Opinion
No. 82-1345
Decided June 8, 1983.
Attorneys at law — Class actions — Calculation of attorney's fees — Factors to be considered — Prejudgment interest cannot be adjudged against state for delay in payment of money, when — R.C. 2743.18(A) limited to cases arising in Court of Claims — Nursing homes — Computation of reasonable costs for Medicaid services — Am. Sub. H.B. Nos. 155 and 1546 — "Per available bed per day" and "constructed and subsequently originally licensed," construed.
APPEAL and CROSS-APPEAL from the Court of Appeals for Franklin County.
In 1976, relators, nursing homes, appellees and cross-appellants herein, brought a mandamus action in the Court of Appeals for Franklin County against respondents, the (then) Director of the Ohio Department of Public Welfare ("ODPW"), and other state officials, appellants and cross-appellees herein. Relators claimed that the respondents had reimbursed relators under the ODPW-administered Medicaid program in an amount less than prescribed by statute. In addition, relators sought to maintain the action as a class action whereby they would represent all the nursing homes in similar situations. The court of appeals, in 1977, declined to issue the requested writ of mandamus.
Relators appealed directly to this court, and in State, ex rel. Montrie Nursing Home, Inc., v. Aggrey (1978), 54 Ohio St.2d 394 [8 O.O.3d 401], we unanimously reversed the decision of the court of appeals denying the writ. We held that the court of appeals erred in finding that mandamus would not lie because relators could sue in contract in the Court of Claims. Id. at 396 and 397. Thus, we allowed the writ to issue.
The court of appeals issued the writ of mandamus pursuant to our mandate. In so doing, the court of appeals failed to rule on the precise amount to be paid each class member or the class member's right to the relief prayed for. The court of appeals also proceeded to award attorney's fees based upon the rate of $75 per hour and one half of one percent of the total recovery, which amounted to $51,307.
Relators again appealed to this court assigning as error the amount of attorney's fees and the failure to award interest. We vacated the court of appeals' orders in State, ex rel. Montrie Nursing Home, Inc., v. Aggrey (1980), 63 Ohio St.2d 121 [17 O.O.3d 74]. There we held that the court of appeals had prematurely issued the writ of mandamus and we remanded for the court of appeals to determine, as a preliminary matter, the specific amounts to be paid to the relators and the right of any class members to relief. Further, we determined that since the writ issued by the court of appeals was invalid, the issues of prejudgment interest, attorney's fees and enforcement could not be answered.
On remand, the court of appeals initially ordered that the action be maintained as a class action. The court of appeals then ordered respondents to prepare a "spread sheet" which would list each class member and the precise amount owed to each member. To calculate these amounts, the court of appeals ordered that the date of original licensure determined the daily rate per bed rather than the date of licensure to a subsequent purchaser.
On September 30, 1981, after making the necessary computations, respondents deposited $9,122,428.65 with the Franklin County Clerk of Courts. This deposit represented the total amount calculated by respondent owed to all the class members less the amounts owed to those members who had opted out of the class. After certain adjustments were made, the amount of the deposit ultimately reached $9,459,652.20.
Hearings were held before a court-appointed referee on the issues of the method of calculating respondents' liability and attorney's fees. By entry, the court of appeals rejected relators' contentions that cost of ownership should be calculated per available bed per day, as opposed to the number of beds occupied by Medicaid patients per day. Relators' claim that interest should accrue to the class as of the date of our decision in the first appeal of this case was likewise rejected.
On July 19, 1982, the court of appeals entered judgment for relators and ordered that the amount deposited by respondents be disbursed according to the spread sheet and that interest on the amount from the time of the deposit to July 15, 1982 less poundage and court costs, would be paid to counsel for relators as attorney's fees. This amounted to an award of $938,606.79. Approximately one month later, the court of appeals entered a nunc pro tunc judgment whereby it was ordered that only ninety-five percent of the disbursements would be made and five percent ($472,982.86) would be immediately paid to relators' attorneys as an advance on their attorney's fees. The court below noted that, in the event this court would rule that the interest on the deposit belongs to the state, relators' attorneys have agreed not to seek attorney's fees beyond five percent of the total judgment.
In summary, the court of appeals determined that three hundred sixty-five nursing homes were entitled to a total of $9,498,565.14 and that relators' attorneys were entitled to interest on that figure from September 30, 1981 to July 15, 1982 in the amount of $938,606.79. To date, all but $474,928.26 of the approximately $9.4 million deposited by respondents has been distributed to the class members. In addition, pursuant to the order of the court below, the balance due relators' attorneys is $465,523.93. All further distributions have been stayed pending the outcome of this appeal.
Respondents' appeal challenges the assessment of attorney's fees and the decision of the court of appeals that the interest on the deposit did not belong to the state. Relators in their cross-appeal challenge the court of appeals' interpretation of the relevant legislative enactments utilized to calculate the amounts owed them by respondents.
The cause is now before this court upon an appeal and cross-appeal as a matter of right.
Messrs. Lucas, Prendergast, Albright, Newman Gee, Rankin M. Gibson Co., L.P.A., Mr. Rankin M. Gibson, and W. Joseph Strapp Co., L.P.A., for appellees and cross-appellants.
Mr. William J. Brown, attorney general, Mr. Thomas W. Hess and Mr. Michael H. Igoe, for appellants and cross-appellees.
Respondents initially raise the question of whether the court of appeals properly used the interest on the amount deposited by respondents to pay attorney's fees to relators' attorneys. Respondents argue that any prejudgment interest belongs to the state, while relators maintain that the state admitted liability when it deposited the sum with the court and the interest which subsequently accrues inures to the relators, the prevailing party. We find respondents' argument well-taken and reverse the decision of the court of appeals to distribute the interest as attorney's fees.
This court faced nearly the same issue in State, ex rel. Home Care Pharmacy, Inc., v. Creasy (1981), 67 Ohio St.2d 342 [21 O.O.3d 215]. There, certain pharmaceutical retailers sought a writ of mandamus to compel the payment of Medicaid reimbursements from the ODPW which had been delayed due to a state fiscal crisis. In addition, relators sought to compel the state to pay interest on the delayed reimbursements. We unanimously denied the writ and stated at page 344:
"* * * `"[i]n the absence of a statute requiring it * * * interest cannot be adjudged against the state for delay in the payment of money."' Lewis v. Benson (1979), 60 Ohio St.2d 66, 67 [14 O.O.3d 269], quoting from the fourth paragraph of the syllabus in State, ex rel. Parrott, v. Board of Public Works (1881), 36 Ohio St. 409."
While R.C. 2743.18(A) does allow prejudgment interest to be assessed against the state, we have limited R.C. 2743.18(A) to cases arising in the Court of Claims:
R.C. 2743.18(A) states:
"Prejudgment interest shall be allowed with respect to any civil action on which a judgment or determination is rendered against the state for the same period of time and at the same rate as allowed between private parties to a suit.
"The court of claims, in its discretion, may deny prejudgment interest for any period of undue delay between the commencement of the civil action and the rendition of a judgment or determination against the state, for which it finds the claimant to have been responsible."
"* * * This statute [R.C. 2743.18(A)] is part of the Court of Claims Act and is applicable only to actions brought in the Court of Claims." Id.
As a result, relators' argument that the state is not entitled to retain the prejudgment interest is without merit. For the foregoing reasons, the judgment of the court of appeals awarding the prejudgment interest to relators' attorneys as attorney's fees is reversed.
The next issue is whether the award of attorney's fees was proper in this case. In Smith v. Kroeger (1941), 138 Ohio St. 508 [21 O.O. 386], this court stated at paragraph three of the syllabus:
"In such case [class action], a court exercising equitable jurisdiction may allow, in addition to costs between party and party, reasonable attorney fees, technically known as costs between solicitor and client, to be paid out of the fund under the control of the court."
The court in Smith v. Kroeger, supra, at 515, further stated that the attorney who is eligible for attorney's fees is one "`who, at his own expense, has maintained a successful suit for the preservation, protection, and increase of a common fund or common property, or who has created at his own expense, or brought into court a fund in which others may share with him.'"
In other words, where a fund has been created or preserved for the benefit of a class at the expense of one class member or a few class members, all members of the class may be required to share proportionately in the counsel fees incurred thereby. Thus, the court below had discretion whether to grant attorney's fees. However, any attorney's fees must come from the fund itself and may not be assessed against respondents in the absence of some exceptional conduct on respondents' part which would justify the imposition of attorney's fees as costs or damages.
See, e.g., State, ex rel. Crockett, v. Robinson (1981), 67 Ohio St.2d 363 [21 O.O.3d 228] (bad faith), and State, ex rel. Fraternal Order of Police, v. Dayton (1977), 49 Ohio St.2d 219 [3 O.O.3d 360] (civil contempt).
The facts of the case at bar mandate a remand to the court of appeals for a consideration of the propriety of awarding attorney's fees from the fund created in this case. On remand, should the court of appeals determine that relators' counsel are entitled to a portion of the fund as attorney's fees, the court shall not award simply a percentage of the fund as attorney's fees, but shall award any attorney's fees solely upon a determination of the amount of reasonable compensation for the legal services rendered by counsel for relators.
Several questions must be answered by the court of appeals. The court below shall first consider the effect of the fact that the costs of this litigation were advanced to relators' counsel by the Ohio Health Care Association. Specifically, it must be determined whether the members of the class have in fact already financed this litigation through membership fees or dues in this organization.
If the court below ultimately finds that attorney's fees are proper under these circumstances, the court will consider the following factors in arriving at the amount of allowable fees: (1) the time and labor involved in maintaining this litigation, (2) the novelty, complexity, and difficulty of the questions involved, (3) the professional skill required to perform the necessary legal services, (4) the experience, reputation, and ability of the attorneys, and (5) the miscellaneous expenses of this litigation.
See, generally, Annotation, Attorney's Fees in Class Actions (1971), 38 A.L.R. 3d 1384.
Finally, we address the court of appeal's construction of Am. Sub. H.B. Nos. 155 and 1546, 111th General Assembly. That bill provided the method to compute the reasonable costs incurred by nursing homes in providing Medicaid services. The nursing homes were then reimbursed for these costs by the ODPW-administered Medicaid program. In part, the bill stated:
"(B) * * * Reimbursement for a cost of property and equipment * * * shall be on a reasonable cost basis, as follows: Facilities * * * constructed prior to and subsequently originally licensed prior to 1958 — $2.50 per available bed per day. Facilities * * * constructed and subsequently originally licensed after 1957 but prior to 1968 — $3.50 per available bed per day. Facilities * * * constructed and subsequently originally licensed January 1, 1968 and after, $4.50 per available bed per day."
The court below interpreted the phrase "per available bed per day" to refer to those beds occupied by Medicaid patients only. Additionally, the court construed the phrase "constructed and subsequently originally licensed" to refer to the date of original licensure, not the licensure to a subsequent purchaser of the facility. We agree with both these interpretations.
We find no merit to relators' assertion that the phrase "per available bed per day" means the number of beds, regardless of their occupancy by a Medicaid patient. If that were true, the state would be required to reimburse nursing homes with Medicaid money even if no services were rendered to a Medicaid patient. Contrary to relators' position, we find that the General Assembly intended that Am. Sub. H.B. Nos. 155 and 1546 only apply to beds used to render services to Medicaid patients. Accordingly, the court of appeal's interpretation was correct and no error was committed in calculating respondents' liability.
Relators also contend that the phrase "constructed and subsequently originally licensed" should be construed to refer to the date a subsequent purchaser of the nursing home acquires a license to operate the facility. To the contrary, the bill specifically refers to original licensure, not any subsequent licensure. Thus it is clear that the General Assembly intended that the date of original licensure control for purposes of computing reimbursement under the Medicaid program. Ergo, the court of appeals properly construed Am. Sub. H.B. Nos. 155 and 1546 to be limited to the original licensure and not to extend to a subsequent licensure of the nursing home.
Accordingly, for the reasons expressed in this opinion, the judgment of the court of appeals is reversed in part and affirmed in part, and the cause is remanded for further proceedings not inconsistent with this opinion.
Judgment accordingly.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES, C. BROWN and J.P. CELEBREZZE, JJ., concur.