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CITY OF SIOUX FALLS, a Municipality charted under the Constitution of the State of South Dakota, Plaintiff and Appellants, v. DOUGLAS L. JOHNSON and SHERRY D. JOHNSON Defendants and Appellees. [2003 SD 115] South Dakota Supreme Court Appeal from the Circuit Court of The Second Judicial Circuit Lincoln County, South Dakota Hon. William J. Srstka, Jr., Judge R. SHAWN TORNOW of Sioux Falls City Attorney's Office Sioux Falls, South Dakota Attorneys for plaintiff and appellant. MARK V. MEIERHENRY of Danforth, Meierhenry & Meierhenry Sioux Falls, South Dakota Attorneys for defendant and appellee. Argued February 11, 2003 Opinion Filed 9/17/2003 #22395, 22396 JOHNSON, Circuit Judge [¶1.] This case involves a challenge to an award of attorney fees and prejudgment interest in favor of Doug and Sherry Johnson (Johnsons) and against the City of Sioux Falls (City). By notice of review, Johnsons seek to challenge the constitutionality of the statutory prejudgment interest rate. We affirm the attorney fee award and remand for recalculation of prejudgment interest. We do not reach the constitutional question raised by Johnsons. FACTS AND PROCEDURE [¶2.] This case is before us for the third time. City commenced this action in 1995, seeking condemnation of a residence and land owned by Johnsons for highway and other public uses. The first jury awarded Johnsons damages of $1.2 million and the trial court awarded attorney fees and costs of $130,000. City appealed. In City of Sioux Falls v. Johnson, 1999 SD 16, 588 NW2d 904 (Johnson I), we reversed the judgment on evidentiary grounds and ordered a new trial. Upon retrial, the second jury awarded Johnsons damages of $1.1 million and the Honorable Judge Richard Bogue awarded attorney fees and costs of $175,000. [¶3.] City again appealed the awards to Johnsons. In City of Sioux Falls v. Johnson, 2001 SD 108, 632 NW2d 849 (Johnson II), we affirmed the verdict but reversed the judgment and remanded the case to circuit court for a redetermination of attorney fees, costs, and prejudgment interest. Johnson II, 2001 SD 108 ¶ 11, 632 NW2d at 855. We reversed the award of attorney fees because we were unable to conduct meaningful appellate review and remanded the issue to the circuit court to conduct an evidentiary hearing

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on appellate attorney fees, costs and prejudgment interest. On remand, the Honorable Judge William J. Srtska, Jr., after conducting a series of hearings, awarded Johnsons attorney fees of $174,900 and prejudgment interest of $86,785.09. [¶4.] City now appeals claiming Judge Srtska abused his discretion in the award of attorney fees and that he erroneously calculated the prejudgment interest owing. Johnsons filed a notice of review, challenging the constitutionality of the statutory prejudgment interest rate. ISSUE ONE [¶5.] Whether the award of attorney fees to Johnsons was an abuse of discretion. [¶6.] Attorney fee awards are reviewed under an abuse of discretion standard. Johnson II, 2001 SD 108, ¶ 8, 632 NW2d at 852. "We determine that an abuse of discretion occurred only if no judicial mind, in view of the law and the circumstances of the particular case, could reasonably have reached such a conclusion." Action Mechanical, Inc. v. Deadwood Historic Preservation Com'n, 2002 SD 121, ¶ 14, 652 NW2d 742, 748 (internal quotations omitted). [¶7.] SDCL 21-35-23 provides that if the verdict in favor of the landowner exceeds seven hundred dollars and is twenty percent greater than the condemning authority's prior offer, the trial court shall allow reasonable attorney fees, together with taxable costs and compensation for not more than two expert witnesses. The verdict in this case exceeded City's final offer of $547,955.98 by 101 percent; therefore, pursuant to SDCL 21-35-23, City is required to pay Johnsons reasonable attorney fees. [¶8.] On remand, we directed the trial court to conduct a review of the attorney fees claimed in light of the following factors previously set forth in City of Sioux Falls v. Kelley, 513 NW2d 97,111 (SD 1994) (quoting Model Rules of Professional Conduct, Rule 1.5): (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) (3) (4) (5) (6) (7) (8) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; the fee customarily charged in the locality for similar legal services; the amount involved and the results obtained; the time limitations imposed by the client or by the circumstances; the nature and length of the professional relationship with the client; the experience, reputation, and ability of the lawyer or lawyers performing the services; and whether the fee is fixed or contingent.

On remand, the court held three evidentiary hearings and then entered findings of fact and conclusions of law applying the Kelley factors. Specifically, the court found: 1) The law firm expended approximately 380 hours of time for trial time for the second case. The City made a general objection to the amount of attorney fees requested by the landowners and urged the court to award approximately $81,500 in attorney fees. 2) As to the second factor, this case would have only prevented the employment by defendants' counsel of the City of Sioux Falls and the City of Sioux Falls has not been and is not a normal client and the

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court places no weight on this factor. 3) The fee customarily charged in the locality is a contingent fee. No evidence indicates that the usual private arrangement is hourly but always contingent. The normal reasonable rate of contingent fees is between 50% to a low of 33% of the lift or the original amount offered by the government before litigation begins. The fee requested by the landowner is the low end of the range of reasonable fees as charged between landowners and clients. As to the fourth factor, the court finds that the amounts are very substantial and the results were excellent in both trials. Two different juries with somewhat different facts for consideration as to the values, awarded $1.2 million and $1.1 million. The landowner received 260% more than the original deposit. There were no time limitations involved by the clients and the only limitation was to get the case tried as quickly as possible. There was not a lengthy relationship between the defendants and counsel but it has continued during the duration of this case, which now exceeds six years. Defendants' counsel has shown the experience, the skill, and the ability to perform properly this particular form of litigation. The fee arrangement in this case was a contingent fee based on a percentage of the amount over the initial deposit of the City of $423,000. The contingent fee agreement provided for one-third of the first $600,000 of lift and 22% thereafter above the deposit of $423,000. The landowner has paid fees over $243,005.00 and requested $165,000 plus 6% tax.

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[¶9.] While City generally objected to all of the findings of fact, it is unable to point to any finding or findings that are clearly erroneous. Instead, City asserts that a contingent fee was not reasonable in this case. As support for that proposition City cites Johnson II where this Court stated: "[W]hile such contingent fee arrangements may be perfectly valid and proper as between an attorney and his client, it does not necessarily follow that such fee is a reasonable fee to be taxed against the party taking private property for a public use, as permitted under [SDCL 21-35-23]." Johnson II, 2001 SD 108 at ¶ 21, 632 NW2d at 855 (quoting Kelley, 513 NW2d at 111 (citation omitted)). Utilizing this language, City maintains that while a contingent fee agreement may be reasonable between a landowner and his counsel, only an hourly rate of compensation is reasonable as between condemner and landowner. However, the remand court refused to place such a dominant significance on this single Kelley factor to the exclusion of the others. [¶10.] The remand court carefully considered all of the Kelley factors, finding that some were more applicable than others. In reaching its determination, the remand court used an hourly rate as one reference point and the actual fees paid by landowner as another. Clearly, the purpose of SDCL 21-35-23 is not to compensate landowner's counsel, but to reasonably reimburse landowner for legal fees. Johnsons paid total compensation to their attorney of over $243,005 pursuant to a contingency fee agreement. They were awarded $174,900 by the remand court. Johnsons' reimbursement in this case was twenty-eight percent less than what they paid their counsel, an amount which even City's experts agreed was customary and reasonable in condemnation cases. Given these facts, we are unable to say that the trial court abused its discretion by awarding attorney fees in an amount that is midway between the award proposed by City and

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the actual fees paid to counsel by Johnsons. [¶11.] City also argues the trial court erroneously allowed compensation for previous appellate work performed by Johnsons' attorney. City is incorrect. At the December 17, 2001, hearing Judge Srtska stated: "I'm not granting anything on the appeal. I

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