Attorneys want to get paid
To answer the bigger question of how much Socorro Electric Cooperative’s lawsuit against its member-owners will ultimately cost, another question — possibly two — need to be answered first:
Will attorneys who successfully defended the case on behalf of some or all of the approximately 10,000 member-owners be awarded costs and fees for their efforts?
And if so, how much?
Payment Proposals
Though Judge Albert J. Mitchell Jr. ruled against the co-op in its effort to block three bylaws that call for increased transparency last May, he has yet to answer those questions. He is considering awarding fees and invited attorneys to file motions requesting compensation and some of them have done so.
Socorro attorneys Thomas G. Fitch and Polly Ann Tausch, who initially filed their response to the lawsuit pro se as member-owners of the co-op, asked for fees and costs “but only to the extent that it does not unduly burden the member/owners of the cooperative,” their motion reads.
They did, however, attach an itemized statement for professional services which totaled $7,600, but was discounted 50 percent to $3,800.
“Movants do not wish to see the member/owner’s cooperative — which has already paid extensive attorney fees to prosecute this ill-advised suit — bear additional fees and expenses,” their motion reads.
As reported in El Defensor Chieftain on Aug. 13, a Inspection of Public Records request revealed attorney fees paid by the co-op doubled during the year the lawsuit was filed, increasing by nearly $34,000 over the previous two-year average.
And that’s not counting how much is owed to the Kennedy & Han law firm of Albuquerque, which has been involved in the lawsuit since early on but hasn’t billed the co-op for any of it. Attorney Paul Kennedy said in an Aug. 11 phone interview that a bill was forthcoming, but he had no idea how much it would amount to.
Socorro Electric is anticipating a big bump in legal fees this year. A proposed budget calls for a $177,711 increase for professional services, the line item out of which attorney fees are paid.
In addition to Fitch and Tausch, the Deschamps & Kortemeier law firm of Socorro, which defended individual members and is part of a team of attorneys pursuing a class action countersuit, similarly submitted an itemized statement with their motion, billing a little more than $7,600.
“And this is just the tip of the iceberg,” Stephen Kortemeier said. “We have not begun to seriously litigate the claims of the class action suit. That will involve considerable discovery. All the board members and a few others will probably be asked to give depositions, and those cost about $1,000 apiece.”
Claims in the countersuit allege that co-op officials breached their fiduciary duties and were guilty of fraud, taking reimbursements for expenditures they were not entitled to.
Before members passed a bylaw to limit trustees’ expenses, the 12-member board incurred expenses totaling $492,000 in 2009.
Kortemeier said whatever the cost of litigation turns out to be, it’ll be worth it.
“In the long run, it’ll save money rather than cost because the shenanigans will stop,” he said.
Deschamps & Kortemeier has been working in concert with the Ikard Wynne law firm of Austin, Texas, on the countersuit.
Nothing, as yet, has been filed by the Texas law firm requesting costs and fees from the co-op, but Bill Ikard said in a recent phone interview that one could be filed as a supplement to Deschamps & Kortemeier’s motion. He provided the Chieftain with a statement detailing hours the firm spent on the case that totaled more than $18,000.
Keeping in mind that Judge Mitchell hasn’t decided whether he’ll award anything at all to the defense attorneys — and that Ikard Wynne hasn’t filed a formal request for fees with the court — the three itemized statements indicate attorneys feel justified in asking the judge to award them roughly $29,600 for defending members in an unusual case that essentially amounted to the co-op bringing suit upon itself.
Judge Mitchell has emphasized during the hearings held so far that he is interested in minimizing the ultimate cost to members. He’s requested and received a copy of the co-op’s insurance policy, as well as a letter from Federated Rural Electric Insurance Exchange that indicates the co-op may not be covered by the countersuit that’s still pending.
The case is currently in the discovery phase, which itself can be a time-consuming process. The purpose of discovery is to gather evidence each side may present as exhibits to assist the judge in making the decisions he’ll have to make.
Attorneys on both sides said recently they haven’t even begun discovery, so the answers probably won’t come anytime soon. No date has been set for the next hearing.
The Hired Gun
William “Bill” Ikard is an Austin, Texas, attorney who fits the profile as the “hired gun” in the co-op fray. He helped win a $23 million class action settlement against Pedernales Electric Cooperative, the largest co-op in the country, a few years ago.
Enlisted by reform-minded Socorro Electric Trustee Charlie Wagner, Ikard is the lead attorney in the countersuit against the co-op and the class action proposal names Wagner as the representative of the class of member-owners.
Ikard said he was currently negotiating with attorney Paul Kennedy, who is handling the co-op’s defense against the countersuit, on the terms of the court scheduling order for this next phase of the case.
Ikard said it could be a long while before there’s a resolution to the case.
“I don’t know exactly how to assess the duration,” he said, adding that much of it depended on whether class action certification was granted. “It could be a year or 18 months before it goes to trial.”
The countersuit takes aim not at the co-op, per se, but members of the board of trustees, who voted to bring the lawsuit, and several former co-op officials. It calls for them to be disgorged of money the countersuit alleges was improperly obtained over the years.
“There are many pieces to the equation,” Ikard said when asked how much the litigation will eventually cost members. “Obviously, minimizing cost is extraordinarily important for everyone. At the end of the day, payment for what we receive has to cover the costs to defend the litigation.”
According to the statement from Ikard Wynne, the firm put 55.5 hours into the case from April 11 to May 31 of this year. Ikard logged 25 hours and billed at a rate of $450 per hour. His associate, Jordan Haedicke, put in 30.5 hours at a rate of $225 per hour for a grand total of $18,112.50.
Asked how he justifies the cost and the potential impact it’ll have on members, Ikard said it’s a concept some people may have difficulty understanding.
“They might say that the members end up paying for whatever remedies they get, so it’s sort of a pyrrhic victory, but that’s shortsighted,” he said. “The benefits are beyond calculation. How do you put a dollar amount on democracy and fair dealing?”
A Year’s Work
Meanwhile, Deschamps & Kortemeier has asked to be reimbursed for $7,607.58 in fees and costs. Its itemized list of professional services and expenses were from May 26, 2010, the same day the board of trustees passed a motion to contest the new bylaws in court, to May 20, 2011, two days after the judge made the ruling that the bylaws were valid and binding.
Deschamps and Kortemeier each charge a rate of $300 per hour, which is described as the “average” rate for attorneys with comparable experience.
The first item they list is a 0.30-hour meeting with Charlene West, which came at no charge. In all, the firm accounted for 24.17 hours. They arrived at the final figure with the inclusion of copy and filing fees and gross receipt tax.
The motion contends that in a declaratory judgment action, discretion to award attorney’s fees is “as a well recognized exception to the general rule that attorney’s fees must be provided for in the contract or by statute,” something the co-op disputes.
“New Mexico courts do not have statutory authority to award attorney’s fees in declaratory judgment action,” the co-op’s response states, “and that there are few circumstances where a common law rule would allow awarding such fees.”
The response goes on to argue that fees are not recoverable under any exception to the general rule.
The co-op’s filing also claims Deschamps & Kortemeier didn’t provide evidence of the reasonableness of its fees and the scope of its services.
In addition, the response states the co-op tried to have the lawsuit dismissed, which would have minimized the cost of litigation. It says the defendants should not be rewarded for refusing to agree to a voluntary dismissal and keeping the case in the courts.
Finally, the co-op’s response brings up an “alleged” Legal Defense Fund it suggests was established and managed by Deschamps & Kortemeier. It asks the court to look into the assets and identities of the contributors in order to make a “reasoned and balanced” judgment on the issue.
In its reply, Deschamps & Kortemeier say a third-party not associated or controlled by the law firm started the fund drive. The law firm has nothing to do with fundraising efforts, but is holding approximately $900 in trust based on unsolicited contributions.
The reply also states the co-op “misses the point” in its analysis of the exception to the general rule and its argument on the declaratory judgment issue is misplaced.
“Plaintiff has either misperceived Defendants’ arguments or is attempting to confuse the issue by interjecting immaterial argument,” the reply reads.
In regard to refusing to allow dismissal, Deschamps & Kortemeier say that seeing the lawsuit through to its conclusion is necessary to bring resolution to the matter once and for all:
“Presumably, the Trustees’ would have continued their unwillingness to accept the by-law amendments as binding and the rights, duties and obligations of the parties would be returned to legal limbo. Thus voluntary dismissal would not end the controversy, would not have resulted in recognition of the validity of the amendments and would not have precluded this matter being litigated in the future.”
An Ironic Twist
Last reported to be in an Albuquerque hospital, the victim of a brutal attack at his Socorro office on Aug. 5, attorney Thomas Fitch is pretty much through with the co-op case.
A former district court judge and amateur thespian, Fitch may have recognized the irony in filing his motion to recover costs on June 29, 2011, exactly one year after the co-op filed its lawsuit.
Regarding costs, Fitch wrote that he and his partner Polly Ann Tausch did not enter into the defense anticipating remuneration. But they did attach an itemized time and expense statement for time spent and mileage reimbursement.
The attorneys invested 35 hours in the case, according to the document, and charged at a rate of $200 per hour. As a “community service” they worked for half their normal rate and listed $3,800.48 as balance due.
“. . . it does not seem fair to penalize the Socorro Electric Cooperative which, in essence, would be a charge against the member/owners who are the very persons being sued and who have prevailed,” the motion reads.
Instead, Fitch and Tausch suggest an ironic twist — that the individuals who brought the lawsuit should be made to pay for it, starting with co-op attorney Dennis Francish.
“It would seem (in the first place) equitable to charge the person or persons responsible for the ill-advised lawsuit. Primarily this would be, first, the attorney who advised the proceeding, the professional responsible for the suit,” the motion reads. “Secondly, this would be the Trustees who voted to have the lawsuit prepared and filed.”
The motion also suggests the legal defense fund held by Deschamps & Kortemeier be used to pay attorneys fees and costs.
Socorro Electric’s response to the motion makes the same arguments about the rules disallowing attorney fees to be awarded in declaratory judgment cases and further argues that pro se defendants are not entitled to being awarded fees and costs.
It also addresses the proposal to have the co-op’s attorney and trustees foot the bill:
“Such suggestions are entirely inappropriate, and Defendants provide no statements of law which would support the granting of such an award. Defendants are in effect asking this Court to issue a severe sanction against counsel and/or the Trustees for bringing suit. There is nothing equitable in this suggestion, and Plaintiff urges the Court to disregard Defendants’ request.”
Who pays? How much? When is this all going to end? — all questions that can’t yet be answered.
Awaiting Judge Mitchell’s decisions, the only thing known for sure is that it’ll take time, and someone’s money, to reach a final resolution to an unusual case.
Editor’s note: This is the second article of a two-part series examining the cost of the lawsuit Socorro Electric Cooperative brought against its member-owners last year. Part I, which appeared in the Aug. 13, 2011, edition of El Defensor Chieftain, took a look at the costs incurred by co-op attorneys.
Contact T.S. Last