8.6Attorney Fees

“Michigan adheres to the general rule that attorney fees are not recoverable, either as an element of costs or as an item of damages, unless expressly authorized by statute, court rule, or a recognized exception.” Ypsilanti Charter Twp v Kircher, 281 Mich App 251, 286 (2008) (quotation marks and citation omitted).¹ “An attorney-client relationship must be established by contract before an attorney is entitled to payment for services rendered.” Plunkett & Cooney, PC v Capitol Bancorp, Ltd, 212 Mich App 325, 329 (1995).

A.“Reasonable” Fees

To calculate a reasonable attorney fee, the court should first determine “the reasonable hourly or daily rate^[2] customarily charged in the locality for similar legal services, using reliable surveys or other credible evidence.” Smith v Khouri, 481 Mich 519, 522 (2008). The court should then multiply that number by “the reasonable number of hours expended.”³ Id. Finally, the court may adjust the fee up or down after considering and indicating its view of each of the factors listed in Wood v DAIIE, 413 Mich 573, 588 (1982), as fine tuned by the Smith court, and in light of Michigan Rule of Professional Conduct 1.5(a). Smith, 481 Mich at 531. In Pirgu v United Servs Auto Ass’n, 499 Mich 269, 281 (2016), the Michigan Supreme Court distilled the factors from Wood and MRPC 1.5(a) into one list:

“(1) the experience, reputation, and ability of the lawyer or lawyers performing the services,

(2) the difficulty of the case, i.e., the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly,

(3) the amount in question and the results obtained,

(4) the expenses incurred,

(5) the nature and length of the professional relationship with the client,

(6) the likelihood, if apparent to the client, that acceptance of the particular employment will preclude other employment by the lawyer,

(7) the time limitations imposed by the client or by the circumstances, and

(8) whether the fee is fixed or contingent.” Pirgu, 499 Mich at 281-282.

The Pirgu factors “are not exclusive, and the trial court may consider any additional relevant factors.” Pirgu, 499 Mich at 282. However, “ability to pay is not a relevant consideration.” Cadwell v Highland Park, 324 Mich App 642, 657 (2018) (citation omitted). “In order to facilitate appellate review, the trial court should briefly discuss its view of each of the factors . . . on the record and justify the relevance and use of any additional factors.” Pirgu, 499 Mich at 282-283 (holding that “[t]he trial court erred by not starting its analysis by multiplying a reasonable hourly rate by the reasonable number of hours expended[ and] . . . by primarily relying on only one factor—the amount sought and results achieved—and failing to briefly discuss its view of the other factors”).

“A meaningful application of the factors is more than a recitation of those factors prefaced by a statement such as ‘after careful review of the criteria the ultimate finding is as follows . . . .’ Similarly, an analysis is not sufficient if it consists merely of the recitation of the factors followed by a conclusory statement that ‘the trial court has considered the factors and holds as follows . . .’ without clearly setting forth a substantive analysis of the factors on the record. The trial court should consider the interplay between the factors and how they relate to the client, the case, and even the larger legal community.” Augustine v Allstate Ins Co, 292 Mich App 408, 436 (2011).

The trial court abused its discretion by “not comprehensively review[ing] and stat[ing] its findings with respect to all of the factors in the Smith/Pirgu framework, but rather focus[ing] on ‘the amount in question and the results obtained,’ as well as the fact that the fees at issue were contingency fees[.]” Powers v Brown, 328 Mich App 617, 624 (2019) (emphasis added).

Applicability of Reasonable Fee Analysis. “[W]hether the Smith/Pirgu framework for determining a reasonable attorney fee is applicable will ‘depend on the plain language of the statute . . . at issue.’” Powers, 328 Mich App at 622, quoting Pirgu, 499 Mich at 278. “The operative language triggering the Smith analysis is the Legislature’s instruction that an attorney is entitled to a reasonable fee.” Pirgu, 499 Mich at 279.

The framework for determining a reasonable attorney fee developed in Smith and its progeny has been applied to cases involving a variety of court rules and fee-shifting statutes permitting the award of attorney fees. Kennedy v Robert Lee Auto Sales, 313 Mich App 277, 290-293 (2015). For example, the Smith and progeny analysis has been applied to cases involving:

•attorney fee determinations under MCL 500.3148(1) (actions for overdue personal or property protection insurance benefits), see Pirgu, 499 Mich at 282;

•the Headlee Amendment, see Adair v State (On Third Remand), 298 Mich App 383, 390 (2012), overruled on other grounds 494 Mich 852 (2013)⁴;

•the Freedom of Information Act, see Coblentz v Novi, 485 Mich 961 (2009);

•case evaluation sanctions, see Smith, 481 Mich at 522;

•attorney fee determinations under the Michigan Consumer Protection Act (MCPA) and the Magnuson-Moss Warranty Act (MMWA), see Kennedy, 313 Mich App at 279;

•MCR 3.403(C), regarding the sale of premises and division of proceeds as substitution for partition, see Silich v Rongers, 302 Mich App 137, 146 (2013);

•the Whistleblowers’ Protection Act (WPA), see Cadwell, 324 Mich App at 645; and

•MCL 600.2919a, regarding stolen, embezzled, or converted property, or the buying, receiving, possessing, concealing, or aiding in the concealment of stolen, embezzled, or converted property, see Powers, 328 Mich App at 621.

It is unclear if the Smith framework applies to attorney fees awarded in domestic relations cases under MCR 3.206(D)(2)⁵, because the Court of Appeals has inconsistently applied it in such actions. See Riemer v Johnson, 311 Mich App 632, 656-657 (2015) (declining to apply the Smith framework to attorney fees awarded under MCR 3.206(D)(2) in a custody action); Cassidy v Cassidy, 318 Mich App 463, 489-492 (2017) (applying the Smith framework to attorney fees awarded under MCR 3.206(D)(2) in a divorce action).

“[P]ro bono representation is not an appropriate consideration in determining the reasonableness of attorney fees.” Woodman v Dep’t of Corrections, ___ Mich ___, ___ (2023). Although the Court of Claims “determined that the attorney fees were reasonable based on the hours and hourly rates provided by plaintiffs in support of their motion for fees but decided to reduce [the law firm’s] fee by 90% solely on the basis of [the law firm’s] pro bono representation,” the Woodman Court determined that it abused its discretion because “pro bono representation is never an appropriate factor for a court to consider in determining the reasonableness of an attorney fee.” Id. at ___. “[W]hether an attorney represents a client pro bono is not a valid consideration under the Smith/Pirgu framework because it is not relevant to the reasonableness of a fee.” Woodman, ___ Mich at ___ (noting an issue of first impression in Michigan).

1.Determining the Reasonable Hourly Rate

In the context of determining a reasonable attorney fee, “a ‘reasonable hourly rate represents the fee customarily charged in the locality for similar legal services, which is reflected by the market rate for the attorney’s work.’” Van Elslander v Thomas Sebold & Assoc, Inc, 297 Mich App 204, 233 (2012), quoting Smith v Khouri, 481 Mich 519, 531 (2008). However, “an attorney’s reasonable hourly fee [is not necessarily capped] at the highest amount supported by the locality.” Fraser Trebilcock Davis & Dunlap PC v Boyce Trust 2350, 304 Mich App 174, 222 (2014) (the trial court did not abuse its discretion in determining that the attorney’s “experience and skill justified a premium rate consistent with the 75th percentile of comparable attorneys in Michigan,” as opposed to the locality), rev’d in part on other grounds 497 Mich 265 (2015).⁶ See also Lakeside Retreats LLC v Camp No Counselors LLC, 340 Mich App 79, 94-95 (2022) (holding that a billing rate “comfortably below” the 75th percentile of comparable attorneys in the county was not unreasonable “given the statewide mean billing rate for civil litigation, the fault of the [opposing party] in dragging [the case] out and adding to its complexity, and the above-average qualifications of the four attorneys” who worked on the case; the trial court properly considered the 2020 State Bar of Michigan Economics of Law Practice Survey in determining the customary local fee).

The fee applicant bears the burden of “produc[ing] satisfactory evidence—in addition to the attorney’s own affidavits—that the requested rates are in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation.” Smith, 481 Mich at 531 (quotation marks and citation omitted). The fee applicant may support his or her request with “testimony or empirical data found in surveys and other reliable reports.” Id. at 531-532. See also Van Elslander, 297 Mich App at 232. One such acceptable report may be the Economics of Law Practice Survey published by the State Bar of Michigan. See id. at 229.

Because “[t]he market rate is the rate that lawyers of similar ability and experience in the community normally charge their paying clients for the type of work in question . . . the actual fee charged, while clearly not dispositive of what constitutes a reasonable fee, is a factor to be considered in determining market place value as it is reflective of competition within the community for business and typical fees demanded for similar work.” Van Elslander, 297 Mich App at 233-234 (quotation marks and citation omitted). In addition, a trial court may consider other factors when determining a customary fee for similar legal services, including:

•Referral appreciation discounts;

•Attractive rates used to entice future business;

•Familial relationships; and

•Blended fee arrangements. Van Elslander, 297 Mich App at 234, 237.

2.Determining the Reasonable Number of Hours Expended

To satisfy the “reasonable number of hours expended” requirement, the fee applicant must submit detailed billing records and evidence to support the claimed hours. Smith v Khouri, 481 Mich 519, 532 (2008). The court must examine these records for reasonableness, and the opposing party may dispute them. Id. If there is a factual dispute, the opposing party is entitled to an evidentiary hearing to contest the reasonableness of the hours billed or the hourly rate. Id. 

“Block billing refers to the time-keeping method by which each lawyer and legal assistant enters the total daily time spent working on a case, rather than itemizing the time expended on specific tasks.” Lakeside Retreats LLC v Camp No Counselors LLC, 340 Mich App 79, 95 (2022) (quotation marks and citation omitted). Although block billing necessarily contains some entries that are vague, the use of block billing to calculate the reasonable number of hours expended on a case is not per se improper “so long as the block-billing entries are sufficiently detailed to permit an analysis of what tasks were performed, the relevance of those tasks to the litigation, and whether the amount of time expended on those tasks was reasonable.” Id. at 98. For example, in Lakeside Retreats, block billing invoices were detailed enough to determine the number of reasonable hours spent on a case because the invoices were broken down by month, staff member, and the specific tasks undertaken each day. Id. at 98.

B.Evidentiary Hearing

Generally, when an attorney fee is requested and a party challenges the reasonableness of that fee, an evidentiary hearing is required, and the court must make findings of fact on the issue. Miller v Meijer, Inc, 219 Mich App 476, 479-480 (1996). However, “[t]here was no error in failing to conduct an evidentiary hearing [on the reasonableness of the attorney fees] given the fact that there was a sufficient record to review the issue, and the court fully explained the reasons for its decision.” Cassidy v Cassidy, 318 Mich App 463, 492 (2017) (noting that the defendant did not challenge the hourly rates, the work performed, or the affidavits and billings submitted to the court by the plaintiff). See also Pioneer State Mut Ins Co v Michalek, 330 Mich App 138, 150 (2019) (after failing to contest to the reasonableness of the attorney fees or request an evidentiary hearing in their response brief, defendants’ request for an evidentiary hearing in their motion for reconsideration was “too late to preserve the request”).

A “trial court abuse[s] its discretion when it fail[s] to hold [an evidentiary hearing]” where the resolution of attorney fees “involves an examination of many factors,” some of which are not “capable of being addressed without an evidentiary hearing[.]” Sabbagh v Hamilton Psychological Servs, PLC, 329 Mich App 324, 360-361 (2019).

“[I]n relatively simple legal matters,” expert testimony is not required “to establish the reasonableness of attorney fees.” Zeeland Farm Svcs, Inc v JBL Enterprises, Inc, 219 Mich App 190, 196 (1996).

C.Fees for Work of a Legal Assistant

Attorney fees may include any legal assistant’s time and labor in contributing “nonclerical, legal support under the supervision of an attorney, provided the legal assistant meets the criteria set forth in Article 1, § 6 of the Bylaws of the State Bar of Michigan.” MCR 2.626.

D.Settlement and Entitlement to Attorney Fees

A party cannot contest the other party’s entitlement to attorney fees when payment of attorney fees is part of the settlement agreement. Kennedy v Robert Lee Auto Sales, 313 Mich App 277, 285 (2015) (holding that where “the parties reached a settlement in which they agreed that if they could not determine the amount of ‘statutory attorney fees and costs on their own,’ the trial court would decide the matter,” the plaintiff was entitled to an award of attorney fees in accordance with the settlement agreement; “any argument that plaintiff was not entitled to statutory attorney fees because there was no judgment against defendant [was] without merit”).

E.Self-Representation

Where there is “no agency relationship between two different people, there [is] no lawyer-client relationship as understood in the law”; accordingly, “a person who represents himself or herself cannot recover actual attorney fees even if the pro se individual is a licensed attorney.” Omdahl v West Iron Co Bd of Ed, 478 Mich 423, 432, 432 n 4 (2007) (“both a client and an attorney are necessary ingredients for an attorney fee award”) (quotation marks and citation omitted).

In Omdahl, 478 Mich at 424, a pro se attorney-litigant sought to recover actual attorney fees pursuant to the Open Meetings Act. Similarly, in Laracey v Fin Institutions Bureau, 163 Mich App 437, 446 (1987), the Michigan Court of Appeals determined that an attorney representing himself in an action brought under the Freedom of Information Act was not entitled to statutory attorney fees because “[w]here no fees were paid, no fee award is merited.”

While existing authority precludes an award of attorney fees sought by an attorney-litigant pursuant to a fee-shifting statute or court rule, it is unclear if such a preclusion applies when an attorney-litigant seeks compensation pursuant to a contractual agreement that provides for an attorney fee.⁷ See Bode & Grenier, LLP v Knight, 31 F Supp 3d 111, 120 (2014), which concluded attorney fees were properly awarded to a law firm represented by its attorney members where there was “no language in the parties’ contract which suggest[ed] that the parties intended to preclude fees incurred by [the law firm] while representing itself[.]”⁸

F.Contract Provides for Attorney Fee

“[T]he parties to an agreement may include within the agreement a provision respecting the payment of attorney fees, which courts will enforce like any other term unless contrary to public policy.” Pransky v Falcon Group, Inc, 311 Mich App 164, 194 (2015). “[W]hen a contract specifies that a breaching party is required to pay the other side’s attorney fees, only reasonable, not actual attorney fees should be awarded.” Papo v Aglo Restaurants of San Jose, Inc, 149 Mich App 285, 299 (1986).

“[A]ttorney fees sought under a contractual fee-shifting provision are a form of general damages and, as a result, are properly considered as part of the amount in controversy.” ABCS Troy, LLC v Loancraft, LLC, 337 Mich App 125, 128 (2021). As such, a district court does not “err by capping the award of contractual attorney fees” “to fit within the court’s jurisdictional limit[.]” Id. at 141. See Section 2.3 for additional discussion regarding the impact of contractual attorney fees on district court jurisdiction.

“Because the authority to award attorney fees arises under the terms of the agreement, the attorney fees are a type of general damages,” and “the party seeking payment must sue to enforce the fee-shifting provision[.]” Pransky, 311 Mich App at 194. Accordingly, a trial court can only award the fees as general damages on a claim brought under the contract. Id. at 194-195 (holding that the trial court “lacked the authority to order [the plaintiff] to pay [the defendant]’s attorney fees” where the defendant “did not file a counter-claim for damages under the [parties’] . . . agreement”).

“‘A contractual provision for reasonable attorney fees in enforcing provisions of [a] contract may validly include allowance for services rendered upon appeal.’” Talmer Bank & Trust v Parikh, 304 Mich App 373, 403 (2014), quoting Central Transp, Inc v Fruehauf, 139 Mich App 536, 549 (1984), vacated in part on other grounds Talmer Bank & Trust, 497 Mich 857 (2014).⁹

Where the parties’ “contract provid[ed] that plaintiff agreed ‘to reimburse [defendants’] attorney fees and costs as may be fixed by the court,’ the parties agreed that the amount of reasonable attorney fees would be fixed by a court rather than a jury,” the “plaintiff waived any right she had to a jury trial[.]” Barton-Spencer v Farm Bureau Life Ins Co of Mich, 500 Mich 32, 34, 43 (2017) (second alteration in original) (“[t]he Court of Appeals erred when it held that the [parties’ agreement] was ‘ambiguous on the question whether the parties intended to have the reasonableness of contractual attorney fees decided by the trial court rather than a jury’”) (citation omitted).

Corporate bylaws constitute a contract between the parties, and a bylaw providing for attorney fees in a particular case should be enforced by the court. Great Lakes Shores, Inc v Bartley, 311 Mich App 252, 255 (2015) (trial court erred in not awarding attorney fees pursuant to the bylaws).

Michigan authority provides that the factors outlined in Smith v Khouri, 481 Mich 519 (2008), are triggered by a statute’s “‘instruction that an attorney is entitled to a reasonable fee.’” Powers v Brown, 328 Mich App 617, 622 (2019), quoting Pirgu v United Servs Auto Ass’n, 499 Mich 269, 279 (2016).¹⁰Although it appears that no case has similarly stated the analysis for determining a reasonable attorney fee as contemplated in a contract, at least one case has indicated, in dicta, that the factors outlined in Smith may be applicable. See Talmer Bank & Trust, 304 Mich App at 403-404. See also Lakeside Retreats LLC v Camp No Counselors LLC, 340 Mich App 79, 93 (2022) (discussing that the non-exclusive list of factors outlined in Smith may be considered when determining a reasonable attorney fee, but “the starting point is to determine the fee customarily charged in the locality for similar legal services” (quotation marks and citation omitted)).

G.Contingency-Fee vs. Fixed-Fee Agreements

“Where an attorney’s employment is prematurely terminated before completing services contracted for under a contingency fee agreement, the attorney is entitled to compensation for the reasonable value of his services on the basis of quantum meruit, and not on the basis of the contract, provided that his discharge was wrongful or his withdrawal was for good cause.” Plunkett & Cooney, PC v Capitol Bancorp, Ltd, 212 Mich App 325, 329-330 (1995). Non-exclusive factors the court should consider when valuing fees based on quantum meruit include:

“(1) the professional standing and experience of the attorney;

(2) the skill, time and labor involved;

(3) the amount in question and the results achieved;

(4) the difficulty of the case;

(5) the expenses incurred; and

(6) the nature and length of the professional relationship with the client.” Plunkett & Cooney, PC, 212 Mich App at 331.

However, “where the attorney is prematurely terminated,” and “a fixed-fee agreement exists, the value of the services that the attorney has agreed to render has been established.” Plunkett & Cooney, PC, 212 Mich App at 331. Accordingly, “in light of the client’s implicit right to discharge the attorney, the attorney is not entitled to recover the entire contract price. Instead, the attorney is entitled to recover for the services rendered before the discharge. The value of those services constitutes the percentage of the services that have been completed pursuant to the contract, multiplied by the contract price.” Id. “It is inappropriate to calculate damages on the basis of quantum meruit where a fixed-fee agreement explicitly provides the agreed-upon value of the services.” Id.

H.Attorney’s Lien

An attorney may have a lien for his or her services. George v Sandor M Gelman, PC, 201 Mich App 474, 476-478 (1993). In describing the types of attorney’s liens, the Michigan Court of Appeals has stated:

“An attorney’s lien can be one of two kinds: (1) a general, retaining, or possessory lien, or (2) a special, particular, or charging lien. A general or retaining lien is the right to retain possession of all documents, money, or other property of the client until the fee for services is paid. The special or charging lien is an equitable right to have the fees and costs due for services secured out of the judgment or recovery in a particular suit.” George, 201 Mich App at 476 (internal citation omitted).

“[A]n attorneys’ charging lien for fees may not be imposed upon the real estate of a client, even if the attorney has successfully prosecuted a suit to establish a client’s title or recover title or possession for the client, unless (1) the parties have an express agreement providing for a lien, (2) the attorney obtains a judgment for the fees and follows the proper procedure for enforcing judgment, or (3) special equitable circumstances exist to warrant imposition of a lien.” George, 201 Mich App at 478.

“An attorney’s lien is not enforceable against a third party unless the third party had actual notice of the lien, or unless circumstances known to the third party are such that he should have inquired as to the claims of the attorney.” Doxtader v Sivertsen, 183 Mich App 812, 815 (1990).

I.Referral Fees

A referral fee between lawyers who are not in the same law firm is only enforceable if “the client is advised of and does not object to the participation of all the lawyers involved” and “the total fee is reasonable.” MRPC 1.5(e)(1)-(2). While “an untimely objection to a referral fee [agreement] is [not] completely irrelevant,” there must be evidence “to prove that the clients objected to the referral-fee agreement at the time they were informed[.]” Babi v Herman Estate, ___ Mich App ___, ___ (2024) (quotation marks and citation omitted). “[T]o allow subsequent events, such as a mere change of heart, to upset the referral arrangement is inconsistent with basic contract law, and would be unwise as a matter of policy[.]” Id. at ___ (quotation marks and citation omitted). Accordingly, “the clients must have objected at the time they were informed of the agreement in order for there to be a violation of MRPC 1.5(e).” Babi, ___ Mich App at ___ (quotation marks and citation omitted).

In Babi, ___ Mich App at ___, “[a]ccording to plaintiff’s complaint, plaintiff and [defendants] had a professional relationship wherein plaintiff would send [defendants] client referrals in exchange for a referral fee.” Plaintiff referred a prospective client to defendants, and when “the issue of an attorney’s lien asserted by plaintiff against the settlement proceeds” was raised, the client denied being referred by plaintiff to defendants, and objected to plaintiff being paid a referral fee. Id. at ___. When plaintiff sued defendants to recover the referral fee, defendants argued “that on the basis of [the client’s] testimony during the settlement hearing in which she objected to the sharing of the fee, any agreement between plaintiff and defendants was unenforceable under MRPC 1.5(e).” Babi, ___ Mich App at ___. The trial court “concluded that absent a written retainer agreement in which [the client] agreed to the fee, there was no genuine issue of material fact that [the client] objected to the fee and that no further discovery [could] reveal a different result[.]” Id. at ___ (quotation marks omitted). Defendants eventually “produced a signed and written copy of [the client’s] retainer agreement with defendants, in which she agreed that” in the event she had been referred by another attorney, defendants could pay that attorney a referral fee. Id. at ___ (noting plaintiff also “submitted evidence in the form of e-mail and text message communications between plaintiff and defendants concerning plaintiff’s referral”) Thus, while the client’s “objection at the settlement hearing was not completely irrelevant, it was not sufficient to render the purported referral fee agreement unenforceable under MRPC 1.5(e)”; accordingly, “the trial court erred when it granted summary disposition in favor of defendants because discovery had not begun in earnest and it would be premature to grant summary disposition when discovery had a reasonable chance of uncovering relevant information to plaintiff’s claim,” and also “erred to the extent it considered [the client’s] untimely objection made four years after the referral.” Babi, ___ Mich App at ___.

J.Standard of Review

An award of attorney fees will be upheld absent an abuse of the trial court’s discretion. Ypsilanti Charter Twp v Kircher, 281 Mich App 251, 286 (2008). “Findings of fact on which the court bases its award of attorney fees are reviewed for clear error.” Id.

A trial court’s decision to impose an attorney’s lien is reviewed for an abuse of discretion. Reynolds v Polen, 222 Mich App 20, 24 (1997).