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Lawyers can’t petition for fees in condemnation case

Lawyers in inverse condemnation cases have no standing to petition for their attorney fees because that is a right that belongs only to the landowner, the Court of Appeals ruled on April 17 in Vermillion State Bank, Faegre Baker Daniels v. State of Minnesota.

The ruling leaves Faegre with an unpaid bill for about $64,000 in fees and costs that its unhappy former client, Vermillion State Bank, has said it will not pay.

A Dakota County District Court judge ordered the Minnesota Department of Transportation to pay about $52,400 in Faegre’s fees and costs, but the Court of Appeals reversed, saying Minn. Stat. sec. 117.045 entitles only the successful landowner in an inverse condemnation to petition for fees.

The unanimous opinion was written by Judge Renee Worke.

The ruling is harmful to the landowner because if the law firm tries to collect its fee from the client, the client may have no recourse for reimbursement, said attorney Leland Frankman, one of the authors of an amicus brief for the Minnesota Eminent Domain Institute. Frankman said the District Court decision was correct.

What should have happened, Frankman said, was that Larkin Hoffman should have petitioned for the entire obligation owned by its client, including Faegre.  He believes that the District Court would have awarded it and the Court of Appeals would have affirmed.

Frankman also theorized that since the client owed money to Faegre, when Faegre petitioned the court it was asking for relief on behalf of the former client and did have standing. If Faegre sues the bank and wins, the bank would be able to request reimbursement from MnDOT but the state will argue res judicata, he said.

Although Faegre had a contingent fee contract with the client, it is entitled to a fee award based on quantum meruit, Frankman said. “I don’t know what the landowner wanted to do, but I would have recommended to the client to throw [both attorney fee claims] in,” Frankman said.  That is a common practice, but it implies a level of cooperation between the law firms that may not exist, he said.

Inverse condemnation action succeeded

The case began when MnDOT permanently closed a restaurant’s only access to a state highway. Vermillion State Bank held a mortgage on the property, which the restaurant owners could no longer pay, so the bank foreclosed.

In January 2014, the bank retained Faegre in an inverse condemnation action against MnDOT. The court stated that Faegre conducted title work and extensive legal research, wrote a demand letter and drafted pleadings. In February 2015, Vermillion fired Faegre and hired Larkin Hoffman Daly & Lindgren. Larkin Hoffman filed suit using pleadings substantially similar to those prepared by Faegre, the court said.

In December 2015 the court granted Vermillion’s motion for summary judgment and an inverse condemnation ensued. Faegre filed a motion for its attorney fees and costs and Vermillion sought $55,416 in fees and costs for Larkin. Vermillion did not request any fees for Faegre and told Faegre it would not pay the firm because it had a contingent fee agreement and fired the firm before suit was filed. The District Court trimmed Faegre’s bill but ordered MnDOT to pay it — the opinion does not state the rationale for the reduced award.

Statutory standing

The issue is whether Faegre had standing under the statute, not whether it sustained an injury in fact that gave it standing, Worke wrote.  The court conducted a de novo review of the District Court’s statutory interpretation. It agreed with Vermillion that it alone was authorized to seek fees, as it was the person who owned the property and who brought the action. (See sidebar for text of Minn. Stat. sec. 117.045.)

The District Court had held that such an interpretation of the statute was too narrow and that allowing Faegre’s petition did no violence to the statute and was within the spirit of the law. That explanation did not convince the appellate court, which said that the language is plain and unambiguous and may not be set aside to pursue the spirit of the law.

Furthermore, the court said, the purpose of the statute is consistent with allowing only the landowner to petition for fees since it is the landowner who was forced to initiate proceedings who should be made whole.

Faegre had no comment on the case, said partner David Jann, who represented the firm at the Court of Appeals.

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