INNA V. BOIKO and LOUIS PICARELLA v. GEORGE M. KAPOLCHOK and GEORGE KAPOLCHOK LAW OFFICES, INC.
Supreme Court Nos. S-16482/16512
THE SUPREME COURT OF THE STATE OF ALASKA
August 24, 2018
Superior Court No. 3AN-14-10765 CI. OPINION No. 7278
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.us.
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Pamela Scott Washington, Judge pro tem.
Appearances: James Alan Wendt, Law Offices of James Alan Wendt, Anchorage, for Appellants/Cross-Appellees. George M. Kapolchok, George Kapolchok Law Offices, Inc., Anchorage, for Appellees/Cross-Appellants.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.
I. INTRODUCTION
A self-represented couple sued their lawyer for legal malpractice. After lengthy and contentious discovery disputes, at the end of which the couple was sanctioned, the couple retained counsel to assist them in terminating the litigation. The parties agreed to dismiss the suit with prejudice, leaving open the couple‘s former lawyer‘s right to seek an award of attorney‘s fees. This appeal focuses on the superior court‘s decisions regarding that lawyer‘s motion for attorney‘s fees.
Very early in the litigation the lawyer gave the couple a joint, unapportioned
The superior court applied
We therefore affirm the superior court‘s judgment.
II. FACTS AND PROCEEDINGS
Inna Boiko and Louis Picarella retained attorney George Kapolchok and his law firm to represent them in dental malpractice and loss of consortium claims after Boiko underwent procedures allegedly resulting in disfigurement and extreme pain. The dentist moved for partial summary judgment, arguing that the statute of limitations period had expired before the initial complaint was filed. Boiko and Picarella opposed, asserting that there were genuine issues of material fact regarding the date the statute of limitations began to run.
While the summary judgment motion was pending, the parties engaged in settlement negotiations. Months later, on December 13, 2012, the court denied the motion, holding that — based on the continuing course of treatment doctrine — the original complaint was timely filed. A certificate of distribution on the order indicates it was mailed to the parties’ attorneys the day it was issued. On December 17 Boiko and Picarella signed a settlement agreement in Kapolchok‘s office. They stipulated to dismissal of the case, with prejudice, in return for a settlement payment. The day after the settlement agreement was signed, Kapolchok‘s paralegal emailed Picarella the favorable summary judgment decision.
Kapolchok retained a second attorney to represent his corporate law firm and assist him in defending the legal malpractice claim. One month after service of the complaint, Kapolchok made the couple a $1,500 joint, unapportioned
At this point Boiko and Picarella hired an attorney, who filed a motion for complete dismissal of their claims with prejudice, conditioned on their ability to contest any attorney‘s fees motion by Kapolchok. The superior court dismissed the case with prejudice and gave Kapolchok a deadline to file a motion for attorney‘s fees.
Boiko and Picarella preemptively moved for the superior court to hold the
Boiko and Picarella opposed; they asserted that instead of
enumerated several grounds for a variance under
Before Kapolchok replied, the superior court ruled without elaboration that the
The superior court awarded Kapolchok
forms the basis of this malpractice case when deciding whether to enhance or reduce attorney fees in this case.”
Boiko and Picarella appeal the court‘s decision to award attorney‘s fees and to maintain the discovery sanction. Kapolchok cross-appeals, challenging both the court‘s decision invalidating the
III. STANDARD OF REVIEW
The validity of a
IV. DISCUSSION
A. The Rule 68 Offer Was Invalid.
Kapolchok made a $1,500 joint offer of judgment to Boiko and Picarella “in complete satisfaction of all [their] claims.” Kapolchok argues that the couple‘s rejection of this offer compelled the superior court to employ
But “[n]ot all settlement offers trigger
The parties dispute only the second prong, whether “apportionment difficulty actually exist[ed].”20 Kapolchok asserts the joint offer was appropriate because Picarella‘s claims were purely derivative in both the dental and legal malpractice cases, and no apportionment difficulties existed between the husband and wife, as they had accepted a joint offer for the dental malpractice case. Kapolchok also contends that we
are obligated to remand because the court failed to specify any basis for holding the offer invalid, hindering Kapolchok‘s ability to contest the ruling.
We disagree on both counts. Although the superior court‘s decision did not explicitly state the basis upon which it found the
We also agree with the superior court that the offer was invalid. The $1,500 offer to Boiko and Picarella was a classic joint offer: an offer of a lump sum to two offerees without reference to apportionment.22 Our past decisions recognize the difficulties of apportioning offers and hold that such difficulties “warrant a general exclusion of joint offers from the penal cost provisions of
Picarella had a separate legal malpractice claim and was thus owed an apportioned offer. It is irrelevant that Boiko and Picarella were joint payees for the dental malpractice claim or treated as a single client by Kapolchok. Picarella‘s original loss of consortium claim in the dental malpractice lawsuit being derivative does not bear on whether he had an independent legal malpractice claim in this litigation. Kapolchok formed a separate attorney-client relationship with Picarella by obtaining his signature on the attorney-client fee agreement and adding his loss of consortium claim to the dental
malpractice lawsuit. Duties individually owed to Picarella flowed from the creation of that attorney-client relationship in addition to those separately owed to Boiko.24 Because Picarella had a separate legal relationship with and therefore a separate
We see no grounds for deviating from the general rule against joint offers under the facts of this case. Because we agree that the
B. The Rule 82 Attorney‘s Fees Award Was Not An Abuse of Discretion.
We review all
1. Reduction of attorney‘s fees from 20% to 15%
In determining whether varying an award under
Here the court reduced the fee award from 20% to 15% “due to the unreasonableness of paying two attorneys to defend what appears to be a rather unremarkable attorney malpractice case” brought by self-represented plaintiffs. This view was compounded by Kapolchok not documenting the full amount of fees sought, prompting the court to rely on a lower estimate. The fee reduction was further motivated by the court‘s policy concern that “a large fee award may deter similarly situated plaintiffs from bringing similar cases.” The court noted that “[i]mposition of a large fee award when a defendant attorney ultimately prevails insidiously closes the doors of the courthouse ever so slightly to plaintiffs who choose to represent themselves and assume the formidable task of suing their former attorney.”
Kapolchok advances three arguments supporting his position that the court erred in its decision to reduce attorney‘s fees. First, Kapolchok argues that because he was sued both in an individual capacity and as a corporation, a second attorney had to be retained under the statute requiring that corporations appear by attorney. But Kapolchok contorts the purpose of
however advisable that may be; the statute simply means a lay person cannot represent the law firm.
Second, Kapolchok disputes the court‘s characterization of the litigation as “unremarkable” and “not complex.” Kapolchok frames the legal malpractice suit as a case involving the larger dental malpractice case, and he asserts he would have needed to hire at least 3 experts, conduct 30 depositions, and interview 40 doctors across 4 different states to defend the suit, which he claims sought $3 million in damages.36 He contends retaining a second attorney “to oversee the litigation was reasonable, necessary, and prudent.”
In Nautilus Marine Enterprises, Inc. v. Exxon Mobil we upheld an award of fees when 15 attorneys had billed large sums for duplicative efforts; we accepted the superior court‘s rationale that “it is often advantageous to have more than one attorney present,” and we concluded the award was not an abuse of discretion.37 But we did so out of recognition that a trial court is “uniquely situated” to analyze the reasonableness of fees “because of its ‘greater knowledge of the case,’ ” and we emphasized that “[i]t is ... for the trial judge to determine ... whether too many attorneys were employed.”38
Similarly, in Gamble v. Northstore Partnership we affirmed an award even though the prevailing party‘s fees were double those of the unsuccessful party, observing “it is a judgment call . . . whether such a discrepancy reflects over-preparation and over-billing by one set of attorneys, or under-preparation and under-billing by the other set
of attorneys.”39 We noted that “there was much discovery practice, two sets of motions for summary judgment, and a five-day trial” and that the trial court reviewed itemized billings and “was personally aware of the quality and quantity of the work . . . [done] at the trial level.”40 Given the record and the court‘s level of engagement, we concluded the court had not abused its discretion.41
Here the superior court engaged in the type of analysis for which it is particularly well-suited: reviewing itemized billing, considering whether the number of attorneys was appropriate, and assessing the fees’ proportionality to the case‘s requirements.42 The superior court was “personally aware” of the course and complexity of the litigation, “the quality and quantity of the work” performed, and the lengths to which Kapolchok was willing to go in defending his reputation from attack by his former clients, who were rather unsuccessfully proceeding self-represented.43 The court found that Kapolchok had over-billed for a case that was not complex and did not merit the attention of two attorneys. Assuming none of the court‘s factual findings were clearly erroneous, it was within the court‘s discretion to reduce the percentage of fees awarded on this basis.
On review we conclude that the superior court‘s findings with respect to the complexity of the case and the number of attorneys needed were not clearly erroneous. Contrary to Kapolchok‘s assertions, the legal malpractice claim‘s primary focus was a
simpler question: whether Kapolchok knew of and
We also note that the billings submitted for computation under
We continue to accept that it is often necessary and prudent to retain additional attorneys,44 and we do not at all mean to suggest a legal malpractice defendant should not retain counsel for representation. However, given this record of work allocation, as well as our general deference to the superior court‘s personal knowledge of the parties and the case,45 we cannot say the court‘s reduction of fees based on the number of attorneys was an abuse of discretion or premised upon clearly erroneous fact finding.
Finally, Kapolchok contends that the superior court‘s concern about a “chilling effect” on future litigants was improper. But
non-prevailing party that it would deter similarly situated litigants from the voluntary use of the courts.”46 The attorney‘s fees award here is $17,887.43, hardly an insignificant sum. Given that the rule explicitly permits consideration of this factor, it was not error for the court to do so.
Because the court‘s legal analysis and factual findings are sound, we conclude the court did not abuse its discretion. We therefore affirm the reduction of attorney‘s fees from 20% to 15%.
2. Denial of motion for enhanced attorney‘s fees
Kapolchok argues that the superior court “failed to appreciate the unreasonableness” of Boiko‘s and Picarella‘s claims and did not adequately penalize the couple for the difficulties they caused during the discovery process. He asserts that the superior court erred when it declined to enhance the award under
The superior court‘s underlying determination that Boiko‘s and Picarella‘s uncooperativeness during the discovery process was more attributable to their misunderstanding as self-represented litigants than bad faith, particularly in light of the numerous instances in which Picarella exhibited confusion about the rules and purpose of discovery, was not clearly erroneous.47 Neither was the court‘s determination that Boiko and Picarella‘s claims — that Kapolchok “used coercive tactics to induce [them] to settle” and attempted to hide the possibility of continuing to trial — were reasonable and brought in good faith. We have reviewed enhanced attorney‘s fees awards for unreasonableness and bad faith when, for example, claims lacked any evidentiary
support, were fraudulent from inception, or were clearly brought with the intent to harass.48 But the record
3. Denial of motion to further reduce attorney‘s fees
Boiko and Picarella argue that the superior court neglected to consider their argument that Kapolchok‘s bad faith conduct in the litigation violated standards of professional conduct and warranted a further reduction of attorney‘s fees. They allege Kapolchok committed perjury in response to an interrogatory asking why he did not inform his clients that he did not carry legal malpractice insurance. Rather than answer the question, Kapolchok responded: “Defendants and Plaintiffs discussed this issue at least three (3) times and signed off on it.” Boiko and Picarella also cite as evidence of
bad faith Kapolchok‘s motion to compel production of tax returns they had not filed, which he knew from privileged communications in his capacity as their attorney.
Alaska Rules of Professional Conduct require attorneys to disclose in writing whether they carry requisite amounts of malpractice insurance.50 Alaska‘s professional rules also require that a lawyer “not reveal a client‘s confidence or secret unless the client gives informed consent, except for disclosures that are impliedly authorized.”51 “Confidence” is defined as “information protected by the attorney-client privilege under applicable law” and “secret” refers to “information gained in the professional relationship if the client has requested it be held confidential or if it is reasonably foreseeable that disclosure of the information would be embarrassing or detrimental to the client.”52 However, a lawyer is permitted to breach this confidence “to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client.”53
We conclude the superior court‘s decision not to vary the award on this ground was within its discretion. The court decided Kapolchok‘s actions were best characterized as “harsh litigation tactics” rather than bad faith or vexatious conduct. Moreover, Kapolchok‘s request for the couple‘s tax returns to prove lost income did not violate attorney-client confidentiality. The tax returns conceivably were necessary to establish the defense that Boiko‘s income loss was less than alleged, a permitted use
under the rules.54 Even if Kapolchok knew from his previous representation that the couple did not possess the requested tax returns, he did not himself divulge the information or actually breach confidentiality. The court‘s findings were not clearly erroneous, nor was its decision manifestly unreasonable or arbitrary.
4. Refusal to consider evidence of attorney misconduct in the underlying dental malpractice case
Boiko and Picarella contend that the superior court erred when it neglected to consider the “overwhelming” evidence of Kapolchok‘s
We agree with the superior court that our holding in Alderman controls.58 An allegation of bad faith conduct under
between the parties.”59 Boiko and Picarella misconstrue the rule recited in Crittell and Garrison, which permits a court to consider the plaintiff‘s motives for filing the lawsuit, i.e., whether the underlying case was frivolous or brought in bad faith, when awarding enhanced attorney‘s fees to a prevailing defendant. In Crittell we upheld an enhanced attorney‘s fees award to a prevailing defendant when evidence showed that the plaintiffs fabricated a will and then advanced their fraudulent claim through fraudulent actions at trial.60 Similarly, in Garrison we upheld a full attorney‘s fees award to a real estate agency that successfully defended against an unfair trade practice claim because the court found the plaintiffs had “prosecuted the case in bad faith and to gain an advantage over a business competitor.”61 Neither case — nor any other of this court — supports what Boiko and Picarella suggest here: that in determining attorney‘s fees, the court must consider the misconduct of the party who successfully defended against those very claims of misconduct. We conclude the superior court was correct to decline to do so.
C. Upholding The Previously Imposed Sanctions Was Not An Abuse of Discretion.
to revisit the issue when litigating the motion for attorney‘s fees, particularly as self-represented litigants. They also raise the point that Kapolchok‘s motion to compel did not contain a certification that he had attempted in good faith to confer with them on production of the tax returns prior to involving the court, as required, but rather had included a general statement about difficulties throughout the discovery process.
We review an imposition of sanctions under
We conclude that it was not an abuse of discretion to impose sanctions. The superior court fulfilled its responsibilities to Boiko and Picarella as self-represented litigants before issuing sanctions. The court made every attempt to supply guidance and inform the couple of the procedures necessary to comply with the discovery process, and they had ample notice that sanctions loomed. There was a pattern of noncompliance, and
the court levied sanctions only after numerous motions to compel and repeated warnings regarding other discovery violations. Boiko and Picarella had adequate opportunity to cure the defects in their discovery production, yet they failed to do so.
Moreover, Boiko and Picarella recognized that they forfeited their right to revisit the sanctions issue when they voluntarily dismissed the legal malpractice case. Their motion expressly stated that it was not conditioned on the couple‘s ability to contest the sanctions imposed. Given they neither cured the defect nor contested the sanctions prior to voluntarily dismissing the case, it was not an abuse of discretion to deny them the opportunity to revisit the sanctions. We affirm the superior court‘s decision to uphold the previously imposed sanctions.
V. CONCLUSION
The superior court‘s judgment is AFFIRMED.
WINFREE, Justice.