Justice HOBBS delivered the Opinion of the Court.
¶ 1 We granted certiorari in Planning Partners International, LLC v. QED, Inc., ___ P.3d ___, No. 10CA1848, 2011 WL 5084925 (Colo.App. Oct. 27, 2011) (selected for official publication), to determine whether the court of appeals erred in concluding that, where reasonable attorney fees are provided for in a promissory note or contract, and the judgment based on that note or contract has been reduced by a counterclaim arising out of the transaction, the trial court must apportion attorney fees in proportion to the amount recovered on the note less the amount recovered on the counterclaim.
¶ 2 Planning Partners International (PPI) is a meeting planning company based in Colorado. Quality Electrical Distribution (QED) is an electrical supply company headquartered in Denver. In February of 2008, PPI and QED entered into a Letter of Agreement, in which PPI agreed to plan, manage, and coordinate all flight reservations for QED's upcoming incentive trip to Barcelona, Spain. PPI agreed to act as QED's agent and, in this capacity, negotiated and entered into a Standard Charter Agreement with Omni Air International, Inc. (Omni) to provide a chartered plane. The Standard Charter Agreement provided that QED would be notified of any cost increases in fuel at least thirty days before the scheduled departure date. It further stated that any such increase
¶ 3 On June 3, 2008, three days before departure, Omni notified PPI that fuel prices had risen significantly above the originally estimated charter price and that QED would be required to pay an additional $122,428.35. QED's representative informed PPI that he could not access these funds because QED's owner was already in Europe and unavailable. Because Omni demanded immediate payment, PPI offered to lend QED the amount of the surcharge, which QED accepted.
¶ 4 PPI and QED entered into a Loan Agreement & Promissory Note on June 4, 2008. The note provided that PPI would loan QED $122,428.35 for immediate payment to Omni, and QED would repay PPI that amount by June 18, 2008. The note contained the following provision with regard to attorney fees:
¶ 5 QED failed to repay the principal on the note. PPI brought suit on July 22, 2008, asserting claims for breach of the note, promissory estoppel, and unjust enrichment. QED counterclaimed, alleging that PPI had breached its duties as QED's agent under the Letter of Agreement based on PPI's failure to enforce, or its waiver of, the thirty-day notice provision in the Standard Charter Agreement. QED also filed a third-party complaint against Omni for breach of its duties under the Standard Charter Agreement. PPI later amended its complaint to add additional claims for fraud and breach of contract related to the PPI/QED Letter of Agreement.
¶ 6 The parties tried the case before a jury on February 22-25, 2010. At trial, the judge granted QED's motion for directed verdict on PPI's fraud claim, as well as PPI's motion for directed verdict on QED's negligence and breach of fiduciary duty counterclaims. On the remaining claims, the jury found in favor of PPI for breach of contract under the promissory note and Letter of Agreement and in favor of QED on its counterclaim for breach of the Letter of Agreement. The jury awarded $131,725.27 to PPI and $58,534.65 to QED. The trial court entered judgment consistent with these verdicts.
¶ 7 Following entry of judgment, both parties moved for an award of costs and attorney fees. The trial court concluded that PPI was the prevailing party pursuant to C.R.C.P. 54(d) and awarded PPI its reasonable fees and costs
¶ 8 Upon hearing argument and considering the various submissions, exhibits, and expert testimony of the parties, the trial court rejected QED's contention that apportionment was mandatory. It concluded that apportionment is one of "a number of tools" available to trial courts to use in their discretion but it has never been explicitly required by Colorado law. The court declined to apportion fees in the manner requested by QED:
¶ 9 The trial court did not, however, grant PPI the full $262,939 in fees it requested. Instead, it excluded $26,290.50 related to PPI's unsuccessful fraud claim, $88.50 earned by an individual the court found had no apparent reason to be involved in the litigation, and reduced the total amount by twenty percent, finding that, although PPI attorneys charged a reasonable hourly rate, the overall number of hours claimed was unreasonable. In sum, the court awarded PPI $188,748.80 in attorney fees.
¶ 10 The court of appeals reversed, concluding that the trial court erred as a matter of law in calculating PPI's fees. Noting the lack of governing authority on point, the court reviewed several other jurisdictions' approaches to fee apportionment and concluded that, where reasonable attorney fees are provided for in a promissory note or contract, and the judgment based on that note or contract has been reduced by a counterclaim arising out of the transaction, an apportionment of attorney fees is required in proportion to the amount recovered on the note less the amount recovered in the counterclaim. Accordingly, the court of appeals calculated PPI's fees by taking PPI's net recovery ($73,190.62) and dividing it by the total jury award to PPI ($131,725.27), resulting in a factor of 0.5556. It then multiplied the trial court's award of attorney fees ($188,748.80) by 0.5556, resulting in a total fee award of $104,868.83. PPI appeals this judgment.
¶ 11 We conclude that, where a promissory note or contract provides for reasonable attorney fees, and the judgment based on the note or contract is reduced by a counterclaim arising out of the transaction, the determination whether and how to apportion fees rests within the discretion of the trial court and will be overturned only upon an abuse of that discretion.
¶ 12 We typically review the reasonableness of attorney fee awards for abuse of discretion. Crandall v. City of Denver, 238 P.3d 659, 661 (Colo.2010); Haystack Ranch, LLC v. Fazzio, 997 P.2d 548, 556 (Colo.2000). A trial court abuses its discretion if its actions are manifestly arbitrary, unreasonable, or unfair. Colo. Nat'l Bank of Denver v. Friedman, 846 P.2d 159, 167 (Colo. 1993). Accordingly, a trial court's determination of a reasonable attorney fee award will generally not be disturbed on review unless it is patently erroneous and unsupported by the evidence. Hartman v. Freedman, 197 Colo. 275, 281, 591 P.2d 1318, 1322 (1979); see also Haystack Ranch, 997 P.2d at 556 ("Appellate courts review an award of attorney fees and costs for an abuse of discretion, which occurs when `the findings and conclusions of the trial court are so manifestly against the weight of the evidence as to compel a contrary result.'" (citing In re Water Rights of Hines Highlands Ltd. P'ship, 929 P.2d 718, 728 (Colo.1996))); Am. Water Dev., Inc. v. City of Alamosa, 874 P.2d 352, 388 (Colo.1994) ("A determination of reasonableness is a question of fact for the trial court and `will not be disturbed on review unless it is patently erroneous and unsupported by the evidence.'" (citation omitted)). Further, the party requesting fees has the burden of proving that it is entitled to them. Anderson v. Pursell, 244 P.3d 1188, 1194 (Colo.2010).
¶ 13 In Colorado, attorney fees are generally not recoverable absent a statute, court rule, or private contract to the contrary. Bernhard v. Farmers Ins. Exch., 915 P.2d 1285, 1287 (Colo.1996); see also Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 44 L.Ed.2d 141
¶ 14 In this case, the court of appeals held that, where a promissory note or contract provides for reasonable attorney fees, and the judgment based on that note or contract has been reduced by a counterclaim arising out of the transaction, trial courts must apportion attorney fees in proportion to the amount recovered on the note, less the amount recovered on the counterclaim. The court of appeals reached this conclusion after acknowledging the lack of Colorado Supreme Court authority on point; it consulted other jurisdictions for guidance. Contrary to the court of appeals' conclusion, we determine that, although trial courts may apportion fees where reasonable, they are not required to do so.
¶ 15 QED encourages us to follow the "majority of jurisdictions that have addressed the issue" in requiring proportional diminishment of attorney fees when the defendant recovers on a counterclaim. However, our own survey of the case law does not clearly support QED's position that proportional diminishment is the general rule.
¶ 16 In Husband v. Colorado Mountain Cellars, Inc., 867 P.2d 57 (Colo.App.1993), Husband had made a loan to Colorado Mountain Cellars evidenced by two promissory notes secured by Mountain Cellars' inventory and equipment. When Mountain Cellars failed to repay the notes, Husband foreclosed on the secured property. Husband brought an action to recover the deficiency on the property, and Mountain Cellars counterclaimed for breach of contract. Both parties prevailed on their respective claims at trial. On appeal, Mountain Cellars contended that the court erred in its award of attorney fees to Husband because a substantial portion of the fees awarded were incurred defending against Mountain Cellars' successful counterclaim — not in prosecuting Husband's claims on the notes. The court of appeals rejected this argument, concluding that, where "fees are incurred in defending against counterclaims that are grounded upon the same transaction out of which the principal debt arose and are asserted to defeat that debt,... it is not improper to consider these fees as a part of the costs of collection of that debt." Id. at 62. Thus, the court declined to require strict apportionment of fees based on Mountain Cellars' successful counterclaim.
¶ 17 Similarly, in Universal Drilling Co. v. Camay Drilling Co., 737 F.2d 869 (10th Cir. 1984), a buyer of drilling rigs brought an action against the seller for breach of warranty. The parties had executed a promissory note authorizing the provision of reasonable attorney fees. Id. at 875. On appeal, the Tenth Circuit rejected the plaintiffs' contention that the trial court was required to apportion fees to reflect only the fees incurred in recovery of monies owed to the defendant under the note, as opposed to those incurred defending against the plaintiffs' claims for breach of warranty. See id.; see also Saad v. GE HFS Holdings, Inc., 366 Fed.Appx. 593, 606 (6th Cir.2010) (determining that attorney fees incurred by defendant were recoverable pursuant to Ohio statute governing attorney fees in commercial contracts of indebtedness); Sybert v. Combs, 555 So.2d 1313, 1314 (Fla.Dist.Ct.App.1990) (holding that, where seller brought suit against buyer based on breach of a promissory note and buyer counterclaimed, the attorney fees provision in the note unambiguously provided for payment of attorney fees to seller notwithstanding a jury verdict finding both parties' claims successful and awarding each $10,000); Duryea v. Third Nw. Nat. Bank of Minneapolis, 606 F.2d 823, 826 (8th Cir.1979) (rejecting appellant's claim that attorney fees should exclude those incurred in defending against claims of illegal banking practices and, rather, should be limited to those directly incurred in collecting on note).
¶ 18 By contrast, in Jackson v. Oppenheim, 533 F.2d 826 (2d Cir.1976), a plaintiff appealed an unsuccessful securities law action, arguing, among other things, that the district court erred in its award of attorney fees. The plaintiff contended that the two promissory notes authorizing an award of attorney fees were intended to cover fees incurred only in collection on the notes, rather than fees incurred in defense of an ancillary federal securities law claim. Id. at 831.
¶ 19 In the instant case, our court of appeals relied in part on Pioneer Constructors v. Symes, 77 Ariz. 107, 267 P.2d 740, 744 (1954), as the "leading case" on the method of apportionment the court ultimately chose to adopt. In Pioneer, the Supreme Court of Arizona articulated the "general rule" as,
Id. The Colorado Court of Appeals in Wagonmaster, Inc. v. Parrot, 713 P.2d 417 (Colo. App.1985), cited Pioneer as support for its conclusion that a contractor was not entitled to a judgment for attorney fees. The contractor had filed an action against Dr. and Mrs. Parrot (the owners) to enforce a mechanic's lien and recover damages for breach of contract. Id. at 417. The owners counterclaimed for breach of contract and negligence. Id. The jury awarded $10,000 to the contractor on its complaint and $19,300 to the owners on their counterclaim. The construction contract provided in relevant part that the owners "agree[] to pay interest ... on the unpaid balance on past due amounts ... and further agree[] to pay ... reasonable attorney's fees and court costs as may be required." The court of appeals concluded that, because the owners' counterclaim was greater than the amount recovered on the complaint, there was no "unpaid balance on past due amounts" and therefore no basis for allowance of attorney fees. Id. at 418.
¶ 20 The case which the court of appeals most directly relied on in arriving at its proportional diminishment approach
¶ 21 Upon review of these and other cases we do not find proportional diminishment to be the clear majority rule, nor do we choose to adopt it as a general principle here.
¶ 22 First, the majority of cases cited by both PPI and QED examine the reasonableness
¶ 23 As observed by the United States Supreme Court, "`there is no precise rule or formula' for determining attorney's fees." Evans v. Jeff D., 475 U.S. 717, 736, 106 S.Ct. 1531, 89 L.Ed.2d 747 (1986) (citing Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)); see also Am. Water Dev., Inc., 874 P.2d at 386. Trial courts consider a variety of factors in determining the reasonableness of a fee. See Am. Water Dev., Inc., 874 P.2d at 386 ("[T]he proper starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate."); Mau v. E.P.H. Corp., 638 P.2d 777, 779 (Colo.1981) (discussing the list of factors set forth in the Code of Professional Responsibility to be considered in determining the reasonableness of a fee, including but not limited to the time and labor required, the novelty and difficulty of the questions involved, the skill requisite to perform the legal service properly, the fee customarily charged in the locality for similar legal services, the amount involved and the results obtained, the experience, reputation, and ability of the lawyer or lawyers performing the services).
¶ 24 Further, our case law has often emphasized the considerable discretion afforded to trial courts in determining the reasonableness of attorney fees. See Am. Water Dev., Inc., 874 P.2d at 388 (upholding a trial court award of attorney fees and noting that the trial judge had "participated in each stage of the proceeding," "heard the testimony of expert witnesses," "was familiar with much of [the experts'] work product in the form of exhibits," and "was capable of understanding what was reasonably expected in attorney fees"); Farmers Reservoir & Irr. Co. v. City of Golden, 113 P.3d 119, 126 (Colo.2005) ("The determination of what constitutes reasonable attorney fees `is a question of fact for the trial court and will not be disturbed on review unless it is patently erroneous and unsupported by the evidence.'" (citation omitted)); Haystack Ranch, 997 P.2d at 556 ("Appellate courts review an award of attorney fees and costs for an abuse of discretion, which occurs when `the findings and conclusions of the trial court are so manifestly against the weight of the evidence as to compel a contrary result.'" (citation omitted)).
¶ 25 In this case, QED does not directly contest the trial court's determination of PPI's reasonable fees; it argues only that the trial court was obligated to apportion fees in the manner it requested. However, requiring proportional diminishment in all cases presenting these factual circumstances would undermine trial courts' ability to determine a reasonable fee under the specific
¶ 26 The trial court did not abuse its discretion in refusing to strictly apportion fees in the manner requested by QED. As the trial judge noted at the hearing, he was thoroughly familiar with how the case had progressed and the multitude of issues involved:
¶ 27 In his oral analysis contained in a transcript of record in this case, the trial judge proceeded methodically through PPI's accounting, discounting the fees incurred in a claim he found to be unsupported by the evidence and reducing the entire amount of requested fees by twenty percent. He further determined that that issues in this case were "sufficiently intertwined and inter-related" that apportionment was not appropriate. As discussed above, neither party argued whether apportionment was appropriate based on the language of the note itself. Evidence in the record supports the trial court's findings and we will not disturb them on appeal.
¶ 28 Finally, PPI requests that this court award it attorney fees associated with this appeal pursuant to C.A.R. 28(b), C.A.R. 39.5, and the language of the promissory note itself. We remand this case to the appeals court with directions to return it to the trial court for entry of judgment consistent with this opinion, including a determination of whether PPI is entitled to attorney fees in connection with this appeal and, if so, the amount of PPI's reasonable fee award.
¶ 29 Accordingly, we reverse the judgment of the court of appeals. We remand this case to the court of appeals, with directions to return the case to the district court for further proceedings consistent with this opinion.
Justice EID concurs in the judgment.
Justice EID, concurring in the judgment.
¶ 30 I agree with the majority that the trial court was not required to apportion fees in this case, but come to this conclusion by way of different reasoning. Here, the language of the contract required QED to pay reasonable costs and fees that PPI might incur "in connection with the enforcement of" the loan agreement and promissory note. The language "in connection with the enforcement of" the agreement and note is broad enough to include costs and fees associated with defending against QED's counterclaims stemming from the same transaction. I therefore agree with PPI that the court of appeals erred in attempting to devise a general rule of apportionment when the contractual language did not support apportionment
The issue as framed does not squarely reflect the holding of the court of appeals. The court did not hold that Colorado district courts lack discretion to determine whether, and how, an award of attorney fees should be apportioned between claims and counterclaims across all conceivable contexts. Rather, the court held that in the circumstance where reasonable fees are provided for in a promissory note or contract, and the judgment based on the note or contract has been reduced by a counterclaim arising out of the transaction, an apportionment of attorney fees is required in proportion to the amount recovered on the note less the amount recovered on the counterclaim.