A Recent Interpretation of Fee-Shifting Statutes from the Wisconsin Supreme Court

Posted on September 3rd, 2014 by Legal Fee Advisors

 In a recent decision, Betz v. Diamond Jim’s Auto Sales,[1] the Wisconsin Supreme Court considered whether a plaintiff’s attorney is entitled to statutory attorney’s fees when, without the knowledge or approval of the attorney, the plaintiff and defendant enter into a settlement agreement that does not discuss attorney’s fees.

The Court recognized that if clients may settle cases involving fee-shifting statutes without their attorneys’ knowledge or participation, attorneys will be discouraged from accepting such cases.  Nonetheless, the Court found that it was bound by the applicable state statute, which provides that an award of attorney’s fees “belongs to the ‘person suffering pecuniary loss.’”  This language clearly indicates that it is the client, rather than the attorney, who has the right to petition the Court for attorney’s fees.

However, the Court noted (citing a Seventh Circuit case, Ziesler v. Neese [2] that attorneys could avoid this problem by clearly indicating in a written fee agreement that the client’s right to attorney’s fees is assigned to the attorney.  If such an assignment is made, and the opposing party has notice of the assignment, the attorney may sue the opposing party for attorney’s fees without the client’s involvement.

In this case, the Court first considered whether the client had assigned his right to attorney’s fees to the attorney.   Noting that an assignment requires the “’manifestation of the assignor’s intent to transfer’ a right,” the Court found that no such intent was present here.  The fee agreement between the attorney and client indicated that a defendant was “usually” responsible for paying attorney’s fees in cases brought under the applicable statute, but also contemplated a number of scenarios in which the client—rather than the defendant—would be responsible for the attorney’s fees (for example, the agreement provided that the client would have had to pay a flat fee if the case settled prior to the filing of lawsuit, and that the client would have to pay attorney’s fees and costs if either party terminated the attorney-client relationship).

Next, the Court considered the possibility that the client had equitably subrogated his right to attorney’s fees to his attorney.  The Court explained that equitable relief is appropriate “in situations in which there is no explicit statutory authority or . . . the available legal remedy is inadequate to do complete justice.”  Because the instant case involved explicit statutory provisions for attorney’s fees, the Court concluded that the equitable doctrine of subrogation was not appropriate.

Finally, because the client had neither legally nor equitably assigned his right to recover attorney’s fees to his attorney, the Court reasoned that it would be impossible for the defendant to have notice of the assignment.  Therefore, the Court held, the attorney could not seek attorney’s fees from the defendant.

This case provides an important lesson about fee-shifting statutes.  Such statutes serve an important public policy function by encouraging attorneys to take cases in which the recovery would otherwise be dwarfed by the costs of litigation.  However, attorneys cannot rely blindly on this public policy.  Rather, they must read the applicable statutes closely and draft their attorney-client agreements carefully to ensure that the fee-shifting provisions of these statutes are properly invoked.

E. Burgess

Legal Fee Advisors © 2014

[1] No. 2012AP183, 2014 WL 3407387 (Wis. July 15, 2014).

[2] 24 F.3d 1000 (7th Cir. 1994).