United States District Court, W.D. Virginia, Roanoke Division
TOMMY JOE WILLIAMS, Conservator of Michael Sprick, An incapacitated individual, Plaintiff,
OLD HB, INC., et al., Defendants.
REPORT AND RECOMMENDATION
ROBERT S. BALLOU, Magistrate Judge.
The attorneys for Michael Sprick ("Sprick"), an incapacitated adult, ask this court to approve a one third contingency fee and associated costs of litigation arising from a $21 million personal injury settlement. Sprick suffered catastrophic injuries in an accident on October 8, 2011 which rendered him incompetent and unable to care for his own personal and financial affairs. The court is charged with protecting the interests of vulnerable parties such as Sprick, and reviewing the proposed settlement of his personal injury claims for fairness and reasonableness. Thus, the court must assure that a $7 million attorney's fee and associated costs are reasonable in this case. The Fourth Circuit instructs that when reviewing a proposed attorney's fee associated with a personal injury settlement, the court must recognize and respect the value that contingency fee arrangements provide, especially to those who otherwise have no access to legal representation. In re Abrams & Abrams, P.A., 605 F.3d 238, 245-46 (4th Cir. 2010). I have examined in detail and with care the materials submitted enumerating the history of the accident, the injuries Sprick suffered, and the work the attorneys undertook to achieve this settlement. I have also considered each of the factors set forth in Johnson v. Georgia Highway Express Inc., 488 F.2d 714, 717-19 (5th Cir. 1974), and specifically the degree of success obtained, "the most critical factor in determining the reasonableness of a fee award." Doe v. Chao, 435 F.3d 492, 506 (4th Cir. 2006). The attorneys for Michael Sprick achieved an excellent result for their client, which will pay for his extensive medical care for the remainder of his life. Having fully considered the Johnson factors, the catastrophic injury underlying this case, the work performed by Sprick's attorneys, and the successful result achieved, I find that the one third contingency fee sought by plaintiff's counsel, and endorsed by his sister and conservator Alexandra Heidebruch ("Heidebruch"), should be approved.
On October 8, 2011, 40-year-old German citizen Michael Sprick was struck by a truck while riding his bicycle on the shoulder of Route 100, a two-lane road in Pulaski County, Virginia. Sprick was an avid cyclist, and had traveled to the United States from Germany in September 2011 for a cycling trip that would take him from Chicago to Miami over a number of months. Sprick was cycling through Virginia a month into his trip when this accident occurred. According to witnesses, at the time of the accident, a Freightliner truck traveling behind Sprick drifted over the right white line and onto the shoulder, striking Sprick, who suffered grave injuries as a result of the accident. At the accident scene, Sprick went into cardiac arrest and incurred anoxic brain damage. Sprick was airlifted to Carilion Roanoke Memorial Hospital ("Carilion"), where the medical staff initially recommended that his family discontinue lifesaving care. However, Sprick remained on a ventilator at Carilion the next three months, receiving treatment for his severe injuries, including the traumatic brain injury. At the request of his family, Sprick was flown back to Germany on a medically equipped jet in December 2011. Since that date, he has undergone multiple surgeries, and has been confined to a hospital or skilled nursing facility where he requires 24-hour care to assist him with all activities of daily living. Sprick does not use a ventilator, but is unable to speak, feed or care for himself, and is confined to a wheelchair or bed.
Sprick is single with no children. Shortly after the accident, his sister, Alexandra Heidebruch, flew to Roanoke from Germany, and sought a bilingual attorney to assist her while she handled Sprick's pending medical and legal issues. Heidebruch's request reached German-speaking Virginia lawyer Michael Kernbach by email on October 13, 2011, and he traveled to Roanoke to meet with Heidebruch a few days later. During their initial meeting, Kernbach explained the legal and insurance process in the United States to Heidebruch in German. Kernbach also reviewed his retainer agreement with Heidebruch, and the terms under which he would represent Sprick relating to his personal injury claim and issues relating to his medical care in the United States. The retainer agreement provided for a one third contingency fee to be paid from any monies collected in Sprick's personal injury claim. Heidebruch expressed her wish that Sprick be returned to Germany as soon as possible, so that her father could see him one last time. Heidebruch agreed to hire Kernbach after their initial meeting because, "he told me to call him anytime; email him as often as I needed; and he offered to do what he could to get Sprick home and would come to Germany whenever it was needed. This was all discussed with me in German so I understood what work he would be doing." Dkt. No. 60-1.
Kernbach immediately began to represent Sprick's interests and pursue his legal claims, performing tasks such as obtaining Sprick's personal effects from the accident scene, hiring an accident investigator, sending letters to the Virginia State Police to preserve and obtain radio traffic transmissions and dispatch logs from the accident, contacting the investigating trooper and eye witnesses, recording the traffic court hearing for the driver in the accident, obtaining interim medical progress reports while Sprick was at Carilion and having them translated into German and sent to Heidebruch, hiring a life care plan expert, retaining an attorney in Germany for the appointment of Heidebruch as conservator for Sprick, and preparing a complaint to be filed in Pulaski Circuit Court.
Kernbach helped return Sprick to Germany by working with Sprick's physicians, who initially refused to allow Sprick to travel due to potential complications in flight. Kernbach negotiated with the insurance carrier for the truck and driver involved in the accident and convinced it to pay the $68, 000 needed to cover Sprick's flight to Germany, even though they had not yet accepted liability for the accident. Kernbach communicated with physicians in both Virginia and Germany to coordinate the transition of Sprick's medical care to Germany, drafted German medical releases, and was present in Roanoke to assist with Sprick's trip on December 7, 2011. Believing that these were likely Sprick's final days, Kernbach hired a videographer to videotape a day in Sprick's life while he was at Carilion, and videotape the flight to Germany.
After Sprick arrived in Germany, Kernbach continued to pursue Sprick's claims both in Germany and the United States by developing relationships with Sprick's treating physicians, navigating the German health care system to obtain medical records and bills for treatment, monitoring Sprick's unstable medical condition,  and remaining in constant communication with Heidebruch.
On October 24, 2011, a little over two weeks after the accident, Kernbach filed suit in the Pulaski County Circuit Court on Sprick's behalf against Norman Richard Marchant (truck driver), International Brands Corporation, Merita d/b/a Merita Bread Box, and Hostess Brands. See Michael Sprick v. Norman Richard Marchant, et als., Case No. CL1100000593. That action remains pending in state court with no service having been attempted against any defendant. In January 2012, Hostess filed for Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed Sprick's state court action. Kernbach, with Heidebruch's consent, recruited Roanoke attorney Paul R. Thomson to join as counsel in the case, and hired New York law firm Klestadt & Winters, LLP, to assist with filing motions in the bankruptcy court in an effort to lift the bankruptcy stay to allow the personal injury case to go forward outside of the bankruptcy proceedings.
Kernbach and Thomson began what became a year and a half long process of lifting the bankruptcy stay, which prevented Sprick's case from moving forward. Their first two motions to lift the stay were denied by the bankruptcy judge because Hostess's insurance policy included a $1.5 million deductible that was secured with collateral. In the meantime, the bankruptcy court consolidated Sprick's case, along with over four hundred other lawsuits against Hostess pending across the United States, in an Alternate Dispute Resolution ("ADR") process. The ADR process required plaintiffs to participate in binding arbitration and obtain a judgment, which would then be treated as a general unsecured claim against Hostess.
In November 2012, the bankruptcy court liquidated Hostess's assets, which threatened to eliminate the available funds both to administer the ADR process and to secure the collateral for Hostess's insurance deductibles. Kernbach and Thomson prepared and sent a demand package to four insurers for Hostess with a written summary of Sprick's case, along with extensive attachments including photographs, videos of Sprick, a life care plan, wage information, a transcript of the traffic court hearing for the driver in the accident, and German and U.S. records and bills of Sprick's medical care and treatment. In September 2013, Kernbach and Thomson filed a third motion to lift the stay, which was eventually stipulated and agreed to by counsel for Hostess and granted by the bankruptcy court.
Kernbach and Thomson re-filed the personal injury action in this court on October 7, 2013. The case was set for trial on September 8-12, 2014, and a pre-trial order was put in place to assure that discovery progressed in an orderly fashion and that the parties were ready to proceed on the trial date. During the pendency of the case in this court, Kernbach and Thomson engaged in discovery and filed multiple motions for summary judgment. Dkt. Nos. 23, 26 & 29. On July 15, 2014, the parties reached an agreement to resolve this case for $21 million.
The court has a duty to protect the interests of those who may be especially vulnerable to manipulation or who may be unable to protect themselves, such as minors and incapacitated adults. Abrams, 605 F.3d at 243. In fulfilling that duty, the court has the inherent power and an obligation to ascertain whether an attorney's fee agreement involving an incompetent, including a contingent fee contract, is reasonable. Bergstrom v. Dalkon Shield Trust (In re A.H. Robins Co.), 86 F.3d 364, 373 (4th Cir. 1996); Allen v. United States, 606 F.2d 432, 435 (4th Cir. 1979). The court must make an independent investigation into the fairness and reasonableness of a fee to be charged against an incompetent person's estate, and that inquiry is guided by the twelve factors first set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974), and adopted by the Fourth Circuit in Barber v. Kimbrell's, 577 F.2d 216, 226 (4th Cir. 1978) and Allen, 606 F.2d at 435-46 ("the Johnson factors"). Abrams, 605 F.3d at 243-44. The Fourth Circuit has construed the Johnson factors as:
(1) the time and labor required in the case, (2) the novelty and difficulty of the questions presented, (3) the skill required to perform the necessary legal services, (4) the preclusion of other employment by the lawyer due to acceptance of the case, (5) the customary fee for similar work, (6) the contingency of a fee, (7) the time pressures imposed in the case, (8) the award involved and the results obtained, (9) the experience, reputation, and ability of the lawyer, (10) the "undesirability" of the case, (11) the nature and length of the professional relationship between the lawyer and the client, and (12) the fee awards made in similar cases.
Abrams, 605 F.3d at 244. Not all factors may apply to a given case; the court must consider and provide detailed findings with regard to each of the twelve factors. Id. at 436. I review ...