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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

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“Reasonable” attorney fees means the same thing whether the phrase is used in the court rule for case evaluation sanctions or the statute penalizing insurers for unreasonably denying personal injury protection (PIP) benefits, said the Michigan Supreme Court in <a href="http://publicdocs.courts.mi.gov:81/OPINIONS/FINAL/SCT/150834_63_01.pdf" target="_blank" rel="noreferrer noopener">Pirgu v United Services Automobile Association</a>, Docket No. 150834.  In either case, courts must apply the framework in Smith v Khouri, 481 Mich 519 (2008), which starts by multiplying the fee customarily charged in the locality for similar legal services by the reasonable number of hours expended.  For clarification, the Court consolidated the factors in Smith and MRPC 1.5(a) for determining whether an upward or downward departure is warranted.

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This decision arises from an accident in 2008, where Feridon Pirgu sustained closed head injuries after he was struck by a vehicle driven by an individual insured by defendant, United Services Automobile Association. Plaintiff, Feridon’s wife Lindita, filed a complaint against defendant in the Oakland Circuit Court after defendant discontinued payment of personal protection insurance (PIP) benefits previously provided for Feridon’s care. Plaintiff sought a judgment of $200,000 to $400,000 and the reinstatement of benefits. The jury awarded plaintiff $70,237.44. Plaintiff requested attorney fees totaling $220,945. Plaintiff’s counsel claimed that he spent more than 600 hours prosecuting the case, and that his normal billing rate was $350 an hour. The trial court noting that the jury only awarded 33% of the damages requested, it awarded plaintiff only 33% of the jury verdict. &nbsp;The Court of Appeals, over a dissent from Judge Gleicher, affirmed the award.

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Applying Smith, the Michigan Supreme Court held that a court must first begin its analysis by determining the reasonable hourly rate customarily charged in the locality for similar services.&nbsp; The court must then multiply that rate by the reasonable number of hours expended in the case to arrive at a baseline figure. &nbsp;Thereafter, the court must consider all of the remaining Wood v Detroit Auto Inter-Ins Exch, 413 Mich 573, 588 (1982) and MRPC 1.5(a) factors to determine whether an up or down adjustment to that baseline number is appropriate.&nbsp; Because the factors overlap, the Court consolidated the two sources to obtain a combined list of 8 factors: (1) the experience, reputation, and ability of the lawyer or lawyers performing the services, (2) the difficulty of the case, i.e., the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly, (3) the amount in question and the results obtained, (4) the expenses incurred, (5) the nature and length of the professional relationship with the client, (6) the likelihood, if apparent to the client, that acceptance of the particular employment will preclude other employment by the lawyer, (7) the time limitations imposed by the client or by the circumstances, and (8) whether the fee is fixed or contingent. These factors are not exclusive; the court may consider additional relevant factors.

The Michigan Supreme Court determined that the trial court abused its discretion by failing to apply this framework, and the Court of Appeals’ majority erred to the extent that it affirmed the trial court’s attorney fee award. &nbsp;The Supreme Court reversed the trial court’s judgment, vacated the trial court’s award of attorney fees, and remanded the matter to the trial court for reconsideration.

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Gaëtan Gerville-Réache

Labor and Employment

MSC uses Smith v. Khouri as a uniform test for determining “reasonable” attorney fees and clarifies the Khouri analysis

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MSC uses Smith v. Khouri as a uniform test for determining “reasonable” attorney fees and clarifies the Khouri analysis

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