Getting the other side to pay your fees

Appeals court approves departure from so-called 'American Rule'

By Scott Lauck
BridgeTower Media Newswires

ST. LOUIS, MO - There's nothing more American than paying your own legal bills. But sometimes there are exceptions, as two recent cases in the Western District Court of Appeals demonstrate.

Last March, the appeals court tentatively approved a departure from the so-called "American Rule" and said that, with the right evidence, a judge could make the city of Kansas City pay the successful parties' attorneys' fees in a lawsuit over an airport lease.

Later that month, the same panel of judges gave a firm OK to an order for a man to pay attorneys' fees after losing an intra-family property dispute.

In the first case, the appeals court on March 7 largely affirmed a Jackson County circuit judge's ruling in favor of K.C. Air Cargo Services, which leases land at Kansas City International Airport and sublets it for air cargo facilities. In 2015, the city settled with the company for $1.7 million over water damage on the property, prompting an attorney for the city to tell Missouri Lawyers Weekly that the city might not renew the company's 30-year lease when it expired in September 2017.

K.C. Air Cargo filed a declaratory judgment to determine the validity of the lease's renewal provision. Circuit Judge Sandra Midkiff ruled last year that the company had the right to renew the lease, rejecting the city's argument that the company only had a right of first refusal.

The victorious party in a declaratory judgment action has statutory authority to recover attorneys' fees, though the process isn't nearly as straightforward or explicit as it is in employment or civil rights cases. Section 527.100 allows courts to award "costs" in an amount the court deems "equitable and just." Missouri Supreme Court has held that "costs" can include attorneys' fees when there are "special circumstances," providing a narrow exception to the American Rule.

Citing "the lack of substantial legal grounds for the City's position, the improper interference with KCACS' property rights, the shifting position of the City on the meaning and interpretation (if any) to be given to the disputed renewal provision of the Lease, and the apparent financial motivation for the City's action," Midkiff awarded K.C. Air Cargo about $66,000 in attorneys' fees and more than $3,000 in costs. The appeals court, however, remanded the issue to the circuit court, saying the company needed to submit specific evidence beyond its billing records.

"Given the limited facts that were uncontroverted in the summary judgment proceeding, we do not believe that the circuit court had before it sufficient facts for it to declare that special circumstances existed to award attorneys' fees to KCACS," Judge James Welsh wrote for the appellate court. Judges Rex Gabbert and Ted Ardini concurred.

Following the city's unsuccessful attempt to appeal the case to the Supreme Court, the case was returned to Midkiff in June.

"Now that the decision is locked in, we're going to be going back to the trial court and asking for a hearing or some other sort of process that would allow us to put that extra detail in the record," said S.J. Moore of Shank & Moore, an attorney for K.C. Air Cargo.

In a brief, the city argued that the case didn't fall within the narrow exception to the American Rule.

"This case is commercial litigation in which City and KCACS disagree over the interpretation and validity of a Clause in a lease," Senior Associate City Attorney Dorothy Campbell wrote. "Disagreement is not enough to establish special circumstances to justify an award of attorneys' fees."

Yet just weeks after the Western District left open the possibility of fees for K.C. Air Cargo, it approved wholeheartedly of such fees in a separate case, though arguably under murkier circumstances.

Daniel Barkho alleged that he had an oral contract with his sister and her husband, Beth and Douglas Ready, to purchase a piece of family land in Callaway County. Barkho sent the Readys $46,000 for the land, but shortly afterward the couple separated, and Douglas Ready refused to complete the process. Barkho filed a lawsuit seeking specific performance of the agreement, and Judge Gary Oxenhandler ruled in his favor.

Oxenhandler also ordered Douglas Ready to pay $19,785 in attorneys' fees to Barkho, and about $23,000 in fees to his ex-wife, who had joined her brother in his suit. According to court transcripts, the judge said Douglas Ready had been the "bad actor in this case" and that he "took the money and ran and he took the land and ran."

Oxenhandler didn't make any findings on the basis for the fees, but he mentioned case law that allows awards of attorneys' fees to be made "in unusual circumstances" in an equity action, as well as the court's "inherent power" to sanction a party for bad faith. In a March 28 opinion, the Western District noted that Oxenhandler found Douglas Ready's actions to be "reckless, willful, and malicious," a finding the appeals court said was supported by the evidence.

"Although courts have rarely found the very unusual circumstances that permit the award of attorneys' fees in the absence of a statute or contract," the court said, "it is still within the circuit court's discretion to award attorneys' fees when unusual or exceptional circumstances exist."

Jonathan Sternberg, a Kansas City-based appellate lawyer who represented Douglas Ready at the Western District, said that his client had not acted in bad faith in defending himself from Barkho's lawsuit and that the court's reasoning for upholding the fee award was "really amorphous." He added that the ruling could be cited as precedent in other cases by parties seeking to get around the American Rule.

"That's the danger of upholding this kind of thing," Sternberg said.

The Western District, however, apparently saw no conflict between affirming Oxenhandler's ruling and its earlier demand for more evidence in the K.C. Air Cargo case. Judge Welsh, backed by Gabbert and Ardini, wrote both opinions.

Barkho was represented by Joe D. Holt of Riley & Stingley in Fulton. In an interview, he said he wasn't surprised by the fee award. Holt, who has practiced for nearly 50 years and is a former Callaway County associate circuit judge, said Douglas Ready's lack of truthfulness on the stand was the most egregious he'd ever seen.

"I don't expect to find many factual circumstances that are close to this - God, I hope you wouldn't," Holt said.

Published: Thu, Aug 10, 2017

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