” (where there is a constitutional right to a jury trial), or a case “in equity” (where there is no constitutional right to a jury trial).

In reaching its decision, the Minnesota Supreme Court observed that it first upheld a contractual attorney’s fee provision in a mortgage default case in the 1800s, describing the provision as a “stipulation which will save the mortgagee harmless in the event of a forced collection.” Griswold v. Taylor, 8 Minn. 342, 244 (1863) (emphasis added). A clause in a contract holding one party harmless from possible losses is called an indemnity clause.

The court previously held that an action for contractual indemnity is an action “at law” and that “[i]f fact issues exist with respect to the indemnity agreement, they are for the jury.” Amsterdam Casualty Co. v. Lundquist, 198 N.W.2d 543, 551 (Minn. 1972). Since contractual indemnity is traditionally a question of law, so must be the issue of contractual attorney’s fees. Accordingly, the Court held that Article 1 Section 4 of the Minnesota Constitution grants the right of a jury trial on claims for the recovery of attorney’s fees based on contractual fee-shifting provisions.

The Impact of United Prairie on Rule 119 and the Discoverability of Attorneys’ Fees Records
Minnesota General Rule of Practice 119 provides that the “application for an award or approval of fees shall be made by motion.” Minn. Gen. R. Prac. 119.01. The motion must be accompanied by an affidavit from the attorney establishing:

  1. A description of each item of work performed, the date upon which it was performed, the amount of time spent on each item of work, the identity of the lawyer or legal assistant performing the work, and the hourly rate sought for the work performed;
  2. The normal hourly rate for each person for whom compensation is sought, with an explanation of the basis for any difference between the amount sought and the normal hourly billing rate, if any;
  3. A detailed itemization of all amounts sought for disbursements or expenses, including the rate for which any disbursements are charged and the verification that the amounts sought represent the actual cost to the lawyer or firm for the disbursements sought; and
  4. That the affiant has reviewed the work in progress or original time records, the work was actually performed for the benefit of the client and was necessary for the proper representation of the client, and that charges for any unnecessary or duplicative work have been eliminated from the application or motion.

Minn. Gen. R. Prac. 119.02. Additionally, the court may require the production of additional documents, including bills, time sheets, progress reports, invoices, or other relevant records, which would be reviewed either by all parties or by the court in private. Minn. Gen. R. Prac. 119.03.

Prior to United Prairie, most fee applications (motions to recover attorney’s fees) were brought following a judgment on the merits of the case, at which time the prevailing party could be identified. Attorneys would typically wait until a motion was made under Rule 119 to review their opponent’s billing records. In light of United Prairie, it will be more common for parties and their attorneys to seek the discovery and production of billing records during the discovery phase of the lawsuit rather than waiting for the prevailing party to make a fee application under Rule 119. In this regard, Minn. R. Civ. P. 26.02(a) provides that “[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to a claim or defense of any party, including the existence, description, nature . . . of any books, documents, or other tangible things.” Evidence regarding the existing and amount of a party’s attorney’s fees is certainly relevant to a claim that the party is entitled to recover those attorney’s fees pursuant to a contractual fees-shifting provision.

Accordingly, United Prairie makes it more likely that litigants will seek the production of attorney billing records during the “discovery phase” of a lawsuit when such a claim has been brought.While certain information contained in such billing records may be shielded from discovery under the attorney-client privilege to the extent that they summarize the substance of attorney-client communications, other information contained in such records is likely discoverable. See City Pages v. State, 655 N.W.2d 839, 844 (Minn. App. 2003) (“Where the narrative descriptions in billing statements provide only general descriptions of the nature of the services performed and do not reveal the subject of confidential communications with any specificity, they are not privileged.”).

Additionally, certain information in billing records may be shielded from discovery by the work-product doctrine to the extent that they show an attorney’s mental impressions, trial strategy, and legal theories in preparing a case for trial. However, “there is no work product immunity for documents prepared in the regular course of business rather than for purposes of litigation.” City Pages, 655 N.W.2d at 846. A court would therefore have to look at the billing records and determine if they amount to an attorney’s mental impressions, trial strategy, or legal theories in preparation of trial rather than normal business records in excluding the records from discovery.

Under United Prairie, the Minnesota Supreme Court held that parties are entitled to a constitutional right of trial by jury regarding the award of attorney’s fees under a contractual fee-shifting provision. This means that in cases involving such a fee-shifting provision, the jury will be reviewing and weighing evidence as to the fairness and appropriateness of the attorneys’ fees being sought and information pertaining to those fees may also be discoverable during the course of the underlying lawsuit.

If you would like advice regarding contractual attorney’s fees shifting clauses or need legal representation in a dispute over the award of attorney’s fees, please contact one of the litigation attorneys at Trepanier MacGillis Battina P.A.
About the Author:
Minnesota business litigation attorney Bryan R. Battina is a trial lawyer who practices extensively in the area of commercial litigation, including breach of contract disputes involving the award of attorney’s fees and costs. Bryan may be reached at 612.455.0505 or Trepanier MacGillis Battina P.A. is a Minnesota commercial litigation law firm located in Minneapolis, Minnesota.