Appeals Court upholds $7 million lawyer fee in Des Moines franchise fee class-action case

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DES MOINES, Iowa — A team of lawyers who won a class-action lawsuit against the city of Des Moines for charging improper franchise fees should be paid $7 million instead of the requested $15 million, a divided state court ruled Wednesday.

A majority of a three-member Iowa Court of Appeals panel agreed with a Polk County judge, who in October 2013 concluded that since the citizens of Des Moines would "be called upon to pay themselves the refunds to which they are entitled," the $15 million fee sought by the three attorneys who won the case was too high.

Their decision sets a precedent in Iowa that courts may reduce lawyer fees when public funds are the pool from which lawyer fees will be drawn.

Attorneys Brad Schroeder, Bruce Stoltze and Steven Brick took on the case in 2004, representing Lisa Kragnes, who sued the city after she questioned the franchise fee on her MidAmerican Energy bill. A Polk County District Court judge ordered the city to refund nearly $40 million in 2009, saying it was overcharging customers and had collected what amounted to an "illegal tax."

Lawyers typically get between 33 percent and 45 percent for contingency cases, those for which they agree to take a share of the recovery at the end of a case instead of advance payment. The attorneys' fees would come out of the $40 million pool of money the city has set up.

Polk County Judge Joel Novak said in his 2013 decision that it's important to strike a balance between fair compensation for the lawyers and reducing the refund citizens will recover. The appeals court majority agreed.

The attorneys said such a test has never before been used and it will impact future cases involving government entities.

"Why would an attorney take this case when he can get the standard third on a different case?" Schroeder said.

The attorneys also argued that they had a contingency fee agreement but Novak and the panel majority said they are not bound it and that state court rules give judges control over setting fees, citing similar decisions in other states.

The lawyers said they took significant risk of losing their out-of-pocket costs of more than $600,000 in the case for which they have spent more than 10,000 hours over 10 years.

Appeals Judge Gayle Vogel, the dissenting opinion, said there is no difference in the time, effort, or risk shouldered by the attorneys in this case than in any other case that might not be paid from public funds. She said a $7 million fee seems arbitrary and she'd approve the $15 million.

Schroeder said a request will be sent to the Iowa Supreme Court to review the appeals panel's decision.

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