Legal auditors are often hired by insurance carries, law firms, corporations, government agencies, and municipalities to review legal invoices in underlying litigation and transactional matters.  No two legal auditing programs are the same.  So, before hiring a legal bill auditor, here are a few questions you should ask:

Is your legal auditing program certified by NALFA?

Do you abide by NALFA's Industry Best Practices?

Is your legal bill review process manual or computerized?

Do you do quantitative or qualitative analysis?

Do your legal bill auditors participate in professional development programs?

What is your turn around time?

Will you back the legal audit report up with expert testimony, if needed?

Do you look at the legal invoices alone or the work product as well?

Who reviews the bills (i.e. attorneys, paralegals, accountants)?

Do your legal auditors keep up with the latest attorney fee and legal billing jurisprudence?

A recent NLJ story, “Objections Mount to $1.6 Billion Toyota Settlement,” reports that potential class members in the sudden acceleration litigation against Toyota Motor Corp. have filed objections to the proposed $1.6 billion settlement.  More than a dozen fee objectors raised various problems with the deal, including a proposed $30 million cy pres award for automotive accident research; the $200 million in attorney fees sought; and the potential release of claims in companion over anti-lock braking system defects in Prius vehicles. 

The settlement, announced on December 26, has a total estimated economic value of $1.63 billion.  It includes $757 million in cash, of which $250 million would go to consumers whose vehicles lost value and $250 million to consumers whose vehicles are not eligible for installation of a brake override system, intended to correct potential sudden acceleration problems.

“These are excellent recoveries in any litigation and a truly exceptional recovery in a class action fraught with as much risk as this one,” Steve Berman, managing partner of Seattle’s Hagens Berman Sobol Shaprio, and Marc Seltzer, of Susman Godfrey in Los Angeles, co-lead counsel of the economic loss cases on the plaintiffs steering committee, wrote in the final approval motion.

Berman and Seltzer argued that the fee request represents 12.3 percent of the estimated economic value of the settlement.  The leading firms, whose attorneys billed $150 to $950 per hour, spent more than $100 million litigating the case.

The class action, they underscored, was “fraught with risk.”  The U.S. National Highway Traffic Safety Administration, for example, had identified no electronic defect in Toyota vehicles, and plaintiffs’ software experts had been unable to replicate a sudden acceleration incident.  Furthermore, had plaintiffs lost two interlocutory appeals before the Ninth Circuit, the case would have been “gutted,” they wrote.

NALFA welcomes John D. O’Connor to the Attorney Fee Practice Group.  John O’Connor is the principal of O’Connor & Associates in San Francisco, specializing in attorney fee disputes.  Mr. O’Connor and his team have more than 35 years of experience dealing with complex attorney fee disputes and have served numerous clients as both litigator and expert consultant.

As a former Federal Prosecutor, Mr. O’Connor has successfully represented high-profile clients including the FDIC, R.J. Reynolds Tobacco Company, the  California Attorney General, and Golden State Warriors Head Coach Don Nelson.  He has analyzed numerous legal audits and expert fee opinions in attorney fee disputes throughout the country, and frequently serves as an expert witness on a range of attorney fee and billing matters.

In published opinions in two recent cases, the Court specifically referred to Mr. O’Connor’s expert opinions as the basis for discrediting auditor criticisms. One opinion supported a $19.8 million fee award, employing a 2.0 multiplier, in a wage and hour case; another, a $3.1 million fee award, with a 1.5 multiplier, in a wrongful termination case.

His seventy trials and forty years of litigating complex cases enables him to draw on a vast pool of experience. Mr. O’Connor and his team offer a broad range of services including disputes over the appropriate billing rates, litigation efficiency, task assignments, and staffing, litigation success and prevailing party determination, and litigation skill.  Their work in this area has been widely lauded by clients, lawyers, courts, and arbitrators.

For more information on John O’Connor & Associates, visit http://www.joclaw.com/

A recent ABA Journal story, “With $1B Fee Unpaid, Plaintiff Lawyer Who Won $18B Enviro Case is Now Pro Se Against Chevron,” reports that plaintiffs’ lawyer Steven Donziger could earn $1 billion in attorney fees, according to his opposing counsel, if an $18 billion foreign judgment against Chevron Corp. concerning environmental damages in Ecuador is upheld.

Meanwhile, Steven Donziger of Donziger & Associates in New York can’t afford to pay his own counsel as Chevron continues its bruising counterattack in the U.S.  Chevron has retained 60 law firms to discredit Donziger on bribery and fraud charges.  Donziger’s lawyer, John Keker of Keker & Van Nest in San Francisco, is seeking to withdraw from the civil racketeering and fraud case, citing Chervon’s “scorched-earth” litigation strategy.  Dozinger is now proceeding as a pro se litigant against Chevron.

The litigation over the Amazon pollution began in New York in 1993, when dozens of rainforest aborigines sued Texaco in U.S. district court, claiming that the oil company left behind an environmental and public health crisis in a region home to 30,000 people.  The suit argued Texaco Inc. dumped chemical-laden wastewater in the Amazon basin from 1964 to 1992.  Chevron acquired Texaco in 2001.   

Chervon convinced the New York court to let the case play out in Ecuador, where the drilling occurred.  The case in Largo Agrio went through several judges amid allegations of corruption and scandal, until the final judge ordered Chevron to pay $8.6 billion and $9 billion in punitive damages. 

Environmental hero Pablo Fajardo, the lead lawyer in Ecuador, said his clients are going to focus on the $18 billion Ecuadorian judgment in other countries.  Chevron does not have significant assets in Ecuador, but does in other countries including, but not limited to, the U.S. Suits have recently been filed in Argentina, Brazil and Canada, in an effort to collect on the judgment.

The case is Maria Aguinda v. Chevron, 002-2003 Superior Court of Nueva Loja, Largo Agrio, Ecuador.  For more on this case, visit http://chevrontoxico.com/

A recent The Recorder story, “In Netflix Captioning Case, an Unexpected Fee Fight,” reports that both sides are claiming victory in a disability rights class action against Netflix Inc., resulting in a prevailing party fee dispute.  In dueling briefs in San Jose federal court, lawyers for plaintiff Donald Cullen and for Netflix argue they technically prevailed in the discrimination case and should recover attorney fees.  The dispute centers on the result of a 2012 California Supreme Court decision mandating attorney fees for prevailing parties in disability access suits brought under state law.

Cullen sued Netflix in March 2011, claiming discrimination under the ADA and California’s Disabled Persons and Unruh Civil Rights Acts and also accusing Netflix of false advertising in statements about the availability of close captioning.  Cullen, a deaf college student represented by San Diego-based Gregory Weston of the Weston Firm, is seeking fees of $262,641.  Meanwhile, Netflix says it should receive $165,000 from Cullen to pay lawyers from the Los Angeles law firm of Morrison & Foerster.  Both sides cite Jankey v. Lee to support their bid.

In June 2011 the National Association for the Deaf (NAD) filed a similar action against Netflix under the ADA in Massachusetts and obtained a consent decree requiring full captioning for all streaming video content by September 2014.  Netflix also agreed to pay the NAD’s attorney fees of $775,000.  Prior to the settlement, Cullen dropped his ADA claims and refiled under state laws.  Despite Cullen’s state claims being dismissed in July 2012, Cullen’s lawyers contend he should be the prevailing party because the suit achieved its main objective – “to caption its entire streaming video library,” Weston wrote.

Attorneys for Netflix take a different view, insisting Cullen and his lawyers should receive no credit for the settlement, which resulted from negotiations with NAD that began prior to Cullen filing.  David McDowell, a MoFo partner, wrote in a brief opposing Cullen’s fee request, “His action was not a ‘catalyst’ and does not entitle him to recover fees.”

State law provides mandatory fee shifting for certain claims under California’s Disabled Persons Act.  The provision states the prevailing party “shall be entitled to recover reasonable attorney’s fees.”  In Jankey, the California Supreme Court held the language applies to defendants just as to plaintiffs, even in cases that simultaneously pursue remedies under the ADA.  Cullen’s lawyers contend the mandatory fee-shifting provision does not apply to class action cases.

A recent Thomson Reuters story, “Funder Sues Plaintiffs’ Lawyer for $28M in LCD Class Action Fees,” reports that the law firm lender LFG National Capital filed a suit in federal district court in San Francisco against antitrust lawyer Joseph Alioto and his law firms, The Alioto Law Firm.  The breach-of-contract suit claims that under a lending agreement (pdf), Alioto owes LFG $28 million of the $49 million he has been awarded as co-lead counsel to a class of the Flat Panel MDL.  LFG asserts that it holds a lien on all of the Alioto firm’s fees and receivables via an $18.3 million credit facility extended by the lender.

LFG does not contend that the lending agreement specifically entitles it to attorney fees from the Flat Panel MDL, which hadn’t even begun at the time Alioto signed the loan deal in 2004.  Alioto reached the agreement with an LFG National affiliate called the LawFinance Group, which assigned rights to the loan to the parent company in 2005.  The funder did not extend Alioto credit in order to litigate the class action.  The loan was for Alioto’s firm, with Alioto providing personal guarantee.  According to Alioto, his loan was no different from the credit lines that smooth operations for most law firms.

“The idea was that as receivables came in, portions of the fees would be used to pay the loan,” Alioto said.  He was supposed to repay LFG based on a sliding percentage of the fee depending on the size of the settlements he obtained.  LFG’s claim to $28 million in Flat Panel MDL fees is not based on a percentage of Alioto’s fees in the class action but on how much the Alioto firm has borrowed.

NALFA has identified 16 factors in court awarded attorney fees.  Several of these fee factors draw from seminal fee jurisprudence cases Goldberger v. Integrated Resources and Johnson v. Georgia Highway Express.

1. Reasonable, Prevailing Hourly Rates 
2. Reasonableness of the Number of Hours Billed
3. Percentage of the Fund: Fees in Relation to the Economic Value of the Settlement
4. Successful Results Obtained for the Number of Client(s)
5. Risk of the Litigation: Non-Payment and Preclusion of Other Cases
6. Quality of the Work and Representation
7. Experience, Reputation, and Ability of the Attorneys
8. Novelty and Difficulty of the Legal Issues in the Underlying Case
9. Efficient Litigation Management Practices: Case Staffing and Task Assignments
10. Economic Exposure: Fees in Relation to the Amount at Stake in the Underlying Case
11. Fees in Relation to Similar Cases
12. Nature of the Working Relationship with Opposing Counsel
13. Customary Timekeeping Billing Practices
14. Billing Judgment
15. Public Policy Considerations
16. Nature and Length of the Attorney-Client Relationship

A recent Thomson Reuters story, “Plaintiffs’ Lawyers Can Seek Fees from State Lawyers in Vioxx MDL,” reports that a federal judge has ruled that lawyers for individuals who sued Merck & Co. Inc. over the painkiller Vioxx may be entitled to some of the legal fees Pennsylvania’s outside counsel received in a settlement with Merck in January.  While lawyers for individuals, known as the plaintiffs’ steering committee (PSC), often ask courts for so-called “common benefit” fees from other plaintiffs who recover money in MDLs, it is unusual for the committee to seek fees from the lawyers for the state.

Merck received approval from the FDA in 1999 to sell Vioxx to treat pain.  In 2004, Merck withdrew the drug from the market after data showed that Vioxx carried increased risk of heart attack and stroke.  Thousands of individual lawsuits and numerous class actions were filed against Merck in state and federal court alleging various product liability and tort claims. 

In addition, numerous state and local governments, including Pennsylvania, sued Merck under consumer protection statutes to recover money their citizens paid for Vioxx prescriptions.  All the suits were consolidated to the MDL proceeding in the Eastern District of Louisiana.  The states involved in the MDL agreed by contract to pay the PSC, which includes about a dozen law firms, a common-benefit fee of 6.5 percent of the recovery.  Pennsylvania was the only state not to sign the contract.

Lawyers on the PSC argued that Pennsylvania’s outside counsel had benefited from their work.  Pennsylvania’s lawyers argued that the request was actually a claim for damages against the state, and therefore was barred by the doctrine of sovereign immunity, which prevents states from being sued.  But U.S. District Judge Eldon Fallon of the Eastern District of Louisiana ruled that the claim was not covered by Pennsylvania’s immunity as a state and did not interfere with its ability to choose its own lawyers.  A factual dispute still remains over whether the PSC work actually benefited Pennsylvania’s lawyers.  Fallon referred that fee allocation dispute to a special fee master.

The MDL is In Re Vioxx Product Liability Litigation.  For more information visit http://vioxx.laed.uscourts.gov/

A recent Corporate Counsel story, “In M&A Litigation, Attorneys’ Fees Under Attack?,” reports that three court decisions last month have taken aim at plaintiffs’ attorney fees.  The rulings, two in Delaware and on in Texas, “suggest a trend toward greater judicial scrutiny of ‘disclosure-only’ merger litigation settlements and, in particular, attorneys’ fee awards in such settlements,” according to the latest Morrision & Foerster newsletter (pdf), written by Joel C. Haims and James J. Beha.  The three cases are In Re Transatlantic Holdings Inc. Shareholders Litigation, In Re PAETEC Holdings Corp. Shareholders Litigation, and Kazman v. Frontier Oil Corp.  Haims and Beha write:

“Delaware is, of course, the most popular state of incorporation and its Chancery Court is the most popular forum for merger litigation.  The decisions in In re Transatlantic and In re PAETEC Holdings show the plaintiffs’ bar that the Chancery Court will not rubber stamp fee awards in merger litigation.  Plaintiffs’ attorneys often attempt to escape such scrutiny by bringing suit in other jurisdictions, most often the state where the defendant corporation’s headquarters are located. 

But it appears that Kazman effectively precludes merger litigation in Texas, the country’s second-most populous state and home to the second-most Fortune 500 companies.  As a result, taken together, these cases should cause the plaintiffs’ bar to evaluate more carefully the basis of merger suits and the relief to shareholders that such suits are meant to secure.”

A recent Legal Intelligencer story, “Client Identities, Legal Bills Can Be Disclosed, Court Rules,” reports that the disclosure of client identities is only protected by the attorney-client privilege when other information about the scope of the representation is in the public domain and revealing the identity would essentially reveal attorney-client communications, the Pennsylvania Supreme Court has ruled.

The case stems from a Right to Know Law (RTKL) request by Associate Press reporter Marc Levy for legal bills related to the Senate’s hiring of attorneys to represent former state Senator Robert J. Mellow and other Democratic caucus employees.  The Senate had argued the name of clients and the descriptions for the services the attorneys provided them were protected by the attorney-client privilege.

In the majority opinion, written by Justice Max Baer, addressed the issue of whether descriptions of legal services are privileged.  Baer said at the outset of his opinion that general descriptions of legal services included in attorney invoices are not privileged, while specific descriptions that would reveal attorney-client communications are protected.

Later in his opinion, Baer dismissed the Senate’s argument that the Commonwealth Court had issued a bright-line rule finding legal descriptions were not protected.  Rather, Baer said, the court and special master did a line-by-line analysis of the legal invoices and redacted those descriptions it felt were privileged.  The relevant question, Baer said, was whether the descriptions would result in disclosure of information otherwise protected by attorney-client privilege.

“For example, descriptions of legal services that address the client’s motive for seeking counsel, legal advice, strategy or other confidential communications are undeniably protected under the attorney-client privilege,” Baer said.  In contrast, an entry that generically states that counsel made a telephone call for a specific amount of time to the client is not information protected by the attorney-client privilege, but, instead, is subject to disclosure under specific provision of the RTKL.”

A recent Corporate Counsel story, “How to Protect Against Outside Counsel Overbilling,” written by Steven Barentzen offers tips for corporate counsel to protect themselves against overbilling.  Here are the tips:

1)  Choose the Correct Lawyer or Law Firm:  Overbilling is not limited to large firms. However, there is little question that the realities of the economics of a large firm create added incentives for attorneys at these firms to pad their bills, pressures that do not exist at smaller firms. These include incentives for partners to maximize profits that now average over $1.4 million per partner at the largest firms; and on associates to meet minimum billing requirements, which can be as high as 2,400 hours per year.

There are some large and complex matters that require the capacity and infrastructure that can only be provided by a large firm. However, these matters are rare. Experienced and skilled attorneys practicing at medium-sized and small firms can handle the great majority of legal matters—including large and complex ones. In my experience, attorneys at smaller firms often provide superior and more attentive service, obtain better results, and do so more efficiently and at a fraction of the cost of a larger firm. This is especially true for individual clients, or small or medium-sized businesses, who are unlikely to be a priority for larger firms.

2)  Ensure that the Matter is Not Overstaffed:  The surest way to run up excessive fees is by overstaffing a matter with too many attorneys. Logic dictates that the more attorneys on a matter, the higher the bill. Staffing too many attorneys on a matter creates inefficiencies, results in a duplication of effort, and inevitably leads to numerous unnecessary and expensive internal meetings and communications.

While there may be some matters that are so large that they require numerous attorneys to properly handle, the overwhelming majority of matters can be handled by two or three attorneys with the assistance of a paralegal or secretary. Clients should demand to know exactly who is working on their matter, what it is those attorneys are doing, and why those attorneys are necessary to the representation.

3)  Limit the Use of Inexperienced Attorneys:  Young and inexperienced attorneys at large firms are often given little training and are expected to learn on the job. Even though summer associates and first- and second-year associates at the largest firms can bill upwards of $400 to $500 per hour, these attorneys are the ones most likely to work inefficiently, make the most mistakes, and provide the least value to the client. These attorneys are also likely to be performing administrative tasks that are more properly performed by a secretary or paralegal, or performing tasks that are completely unnecessary, such as carrying the bags of a more senior attorney.

While there are some basic tasks that inexperienced attorneys can be reasonably expected to competently perform, such as research, clients should greatly limit the amount of time billed by these associates and should be leery of paying firms high hourly rates to essentially train their least experienced associates.

4)  Limit the Number of Open Matters:  This is a corollary to the rule in paragraph 2 above—the more open matters, the higher the bill. For bookkeeping purposes, clients will often have a firm bill to numerous different matters. However, having too many open matters can result in excessive bills.

For example, in one case I represented a former client of a top-20 global law firm that had over 10 matters open at one point. By analyzing the time entries, we uncovered the fact that a senior partner at the firm was routinely billing the minimal billing increment of 0.25 hours—or 15 minutes—to each of those matters per day. This resulted in roughly 2.5 hours of daily billable time to the client even though we estimated that the actual amount of work that partner had performed was 30 minutes or less per day. When a client is being billed for numerous different matters, it should be sure to look at the cumulative totals being billed to it by each attorney.

5)  Scrutinize the Bill:  Reviewing and scrutinizing the firm’s invoice is the most important way that a client can protect itself. Law firms should invoice clients promptly at the end of each month. Bills should detail all of the work performed by any attorney working on that matter that particular month. In scrutinizing the bills, clients should be sure to evaluate the work performed against the time billed for reasonableness.

For example, if a client is billed for an internal legal memo prepared by the firm, the client should total up the amount of time spent preparing that memo. If the memo has not already been provided by the firm, the client should demand a copy of the memo or other work product for which it has been billed. The client should then determine whether the amount of time billed was warranted by the end result. This is true for all major tasks, such as preparing pleadings, internal or external correspondence, or document review.

There are other indicia of overbilling that clients should be aware of. (These patterns were reported by the California Bar’s Committee on Mandatory Fee Arbitration, Arbitration Advisory 03-01, “Detecting Attorney Bill Padding” [PDF], dated January 29, 2003.) Patterns in invoices that suggest padding include:

Formula billing:  Billing separately for each task even if that takes a short time, i.e. billing 0.1 each for the review of 10 emails, for a total of one hour, even though less than one minute was spent on each email.

High minimum increments:  The standard billing increment is 0.1, or six minutes. Higher minimum billing increments should not be accepted.

Time estimates:  Numerous entries such as 8.0 or 10.0 hours are likely estimates rather than actual time billed and should be investigated.

Block billing:  If one amount of time is shown for working on more than one discrete matter, this is known as “block billing” or “lumping.” This practice is generally not accepted by federal courts and warrants closer scrutiny, especially for larger blocks.

Standardized work descriptions:  Repeated use of the exact same phrases in bills, i.e. “document review” or “prepare for deposition,” suggests padding.

Lack of detail:  Lack of specificity in work descriptions, i.e., “Attention to file” or “Discovery,” suggests padding.

Mistakes:  Bills often contain mistakes. For example, if a client is billed two hours for a hearing that only lasted one hour. Clients should carefully review bills for errors.

6)  Challenge the Bill:  If any evidence of overbilling is found, clients should discuss the matter with the law firm. There are many reasons why a client may be reluctant to do so. However, any law firm should be receptive to complaints from its clients about billing, provide answers to clients’ questions, and adjust their bills accordingly when confronted with evidence of overbilling. If not, the client should look to take their business elsewhere.

Steven Barentzen is the principal of the Law Offices of Steven Barentzen in Washington, DC.  The firm focuses on complex and sophisticated commercial civil litigation including professional malpractice and overbilling matters.  For more information, visit http://www.barentzenlaw.com

Class counsel are seeking attorney fees of $720 million and $27 million in expenses in the Visa/MasterCard Merchant Antitrust MDL.  The fee request represents 10 percent of the estimated value of the cash value of the settlement.  The attorneys, representing a class of more than 7 million merchants, filed court documents seeking final approval of the accord from U.S. District Judge John Gleeson in New York.

The settlement, valued at $7.25 billion, is the largest antitrust settlement in U.S. history.  In fact, that figure is more than double the recovery in any previous private antitrust action.  According to the memorandum in support of fees (pdf), filed by Robins Kaplan Miller & Ciresi, Berger & Montague, and Robbins Geller Rudman & Dowd, the lead plaintiff firms, wrote, “The settlement will affect as great a segment of the United States economy as any previous antitrust class action.”  In addition, the injunctive relief rule changes in the case will likely translate into billions of dollars beyond the settlement.

Over 60 law firms worked on the litigation over an eight year period, investing nearly 500,000 hours in the action.  Class counsel complied, reviewed, and organized a massive discovery record, which included 65 million pages of documents, produced by the 19 defendants.  In the trial preparation phase, class counsel produced five expert reports, while defendants responded with 12 expert reports, which in turn produced six expert rebuttal reports, creating Daubert challenges from both sides.

In addition, plaintiffs’ counsel assisted in securing legislation regulating interchange fees by passing the Durbin Amendment in the Dodd-Frank Act.  As a result of this amendment, class members saved an estimated $9 billion per year in debit-card fees.  What is more, this action also prompted the DOJ and several states’ Attorneys General to investigate anti-steering rules, resulting in a consent judgment against Visa and MasterCard, limiting several of Visa and MasterCard rules, the very rule changes the underlying action sought.

“Indeed, the settlement secured by class counsel is unprecedented in the history of antitrust law,” said Terry Jesse, executive director of NALFA.  “The fact that the litigation produced beneficial legislative and executive action, relying primarily on the discovery record developed in the MDL, in the plaintiffs’ favor, may be reason alone to justify the 10 percent fee request,” Jesse concluded.

The case is In re Payment Interchange Fee and Merchant Discount Antitrust Litigation. For more information on this MDL, visit https://www.paymentcardsettlement.com

A recent The American Lawyer story, “With Record Settlement Under Fire, Lawyers in Credit Card Case Ask for $720 Million in Fees,” quoted NALFA as the expert source for statistics on the nation’s largest class action attorney fee awards.  The story centered on the $720 million attorney fee request in the $7.25 billion settlement in the MDL, In re Payment Interchange Fee and Merchant Discount Antitrust Litigation.  The story (which requires NLJ premium access) said:

Setting aside the fees generated by the $206 billion tobacco industry settlement in 1998, a $720 million fee award would be the largest ever in a class action. By way of comparison, Enron's landmark $7.2 billion deal with investors netted plaintiffs lawyers $688 million in fees. A $3 billion settlement that Visa and MasterCard reached over debit card fees in 2003--then the largest-ever antitrust class action settlement--produced a $220 million fee award. Judge Gleeson also oversaw that case. (The National Association of Legal Fee Analysis (NALFA) has a handy chart detailing top class action fee awards.)

The story went on to say:

Terry Jesse, the executive director of NALFA, told us that Friday's fee request may be a reasonable one, given the costs that came with the interchange fee litigation. "Antitrust cases are very complex and require tremendous work," he said.

NALFA is hosting The Attorney Fees Conference - 2013 at the Bar Association of San Francisco on October 25, 2013.  The conference is widely regarded as the nation’s largest and most comprehensive program on attorney fees and legal billing.  Leaders from across the legal fee analysis profession participate as sponsors, panelists, and attendees.  Panelists include:

The Honorable Richard A. Kramer is a San Francisco County Superior Court Judge in the Complex Civil Litigation Division.  Prior to joining the bench in 1996, Judge Kramer worked as a civil litigator representing the banking industry.

The Honorable William F. Downes is a former U.S. District Court Judge of Wyoming, 12 years of which he was the Chief Judge.  Judge Downes served 17 years on the bench where he presided over hundreds of jury and bench trials.  Prior to serving on the federal bench, Judge Downes was an accomplished trial lawyer in Wyoming, handling cases ranging from tort and real estate matters to medical malpractice and personal injury disputes.  Judge Downes currently serves as a full-time JAMS mediator and arbitrator where he handles complex civil disputes throughout the U.S.

The Honorable Cruz Reynoso is a former Associate Justice of the Supreme Court of California and Associate Justice for the Third District Court of Appeals of California. Justice Reynoso is currently Professor of Law Emeritus at UC Davis School of Law.  He is a nationally recognized leader in civil rights, immigration, and the administration of justice.  Justice Reynoso also serves as an expert witness on a range of attorney fee matters.

Bruce R. Meckler serves as Co-Chair of Meckler Bulger Tilson Marick & Pearson in Chicago.  In addition to his nationwide litigation practice, focused on complex commercial litigation, insurance and reinsurance disputes, white collar criminal matters and professional liability litigation, Mr. Meckler is a nationally preeminent attorney fee expert who frequently testifies on the reasonableness of legal fees in court and arbitration.  Mr. Meckler has conducted or supervised hundreds of legal bill reviews involving billions of dollars in legal fees.

Philip R. Strauss is the Director of Forensic Technology Services at KPMG LLP.  Mr. Strauss has over 20 years experience in corporate executive leadership and corporate law department management, including being General Counsel for two publicly traded Silicon Valley software companies and being in private practice for two top-tier national law firms.  Mr. Strauss also served as a two-term President of the Association of Corporate Counsel’s San Francisco Bay Area Chapter and founded the ACC’s Corporate Counsel University.

John D. O’Connor is the principal of O’Connor & Associates in San Francisco.  Mr. O’Connor has tried over 70 cases in federal and state venues throughout the country, with highly enviable success in complex, contentious disputes.  A former Federal Prosecutor, Mr. O’Connor has successfully represented high-profile clients including a former California Attorney General and Golden State Warriors Head Coach Don Nelson.  He has analyzed numerous legal audits and expert fee opinions in attorney fee disputes throughout the country, and frequently serves as an expert witness on a range of attorney fee and billing matters.

Gary A. Greenfield, a former litigator, founded Litigation Cost Management in Oakland to consult exclusively on attorney fee issues.  Mr. Greenfield acts as an expert witness on attorney fee matters and has been a court-appointed Special Fee Master and conducted numerous analyses related to legal fees in complex litigation on behalf of parties seeking and parties opposing recoveries of legal fees.

Steven A. Tasher is the CEO and Managing Director of Wyatt Partners LLC.  He is a former Deputy Attorney General of New Jersey, partner at Donovan, Leisure, Newton & Irvine and Willkie, Farr & Gallagher and Vice President and Associate General Counsel of Wyeth.  His firm specializes in litigation budgeting, legal billing practices, and effective litigation management.

Scott Wirtz is Controller at Loeb & Loeb, LLP in Los Angeles and sits on the LEDES Oversight Committee (LOC) Board of Directors.  Mr. Wirtz has over 20 years of law firm finance experience and has written articles published in Law Technology News and Metropolitan Corporate Counsel.

Ken Bacon is Counsel at Mastagni, Holstedt, Amick, Miller & Johnson in Sacramento.  Mr. Bacon is the Presiding Arbitrator at the State Bar of California’s Mandatory Fee Arbitration Program.  He has trained fee dispute arbitrators and mediators throughout the state of California and has presided over hundreds of attorney-client fee disputes.

Malcolm Sher is a full-time mediator and arbitrator specializing in high emotional, cross-cultural disputes.  Mr. Sher is a member of the State Bar of California’s Mandatory Fee Arbitration Executive Committee and Chair of the Contra Costa Bar Association’s Mandatory Fee Arbitration Committee.  He has arbitrated and mediated hundreds of fee disputes and lectured widely on the subject of fee arbitration and mediation.

William Gwire is the principal of Gwire Law Offices in San Francisco.  Mr. Gwire was identified in California Lawyer as one of only a handful of “go to” plaintiff’s legal malpractice lawyers in California.  He tried to judgment one of the largest legal fee disputes in history, the $100 million fee dispute between Dow Corning and a consortium of insurance companies arising out of breast implant litigation.  Mr. Gwire achieved a $13.7 million deduction in the attorney fee claim.

Martin Quinn is a full-time JAMS arbitrator and mediator who settles, arbitrates, and manages complex legal disputes.  Mr. Quinn served as the court-appointed Special Fee Master in the MDL, In re TFT-LCD (Flat Panel) Antitrust Litigation, issuing an expert report and recommendation on the $310 million fee allocation dispute in the MDL.

Richard M. Pearl is the author of California Attorney Fee Awards, 3d Ed., published by California's Countinuing Education of the Bar.  Mr. Pearl has litigated some of the key attorneys’ fees cases in California, including Graham v. DaimlerChrysler Corp., Flannery v. Prentice, and Maria P. v. Riles.  He also has served as an expert witness on attorneys' fees, and his opinions have been cited by numerous courts.  He also has served as an Adjunct Professor of Law at Hasting Law School.

Aashish Y. Desai is the Managing Partner of Desai Law Firm in Costa Mesa.  Mr. Desai is an experienced advocate for clients and enjoys a reputation of integrity, intelligence, and professionalism among his peers.  Mr. Deasi has recovered millions of dollars for class members on a range of mass torts and has earned record-setting attorney fee awards.

Eric H. Gibbs is a Partner at Girard Gibbs LLP in San Francisco.  Mr. Gibbs represents plaintiffs in a broad range of cases, including employment, pharmaceutical and medical device litigation, as well as consumer class actions.  Mr. Gibbs has achieved significant recoveries on behalf of class members including record-setting settlements in Providian Credit Card Cases and Mitchell v. American Fair Credit Association and Mitchell v. Bankfirst.

Francis O. Scarpulla is a Senior Partner at Zelle Hofmann in San Francisco.  Mr. Scarpulla specializes in complex federal antitrust class actions, representing plaintiffs in many federal antitrust class actions including Pharmaceutical Antitrust Litigation, Microsoft Monopolization Antitrust Litigation, and DeBeers Diamond Antitrust Litigation.  Most recently, Mr. Scarpulla achieved a record-breaking $1.082 billion settlement in the MDL In re TFT-LCD (Flat Panel) Antitrust Litigation, earning a $310 million attorney fee award.

For more information, visit http://www.thenalfa.org/CLE-Programs/

A recent New York Law Journal story, “U.S. Judge Approves $115M Settlement in AIG Class Action,” reports that a federal judge in Manhattan yesterday approved a $115 million settlement reached by former American International Group Inc. CEO Maurice “Hank” Greenberg and other former AIG executives to resolve a shareholder class action. 

Southern District Judge Deborah Batts ruled from the bench in In re American International Group Securities Litigation, that the settlement was “fair, reasonable and adequate,” overruling the sole objection by an investor, which did not appear in court.

Batts also approved awarding 13.25 percent of the settlement, or $15.24 million, as attorney fee to plaintiffs’ lawyers led by the law firms Labaton Sucharow and Hahn Loeser & Parks.

The underlying case was brought by three Ohio public employee retirement funds, alleged that AIG misled investors with sham accounting.  When the company eventually had to restate several years of finances in 2005, investors lost money.  Greenberg left shortly thereafter.

A recent NLJ story, “Split Outcome to Contract Beef Means No One Gets Attorney Fees,” reports that a federal appeals court nixed competing $2.7 million and $1.3 million in attorney fees and cost requests in a contract dispute between beverage companies that generate just more than $1 million in judgments.  In Southern Wine and Spirits v. Mountain Valley Spring Valley Co., the U.S. Court of Appeals for the Eight Circuit affirmed Western District of Arkansas Judge Jimm Larry Hendren’s March 2012 denial of attorney fees to either side.  The Eight Circuit agreed with Hendren that the case produced no “prevailing party” because each side won “sizable jury awards by prevailing on significant issues.”

The underlying case was a contract dispute between bottled water company Mountain Valley and regional distributor.  Southern won a $819,000 judgment against Mountain Valley for breach of contract and breach of an implied covenant of good faith and fair dealing, plus an extra $42,000 for Mountain Valley’s failure to pay an account.  Mountain Valley won an $183,000 judgment against Southern on its breach of an implied covenant of good faith and fair dealing counterclaim.

Southern sought $2.7 million in fees and costs for its lawyers at Texarkana’s Haltom & Doan and its of-counsel firm, Los Angeles-based Korshak, Kracoff, Kong & Sugano.  Mountain Valley’s lawyers at the Rose Law Firm in Little Rock, Ark., countered with a request for $1.3 million in fees and costs if the court awarded fees to Southern.

The Eight Circuit wrote that, “where the district court declined to find even that Southern was a prevailing party, Southern asserts no facts to support its contention that it merited an award of attorney’s fees.”  The ruling went on to conclude: “Because we affirm the denial of attorney’s fees to Southern, we need not discuss Mountain Valley’s protective claim for its own attorney’s fees.”

A recent Reuters story, “Judge Singles out Ohio Firm in Trimming Fee Award in BofA Case,” reports that the judge who gave his blessing to Bank of America’s $2.43 billion MDL settlement with investors trimmed the total legal fees awarded in the case after challenging the fee request of a small Ohio firm that never appeared before him.  Judge Kevin Castel of U.S. District Court in Manhattan last week cut the proposed $158 million in plaintiffs’ lawyers fees to $152.4 million, after rejecting a fee award sought by Flanagan Lieberman Hoffman & Swaim of Dayton, Ohio.

The three lead plaintiffs’ firms, Bernstein Litowitz Berger & Grossman and Kaplan Fox & Kilsheimer, both of New York, and Kessler Topaz Meltzer & Check of Radnor, Pennsylvania, all had supported Flanagan Lieberman’s fee request.  But Castel said the firm, which served as an additional counsel for two Ohio pension funds that were plaintiffs in the case, should seek its fees from the state of Ohio, not the class.

In the unerlying case, Bank of America had agreed to buy Merrill in an all-stock deal initially valued at $50 billion on Sept. 15, 2008, the same day that Lehman Brothers Holdings Inc. went bankrupt.  But Merill ended up losing $15.84 billion in that year's fourth quarter, even as it awarded $3.62 billion of bonuses to employees.  Bank of America ultimately obtained a federal bailout, since repaid, to absorb Merrill.  Shareholders said Merrill's mounting losses and bonus plans should have been disclosed before investors voted on the merger in December 2008.

Flanagan Lieberman had sought $3.4 million, plus a multiplier that would have made its net payment $6 million.  In a declaration filed with the court, the firm had said it regularly consulted with the pension plans, reviewed pleadings and helped with discovery requests, among other duties.  But the firm’s role in the case was news to Castel.  It never entered a notice of appearance with the court and was not mentioned in briefs, the judge said at a hearing.

Judges have broad discretion in awarding legal fees in class action cases.  But they don’t typically single out a firm in deciding not to award the amount requested, especially when there were no objections to the fee request, said Brian Fitzpatrick, a professor of law at Vanderbilt Law School who has researched class action litigation.

Though Castel did not accuse Flanagan Lieberman of wrongdoing, he suggested it was a “hanger-onner,” trying to profit off the class at the last minute.  Castel ultimately told Lieberman his firm should petition the state of Ohio for its fees.  He also ruled that the lead plaintiffs’ firms could not share any portion of their fees with any other law firm without a court order.

The $2.43 billion MDL settlement is one of the largest investor settlements stemming from the recent global financial crisis.  The case is In re Bank of America Corp Securities Derivative and Employee Retirement Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York.  For more on this case, visit http://www.boasecuritieslitigation.com/.

The National Association of Legal Fee Analysis (NALFA) has launched a new pilot project that focuses on attorney fees in MDLs.  Our objective is to work with courts to publish attorney fee award statistics in MDL cases.  “Our goal is to work with the U.S. Judicial Panel on Multidistrict Litigation (JPML) and U.S. District Courts to publish statistics on attorney fee awards in MDL cases.  These statistics would provide real-time attorney fee metrics on pending MDLs throughout the U.S.,” said Terry Jesse, executive director of NALFA.  “Compiling these MDL case statistics would provide a valuable tool for fee-requesting lawyers and fee-awarding judges,” Jesse said.

In addition, NALFA has created a new Special Fee Master Program to address attorney fee issues in complex federal litigation.  Attorney fee and legal billing issues can often arise in the MDL process.  From pretrial time keeping practices to post-settlement fee allocation disputes, our fee experts have the skills and expertise to resolve fee issues in an efficient manner and in line with FJC’s Manual for Complex Litigation, Fourth Edition § 14.231 (2004) and FJC’s Awarding Attorney Fees and Managing Fee Litigation, Second Edition § 4(D)(3) (2005).

A recent Thomson Reuters story, “Court Awards $310M in Attorneys’ Fees in LCD Case,” reports that dozens of law firms that obtained more than $1 billion in settlements in a long-running price-fixing case over display panels used in electronics have received court approval for $310 in attorneys’ fees.  U.S. District Judge Susan Illston in San Francisco awarded the fees and approved a plan to allocate the money among 116 law firms that contributed to the litigation.  The top two recipients were co-lead firms in the case: Zelle Hofmann Voelbel & Mason, which was allocated $75 million, and the Alioto Law Firm, which was allocated $49 million.

The law firms represented a nationwide class of retail purchasers who bought products containing thin-film liquid-crystal display panels used in a range of electronic products, including laptops and TVs.  Defendants that made the panels, including Samsung Electronics Co Ltd and Hitachi Ltd, agreed to settlements totaling about $1.08 billion.

Illston’s ruling was the latest development in a contentious process over fees.  Last August, she appointed a special fee master to prepare reports and issue recommendations on attorneys’ fees.  The special fee master’s findings contained in reports issued November and December, prompted several objections from law firms in line to receive fees.

Among the objectors was co-lead counsel in the case, Joseph Alioto of the Alioto Law Firm.  Alioto claimed he had come to an agreement with his co-lead counsel in the case, Francis Scarpulla of Zella Hofmann, divide the work and their fees equally between the “Alioto team” and the “Zelle Hofmann team.”

But the special fee master found that Alioto had not carried his burden of proof to show that such an agreement existed.  In her order, Illston agreed with the special fee master’s conclusion and found that even if an agreement had existed, it likely would be unenforceable.  Fee agreements among attorneys at different firms, she noted must be “in writing and signed by the clients” under federal law and California law.

The case is In re TFT-LCD (Flat Panel) Antitrust Litigation.  For more information on this case, visit https://tftlcdclassaction.com.  NALFA also reported on this case in “$300M Fee Allocation Dispute in Flat Panel MDL.”

A recent Thomson Reuters story, “Attorneys Defend $53M in Fees Sought in Dairy Antitrust Settlement,” reports that attorneys for a class of dairy farmers are seeking final court approval of a $158.6 million settlement, with about a third going to plaintiffs’ counsel.  Since the settlement, two class members wrote letters to the court in Greenville, Tenn., asking for a reduction in the attorneys’ fees.  One of the members called the fees “obscenely excessive.” 

Lawyers at Baker & Hostetler, which served as lead counsel for the class, countered that the letters offered no legal basis for the reduction in attorney fees.  They also noted that their side had invested $53 million in attorney time plus $8 million in out-of-pocket expenses, “with no guaranty of any recovery much less a return.”

The underlying case involves control of the milk market in the American Southeast.  The suit alleged that the defendants conspired to control the milk market in 14 states in the Southeast by excluding competition from independent milk farmers and cooperative.  Defendants in the case include the Dairy Farmers of America and former CEO Gary Hanman, National Dairy Holdings, LP, Dairy Marketing Services LLC and Mid-Am Capital LLC.  The total obtained from all the defendants, $303.6 million, represents the largest antitrust settlement in the Eastern District of Tennessee.

Even if the court approves the fees, there is some uncertainly about the allocation of those fees.  That is because when the case started more than six years ago, Robert Abrams of Baker & Hostetler, the lead attorney for the plaintiffs, was a partner at Howrey, the defunct law firm that filed for bankruptcy in 2011.  Allan Diamond, the Howrey trustee of Diamond McCarthy, who is seeking to recover assets for the estate, has indicted in court papers that he considers the fee recovered by Abrams in the dairy litigation as significant assets belonging to the estate.

The case is In Re Southeastern Milk Antitrust Litigation.  For more information on this case, visit http://www.southeastdairyclass.com/

A recent BLT blog post, “Judge Cuts Fees for Plaintiffs’ Lawyers in LivingSocial Settlement,” reports that, citing inefficient staffing and high hourly rates, U.S. District Judge Ellen Segal Huvelle slashed attorney fees in half for plaintiffs’ lawyers in multi-district litigation against daily deal company LivingSocial.  In her opinion (pdf) approving a settlement between consumers and LivingSocial over expired deals, Huvelle awarded $1.35 million in fees to the 12 law firms that represented the plaintiffs, instead of the $3 million they asked for as part of the settlement.

Washington-based LivingSocial was hit with a series of class actions beginning in 2011 over expired deals that consumers bought through the company’s website.  The plaintiffs claimed the vouchers’ limited expiration violated the federal Credit Card Accountability Responsibility and Disclosure Act, as well as state laws regulating gift certificates.  LivingSocial denied its vouchers were gift certificates and argued that even if they were, the expiration dates did comply with state and federal laws.

The cases from across the U.S. were consolidated as an MDL in D.C. in August 2011 and settlement talks started soon after, according to court filings.  Under the settlement, LivingSocial agreed to establish a $4.5 million fund reimburse class members whose deal expired before they were used.  The class included about 10.9 million consumers who bought deals between 2009 and late 2012.  Any remaining funds would go to the Consumer Union and National Consumers League as cy pres awards.

Plaintiffs’ lawyers asked for $3 million in fees, an amount that LivingSocial agreed not to contest.  Huvelle wrote that although the four formal fee objections to the settlement agreement were “largely meritless,” she agreed with complaints about the size of the fee request.  Huvelle criticized how the plaintiffs’ legal team staffed the case, noting that 46 lawyers, at the 12 firms involved in the case, billed time.  “At a minimum, this is a highly inefficient was of doing business,” she wrote.

Plaintiffs’ lawyers billed more than 4,000 attorney and paralegal hours, a number that Huvelle called “excessive” given that there were only three depositions taken and two briefed motions.  She said she was unwilling to accept the high hourly rates charged by some attorneys working on the case, citing the $600 rate charged by Cuneo Gilbert partner Charles La Duca as exceeding the established Laffey Matrix.

Huvelle rejected the argument that plaintiffs’ counsel should be paid based on a percentage of the estimated value of the settlement and its injunctive relief, which the plaintiffs’ lawyers pegged at $62 million.  She instead awarded 18 percent of the settlement fund, which was estimated at $7.5 million.  “A modest percentage is appropriate in this case given the limited value of the direct benefits to the class members, the small number of class members who will benefit, the proportionally large cy pres distributions…and the somewhat dubious value of the injunctive relief,” Huvelle wrote.

NALFA also reported on this case in “Lawyers in LivingSocial Class Action Seek $3M in Fees”.  For more on this case, visit http://www.livingsocialvouchersettlement.com/index

In Viveros v. Donahoe, CV, 2013 WL 1224848 (C.D. Cal. Mar. 27, 2013) plaintiff, after prevailing in a pregnancy discrimination case, sought a fee award of $440,570 under 42 U.S.C. § 2000e-5(k).  Plaintiff sought a rate of $500 per hour for its lead attorney (“Yun”) and sought compensation for a total of 1235.6 hours.

Making its own independent inquiry and relying on NALFA Attorney Fee Practice Group member Jim King’s expert opinion, the Court found that plaintiff’s time entries evidenced “a pattern of billing more hours than reasonably necessary to complete the tasks described.”  The court reduced the total number of chargeable hours by 40 percent.  Viveros v. Donahoe, 2013 WL 1224848 at *6.  The court also reduced the requested $500 hourly rate for plaintiff’s lead attorney to $350 per hour:

Because plaintiff has not adduced adequate evidence to corroborate the hourly rate requested for Yun, and because defendant’s evidence and the published data indicate that the prevailing rate in the community for similar work performed by attorney of comparable skill, experience, and reputation is lower than $500, the court will award fees to plaintiff for Yun’s services at the hourly rate of $350.  Based on the case law cited above, the evidence adduced by defendant, the published data, and the court’s own experience and knowledge of rates in the community, the court finds that this hourly rate more accurately represents prevailing market rates for comparable services.  Viveros v. Donahoe, 2013 WL 1224848 at *5.

The court awarded plaintiff $217,273 in attorneys’ fees, $3,870 in law clerk fees, and $4,250 in expert fees.  For more on Jim King, visit http://www.kinglawfirmcorporation.com/.

DLA Piper has issued a memo (pdf) is response to The New York Times story, “Suit Offers a Peek at the Practice of Inflating a Legal Bill” and in response to the suit, DLA Piper v. Victor.  In that suit, former client Adam Victor says court exhibits show DLA attorneys discussing deliberate overbilling on his bankruptcy case.  In one 2010 email, a then-DLA attorney refers to a “churn that bill, baby!” approach and says “that bill shall know no limits.” 

The law firm in a public statement said: “We hold ourselves to the highest legal and ethical standards.  The behavior as described is unacceptable to DLA Piper and our clients.  The emails were in fact an offensive and inexcusable effort at humor, but in no way reflect actual excessive billing.”

Roger Meltzer, DLA Piper United States co-chair, said in an interview that DLA attorneys were answering calls from clients yesterday and others reached out to in-house counsel on their own.  Meltzer said no clients have cut off ties as a result of the exposure of the emails and he believed the firm would not suffer a loss of revenue or client relationship.  Clients have been “enormously supportive,” and know the emails are not related to the firm’s standards, performance or billing practices, he said.

Victor’s suit was in response to a fee collection action initiated by DLA to collect $675,000 in unpaid legal fees.  In the Victor case, the firm believes it provided legal services that ought to be paid for.  He said DLA wouldn’t sue a client “if we were not confident in the appropriateness of a bill.”  The memo went on to say, “our bills and billing practices undergo the most sophisticated reviews and audits by clients who employ such techniques as a standard practice in connection with outside counsel billings.”

“There’s been a little overreaction to this story from some on the corporate side,” said Terry Jesse, executive director of NALFA.  "Some are using this story to claim overbilling is widespread at DLA and other law firms.  But it’s important to keep in mind that law firms are not monolithic.  There are internal practice groups within law firms that manage cases.  If the emails were more than inappropriate humor, it could be the case that this bankruptcy case was inefficiently managed by a practice group within DLA,” Jesse concluded.

Attorney fee experts are often hired in cases when underlying legal fees are at issue.  Attorney fee experts are retained to support or challenge the reasonableness of attorney fees at trial or in arbitration.  Fee experts can provide expert reports and opinions on the factors that related to the reasonableness of attorney fees.  Here are some tips when hiring an attorney fee expert on a fee matter:

Retain an attorney fee expert on large, complex fee matters
It is considered a litigation best practice to retain a fee expert on large, complex fee matters of one million dollars or more.

Hire a qualified attorney fee expert
Hiring an experienced, qualified fee expert will add credibility to a fee claim and their expert report and testimony will stand up under cross-examination.

Hire a fee expert early in the process
Retain a fee expert early in the process because the work required can take several weeks and even months.

The Attorney Fee Practice Area is a new, highly specialized practice area that covers a range of matters where attorney fees are at issue.

NALFA has created a new on-line Submit-A-Case form for clients who have attorney fee or legal billing issues.  Now, clients such as law firms, courts, and corporations with attorney fee or legal billing issues from across the U.S. can submit their case on-line. 

Whether clients are seeking to recover attorney fees or save on fees, parties will have the opportunity to talk with a member of NALFA's Attorney Fee Practice Group about their fee matter.

NALFA’s Attorney Fee Practice Group is the first-of-its-kind national practice group specifically devoted to attorney fee issues.  Members of NALFA’s Attorney Fee Practice Group are qualified attorney fee experts, fee dispute mediators, and legal bill auditors.  Members of NALFA's Attorney Fee Practice Group adhere to Industry Best Practices.

To submit an attorney fees or legal billing inquiry to NALFA’s Attorney Fee Practice Group, visit http://www.thenalfa.org/Practice-Areas/submit-a-case/

A recent Association of Certified E-Discovery Specialists (ACEDS) story, “Law Firm’s Big Markup of Contract Review Fees Sparks Client Attack, US Court Scrutiny,” reported on the use of fee objectors in  In  re Citigroup Securities Litigation.  In the article, NALFA was quoted as a critic of serial fee objectors:

“Our issue with fee objectors is that they usually have an axe to grind, says Terry Jesse, executive director of the National Association of Legal Fee Analysis, in Chicago.  This is not the first time Ted Frank has objected to fees, and he has a very tangential connection to the case.”

Jesse tells ACEDS that the solution is for courts to appoint special fee masters, who can assess bills independently and objectively.

A recent New York Law Journal story, “DLA Piper Emails Reveal Firm Overbilled, Former Client Says,” reports that a former DLA Piper client who is challenging the firm over attorney fees has filed with the court what he claims are internal emails by DLA attorneys (pdf) who discuss deliberate overbilling, with on attorney allegedly writing about another’s “churn that bill, baby!” approach.  Attorneys for the former client, energy executive Adam Victor, say in court papers that the emails “shock the conscience.”

“Until now, there probably has never been a written admission where members of a law firm have flatly acknowledged they have engaged in such a reprehensible and damning conduct,” Larry Hutcher and Josh Krakowsky write in DLA Piper v. Victor, in Manhattan Supreme Court.  Victor is requesting punitive damages of $22.47 million, which he says is 1 percent of DLA’s reported revenue for 2012.

The new allegations arise from a lawsuit brought against Victor in February 2012 for $678,763 in past due legal bills.  DLA was hired in April 2010 by Project Orange Associates (POA), which is owed by Victor, to handle its bankruptcy before being disqualified due to a conflict.  In court papers, Victor claimed the firm acted as his company’s “ghost counsel” after being ordered to withdraw and continue to bill him.  He alleged a “sweeping practice of over-billing.”  In the most recent filings, Victor and his attorneys argued that they now have proof of that allegation.

In one exhibit from an email dated May 20, 2010, then-DLA attorney Erich Eisenegger writes to attorneys Christopher Thomson and Jeremy Johnson, “I hear we are already 200K over our estimate—that’s Team DLA Piper!”  According to court papers, Thomson replied to Eisenegger and Johnson: “What was our estimate? But Tim [Walsh] brought Vince [Roldan] [two other DLA Piper attorneys working on POA] in to work on the objection for whatever reason, and now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode.  That bill shall know no limits.”

A federal judge has referred a dispute over millions of dollars of attorneys’ fees related to the $3.4 billion settlement of the Cobell class action lawsuit to a special magistrate for mediation.  The Cobell suit was filed in 1996 and challenged the federal government’s mismanagement of billions of dollars of funds it held in trust for more than half million American Indians.  Although the suit was settled in 2009, a bitter dispute over divvying up the almost $100 million in legal fees lingers on.

The Cobell settlement called for $99.1 million to be paid to all lawyers involved in the case.  The firm Kilpatrick, Kilpatrick Townsend & Stockton and solo practitioner Dennis Gingold have reportedly been paid $85.3 million, although it is not clear how the payment was split between the two parties.  The remaining $13.6 million is claimed for legal services rendered by the Native American Rights Fund (NARF), which seeks $8.1 million, and attorney Mark Brown, who seeks $5,500,000, according to court documents.  But Kilpatrick Townsend and Gingold argue that NARF left the case in 2006 and had a conflict of interest and that Brown abandoned the case in 2007 and therefore should not get paid.

On March 18, Judge Thomas Hogan of the U.S. District Court for the District of Columbia said the fee dispute ultimately may have to go to trial for resolution, but in order to spare the expense of a trial, he ordered the fee dispute to go before a special magistrate in hope that it will be settled in mediation.  “This is an historic case.  A lot of good was done for people who deserve it.  It’s a shame it’s somewhat degenerated into fighting over lawyers’ fees,” Hogan said.

For more information on this case, visit http://www.indiantrust.com/

NALFA Attorney Fee Practice Group member Ken Moscaret, Esq. is a nationally-recognized expert witness on legal fees and litigation management who testifies in multimillion-dollar fee disputes, and who has references among both law firms and corporate clients.  Mr. Moscaret believes that clients which prematurely fire their law firms due to unresolved frustrations with the attorney-client relationship or with the escalating legal bills in an expensive lawsuit can hurt themselves in the process.

To address that problem, Mr. Moscaret and his firm, Moscaret Consulting, have introduced a new consulting program to advise and guide clients on ways to avoid costly, damaging break-ups with their law firms.  A ruptured attorney-client relationship results in a lose-lose for both sides.

Moscaret Consulting works with all kinds of clients (e.g., public and private companies, government entities, non-profits, and individuals) who have become frustrated enough with their law firms or legal bills in an expensive lawsuit to be contemplating firing their law firm and switching counsel in mid-case.  Moscaret Consulting works to prevent that from happening.

They show clients, often for the very first time, how to defuse their frustrations by taking proactive, concrete steps each month that help avoid a break-up with their law firm, thereby salvaging the ongoing relationship.

Mr. Moscaret views this approach as a win-win for both client and law firm, who might otherwise ruin their relationship for good, lose their entire investment in one another in the process, and end up in a fee dispute – all bad outcomes.

For a one-page summary of Moscaret Consulting’s specialized services, CLICK HERE.

A recent NLJ story, “Judge Grants Final Approval of $25.5M Settlement in Shareholder Case,” reports that U.S. District Judge Dale Fischer in Los Angeles has granted final approval of a $25.5 million settlement that resolves shareholder claims against Toyota over alleged misstatements regarding its 2010 recalls because of sudden acceleration defects.  At a March 11 hearing Judge Fischer planned to approve the deal, which includes nearly $4.25 million in attorney fees and expenses.  She has not issued a final written order.

In court filings, lead plaintiff counsel Blair Nicholas, of Bernstein Litowitz Berger & Grossman in San Diego wrote that the settlement’s benefits—more than 20 percent of an estimated $124 million in potentially recoverable damages—significantly outweighed the risks.

The settlement, plus interest, was deposited into an escrow account on January 15. Nicholas estimated that his firm obtained 6 million pages of documents, took 10 depositions and expended more than 17,000 hours on the case—a total cost of more than $6.5 million in fees and $1.35 million in expenses. 

The nearly $2.9 million in requested fee constitutes 12 percent of the settlement fund, Nicholas wrote.  His firm also is asking for $1.35 million in expenses, plus interest, and $85,900 in reimbursement costs for his client.

A recent New York Law Journal story, “A.G. Blasts Fee Request From Counsel Madoff Investors,” reports that Attorney General Eric Schneiderman has blasted as unreasonable and “wildly excessive” a $42 million fee request (pdf) from plaintiffs lawyers representing investors in a settlement related to Bernard Madoff’s Ponzi scheme run as Bernard L. Madoff Investment Securities LLC.

Schneiderman’s office, the U.S. Labor Department and 13 plaintiffs firms brought separate actions on behalf of investors against Ivy Asset Management, a subsidiary of Bank of New York Mellon, accusing it of advising clients to invest with Madoff in spite of red flags about Madoff’s operations.  In November 2012 the parties reached a proposed $219 million settlement, which awaits approval by U.S. District Judge Colleen McMahon of New York.  The bulk of the settlement funds would come from Ivy Asset.

Plaintiffs lawyers then requested $40.8 million in attorney fees, about 20 percent, and $1.2 million in expenses as part of the settlement.  The attorney general shot back with a fee objection (pdf) that sharply criticized the total proposed award and number of hour, 118,000, the attorneys say they devoted to the case.  “118,000 is an astounding number to develop the same body of evidence that the Attorney General developed in 6,000 hours,” the state’s motion said, claiming the number of hours reflects “substantial non-efficiencies, waste and duplication.”

One of the firms is Lowey Dannenberg Cohen & Hart in White Plains, lead counsel and co-liaison counsel with the U.S. Labor Department.  The firm would receive $14.3 million if a 20 percent fee is awarded, Lowey partner Barbara Hart said in court papers.  In their motion for a fee award, plaintiffs counsel defended the fee request by explaining that in a beauty contest Lowey was retained as lead counsel after agreeing to a cap on fees lower than all the other qualified bidders. 

The attorneys also claimed that lead plaintiffs and other class representatives have agreed the request is fair, and supported under the factors set forth under the Second Circuit’s 2000 ruling in Goldberger v. Integrated Res., such as time and labor expended and the risks of the litigation.  “It took tremendous skill and perseverance to achieve a settlement at this level in these coordinated actions,” the attorneys said.  With few exceptions, they added, they have not been compensated for any time or expenses since the suits began.

But Schneiderman’s office said that before the mediation that resulted in the $219 million settlement, Ivy Asset offered the office $140 million to settle substantially identical claims.  Accordingly, the efforts of private counsel provided a benefit to clients of no more than $79 million, the state said in a brief signed by Roger Waldman, senior counsel in the investor protection bureau.  The fee request would consume 53 percent of the additional $79 million benefit they achieved. 

Waldman also claimed that after the attorney general’s office filed its suit, class counsel filed an amended complaint that “wholly adopted the facts and theory” of the government’s complaint.  Waldman said any fee award to private counsel must be based on a contribution of securing $79 million, not $219 million.  At 20 percent, that would calculate to less than $16 million, he wrote.

But in their fee reply (pdf), plaintiffs attorney argued that over the last year, the attorney general “came to rely heavily on private counsel” and noted that the NYAG “sat idly through the post-settlement fee mediation, offering commentary but were unprepared.”  “The NYAG’s assertion about the comparative worth of the withdrawn 2010 offer and the current Settlement, and how little value Private Counsel conferred, are grossly inaccurate.  Billions in Bankruptcy Trustee recoveries sharply reduced recoverable damages and there were major flaws in the 2010 offer,” plaintiffs lawyers said.

In a civil rights case, Padgett v. Loventhal, the U.S. Court of Appeals for the Ninth Circuit overruled a decision of a trial court, and remanded the case for further consideration.  U.S. District Court Judge James Ware reduced attorney fees from $3.2 million to $500,000 and reduced costs from $900,000 to $100,000 without detailed explanation or computation of the reasons for reducing the attorney fee claim.  The appeals panel was critical of the reduction as the district judge slashed the fees and costs without detailed description or supporting calculations for the reductions ordered.

The Ninth Circuit reversed the decision of the trial judge, noting that district courts must give reasons for declining to award costs and for reducing costs based on a partial victory.  “While it identified the correct rules, it provided no explanation for how it applied those rules in calculating the costs and attorney’s fees.  Therefore, we vacate the district court’s award of costs and fees and remand to the district court for an explanation of how it used the lodestar method Padgett’s fees and how it calculated Padgett’s reduced costs,” the Ninth Circuit wrote in its decision (pdf).

A recent Thomson Reuters Legal story, “Plaintiff can Recoup Fees after State Voluntarily Concedes,” reports that a New York appeals court held that the state’s Equal Access of Justice Act permits litigants to recoup fees even in the absence of a ruling in their favor if the state voluntarily grants the relief they sought.  The court’s 4-1 ruling is a departure from U.S. Supreme Court precedent, as well as its own.

The underlying case, Matter of Solla v. Berlin, involved a disabled woman, Luz Solla, whose public assistance benefits were reduced by $200 a month by New York City in 2010.  She challenged the cut, and the state Office of Temporary and Disability Assistance ordered the city to restore her benefits.  When the city failed to comply, Solla filed a motion seeking to enforce the order.  The city then complied and moved to dismiss the action as moot.

After Manhattan Supreme Court Justice Alexander Hunter dismissed the petition, Solla made a motion to recover attorney’s fees under the EAJA.  The act, which is intended to make it easier for poor litigants to challenge state action, permits a “prevailing party” that brought a civil action against the state to collect fees unless the state can show that its position was “substantially justified.”  Solla argued that she was entitled to fees under the “catalyst theory,” which holds that a party whose litigation prompts state action should receive fees because he or she was the “catalyst” for the state’s decision.

Hunter denied the motion, citing the appeal court’s 2001 ruling in Matter of Auguste v. Hammons, where the court found that the catalyst theory was invalid.  That ruling was based on a U.S. Supreme Court decision that same year, Buckhannon Board & Care Home v. West Virginia Department of Health and Human Resources.  In Buckhannon, the Supreme Court found only a court order could allow a prevailing party to collect fees.  That decision meant that parties who sued under the federal EAJA cannot collect fees even when the state changes its position as a result of the lawsuit, unless a court order is involved.  Since the state EAJA was modeled on the federal statute, the appeals court ruled in Auguste that the catalyst theory also could not be applied under state law.

However, the appeals court reversed its position, noting that the state EAJA was intended to be similar, not identical, to the federal statute.  Without the ability to collect fees in “catalyst” cases, wrote Justice Angela Mazzarelli, the EAJA would fail in its goal of encouraging litigants with scarce resources to challenge the state.  “If anything, preservation of the catalyst theory is critical to achieving the legislative purpose behind the State EAJA,” she wrote.

For more information on this conference, visit http://www.thenalfa.org/CLE-Programs/

A recent Legal Intelligencer story, “Second Mile Insurer Off the Hook for Sandusky’s Legal Bills,” reports that an insurer of the charity started by convicted serial child molester Jerry Sandusky does not have to cover the former Penn State assistant football coach’s legal bills, a federal judge has ruled.  U.S. District Chief Judge Yvette Kane of the Middle District of Pennsylvania ruled that Federal Insurance Co., The Second Mile’s insurer, was not obligated to cover Sandusky’s legal cost.

“Applying the facts set forth in the criminal and civil claims against defendants Sandusky to the language of the insurance policy leads to the clear conclusion that defendant Sandusky’s offenses against children – whether proven or merely alleged – were not conducted in his capacity as an employee or executive of The Second Mile,” Kane said in an 18-page opinion in Federal Insurance v. Sandusky.

According to Kane, about a month after his arrest, Sandusky filed a claim for coverage under the policy for criminal charges he was facing along with the civil claim in Doe A v. The Second Mile.  Kane said Federal Insurance provided Sandusky’s criminal defense attorney with $125,000, subject to is reservation of rights.  However, Federal followed with the underlying federal lawsuit against Sandusky, asking the court for a declaratory judgment that it was not required to provide insurance coverage to the embattled former coach for both the civil and criminal claims he was facing.

A recent ABA Journal story, “Law Firm Billing Contract Lawyers at $1K Hourly must Reveal what they were Paid, Federal Judge Says,” reports that a federal judge in Manhattan ruled in favor of discovery by a perpetual fee objector over the wages paid by a law firm to the contract attorneys it billed at $1,000 an hour in its fee request.

Last year, Citigroup Inc. agreed to pay $590 million to settle the securities class action suit, In re Citigroup Inc. Securities Litigation, brought by plaintiffs firm Kirby McInerney over the subprime/mortgage crisis.  The suit alleged that Citigroup materially misrepresented its exposure to collateralized debt obligations (CDOs), as well as the value of those CDOs.  Kirby McInerney litigated this case for over four years and engaged in extensive motion practice and discovery to achieve the result for shareholders.  The settlement, however, grinded to a halt when perpetual fee objector Ted Frank objected to the plaintiffs’ $100 million fee request.

“At NALFA, we think this sets a bad precedent and goes too far.  Now, law firm wages and salary is fair game for fee objectors to comb through as they prolong and derail the class action settlement process,” said NALFA Executive Director Terry Jesse.

NALFA also reported on this case in “Citigroup Plaintiff Lawyers Fire Back at Perpetual Fee Objectors”

A recent Legal Intelligencer story, “Justices Rule Peer Review Precludes Attorney Fee Award,” reports that the Pennsylvania Supreme Court has ruled that an insurer cannot be ordered to pay a medical provider’s attorney fees when the insurer properly employed the peer review process before denying coverage because it deemed the medical care unnecessary.  In Herd Chiropractic Clinic v. State Farm Mutual Automobile Insurance, the justices ruled 4-2 to reverse a Superior Court decision that unanimously affirmed a Dauphin County trial court’s ruling awarding $24,047 in attorney fees to plaintiff Herd Chiropractic and against State Farm.

Justice Thomas G. Saylor, writing for the majority, said Section 1797(b)(4) of the Motor Vehicle Financial Responsibility Law (MVFRL) only allows providers to appeal insurers’ coverage refusals, “the reasonableness or necessity of which the insurer has not challenged a [peer review organization].”  Section 1797(b)(6), meanwhile, only allows for courts to award attorney fee “pursuant to paragraph (b)(4),” Saylor said.  “There is, as insurer emphasizes, simply no express statutory authorization for fee shifting on provider challenges to peer-review determinations,” Saylor said.

State Farm submitted the bills to a peer review organization pursuant to Section 1797 of the MVFRL.  State Farm ultimately refused to pay for certain treatments Herd Chiropractic provided and the medical provider sued the insurer, seeking unpaid medical expenses, attorney fees and damages, according to court documents.  The trial court determined that the medical care was reasonable, granting $1,380 in unpaid medical expenses, but denied treble damages and attorney fees.  Herd Chiropractic filed a motion for reconsideration, which the trial court granted, and was awarded attorney fees of $24,047.

A recent New Jersey Star-Ledger story, “Toys R Us Antitrust Settlement Tossed Over $14 million in Attorney Fees,” reports that a federal appeals court held up a $35.5 million consumers’ class action settlement with baby products companies, citing concerns about the distribution of funds and attorneys’ fees.  The U.S. Third Circuit Court of Appeals in Philadelphia reversed a district court judge’s approval of a settlement to resolve claims that retailer Toys R Us Inc., along with baby product manufacturers, conspired to set a price floor for certain products, hurting consumers.

The three-judge panel of the appeals court found that of the $35.5 million, only $3 million was expected to make it to class plaintiffs while $14 million would go to pay attorneys’ fees and expenses.  The rest of the fund – roughly $18.5 million minus administrative expenses – would be reserved for one or more charities designated by the parties.  The appeals court found that when U.S. District Judge Anita Brody in Philadelphia approved the settlement, she was unaware that so much money would be going to charities instead of to class members.

The appeals court’s decision (pdf) focuses on a doctrine known as cy pres, which derives from a French expression meaning “as near as possible.”  Under the doctrine, parties can designate funds that are not claimed in a settlement to charities that promote the interests of class members.  In its decision, the Third Circuit panel did not adopt a bright line rule prohibiting cy pres awards in class action settlements.  But it noted they “should generally represent a small percentage of total settlement funds.”

The appeals court also ruled that courts should consider the total cy pres awards compared to recoveries for class members when determining the amount of attorneys’ fees awarded to class counsel.  The court remanded the case, In Re Baby Products Antitrust Litigation, to the district court judge to reevaluate the fairness of the settlement and the attorneys’ fees.

For more information on the case, visit http://www.babyproductsantitrustsettlement.com/

A recent The Montana Standard story, “Attorneys in Asbestos Settlement Seek $4M in Fees,” reports that attorneys for asbestos victims in a Montana mining town are seeking more than $4 million in attorney fees and expenses out of a legal settlement with chemical company W.R. Grace.  State District Judge James Wheelis has ordered a March 1 fairness hearing on the fee request, recently submitted by a group of lawyers who said they spend more than 16,000 hours of work into the case that lasted over 11 years.

Last year’s settlement followed decades of asbestos exposure from a Grace mine outside the town on Libby that so far has killed an estimated 400 people and sickened more than 2,000.  In documents submitted to the court, the plaintiffs’ attorneys described their fee request as reasonable given the time and effort they put into suits filed against Grace.  It equals about 20 percent of the $19.6 million that Grace last year agreed to put into a trust fund set up to help Libby residents cover medical expenses.

Total costs and fees requested topped $5 million, but almost $1 million of that amount would be returned for the benefit of the victims, according to documents filed by the attorneys.  The attorneys said they were entitled to up to 40 percent of their client’s share of the settlement under their retainer contracts, but opted for a lesser percentage that would come from all qualifying victims and not just the attorneys’ clients.

The medical trust fund set up with the Grace settlement funds has enough money to last about five years, said trust administrator and Missoula attorney Nancy Gibson.  The trust money is being used to cover the victims’ premiums for Medicare or comparable private insurance policies, said Gibson.  Gibson said that the fee request was not out of line given the time and effort the attorneys put into the case.  She added the attorneys have been working unpaid to persuade Medicare administrators to forgive money owed to the government by some victims.

A recent The Legal Intelligencer story, “Distribution of $144 Mil. in Avandia Legal Fees Approved by Judge,” reports that the judge presiding over the entire Avandia MDL has approved the distribution of nearly $144 million in Avandia attorney fees and costs undertaken for the common benefit of the entire litigation in the wake of attorneys setting objections to how the funds were divided.

U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania previously gave approval to the overall amount to be paid for common benefit work regarding lawsuits of people who used the diabetes drug.  When fee objections were raised to how the funds were to be distributed, Rufe appointed special fee master Bruce P. Merenstein of Schnader Harrison Segal & Lewis to mediate the dispute.

Merenstein said in a report to the court that nine firms had their allocations of the common benefit fund adjusted following the mediation.  As a result, Merenstein recommended that the potential recovery be approved for 58 firms.  At least six firms are looking at potential fees in excess of $10 million each, according to Merenstein’s recommendations.

The common benefit fund was seeded by a 7 percent assessment levied on all Avandia claims settled with the MDL or in state-court cases in which plaintiffs lawyers chose to receive the benefit of the discovery and other work product undertaken within the MDL.  During the hearing Rufe held on approving the common benefit attorney fees, The Legal reported that the individual plaintiffs steering committee members were carrying costs of $750,000 to $1 million.  The collective fee amount initially approved by Rufe makes up to 6.25 percent of the estimated aggregate value of the settlements in the litigation.

Dianne M. Nast, Vance R. Andrus, Bryan Aylstock, Thomas P. Cartmell, Stephen Corr, Paul R. Kiesel, Bill Robins III and Joseph J. Zonies were members of the PSC that developed the plan for the fee allocation of the common benefit fund.  The highest amounts will go to a dozen firms:

$22.6 million based upon a lodestar of $8.1 million and 18,232 hours of work by Reilly Pozner of Denver.

$17.2 million based upon a lodestar of $4.6 million and 8,407 hours of work by Aylstock Witkin Kreis & Overholtz of Pensacola, Fla.

$17.2 million based upon a lodestar of $5.8 million and 12,424 hours of work by Wagstaff & Cartmell.

$14.7 million based upon a lodestar of $3.5 million and 6,397 hours of work by Andrus Hood & Wagstaff of Denver.

For more information on this case visit http://www.paed.uscourts.gov/mdl1871.asp.

A recent study from NYU Law School’s The Center for Justice and Democracy (CJ&D), “Courthouse Cornerstone: Contingency Fees and Their Importance for Everyday Americans (pdf),” finds that the contingency fee system provide everyday Americans with access to justice and prevents meritless cases from clogging the courts because contingency fee lawyers front litigation expenses and are not paid unless the case is successful.

“Contingency fee attorneys are outcome-focused, not time focused,” notes CJ&D.  “Their interest is to work hard and achieve the best possible results from their clients in timely efficient manner.”  There are three main societal functions of the contingency fee system:

1. Contingency Fees Provide Everyday People With Access to the Courts;
   
   
2. Contingency Fees Screen out Meritless Cases; and
   
   
3. Contingency Fees Align Attorney-Client Interests and Promote Efficiency of Judicial Resources.

The study directly counters the tort reform lobby who seek government-imposed wage and price controls, interfering directly with the right of citizens to contract in a private contingency fee relationship and turn a free-market approach to providing legal representation into a botched system of government regulation that harms injured victims’ quest for justice.

“There are legislative efforts underway from the tort reform lobby to undermine our contingency fee system,” said Terry Jesse, Executive Director of NALFA.  “At NALFA, we are committed to strengthening our long-standing contingency fee system and oppose efforts to place statutory limits on contingency fees.  We look forward to working with other like-minded groups to ensure a strong contingency fee system,” Jesse concluded.

A recent Thomson Reuter story, “Qualcomm Awarded $12.4M in Attorneys’ Fees in Patent Case,” reports that San Diego-based Qualcomm Inc. can recover its legal fees, $12.4 million, from a company whose claims of patent infringement and stolen trade secrets were thrown out.  U.S. District Judge Anthony Battaglia of San Diego ordered Gabriel Technologies Corp, which owes a portfolio of patents, must pay nearly all attorneys’ fees that Qualcomm incurred in the case.

In the underlying case, Gabriel Technologies Corp v. Qualcomm Inc, Gabriel Technologies sued Qualcomm, the world’s leading supplier of chips for cellphones, in October 2008 over patents related to global positioning system tracking devices.  Gabriel sought $1 billion in damages.  Gabriel’s claims were entirely baseless and it could not have expected to succeed on any of them, the judge said in a written order.  “Several emails between Gabriel’s employees and former employees…suggest that plaintiffs knew they lacked the requisite evidence and opted to pursue their claims nonetheless,” Battaglia wrote.

In its fee petition, Qualcomm also asked that Gabriel’s local counsel, Wang Hartman Gibbs & Cauley, be forced to contribute to any fee award.  The court ordered Wang Hartman to pay $64,000, the amount it billed Gabriel in the case.  That amount “should deter local counsel from filing documents without performing a reasonable inquiry under the circumstances,” the judge said.

A recent story in Canada’s Global and Mail story, “From $100 Emails to $300,000 for Photocopies and Meals, How Nortel Racked up $755 Million Tab,” reports that Nortel’s bondholders, pensioners and other creditors have engaged in an expensive fight over the $9 billion left over from the piecemeal sale of the company.  So far, the defunct former telecommunications giant has been charged a total of $755 million worldwide in “professional fees,” $630 million of it in Canada and the U.S., since it went into insolvency proceedings in both countries in 2009.

According to court documents, Nortel’s main U.S. firm, Cleary Gottlieb Steen & Hamilton LLP, charged Nortel $1.25 million in legal fees and another $300,000 in expenses such as photocopying and meals in November 2012.  It also charged the company $40,000 to produce a 180-page document to submit to U.S. Bankruptcy Court in Delaware detailing all its charges and fees, declaring that it took 80 hours of staff work.

There is no question the massive, complex case requires top-flight legal talent.  Other huge bankruptcies have run up hundreds of millions of dollars in costs.  But some question the size of Nortel’s legal bill.  Diane Urquhart, a financial consultant working with a group of disabled former Nortel employees who has tallied up the professional fees, says the $755 million total is shocking.  In Canada alone, professional fees charged to Nortel amount to $244 million, but court documents here do not provide the details filed in U.S. courts.

CLICK HERE (pdf) to view part of Nortel’s legal bill

A recent NERA Economic Consulting report, “Recent Trends in Securities Class Action Litigation: 2012 Full-Year Review (pdf),” reports that settlements are up and attorneys’ fees are down in 2012 in federal court.  According to the study, plaintiffs firms that handle securities class actions last year collected attorney fees and expenses amounting to $653 million, a 4 percent increase from 2011, but reflects an overall decline from the period of 1996 to 2009.

Last year’s largest attorney fee award stemmed from a 2004 case against American International Group (AIG) that resulted in two partial settlements totaling $822.5 million.  In that case, the court awarded more than $100 million in fees to plaintiffs firm led by Labaton Sucharow and Hahn Loeser & Parks.  Some other top attorney fee awards in 2012 include:

$55M in Fees from a $200M Settlement with Motorola Inc.

$53M in Fees from a $315M Settlement with Bank of America

$35M in Fees from a $295M Settlement with Bearn Stearns

Nonetheless, NERA’s report says the median proportion of fees to settlements has been declining.  Settlements recovering $100 million to $500 million resulted in fees that were 18.2 percent of that recovery from 2010 to 2012; from 1996 to 2009, that number was 24.2 percent.  The exception was cases with settlements in which more than $1 billion was recovered; in those cases, 12.6 percent of the recovery went to fees from 2010 to 2012, compared with 8.3 percent from 1996 to 2009.

A recent AP story, “Arkansas Judge Affirms $181 Million in Legal Fees,” reports that an Arkansas judge says Johnson & Johnson must pay $181 million in attorney fees to attorneys who successfully argued that the pharmaceutical company committed Medicaid fraud in the marketing of its antipsychotic drug Risperdal.  The case was brought by Attorney General Dustin McDaniel through outside lawyers, Houston-based law firm Bailey Perrin Bailey.

Pulaski County Judge Tim Fox ruled Thursday that Arkansas taxpayers should not foot the bill in the lawsuit filed last year by the state’s attorney general.  Last year, a jury found that Johnson & Johnson, through its Janssen Pharmaceuticals subsidiary, had committed Medicaid fraud and violated the state’s deceptive trade practice act.  Assessing a $5,000 fine for each Risperdal presciption added up to a $1.2 billion verdict.  The attorney fees are a 15 percent contingency fee that Attorney General Dustin agreed to pay the law firm.

Johnson & Johnson had argued that legal fees of $2.2 million to $3.8 million would be appropriate.  A Janssen spokeswoman tells the Arkansas Democrat-Gazette that company maintains it did not violate the state’s Medicaid fraud law and that no legal fees should have been ordered.

With a federal judge set to approve $308 million in attorney fees in one of the LCD price-fixing class actions, two prominent San Francisco antitrust lawyers are in a feud over their share of the fees.  What is more, Joseph M. Alioto of Alioto Law Firm and Francis Scarpulla of Zelle Hofmann Voelbel & Mason aren’t just co-lead counsel turned rivals, they’re also cousins.  Each attorney insists he deserves more credit for achieving the massive $1.1 billion settlement.

In the underlying case, In re: TFT-LCD (Flat Panel) Antitrust Litigation, the lead plaintiffs’ attorneys, Alioto and Scarpulla, filed suit concerning alleged conspiracy to fix prices of TFT-LCD display panels and products resulting in overcharges to purchasers.  The $1.1 billion settlement is the largest collection ever in a consumer antitrust class action.

The fee allocation dispute is now before U.S. District Judge Susan Illston in San Francisco.  Court appointed special fee master Martin Quinn’s report (pdf) recommended payment of $75 million to Scarpulla’s firm and $47 million to Alioto’s firm.  Minami Tamaki, law firm of liaison counsel Jack Lee, stands to receive $20 million.  The more than 100 other plaintiffs firms were allocated amount ranging from $700 to $18 million.

Quinn determined the allocations for individual firms by looking for each firm’s lodestar – a figure representing the number of hours spent on the case multiplied by applicable rates.  Not surprisingly, Scarpulla endorses Quinn’s report.  “The special master got it right, regardless of what Joe says,” Scarpulla said.  Alioto says using each firm’s lodestar was the wrong approach.  “This is a corrupt practice in my view,” he said.  “It rewards time spent rather than results achieved.”

At a hearing last week, Illston said she would likely approve total fees of $308 million, 28.5 percent of the settlement fund.  For more information, visit https://tftlcdclassaction.com/

A recent The Record story, “After Long Fight, Bratz Case Ends in Zero Damages,” reports that the long-running IP war between Mattel Inc. and MGA Entertainment Inc. over the Bratz line of dolls has ended – for now – with zero damages.  The U.S. Court of Appeals for the Ninth Circuit laid waste to Bratz maker MGA’s $170 million trade secret award – an award procured on retrial after the appeals court wiped out Barbie marker Mattel’s $100 million copyright verdict and constructive trust.

The Ninth Circuit left untouched $137 million in attorney fees and costs award to MGA for defending against Mattel’s copyright claims.  Chief Judge Alex Kozinski wrote trial Judge David Carter had not abused his discretion in awarding them under the Copyright Act, and that it didn’t matter whether Mattel’s claims were brought in good faith.  “At one point, copyright defendant had to show that the plaintiff’s claim was frivolous or made in bad faith in order to be entitled to fees; but no longer,” Kozinski wrote.

The MGA is the largest attorney fee award in a copyright infringement case in U.S. history.

A recent BLT Blog post, “Lawyers in LivingSocial Class Action Seek $3M in Fees,” reports that lawyers behind a class action against LivingSocial are hoping to collect $3 million in attorney fees, the maximum amount that the two sides agreed to in a settlement.  The fees are on top of the $4.5 million that LivingSocial agreed to pay to settle claims that its deal voucher expiration dates and other restriction violated federal and state laws.

The fee arrangement was spelled out in an agreement that U.S. District Judge Ellen Segal Huvelle gave preliminary approval to in October.  Under the agreement, LivingSocial said it wouldn’t contest a request for attorney fees up to $3 million.  On January 18, the plaintiffs filed a motion for attorney fees, asking Huvelle to order the fee award.

Plaintiffs filed class action in early 2011 against LivingSocial, alleging violations of the federal Credit Card Accountability Responsibility and Disclosure Act and state laws.  The cases were consolidated into a single MDL in D.C. federal court.  The plaintiffs claimed that LivingSocial’s daily deals should be considered the same as gift certificates or gift cards, which can’t have an expiration date of less than five years under federal law.  They accused the company of selling deals with illegally short expiration dates with the knowledge that consumers wouldn’t use them.

In settling, LivingSocial agreed to pay $4.5 million to reimburse consumers with expired deals.  Any leftover funds would go to two nonprofits that work on consumer protection issues, the National Consumers League and the Consumer Union.  The company also agreed to split and specify the expiration dates for the promotional value of a deal -- $10 for $20 of services, for instances – and the actual paid value expired in compliance with federal law of state law (whichever was longer).

In the motion for attorney fees, plaintiffs’ lawyers said that $3 million was reasonable because of the time they put into the case and its complexity, claiming that the figure represented less than five percent of the value of the settlement: the $4.5 million case payment, the estimated $80,000 that LivingSocial spent on administrative costs, and the estimated $54 million in savings for consumers, in light of the policy changes LivingSocial made as part of the settlement.

A recent Forbes story, “Citigroup Plaintiff Lawyers Fire Back at Fee Objectors,” reports that lawyers seeking nearly $100 million in attorney fees for negotiating a $500 million settlement with Citigroup fired back at critics who accused them of unreasonably marking up the services of temporary attorneys.

Kirby McInerney defends the fee request, saying that’s what lawyers at equivalent firms make (after courts tack an extra multiple to reflect the risk of earning nothing it the contingency-fee case fails).  “Project-specific personnel were performing highly complicated, highly important work – work that, absent extensive training, almost no one else could do,” said Kirby McInerney partners Ira Press and Peter Linden in their 61-page response.

The detailed response is aimed mostly at perpetual fee objector and class action foe Ted Frank.  In the fling Kirby McInerney says it rejected 75 percent of the lawyers it considered hiring on a temporary basis and sought out graduates of prestigious schools with specialized training in the collateralized debt obligations at the core of the litigation.  The final team included two graduates of Columbia Law School, five from NYU, and four from Georgetown, as well as a Chartered Financial Analyst and two MBAs.

“Almost all fee objectors are not qualified fee experts.  Perpetual fee objectors are not qualifed fee experts because they are not hired or appointed by anyone; they appoint themselves to these cases to advance their political agenda.  The fact is that using highly-skilled, experienced temporary attorneys are a very cost effective model for law firms in large, complex cases.  The alternative, training-up young associates on these highly complex issues, would have actually been more costly for Citigroup,” said Terry Jesse, Executive Director of NALFA.

A recent Thomson Reuters News story, “Fee Dispute Over $1.5B Abbott Laboratories Settlement,” reports New York law firm Wolf Haldenstein Adler Freeman & Herz has sued Delaware plaintiffs’ firm Grant & Eisenhofer over legal fees generated by a $1.5 billion settlement between Abbott Laboratories and government authorities.  In a lawsuit filed Friday in New York Supreme Court, Wolf Haldenstein claimed that Grant Eisenhofer had failed to pay Wolf Haldenstein its fair share, or at least $150,000, of the settlement’s legal fees.

The federal whistle-blower suit concerned alleged off-label promotion by Abbott Laboratories of Depakote to treat dementia and schizophrenia, for which the prescription drug had not been approved by the U.S. Food and Drug Administration.  In May 2012, Abbott agreed to a $1.5 billion settlement with federal and state governments, the third-largest payment by a pharmaceutical company in a lawsuit.

According to Wolf Haldenstein, former partner Reuben Guttman originated the lawsuit, but left Wolf Haldenstein in July 2007 to join Grant Eisenhofer, bringing the litigation with him.  Wolf Haldenstein claimed its lawyers and support staff were responsible for 267 hours of legal work associated with drafting the lawsuit.  The work included analyzing thousands of pages of Abbott’s documents and emails obtained through a whistle-blower, researching legal issues and developing claims theories of liability, according to the suit.  Wolf Haldenstein claimed it is owed at least $150,000 out of the “millions of dollars” in legal fees Grant Eisenhofer earned in the settlement.

Most personal injury attorneys, including those who handle medical negligence cases, charge a contingency fee based on what a case is worth.  You pay nothing up front, but at the end of your case, you share a percentage or portion of what you get at trial (or in settlement) with your attorney.  For most personal injury cases, the contingency fee is around 33 percent, but it can be less in specific cases.  If you lose your contingency case, there is no fee.

In Illinois, there is a law that puts a cap on contingency fee in medical malpractice lawsuits.  This is not the case in all types of injury cases.  The law is changing, but there will still be a limit on attorney fees in this area.  Up until now, Illinois law said that attorneys in medical malpractice lawsuits could charge 33 percent of the first $150,000 of an award, 25 percent of the next $850,000, and 20 percent of anything above $1 million.  The law has included an exception allowing attorneys to petition the court for higher fees in certain situations.  Basically, a lawyer could argue that a particular case warranted a higher fee, a request that was then left up to the judge.

A new Illinois law will simplify the limit on attorney fees and eliminate the exception.  The new law says that attorneys in medical malpractice cases can charge a contingency fee up to 33 percent.  There is not a varied fee schedule as there was before.  The new law essentially raises the limit but does not include a provision allowing attorneys to petition the court for higher fees in certain situations.  So it would appear that 33 percent is the true cap in this new law.  The Illinois senate and house have approved the law, and it is expected to be signed by Gov. Quinn.

1.  $305M Southern Peru Copper Attorney Fee Award

2.  $144M Avandia MDL Attorney Fee Award

3.  $140M Mattel-MGA Bratz Doll Attorney Fee Dispute

4.  $90M Black Farmers Attorney Fee Request 

5.  $30M Bluetooth MDL Attorney Fee Calculation & Request

New Proposed Guidelines for Bankruptcy Fees in Large Cases

Judge Approves $144M in Fees in Avandia MDL

Plaintiffs’ Lawyers Seek $4.95M in Moody’s Shareholder Class Action

First Circuit Tosses $30M in Fee Award in Volkswagen Case

Ninth Circuit Rejects Attorney Fees in Kellogg Case

NALFA’s New Attorney Fee Dispute Mediation Program

Plaintiffs’ Lawyers Defend Fee Award in Southern Peru Shareholder Litigation

Mattel Challenges Largest Copyright Fee Award in U.S. History

Attorney Fee Analysis Shows Plaintiffs’ Fee Request Under-Valued in Bluetooth MDL

House GOP Targets Contingency Fees in State AGs Contracts

Toyota Motor Corp. has agreed to pay more than $1 billion to settle litigation over claims that its vehicles suddenly and unintentionally accelerated, according to court filings made public.  Toyota has recalled more than 14 million vehicles worldwide due to acceleration problems in several models and brake defects with the Prius hybrid.

The settlement, pending approval from U.S. District Judge James V. Selna, is valued between $1.2 and $1.4 billion, which includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles.  The total value of the settlement amounts to the largest settlement of this type in U.S. history in terms of dollars paid out and number of vehicles involved.

Toyota will pay no more than $200 million in attorney fees and $27 million in expenses to plaintiffs’ lawyers, pending final court approval.  The total will be paid out to 25 law firms and about 85 attorneys.

The case is In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, U.S. District Court, Central District of California (Santa Ana).

For more information, visit http://www.toyotaelsettlement.com/.

Jim King of the King Law Corporation in San Diego joined NALFA’s Attorney Fee Practice Group.  Jim King is a qualified attorney fee expert and fee dispute arbitrator and mediator.  Jim King learned the intricacies of attorney fee disputes – and how to view them from the viewpoint of the attorney and the client – through long hours of arbitrating hundreds of these disputes.  He was first appointed a fee arbitrator by the State Bar of California in the mid-1980s.  A decade later, as Co-Chair of the San Diego County Bar Association Fee Arbitration Committee, he reviewed and approved every fee award in San Diego County for over a year.

Through this work and through his own practice, Mr. King developed a deep understanding of the State Bar’s Guidelines for deciding attorney fee disputes, and his understanding of the attendant case law concerning such is second to none.  Outside of California, Mr. King has handled an eight-figure legal fee award dispute in Mississippi, and the American Arbitration Association once selected Mr. King to be Panel Chair (Chief Arbitrator) in a $50 million fee claim in Pennsylvania.

Mr. King has testified in trial, arbitrators, depositions, motions, and declarations about the reasonableness, or lack thereof, of fee requests in virtually every imaginable context.  His testimony has concerned fee disputes involving some of the most prominent attorneys and law firms in the U.S., as well as Fortune 100 companies.  The total amount of attorneys’ fees which he has considered as either an advocate, expert witness, or arbitrator exceeds $100 million.

For more information, please visit http://www.kinglawfirmcorporation.com/

A recent Thomson Reuters Legal story, “Should State AGs be Allowed to Use Contingency Fee Lawyers?” reported on the relationship between state AGs and outside counsel in public interest litigation.  The article cites “tort reform” sources (i.e. U.S. Chamber of Commerce) who think this is a huge problem and are challenging the use of contingency fee lawyers in court.  In fact, the tort reform lobby is even considering federal legislation to regulate states’ ability to hire contingency fee lawyers.

In a report, “Contingency Fee Plaintiffs’ Counsel and the Public Good? (pdf),” published by Husch Blackwell, reports that 10 states have passed legislation addressing AGs’ use of contingency fee lawyers – and six of them (Texas, Wyoming, Arkansas, Kansas, North Dakota and Alabama) have imposed limits on the use of contingency fee counsel.  And judges in the half-dozen cases in which defendants challenged state governments’ use of outside counsel have overwhelmingly rejected arguments that defendants’ due process rights violated by such arrangements.

But the tort reform lobby is challenging the use of outside contingency fee lawyers in court.  In Kentucky, tort reform advocates are challenging Democratic Kentucky Attorney General Jack Conway’s authority to hire contingency fee lawyers in Commonwealth of Kentucky ex rel. Conway v. Merck & Co., Inc.  In that case, Kentucky had entered into a contract (pdf) with Garmer & Prather to investigate and litigate any Vioxx-related claims the state might have against Merck under its consumer protection act.  Merck claimed the AG violated his duty to serve the public interest by ceding control of the case to private lawyers incentivized to maximize the recovery against Merck.  As a result, Merck claimed its due process rights were compromised.  Merck is represented by John Beisner of Skadden Arps, a noted tort reform advocate.

"The private attorney general doctrine is a fundamental principle in American jurisprudence.  We need the plaintiffs' bar to take on these important public interest cases.  This is a pure partisan effort to weaken the doctrine and serve corporate interests.  Of course state AGs should be allowed to use outside contingency fee lawyers.  In fact, with state budgets stretched thin it makes economic sense to only hire outside lawyers who work on a contingency fee basis,” said Terry Jesse, Executive Director of NALFA.  “Working on a contingency fee basis saves taxpayers millions of dollars and ensures the people are protected against corporate wrongdoers,” Jesse concluded.

NALFA also reported on these issues in “House GOP Targets Contingency Fees in State AGs Contracts” and "Mississippi Bill Limits Fees for Outside Lawyers and AG's Powers"

A recent New Jersey Law Journal story, “Venable’s Fees Slashed in FTC Suit Settled Without Liability Admission” reports that a judge who balked at $2 million Federal Trade Commission settlement that included no admission of wrongdoing by the defendant, and then approved it with unusual conditions, has ordered that some of the money go to defense counsel Venable for fees.  But U.S. District Judge Renee Bumb slashed the fee request by almost half, finding misplaced the firm’s reliance on a National Law Journal survey of billing rates to show its fees were reasonable, rather than submitting affidavits from lawyers practicing in the relevant market: southern New Jersey.

“[T]his court affords no value to that value to the survey because it (1) is unsworn and based on self-reported figures by firms; (2) provides only a broad range of attorney’s fees, without regard to the nature of the work performed or experience or skill of those performing it; and (3) contains no information as to reasonable rates for non-attorney personnel,” Bumb said in a decision handed down Monday.  She held Venable was entitled to $129,095 in fees, a bit more than half the $250,077 it sought, on top of the $150,000 in retainer fees already paid.

The case, FTC v, Circa Direct, accused Circa Direct and its principal, Andrew Davidson, of using fake online news sites to market acai berry diet products.  The sites, with addresses like onlinenews6.com, were designed to resemble legitimate news portals, featuring purportedly objective reports by fictional reporters and commentators about dramatic weight loss achieved using acai berry.

In February, the FTC asked Bumb to approve a settlement that would make an injunction permanent and impose an $11.5 million judgment, which would be suspended if the defendants provided honest information about their financial condition and turned over assets valued at more than $2 million.  The settlement said it was without admission or finding of wrongdoing or liability.  Although judges routinely approve settlements where no one admits doing anything wrong, Bumb balked.

On Sept 11, Bumb approved the Circa Direct settlement, swayed by the FTC’s argument that otherwise it would have to spend a lot of time and money trying the case.  But she conditioned approval on the FTC creating a web page by Oct. 12 that would put the allegations “before the public for evaluation and discussion.”  The settlement said a portion of the client funds Venable was then holding in escrow could be used to pay its “fees and costs reasonably incurred” for work in the case, contingent on FTC approval or court order.

The fee request included charges for Edwin Larkin, who typically bills at $800 per hour, fellow partner Thomas Cohn, $650, and associate Heather Maly, $416, all of them in New York.  Venable discounted those rates to $600 for partners and $300 for associates, but they were still too high for Bumb.  Saying she was exercising her discretion, she set rates of $400 an hour for Larkin and Cohn, $375 for a less-experienced partner, and $275 for Maly and another fourth-year associate.

She called those rates reasonable in light of other fee applications granted in the district and what the FTC conceded was reasonable in declarations it submitted opposing Venable’s fee request.  She concluded that Venable was entitled to a total of $279,095, $150,000 of which had already been paid, resulting in the $129,095 award.

A recent Penn Record story, “Judge Awards $7.5 Million in Lawyers’ Fees in Processed Egg Products Antitrust MDL,” reports that the federal judge in Philadelphia who is overseeing the Processed Egg Products Antitrust Litigation has granted a plaintiffs’ motion seeking $7.5 million in lawyers’ fees and nearly a half-million dollars in costs and expenses tied to the multi-litigation, class action litigation.  In a Nov. 9 memorandum and order, U.S. District Judge Gene E. K. Pratter, sitting in the Eastern District of Pennsylvania, awarded counsel representing the direct purchaser plaintiffs in the case $7.5 million along with accrued interest, and also awarded reimbursement of expenses in the amount of $443,944, along with accrued interest.

The plaintiffs in the litigation, director purchasers such as grocery stores, commercial food manufactures, restaurants and other food service providers, alleged a conspiracy among egg producers and trade groups to manipulate the supply of egg producers, thereby affecting the domestic prices of those goods.  The attorneys’ fees represent 30 percent of the common fund created by the settlement agreement between the direct purchaser and defendants Moark, LLC, Norco Ranch Inc. and Land O’ Lakes Inc.

Final approval of the settlement was given by the court about four months later, with the agreement providing $25 million in monetary relief to the class members, and obligating Moark to cooperate with the plaintiffs’ preparation for and prosecution of their case, the judicial memorandum states.

The judicial ruling states that the antitrust litigation has been exceedingly complex, expensive and lengthy.  The memorandum states that the court determined that lawyers with 35 different firms spent a collective 22,772.81 hours working on the litigation through Fed. 28, 2011, which was the day the court held a final fairness hearing on the Moark settlement.

“Given the complexity that necessarily accompanies consolidated antitrust litigation and the duration of the case, the Court finds that this factor favors granting the motion,” for attorneys’ fees, the judge wrote.  “The amount of time spent on this case prior to final approval of the settlement most likely reflects the complexity of Plaintiffs’ claims, not the inefficiency of their counsel.  “Presumably, the thousands of hours counsel spent working on this matter prevented those individuals from litigating other cases.” The judge continued.  “This factor thus strongly favors granting the motion for attorneys’ fees.” 

A recent BLT Blog post “Jones Day Sues Former Client Vizio for $6 Million in Fees” reports that Jones Day is suing former client Vizio Inc. in Washington federal court, claiming that the consumer electronics corporation owes the law firm more than $6 million in attorney fees.  According to a complaint filed in U.S. District Court for the District of Columbia, Jones Day did intellectual property work for Vizio from May 2008 to October 2012.  The firm alleged that Vizio, proportedly unhappy with how a patent prosecution had played out, refused to pay invoices from June through November of this year.

Jones Day is seeking $6,725,981 in fees, plus interest.  According to the suit, about $1.7 million of those fees were for work unrelated to the patent matters.  According to the complaint, Vizio hired Jones Day in May 2011 to bring complaints for patent violations against nine entities before the International Trade Commission.  After filing the ITC action, some respondents settled with Vizio, but others did not.  Two respondents filed a countersuit against Vizio; Jones Day said in the complaint that firm lawyers warned Vizio of the possibility of a countersuit.

Before Vizio’s case and the countersuit were suppose to go to trial, Jones Day said that it negotiated a settlement that would pay $4 million Renesas Electronics Corporation and Renesas Electronics America, which had pursued the countersuit.  Vizio was unhappy about having to pay Renesas and argued that Jones Day should have to cover the cost of the settlement.  Jones Day says that Vizio claimed they were never told that Renesas would be named in the original complaint, an allegation that Jones Day denied. 

“This excuse for not paying has no basis in fact.  Jones Day lawyers who worked on the ITC action and the Renesas countersuit recall clearly and specifically informing Vizio management on more than one occasion who would be named as respondents in the ITC action and why,” the firm claimed in its suit.

The U.S. Supreme Court has agreed to decide whether a party whose petition under the National Vaccine Injury Compensation Program was dismissed as untimely may recover an award of attorney fees and costs from the government.

In the underlying case, the plaintiff claimed she developed multiple sclerosis after receiving a series of Hepatitis-B vaccinations.  In 2005 she filed a claim under the Act, but the claim was dismissed because it was filed more than 36 months after the first symptoms of MS occurred in 1997.  She appealed to the Federal Circuit, which reversed the district court and ruled that her claim was not time barred because at the time her symptoms began the medical community at large did not recognize the link between vaccines and her injury.

On en banc review, the court held that the Act’s statute of limitation is not jurisdictional and that some claims brought under the Vaccine Act are subject to equitable tolling.  However it concluded that the plaintiff’s claim did not meet the equitable tolling criteria and reversed again, dismissing her petition as untimely.

The plaintiff then sought an award of attorney fees and costs, arguing that although she did not untimely prevail on the merits of her claim her appeal led to a precedential ruling that potentially opens the door for others who would have been precluded from seeking redress under the Act.

The Federal Circuit agreed, holding that “a petitioner who asserts an unsuccessful but non-frivolous limitations argument should be eligible for a determination of whether reasonable attorneys’ fees and costs incurred in proceedings related to the petition should be awarded,” and remanded the case.  The Supreme Court granted the government’s petition for certiorari and will hear the case later this term.

Sebelius v. Cloer, No. 12-236.  Certiorari granted: November 20, 2012. Ruling below: 675 F.3d 1358 (Fed. Cir. 2012).

NALFA also reported on attorney fees in vaccine cases in, “Federal Circuit Denies Laffey Matrix Rates in Vaccine Cases.”

NALFA would like to welcome Steven Tasher, Co-CEO and Managing Director of Wyatt Partners, LLC as the newest member of the Attorney Fee Practice Group.

Wyatt Partners’ primary focus is its program aimed at the evaluation and control of legal fees and costs.  In the field of Legal Fee Expert Analysis, Wyatt has the expertise and credentials to testify as an expert and provide opinions on law firm’s/law firm’s clients’ behalf in areas including, but not limited to:

Overall reasonableness of legal fees and costs;

Detailed analysis of legal fees and expenses;

Law firm billing rates;

Issues regarding law firm retention/selection processes; and

Issues involving coordinating counsel/liaison counsel.

Wyatt Partners’ expertise also encompasses a program to review and audit corporate legal fees in complex litigation – a program that has been highly successful in cost savings and cost avoidance.  Additionally, the company has developed a litigation budget and support program that has a proven track record of dramatically reducing litigation spend.  Wyatt Partners offers a comprehensive, focused, and structured program to control litigation costs and includes:

Comprehensive evaluation of the current litigation process and costs;

Creating fee agreements and guidelines which incorporate cost saving and methodologies;

Establishment of a litigation planning process and monitoring system;

Creating a dedicated Budget Group to track and trend legal spend;

Implementing a Budget Charter committed to cost savings;

Utilizing appropriate cost-effective technology solutions; and

Establishing programs to review and control the cost of third party vendors.

For more information, please visit Wyatt Partners at http://www.wyattpartners.com/

Federal courts routinely determine fee petitions for prevailing parties in various fee-shifting cases.  A recent opinion from Magistrate Judge Denise LaRue illustrates guiding principles here.  In M.T. v. Accounts Recovery Bureau Inc., LaRue issued a report and recommendations on fees in a Fair Debt Collection Practices Act (FDCPA) case.  Plaintiff was a prevailing party based on accepting defendant’s offer of judgment, and sought fees and costs pursuant to the act totaling $3,230.  Over objections challenging the claimed hourly rate of $250 and the reasonableness of some of the work, LaRue determined and recommended that the total award be $2,710.  That much is unremarkable, but the 13-page opinion provides a good current summary of this area of federal practice and some useful insights for plaintiff and defense alike.

First, the court explained the general standards, writing “The Supreme Court has recognized that the lodestar method – the product of a reasonable hourly rate and the number of hours reasonably expended on the litigation – yields a fee amount that is presumptively reasonable.  The Court may exercise flexibility to ‘adjust that figure to reflect various factors including the complexity of the legal issues involved, the degree of success obtained, the public interest advanced by litigation.’  The party seeking the fee award bears the burden of proving the reasonableness of the hours worked and the hourly rates claimed.”  LaRue also noted that the “Seventh Circuit recognizes that fee awards should include time that attorneys reasonably spend on fee disputes.”

Second, as the reasonableness of hourly rates, LaRue observed, “Generally, a reasonable hourly rate for an attorney is based on what the attorney charges and receives in the market from paying clients for the same type of work.  Plaintiff bears the burden of producing satisfactory evidence that the hourly rate is reasonable and in line with those prevailing in the community.  If plaintiff satisfies this burden, the opposing party must offer evidence setting forth ‘a good reason why a lower rate is essential.’”

Third, as to the reasonableness of the hours spent on the matter, LaRue went through each aspect of defense objections and recommended:

The time charged for preparation of the form complaint and for undefined “research” should be reduced;

The time charged for secretarial or clerical tasks should not be charged as attorney or paralegal time; and

The time spent in creating billing records after the fact to support a fee award is not compensable.

Finally, and notably for those on the defense side who confront this issue with insurers or corporate clients, LaRue determined that while filing matters in court is administrative time that was not compensable, e-filing is another matter.  She explained, “However, the Court views the filing of electronic documents differently.  Plaintiff points out that electronic filing requires court training and is not available to everyone.”

This article was written by John R. Maley of Barnes & Thornburg, LLP.

A recent Metropolitan News story, “Appeals Court Finds That ‘Legal Expense’ Connotes Attorney Fees,” reports that a contract providing that in the event of a dispute, the prevailing party would receive recompense for its “legal…expenses” is sufficiently certain as to require an award of attorney fees to the victor, the Court of Appeals for Division Two held.  Justice Judith Ashmann-Gerst wrote the opinion.

In Dickerson Associates v. ShinYoung 3670, the appellate, Donald F. Dickerson Associates, Inc, successfully sued ShinYoung 3670, LLC, for unpaid fees incurred in connection with a construction project, but Los Angeles Superior Court Judge John A. Kronstadt declined to award attorney fees.  He ruled that the fee-shifting provision in the parties’ contract would not support such an order.

Wording of Contract

The contract read: “In the event of legal of collection expenses in connection with this agreement, [defendant] agrees to pay such expenses.”  Kronstadt relied on the wording of California Civil Code 1717(a) which provides:

“(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the prevailing party on the contract, whether he or she is the party specified on the contract or not, shall be entitled to reasonable attorneys’ fees in addition to other costs.”

The jurist noted that the contract does not “specifically” provide for an award of attorney fees.

Ashmann-Gerst’s Rationale

Explaining the reversal, Ashmann-Gerst wrote: “We cannot imagine what the phrase ‘legal…expense[s]’ would include if not attorney fees.  At the hearing on plaintiff’s motion, defendant’s counsel suggested that ‘[l]egal expense’ could be limited to litigation costs, but we are not convinced.  Litigation costs are recoverable by a prevailing party as a matter of right…Thus, a contractual provision allowing solely for the recovery of costs would be unnecessary, rendering this paragraph ineffectual and superfluous…

In Evanston Ins. Co. v. MGA Entertainment Inc., the Central District of California dismissed Evanston Insurance Company’s subrogation claim against Mattel in the long-running trade secrets dispute between Mattel and Evanston’s insured, MGA Entertainment Inc., concluding that because an insurer stands in the shoes of its insured with respect to subrogation, Evanston was bound by the 14-day time limit on seeking attorney fees prescribed by Federal Rule of Civil Procedure 54(d)(2)(B).  In so holding, the court rejected Evanston’s argument that it’s insured regarding payment of attorney fees.

MGA tendered defense of the underlying litigation to Evanston in October 2007.  Following the April 21, 2011 jury verdict in the underlying litigation, the court ordered the parties to file any motions seeking attorney fees by May 5, 2011.  MGA did so, and ultimately was awarded attorney fees and costs. 

Following the February 2012 decision, in March 2012 Evanston and MGA entered into a settlement agreement to resolve Evanston’s obligations to its insured for attorney fees and costs.  Later 2012, Evanston filed a complaint against Mattel seeking attorney fees, seeking a declaration that it was entitled to fees, and seeking a declaration that Mattel should be required to pay into court or into escrow a fee award.

The court dismissed Evanston’s claim for fees in light of the plain language of Rule 54(d)(2) (B).  In particular, the rule requires a party seeking fees to file a motion for fees within fourteen (14) days of entry of judgment, in the absence of a statute or order providing otherwise.  Because Evanston stood in the shoes of its insured MGA, and MGA was required to have filed any motion for fees by May 5, 2011, Evanston was required to do the same. 

The court rejected Evanston’s argument that its cause of action for fees did not accrue until its March 2012 settlement agreement with MGA, an argument it seemed to find disingenuous.  In particular, the court noted that Evanston had deliberately refused to pay its insured until after it was twice held to owe a duty to defend.  Moreover, Evanston’s position would undermine the reasonable expectations of insureds and, as the court explained, would have the undesirable consequence of incentivizing insurers to defend their insureds until the insurer is confident that it can recover its expenses from the insured’s opponent in the underlying litigation.

A recent New York Law Journal story, “U.S. Trustee Program Narrows Proposal for Disclosure of Law Firm Bankruptcy Fees,” reports that the U.S. Trustee Program announced that its proposals extensive disclosure related to law firm fee requests would apply only to very large Chapter 11 bankruptcies.  In narrowing the scope of cases to which the proposals would apply—to those with $50 million or more in assets and $50 million or more in liabilities as opposed to cases with a combined $50 million in assets and liabilities—the agency was responding to intense criticism from firms calling “burdensome” and “ethically unacceptable” the agency’s new recommendations for attorneys’ fee applications.

The trustee program has modified proposed guidelines (pdf) for disclosure of rates in non-bankruptcy practices, and said it would continue to seek budgets and staffing plans, either by consent of the parties or court order.  Unchanged from the originally proposed guidelines, firms would still have to submit in their fee applications the number of rate increases since the inception of the case and disclose the effect of any rate increases on the total compensation a firm is seeking.

Some significant updates to the proposed rules are:

The increase in the asset and liability threshold.  The agency also said that single asset real estate cases should be excluded, an exception not specified in the original guidelines.

Elimination of the proposal that firms disclose high, average and low rates and rates billed by other practices within the firm.  That has been replaced by disclosure of group blended rates, and blended rates for non-bankruptcy matters, based on time billed or revenue collected.

Budget and staffing plans would be used only by consent of the parties or a court order and would not be mandatory.

The agency is encouraging the use of co-counsel for better staffing and fee efficiency.  “These arrangements include using less expensive co-counsel for certain routine, commoditized, or discrete matters to avoid duplication, overlap, and inefficiencies.” It said.

As lawyers often advise their clients, any litigation involves some element of risk, and “there is no such thing as a slam dunk.”  A recent California case illustrates that when attorney fees are on the line, the stakes are increased and litigants—and their counsel—need to evaluate carefully the risks before going all-in.

In Nemecek & Cole v. Horn (pdf), the California Second District Court of Appeals affirmed an attorney fees award, concluding a string of cases that started with a lot boundary line dispute between neighbors.  By the end, the attorney at the center of these cases was more than $600,000 in debt after being ordered to pay attorney fees three separate times—once by an arbitrator and twice by two different trial court judges.

Attorneys Pursuing Unpaid Fees Risk More Than Just Losing the Case

Attorney Steven Horn was initially retained to represent a couple in a lot line dispute against their neighbors.  Horn’s clients lost and failed to pay Horn’s invoice.  Horn than sued his clients for unpaid fees.  They counterclaimed for fraud.

“It’s almost universally the case that when attorney sue clients over fees, the clients think of something they didn’t like that their attorneys did, and they counterclaim,” observes Betsy P. Collins, Mobile, AL, co-chair of the ABA Section of Litigation’s Pretrial Practice and Discovery Committee.  “Then you have a malpractice claim instead of just a fee claim,” adds Collins.

“Many attorneys and law firms are reticent to enter into fee disputes because of the danger of their reputations—if not their financial well being—from counterclaims,” notes Thomas J. Donlon, Stamford, co-chair of the Section of Litigation’s Appellate Practice Committee.  “Even if the counterclaim is unsuccessful, the negative publicity that arises from allegations of fraud, malpractice, or malfeasance is more damaging than the amount recovered,” explains Donlon.

Horn retained Nemecek & Cole to represent him in litigation against his former clients.  The case resulted in Horn being awarded $42,282.56 on his fee claim and a matching award for his former clients on their fraud counterclaim.  These awards offset, resulting in a net judgment of zero dollars.  Horn’s former clients, however, sought and were ultimately awarded $380,000 in attorney fees because “they were the prevailing defendants on the complaint.” Horn settled the case for $250,000 while it was on appeal.

Know When to Fold When Attorney Fees Are in Play

Horn, undeterred by his loss to his former clients or the hefty fee award, made another litigation gamble.  This time Horn initiated arbitration against his former counsel, Nemecek, asserting that the firm’s negligence was the cause of the “disastrous results” in the litigation with his former clients.  Nemecek counterclaimed for unpaid attorney fees that Horn owed to the firm.

“Having lost that first case so substantially, to then turn around and sue his next lawyer, really indicates that he didn’t analyze his situation very closely,” concludes Donlon.  “When professionals are going to sue over fees, they better decide carefully what their risk is,” Collins warns.  “When you’re not prevailing in a variety of forums, you are usually better off finding a different battle to spend your time on,” adds Bruce A. Rubin, Portland, OR, co-chair of the Section’s Alternative Dispute Resolution Committee.

Horn and Nemeck were awarded nothing on their respective claims asserted in the arbitration.  The arbitrator, however, found that Nemeck was entitled to $289,028.95 in attorney fees and denied any offset claim by Horn, finding that “Nemeck was the prevailing party since they were granted virtually all the relief they sought on Horn’s claim.”

Know When to Run From a Fee Dispute

Horn, still determined despite his mounting loss, pressed on and filed a petition to vacate the arbitration award and to oppose Nemeck’s confirmation petition.  The arbitration award was confirmed and, for the third time, Horn was ordered to pay fees.  This time, he was required to pay his opponent’s “reasonable attorneys’ fees” in connection with the confirmation proceedings in the amount of $42,207.31.

After losing at arbitration and in the confirmation case, Horn played his last card and appealed the confirmation decision.  He argued that the trial court abused its discretion because the fee award from the confirmation proceedings “was more than double the amount actually incurred” and the fee award should have been capped at the amount actually incurred.  The appellate court disagreed, affirmed the trial court’s judgment, and permitted Nemeck to recover its costs for the appeal from Horn, which made Horn a four-time loser in litigation that all began with a lot boundary line dispute between neighbors.

While this case is exceptional, it teaches litigants fundamental lessons to keep in mind when attorney fees are on the table.  “You need to talk to your client whether you’re on the plaintiff’s side or the defense side about the risks of being exposed to an attorney fee award to the other side.  That’s a discussion that I’m not sure happens as often as it should,” says Edward A. Salanga, Phoenix, co-chair of the Section’s Expert Witness Committee.

“It’s not as simple as, well if we don’t win, my client doesn’t recover anything and maybe I don’t get paid it I’m on a contingency fee agreement.  In some cases, there is an additional ramification actually exposing your client to a fee award,” explains Salanga.  When attorney fees are in play, recognize, evaluate, and know the risks before gambling on litigation.

This article, “Attorney Gambles Chasing Fees and Loses Big” was written by M. Derek Harris of Carlton Fields and published in Litigation News.  © American Bar Association.  Reproduced with permission.  All Rights Reserved.

A recent Legal Intelligencer story, “Judge Approves Nearly $144 Mil. in Avandia MDL Attorney Fees,” reports that the federal judge presiding over the diabetes drug Avandia MDL has approved the dispersal of up to $143.75 million in attorney fees.  The fees make up to 6.25 percent of the estimated aggregate value of the settlements in the litigation.  U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania also authorized that $10.1 million be held in reserve for the payment of future administrative fees and expenses.

Over 150 lawyers from over 50 plaintiffs law firms sought approval of the dispersal of attorney fees and costs undertaken for the common benefit of the entire mass tort litigation, including cataloging more than 30 million pages of documents, taking or defending 220 depositions, working with more than 20 expert witnesses, and “becoming educated on, and adept at addressing, complex medical and scientific issues,” Rufe said.

Between October 16, 2007 and February 14, 2012, “common benefit counsel and other members of their firms spent more than 134,000 hours preparing and litigating this case for the common benefit of all claimants,” Rufe said.  “The time that common benefit counsel devoted to this case supports the reasonableness of the requested attorneys’ fees, as shown by a comparison to the hours spent in other super-mega-fund cases in which requests for attorneys’ fees have been approved.”

The judge conducted a cross-check of the lodestar of $55.3 million, which was calculated by multiplying the number of hours worked on the case by counsel’s reasonable hourly rates.  The plaintiffs counsel billed $185 an hour for paralegals and rates for attorneys starting at $225 an hour and ranging up through $285, $380, $475 and $595 an hour, according to the 23-page opinion (pdf).  Rufe said the plaintiffs counsel’s fees were reasonable in comparison to billable hourly rates in the Philadelphia market.

Rufe said the fee is reasonable when measured under any of the possible frameworks that the U.S. Court of Appeals for the Third Circuit would use to judge the fees.  Rufe looked at the common fund analysis under Gunter v. Ridgewood Energy and In re Prudential Insurance Co. of America Sales Practices Litigation, which involved weighting factors such as the skill and efficiency of the attorney involved and the complexity and duration of the litigation; the Third Circuit’s common benefit attorney fees may be awarded if substantial benefit was conferred on every claimant and the fees were proportional; the managerial powers doctrine under which the federal judiciary has the power to manage docket and fashion a way to compensate attorneys who provide “class-wide services” and which also was discussed by the Third Circuit in Diet Drugs.

One way that the plaintiffs common benefit work was of substantial benefit was that the Food and Drug Administration’s “actions did not secure the payment of damages by [Avandia drugmaker GlaxoSmithKline] to injured claimants,” Rufe said.  “Rather, payment was secured by the independent efforts of common benefit counsel, and only after a hard-fought battle with a well-represented opponent.”  It was also reported that the individual plaintiffs steering committee members were each carrying costs of $750,000 to $1 million.

NALFA also reported on this case in “Plaintiffs Seek $144M in Fees in Avandia MDL.”  For more information on the case, visit http://www.paed.uscourts.gov/mdl1871a.asp

A recent The Recorder story, “Grewal Takes Red Pen to Legal Bills in Apple-Samsung Feud,” reports that U.S. Magistrate Judge Paul Grewal ordered Samsung Electronics Co. to pay $21,554 to Apple Inc. and Apple to pay $160,069 to Samsung as sanctions for separate discovery violations in their epic patent suit, Apple v. Samsung.  To arrive at his sums, the San Jose magistrate slashed the hourly rates sought by Samsung’s lawyers at Quinn Emanuel Urquhart & Sullivan, which exceeded the rates requested by Apple’s lawyers at Morrison & Foerster.

It was clear from his 21-page-order (pdf) that Grewal, a former IP litigator, also had a sharp eye on sloppy billing practices.  “Unfortunately, despite two opportunities to submit detailed and accurate supporting invoices, the parties have left the court to parse through bare descriptions of their attorney activities,” Grewal scolded.  The magistrate appointed in 2010, specifically took issue with block billing that failed to detail how attorneys spent the hours they worked and with apparent overstaffing.

Grewal noted that one Quinn Emanuel associate, Curran Walker, billed 93.5 hours for “substantial assistance with all aspects of the preparation” of pleadings from Samsung.  “How were those hours divided among the various tasks?” Grewal wrote.  “Is it reasonable that Walker spent nearly two work weeks on a motion for sanctions when two partners, three other associates and innumerable contract attorneys were also staffed on the motion?  The court can only guess at the answers to those questions because Samsung offers only the barest description of Walker’s activities.

Grewal also scrutinized 50 hours of work billed at $1,035 an hour by London-based Quinn Emanuel partner Marc Becker.  “The court tends to find it unreasonable that a partner with almost 25 years of experience needed 50 hours to draft a 14-page motion and to review a 15-page reply, especially when five associates also billed 85.8 hours for the same motion,” Grewal wrote.  Becker’s hourly rate fee settled at $800, after Grewal deflated his firm’s rates based on an annual survey from the American Intellectual Property Law Association.  The highest hourly rate from a Quinn Emanuel associate was reduced from $620 to $470.

 Attorney fees are a multi-billion dollar practice area in the U.S.

The attorney fee practice area is a new, highly specialized practice area that covers a range of matters where attorney fees at issue.  This practice area covers 4 main areas:

Supporting or Challenging Attorney Fee Requests
Attorney Fee Dispute Litigation
Attorney Fee Dispute Mediation
Litigation Management & Legal Spend Programs

Our members and sponsors are the leaders who define, shape, and advance this practice area.

A recent New Jersey Law Journal story, “J&J Shareholders’ Suit Settles; $10M in Fees, Costs Expected,” reports that Johnson & Johnson has agreed to ramp up oversight of subsidiaries and to pay up to $10.5 million in attorney fees and costs to settle a shareholders’ fraud and misconduct suit.  The evaluative factors “strongly suggest that the proposed settlement is fair, reasonable and adequate,” U.S. District Judge Freda Wolfson said in approving the deal, In Re Johnson & Johnson Derivative Litigation on Oct.26.

In the underlying case, shareholder plaintiffs claimed the board of directors ignored red flags such as criminal investigations, civil suits, subpoenas and Food and Drug Administrative warnings over product recalls and alleged off-label drug marketing, kickback schemes and flouted manufacturing standards.  The parties reached a settlement.  Among other changes, J&J will have to centralize its compliance oversight and assign ultimate authority to its chief quality officer, rather than leave those functions to the subsidiaries.

Wolfson noted that judges have approved fee awards close to and, sometimes exceeding, $10 million in corporate governance cases.  But she made no determination on the reasonableness of the fee request, instead appointing a special master to make a recommendation.  As for the settlement, Wolfson said the factors in Girsch v. Jepson (3d Cir. 1975) – the goals of cutting down on time-consuming and expensive litigation – favor approval.

Plaintiff lawyers from six firms claimed more than 10,000 hours, and requested a total of $6.61 million in fees and $452,017 in costs.  They are Carella, Byrne, Cecchi, Olstein, Brody & Agnello, with an $841,769 request; Robbins Geller Rudman & Dowd, $659,066; Kantrowitz Goldhamer & Graifman, $511,635; Bernstein Litowitz Berger & Grossmann, $1.15 million; Morris and Morris, $2.26 million; and Abraham Fruchter & Twersky, $1.65 million.  The lawyers also asked the court to apply a multiplier of 1.5 to the lodestar, bringing the total fee request to $10 million.

A recent New York Law Journal story, “Civil Rights Firms Accused of Failing to Honor Fee Agreement,” reports that two prominent civil rights firms in New York are accused by a Washington, D.C. firm of cheating it out of a significant fee as part of a $3.75 million settlement in a wrongful death case.  Catalano & Plache claims that Neufeld Scheck & Brustin and Emery Celli Brinckerhoff & Abady submitted court documents on settlement terms without naming Catalano as a participating firm.

The Catalano firm said it was asked to represent the estate of Emil Mann in a civil rights, negligence and wrongful death claim on behalf of his estate.  The three firms signed a joint retainer letter, along with Mann’s son, who was the executor of his estate, according to the complaint. A retainer letter (pdf) attached to the complaint, dated May 23, 2006, provides that the client agrees “that any attorneys’ fees will be divided among the Firms,” which it named as Cochran Neufeld, Emery Celli and Catalano & Plache.

Specifically, the retainer agreement, on Emery Celli’s letterhead, provides that Catalano & Plache would receive 16.65 percent of the 33.3 percent attorney fees on the first $500,000 recovered; 15 percent of the 30 percent of the fees on the next $500,000; 12.5 percent on the 25 percent of fees on the next $500,000; and 10 percent of the 20 percent of fees recovered in the next $500,000.

In the wrongful death case, the parties agreed to about $2.37 million for compensatory damages; $1.19 million for legal fees; and $185,359 for attorney disbursements, for a total settlement of $3.75 million, according to court documents.  But the Catalano firm alleges the New York firms claimed it was not entitled to a share of fees.  Neufeld Scheck and Emery Celli filed documents in support of the settlement in Orange County, NY, Surrogate’s Court, and the New Jersey court “that failed to name Catalano & Plache LLC as counsel to the estate,” Catalano argues.

In June 2012, the U.S. District Court for the Northern District of Illinois entered partial judgment in favor of an insured against its insurer for unpaid defense expenses in Philadelphia Indemnity Ins. Co. v. Chicago Title Ins. Co.  Among the defenses raised by the insurer in response to the insured’s motion for judgment was the unreasonableness of the defense expenses, and that the insured’s defense attorney had not complied with the insurer’s billing guidelines.

The court rejected the insurer’s argument regarding billing guidelines, observing that the insurer “provides no support for its indication that later-provided conditions can govern the amount to which an insured is entitled when those guidelines were not part of the original insurance contract” and, therefore, “any noncompliance with the billing guidelines does not render the fees legally unreasonable and does not otherwise affect the amount that [the insurer] owes.”

In ruling that the defense expenses were not unreasonable, the Philadelphia Indemnity court followed the reasoning of the court in Taco Bell Corp. v. Continental Cas. Co., and held that close review of the invoices was unnecessary because at the time the insurer incurred the defense expenses, it was “vigorously” denying that they had a duty to defend, thereby “providing a significant market incentive [for the insured] to minimize defense costs.”

In what the Philadelphia Indemnity court described as a “similar situation,” the Taco Bell court had held that when an insured incurs defense costs at a time when the insurer is contesting its duty to defend, the “resulting uncertainty about reimbursement” provides the insured with “an incentive to minimize its legal expense (for it might not be able to shift them); and where there are market incentives to economize, there is not occasion for painstaking judicial review.”  The Philadelphia Indemnity court also awarded prejudgment interest on unpaid defense invoices.

A recent Connecticut Law Tribune story, “Firms Grow Bolder About Suing Clients for Unpaid Legal Fees,” reports that suing clients for unpaid legal fees could become routine as firms are growing more assertive about collecting overdue bills.  “There was a time when a lot of firms would feel it was unseemly to bring an action against a client” regardless of the amount owed, said Martin Wasser, a partner at Phillips Nizer.  “Firms are more aggressive in following up with bills than they’ve ever been,” said Wasser, whose firm is among the many that have filed suit to collect fees from former clients this year.

The New York Law Journal reviewed law firm collection suits against former clients filed in the past two months in Manhattan Supreme Court.  Each week, between three and seven such suits were filed during the period.  Several attorneys said lawsuits are a last resort and that whether to sue a client is decided on a case-by-case basis depending on factors such as amount owed, the length of the relationship, risk of counter malpractice suit, and whether the client can afford to pay.

Not all fee disputes wind up in court.  The number of cases closed in arbitration and mediation programs overseen by the state court’s Attorney-Client Fee Dispute Resolution Program increased to 1,179 last year from 579 in 2004.  The figures don’t capture disputes going to private ADR providers.  Generally, attorneys can’t file suit against clients who have chosen to use the ADR program.  The amount in dispute must be between $1,000 and $50,000, although it could be more if the attorney and client consent to arbitration.

Howard Koh of Meister Seelig & Fein which has sued clients for fees in the last year, said that before initiating litigation, the firm considers the client’s ability to pay, what the firm considers to be the value of its work and the client’s expectations of cost.  “If we honestly and genuinely believe we had” not served the client well, “we would not bring suit,” Koh said.  “When we bring a lawsuit we have made a decision that despite what the client may say after the fact, no malpractice occurred.” 

Koh drafts and oversees collections suits at his firm in addition to his commercial litigation practice.  “It’s not the most glamorous but it’s the straw I drew,” Koh said.  Time spent on these cases, he recognized, is “time that could be spent billing existing clients and generating revenue that way.”

A recent Los Angeles Times story, “JP Morgan Sets Aside an Additional $684 Million for Lawsuits,” reports that JP Morgan Chase & Co., bracing for higher legal costs, set aside an additional $684 million in the third quarter for litigation expenses.  Jamie Dimon, the bank’s chairman and chief executive declined to specify what led the bank to up its litigation reserves.  “Obviously we’re in a litigious society,” Dimon said in a conference call with reporters Friday morning.  “We’ve got a lot of mortgage suits coming, and others.”  “We expect some litigation expenses going forward but hopefully it’ll come down over time,” he added.

The disclosure of the pre-tax expense, reported as the bank posted a 34% jump in third-quarter profits Friday, comes a week after New York Attorney General Eric Schneiderman hit JP Morgan with a lawsuit.  The suit, brought as the first major action by a federal task force aimed at mortgage fraud and its role in the financial crisis relates to mortgage bonds sold by Bear Sterns, the investment bank JP Morgan purchased when it ran into trouble during the financial crisis.

Szaferman Lakind Blumstein Blader & Lehman v. Parise in Superior Court of New Jersey, Appellate Division, is summarized as follows:

Facts: Defendants retained Plaintiff attorneys in an underlying residential construction matter.  Upon the submission of summary judgment motions in the underlying matter, defendants instructed their attorney to cease all legal work.  The attorneys advised of the need to prepare for upcoming court events and trial.

Prior to trial, however, the underlying litigation was dismissed upon entry of a mutual release, which included the parties’ agreement to satisfy their respective counsel fees and costs.  Despite this agreement, defendants paid only half of the outstanding legal fees and costs.  In response to Plaintiff’s efforts to collect the remainder of their fees, Defendants filed an action for malpractice.  Specifically, Defendants disputed the reasonableness of certain time entries, cited to alleged billing irregularities, and asserted that the fees charged were excessive for the work performed.

The lower court dismissed the malpractice claim for failure to obtain an expert report.  Defendants appealed.

Issue: Is the reasonableness of attorney’s fees an issue of “common knowledge” or is an expert opinion necessary?

Ruling: An expert opinion is necessary:

Expert testimony is required of professional malpractice where the matter to be address is so esoteric that the average juror could not form a valid judgment as to whether the conduct of the professional was reasonable.  This is because the duties a lawyer owes to his client are not known by the average juror.

The court concluded that Defendants’ alleged dissatisfaction with the amount of legal fees charged, supported only by their personal experience in paying other attorneys was not a sufficient factual basis for their malpractice claim.  The court also rejected Defendants’ argument that the jury ought to disallow all contested charges, unless Plaintiff provides sufficient justification.

Lesson: An expert opinion is necessary to successfully dispute the reasonableness of attorney’s fees.

Hat Tip to: http://www.legalmalpracticelawreview.com

A recent Thomson Reuters story, “Plaintiffs’ Firms Plan for $150M in Fees in BofA Case,” reports that plaintiffs’ law firms at the center of the $2.43 billion class action settlement with Bank of America Corp are expected to apply for $150 million in attorney fees, a spokesman for the Ohio attorney general said Friday.  The sum, while hefty, only amounts to 6 percent of the settlement, a relatively modest contingency fee rate for what is the largest recovery in a securities class action arising out of the financial crisis.

The firms have yet to file a formal fee request, which like the settlement, would be subject to approval by U.S. District Judge Kevin Castel in Manhattan.  The law firms include Bernstein Litowitz Berger & Grossman, Kessler Topaz Meltzer & Check, and Kaplan Fox & Kilsheimer.  The firms are expected to split the fees.

The litigation itself centered on allegations that Bank of America made false statements and omitted facts related to its 2008 acquisition of Merrill Lynch, subsequent losses it suffered and plan to award $5.8 billion in bonuses.  Bank of America’s stock subsequently fell when facts about the merger emerged, the action claimed.  Bank of America denied the allegations.

Attorney fee experts said the expected fee, while large was within the range of past massive class action settlements, if not smaller percentage-wise.  The fee, if approved, works out to 6 percent of the settlement fund.  The percentage is lower than the median in securities class action settlement of more than $500 million, or 11.1 percent, according to Renzo Comolli, a senior consultant with NERA Economic Consulting.

The case is In re Bank of America Corp Securities, Derivative, and Employee Retirement Income Securities Act (ERISA) Litigation.

A recent The New York Times story, “Adding Up the Government’s Legal Bills for Fannie and Freddie,” reports that the legal bills from former executives at Fannie Mae and Freddie Mac continue to pile up for the government.  A decision last week by Judge Richard J. Leon of the U.S. District Court for the District of Columbia to dismiss a shareholder lawsuit against former Fannie Mae CEO Franklin D. Raines may provide a bit of relief from the legal bills.  But more recent cases will require the government to pay to defend executive accused of misleading investors about subprime mortgages on the companies’ books that all likelihood will take years to resolve.

Like most public companies, Frannie Mae had a broad indemnification policy requiring it to advance the legal fees for executives accused of misconduct based on their work for it.  When the government took over the company in September 2008, it affirmed that position and has continued to pay for the lawyers.

A report (pdf) issued in February by the inspector general of the Federal Housing Finance Administration, which oversees Fannie Mae and Freddie Mac, estimated that the legal fees paid on behalf of Mr. Raines and other executives totaled $97 million to that point, of which the government had paid approximately $37 million.  Judge Leon has not yet decided whether to dismiss the case against the two other Frannie Mae executives.  In addition, plaintiffs can appeal his decision on Mr. Raines, so the legal bills can certainly continue to add up.

A recent WSJ Law Blog post, “Ex-Goldman Programmer Seeks Legal Fees from Investment Bank,” reports that a one-time Goldman Sachs computer programmer, Sergey Aleynikov, sued his former employer for attorney fees and expenses.  Aleynikov was charged in August with two felony counts by the Manhattan district attorney’s office related to his taking of the proprietary codes.  His conviction was later overturned by a federal appeals court in February.

The suit, filed in New Jersey federal court against Goldman, seeks $2.38 million in attorneys’ fees and expenses for his prior criminal case and the advancement of legal fees for his current case.  In the lawsuit, Kevin Marino, Mr. Aleynikov’s lawyer, said his client is entitled to have legal fees paid by Goldman because he was an officer of the company at the time of the alleged incident.

“Aleynikov exhausted his financial resources prior to his trial on the federal charges and owes a substantial sum of legal fees and expenses he incurred in his successful defense of those charges in the Southern District of New York and the Second Circuit Court of Appeals,” Mr. Mario said in complaint.  “Thus, unless the court orders Goldman Sachs to honor its legal obligation to advance his legal fees and expenses to defend the State Charges, Aleynikov’s ability to defend those charges will be irreparably harmed.”

A recent BLT blog post, “Lawyers in Black Farmers Case Renew Request for $90M in Fees,” reports that the attorneys who secured a $1.25 billion settlement for black farmers in a high-profile discrimination case in Washington renewed their fee request for $90.8 million in legal fees, the highest amount allowed under the deal.  The lead class counsel filed an updated fee request (pdf) in Washington’s federal court, arguing that the amount constitutes “fair and appropriate compensation for the enormous amount of work class counsel have performed” and for the results achieved in the deal.

The settlement, which Congress approved and the president signed, provides money to tens of thousands of black farmers who missed out on an earlier deal with the U.S. Department of Agriculture over claims of discrimination in loan processing.  “The complexity of the settlement agreement that was reached demonstrates the skill level required by counsel to establish terms that would ensure that the claims of class members are resolved fairly, efficiently and with integrity,” the plaintiffs’ lawyers wrote in their fee petition.

The Justice Department has said in court papers in the litigation that the government opposes an award of $90.8 million in fees.  In the updated fee petition, the plaintiffs’ lawyers said they conducted 380 group meetings in 66 cities during the claim process.  The petition said class counsel have reported more than 80,000 attorney hours in litigation and in the implementation of the claims process.

U.S. District Judge Paul Friedman last year approved the settlement, kicking off the claims process.  The settlement set the fee award between 4.1 percent and 7.4 percent.  The law firms and solo practitioners in the case have a separate fee allocation agreement (pdf) to divide up any fee award.  The lead class counsel firm, Crowell & Moring is in the group that would keep and divide 75 percent up of any fee award.

For more information, visit https://www.blackfarmercase.com//

There's been a lot of hand-wringing by the WSJ and Thomson Reuters News over big attorney fee awards in recent shareholder class actions.  See “Foretelling the End of Money-for-Nothing Class Actions,” and “Dealpolitik: Delaware Supreme Court Should Revisit $304M Legal Fee.”  These news stories cherry-pick a handful of class actions from across the country that have resulted in large fee awards for winning plaintiffs’ lawyers.  To the untrained eye, these multi-million dollar fee awards seem jaw-dropping, but if you drill down in each particular case, the criticism is unwarranted.

Criticism over these big fee awards fluctuates between the work and the results of winning plaintiffs’ counsel.  When winning plaintiffs’ lawyers obtain favorable non-monetary judgments, they criticize the results, not the work.  When winning plaintiffs’ lawyers obtain big monetary judgments, they criticize the work, not the results.  The reality is, these relatively "big" fee awards are determined by a whole range of factors, which include, among other things, the work AND the results.

Criticism of Moody's $4.5 million fee award focused on the lack of monetary judgment and all-but-ignored the over 28,000 hours of work by plaintiffs' counsel.  Not all class actions are about obtaining cash judgments.  You can’t always calculate the economic dollar value of public benefits that extent well beyond class members.  In these types of class actions, plaintiffs’ counsel act as private attorneys general for important public interest matters.  Winning plaintiffs' lawyers in these cases shouldn't be penalized by not being fairly compensated.  In fact, there's empirical research that class counsel don't make enough money in these cases.  See: "Do Class Action Lawyers Make Too Little?"

Criticism of Southern Copper's $305 million fee award focused on the  plaintiffs' counsel work of $35,000 per hour and all-but-ignored the $2 billion judgment obtained for class members.  When winning plaintiffs’ counsel obtains large settlements in class actions, they ought not be penalized for working efficiently.  When class actions drag on year after year, it is often the result of a high-priced, work-churning defense.  Just because large settlements can happen quickly, doesn’t mean winning plaintiffs’ counsel should be penalized by not being fully compensated.

“Whether big or small, attorney fee awards are determined by a range of factors,” said Terry Jesse, Executive Director of NALFA.  "Work and results are but just two factors we've considered here.  But judges and qualified attorney fee experts look at the other range of factors and they are in the best position to judge these fee awards because they do the in-depth forensic analysis that’s required in underlying cases,” Jesse said.

A recent Reuters story, “Delaware Supreme Court Won’t Revisit Record $305 Million Attorneys’ Fee,” reports that the Delaware Supreme Court declined to consider a challenge to the $305 million fee award, believed to be the biggest ever fee award by the Delaware’s Court Chancery.  It is also one of the largest attorney fees awarded in securities class actions nationwide.  The fee award was awarded in December for plaintiffs’ attorneys who brought a shareholder lawsuit on behalf of Southern Cooper Corp.

The court’s chief judge, Leo Strine, calculated the fee as 15 percent of the $2 billion judgment to be paid to Southern Cooper.  Strine said at the time that the fee was meant as an incentive for lawyers to achieve good outcomes for their clients.  The judgment and fee award were affirmed by the Delaware Supreme Court in August.  Strine ruled that defendant Grupo Mexico could satisfy the judgment by returning to Southern Cooper an equivalent value of the Southern Cooper shares it held, but that the fee award had to be paid out of the judgment in cash.

The defendants asked the Delaware Supreme Court to change its ruling on the fee because the high court did not consider the limited impact of the judgment on minority shareholders.  The defendants argued the minority shareholders will get just $386 million of actual benefits.  On that basis, they argued the fee award was not 15 percent, but 79 percent.  An appeal to the U.S. Supreme Court is possible, but unlikely.  The judgment is increasing by $212,000 a day due to interest costs, according to court records.

The judgment is due immediately, said plaintiffs’ attorney Ronald Brown of Pickett Jones.  He said after 20 days of the judgment is not paid, it can be satisfied by cancelling shares of Southern Cooper stock held by Grupo Mexico.  Brown said a bond for the attorneys’ fee had been posted by Grupo Mexico.  If the company did not pay the plaintiffs’ attorneys next week the bond would be used to cover the payment.

A recent The Legal Intelligencer story, “Avandia Plaintiff Counsel Seek Approval of Nearly $144 Mil. in Fees,” reports that as the federal Avandia MDL draws to a close after 65,000 claims have been winnowed down to between 500 to 600 cases, over 150 lawyers from over 50 plaintiffs law firms are seeking court approval of the dispersal of up to $143.75 million in attorney fees as well as costs undertaken for the common benefit of the entire mass tort litigation.  The attorney fee request is estimated to be 6.25 percent of the settlements reached in the litigation.  The five-year-old litigation is over the diabetes drug Avandia, made by drugmaker GlaxoSmithKline (GSK).

Joseph J. Zonies, a Denver plaintiffs attorney with Reilly Pozner who was part of the Plaintiffs Steering Committee (PSC), testified that the work undertaken in the Avandia litigation meets the requirements under Gunter v. Ridgewood Energy of a fee that is appropriate to the risk of the undertaking, to the quality of the lawyers involved, to the quality of the work involved, and to the benefit conferred upon the mass tort claimants.  Another Gunter factor is the risk of nonpayment, Zonies said.

The individual PSC members were each “carrying costs” of $750,000 to $1 million, Zonies said.  The plaintiffs also formed a virtual law firm in order to handle the litigation.  Over 30 million documents were produced by GSK, which were all online and accessed by lawyers around the country through a secure portal, Zonies said.  Close to 147,000 hours were submitted for common benefit work, and over 134,000 work hours were approved by the forensic account retained by the plaintiffs counsel.

As an example of the in-depth work required in the litigation, Zonies described the PSC visiting defense counsel Pepper Hamilton’s law office to go through 400 dusty boxes of GSK documents related to its initial new drug application for Avandia to the federal Food and Drug Administration.  Trips were taken to take depositions at GSK’s London offices, Zonies said, and multiple experts in the fields of biostatistics, cardiology, epidemiology, endocrinology, federal regulations and marketing were worked with around the country and even aboard.

A recent New York Law Journal story, “Judge Slashes Kramer Levin’s ‘Breathtaking’ Request for Fees,” reports that a federal judge has rejected a “breathtaking” $3.1 million fee request submitted by Kramer Levin Naftalis & Frankel, awarding the firm only a fraction of the money sough for winning a fight over a down payment on a luxury apartment co-operative.  Southern District Judge William Pauley said he conducted a “mind-numbing review” of Kramer Levin’s billing records in Campbell v. Mark Hotel Sponsor (pdf), but declined “to recapitulate that review” in his opinion to “avoid undue embarrassment to a fine law firm like Kramer Levin” in his opinion.

Kramer Levin represented defendant Mark Hotel Sponsor LLP in the effort of Roberta Campbell to recover a $4.68 million down payment she made on an $18.75 million co-op apartment at the Mark Hotel on East 77^th Street between Madison and Fifth avenues.  Pauley conducted a bench trial and, on Aug 20, issued an opinion finding that the parties’ contract entitled Mark Hotel Sponsor to keep the down payment and recover its reasonable legal fees and expenses.

“Astonishingly, Kramer Levin attorneys, paralegals, and staff amassed 5,536.4 billable hours on this matter, employing four partners, three special counsel, ten associates, eight paralegals and a summer associate,” he said, with partners billing range of $680 per hour to $1025 per hour, associates from $440 per hour to $745 per hour, paralegals from $250 per hour to $295 per hour, and “last but not least,” a summer associate for $335 per hour.  On Sept. 13, Pauley allowed only a total award of $475,000 in legal fees and expenses.

In the plaintiff’s memorandum in opposition of the fee request (pdf), while the matter involved a dispute over millions of dollars, Amos Alter called the case a “simple contact action.”

In a recent Thomson Reuters story, “Lawyers Under Fire for Boosting Fees on Bankrupt Companies,” reports that in June, members of the U.S. Trustee Program (USTP) met to discuss proposed guidelines that would increase government oversight of Chapter 11 filings.  The USTP is an arm of the Department of Justice that oversees how companies spend money during a court-supervised liquidation or restructuring.  The proposed guidelines (pdf) would require law firms working on bankruptcy cases to disclose their billing rates and fee applications, stop rounding up billable hours and work within budgets.

The government claims the new disclosure rules are necessary because bankruptcy lawyers’ ever-rising fees, which frequently top $1,000 per hour, unfairly target companies when they are financially fragile.  The government also says bankruptcy lawyer’s fees are rising disproportionately to other lawyers’ fees.

The new disclosure rules will require law firms to notify their clients of rate increases, calculate how much clients’ bill will rise and supply the Trustee’s office with statements from clients saying they agreed to the higher fees.  With any luck, the changes will curb rising legal costs among floundering companies that are routinely paying fees of hundreds of millions of dollars in large bankruptcy cases.  For example, the liquidation of Lehman Brothers Holdings, which is the largest Chapter 11 case in U.S. history, has netted $1.6 billion in fees, so far.

More than 100 law firms, including Foley & Lardner and Weil Gotshal, are against the Trustee’s office’s new rules, saying they are too burdensome and could increase costs even more.

A recent NLJ story, “First Circuit Finds Appeal of Fees Timely, Deepening Circuit Split,” reports that the U.S. Court of Appeals for the First Circuit has deepened the circuit split on the deadline for filing civil appeals involving attorney fees.  On September 12, in a case involving a collective bargaining dispute at a landscape supply company, a unanimous panel ruled that an appeal was timely.  The ruling resolved an issue of first impression in the circuit.

The First Circuit revived the union’s appeal, which was filed on August 15, 2001, less than 30 days after the court’s ruling on attorney fees due the plaintiffs for prevailing on a collective bargaining contract.  The defendants claimed the appeal was invalid because it was filed more than 30 days after the District of Massachusetts ruled on the underlying claim, on June 17, 2011. 

The appeals court found that the attorney fees were an element of the plaintiffs’ contractual damages, so the judgment was not final until the court issued the fee award on July 25, 2011.  Senior Judge Bruce Selya wrote the opinion in Central Pension Fund of the International Union of Operating Engineers and Participating Employers v. Ray Haluch Gravel Inc. (pdf)

Ray Haluch Gravel argued that a 1988 Supreme Court case, Budinich v. Becton Dickinson & Co., meant that International Union’s appeal was untimely.  The plaintiff in Budinich sought attorney fees under a state fee-shifting statute after prevailing on an employment claim.  The court rejected the appeal of fees because it was filed more than 30 days after the judgment in the case.

“We do not believe that Budinich should be read mechanically to apply to all claims for attorneys’ fees, whatever their genesis,” Selya wrote.  “This acknowledgement unmistakably signals that, although the Budinich Court determined that attorneys’ fees generally should be considered a collateral matter, they may sometimes be considered as part of the merits,” Selya wrote. 

Selya observed that International Union brought suit at least partly to enforce the collective bargaining agreement, which provided for attorney fees as part of damages for contract breach.  “Viewed through this prism, the attorneys’ fees must be considered an element of the plaintiffs’ contractual damages.”

In a recent Courthouse New Services story, “Nice Try, But Attorneys’ Fees are for Counsel Only,” reports that a man who held Chicago police liable for excessive force cannot keep 60 percent of the amount meant for his attorneys, the seventh circuit ruled.  In a February 2006 complaint against Chicago and several officers, Morad Elusta claimed that police used excessive force while searching his home and falsely arresting him.  The city offered to settle Elusta’s claim for $100,000, but Elusta refused the offer because he was unwilling to award his attorneys, David Cerda and John DeLeon, a 40 percent share.

Eventually, Elusta hired new counsel – Zane Smith and Shelia Genson – who took the case to trial before a jury that awarded him $40,000.  The court later awarded Smith and Genson $83,000 in fees and ruled that Elusta owed his former lawyers, Cerda and DeLeon, $15,000 for their services.  Elusta then moved to have Chicago pay Cerda and DeLeon, but give him 60 percent of the amount.  He also said Smith and Genson should turn over 60 percent of their fee award to him.

A federal judge denied Elusta’s motion, and the seventh circuit affirmed last week, poking fun at Elusta’s interpretation of his agreement with his second set of lawyers.  “Elusta argues that the phrase ‘the attorney’s fees’ does not clearly cover all of the attorney’s fees,” Judge Diane Wood wrote for a three-member panel.

“We agree with the district court that this argument ‘defies logic,” Wood wrote.  “The court awarded $15,000 to Cerda and DeLeon precisely because it concluded that it would be unjust for Elusta to keep that money after he had received the benefits of Cerda and DeLeon’s services.  Elusta is thus, by definition, not entitled to keep any of it.”

Today, NALFA Executive Director, Terry Jesse met with U.S. Trustee, Patrick S. Layng of the DOJ’s U.S. Trustee Program in Chicago.  Mr. Layng is the U.S. Trustee who oversees Region 11 which includes U.S. Bankruptcy Courts in the Northern District of Illinois, the Western District of Wisconsin, and the Southern District of Wisconsin.

The U.S. Trustee Program (USTP) is a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. § 586 and 11 U.S.C. § 101, et seq.  Part of the responsibilities of the USTP is to ensure attorney fees paid in underlying bankruptcy cases are reasonable.  The USTP seeks to improve efficiency when reviewing attorney fees for reasonableness.  When the USTP reviews attorney fees, they are looking for block billing, overstaffing, and other litigation inefficiencies, that can quickly add up.

“It was great to visit with the U.S. Trustee, meet with the staff, and get a better understanding of the work they do,” said Jesse.  “We talked about our mutual interests in reviewing attorney fees for reasonableness and ways to improve that process.  I look forward to working with them in the future,” Jesse concluded.

A recent New York Law Journal story, “Fee Request Found ‘Grossly Inflated’ Denied in Entirety,” reports that four law firms that submitted a “grossly inflated” $2.7 million fee request after winning $12,500 for their client should go away empty-handed, a federal judge ruled.  Eastern District Judge Joanna Seybert, sitting in Central Islip, NY, condemned the fee application submitted by real estate investor Robert Toussie’s attorneys, including $2.65 million for Chadbourne & Parke, as “outrageously excessive” and done in “bad faith.”

“Counsel have so grossly inflated their fee application to a figure more than 200 times Toussie’s recovery—by ignoring prior directive of [Magistrate Judge Arlene] Lindsay, seeking fees related to claims on which Plaintiffs obviously did not prevail, misrepresenting the total number of hours billed, and providing extraordinary vague descriptions of billable hours in block time entries such that the Court cannot even begin to determine how many hours were actually spent on Toussie’s successful claims—in the hopes that the Court would award a small fraction of that.

In their request for legal fees, Toussie’s attorneys submitted more than 400 pages of billing records.  They maintained the case was “extremely complex in all aspects,” and further complicated by the case’s “vast record.” They argued Toussie had won more than nominal damages and his constitutional rights had been vindicated.

But Suffolk County claimed Toussie’s attorneys were not entitled to fees because the jury award was “de minimus” and the request was “so unreasonable and grossly excessive.”  At most, the county said, Toussie’s attorneys should get $25,000, representing twice the amount of the jury award.  The judge observed the sought-after hourly rates ranged from $375 to $905, but those “greatly exceed” the rates now being awarded in the Eastern and Southern districts.  She also faulted the attorneys for not breaking out travel time and asking 100 percent compensation though Lindsay previously ordered that travel time was compensable at 50 percent.

A recent NLJ story, “Texas Lawyer Wins Hard-Fought Fees in Bitter Disability Case,” reports that a Louisiana appeals court has awarded $2 million in fees and costs to a Houston lawyer who has spent more than a decade in a bitter battle against Louisiana’s attorney general over the lack of handicapped-accessible restrooms at a public university.  The Louisiana Third Circuit Court of Appeal on September 5 entered the fee award for Seth Hopkins in a case he brought on behalf of Collette Covington, a student at McNeese State University.  Hopkins helped Covington obtain summary judgment in her 2001 federal civil rights case against the Lake Charles, La., college after she was unable to use the restrooms at the student union.

Covington, who suffers from epilepsy and uses a wheelchair, urinated on herself while unsuccessfully trying to enter the restroom in January 2001 as an undergraduate.  In its September 5 decision, the appeals panel issued scathing criticism against the Louisiana attorney general’s office and outside counsel who defended Covington’s American with Disabilities Act claim.  They had appealed an earlier award of fees to Hopkins, a solo practitioner.  The trial court granted Hopkins and four other attorneys representing Covington a rate of $240 per hour.  The appeals court rejected the challenge and raised the rate to $265 per hour.

“This has been an emotional case,” Hopkins said.  “Our intention has always been to make the campus and community better.”  The fee award included $265 per hour for 5,490 billable hours, at an interest rate of 9.5 percent beginning on Feb. 24, 2011.  The court also awarded Hopkins about $89,700 in appeals fees.  It assessed $57,250 in appeals costs against the university.

A recent NLJ story, “Ninth Circuit Rewrites Rejection of Kellogg’s Settlement, but Result is the Same,” reports that a federal appeals court that struck down a consumer class action settlement based in part on “impermissibly high” attorney fees has withdrawn its opinion, issuing a revised version that nevertheless denied the fee request.

The settlement, reached last year, resolved claims that Kellogg Co. misled a nationwide class of consumers into believing that children who ate its Frosted Mini-Wheats cereal for breakfast improved their attentiveness by 20 percent.  The settlement, valued by the parties at $10.64 million, included a $2.75 million fund to provide class members with $5 to $15 off future cereal purchases.  It provided at least another $5.5 million in donations under the cy pres doctrine, which allows donations to charities of money unclaimed from legal settlements.

In both opinions, the Ninth Circuit questioned the $5.5 million figure given for the cy pres, since it was unclear how the food donation was being valued.  Senior Judge Stephen Trott wrote: “Not only does the settlement fail to identify the cy pres recipients of the unclaimed money and food, but it is unacceptably vague and possibly misleading in other areas as well.”  In the revised opinion, he added: “This deficiency raises in turn serious issues about the alleged dollar value of the product cy pres award, an important number used to measure the appropriateness of attorneys’ fees.”  Subtracting the $5.5 million in food donations from the total settlement, the court conclude that the $2 million fee award would represent 38.9 percent of the settlement fund.

In its original opinion, the Ninth Circuit called such an award “extremely generous” given the number of hours and amount of money spent by plaintiffs’ counsel – going as far as calculating a billing rate of $2,100 per hour.  In his petition for rehearing, Timothy Blood of Blood, Hurst & O’Reardon in San Diego, the lead plaintiffs’ attorney, disputed the $2,100 figure, which he said was an average that excluded additional billings for work spent seeking final approval of the settlement, the appeal and hours spent handling the claims process.

He also argued the Ninth Circuit did not have to analyze law firm billings to determine whether the attorney fee request was reasonable, particularly when basing it on a settlement amount different from the one that was approved.  “Attorneys’ fees in a class action suit cannot be evaluated in a vacuum, but he panel nonetheless did so,” wrote Blood.  “Having vacated and remanded the panel should have left it to the parties to litigate or renegotiate a settlement, including attorneys’ fee provisions.”

NALFA also reported on this case in, “Ninth Circuit Rejects Attorney Fees in Kellogg Case”

A recent Thomson Reuters story, “J&J Faces Settlement Objection From Ted Frank,” reports that Ted Frank, a professional fee objector and tort reform lobbyist, who frequently seeks to knock down attorney fees in class action settlements, has now inserted himself into the middle of a shareholder derivative lawsuit.  Frank is asking a federal court in New Jersey to dismiss an entire action brought against Johnson & Johnson board members and executives, arguing that the settlement, in which the plaintiffs’ attorneys could receive $10 million, provides no benefit for shareholders and should have never been filed.

In July of this year, Johnson & Johnson, represented by attorneys at Sidley Austin, and members of its board and other company leaders, represented by Patterson Belknap Webb & Tyler, agreed to settle multiple derivative actions filed in 2010 and 2011.  The plaintiffs alleged that the individual defendants breached their fiduciary duties and caused the company regulatory and legal problems relating to drug marketing and medical product and device quality control. 

The proposed settlement agreement, submitted to U.S. District Judge Freda Wolfson in Trenton, New Jersey, requires the defendant to adopt certain governance reforms, to spend the funds necessary to carry out the reforms, and to maintain the provisions of the agreement for five years from the effective date.  The settlement agreement states that the company has agreed to pay plaintiffs’ attorney, led by Carella, Byrne, Checchi, Olstein, Brody & Angello and Bernstein Litowitz Berger & Grossman, “not more than $10 million for their fees and $450,000 for their expenses, subject to court approval.”

“Not all professional fee objectors are actual qualified attorney fee experts, because they don’t do the expert work required for each case,” said Terry Jesse, Executive Director of NALFA.  “The work of a fee expert requires in-depth analysis that considers a range of factors that determine reasonable attorney fees.  Our fee experts are independent experts that rely on underlying billing statements and work product.  Most class action fee objectors don’t put in the time to do the in-depth analysis required in cases, instead they only file general, boilerplate fee objections,” Jesse concluded.

A recent ABA Journal story, “Ex-Client Sues Firm re ‘Massive Overbilling,’ Partner Says ‘Meritless’ Suit a Bill Dispute Tactic,” reports that a former client has sued a New York-based law firm in federal court for malpractice, accusing Wilk Auslander of “massive overbilling for needless work” while defending several securities.  In the suit (pdf), which was filed in the Central District of California, ex-client Westport Capital Inc. and two individual plaintiffs also accuse the law firm of revealing confidential information related to the representation and harming the defense of the cases by attaching unredacted copies of law firm billing statements to a New York state court suit filed last month.

The Westport Capital plaintiffs say they were not told by Wilk Auslander of the automatic discovery stay that applies to securities class actions.  Instead, they contend, the law firm “pursued at full throttle overblown discovery,” racking up substantial costs even as its clients sought to keep a lid on costs and have the firm perform only reasonably necessary work.

However, name partner Jay Auslander told the ABA Journal in a telephone interview that the law firm and its attorneys had done nothing wrong, had informed its client of the stay and had looked into the facts of a complex securities matter in order to understand the litigation, the appropriate defenses that could be pursued and its settlement value, if any.  “We sued them, and this is surely a tactical response to that litigation,” he said, adding that the $200,000 amount at issue in the New York state court legal bill dispute is very reasonable for this type of representation.

A recent WSJ Law Blog story “Check, Please: Experts Say Apple, Samsung Face Sky-High Legal Fees,” reports that the attorney fees in the largest patent verdict in history should top tens of millions or even hundreds of millions for each side in the Apple-Samsung trial. 

The nine-member federal court jury setting in San Jose rendered a verdict of $1.05 billion against Samsung after just two-and-a-half days of deliberations.  The four-week trial featured attorneys from Morrison & Foerster and Wilmer Culter Pickering Hale and Dorr for Apple, and Quinn Emanuel Urquhart & Sullivan for Samsung.

Court documents show that some Morrison Foerster partners and of counsel billed a median rate of $582 an hour for work on portions of the case, while some Quinn Emanuel partners billed on average $821 per hour.  Money well spent, give the stakes.  “This is big, high-stakes litigation,” said Donald R. Dunner, a patent law expert and senior partner at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.  “They’ve got the best lawyers they could find, and they charged fees that are commensurate with their talent.”

A recent ABA Journal story, “Top Del. Court OKs Record $300M Attorney Fee Award,” reports that, in an en banc decision Monday, the Delaware Supreme Court upheld a record $300 million attorney fee award in a shareholder derivative suit.  In a 4-1 opinion (pdf) written by Justice Randy Holland, backed Chancellor Leo E. Stine’s (who serves as chief judge of the state’s highly regarded chancery court) judgment.  “The challenge of quantifying fee awards is entrusted to the trial judge and will not be disturbed on appeal in the absence of capriciousness or factual findings that are clearly wrong,” the opinion states.

The attorney fee award in the Southern Peru Copper Co. case reportedly is the largest amount ever approved in a shareholder derivative action.  The case concerned a claimed deal by the company’s biggest shareholder to sell one of its own holdings to Southern Peru Cooper in exchange for company stock that had risen significantly in value by the time the transaction concluded.

Strine said at a December hearing that corporate lawyers, like investment bankers, sometimes deserve a big payday.  “There’s an idea that when a lawyer or law firms are going to get a big payment, that there’s something somehow wrong about that, just because it’s a lawyer.  I’m sorry, but investment banks have hit it big, a lot of the bigger plaintiffs’ lawyer firms have hit it big.  They’ve hit it big many times,” said Strine.  “And to me, envy is not an appropriate motivation to take into account when you set an attorney fee.  It’s not.”

Multidistrict litigation (MDL) functions similar to class action lawsuits, with several key differences, including how courts address attorneys’ fees.  However, as more mass tort cases are being directed toward MDL instead of class action lawsuits, courts are encouraging that attorneys’ fees in MDL should be handled in a quasi-class action manner.  According to Jeremy Hays, in his article, “The Quasi-Class Action Model for Limiting Attorneys’ Fees in MDL Litigation,” despite some drawbacks in using the quasi-class action approach in determining attorneys’ fees in aggregate multidistrict tort litigation, the quasi-class action approach might be the best option for courts at this time.

Courts are favoring MDL over class action litigation as a way to resolve mass tort cases.  Courts have held that the interests and injuries of the potential members of a class make certification inappropriate, and the class action lawsuits may result in a limited fund for reimbursing victims of the torts, which means class action litigation is not the superior vehicle for achieving a just outcome for the parties.  Also, changes to Rule 23 of the Federal Rules of Civil Procedure have made class certification more difficult in mass tort cases.

However, unlike in class action lawsuits, courts do not have control over attorneys’ fees in MDL.  Attorneys take the cases in a contingency basis, but the plaintiffs often have to do much of the paperwork for the case.  In contrast, Rule 23(h) allows the courts to award “reasonable” attorneys’ fees in class action litigation.  Because the attorneys’ fee issues create inefficiencies in MDL, the quasi-class action lawsuit was created.

Instead of discarding the idea of quasi-class actions, courts should allow the quasi-class action model to evolve.  The quasi-class action was proposed principally to bring the protections of Rule 23(h) into the MDL context.  The quasi-class action, which is still developing, will present a more efficient approach for dealing with attorneys’ fees, but the quasi-class action may not be accepted by all courts as it continues its development.

A recent BLT Blog story, “Appeals Court Sets Guidelines for Attorney Fees in FOIA Cases,” reports that for the first time since the District of Columbia adopted its Freedom of Information Act (FOIA) in 1976, the D.C. Court of Appeals has spelled out when prevailing parties in FOIA cases can recover attorney fees and how judges should weight those fee requests.  In an opinion (pdf), a three-judge panel explained that while the city’s FOIA law is different from the federal FOIA statute, local trial judges should use the four-factor test that federal judges rely on to decide whether to award attorney fees.

The ruling is a loss for the city’s police union, which appealed a D.C. Superior Court judge’s decision denying attorney fees after the union prevailed in a FOIA case against the city.  The appeals court found that Judge Anita Josey-Herring correctly used the four-factor test and upheld her finding that the union failed to satisfy enough of the criteria.  The court also rejected the union’s argument that prevailing parties should be automatically entitled to fees.

The four-factor test asks judges to consider any public benefit from the FOIA case, commercial benefit from the plaintiffs, the plaintiff’s interest in the case and the government agency’s reasonableness in withholding the information requested.  Under the four-factor test, Josey-Herring found that there wasn’t a strong public benefit in the union’s request and that the fee request was very much in the union’s own interest.  Writing for the appeals panel, Judge Catherine Easterly, wrote, “…we presume that the trial court found that the lack of public benefit simply outweighed the unreasonableness of the government’s behavior in this case.”

A recent NLJ story, “Fee Enhancement Limits Don’t Extend to Bankruptcy, Fifth Circuit Rules,” reports that a recent appellate holding that bankruptcy cases aren’t governed by a U.S. Supreme Court ruling limiting district courts’ fee enhancement power will help lawyers seek bonus fees when they get good results for creditors, according to practitioners who reviewed the opinion.  The U.S. Court of Appeals for the Fifth Circuit on Aug. 10 affirmed a Northern District of Texas Bankruptcy Judge Russell Nelms April 2011 award of a $1 million fee enhancement to turnaround consulting firm CRG Partners Group. 

CRG sought $5.98 million in attorney fees, plus a $1 million fee enhancement recommended by the debtors’ board of directors.  That April, the bankruptcy court awarded CRG the fee enhancement but certified its order for direct appeal to the Fifth Circuit.  The U.S. trustee argued that the Supreme Court’s 2010 ruling in Perdue v. Kenny A. sharply curtailed the bankruptcy court’s discretion to grant fee enhancements. 

Circuit Judge Jennifer Walker Elrod wrote the opinion (pdf) in CRG Partners Group LLC v. Neary.  Elrod analyzed numerous Fifth Circuit rulings and concluded that “we have consistently held that bankruptcy courts have broad discretion to adjust the lodestar upwards or downwards when awarding reasonable compensation to professionals employed by the estate.”  While the courts’ “discretion is far from limitless,” she wrote, upward adjustments are permissible in rare and exceptional circumstances when “the applicants had provided superior services that produced outstanding results – that are supported by detailed findings from the bankruptcy court and specific evidence in the record.”

Additionally, because bankruptcy courts have the discretion to enhance fees for professionals’ superior performance, “we affirm fee awards that would have been proscribed under Perdue,” she wrote.  Bankruptcy cases are unlike section 1988 cases, in which taxpayers foot the bill for any fee enhancements, she added.  “The Debtors are the only party whose bottom-line was reduced by the enhancement and, because their own board of directors recommended paying the enhancement, we can hardly compare the Debtors’ situation to that of the non-consenting taxpayers.”

A recent Thomson Reuters story, “Plaintiffs’ Lawyers to Receive all the Cash in Moody’s Derivative Settlement,” reports that plaintiffs’ firms asked U.S. District Judge George Daniels of Manhattan to grant final approval to the settlement and fee award in the consolidated shareholder derivative litigation against Moody’s.  Moody’s agreed to settle the case last month, in a deal that requires the rating agency to institute corporate governance reforms.  If approved, the $4.95 million may well be the only cash Moody’s shells out in any of the shareholder litigation accusing the agency of misrepresenting its role in rating subprime mortgage-related securities.

Moody’s settlement of five derivative suits would provide for governance provisions aimed principally at promoting “independence, rigor, professional skepticism, and credit judgment” in the agency’s credit rating processes, according to the motion to approve the accord filed in court.  Plaintiffs’ lawyers argued that the reforms would address core claim in their suit that Moody’s failed to properly manage the quality and independence of its ratings because issuers of mortgage-backed securities paid the agency to rate their offerings.

Co-lead plaintiffs’ lawyer Richard Greenfield of Greenfield & Goodman said the settlement was notable, given the tough standards derivative plaintiffs have to meet in litigation, in addition to the difficulty of pursuing claims against rating agencies, which have largely avoided liability in the financial crisis.  Greenfield said the corporate governance reforms Moody’s agreed to adopt are worth a lot to shareholders and justify the fee request.  “The nature of the relief is of substantial value,” he said.

The plaintiffs’ firm asserted in their fee request (pdf) that they would have earned $15.8 million had they billed by the hour.  They argued that $4.95 million is a “modest fraction” of those hourly billings, so the fee award is “presumptively reasonable.”  The plaintiffs’ lawyers cited at least four derivative cases in which larger fee requests have been approved, including a 2008 case against Home Depot in which a Georgia state court awarded $14.5 million to Robbins Geller Rudman & Dowd. 

A recent ABA On-Line Journal story, “UK Insurers Mull Taking Work In-House and Setting Up Their Own Law Firms as Latest Cost-Cutting Move,” reports that after a change ushered in with the United Kingdom’s Legal Services Act allowing non-attorneys to have an ownership interest in law firms, a number of insurance companies are planning to either bring legal work in-house or set up their own law firms as a cost-cutting move, a study has found.

If the research by Espirito Santo Investment Bank proves to be correct, private law firms could wind up losing a substantial amount of the approximately 5 billion pounds in legal fees that the insurance industry currently antes up each year, Legal Week reports.  Those legal fees amount to about $7.84 billion in U.S. dollars at the current exchange rate.  Law firms that do continue to get such work could face increased pressure to cut their own costs as insurers look for law firms willing to agree to fixed-rate fees.

“The problem many insurers are facing is the massive number of personal injury claims and so an attempt to bring some of this in-house or look for other ways of managing it would make sense,” an unidentified managing partner in a London insurance firm tells the legal publication.  However, specialist law firms in London likely will not be as much effected by the potential change as those doing high-volume elsewhere, he continued, saying that it will take time for insurers to develop alternatives to provide representation at the same level.

A recent The Recorder story, “Whyte Takes a Bite out of Attorney Fees in Apple Settlement,” reports that a class action Apple Inc., claiming that faulty antennas in the iPhone 4 caused bad cellular reception, has settled.  But plaintiffs’ attorneys aren’t getting everything in their fee request.  U.S. District Senior Judge Ronald Whyte approved a settlement that gives consumers some cash and a device to attach to the phone.  He slashed by about half of plaintiffs’ attorney fees, citing a low number of claims by class members and an oversized group of lawyers.

Plaintiffs in In Re Apple iPhone 4 Products Liability Litigation had moved, unopposed by Apple’s counsel at Morrision & Foerster, for $5.9 million in fees.  That was more than double the plaintiffs’ documented lodestar, or fees for time worked.  Whyte, in cutting the fees to $2.2 million, wrote that the lodestar calculation was already “very generous,” and that it included the time of more attorneys than necessary to efficiently handle the case.  Whyte also noted that the plaintiffs’ attorneys billed at “high-end rates” based upon “liberally kept time records.”

Co-lead counsel Ira Rothken of the Rothken Law Firm in Novato, called the judge’s ruling “fair.”  He and other co-lead counsel, including lawyers from Gardy & Notis in New Jersey, Robbins Geller Rudman & Dowd in Florida and Kirkland & Packard in El Segundo,“understand and respect the decision not to award a multiplier,” he said.

A recent Forbes story, “Roger Goodell Seeks Attorney’s Fees and Discovery Stay in Jonathan Vilma’s Defamation Suit,” reports that the National Football League Commissioner Roger Goodell filed a motion to dismiss in a defamation suit filed by New Orleans Saints player Jonathan Vilma and to strike Vilma’s complaint pursuant to the Louisiana Anti-SLAPP Statute.  SLAPP stands for “Strategic Lawsuit Against Public Participation.”

Certain states, including Louisiana, have explicitly sought to curb the filing of such lawsuits by enacting anti-SLAPP statutes.  If Commissioner Goodell is able to prove that the claims asserted against him arose from an act in furtherance of the exercise of his right of petition or free speech under Louisiana or the U.S. Constitution in connection with the alleged bounty scheme (certainly considered a public issue) and Vilma is not capable of demonstrating a probability of success on the merits of his defamation action, then Commissioner Goodell shall be awarded reasonable attorney fees and costs.

It would be fair to say that Goodell has hired attorneys who bill at a very high hourly rate and do not skimp on the amount of time they appropriate to their research and drafting.  However, if Vilma is able to defeat Commissioner’s Goodell’s motion to dismiss based on Louisiana’s Anti-SLAPP statute, Vilma could be entitled to recoup his own attorney fees and costs.

Congressman Peter Defazio (D-OR) recently introduced H.R. 6245 (pdf).  The working title of the house bill is the “Saving High-Tech Innovators Egregious Legal Dispute Act of 2012” also known as the SHIELD Act.  The bill would permit the award of attorney fees to successful defendants (but not successful plaintiffs) accused of infringing a computer hardware or software patent if the action “did not have a reasonable likelihood of succeeding.”  Currently attorney fees are only awarded in “exceptional cases” under 35 U.S.C. 285 or as a sanction for violation of Fed. R. Civ. Pro. R. 11.

The statute would read:

(a)  In General – Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.

Most jurisdictions around the world follow a loser-pays rule in civil litigation.  In theory (and with certain assumptions) a loser pays rule results in more meritorious claims and fewer non-meritorious claims.  The system (again in theory) allows a legally vindicated party to walk away without direct financial loss due to litigation.  A major difference between those systems and that proposed here is that the normal loser-pays system is a two-way while this bill proposes a one-way system that only injures patentees.  The stated purpose of the legislation is to reduce the amount of patent litigation brought by “patent trolls.”

A recent NLJ story, “Prius Plaintiffs Attorneys ask Ninth Circuit to Rescue Their Fee Award,” reports that five plaintiffs firms that obtained a class action settlement over alleged headlight defects in the Toyota Prius have petitioned a federal appeals court to overturn a trial judge’s rejection of $4.7 million in attorney fees as “highly unreasonable.”  Girard Gibbs, which took the lead in the case, told the U.S. Court of Appeals for the Ninth Circuit in a brief that U.S. District Judge Manuel Real had abused his discretion in arbitrarily cutting the fees in the case, resolved claims by consumers against Toyota Motor Corp.

Real approved the Prius settlement on Oct. 17.  In determining attorney fees, however, he repeatedly noted the simplicity of the case, concluding that the legal work amounted to “just a few short months of discovery, settlement negotiations, and a one day mediation.”  He noted that the National Highway Traffic Safety Administration has dropped its investigation into potential headlight defects in Prius automobiles, giving Toyota a distinct advantage in the case, and that the records of that investigation were public.

Real, in determining that the fee request should be reduced, referred to the plaintiffs attorneys as “negotiation agents,” who typically takes a 20 percent cut for their work.  As a result, he calculated the fees at about $760,000, or 20 percent of the total value of the settlement, which he estimated at $3.8 million.  He awarded 65 percent of that amount to Girard Gibbs, which was to distribute the remaining 35 percent to the other firms.

In his brief, partner Eric Gibbs argued the value of the settlement was “hypothetical” and that, at any rate, Real should have at least considered the lodestar amount in double checking his fee calculation.  Gibbs noted that his firm spent 2,900 hours on the case for a lodestar of $1.25 million.  Furthermore, Gibbs wrote, because the case involved the California Consumer Legal Remedies Act and the state’s private attorney general statute, Real should have relied on more than a percentage analysis of the fees.

He disagreed with Real’s valuation of the settlement and the percentage assessed against the fees.  “The percentage paid to sports and entertainment agents is not an appropriate consideration for an award of attorney fees in a class action case,” he wrote.  He also took issue with Real’s characterization of the case as a “simple breach of warranty” action based on “boilerplate class action complaint” that relied on NHTSA’s investigation.  “Where NHTSA was unable or unwilling to act, Plaintiffs achieved a settlement that addressed a problem that had bemused and alarmed thousands of Prius owners,” Gibbs wrote.

A recent Thomson Reuters story, “Attorney Fees in Air Cargo Case Near $93 Million,” reports that a Brooklyn federal judge has awarded $54.4 million to plaintiffs’ counsel in a class action over air cargo shipping rates, bringing the fee awarded in the antitrust case to $92.9 million.  The fee award, the third in the ongoing case was approved by U.S. District Judge John Gleeson.  Unlike some class actions, in which plaintiffs’ counsel submit fee applications when the case is nearing a final resolution, the attorney fees the air cargo case have been processed in a piecemeal manner.

The fee award will be paid to 73 firms involved in the litigation and allocated by four lead plaintiff firms – Kaplan Fox & Kilsheimer; Labaton Sucharow; Hausfeld and Levin Fishbein Sedran & Berman.  Between December 2006 and December 2011, the 73 firms spent 199,510 hours litigating the antitrust action, according to court filings.

The class action was brought in 2006 on behalf of companies that purchased air cargo freight shipping services from dozens of airlines.  The plaintiffs accused the airlines of participating in a global conspiracy to artificially inflate shipping prices.  Gleeson approved $224.4 million in new settlement payments, which included the $54.4 million fee award.  That brings the total to be paid by 17 airlines to $485 million.

The case remains ongoing against 11 other airlines.  Depending on the outcome, plaintiffs and their lawyers could see the settlement funds and accompanying fee awards increase.  Gleeson cautioned plaintiffs’ firms that if the settlement fund balloons, they may need to revisit their method for computing fees in relation to the size of the settlement fund.  “In megafund cases such as this one, courts typically decrease the percentage of the fee as the size of the fund increases to avoid an unjust windfall,” Gleeson wrote.

The case is In re Air Cargo Shipping Services Antitrust Litigation, U.S. District Court for the Eastern District of New York, No. 06-1775.

A recent NLJ story, “First Circuit Tosses $30 Million Fee Award Volkswagen Case,” reports that a federal appeals court threw out a Boston federal judge’s $30 million attorney fee award for plaintiffs’ lawyers in multidistrict litigation over oil-sludge damage to Volkswagen cars.  In a unanimous ruling on July 27, the U.S. District Court of Appeals for the First Circuit vacated U.S. District Judge Joseph Tauro’s March 2011 fee award, plus nearly $1.2 million in costs.  The First Circuit panel ruled that Tauro erroneously based the fee award on federal law.  The court remanded Volkswagen Group of America Inc. v. Petel J. McNulty Law Firm (pdf) so that the fees could be calculated based on Massachusetts law.

The underlying lawsuit claimed that defects caused the 1.8-liter turbo engines in some Volkswagen Passet and Audi Cabriolet model were susceptible to damaging engine sludge.  The settlement provided for free oil changes and extended warranties.  A special master valued the deal at about $223 million for a potential class of about 480,000 car owners.  On appeal, Volkswagen argued that the plaintiffs’ attorney fees should have been about $7.7 million.  The class counsel sought $37.5 million in fees and about $1.8 million in costs.

The First Circuit ruling cited U.S. Supreme Court precedents to conclude that state law governs the interpretation of settlement agreements.  Chief Judge Sandra Lynch wrote the opinion.  “The basis for the award here is the agreement itself, a contract under state law, and not federal law.  The fact that attorneys’ fees are provided for by the settlement agreement is one of several reasons why there is no basis to resort to these federal equitable doctrines,” Lynch wrote.

Under Massachusetts law, Lynch continued, a trial can use either the lodestar approach or a multifactor analysis.  The latter weights factors including the attorney’s ability and reputation; the matter’s importance; the time spent; fees usually charged for similar services by other lawyers in the area; the value of the property affected; and the results.  If the lower court opts for the lodestar approach, it should adopt $7.7 million as the bases figure “given the absence of any direct challenge to the number,” Lynch wrote.  That number does not include work by plaintiffs’ attorneys who were not class counsel, work performed after the district court’s fee award and any possible contingency enhancement.

NALFA also reported on this case in "Volkswagen Challenges Fee Calculation in $30M Attorney Fee Award"

A recent Thomson Reuters Legal story, “Lawyers’ Fees Cut in FedEx Wage-and-Hour Case: Is this a Trend,” reports that in a recent case against FedEx, a federal judge in Los Angeles cut fees for class counsel, in what may be the beginning of a movement toward stricter scrutiny of contingency deals in wage-and-hour cases.  Earlier this month, Federal Express agreed to pay $8.25 million to settle a 2010 class action in which employees alleged that information in their pay stubs wasn’t properly displayed. 

Plaintiffs’ lawyers at Jackson Hanson in San Diego had signed retainer agreements with FedEx employees that would give them 33 percent of the settlement.  But in an order (pdf) approving the deal, U.S. District Judge Gary Feess awarded Jackson Hanson 25 percent, or just over $2 million, rather than the $2.75 million the plaintiffs’ attorneys said they were entitled to.  Feess found no reason to elevate beyond 25 percent, which he said is an established benchmark for class action fees in cases in the Ninth Circuit.

The plaintiffs’ lawyers argued that they’d taken a risk and achieved a positive result, but the judge said that wage-and-hour litigation “is not as legally complex as other types of litigation that often generate a common fund.”  He noted that the fees were still an improvement over hourly rates: Class counsel projected that their total hours on the case would be around $1,050 to $1,100, and market rates are $550 to $600 an hour.  If they were paid by the hour, the judge said, plaintiffs’ lawyers would have brought in approximately $640,000.

Gregory Mersol of Baker Hostetler, who wrote about the case for the firm’s Employment Class Action blog and is currently defending about half a dozen wage-and-hour cases in California, said Feess’s order reflects an “evolutionary trend.”  Judges, he said, are taking a closer look at settlements in garden variety wage-and-hour cases and balking at fee awards that would permit plaintiffs’ attorneys to walk away with over-the-top hourly rates.  Stricter scrutiny of fees, both in wage-and-hour and other common fund cases, is not yet rountine, Mersol said, but judges are beginning to resist rubber-stamping fee requests even when the defendants don’t object to them.

A recent NLJ story, “Arguments Swirl Over Fairness of Ticketmaster Settlement,” reports that eight lawyers representing more than a dozen of the nearly 100 fee objectors to a consumer class action settlement with Ticketmaster urged a Los Angeles judge on July 24 to reject the deal, which they called the latest example of paying cash to the lawyers while the class members make do with coupons.

Addressing Los Angeles Superior Court Judge Kenneth Freeman, the lawyers took turns during a fairness hearing to argue against final approval of the deal, which would grant $16.5 million in fees and costs to plaintiffs attorneys and discounts off the future ticket purchases to the nationwide class of consumers.

Under the deal, each class member would receive an e-mail discount code worth $1.50 against each future ticket purchase and a $5 discount code for each UPS delivery fee – both capped at 17 transactions.  The estimated class encompasses customers who bought tickets from Oct. 21, 1999 through Oct. 19, 2011.

Under the deal, plaintiffs’ attorneys would receive $15 million in attorney fees and about $1.5 million in costs.  W. Michael Hensley, a shareholder in the Santa Ana, Calif., office of AlvaradoSmith, a plaintiffs firm in the case, said attorneys has laid out their costs and fees in “excruciating detail.”  “We have not asked for all the fees that we have actually generated,” he said, noting that the lodestar amount came to $6.5 million.  He said that this case, unlike others cited by the fee objectors, took nearly nine years to litigate.

Google wants $4 million from Oracle to cover the legal costs it incurred during the infringement litigation over the Android mobile operating system.  In a brief (pdf) of Google’s Bill of Costs filed in federal court, Google lead counsel Robert Van Nest of Keker & Van Nest, LLP in San Francisco argued that Oracle is required to pay Google’s legal costs because the judge and jury ruled in favor of Google on almost every claim during the six-week trial.  The $4 million figure includes only the legal (i.e. administrative costs) expenses of the litigation and not the attorney fees (i.e. billable hours) associated with the case.

“Google prevailed on a substantial part of the litigation,” read Google’s brief.  “[Oracle] recovered none of the relief it sought in this litigation.  Accordingly, Google is the prevailing party and is entitled to recover costs.”  Google has not publicly revealed an itemized list of its expenses, but the total bill included $2.9 million spent copying and organizing documents.  According to the brief, the company juggled 97 million documents during the case.

In the underlying litigation, Oracle lost an infringement case against Google concerning various Java APIs and the way they were utilized in the Android operating system.  The judge decided that the structure, sequence, and order of these APIs wasn’t covered by existing copyright law and threw out the majority of the claims against Google.

A recent NLJ story, “Ninth Circuit Rejects Mini-Wheat Settlement of Attorney Fees, Cy Pres Award,” reports that a federal appeals court has rejected a class action settlement over alleged false advertising of a breakfast cereal, ruling that a plan to contribute some of the payout to charity bore no relation to the case and that the plaintiffs attorneys’ fee award was excessively generous. 

The U.S. Court of Appeals for the Ninth Circuit on July 13 reversed the trial judge who’d approved the settlement between Kellogg Co. and a nationwide class of consumers who alleged false advertising of its Frosted Mini-Wheats cereal.  Citing its 2011 decision in In re Bluethooth Headsets Litigation, the three-judge panel ruled that the settlement did not survive the heightened scrutiny that should be applied to class action settlements.

The ruling in Dennis v. Kellogg Co. (pdf) was the latest in which the Ninth Circuit has struck down a class action settlement based on excessive attorney fees or fear of collusion between counsel who crafted the deal.  “There is a lot of case law on attorney fees out there: Bluetooth, and now this case, are certainly adding to that body of case law,” said plaintiffs counsel Timothy Blood, managing partner of Blood, Hurst & O’Reardon in San Diego.

The court cited its Bluetooth decision in finding the fee request unreasonable, particularly given the number of hours and amount of money spent by plaintiffs counsel in light of what class members would receive.  “The settlement yields little for the plaintiff class,” wrote Senior Judge Stephen Trott.  “In comparison, the $2 million award is extremely generous to counsel – even if we were to accept their assertion that the value of the common fund is $10.64 million.

Had the case been litigated on an hourly basis, the fees would have totaled $459,203, Trott wrote, so a $2 million fee award would translate to $2,100 per hour.  “Not even the most highly sought after attorneys charge such rates to their clients,” he wrote.

A recent BLT Blog post, “Mayer Brown Sues Pacific Seafood Group for $5M in Fees,” reports that Mayer Brown filed a breach of contract lawsuit (pdf) in D.C. Superior Court against former client Pacific Seafood Group, claiming unpaid attorney fees in excess of $5 million.  The firm represented Pacific, a global seafood processing and distribution company based in Clackamas, Ore., against a series of antitrust claims, including a class action in U.S. District Court for the District of Oregon.  According to the claimant, the firm stopped representing the company in February because of nonpayment of fees.

Mayer Brown claims Pacific paid part, but not all of the fees it owed.  The firm is suing for more than $5 million, which includes $3.8 million in fees, an additional $1.3 million for a discount the firm has originally provided, and interest.  According to the claimant, Pacific hired Mayer Brown attorneys from the Washington office in July 2010.  From the fall of 2010 through the summer of 2011, Pacific never fully paid invoices sent the firm.  The company “requested that Mayer Brown be patient and continue rendering professional services,” the firm said in its complaint.

Mayer Brown reached a breaking point early this year and told Pacific it would be ending its representation, according to the complaint.  “Mayer Brown is now informed and believes that Pacific intentionally misled Mayer Brown and caused it to provide legal services, while intending not to pay for such services and informed Mayer Brown of its intent,” the firm wrote in the complaint.

A recent Thomson Reuters News story, “Analysis: Lawyers Eye Payday in Record Credit Card Settlement,” cited the National Association of Legal Fee Analysis (NALFA) as the leading authority on attorney fee awards.  NALFA was asked to provide statistics on the largest attorney fee awards in U.S. history. 

The largest single attorneys' fee award to date was $688 million, doled out in 2008 in the Enron case.  In second and third place was $492 million in fees resulting from Tyco litigation and about $336 million in fees in the WorldCom case. 

This is the second time NALFA has been cited by Thomson Reuters. In 2011, NALFA was quoted on a news story concerning legislation on fee objectors in New York.  See “NALFA in News: Quoted As Industry Source in Reuters News”

Attorney fee disputes are often a result of a breakdown in the attorney-client relationship.  Mediation is the quickest, simplest, and most cost effective way to resolve attorney fee disputes.  NALFA offers a mediation program specifically designed for attorney fee disputes of all sizes.

Our fee dispute mediators are uniquely qualified to sit down with both parties and settle a fee dispute in a cost effective and confidential manner.  Our fee dispute mediators are trained to handle simple attorney-client fee disputes and larger, more complex multi-party fee disputes.  Our fee dispute mediators are trained neutrals who understand the underlying issues in fee dispute cases.  They include former judges, seasoned litigators, and in-house counsel.  NALFA uses a customized approach for each fee dispute case.

“Attorneys don’t want to be in the business of suing clients over unpaid fees.  So before filing a suit in court, attorneys should attempt fee dispute mediation.  In fact, participating in fee dispute mediation, in good faith, can only strengthen your legal action in court, if the case is not resolved in mediation,” said Terry Jesse, Executive Director of NALFA.

A recent FindLaw.com post, “5 Ways to Collect Unpaid Fees From Clients” by Andrew Lu of Top Floor Legal reports that a recent survey found that most attorneys only get paid for a fraction of the hours they work during the day.  The reason weren’t given as to why the attorneys don’t get clients to pay up.  So, what can attorneys do to collect unpaid legal fees from clients? 

Here are five steps from Top Floor Legal that attorneys can take when looking to get paid:

1. Ask the Client to Pay:  Passive aggressiveness does not work.  Let your client know that he or she owes you money.  Oftentimes, your client may not know or may have forgotten that they owe you.
2. Have Someone Call the Client:  If you are not comfortable with confrontation over money, you can hire a third party bill collector to call the client.  Outside pressure may convince your client to pay up, and can signal to your client that you’re serious.
3. Understand Your Client’s Situation:  Talk to your client and understand why he or she cannot pay.  If there is a momentary financial crisis, you may forebear from collecting for a few weeks or agree upon a partial payment plan.
4. Draft a Formal Demand Letter:  If you can’t get a hold of the client of if the client is not willing to work with you, you may want to draft a formal demand letter asking for payment.  This can be the basis of any legal action.
5. File a Lawsuit:  You don’t want to be in the business of suing your clients, so this is definitely a last resort.  But if your client owes you a significant sum and refuses to pay, you may be left with no resort but to seek legal action.

A recent Madison Record story, “Tillery Seeks at Least $18K in Fees From Third Party to Litigation – University of Chicago” reports that an attorney who will share close to $35 million in attorney fees by way of a recent class action settlement in federal court, is seeking at least $18,000 in fees from the University of Chicago in related state court litigation.  Stephen Tillery filed a motion for reimbursement of costs and attorney fees in an eight-year-old Madison County, Illinois class action against Syngenta Crop Protection involving the weed killer atazine.

The University of Chicago and its scientist Don Coursey, who was hired as an expert by Syngenta, were brought into the litigation as third parties.  For years, they fought Tillery’s discovery requests.  In a motion, Tillery chided the University for being “uncooperative” by delaying production of subpoenaed documents.  He seeks reimbursement on grounds that the University repeatedly filed motions without substantial justification and for its “significant” delay in conducting a search and compiling responsive documents.

“But for the University’s lack of cooperation and unjustified habitual defiance, it would not have undertaken seven months to compile 952 documents,” Tillery’s motion states.  “[P]laintiffs should not be forced to pay thousands of dollars to cover the University’s irresponsible inaction and delay,” Tillery wrote.  A footnote to the $18,050 in fees Tillery seeks from the University, states that the figure does not include “Mr. Steve Tillery’s time, nor does it include paralegal time.”

According to a May 22, 2012 article in Corporate Counsel Magazine, “…as the next generation of general counsel takes charge, evaluations of outside counsel will rely more and more on metrics assessing efficiency and productivity.”

Whenever NALFA member and attorney fee expert Ken Moscaret, Esq. opines in support of the efficiency of multimillion-dollar legal fees billed by major law firms in large, complex litigation, he customarily focuses on five court-tested factors:

1. Concentration of workflow in the hands of a core team of attorneys
2. Appropriate mix of attorneys by skill, experience, and ability
3. Delegation of workflow to less-expensive but competent timekeepers
4. Case staffing continuity
5. Exercise of billing judgment

As one example, in the Enron litigation in 2008, the presiding federal judge cited and relied in part on Mr. Moscaret’s “efficiency factors” to support her record-setting $700 million fee award in that case to a large, well-known California law firm, as follows:

“[Mr.] Moscaret also examines the fee request for “efficient” case staffing, i.e., using as few attorneys as necessary doing as much of the legal work on a case as possible.  In large complex cases like this one, he looks for a ‘tight compact litigation team of attorneys doing the majority of the work on the case,’ i.e., ‘core’ attorneys billing at least 75% of the hours on the case… He also identifies and discusses in detail other indicia demonstrating reasonableness and efficiency of overall staffing in this litigation, including an appropriate mix of attorneys for the demands of a complex litigation, reasonable delegation of work flow, continuity of case staffing,…” 586 F.Supp.2d at 785.

NALFA’s Law’s Top Civil Litigators is a new membership category for a select group of plaintiffs’ lawyers who’ve achieved record settlements and verdicts in areas of tort litigation: consumer, personal injury, environmental, employment, and securities.  Nomination is based on results obtained for the client and the community.  Our motto is “Winning for the Client and the Community.”

Law’s Top Civil Litigators will be among the first to put their lawyering stats on a baseball card.  Members will be able to choose from 4 different baseball card style formats.  On the front, lawyers will be pictured “in action” or a simple head shot with name, firm name and logo, along with position in the firm. 

On the back, lawyers can display lawyering stats such as year, case name, type of case, court, and settlement and/or verdict amount.  Like baseball cards, we’ll also include other biographical information such as law school, court admissions, and contact information.  And because this is a “virtual” baseball card, users will be able to click on the stats to learn more case details.

This new app, (for online, ipad, iphone, and android users), is an effective way for plaintiffs' lawyers to promote their record of success in a familar format.  “This new app is a simple, fun, and familar way for trial lawyers to share their winning record with potential clients, the media, and others in the legal profession,” said Terry Jesse, Executive Director of NALFA.

Beyond this new app, Law’s Top Civil Litigators is also a pro-plaintiffs’ advocacy group that seeks to combat the efforts of the tort reform lobby.  “There are scores of positive stories from the plaintiffs' bar.  We want to promote these positive cases at a national level and correct much of the misinformation from the tort reform lobby,” said Jesse.

For more information, please call Terry Jesse at 312.854.7158 (direct) or e-mail terry@thenalfa.org.

Disclaimer: NALFA owes the creative concept, proprietary rights, and all technology associated with this app.

A recent Corporate Counsel story, “Fee Fight the Next Battle in Oracle and Google’s Smartphone War?,” reports that while nothing has been filed in court, observers say the next battle in Oracle v. Google could be over attorney fees.  A fight over legal bills would offer tantalizing details of the fee arrangement between Google and its legal team, and put a public price tag on what it can cost to engage in complex, high-stakes IP cases.

Oracle Corp. took Google Inc. to court on a quest for eye-popping damages in the first of the smartphone wars to go to jury trial.  Oracle lost on almost every claim and can only get a fraction of the billions it once sought.  So observers say they expect Google to try to recoup the small fortune it surely paid Keker & Van Nest and two other firms to do battle with the likes of David Boies and top Morrision & Foerster IP litigators.

Google would likely petition for fees after U.S. District Judge William Alsup issues a final order in the case, which could come some time after a hearing held today.  If Oracle makes its own bid to pursue attorney fees, which observes said isn’t entirely out of the question since it prevailed on two small claims, it could expose hourly rates and fee arrangements to famed litigator David Boies and other top litigators at Morrision & Foerster.

The fee petition would come under a provision of the Copyright Act.  Unlike in other areas of civil litigation, either the prevailing defendants or plaintiff can seek reimbursement for reasonable attorney fees in copyright cases.

A recent ABA Journal story, “7^th Circuit Nixes ‘Feeable’ Sears Class Action, Says Its ‘Only Goal’ is Fees for Plaintiffs Lawyers,” reports that a federal appeals court said a shareholder derivative suit’s “only goal” appeared to be generating fees for plaintiffs counsel.  The appeals court not only held a federal district judge had erred in refusing to permit a professional fee objector to intervene, but directed the judge to dismiss the case on remand.

“The suit serves no goal other than to move money from the corporate treasury to the attorneys’ coffers, while depriving Sears of directors whom its investors freely elected,” wrote Chief Judge Frank Easterbrook in a three-judge panel’s unanimous opinion (pdf).

The plaintiffs in this suit contented that antitrust law was violated by having two directors sit on competing boards of other companies following the 2005 merger of Sears, Roebuck & Co. with Kmart Corp.  However, as Sears pointed out to the district court in a motion to dismiss, “Delaware usually allows investors to sue derivatively only if, after a demand for action, the board cannot make a disinterested decision.”  The plaintiffs made no such demand prior to suit, the Seventh Circuit says, although they argued it would have been futile to do so.

Antitrust suits are notoriously expensive and Sears was willing to settle for $925,000 in attorney’s fees to opposing counsel rather than likely pay over $1 million in defense costs.  But Easterbrook says, shareholders would derive no benefit from this and neither the Department of Justice not the Federal Trade Commission, which ordinarily enforce antitrust violations, have shown any interest in pursuing enforcement action here.

A Lexis Nexus Law Firm Billable Hours Survey, (pdf) out on Friday looked at billing efficiency among firms of one to 50 lawyers.  The report, from legal technology company, LexisNexis, is based on responses from 499 law firms and law departments polled in May. 

On average, respondents worked nine hours a day but only billed six hours, it found.  That’s a 33% gap, which LexisNexis chalked up to general lawyerly inefficiency or not using staff to cover non-billable functions.  Other factors: hours attorneys spend networking or cozying up to prospective clients, plus some intentional discounting of hours worked to keep existing clients happy.

Bigger law firm often have armies of support staff and sophisticated billing systems that boost efficiency and let “attorneys be attorneys,” said Loretta Ruppert, senior director of community management for LexisNexis Legal and Professional.  “But at the smaller end of law, they typically wear multiple hats.”

Among the subset of smaller firms, billing efficiency is all over the place.  For example, lawyers in Delaware (at least those who responded to the survey) lead the pack, billing 94% of hours worked.  Other states in the top quadrant included New York, Colorado, Utah, Louisiana, and Mississippi.  Less distinguished were respondents in Oregon, who billed a scant 40% of hours worked.

A recent Reuters story, “Judge Limits Attorneys’ Fees in BP Oil Spill Case,” reports that a federal judge overseeing the massive litigation stemming from the 2010 Gulf of Mexico oil spill issued an order on Friday capping the amount attorneys can charge plaintiffs who participate in a settlement with BP.  U.S. District Judge Carl Barbier in New Orleans gave preliminary approval last month to an estimated $7.8 billion settlement BP reached to resolve more than 100,000 claims by individuals and businesses affected by the oil spill.

In his order, Barbier ruled that attorneys for plaintiffs who settle claims through the settlement must limit their contingency fee arrangements to 25 percent of any recovery a plaintiff receives plus “reasonable costs.”  Barbier stressed that the 25 percent figure was a ceiling and that attorneys were free to charge less.

“In many cases, a reasonable fee may be less than 25 percent, particularly for a relatively simple claim by an individual,” he wrote.  “This Order is not intended to allow or encourage attorneys to charge more than a reasonable fee under any circumstance.” 

A group of attorneys who negotiated the settlement with BP, known as the Plaintiffs’ Steering Committee, are seeking $600 million for their work.  Those fees, which would be paid by BP under the terms of the settlement, must be approved by Barbier.

A recent WSJ story, “Panel Rules Investors Must Pay Goldman $500K in Legal Fees,” reports that two investors must pay $500,000 in legal fees to a Goldman Sachs unit after losing an arbitration case against the firm involving a options trading strategy, an arbitration panel has ruled.  Eric Snyder, a former real estate investment trust executive, and his wife Barbara, filed “clearly erroneous” claims against Goldman Sachs, according to a Financial Industry Regulatory Authority (FINRA) arbitration award.

The Snyders originally sought $10 million for allegedly recommending unsuitable investments, misrepresenting information and breaching the duty of fair dealing to them, among the misdeeds.  The FINRA panel not only rejected those claims, but ordered the Snyders to pay $500,000 to cover Goldman’s legal fees and costs.  A law in Tennessee, where the Snyders lived at the time of the dispute, authorized the panel to award legal fees to Goldman.

The outcome in the case is a rare instance in which an arbitration panel has ordered investors who lost the case to pay a brokerage firm’s legal fees, say lawyers.  “It’s a head turner,” said Andrew Stoltmann, a Chicago-based lawyer who represents investors in arbitration cases.

A recent BLT Blog post, “D.C. Appeals Court Hears Fee Dispute in TV Writers’ Discrimination Case,” reports that the D.C. Court of Appeals heard arguments in a fee dispute between attorneys who worked on the same side of a decade-long class action on behalf of older television writers.  Local solo practitioners Daniel Wolf and Maia Caplan content that an arbitrator hired to divide up more than $23 million in fees awarded to class counsel based his decision on issues that were outside his authority.  The class counsel had agreed that the fee petition submitted to the court wouldn’t be binding on arbitration, they argued, but the arbitrator nonetheless rejected the idea that the parties could object to the petition and claim different fees in arbitration.

Wolf and Caplan represented a group of television writers who sued studios, network and talent agencies for age discrimination in Los Angeles County Superior Court.  Their co-counsel included attorneys from Sprenger + Lang and Kator, Parks & Weiser, both in Washington, DC.  The writers reached a $70 million settlement with a balk of the defendants in 2010.  The court awarded the class counsel one-third of the settlement. 

The parties agreed to bring any fee dispute to mediation and arbitration to avoid a public scene that might delay or jeopardize the settlement.  The parties went to mediation, and when that failed, to arbitration.  The arbitrator issued a decision in late 2010.  Wolf and Caplan sued in D.C. Superior Court to vacate the award, and Judge Michael Rankin denied their motions, prompting the appeal.

Wolf’s attorney, William Stein of Hughes Hubbard & Reed, argued that the problem is that the arbitrator never made a finding about the reasonableness of the attorney fees, instead finding that he was bound to use the fee petition because of language in the contracts signed by co-counsel.  Wolf and Caplan’s former co-counsel argued that the arbitrator had no legal authority to base his decision on his reading of the original co-counsel agreement.  Contract provisions gave him the right to base his decision on the fee petition submitted to the court, even if the parties disagreed.

For more information visit www.writerscase.com

A recent Insurance Journal story, “Judge to Insurer: Pay Legal Fees in Pending Insider Trading Fraud Case” reports that a federal judge in New York order an insurance company to keep paying the attorney fees of several former hedge fund managers and traders caught up in an insider trading investigation.  U.S. District Court Judge Paul Engelmayer said irreparable harm could be done to the employees of Global Investors, if XL Specialty Insurance did not keep paying attorney fees for their defense.  But the judge said he would give XL enough time to appeal his decision of the insurer wanted.

In March, XL sued Level Global, claiming if did not have to pay the attorney fees for employees implicated in the insider trading ring because a former analyst for the now-closed hedge fund had been secretly cooperating with federal authorities.  XL is arguing that since the cooperating witness, Spyridon Adondakis, knew he had committed fraud at the time the insurance policy was signed, any changes stemming from or related to his crime aren’t covered by the policy.

Level Global lawyers argue that the fund’s general counsel, who signed the policy application, didn’t know about the crime and did not learn of it after making a reasonable inquiry among Level Global’s employees into possible facts or circumstances that could lead to charges.  They also argue that since the attorney fees XL has been paying are not for Adondakis himself, and only Adondakis is actually a convicted criminal, the exemption shouldn’t apply.

As part of its policy, XL agreed to cover $10 million in claims for Level Global.  It has paid out all but $2.7 million in claims so far, and Level Global spent an amount equivalent to the remaining balance before it received word of XL’s suit.  The case is XL Specialty Insurance Company v. Level Global Investors.

Last Friday, the Republican controlled U.S. House held hearings on cy pres awards in class action litigation.  Cy pres awards are final surplus funds left over from class action cases.  The tort reform lobby seeks to repeal cy pres awards under the Class Action Fairness Act of 2005 (CAFA). 

During a hearing by the U.S. House Subcommittee on the Constitution, Northwestern Law Professor Martin Redish testified about the problems with such awards, saying class members are unaware of the lawsuit or can’t be found, or the award is so small that it doesn’t make sense for them to seek payment.

According to the U.S. Chamber of Commerce’s Institute for Legal Reform, cy pres awards in class actions help pump up attorney fees for plaintiffs’ lawyers.  Testifying last week from the Institute’s viewpoint was John Beisner of Skadden Arps.  Beisner said cy pres awards help inflate the size of the award and justify higher attorney fees.

"At NALFA, we oppose the repeal of cy pres awards under the Class Action Fairness Act.  Unclaimed funds in class actions are better served with charities and non-profits than returned to the defendants, the very individuals who just conceded wrongdoing.  This is like allowing a bank robber to keep some of the stolen money after he's been found guilty," said Terry Jesse, Executive Director of NALFA.

A recent Reuters Legal story, “Preview: Lawyers to Defend Fee Award by Delaware Judge,” reports that a team of plaintiffs’ attorneys will defend their $304 million attorney fee award before Delaware’s Supreme Court in a case that put the spotlight on the new chief judge on the state’s high-profile business court.  The attorney fees stems from a $2.03 billion judgment awarded by Delaware Chancery Court Judge Leo Strine in October in a case brought by shareholders of Southern Copper Corp, who accused the company of overpaying in a takeover.

The two law firms, Kessler Topaz Meltzer & Check and Prickett Jones & Elliott, logged 8,597 hours on the case, which was spread among 45 lawyers and paralegals, according to court records.  The attorney fees, if award by the lodestar calculation, instead of the percentage of fund (POF) method, would amount to $35,000 per hour.  By comparison, the plaintiffs’ legal team that recovered $3.2 billion for Tyco shareholders spent 488,000 hours on the case, according to a brief on Southern Copper, receiving $1,010 per hour.

Judge Leo Strine amended his original judgment a few days after awarding the fees, and as a result the fee award was increased to $304 million from $285 million. Stine said the payment was based on the size of the recovery and was meant to encourage entrepreneurial plaintiffs’ attorneys.  The judgment and the fees were stayed pending appeal, although the judgment will accrue interest.

“The message I think he is sending is that if you have a meritorious case and your lawyers add true value to the shareholders you will be appropriately rewarded,” said John Coffey, a former plaintiff’s lawyer who is a managing director with BlackRobe Capital Partners, which advises investors in legal claims.  “I would be surprised if the Supreme Court disagreed with his basic premise,” Coffey said, though he said the fees could be trimmed on appeal.

The DOJ’s United States Trustee Program (USTP), which monitors bankruptcy proceedings, has been pressing for new rules and guidelines on attorney fees in Chapter 11 bankruptcies.  On Monday, members of the agency’s U.S. Trustee Program convened a public meeting to discuss proposed guidelines that would increase government oversight of Chapter 11 filings by companies with more than $50 million in assets. 

Under new rules, law firms working these cases would have to disclose their Chapter 11 billing rates and fee applications, stop rounding up billable hours and work within present budgets.  Clifford J. White III, director of the U.S. Trustee Program, said in an email statement that the proposed changes to the 16-year-old fee guidelines would help “add transparency to the bankruptcy ststem.”

Government officials contend that bankruptcy lawyers charge higher attorney fees than other attorneys—sometimes in excess of $1000 an hour—because their clients are less apt to negotiate discounts.  The DOJ also examined whether law firms justify exorbitant rates by devoting unnecessary hours and personnel to bankruptcy cases.

Law firms and other professional groups argue the proposed changes would actually increase the already high price tag for Chapter 11 cases and create unnecessary work for professionals at a time when their clients are in crisis.  More detailed rate disclosures would be especially tough for law firms, which can be secretive about hourly rates.

CLICK HERE to read New Proposed Fee Guidelines (pdf) and for more information visit http://www.justice.gov/ust/eo/rules_regulations/guidelines/proposed.htm

A recent Reuters story, “MF Global Trustee’s Law Firm Bills $17 Million So Far,” reports that the legal team unwinding MF Global Holdings’ broker-dealer billed more than $17 million in attorney fees in the first four months of the bankruptcy.  The team from the law firm Hughes Hubbard & Reed, led by trustee James Giddens, has been paid from the estate of MF Global Inc., according to court documents filed on Monday in U.S. Bankruptcy Court in Manhattan.

Giddens’ team has billed for roughly $20.1 million for the four-month period, but is withholding 15 percent of the total under an agreement with  the Securities Investor Protection Corp (SIPC), an insurance fund for securities customers that taps trustees like Giddens to liquidate failed brokers.  Giddens’ own rate is about $894 an hour, which incorporates a 10 percent reduction from his normal rate under the agreement with SIPC, according to the filing.  Giddens billed 424 total hours in the four months.

Some of the key partners on Giddens’ team have billed more hours.  James Kobak, who charged the same rate as Giddens, put in 749 hours, while bankruptcy partner Christopher Kiplok logged about 675 hours at $691 per hour.  The full team, which includes nearly 130 lawyers and another 28 paralegals, has racked up more than 43,000 hours, according to the fee submission.

A recent NLJ story, “Mattel Argues Huge Bratz Award was Built Upon Errors,” reports that the $310 million judgment against Mattel, Inc. in its long-running litigation against Bratz doll maker MGA Entertainment Inc. should be revered because it was based on inaccurate damages calculations and erroneous billing invoices from 11 law firms, Mattel argued in its latest appellate filing. 

The judgment includes nearly $140 million in attorney fees and costs, all but $2.5 million of which were related to MGA’s defense against claims that it infringed on Mattel’s copyright by hiring away the Bratz doll’s designer.  Mattel’s reply, filed with the U.S. Court of Appeals for the Ninth Circuit sets the stage for oral arguments on whether the $310 million judgment issued by U.S. District Judge David Carter in Santa Ana should be reversed or remanded for a new trial.

MGA, in opposing Mattel’s brief, said the award was justified against “one of the largest and most aggressively litigated cases ever tried in this Circuit.”  “Mattel launched litigation warfare to obliterate upstart MGA and seize MGA’s competing Bratz brand,” wrote attorney Clifford Sloan, a partner in the Washington office of Skadden Arps.  Sloan argued that the attorney fees and costs paled in comparison to the more than $400 million that Mattel reportedly spent on the litigation, which began in 2004.

In its reply, Mattel challenged the attorney fees, even after Carter subtracted $24 million from a total of $129 million that MGA purportedly spent on defending Mattel’s copyright claims.  “The district court’s mistaken assumption that MGA spent all $129 million on defensive fees infects it entire award,” wrote Kathleen Sullivan, a New York partner at Los Angeles-based Quinn Emanuel Urquhart & Sullivan.  She cited tens of millions in duplicative billings, discounts and work contracted out to other firms.  At a minimum, the fee award should be remanded for recalculation, with Mattel given the chance to review invoices that so far have been redacted, Sullivan wrote.

This week a WSJ article, “Should Lawyers Get Paid for a Win Without a Fight?” by Peg Brickley takes issue with large fee awards earned in securities class actions.  The answer to Peg’s question is…YES!

In her article, Peg takes issue with a handful of shareholder suits filed in Delaware’s Court of Chancery.  She asks weather plaintiffs’ lawyers representing shareholders deserve “hefty fees” for filing suits that resulted in quick changes to company bylaws.

“Attorney fee awards are determined, in part, by the results they achieve.  Is it any surprise that winning big settlements (and/or verdicts) earn big attorney fees?  Of course not, it's simple economics.  Because a settlement was achieved quickly only adds to the value of the case,” said Terry Jesse, Executive Director of NALFA.   “The efficient work of the plaintiffs’ lawyers resulted in benefits to shareholders; that should earn them significant compensation," Jesse concluded.

The Republican controlled Michigan House of Representatives introduced legislation that would limit attorney fee compensation in civil litigation.  The proposed law would restrict any attorney from contracting with a client on a contingency fee basis, if his/her fees exceed $1 million.

The 2-page legislation, House Bill No. 5702 (pdf), would cap attorney fees at $1 million for all personal injury and wrongful death cases.  The proposed legislation reads: “the attorney shall not receive, retain, or share a fee that is more than $1,000,000, regardless of the percentage of the amount recovered involved.”

"At NALFA, we are opposed to this legislation.  Two private citizens should be able to contract without government interference.  The right to contract is not only one of the principles of our free market economy, but it is one of the hallmarks of the attorney-client relationship," said Terry Jesse, Executive Director of NALFA.

A recent Jurist story, “Supreme Court to Consider Challenge to Attorney’s Fees,” reports that the U.S. Supreme Court granted certiorari in Marx v. General Revenue Corp. to determine whether a defendant may be awarded attorney’s fees in a Fair Debt Collection Practice Act (FDCPA) [15 USC § 1692] where the plaintiff brought the lawsuit in good faith. 

The FDCPA allows a court to award attorney’s fees “[o]n a finding by the court that [the] action…was brought in bad faith and for the purpose of harassment,” while the Federal Rules of Civil Procedure (FRCP) allow such an award “[u]nless a federal statute…provides otherwise.”  The U.S. Court of Appeals for the Tenth Circuit upheld the fee award, holding it was justified under the FDCPA and the FRCP.  CLICK HERE (pdf) to read the Tenth Circuit ruling.

Plaintiffs’ counsel, who negotiated a $3.2 billion settlement of securities claims against Tyco International, Ltd. in 2007 were awarded $464 million in attorney fees (or 14.5% of the settlement fund) and $28.9 million expenses from a federal court in New Hampshire.

After extensive discovery and litigation, the class reached a historic settlement with Tyco for $2.975 billion, the single largest payment from any corporate defendant in the history of securities class action litigation.  Plaintiffs’ class counsel include Grant & Eisenhofer, P.A., Milberg, LLP and Barroway, Topaz, Kessler, Meltzer & Check, LLP.

CLICK HERE (pdf) and CLICK HERE (pdf) to read court documents related to Tyco's Class Action Attorney Fee Award.

For more information, visit www.tycoclasssettlement.com

A recent Reuters Legal story, “Comments Oppose OCA Proposal on Fee Dispute Program” reports that the state Office of Court Administration (OCA) proposed preventing disbarred or suspended attorneys from participating in fee dispute programs.  Under the proposal, resolution of fee disputes involving attorneys facing disciplinary action would be delayed until the disciplinary proceedings were complete.  But a number of attorneys say the proposed rule change could harm clients and clog small claim courts with new cases.

The fee dispute program was created as an inexpensive and efficient to litigation for clients who feel they’ve been overcharged for legal services.  A number of attorneys, some of who arbitrate fee disputes, wrote in public comments that the proposal could block clients with legitimate cases from using the program and that an attorney’s misconduct is irrelevant unless it is directly related to a client’s fee dispute.

Louis Kash, Rochester attorney and chair of Monroe County Bar Association’s fee dispute program, said the proposal could steer some attorney-client fee dispute cases into the courts, which would undermine the purpose of the arbitration program.  Others took issue with the provision that would bar attorneys who are the subjects of open complaints from participating in the fee dispute programs.  Claims of professional misconduct are kept confidential until an attorney is formally disciplined, but the fee dispute rule, several people said, could force attorneys to out themselves as the subjects of complaints.

“The mere fact of a complaint is hardly compelling evidence that the lawyer actually engaged in misconduct,” wrote Richard Supple, the chair of the New York City Bar Association’s Professional Discipline Committee.  NYCBA opposes the proposed rule.  Under the current program, arbitrators are allowed to determine only whether a fee was reasonable and are barred by state regulations from considering “claims involving substantial legal questions, including professional malpractice or misconduct.” 

“Arbitrators understand that they cannot resolve issues of malpractice or other legal questions,” wrote Malvina Nathanson, an arbitrator with the New York County Lawyers’ Association’s fee dispute program.  “However, whether the fees were reasonable in terms of the services rendered can be determined without regard to malpractice.”

A recent Sun Herald story, “High Court: Legal Fees are Public Funds,” reports that the Mississippi Supreme Court ruled last today in two cases that legal fees paid to private lawyers to represent the state are public funds.  Justices said because the money belongs to the public, it should’ve been paid out to lawyers from the attorney general’s contingent fund or from other money appropriated to the attorney general.

In 2010, a Hinds County judge ruled the $14 million in attorney fees paid to two attorneys for handling a state lawsuit against telecommunications giant MCI was properly handled.  Another Hinds County judge ruled the same case in 2010 involving $10 million in attorney fees paid to lawyers for handling a state lawsuit against computer software maker Microsoft.

The Supreme Court rejected arguments from Mississippi Attorney General Jim Hood and the attorneys involved in the cases that the attorney fees were property of the lawyers, not the state.  The Supreme Court said the settlement funds paid by MCI and Microsoft belong to the state.  The court said state law clearly “mandates that outside retained by the attorney general can be paid only from the attorney general’s ‘contingent fund’ or from funds appropriated to the attorney general by the Legislature.”

“That is where it must be paid – and distributed,” wrote Presiding Justice Jess Dickinson.  “The statute does not allow direct payment of attorney fees.”  But Justice Jim Kitchens said the law firms had a valid contract with the state and were entitled to their fees being paid from the settlement.  Kitchen said a better approach would have been to submit all of the settlement proceeds to the attorney general, have him deposit them into his contingency account and then write a check to the law firms.

Hood said the private attorneys’ fees are part of the settlement of the lawsuit and should not be counted in the money the state receives.  Hood enters into contracts with private attorneys when his office does not have the expertise, resources, or staff to pursue the litigation.

CLICK HERE to read the Miss. Supreme Court decision

Today, Republican Governor Phil Bryant signed into law restrictions on the state’s use of outside, contingency fee lawyers.  The “sunshine” law would require all outside counsel representing the state to keep detailed time and expense records and limit contingency fee lawyers to a total fee of $50 million.

The law imposes hourly rates not exceed “recognized bar rates” (whatever that means).  The bill imposes strict limits on contingency fee awards.  Attorney fees are limited to 25% of a $10 million recovery, 20% for amounts between $10 million and $15 million, and only 5% for amounts over $25 million with a cap of $50 million.  The state will also establish an Outside Counsel Oversight Commission to review contingency fee contacts and require those contracts to be posted on the AG’s website.

Mississippi Attorney General Jim Hood’s office is considering challenging the constitutionality of the new law in court.  In a statement (pdf) Hood’s office projects the bill will cost the State about $11 million a year because the average private lawyer is paid $145 per hour and the AG only charges $65 per hour for the same services and that difference will be paid for by Mississippi taxpayers. The current system works. Over the past 7 years Jim Hood’s office has recovered over $500 billion for the taxpayers of the state and it did not cost the taxpayers a single dime. In addition, the law of the state already allows state agencies to file suit should the attorney general decline, or file suit even if the attorney general opposes such.

“Mississippi Attorney General Jim Hood is one of the most successful attorneys general in U.S. history. He was one of the first AGs to bring a suit against the tobacco companies. Throughout his career, he has taken on powerful industries such as insurance companies, big tobacco, and drug companies. Hood has tallied up record settlements against a host of corporate wrongdoers including Entergy, State Farm, MCI/World Com, and BP, thus securing hundreds of millions of dollars for Mississippians,” said Terry Jesse, Executive Director of NALFA.

A recent AM Law Daily story, “Tallying Up the TARP-Related Legal Fees Racked Up By AM Law Firms,” reports that the U.S. Department of Treasury’s Troubled Asset Relief Program (TARP) may have expired, but some of the initiatives that grew out of that massive federal effort to bail out ailing banks and cope with other financial crisis fallout live on.

Several AM Law 100 firms have amassed significant legal tabs over the past four years.  Treasury has a breakdown on those firms and the “obligated value” of their TARP contracts, which extend for various time periods between 2008 and 2015, through the procurement section of its FinancialStability.gov website.

Copies of contacts – which are mostly boilerplate agreements for legal advice on investments, asset-backed security deals, debt transactions, mortgage loan modifications, other mortgage-related issues, or restructuring matters visit http://www.treasury.gov/initiatives/financial-stability/procurement/Contracts/Pages/contract-detail.aspx

Cadwalader: $23,842,317

Simpson Thacher: $10,310,139

Hughes Hubbard: $5,293,856

Paul Weiss: $4,799,741

SNR Denton: $4,639,402

For more on this visit “Legal Fees Paid Under TARP Questioned”

A recent New Jersey Law Journal story, “Firm Wins $2.3M in Fees in Suit Over Insurance Coverage of Eating Disorders,” reports that Nagel Rice, LLP was awarded $2.3 million in attorney fees and expense for its work toward a $1.18 million settlement over insurance coverage for eating disorder treatments.  U.S. District Judge Faith Hochberg in Newark made the award to Nagel Rice based the recommendation of attorney fee expert Douglas Wolfson, who arrived at an adjusted lodestar of $1.57 million and an allowance of $112,505 for expenses.

That sum was reached after the deduction of $73,405 from records submitted by Nagel Rice for work that it admitted was excludable or what Wolfson found duplicative or related to its dispute with Mazie, Slater, Katz & Freeman.  Nagel Rice requested a lodestar multiplier of 1.4, citing the case’s complexity and amount of relief obtained, and Hochberg granted it, bringing the fee award to $2,196,580.  With expenses, the total comes to $2,309,086.

Fee expert Wolfson praised Nagel Rice’s efforts to pursue the litigation in an efficient manner, noting that of 32 depositions, only one was attended by two attorneys from the firm.  “Counsel’s avoidance of an excessive presence at depositions is in keeping with the best interests of the profession,” Wolfson said.  He gave careful attention to many instances when the firm’s attorneys conferred with each other.  But he concluded that such entries “simply reflected the fact that the suit was complicated, involving many complex issues…necessitating constant oversight by senior attorneys.”

The settlement, in Drazin v. Horizon Blue Cross Blue Shield of New Jersey, represents the spoils of a battle Nagel Rice waged with Mazie Slater.  The firms are the remnants of the former Nagel Rice & Mazie, which broke into two in a partnership dispute in 2006.  The firms each brought a series of nearly identical class actions against insurers over restrictions on eating disorder coverage, and hostility between the firms prevented consolidation of the cases.  The Drazin settlement provides $1.2 million in reimbursements from past denied claims, allows future claims to receive parity with treatment for biologically based mental disorders.

Hochberg instructed Wolfson to deduct time for fees or expenses that were incurred as part of the conflict between the firms and that did not confer a benefit on the class.  Mazie Slater sought 50 percent of the fees from the settlement, but Hochberg ruled the firm was not entitled to attorney fees.  She said it played no role in the recovery obtained for the class.  Mazie Slater has appealed that decision to the U.S. Court of Appeals for the Third Circuit.

A recent New Jersey Law Journal story, “Philips/Magnavox Settles Class Action Over Malfunctioning TVs for $4 Million,” reports that a federal court has given final approval to $4 million class action settlement that resolves consumer fraud claims against Philips/Magnavox over overheating plasma and liquid crystal display flat-screen televisions.  U.S. District Judge Claire Cecchi in Newark signed off Monday on the deal, which in addition to the cash gives class members an uncapped number of vouchers.  It also provides $1.575 million for the plaintiffs’ attorney fees and expenses.

The $1.575 million approved for attorney fees and expenses is based on a $2,101,955 lodestar, with a multiplier of 0.75.  Cecchi, noting that the sum did not include fees for the fairness hearing, said there was no reason to reduce the lodestar given the degree of risk and high quality representation and thus concluded that the $1.575 million fee request was reasonable.  It also pass muster under the percentage of recovery cross-check, given that the fees comprised 39 percent of the cash portion alone, that class counsel spent nearly 4,000 hours over three years working on a contingent basis and that it fit within the range of fee awards in comparable cases.

The consolidated complaint, In re Philips/Magnavox Television Litigation, was filed in Dec. 2009, on behalf of 14 plaintiffs from New Jersey, California, Texas, Florida and elsewhere who paid as much as $5,100 for a 50-inch model.  The action alleged that Philips Electronics North America Corp. knowingly sold Philips and Magnavox TVs with defective power boards. 

Class counsel were Andrew Friedman of Cohen Milstein Sellers & Toll in Washington, DC, Michael Schwartz of Horwitz Horwitz & Paradis in New York and Steven Schwartz of Chimicles & Tikellis in Haverford, Pa.

For more information, visit www.philipsplasmatvsettlement.com

A recent AM Law Daily report, “Facebook Lists $2.6 Million in Legal Fees Ahead of Friday IPO,” reports that when Facebook lists legal fees and expenses related to its hotly anticipated IPO at $2.6 million, according to a company filing with the SEC on Tuesday.  The estimated fees are a rough approximation and not a precise tabulation of invoices related to the myriad legal costs in bringing a company public. 

Fenwick & West chairman Gordon Davidson and securities group co-chair Jeffrey Vetter are leading a team from the firm representing Facebook, while Simpson Thacher & Bartlett corporate partners William Hinman Jr. and Daniel Webb in Palo Alto are advising underwriters on the IPO led by Morgan Stanley, Goldman Sachs, Bank of America/Merrill Lynch, Barclays Capital, and JPMorgan Chase.

Fenwick represented the company on its April acquisition of photo-sharing service Instagram for $1 billion, as well as on its $550 million purchase of what had been AOL patent portfolio from Microsoft late last month.  In previous years, Fenwick also handled Facebook’s purchase of London-based mobile application developer Snaptu and a $200 million investment in Facebook by Russia’s Digital Sky Technologies.

A recent NLJ story, “Volkswagen Challenges Fee Award Method in MDL Settlement,” reports that an award of $30 million in attorney fees and nearly $1.2 million in costs to plaintiffs’ lawyers who worked on multidistrict litigation came under fire at the U.S. Court of Appeals for the First Circuit on May 10.  Volkswagen claimed that the district court should have used the lodestar method.  Instead, the court used the percentage-of-the fund method.  Volkswagen said if the lodestar method was used, the plaintiffs’ fee award would have been $7.7 million.

The underlying litigation concerned oil-sludge damage to Volkswagen cars.  A special master settlement specialist estimated the value of settlement at about $223 million for a potential class of about $480,000 cars.  The settlement included oil changes and extended warranties.  Three firms were leading plaintiffs class counsel and parties to the appeal, Volkswagen Group of America Inc. v. Peter J. McNulty Law Firm.  They were the McNulty Firm, Denver’s Irwin & Boesen and Philadelphia’s Berger & Montague.

Volkswagen claimed that the New Jersey fee-shifting statute, which state’s courts have said requires use of the lodestar method, should have applied.  New Jersey state law governs the attorney fee calculations because the case centers on alleged violations of the New Jersey Consumer Fraud Act.  Volkswagen also noted that the agreement does not language that would create an entitlement to fees independent of the fee-shifting statute.  The agreement stated that the fee calculation “shall not…be derived” from the benefits awarded to the class, so applying the percentage method was inappropriate, Volkswagen claims.

The McNulty firm argued that, under well-settled principles of class action law, courts have discretion when awarding attorney fees.  The firm also disputed that it fees were awarded under New Jersey’s Consumer Fraud Act.  Instead, its brief stated, fees “were asserted on numerous theories, including breach of contract, breach of implied warranty of merchantability, unjust enrichment, declaratory judgment under federal law, and violations of the consumer fraud statutes of several states.”  The court “properly used lodestar methodology solely as a cross check of the reasonableness of its award,” stated the McNulty firm in its brief.

The McNulty firm further claimed that Volkswagen’s agreement to pay fees was part of the settlement and “memorialized in the class notice.”  Class counsel agreed in a lower court hearing not to seek more than $37.5 million in fees and about $1.8 million in costs.

A recent New York Law Journal story, “Judge Backs Firm’s Demand for $414,000 in Fee Dispute,” reports that Manhattan Supreme Court Justice Joan Madden has ruled that Emery Celli Brinkerhoff & Adaby is due more than $414,000 in attorney fees from a disgruntled client who contended the law firm mishandled the accounting of a stock transfer transaction and other matters in what became an acrimonious attorney-client relationship.  She ruled that the “account stated rule,” in which a client pays part of a bill is generally deemed to have accepted the entire billing as valid. 

In Emery Celli Brinckerhoff & Adaby v. Michael Rose, Madden said she agreed with Emery Celli’s contention that the account stated rule makes Rose liable for the outstanding legal bills.  She ruled that Rose cannot invoke legal malpractice as a defense against account stated in this matter because he failed to show how Emery Celli had actually committed malpractice.

Rose hired Emery Celli for an initial retainer of $50,000 and the law firm agreed to bill the real estate company for the hourly service of its attorneys thereafter.  Emery Celli said it represented Rose or Broadside Realty in three subsequent suits stemming from Rose’s efforts to gain control of the company.  In April 2008, Emery Celli negotiated a settlement with the other shareholders under which Rose would get back all outstanding stock for $12 million.  Emery Celli alleged that Rose, after some sporadic payments to the law firm, stopped payments altogether in 2009.

Richard Emery said yesterday in an interview that the ruling is “especially appropriate in light of the fact that we achieved success for our client, who then decided not to pay us.”

A recent AM Law Daily story, “Court Slashes Baker & Hostetler Fees in Maine Redistricting Litigation,” reports that a three-judge panel has ruled that the attorney fees by lawyers for plaintiffs in a suit that forced the redrawing of Maine’s two congressional district lines should be cut by about 53 percent, from roughly $150,000 to about $70,400.  The lawyers in question – Timothy Woodcock of Eaton Peabody and four Baker & Hostetler attorneys, including election law counsel E. Mark Braden—represented William Desena and Sandra Dunham who sued the state of Maine, Governor Paul LePage, three other state officials, and the state’s Bureau of Corporations, Election and Commissions in March 2011.

The plaintiffs and defendants agreed on the constitutionality issue at the heart of the suit, but the question of what legal fees and expenses the plaintiff and their counsel could recover as the lawsuit’s prevailing party was much more contentious.  Plaintiffs counsel asked for about $150,000 in fees and expenses, broken down as follows: about $41,200 for Woodcock and his paralegal, $6,200 for data analyst Clark Bensen, and approximately $103,000 for Baker and Hostetler attorneys, including about $25,000 for redistricting litigation veteran Braden.

The defendants balked at the fee request, claiming the request was excessive and constituted overstaffing and redundancies.  The defendants argued that the associates only deserved to get $175 an hour, the prevailing rate in Maine for a similarly credentialed attorney.  Taking all their objections into account, the defendants asked the court to reduce the plaintiffs’ request for fees and costs from about $150,000 to $47,200.  In the end, the three-judge panel didn’t cut quite that much.  In their March 21 order, the judges ruled the plaintiffs’ lawyers were entitled to only $70,400 of the requested amount, because the “plaintiffs’ overall staffing pattern was excessive, resulting in the billing of duplicative and unproductive hours.”

A recent NLJ story, “$7.8 Billion BP Settlement Wins Judge’s Preliminary OK,” reports that a federal judge gave preliminary approval to a settlement between BP PLC and individuals and businesses that suffered economic harm or medical costs associated with the Deepwater Horizon oil spill – and clarified that BP, and not the claimants themselves, would pay the lawyers who spearheaded the litigation.  In approving the deal, estimated to be worth $7.8 billion, U.S. District Judge Carl Barbier rejected nearly a dozen objections by parties including Halliburton Energy Services Inc., which is a remaining defendant in the MDL over the spill, and the states of Mississippi and Florida.

“The Court preliminarily and conditionally finds, for settlement purposes only, that the terms of the Proposed Settlement are sufficiently fair, reasonable, adequate, and consistent with governing law,” Barbier wrote.  “At this stage, the Settlement Agreement appears fair, has no obvious deficiencies, doe not improperly grant preferential treatment to the Class Representatives or to segments of the Class, and does not grant excessive compensation to attorneys.”

He noted some unusual terms in the deal – primarily, that claims be paid ahead of final settlement approval and that BP, not the class members, would be responsible for paying the plaintiffs steering committee’s attorneys fees and costs, referred to as “hold back” fees.  In a subsequent order on May 3, Barbier clarified that no “hold back” fees would be deducted from settlement payments.  Plaintiffs would still be responsible for paying their individual attorneys.

A recent article by Adam Freed of Los Angeles-based Proskauer Rose, “California Supreme Court Denies Fee-Shifting on Meal and Rest Period Claim,” reports that the California Supreme Court issued its decision in Kirby v. Immoos Fire Protection, Inc. (pdf), holding that attorney fees may not be awarded under California Labor Code § 218.5 to a party that prevails on a claim for meal and rest break violations.  Section 218.5 provides that attorney’s fees are to be awarded to the prevailing party “[i]n any action brought for the nonpayment of wages…” (thus, a two-way fee-shifting statute, awarding fees whether one is the plaintiff or defendant).  However, the statute exempts from its scope any action for which attorney’s fees are recoverable under Labor Code § 1194, which entitles prevailing employees to attorney’s fees in an action for any unpaid “legal minimum wage or…legal overtime compensation.”

Here, the defendant moved for attorney’s fees under section 218.5 upon plaintiffs’ dismissal of their meal and rest break causes of action.  Thus, the Court set out to determine two questions: (i) whether meal and rest break claims fall within the ambit of section 1194 and are thereby excluded from section 218.5 attorney’s fees and, if not (ii) whether section 218.5 authorizes an award for meal and rest break claims.  Justice Liu, writing for a unanimous Court, held that while section 1194 does not apply to meal and rest break claims, such claims are not authorized by section 218.5.  As such, the Court reversed the Court of Appeal’s decision affirming attorney’s fees for the defendant.

The Court first determined that neither the text nor the history of section 1194 indicated that the statute is meant to refer to anything other than “ordinary minimum wage and overtime obligations,” which do not encompass meal and rest break claims.  Second, the Court found that an employer’s alleged failure to provide meal and rest periods does not constitute an “action brought for the nonpayment of wages” within the meaning of 218.5.  While the Court acknowledged defendant’s argument that the remedy for meal and rest has been interpreted to constitute “wages,” the Court held that section 218.5 envisions an action on account of the nonpayment of wages, not an action for which the remedy is a wage.

A recent NLJ story, “Huge Award was Justified by Mattel’s Scorched-Earth Tactics, MGA Argues” reports that MGA Entertainment Inc. told an appellate court that the $310 million judgment it won against competitor Mattel Inc. in the Bratz doll litigation was justified against “one of the largest and most aggressively litigated cases ever tried in this Circuit.” 

The $310 million judgment included an $85 million verdict, $85 million in exemplary damages, and nearly $140 million in attorney fees and expenses, most of which related to MGA’s successful defense against claims that it infringed on Mattel’s copyright by hiring away the Bratz doll’s designer.  Mattel, in petitioning the U.S. Court of Appeals for the Ninth Circuit, called the judgment “the largest copyright fee award in history.”

Clifford Sloan, a partner in the Washington office of Skadden Arps noted that U.S. District Judge David Carter actually excluded $24 million before awarding the attorney fees and costs related to the copyright claim.  “The amount that the district court awarded, $105.6 million in attorney’s fees and $31.6 million in costs, is a small fraction of what was at stake for MGA in this suit and what the litigation has cost, and it pales in comparison to the more than $400 million that Mattel reportedly spent on its prolonged litigation warfare against MGA,” he wrote.

A recent Texas Lawyer story, “Firm at War Over $10 Million Contingency Fee in Patent Suit,” reports that The Matthews Firm has sued Laminack, Pirtle & Martines and two clients they jointly represented, alleging Laminack, Pirtle and the clients refused to recognize The Matthews Firm’s interest in a contingency fee arising from a nearly $50 million judgment.  Fred Hagans, who represents the plaintiff in The Matthews Firm v. Laminack, Pirtle & Martines, et al., says his client is entitled to about $10 million.

The plaintiff, a Houston firm that handles intellectual property work, brings breach of contract and quantum meruit causes of action against the defendants and seeks a declaratory judgment that it is entitled to a 22.5 percent fee in the underlying case.  But Rick Laminack, a partner in Houston’s Laminack, Pirtle, says he’s surprised The Matthews Firm sued his firm and its client over the contingent fee, since the underlying suit, Wellogix Inc. v. Accenture, is on appeal before the 5^th U.S. Circuit Court of Appeals.

In February 2009, The Matthews Firm alleges, Wellogix hired Laminack, Pirtle to pursue litigation against specific parties related to alleged improper use of some software.  Wellogix’s contract with Laminack, Pirtle calls for 40 percent of any settlement or recovery made after litigation is filed against alleged improper users, and 45 percent if a notice of appeal is filed in the suits.

CLICK HERE to read the Matthews petition.

A Washington, DC-based tort reform lobby group, American Tort Reform Association (ATRA), wrote legislation that would limit Mississippi Attorney General Jim Hood’s power to hire outside lawyers.  The legislation, H.B. 211 (pdf), would allow state agency heads to hire private attorneys instead of relying on the AG’s office to represent their interests, as well as requiring attorneys who bill the state for more than $100,000 to have those amounts published.  The bill also requires outside counsel to keep detailed records of the time spent working on cases and expense reports.

“Mississippi Attorney General Jim Hood is one of the most successful attorneys general in U.S. history.  He was one of the first AGs to bring a suit against the tobacco companies.  Throughout his career, he has taken on powerful industries such as insurance companies, big tobacco, and drug companies.  Hood has tallied up record settlements against a host of corporate wrongdoers including Entergy, State Farm, MCI/World Com, and BP, thus securing hundreds of millions of dollars for Mississippians,” said Terry Jesse, Executive Director of NALFA.

In a statement (pdf), Hood’s office said the bill is unconstitutional.  Hood’s office projects the bill will cost the State about $11 million a year because the average private lawyer is paid $145 per hour and the AG only charges $65 per hour for the same services and that difference will be paid for by Mississippi taxpayers.  The current system works.  Over the past 7 years Jim Hood’s office has recovered over $500 billion for the taxpayers of the state and it did not cost the taxpayers a single dime.  In addition, the law of the state already allows state agencies to file suit should the attorney general decline, or file suit even if the attorney general opposes such.

A recent AM Law Daily story, “As Lehman Exits Bankruptcy, Weil’s Tab Stands at Nearly $383 Million,” reports that Weil, Gotshal & Mange’s business finance and restructuring group has been busy the past three years with Chapter 11 cases for fallen financial service giants Lehman Brothers and Washington Mutual.  In March, Lehman Brothers emerged from bankruptcy more than three years after the abrupt collapse of the New York-based investment banking giant in Sept. 2008 forced Weil to help one of the biggest clients quickly put together the largest Chapter 11 case in U.S. history.

A monthly operating report filed by the Lehman estate with the SEC shows that its total bankruptcy bill for outside lawyers, accountants, and other restructuring professionals reached almost $1.6 billion, not too far off the $1.4 billion that Bloomberg estimated it would pay external advisers three years ago.  Of that amount Weil has been paid nearly $383 million in fees and expenses through January—the firm billed another $7.4 million that month—for its work as lead debtor’s counsel.

Milbank, Tweed, Hadley & McCloy, lead counsel to Lehman creditors, has received almost $133.7 million in fees and expenses for its work.  Lehman’s special litigation counsel Jones Day ($61.2 million). Conflicts counsel Curtis Mallet-Prevost, Colt & Mosle ($42.5 million), and special tax counsel Bingham McCutchen ($21 million) have also reaped the rewards of landing roles in the Chapter 11 case, which has seen more than 30 law firms bill the bankruptcy estate.

A recent AM Law Daily story, “When It Comes to Billing, Latest Rate Report Shows the Rich Keep Getting Richer,” reports that hourly rates just keep rising—and the best paid lawyers are rising their rates faster than everyone else.   Those are two key findings contained in the 2012 Real Rate Report, an analysis of $7.6 billion in legal bills paid by corporations over a five-year period ending in December 2011.  The report, released Monday, is the second such collaboration between TyMetrix, a company that manages and audits legal bills for corporate legal departments and the Corporate Executive Board.

Many of the new rate report’s findings echo those contained in the 2010 study, including the fact that rates keep going up, almost across the board, and that the cost of a given matter can very dramatically depending on a law firm’s size and location and its relationship with a particular client.  At the same time, this year’s study shows the legal sector is becoming increasing bifurcated, with top law firms rising rates faster than those at the bottom of the market and large firms changing a premium price based purely on their size.

“It’s no surprise that defense fees have ticked up,” said Terry Jesse, Executive Director of NALFA.  “The rates are keeping in-line with the demand, especially for the very best in the field.  Generally speaking, I would expect rates to rise less rapidly and/or and increase in alternative fee arrangements in both transactional and litigation matters when demand levels off,” Jesse concluded.

A recent Texas Lawyer story, “Firm Vows Appeal After $4 Million Judgment in Fen-Phen Fee Fight,” reports that a battle between plaintiffs firms over fen-phen attorney fees wrapped up on March 23 in a state district court in Houston.  Dan Barton, The Barton Law Firm and The Johnson-Barton Joint Venture secured a nearly $4 million judgment in a breach of contract suit against Fleming, Nolan & Jez.  G. Sean Jez, a partner in Fleming Nolan in Houston says, “We will be filing an appeal.”

The breach of contract suit stems from a dispute over attorney fees some fen-phen cases the plaintiffs had referred to what was then Fleming & Associates under a 2002 litigation contract.  The underlying fen-phen suits settled by 2006.  The plaintiffs filed the petition in Daniel P. Barton, et al. v. George Fleming et al. in August 2009.  The plaintiffs alleged Fleming & Associates and George Fleming had breached a contract by deducting expenses, not specifically listed in the 2002 contract, from their share of fees.  In the petition, the plaintiffs brought breach of contract and promissory estoppels causes of action and sought damages as well as attorneys’ fees.

District Judge Sylvia Matthews granted the plaintiffs summary judgment on the breach of contract claim.  Because of that ruling, plaintiffs’ attorney Fred Hagan says, the plaintiffs subsequently dropped the promissory estoppels cause of action.  According to the March 23 judgment, the following took place in the litigation before the trial: On Sept. 6, 2011, Matthews granted in part a summary judgment motion ordering Fleming & Associates to pay $2.6 million in damages to the plaintiffs.  On Dec. 29, 2011, she granted another summary judgment motion and ordered Fleming & Associates to pay the plaintiffs $305,000 in certain reimbursements expenses and attorneys’ fees.

A trial began on Feb. 27.  On March 1, a jury issued a verdict awarding the plaintiffs $790,000 in attorneys’ fees for litigation of the Barton suit and a possible additional $130,000 for appeals.  Hagans, a partner in Houston’s Hagan Burdine Montgomery & Rustay who represents the plaintiffs in Barton, says the fen-phen clients the plaintiffs referred to Fleming & Associates constituted about 2,000 of the 8,000 clients whose suits Fleming & Associates handled.

A recent Metropolitan News story, “C.A. Tosses Ruling Allowing Client to Cut Lawyer Out of Fee Award,” reports that an attorney who represents the prevailing plaintiff in a wage-and-hour case is entitled to have fees awarded to the lawyer personally, rather than the client, unless the parties’ fee agreement is to the contrary, the Court of Appeals ruled.  Div. Three overturned Los Angeles Superior Court Judge Mary H. Strobel’s denial of a motion to allow attorney Henry M. Lee to personally enforce the $300,000 fee award he received for representing Ok Song Chang in a suit against A-Ju Tours, Inc.  The court ordered the trial judge to determine whether the fee agreement between Lee and Chang bars Chang from enforcing the award in his own name.

The plaintiff was awarded $62,000 in unpaid wages and penalties.  The fee award was added on motion filed by Lee, but before a writ of execution could be enforced, the defendant obtained an ex parte stay and a hearing was scheduled in order to determine whether the undertaking filed by defendant was sufficient to stay the fee award.  The plaintiff fired Lee, and substituted herself in propria persona, apparently in order to settle with A-Ju directly.  Lee then moved to amend the judgment to provide that attorney fees were awarded to, and could be enforced by, him personally.  The judge denied the motion and Lee appealed the ruling.

Justice Walter Croskey wrote for the court, which rejected arguments that Lee lacked standing and that the case was inappropriate for writ relief.  “Lee’s claim that the fee award should be made payable to him rather than Chang must be resolved before the appeal from the fee order proceeds any further so that he may have an opportunity to participate as a respondent in that appeal if he is successful on his claim,” the justice said.

“Construing Labor Code sections 1194, subsection (a) and 226, subsection (e) as requiring the payment of a statutory attorney fee award to the litigant rather than to the attorney, absent a contract providing for a different disposition of an attorney fee award, would diminish the certainty that attorneys who undertake such litigation will be fully compensated, contrary to the legislative intent of encouraging counsel to prosecute such litigation,” the justice said.

The published ruling is Henry M. Lee Law Corporation v. Superior Court (Chang) (pdf).

A recent WSJ Law Blog story, “First Circuit Lifts Ban on ‘Attorney Fee-Only’ Bankruptcy Plans” reports that the paradox in personal bankruptcy is that you need a lawyer to help you through it, in many cases.  Lawyers have to get paid, but sometimes debtors don’t have the cash up front, and the Supreme Court has said that attorneys’ fees are not payable from estate funds in Chapter 7 proceedings, except in very limited circumstances.

In recent years, lawyers have come up with a workaround: Chapter 13 proceedings.  If Chapter 7 is the conventional, and often speedy, course when an individual has debts that dwarf his income and assets, Chapter 13 is the road less traveled.  It’s longer (a minimum of 36 months) and allows a debtor to discharge debts over time, as long as the court approves his plan for satisfying some of his creditors.

In a case before the Boston-based U.S. Court of Appeals for the First Circuit, a debtor couldn’t afford to pay his attorney up front for Chapter 7 proceedings, so the attorney suggested his client apply for Chapter 13 protection.  Under the proposed plan, the debtor would pay into the bankruptcy estate $100 per month for 36 months.  Of that, only about $300 (or about 2% of the roughly $15,000 owed) would be available to general creditors.  The attorney would get the lion’s share ($2,900), while the rest would cover the trustee’s fees.

It’s known as a “fee-only” plan, and the bankruptcy court rejected it.  So did the federal district court, ruling that such arrangements were verboten.  The First Circuit, the first federal appellate court to weigh the issue, said that an outright ban on “fee-only” plans was wrong as a matter of law.  The First Circuit panel was adamant that the plans should only be used in exceptional circumstances, noting that they may be “vulnerable to abuse by attorneys seeking to advance their own interests without due regard for the interests of debtors.”

A recent Texas Lawyer story, “Patton Boggs Alleges It’s Unpaid By Upaid,” reports that Patton Boggs has filed a breach of suit against former client Upaid Systems Ltd., alleging the British Virgin Island company owes it more than $3.1 million in unpaid legal fees and expenses, a 15 percent share of the settlement of a patent infringement suit and interest.  According to the complaint (pdf) filed in the Eastern District of Texas, “Upaid has materially and repeatedly breached its obligations under the Engagement Agreement by failing to pay the Patton Boggs invoices for agreed monthly fees, costs and expenses, by failing to pay the contingency fee due upon the settlement moneys, and by failing to pay interest on the unpaid amounts as agreed.”

John Ward Jr., a partner at Ward & Smith who represents Patton Boggs said, “It’s an unusual set of circumstances.  It’s unusual that clients stiff their lawyers after a good result.”  In its complaint in Patton Boggs LLP v. Upaid Systems Ltd., the firm alleges the following: Upaid retained Patton Boggs lawyers in May 2007 to represent Upaid in a fraud and patent infringement suit it had filed in the Eastern District of Texas against Satyam Computer Services Ltd. 

As alleged, the firm’s engagement agreement with Upaid called for the partners to reduce their billing rates by 40 percent and for Upaid to pay a “success fee” of 15 percent of the gross of “any damages award or settlement payment.”  The agreement also specified that invoices should be paid in full within 30 days of receipt to avoid a 1 percent per month late charge.  In February 2009, Patton Boggs alleges, Upaid paid only a portion of an invoice and “made no payments thereafter.”  The firm alleged the Upaid “induced” it to continue working on the litigation by “promise of payment.”

Patton Boggs alleges that while Upaid had been delinquent in paying invoices since mid-2009, it subsequently used t he firm for legal services from time to time, and delinquent billings now total $3.1 million.  In addition to damages for breach of contract, Patton Boggs seeks a declaratory judgment that it is entitled to the “full amount” of its contingency fee, including 15 percent of any future settlement money paid to Upaid from Satyam.  It also seeks attorneys’ fees and costs.

A recent NLJ story, “MLB wants Dodgers to Cover League’s Legal Costs in Team’s Bankruptcy” reports that the settlement between Major League Baseball and Los Angeles Dodgers owner Frank McCourt didn’t resolve all their difference: Baseball Commissioner Bud Selig now wants the league’s $7.6 million in legal bills and costs paid for by the team before it emerges from bankruptcy.  The Dodgers filed for Chapter 11 protection last year.

On March 20, Dodgers counsel Donald Bowman, an attorney at Young Conaway Stargatt & Taylor in Wilmington, Del., filed a notice declaring that the team owes no money on contracts, leases or other agreements with Major League Baseball that the Dodgers must assume under the reorganization plan.  Attorneys for the league filed an objection, saying that under the Major League Constitution, the Dodgers are liable for all “fees, costs and expenses incurred by [the league] associated with disputes and litigation between [the team] and [the league] including, without limitation, those arising from enforcement of the Baseball Agreements.”

The league cited $115,110 in legal fees, costs and expenses charged in anticipation of the team’s bankruptcy filing.  Of that, White & Case, the league’s lead counsel in the bankruptcy, charged nearly $3700.  Proskauer Rose, which served as general counsel to the league before the filing, handling labor and employment matters including collective bargaining agreements, charged $111,437.  After the filing, the league racked up another $7.78 million in professional fees and expenses.  Of that, $7.5 million was for legal fees and costs.

“As is made clear in its previous filing on this matter, the debtor does not owe MLB the fees in question,” insisted Robert Siegfried, spokesman for the Dodgers, in a prepared statement.  The Dodgers are expected to file their response to the league’s filing.  Of the legal fees associated with the bankruptcy proceedings, White & Case charged more than $6.15 million and Proskauer Rose charged nearly $888,000.  Longtime league counsel Paul Weiss charged almost $235,000 to review bidder application and other agreements, and Fox Rothschild, the league’s Delaware counsel, billed $231,200.  The fee dispute now goes before retired U.S. District Judge Joseph Farnan, the mediator in the case.

On March 22, 2012, the U.S. House passed a measure to limit attorney fees in medical malpractice cases.  The legislation, H.R. 5 (pdf), passed on a largely partisan 223-181 vote.  In addition to limiting contingency fees for lawyers, the legislation would cap awards in medical malpractice claims for pain and suffering at $250,000 in most states.

“Republicans say they support our free enterprise system, yet they want to limit what attorneys can earn in medical tort cases,” says Terry Jesse, Executive Director of NALFA.  “We are opposed to legislative efforts to cap attorney fee awards in tort cases.  In our civil justice system, judges should determine reasonable fee awards, not politicians,” Jesse concluded.

A recent AM Law Daily story, “Sidley, Chadbourne Claim Crown as Tribune Bankruptcy’s Biggest Billers” reports that, according to court filings, two of the more than 20 law firms paid by the Tribune estate since the company’s Chapter 11 case began in December 2008 have racked up a combined total of roughly $111 million in fees and expenses in that time.  Lead debtor’s counsel Sidley Austin has been paid almost $69 million, while Chadbourne & Parke, lead counsel to the company’s creditors’ committee, has received $42.2 million.

The amount paid to the two law firms is roughly half the $233.3 million paid by the Chicago-based media company – which was purchased in an ill-fated $8 billion leveraged buyout in 2007 – to outside lawyers, accountants, and other professional advisers after entering bankruptcy.  A service list for the Tribune bankruptcy shows that attorneys from nearly 100 firms are representing clients in the case.  Stuart Maue, who court records show has been paid $1.9 million for its work on the case, has been appointed as fee examiner in the proceedings.

Other firms receiving payments from Tribune include:

Zuckerman Spaeder, Special Litigation Counsel: $11.8 Million

McDermott Will & Emery, Special Counsel: $10 Million

Landis Rath & Cobb, Delaware Counsel to Creditors’ Committee: $5.5 Million

Dow Lohnes, Special Regulatory Counsel: $4.1 Million

A recent Atlanta Journal-Constitution story, “Legal Fees Add Up as Water Litigation Stretches On and On” reports that the State of Georgia and the Atlanta Regional Commission (ARC) have spent about $18.7 million in outside legal fees in a two decades long tri-state water wars negotiating and litigating to preserve metro Atlanta’s access to drinking water from Lake Lanier.  This spending is viewed as critical to protecting the area’s economic viability, as a shortage of drinking water, by some estimates, would cost the local economy billions annually.

The balk of the $8.5 million in fees Georgia has paid to outside attorneys has gone to the Atlanta firm of McKenna Long & Aldridge.  The balk of the $10.3 million in legal fees ARC and five water agencies joining it in the suit have paid in legal fees has gone to Atlanta’s firm King & Spalding.  The state and the ARC have split the $1.3 million paid lead attorney, Seth Waxman, and his Washington, DC firm, WilmerHale, since they joined the case in 2009.  Of that, Georgia paid about $680,000, and the ARC and six metro water authorities paid about $600,000.

In the underlying litigation, the 11^th Circuit overturned a decision by U.S. District Judge Paul Magnuson that would have cut off metro Atlanta’s access to Lanier’s water supply.  That ruling said the U.S. Army Corp of Engineers, which manages the lake, doesn’t have the authority to manage it as a water supply.  The three-judge panel ruled unanimously that the Army Corp of Engineers has authority to allocate additional water from Lake Lanier.  Florida and Alabama appealed that ruling to the U.S. Supreme Court.

Now, with the meters running, ARC attorneys are preparing a brief to argue against theat appeal.  Patricia Barmeyer, King & Spalding’s lead attorney said, who has been on the case since 1999, said the state has no choice but to defend itself after Alabama fired the first shot filing a federal lawsuit against Georgia in 1990.  Years of litigation lie ahead with too many legal issues remain unresolved.

A recent Thomson Reuters story, “Legal Fees Take Mound in Madoff-Mets Case” reports that in a trial over whether owners of the New York Mets turned a blind eye to Bernard Madoff’s Ponzi scheme, jurors are expected to hear about fabulous fortunes.  But Irving Picard, the court-appointed trust, has sought an order to exclude any evidence concerning the more than $275 million in fees that the army of lawyers at his firm, Baker & Hostetler, racked up in their effort to recoup money for Madoff’s victims.

In his request, Picard anticipates that lawyers for the Mets owners will raise the legal fee issue.  He argues that the fees are irrelevant to the trial and could unfairly prejudice the jury against him.  U.S. District Judge Jed Rakoff, who will oversee the trial has yet to rule on the order.  Picard is seeking more than $300 million in principle the Mets’ owners invested and recouped in the two years before Madoff’s 2008 arrest.  In addition, Picard also is seeking to claw back $83.3 million in “fictitious profits” that the Mets earned in their accounts as a result of Madoff’s scheme.

Since bankruptcy-related cases are rarely heard by juries, the fees made by the trustee are not often an issue of contention before trial, according to legal experts.  The Mets case could be a rare case in which a jury learns just how lucrative trusteeship work can be.  In its most recent fee application made to the bankruptcy court overseeing the Madoff case – which covered the period from June 1, 2011, through Sept. 30, 2011 – Picard and Baker & Hostetler sought nearly $48 million.

According to the fee application, Picard billed 674.7 hours at an hourly rate of $850 for a total of $573,495.  David Sheehan, another Baker & Hostetler partner and the lead attorney for Picard, billed 877.9 hours, also at $850 an hour, for a total of $746,215.  It’s not known how much Picard has personally received for his work on the Madoff case.  The federal court case is Picard v. Katz, U.S. District Court, Southern District of New York.

A recent NLJ story, “Despite Quibbles, Plaintiffs’ Firms Like Estimate of Bluetooth Fees” reports that plaintiffs’ attorneys in the Motorola Bluetooth headset litigation, whose fees a federal appeals court last year deemed potentially excessive, have agreed to a revised calculation submitted by defense attorneys that actually boosts the original award.  The original settlement called for $800,000 in attorney fees.  But the U.S. Court of Appeals for the Ninth Circuit ruled that U.S. District Judge Dale Fischer had failed to adequately test whether the fees were excessive.  On Feb. 22, defendants, reviewing the bills of seven plaintiff firms at Fischer’s request, estimated that attorneys had performed more than $1.3 million in justifiable work.

Under the original settlement, the plaintiffs’ attorneys had estimated their fees at $1.6 million and cut that figure in half.  The defendants’ latest figure would represent a discount on the actual work done of 40 percent.  The revised calculation represents an estimate of reasonable fees but not a new award for the plaintiffs’ firms.  Fischer has not ruled on the effect such a lodestar would have on the settlement. 

In reviewing the plaintiffs-side fees, the defense slashed $333,667 for what it deemed inappropriate “block billing” and unreasonable amounts of time or numbers of people devoted to certain work.  In total, the defense concluded that the plaintiffs’ firms billed $1,330,185 in reasonable fees between April 1, 2006 and July 31, 2009.

“We are accepting defendants’ number,” said Daniel Warshaw, a partner at Sherman Oaks, Calif.-based Pearson, Simons, Warshaw & Penny, who filed the plaintiffs’ response.  “Because class counsel’s lodestar substantially exceeds the fee award, Plaintiffs do not ask the Court to conduct an accounting and check every dollar Defendants propose cutting,” Warshaw wrote.  “In any litigation involving coordinated proceedings, class counsel acknowledges that inefficiencies exist.

At the same time, Warshaw pointed to what he described as numerous “errors” in the defense calculation.  For example, the defense concluded that the Wyly-Rommel of Texarkana, Texas hadn’t provided descriptions of the tasks performed by its attorneys, and therefore argued for cutting 30 percent across the board from its fee request.  In fact, Warshaw wrote, the firm’s declaration included 61 pages of detailed time entries.

In today’s litigation practice, the economics of attorney fees has never been more important.  Attorney fee litigation is at unprecedented levels.  More and more law firms are suing former clients to collect unpaid legal bills and more clients are suing law firms for overbilling claims than ever before.  That, added with the rise of “loser pays” fee-shifting litigation, the growing body of court awarded attorney fee jurisprudence, attorney fees themselves have become a highly specialized practice area.

NALFA announces a first-of-its-kind practice group specifically devoted to attorney fee issues, The Attorney Fee Practice Group.  The Attorney Fee Practice Group is a highly specialized, niche practice area within the legal profession dedicated to attorney fee and legal billing matters.  Members of the Attorney Fee Practice Group are retained by law firms and clients when attorney fees are at issue.  Members of NALFA’s Attorney Fee Practice Group are qualified attorney fee experts, fee dispute arbitrators, and legal bill auditors.

Our attorney fee experts are retained by some of the nation’s top law firms to provide expert reports, opinions, and testimony on the reasonableness of attorney fees in large, complex underlying litigation and transactional matters.  Our fee experts are retained by attorneys to both support or challenge fee requests in court.  As fact-finders, trial judges have relied on, and often cite our fee experts favorably in their fee award rulings.  Our fee experts can provide fee-seeking lawyers the prevailing market knowledge to succeed in court, including, but not limited to:

Reasonable, Prevailing Market Rates
Reasonableness of Hours Billed
Customary Law Firm Billing Practices
Billing Judgment
Amount at Stake in Underlying Case vs. Amount of Legal Fees Spent
Novel, Complex, or Unusual Legal Issues in Underlying Case
Successful Results Obtained for the Client
Skill, Experience and Reputation of Law Firm
Efficient Litigation Management Practices

A recent The Recorder story, “Justice Grapple with Attorney Fee Awards in Rest Break Suit,” reports that after wading into the latest wage-and-hour suit, the state Supreme Court sounded wary of allowing the winning side to recover attorney fees in suits over missed breaks.  In Kirby v. Immoos Fire Protection, a Sacramento Superior Court judge awarded fees to the defendant after the plaintiffs failed to win class certification and dropped the suit over rest breaks against Immoos Fire Protection.  The Third District upheld the award.

The plaintiffs argued in court Tuesday that rest breaks suits like the one they brought should be governed by the Labor Code Section 1194, which concerns suits for overtime and minimum wage violations and only allows plaintiffs to recover attorney fees.  Mark Peters, a partner at plaintiffs firm Duckworth, Peters, Lebowitz, Olivier LLP in San Francisco, said the court might end up “splitting the baby” by ruling that payments for lost benefits like meal and rest breaks aren’t wages and therefore neither party is eligible for fees under the labor codes at issue in Immoos.

George Abele, a Los Angeles-based Paul Hasting partner arguing for amicus California Employment Law Council, said payments for lost breaks should fall under a miscellaneous category of “all other wages,” governed by Section 218.5, which awards fees to the prevailing party.  Defense attorneys opened with a dramatic appeal to the court.  Robert Rediger of Sacramento’s Rediger, McHugh & Owensby, who represents Immoos, told justices that treating lost breaks as wages would open wage-and-hour suits up to “gamesmanship” by plaintiffs attorneys seeking to “insulate” themselves against defense fee awards.

A recent Reuters news story, “Legal Fees in Gulf Oil Spill Deal Stir Conflict,” reports that the estimated $7.8 billion settlement reached between BP and attorneys for victims of the Gulf of Mexico oil spill left many details unresolved, including the attorney fees.  At the moment, there’s nothing yet to battle over.  It’s unknown how many plaintiffs will participate in the deal and what their claims are worth.  But with the pot for lawyers likely to reach into the hundreds of millions of dollars, one set of attorneys who negotiated the deal with BP are seeking to allay fears that the fees will come out of the pocket of claimants.  Meanwhile, another set of attorneys are concerned the money will go to lawyers who don’t deserve it.

As is typical in such cases, the presiding judge, U.S. District Judge Carl Barbier, appointed a Plaintiffs’ Steering Committee (PSC) of about two dozen lawyers to gather evidence and prepare witnesses on behalf of the plaintiffs.  Given the lucrative nature of mass tort litigation – attorneys in leadership positions can collect between around 5 percent and 30 percent of a settlement’s value – there was fierce jockeying for the seats on the PSC.  PSC lawyers Stephen Herman and James Roy sought to position the committee as not taking fees “out of the claimant’s pocket” and stated that BP has agreed to pay their legal fees on top of what is paid to victims. 

But lawyers who had been pursuing their clients’ claims with Kenneth Feinberg, administer of the Gulf Coast Claims Facility, and were not part of the settlement discussions with BP, worried that PSC attorneys will receive fees that don’t belong to them.  “We have clients who have offers on the table that have either been accepted or are probably going to accept,” said non-PSC attorney Tony Buzbee, who said he has settled about $150 million worth of claims.  “If we accept these offers, lawyers who had nothing to do with it will claim they’re entitled to some of the money.”

Finally, last year, the court case lawyers asked Judge Barbier to hold back 6 percent of Feinberg’s settlements for “common benefit fees” to be paid to the PSC.  The PSC argued it deserved the fees because its work had benefited fund claimants.  Barbier initially granted the PSC request, but amended his order in January to exempt settlements to fund claimants who never had or didn’t currently have claims pending in the mass tort.

A recent New Jersey Law Journal story, “Merck Shareholders’ Suit Over Vytorin Settles for No Damages, $5.1M in Fees,” reports that settlement of a shareholders derivative suit over Merck & Co.’s alleged suppression of an unfavorable clinical study of its cholesterol drug Vytorin has won a federal judge’s approval.  No shareholder objected to the deal and District Judge Dennis Cavanaugh in Newark signed off on it after a hearing, finding it “fair, adequate, reasonable and proper, and in the best interests of the class and the shareholders.”

The settlement pays no money damages but Merck agrees to adopt reforms valued at $50 to $75 million and to pay $5.1 million in legal fees and costs for the four-year litigation to plaintiffs’ lawyers Scott & Scott, of Colchester, Conn.  The suit, Plymouth County Contributory Retirement System v. Hassen, concerned the results of a Vytorin clinical trial that was completed by Schering Plough Corp., the drug’s original maker, which merged with Merck in 2008.  The action included claims of breach of fiduciary duty, gross mismanagement, waste of corporate assets and unjust enrichment.

Cavanaugh gave the settlement preliminary approval in January.  After notice to shareholders produced no objections, he granted final approval, finding most of the factors set out in Girsh v. Jepson (3d Cir. 1975) – including complexity, expense and duration of the case, class reaction and risk of litigation – weighed in favor of the settlement and none weighed against it.  The motion for $5.1 million in fees, filed Feb 21, was also granted based on factors like the skill of the lawyers, the time spent and fee awards in similar cases.  The request was less than the $6.1 million lodestar and thus “presumptively reasonable,” said Cavanaugh.

The efforts expended by Scott & Scott included reviewing more than 7 million pages of documents and taking or attending about 40 depositions.

A recent NLJ story, “Mattel Attacks $310 Million Bratz Copyright Award on Appeal” reports that Mattel Inc. has asked a federal appeals court to reverse the $310 million judgment against it in a long-running legal battle over Bratz dolls, maintaining that its failed infringement allegations didn’t justify “the largest copyright fee award in history.”  In its opening brief before the U.S. Court of Appeals for the Ninth Circuit, Mattel challenged U.S. District Judge David Carter’s entire judgment.  Carter ordered Mattel to pay $85 million in compensatory damages, $85 million in exemplary damages, $107.9 million in attorney fees and $32 million in costs to MGA Entertainment, Inc., maker of the Bratz doll.

Mattel counsel Kathleen Sullivan, a partner in the New York office of Quinn Emanuel, wrote that the attorney fees were unjustified because many were not related to MGA’s defense of Mattel’s copyright claims and, according to MGA’s own accounts, were “improper, bloated, excessive, unreasonable or even false” and “unnecessary.”  In its brief, Mattel did not challenge the jury’s finding of non-infringement on its copyright.  But the fact that another jury in 2008 awarded $100 million on those same claims, the first time the dispute went to trial, evidenced the reasonableness of pursuing them a second time, Sullivan wrote.

As a result, MGA did not deserve such “jaw-dropping” attorney fees, all but $2.5 million of which were associated with MGA’s copyright defense.  Furthermore, she wrote, the award was based on 7,000 pages of attorney invoices filed under seal and gave MGA “a windfall for amounts it would never pay its own lawyers.”  Sullivan noted that Carter based his award on MGA’s estimate of $129.6 million in fees billed by 11 firms – including Skadden Arps and Keller Rackauckas.  “But the assumption that every dollar of Skadden and Keller’s bills were for defensive work unrelated to any of MGA’s claims is unfounded,” Sullivan wrote.

Moreover, Carter did not account for “duplicative or wasteful sums” in those bills, she wrote.  “The court ignored the fact that MGA had called its own former lawyers’ fees ‘improper, bloated, excessive, unreasonable or even false’ and ‘unnecessary.’  The district court also erred in failing to reduce MGA’s claimed fees even though MGA has not and will not ever pay a large portion of those fees to its lawyers.” 

MGA initially sought $161 million, including the $129.6 million in fees and $32 million in costs.  In a recent ruling against its insurers, MGA upped its estimate of fees and costs to $175 million.

A recent NLJ story, “Dispute Bluetooth Settlement Actually Underpays Plaintiffs’ Team, Defense Says” reports that plaintiffs’ attorneys in the Motorola Bluetooth headset litigation – in which a federal appeals court rejected a settlement last year on the grounds that the $800,000 award might be excessive – performed more than $1.3 million in justifiable work, according to a document filed by the defense.  A defense team led by Ann Tria of McBreen & Senior in Los Angeles reviewed the plaintiffs’ billing at the request of U.S. District Judge Dale Fischer after the U.S. Court of Appeals for the Ninth Circuit tossed out the deal.  A three judge panel said that Fischer had failed to adequately test whether the attorney fees were excessive.

Both sides filed briefs on Feb. 13 defending the fees.  As part of their argument, the defendants detailed a proposed “lodestar” figure, calculated by multiplying the number of hours reasonably spent on the case by a reasonable hourly rate.  After conducting that analysis, the defense didn’t accept all the $1.7 million in fees billed by plaintiffs’ counsel, attributing more than $333,000 to inappropriate “block billing” and unreasonable amounts of time or numbers of people devoted to certain work.

The filing took issue with other fees and expenses, however, recommending cutting $79,794 in work it said should have been done at lower rates.  Pearson Simon raised billing rates “several times” for two partners, from $500 to $750 per hour, the document said.  The document proposed slashing another $11,805 in legal fees charged for “clerical and administrative tasks” – of the 58.8 hours billed for that work, 51 involved a Segal MeCambridge associate inserting comments into a Power Point presentation.  Segal McCambridge charged $13,600 for unnecessary travel time, it said.

The team also said it found $77,193 in “block billing,” the practice of lumping multiple tasks into a single billing entry.  All but one firm participated in a total of 586.6 hours of block-billed time entries.  It proposed reducing $33,679 billed for preparing motions and declarations concerning attorney fees, noting that the firms “presumably had little more to do than recycle standard forms.”

Still, the plaintiffs’ team was pleased.  “After the audit by defense counsel, the lodestar they requested still substantially exceeded the $800,000 fee we requested by $500,000,” said Daniel Warshaw, a partner at Pearson, Simons, Warshaw & Penny in Sherman Oaks, Calif.  At the time, Fischer concluded that the lodestar amount would “substantially” exceed $800,000.  The defense fee analysis appeared to support that conclusion.  It found seven plaintiffs’ firms billed $1,330,185 in reasonable attorney fees between April 1, 2006, and July 31, 2009.

A recent NLJ story, “MGA’s Insurer on the Hook for Bratz Litigation Cost” reports that a federal judge has ordered Evanston Insurance Co., one of MGA Entertainment Inc.’s insurers, to pay $8.5 million to the insurance companies that covered the Bratz doll manufacturer’s defense fees and costs during its drawn out litigation with Mattel Inc.  U.S. District Judge David Carter refused to trim the amount that Evanston could end up owing MGA, which it balked at defending during the litigation.

Carter’s ruling revealed that MGA is seeking about $175 million in attorney fees and costs from its insurers – far in excess of the $141 million in fees and costs awarded under the $310 million final judgment.  Mattel has appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit.  Carter’s rulings set the stage for a trial over whether Evanston, which provided two general liability policies in 2001 and 2002, acted in bad faith when it denied coverage to MGA.

Evanston is one of three insurance companies that provided primary general liability coverage to MGA during the periods in which Mattel alleged its rival stole the copyright for the Bratz doll. Crum & Forster Specialty Insurance Co., which also refused to defend MGA.  In a motion, Evanston sought a number of discounts to reduce the amount it owes MGA should it be found liable.  MGA has estimated that Evanston is responsible for as much as $96 million of the $175 million in fees and costs in the Bratz doll litigation.  Of that, Evanston has paid $16 million but owes $80 million.

Evanston argued that MGA’s calculation was off because it involved numerous instances of incorrect costs, including a $13.2 million difference between the amount billed by Skadden Arps and what MGA actually paid the law firm, and at least $3.5 million that MGA has refused to by Orrick Herrington.  Evanston also challenged fees that MGA paid to defend individuals and entities that weren’t insured under its policies, including Carter Bryant, the designer of the Bratz doll.  Carter granted some of the deductions, including the Skadden bills, but rejected most of them.

A recent New York Times story, “Legal Fees Mount at Fannie and Freddie,” reports that taxpayers have advanced almost $50 million in legal payments to defend former executives of Fannie Mae and Freddie Mac in three years since the government rescued the giant mortgage companies, a regulatory analysis has found.  In that time, $37 million has gone to three former Fannie Mae executives accused of securities fraud, according to the analysis by the inspector general of the Federal Housing Finance Agency (FHFA), which oversees both companies.  The FHFA report is entitled “Evaluation of FHFA’s Management of Legal Fees for Indemnified Executives” (pdf).

Although the legal costs for the former executives are a small fraction of the companies’ mortgage losses, it is imperative that the housing agency move to limit these fees, said Steve A. Linick, inspector general of the agency.  “FHFA and Fannie Mae believe that their options are limited in paying current legal fees for former officers and directors,” Mr. Linick said in a statement.  But he called for greater oversight.  The legal costs are the responsibility of taxpayers because of contracts struck by the companies before they collapsed.  Those agreements, which are typical in corporate America, state that legal fees incurred by executives against lawsuits will be advanced by the companies.  If a court or jury rules that the officials breached their duties or acted in bad faith, the officials will have to pay the advances.

There were no recommendations in a plan submitted to Congress (pdf) regarding the rising legal bills for former executives.  They were the subject of heated Congressional hearings in February 2011.  Since then Fannie Mae and Freddie Mac have moved to control the legal fees, the report noted.  For instance, the companies have set up policies to avoid duplicated legal representation and to monitor legal expenses to determine if they are reasonable.  But the efforts are uneven.  Fannie Mae, for example, questions legal bills for depositions if more than one lawyer attends representing former officials; Freddie Mac does not, the report noted.  More significant, the housing agency has not independently validated the processes used by Fannie and Freddie to monitor the legal services provided to their former executives or the amount of the legal bills that are paid.

A recent BLT Blog post, “Landmark D.C. Gun Case Heads To Appeals Court Over Legal Fees,” reports that Alan Gura, of Alexandria’s Gura & Possessky is taking the District of Columbia’s big Second Amendment case back to the federal appeals court, where the dispute this time is over legal fees and not gun ownership rights.  Gura and Clark Neily III of the Institute for Justice today filed a notice of appeal in the U.S. District Court for the District of Columbia, announcing his intent to ask for a second opinion about how much he contends he is owed for his work securing the right to own a handgun in the District.

Last December, U.S. District Judge Emmet Sullivan said Gura is entitled to $1.7 million in attorney fees and nearly $4,900 in expenses.  Sullivan rejected Gura’s request for more than $3.12 million in fees and expenses.  “Sensitive to the fact that  the fees in this case will be paid by the taxpayers, this Court is left with the difficult task of closely scrutinizing plaintiff’s fee petition to determine what is fair, reasonable, and just compensation for the legal services of plaintiff’s attorneys,” Sullivan said in his fee ruling (pdf).

A recent The Legal Intelligencer story, “Penn State Sues Insurer for Defense Costs, Asks for Jury,” reports that Penn State University has sued its insurance company following the insurer’s own legal action to limit its coverage in a lawsuit against the university stemming from the Jerry Sandusky sex abuse scandal.  According to reports, as of December 31, Penn State has paid a total of nearly $3.2 million to outside lawyers, consultants, and public relations advisers hired to address the sex abuse scandal.

In a 12-page complaint filed in Centre County Common Pleas Court, Penn State argued three counts of breach of contract and one bad faith county against Pennsylvania Manufacturers’ Association Insurance Co (PMA).  Namely, the school said the insurer breached its contract with the university by refusing to cover Penn State’s defense of Doe A v. Second Mile and refusing liability coverage for any damages in that suit.

“PSU has been damaged by PMA’s breach by, among other things, being denied the benefits of the insurance coverage for which it contracted, that are required by law, and for which PMA collected substantial premiums, and PSU has been forced to incur the substantial burden and expense of bringing and pursuing this action,” the complaint said.

Last week, the Missouri Legislature introduced a bill that would implement the so-called “loser pays” English Rule and undo centuries of jurisprudence under the American Rule in civil litigation.  But the one-page “loser pays” bill is no English Rule at all.  The bill is a one-way fee-shifting rule that applies only one party, not both parties.

The legislation, H.B. 1342 (pdf), would only apply to non-prevailing (i.e. losing) plaintiffs, not to non-prevailing (i.e. losing) defendants.  In other words, only plaintiffs would be forced to pay the attorney fees of defendants, if they don’t prevail in underlying civil litigation.  The bill would not require losing defendants to pay the attorney fees of prevailing plaintiffs.  “It’s not fair to implement a one-way fee-shifting provision to apply only to one party,” said Terry Jesse, Executive Director of NALFA

A recent Courthouse News story, “Oil Spill Attorneys’ Fees Upheld” reports that the 5^th Circuit upheld a federal judge’s order giving 6 percent of all Deepwater Horizon settlements or awards to 18 court-appointed plaintiff attorneys.  Attorneys who are not members of the Plaintiffs' Steering Committee (PSC) in the oil spill litigation had asked the 5^th Circuit to overturn U.S. District Judge Carl Barbier’s order on the 6 percent fees. 

BP established a claims payment process through the Gulf Coast Claims Facility (GCCF), establishing a $20 billion fund in August 2010, after the April 20, 2010 oil spill that killed 11 and set off the worst environmental disaster in U.S. history.  In October 2010, the court-appointed PSC was created to coordinate the more than 100,000 oil spill litigants whose consolidated lawsuits are being overseen by Judge Barbier in New Orleans Federal Court. 

Attorneys who are not on the PSC argued that because BP stepped up as the party responsible for the oil spill and set up a $20 billion fund to pay victims before the PSC was created, it is unreasonable for the steering committee to claim that it had anything to do with BP’s claims payment process. 

Anthony Buzbee, a Houston-based attorney not on the PSC, was among the attorneys who appealed Barbier’s ruling to the 5^th Circuit.  In his writ of mandamus, Buzbee writes, “The PSC conferred no benefit to petitioner, and thus has not even attempted to do so…Indeed, the PSC has, at times, intentionally or not, worked against the interests of many claimants and their counsel outside this litigation.”

The first oil spill trial will focus on the Deepwater Horizon explosion.  Trial begins Feb. 27 and is expected to last 3 months.

A recent article in the State Bar of California’s California Litigation, “When the American Rule Doesn’t Apply: Attorney’s Fees as Damages in California Litigation (pdf),” by Marc Alexander and William (Mike) Hensley looks at attorney fees in the context of damages in California litigation.  

The article discusses three judicially created exceptions under California law to the American Rule: The “tort of another” doctrine, Brandt recovery, and damage recovery in malicious prosecution/false imprisonment cases.  Where these exceptions apply, prevailing parties can be made whole by being compensated for attorney’s fees – but the relief, rather than being treated as fees, per se, is given as an item of damages.

Marc Alexander and William (Mike) Hensley are shareholders at Alvarado Smith in Santa Ana.  They run California Attorney’s Fees Blog located at www.calattorneysfees.com

A recent NLJ story, “Bluetooth Litigants Defend Settlement Against 9^th Circuit Qualms” reports that lawyers on both sides of a settlement over hearing loss claims involving Motorola’s Bluetooth headsets are insisting the attorney fees were not inflated, despite concerns voiced by the federal appeals court that rejected the deal last year.  The U.S. Court of Appeals for the 9^th Circuit tossed out the settlement, concluding that U.S. District Judge Dale Fischer failed to adequately test whether the attorney fees were excessive.

The settlement provided $100,000 in cy pres awards – gifts to various charitable organizations – and $800,000 to the plaintiffs’ lawyers.  The potential class members received no money, except $12,000 for nine named representatives.  Plaintiffs’ attorney Daniel Warshaw, a partner at Pearson, Simon, Warshaw & Penny in Sherman Oaks, Calif., wrote that the 9^th Circuit failed to account for the value of the injunctive relief, which included the posting of warning labels on product packaging.  He estimated the injunctive value at about $878 million, meaning that an $800,000 attorney fee award would represent less than 1% of the settlement.

The 9^th Circuit stopped short of calling the settlement unfair or unreasonable, but said that Fischer had ignored numerous “red flags” in approving the deal, including a “clear sailing agreement” by which defendants agreed not to object to attorney fees, and a “kicker” providing that fees not awarded would revert to the defendants rather than to a cy pres fund or the class.  The panel also found that Fischer failed to explicitly calculate the attorney fees other than to deduce that they were less than $1.6 million.  She also failed to compare what attorneys would have received had they based their fees on a percentage of the settlement – in this case, about $240,500, given a 25 percent benchmark.

A recent law.com story, “News Corp. Financials Show Phone-Hacking Legal Bills Nearing $200 Million” reports that News Corp. has paid our nearly $200 million in legal costs over the phone hacking scandal to date, according to the company’s latest financial results.  The company said it could not forecast what its expenditure would be on legal fees and external advisers working on the hacking scandal for a full year.

The figures, contained within the company’s results for the last three months on 2011, show the media giant paid out $87 million in legal fees and investigations into phone-hacking at its now defunct newspaper News of the World during the period up to Dec. 31 last year.  The costs come in addition to a total of $108 million News Corp. spent during the previous quarter, $17 million of which had not been previously disclosed.  The costs principally went toward restructuring its U.K. newspaper business after the closure of News of the World.

Around 85 percent of the costs were attributed to “fees to outside lawyers and advisers working on various investigations and committee hearings in the UK,” with the remaining 15 percent relating to legal settlements, largely paid to phone-hacking victims, amounting to around $15 million.  The legal bill was substantially higher than News Corp. had expected, and the company said that it could not forecast what its expenditure would be on legal fees and external advisers on the hacking scandal for the full year.

On February 2, 2012 the U.S. House of Representatives Judiciary Subcommittee on the Constitution held a hearing on “Contingency Fees and Conflicts of Interest in State AG Enforcement of Federal Law.”  At the hearing, three people testify:  Bill McCollum, a partner of SNR Denton’s Public Policy and Regulation Practice Group, Amy Widman, Assistant Professor of Northern Illinois University Collage of Law, and James R. Copland, Director and Senior Fellow of Manhattan Institute for Policy Research.

"The 'tort reform' lobby (i.e. U.S. Chamber of Commerce) is targeting this for one reason; it’s working.  Private lawyers have been effective in helping states reach huge settlements on behalf of their citizens," said Terry Jesse, Executive Director of NALFA.  “It makes sense for underfunded and understaffed AG offices to contract with outside law firms to represent citizens of their state against large-scale consumer abuses.  Working on a contingency fee basis actually protects taxpayers and ensures the people of their state are well represented against  well-funded industries,” Jesse concluded.

There’s been no legislation produced from this hearing, but in his testimony, Copland said that Congress should take a “modest step” and codify Executive Order 13433 (pdf).  Executive Order 13433 was signed by President George W. Bush and prohibits federal agencies from entering into contingency fee agreements with outside counsel.  In other words, Copland would have the federal government dictate to all state attorneys general what type of fee arrangement they may enter into with outside counsel.

CLICK HERE for a link to a video of the hearing.

A recent VTDigger.org story, “Entergy Seeks $4.6 Million in Legal Fees From State of Vermont” reports that Entergy Corp. filed a motion with the U.S. District Court on Friday to recover $4.6 million in legal fees for its suit against the state.  The Louisiana company prevailed in federal court then Judge J. Garvan Murtha struck down two state laws that require Entergy to seek approval from the Legislature to continue operating Vermont Yankee Nuclear Power Plant past its 40-year anniversary and to store high level nuclear waste and the plant site.

Entergy filed its motion for attorney’s fees (pdf), claiming it prevailed on its claim under the Commerce Clause.  Chanel Lagarde, spokesman for Entergy, said that “the law allows for the prevailing party to seek recovery of attorney’s fees.  We believe this is the appropriate next step for our company in this case where we were compelled to challenge several Vermont state laws that we believe were unconstitutional and were in fact found to be unconstitutional,” Lagarde said.

Vermont Attorney General Bill Sorrell said he expected the request for attorneys’ fees.  Sorrell said “they threw a lot of legal horsepower at us, they went into the record extensively and they charged New York City rates.”  Entergy hired Kathleen Sullivan, the dean of Stanford Law School to litigate the case.  Sullivan was on the short list of candidates for Obama’s recent Supreme Court appointment and she has been described as one of the most trusted advocates before the U.S. Supreme Court.

The state can challenge the amount of the fee, Sorrell said.  “This is a long way from over,” he said.  Sorrell said his office can question whether the lawyers’ hourly rates and the amount of time they spent on the case was reasonable.  It’s not unusual for litigants to go through a mediation process and retain fee experts to review attorneys’ fees on a case of this magnitude, according to Sorrell.

A recent Star Tribune story, “House Approves Changes to Laws on Lawsuits” reports that Republicans in the Minnesota House pushed through a series of so-called “tort reform” legislation.  The measures passed largely on a party-line vote.  One bill, SF 429/HF 747 (pdf), places limits or caps on court award attorney fees for over 300 statutes.  This would include important civil cases such as wrongful termination and sexual harassment.

“We are opposed to caps on attorney fee awards in civil litigation,” said Terry Jesse Executive Director of NALFA.  “Judges should determine reasonable fee awards, not politicians,” Jesse added.

A recent Am Law Daily story, “Super Bowl Special: A Look at the Legal Fees Racked Up by NFL Player Ahead of the Lockout” reports that the National Football League Players Association (NFLPA), like all labor unions, must file annual LM-2 forms with the U.S. Department of Labor.  The union’s most recent filings detailing its finances is for the period between March 1, 2010 and February 2011.  Included in those disclosures are payments made to outside accounting, financial, law, and lobbying firms, as well as to other external vendors.  By far, a new collective bargaining agreement (CBA) consumed the bulk of the NFLPA’s outside legal and lobbying expenditures.  Top billing law firms included:

Latham & Watkins: $3.1 million (CBA and public policy)

Dewey & LeBoeuf: $2.9 million (CBA matters/legal services)

Patton Boggs: $948,983 (CBA and public policy matters)

Gibson Dunn: $294,843 (Antitrust/CBA matters)

Weil Gotshal: $274,075 (CBA matters)

One interesting conclusion that can immediately be drawn by reviewing the NFLPA’s financial statements is that since DeMaurice Smith, a former Latham and Patton Boggs partner became the union’s executive director three years ago, those firms have encroached on the outside legal turf traditionally owned by Dewey and Weil.  The filings also shows salaries and bonuses paid to the NFLPA’s in-house counsel.  The union’s longtime outside counsel Jeffrey Kessler, chair of Dewey’s global litigation department received more than $1.5 million in compensation for the union’s 2010 fiscal year.

A trio of Smith’s former colleagues from Patton Boggs that left the firm to join him at the NFLPA also appear on the union’s in-house legal payroll.  Longtime Patton Boggs partner and chief operating officer Ira Fishman received $606,300 in his new role as managing director of the NFLPA.  Payments to associate general counsel Heather McPhee and vice president of legal affairs Ahmad Nessar, both of whom are former Patton Boggs associates, totaled $310,020 and $287,324, respectively.  Tuaranna “Teri” Patterson, a former Latham associate now serving as deputy managing director and special counsel to Smith, was paid $178,554.

A NLJ story, “Insurers Fail to Slip the Hook for MGA’s Bratz Litigation Costs” reports that a federal judge has sided with MGA Entertainment Inc, against insurance companies that balked at paying its legal costs for the past two years of its battle against Mattel Inc. over copyrights to the Bratz doll.  In a pair of rulings on Jan. 27, U.S. District Judge David Carter in Santa Ana, Calif., rejected motions by Evanston Insurance Co. and its parent corporation, Markel Corp., to toss MGA’s attempts to force them to pay up.

The insurers claimed that their duty to defend MGA ended April 12, 2010, when Mattel, maker of Barbie, filed its fourth amended counterclaim.  They argued that Mattel dropped allegations of trade libel and failed to assert sufficient “advertising injury” against MGA, both of which were predicated for MGA’s insurance coverage.  Carter wrote that the companies failed to show that Mattel’s counterclaim “extinguished all potential that MGA’s use of Mattel’s advertising strategies and plans took the form of MGA’s advertising.”

Last year, the four insurers attempted to intervene in MGA’s case against Mattel in a bid to obtain a share of the $141 million in attorney fees and costs awarded as part of a final judgment in that case.  The insurers sought about $80 million, but Carter denied their motion on Sept. 27.  They have appealed his ruling to the U.S. Court of Appeals for the 9^th Circuit, which has scheduled opening briefs for April.

A New Jersey Law Journal story, “Court Upholds Rendine Fee Shifting, Declining to Follow U.S. High Court” reports that the New Jersey Supreme Court reaffirmed its nearly two decade old commitment to a doctrine that permits trial judges to enhance counsel fees in cases that might never be filed if not for the ability to shift fees.  In a consolidated ruling in two cases, the unanimous Court overturned two appellate rulings that followed the U.S. Supreme Court’s holding, in Perdue v. Kenny A., that trial judges may award fee enhancements only in rare and extraordinary circumstances.

Justice Helen Hoens said the justices saw no reason to abandon the fee-shifting principles it established in Rendine v. Pantzer.  In a unanimous ruling (pdf), the court held the mechanism for awarding attorneys’ fees, including contingency enhancements, adopted in Rendine remain in full force and effect as the governing principles for fee awards made pursuant to New Jersey fee-shifting statutes.  The court rejected the Perdue analysis, saying that Perdue breaks no new ground; rather it reiterates the framework that applies to fee awards in federal courts arising from federal statutes.

A Texas Lawyer story, “BAM! Counsel Win $21 Million in Fees From Clients Who Wouldn’t Pay” reports that three Dallas plaintiffs lawyers and their firms won a judgment ordering wealthy former clients to pay more than $21 million in legal fees.  But the attorneys didn’t win the full amount they sought.  The Jan. 10 judgment in Campbell Harris & Dagley, et al. v. Albert G. Hill, et al. arises from a lengthy and complicated fee dispute.  The lawyers and firms that wanted to be paid were Lisa Blue of Baron and Blue; and Charla G. Aldous of the Aldous Law Firm; and Stephen F. Malouf of the Law Offices of Stephen F. Malouf – collectively known as BAM in the judgment.

BAM had represented Albert G. Hill, Erin Nance Hill and their minor children (collectively Hill III) in the 2010 settlement of Hill v. Hunt, et al.  But Hill III refused to pay BAM.  Hill III alleged BAM wanted millions “in attorney fees for no more than six months work.”  The court severed the attorneys’ fee dispute from Hunt after Hill challenged the validity of the contingent fee agreements with BAM and the amount owed.  Both parties agreed to have U.S. Magistrate Judge Renee Harris Toliver hear the case.

Toliver entered findings of fact and conclusion of law that BAM’s fee agreement with Hill III was valid and binding and that Hill III had breached the agreement.  Toliver also wrote that the fair market value of Hill III’s “gross affirmative recovery” in the Hunt settlement was $113,357,232, of which BAM was entitled to a 30 percent contingency fee totaling $33,707,232.  Both sides objected to Toliver’s conclusions.  U.S. Distrcit Judge Reed O’Connor reduced the attorneys’ fees recovery to $21,942,961 after sustaining some of Hill III’s objections regarding the contingent fee.

In his Jan. 10 judgment (pdf) O’Connor gave Hill III 30 days to either pay BAM 30 percent of the fair market value of their gross affirmative recovery in the trust dispute settlement in Hunt or pay BAM 30 percent of the amounts that Hill III receives from the Hunt settlement as Hill III receives them.  Alan Loewinsohn, representing BAM explains that the Hill III defendants likely are better off choosing O’Connor’s first payment option “because there was a determination as to the current fair market value to the settlement [Hill III] obtained."

A Record Courier story, “State Lawmaker Asks AG to Respond to Question about $6 Million in Outside Legal Fees” reports that Nevada State Sen. Greg Brower has asked Attorney General Catherine Cortez Masto why an outside legal firm was retained to defend the state against a freeway construction dispute (view letter pdf).  Legal costs charged to the state will total $6 million by the end of an arbitration hearing set for next month.

Brower asked about the process that led to the retention of the firm of Watts, Tieder, Hoffar & Fitzgerald to handle the case beginning in 2008.  He also asked why a Nevada firm was not retained, and what controls are in place to monitor the fee being incurred.  “Those two issues raised red flags with me, and so I thought it made sense to just ask a few questions of the attorney general’s office and ask her to clarify exactly, as I set forth in the letter, why the state has hired this out-of-state firm as opposed to an in-state firm or doing the litigation in the AG’s office,” Brower said.

Scott Magruder, a spokesman for NDOT, said today the agency actually retained the firm, which is one of the leading construction litigation firms in the nation.  The firm has an office in Las Vegas.  The agency wanted quality representation because of the size of the claim, he said.

Gov. Brian Sandoval first raised concerns about the amount of legal fees at a meeting of the Broad of Directors of the Department of Transportation earlier this month.  “Because even at those rates, $6 million, I haven’t seen that before,” Sandoval said at the Jan. 9 meeting.  “I mean this just gets us to the mediation, as you say, and then we don’t know what the outcome of the mediation is going to be after that.”  The rates charged by the law firm’s attorneys are as high as $340 an hour for a senior partner, but members of the board were told the rates are not excessive and have not charged since the dispute first began.

A Daily Business Review story, “$89,000 Legal Fee Approved Despite $500 Award” reports that a women who sued the management of a Brooklyn housing development alleging that one of its private police officers used excessive force in arresting her is entitled to close to $89,000 in legal fees and expenses even though she won a judgment of only $500, a federal judge has ruled. U.S. District Court  for the Eastern District Judge Jack B. Weinstein ruled on Jan. 9 in Brown v. Starrett City Associates, that the plaintiff, Annette Brown, was entitled to more than $80,600 in fees and over $8,600 in litigation expenses.

At trial, the jurors were instructed that if they found that Ms. Brown’s rights had been violated but suffered “no physical, emotional or financial injury” as a result, they could award her $1 in nominal damages.  He said if they found she had been injured, they could award her compensatory damages.  The jury found in favor of Starrett City on the wrongful arrest claim, but in favor of Ms. Brown on the excessive force claim and awarded her $500 in compensatory damages.

Following the judgment, the judge held that Ms. Brown was entitled to attorney fees under the Civil Rights Attorney’s Fee Award Act.  Her attorney, Michael P. Mangan submitted an application seeking over $82,700 in attorney fees and $11,000 in expenses.  Starrett City argued that the fee award was too large compared to the judgment.  Magistrate Judge Roanne L. Mann rejected that argument in her October report and recommendation (pdf). 

“Although the success of the party in pursuing his or her claim, and the quality of the attorney’s performance, are relevant to the determination of a reasonable hourly rate, the case law is clear that a court may not reduce an attorney’s fee award simply because the fee award would be disproportionate to the damages in the underlying case,” the magistrate judge wrote.

Magistrate Judge Mann said that Mr. Mangan’s hourly rate of $300 was in line with the rate awarded to other civil rights attorneys in the Eastern District.  She said that rate was justified because Mr. Mangan had performed well in the case, even though it did not result in a large damage award.  She said that he had dealt with an unusual legal issue: the “vicarious liability” of a private corporation when its employees violated someone’s constitutional rights.  She also noted that Judge Weinstein had said on the record at the end of the trial that Mr. Mangan was “an excellent attorney.”

A recent Insurance Journal story, “Florida Supreme Court Rules Guaranty Fund Not Responsible for Legal Fees” reports that Florida’s high court has ruled that the state fund charged with paying claims from insolvent insurers is not responsible for paying a claimant’s legal fees on a pre-insolvent claim unless they are specifically covered under the terms of the policy.  In Petty v. Florida Insurance Guaranty Association the Florida Supreme Court resolved a conflict between two lower court rulings that addressed the guaranty association’s liability for paying claimant’s attorney fees based on the definition of a “covered claim.”

The case is from 2004 when Diane Petty’s home sustained damage from Hurricane Charley.  At the time, her property was covered through Florida Preferred Property Insurance Co., which initially made a partial payment to Petty.  Afterwards, Petty later demanded an appraisal to resolve a dispute over monetary value of her loss.  Although the insurer paid Petty more money, it went bankrupt before the court could decide whether the insurer owed her any legal fees.

Since Florida Preferred’s policies were assumed by FIGA, Petty sued the guaranty fund seeking to collect the legal fees.  Petty’s lawyers argued that under the Third District Court of Appeals case, Florida Insurance Guaranty Association v. Soto, was owed the legal fees based on a state law that grants policyholders’ legal fees when there is a disputed claim and the policyholder prevails.

Supreme Court Justice J. Polston, however, agreed with the decision by the Second District Court of Appeals in another case.  “In order to recover from FIGA, Petty’s claim for fees must also be within the coverage of her underlying insurance policy,” wrote Polston.  “Her underlying insurance policy does not expressly provide coverage for her fee award.”  By way of an example, Polston noted that the state’s workers’ compensation law includes a specific statutory provision that requires claimants attorneys to be paid if they prevail in court based on a contingency fee schedule.

In today's litigation practice, the economics of attorney fees has never been more important.  Attorney fee litigation is at unprecedented levels.  More and more law firms are suing clients to collect unpaid legal bills and more clients are suing law firms for over billing claims than ever before.  That, added with the rise in "loser pay" fee-shifting litigation, and the growing body of court awarded attorney fee jurisprudence, attorney fees themselves have become a highly specialized practice area.

Join the first-of-its-kind practice group specifically devoted to attorney fee issues, the Attorney Fee Practice Group.  The Attorney Fee Practice Group is a highly specialized, niche practice area within the legal profession dedicated to attorney fee and legal billing matters.  Members of the practice group are retained by law firms when attorney fees are at issue in underlying litigation.  Members of the Attorney Fee Practice Group are qualified attorney fee experts, fee dispute arbitrators, and legal bill auditors.

At NALFA, we project the attorney fee practice area to not only continue to grow, but expand in new areas.  Secure your place in the Attorney Fee Practice Group.  Benefits include:

Member-to Member Referral Program: Members of our Attorney Fee Practice Group can turn to one another when a conflict arises.  Our members can exchange attorney fee and legal billing cases with one another and refer clients to one another when an ethical, business, or scheduling conflict arises.

Certificate of Qualification: Upon membership, members of our Attorney Fee Practice Group will receive a professional certificate that bears their name (or company’s name) for display purposes.  This certificate of qualification shows that they are a member in good standing and have met the standards of excellence for selection in their respective member category.  This professional certificate is individualized, printed in full-color and on high-quality stock paper.

Updates on Attorney Fee & Legal Billing Jurisprudence: All NALFA members will receive periodic e-mail updates on the latest developments on important attorney fee and legal billing jurisprudence.  These e-mail updates summarize attorney fee and legal billing cases in both state and federal courts from across the U.S. and include both published and unpublished court decisions.

Customized Profile Page in On-Line Membership Directory: NALFA members will be provided their own profile page in our on-line membership directory to list their professional qualifications and experience on attorney fee and legal billing matters.  Members can customize their profile to include hyperlinks, white papers, articles, and news.  This on-line directory also allows potential clients to contact you directly on attorney fee and legal billing matters.

Promote News in Attorney Fees Blog: NALFA members can promote news on our Attorney Fees Blog.  Members can take advantage of reaching a national audience by posting news, articles, and announcements in NALFA’s Attorney Fees Blog, a heavily trafficked site and a great source for attorney fee and legal billing news.

Professional Development: Our CLE programs are the perfect opportunity to build on your knowledge of attorney fee and legal billing issues.  By attending our CLE programs, members benefit professionally with the very latest case law and developments on attorney fee and legal billing jurisprudence.

Speaking & Publishing Opportunities: Members are invited to participate in our CLE programs as sponsors and panelists.  By participating in our CLE programs, members not only help develop program content, but also help shape the growing body of attorney fee and legal billing jurisprudence.

Networking Opportunities: Our members build lasting relationships with fellow members, colleagues, peers, and clients by networking at our events.  Networking with other fee and billing experts, consultants, and clients is an excellent way to build new lines of business and expand your area of expertise.

Marketing Project Opportunities: NALFA can work directly with members on marketing projects.  We can market your practice and promote your area of expertise.  Through our e-mail database, members can reach a desired audience to promote news or to make special announcements.  NALFA charges a separate marketing fee for this service.

If you are interested in joining, please contact us at 312-907-7275.

A recent The Legal Intelligencer story, “GSK Seeks to Limit Contingency Fees in Avandia MDL” reports that drugmaker GlaxoSmithKline has asked a judge overseeing the federal multidistrict litigation over the diabetes drug Avandia to limit the contingency fees of attorneys representing individual plaintiffs to 25 percent of client account or awards.  The motion is still pending before U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania.

In litigation in which many plaintiffs have already settled, the court should limit “individual plaintiffs’ attorneys’ fees where, as here, the attorneys did not perform a substantial portion of the work, but rather benefited from coordinated discovery and other work performed by plaintiffs’ steering committee,” GSK said in court papers.  District courts capped contingency fees from 20 percent to 35 percent in pharmaceutical and medical device MDLs involving Medtronic, Vioxx, Guidant and Zyprexa, GSK said in their motion.

In response, one of the plaintiffs’ law firms with individual cases said that while it was not one of the firms involved in the litigation earlier and did not participate in the plaintiffs’ steering committee, it has and will continue to conduct “extensive work” on behalf of its clients and deserves to be compensated according to the contingency fee agreements it has with its clients.  Weitz & Luxenberg said the case law cited by GSK involved cases in which the parties had already entered into global settlement agreements and that there are hundreds of MDL litigations beyond the five cited by GSK that did not involve such judicial intervention on the issue of attorney fees. 

In a motion filed by Paul J. Pennock and Jaime M. Farrell, Weitz & Luxenberg said the firm is already dealing with reduced fees.  Under the Avandia common benefit fund set up to compensate and reimburse attorneys for services performed and expenses incurred in prosecuting the MDL, the plaintiffs will be assessed 7 percent of their gross monetary recovery, of which 4 percent will be deducted from attorney fees, Weitz & Luxenberg said in court papers.  The firm would ordinarily receive 33.3 percent in contingency fees, but because of the common benefit fund, the firm will receive 29.3 percent, according to court documents.

A recent Thomson Reuter story, “Record $285M Fee Award is Strine’s Message to Plaintiffs’ Bar” reports that in a footnote at the end of his October 14 ruling granting Southern Peru shareholders $1.3 billion from majority stockholder Grupo Mexico, Delaware Chancery Court Chancellor Leo Strine Jr. had cautionary words for the plaintiffs’ firms that won the recovery.  Prickett, Jones & Elliott and Kessler Topaz Meltzer & Check, the judge said, had been too slow to prosecute the derivate suit when it was filed back in 2005.  He instructed the firms to confer with defense counsel from Milbank Tweed (for Grupo Mexico) and Ashby & Geddes (for Southern Peru, now Southern Cooper) to see if they could agree on a “reasonable” fee request, “with the plaintiffs’ counsel taking into account the reality [that] their delays affected the remedy and are a basis for conservatism in any fee award.”

Kessler Topaz and Prickett Jones had originally asked for 22.5 percent of the recovery they obtained.  In a Oct. 28 brief that liberally quoted Strine’s own words from previous cases, the plaintiffs’ firms argued that they should be rewarded for the “huge risk” of hard-fought derivative litigation.  The firm said they’d kept Strine’s admonition in mind, which is why they were asking for 22.5 percent instead of the customary 33 percent.  But they asserted that if the chancellor refused to award a big percentage just because it amounted to hundreds of millions of dollars, he would encourage plaintiffs’ firms to settle quickly rather than fight for the best possible recovery.

“Limiting fee awards in large cases would create a strong disincentive to take the huge risk of trying large cases,” the brief said.  “For example, how would lawyers be incentivized to take a potential billion dollar case to trial it they know that they win a billion dollar they will get the same fee award as they would have if they settled the case for $200 million?  It is clear that such a declining percentage approach would misalign the interests of the lawyers and those they represent.”

So why did Strine agree to grant such a large fee award?  Because he was sending a message not just to lawyers in the Southern Cooper case, but to the entire securities class action bar.  The chancellor spoke about rewarding plaintiffs’ lawyers for taking risks – and chided defense lawyers for being envious when those risks pay for in big fee awards.  If lawyers are willing to litigate big cases through discovery and trial, he suggested, we’ll make sure they’re compensated for their efforts.

A recent Courthouse News Service story, “Foreign Attorney Sue for Share of $100M Fee” reports that Argentinean attorneys claim a Miami law firm stiffed them for a 23 percent consulting fee from a $410 million consumer class action settlement “and one of the largest attorney’s fee awards in such a case, over $100 million.”  Raponi & Hunter Abogados claim Jeremy Alters of Alters Morelli Ranter “sold off or assigned interests in the recovery from the class action lawsuits to fund his law firm and lavish lifestyle.”

The underlying class action involved U.S. banks’ chronologically rearranging debit transactions from largest to smallest, to generate “billions of additional overdraft fees.”  According to the Argentinean partners, Osvaldo Raponi and Jaime Hunter, In August 2008, Raponi, and expert in banking law, and Hunter, bought to Alters and his firm the most significant case in Alters’ legal career.  This was the first consumer banking class action in which Alters or his firm were involved.  Raponi and his firm were the architects of the claims bought by Alters, which resulted in one of the largest consumer class action settlements in history, $410 million and one of the largest fee awards in such a case, $100 million.

Alters acknowledges that Raponi consulted in the overdraft case in a “meaningful way that deserves compensation for his work and that he has done work, a lot of it.”  In exchange for originating the case and providing his assistance, Alters agreed that Raponi and Hunter would receive 23 percent of his firms’ fee from the litigation.  Years later, after the Bank of America case settled, Alters betrayed Raponi and Hunter and misrepresented that the fee agreement was unenforceable and that they could receive  a mere fraction of the agreed upon fee as “consultants,” not as foreign lawyers, or they would receive  nothing at all.

A recent NLJ story, “Federal Circuit Upholds $4.7M Fee Award to Cordis Over MarcTec’s Litigation Misconduct” reports that the U.S. Court of Appeals for the Federal Circuit has upheld a lower court’s award of nearly $4.7 million in attorney and expert fees to patent defendant and Johnson & Johnson subsidiary Cordis Corp. for its opponent’s litigation.  On Jan. 3, a unanimous panel in MarcTec LLC v. Johnson & Johnson affirmed rulings by Chief Judge David Herndon of the Southern District of Illinois.

Herndon granted Cordis’ motion to declare the case exceptional under the U.S. Patent Code and award Cordis $3.8 million for attorney fees and expenses and $809,000 for expert fees and expenses.  Judge Kathleen O’Malley, who authored the ruling, wrote that the trial court did not err in finding the case exceptional and did not abuse its discretion by awarding expert witness fees.

In the underlying case, MarcTec filed suit in 2007 claiming Cordis’ Cypher stent infringed two of MarcTec patents for “heat bondable material” that is “bonded” to a surgical device or implant.  The district court granted Cordis’ motion for summary judgment.  Cordis then asked the court to declare MarcTec’s suit exceptional and to award Cordis its attorney and expert witness fees.  The trial court found that MarcTec’s infringement allegations were “baseless” and “frivolous” and that it acted in “bad faith”.

On appeal, the federal appeal panel found that MarcTec filed an “objectively baseless lawsuit in bad faith.”  The panel also supported the lower court’s expert witness fee award because Cordis was forced to incur expert witness expenses “to rebut MarcTec’s unreliable and irrelevant expert testimony,” and it’s spending wasn’t recoverable under the section of the Patent Code that allows the recovery of attorney fees in exceptional cases.

A recent BLT Blog post, “Heller Attorney Awarded $1.1M in Fees, One-Third of Their Request” reports that after 3 years of the Supreme Court’s landmark decision in District of Columbia v. Heller and a length fight with the District of Columbia, the attorneys for Dick Heller have been awarded their attorney fees.  In a ruling, U.S. District Judge Emmet Sullivan in Washington awarded Heller’s attorneys, led by Alan Gura of Alexandria, Va.’s Gura & Possessky, just over $1.1 million – about one-third of what they had requested.

Gura and his team had requested about $3.1 million in attorney fees.  By contrast, the District of Columbia had argued that Heller’s attorneys merited just over $840,000.  Sullivan said determining the lawyers’ hourly rate alone was difficult, as three of the six attorneys on the case – Clark Neily III of the Institute for Justice, and Robert Levy and Gene Healy with the Cato Institute – work for nonprofit groups.  And the other three, including Gura, Laura Possessky and Thomas Huff, do not have standard fixed hourly rates, in part because they charge lower rates to clients who otherwise couldn’t afford them.

Both side argued to Sullivan that various matrixes and formulas should be used to determine the correct hourly rate.  The plaintiffs’ team concluded that the rates should be $589 per hour for all the attorneys except Huff, who had less experience.  They argued Huff should be compensated $361 per hour.  Sullivan called those rates “extraordinary” and not appropriate for this case. “[T]he Court is unwilling to award the high rates requested by plaintiff absent specific evidence that those are, indeed, the prevailing market rates for attorneys engaged in complex federal litigation outside the District of Columbia’s largest law firms,” Sullivan wrote.

In a joint statement said they “respectfully” disagreed with Sullivan’s determination of the hourly rates calculated in this case, which they submitted was based on an outdated U.S. Attorney’s Office Fee Matrix.  “As has become increasing apparent in recent years, that matrix bears little if any relationship to prevailing hourly rates for complex litigation in the Washington, D.C. market,” the attorneys wrote.  “nor do we believe the rates provided in the USAO matrix accurately reflect the exceptional quality of the legal work performed by Plaintiff’s counsel in securing this historic win.”

A recent The Wall Street Journal blog story, “How Much is $300 Million in Attorneys’ Fees?”, recognizes NALFA as the industry source for attorney fee and legal billing matters.  The Wall Street Journal is one of the nation’s most respected newspapers and an authoritative news source on business and financial information.

The Wall Street Journal turned to NALFA for information on the largest class action attorney fee awards in U.S. history.  This is not the first time NALFA has been cited by the national press.  In September 2011, NALFA was quoted in a Thomson-Reuters story, "Cuomo Considering Law Change on Class Action Attorneys' Fees". 

“We are pleased to be recognized by the WSJ as the industry source on attorney fee and legal billing issues,” said Terry Jesse, spokesman for NALFA.  “We were happy to provide the WSJ with the information and look forward to working with other media outlets in the future,” Jesse concluded.

The National Association of Legal Fee Analysis (NALFA) is working to establish a professional certification program for the attorney fee and legal billing community in 2012.

“As a 501(c)(6) professional organization, it’s important to establish a certification program for the attorney fee and legal billing community.  This will ensure creditability and reliability in the field.  As a 501(c)(6) professional association, we have a professional obligation to ensure attorney fee experts, fee dispute arbitrators, and legal bill auditors are qualified in their respective field,” said Terry Jesse, Executive Director of NALFA. 

"Certification programs are not implemented overnight and are not done without the input and cooperation of professionals within the field.  We look forward to working with members to identify standards for certification,” Jesse concluded.

A recent Thomson Reuters story, “Plaintiffs Atty in So. Copper Case get $285M Fee” reports that plaintiffs’ attorneys in a shareholder suit involving Southern Copper Corp. won a blockbuster $285 million fee award from Delaware’s Chancery Court on Monday.  It is believed to be the biggest fee award ever by the court, one of the busiest venues in the United States for commercial litigation.

Leo Strine, the chief judge of the Chancery Court approved the fee award for two law firms, Kessler Topaz Meltzer & Check, LLP and Prickett Jones & Elliott.  The firms had requested $428.2 million in fees.  The defense attorneys for Southern Cooper and its board of directors had suggested a fee of less than $14 million.  Strine said he expected the defense to appeal the award to Delaware’s Supreme Court.

The fee award ranks among the largest in securities litigation.  Plaintiffs’ attorneys in lawsuits involving the collapse of Enron Corp. got $688 million in fees, while lawyers in Tyco International Ltd. litigation were awarded $492 million.

Some plaintiffs’ attorneys view Delaware as stingy in awarding attorney fees compared with some other states.  At a law conference last month in New York, Strine hit back that charge, telling the gathering that good cases will be awarded by the Chancery Court.

The case is In re Southern Peru Copper Corp. Shareholders Derivative Litigation.

A recently NLJ story, “IP Boutique Sues Former Client for More than $561K in Fees, Expenses”, reports that Lando & Anastasi, an intellectual property boutique, has sued former client Innovention Toys LLC for more than $560,000 in unpaid legal bills.  The Cambridge, Mass.-based firm filed the suit, Lando v. Innovention Toys LLC, in the District of Massachusetts.  The firm claims Innovention owes $561,439, including $528.985 in legal fees and $32,453 in expenses.

Innovention generally paid its legal bills from 2006 through 2009, but stopped paying in September 2009, according to the complaint.  Lando’s legal claims are breach of contract and quantum meruit.  The firm asks the court to award monetary damages, costs and interest.  Lando represented Innovention in an Eastern District of Louisiana case filed in 2007, Innovention Toys LLC v. MGA Entertainment Inc. Wal-Mart Stores Inc. and Toys “R” Us Inc. are also plaintiffs on the ongoing case.

A recent NLJ story, “Defense Counsel May Not Pull out of Patent Case Despite Client’s Nonpayment” reports that a federal magistrate judge has denied a bid by a Minneapolis firm Leffert Jay & Polglaze to withdrawal from a patent case despite the fact that its client hasn’t paid nearly $278,000 in legal bills.  Magistrate Judge Jeanne Graham of the District of Minnesota denied Leffert’s motion to withdraw from representing Quest Optical Inc. in a case against it brought by Walman Optical Co.

In the underlying case, Walman sued Quest for infringing its patent for an abrasion-resistant coating for eyeglasses.  District Judge Patrick Schilitz entered a judgment in August, finding, finding that Quest infringed Walman’s patent and that Walman’s patent is valid and enforceable.  The injunction bars Quest from making, using, importing, offering to sell or selling in the U.S. any product that infringe Walman’s patent. 

According to court documents, Leffert claimed that Quest owes it $277,749 in legal fees.  Walman Optical opposed the motion to withdrawal on the ground that it would be prejudiced by Laffert’s withdrawal if Quest Optical fails to move forward with the discovery ordered by Schilitz.

Withdrawal of counsel without substitution requires “good cause,” or nonpayment of fees plus an additional aggravating circumstance such as showing that the client doesn’t want that lawyer’s representation, Graham wrote.  Graham added that the court is sympathetic to Laffert’s position that there’s a significant amount of money at stake, particularly since the firm only has seven lawyers.  “The case is so near completion, however, that the Court finds that continued representation by [Leffert] does not constitute an ‘unreasonable burden,’” Graham wrote.

A recent The Legal Intelligencer story, “Pa. Judges Uphold $5.6 Mil. Brake Class Action Against Kia” reports that the Supreme Court of Pennsylvania upheld a Philadelphia court class action verdict awarding $5.6 million to owners of Kia sedans with faulty braking systems, but class counsel lost on the attorney fee risk multiplier issue.  Philadelphia Common Pleas Court Judge Mark I. Bernstein had awarded a risk multiplier of 1.375 times the $3 million lodestar, for a total of $4.125 million. 

Chief Justice Ronald D. Castille wrote the federal statute under which the class won its verdict – the Magnuson-Moss Warranty Act – explicitly states that attorney fees are to be based on actual time expended and does not “provide for discretionary fee enhancement.”

“Pennsylvania generally adheres to the ‘American Rule,’ under which ‘a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties or some other established exception,’” Castille said.

Class co-counsel include James A. Francis of Francis & Mailman and Alan M. Feldman of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig.  Even with the fee reduction, Feldman said the attorney fees award would probably be close to the original award because of interest and the appellate work done by plaintiffs counsel.

Arguing on behalf of appellee, Michael D. Donovan of Donovan Axler said because the U.S. Supreme Court has ruled against multipliers in a class action case, the state Supreme Court’s ruling makes it unlikely that Kia could challenge the attorney fees because of a multiplier.

Republican Governor Scott Walker signed a bill Wednesday designed to limit attorney compensation.  The law, 2011 Wisconsin Act 92 (pdf), would require judges to award attorney fees to no more than three times damages.  Plaintiffs’ attorneys point out that fee awards and monetary damages are often disproportional for good reason, especially in small tort cases.  According to the Wisconsin Association for Justice, Wisconsin will be the only state in the country that imposes factors judges must use when awarding attorney fees as well as creating a presumption that fee awards more than three times damages are unreasonble in fee-shifting cases.

"There is absolutely nothing wrong or unreasonable with fee awards being three times, four times, or even eight times that of monetary damages," explains Terry Jesse, Executive Director of NALFA.  "Caps on attorney fees is a solution to a problem that does not exist.  Plaintiffs' attorneys should be proud of earning big fee awards and proud when fees are several times that of damages, because that means they worked hard and did a great job on the case," Jesse conclued. 

In a recent academic paper, “Do Class Action Lawyers Make Too Little? (pdf)” by Law Professor Brian T. Fitzpatrick of Vanderbilt University Law School explores the economics of attorney fee awards in class action litigation.  The paper concludes:

"Judges have been given the discretion to award a significant portion of all the contingency fees lawyers in the United States collect when they set attorneys’ fees in a few hundred class action judgments every year.  Judges current appear to award these fees largely in the absence of any normative theory and, instead on the basis of intuition.  As a result, judges tend to award lower fee percentages in class action cases than those negotiated in the competitive market for individual litigation.

Although lower percentage might be justified in large-stakes class actions, current compensation practices underpay class counsel in small-stakes actions that may comprise most of the class action docket in state and federal court.  To maximize social welfare, it is often thought that litigation should both deter defendants from causing harm and insure plaintiffs against those harms when they are not deterred.

But small-stakes class actions serve no insurance function; they are only about deterrence.  As such, there is little reason as a theoretical matter not to fully incentivize class action lawyers to bring these suits by awarding them to the entire class recovery.  Although political and perhaps even legal constraints might prevent judges from setting fee percentages at 100% in small-stakes cases, deterrence-insurance theory nonetheless suggests that judges ought to give class counsel as much as they can, which, by any measure is more than the 25% they usually give now."

A recent New York Times story, “Plaintiffs’ Lawyers in a Bitter Dispute Over Fees in Gulf Oil Spill Cases” reports that plaintiffs' lawyers are seeking a reserve fund to help cover litigation costs in the BP multidistrict litigation.  In early November, the Plaintiffs’ Steering Committee (PSC) filed a motion in court asking U.S. District Court Judge Carl Barbier to require defendants to set aside 6 percent of any settlements, judgments or “other payments” – meaning Kenneth Feinberg’s Gulf Coast Claims Facility – to create a reserve fund to reimburse the committee of plaintiff attorneys for their expenses in waging the case. 

The PSC notes that since the case began, over 300 attorneys from 90 law firms have invested over 230,000 hours of time and spent $11.54 million of their own money on the case.  The PSC left it to Judge Barbier to say how the money would be extracted, whether by requiring BP to pay an additional amount equivalent to 6 percent of settlements to the fund, which would give plaintiffs their full recovery, or have it come out of the settlement.

Ed Sherman, a Tulane law professor who studies multidistrict litigation said that it’s not unusual for plaintiff committees to begin talking with the court about how to get costs covered before the case is wrapped up, because waging massive liability cases are expensive, time-intensive propositions.  “In order to keep putting that time in, they need the confidence that a fund will be there,” Sherman said.  The difference here, Sherman said, is that there is another avenue for people to have claims addressed, and the people in the claims process and outside lawyers not on the steering committee are opposed to the reserve fund.

For more information on the Plaintiffs’ Steering Committee in the BP MDL, visit http://www.bpmdl2179.com/

In today's litigation practice, the economics of attorney fees has never been more important.  With the rise in attorney fee-shifting litigation, to the growing body of attorney fee law, attorney fees have become a highly specialized practice area.

Packed with over 100 pages of substantive material on attorney fee and legal billing jurisprudence, The Attorney Fees Conference Course Book provides useful and practical information on the economics of attorney fees in complex cases.  Topics include:

Court Awarded Attorney Fees in Prevailing Party Litigation
Class Action Litigation & Attorney Fee Awards
Attorney Fee Issues in Chapter 11 Bankruptcy Proceedings
Insurance Coverage Litigation: Who Pays the Legal Bills?
Reviewing Legal Bills for Reasonableness
Dispute Over Legal Fees: Litigation vs. Arbitration

CLICK HERE for Course Book Order Form

A recent The Recorder story “Linear Technology on the Hook for $8.4 Million in Attorney Fees” reports that a California court of appeals upheld a defense judgment in favor of Novellus System Inc. and Tokyo Electron Corp. in a protracted contract fight over semiconductor processing equipment.  The decision left plaintiff Linear Technology Corp., a semiconductor manufacturer, on the hook for $8.4 million in attorney fees in the breach of contract case.

After eight years of litigation by Linear Technology, a jury in 2010 rendered a verdict for the defense.  Texas Instruments Inc., in multiple lawsuits in federal court alleged that the equipment Linear used infringed on TI’s patents. Linear agreed to pay TI $70 million.  The firm then turned around and sued Novellus and Tokyo Electron, who had supplied the equipment in 2002.  After the jury decided there was no breach of contract, Linear moved for judgment notwithstanding the verdict.  The company argued it had proved its case as a matter of law.

The trial court awarded $5.2 million to Novellus and $3.2 to Tokyo Electron Corp. in attorney fees.  The appellate panel affirmed that attorney fee award because Linear would have been entitled to fees if it had prevailed.

The case is Linear Technology v. Tokyo Electron.

A recent Legal Intelligencer story, “Western District Judge Slashes Attorney Fees in Patent Case” reports that a federal judge awarded less than half of the requested attorney fees for the defendant in an infringement case, despite repeated failures by the plaintiff to comply with local patent rules.  U.S. District Court Judge Terrence F. McVerry of the Western District of Pennsylvania awarded Accuray Inc. $43,134 in attorney fees for work done by lawyers in Pittsburgh, New York, and California.  The award was less than half of the more than $107,000 in fees the company was seeking and reduced the partners’ rates by more than $150 an hour.

Three lawyers and a paralegal submitted their fees.  Madison Jellins is based in California and began her representation of Accuray in this case while she was a partner at Alston & Bird, where she charged $625 an hour.  She has since moved to Helix IP, where she charges $550 an hour.  She has 21 years’ experience.  Janice Christensen is a senior associate at Alston & Bird New York with eight years’ experience and bills $525 an hour.  In total, the attorneys and paralegals sought reimbursement of more than $107,000 for more than 211 hours worked.

In his legal analysis, McVerry relied on the court’s 2011 decision in NFL Properties LLC v. Wohlfarth, in which he had articulated the standards for fee petitions in the circuit.  The analysis includes a lodestar calculation of reasonable rates in the relevant legal community multiplied by reasonable hours.  As the hourly rate goes up, he said there should be a corresponding decrease in the amount of time required to accomplish a task because the attorney’s experience and expertise.

When it came to determining the reasonable hourly rate in Pittsburgh, McVerry said Accuray failed to submit evidence to prove the rates from the attorneys in all the locations are reasonable.  He dismissed a belated submission by Accuray of an affidavit filed in a separate, unrelated case before the court – Air Vent Inc. v. Vent Right Corp. – in which an attorney said $350 an hour was a reasonable rate for experienced patent litigators in Pittsburgh.

Because Accuray failed to meet its burden of proof, McVerry said the court was left to determine a reasonable rate.  He gave Jellins and Rydstrom a rate of $400 an hour, Christensen a rate of $250 an hour.  “These rates are comparable to the rates used in NFL Properties for an associate attorney and paralegal with similar years of experience and well within the market range identified by" the attorney in Air Vent, said McVerry.

In a new academic paper, “An Empirical Study of Class Action Settlements and their Fee Awards” (pdf), Law Professor Brian T. Fitzpatrick of Vanderbilt University Law School examines attorney fee awards in class action litigation in federal court.

The following is a brief synopsis of the 42-page paper:

"This article is a comprehensive empirical study of class action settlements in federal court.  Although there have been prior empirical studies of federal class action settlements, these studies have either been confined to securities cases or have been based on samples of cases that were not intended to be representative of the whole (such as those settlements approved in published opinions).  By contrast, in this article, I attempt to study every federal class action settlement from the years 2006 and 2007.  As far as I am aware, this study is the first attempt to collect a complete set of federal class action settlements for any given year. 

I find that district court judges approved 688 class action settlements over this two-year period, involving nearly $33 billion.  Of this $33 billion, roughly $5 billion was awarded to class action lawyers, or about 15% of the total.  Most judges chose to award fees by using the highly discretionary percentage-of-the-settlement method, and the fees awarded according to this method varied over a broad range, with the mean and median around 25%.  Fee percentages were strongly and inversely associated with the size of the settlement.  The age of the case at settlement was positively associated with fee percentages.  There was some variation in fee percentages depending on the subject matter of the litigation and the geographic circuit in which the district court was located, with lower percentages in securities cases and in settlements from the Second and Ninth Circuits.  There was no evidence that fee percentage were associated with whether the class action was certified as a settlement class of with the political affiliation of the judge who made the award."

On November 17, 2011, NALFA hosted The Attorney Fees Conference at Loyola Law School in Los Angeles.  The conference featured 3 sitting judges, top trial lawyers, and attorney fee experts covering a range of complex issues on attorney fee and legal billing matters in a number of litigation areas.

California Attorney’s Fees reported on the conference.  For more information on each panel discussion, please click on link below. 

Attorney Fees in Prevailing Party Litigation

Class Action Litigation & Attorney Fee Awards

Attorney Fee Issues in Chapter 11 Bankruptcy Proceedings

Insurance Coverage Litigation: Who Pays the Legal Bills?

CLICK HERE for Course Book Order Form.

A recent Boston.com story, “Jackson Doctor’s Legal Bills Issue in Texas Court” reports that an insurer for the doctor charged in Michael Jackson’s death has asked a judge to rule it is not responsible for the physician’s legal bills.  Medicus Insurance Co. argues that Dr. Conrad Murray’s medical malpractice policy doesn’t cover his defense costs because the case stems from alleged criminal wrongdoing, according to documents filed in state court in Houston.  Murray’s policy, which was purchased roughly a month before Jackson’s death in June 2009, did not cover incidents involving general anesthesia, the company argues.

Medicus, which is based in Austin, claims it is not required to defend Murray’s medical license in three states.  The insurer argues that scrutiny by Texas and California officials came as a result of allegations of wrongdoing in Jackson’s death, and that Nevada attempted to suspend Murray’s medical license because he was behind on child support payments, not for his medical work. 

The court filings do not indicate how much Murray’s defense in the various cases may cost.  The company’s lawsuit states that Murray’s policy only covers the doctor’s actions in Texas.  Medicus filed its case after Murray asked the insurers to pay for his defense in the California court case and medical board hearings in other states, according to the suit.

In today's litigation practice, the economics of attorney fees has never been more important.  With the rise in fee-shifting litigation and the growing body of attorney fee law, attorney fees have become a highly specialized practice area.  Whether you're seeking to recover fees in court or to adjudicate a fee dispute with a former client, today's litigators require both substantive and procedural knowledge of attorney fee jurisprudence.  In fact, pursuing the right attorney fee strategy from the outset can often mean millions of dollars more (or less) in attorney fees.

This seminar provides useful and practical information on the economics of attorney fees in complex cases.  From achieving prevailing party status, to well-documented fee requests, to allocation issues, to rates and billing issues, the Attorney Fee Conference 2011 covers a range of complex attorney fee issues in a number of underlying litigation areas.  This conference is widely regarded as the nation's largest and most comprehensive program on attorney fees.  The program includes a course book with over 100 pages of substantive material on attorney fees matters.

You will hear from top attorney fee experts, trial lawyers, and sitting judges on:

• Court Awarded Attorney Fees in Prevailing Party Litigation
• Class Action Litigation & Attorney Fee Awards
• Attorney Fee Issues in Chapter 11 Bankruptcy Proceedings
• Insurance Coverage Litigation: Who Pays the Legal Bills?
• Reviewing Legal Bills for Reasonableness
• Disputes Over Legal Fees: Litigation vs. Arbitration

In today's litigation practice, the economics of attorney fees has never been more important.  With the rise of fee-shifting litigation and the growing body of attorney fee law, attorney fees have become a highly specialized practice area.  Whether you're seeking to recover fees in court, or adjudicate a fee dispute with a former client, today's litigators require both substantive and procedural knowledge of attorney fee jurisprudence.  In fact, pursuing the right attorney fee strategy from the outset can often mean millions of dollars more (or less) in attorney fees.

This seminar provides useful and practical information on the economics of attorney fees in complex cases.  From achieving prevailing party status, to well-documented fee requests, to allocation issues, to rates and billing issues.  The Attorney Fees Conference - 2011 covers a range of complex attorney fee issues in a number of underlying litigation areas.  This conference is widely regarded as the nation's largest and most comprehensive program on attorney fees.  This program includes a course book with over 100 pages of substantive material on attorney fees.

For more infomation, or to register visit http://www.thenalfa.org/CLE-Programs/

A recent BLT Blog post, “Prosecutors: Clemens’ Defense Team Not Entitled to Legal Fees” reports that the prosecutors in the Roger Clemens perjury case said today the former baseball pitcher’s defense team is not entitled to attorney fees from the government as a sanction for the botched prosecution.  Clemens’ lawyers, including Houston’s Russell Hardin Jr., want Judge Reggie Walton of Washington federal district court to order the government to pay thousands of dollars in legal fees following the mistrial in July.

Walton terminated the trial after prosecutors presented evidence to jurors that the judge had previously restricted.  Assistant U.S. Attorney Steven Durham said, “The government regrets this.  This mistake does not entitle defendant to attorney fees and costs.”  The prosecutors went on to say that “no trial is perfect” and that allowing the imposition of fees for errors “would mire the federal courts in collateral litigation about the ‘costs’ of mistakes.”

The prosecutors said Clemens’ legal team cannot invoke the Hyde Amendment, which provides some recourse for defendants in criminal cases, to recoup fees.  Durham said Clemens was not the prevailing party and be cannot show the prosecution was “vexatious, frivolous, or bad faith government misconduct.”

Walton said in court he did not know whether he has the authority to order the government to pay Clemens’ defense team.  “I think fundamental fairness obviously would require that he be reimbursed for those expenses, but sometimes fundamental fairness doesn’t bear out when it comes to legal issues that a court has to resolve,” Walton said.

A recent The Legal Intelligencer story, “Judge: Losing Plaintiff Must Pay $6.5 Mil in Attorney Fees, Costs” reports that a federal judge has ordered the losing plaintiff in a patent infringement case to pay the two defendants a total of $6.5 million in attorney fees and costs.  U.S. District Judge Petrese B. Tucker in Pennsylvania rejected all but one of the plaintiff Checkpoint Systems’ objection to the fees and costs submitted by defendants Sensormatic Electronics Corp. and All-Tag Security.  Checkpoint didn’t contest the reasonableness of the rates the defense lawyers charged or the time they spent on the case, but rather focused on what tasks the company should be forced to reimburse the defendants.

The defendants submitted their bills after Tucker found the case to be “exceptional” under Section 285 of the U.S. Code, which provides for the award of attorney fees in bad faith litigation.  Checkpoint was ordered to pay All-Tag’s attorney fees and costs of $2.43 million.  The company was represented by attorneys at Breiner & Breiner in Virginia and Reed Smith in Philadelphia.  The award includes about $1.61 million in attorney fees, more than $191,000 in expenses, nearly $634,000 in prejudgment interest and $35.98 a day in post-judgment interest, according to the opinion.

Checkpoint was ordered to pay Sensormatic $4.15 million on top of the $91,000 it had already paid the company.  The sum includes slightly more than $3 million in legal fees generated by Morgan & Finnegan and Pepper Hamilton, nearly $337,000 in expenses, about $806,000 in prejudgment interest and $55.63 a day in post-judgment interest.  The award does not include a $50,000 litigation success fee owed by Pepper Hamilton under the firm’s fee arrangement with Sensormatic.  Tucker concluded, “requiring plaintiff to pay the litigation bonus does not align with the purpose of the exceptional case finding, which is designed to compensate a party for money it was required to spend to litigate the case.”

Checkpoint also sought the exclusion of nearly $1.1 million of the combined attorney fees and costs from the two defendants because they were racked up on pieces of the litigation the defendants lost.  Tucker said other courts have expressly rejected that argument, ruling the defendant would not have had incur any legal fees if the plaintiff had not engaged in “inequitable conduct.”  Checkpoint also sought the exclusion of almost $8,000 in fees Sensormatic incurred related to the case but prior to the case filing, and more than $424,000 in fees and costs the company was billed without descriptions of the work performed.  Tucker said other courts have found expenses for preparing for litigation to be included in these awards.  She also pointed out that Sensormatic updated its filings regarding the $424,000 to reflect what work was done for those charges.

A recent New York Law Journal story, “Circuit Pares Emery Firm’s Fee in Favor of Plaintiffs’ Committee” reports that the long-running dispute over the allocation of attorney fees for attorneys who represented the families of those killed in the 1988 bombing of a plane over Lockerbie, Scotland, has been brought to an end by the U.S. Court of Appeals for the Second Circuit.  The Second Circuit upheld a lower court’s decision directing Emery Celli Brinckerhoff & Abady to pay 20 percent of its fee from the settlement of the litigation against Libya, which was accused of orchestrating the bombing, to the plaintiffs’ committee.

Judge Thomas C. Platt in 2009 had rejected the argument of Richard Emery, the lead plaintiffs’ attorney, that the firm should not have to contribute that amount because several non-lead attorneys played no role in a decisive event that led to the settlement—the successful lobbying effort that led Congress to write a terrorism exception into the Foreign Sovereign Immunities Act (FSIA).  But the Second Circuit in Emery Celli Brinckerhoff & Abady v. Plaintiffs’ Committee, said “We cannot conclude on this record that the district court abused its discretion in deciding that Emery’s work did not play a ‘substantially instrumental’ role in the FSIA’s amendment or the Libya settlement itself.”

Judge Platt originally dismissed the suit brought in 1995 by two survivors of victims against Libya and two Libyan officials, but the suit was reinstated after Congress changed FSIA to include terrorism exception, promoting a wave of suits that were settled when Libya offered to pay each of 269 decedents $10 million each.  In the fee allocation dispute, Judge Platt first directed Emery Celli to pay 21.3 percent, or $1.44 million, of the contingency fee, to the plaintiffs’ committee, a portion equal to 3 percent of its clients’ settlement award.  Emery appealed.  The Second Circuit reversed saying Platt improperly relied on a settlement proposal in resolving the fee dispute.

On remand, Platt ordered the firm to pay 20 percent of its fee and Mr. Emery appealed again, but this time the circuit upheld Judge Platt.  The court said “the question is whether the evidence that Emery’s lobbying conferred a substantial benefit on the class so much greater than that attributable to the other non-committee counsel, or so significant in relation to the efforts of the Committee, as to compel the conclusion that Emery is entitled to be excused, in whole or part, from the same ‘tax’ fairly imposed on other non-Committee counsel to compensate the Committee for its efforts.”  And while the Emery firm stated that it had spent “2900 plus” hours prosecuting the case, “it offered no evidence, despite available billing records, regarding how much of that time was spent on lobbying activities.”

Mr. Emery said the 20 percent figure now comes to roughly $1.7 million.

A recent ABA Journal post, “Judge Orders Ogletree Deakins to Turn Over Records in Billing Dispute, But Protects Privileged Info” reports that an Arizona judge order Ogletree, Deakins, Nash, Smoak & Stewart to open its billing records in a legal fee dispute with Maricopa County.  Judge John Buttrick ruled Friday that the county had a right to audit Ogletree Deakins billing records, but the law firm did not have to turn over privileged information.  The lawyer who represented the law firm, John Doran, said the judge will have to appoint a special master to determine what information is privileged.  The county attorney, Julie Pace, said that wouldn’t be necessary, however.

Ogletree Deakins billed the county for $5 million in legal work over several years for the sheriff’s office and former County Attorney Andrew Thomas.  The county has refused to pay $1.1 million of the amount, and has alleged that the law firm improperly expanded its assignments.  Ogletree Deakins had balked at turning over its billing records.  The law firm had maintained the county may be trying to get confidential information about Thomas and Sheriff Joe Arpaio for federal and bar investigations.

In today's litigation practice, the economics of attorney fees has never been more important.  With the rise in fee-shifting litigation and the growing body of attorney fee law, attorney fees have become a highly specialized practice area.  Whether you're seeking to recover fees in court or adjudicate a fee dipsute with a former client, today's litigators require both substantive and procedural knowledge of attorney fee jurisprudence.  In fact, pursuing the right attorney fee strategy from the outset can often mean millions of dollars more (or less) in attorney fees.

This seminar provides useful and practical information on the economics of attorney fees in complex cases.  From achieving prevailing party status, to well-documented fee requests, to allocation issues, to rates and billing issues, The Attorney Fees Conference - 2011 covers a range of complex attorney fee issues in a number of underlying litigation areas.  This conference is widely regarded as the nation's largest and most comprehensive program on attorney fees.  The program includes a course book with over 100 pages of substantive material on attorney fee matters.

For more information or to register, visit http://www.thenalfa.org/CLE-Programs/

A recent NLJ story, “MGA’s Insurers Attempt End-Run Around Ruling Thwarting Bid for Fees” reports that four insurance companies have appealed a judge’s order that frustrated their attempt to snag a portion of the $141 million in attorney fees and costs awarded to Bratz doll maker MGA Entertainment Inc. in its fight against Mattel Inc.  The insurers – National Union Fire Insurance Co. of Pittsburgh, Lexington Insurance Co., Chartis Specialty Insurance Co. and Crum & Forster Insurance Co. – paid legal costs for MGA, which obtained a $310 million judgment following a jury trial against Mattel over the copyright to the Bratz doll.  The insurers seek reimbursement for MGA’s defense fees and costs, which they estimate at about $80 million.

U.S. District Judge David Carter in Santa Ana, Calif., denied the insurers’ motion to intervene in the Mattel case, finding the move “untimely” and “futile,” since “the insurers can no longer attempt to step into MGA’s shoes and directly recover reasonable attorneys’ fees from Mattel.  And any claim for reimbursement of those fees from MGA would unduly prolong this litigation, which has been administratively closed and is now on appeal.”  Furthermore, he said intervening would do nothing to ensure that MGA paid its insurers.

A recent BLT Blog post, “Rogers Clemens’ Lawyers Seek Fees After Mistrial” reports that the government should be forced to pay fees and costs associated with the botched obstruction and perjury trial of Roger Clemens, the defense attorneys for the former baseball pitcher told a judge in Washington.  The attorneys, including Houston’s Russell Hardin Jr., said in an entitlement request (pdf) filed in Washington federal district court that trial judges have the inherent authority “to sanction conduct that abuses the judicial process.”

U.S. District Judge Reggie Walton declared a mistrial in July after prosecutors presented evidence to jurors the judge had previously restricted.  Hardin and co-counsel Michael Attanasio of Cooley did not specify the amount they are seeking.  The lawyers said they would submit a fee petition to the court documenting attorney fees and expenses incurred between June 25 and July 14.  At a hearing in September, Walton said jury selection and several days of the trial itself “obviously cost Mr. Clemens a lot of money.”

Walton said in court last month he was unsure whether he has the authority to order the government to reimburse Clemens.  “I think fundamental fairness obviously would require that he be reimbursed for those expenses, but sometimes fundamental fairness doesn’t bear out when it comes to legal issues that a court has to resolve,” Walton said.

A recent New Jersey Law Journal post, “N.J. High Court Mulls Federal Fee-Shifting Rule That Could Spell Doom for Rendine” reports that the New Jersey Supreme Court on Tuesday took up whether to adopt a U.S. Supreme Court ruling that sharply curtails trial judges’ power to enhance attorney fees in cases that might have never been filed but for fee-shifting rules.  In two cases, Walker v. Giuffre and Humphries v. Powder Mill Shopping Center, the Appellate Division slashed enhanced fees under Perdue v. Kenny A. (pdf), which held that a trial judge may award such fees only in rare and extraordinary circumstances and not “on an impressionistic basis.”  If those ruling stand, they would eviscerate the doctrine of Rendine v. Pantzer, which allows judges to enhance fees if it is demonstrated that the attorney worked on a contingency-fee basis, there was a financial risk absorbed by the attorney, and there was some question about the relative likelihood of success.

In Walker, a consumer fraud case, the plaintiff’s lawyer asked the Court to reinstate a $99,000 legal fee on the plaintiff’s $650 recovery.  The appellate panel said Middlesex County Superior Court Judge Alexander Waugh failed to provide a sufficient analysis for his decision to enhance the plaintiffs counsel’s lodestar by 45 percent.  In that case, plaintiff Mary Walker purchased a new car at Route 22 Nissan in 2001.  The sales contract included a $140 vehicle registration fee that was $51.50 more than the Motor Vehicle Commission charges.  Waugh ruled for the plaintiff, awarding damages of $654.50.  Waugh rejected Nissan’s argument that no fees should be awarded to Walker’s attorneys since the case was over the same alleged practices in Cerbo v. Ford of Englewood and covered the same work.

In Humphries, a disability discrimination case, wheel-chair bound Bobbie Humphries alleged the parking lot did not have enough handicap parking spaces.  In a partial settlement, Power Mill agreed to fix the ramps and improve striping and signage for handicap spots and pay Humphries $2,500.  The parties left it up to the judge to decide the attorney fees for her lawyer, Edward Kopelson.  Judge Deanne Wilson held Humphries was a prevailing party and awarded $62,235 in fees plus an additional $12,448, a 20 percent enhancement of the lodestar. 

Walker’s lawyer on the Supreme Court appeal, Bruce Greenberg of Newark’s Lite DePalma Greenberg said the fee enhancement should be reinstated.  Greenberg told the justices they were faced with a stark decision.  “If Rendine is still good law, then Perdue is incompatible,” he said.  Greenberg said it would be wrong to dismiss Rendine because it is an incentive for attorneys to take on matters that are risky at the outset.  “Humphries is a good example of why enhancement is necessary.  Architectural relief is equitable.  Damages are rarely more than minimal, and plaintiffs are rarely able to afford counsel.”

A recent law.com story, “Firms Defend Their Work in Dodgers Bankruptcy Against Trustee’s Attack” reports that the U.S. Trustee overseeing the bankruptcy case of the Los Angeles Dodgers has objected to about $350,000 in legal fees and expenses, arguing that work billed by attorneys to obtain financing over the summer was “not reasonably likely to benefit” the baseball team.  The Dodgers’ lawyers at Dewey & LeBoeuf (D&L) and Young Conaway, Stargatt & Taylor (YCST), in a response defended their actions, which they insisted ended up benefitting the Dodgers.

U.S. Trustee Roberta A. DeAngelis in Wilmington, Del. has objected to the fee request.  The trustee has taken issue with a portion of the fees tied to a proposed financing arrangement designed to meet the team’s payroll.  D&L submitted its fee application, seeking more than $1.7 million in compensation and about $32,000 in expenses.  Of that, more than 2,000 hours, and $1.1 million, were spent on attempts to obtain immediate financing.  In its fee application, YCST sought more than $267,000 in compensation and $41,000 in expenses.  The proposed financing deal accounted for more than $104,000 or 256 hours.

Mark Kenney, trial attorney in the trustee’s office argued that D&L compensation should be reduced by $312,000 and YCST by about $41,000, “on account of services rendered that were not necessary to the administration of these cases.”  He added that the work provided no benefit to the team.

Under the proposed financing arrangement, the Dodgers sought court approval for a $150 million deal from Highbridge Principal Strategies, a hedge fund.  Under the terms of the deal, the Dodgers would have paid a $5.25 million closing commitment fee and $4.5 million deferred commitment fee.  Major League Baseball countered with a competing offer that excluded such fees, the Dodgers attorneys continued to negotiate for the Highbridge deal, according to Kenney.

A recent NLJ story, “Teva Must Pay Pfizer $378K in Attorney Fees for Pursuing ‘Frivolous’ Claim in Case Over Viagra Patent” reports that a Virginia federal judge has slapped Teva Pharmaceuticals USA Inc. with an order to pay $378,285 of Pfizer Inc’s attorney fees for its litigation conduct during Pfizer’s case claiming Teva infringed its patent that underpins Viagra.  Pfizer asked for, and U.S. District Court Judge Rebecca Beach Smith of the Eastern District of Virginia awarded fees based on the recent seminal ruling by the U.S. Court of Appeals for the Federal Circuit, Therasense Inc. v. Becton Dickinson & Co.

Pfizer sued Teva in March 2010 for infringing its patent for an erectile dysfunctrion treatment that is the basis for Viagra.  In two different court filings, Teva claimed Pfizer committed inequitable conduct because its attorneys persuaded the U.S. Patent and Trademark Office to issue overbroad claims related to the treatment of erectile dysfunction in a “male animal,” even though it “disclaimed nearly identical subject matter in a related counterpart Canadian patent” in November 2002, just 17 days after the U.S. patent issued.

Although Pfizer would not be able to collect attorney fees if Teva prevails in its Federal Circuit appeal of the patent case, “this court is not persuaded that it should delay ruling on Pfizer’s motion,” Smith wrote in her opinion.  Smith wrote that “Teva must have known that its inequitable conduct claim, far from being even remotely supported by clear and convincing evidence, was objectively baseless.  Smith also found that “Teva’s continued litigation of its claim for inequitable conduct after the Federal Circuit’s decision in Therasense was “frivolous” and an exceptional case that warranted an award of attorney fees.

A recent NLJ story, “Judge Allows Orrick to Fire MGA Over Unpaid Legal Bills” reports that a federal judge has granted Orrick, Herrington & Sutcliffe’s motion to withdraw from representing MGA Entertainment Inc., maker of the Bratz doll, in its copyright dispute with Mattel Inc.  On Sept. 23, Orrick moved to withdraw from representing MGA and its chief executive, Isaac Larian, citing $3.85 million in unpaid legal fees and other compensation associated with the Mattel case. 

According to the motion, MGA had agreed to pay a monthly fixed amount of $550,000 beginning in December 2010 and turn over its insurance payouts to cover legal fees, costs and expenses.  Instead, the motion said MGA has paid Orrick’s fees only twice – in January and March – and has not turned over insurance proceeds since May 2011.  In addition, MGA owes at least $287,000 for outstanding costs and expenses, the motion said.

According to Orrick’s motion, the agreement between Orrick and MGA required that all unpaid fees and costs become due 60 days following the judgment, which would have been Oct. 3.  MGA had no plans to pay the unpaid amounts to Orrick and has filed an arbitration action against the firm for more than $10 million, rendering a relationship impossible, the motion said.

NALFA hosts The Attorney Fees Conference - 2011, the nation's largest conference on attorney fees, on November 17, 2011 at Loyola Law School in Los Angeles.  The program includes three sitting judges. 

For more information or to register visit http://www.thenalfa.org/CLE-Programs/

Last Tuesday, The Subcommittee on Courts, Commercial and Administrative Law of the Judiciary Committee in the U.S. House held hearings on The Government Litigation Savings Act (H.R. 1996) (pdf).  Georgetown University Law Professor Brian Wolfman gave testimony (pdf) opposing the proposed legislation, which would cap attorney fees in EAJA litigation.  Below is a blog post of the Consumer Law & Policy Blog on October 11:

H.R. 1996: Undermining the Equal Access to Justice Act

The Equal Access to Justice Act (EAJA) is a fee-shifting statute that applies in litigation and certain adversary administrative proceedings against the federal government when no other fee-shifting statute applies. It is used mainly in social security and veterans disability cases and administrative law cases under the Administrative Procedure Act. It is used by small businesses as well, such as in government contract disputes.

As with most fee-shifting statutes, the fee applicant may receive an award when it has prevailed in the case. But EAJA is less generous than most fee-shifting statutes for a number of reasons, the most important of which are (1) that the government can avoid a fee request, even if it has lost, if it can show that its position on the merits was reasonable, and (2) fees are awarded at well below market rates.

Enter H.R. 1996. It would make EAJA a dead letter in many cases. First of all, it would make EAJA inapplicable unless the plaintiff is seeking monetary relief in the case. So, no EAJA fees for cases seeking to enjoin or otherwise alter government regulations or conduct. Second, under H.R. 1996, no fee would be awarded where the legal services were provided pro bono -- well that's most litigation filed by non-profits groups and lots of cases brought on behalf of people claiming that they were wrongfully denied government benefits.

That's not all. To learn about all of H.R. 1996's problems, read this testimony I gave today before a House Judiciary subcomittee. It's interesting how times change. The last time I testified on EAJA in 1994, it was thought that Congress might make EAJA better by making it more like other fee-shifting statutes. Now, the effort is to save it.

A recent NLJ story, “Judge Slashes ‘Highly Unreasonable’ Fee Request in Prius Highlight Case” reports that a federal judge in Los Angeles struck down the proposed attorney fees in a class action settlement against Toyota Motor Corp. over Prius headlights, calling the $4.7 million request “highly unreasonable” for a case with “narrow, not complex” legal work.  “This could not be a simpler case,” said U.S. District Judge Manuel Real, who granted final approval of the settlement, which he estimated at more than $3.8 million, but reduced the fee request to 20 percent of that value or $766,000.  He questioned why so many firms were involved, saying, “There was no need for five firms to be involved.”

Eric Gibbs, a partner at San Francisco’s Girard Gibbs, lead counsel for the plaintiffs, said he was pleased to see the settlement approved despite the reduced fee award.  “My firm worked hard to get the settlement benefit for the class,” he said.  “As for the fee award, we’ll need to sit down and weigh the court’s comments against the record that the court has before it, and use that preface to evaluate what our next steps ought to be.”

Toyota attorney Michael Mallow, a partner in the Los Angeles office of Loeb & Loeb, questioned why so many firms were needed and called their billing records “inherently unreliable by bloated timekeeping, unnecessary work, and contradictory statements.”  He wrote that the fee request was “grossly excessive” –particularly since he valued the settlement at about $3.8 million.  He cited the U.S. Court of Appeals for the 9^th Circuit’s Aug. 19 ruling in the Motorola Bluetooth headsets litigation.  The 9^th Circuit rejected a settlement, ruling the trial judge had failed to cross-check the amount the plaintiffs could have demanded by billing at their usual rates--called the “lodestar” amount--to what they would have received were their fees based on a percentage of the settlement.

Gibbs, who estimated the value of the Prius settlement at more than $4 million, wrote that the Bluetooth case was nothing like his own, which involved “a high degree of success” for class members.  He disputed Toyota’s calculation of how much future warranty repairs were worth.  Under such a calculation, Gibbs wrote, the settlement amount would be closer to $6.35 million, and the plaintiffs’ attorney fees would represent only 31 percent of its value.

In reducing the fee award, Real cited the number of pages of each major documents filed in both cases—one of which he called a “form” complaint that was a “piggyback” to the first complaint.  He not that mediation lasted just one day and that much of the information used by plaintiffs’ attorneys was in the public record, including the National Highway Traffic Safety Administration’s report.  He noted that the case involved only two months of discovery, making plaintiffs’ attorneys more akin to “negotiation agents” for the class than actual litigators confronting “new legal issues.”  As for the billing records submitted, Real found them “most difficult, if not impossible, to decipher.”

A recent American Lawyer story, “As Stanford Victims Grumble, Court Approves Receiver’s Latest Fee Request” reports that on Tuesday the Dallas federal district court judge overseeing the receivership of alleged Ponzi schemer R. Allen Stanford’s collapsed financial empire, approved the latest $1 million in legal fees requested by receiver Ralph Janvey and the outside law firms advising him.  Federal district court judge David Godbey is expected to rule soon on a July motion to intervene filed by a group of disgruntled Stanford investors who claim their interests are not being are not being adequately represented by the committee appointed by Janvey to fill that role.

Those moving to intervene accuse the lawyers serving as members of the committee of “double-dipping” in the estate because they were paid retainers up front by individual victims and are eligible under their contracts to collect large contingency fees based on what they recover.  Since early this year, Janvey has tapped the committee to take over a number of fraudulent conveyance claims he and his team originally developed, removing the day-to-day expense of litigating those claims.  Janvey told the judge in court filings this past summer that he did so as a cost-saving measure.

Janvey’s recovery efforts in the case continue to move slowly.  To date, of the estimated $7.2 billion lost via Stanford’s alleged scheme, the receiver’s legal team has recovered just over $146 million. (Another $63 million was sitting in Stanford accounts the day Janvey was appointed.)  Much of the total recovery has already been spent on a combination of legal and professional fees ($50 million) and expenses ($50 million).  A majority of the legal fees have gone to one firm, Baker Botts, where Austin-based litigation partner Kevin Sadler is heading up the firm’s efforts.

For more information, visit www.stanfordfinancialreceivership.com

Republicans in the U.S. House of Representatives held a hearing on Oct. 11 as part of an effort to cap attorney fees under the Equal Access to Justice Act (EAJA).  The legislation, H.R. 1996 (pdf), takes specific aim at attorney fee awards under the EAJA statute.  The EAJA allows attorney fees to be awarded to those who win litigation against the federal government.  Republicans incorrectly claim that environmental and other non-profit groups are somehow getting rich on attorney fees and using those fees as substantial funding sources for their organizations.

"We're opposed to the legislative effort to cap attorney fee awards in EAJA litigation," said Terry Jesse, executive director of NALFA.  “These groups perform valuable public interest litigation and even if they're earning big fee awards, what's wrong with that?; it's terrific for them.  Attorney fee awards are earned for the work done in litigation.  Judges should determine reasonable attorney fee awards, not politicians," Jesse concluded.

A recent NLJ story, “MGA Settles Billing Dispute with O’Melveny” reports that MGA Entertainment Inc. has settled in principle its $10.2 million billing dispute with O’Melveny & Myers, which represented the Bratz doll manufacturer in its high-profile copyright litigation with Mattel Inc. 

During an Oct. 12 court hearing, Christopher Jennings, an attorney at Los Angeles-based Gibson Dunn & Crutcher who represents O’Melveny, said the parties were working with retired U.S. District Judge Dickran Tevrizian, a neutral at JAMS in Los Angeles, on the details of the settlement.  He asked Los Angeles County, Calif., Superior Court Judge Elizabeth White to give the lawyers a month or so to iron out the details.  White obliged, scheduling a Nov. 7 status conference.

Both Jennings and MGA attorney Edmond Connor, managing partner of Connor Fletcher & Williams in Irvine, Calif., declined to comment following the hearing.  During the proceedings, neither discussed the details of the settlements.  And no specifics were outlined in a stipulation filed on Oct. 3 in which lawyers on both sides told White that parties had reached a tentative settlement.

A recent Reuters news story, “Winklevoss Twins Lose $13M Appeal of Attorneys’ Fees” reports that Cameron and Tyler Winklevoss – the famous twins who claim to have come up with the original idea for Facebook – have lost a bid to appeal a decision last year that awarded the law firm Quinn Emanuel Urquhart & Sullivan a $13 million contingency fee stemming from the twins’ settlement with the social media giant.

On Oct. 6, New York’s Appellate Division, First Department, dismissed the case brought by the Winklevoss.  The twins had fought against paying the attorney fees by arguing that the law firm committed malpractice in reaching a $65 million settlement in an intellectual property dispute between Facebook and ConnectU, the Winklevosses’ social network website.  The dispute was the subject of the fim “The Social Network.”

The brothers alleged that in reaching the settlement, the law firm miscalculated the value of Facebook stock.  They also asserted the law firm revealed the amount of the settlement in a newsletter, despite a confidentiality agreement.  An arbitration panel in August 2010 determined that the Winklevosses should pay the attorney fees.  In November 2010, New York Supreme Court Richard Lowe III confirmed the arbitration decision.  The appeal to the First Department followed.  In a one-page decision, the five judge appeals panel granted Quinn Emanuel’s motion to dismiss with “due deliberation having been had thereon.”

The Winklevosses were represented by Sean O’Shea with O’Shea & Partners in New York.  The case is ConnectU v. Quinn Emanuel.

A recent madison.com story, “Crime and Courts: More ‘Tort Reform’ Bills Coming From the GOP” reports that recent legislative efforts by Wisconsin State Sen. Rich Zipperer places attorney fees on the front burner as the Republican majority attempt to enact tort reform similar to that which took place in Michigan 15 years ago.  Trial lawyers are opposing the measures, arguing that certain provisions deny injured parties their day in court.  “If this becomes law, all of those people who are injured, or the families of people who die, will just be (out of luck) says Mike End, the president of the trial lawyers group Wisconsin Association for Justice.

The proposed legislation (pdf) would limit attorney fees to three times the amount of compensatory damages awarded.  “We oppose politicians imposing caps on attorney fee compensation,” says Terry Jesse, executive director of NALFA.  “We work in a free market economy, where clients and attorneys are free to contract with one another without politician or government interference.”  Jesse concluded, “Judges determine reasonable attorney fee awards, not politicians.”

A recent Reuters story, “Attorney Who Charged Excessive Fees Wins Back Law License” reports that an attorney whose license was suspended for routinely excessive fees in surrogate cases has won the right to practice law again.  A New York appellate court ruled that Louis Rosenthal, who served as counsel to the Brooklyn public administrator from 1997 to 2002, where he handled the estates of people who died without written wills or close relatives, “possesses the character and general fitness to resume the practice of law.”

In 2008, the same court slapped Rosenthal with a two year suspension after investigators found he had billed more than $2 million in excessive fees over a five year period.  State law caps attorneys’ fees in surrogate cases at 6 percent, but Rosenthal regularly charged 8 percent.  In addition to billing for excessive fees, Rosenthal admitted to failing to file mandatory affidavits that outlined the work he had done.  Instead, he wrote fee requests on Post-It notes and affixed them to court documents.

The case spurred the state’s top court to kick former Surrogate Court Judge Michael Feinberg off the bench in 2002.  Feinberg, who granted Rosenthal a total of $8.6 million in fees over five years without questioning his methods, was disbarred in 2005.  Investigators and the media claimed Feinberg and Rosenthal, who both attended Brooklyn Law School in the 1960s, were good friends, and said the attorney curried favor with the judge to win the counsel job.  “We were friends, (Feinberg) came to my son’s bar mitzvah, but so did 300 other people,” Rosenthal said.

A recent NLJ story, “Insurance Companies May Not Intervene to Seek Fees in MGA Case” reports that a federal judge has denied a request by insurance companies that paid legal fees for MGA Entertainment Inc. in its successful case against Mattel Inc. to intervene in a bid to snag part of the $141 million in attorney fees and costs awarded to the Bratz doll manufacturer.  Four insurance firms – National Union Fire Insurance Co., Lexington Insurance Co., Chartis Specialty Insurance Co. and Crum & Forster Co. – filed the motion to intervene in the case, arguing they are entitled to reimbursement for MGA’s defense fees and costs.

U.S. District Judge David Carter in Santa Ana, Calif. denied the motion, concluding that the insurers should have made their entitlement claim before MGA had applied for attorney fees and costs in the case.  Since they did not, “the insurers can no longer attempt to step into MGA’s shoes and directly recover reasonable attorneys’ fees from Mattel.  And any claim for reimbursement of those fees from MGA would unduly prolong this litigation, which has been administratively closed and is now on appeal.”  In their motion to intervene, the insurers said they had paid about $80 million for the MGA litigation.

“Nowhere in MGA’s fee application or briefing in support of its application did MGA indicate that it was pursuing attorney fees on behalf of its insurers,” he wrote.  “Moreover, the fact that MGA and its insurers have been engaged in other contentious litigation about coverage obligations, including a claim by MGA that the insurers acted in bad faith, and should have alerted the insurers to MGA’s unwillingness to champion their claims.”

A recent New York Law Journal story, “Attempt to Win Fees for Withdrawn Suit Against Goldman is Rejected” reports that attorneys for investors who sued Goldman Sachs over bonuses the bank planned to distribute after it received government bailouts, and then dropped the suit when the bonuses were reduced, have been rebuffed in their attempts to win attorney fees for their role in the litigation.  In Central Laborers Pension Fund v. Lloyd C. Blankfein (pdf), Manhattan Supreme Court Justice Bernard J. Fried ruled that even if the investors had not agreed to dismiss their suit, it should have been dismissed anyway.  As a result, the investors could not claim credit of Goldman’s change in policy, and thus, their counsel, including Grant & Eisenhofer, could not claim attorney’s fees.

The plaintiffs claimed the officers and board breached their fiduciary duty for their adherence to a wasteful policy of paying about 50 percent of net revenues as employee compensation.  The suit sought to halt Goldman’s 2009 planned compensation payments.  In 2010, Goldman announced it had reduced its employee compensation.  The plaintiffs then moved to drop the suit and said that they were directly responsible for Goldman’s change in policy and moved for attorney’s fees under the state’s Business Corporation Law.  The defendants countered that the derivative suit was meritless, saying that plaintiffs never had standing because they did not make a pre-suit demand of the board, and therefore could not collect attorney’s fees.

Justice Fried agreed with the defendants that the investors lacked standing. It “simply cannot be” that a party could be awarded fees for a lawsuit that it never had standing to bring, the judge said.  “Any other rule would permit, even encourage, the filing of baseless claims, the sole objective of which is to collect an award of attorney’s fees,” he said.

A recent BLT Blog posts, “Audit Questions $8.1M in Legal Fees” reports that a new audit report says that four major law firms failed to justify $8.1 million in legal fees that they charged the U.S. Treasury Department for work related to the financial crisis.  The 52-page legal audit report (pdf) indicates that billing problems at law firms working for the Treasury Department have been more widespread than previously known.  The latest report is especially critical of Simpson Thacher & Bartlett.  Legal bill auditors looked at $5.8 million in fees that the firm received under three Treasury Department contracts, and they called into question all of it.  The firm, the report says, “provided no detail of work performed in its fee bills, and did not provide receipts or proper documentation for expenses.”

On one day, the report says Simpson Thacher submitted two legal bills, one for $200,000 and another for $300,000, that “contained only the total dollar amount owed” with no detail of the work performed, the hours worked or hourly rates.  Later, the firm was able to provide the names of lawyers and their hours and rates but no detail of what work they did.  “No invoice contained enough information to justify [Treasury officials] paying Simpson Thacher,” the report says.  Three other law firms come in for criticism: Cadwalader, Wickersham & Taft; Locke Lord; and Bingham McCutchen along with Bingham predecessor firm McKee Nelson.  Those firms’ legal bills were plagued by inadequate detail and block billing, the report said.

Legal auditors wrote that the Treasury Department’s Office of Financial Stability contracts with the law firms were inadequate because they had little direction for how detailed the firms’ legal bills should be, and the office had inadequate and inconsistent policies for reviewing legal bills once they were received.  The report is a product of the special inspector general for the Troubled Asset Relief Program, known as “SIGTARP.”

Legal auditors recommended that the Treasury Department try to get at least $91,482 from Simpson Thacher.  The amount reflects what auditors called “questioned, ineligible fees and expenses” that the firm should not have been paid for, such as instances of billing above rates that were agreed upon in the firm’s contracts.  Further, auditors recommended that Treasury “specifically determine the allowability” of the other $8 million in questioned legal fees: $5.8 million from Simpson Thacher, $2 million from Cadwalader, $146,867 from Locke Lord and $57,939 from Bingham.

A recent NLJ story, “Orrick Wants to Fire MGA Again Over a Second Billing Dispute” reports that Orrick, Herrington & Sutcliffe has moved to withdraw from representing MGA Entertainment Inc., citing $3.85 million in unpaid legal fees and other compensation associated with a high-profile case against Mattel, Inc. In a Sept. 23 filing, Thomas McConville said its client, the manufacturer of the Bratz doll, had agreed to pay a fixed monthly amount of $550,000 beginning in December 2010, in return for representation in its long-running dispute with Mattel, maker of Barbie. 

MGA was to turn over insurance payouts to cover legal fees, costs and expenses.  Instead, MGA has paid Orrick’s fees only twice – and has not turned over insurance proceeds since May 2011.  In addition, MGA owes at least $287,000 for outstanding costs and expenses.The agreement between Orrick and MGA requires that all unpaid fees and costs become due 60 days following judgment in the Bratz case, according to the motion,  Given the date of the judgment, MGA’s unpaid attorney fees and other compensation could exceed $20 million when they come due on Oct. 3, the motion said.

According to the motion, MGA has no plans to pay the unpaid amounts to Orrick and had filed an arbitration action against its former firm seeking more than $10 million.  As a result, both parties have a conflict that impedes their ability to continue working together in the Mattel case.  The withdrawal, if granted, would not be the first time Orrick has fired MGA as a client.  While MGA’s request for attorney fees in the Mattel action was pending, Orrick abruptly withdrew from a related copyright action in New York citing $1.2 million in unpaid legal bills.

A recent NLJ story, “Judge Losing Patience with Discovery Pace in O’Melveny’s Fee Fight with MGA” reports that a Los Angeles judge appeared likely to impose sanctions against MGA Entertainment Inc. in an increasingly contentious billing dispute with its former law firm, O’Melveny & Myers.  During a hearing on Sept. 21, a Los Angeles County Superior Court Judge Elizabeth White told a room full of lawyers that she was getting frustrated about MGA’s “very serious breaches of discovery obligations” in the case, in which O’Melveny has alleged that its former client owes $10.2 million in unpaid legal bills for its work in a high-profile case against Mattel Inc. over ownership of the Bratz dolls.

“I feel powerless,” White said, emphasizing that she ordered MGA 13 months ago to produce documents.  “You’re big parties.  You’re expensive lawyers.  I’m low on the totem pole in comparison to the dollars before me.  It’s really, really frustrating.”  She told both sides to go to the jury room and come up with a list of documents that still haven’t been produced.  The lawyers emerged minutes later, left the courtroom, and returned later in the morning.  Following the hearing, lawyers in the case said the parties had not agreed on the list.

On April 21, a federal jury awarded MGA $88.5 million in damages after finding that Mattel had stolen trade secrets by planting spies at industry trade shows.  The jury rejected Mattel’s claims that it owned the copyright to the Bratz dolls but awarded the company $10,000 in damages after finding that MGA and its CEO Issac Larian, had interfered with Mattel’s contract with the Bratz doll designer, Carter Bryant, who had left Mattel for MGA.

U.S. District Judge David Carter in Santa Ana, Calif., reduced the verdict to $85 million to correct a mathematical error but on Aug. 4 issued a $310 million judgment for MGA, which includes $109 million in attorney fees.  Mattel has said it plans to appeal the judgment.

A Thomson Reuters News story, “Cuomo Considering Law Change on Class Action Attorneys’ Fees”, reports that lawyers in New York who successful challenge class action settlements on behalf of individual plaintiffs could be entitled to attorneys’ fees, if Gov. Andrew Cuomo signs a bill currently before him.  The measure, which would reverse a 1975 law, would allow courts to award fees to anyone whose work benefits an entire class – for example, a lawyer who negotiates an increase in the total amount of a settlement.  The current law reserves attorneys’ fees only for “representatives of a class,” which courts have interpreted to exclude lawyers who represent “fee objectors,” those class members who disagree with specific terms of the settlement, such as the amount of the settlement or attorneys’ fees.

A 2010 ruling by the Court of Appeals highlighted the issue and generated the push for the proposed legislation.  In the case, Fleming v. Barnwell Nursing Home, which involved a class of 242 plaintiffs with claims of wrongful death, the defendant nursing home settled for $950,000, $448,000 of which was pegged for attorney fees and expenses.  After the executor of one class member’s estate objected to the fees, an appellate court reduced them to $425,000.  But when the fee objector applied for fees for negotiating the reduction, the Court of Appeals denied him fees, citing the 1975 law.  (For more information on this case visit NALFA Attorney Fees Blog story “Class Action Fee Objectors Face Set Back in New York Courts”)

Proponents say the new law would encourage members of the class to raise objections, and thus make it harder for class action defendants to craft “coupon settlements,” in which they provide plaintiffs with a token award, such gift coupon, without addressing their grievances.  There is some concern that the new legislation, if passed could clog up the courts with spurious objections, particularly in high-profile class action suits.  “There could be more [fee] objectors coming out of the woodwork and trying to muck up a settlement process,” said Terry Jesse, the executive director of the Chicago-based National Association of Legal Fee Analysis.  But Jesse also noted that because the measure would preserve the discretion of judges in doling out awards, it could keep unreasonable objections to settlements in check.

A recent American Lawyer story, “Porton Wants Legal Fees if 3M is Allowed to Withdraw Suit” reports that litigation involving Porton Capital, 3M Company and prominent lawyer Lanny Davis took a new turn Monday, with Porton’s lawyers asking New York state court not to allow 3M to withdraw a suit filed against Porton unless 3M agrees to pay the investment firm’s legal fees. 

In a letter filed Monday in New York state court by its counsel at Boies Schiller & Flexner, Porton asked to be compensated for legal expenses it incurred defending itself after 3M filed two similar conspiracy and defamation suits in New York naming Porton among the defendants.  3M subsequently moved to with to withdraw those suits on the way to filing a separate federal suit in Washington, D.C.  One of the New York suits has been dismissed; 3M is seeking to withdraw the second one.

In his 50-page letter (pdf), Boies Schiller litigation partner Christopher Duffy says 3M’s suit should not be dismissed unless the company agrees to compensate Porton for its attorneys’ fees.  Duffy argues that 3M sought two successive dismissals in New York, a forum its counsel now admits is inappropriate for the lawsuit.  In the process, Duffy claims that his clients were required to unnecessarily defend themselves in court multiple times.  The plaintiff’s actions Duffy writes, “cost the defendants in the form of needless legal fees.

A recent Southeastern Texas Record story, “Appeals Court Upholds 40 percent Legal Fees in Rollover Settlement” reports that Montgomery County District Judge Michael Mayes improperly slashed $277,403 in attorney fees that Orange County District Judge Patrick Clark awarded in a wrongful death suit, Ninth District appellate judges decided on Aug. 25.  Chief Justice Steve McKeithen and Justice Hollis Horton upheld Clark’s approval of fees for the law firms Stewart Cox & Hatcher and Turner & Associates.

The law firms represented the family of Oscar Flores, who died in the rollover of a Ford vehicle with Firestone tires.  The family sued Ford, Firestone, North American Tire and Arrow Ford in 2011 in Orange County district court.  Clark and Mayes shared the case through an unusual arrangement, with Clark acting as trial judge and Mayes as pretrial judge.  Firestone settled for about $3 million, with the family’s lawyers collecting 40 percent.  Mayes chafed for seven years at Clark’s approval of the Firestone settlement. 

When Ford and the family settled, they brought the agreement to Mayes.  He approved it, but reduced attorney fees in both settlements from 40 percent of gross proceeds to a third of net proceeds.  He earmarked the $277,403 difference for a trust fund of a minor plaintiff who suffered injuries in the accident.

On appeal, McKeithen and Horton found no one but Mayes objected to the attorney fees.  They found no one claimed the fees weren’t improperly laid before Clark and that no one asked Mayes to disregard any terms of the Firestone settlement in considering Ford’s proposal.  Horton wrote that he wouldn’t divest Clark of subject matter jurisdiction in a case in which he was given constitutional and statutory authority.

NALFA has joined the social media world on Facebook, Linkedin, and Twitter.  For professionals, social networking is an excellent way to develop contacts, promote services, and share information within a professional community.  This new social media allows attorneys and others interested in attorney fees and legal billing issues to interact, comment, and share information.

“Social media is changing the way people interact with one another and with organizations, and the way they get their news,” said Terry Jesse, Executive Director of NALFA.  “These initiatives will allow us to not only relay information more frequently, but also to better engage and connect with our members, clients, and other parties interested in attorney fee and legal billing issues.”

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U.S. lawyers are free to modify existing fees during representation, but they must be reasonable as well as communicated and accepted by the client.  A new opinion, ABA Opinion 11-458 (pdf.), provides guidance on changes in fees.

“Periodic, incremental increases in a lawyer’s regular hourly billing rates are generally permissible if such practice is communicated clearly to and accepted by the client at the commencement of the client-lawyer relationship and any periodic increases are reasonable under the circumstances,” the opinion states.  “Modifications sought by the lawyer that change the basic nature of a fee arrangement or significantly increase the lawyer’s compensation absent an unanticipated change in circumstances ordinarily will be unreasonable,”

Fee arrangements between clients and lawyers will sometimes need to change, and contracts generally outline these rules.  However, even when clients have given consent, any modifications to the fee will be scrutinized once the client-lawyer relationship has developed and the client is being represented, the opinion said.  As a result, fee changes will have to be justified and explained to the client.

The opinion notes that, though the only one specific reference in the Model Rules of Professional Conduct regarding changes to a fee arrangement is in Rule 1.5(b), which states that: “Any changes in the basis or rate of the fee and expenses shall also be communicated to the client,” it does not mean the lawyer is only obligated to provide notice.

Outside legal bill auditors are often retained by insurance carriers, law firms, corporations, government agencies, and municipalities to review legal invoices in underlying litigation or transactional matters.  No two legal auditing programs are the same.  Legal bill auditing is part art and part science.  Here are a few questions clients should ask legal bill auditors:

• Is your legal auditing program certified by NALFA?
• Is your legal bill review process manual or computerized?
• Do you do quantitative or qualitative analysis?
• Do your legal bill auditors participate in professional development programs?
• What is your turnaround time?
• Will you back the legal audit results with expert testimony, if needed?
• Do you look at the legal invoices alone or the work product as well?
• Who reviews the bills (i.e. attorneys, paralegals, accountants)?
• Do your legal bill auditors keep up with the latest attorney fee and legal billing jurisprudence?

Two recent state appellate court rulings have concluded that fee experts are necessary to prove the reasonableness of attorney fees and costs in court awarded attorney fee awards:

In Ohio's, Fischer v. Phillip, in an affidavit, Phillips provided an expert opinion that his representation had not breached the standard of care, and that the $15,000 retainer was a reasonable fee that was based on his specialized knowledge, professional skill and judgment.  Fincher filed a brief in opposition to the fee motion, but failed to furnish any contrary expert testimony in support of his claim of unreasonable attorney fees.  The trial court ruled in favor of Phillips in light of Fincher’s failure to produce an expert report.  The Ohio appellate court, however, concluded “the determination of legal fees involves several factors including the time and labor required, the difficulty of the issues involved, and the requisite skill needed to provide the legal service.  This is not within the knowledge of laymen.  Establishing [a claim] for charging excessive [attorney] fees clearly necessitates expert testimony.”

In Florida's, Sourcetrack, LLC v. Ariba, Inc., the court struck a $302,000 fee award because the party entitled to fees failed to present any expert testimony regarding the reasonable and necessary attorney’s fees.  The Florida appellate court conclude, “the trial court erred by awarding fees without competent, substantial evidence to support a[n] [fee] award.  There is currently some debate about whether trial judges should be given greater latitude to award attorney’s fees without always receiving expert testimony from attorneys uninvolved in the case.  This court, however, continues to require such testimony.”

A recent NLJ story, “Insurers Demand a Piece of MGA’s $141 Million Legal Fees and Costs Award” reports that the insurance companies that paid the legal bills associated with MGA Entertainment Inc.’s successful court battle with Mattel Inc. are seeking to recover a portion of the $141 million in attorney fees and costs awarded to the Bratz doll manufacturer.  In an Aug. 26 motion to intervene, four insurance companies said they have rights to share in the fees and costs awarded to MGA earlier this month after a federal jury issued an $88.5 million verdict against Mattel.

In their motion to intervene, the insurance companies claimed to have spent $80 million in legal fees and costs for MGA.  Of that, three of the insurers – National Union Fire Insurance Co. of Pittsburgh, Lexington Insurance Co. and Chartis Specialty Insurance Co. – claimed to have spent more than $55 million.  Lexington provided general liability coverage for MGA from 2006 through 2008, while National Union and Chartis provided excess umbrella coverage from 2001 through 2003.  The forth company, Crum & Forster Specialty Insurance Co., which provided coverage from 2003 through 2005, claimed to have spent more than $25 million.

“A significant portion of the fees and costs paid by the proposed Intervenors are the fees and costs the MGA [has] now been awarded,” wrote lawyers for the insurance firms.  “Despite these rights, MGA has advised this Court and Mattel that the insurers are not entitled to any portion of the fees and costs that have been awarded.”  In opposing attorney fees and costs, Mattel’s lawyers emphasized that MGA was well funded by insurance companies and didn’t need such compensation.  MGA’s lawyers, in response, said that insurance companies would not be receiving funds awarded as part of the fee request.  The fee award was designed to cover billing invoices for a long list of law firms, including Skadden, Arps, Slate, Meagher & Flom; Orrick, Herrington & Sutcliffe; and O’Melveny & Myers.

In addition, a hearing was scheduled regarding whether MGA, which disputes O’Melveny’s claims for unpaid legal fees, should be sanctioned for alleged discovery abuses.  Separately, Lexington also has suits against MGA and Crum & Forster.  In the Crum & Forster case, Lexington seeks reimbursement for more than $40 million in defense fees, costs and related expenses it paid to MGA.  The insurance cases have been consolidated before U.S. District Judge David Carter in Santa Ana, Calif. and are scheduled to go to trial on Feb. 7.

A recent NLJ story, “Judge Stalls Prius Headlight Settlement, Citing ‘Big Problem’ with Fees” reports that a federal judge, citing concerns about a request for attorney fees, has put the breaks on a proposed class action settlement between Toyota Motor Corp. and nearly 300,000 owners and lessees of Prius who claimed that their headlights were defective because they intermittently shut off.  U.S. District Judge Manuel Real, during a final settlement hearing on Aug. 29 in Los Angeles, said he was having a “big problem” going through the fee request, estimated at $4.7 million for five plaintiffs’ firms.  Toyota’s lawyers have maintained in court documents that the amount is too high – particularly since the value of the settlement is less than $4.7 million.

On June 6, San Francisco’s Girard Gibbs submitted a fee request to approve nearly $4.7 million in attorney fees for approximately 6,881 hours of work.  The fee request included $1.9 million to Girard Gibbs; $720,000 to Wasserman, Comden, Casselman & Esensten of Tarzana, Calif.; $250,000 to Los Angeles-based Arias Ozzello & Gignac; $1.2 million to Los Angeles-based Initiative Legal Group; and nearly $600,000 to Cohen Milstein Sellers & Toll in Washington.

In opposing the fee request, Toyota estimated the total value of the settlement at between $3.3 million and nearly $4.7 million, including the value of extended warranty repairs, according to documents filed on July 8.  Toyota’s attorney Michael Mallow, a partner in the Los Angeles office of Loeb & Loeb, called the fee request “an astounding case of ‘piling on.’”  Mallow maintains that the work should have been performed by only one of the plaintiff law firms for a quarter of the amount claimed by the collective five firms.  He said that a more reasonable fee award, based on 25% of the value of the settlement, would be $1 million to $1.2 million.  Additionally, he said, the fees are unreasonable when compared to what Loeb & Loeb billed Toyota: about $1.5 million for 4,218 hours of work.

A recent WSJ Law Blog story, “KBR Requests That That Losing Rape Complaint Pay Company’s Legal Fees” reports that KBR wants Jamie Leigh Jones, the Houston woman who claimed that she was raped while working in Iraq for defense contractor KBR.  Jones filed suit seeking $145 million in damages against KBR, claiming it condoned a hostile sexual climate in Iraq, but the jury last month rejected her claims.

In its fee motion (pdf) seeking to recover more than $2 million in attorney fees, KBR alleged that Jones’ rape and hostile work environment claims were fabricated and frivolous.  The company has also requested that she cover its court costs of $145,000.  In a reply brief, Jones countered that there is “nothing frivolous” about her claims, as evidence by the fact that the judge agreed to let her proceed to trial and the jury deliberated for more than 10 hours before reaching its verdict.

Her lawyer, Todd Kelly, said that in 16 years of practicing law he has never had a case where the defendant requested that a plaintiff cover its legal fees.  Jones does not have the means to cover KBR’s fee request, “nor could I,” Kelly said.  “They have beaten us and now they are attempting to crush us,” he added.  “This is an attempted by KBR to chill other people from bringing claims against them.”

• Are you certified by NALFA?
• Do you participate in professional development programs?
• Do you keep up on the latest attorney fee and legal billing jurisprudence?
• Have you been published or a panelist on attorney fee or legal billing matters?
• Have you testified on reasonable attorney fees?
• Can I see your experience and qualifications listed on NALFA’s membership directory?

A recent BLT Blog story, “DOJ to Oppose $90.8M Fee Request in Class Action” reports that the U.S. Justice Department is planning to oppose the $90.8 million attorney fee request in the black farmers’ loan discrimination case in Washington federal district court.  Justice lawyers said in a recent court filing the government will litigate the plaintiffs’ attorneys assertion that they should receive 7.4% of the $1.25 billion settlement.   The settlement, reached in February 2010, set the fee range between 4.1% and 7.4%.  The deal between the government and farmers resolved claims among people who missed a court-imposed deadline to participate in an earlier settlement that involved discrimination allegations.

The Justice Department has also asked Judge Paul Friedman of the U.S. District Court for the District of Columbia to strike an attorney fee expert’s declaration that plaintiffs’ lawyers in the black farmers case filed with the fee petition.  DOJ called the declaration “improper.”  Cornell University Law School professor Theodore Eisenberg, who has written several studies on attorney fees and class actions, said in the declaration the plaintiffs’ fee petition in reasonable.  The benefit the plaintiffs’ lawyers obtained for the class, he said, supports a $90.8 million legal fee award.

A recent NLJ story, “9^th Circuit Tosses Bluetooth Settlement, Citing Attorney Fees” reports that a federal appeals court has tossed out a settlement of hearing loss claims involving Motorola’s Bluetooth headsets ruling that the trial judge failed to adequately test whether the attorney fees were excessive.  In its published decision (pdf), the U.S. Court of Appeals for the 9^th Circuit on Aug. 19 reversed and remanded the settlement, which provided $800,000 to the plaintiffs’ lawyers.  The plaintiffs received no economic recovery other than $12,000 allocated for nine class representatives.

Several fee objectors appealed U.S. District Judge Dale Fischer’s approval of the deal and the fee award on the ground that they appear disproportionate – essentially, that the lawyers received eight times more than the potential class members.  “We agree that the disparity between the value of the class recovery and class counsel’s compensation raises at least an inference of unfairness, and that the current record does not adequately dispel the possibility that class counsel bargained away a benefit to the class in exchange for their own interests,” wrote Senior Circuit Justice Michael Hawkins.  The court stopped short of concluding that the deal was unfair or unreasonable.

The panel concluded that Fischer, who found that the fees charged by attorneys in the case “substantially exceeds” $800,000 under the lodestar method, failed to explicitly calculate that figure other than to deduce that it was less than $1.6 million.  “With neither a lodestar figure nor a sense of what degree of success this settlement agreement achieved, we have no basis for affirming the fee award as reasonable under the lodestar approach,” the panel concluded.

Fischer also failed to compare the lodestar amount to what the attorneys would have received had their fees been based on a percentage of the settlement, the court said.  In fact, the fees amounted to a 83.2% of the total defendants agreed to pay, it said, and if that amount had been structure as a common fund instead, attorney fees, based on 25% of the settlement, would have been $240,500.

Daniel Warshaw, a partner of Pearson, Simon, Warshaw & Penny in Sherman Oaks, Calif., one of the plaintiffs’ firms in the case and the firm that handled the appeal, said the panel failed to account for Fischer’s extensive in camera review of lawyers’ time records.  “We feel Judge Fischer got it right the first time,” he said.  She’ll get it right the second time and find that the settlement is fair, adequate, and reasonable, and the attorney fees are appropriate in the case.”

A recent WSJ.com story, “Baker Botts Fees Upheld in Asarco Case” reports that a federal judge in Texas upheld fees paid to Baker Botts, LLP of $113 million, plus $6 million for expenses, for its handling of the 2009 Asarco LLC bankruptcy.  The four-year litigation ended with the full payment of all creditors’ claims, plus interest and legal fees.  In his ruling, Richard S. Schmidt, U.S. bankruptcy judge for the Southern District of Texas in Corpus Christi, praised Baker Botts’s work in what he described as “probably the most successful Chapter 11 of any magnitude” in the history of the Bankruptcy Code.

Judge Schmidt even lavished a fee enhancement of $4 million for Baker Botts’s efforts that he called “instrumental in producing the exceptional results that were unanticipated at case commencement.”  Lead Baker Botts trial lawyer in the case was jubilant.  “I’ve been trying cases for 39 years and I’ve certainly heard judges criticize plenty of lawyers,” said Irv Terrell.  “That’s a good feeling for a lawyer to feel like he earned his fee, and the court even rewarded us for exceptional performance.”

Baker Botts’s attorney fees aren’t the biggest paid to a U.S. law firm in a bankruptcy case.  Both the Enron collapse and Lehman Brothers’ failure generated attorney fees approaching $1 billion for the law firms involved.

NALFA is hosting the Attorney Fees Conference -2011 on November 17, 2011 (Noon-5pm) at Loyola Law School in Los Angeles. 

The Attorney Fees Conference – 2011
Loyola Law School
Los Angeles, CA
November 17, 2011
Noon-5pm

For more information or to register visit http://www.thenalfa.org/CLE-Programs/

NALFA has established the only practice group of its kind, specifically devoted to attorney fee and legal billing matters.  Members of NALFA's Attorney Fee Practice Group are defined as follows:

Attorney Fee Expert is a qualified expert who provides expert testimony in court or arbitration on the reasonableness of attorney fees in underlying litigation.  Attorney fee experts are retained by law firms to support or challenge a fee request and/or serve as court-appointed special masters on large, complex fee dispute cases.

Fee Dispute Arbitrator is a trained arbitrator and/or mediator who offers substantive knowledge of attorney fee and legal billing matters.  Fee dispute arbitrators are hired to settle and resolve attorney-client fee disputes in a cost effective and confidential manner.

Legal Bill Auditor is a professional who provides qualitative and/or quantitative analysis (i.e. tables, charts, summaries) of legal tasks performed.  This work is done either manually or by computerized processing.  Legal bill auditors work for insurance carriers, legal auditing firms, law firms, or government agencies.

A recent BLT Blog story, “D.C. Attorney Suspended After Double Billing Superior Court” reports that a Washington attorney has been suspended from practicing law in the District of Columbia for a year after it was revealed that he double billed D.C. Superior Court.  Between 1999 to 2003, Harry Tun double billed the court on 162 occasions in what the court called “abysmal” record-keeping.  The vouchers he submitted to the court were for “legal services rendered to indigent defendants.”

Tun cooperated with the Bar Counsel investigation and repaid the Superior Court $16,034.  Because of his cooperation, the court dropped six months of Tun’s 18-month suspension.  The suspension is followed by one year probation period.  Should the probation be revoked, however, the six-month stay of his suspension would be lifted.

There is a distinction in civil litigation between “attorney fees” and “costs.”  Attorney fees are sums earned by the attorney for working on the case.  Costs are basically all other out-of-pocket expenses of litigating a case, including such things as filing fees, service fees, court reporter costs, mediation fees, jury fees, witness fees, and copying costs.  The general rule is that the winner is entitled to receive payment of costs from the loser in every case.  However, when it comes to attorney fees, the general rule is that they are not recoverable by any party unless recovery is authorized by statute, contract, court rule, or special case law exception.  This is known as the “American Rule” and is in contrast with the “English Rule” where the loser pays the winner’s attorney fees in addition to costs in every case.

When a person is thinking about pursuing a case, the facts and potential claims must be examined carefully to determine if there is a potential basis to recover attorney fees under one of the exceptions to the American Rule.  It can be uneconomical to pursue even the most meritorious case without the ability to recover attorney fees.  Even where there is a basis to recover attorney fees, it is important to remember that it may be merely permissible, not mandatory, for the court to award them … and, in any event, the court has discretion as to the amount of fees that will be awarded.  Because of the uncertainties surrounding the issue, it is wise for litigants to make decisions as if they will not recover their attorney fees and treat it as a bonus if they do.  While there are situations where only one side stands to recover attorney fees, it is more common that fees are reciprocal and either side stands to recover them if they win.  Litigants often use the threat of paying attorney fees and costs as leverage in pre-trial settlement negotiations.

Generally speaking, the issue of awarding attorney fees and costs is reserved until after trial when it is clear who won and lost what claims.  A party with a winning claim for which attorney fees or costs may be awarded is required to file documents with the court asking for them and substantiating the amount.  The other party can challenge the request on various grounds and the court will ultimately decide the proper award.  When a case includes some claims that were successful and some that were not, some claims that permit recovery of attorney fees and some that do not, or similar circumstances, the court may adjust the award of attorney fees and costs appropriately.

Noah Klug is the principal of The Klug Law Firm, LLC, a general practice in Summit County, CO, emphasizing real estate, business law and litigation.  He may be reached at (970) 468-4953 or Noah@TheKlugLawFirm.com.

A recent BLT Blog story, “Class Counsel Request $90.8M in Fees in Black Farmers Case” reports that the lawyers who represent a class of African American farmers in a suit against the government that claimed loan discrimination are demanding $90.8 million in legal fees, the maximum allowed under the terms of a settlement.  The three lead class attorneys in the case said in a fee petition (pdf) filed Monday in Washington federal district court that class counsel is entitled to 7.4% of the $1.25 billion settlement.  (The settlement base is about $1.22 billion after $22.5 million is taken for implementation costs.)

The settlement sets out a fee range of 4.1% to 7.4% of the $1.25 billion deal.  Lawyers representing claimants on a certain track are allowed, apart from the settlement, to negotiate a contingent fee arrangement of up to 8%.  The attorneys, Gregorio Francis of Morgan & Morgan, Andrew Marks of Crowell & Moring and Henry Sanders of Chestnut, Sanders, Sanders, Pettaway & Campbell, said lead class counsel will allocate the award among the dozens of lawyers who participated in the litigation.

The participation agreement (pdf) among the lawyers in the case includes a dispute resolution clause that will require disagreements about fee allocation to be submitted to binding arbitration.  The agreement said nine law firms are entitled to split 75% of any legal fee award.  The firms in Washington are: Crowell, Stinson Morrison Hecker and Conlon, Frantz & Phelan.  Nine other firms, including Patton Boggs, are entitled to divide 25% of the award.

The attorneys in the case reported more than 40,000 hours and 60,000 paralegal hours.  Marks, Francis and Sanders, the lead attorneys, said in the fee petition that class counsel “have incurred substantial out-of-pocket costs” and will not receive payment until at least late next year or later.  “The work effort of the class counsel in this case has already been enormous,” the plaintiffs’ lawyers said.

For more information, visit https://www.blackfarmercase.com

A recent BLT Blog story, “D.C. Circuit Rules for Zuckerman Spaeder in Fee Dispute” reports that Zuckerman Spaeder has prevailed in a federal appeals court in Washington in the firm’s legal fight to force a former client in a tax fraud case to pay $834,000 in attorney fees.  The three-judge panel for the U.S. Court of Appeals for the D.C. Circuit unanimously upheld a trial judge’s ruling in March 2010 to deny staying the proceedings in Washington federal district court.  The former client, James Auffenberg Jr., and his lawyers tried to convince the appeals court that the dispute belongs in arbitration, not in federal court.

The trial court last year said Auffenberg failed to invoke arbitration “prior to actively participating in this litigation.”  Judge Douglas Ginsburg, sitting with Judge Marrick Garland and Senior Judge Stephen Williams, said in the appeals court ruling it’s undisputed Auffenberg failed to invoke arbitration in or before filing his answer to Zuckerman’s suit.  “In this appeal, we affirm the district court’s denial of the stay because Auffenberg failed to make a timely assertion of his rights to arbitrate, and his litigation activity after he failed his initial answer and counterclaim imposed substantial costs upon Zuckerman and the district court,” Ginsburg wrote in the opinion.

Auffenberg sued the firm in a counterclaim for legal malpractice, saying the firm agreed to cap fees at $1.5 million.  He alleged the $834,000 beyond that was unreasonable.

A recent GreenwichTime.com story, “Lawyer Fees Case Before Miss. Supreme Court” reports that Mississippi State Auditor Stacy Pickering (R) has asked the Mississippi Supreme Court to declare attorney fees and expenses the attorney general collects from lawsuits to all be turned over to the state legislature, including what private law firms collect for their work.  Attorney Arthur Jernigan Jr. told the court that Pickering has no dispute with Mississippi Attorney General Jim Hood’s (D) hiring of private lawyers to represent Mississippi in lawsuits.  Jernigan said the dispute centers on legal fees that firms collect; he contends the money should go to the state.

Pickering is also appealing a second lawsuit over attorney fees.  In this one, Pickering is appealing a judge’s decision last year upholding $10 million in attorney fees paid to lawyers for representing the state in a lawsuit against Microsoft.  Microsoft is not a party to Pickering’s suit.  Microsoft reached a $100 million settlement with the state of Mississippi in 2009.  Part of the settlement included $10 million in attorney fees for the work of private lawyers hired by the attorney general’s office to handle the litigation.  The Microsoft settlement was approved by Hinds County Chancellor Denise Owens.  Pickering sued arguing the legal fees should be paid with money appropriated by the state legislature.

Earlier this month, the Mississippi Supreme Court heard arguments in a similar case involving a group of lawyers awarded $14 million for their work to collect more than $100 million from MCI.  The MCI settlement was upheld by Hinds County Circuit Judge Winston Kidd.  In both cases, Pickering is attacking a state law that allows the attorney general to hire outside lawyers when the state does not have the expertise, resources, or manpower to pursue a case.  Pickering contends the funds received by the outside attorneys are public money.

“The state of Mississippi should collect all the money and then disperse the money to the attorneys,” Jernigan said.  “The attorney general should request an appropriation from the Legislature for the fees.  Assistant Attorney General Harold Pizzetta said “There is no question the state got 100 percent of its settlement.  The attorneys’ fees were separate.”  State law allows the attorney general to hire outside lawyers.  Those lawyers receive no funds from the state.  Asked why Pickering doesn’t go to the Legislature and have the law changed, Pickering gave no answer.

CLICK HERE to view the contract between the Mississippi Attorney General and outside counsel in the Microsoft case.

A recent NLJ story, “O’Melveny Seeks Discovery Sanction Against Former Client MGA” reports that O’Melveny & Myers has moved for sanctions against MGA Entertainment, Inc., complaining that its former client failed to turn over a large portion of discovery in a fee dispute case.  O'Melveny represented MGA in the first trial in its lengthy copyright infringement case against Barbie manufacturer Mattel Inc. over the rights to the Bratz line of dolls.  In 2008, a jury awarded Mattel $100 million in damages, although that verdict was tossed out on appeal and a subsequent jury awarded MGA $88.5 million for trade-secrets theft.  O'Melveny sued MGA in July 2010 seeking $10.2 million in unpaid legal bills. Now, a year later, O'Melveny has asserted that MGA has failed to comply with discovery orders.

"The conclusion is now inescapable: MGA has made a calculated gamble that it can pursue its defense and cross-claims through a deliberate strategy of discovery evasion and litigation by ambush," O'Melveny's lawyer, Kevin Rosen, a partner at Los Angeles-based Gibson, Dunn & Crutcher, wrote in a court document on July 27.  "For the past year, MGA has willfully dodged its discovery obligations, repeatedly ignored multiple court orders, and effectively derailed this entire litigation."

MGA's attorney, James Rosen of Rosen & Saba in Beverly Hills, Calif., replied that O'Melveny's sanctions request violates his client's due process rights.  He argued that the sanctions argument is moot, given MGA's request to file a new cross-complaint in the case.  "Even though MGA firmly believes that O'Melveny was a substantial cause for the loss of the first Mattel trial and cost MGA hundreds of millions of dollars, MGA has determined that protection of its communications with subsequent counsel in the ongoing Mattel action is paramount to pursuing its current legal malpractice allegations in the cross-complaint," James Rosen wrote for MGA.

O'Melveny is seeking terminating or evidentiary sanctions that would prohibit MGA from arguing that the firm botched the transition of the case to Skadden, Arps, Slate, Meagher & Flom, causing "millions of dollars in attorney's fees and costs billed by Skadden," the firm argued.  Among the discovery that MGA has failed to provide are invoices, communications and work product associated with Skadden, the firm said. Additionally, O'Melveny wants sanctions prohibiting MGA from pursuing over-billing allegations against the firm.  In the Mattel case, Kevin Rosen wrote, MGA has filed documents arguing that its request for attorney fees--which includes O'Melveny's--is reasonable.  MGA is seeking $161 million in fees and costs.

A recent NLJ story, “Video Game Makers Seek $1.1 Million for Successful Supreme Court Battle” reports that the entertainment groups that persuaded the U.S. Supreme Court to strike down a California law banning the sale of violent video games to minors is seeking $1.1 million in attorney fees and expenses from the state.  On June 27 the U.S. Supreme Court ruled that the California law – which would have penalized anyone who sold or rented a violent video game to a minor and required such games to be labeled for ages 18 or older – violated the First Amendment rights of the Entertainment Merchants Association, whose members create and design video games.

The California law passed in 2005 and became effective in 2006.  In 2007, a federal judge granted summary judgment to the associations and awarded them $276,000 plus interest in attorney fees.  The U.S. Court of Appeals for the 9^th Circuit affirmed that decision, granting the groups an additional $94,000 in attorney fees.  The new request covers legal work associated with the case while it was before the Supreme Court.  The fees primarily would go to a team of lawyers at Jenner & Block, led by senior partner Paul M. Smith in Washington.

The team at Jenner & Block billed about $53,000 in 2009 and more than $1 million in 2010.  The 2011 amounts have not yet been tallied.  Nearly $254,000 of that was for Smith, who is the chairman of the firm’s appellate and Supreme Court practice and co-chairman of the media, First Amendment and election law and redistricting practices.  Smith billed between $725 and $765 per hour.  The groups sought $24,000 in compensation for hiring Paul Clement, Theodore Olson, and Lee Levin to participate in a moot court session in preparation for oral arguments before the Supreme Court.

A recent Thomson Reuters story, “Who’s Likely Footing News Corp’s Legal Bills? The Insurers”, reports that with News Corp executives heading for the exits, the hacking scandal legal bills are no doubt stacking up.  But depending on the companies’ directors and officers (D&O) insurance coverage, News Corp and its divisions aren’t likely to be responsible for paying the legal fees.  At least for now.

The D&O insurance policies at companies like News Corp cover the legal fees for executives and board members.  Large corporations such as News Corp, usually buy at least $100 million in D&O insurance.  In most cases, the coverage includes defending criminal charges for current and former executives.  Former executive are covered so long as the alleged misconduct occurred within the policy term.  Under the D&O policy, the legal fees will be covered by the insurance carrier and high-profile white-collar attorneys can charge as much as $1000 per hour.

But that’s all theory.  What often ensues, and is a real possibility in the News Corp action, are battles between the variety of insurance companies providing coverage for a company about who is going to pay what.  Sometimes insurers and insured executives can end up on opposite sides.  Such was the case between an insurer and Sprint Nextel Corp executives in a securities litigation settlement and between an insurer and Stanford Financial Group executives.

A recent NLJ story, “MGA Defends $108 Million Fee Award in Bratz Fight, Documents Show” reports that MGA Entertainment Inc., which requested $161 million in attorney fees and costs following its $88.5 million verdict against Mattel Inc., has acquiesced to a special master’s recommendation that it collect $108 million in attorney fees, according to court documents.  In the unsealed documents released on Monday, MGA wrote that the legal fee award recommended by special master Robert O’Brien is “both fair and reasonable and supported by the record.”

Mattel has disputed O’Brien’s findings and demanded to look at the more than 9,000 pages of legal billing invoices that MGA turn over to the special master.  O’Brien recommended that Mattel pay $84 million to compensate MGA for defending Mattel’s copyright infringement claims and $23 million to cover legal fees associated with MGA’s trade secrets claims against Mattel.  Such an amount hardly amounts to a “windfall,” MGA wrote in court papers.

“MGA, in fact, spent significantly more than that amount in prosecuting its trade secret claims and defending against related and overlapping Mattel claims,” MGA wrote.  “Even combining this $23 million with the $84 million recommended by the special master on the copyright claims leaves MGA short of recovering all fees.  Moreover, through this litigation, Mattel was able to do significant harm to MGA and the Bratz brand, including the loss of many MGA jobs.”

A recent New York Law Journal story, “Circuit Criticizes Big Fee Reduction in Disability Case” reports that the U.S. Court of Appeals for the Second Circuit reversed Northern District Magistrate Judge Victor E. Bianchini’s decision to slice an attorney’s fees by two-thirds based on the lawyer’s failure to develop an administrative record on issues collateral to a disability determination.  The appeals panel held that the judge abused his discretion by making a sua sponte (without prompting) critique of attorney Mark Schneider’s billing records and a finding of excessive legal billing.

In the underlying case, Schneider represented Loretta Vincent on her successful claim for disability benefits based on a work-related back injury that rendered her unable to work.  Ms. Vincent moved for attorney’s fees of $8,272.  Judge Bianchini ruled that the failure to develop the record was a “special circumstance” that would render a full award “unjust” under the Equal Access to Justice Act, 28 U.S.C. § 2412(d).  He said that Mr. Schneider’s time spent preparing the fee application was “clearly excessive and unreasonable,” the billing records contained “conclusory explanations” for several lengthy increments of time” and the attorney had improperly intermingled legal and clerical tasks.

On appeal, the second circuit held that the failure of a Social Security claimant’s counsel to develop an administrative record on issues collateral to a disability determination is not a special circumstance that warrants a fee reduction under the Equal Access to Justice Act.  The decision in, Vincent v. Commissioner of Social Security (pdf) also noted that this was the second time in two years that the circuit had reversed orders by Magistrate Judge Bianchini reducing or denying fees for Mr. Schneider’s work, the panel ordered the case assigned to a different judge on remand.

A recent Boston Globe story, “Coakley Seeks Inquiry into Utility’s Legal Fees” reports that Massachusetts Attorney General Martha Coakley announced last Thursday that she has asked the Department of Public Utilities to look into a gas company’s allegedly improper collection of $18.5 million in legal fees passed on to Massachusetts consumers.  The Attorney General’s office says consumers have been charged to pay legal fees to a New York law firm that employs the president of Southern Union, the parent company of New England Gas Company (NEGC).

Over $18.5 million in legal fees were allegedly funneled to Kasowitz, Torres Benson & Friedman, a New York-based law firm that employs Eric D. Herschmann, Southern Union’s president, chief operating officer and vice-chairman of its board of directors.  Coakley alleges that under the arrangement the more legal fees charged by the Kasowitz firm and collected from NEGC’s Massachusetts consumers, the more Herschmann stood to gain monetarily.

“Massachusetts consumers paid millions in legal fees to an outside form with direct ties to a Southern Union executive,” Coakley said in a statement.  “This appears to be a clear conflict of interest.”  As attorney general, Coakley’s office acts as an advocate for Massachusetts ratepayers and is authorized to intervene in judicial and administrative proceedings on behalf of consumers in connection with any matter involving rates, charges, prices or tariffs of any gas company doing business in the state.

A recent NLJ story, “MGA Should Receive $108M in Fees in Bratz Case, Special Master Finds” reports that MGA Entertainment Inc. should receive $108 million in attorney fees, according to a discovery master’s recommendation.  The recommendation was issued on June 20 by Robert O’Brien, who is acting as special master on attorney fee issues.  Court documents filed by both sides regarding the proposed attorney fees has been redacted to hide the amounts, but on June 30, U.S. District Judge David Carter denied all requests made since April 25 to file documents under seal, many of which related to the special master’s recommendation.

In the underlying case, MGA, manufacturer of the Bratz doll, was seeking $129 million in attorney fees and $32 million in costs after a jury found that Mattel, maker of Barbie, had stolen trade secrets from MGA by planting spies to industry trade shows.  The jury rejected Mattel’s assertion that MGA had infringed on its copyright by stealing away a designer who took the Bratz doll concept with him, concluding that Mattel did not own the rights to the first four models of the Bratz doll plus two newer versions.

Mattel has picked apart much of the special master’s recommendation, which did not address MGA’s costs.  Mattel also wants more than 9,000 pages of legal billing invoices that MGA turned over to the special master in order to oppose the fee recommendation.  Depriving Mattel of those documents “would be a miscarriage of justice and a deprivation of due process,” wrote Mattel’s lawyer, Michael Zeller, a partner at Quinn Emanuel Urquhart & Sullivan.

A recent Los Angeles Times story, “CalPERS’ $11-Million Legal Bill Raises Eyebrows” reports that the California Public Employees’ Retirement System (CalPERS) paid $11 million in attorney fees to Steptoe & Johnson to conduct an internal review, an amount that has some of the fund’s own directors proposing more stringent oversight of outside legal fees.  CalPERS is the nation’s largest public pension fund, with over $232 billion in the fund.

CalPERS disclosed the $11 million payment to Steptoe in response to a March 18 request from the Los Angeles Times.  Executives said they negotiated a special rate of no more than $400 an hour per lawyer, but they declined to say how many lawyers worked on the case.  Still, the legal bill needs to be closely scrutinized, said California State Controller John Chiang, a CalPERS board member.  The controller “wants to see a full accounting of the dollars spent,” his spokesman Garin Casaleggio said.

Critics of the legal bill said the internal review of the CalPERS could have been done by the California attorney general’s office.  Others say they were underwhelmed by the Steptoe investigation’s findings, many of which had been previously reported by the media.  Others point to the close relationship of the Steptoe firm and CalPERS, pointing to previous work the firm did for the pension fund.  “Normally, when you hire an outside law firm to do an investigation of this type, you want someone who doesn’t have a relationship with the company and the management of the company or, in this case, a government agency,” said Keith Bishop, securities lawyer and former California Department of Corporations commissioner.

A recent Metropolitan News story, “Lawyers Who Represent Each Other Not Entitled to Fees” reports that a California appellate court rejected a request for attorney fees by two northern California practitioners who represent each other in a lawsuit against a former mutual client in an apparent effort to evade the rule against compensation for lawyers who engage in self-representation.  In an unpublished decision, Law Offices of Edward Higginbotham v. Horejsi (pdf), the appeals court concluded Alameda Superior Court Judge Jon Tigar had not abused his discretion in declining to award fees to San Francisco attorney Edward M. Higginbotham and Berkeley practitioner Michael M. Sims.

In the underlying case, Michael Horejsi, the owner of an apartment building in Oakland, had hired Sims to represent him in various lawsuits and Higginbotham to represent him in his defense against a civil injunction.  After Horejsi failed to pay fees owed to the attorneys, they each filed complaints against Horejsi.  In fee dispute arbitration, a panel awarded $10,764 to Sims and $21,557 to Higginbotham.  Horejsi rejected these awards and filed a cross-complaint in superior court for legal malpractice and breach of contract.  At trial, Sims served as the attorney for Higginbotham and Higginbotham was counsel for Sims.  The jury found that Horejsi breached his contacts with Higginbotham and Sims, and had committed fraud against them by promising to pay their legal fees.  The jury awarded $13,338 to Sims and $23,843 to Higginbotham.  Horejsi appeared in propria persona.

After the trial, Higginbotham and Sims subsequently requested attorney fees but Tigar declined to issue a fee award, based on the rule of Trope v. Katz (1995).  That case held that “an attorney litigating in propria persona cannot be said to ‘incur’ compensation for his time and his lost business opportunities, because he does not become obligated to pay for them,” and therefore cannot recover fees.  Higginbotham and Sims appealed, arguing that Trope applies only to requests for attorney fees under Civil Code Sec. 1717.  The appellate court, however, disagreed.

In Trope, the high court said Sec. 1717 “was designed to establish mutuality of remedy when a contractual provision makes recovery of attorney fees available to only one party, and to prevent the oppressive use of one-sided attorney fee provisions.”  The justices reasoned that “[i]f an attorney who is the prevailing party in an action to enforce a contract with an attorney fee provision can recover compensation for the time he expends litigating his case in propria persona, but a non-attorney pro se litigant cannot regardless of the personal and economic value of such time simply because he has chosen to pursue a different occupation, every such contract would be oppressive and one-sided.”  Justice James R. Lambden also emphasized that Higginbotham and Sims were not seeking fees mandated by statute, but monies which the trial court had discretion to award. 

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New legislation entitled the Government Litigation Savings Act (pdf), sponsored by Representative Cynthia Lummis (R-WY) and Senator John Barrasso (R-WY) would limit the amount of attorneys’ fees recovered in lawsuits against the federal government.  The bill (HR 1996 and S 1061) would cap attorneys’ fees and block groups whose net worth exceeds $7 million from filing for payment under the Equal Access to Justice Act (EAJA) of 1980.  According to the bill, all attorney fees will be capped at $175 per hour, the bill would also remove all multipliers, place a $200,000 limit for any single lawsuit, and no more than three EAJA awards in any calendar year can be awarded to the same claimant.

Legal action against the federal government can be very costly and the EAJA authorizes the reimbursement of attorney fees and expenses for prevailing litigants.  If passed, many organizations, especially environmental groups, would not be able to afford to bring important environmental actions against the federal government.  What is more, imposing caps on attorney fees sets a bad precedent.  Attorney fees are compensation.  In a free market economy, it is wrong for the federal government to limit compensation for any one particular profession.  “At NALFA, we believe judges should decide reasonable attorney fees, not politicians,” said Terry Jesse, Executive Director of NALFA.

A recent American Lawyer story, “Weil’s Lehman Bankruptcy Fees Break the $300 Million Barrier” reports that Lehman Brothers filed its latest monthly operating report with the SEC this week, listing a fresh $53.1 million in fees and expenses paid to outside advisers for their work during May.  Leading the pack among all the professional service firms: lead bankruptcy counsel Weil Gotshal & Manges, which received nearly $16 million for its efforts in the Chapter 11 case.

The May billings bring Weil’s total haul in the case, which will be three years old in September, to $309.8 million.  Other firms racking up billables on the Lehman matter in May include Curtis, Mallet-Prevost, Colt & Mosle, which received another $3.6 million to bring its total fees in the case so far to nearly $31.4 million, and special Asia and domestic litigation counsel Jones Day at $2.5 million.  (Jones Day’s total Lehman fees now stand at $52.6 million.)

Milbank Tweed Hadley & McCloy billed $8.9 million in May for its work in representing Lehman's unsecured creditors committee; the firm's total fees in the case have now topped $102 million.  Quinn Emanuel Urquhart & Sullivan, counsel to creditors, billed for nearly $1.6 million in May, bringing its Lehman tab to almost $18.7 million.

Source: NALFA Research Library

In a recent BLT Blog story, “Judge Approves $3.4B Settlement in Native American Class Action” reports that Senior Judge Thomas Hogan in Washington approved a landmark $3.4 billion settlement in a Native American class action that stands to compensate hundreds of thousands of American Indians.  The settlement caps more than 15 years of hostile litigation that featured numerous appeals, trials and failed negotiations.  Hogan called the deal “truly historic.”

The case, named after lead plaintiff Elouise Cobell, sought a historical accounting of trust accounts the government mismanaged for more than a century.  Class members will receive a minimum payment of $1,000, Hogan said.

Hogan awarded $99 million in legal fees for plaintiffs’ lawyers.  The settlement set compensation between $50 million and $99.9 million.  But the deal gave the judge the final say on a reasonable amount in accordance with controlling law.  The Justice Department has urged Hogan to award no more than $50 million in compensation.  Led plaintiffs’ lawyer Dennis Gingold, in court asked Hogan to award more than $99.9 million.  Cobell’s lawyers argued in recent court papers that there was never a cap on fees.  The attorneys argued for a higher amount in order to compensate for the outcome and complexity of the case.

A recent NLJ story, “Boston Federal Judge Awards Nearly $680K in Fees to Wine Association” reports that a Boston federal judge has awarded a wine association close to $680,000 in attorney fees and expenses after it won a nearly five-year fight against a Massachusetts state agency over a state wine shipment law.  Judge Rya Zobel’s ruling in Family Winemakers of California v. Jenkins (pdf) awarded $615,873 in fees and $62,561 in expenses to the plaintiffs, victors in a challenge to the Massachusetts statute, which banned large wineries from directly shipping to the state’s consumers.  Kirkland & Ellis of Chicago and Boston-based Rubin & Rudman represented the wine association and two individual plaintiffs.

In the ruling, Zobel wrote that plaintiffs’ fee requests for several types of work were excessive.  “Counsel…spent an unreasonable amount of time on various phases of the litigation,” she wrote.  Zobel concluded that the plaintiffs sought unreasonable reimbursement for four different types of work, including lawyer conferencing time, work on the summary judgment motion, preparing for the 1^st Circuit oral argument and preparing the fee motion.  Those four categories counted for 2,247.96 of the 4,058.5 claimed hours, Zobel wrote.  She deemed that 1,179.48 hours -- 52% -- was reasonable for those categories of the work.

The judge cut the rest of the plaintiffs’ requested billable hours by 24% to account for what she considered unreasonable billing, such as paralegal time spent on clerical tasks.  She ultimately awarded the plaintiffs 2,555.49 of their requested billable hours.  In her analysis of the billable rates, Zobel wrote that the $559.58 hourly rate for the lead plaintiffs’ lawyer, Tracy Genesen, a San Francisco Kirkland & Ellis partner “is not unreasonable given her particular expertise in the area of wine law.”

Still, Zobel cut her blended rate by 10% to $503.62 because “the use of her 2010 rate for all billed hours…creates a windfall for plaintiffs, as it far exceeds the rate at which the majority of her work was invoiced to the client.”  “I reduced her blended rate by 10% so that she is compensated fairly, but not excessively, for the delay in payment,” Zobel wrote.  Nor did she allow $6,832.08 in overtime and meal costs, and she trimmed $33,997.85 in postage, telephone, and document related cost requests by 25% due to “unnecessary use of messenger and overnight mailing.” The judge declined the plaintiffs’ request for travel expenses because they were not itemized.

A recent Legal Intelligencer story, “Superior Court Upholds $187.6 Mil. Class Action Against Wal-Mart” reports that the state Superior Court in Pennsylvania has upheld a $187.6 million class action award against retailer Wal-Mart over allegations that its Pennsylvania employees were not properly compensated for off-the-clock work and missed rest breaks.

At the same time, the panel of Judges John L. Musmanno and Christine L. Donohue and Senior Judge James J. Fitzgerald III also found that the $45.6 million in attorney fees Philadelphia Common Pleas Court Judge Mark I. Bernstein awarded to law firms Donovan Searles & Axler in Philadelphia, Abbey Spanier Robb Abrams & Paradis in New York, Bader & Associates of Denver, and Azar & Associates of Aurora, Colo., must be recalculated.  In its 211-page opinion (pdf), the panel said Berstein “in advertently double-counted” the firms’ contingency fee rates.

When Berstein granted the class counsels to apply a contingency multiplier of 3.7 to their total counsel fees of $12.34 million and $3.58 million in expenses for the work of 26 lawyers and 17 paralegals, among others, he did not take into account that Donovan Searles, as well as Abbey Spanier, had already factored the risk of a contingency fee into their rates, the panel said.  The other firms calculated their rates based on their complex litigation hourly rates.

A recent NLJ story, “Management Training Company Awarded Over $700K in Fees, Costs in Copyright Case” reports that a Boston federal judge has awarded Situation Management Inc. nearly three-quarters of a million dollars to cover attorney fees and costs after ruling that ASP Consulting willfully infringed its copyrights in training manuals.  In his June 6 order in Situation Management Systems Inc. v. ASP Consulting Group, Judge Richard Stearns of the District of Massachusetts awarded Situation Management Systems, a management training company, $718,015 in attorney fees and expenses and $25,733 in costs. 

Situation Management Systems sued ASP, an Austrian consulting company, in September 2006 for infringing its copyrights in training manuals on such topics as negotiation and promoting and implementing innovation.  Stearns found that ASP had engaged in substantial and willful copying of the manuals, and thus had infringed the copyrights at issue.  Stearns also enjoined ASP from any further infringement of Systems Management Systems’ copyrighted work and allowed the company to submit its application for attorney fees and costs within 30 days. 

In his ruling, Stearns noted that he considered several factors, including the plaintiff’s attorneys’ experience; the rates in light of the cost of similar intellectual property litigation in the Boston area; the number of hours spent on the two trials and an appeal to the U.S. Court of Appeals for the 1^st Circuit; and the measure of success.

A recent ABA Journal story, “Kagan Opinion Deems Fee-Shifting Calculations to Be ‘Rough Justice’” reports, that in an attorney fee award ruling before the U.S. Supreme Court, Justice Elena Kagan muses that if litigation had more dramatic resolutions, fee-shifting litigation would be a lot easier.  The issue: How should a court apportion attorney fees under the civil rights fee-shifting statute when a plaintiff asserts both frivolous and nonfrivolous claims?  Kagan tackled the questions in a unanimous opinion (pdf) for the court that talked about the nature of real world litigation and the difficulties of determining fees.

When both frivolous and nonfrivolous clams are made, Kagan said, courts may grant reasonable fees to the defendant, but only for costs that the defendant would not have incurred but for the frivolous claims.  The fee-shifting statute allows an award of fees to civil rights defendants fight frivolous claims, but the determination is not so cut and dried, Kagan said.

“In the real world, litigation is complex, involving multiple claims for relief that implicate a mix of legal theories and have different merits.  Some claims succeed; others fail.  Some charges are frivolous; others (even if not ultimately successful) have a reasonable basis.  In short, litigation is messy, and courts must deal with this untidiness in awarding fees,” Kagan wrote.

The calculations aren’t so easy either, Kagan wrote.  “Trial courts need not, and indeed should not, become green eyeshade accountants,” she said.  “The essential goal in shifting fees (to either party) is to do rough justice, not to achieve auditing perfection.”

A recent NLJ story, “Mattel Hotly Resists Demand it Pay Attorney Fees in Bratz Doll Battle” reports that MGA, which makes the Bratz doll is seeking $129,688,073 in attorney fees from Mattel under federal copyright law in light of a federal jury verdict on April 21 rejecting Mattel’s claims that MGA infringed on its copyright by hiring away a designer who allegedly stole the idea for the Bratz doll.  But Mattel lawyers argue the MGA Entertainment is not entitled to attorney fees just because it won a major trade secrets victory in court.

“To hold that the winning party has any entitlement or presumption of attorney fees would be…clearly reversible error,” Susan Estrich, a partner at Los Angeles-based Quinn Emanuel Urquhart & Sullivan, said.  MGA attorney Annette Hurst, a partner at San Francisco’s Orrick Herrington & Sutcliffe, argued in turn that the fees are necessary to fully compensate her client for the damages Mattel has done since first suing MGA in 2004.

Hurst insisted that her client’s fees have been “in furtherance of the purpose” of the Federal Copyright Act – which, under the law, is ground to recover legal fees.  She added that the fees are for the entire case because all the claims centered on one assertion: That MGA stole the idea for the Bratz doll by hiring away its designer.  “It was all related to the fundamental question of ownership of the Bratz copyright,” she said.

U.S. District Judge David Carter didn’t ruling on the attorney fees motion.  But he issued tentative orders during a hearing on some other motions, including that the parties exchange certain billing records.

A recent Thomson Reuters story, “Wham-O Plays Hardball Over Goodwin Procter Fees” reports that Wham-O has hit Goodwin Procter with a lawsuit that claims the law firm overbilled it by racking up $5 million in legal fees.  The suit stems from Goodwin Procter’s representation of Wham-O in trademark infringement litigation involving its Frisbee, Slip ‘n Slide and Hula Hoop against other toy manufacturers.

The action, filed in California state court, alleged that Goodwin Procter’s fees were “excessive, unreasonable and not necessary” for work billed from January 2009 to April 2010.  Wham-O claimed breach of contract and asked for a declaratory judgment to determine what portion of Goodwin Procter’s $5 million legal bill it owes.  In April, an arbitrator ruled that Wham-O owed Goodwin Procter $4.7 million, but the toymaker has rejected that ruling as nonbinding.  In its suit, Wham-O asked the court for a finding regarding the enforceability of the arbitration clause in the party’s fee agreement.

Goodwin Procter has represented Wham-O in some of its infringement cases of various manufacturers.  In 2007, Wham-O won a $6 million verdict against SLB Toys USA Inc, for infringement of the Slip ‘n Slide in a case that involved the water toy’s signature yellow color.  An appeals court later affirmed the award.

A recent NLJ story, “Fight Over Bratz Doll Turns to Attorney Fees, Punitive Damages” reports that Bratz doll manufacturer MGA Entertainment Inc. is seeking attorney fees plus $177 million in punitive damages after obtaining an $88.5 million verdict against rival Mattel Inc.  MGA attorney Annette Hurst, a partner at San Francisco’s Orrick, Herrington & Sutcliffe moved for attorney fees on behalf of the primary firms that handle the litigation for her side: O’Melveny & Myers; Skadden Arps; Orrick; and Keller Rackauckas.

A federal jury in Santa Ana, Calif., rejected Mattel’s claims that MGA infringed on its copyright after hiring away a designer who took the idea for the Bratz doll with him.  The jury found Mattel, maker of Barbie, did not own the rights to the first four models of the Bratz doll.  Instead, jurors found that Mattel had stolen MGA’s trade secrets by having its employees spy at industry trade shows.

The amount of attorney fees MGA is seeking has been redacted in publicly available court documents.  In her fees motion, Hurst wrote that MGA’s demand was “conservative” compared to what the company actually spent.  The amount did not include fees for several firms whose “roles were less centrally related.”  “Mattel is a prolific litigant,” Hurst wrote.  “Mattel waged war against MGA in this litigation, using every means available to multiply the expense.  She noted that MGA is in litigation with its insurers, some of which have refused to cover all of its legal fees.

Hurst’s fee motion cited a news report estimating Mattel had spent $400 million in six years on the litigation.  “If Mattel wants to attack the amount of fees MGA has spent as being unreasonable, then it needs to come clean on what it spent,” she said during an interview.  U.S. District Judge David Carter ordered that a fee expert review billing records in the case.

The trustee, Irving H. Picard of Baker & Hostetler LLP in New York, work in Re Bernard L. Madoff Investment Securities LLC, has produced the following results, thus far:

            Recovered For Investors: $7.6 billion

            Attorney Fees Sought: $175.5 million

For more information visit http://www.madoff.com/

Attorney fees are important.  With the rise in fee-shifting litigation and the growing body of attorney fee jurisprudence, attorney fees have become a highly specialized practice area.  Whether you’re seeking to recover fees in court or to resolve a fee dispute with a former client, today’s litigators are turning to a new practice group for answers.

NALFA announces a first-of-its-kind practice group specifically devoted to attorney fee issues, the Attorney Fee Practice Group.  The Attorney Fee Practice Group is a highly specialized, niche practice area within the legal profession.  Members of the practice group are retained by law firms and appointed by courts when attorney fees are at issue.  Members of the Attorney Fee Practice Group are attorney fee experts and fee dispute arbitrators. 

Our attorney fee experts are retained by some of the nation’s top law firms to provide expert reports, opinion, and testimony on the reasonableness of attorney fees in large, complex cases.  Our fee experts are retained by attorneys to both support or challenge multi-million dollar fee requests in court.  As fact-finders, judges have relied on, and cited our fee experts favorably in their fee award decisions.  Our fee experts can provide fee-seeking attorneys the prevailing market knowledge to succeed in court, including, but not limited to:

• Reasonable, Prevailing Market Rates
• Reasonableness of Hours Billed
• Customary Law Firm Billing Practices
• Billing Judgment
• Amount at Stake in the Underlying Case vs. Amount of Legal Fees Spent
• Novel, Complex, or Unusual Legal Issues in Underlying Case
• Successful Results Obtained for the Client
• Skill, Experience and Reputation of Law Firm
• Efficient Litigation Management Practices

Attorney-client fee disputes are often the result of a breakdown in the attorney-client relationship.  Mediation or arbitration is the quickest, simplest, and most cost effective way to resolve large, complex attorney fee disputes.  Our fee dispute arbitrators are uniquely qualified to settle those fee disputes through the arbitration or mediation process.  Our fee dispute arbitrators have the skills and experience to sit down with both parties to settle a high-stakes fee dispute in a cost effective and confidential manner.

“We’re excited about this new and growing practice area,” says NALFA Executive Director Terry Jesse.  “We look forward to working with law firms and courts when they encounter a large, complex fee dispute,” Jesse added.

A recent Texas Tribune Story, “Loser-Pays Bill Clears Texas House” reports that Texas got one step closer today to becoming one of the few states with a rule that awards legal fees to prevailing parties in lawsuits.  The bill enacts a modified loser-pays rule that allows winning parties to recover attorney fees and expenses in breach of contract suits or if a judge grants a motion to dismiss.  It directs the Texas Supreme Court to create a procedure for early dismissal of certain civil claims and expedites the discovery process for cases with claims between $500 and $100,000.  The law only would apply if the parties didn’t have a previous agreement about attorney’s fees.

Most objectionable to some Democrats and the plaintiff’s bar, it contains a provision that awards attorneys’ fees to defendants if they make an offer to settle, and it’s turned down – if the jury finds for the plaintiff and makes an award less than 80 percent of the initial settlement offer.  Current law allows defendants to recover attorneys’ fees in that scenario – but it limits the amount defendants can recover to less than whatever the plaintiff finally wins.

For example, if a defendant made a settlement offer of $100,000 and the plaintiff rejected it, then went on to win the suit, but only with an award of $79,000, that would mean the plaintiff would have to pay the opposing party’s attorney fees – even if that added up to more than the final award.  That prompted Rep. Craig Eiland, D-Galveston, to dub the legislation the “loser pays and sometimes the winner pays, too” bill.

See also blog post, "Texas Proposes 'Loser-Pays' Fee-Shifting Civil Justice System"

A recent NLJ story, “Chicago Wants Appeals Court to Shoot Down Legal Fee Request” reports that lawyers for the City of Chicago maintain the plaintiffs’ attorneys in the gun rights case that reached the U.S. Supreme Court should not be awarded attorney fees because the city voluntarily repealed its handgun ban before an judgment was issued.  At issue, in the fee dispute is whether plaintiffs’ lawyers, including Alan Gura of Gura & Possessky in Alexandria, VA, were the so-called “prevailing parties” in the Second Amendment litigation.

In McDonald v. Chicago, the U.S. Supreme Court ruled for the plaintiffs, declaring that individuals have a right to possess firearms, at least in their homes.  The high court reversed the U.S. Court of Appeals for the 7^th Circuit and remanded the case to the trial court.  Before the case returned to the trial court, however, Chicago repealed the city’s handgun ban.  Chicago lawyer’s said the city’s handgun repeal was a voluntary action.  No judgment required the city to act.  Gura’s suit against Chicago was dismissed as moot and the trial judge in the case declined to award attorneys’ fees to him and to the National Rifle Association, which was involved in a parallel suit in nearby Oak Park.  Gura is appealing the trial judge’s ruling.

Chicago’s lawyers said the plaintiffs’ claims “were properly dismissed before they were resolved by judgment, consent decree or other judicially enforceable order.”  The plaintiffs, the city lawyers said, did not win and now are trying to ‘water down’ settled law that prohibits an award of attorneys’ fees in cases in which there was no final court order.  Gura called Chicago’s position “absurd”.  Gura added, “there was nothing voluntary about what the City of Chicago did.  The city was compelled to change its law by the Supreme Court.”

A recent Metropolitan News story, “Judge Can’t Give City Break on Legal Fee, C.A. Rules” reports that a California court of appeals ruled yesterday that properly documented attorney fees cannot be cut merely because the losing party is a government entity.  The appeals panel explained that Los Angeles Superior Court Judge Kevin C. Brazile’s determination that “the money should be spent in Lywood and not on the lawyers” was not an appropriate factor upon which to reduce the fee award to attorneys who represented residents of a mobile home park in a lawsuit against the city.

In the underlying action, the residents sued the city in 2004, alleging that a proposed Lynwood Redevelopment Agency (LRDA) plan to change the mobile home park where they lived into town homes would result in the loss of low income rental housing.  The LRDA and the residents settled before trial.  The settlement provided that the residents could “recover reasonable attorneys’ fees and costs” but that LRDA was not precluded “from raising its financial condition in response to the effort to recover the attorney fees.  The residents thereafter moved for an award of fees and costs, supported by expert declarations and billing documentation that totaled $2.7 million.  LRDA opposed the fee request, claiming the most it could pay in attorney fees was roughly $160,000.

Brazile ruled that the residents were the prevailing party and that the litigation had “conferred a significant public benefit.”  The judge, however, applied a negative multiplier of 0.2 to the lodestar, citing his concern that “request attorneys’ fees would significantly reduce the amount the [LRDA] has to provide additional low income housing.”  Thus, applying a negative multiplier, the lower court cut down the fee award by $540,000 reasoning that the money was better spent funding ongoing governmental operations rather than paying the prevailing parties in the litigation.

In the published decision, Rogel v. Lynwood Redevelopment Agency (pdf), the appellate court concluded that although the settlement agreement allowed consideration of LRDA's financial situation, the trial court should not be allowed to override the fact prevailing parties were entitled to a lodestar compensating their attorneys for the market value of their work.  “In our view, Serrano III precluded a rule which awards less than the fair market value of attorneys’ fees merely because the case was filed against a government agency.” 

“We also see a strong public policy against such a rule.  Allowing properly documented attorneys’ fees to be cut simply because a losing party is a governmental entity would defeat the purpose of the private attorney general doctrine and would also incentivize governmental entities to negligently or deliberately run up a claimant’s attorneys’ fees, without any concern for consequences.”

In a recent BLT Blog post, “Judge Approves $760M Native American Class Action Settlement” reports that U.S. District Judge Emmet Sullivan of Washington, DC approved $60.8 in attorney fees in an historic class action.  The case, Keepseagle v. Vilsack, alleged the government, between 1981 and 2007, denied Native American farmers and ranchers the same opportunities as others to obtain low-interest rate loans from the government. 

Sullivan called the overall settlement, $760 million, reached after more than a decade of litigation, historic, fair, and appropriate.  The settlement also calls on the U.S. Department of Agriculture to improve farm loan services.  Tens of thousands of farmers and ranchers are expected to receive compensation.  The settlement set out two tracks—one that provides the ability to recover up to $50,000 and another that allows recovery up to $250,000 based on evidence of economic loss.

The plaintiffs’ team, which included Cohen Milstein Sellers & Toll, Jenner & Block, Patton Boggs, and Frantz & Phelan, will split the $60.8 million fee award.  Over the objection of the Justice Department, Sullivan today awarded the maximum allowed under the agreement.  DOJ had pushed for $30.4 million in fees.  Sullivan called the plaintiffs’ legal fees – 8 percent of the settlement – on the “modest end of the range.”  Citing a colleague’s decision in 2003 in an antitrust case, Sullivan said a fee award of 15 percent is not uncommon in mega fund cases.

In a crowded courtroom in Washington, Sullivan also noted the plaintiffs’ team faced significant risk of never getting paid for their work in the case.  “There were many battles looming on the horizon if this litigation continued,” the judge said.  He noted that in a similar suit, filed by women and Hispanic farmers, judges in Washington denied class certification.  “Suffice it to say to all, congratulations.” Sullivan said from the bench.

The Association of Corporate Counsel (ACC) is an in-house bar association for professional corporate counsel who practice in legal departments globally.  ACC has published a 2010 “Value-Based Fee Primer,” available for reading at http://www.acc.com/valuechallenge/index.cfm, that has some interesting fee rate statistics and alternative arrangements for retaining outside counsel other than traditional “by the hour” retentions.  Here are the interesting trends:

• Non-hourly fee billing arrangements by corporate legal departments comprised 43% of surveyed departments in 2009, up from 27% of departments doing so in 2008;
• Alternative fee arrangements in law departments totaled $13.1 billion in 2009 versus $8.6 billion in 2008;
• Savings from alternative billing arrangements ranged from 15% to over 30%;
• Over the past 10 years, overall costs to U.S. companies rose 20% while legal costs rose 75% with U.S. law firms actually increasing hourly billing rates during the 2009 great recession and 90% of law firm respondents saying they would increase rates in 2010.

A recent Palm Beach Post story, “Is State Law Limiting Workers Comp Attorney Fees Constitutional? Fla. Supreme Court May Get Issue” reports that attorneys for a woman who suffered a back injury while working as a caretaker asked the Florida Supreme Court this month to rule on the constitutionality of a state law that places strict limits on attorney fees.  The 1^st District Court of Appeals in March upheld limits on a Port Charlotte case – a case that amounted to only $6.84 an hour.  In a brief to the Supreme Court, attorneys for the injured Port Charlotte worker, Jennifer Kauffman, said the fee limits “may severely impair, if not eliminate, the ability of claimants to obtain the assistance of counsel.”

The law bases attorneys’ fees on the amount of benefits that are awarded to an injured worker.  Fees are 20 percent of the first $5,000 in benefits; 15 percent of the next $5,000 in benefits; and either 10 percent or 5 percent of additional benefits, depending on the length of time involved.  The law only applies to plaintiffs' fees.  Such fee limits do not apply to defense lawyers who represent employers or their insurance companies.

In the Port Charlotte case, a judge ruled that Kauffman should receive $3,417 in benefits after a dispute with her employer and its insurance company.  Kauffman’s lawyers reported working 100 hours on the case, but the fee limits restricted the amount they could be paid to $684 – or only $6.84 an hour.  While the judge in the case awarded that amount, he also wrote that reasonable fees would be $250 an hour, or $25.000.

A recent Southeast Texas Record story, “O’Quinn Firm Sued for Legal Malpractice by Silicosis Clients” reports that a group of 187 former silicosis clients of the O’Quinn Law Firm has sued the Houston firm, the late John M. O’Quinn’s estate and others, alleging the defendants overcharged them for expenses in silicosis suits, failed to distribute some silicosis settlements and communicate information about them, and were negligent in handling claims against some bankrupt silica defendants.

In the underlying action, the plaintiffs were workers in plants, refineries, and construction worksites at various Texas locations where they claim they were exposed to silica-containing products and diagnosed with silica related diseases.  The plaintiffs employed the O’Quinn firm on a contingency fee basis and issued them a Power of Attorney to represent them in claims against manufactures and distributors of silica related products, materials, and protective equipment.

According to the 11- page complaint, Troy House, et al. v. O’Quinn Law Firm, et al. (pdf), the plaintiffs allege that during the course of representing the plaintiffs, the O’Quinn firm incurred unnecessary and excessive expenses and then recouped the expenses from the plaintiffs’ settlement funds.  Jerry Pusch, a Houston solo who represents the plaintiffs, says a few weeks ago, some former silicosis clients received letters from the firm stating that as part of the wind-down the firm is auditing some silicosis settlements that could affect how much money they receive.

In 2007, an arbitration panel ordered O’Quinn to refund at least $35.7 million to more than 3,000 former breast implant litigation clients who claimed the firm improperly withheld settlement money.  The arbitrators said O’Quinn made improper general expense deductions including professional association dues, flowers, fundraising, other lawyer’s fees and overhead.  O’Quinn had required his clients to sign a binding arbitration agreement in the event of a fee dispute.

A recent NLJ story, “4^th Circuit Reverses Award of Attorney Fees Against False Claims Act Whistleblower” reports that the U.S. Court of Appeals for the 4^th Circuit has reversed a ruling awarding roughly a half-million dollars in attorney fees to defendants in a government contracting whistleblower case.  The published decision in U.S. ex rel Ubl v. IIF Data Solutions (pdf) concluded that the district court abused its discretion by awarding attorney fees to IIF.

At trial, the jury found in favor of IIF on all counts.  The district court thereafter determined that the action was “clearly frivolous” and ordered Ubl to pay IIF $501,546 in attorney fees.  On appeal, however, the appeals court wrote, “The question before us is whether Ubl’s FCA claims objectively had any reasonable chance of success.  We believe that the question must be answered in the affirmative, and we therefore conclude that the district court abused its discretion by awarding attorney’s fees to IIF.”

Ubl’s lawyer, Victor Kubli of Germantown, Md.-based whistleblower boutique Kubli & Associates, said the opinion is “critically important” because it keeps the False Claims Act statute strong, by ensuring that whistleblowers and potential whistleblowers are not afraid of blowing the whistle.  “They’re not going to do that if they’re afraid there will be fee shifting,” Kubli said.

Billions of dollars of recovery of fraudulent government programs would be at risk if the 4^th Circuit had ruled the other way, because “whistleblowers would have to consider that they’d have to pay outsized attorneys’ fees it they didn’t win their case,” Kubli said.

A recent BLT Blog post, “Chamber’s Legal Arm Sees Uptick in Lobbying” reports that the U.S. Chamber of Commerce’s Institute for Legal Reform is spending more money lobbying the federal government, according to a disclosure report filed Thursday.  The business-back group spent $6.03 million on in-house federal lobbying during the first three months of 2011, compared to $5.64 million during the same period last year.

The rise occurred as the group lobbied on a wide array of issues, including a bill designed to cap attorney fees in medical malpractice cases.  Section 5 of the legislation, H.R. 5, the Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2011 would impose limits on contingent fees that range from 40% of the plaintiff’s recovery up to $50,000 to a maximum of 15% of any recovery over $600,000.  For more information, visit “Attorney Fees Come Under Attack From House Republicans.”

The House also voted to stop payments of attorney fees to prevailing litigants in lawsuits filed against the federal government.  Under the Equal Access of Justice Act (EAJA) of 1980, individuals, small businesses, non-profits, and others can collect attorney fees from the federal government if they prevail in a case and meet certain other requirements, such as a falling below a net worth ceiling.  For more information, visit “House Votes to Cut Off Attorney Fees Under EAJA.”

A recent BLT Blog post, “Pillsbury Loses Appeal for Fee Reimbursement in ‘Bitter Feud’ with Former Client” reports that U.S. District Chief Judge Royce Lamberth upheld a bankruptcy court judge’s ruling that Pillsbury Winthrop Shaw Pittman LLP was not entitled to attorney fees as reimbursement for litigating a malpractice claim against a former client, who unsuccessfully brought against the firm.  In Capitol Hill Group v. Pillsbury (pdf), Lamberth wrote that Pillsbury could not rely on an earlier fee agreement that came under dispute in previous litigation to argue that CHG was barred from bring any claims in the future.

The dispute stems from Chapter 11 bankruptcy proceedings CHG began almost a decade ago.  According to Lamberth’s opinion, a fee agreement was hammered out in which CHG was allowed to delay full payment of fees in exchange for agreeing not to challenge Pillsbury’s fee applications.  The conflict arose, Lamberth wrote, when CHG objected to the firm’s fee application – despite the earlier agreement – and Pillsbury in turn “sought an unnecessary and overbroad declaratory judgment.”  Pillsbury was ultimately awarded fees for its work on the bankruptcy proceedings.

CHG then bought a $50 million legal malpractice claim against Pillsbury in 2007 relating to other litigation the firm had handled on CHG’s behalf, which was dismissed by Lamberth on the grounds that CHG had already had an opportunity to litigate claims against Pillsbury.  The dismissal was affirmed by the U.S. Court of Appeals for the D.C. Circuit.  Pillsbury then filed a counterclaim (pdf) against CHG, claiming that the original fee agreement at issue in the bankruptcy proceedings also precluded CHG from bringing the malpractice suit.  Pillsbury sued CHG for fees incurred in defending against CHG’s 2007 malpractice claim.

Bankruptcy Judge S. Martin Teel ruled against Pillsbury, finding that while the fee agreement may have barred CHG from challenging Pillsbury’s request for attorney fees, it did not address whether CHG could bring a malpractice suit against the firm on issues other than attorney fees.  The law firm appealed Teel’s decision (pdf), which landed before Lamberth.  In affirming Teel’s decision, Lamberth wrote that Pillsbury was incorrect in interpreting the original fee agreement to say that CHG was barred from pursuing any claims against Pillsbury.  “Nothing in the text of the Fee Agreement, however, purports to waive any substantive rights of CHG beyond its right to dispute [the] fee applications,” Lamberth wrote.

A recent Reuters Legal story, “Madoff Trustee Seeks an Additional $45 Million in Fees” reports that the trustee for victims of Bernard Madoff’s Ponzi scheme asked a federal bankruptcy court judge to approve nearly $45 million in attorney fees and expenses, his first compensation request since regulators voiced concerns over his fees in March.  Irving Picard and his legal team at Baker & Hostetler LLP filed a motion seeking roughly $44 million in fees and $1 million in expenses for work done between Oct. 1 and Jan. 31.  Picard told the U.S. Bankruptcy Court in Manhattan that the firm’s work during the period – which included striking a $5 billion settlement with the estate of former investor Jeffry Picower – justified the request.

According to the fee motion, Picard worked 954.8 hours during the four month period, at an average rate of $747.59 per hour.  Other Baker & Hostetler lawyers worked 116,398 hours at an average rate of $370.94 per hour.  If approved, the firm’s total compensation would jump to nearly $150 million since Picard’s appointment in December 2008.

The payments caught the attention of the Securities and Exchange Commission in March, when Inspector General David Kotz said the fees risk depleting the Securities Investor Protection Corp’s fund that is paying some of the costs of former Madoff customers.  Those concerns have been downplayed by SIPC President Stephen Harbeck, who said the fund will remain stable thanks to new fees being imposed on the brokerages that pay into it.  The fund still has $1.3 billion in reserve despite costly liquidation proceedings for Lehman Brothers Holdings Inc. and Madoff, Harbeck said.

A recent ABA Journal story, “Appeals Court Nixes $650K Legal Fees Award, Says Parties Never Mutually Agreed to Arbitrate” reports that a California appeals court has snatched away more than $650,000 in attorney fees from Glaser Weil Fink Jacobs & Shapiro, LLP by reversing an arbitration award in a dispute involving artist Thomas Kinkade.  The appeals court threw out a lower court ruling that confirmed an arbitration award to the prominent Los Angeles law firm.  The appeals panel held 2-1 that the arbitration agreement between the former clients, who were operators of an art gallery, and the law firm was not binding.  Jonathan Cole, an attorney with Nemecek & Cole, is representing Glaser Weil in the matter.

The underlying case began when George and Esther Goff hired Glaser Weil to represent them in a dispute over royalties with Thomas Kinkade, whose oil paintings of cottages and village streets are mass produced and sold in galleries across the country.  Glaser Weil notified the Goffs that they owed $654,758 in legal fees and that it would file a lawsuit to collect.  It also advised them that they could seek arbitration through the local bar association.  The Goffs are represented by Terran Steinhart, a solo practitioner in Los Angeles. 

The Goffs offered to settle the matter through binding arbitration, which Glaser Weil initially rejected.  However, after it learned the identities of the arbitrators, the law firm agreed to arbitration.  The Goffs subsequently changed their minds and said they did not want arbitration.  The chairman of the arbitration panel decided that the Goffs’ original offer meant that the resolution of the proceeding would be binding.  The panel then awarded the fees to the firm, and the Goffs’ sought to overturn the award in court.

At issue before the Court of Appeals was whether the arbitration decision was final because the law firm initially rejected the clients’ request for binding arbitration.  The appeals panel determined that – because the firm initially rejected the Goffs’ offer and the Goffs rejected the firm’s offer – parties never entered into a written agreement.  When the firm rejected the Goffs’ written request for binding arbitration, “the Goffs’ offer was terminated and could not later be accepted by the firm,” wrote California Court of Appeal Associate Justice Frances Rothschild.

A recent BLT Blog post, “Treasury Watchdog Questions Venable’s Billing, Including ‘Vague and Inadequate’ Work Descriptions” reports that a new audit report on the federal government’s Troubled Asset Relief Program (TARP) is knocking the legal billing practices of the Venable law firm, and is questioning about two-thirds of the firm’s legal fees the auditors reviewed.  The report says Venable lawyers and timekeepers often failed to describe their contract work for the government program adequately.

The report does not argue that the fees paid to Venable were necessarily improper because, the auditors write, many descriptions were too vague to make a determination.  The report comes from the acting special inspector general of TARP, an office nicknamed “Sigtarp” and headed on an acting basis by former Securities and Exchange Commission counsel Christy Romero.  According to the report, the Treasury office in question has already changed the level of detail it requires from contracting law firms as a result of initial audit findings.

In all, the auditors examined invoices totaling just over $1 million in legal fees, and auditors questioned $677,000 worth of fees.  As of Dec. 31, five law firms, including Venable, had been paid $27 million in fees.

CLICK HERE (pdf) for a copy of the audit report.

A recent law.com story, “Federal Judge Again Approves Bonus Fees to Civil Rights Lawyers” reports that a federal judge in Atlanta, whose bonus fee award to civil rights attorneys prompted the U.S. Supreme Court last year to place limits on such fees, has again found that a child welfare organization and its Atlanta legal partners deserve additional money for their work in reforming Georgia’s foster care system.  “The question is,” asked U.S. District Senior Judge Marvin H. Shoob, “How much?”  In remanding the case to Shoob, the high court refused to eliminate fee enhancements, but said that such fees should be levied “due to superior performance but only in extraordinary circumstances.”

In a hearing on April 1, Shoob signaled that the foster care litigation is one of those cases.  The lawyers for the class, Jeffrey O. Bramlett and Michael A. Caplan of Atlanta’s Bondurant Mixson & Elmore and Children’s Rights Inc. lawyer Marcia Robinson Lowry petitioned the court for $4.5 million in enhanced fees, about 97 percent of Shoob’s original lodestar fee award. 

The enhanced fees include an additional $3 million to “true up” what Bondurant lawyers said was a lodestar hourly rate of $235 that “didn’t measure the true market value” of counsel’s time on the case.  The request also included $1.2 million in “lost opportunity” costs for funds that Bondurant and Children’s Rights used to finance the litigation; $1.3 million to offset delays by the state in the payment of attorney fees; and nearly $400,000 to compensate for the state’s delays in paying opposing counsel’s legal expenses.

Shoob determined that the enhanced fees were warranted because of major reforms that were achieved by counsel for more than 3,000 foster children.  In awarding the fees, he also cited the difficulties their attorneys encountered during the course of the litigation, including what Shoob described as protracted delays by the state.

See also blog post, "U.S. Supreme Court Makes Lodestar Multiplier Less Likely"

A recent BLT blog post, “Proposed Caps on Fees and Damages in Malpractice Cases Debated at House Hearing” reports that legislation, H.R. 5, introduced by House Republicans, would cap attorney fees to the nation’s medical malpractice laws.  Section 5 of H.R. 5, The Help Efficient, Accessible, Low-cost, Timely Healthcare Act of 2011 (pdf) would impose limits on contingency fees in medical malpractice cases that range from 40% of the plaintiff’s recovery up to $50,000 to a maximum of 15% of any recovery over $600,000.

Brian Wolfman, a visiting professor of law at Georgetown University Law Center, said the bill would undermine public safety by limiting attorney fees and possibly prevent lawsuits from being filed by patients who have been injured as a result of medical negligence.  “The free market works reasonably well in individual lawsuits, where the client’s interest in maximizing recovery and the lawyer’s interest in a fair fee are well aligned and do not require the kind of micro-management and anti-free market regulation that H.R. 5 would impose,” Wolfman said in testimony before the House Energy & Commerce Committee’s Subcommittee on Health.

What is more, the bill also includes a cap of $250,000 for noneconomic damages.  “The idea that $250,000 can fully compensate for these type of injuries – injuries that may last a lifetime – is, to be blunt, absurd.  And the fact that H.R. 5 fixes noneconomic damages at $250,000 forever, regardless of the impact of inflation, underscores the conclusion that the $250,000 cap is not a genuine attempt at gauging the impact on real people’s lives of noneconomic injuries,” Wolfman said.

Two House Republicans today continued their effort to prevent the plaintiffs’ lawyers in the Cobell class action from getting more than $50 million in attorney fees for their work in the 15-year old case.  Congressmen Doc Hastings of Washington and Don Young of Alaska introduced legislation, H.R. 887 in March.  H.R. 887 establishes a cap of $50 million on attorney fees and expenses on plaintiffs’ attorneys in the class action case, Cobell v. Salazar.

Without any knowledge of the work and hours involved in the 15-year old underlying class action, in a letter (pdf), Congressman Young stated that plaintiffs’ fee request was “grossly excessive.”  Without any knowledge of the factors that determine reasonable attorney fees, in a letter (pdf), Congressmen Hastings stated that plaintiffs lawyers were only seeking to “enrich themselves” at the expense of the client.

A recent The Recorder story, “Embarrassed Panel Rethinks Ruling on Fee Arbitration” reports that an appeals court in California seemed ready to undo a published opinion (pdf) that said a volunteer fee arbitrator should have disclosed that he regularly represents law firms in fee disputes.  At the root of the problem, Justice J. Anthony Kline said, was that parties in the fee dispute engaged in a binding arbitration – but they do so under the State Bar of California’s Mandatory Fee Arbitration (MFA) Program, which is nonbinding.

Everything flowed from that blunder, Kline said, including the initial opinion he wrote for the court, Benjamin Weill & Mazer v. Kors.  In it, the court sided with a woman fighting her former law firm over unpaid attorney fees, finding that the chief fee arbitrator in the case, Howard Rice Nemerovski Canady Falk & Rabkin partner Sean SeLegue, should have disclosed that he regularly represents law firms in fee disputes cases. 

That ruling troubled leaders of the MFA program, who noted in a de-publication request letter (pdf), signed by several former chairs of the State Bar Committee on Mandatory Fee Arbitration, that under the rules of the Bar Association of San Francisco mandatory fee arbitration program, SeLegue did not have the same disclosure requirements a private neutral would.  The letter went on to predict that the onerous disclosure requirements the Kors case would impose would cause the fee arbitration system to “collapse.”

See also blog post “CA Appeals Court: Disclose Clientele to Arbitrate Attorney Fee Disputes”

A recent The Recorder story “Open Ended Retainer Agreements Don’t Disqualify Firm” reports that a California appeals court concluded that an open-ended retainer agreement don’t automatically create attorney-client relationships.  Shute, Mihaly & Weinberger shouldn’t have been disqualified in the case just because of a couple of open-ended retainer agreements it signed in 2005 with the city of Newport Beach, the California appeal panel concluded in its published opinion (pdf).

Shute, Mihaly represents Banning Ranch Conservancy in litigation over the city’s plans to build a four-lane highway on a 400-acre coastal property.  Lawyers for Newport Beach had argued that the firm shouldn’t be allowed to represent the conservancy because two retainer agreements it signed with the firm from 2005 established an attorney-client relationship.  They cited the firm’s “special insight” into the city’s approach to land use matters based on its representation of the city in past decades.

But the conservancy argued that they were mere “framework” retainer agreements that didn’t create an attorney-client relationship unless the firm accepted the work.  It argued the court to issue a writ of mandate on the disqualification order, arguing that it might not be able to continue its case with any other law firm.

The panel noted the competing considerations raised by disqualification motions.  “On the one hand, these include clients’ rights to be represented by their preferred counsel and deterring costly and time-consuming gamesmanship by the other side,” the panel wrote.  “Balanced against these are attorneys’ duties of loyalty and confidentiality and maintaining public confidence in the integrity of the legal process.”

A recent PatentlyO Blog story, “Old Reliable v. Cornell: Federal Circuit Again Rejects Award for Attorneys’ Fees” reports that for a second time this year the Federal Circuit has issued a precedential decision reversing an award of attorneys’ fees entered against a patentee (the party that possesses or had been granted a patent).     

In patent cases, 35 U.S.C. § 285 allows district judges to award attorney’s fees to a litigant in an “exceptional” case, where the fee-seeking party satisfies two “exacting” standards – sanctions may be imposed against the patentee only if both (1) the litigation was brought in subjective bad faith, and (2) the litigation is objectively baseless.

The Federal Circuit in Old Reliable Wholesale, Inc. v. Cornell Corp. (pfd) further put the clamps on fee recovery under section 285.  The “objectively baseless” requirement involves a purely objective inquiry that parallels the finding that must be made with respect to willful infringement under section 284.  This standard must be met whether the action is one for willful infringement or determined to be a meritless, non-willful infringement action, with subjective considerations of bad faith playing no role in this determination.  Using these tenets, the Federal Circuit found that the objective threshold was not satisfied, reversing an award of $183,500 in attorney fees and $13,100 in costs against a patentee whose patent was found to be invalid.

See also: “Despite Prevailing in Patent Infringement Case, Google Must Pay Own Attorney Fees”

A recent BLT Blog story, “D.C. Judge Requests Three Firms’ Rates in Legal Fee Dispute” reports that a judge in Washington said he wants the three law firms that provided pro bono services to the District of Columbia in the landmark gun rights case to open up their books to provide billing data to the court.  Judge Emmet Sullivan of Washington’s federal trial court is trying to determine a fair and reasonable fee for the plaintiffs’ team that represented a group of District residents in the suit in which the U.S. Supreme Court in 2008 overturned the city’s ban on handguns.

Sullivan said in court he’s spent a “great deal” of time reviewing the fee petition and has struggled over assessment of the prevailing market rate for complex civil litigation.  Last year, Sullivan denied without prejudice lead plaintiffs’ lawyer Alan Gura’s of Alexandria, Va.’s Gura & Possessky request to inspect the records.  Sullivan reversed course, saying records, while perhaps not dispositive, will aid his work.

Three law firms – O’Melveny & Myers, Covington & Burling, and Akin Gump Strauss Hauer & Feld – provided pro bono work for the District in the litigation.  Sullivan said he wants to avoid “full-blown litigation” over the three firms’ billing records, and he said he’s not interested in having names attached with the financial data.  The judge also said he is hopeful he will not have to authorize subpoenas to compel Covington, Akin, and O’Melveny to provide the standard billing rates for lawyers who worked on the gun case in the District.

In a recent Metropolitan News story “Court of Appeals for this District Tosses Post-Judgment Attorney Fee Award” reports that a California Court of Appeals has thrown out a $22,500 attorney fee award in a breach of contract suit against a San Fernando Valley area investment brokerage by a former employee.  The appellate court concluded a clause in a contact between Krikorian Investment Services Inc. and Iman Eshaghyan only provided for a recovery of attorney fees incurred in connection with an arbitration.

Eshaghyan signed an employment agreement with Krikorian which provided, in part, that any dispute arising out of the agreement would be subject to arbitration and set forth the terms governing such a proceeding.  The contact stated that “all initial costs of arbitration” would be split between the parties, and the prevailing party “shall be entitled to reimbursement of attorney’s fees, costs, and expenses incurred in connection with the arbitration.”

Eshaghyan filed suit in 2007 alleging breach of contract and other counts.  The jury found in favor of Eshaghyan and awarded him $245,280 in damages.  Eshaghyan then sought recovery of his attorney fees, contending he was entitled to an award of $155,370 pursuant to the terms of his employment contract.  Los Angeles Superior Court Judge Ronald M. Sohigian granted the motion in part, awarding $22,500 in attorney fees against Krikorian Investment, indicating which contract he found to have supported the award.

Writing for the appellate court, Justice H. Walter Croskey noted the attorney fee clause in the employment agreement appeared in a paragraph expressly dealing exclusively with arbitration.  These repeated references to arbitration, Croskey reasoned, “leave no doubt that the parties intended to provide for a recovery of attorney fees by prevailing party only in the event of an arbitration and that only fees incurred in connection with an arbitration are recoverable.”  Since no arbitration took place, no fees were incurred “in connection with an arbitration,” as required by the terms of the employment contract, and so the agreement did not authorize the fee award to Esahaghyan, Croskey explained.

A recent story by The New York Times, “Texas May Consider a Bill Forcing Loser in a Suit to Pay Opponents’ Legal Fees” reports that in his February State of the State address, Gov. Rick Perry pushed a proposal that would require the losing parties in litigation to pay their opponents’ attorney fees.  Also known as the English Rule, because of its prevalence in Britain, the loser-pays approach, advocates say, is the cure for courts choked with the costs of “junk” lawsuits.  But opponents say it obstructs all litigation – without regard to merit – and keeps those without plausible legal claims from seeking justice.

Perry praised a loser-pays approach that would require “those who sue” to pay lawyers’ fees.  The prospect of a one-way loser pays system has put the state’s plaintiff bar on high alert.  The tort reform legislation is still being drafted.  Which version of the loser-pays will ultimately make it into the legislation is unclear.  Jenni Sellers, chief of staff to Representative C. Brandon Creighton says Mr. Creighton thinks any loser-pays proposal should be fair to both sides.  He believes “it’s a two-way street.” Ms. Sellers said.  “Not just plaintiffs pays, both whoever the loser is ends up paying.”

But in an op-ed article, “Loser Pays’ Next Step for Successful Lawsuit Reform in Texas” published in The Midland Reporter-Telegram, Mr. Creighton, along with six of his House colleagues, used language that suggested a focus on plaintiffs: “A plaintiff should be required to pay the defendant’s legal fees in cases where a court determines that a lawsuit is groundless or where a jury determines a suit is frivolous.”

W. Mark Lanier, a plaintiffs’ lawyer in Houston, said he did not have a problem with a loser-pays system, “as long as it’s fair.”  But Mr. Lanier said a one-way approach focused on plaintiffs was “blatantly anti-Texan” because of the barrier it would create for those who cannot afford the risk of having to pay the defendant’s attorney fees.

NALFA will be registering a corporate Political Action Committee (PAC) with the Federal Election Commission (FEC).  The NALFA PAC will work to defend attorney fee compensation and third-party litigation financing.  The tort reform lobby's (i.e. U.S. Chamber of Commerce) top legislative priorities are to cap attorney fees and prohibit third-party litigation financing.

“We have already seen legislative efforts underway in the Republican-controlled U.S. House to eliminate EAJA payments to attorneys and cap plaintiffs’ fees in class actions cases.  The NALFA PAC will support candidates who believe that judges should determine reasonable attorney fees, not politicians,” says Terry Jesse, Executive Director of NALFA.

1. Dickie Scruggs’ Judicial Bribery Scandal:  Richard “Dickie” Scruggs of Scruggs Law Firm in Oxford, Mississippi was one of the most successful trial lawyers in U.S. history.  Scruggs was a successful plaintiffs’ attorney who amassed hundreds of millions of dollars in asbestos and tobacco litigation.  Worth an estimated $1 billion, Scruggs gave back to the community.  He donated to charities, Ole Miss University, and to political candidates and causes.  But in a fee dispute with former partner Johnny Jones, Scruggs crossed the ethical line.  He attempted to bribe a state judge Henry Lackey with $40,000 in exchange for a judicial order sending the fee dispute case, Jones v. Scruggs, to arbitration.

2. Scott Rothstein’s Ponzi Scheme:  Scott Rothstein of Rothstein Rosenfeldt & Adler (RRA) in Fort Lauderdale, Florida operated a $1.2 billion Ponzi scheme.  Unbeknownst to others in his law firm, Rothstein sold settlements that did not exist to wealthy investors.

3. Kentucky’s Fen-Phen Lawyers:  Kentucky’s Fen-Phen lawyers took nearly $94 million from their client’s settlement funds.  William J. Gallion and Shirley A. Cunningham, Jr. did not tell their clients about a $200 million settlement in the Fen-Phen class action litigation.  In addition, they convinced each plaintiff to accept a low value for their claim by withholding facts about the settlement and threatened imprisonment to plaintiffs who revealed their individual settlement amount to others.

4. Milberg Weiss’ Class Action Plaintiff Kickback Scandal:  For over two decades, securities class action powerhouse Milberg Weiss, LLP participated in a scheme whereby the firm paid out over $11.3 million in kickbacks to clients who agreed to serve as plaintiffs in class action lawsuits.  Prompting its own clients to file the first lawsuit in a class action meant that the firm would control the litigation as lead counsel, a position that guaranteed it the highest percentage of attorney fees from a settlement or judgment.

5. Marc Dreier’s Ponzi Scheme:  Marc Dreier was the sole equity partner of Dreier, LLP in New York.  He defrauded investors of nearly $400 million in a Ponzi scheme, where he successfully convinced hedge funds to invest in a company belonging to his former client, Sheldon Solow.  His former client, Sheldon Solow and members of his own law firm had no idea what Dreier was doing.

A recent BLT Blog post, “Two House Republicans Push Limiting Cobell Legal Fees to $50M” reports that two House Republicans last week introduced legislation to cap the legal fees in the Cobell v. Salazer case at $50 million.  The bill that Rep. Don Young (R-Alaska) and Rep. Doc Hastings (R-Wash.) introduced was referred to the House Judiciary Committee and to the House Committee on Natural Resources.

Plaintiffs’ lawyers for Cobell said they should receive at least $223 million in fees, an amount based in large part on a 14.75% contingency fee arrangement.  Cobell’s lawyers cited the novelty of the case and its duration – the suit was filed in 1996.  The attorneys also said $223 million in on the low end of the percentage scale for lawyers who successfully handle complex class action litigation.

Responding to the criticism, Dennis Gingold, lead plaintiffs’ attorney, said that the demand to cap attorney fees raises separation of power issues, since the settlement has already received preliminary approval and is pending before a federal district judge.  Two members of Congress, Gingold said are “trying to limit the authority of a United States district judge.  There is a substantial separation of powers issue.”

A recent AP story, “Spector, Shapiro Settle $1M Legal Fee Dispute” reports that imprisoned music producer Phil Spector has settled his lawsuit against attorney Robert Shapiro over a $1 million retainer fee.  Spector settled a suit demanding that Shapiro return the $1 million retainer, just three days before the matter was to go to trial in Los Angeles County Superior Court.  Lawyers said they could not reveal the terms of the agreement, which came during a last ditch settlement conference with Judge Peter Lichtman.

Spector hired Shapiro, famous for his defense of O.J. Simpson, within days of his arrest, but fired him less than a year later because, according to the suit, the lawyer wasn’t spending enough time on his case.  For settlement negotiations, Spector gave another high-profile defense attorney, Leslie Abramson, power of attorney to approve the deal.

A recent Texas Lawyer story, “Firm Alleges Former Client Didn’t Pay Fees” reports that Houston-based Roach & Newton, LLP has sued former clients Walter Teachworth and TFT Galveston Portfolio, Ltd., alleging they failed to pay the firm for post-verdict and appeals work following a $51 million adverse jury verdict.  In its petition, Roach & Newton v. TFT Galveston Portfolio, Ltd., et al., the firm alleges the defendants benefited from its work and that because of it, the defendants were able to settle the underlying litigation in 2010 for a “fraction of the amount of the judgment.”

Randy Roach, a partner in Roach & Newton, alleges Teachworth and TFT, have paid his firm nothing.  He says the unpaid fees total about $425,000, but because the firm didn’t have a written fee contact with Teachworth and TFT to handle the post-verdict and appellate work, they aren’t suing for beach of contact.  “We aren’t suing on a breach-of-contact theory.  It’s a quantum meruit theory, which is whatever is [a] reasonable value for our services,” he says.

Lawyers in the U.S. Department of Justice and a former U.S. Senator have all come out against the plaintiffs’ attorney fee request in Cobell v. Salazar.  Plaintiffs’ lawyers in the case are seeking $224 million in attorney fees and expenses.  The historic class action was filed in June 1996 against the federal government for the mismanagement of Native Americans trust accounts stemming from the use of land for oil, gas, and minerals.  The civil litigation lasted for fourteen years and resulted in a landmark $3.4 billion settlement, one of the largest settlements in U.S. history.  The fee request represents 6.588% of the total settlement.

DOJ Civil Division attorney Robert Kirschman, Jr. filed the government’s opposition to the plaintiffs’ fee request (pdf).  DOJ said the demand for compensation goes against promises lawyers for the class representatives made during settlement talks in 2009.  The plaintiffs’ attorneys, DOJ lawyers said, agreed not to ask for more than $99.9 million in fees, expenses, and costs.  Plaintiffs’ lawyers argue that they never agreed to “cap” fees and that the fee is justified given the length and complexity of the case.

Last week, former U.S. Senator Byron Dorgan (D-ND), who helped facilitate settlement talks with the parties, called the plaintiffs’ fee request “shameful.”  “For the attorneys to argue for this amount of money now undermines the very interests of the victims they were representing,” Dorgan said.  Dorgan is now the co-chair of Arent Fox’s government relations practice in Washington, DC.

Senior Judge Thomas F. Hogan has the final say on attorney fees and any incentive award.  A fairness hearing is set for June 20, 2011 in U.S. District Court in Washington, DC.

CLICK HERE for a copy of plaintiffs’ fee request.

CLICK HERE for a copy of plaintiffs’ incentive fee request.

For more information visit http://www.indiantrust.com

Bank of America faces up to $1.5 billion in legal losses in 2011, according to a Wall Street Journal report.  The report, citing the bank’s recently filed annual report, says Bank of America disclosed it estimates between $145 million and $1.5 billion in expenses tied to lawsuits in 2011.  That doesn’t include accrued liability, a figure not disclosed.

Most of the expected legal costs will be tied to mortgage-securitization lawsuits and similar demands.  Thanks to Countywide Financial – the acquisition that keeps on giving – Bank of America is faced with a number of angry investors over mortgage securities packaged by Countrywide that are now riddled with bad mortgages.  Bank of America settled a lawsuit for $600 million with New York pension funds and others tied to mortgage securities at Countrywide.

A recent NLJ story, “Judge Approves $601.5 Million Settlement with Countrywide” reports that U.S. District Judge Mariana Pfaelzer in Los Angeles has approved a $601.5 million class action settlement between Countrywide Financial Corp and its shareholders – the largest securities agreement to come out of the housing crisis.  More than two dozen large institutional investors opted out of the settlement, forcing both side to reduce the settlement from $624 million.

Labaton Sucharow, the New York law firm hired by several New York pension funds on a contingency basis to pursue securities fraud claims against Countrywide and its senior managers, sought $46.5 million in attorney fees, nearly $1 million less than its initial request, which represented 7.59% of the total settlement.  The new request represents 7.73% of the total agreement.  Labaton Sucharow sought $8 million in expenses.

Pfaelzer appeared surprised by the enormous expense of the case, particularly when the discussion came to attorney fees.  “It’s startling how much litigation costs,” she said.  “It’s always far more substantial than I think in terms expenses.”  Pfaelzer, who confessed she is “not as a rule very generously disposed toward attorney’s fees of this size,” said she was shocked by the sheer magnitude of the fee request in this case.  But she also recognized that the percentage sought was below average when compared to similar settlements.

A recent NLJ story, “Disbarment Recommended for Litigator Chesley Over Fen-Phen Fees” reports that a Kentucky trial commission has recommended permanent disbarment for attorney Stanley Chesley for allegedly taking millions in unauthorized attorney fees in fen-phen litigation.  In a 29-page report, Trial Commissioner William Graham concluded that Chesley and his co-counsel unlawfully took attorney fees totaling 49 percent of the settlement funds in a class action against diet drug maker American Home Products in a Kentucky state court.  Chesley collected about $20 million in fees.

The report stems from a $200 million class action in 2000.  A jury in April 2009 found other attorneys on the case, William Gallion and Shirley Cunningham, guilty of one count of conspiracy to commit wire fraud and eight counts of wire fraud.  Prosecutors said they kept about two-thirds of the settlement with American Home – about twice what they could lawfully collect.  Gallion was sentenced to 25 years in prison.  Cunningham was sentenced to 20 years.

The trail commissioner wrote that Chesley of Cincinnati, violated attorney ethics rules pertaining to unreasonable fees, notification of fees, making false statements to the court and more.  In addition to recommending disbarment, he called Chesley to pay back more than $7.5 million.  The Kentucky Supreme Court ultimately will decide the matter.

This story was featured on CNBC's American Greed.  CLICK HERE for more information.

A recent Corporate Counsel story, “Fierce Fight Erupts Over $315 Million Vioxx Attorney Fee Funds” reports that several law firms have objected to the proposed allocation of fees from the $4.85 billion Vioxx product liability settlement.  Last year, after winning 11 of 16 trials involving allegations that its painkiller Vioxx contributes to heart disease and other illnesses, Merck agreed to a $4.85 billion settlement fund.  In October 2010, New Orleans federal district court judge Eldon Fallon set aside 6.5 percent of the fund -- $315.3 million – for attorney fees.  He also appointed nine firms to allocate the fees among the 109 plaintiffs law firms involved in the New Orleans MDL Vioxx litigation.

Last month, the committee filed its fee allocation recommendations (pdf) with the court.  The proposal grants the committee’s own members a large portion on the fees in the common benefit fund: $230 million, or about 70 percent of the total pool.  Since the fee committee submitted its recommendation, 17 law firms have filed objections to the allocation of fees.  They accuse the committee of ignoring lodestar calculations and granting its own members fee equivalent to hourly rates as high as $2,205, while leaving only scraps for other lawyers who committed thousands of hours to the Vioxx litigation.

“No one to my knowledge who has taken such a risk has ever been awarded such a ridiculously low rate considering the qualifications of the people who did this work,” wrote plaintiffs lawyer Daniel Becnel in his fee objection (pdf).  Becnel, who told us his firm committed more than 16,000 hours to the Vioxx litigation, including work that steered the MDL to Louisiana, was allocated $455,000 by the fee committee after complaining that his initial award of $97,000 amounted to only $6 an hour.

The objectors have also raised questions about the agreement between Michael Stratton of Stratton Faxon and fee committee members Herman of Herman Herman Katz & Cotlar, Christopher Seeger of Seeger Weiss, and Andrew Birchfield of Beasley Allen.  Stratton was appointed by Judge Fallon to represent plaintiffs attorneys with single clients in the Vioxx litigation, who didn’t want to pay a full 8 percent share of their clients’ settlement into the MDL common fund.  At a conference before the judge (pdf), Stratton and the fee committee members agreed to reduce the pay-in to 4 percent for single-client plaintiffs firms that had already squawked at the 8 percent assessment.  Fee allocation objectors claim the Stratton deal decreased the size of the common fund.  “Of the $315,250,000 awarded by this court, only $311,885,030 has been recommended for allocation,” they argue.

NALFA first reported on this case in blog post “Plaintiffs Lawyers Awarded $315M in Fees in Vioxx Litigation.”  For more information visit www.officialvioxxsettlement.com

A recent NLJ story, “1^st Circuit Deems Plaintiffs Who Achieved Settlement ‘Prevailing Parties’ Entitled to Fees” reports that the U.S. Court of Appeals for the 1^st Circuit has ruled in Hutchison v. Patrick (pdf) that parties who achieve litigation goals through settlement, as opposed to a verdict or a formal consent decree are nonetheless “prevailing parties” eligible for attorney fees.  The plaintiffs’ total award for legal costs includes $414,036 in attorney fees and $10,986 in costs to the Center for Public Representation and $361,191 in attorney fees to lawyers at Wilmer Cutler Pickering Hale & Dorr.  The state appealed the fee award.

In the underlying case, plaintiffs sued the state for allegedly violating the American with Disabilities Act and other federal laws by failing to provide brain-injured residents of nursing homes with appropriate services.  The parties began settlement talks in October 2007 and reached final agreement in May 2008, which the district court approved in September 2008. 

The 1^st Circuit ruling, written by Senior Judge Bruce Selya, analyzed the Hutchison case in light of the 1^st Circuit ruling Aronov v. Napolitano.  The panel made three conclusions: that “the district court appropriately characterized the plaintiffs as prevailing parties, that the relief obtained was sufficiently final to justify a fee award, and that the court acted within the purview of its discretion in fixing the amount.”  “The broad enforcement authority bestowed upon the district court separates the Agreement from the mine-run of private settlements, which – though enforceable – require resort to an independent action for breach of contract,” Selya wrote.

Selya also upheld the plaintiffs’ fee request and rate request on the grounds that the plaintiffs “discounted the total number of hours before compiling their fee request.”  He concluded that the hourly rates of $250 and $425 for both groups of plaintiffs’ lawyers were in line with their rates for similar work.  The non-profit Center for Public Interest used the same rates that the organizations’ lawyers charged in other civil rights cases, Selya noted.  Wilmer’s rates “were pretty much the same as those received by the firm in a recently concluded public interest case,” he wrote.  He also noted that they “were in many instances substantially below the standard billing rate charged by the private attorneys.”

NALFA first reported on this case in blog post "1st Circuit Considers Prevailing Party Status in Pretrial Class Action Settlement"

A recent law.com story, “Madoff Work Pays Off for Baker & Hostetler” reports that the trustee of the Bernard L. Madoff Investment Securities bankruptcy proceedings, Irving H. Picard, a Baker & Hostetler partner, has received nearly $97 million in attorney fees to date from Madoff work, stretching back to early 2009.  According to reporting from law.com, it appears that in 2010 the firm’s revenue increased 17 percent to $386 million, and profits per partner jumped 27 percent to $763,000.  Based on court filings in the Madoff case, it appears that least $58 million of the firm’s 2010 revenue stems from that high-profile assignment. 

In May the court approved $24.6 million in attorney fees for Picard and the firm, and in September it approved an additional $34.6 million in attorney fees.  These attorney fees are paid by the Securities Investor Protection Corporation, an industry funded group established to protect investors, and not out of the funds recovered for Madoff victims.  There is an outstanding attorney fee request by the law firm for nearly $40 million that has not yet been ruled by Manhattan federal bankruptcy court judge Burton Lifland.

For more information visit http://www.madofftrustee.com

A recent BLT Blog post, “House Votes to Stop ‘Equal Access of Justice’ Fees” reports that the Republican controlled U.S. House of Representatives voted last Thursday for a proposal that would temporarily halt payments of attorney fees to prevailing litigants in lawsuits filed against the federal government.  Under the Equal Access to Justice Act (EAJA) of 1980, individuals, small businesses, non-profits, and others can collect attorney fees from the federal government if they prevail in a case and meet certain other requirements, such as a falling below a net worth ceiling.

Rep. Cynthia Lummis (R-Wyo.), the sponsor of the amendment, called the 1980 law a “very fair law.”  But she said the payments should stop because there’s no centralized information about which lawyers and plaintiffs are getting the fee awards.  Democrats, making an appeal to Tea Party supporters, said an end to the payments would harm people who are fighting the government with few resources.  They described plaintiffs suing because they were denied Social Security benefits or used as “guinea pigs” in nuclear experiments decades ago.  Amendment opponents also point to the law’s several requirements before attorney fees can be awarded.  For example, attorney fees are not available if the federal government’s position was “substantially justified.”

A recent law.com story, “Factors to Consider Before Law Firms Sue Ex-Clients Over Unpaid Fees” reports that the common logic with many law firms was that it wasn’t worth it to sue a client over unpaid legal fees because it was bad for business.  The professional liability lawyers say fee dispute cases against former clients inevitably lead those former clients to file legal malpractice counterclaims against the firms; sometimes the fee dispute cost more money to litigate than the fees owed; and such litigation may lead to higher legal malpractice insurance premiums.

Tobey, who represents plaintiffs in legal malpractice cases, says he is seeing more lawyers and firms willing to litigate legal fee disputes.  “My sense is you’re seeing a lot more suits for fees by both big firms and small firms, all of whom seem to know the likelihood that they will face a counterclaim for malpractice.  And I think if the old statistic was that there is an 80 percent chance that a suit for fees will get a counterclaim for malpractice, I would say that percentage is reaching nearly 100 percent,” Tobey says.  “And you’re seeing even more claims for malpractice but also breach of fiduciary duty in fee claims.”

Houston firm consultant Bill Cobb says there are ways firms can avoid suing former clients for fees.  For starters, firms always should have a strong engagement letter with a new client that explains the firm’s rate structure, Cobb says.  Firms also need an internal screening process to examine new clients—especially clients who may not be long-term customers of the firm.  “Look at it as a venture capital investment: Are you going to get a return on that investment?” Cobb says.

It all else fails and a firm decides to sue a client, make sure the lawyer’s work for that cannot be challenged in court for alleged overbilling.  “If they think the client may have been overbilled…then you might be a little more concerned about doing it,” Cobb says of suing a client.  “But if you’ve got a partner that has never had a problem, ever, and you really don’t think there is going to be a problem, you can sue the guy.”

A recent BLT Blog post, “Washington Firm Demands Fee Cut of TV Writers’ Settlement Fund” reports that Washington-based employment law firm Kator, Parks & Weiser (KPW) is seeking more than $75,000 in legal fees for work representing a group of television writers in an age discrimination class action.  The class action, in California state court, ended in a $70 million settlement last year.  The settlement called for $23.3 million in legal fees to be split among the plaintiffs’ firms.  Kator Parks, one of several shops that represented the writers in the litigation, said in a complaint filed in Washington’s federal district trial court that it has not been paid its attorney fees.

The fee complaint (pdf), filed in the U.S. District Court for the District of Columbia, names as defendants Maia Caplan Kats, a former lawyer with the firm, and trustees of the settlement fund, Paul Sprenger and Jane Lang of Washington’s Sprenger & Lang.  Kats said she believes KPW “knowingly violated confidentiality orders and agreements by filing their document without sealing as it implicates and references the multiple-party fee dispute and arbitration.”  The Kator Parks complaint said the settlement agreement included an arbitration clause “that provided any such dispute be kept confidential except to the extent necessary to resolve the dispute.”

According to the complaint, Kats was an attorney at KPW between July 2000 and May 2010, when she resigned.  A California state judge approved the $70 million settlement in June 2010.  An agreement among the firms provided a blueprint for the allocation of the attorney fee award among the firms representing the plaintiffs.  An attorney fee dispute arose among the law firms, according to Kator Parks’ complaint.

A recent BLT Blog post, “Plaintiffs’ Lawyers Seek $60.8M in Fees in Native American Class Action” reports that plaintiffs’ lawyers who negotiated a $760 million settlement for a class of Native American farmers and ranchers are asking the court for $60.8 million in attorney fees and expenses.  The settlement, in Keepseagle v. Vilsack sets out a range of fees between 4% and 8%.  The class action, filed in 1999 alleged the U.S. Department of Agriculture discriminated against Native Americans in the government’s farm loan program.

The plaintiffs’ attorneys, including lead counsel Joseph Sellers of Washington’s Cohen Milstein Sellers & Toll, said the class lawyers have invested nearly 42,000 hours in the case, amounting to about $16.2 million in fees, based on hourly rates, and $1.6 million in expenses.  The plaintiffs’ lawyers—who also included Paul Smith of Jenner & Block, Anurag Varma of Patton Boggs, and David Frantz of Conlon, Frantz & Phelan—called the fee request “amply justified” based on, among other things, the complexity of the case and the risk that the lawyers would never receive compensation.  The attorneys noted that the fee percentage is less than half the percentage that is typically awarded in Washington federal district court.

Sellers said that Cohen Milstein’s hourly rates for attorneys who worked on the case range between $295 and $785.  Smith, chairman of Jenner’s appellate and Supreme Court practice, said Jenner lawyers who worked on the case bill between $400 and $800 an hour for commercial clients.  He said Jenner lawyers and staff spent more than 9,000 hours on the case between the fall of 2007, when the law firm got involved, and November 2010.

CLICK HERE to view Plaintiffs’ Motion for an Award of Attorney Fees and Expenses.  CLICK HERE to view plaintiffs’ supporting exhibits.

A recent BLT Blog post, “Los Angeles Lawyer Demands Cut of Cobell Attorney Fees” reports that a solo practitioner in Los Angeles is objecting to the attorney fee petition filed in the high-profile Native American trust case in Washington, saying the plaintiffs’ attorneys cut him out of the demand for compensation.  The lawyer, Mark Brown, filed a notice on Jan. 31 announcing his plan to object to the plaintiffs’ fee petition pending in the U.S. District Court for the District of Columbia.  The fee petition says class counsel should receive at least $223 million in compensation for their work over 15 years of litigation.

Brown said in court papers he is “entitled to a share of any attorney fee award for his work on this case since 2000 as counsel for plaintiffs.”  Brown’s notice to the court did not specify an amount he claims he is owed.  In response to Brown’s notice, Cobell’s attorneys, including Washington solo Dennis Gingold and Kilpatrick Townsend & Stockton partner Keith Harper, said in court papers that Brown “incorrectly describes his limited role in these proceedings.”  Brown, Cobell’s lawyers said, has not provided class counsel his time and charges.  Brown would not have been singled out in the fee petition because it seeks compensation collectively and not for any single lawyer.

A recent law.com story, “Factors to Consider Before Law Firms Sue Ex-Clients Over Unpaid Fees” reports that some recent court filings in Texas suggest that some law firms they have  no choice but to sue a client for unpaid legal fees.  Filings include:

In Re Sayles/Werbner, et al:  In this case, three Texas firms want to depose four executives of GeoTag to ask them why they terminated the firms’ representation last year and why they allegedly didn’t pay the firms.  The law firms allege they preformed a significant amount of patent litigation for GeoTag under an attorney-client contingent-fee agreement, including serving as litigation counsel for GeoTag in four suits.  That fee contract called for the firms to be paid based on a percentage of proceeds received from the patent.  The firms claim their legal work has “greatly enhanced” the value of the patent, but the company never paid the firms.

“Therefore, Petitioners, despite their reluctance to bring an action against their former client, will likely have to file a suit against GeoTag in order to protect Petitioners’ right to recover their agreed percentage shares of any and all funds received by GeoTag from the monetization of the…patent in any manner.”

Thompson & Knight v. Daniel Bloom, et al:  In this case, Dallas’ Thompson & Knight sued former client Daniel Bloom and Dana Bloom alleging the defendants failed to pay the firm $9,230 in legal fees for representation in a stock sale.  Jeff Zlotfy, Thompson & Knight’s managing partner, says the fee dispute case is an “extremely unusual” case for the firm, but filed it to protect other clients also involved in the stock sale.  “It was an unusual circumstance where we had multiple clients.  And other clients could have become obligated to increase the amount they pay to us if the other clients didn’t come through with their fair share,” Zlotky says.

A recent NLJ story, “Federal Circuit: Lawyers in Vaccine Cases Not Entitled to Fees that Apply to in Complex Litigation” reports that in a precedential opinion, Rodriguez v. Secretary of Health and Human Services, the U.S. Court of Appeals for the Federal Circuit has affirmed a federal claims court decision approving attorney fees for lawyers handling vaccine cases based on “reasonably hourly rates” of similar practitioners.  The appeals court rejected the higher rate sought by the petitioner, based on U.S. Department of Justice rates for lawyers handling complex litigation.

A Special Master for the U.S. Court of Federal Claims in Washington, DC set the fee award based on an analysis of hourly rates of lawyers handling National Childhood Vaccine Injury Act cases in the forum.  The special master’s ruling rejected rates based on the Laffey Matrix, used by DOJ to compensate lawyers who successfully try complex federal litigation.  The Laffey Matrix and the Adjusted Laffey Matrix are a schedule of hourly rates maintained by the DOJ to compensate attorneys prevailing in complex federal litigation.  The Federal Circuit affirmed that ruling, which deemed that vaccine cases aren’t comparable to those in which the Laffey Matrix applies, even though vaccine cases can involve complicated medical issues and require “highly skilled counsel.”

Northern District of California Judge Ronald Whyte, who sat on the case by designation, authored the opinion.  Whyte listed several reasons why cases under the Vaccine Act are less complex than other federal cases.  These include the following: relaxed causation standards; streamlined procedural rules; lack of discovery disputes; and the fact that the rules of evidence do not apply.  Whyte also noted that Vaccine Act attorneys do not need to win to receive attorney fees, assuring them of compensation in every case.

In the underlying case, New York solo practitioner John McHugh filed a fee petition, requesting $94,642 in attorney fees.  That total was based on three different hourly rates for different time periods: $598 for work performed in May 2006; $614 for work done between June 2006 and May 2007; and $645 for work done after May 2007.  The special master cut the hourly rate for McHugh’s services to $310 for 2006, $320 for 2007, and $335 for 2009.

A recent law.com story, “Judge Endorses Divorce Lawyer’s Use of ‘Success Bonus’ to Enhance Fees” reports that a divorce lawyer’s retainer agreement that included an optional “success bonus” isn’t unethical, a judge ruled in an ethics case filed by Connecticut disciplinary officials.  The success fee collected by lawyer Gary Cohen of Greenwich, Conn., amounted to $1,200 an hour in one case, according to statewide disciplinary counsel Mark Dubois.  His ethics grievance against Cohen cited that instance, along with two other client complaints that were based solely on the language of his retainer agreement.

The agreement reads: “In addition to the hourly charges described, we may request an additional reasonable charge for matters of extraordinary difficulty, or which require special expertise or the giving of special priority treatment.  This additional charge is subject to your approval after discussion with you.  It cannot be imposed unless you agree to it.”

Ruling on a motion to strike the two counts based only on the contract language, Judge Kevin Tierney of Stamford said the success bonus wasn’t a contingency fee agreement and it wasn’t unethical, the story says.  The Connecticut Law Tribune describes his opinion a “far-ranging legal essay” that found little in the way of public policy to support the ban of contingent fees in divorce cases.  Tierney found a 1951 case claiming a contingency fee discourages lawyers from promoting reconciliation.  He noted that the decision was issued before no-fault divorce was allowed and before hourly billing became widespread.

In a recent law.com story, “Foster Care Case Tests Court’s Attorney Fee Bonus Ruling” reports that some law firms have reacted to the delay in an attorney fee award in the Georgia foster care class action case.  NALFA first reported on this case in “U.S. Supreme Court’s New ‘Extraordinary Circumstances’ Fee Enhancement Standard Put to the Test”.  Comments include:

King & Spalding’s John A. Chandler wrote that most lawyers who would be qualified to handle a case like the foster care challenge “have made a business decision to practice almost exclusively on the defense side, where the law firm is typically compensated on current hourly rates that assume payment of accrued fees and reimbursement of expenses within 30-90 days.”  Such speedy payment, he added, “minimize the demands on a law firm’s working capital, overhead, and the costs associated with extended delays in payment of fees or reimbursement of expenses.”

Henry D. Fellow Jr. of the litigation boutique Fellows LaBriola said if a client approached his firm “requesting that we take on a complex civil rights matter against the State of Georgia requiring the firm to advance tens of thousands of hours of legal services and over $1.6 million in litigation expenses over the course of an unknown period of time, it would be difficult, if not impossible, for my law firm to take such a matter alone in light of the enormous demands such a matter would impose on my firm’s human resources, overhead, and working capital.”

Ralph I. Knowles Jr. of Doffermyre, Shields, Canfield & Knowles suggested that a 200 percent increase over hourly rates would be required to persuade him to take such a case, “in light of the opportunity costs and overhead costs associated with accepting the representation in lieu of devoting my law firm’s resources to more remunerative matters.”

James C. Rawls of McKenna Long & Aldridge, suggested, at a minimum, a 20 percent premium over the lodestar would be needed in a case where, as in this case, “The district court found that the defendants’ ‘strategy of resistance’ undoubtedly prolonged this litigation and substantially increased the amount of fees and expenses that plaintiffs were required to incur.”

A recent BLT Blog post, “Issa Asks for Details of Fannie, Freddie Legal Fees”, reports that the Chairman of the House Committee on Oversight and Government Reform wants to know why lending giants Fannie Mae and Freddie Mac are still paying the legal bills for their former executives.  Those legal fees have run well into the millions of dollars -- $24.2 million to defend the former executives and $160 million overall to defend them and the companies in various lawsuits.  Taxpayers are effectively on the hook for the legal fees, because the federal government took over the two mortgage companies in 2008.

Rep. Darrell Issa (R-Calif.), the oversight chairman, released a seven-page letter (pdf) he has sent to the federal agency that oversees the two companies.  The letter asks for a “full and complete explanation” of the decision to “continue advancing legal fees on behalf of former executives.”  The letter asks for employment contracts for the former executives and for communications involving the companies, the Treasury Department, and the White House.

A recent NLJ story “Fee Fight on Appeal” reports that the attorney fee dispute litigation between Zuckerman Spaeder, LLP and their former client, St. Louis-area car dealer James Affenberg, Jr. is now set for review by the U.S. Court of Appeals for the D.C. Circuit.  On Feb.8, the circuit will hear arguments on whether the case should proceed in federal court or move into arbitration.  The case is being watched closely because it may provide greater guidance to law firms on the application of the District of Columbia Bar rule that requires firms to arbitrate fee disputes if a client requests it.  That said, under prior D.C. Circuit precedent, if a client “actively participates” in a suit filed by the firm, the trial judge can determine that the client has waived his or her right to arbitration.

Barry Cohen, a Crowell & Moring partner who regularly represents law firms in fee dispute cases, said the case raises a question that is unique to law firms.  “Unlike in the corporate context, where arbitration is usually only required if it is included in an agreement between the parties, law firms are required by the D.C. Bar rules to arbitrate a matter if the client requests it.  The question here is whether the client slept on his rights.  If the D.C. Circuit finds that the client can force the law firm into arbitration, this would be a key case for the arbitration of fee disputes,” Cohen said.

According to court records, Affenberg’s lawyers didn’t mention arbitration in his initial answer to Zuckerman’s complaint or move to stay the suit pending arbitration until Jan. 29, 2010 – almost a year into the court fight.  Regardless, Auffenberg argues in his brief to the appeals court that he “repeatedly communicate[d] to Zuckerman his intent to seek mandatory arbitration” after the firm filed suit.  Despite Auffenberg’s claim that he requested arbitration “early and often,” Zuckerman partner Francis Carter wrote in the brief, “The very first time Auffenberg communicated he was even considering arbitration was in discussing an offer by the Hon. John Facciola, United States magistrate judge, to personally arbitrate the dispute.”

NALFA News Blog first reported on this case in “Zuckerman Wants Fee Dispute Case in Federal Court”

A recent New York Times story, “Mortgage Giants Leave Legal Bills to the Taxpayers” reports that since the government took over Fannie Mae and Freddie Mac in September 2008, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in lawsuits accusing them of fraud.  The bulk of those expenditures-$132 million-went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted.  The legal bills show no sign of abating.  Documents released to Congress indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.

It is typical for corporations to cover such legal fees unless an executive is found to be at fault.  In this case, if the former executives are found liable, the government can try to recoup the costs, but that could prove challenging.  Employment contracts and company by-laws usually protect, or indemnify, executives and directors against liabilities, including legal fees associated with defending against such lawsuits.  After the government moved to back Fannie and Freddie, the Federal Housing Agency agreed to continue paying to defend the executives, with taxpayers covering the costs.

Asked why it has not cut off funding for these mounting legal bills, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, said: “I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees.  It is my responsibility to follow the applicable federal and state law.  Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship.”

Some of the law firms that worked for Fannie Mae/Freddie Mac include Jenner & Block, Latham & Watkins, Mayer Brown, O'Melveny & Myers, Williams & Connolly, and Zuckerman Spaeder.

A recent law.com story, “Foster Care Case Tests High Court’s Attorney Fee Bonus Ruling” reports that children’s rights advocates, whose suit forced major reforms in Georgia’s foster care system, and their Atlanta counsel are seeking as much as $5.8 million in additional fees—on top of $6.7 million in fees based on hourly rates, and expenses, they already have been paid by the state.  This additional sum would put the U.S. Supreme Court’s new standard for awarding attorney fees to successful civil rights plaintiffs to the test.  The new standard decided last year in Perdue v. Kenny A. (pdf) provided that such fee bonuses be limited to cases involving “extraordinary circumstances.”

Counsel for the state’s foster children are seeking to apply the Supreme Court’s new standard to justify a fee enhancement award ranging from $3.1 million to $5.8 million.  The added fees, they assert, are what would be “minimally necessary to attract counsel competent to provide the extraordinary level of services required to litigate a case of this magnitude,” one of the Supreme Court’s new standards.  Plaintiffs’ counsel noted that they invested more than 30,000 hours and advanced $1.7 million of their own funds to litigate the case—a point echoed by their supporters in affidavits supporting the fee enhancements.

U.S. District Senior Judge Marvin H. Shoob, who presided over the foster care case, justified the fee enhancement in a 2006 order.  He said that the value of the services provided by the lawyers for the class of more than 3,000 children consigned to Georgia’s crisis-ridden foster care system—“in light of the result achieved, difficulties encountered, capital resources required, and protracted delay caused by the state defendants—‘far exceed what could reasonably be expected for the standard hourly rate' used to calculate the fees.

Nonetheless, any fee enhancement Shoob chooses to award in the next round of litigation will be subject to the Supreme Court’s definition of a “reasonable fee.”  The high court’s new rules for fee enhancements require that they not be based on factors implicitly covered by an hourly rate, such as the case’s novelty and complexity or the quality of an attorney’s performance.

NALFA News Blog first reported on the new Supreme Court fee enhancement standard in “U.S. Supreme Court Makes Lodestar Multiplier Less Likely”

A recent NLJ story, “Two Firms Seek up to $6.5M for Work on Settlement Yielding Shareholders No Monetary Benefit” reports that two plaintiffs’ law firms plan to ask the Delaware Court of Chancery for as much as $6.5 million in attorney fees for legal work related to shareholder lawsuit settlements with Alberto Culver Co. that didn’t increase the shareholders take in a pending merger deal.  In its petition for attorney fees and expenses, law firms Bernstein Litowitz Berger & Grossman and Grant & Eisenhofer, tell the court that “plaintiffs have reviewed over 135,000 pages of documents and have taken six depositions.”

Shareholder lawsuits are typically taken on a contingent fee basis, but the Alberto Culver case was resolved with unusual deal concessions, not monetary damages.  The concessions were designed to make it easier for a competing company to make a higher offer.  It turned out that there was no competing offer and Alberto Culver shareholders agreed to an acquisition by Unilever at $37.50 or about $3.7 billion in cash.

The deal term changes are “hypothetical benefits for which shareholders are being asked to pay $6.5 million,” said Michael Perino, a law professor at St. John’s University in New York who has studied fee awards in securities cases, but isn’t involved in this case.  “There’s a significant question about what value the plaintiffs attorneys actually provided for shareholders,” Perino said.  The chancery court’s 2010 ruling in In re Revlon Inc. Shareholders Litigation signals the court’s interest in carefully scrutinizing settlements when there’s no monetary deal for shareholders but the plaintiffs’ attorneys collect fees, said Francis G.X. Pileggi, a litigation partner at Fox Rothschild.

“There are sound policy reasons for this Court to police against shirking by representative counsel,” noted the Revlon ruling, authored by Vice Chancellor Travis Laster.  “Traditional plaintiffs’ law firms who bring class and derivative lawsuits on behalf of shareholders without meaningful economic stakes can best be viewed as entrepreneurial litigators who manage a portfolio of cases to maximize their returns through attorneys’ fees.”

A recent NLJ story, “Federal Circuit Rejects Fee Award to Google, Finding Ky. Company’s Position ‘Not Objectively Baseless’ reports that in a precedential opinion (pdf) by the U.S. Court of Appeals for the Federal Circuit, a Kentucky technology company that lost a patent infringement case against Google, Inc. does not have to pay about $660,000 of Google’s legal bills.  The ruling sets a new standard for finding a patent case exceptional in the context of awarding attorney fees.  In iLOR LLC v. Google Inc., the three-judge panel unanimously reversed the Eastern District of Kentucky’s award of legal fees to Google and remanded the case back to court, holding that iLOR’s patent claims were “not objectively baseless.”

iLOR sued Google, claiming that it infringed on its patent involving technology for using a mouse cursor to open a toolbar over a hyperlink.  U.S. District Court Judge Joseph Hood dismissed iLOR's case and granted summary judgment for Google, finding iLOR's suit objectively baseless.  The court awarded Google $660,351, including $627,039 for attorney fees and the rest for costs, expenses, and expert witness fees.

The Federal Circuit’s ruling, authored by Circuit Timothy Dky, deemed that iLOR’s actions in the case did not involve the type of misconduct that a prior Federal Circuit case ruled was required for fee awards.  According to Federal Circuit case law, courts can impose sanctions (such as paying your opponent's attorney fees) against plaintiffs when there’s no misconduct of the litigation is brought in bad faith or is objectively baseless, Dyk wrote.

iLOR is represented by Frost Brown Todd, LLC and Google is represented by Fish & Richardson, PC.

A recent Legal News Line story, “Ill. Central Again Argues for $1M from Asbestos Lawyers” reports that Illinois Central Railroad lawyers are arguing for nearly $1 million in attorney fees in connection with a pair of Mississippi lawyers who withheld their clients’ previous involvements in an asbestos lawsuit.  Those attorneys, William Guy and Thomas Brock, have already been ordered to return $210,000 in settlements and give another $210,000 in punitive damages to Illinois Central, which filed a fraud suit against the two in November 2006.

In its brief, Illinois Central argues that its hours (5,731) are reasonable even through the law firm representing Guy and Brock worked only 2,532 hours because of time consuming discovery requests.  “While Guy and Brock were involved in the motion practice, their lawyers had no role in the tedious and labor intensive process of reviewing, redacting, and managing the hundreds of pages of privileged documents requested in Guy and Brock’s overly broad discovery requests,” the brief states.

Should U.S. District Judge David Bramlette ruled against awarding attorney fees to Illinois Central, then it will have been, so far, spend more than twice as much in fees fighting the asbestos lawyers than it recovered from the underlying lawsuit.  Illinois Central hired Forman Perry Watkins Krutz & Tardy of Jackson, Mississippi to pursue the case.  The firm, as an accounting filed in November, spent 5,731 hours on the case and charged an average of $167 per hour.  By comparison, the defendants were charged $713,549 by attorneys at Corlew Munford & Smith, according to the accounting they filed.  The firm billed 2,532 hours for an average hourly fee of $282.

According to Black’s Law Dictionary, the definition of attorney’s fees is as follows:

Attorney’s Fees: The charge to a client for services performed for the client, such as an hourly fee, a flat fee, or a contingent fee.

Source: Black’s Law Dictionary, 3^rd Pocket Edition.  Bryan A. Garner, Editor in Chief

A recent St. Louis Post-Dispatch story, “Firm that Sued, Won Over MSD Charge Seeks $4.3 Million in Fees” reports that St. Louis-based Greenfelder, Hemker & Gale are seeking $4.3 million in attorney fees and $458,523 in expenses in the Metropolitan St. Louis Sewer District (MSD) class action.  The judge in the case, Lincoln County Circuit Judge Dan Dildine invalidated the new storm water service charge, which based fees on the area of a property that cannot retain water.  Richard Hardcastle, the lead attorney in the case for Greensfelder, said in an interview, “We saved the ratepayers $300 million.”  The legal costs would be about 1.1 percent of what ratepayers will save, Hardcastle added. 

The law firm originally submitted a $2.14 million legal bill to the court.  The proposed doubling of attorney fees is part of the “success factor”, Hardcastle explains.  The attorneys in the case are seeking the fees under Missouri’s Hancock Amendment, which says that a plaintiff who successfully challenges a tax or fee shall receive “the applicable unit of government his costs, including reasonable attorneys’ fees incurred in maintaining such suit.”  The plaintiffs’ brief to Dildine said Missouri judges should follow rulings of the California and Florida supreme courts that allow judges to multiply fees.  The action provides “financial incentives for attorneys enforcing important constitutional rights,” the California Supreme Court said in a decision approving the multiplication of attorney’s fees.  The California court said such multiplication replicates the contingency fees that attorneys often charge in civil cases.

A recent law.com story, “Plaintiffs Firms Claim Lead Counsel Shortchanged Them by $22 Million in Adelphia Class Action” reports that law firms Bernstein Litowitz Berger & Grossmann and Berman DeValerio filed suit last month in New York state supreme court over $22 million in attorney fees in the Adelphia class action.  The Adelphia class action ended in 2006 with $455 million in settlements from Deloitte & Touche and almost three dozen banks.  In 2007 Manhattan federal district court judge Lawrence McKenna approved $97 million in attorney fees for plaintiffs lawyers, led by appointed class counsel from Abbey Spanier Rodd & Abrams and Kirby McInerney.

The complaint asserts that Bernstein and Berman agreed in 2003 to withdraw a competing bid to lead the case.  All four plaintiffs firms signed a contract in which, in exchange for Bernstein and Berman dropping their lead counsel motion, Abbey and Kirby pledged to support the other firms’ clients as class representatives in future complaints in the Adelphia litigation and to give Bernstein and Berman 25 percent of the legal work in the case.  In the years since, Bernstein Litowitz and Berman DeValerio assert they “completed every assignment they were given and repeatedly sought out additional assignments” from Abbey Spanier and Kirby McInerney only to be “rebuffed.”

In fact, according to the complaint, Bernstein Litowitz and Berman DeValerio did not even know about the Deloitte and bank settlements until they were already negotiated, despite the firms’ right under their deal, to participate in all major decisions.  Nevertheless, after Judge McKenna awarded $97 million in attorney fees, Abbey and Kirby kept $84 million, allocating only $3.5 million to Bernstein and Berman.

For more information, visit http://www.adelphiasettlement.com

A recent Metropolitan News story, “C.A. Upholds Fee Award Against Lawyer in Copier Dispute” reports that a California appeals court has rejected an Orange County attorney’s challenge to the $68,000 attorney fee award he was ordered to pay the prevailing party in a dispute over a photocopier he had leased.  In an unpublished decision, Ghods v. Citicorp Vendor Finance, Inc. (pdf), the court ruled that Mohammed Ghods’ grievances against the leasing company, Citicorp Vendor Finance Inc., were based on a contract between them which contained an attorney fee-shifting provision, and that the fee award was reasonable.

The attorney fee provision entitled Citicorp to charge Ghods “for all expenses incurred in connection with the enforcement of any of our remedies, including all costs of collection, reasonable attorney’s fees, and court costs” if he defaulted on his payments.  Ghods filed suit, alleging Citicorp had “breached their obligations to repair and maintain the copier as agreed.”  He sought $250,000 in damages, plus punitive damages, and attorney fees and costs.

The trial judge ruled in favor of Citicorp.  Citicorp then moved for attorney fees and costs and was awarded $68,960.  On appeal, Ghods argued Citicorp was not entitled to attorney fees because it was not a “party prevailing on the contract” entitled to recover it legal costs pursuant to California Code of Civil Procedure Sec. 1717(a) since he had not sought enforcement of the rental agreement, but to invalidate it.  Writing for the appellate court, Justice Kathleen O’Leary explained that Ghods’ claims fell within the scope of Sec 1717.  O’Leary further concluded that the fee award was not unreasonable based on the declarations submitted.

A recent Courthouse New Service story, “Attorney Fired by Client Lacks Valid Claim for Fees” reports that an attorney who bought in a more experienced attorney to help on a personal injury case lost his right to his attorney fees when the client fired him, a California appeals court ruled.  Kathleen Klawitter hired Christopher J. Olsen to represent her after she suffered injuries on a golf course.  Olsen enlisted the help of the more experienced Joseph F. Harbison III to assist Olsen on the case in exchange for 60 percent of the attorney fees. 

Klawitter soon fired Olsen, however, in favor of Harbison, and the case settled for $775,000.  Olsen sued Harbison for fraud and interference with a contractual relationship.  The trial court ruled in favor of Harbison, and Justice Harry Hull, ruled that Harbison is protected by the litigation privilege.  “Once Klawitter fired plaintiff as her attorney, the contract between them ceased to exist.  When the Klawitter-plaintiff contract ceased to exist, the fee-sharing agreement between plaintiff and defendant promised on that agreement also ceased to exist,” wrote Justice Hull.

A recent Associated Press story, “Officials: CIA gave Waterboarders $5M Legal Shield” reports that the CIA agreed to pay at least $5 million in legal fees for two psychologists who created the CIA’s waterboarding and interrogation program.  The psychologists, Jim Mitchell and Bruce Jessen, personally conducted waterboarding sessions inside CIA-run secret prisons.  But to do the job, the CIA had to promise the pair of private contractors that they would cover at least $5 million in legal fees if there was ever a legal inquiry over the interrogation techniques.  This secret deal was even more generous than the protections the CIA provides its own employees, who had to cover half of their insurance premiums after the September 11 attacks. 

According to the report, normally, CIA officers buy insurance to cover possible attorney fees.  It costs about $300 a year for $1 million in coverage.  Today, the CIA pays the premiums for most officers, but at the height of the war on terrorism, officers had to pay half.  The Mitchell and Jessen agreement, known as an “indemnity promise” was structured differently.  Unlike CIA officers, whose identities are classified, Mitchell and Jessen were public citizens who received some of the earliest scrutiny by reporters and lawmakers.  The two men wanted more protection.  The legal bills would be paid directly from CIA accounts, according to sources.

A recent Los Angeles