Alaska SC rules in case over contingency fee agreement

ANCHORAGE, Alaska (Legal Newsline) -- The Alaska Supreme Court ruled last week that an arbitration panel's fee award and a lower court's entry of judgment violated federal restrictions on contingency fee contracts involving Alaska Native Claims Settlement Act lands.

In the case at issue, Leisnoi Inc., an Alaska Native corporation, retained the law firm of Merdes & Merdes PC to represent it in litigation against Omar Stratman over its certification of and title to certain lands Leisnoi claimed under the ANCSA.

Leisnoi and Merdes entered a contingency fee agreement under which, if Leisnoi was successful in the litigation, Merdes would receive an interest in the lands Leisnoi obtained or retained.

The Stratman case was resolved in 1992 in favor of Leisnoi, although Stratman appealed and the related litigation continued for another decade.

The company challenged the validity of the fee agreement with Merdes.

A bar-appointed arbitration panel determined that Merdes was not entitled to an interest in the land itself, but was entitled to payment equal to a percentage of the adjusted value of Leisnoi's property, plus interest.

In 1995, upon Merdes' motion, Superior Court Judge Brian Shortell confirmed the fee award and entered judgment against Leisnoi.

For several years, Leisnoi made payments pursuant to the schedule laid out by the panel.

In September 2002, the company ceased making payments and the judgment went into default.

Leisnoi and Merdes subsequently attempted to negotiate a settlement; Merdes did not pursue execution during this period.

In October 2008, the Stratman litigation finally concluded in Leisnoi's favor. The following year, Merdes moved the superior court to issue a writ of execution.

The company opposed the motion on the grounds that the firm had not shown "just and sufficient cause" for failing to seek a writ of execution within five years of entry of the 1995 judgment.

Leisnoi subsequently moved for relief from the judgment under Alaska Civil Rule 60(b), arguing, among other things, that the judgment was void under 43 U.S.C. § 1621(a)'s restrictions on contingency fee contracts involving ANCSA lands.

In January 2010, Superior Court Judge Sen Tan issued an order denying Leisnoi's Rule 60(b) motion and granting Merdes' motion to execute.

Six months later, Leisnoi paid Merdes the remaining balance.

The company, in response, appealed the superior court's ruling to the state's high court.

Justice Craig Stowers, who authored the Court's 29-page opinion, said the case presented a number of "complex issues" involving questions of waiver and whether the lower court's 1995 judgment was void or voidable.

In its ruling released Friday, the Court concluded the following:

- Leisnoi did not waive its right to appeal by paying Merdes the balance due on the judgment;

- The arbitration panel's fee award and the superior court's 1995 entry of judgment violated 43 U.S.C. § 1621(a)'s prohibition against attorney contingency fee contracts based on the value of Native lands that were subject to the act;

- The superior court's 2010 order granting Merdes' motion to execute on the 1995 judgment separately violated the act's prohibition against executing on judgments arising from prohibited attorney contingency fee contracts, and reversed the order;

- Notwithstanding the illegality of the panel's fee award and the 1995 judgment, Leisnoi is not entitled to relief pursuant to Civil Rule 60(b): the 1995 order was voidable rather than void for purposes of the rule and therefore not subject to attack; and

- Leisnoi is not entitled to relief under Civil Rule 60(b)(5) or 60(b)(6).

The Court said Merdes must return the company's payment of the $643,760 balance on the judgment, with interest; however, Leisnoi is not entitled to recover payments made prior to the issuance of the writ of execution.

Also, Merdes may file an action for any fees it believes it is entitled to under a theory of quantum meruit, the Court ruled.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.