Merchant & Gould P.C., Respondent,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-0898

Merchant & Gould P.C.,
Respondent,

vs.

Larry Holmberg,
Appellant.

Filed January 31, 2022
Affirmed in part, reversed in part, and remanded
Smith, Tracy M., Judge

Isanti County District Court
File No. 30-CV-19-748

Jeffrey S. Nicolet, Wagner, Falconer & Judd, Ltd., Minneapolis, Minnesota (for
respondent)

Edward E. Beckmann, Beckmann Law Fi rm, LLC, Bloomington, Minnesota (for
appellant)

Considered and decided by Bryan, Pres iding Judge; Smith, Tracy M., Judge; and
Rodenberg, Judge.

NONPRECEDENTIAL OPINION
SMITH, TRACY M., Judge
Appellant Larry Holmberg challenges the district court’s grant of summary
judgment in favor of respondent Merchant & Gould P.C. (M&G), a Minneapolis law firm,

 Retired judge of the Minnesota Court of A ppeals, serving by appoi ntment pursuant to
Minn. Const. art. VI, § 10.
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in this dispute over legal f ees owed by Holmberg to M&G. Holmberg does not challenge
that he owed the legal fees, but he asserts that summary judgment against him was improper
because (1) there are genuine issues of mate rial fact regarding Ho lmberg’s counterclaim
against M&G for fee forfeiture based on fraud and bad faith and (2) he was entitled to a
jury trial on M&G’s claim for contract-based attorney fees incurred in this action.
We affirm summary judgment against Holmberg on his counterclaim for fee
forfeiture because Holmberg failed to establish a genuine issue of material fact regarding
his assertion that M&G engaged in fraud or ac ted in bad faith. But, because the district
court erred by awarding M&G attorney fees without applying the proper analysis for
summary judgment on a claim for contract-based attorney fees or holding a trial, we reverse
the award of attorney fees and remand for further proceedings consistent with this opinion.
FACTS
Holmberg was a long-time client of M&G, a law firm specializing in intellectual
property. Holmberg first hire d M&G in 2003 and continued to intermittently employ the
firm’s services for a variety of projects until the time of this dispute. Until this dispute,
Holmberg paid all his M&G bills.
This dispute arises out of legal work that M&G performed for Holmberg in
September and October 2017. Several months earlier, Holmberg contacted M&G attorney
Tony Zeuli about seeking M&G’s advice rega rding a lawsuit that Holmberg had brought
using a law firm other than M&G. The parties refer to that case as “the Peel litigation.”
M&G provided an estimate of $1.5 to $3 million in legal fees to handle the Peel litigation
through trial, and Holmberg decided to stay with his ot her attorneys. But Holmberg
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continued to correspond with Zeuli about the case, and Zeuli informed Holmberg that his
rate was $650 per hour. Holmberg emailed Ze uli and asked what it would cost for M&G
to represent Holmberg in settlement discussions in the Peel litigation. Zeuli replied that he
could not take the matter himself but that M&G attorney Thomas Johnson could do so.
Holmberg met with attorney Johnson about the Peel litigation in October 2017.
Johnson’s rate was $470 an hour—$180 less th an Zeuli’s. In November, M&G sent an
invoice to Holmberg fo r $3,380 in legal fees. The invoice described the work that Zeuli
performed in September and that Johnson performed in October. Holmberg claims that he
did not receive the November invoice.
In December 2017, Holmberg contacted M&G, asking what it would cost for the
firm to represent him in defending against a motion to dismiss in the Peel litigation set for
January 2018, and M&G replied that it charged by the hour and would require a retainer
fee for the limited engagement. The parties en tered into a written e ngagement letter, and
Holmberg paid M&G a $17,000 retainer fee. After M&G successfully defended Holmberg
against the motion to dismiss, Holmberg asked M&G to take over the Peel litigation. M&G
agreed and asked that Holmberg pay a $20,000 retainer for representation in the litigation.
The parties again entered into a written engagement letter, and Holmberg paid the $20,000
retainer fee.
With respect to the retainer fees, the re tainer agreements stated, “Those funds will
be deposited in our client trust account, and we will draw against those funds to satisfy our
monthly statements, copies of which will be sent to you for your information.”
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M&G continued to perform legal services for Holmberg and sent him monthly
invoices reflecting those services and the balance due after application of funds from the
retainer fees. Holmberg did not make any additional paym ents beyond the $37,000 in
retainer fees.
M&G’s work on the Peel litigation en ded in March 2018. That month, M&G
realized that the November 2017 invoice for $3,380 remained unpaid and applied
Holmberg’s retainer funds to pay it. In March 2018, M&G sent Holmberg two documents
entitled “Statement of Account,” which listed each outstanding invoice, the amount billed,
and the balance due. The first statement of account listed the November 2017 invoice for
$3,380 and a balance due for th at amount. The second statement of account, sent after
M&G determined to use the retainer to pay the $3,380, no longer listed the November 2017
invoice or a balance due for that invoice.
As of May 2018, Holmberg’s outstanding balance with M&G was $95,003.54. In
November 2018, in response to a collection letter, Holmberg emailed Zeuli and stated that
he did not have the money to pay his outstanding balance. At some point, Holmberg
objected to M&G’s application of the retainer fees to pay the $3,380 invoice, and M&G
returned those funds to its client trust account.
Eventually, M&G filed this action to collect the $95,003.54, plus interest, attorney
fees, costs, and disbursements. Holmberg filed an amended answer and asserted
counterclaims, including one for total fee forfeiture.
The district court granted M&G’s motio n for summary judgme nt and dismissed
Holmberg’s counterclaims. Thereafter, M& G submitted an affidavit of costs and
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disbursements that included $47,600 for attorney fees incurred in this action. The district
court awarded M&G the principal amount of $9 5,003.54, interest of $41,697.44, attorney
fees of $47,600, and costs and disburseme nts of $570.75 for a total judgment of
$184,871.73. Holmberg filed a memorandum objecting to, among other things, the award
of attorney fees. The district court ordered a hearing and, following that hearing, reaffirmed
its award to M&G of $47,600 in attorney fees.
Holmberg appeals. He challenges only the summary-judgment dismissal of his
counterclaim for total fee forfeiture and the award to M&G of attorney fees.
DECISION
A party is entitled to summary judgment when there is no genuine issue of material
fact and the party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.01.
Appellate courts review the grant of summa ry judgment de novo to determine “whether
there are genuine issues of ma terial fact and whether the district court erred in its
application of the law.” Montemayor v. Sebright Prods., Inc., 898 N.W. 2d 623, 628 (Minn.
2017) (quotation omitted). “[T]here is no genuine issue of materi al fact for trial when the
nonmoving party presents evidence which mere ly creates a metaphysical doubt as to a
factual issue . . . .” DLH, Inc. v. Russ , 566 N.W.2d 60, 71 (Mi nn. 1997). To survive a
motion for summary judgment, the nonmoving party must point to specific facts that show
there is a genuine issue of material fact for trial. See id. at 70-71.
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I. Holmberg has not demonstrat ed that there is a genuine issue of material fact
regarding total fee forfeiture.

Holmberg argues that the district court erred in summarily denying his counterclaim
for total fee forfeiture because a genuine issue of material fact exists with respect to that
claim.
When an attorney commits actual fraud or acts in bad faith, an appropriate remedy
may be total forfeiture of the legal fees that are otherwise due. See Gilchrist v. Perl , 387
N.W.2d 412, 417 (Minn. 1986). Fraud generally requires an intentional misrepresentation
or omission. See U.S. Bank N.A. v. Cold Spring Granite Co., 802 N.W.2d 363, 373 (Minn.
2011).
In seeking total fee forfeiture, Holmberg argues that the entirety of his balance with
M&G—$95,003.54—should be forfeited because M&G engage d in fraud and bad faith.
Holmberg’s allegations of fra ud and bad faith involve two ca tegories of conduct: first,
M&G’s use of Holmberg’s retainer fees to pay the $3,380 balan ce due on the November
2017 invoice; and second, M&G’s failure to di sclose all of its hourly rates. We examine
each in turn.
A. Use of Retainer Fees

Holmberg claims that there is a genuine dispute of material fact as to whether M&G
acted fraudulently or in bad faith when it applied $3,380 of retainer funds to his outstanding
balance from the November 2017 invoice.
Holmberg contends that evidence of fraud or bad faith exists because the retainer
agreements he signed in December 2017 and January 2018 provided that the $37,000 in
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retainer fees would be used only for future work on the Peel litigation, and the $3,380 was
for past work. The argument is unpersuasive. It is true that the agreements used the future
tense when they stated that copies of M&G’s statements “will be sent” to Holmberg for his
information. But the agreemen ts permitted M&G to draw agai nst the retainer “to satisfy
[its] monthly statements.” Considering that the agreements were for M&G’s representation
of Holmberg on the Peel litig ation and that the $3,380 was used to satisfy a monthly
statement for work perfo rmed on the Peel litigation, M&G’s use of the retainer fees to
satisfy that statement is insuffi cient to create a genuine issue of material fact regarding
fraud or bad faith.
Holmberg also contends, thou gh, that there is evidence of fraud or bad faith in
M&G’s conduct regarding its invoicing. He asserts that there is a factual dispute regarding
fraud or bad faith because he never receiv ed the November 2017 invoice and that
document, when later produced, did not include the same type of information as other
invoices. Holmberg also contends that the fi nal invoice that he received, dated April 1,
2018, could be found to be fraudulent or i ssued in bad faith be cause it showed the
application of $13,906 in retainer funds to his balance but did not reference the work that
was performed in September or October 2017.
Holmberg’s arguments are not persuasive. Regarding the November 2017 invoice,
Holmberg does not dispute that M&G sent the November 2017 invoice, nor does he dispute
that the work reflected on the invoice was completed at his request. As for the application
of $13,906 in retainer funds, that use of the retainer funds is distinct from the $3,380 in
funds that he claims were fraudulently applied. The record reflects that the $13,906 in funds
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were applied to Holmberg’s balance for work performed in March 2018. Holmberg
presents no evidence that could lead a reason able trier of fact to conclude that M&G’s
application of the $13,906 shown on the Apr il 1, 2018 invoice was fraudulent or in bad
faith.
Holmberg also alleges that M&G’s actions in connection with the retainer fees
violated Minn. R. Prof. Conduct 1.15(b) and 1.15(c), implying that such a violation would
constitute fraud or bad faith. Rule 1.15(c), as relevant here, states that a lawyer shall
withdraw fees from a trust account as earned. Rule 1.15(b) states that a lawyer must provide
the client with “written notice of the time, amount, and purp ose of the withdrawal.” It
further states that, if there is a dispute regarding the lawyer’s right to the funds, the disputed
funds “shall not be withdrawn until the dispute is finally resolved.”
Holmberg is correct that M&G did not prov ide him with explicit notice that it had
withdrawn $3,380 of the retainer funds and applied those funds to his outstanding balance
from the November 2017 invoice. M&G appears to argue that it gave notice to Holmberg
when it sent him a statement of account showing a balance due of $3,380 for the November
2017 invoice and followed it with a second statement of account in which the November
2017 invoice and balance due are no longer listed. But these two statements of account do
not provide explicit notice that $3,380 was withdrawn from the retainer balance to pay the
November 2017 invoice.
Nevertheless, Holmberg fails to prov ide any evidence suggesting that M&G’s
failure to explicitly notify Holmberg of the withdrawal of funds to pay the November 2017
invoice was an intentional representation or omission or was done in bad faith. Holmberg
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does not dispute that he requ ested that M&G perform the wo rk that was billed in the
November 2017 invoice or that that work related to the Pe el litigation. Moreover, when
Holmberg objected to M&G’s application of the $3,380 to his outstanding balance, M&G
returned the funds to the trust account. These circumstances do not create a genuine issue
of material fact regarding fraud or bad faith.
B. Hourly Rates

Holmberg argues that a genuine issue of ma terial fact exists as to whether M&G
acted fraudulently or in bad faith because M& G did not provide him w ith the hourly rate
of attorney Johnson, which he claims violates Minn. R. Prof. Conduct 1.5. Holmberg’s
argument is unavailing.
Rule 1.5 requires that information regarding rates shall be communicated to a client,
preferably in writing. Minn. R. Prof. Conduct 1.5(b ). The rules also no te that, in a long-
term relationship between a firm and a clie nt, “they ordinarily will have evolved an
understanding concerning the basis or rate of the fee and the expenses for which the client
will be responsible.” Id., cmt. 2.
It is undisputed that Holmberg was a lo ng-term client of M&G and was familiar
with its rates. Additionally, it is not disputed that attorney Zeuli informed Holmberg of his
rate—$650 per hour—in fall 2017. Both c lient-representation letters M&G sent to
Holmberg state, “[b]illing rates for persons assisting with matters we are handling on your
behalf are generally reflected on invoices provided to you and may be adjusted annually
(in October of each year).” Alth ough the hourly rate for each individual attorney was not
included on all invoices M&G sent to Holmberg, M&G sent him invoices on March 1 and
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April 1, 2018, that included the hours its attorneys were spending on his case and the rate
charged for those hours. It is thus not disputed that M&G provided Holmberg, a long-term
client, with information regarding its rate s and charges, including the hourly rate of
attorney Johnson.
Moreover, attorney Johnson’s rate was $470 per hour—$180 per hour less than that
of attorney Zeuli. Thus, even if Holmberg was unaware of Johnson’s rate in the fall of
2017, Holmberg was consisten tly quoted higher rates for th e Peel litigation by attorney
Zeuli. Holmberg has failed to show how he was harmed by the fact that M&G billed him
for work completed by attorney Johnson at a lowe r rate than what he had been quoted by
attorney Zeuli or how that could constitute bad faith or fraud.
In sum, Holmberg has not demonstrated ge nuine issues of mate rial fact regarding
whether M&G acted fraudulently or in bad fa ith, and the district court correctly granted
summary judgment against Holmberg on his counterclaim for total fee forfeiture.
II. The district court erred by awarding M&G attorney fees.
Holmberg argues that the district court erred by awarding M&G attorney fees
because he is entitled to a jury trial on the issue of contract-based attorney fees.
M&G’s claim for attorney fees is fou nded on its agreements with Holmberg. A
claim for attorney fees based on a contract is, like other contract claims, subject to
determination by a jury, both as to liability and as to dama ges, unless there is no genuine
dispute of material fact on those issues. United Prairie Bank-Mo untain Lake v. Haugen
Nutrition & Equip., LLC, 813 N.W.2d 49, 52, 63 n.9 (Minn. 2012).
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M&G does not dispute that this is the law but argues that the law was not followed
here because Holmberg did not establish a genuine issue of material fact regarding attorney
fees. M&G contends that the district court pr operly awarded attorney fees as part of its
ruling on M&G’s motion for summary judgment.
This argument, however, does not accurate ly reflect what happened. While M&G
claimed entitlement to attorney fees in its motion for summary judgment, it did not include
with its motion any evidence supporting the amount of the award (for example, hours spent,
rates charged, reasonableness of the rates, etc.). Rather, only af ter obtaining summary
judgment on its substantive claims did M&G submit a request for costs, including attorney
fees, supported by affidavit evidence. It did so pursuant to Minn. R. Civ. P. 54, which
governs applications for costs and disburse ments, not pursuant to the rules governing
motions for summary judgment. See Minn. R. Civ. P. 56; Mi nn. R. Gen. Prac. 115.
Holmberg objected to the award.
The district court’s reasoning in awardi ng attorney fees was not that summary
judgment on the contractual cl aim for fees was warranted because of a lack of genuine
issue of material fact but rather that the proper method for calculating attorney fees was the
“lodestar method,” which it cited in its affirmation of the fees following a motion hearing.1
The “lodestar method” is appropriate for the award of attorney fees based on statute. State

1 The district court stated th at it “decline[d] to follow [Holmberg’s] line of reasoning,”
commenting that doing so could result in “a pe rpetual number of jury trials.” But this
concern was considered and rejected by the supreme court. In United Prairie, the supreme
court wrote, “The availability of a constitutionally-guaranteed ri ght to trial by jury does
not and should not turn on the practical difficulties of its implementation.” 813 N.W.2d at
60.
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by Comm’r of Transp. v. Krause , 925 N.W.2d 30, 31 (Minn. 2019) (“Minnesota has
adopted and applied the ‘lodestar’ method for awarding statutory attorney fees.”). M&G’s
claim for reasonable attorney fees was based on contract. Under United Prairie, its claim
for attorney fees had to be tr eated like other contract claims . The district court therefore
misapplied the law and erred by awarding M&G attorney fees in the context of a post-
summary-judgment application for costs and disbursements.
We therefore reverse and remand to the di strict court for further proceedings with
respect to the claim for attorn ey fees, including considera tion of any properly brought
dispositive motion or a jury trial.
Affirmed in part, reversed in part, and remanded.