Contingent, ‘PI’ Firm’s Dearth of Time Records Dooms Attorneys’ Fee Award in Real Estate Spat

A personal injury firm’s (Goldberg, Weisman and Cairo) failure to properly document its attorney time records resulted in an almost 88% fee reduction after the defendants appealed from a real estate dispute bench trial verdict.

The plaintiffs – one of whom is a GWC attorney – in Kroot v. Chan, 2019 IL App (1st) 181392 sued the former property owners for violating Illinois Residential Real Property Disclosure Act, 765 ILCS 77/1 et. seq. (the Act) after they failed to disclose known property defects to the plaintiffs.

The trial court found for the plaintiffs on their Act claims and common law fraud claims and assessed nearly $70,000 in attorneys’ fees and costs against defendants. The defendants appealed citing the plaintiffs’ dearth of competent fee support.

Reversing, the First District emphasized how crucial it is for even a “contingent fee law firm” like GWC to sedulously document its attorney time and services.

Under Illinois law, a plaintiff seeking an attorney fee award had the burden of proving entitlement to fees. Additionally, an attorneys’ fee award must be based on facts admissible in evidence and cannot rest on speculation, conjecture or guess-work as to time spent on a given task.

Unless there is a contractual fee-shifting provision or a statute that provides for fees, an unsuccessful litigant is not responsible for the winner’s fees. And while the Act does provide a “hook” for attorneys’ fees, the common law fraud claim did not. As a result, the First District held that the fraud verdict against one defendant wasn’t properly subject to a fee petition.

“Reasonable attorneys’ fees” in the context of a fee-shifting statute (like the Act) denotes fees utilizing the prevailing market rate. The Act’s fee language differs from other statutes in that it provides that fees can be awarded to a winning party only where fees are incurred by that party. “Incurred,” in turn, means “to render liable or subject to” [⁋⁋ 11-12 citing Webster’s Third New International Dictionary 1146 (1981)]. As a consequence, unless attorneys’ fees have actually been incurred by a prevailing party, the trial court has no authority to award fees under the Act.

At the evidentiary hearing on plaintiff’s fee petition, three GWC attorneys admitted they didn’t enter contemporaneous timesheets during the litigation and that a document purportedly summarizing GWC’s attorney time was only an estimate. The lawyers also conceded that plaintiffs didn’t actually pay any legal fees to GWC. Still another attorney witness acknowledged she tried to reconstruct her time nearly 8 months after the underlying work was performed. [⁋ 19]

The appeals court noted the record was devoid of any evidence that (1) plaintiffs ever agreed to pay for legal services, (2) plaintiffs were ever billed for GWC’s legal services, (3) plaintiff ever paid for those services, or (4) that GWC expected plaintiffs’ to pay for its services. The court also found that the supporting affidavits submitted in support of the fee petition were inadmissible hearsay documents. (It’s not clear from my reading of the opinion why the affidavits and billing record did not get into evidence under the business records hearsay exception.)

In the end, the Court found the absence of either simultaneous time records or testimony that the attorney working on the matter had an independent recollection of the time and tasks incurred/performed rendered the fee petition too speculative.

Kroot provides a useful gloss on the governing standards that control when a plaintiff can recover attorneys’ fees. Aside from stressing the importance of making contemporaneous time records and offering proper supporting fee evidence, the case’s lesson is that in the context of a statute like the Act that only provides for fees actually incurred, the plaintiff must actually pay attorneys’ fees to merit a fee award. Since the evidence was that the prevailing plaintiffs never actually were billed or paid any fees to their attorneys, the plaintiffs’ lawyers failed to carry their burden of proof on the fees issue.

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PaulP

Litigation attorney at Kanaris Stubenvoll & Heiss, P.C. representing businesses and individuals in post-judgment enforcement, collections and real estate litigation.