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 312-854-7157.

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 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.”

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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 Daily News story, “L.A. County Sees Legal Costs Drop to $105M” reports that Los Angeles County’s legal costs dropped to $105 million last fiscal year, according to a new report.  In 2008-09, L.A. County’s legal cost was a recording setting $114 million.  In the report, Litigation Cost Manager Steven Estabrook said the decrease was primarily the result of a reduction of legal settlements from $40 million to $27 million.

Estabrook wrote the overall attorney fees and costs rose 5 percent to $52 million, primarily because of a rate increase given to 20 contract law firms in late 2009.  “These panel counsel had not received an increase in 15 years and were considerably below comparable public entity market rates,” Estabrool wrote.  “The rate increase brought these panel firms into parity with other panel firms which had not received a similar rate increase last fiscal year.”

The U.S. Congress recently approved legislation known as H.R. 847 James Zadroga 9/11 Health and Compensation Act.  Now, lawyers for those injured while responding to the September 11 terrorist attacks in New York and Washington will only receive 10% for any settlement achieved on their clients’ behalf.  The attorney fee provision in the legislation would also include a special master, who would be able to reduce attorney fees that he or she determines to be excessive.  The cap on attorney fees was championed by many conservative Republicans, led by Senator Tom Coburn (R-OK), as well as the tort reform lobby.

NALFA is opposed to caps on attorney fees.  “Reasonable attorney fees should be determined by judges, not politicians,” says Terry Jesse, Executive Director of NALFA.  “Attorney fees are not gifts; they are compensation for legal services performed.  It’s troubling that politicians in Washington are limiting compensation in a free market economy.  These caps violate the principles of our free market economy.  Aren’t Republicans supposed to be for the free market economy?” Jesse wondered.

A recent Insurance Journal story, “Lawyer Malpractice Claims on the Rise” reports that  the bad economy has taken a toll on many businesses and law firms are no exception.  Law firms are being forced to trim employees and expenses in this economy.  From an errors and omission (E&O) perspective this spells trouble for some law firms because such cost cutting measures can result in more malpractice claims.  Michele Wade, executive vice president of Lockton Cos., says downsizing the number of attorneys and staff often leads to client falling through the cracks.  “It leads to possibly the same number of clients and a lot less number of people to help them,” she says. 

Another cause for concern when it comes to E&O claims stems from what Wade refer to as “door law,” a circumstance where law firms might choose to represent any client that walks in the door, even when the case involves unfamiliar territory.  The competition for new business is leading many firms to go after clients not typically within their legal specialty, Wade say.

Another basis for rising E&O claims that has developed as a result of the bad economy are lawsuits against firms arising out of unpaid legal fees.  Wade says may E&O claims are related to legal fees.  “In this economy law firms are not getting paid.  Their collections are way down and they tend to want to sue their client for fees more aggressively than in a good economy,” Wade says.  When client get sued for unpaid legal fees, a counter legal malpractice suit tends to follow.  “Suits for fees draw counterclaims and that bring professional liability claims,” Wade says.

A recent law.com story “King & Spalding Sues Vivendi in Fee Dispute” reports that King & Spalding, LLP is suing Vivendi S.A. over its failure to pay legal fees billed for the defense of its ex-CEO following a jury verdict in a securities class action trial resulting in a verdict against the Paris-based telecommunications and entertainment company.

In the suit filed last week in Manhattan Supreme Court, King & Spalding said Vivendi has not paid nearly $866,000 in fees billed in the defense of Jean-Marie Messier, the former CEO who was cleared of liability at the trial in January.  King & Spalding, which continues to represent Messier post-trial and other lawsuits, sought damages for those fees and an order directing Vivendi to pay all his fees going forward.

According to the complaint (pdf), Messier’s fees were initially paid for out of insurance, but became “severely depleted” by 2007.  Vivendi agreed in writing to pay King & Spalding’s fees going forward.  King & Spalding said possibly because of the trial result, Vivendi stopped paying Messier’s fees, which the firm called “unjustified and wrongful”.

A recent Boston Globe story, “$540,000 Overcharged Sheds Light on Law Firm Bills” reports that an arbitrator has concluded Goodwin Procter overstaffed and overbilled legal work for a real estate client.  The arbitrator, Jeffrey Martin, found the law firm submitted vague bills, used too many employees to draft documents, and failed to deliver on a promised discount.  Martin ordered Goodwin to cut its $1.1 million invoice by 55 percent, a reduction of more than $540,000 for the client, Northland Investment Corp.

The Globe reports, “the arbitrator’s finding calls into question the business model Goodwin and many other large law firms have relied on for decades: deploying huge legal teams to pursue clients’ cases, often assigning more than a dozen lawyers to compile research, conduct depositions, and draft motions.”  The story says Martin listed theses charges as questionable: more than 206 hours of work by six employees to draft a complaint and injunction request, nearly 103 hours for seven employees to draft another document, and almost 65 hours for five employees to prepare a motion hearing.

A recent BLT Blog story, “Plaintiffs’ Lawyers: Fee Cap in Cobell Suit Conflicts with Law” reports that the nearly $100 million legal fee cap in a landmark class action in Washington is less than half of the amount the plaintiffs’ attorneys could have received through a contingency fee arrangement, the attorneys for lead class member Elouise Cobell said in court papers.  The plaintiffs’ lawyers, representing a class of Native Americans, agreed in the settlement to a range of fees between $50 million and $99.9 million—money that will be cut from the roughly $1.5 billion in compensation for potentially hundreds of thousands of beneficiaries.  The suit, filed in 1996, challenged the government’s mismanagement of billions of dollars of trust fund assets stemming from private use of Indian land.

The fee cap is a far cry from what plaintiffs’ attorneys call “fair compensation” for a complex civil case that has dragged on in Washington’s federal trial court with no end in sight.  The attorneys, including Washington solo practitioner Dennis Gingold and Kilpatrick Stockton partner Keith Harper, argue that more than $223 million in attorney fees is appropriate.  Government lawyers, however, insist that class counsel not be paid more than $99.9 million in attorney fees and expenses through December 2009, when the parties reached a settlement.

The $223 million represents the compensation from the contingency fee arrangement the plaintiffs’ attorneys executed before the settlement was announced in December 2009.  The attorneys expected a 14.75% cut from any funds created for the class members.  The plaintiffs believe that the contingency fee agreement is consistent with controlling law and that the attorney fees structured in the settlement are “at odds with the executed fee agreements and controlling law.”  The lawyers for Cobell said controlling law holds that the percentage-of-recovery methods is the government standard.

CLICK HERE for a copy of the plaintiffs’ fee notice.

Attorney fee expert Ken Moscaret, Esq., a NALFA member, has been retained by policyholder law firms to testify regarding the reasonableness of multimillion-dollar underlying defense fees at issue in large, complex insurance recovery actions.  Recent examples include environmental contamination/toxic tort, asbestos, and securities fraud cases.

ENVIRONMENTAL COVERAGE LITIGATION

• Policyholder fee expert in 2010 in Los Angeles federal court coverage action involving $25 million in defense fees in large, complex underlying environmental contamination/toxic tort litigation.  Expert report submitted.
• Policyholder fee expert in 2010 in Los Angeles state court coverage action regarding $15 million in defense fees incurred in other large, complex environmental contamination lawsuits. 

 ASBESTOS COVERAGE LITIGATION

• Policyholder fee expert in 2010 in two San Francisco/Los Angeles state court coverage actions involving $50 million in defense fees billed in thousands of asbestos lawsuits nationwide. 

SECURITIES FRAUD COVERAGE LITIGATION

• Policyholder fee expert in 2010 testifying in Maryland state court coverage action involving $375 million in defense fees incurred in a series of securities fraud lawsuits nationwide.  Expert deposition given.  Case settled favorably for policyholder on the verge of trial.
• Policyholder fee expert in 2009 in Ohio federal court coverage action regarding $12 million in defense fees in several underlying securities fraud lawsuits.  Expert report submitted.

Mr. Moscaret has testified for both policyholders and insurers in other types of insurance recovery cases, as well.

A recent law.com story, “Divorce Judge Wrongly Reduced ‘Shocking’ Legal Fees, Appellate Court Finds” reports that a matrimonial judge in New Jersey was out of line when he capped legal fees at $50,000 for both sides because he was offended at the sums charged, a state appeals court ruled Nov. 30.  Essex County Superior Court Judge Thomas Zampino imposed the limit sua sponte (without being prompted) after remarking $148,606 in legal fees for the plaintiff and $81,394 for the defendant were “shocking” in a “cut and dry” case.

But the Appeallate Division found Zampino had no authority to decide on reasonableness of the fee that a lawyer charged to his own client.  “When a court enters judgment on a matter not properly before it, the judgments are not merely erroneous: they would be absolutely void; because the court in rendering them would transcend the limits of authority in those cases,” the court said in McClutchy v. McClutchy.  The fee issue arose in September 2008 after Zampino completed a three-day trial in the divorce.  Each party moved for an award of counsel fees from the other party under Rule 5:3-5(c), which gives a Family Part judge discretion to award fees to a prevailing party.

Typically, requests for such relief are made in a certification of services, but Zampino limited each side to a one-page statement listing bills incurred, the amount paid and a brief summation.  Zampino ordered Harold to pay $10,000 of Jane's legal fees.  The fee application from the plaintiff's lawyer, Lizanne Ceconi of Ceconi & Cheifetz in Summit, N.J., indicated her client had paid $46,706 and had an outstanding balance of $101,900.  The defense lawyer, Frank Donahue of Donahue Hagan Klein Newsome & O'Donnell in Morristown, N.J., had billed $81,394 but agreed to cut his fee to $50,000.

In response to the fee limit, Ceconi moved to be relieved as counsel for Jane, to intervene in the case and to vacate the $50,000 cap.  Zampino denied Ceconi's motions, prompting her appeal.  At the Appellate Division, Ceconi argued that Zampino's action was arbitrary and that he improperly applied Argila v. Argila, 256 N.J. Super 484 (1992), to support his review of her fees.  Appellate Division Judges Stephen Skillman, Anthony Parrillo and Marianne Espinosa agreed that Zampino misapplied Argila.  That case did not apply in the circumstances at hand because it concerned a trial judge's discretion to award counsel fees to an adverse party, and not the reasonableness of fees a lawyer charged her own client, the panel said.

A recent LegalNewsline.com story, “Asbestos Defendant Seeks $1M in Legal Fees in Fraud Case” reports that two attorneys found to have committed fraud during asbestos litigation may be on the hook for nearly $1 million in legal fees incurred by the company that fought them.  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 Railroad, which filed a fraud lawsuit against the two in November 2006.

U.S. District Court Judge David Bramlette ordered an accounting of attorney fees from both sides after Illinois Central had moved to have its fees paid by Guy and Brock.  “Though it submitted lengthy billing records documenting individual billing entries for each timekeeper during that period reflect only the total dollar amounts billed per month but not the total hours,” Bramlette wrote.  “In other words, the Court is unable to determine, without performing tedious calculation, the number of attorney and paralegal hours for which Illinois Central now seeks to be reimbursed.”  Bramlette says, according to state law, the most useful starting point is determining if the amount of hours worked by the attorneys and if the per-hour fees charged were reasonable.

Illinois Central is being represented by Daniel Mulholland of Forman Perry Watkins Krutz & Tardy in Jackson, Mississippi in this case.

A recent NLJ story, “Dole Food Hit with Fees for Suing Directors of Banana Plantation Documentary” reports that Dole Food Co. must pay about $200,000 in attorney fees and expenses to two Swedish filmmakers, a judge in Los Angeles ordered after dismissing the company’s defamation suit over a documentary depicting the alleged of banana plantation workers.  Dole sued over the film Bananas!, which chronicles a lawsuit in which six Nicaraguan banana workers obtained $5.8 million in damages for the company in 2007.  The workers alleged that the company’s use of the pesticide dibromochloropropane, or DBCP, on the banana farms during the 1970s and 1980s left them sterile.

In 2009, Los Angeles County Superior Court Judge Victoria Chaney threw out to similar DBCP cases against Dole after finding the plaintiffs’ lawyers colluded with their clients to falsify work documents and lab reports.  Dole alleged that the film excluded all mention of the fraud finding.  Although Dole voluntarily dropped its defamation suit a year ago, there was nothing to prevent from refilling it, and that legal threat effectively prevented U.S. distribution of the film. 

But in Dole Food Company v. Gertten, Los Angeles County Superior Court Judge Ralph Dau ruled in favor of the filmmakers under California’s Strategic Lawsuits Against Public Participation (SLAPP), finding the filmmakers were entitled to attorney fees to cover the costs that accrued because of the defamation lawsuit.  The SLAPP statute is intended to protect against meritless lawsuits designed to silence free speech.  The SLAPP law contains a fee-shifting provision.

The judge awarded the filmmakers $199,035 in attorney fees and $924 in costs.  They had been seeking $256,793 in attorney fees and $16,620 in costs.

A recent BLT Blog story, “Zuckerman: Keep Fee Dispute in Federal Court” reports that Zuckerman Spaeder, LLP argues in a brief submitted to the U.S. Court of Appeals for the D.C. Circuit that its fee dispute with a former client should not be moved into arbitration because the client has been an active participant in litigation stemming from the dispute.  Zuckerman alleges that James Auffenberg, Jr. has failed to pay for work the law firm performed for him after he was indicted in 2007 for allegedly dodging millions in federal taxes.  Zuckerman filed suit against Auffenberg in 2009 for more than $834,000 in unpaid legal fees.

Auffenberg argues that Zuckerman told him that he would have to pay no more than $1.5 million for the firm to represent him but then sent him a bill for an additional $834,299 after he was acquitted.  Auffenberg’s lawyers, Thomas Duckenfield III and David Holzworth of Yoss LLP, moved to stay the case pending arbitration before the D.C. Attorney/Client Arbitration Board.  Francis Carter, a Zuckerman partner handling the fee dispute litigation, points out three examples in which Auffenberg could have requested arbitration but failed to do so.  Carter also notes that Zuckerman has incurred “substantial” costs as a result of the litigation and carrying the allegedly outstanding fee and would be “prejudiced by restarting the litigation before the [Attorney/Client Arbitration Board].”

A recent Metropolitan News story, “S.C. Will Not Review $7.5 Million Attorney Fee Award” reports that the California Supreme Court yesterday left standing an arbitrator’s award requiring a real estate developer to pay more than $7.5 million in fees to a Northern California law firm that represented it in complex environmental litigation.  Both the Court of Appeals and San Francisco Superior Court Judge Peter Busch ruled that the award was neither unconscionable nor against public policy in Cotchett, Pitre & McCarthy v. Universal Paragon Corporation.

The contingency fee agreement provided that if UPC acquired a contaminated site, the Cotchett firm would be paid an amount equal to the value of the property, or 16 percent of the cost of cleaning up the site, whichever was greater.  The case ultimately settled with UPC acquiring the property – valued at $1.8 million before cleanup – along with $6 million in cash.  The Cotchett firm demanded more than $19 million in fees based on an estimate of the cleanup costs.  The case ended up before JAMS arbitrator Rebecca Westerfield, who awarded the Cotchett firm about $8 million in fees based on a damage estimate of $50 million.  The fee award was upheld by Judge Busch and now the California Supreme Court.

NALFA first reported on this case in “CA Appeals Court Approves Fee Award That’s Greater Than Damages”.

A recent ABA Journal story, “Law Firm Sues Akin Gump and Lloyd’s, Says It Was Stiffed on Stanford’s $435K Defense Bill” reports that the Sydow Firm, one of R.Allen Stanford’s defense firms, filed suit in state district court in Texas on Friday seeking $437,151 in unpaid legal fees and expenses.  The Sydow Firm alleges Certain Underwriters at Lloyd’s of London, one of the insurance companies hold directors’ and officers’ policies covering Stanford Financial Group executives, and the firm representing the insurance company, Akin Gump Strauss Hauer & Feld, “agreed in writing” to pay the Sydow Firm for its work representing Stanford, former SFG chairman.

“The Sydow Firm has performed extensive legal services of behalf of R. Allen Stanford…for which it is entitled to be compensated,” the Houston firm alleges in The Sydow Firm v. Certain Underwriters of Lloyd’s of London.  The Sydow Firm alleges it has been paid about $76,000 for its work, but its invoices for another $437,151 haven’t been paid.  The Sydow Firm is one of the firms defending Stanford in a civil suit pending in U.S. District Court for the Northern District of Texas, Securities and Exchange Commission v. Stanford International Bank Ltd. 

The Sydow Firm alleges it presented its claim to Akin Gump on June 18, but the defendants “did not tender the amount owed within 30 days after the claim was presented.”  That was months before U.S. District Nancy Atlas of Houston issued an order on October 13 that insurance companies holding director-and-officers policies for SFG are not required to pay for the defense of Stanford and others in a criminal case, United States v. Robert Allen Stanford or in the SEC suit.

A New York Times story, “Investors Put Money on Lawsuits to Get Payouts” reports that large banks, hedge funds, and private lenders are bankrolling other people’s lawsuits, pumping hundreds of millions of dollars into medical malpractice claims, divorce battles, and class actions against corporations – all in the hope of sharing the potential winnings.  Examples include:

Counsel Financial, a Buffalo company financed by Citigroup, provided $35 million for lawsuits brought by ground zero workers that were settled tentatively in June for $712.5 million.  The lenders earned about $11 million.

Ardec Funding, a New York lender backed by a hedge fund lent $45,000 in June to a Manhattan lawyer hired by the parents of a baby brain-damaged at birth.  The lawyer hired two doctors, a physical therapist, and an economist to testify at a July trial.  The jury ordered the delivering doctor and hospital to pay the baby $510,000.  Ardec is collecting interest at an annual rate of 24 percent, or $900 a month, until the award is paid.

The rise of lending to plaintiffs and their lawyers is a result of the high cost of litigation.  Total investments in lawsuits at any given time now exceed $1 billion, several industry experts estimated.  Public records from New York show that over the last decade, more than 250 law firms borrowed on pending cases, often repeatedly.

Proponents of third-party litigation financing say it levels the playing field so plaintiffs can afford for well-credentialed experts.  It is helping to ensure that cases are decided by merit rather than which side has the deepest pockets.  Opponents fear that investors will move from supporting lawsuits to producing them.

CLICK HERE to read an earlier NALFA blog story on litigation financing.

A recent law.com story, “MGA Loses Effort to Stall in Fee Fight with O’Melveny” reports that a Los Angeles Superior Court Judge issued a tentative ruling (pdf) on Friday denying MGA Entertainment Inc.’s effort to stay a lawsuit that was filed by its former lawyers at O’Melveny & Myers.  O’Melveny filed a suit against MGA in July seeking $10.2 million in unpaid attorney fees.  The law firm had represented the toy company on several matters, most notably in a hard fought lawsuit against Mattel, Inc. over the ownership of the Bratz doll line (O’Melveny ultimately was replaced by Skadden Arps Slate Megher & Flom.).  MGA responded to O’Melveny’s suit with a cross-complaint that included several malpractice claims including overbilling.

MGA moved to stay the trial until after its lawsuit against Mattel, which is scheduled to be retried in January, was resolved.  It argued that there is a strong nexus between the upcoming re-trial involving the Bratz doll line and this lawsuit.  O’Melveny opposed the stay, arguing that the case is a straight-forward attorney-client fee dispute that is unlikely to be impacted by the fight between Mattel and MGA.  The court sided with O’Melveny’s reasoning and refused to pause the dispute between the law firm and its former client.  The ruling did issue a protective order requesting by MGA that prevents O’Melveny from disclosing or disseminating any information protected by attorney-client privilege.

O’Melveny is being represented by lawyers at Gibson Dunn & Crutcher and Kinsella Weitzman Iser Kump & Aldisert.

MGA is being represented by William Gwire at San Francisco-based Gwire Law Offices.

Aashish Y. Desai of Mower, Carreon & Desai, LLP in Irvine, California was a panelist at the ABA’s Labor and Employment Law Conference held on November 5, 2010 in Chicago.  His article, “Attorney Fees: Ethical Issues, When and How to Negotiate, and Fee Petitions” (pdf) discusses attorney fee awards in Fair Labor Standards Act (FLSA) actions.  Desai writes:

“This paper will discuss practical theories surrounding fee applications and some of the common conflict scenarios that can arrive in negotiating attorney’s fees in a class environment.  In particular, the attorney’s loyalty to the client may be compromised by the attorney’s desire to secure compensation for services.  This, naturally, gives rise to a potential conflict in the class action context.  But as will be shown, the conflict is more theoretical than practical.”

A recent New York Times story, “Taking on a Second Mortgage to Pay Foreclosure Lawyer” reports that some Florida lawyers are charging contingency fees and securing them with second mortgages on the homes they help save from bank repossession.  With recent revelations that banks were “robo-signing” foreclosure documents, homeowners are flocking to attorneys to challenge their lenders.  This demand has lead to a new and growing practice; foreclosure defense, a practice whose strategies and techniques are still being worked out.

Among the law firms taking this new tack is the Ticktin Law Group in Deerfield Beach, Florida.  Peter Ticktin, who has some 3,000 foreclosure clients, says he plans to collect fees by taking another second mortgage on his clients’ properties has already been copied by other firms.  The Ticktin mortgages resemble the loans that the clients originally got from Countrywide, GMAC, and other lenders.  Each will be a contractual obligation with the law firm, labeled as a mortgage and structured like one, too, with the client paying a certain sum every month and using the house as collateral.

If the Ticktin lawyers cause the original mortgage to be nullified or reduced because of the bank’s misdeeds (i.e. robo-signing), the client must take out a new mortgage for 40 percent of the savings.  For example, if the new mortgage was $500,000 and is reduced by the bank to $200,000, the client would owe Ticktin 40 percent of $300,000, or $120,000, minus any legal fees paid by the losing bank as well as any monthly payments to the law firm.

In the November issue of Best’s Review, Frank N. Darras, the founding partner of Darras Law in Ontario, California wrote an article, “Prevailing Party Not a Requirement” (pdf).  The article discusses the recent U.S. Supreme Court decision, Hardt v. Reliance Standard Life Insurance Co.:

“In Hardt v. Reliance Standard Life Insurance Co., the Supreme Court held that an [ERISA] claimant need not be a “prevailing party” to be eligible for attorney’s fees.  Rather, a court may award fees as long as the claimant has achieved “some degree of success on the merits.”

The article concludes:

“Under Hardt, claimants can argue that a remand order constitutes success in order to receive an award of attorney’s fees.  But the question of whether a remand alone, without more, constitutes sufficient success on the merits to justify an award of attorney’s fees remains unclear.”

A recent NLJ story, “New Century Settlement a $14.4 Million Payday for Bernstein Litowitz” reports that U.S. District Judge Dean Pregerson in Los Angeles on Monday approved more than $14.4 million in attorney fees for Bernstein Litowitz Berger & Grossman as lead plaintiffs’ counsel in a $125 million shareholder settlement involving bankrupt New Century Financial Corp., one of the largest lenders to collapse during the subprime mortgage meltdown.  Pergerson told Salvatore Graziano, a partner at the New York firm, that the award “might have set a record for the lowest” in attorney fees in a case such as this.

The complaint alleged that New Century failed to indicate on financial statements the risks its executives were taking in pushing subprime loans.  Bernstein Litowitz was hired on a contingency basis by the New York State Teachers’ Retirement System.  The case settled for $125 million, with Bernstein Litowitz getting 11.5% of the recovery, plus more than $3 million in reimbursed expenses.  The firm noted that the fee was “well below” the 25% usually granted in subprime mortgage securities class actions within the U.S. Court of Appeals for the Ninth Circuit.

The firm said no one had objected to the settlement and that its client has a reputation for scrutinizing attorney fees.  “They have appeared in numerous courts across the country when they feel the fees are too high,” Graziano said in court.  The settlement included three stipulations: Auditor KPMG LLP will pay $44.75 million; the underwriter defendants will pay $15 million; and New Century’s former officers and directors collectively will pay more than $65 million.

The National Association of Legal Fee Analysis (NALFA) has joined the social networking world on Facebook.  For professionals, social networking is an excellent way to develop contacts, promote services and products, and share information to others within a professional community.  This new social media platform allows attorneys and others interested in attorney fee 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.”

CLICK HERE to join our Facebook page.

A recent NLJ story, “Massachusetts Challenges Fee Award in a Case the Settled Pretrial” reports that the U.S. Court of Appeals for the First Circuit heard oral arguments in Hutchison v. Patrick, a case concerning whether plaintiffs' lawyers should have been awarded $780,000 in attorney fees by the district court.  The state’s position is that a pretrial settlement of a class action means plaintiffs, people with brain injuries in nursing homes are not “prevailing parties”; thus the state doesn’t need to pay reimbursements for fees racked up by the plaintiffs, who sued over the state’s services.

Plaintiffs’ lawyers, Wilmer Cutler Pickering Hale & Dorr LLP and the Center for Public Representation filed a class action against the state in May 2007 for violating the Americans with Disabilities Act and other federal laws.  The parties began settlement talks that October and reached a final agreement in May 2008, which the district court approved in September 2008.  The settlement (pdf) calls for the state to expand certain home and community-based services for Massachusetts with brain injuries.  The agreement calls for the case to be dismissed “only after defendants have performed certain defined obligations and are in ‘substantial compliance’.  If the state fails to meet certain obligations, the agreement allows the plaintiffs to return to court.

Assistant Attorney General Jennifer Grace Miller argued that the legal concept of prevailing party has “a long-standing and specific legal meaning.”  In order to be entitled to fee reimbursement, prevailing parties “must obtain some form of judicial relief.”  Senior Judge Bruce Selya told Miller that, by that logic, most consent decrees would not result in prevailing party. “There’s got to be something more than the mechanics,” Selya said.  “You’ve got to look at this case in terms of the three characteristics that we say in Aranov would be necessary to confer prevailing party status.”

In Aranov v. Napolitano (pdf), a 2009 First Circuit ruling, laid out three factors for determining a prevailing party: first, whether the court order changes the parties’ legal relationship; second, whether there’s an appraisal of the merits of the order in question, such as a proposed class action settlement; and third, whether the parties are obligated to comply and whether there will be judicial oversight to enforce the obligation.

CLICK HERE to read the U.S. District Court’s Fee Ruling.

A recent Insurance Journal story, “5^th Circuit Sides with Attorney on Contingency Fee in Insurance Settlement” reports that the U.S. Court of Appeals for the Fifth Circuit has sided with an attorney in an appeal of a lawsuit granting the lawyer contingency fees in the settlement of homeowners insurance claims in the aftermath of Hurricane Katrina.  The court, however, denied the attorney’s request for fees and damages related to the appeal.

Kenneth Schoenberger provided legal services on a contingency fee basis for Jocelyn Richards in litigation with her insurance company seeking an increased settlement offer for damage to her property during Hurricane Katrina.  Schoenberger succeeded in obtaining an increased settlement from Richard’s insurer, Louisiana Citizens Property Insurance.  The attorney fees were to come out of the settlement.  However, the mortgage holder of Richards’ home, American Home, which also named as an additional mortgagee-loss payee on the insurance contract, “sought the full insurance proceeds on the ground that its mortgage balance exceeds the settlement amount.”

The lower court sided with Schoenberger, holding that “under Louisiana law, Schoenberger’s privilege for his contingency fee in the settlement funds he obtained for Richards is superior to American Home’s right.”  American Home appealed, and Schoenberger asked the appeals court to order American Home to pay his attorney fees.  The Fifth Circuit Court agreed with the district court that Schoenberger’s contingency fee is supported under Louisiana law.  In denying his request for attorney fees and damages related to the appeal, the appeals court said it understood “Schoenberger’s frustration from his years long pursuit of his fees,” but it was “constrained by the applicable law.”

NALFA has moved into new offices.  NALFA has moved into one of Chicago’s most historic buildings, the 35 East Wacker Drive Building.  This building was known as the Jewelers Building.  The dome at the top of the building was originally a restaurant called the Stratosphere, used as a speakeasy by Al Capone during Prohibition.  Visit http://www.chicagoarchitecture.info/Building/1064/35-East-Wacker-Drive.php for more information.

NALFA’s Executive Director, Terry Jesse says “This is a terrific and very historic building.”  “We’re exciting about being in the heart of Chicago’s legal community,” Jesse adds.  NALFA’s new address is:

NALFA
35 East Wacker Drive
Suite 922
Chicago, IL 60601
(312) 854-7157

A recent New York Law Journal story, “Judges Deny Attorney’s Fees to Challenger in Class Action” reports that the state Court of Appeals in New York said lawyers who successfully challenge class counsel fees on behalf of individual plaintiffs are not entitled to reimbursement for their attorney fees.  The majority in a 5-2 decision held that “comprehensive” 1975 reforms to class actions in New York by the state Legislature authorized payment of fees only to the “representatives of the class” and not the “award of counsel fees to any party, individual or counsel, other than class counsel.”  Judge Eugene F. Pigott, Jr. wrote for the majority in Flemming v. Barnwell Nursing Home and Health Facilities Inc. 

The “general rule” in New York is that attorney’s fees are considered incidental to litigation and that a lawyer is not entitled to fees from anyone other than his clients merely because other individuals benefitted by his services, Pigott wrote.  In dissent, Judge Robert S. Smith said the Court codified the “common fund” rule in Woodruff v. New York, Lake Erie & W.R.R. Co.  “This result is bad policy,” Smith said.  Individuals in a class who object to the fees paid to class counsel are useful in checking the “inflation” of attorney’s fees and, in light of this ruling, will only seek to do so out of “philanthropic motives,” Smith wrote.

The class action involved medical malpractice and wrongful death claims at Barnwell Nursing Home.  The case settled for $950,000, including $448,000 for counsel fees and expenses, $35,000 to Mr. Flemming as an incentive award and $40,000 to the settlement administrator Paul Macari.  Caroline Ahlfors Mouris, the executor of one class member’s estate, objected to the class counsel’s fees.  Class counsel’s fees were ultimately reduced to $425,000 and eliminated the fees for Flemming and Macari.  Mouris had sought between $35,000 and $50,000 in fees, but the appeals court refused Mouris’ fee request finding that unless there was a specific statute allowing the payments or that the parties had a contract providing for them, each party is responsible for its own attorney fees.

A recent law.com story, “Calif. Appeals Court Says Fee Arbitrator Should Have Disclosed Clientele” reports that the California Court of Appeals for the First District ruled in favor of a former client, holding that the lawyer who acted as chief fee arbitrator should have disclosed that he regularly represents law firms in fee disputes.  In the published opinion (pdf), Benjamin, Weill & Mazer v. Nancy Hurwitz Kors, the court concluded that the chief fee arbitrator, Sean SeLegue’s legal practice might have led the former client, who hired Benjamin, Weill & Mazer, to fend off a lawsuit over a failed adoption she brokered to “reasonably entertain a doubt” that he would be able to arbitrate the fee dispute impartially.  Because arbitration is a commercial enterprise, the court reasoned, the chief arbitrator’s financial interests – in this case, his thriving practice representing law firms in fee disputes against clients – do matter. 

In the underlying case, former client Nancy Hurwitz Kors, complained that her lawyers’ aggressive strategy was costing her more than see was able to pay.  A fee dispute ensued that lead to arbitration.  The arbitration panel concluded that the fee award was reasonable and directed Kors to pay about $100,000 in unpaid attorney fees and interest on top of the more than $227,000 she’d already paid.  In asking the court to vacate the fee award, Kors argued that SeLegue should have disclosed how frequently he works on fee disputes on behalf of law firms.

A recent law.com story, “New York Grants Right to Claim Attorney Fees to Prevailing Homeowners in Foreclosures” reports that New York Governor David Paterson has signed into law a measure that will allow prevailing homeowners in many foreclosure actions to claim attorney fees from lenders.  The Access to Justice in Lending Act, will put defendants in foreclosure proceedings on the same footing as lenders, who often include in mortgage documents the right to recoup reasonable attorney fees if they bring a successful action.  Supporters of the new requirement say that it will encourage attorneys to volunteer their services to homeowners facing foreclosure, many of them who cannot afford to hire a lawyer.  At the same time, they say the measure will give the homeowners leverage to negotiate concessions from lenders seeking to avoid the cost of litigation.

The new law, Real Property Law § 282, provides that all mortgage agreements giving lenders the right to attorney fees, must be read to grant that right to borrowers as well.  The law was opposed by the state Bankers Association in a memorandum (pdf) to the governor drafted by Wilson, Elser, Moskowitz, Edelman & Dicker LLP.

Assemblyman Rory Lancman (D-Queens), an attorney, said the attorney fees to homeowners’ lawyers would likely be low in most cases –ranging from a few thousand dollars to “low five figures” – because skilled attorneys could determine problems with the lenders case early on.  He said attorneys would not make a fortune from foreclosure cases, but the profits would be enough to justify picking up the most meritorious cases.

A recent law.com story, “Lead Vioxx Plaintiffs Lawyers Awarded $315 Million of $4.85 Billion Settlement” reports that U.S. District Judge Eldon Fallon in New Orleans, who oversaw the Vioxx multi-district litigation (MDL), awarded $315.25 million in fees to “all attorneys who performed common benefit work” in the MDL and associated state litigation.  That amounts to 6.5 percent of the $4.85 billion settlement.  The mass tort involved roughly 19 cases that were tried, only five resulted in verdicts for the plaintiffs.  The sheer volume of the Vioxx claims – approximately 50,000 – forced Merck into the $4.85 billion global settlement in 2007.  The award was less than the 8 percent first requested in a fee motion (pdf) by the MDL Plaintiffs’ Liaison Counsel, Russ M. Herman of Herman, Herman, Katz & Cotlar, LLP in New Orleans, last year.

Although Fallon shaved off another 1.5 percent, he heaped praise on the plaintiffs lawyers who led the Vioxx litigation, noting that in 31 months the parties were able to reach a global settlement and provide benefits to 32,886 claimants, out of a pool of 49,893 eligible and enrolled claimants. “[That] efficiency is unprecedented in mass tort settlements of this size,” Fallon wrote.  Lead plaintiffs lawyers operated on many fronts, “preparing pleadings and master class action complaints, taking 2,000 depositions, reviewing and compiling over 50 million documents, briefing and arguing over 1,000 discovery motions, assembling a trial package, conducting bellwether trials, negotiating the global settlement agreement, and implementing the payout under the agreement.  The time and labor expended in this effort is impressive.”

Visit www.officialvioxxsettlement.com for more information.

A recent NLJ story, “Labaton Seeks $55 Million Paycheck in Countrywide Class Action” reports that Labaton Sucharow, LLP, the firm that obtained a $624 million settlement against Countrywide Financial Corp. and KPMG  – the largest recovery to date in a securities class action filed over the housing crisis – is seeking more than $55 million in attorney fees and expenses.  U.S. District Judge Mariana Pfaeizer in Los Angeles gave the settlement preliminary approval, but questioned the hours billed and the number of associates and contract attorneys used by Labaton Sucharow.  Labaton is seeking more than $47.3 million in attorney fees, or about 7.59% of the total settlement.  In addition to the fees, Labaton’s fee motion asks for interest and reimbursement for nearly $8.1 million in expenses.

The firm submitted the expert declaration of Michael Diamond, a mediator in Beverly Hills, with their fee request.  Diamond called the 7.59% figure “reasonable”.  “This is clearly not a case where a strike suit lawyer seeks a windfall fee after forcing a settlement without doing real substantive work,” he wrote.  Diamond, who is getting paid $750 per hour for his expert work, said that partner billing rates of $550 to $865 “seem on the low side” and that the blended rate of $403 per hour, when accounting for paralegals and associates, appeared to be “an extremely reasonable rate for a New York or Los Angeles firm handling cases at this level.”  The firm also had as many as 119 “short-term attorneys” working on the case, Diamond wrote.

The firm submitted a chart comparing its fee request to the percentage of attorney fees awarded in 14 other shareholder class action settlements valued at between $400 million to $800 million.  In those cases, the average fee request amounted to 15.54% of the recovery.  Labaton also submitted charts detailing how hours were spent on the case, noting that nearly 43% of the time involved reviewing documents in discovery.  The firm’s lawyers reviewed nearly 30 million pages of documents and prepared for 81 depositions, according to the fee request.

A recent NLJ story, “The Former WolfBlock Prevails in Fee Dispute” reports that the Appeals Court of Massachusetts affirmed a lower court grant of summary judgment to the now-dissolved law firm in a dispute over legal fees brought by Matthew Krepps, a former client.  Krepps filed the lawsuit in Massachusetts state court after an arbitration proceeding excused him from paying more than $31,000 in fees to WolfBlock, LLP.  The lawsuit claimed that the firm overcharged him by about $10,000 for on-line legal research that it did while representing him in a 2004 lawsuit.

In affirming the lower court, the appellate panel determined that even though Krepps had not filed papers to confirm the arbitration award, he was not entitled to bring claims pertaining to the on-line research fees into state court, since he had raised those claims in arbitration.  “[W]e find nothing unfair about treating the award as a final judgment for purposes of claim preclusion,” the court ruled.

Note: Philadelphia-based WolfBlock, LLP closed its doors in 2009 following a significant loss of partners and a drop in revenue.  At the time, about 280 attorneys worked at the law firm, which had been in business for about 106 years.

A recent NLJ story, “Congregants Not Obligated to Pay Fees to Lewis Brisbois” reports that two congregants of a Pasadena, Calif., Baptist church won’t have to pay Lewis Brisbois Bisgaard & Smith for work the law firm did in suing their pastor.  Reversing the bench trial decision, the California 2^nd District Court of Appeal found that the law firm could not seek $140,000 in attorney fees from Cheryl Greer-Jarman and Charles Pulliam.  The appellate panel found that the actions of the firm’s attorneys and the defendants demonstrated that “none of them believed that [Greer-Jarman and Pullman] were still clients of the firm once the action was filed.”

The decision stemmed from a dispute that Larry Springer, also a member of the church, had with the pastor, Rev. Wayne Cooper, whom Springer accused of misusing church funds.  Springer, Greer-Jarman, and Pullman signed a letter of engagement from Lewis Brisbois partner Dennis Kasper to provide “general counsel” to them and to provide consultation about potential litigation.  The letter asked the church members to let the law firm know what the “next steps” would be.

The lower court found that Greer-Jarman and Pulliam signed a retainer agreement and therefore were responsible for the legal fees.  The appellate court disagreed.  “We agree with the trial court the retainer agreement was ambiguous,” the court wrote.  “We disagree that ‘consultation regarding potential litigation’ is a description of legal services that includes filing and prosecuting a lawsuit.”

A recent law.com story, “Boies Schiller Sued by Former Client Over Fees” reports that high profile lawyer David Boies has been sued by a former client.  The former client, G.K. Las Vegas Limited Partnership is seeking to force Boies’ firm, Boies Schiller & Flexner, to arbitrate a fee dispute before the American Arbitration Association (AAA) and to place more than $5.04 million in disputed fees in escrow.  G.K. claims that it has already paid the firm $5 million and disputes its obligation to pay another $5.04 million.  It alleges Boies attended to other major cases and neglected to perform his duties as lead counsel.  G.K. claims that Boies immediately turned over the matter to less experienced and more junior associates.  As a result of the lack of senior partner attention, G.K. in 2007 bought in Davis Polk & Wardwell, which billed more than $7.6 million.

The underlying litigation involves a commercial dispute arising out of the sale of its interest in a Las Vegas shopping center.  Boies agreed to handle the case in 2003.  Boies Schiller set up an alternative fee arrangement, according to a copy of its retainer letter (pdf).  The firm earned a nonrefundable engagement fee of $250,000 and hourly fee discounted to 80 percent of normal rates.  If a recovery resulted, the firm would get a varying share of the proceeds, from 10 percent of less than $200 million to 30 percent of a $400 million recovery if the result was accomplished in two years, according to the retainer letter.

According to the complaint, G.K. Las Vegas Limited Partnership v. Boies Schiller & Flexner (pdf), G.K. told Boies Schiller that it did not deserve the full amount of hourly and contingent fees because the firm “had neglected its obligation as counsel.”   Boies Schiller insists that the settlement agreement include a clause specifying that the $5.04 million fee be paid out of the settlement amount and be wired directly to the firm.  The fee agreement does not mandate AAA resolution.  G.K. wants the fee dispute resolved by AAA, while Boies Schiller wants retired federal judge Layn Phillip of Irell & Manella to resolve the fee dispute.

A recent law.com story, “2^nd Circuit Recognizes Firm’s Contribution but Rebuffs $17 Million Fee Request” reports that a law firm that claimed it was “solely responsible” for a $245 million federal securities class action settlement has lost its bid to receive an additional $17 million in attorney fees.  In Re: Adelphia Communications Corp. Securities & Derivative Litigation, the 2^nd U.S. Circuit Court of Appeals agreed that non-lead counsel Chimicles & Tikellis (C&T) had conferred a substantial benefit to the class, but it nonetheless held that the district court had not erred when it approved the lead counsel’s allocation of only $155,610 in attorney fees to C&T.

The fee dispute arose from 30 lawsuits, including two class actions brought by C&T, against Adelphia, a cable television provider that went belly up after its founder was accused of looting millions of dollars from the company.  In 2003, these and other suits against Adelphia were transferred to the Southern District of New York, where they were consolidated.  C&T argued that it provided an “independent benefit for the Class that no other plaintiff, including the Lead Plaintiffs provided,” and sought the district court to hike their fees to $17 million.  The district court denied their request.

On appeal, C&T maintained that the district court misapplied Goldberger v. Integrated Resources Inc.  The firm also argued that the lodestar analysis should be applied to non-lead counsel seeking attorney fees for pre-appointment work, and C&T also insisted that the district court should have made a “qualitative comparison between  non-lead counsel’s contribution and other counsel’s contribution to the ultimate recovery.”  In this case, the appeals noted the Goldberger factor alone, the time and hours expended by counsel weighs heavily against C&T, given that it was looking to be paid $17 million in attorneys’ fees for 381.1 hours of work.  “Forty-five thousand dollars per hours seems to us to be quite high regardless of the lawyer’s talent, ability, or contribution to a common fund,” the judge wrote.

A recent law.com story, “Insurers No Longer Must Cover Allen Stanford’s Legal Bills, Judge Rules” reports that R. Allen Stanford and two other Sanford  Financial Group (SFG) executives are cut off from insurance money to pay their legal bills.  U.S. District Judge Nancy Atlas in Southern Texas issued an opinion (pdf) that two insurance companies holding directors-and-officers (D&O) policies for SFG are not required to pay the defense of three former SFG executives in a criminal case, United States v. Robert Allen Stanford, et al.  She also ruled that insurance companies do not have to pay for the defense in a separate Securities and Exchange Commission (SEC) civil suit. 

The underlying case accuses Stanford and other executives at SFG of running a massive Ponzi scheme and engaging in money laundering.  The underwriters, Lloyds of London and Arch Specialty Insurance Co., paid $11.2 million in defense costs for work through July 14, and a portion of the $3.2 million billed by the plaintiffs for the period through Sept. 15.  Atlas also denied a stay of her order pending appeal.  She wrote that granting a stay of her order would harm the underwriters because they would have to continue to pay attorney fees and expenses with little chance to recoup the funds.

A recent Southeastern Texas Record story, “Order Keeps Attorney Fees in $189 TWIA Settlement Under Wraps” reports that a Texas judge issued a temporary restraining order on Sept. 27 that keeps the amount paid to the attorneys involved in massive Texas Windstorm Insurance Association settlement mum.  In the order Galveston County District Court Judge Susan Criss writes that attorneys’ fees in a $189 million Hurricane Ike settlement are to remain under wraps for the time being.

The attorney fees in this case have been a hot political issue between Texas Republicans and Democrats, tort reformers, and trial lawyers.  The attorney fees will be disclosed at future hearing.

A recent Bloomberg story, “Tyco Wins Bid to Exclude Evidence Against Ex-Director Walsh at Trial” reports that Tyco won a bid to exclude some evidence in a lawsuit that centers on former director Frank E. Walsh’s $20 million “finder’s fee” related to the purchase of CIT Group, Inc.  Walsh had asked U.S. District Judge Denis Cote in New York to bar Tyco from putting attorney fees into evidence at trial.  Tyco persuaded Cote that the fees were evidence of damages sustained by the company and that Walsh’s conduct triggered an internal investigation by the law firm of Boies, Schiller & Flexner, LLP, which was hired to investigate the $20 million payment to Walsh.

The ruling (pdf) in Tyco International Ltd. v. Walsh, states, “The investigation began in May 2002, and through this motion Walsh seeks to exclude evidence of only those legal fees incurred by Tyco for this investigation in June 2002 in the amount of almost $53,000.  This amount represents 5% of the June time that Boies Schiller billed for its work on the Tyco matter.  The motion to exclude evidence of the attorney fees underlying the request for the damages associated with the Boies Schiller investigation is properly admitted at trial.  The accuracy of the allocation of 5% for the June work will be resolved at trial.”

A recent Houston Chronicle story, “Spill Fund Legal Fees So Far: $2.5 Million” reports that Kenneth Feinberg and his law firm, Feinberg Rosen, LLP in Washington, have been paid more than $2.5 million in attorney fees for over 3 months for work in compensating the victims of the BP oil spill.  BP agreed to pay Feinberg Rozen a fee of $850,000 a month.  Feinberg Rozen retained former U.S. Attorney General Michael Mukasey and his firm, Debevoise & Plimpton, LLP, to evaluate the attorney fee package.  Mukasey said the payment was reasonable for the demanding work.

William Brennan, a principle with consulting firm Altman Weil said the compensation put Feinberg Rozen on par with the top U.S. law firms where attorneys generate $1 million or more in annual revenue.  “That’s a heck of a lot of money for any law firm,” he said.  “Considering Feinberg’s expertise in this particular area, it’s not unreasonable that he would charge that amount.”  The $850,000 monthly payments to Feinberg’s firm will continue through year-end and then will be reviewed.

A recent Houston Chronicle story, “Ex-Clients Sue Lawyer Over Diet Drug Settlement” reports that ten former clients have sued George M. Fleming of Fleming & Associates, LLP in Houston.  Fleming represented plaintiffs in the Fen-Phen class action against pharmaceutical giant Wyeth in 2006.  The former clients allege they learned after their settlements that approximately 8,100 claimants represented by Fleming were assessed the cost of giving echocardiograms to 35,000 people who were rejected as clients because the tests shows they suffered no ill effects from taking the combination diet drug.  The former clients claim the tests cost them $23 million.

In court, former Fleming associate Jim Doyle testified that Fleming was unhappy that so much effort had netted the lawyers only $41 million in fees and expenses.  “He said he had worked too long and too hard for a lousy $41 million,” said Doyle, who left the firm after objecting to Fleming’s unusual decision to include non-client expenses among those billed to clients.

This is not the first time clients have raised concern over Fleming’s attorney fees.  In the 1990s, Fleming represented thousands of homeowners who sued manufactures of a defective plastic pipe.  Fleming said he was owed about two-thirds of the $170 million settlement, but a state judge reduced his fees from 40 percent to 20 percent, claiming that Fleming had inflated the value of replacement plumbing his clients received as part of the settlement.

A recent Washington Post story, “High-Priced Lawyer Sues Former Client, Then Agrees to Pay Him $102,000” reports that Glenn C. Lewis lost his fee dispute battle with a former client in the Fairfax County courthouse on Friday.  Lewis, a divorce lawyer and the former president of the Virginia Bar Association boasts that he is the most expensive lawyer in the D.C. area, charging $850 an hour.  Lewis sued one of his former clients for an additional $500,000 in attorney fees and interest, although he’d already been paid $378,000.  The former client, Steve Firestone, a lawyer himself, countersued for legal malpractice and hired another former state bar president, Bernard J. DiMuro, as an expert witness.

Lewis’s total legal bill for the Firestone divorce was $627,000.  DiMuro found that not only were Lewis’s legal bills “flagrantly disproportionate to the value of the dispute,” but Lewis’s settlement was a lousy deal.  DiMuro noted that three lawyers from Lewis’s firm worked on Firestone’s case, and two lawyers often appeared at meetings or depositions that would normally be handled by one lawyer.  Di Muro called this “a garden-variety divorce.”  In pretrial discovery, DiMuro obtained billing records for all of Lewis’s cases, not just the Firestone case.  He found examples of days where Lewis billed for 39 hours; 31 hours; 40 hours; 71 hours.  In a 16-month period in 2003 and 2004, DiMuro calculated in court records, Lewis billed his clients for 3,620 hours, or 7.4 hours per day, 365 days per year.

Lewis’s lawyers angered Fairfax judges by failing to respond to basic requests and orders.  Lewis even failed to show up for his own deposition.  Lewis finally agreed to pay his former client more than $102,000, including $25,000 in sanctions.

By the way, Firestone’s ex-wife used Fairfax lawyer David L. Duff for the divorce.  Duff’s total legal bill for the divorce: $73,000.

A recent NLJ story, “Judge Citing ‘Egregious Breach’ Slashes BAR/BRI Fees” reports that U.S. District Judge Manuel Real in Los Angeles, citing “egregious breach of McGuireWoods’s ethical duties,” on Monday granted $500,000 in attorney fees to the firm – significantly less than the $12 million originally awarded in a $49 million settlement with West Publishing Corp. in 2007.  Monday’s hearing was the latest in a developing saga for plaintiffs’ lawyers attempting to recover attorney fees in the antitrust case against the parent company of BAR/BRI. The underlying class action, Rodriguez v. West Publishing Corp. involved a suit by 300,000 consumers who alleged they paid an average $1,000 in overcharges for the bar examination review course because West Publishing conspired to monopolize the market in a secret deal with Kaplan, Inc., which sells preparatory courses for the LSAT.

In addition to McGuireWoods, several other attorneys want fees for having represented groups of plaintiffs who objected to the original settlement on ground of conflict of interest.  Specifically, they argue that incentive payments worth $25,000 to $75,000 that McGuireWoods promised to five class representatives were tied to the value of the settlement – providing little reason to fight rather than make a deal.  Last year, in a published opinion, the U.S. Court of Appeals for the Ninth Circuit upheld the settlement but reversed Real’s decision regarding the fees, concluding that the incentive payments, even if eliminated, presented a “disturbing appearance of impropriety.”  On remand, Real awarded no fees to McGuireWoods, saying the firm violated the California Rules of Professional Conduct by failing to inform class members about the incentive payments.

According to court records, McGuireWoods has spent more than $1.25 million in expenses and about $5.6 million in attorney time.  The $500,000 in attorney fees cover the period between July 10, 2007 and September 10, 2010.

For more information, visit http://www.barbri-classaction.com

Plaintiffs’ attorneys who represented environmental groups that stopped a residential development should be considered for substantially more attorney fees than were originally awarded, a California appellate court ruled.  The published opinion (pdf) could affect the calculation of certain attorney fees in California.  The decision by the Fourth District Court of Appeals in San Diego, said San Bernardino County Superior Court Judge Donald Alvarez erred in two areas of fee consideration.  On remand, Alvarez will have to re-examine supplemental fees as well as fees for appellate work.

The case, Center for Biological Diversity v. County of San Bernardino, pits environmental groups against San Bernardino County and Hawarden Development Co. over the 57-home development near Lake Arrowhead, known as Blue Ridge Estates in a California Environmental Quality Act (CEQA) action.  Plaintiffs originally sought attorney fees under Code of Civil Procedure 1021.5, the private attorney general statute, based on their limited success at trial; they lost on two CEQA claims and won one non-CEQA claim.  Plaintiffs sought fees of $98,615, a fee enhancement of $73,961 based on a multiplier of 1.75, costs of $4,352, and $14,800 for bringing the attorney fees motion (first fee motion).  The trial court reduced the fee request “due to the limited relief granted” and awarded $50,000 in fees.  Plaintiffs appealed.

On appeal, the court held the trial court erred by denying two CEQA claims.  On remand, the case was re-assigned to a new trial judge.  Plaintiffs then moved for an additional fee award (second fee motion).  In addition to seeking attorney fees for the appeal, they argued their greater success on appeal entitles them to a supplemental award for work performed at the trial court level.  Plaintiffs sought a total of $563,926 in fees, including $136,230 for trial work; $180,324 for appellate work; an augment of $256,967 based on a multiplier of 2.0 for the contingent portion of the representation, and $40,405 for bringing the motion for fees.  The fee request included an offset of $50,000 for the first fee award.  The trial court determined it lacked jurisdiction to consider plaintiffs’ request for supplemental fees for trial work because they had dismissed their appeal of the post-judgment order awarding $50,000 in fees and the order “has become final and cannot be altered.”

The appellate court disagreed, saying that successful CEQA plaintiffs are entitled to attorney fees if they meet the criteria of section 1021.5, and here plaintiffs were denied fees for CEQA work even though they ultimately succeed on the issues.  The appeals court also directed the trial court to reconsider the market rates (home v. local rates), number of hours claimed (trial work v. appellate work), and the multiplier.

A recent law.com story, “N.J. Appeals Court Rebukes Judge Who Cut Fee Award to Discourage Fee-Shifting” reports that a New Jersey appeals court had some critical words for a judge who said he routinely trims fee awards to discourage fee-shifting, calling that seat-of-the pants policy “legally untenable.”  A judge “may not impose his or her own policy considerations to arbitrarily reduce a litigant’s otherwise legally justifiable [fee] application,” the Appellate Division said in remanding the case for fee re-calculation.  The underlying case was a probate matter involving an updated and unsigned will and codicil.  Superior Court Judge William Todd dismissed the case, finding insufficient evidence.

Attorneys applied for fees of $34,433 under Rule 4:42-9(3), which allows a contestant an award of fees from the estate if it appears “that the contestant had reasonable cause for contesting the validity of the will or codicil.”  Todd found there was reasonable cause and also found the hourly rate was “fair, realistic, and accurate” under Rendine v. Pantzer, the court’s seminal fee-shifting ruling.  But Todd deducted 15 percent, awarding a total of $28,974, to reflect what he deemed his personal policy of “deterring” such fee-shifting.  But on appeal, Judge Jose Fuentes said that a “judge’s personal views about the need to generally discourage fee-shifting cases is not a valid factor and cannot be included in the analysis mandated by the Court in Rendine.”

A recent law.com story, “Inmate’s Attorneys Awarded $1.50 in Fees” reports that a federal judge has awarded $1.50 in attorney fees to attorneys for an Arkansas inmate who won a civil rights lawsuit against the state prison system.  The attorneys for Shawanna Nelson Lumsey has asked for about $140,000 in fees – but Judge James Moody on Monday said they are limited by state law to 150 percent of damages in the case.  A federal jury found in July found Lumsey’s civil rights were violated when she was shackled as she gave birth while she was an inmate in 2003 and awarded her $1.00.  The Prison Litigation Reform Act of 1996 limits attorney fees in inmates’ lawsuits to 150 percent of damages awarded.

A recent law.com story, “$35 Million More in Interim Fees Awarded in Madoff Case” reports that Trustee Irving H. Picard of Baker & Hostetler, LLP in New York and a team of lawyers liquidating Bernard Madoff’s investment firm have been awarded another $34.6 million in interim attorney fees.  Southern District Bankruptcy Judge Burton Lifland approved some $601,000 in fees to Picard and $34 million in attorney fees to Baker & Hostetler for work done from February 1 through May 31.  To date, the judge has awarded Picard and his attorneys nearly $97 million in attorney fees.

Picard said he and his attorneys have spent thousands of hours “in support of the Trustee’s efforts to liquidate the estate, determine customer claims, and advance the interests of all customer claimants by initiating litigations and negotiations for the return of customer property.”  As of last Saturday, Picard has allowed 2,213 of 13,350 claims, and the Securities Investor Protection Act had committed some $723 million to satisfy customer claims.

According to the fee application, Picard expended 809.70 hours at an average hourly rate of $825.00 during February 1 through May 31 and Baker & Hostetler expended 91,899.70 hours at an average hourly rate of $431.30 for the same period of time.

CLICK HERE to view Picard's Interim Attorney Fee Application (pdf)

A recent law.com story, “Departures From Billing Standards Lead to Loss of $424,000 in Fees” reports that U.S. District Judge Susan Wigenton in New Jersey slashed $424,332 from a $2.9 million fee request of Beveridge & Diamond in Washington, DC.  Beveridge represented Sun Pipe Line Co. during nine years of litigation over who would pay tens of millions to clean up a New Jersey Superfund site.  Sun and Sheehan Pipe Line Construction Co. were third-party defendants in the underlying case, U.S. v. NCH Corp.  Wigenton held that Sun should get only $2,425,605 plus an additional $506,197 in expenses and expert charges, for a total of $2,931,802 compared with the $3,399,499 sought.

Beveridge filed a motion asking Wigenton to seal the fee application to keep its billing practices from the eyes of competitors.  Sheehan opposed the motion, arguing that limited redaction might be appropriate but sealing everything went too far and Beveridge was really trying to squelch scrutiny of the excessive work it did in the case.  Sun and Sheehan later agreed to a consent order that sealed only the 750 pages of invoices detailing Beveridge’s work.  Those details were not enough for Wigenton.  The biggest reduction she made was a 12.5 percent across-the-board cut because Beveridge billed in 15-minute increments rather than what she called the “industry standard” of six minutes.

Wigenton also sliced off time because of Beveridge’s block billing, which bunches different tasks together rather than breaking down the time to show how much was spent on each task.  It’s a common practice that saves time spent on billing because lawyers can summarize activities rather than detailing every task, she said.  While line-item billing is preferred, block billing is allowed and fees billed by that method “will be upheld as reasonable of the listed activities reasonably correspond to the number of hours billed,” she added.  Citing 3^rd Circuit Court of Appeals precedent that a party block bills “at his own peril,” Wigenton split the difference between the numbers calculated by each side, eliminating a total of $121,131.

Wigenton dismissed Beveridge’s efforts to reconstruct the block billing discrepancies, calling it “virtually impossible” for anyone to do so.  Wigenton also refused to allow fees for preparing the fee application, blaming the inability to agree on the amount of fees “on confusion arising out of [Beveridge] billing practices.”  She wrote, “[t]his Court will not reward any ambiguity associated with [Beveridge’s] invoices by awarding fees and costs for this application.”

CLICK HERE to read Judge Wigenton's unpublished opinion (pdf)

A recent law.com story, “Master in Prudential Fraud Case Lowers His Fees as Plantiffs Seek His Ouster” reports that special master William Hunt, who was appointed to handle discovery in a mammoth fraud and bribery suit against Prudential Life Insurance Co. has agreed to reduce his fees, even as the plaintiffs lawyers are trying to dispense with him altogether.  Hunt said in a letter to the parties that he would cut his hourly rate from $450 to $350.  The concession came after plaintiffs lawyer Angela Roper sounded alarms over the $77,265 legal bill Hunt submitted for his first three weeks on the job.  The rate reduction will shave about $17,000 off the total.  According to the legal invoice, Hunt put in 171.7 hours between July 16 and August 7.  The plaintiffs and defendants are splitting Hunt’s tab.

Superior Court Judge Brian Martinotti defended the appointment of a special master and the hours Hunt billed, noting that he had instructed Hunt to “spend considerable time and effort to become familiar with the facts, positions of the parties, and unique legal theories espoused by all the litigants.”  Martinotti said the hours billed were also just in view of the “acrimony and contentious nature of counsels’ behavior towards each other…often resulted in voluminous and numerous e-mails and correspondence” with each other, the court and Hunt himself.

A recent NLJ story, “Law Clinic was Entitled to Recover Fees for Students’ Work” reports that a law school clinic at George Washington University has won attorney’s fees for a 2007 case handled by two third-year students.  The D.C. Court of Appeals ruled that Public Justice Advocacy Clinic at the law school was entitled to legal fees under a District of Columbia law pertaining to government worker disability cases.  The court, found that the students’ work, supervised by George Washington clinical professor Jeffrey Gutman, did not amount to lay representation, which would have precluded a fee recovery.  The clinic sought about $6,400 in fees.

The law students won a reinstatement of benefits for Shirley Copeland, an employee of the D.C. Department of Human Services, before the Compensation Review Board and sought reasonable attorney fees under a D.C. statute.  The law provides for fee payments to an “attorney-at-law” in government-worker disability cases.  Because the students had worked closely with Gutman, a licensed attorney, the court found that awarding the fees was warranted.  It was unconvinced by the Department of Employment Services’ argument that the clinic could not recover fee because the law students were not lawyers.  That argument “founders completely” considering the multitude of state statutes and court rules that authorize law students, under certain conditions, to represent clients in court, the court noted.

A recent law.com story, “Court Vacates $99,000 Fee to Counsel for Plaintiff Who Won $650” reports that a New Jersey appeals court overturned a $99,252 fee award in a consumer fraud case, finding the trial court’s measurement scales askew.  The appeals panel said Superior Court Judge Alexander Waugh Jr. improperly used his own personal experience to gauge the hourly rate of the plaintiffs’ lawyer in Walker v. Gluffre.  The judge also failed to provide a sufficient analysis for his decision to enhance the plaintiffs counsel’s lodestar by 45 percent – he only stated his impression that the case “can hardly be classified as ‘typical’”.

In the underlying litigation, plaintiff Mary Walker purchased a new car at Route 22 Nissan.  The sales contract included a $140 vehicle registration fee that was $51.50 more than the Motor Vehicle Commission charges.  The dealer kept the difference.  Judge Waugh sided with the plaintiff and awarded damages of $654.50.  When plaintiffs’ attorney requested fees, Nissan argued that the lawyers were also plaintiffs counsel in Cerbo v. Ford of Englewood, Inc., a class action over the same alleged practices that named virtually all auto dealers in New Jersey.  Walker’s lawyers were awarded $119,862 in fees as part of the Cerbo settlement in 2006.  Nissan argued the Cerbo fee award “covered the same work, rendering the application moot, or alternatively, substantially duplicative.”

The $99,252 fee award included the credit for the Cerbo fee award as well as a 45 percent enhancement, based on a “contingency fee” arrangement between Walker and her lawyers.  Waugh also awarded $5,431 in costs.  The Appellate Division reversed the fee award.  “The personal opinion of a trial judge predicated solely on his or her own professional experiences does not satisfy the analysis required by the Court…to determine a reasonable hourly rate,” Judge Jose Fuentes wrote citing Rendine v. Pantzer, the Supreme Court’s seminal case on computing fee awards.

In a Rendine analysis, the court must determine the lodestar – a reasonable hourly rate multiplied by the work hours contributed – and must compare the attorney’s hourly rate with that of others attorneys doing similar work in the same community.  The rates must be “fair, realistic, and accurate.”  Next, the court must determine the number of hours reasonably spent on the case, reducing the lodestar if it finds “the prevailing party achieved modest success in relation to the relief sought,” Fuentes wrote, though “there need not be a direct proportionality between the fee and the damages recovered.”  Last, the court must determine whether to enhance that fee, if the attorney worked on a contingency-fee basis, considering the case outcome, financial risk absorbed by the attorney, and “the relative likelihood of success for the undertaking,” Fuentes wrote.

A recent law.com story, “In ‘Doo-Wop’ Case, 3^rd Circuit to Consider ‘Prevailing Party’ Fee Issue” reports that the U.S. Court of Appeal for the Third Circuit has granted en banc rehearing before a 16-judge court to decide on the proper test for determining when a plaintiff is entitled to attorney fees as the “prevailing party”.  The underlying case, Singer Management Consultants Inc. v. Milgram involves a dispute between a music promoter and the State of New Jersey in a “truth-in-music” law.  U.S. District Judge Dickerson Debevoise sided with the music promoter and issued a TRO that enjoined the state from “interfering in any way” with a concert.

But when the music promoter’s lawyers petitioned the court for attorney fees, Debevoise refused, saying the state’s decision to concede the case had left the plaintiff without a judgment in its favor and therefore unable to claim the status of the “prevailing party”.  On appeal, the music promoter won a ruling that said it should be entitled to attorney fees because Debevoise was too strict in his reading of Buckhannon.  Writing for the majority, Senior Judge Jane R. Roth concluded that Buckhannon did not control because New Jersey did not concede its position until Debevoise made it clear that he was poised to rule in the music promoter’s favor.

A recent law.com story, “Calif. Appeals Court Approves Contingency Fee Greater Than Client Award” reports that a California appeals court in San Francisco sided with Cotchett, Pitre & McCarthy in a dispute over a novel contingency fee agreement that called for more legal fees than the amount of money the client recovered.  In Cotchett Pitre & McCarthy v. Universal Paragon Corporation, the California Appeals Court upheld the $7.5 million fee award, rejecting arguments that the fee award – based on a contingency fee of 16 percent of the client’s estimated damages – was unconscionable.  “Although the fee agreement in this case was somewhat unusual, it reflected an attempt by equally sophisticated parties to share the risk of complicated litigation,” justices wrote in their published opinion.  “This was a private business transaction between equally matched parties, pure and simple,” the justices added.

The contingency fee agreement provided that if UPC acquired a contaminated factory site, the Cotchett firm would be paid an amount equal to the value of the property, or 16 percent of the cost of cleaning up the site, whichever was greater.  The case ultimately settled with UPC acquiring the property – valued at $1.8 million before cleanup – along with $6 million in cash.  The Cotchett firm demanded more than $19 million in fees based on an estimate of the cleanup costs.  The case ended up in front of JAMS arbitrator Rebecca Westerfield, who awarded the Cotchett firm about $8 million in fees based on a damage estimate of $50 million.  The amount was upheld by San Francisco Superior Court Judge Peter Busch.

In its strict sense, billing judgment is that judgment attorneys exercise to adjust or write down fees and/or expenses incurred by the attorneys, or those within their control because, in the exercise of their own judgment, the fees and/or expenses incurred are either excessive, duplicative, or unnecessary.  In its broadest sense, however, billing judgment refers to that judgment attorneys must exercise to fulfill their ethical obligation to charge a client only those fees that are reasonable.  It involves both an assessment by the attorneys before-the-fact as to whether and to what extent legal work should be performed and by whom, as well as after-the-fact consideration as to whether the original assessment was correct and executed efficiently.

That billing judgment is a requirement of attorneys in cases of all types was made abundantly clear by the United State Supreme Court.  In Hensley v. Eckerhart, the Supreme Court analyzed an award of attorneys’ fees to the prevailing party in a civil rights case, and – in imposing an affirmative obligation of billing judgment on the lawyers in that case – drew from its experience in the private sector:

The district court also should exclude from this initial fee calculation hours that were not “reasonably expended.” S. Rep. No. 94-1011, p. 6 (1976).  Cases may be overstaffed, and the skill and experience of lawyers vary widely.  Counsel for the prevailing party should make a good-faith effort to exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee submission.  “In the private sector, ‘billing judgment’ is an important component in fee setting.  It is no less important here.  Hours that are not properly billed to one’s client also are not properly billed to one’s adversary pursuant to statutory authority.”  Copeland v. Marshall, 205 U.S. App. D.C. 390, 401, 641, F.2d 880, 891 (1980) (en banc) (emphasis added).

Examples of poor billing judgment are found when attorneys fail to staff cases appropriately, fail to delegate or allocate work among those persons who can perform the task most efficiently, or fail to write-down or adjust time spent by attorneys that is inefficient, nonproductive, or which does not add value to the case.  Poor billing judgment exists where, for example, an attorney spends an excessive amount of time on a project relative to its impact on the case or where an attorney learns the law or his craft at the client’s expense or is duplicating the work of others.  Poor billing judgment may also include charging clients for either work or expenditures that are generally recognized to fall within an attorney’s overhead.

Source: The Insurance Handbook on Insured-Selected Independent Counsel (page 26-28), Meckler Bulger Tilson Marick & Pearson, LLP

A recent law.com story, “Judge Approves Less Than Half of Milberg’s ‘Unusual’ Added Fees Request” reports that U.S. District Court Judge Richard M. Berman in New York has slashed what he called an “unusual” request for additional attorney fees by Milberg, LLP for a $2.4 billion settlement of a securities class action against Nortel Network Corp in 2006.  Judge Berman, in In re Nortel Network Corp. Securities Litigation rejected a fee request by Milberg for 8.5 percent of the settlement, or about $101 million and set attorney fees at 3 percent in 2007.  Berman used the 2nd Circuit Goldberger factors to determine reasonable attorney fees.  Milberg appealed the award, but the U.S. Court of Appeals for the Second Circuit upheld Berman’s fee award (PDF).

Milberg asked for an additional $2.77 million in attorney fees and expenses for work the firm did after filing its initial fee request in 2007.  Berman approved only 41 percent of the request.  Berman chastised Milberg for improper staffing and inadequate documentation.  In particular, the judge noted that 97.2 percent of the time invoiced was billed to six partners for matters including downloading documents from the internet, updating spreadsheets, and sending copies of documents to other lawyers on the case.  Milberg’s partners alone billed $425 to $725 an hour.  “It is clear that a significant portion of the work done by senior attorneys could have been performed by more junior attorneys or paralegals at lower billing rates,” Berman said.

The ABA Journal story, “Ohio Lawyer Suspended for Billing More than 24 Hours in a Day” reports that Ohio lawyer Kristin Ann Stahlbush of Toledo has been suspended for two years for overbilling local courts for her representation of poor clients, submitting bills for more than 24 hours a day on three different occasions. 

According to the Ohio Supreme Court opinion (PDF), Stahlbush billed the courts in Lucas County for more than 24 hours a day three different days, and more than 20 hours a day on five other occasions.  The court said Stahlbash failed to keep adequate records of the hours worked, submitted inflated fee requests, and sometimes “merely guessed at the time she had spent on a case.”  She had no prior discipline, however, and was known as a competent and hard-working lawyer.

According to recent reports by the Associated Press, Republican Governor of Alabama Bob Riley has signed an executive order limiting attorney fees in lawsuits filed by the Alabama Attorney General over the massive BP oil spill in the Gulf of Mexico.  According to the Executive Order (PDF), the Governor’s office must approve any legal contract greater than $195 per hour or contingency fee agreement.

“Ultimately, a cap on attorney fees will hurt the victims of the BP oil spill,” says Aashish Y. Desai of Mower Carreon & Desai, LLP in Irvine, CA.  “You’re not going to get the best qualified attorneys to work on this very important litigation and in the end those whose lives have been devastated by the oil spill will suffer,” Desai adds.

NALFA opposes caps on attorney fees. “Judges should ultimately determine reasonable attorney fees, not politicians,” says Terry Jesse, Executive Director of NALFA in Chicago.  “Attorneys, like other professionals work in our free market economy.  Their hourly rates and contingency fee agreements are subject to the same marketplace conditions that exist for any other profession.  If attorney rates are too high or terms of the fee agreement too much, clients will go elsewhere.  Plus, generally speaking, caps on attorney fees only apply to plaintiffs’ attorneys, thus discriminating against those who bring our nation’s most important public interest cases,” Jesse adds.

The U.S. Court of Appeals for the Ninth Circuit, in In Re Mercury Interactive Corp. (for publication) has snatched away a $29.3 million fee award that two law firms received for serving as lead plaintiffs’ counsel in a class action in California.  The appeals panel vacated the lower court’s decision, holding that U.S. District Court Judge Jeremy Fogel erred in setting the schedule for objecting to counsel’s fee award.  The ruling stems from a stock option backdating securities class action against Mercury Interactive Corp.  The case settled for $117.5 million.  At the time the lower court certified the settlement, it required notice to class members that the attorneys were seeking 25% of the settlement amount ($29.3 million) in a common fund.

After a general fee award notice was disclosed to class members (without specific details, including lodestar calculation), plaintiffs’ counsel filed their fee motion.  The memorandum and declarations supporting the fee motion stated that lead counsel and other law firms worked a total of 17,001.06 hours on the case.  Counsel did not provide time sheets detailing how many hours were spent by each attorney on specific tasks.  Instead, it provided tables listing a lawyer, his or her hourly rate, and the number of hours he or she expended on the case.

In vacating the fee award, the appeals court held that Federal Rules of Civil Procedure 23(h) required the lower court to give class members a chance to object to the fee motion itself, not merely to give preliminary notice that the fee motion was pending.  “At the time that its objection to the fee motion was due, [the objectors] could make only generalized arguments about the size of the total fee because they were only provided with generalized information,” the panel wrote.  The panel expressed no opinion about the merits of the fee motion.

A recent NLJ story, “Firm says its Fee in Beverly Hills Divorce Will Hit $1 Million” reports that lawyers at Knowles Collum, LLP in Beverly Hills are touting a judge’s fee award of $1 million in legal fees as one of the largest granted in a divorce case prior to trial.  “This is a large fee award by any standard, even for a large firm,” said Micheal Collum, who represents Kathrin Saadian in her divorce.  Most fee awards in similar divorce cases have been closer to $250,000 to $500,000, Collum added.

But George Saadian’s attorney, Michael Abrams of the Law Offices of Michael L. Abrams in Los Angeles threw cold water on the firm’s news.  Abrams noted that a large portion of the attorney fees depend on whether the firm is able to obtain a loan on the couple’s Beverly Hills home, valued at $2.7 million.  Abrams also pointed out that the legal fees in another pending high-profile divorce between Los Angeles Dodgers owner Frank McCourt and his wife are expected to exceed $19 million on each side.  “That’s an enormous estate compared to this one,” Collum conceded of the McCourt case.

A recent NLJ story, “D.C. Federal Judge Urges Congress to Fund Cobell Settlement” reports that Senior Judge Thomas Hogan of the U.S. District Court for the District of Columbia has extended the deadline for Congressional authorization to October 15, 2010 and set a status conference for the same day for the Cobell Settlement.  Hogan also urged Congress to fund the historic $3.4 billion settlement, one of the largest class actions ever filed against the federal government.  NALFA reported on the Cobell settlement in a previous blog post.

Some in Congress raised concerns over the attorney fees in the case.  Attorney fees have been capped at $100 million, but the judge in the case will ultimately determine the exact amount.  For more information, visit Cobell Settlement.

A recent law.com story, “Fight Continues Over Split of $4.8 Million Fee in Dram Shop Case” reports that two law firms are fighting over nearly $5 million in legal fees in New Jersey.  The underlying case, Verni v. Lanzaro, is over a 1999 drunken-driving crashed that paralyzed Antonia Verni, then 2 years old.  The case ultimately settled for $25 million with $4.8 million designated for legal fees.  Since then, Rosemarie Arnold, whose firm originated the case, and David Mazie, who took it over and brought it to trial and settlement, have been vying over their share of the money.  Bergen County Superior Court Judge Robert Wilson set Arnold’s share at $227,500 leaving $4.6 million for Mazie.  In deciding the fee split, Wilson applied a clause from Arnold’s contingency fee agreement that required payment of hourly fees if the client chose to discontinue Arnold’s services. 

The appeals court said that Wilson had a basis for reducing the 2,500 Arnold claimed she spent on the case to 827 hours.  For example, Arnold claimed 400 hours for legal research, but the file did not contain a single memorandum, the appeals court said.  It reversed, however, because Wilson did not explain how he arrived at 827 hours.  The “drastic” size of the reduction “requires substantially more specific findings”, the appellate judges wrote.  Their unpublished opinion left it unclear whether the remand judge can jettison Wilson’s contract-based approach in favor of a quantum meruit analysis, as urged by Arnold.

A recent law.com story, “In $22 Million Fee Swing, 9^th Circuit Vacates Attorney Fee Award to EchoStar” reports that U.S. Court of Appeals for the Ninth Circuit reverses fee award after concluding the defendants prevailed at trial.  In the case, EchoStar sued NDS, a pay-TV provider, accusing NDS of breaking EchoStar’s security codes and selling them online to pirates.  A jury found that NDS had intercepted EchoStar’s satellite signal and, in doing so, committed a technical violation of federal law.  The jury awarded EchoStar only $45.69 in actual damages and $1,500 in statutory damages.  The damages were so small that it indicated the jury found no illicit intent behind NDS’ violation and raised a question about which side prevailed.

U.S. District Court Judge David Carter of Santa Ana determined that each side prevailed on some of EchoStar’s claims.  He awarded attorney fees to both sides: about $13 million (plus costs) to EchoStar’s counsel (DLA Piper) and about $9 million (and no costs) to NDS’s lawyers at O’Melveny & Myers and Hogan Lovells.  The net award was about $4 million in fees to DLA.  O’Melveny lawyers filed an appeal of Carter’s fee award, claiming they were in fact the prevailing party.

The Ninth Circuit panel reversed Carter’s fee award, ordering him to enter judgment denying attorney fees and costs to EchoStar.  The appellate judges also reconsidered fees to NDS’ lawyers, concluding that they were due about $18 million in fees, plus reasonable costs – about twice what Carter ordered.  Instead of a net $4 million in attorney fees to DLA, EchoStar now has to pay $18 million in attorney fees to O’Melveny & Myers and Hogan Lovells, a swing of $22 million.  In an unpublished opinion, the three judge panel wrote “as a matter of law, we conclude that, for the purposes of awarding attorneys’ fees and costs, NDS was the prevailing party in this litigation and that EchoStar fails to meet the legal definition of a prevailing party on any of its claims.”

A recent law.com story, “Judge Approves Nearly $500,000 for Counsel Who Won Title VII Suit” reports that U.S. District Judge Jane Boyle of Dallas approved nearly all of the half-million dollars in attorney fees requested by four lawyers who represented a plaintiff in a successful employment discrimination and retaliation suit against UT Southwestern.  Boyle noted in her order that the court has discretion to award attorney fees to the prevailing party in a Title VII case.  The plaintiffs submitted their fees based on a lodestar calculation.  UT Southwestern challenged $20,250 in fees because they were not adequately documented and the hourly rates: $750 an hour for Charla Aldous; $400 an hour for Aldous Law Firm associate Brent Walker; $500 an hour for Brian Lauten, a shareholder in Sawicki & Lauten; and $500 an hour for Sawicki & Lauten shareholder Amy Lauten.

Boyle considered the plaintiffs lawyers’ affidavits and other evidence that described the relevant experience and customary rates of each attorney and concluded that their requested rates provide “reasonable compensation and avoids windfall… This is not to say that these rates are typical or will be routinely accepted, only that they are supported by the record and are reasonable given the specific facts of this case and the remarkable degree of success obtained.”  Ultimately, Boyle approved all but $6,375 in fees.  Of the total amount of attorney fees approved, $314,720 went to Sawicki & Lauten and $175,207 went to the Aldous Law Firm.  Brian Lauten says it’s rare for attorneys to receive nearly all of the fees they are asking for after prevailing in a Title VII case.

A recent law.com story, “New Jersey Hit With Fees Over Truth-in-Music Law” reports that the U.S. Circuit Court of Appeals for the Third Circuit held in Singer Management Consultants Inc. v. Milgram that a music promoter, which accused the state of violating its constitutional and trademark right, was the prevailing party for fee-shifting purposes.  As such, New Jersey will have to pay the legal fees of the promoter that sued the state to stop it from enforcing its “truth-in-music” law.  The lower court dismissed the case and denied attorney fees, finding the case moot because the state did an about-face once it became clear it would lose.  Thus, the promoter, Live Gold Operations Inc. never obtained an order on the merits. 

The district court relied on Buckhannon Bd. & Care Home v. W. Va Dept of Health & Human Res., where the U.S. Supreme Court held prevailing party fees are not available for plaintiffs who do not win a judgment but act as the catalyst for a voluntary change in defendants’ conduct.  But the appeals court, also relying on Buckhannon, allowed a fee award even though no judgment on the merits was reached because the state’s action in backing off its initial stance was not voluntary but resulted from action of the district court.  In reversing, Third Circuit Judge Jane Roth, joined by Ruggero Aldisert, stated that Live Gold did prevail because it obtained complete relief based on the state’s concession to its view of the law.

Our network of qualified fee experts are retained by some of the nation’s top law firms to provide expert reports and opinions on the reasonableness of attorney fee in large, complex attorney fee disputes.  Our fee experts are retained in 4 key practice areas:

Court Awarded Attorney Fees: In many areas of litigation (i.e. ERISA, intellectual property, class action) attorney fees and expenses are awarded by the court.  Most of these cases are the result of “loser pays” fee-shifting provisions.  Fee-shifting provisions are becoming increasingly common in state and federal statutes as well as in contractual agreements.

Our fee experts are retained to support or challenge attorney fee awards in court.  Our fee experts work with both prevailing and non-prevailing parties.  Our fee experts provide expert reports and opinions so prevailing attorneys can recover their fees.  Our fee experts are also retained by non-prevailing parties to challenge prevailing party fees and expenses.

Tripartite Fee Disputes:  Attorney fee and legal billing disputes often arise out of the tripartite relationship, where you have a third-party payor (i.e. insurance company).  In fact, the question, “who pays the legal bills?” is often a source of litigation.

Our fee and billing experts work with both law firms and insurance companies.  Our attorney fee experts are retained by defense counsel to defend their rates and billing practices in order to recover their fees.  Our legal billing experts are retained by insurance companies to establish systems and programs to better manage defense fees and costs.

Attorney Fee Litigation:  Attorney fee litigation occurs when a law firm sues a former client to collect unpaid legal fees or when a former client sues a law firm for overbilling.  Given the expense of litigation, the attorney fees at stake are usually millions of dollars.

Our fee experts are retained to testify for and against law firm on the reasonableness and necessity of their fees and billing practices.  Our fee experts provide expert reports, opinions, and testimony on the range of factors and variables of reasonable attorney fees and proper billing practices.

Mediate/Arbitrate High-Stakes Attorney Fee Disputes:  Attorney fee disputes are often a result of a breakdown in the attorney-client relationship.  Mediation or arbitration is the quickest, simplest, and most cost effective way to resolve a high-stakes attorney fee dispute.

Our fee experts are uniquely qualified to resolve large, complex attorney fee disputes through a private arbitration or mediation process.  Our fee experts have the skills and experience to sit down with both parties and settle a high-stakes fee dispute in a cost effective and confidential manner.

A recent NLJ story, “Lawyering Suits Pile Up at High Court” reports that the U.S. Supreme Court decided an unusually large number of cases involving how lawyers do their jobs.  The justices took up 16 cases – 10 of which were fully briefed and argued, and six of which were disposed of in per curiam decisions.  In total, the lawyering cases amounted to nearly 20 percent of the Court’s decision docket.  Three cases involved attorney fees: Perdue v. Kenny A.; Hardt v. Reliance Standard Life Insurance Co.; and Astrue v. Ratliff. 

In Kenny A., the justices reversed a fee enhancement awarded for extraordinary results by the lawyers in long-running, complex and successful litigation against the state of Georgia.  Writing for the 5-4 majority Justice Samuel Alito set the bar high for lodestar fee enhancements for lawyer’s superior performance.  He said they only would be available in “rare” and “extraordinary” circumstances and when the lodestar calculation does not adequately measure the attorney’s true market value.

In Astrue, Justice Clarence Thomas wrote the Court’s unanimous decision.  The justices held that fee awards under the Equal Access to Justice Act are made to the client, not to the lawyer, and the federal government may offset awards to collect pre-existing debts.

In Hardt, Thomas wrote again for the full Court, saying that a party seeking to recover attorney fees and cost in an Employee Retirement Income Security Act does not have to be a “prevailing party”.  Instead, the Court held that fees and costs may be awarded if the claimant has achieved “some degree of success on the merits.”

As one appellate jurist observed, “All too often attorney fees become the tail that wags the dog in litigation.” Deane Gardenhome Assn. v. Dentkas, 13 Cal.App4th 1394, 1399 (1993).  This fundamental truth is one of the principles that inspired the California Attorney’s Fees blog.  Litigation over issues as what party is the prevailing one for purposes of an award of attorney’s fees/costs and what fee recovery entitlement should be given to the prevailing party is a boutique area of law in California.  This area frequently requires specialized knowledge of fee jurisprudence both substantive and procedural in nature.

Since 2008, the California Attorney’s Fees Blog has been providing a resource tool to practitioners, jurists, and the public about the law governing attorneys’ fee/costs awards.  The blog focuses on the law and pragmatic experiences of attorney fee issues in California state and California federal judicial forums.  The blog is run by Marc Alexander and Mike Hensley of Adorno Yoss in Santa Ana.

A recent story by Finance and Commerce, “Judges Closely Scrutinizing Legal Fees” reports that Federal Magistrate Judge Raymond Erickson’s recent decision to slash an attorney’s bill in half – even though the bill was for a relatively modest amount – shows how closely some judges are scrutinizing fee applications.  The plaintiff’s counsel in Hart Security v. Number One Health brought a motion before the judge seeking to enforce the settlement agreement between the parties and requesting an award of $2,520 in attorney fees for having to bring the motion.  The defendant did not object to the fee request.  Erickson approved of the $300 hourly rate, but did not agree that it should have take 8.4 hours and knocked it down to four hours.

Attorneys say it underscores the need to be explicit in describing the work they performed, both in their billing statements to clients and in their fee petitions to the court.  “If you know you have a chance of getting attorney fees, by statute or by contract, from day one you have to start keeping good records,” says Minneapolis Barbara Berens, who handles cases in federal and state court.  Berens added that if the time spent on research looks extensive at first blush, clarify in an affidavit accompanying the fee petition why it’s merited.

A recent ABA Journal story, “Video Game CEO Balks at $1M Legal Bill, But Appeals Court Says He Has to Pay” reports that Bobby Kotick of Activision Blizzard Inc. refused to pay his attorney’s nearly seven-figure legal bill in defending him in a sexual harassment lawsuit.  But now a California appeals court has upheld a $1.4 million arbitration award to the law firm of his then attorney, Patricia Glaser of Los Angeles based Christensen Glaser Fink Jacobs Weil & Shapiro.  About $938,000 of the award is for legal fees due to Christensen Glaser and the other $479,000 is for the legal fees in the fee arbitration.  A further appeal is possible, however.  A representative for Kotick tells a newspaper he “believes that the billings from Christensen Glaser were excessive and inappropriate given the nature of the case.”

The sexual harassment suit was brought in Los Angeles Superior Court by Cynthia Madvig, who had worked as a flight attendant on a private jet used by Kotick.  The suit alleges the pilot of the plane harassed her when she refused to be “arm candy” for him and Kotick fired her after she complained of being mistreated.

A recent NLJ story, “Prince Accused of Stiffing His Attorney on Legal Fees” reports that high-profile entertainment attorney Ed McPherson of McPherson Rane filed suit against his former client Prince and several of his enterprises in Los Angeles County Superior Court, claiming the artist failed to pay nearly $50,000 in legal fees.  According to the suit, McPherson defended the musician against a suit filed by his former agent, Vigiliano Associates, for breach of contract after Prince allegedly failed to pay commissions for a book deal. 

The complaint alleges that McPherson made “countless attempts” to collect his fees, but that Prince failed to pay or even respond to his requests.  McPherson informed Prince that he would no longer work on his behalf until he was paid.  Representatives for Prince indicated that the legal bill would be paid, but no payment has been made.  “Plaintiff has performed legal services on defendants’ behalf in an exemplary manner; every single charge made by plaintiff was both reasonable and necessary,” the complaint reads.

The NALFA Network Directory is the source for the nation’s best qualified attorney fee and legal billing experts.  Our attorney fee and legal billing experts are retained by some of the nation’s top law firms and insurance carriers to provide expert reports and opinions on the reasonableness of attorney fees in high-stakes attorney fee disputes.  Here’s what clients have said about the NALFA Network Directory in a recent survey:

“The [NALFA Network Directory] will save us time when searching for an outside legal fee/billing expert.  All the information we need is now on one on-line directory.”

“The [NALFA Network Directory] acts as a clearinghouse.  We know the firms and individuals listed are experienced and qualified.”

“The [NALFA Network Directory] has simplified our search for a fee expert or a fee mediator.”

“The A.M. Best’s seal gives me confidence [in the NALFA Network Directory].”

A recent NLJ story, “Judge: Nixon Peabody Charged Excessive Fees” reports that a federal judge has ruled that Nixon Peabody charged excessive fees in a legal battle between aviation companies Signature Flight Support Corp. and Landow Aviation, both of whom operated at Washington Dulles International Airport.  U.S. District Judge James Cacheris determined that Nixon Peabody’s $1.57 million fee request was too high and slashed about $440,000 off that amount, awarding $1.13 million instead.  Following a bench trial, Cacheris held that Signature had “substantially prevailed” in the case.  Signature, represented by Nixon Peabody, moved against Landow for attorney fees and costs as provided for under the parties’ contract.  But Cacheris found that the number of hours Nixon Peabody expended on the case demonstrated a “lack of billing judgment exercised by plaintiff’s counsel” and “overall excessiveness of plaintiff’s fee request.

The firm billed about $74,500 in pre-complaint fees.  Cacheris found that “nearly 53 full work days” the firm spent on research, drafting and arguing for a preliminary injunction motion was “unreasonable”.  He said much of the work performed for “related declarations and post-complaint research and preparation was unnecessary and redundant.”  Cacheris also slashed by nearly $23,000 from the $200,000 in costs incurred by Nixon Peabody on Signature’s behalf.  Most troubling to him were reimbursements that Signature sought for its own personnel and for mediators, including costs for rooms at the Westin and Hyatt hotels during the trial, travel and food, car services and copy expenses.  Cacheris wrote that it would be “unfair to let Landow suffer from unreasonable billing practices committed by plaintiff’s counsel.”

A recent law.com story, “N.J. Fee-Shifting Rule Held Applicable to Out-of-State Coverage Disputes” reports that a New Jersey court rule that allows insureds prevailing in coverage disputes to recover legal fees applies when that litigation takes place out of state, the New Jersey Supreme Court says.  The 6-1 decision in Myron Corp. v. Atlantic Mutual Insurance Co. allows Myron Corporation, a business-to-business personalized gift company based in New Jersey to recover about $160,000 in legal fees incurred battling its liability carrier, Atlantic Mutual Insurance Corp., in a federal court in Illinois.  The coverage dispute was a putative class action file by Stonecrafters, Inc., an Illinois business that claimed Myron blasted it with junk faxes in violation of the federal Telephone Consumer Protection Act of 1991 and Illinois consumer protection law.

Atlantic Mutual and Myron worked out a settlement of Myron’s claim for counsel fees for the Stonecrafters case and the New Jersey coverage litigation, but Atlantic refused to pay anything toward the approximately $160,000 Myron spent on the Illinois coverage litigation.  In reversing, the Appellate Division said the fee rule should apply because “[w]e agree with Myron that, unless the insured can recover its counsel fees for out-of-state litigation in this situation, an insurer could wear down the insured financially through forum shopping.”  Judge Susan Reisner, Joseph Lisa and Paulette Sapp-Peterson found Myron entitled to fees because it fended off an effort to litigate coverage elsewhere and then obtained a favorable result on the merits.

A recent law.com story, “Suit Challenging Bills From Constantine Cannon Goes Forward” reports that the claim of a former client of Constantine Cannon that the law firm excessively billed for legal fees is moving forward.  Manhattan Supreme Court Justice Carol Edmead said that the family of Howard L. Parnes, a White Plaines, NY real estate executive had sufficiently pleaded that it had been overcharged, demanding that nearly $628,000 in “improperly earned” fees be returned.  The Parnes family hired Constantine to assist in managing the family’s assets after amassing a fortune in real estate. 

According to the judge’s opinion in Constantine Cannon LLP v. Parnes, the family alleged “several, specific examples” of unnecessary and duplicative work, but said it paid Constantine the fees before realizing the law firm “had vastly overcharged for its services”.  The Parnes family claimed Constantine Cannon charged it for unnecessary, duplicative work charging “lawyer prices” for work that could be done by nonlawyers.  For example, the Parneses said a Constantine associate spent more than eight hours preparing an IRS document, billing $300 an hour.  The Parneses argued that an accounting clerk could have done that “for a small fraction” of the charge.

A recent law.com story, “Sonnenschein Settles Fee Dispute With Ex-Client Who Lost Money With Madoff” reports that a former client of Sonnenschein Nath & Rosenthal who fell victim to Bernard Madoff has agreed to pay $650,000 to settle a fee dispute with the law firm.  The settlement is about 20 percent less than Sonnenschein had originally sought ($833,000) from Elaine Stein when it sued her in December 2009 in Sonnenschein Nath & Rosenthal v. Stein.  Stein engaged Sonnenschein after one of her sons, Stuart Stein, took control of her assets by convincing financial institutions she was incompetent. The deal to pay Sonnenschein was knocked off course in December 2008 with the implosion of Bernard Madoff’s massive Ponzi scheme.  Sonnenschein in its complaint said “significant funds of a martial trust had been invested with Madoff were lost”.

Under the settlement between Sonnenschein and Ms. Stein, the firm’s former client is to deliver $500,000 upon execution of the stipulation of the deal.  Another $150,000 would be paid to Sonnenschein upon the delivery of the opinion letter, which the firm agreed to draft.  Should Ms. Stein not pay the firm the $150,000, the firm reserved the right to go after the full $833,000 it originally sought.

A recent NLJ story, “POM Sues Hogan Lovells Over Legal Tab” reports that POM Wonderful has filed a lawsuit in District of Columbia Superior Court with accusations of “unnecessary and substandard legal services” and calling Hogan Lovells’ attorney fees “exorbitant”.  The lawsuit is in response to a breach of contract claim filed by Hogan Lovells in February over $669,265 in unpaid legal fees and expenses.  POM has taken an aggressive stance to seal any document relating to the legal fee dispute.  In fact, Superior Court Judge Judith Bartoff signed a temporary restraining order preventing The National Law Journal from publishing the name of the governmental regulatory agency before which Hogan represented POM.

POM is a subsidiary of privately held Roll International Corp.  According to court documents, Roll Vice President and General Counsel Craig Cooper signed the original fee engagement letter in December 2002, agreeing to pay for “various legal services.”  By November, the law firm and the company were at loggerheads and then POM turned to Covington & Burling to handle the regulatory matter.  Hogan wants the fee dispute case in open court in Washington, DC where the representation took place, but POM wants the fee dispute matter resolved with the confidentiality of arbitration, opting instead to have the case decided in California, where POM is headquartered and under California’s State Bar’s Mandatory Fee Arbitration Program, where under California law, a client has a statutory right to request arbitration when a fee dispute arises, and that arbitration becomes mandatory for the attorney involved in the fee dispute.

POM Wonderful is being represented by Barry Coburn of Washington’s Coburn & Coffman.

Hogan Lovells is being represented by Washington solo practitioner Randell Ogg.

Bloomberg reports that the $873.1 million in fees billed since the ongoing Lehman Brothers bankruptcy was filed in September 2008 would quadruple the annual payroll of the New York Yankees.  According to a recent filing by the SEC, 17 law firms collectively will bring in at least half that amount, with almost $396.7 million being paid out by the debtor in the largest bankruptcy in U.S. history.  Lehman’s lead counsel, Weil, Gotshal & Manges is by far the biggest earner on the matter.  The firm’s Lehman haul now stands at nearly $200.6 million.  Weil is not alone on the debtors’ side – 10 other law firms have roles advising what remains of Lehman Brothers.  Here are some of the firms and their billings on the case since September 2008, according to Lehman’s 8-K filing:

Jones Day, special counsel for Asia and domestic litigation: $30.2 million.

Curtis Mallet-Prevost, Colt & Mosle, special conflicts counsel: $18.1 million.

Bingham McCutchen, special tax counsel: $12.8 million.

McKenna Long & Aldridge, special counsel for commercial real estate lending: $3.9 million.

A recent law.com story, “Prevailing Party’s Bid for Fees Fails ‘Exacting’ Test, N.Y. Court Finds” reports that the prevailing plaintiff in Gotham Partners v. High River Limited Partnership cannot invoke an indemnification clause to recover more than $700,000 in attorney fees under an “exacting” test set by the New York Court of Appeals, a unanimous New York appellate panel ruled.  The ruling stems from Hooper Associates v. AGS Computers, which according to Justice David B. Saxe said that “for an indemnification clause to serve as an attorney’s fee provision, the provision must unequivocally be meant to cover claims between contracting parties rather than third-party claims.”  The underlying lawsuit was a contract dispute on a real estate deal between two investors.  Within three years, High River struck a deal which resulted in the merger of Hallwood Realty with another entity. 

Gotham prevailed in the lawsuit and sought to recover $737,000 it spent in attorney’s fees under the indemnification provision of its contract.  That provision said High River would hold Gotham harmless from any liabilities, including “reasonable” expenses of counsel, as a result of “any action…or failure to act” in connection with High River’s interest in Hallwood.  On appeal, Saxe noted that attorneys have been resourceful in parsing the language of indemnification clauses “with an eye to extracting the essence of a right to attorney fees for the winning side.”  But citing Hooper, Saxe characterized New York as being “distinctly inhospitable” to the use of indemnification claims as a mechanism for claiming fees in a dispute between two contracting parties.  Hooper requires that the language of an indemnification clause must be “unmistakably clear” that it covered attorney fees of the winning side of a dispute between the two parties to the original contract, he said.

Gotham was represented by Y. David Scharf, Jerome Tarnoff, and Jay R. Speyer of Morrison & Cohen.

High River was represented by Andrew J. Levander and Jonathan D. Perry of Dechert.

A recent law.com story, “O’Melveny Sues Bratz Doll Maker MGA Over $10.2 Million in Unpaid Legal Fees” reports that O’Melveny & Myers has filed a suit against MGA Entertainment seeking payment of $10.2 million in unpaid legal fees related to the company’s long-running legal dispute with Mattel over ownership of the ownership of Bratz dolls.  O’Melveny’s role representing MGA ended in 2007.  According to the complaint, O’Melveny claims that MGA entered into oral agreements that were subsequently confirmed in writing about the range of legal services the firm would provide.  For years, MGA paid O’Melveny’s legal fees, but eventually a billing dispute forced the firm to withdraw from the case.  Since that time, O’Melveny has been unable to resolve its payment issues with its former client.

The firm says MGA “claimed to be conducting fee audits” that were never provided to O’Melveny.  When one was completed, MGA just commenced a new fee inquiry, the firm says.  “Both during its representation of MGA, and for almost three years after the Court determined that it was appropriate for O’Melveny to withdraw as MGA’s counsel, O’Melveny has attempted to resolve this fee dispute with MGA outside the courtroom by direct negotiation and professional mediation,” the firm states in its complaint.  “All of those efforts have proven unsuccessful, and O’Melveny’s patience and attempts at resolution have been disregarded or exploited by MGA.”

A recent law.com story, “Insurer Hit With Fees for Balking at Defense of Mercury-Contaminated Day Care Center” reports that U.S. Liability Insurance Company must pay its insured $208,748 in legal fees.  The attorney fee award, ordered by U.S. District Judge Jerome Simandle, includes a 35 percent lodestar fee enhancement of $153,750 based largely on the risk that the insureds’ lawyer, who took the coverage case on a contingency basis, would not get paid.  The case, Baughman v. U.S. Liability Insurance Co., was risky because the carrier had a reasonable basis to refuse coverage in light of the novel issues raised – such as whether exposure to indoor mercury contamination was “traditional environmental pollution,” whether medical monitoring constituted “damages” and whether exposure to harmful substances comprises “bodily injury”-- Simandle said.

U.S. Liability did not fight the fee amount requested, but asked Simandle to exercise his discretion and refuse to award fees because it denied coverage in good faith.  Simandle refused saying the purpose of awarding fees in coverage cases is not just to deter insurers from denying coverage without a reason but also to make sure insureds get the full benefit of the coverage they bought.  The original defense fee request totaled $318,140, based on a $158,477 lodestar with a 100 percent enhancement.  In awarding them less --$208,748 – Simandle knocked more than $4,700 off the lodestar and allowed only a 35 percent enhancement.  He took 20 hours spent on legal research as excessive and another 7 hours that were duplicative.

In large, complex attorney fee disputes, clients often turn to a qualified attorney fee expert.  NALFA members are retained by some of the nation’s top law firms and insurance carriers to provide expert reports and opinions on the reasonableness of attorney fees in high-stakes attorney fee disputes.  NALFA members have enjoyed success in the court.  Here are three examples:

Attorney fee expert and NALFA member Brand Cooper of Cooper & Bruning, LLP identified nearly $2 million in unreasonable attorney fees and costs for non-prevailing defendants.  The California court agreed with Cooper’s analysis and cited his expert report and opinions several times in its ruling: “Cooper calculated that 2,798.7 hours of the total 4,937.6 hours in the case were ‘block billing’.  That is nearly 57% of the time entries.  The court will apply an across-the-board 15% reduction in requested fees (after other deductions) based on this impediment to the reasonableness review.”

Attorney fee expert and NALFA member Ken Moscaret of Moscaret Consulting, Inc. successfully testified to a Los Angeles Superior Court judge that over $9 million in fees and costs was reasonable compensation for a major Los Angeles law firm involved in handling a large, complex underlying litigation.  Among his expert opinions, Mr. Moscaret emphasized that there was a rational cost-benefit relationship between the economic value at stake in the underlying litigation versus the legal fees expended.

Attorney fee expert and NALFA member Bruce Meckler of Meckler Bulger Tilson Marick & Pearson, LLP testified (by sworn statement) regarding the reasonableness of legal fees and expenses incurred by Freeborn & Peters, LLP counsel for Brown & Brown, Inc., in Brown & Brown, Inc. v. M.Munawar Ali, Case No. 07 C 2893 in the United States District Court for the Northern District of Illinois, Eastern Division.  In rendering its decision on the reasonableness of legal fees incurred, the Court substantially adopted Mr. Meckler’s opinions.

A recent law.com story, “Novel Fee Fight Lands at Calif. Appeals Court” reports that Cotchett, Pitre & McCarthy v. Universal Paragon Corp. is set to be heard in San Francisco’s 1^st District Court of Appeal.  The case involves millions of dollars in attorney fees and a novel attorney fee agreement based not on the client’s recovery of damages but on the estimated damages the client might suffer.  One side is calling it an “ordinary fee dispute” while the other insists it raises issues about contingency agreements and arbitration that no court has ever addressed.  The case ended up before JAMS arbitrator Rebecca Westerfield, who awarded Cotchett Pitre & McCarthy about $8 million in fees based on a lower damage estimate of $50 million, which was upheld by San Francisco Superior Court Judge Peter Busch.

Because UPC didn’t want to incur hefty up-front attorney fees and the Cotchett firm was taking a financial risk on complex litigation, the two sides came up with an agreement providing for a contingency fee of 16 percent of any money recovered in the suit, plus reduced hourly rates.  It also provided that if UPC acquired the factory site owned by Ingersoll-Rand, the Cotchett firm would be paid a percentage of the amount equal to the greater of the fair market value or the amount of damages UPC estimated it would suffer for remediation cost, insurance, demolition and diminution in value.

A recent NLJ story, “Major Retailers and Tech Companies Support Netflix Over Attorney Fees” reports that Netflix’s bid for the U.S. Court of Appeals for the Federal Circuit to hold an en banc hearing on the legal standard for district court awards of attorney fees in patent cases is generating support among major technology and Internet retail companies.  Netflix, the technology companies and retailers believe that it’s too hard for defendants to recoup attorney fees when they’re hit with frivolous lawsuits.  They claim that the section of the patent code that gives district court judges the discretion to award attorney fees in exceptional cases should apply equally to defendants and plaintiffs. 

Plaintiffs can bring weak patent infringement cases without any downside, and there are very few ways for companies to prevent them, says John Vandenberg, an intellectual property litigation partner at Klarquist.  “There aren’t too many tools the courts can use to police that, but one of them is awarding attorneys’ fees in the right case,” Vandenberg said.  The retailers are frequently on the receiving end of dubious lawsuits with flimsy claims, but it costs far more to fight than settle, says Peter Brann, a partner at Brann & Isaacson.  “Because the scales are not balanced on attorneys’ fees awards, you don’t have the prospect of saying ‘If we draw the line in the sand here, maybe we can deter others,’” Brann said.

A recent law.com story, “Fee Fight Breaks Out Over Multimillion-Dollar Microsoft Case” reports that attorneys representing 23 states involved in the class action against Microsoft Corp. have filed a lawsuit over attorney fees against Roxanne Colin, the Iowa lawyer who spread-headed a $179.5 million settlement with the software company.  Colin of Des Moines negotiated the 2007 settlement that included $75 million in attorney fees that she split with attorney Richard Hagstrom and the Zelle Hoffmann law firm in Minneapolis.

The attorney fee lawsuit claims that the 23 attorneys provided advice, pleadings, and participation and prosecution in the class action case in their states, and in the Iowa case against Microsoft.  The 23 attorneys formed the group called the Microsoft Litigation Consortium and signed an agreement with Colin that called the consortium to receive 20 percent of attorney fees awarded in the case.  The lawsuit said disputes were to be resolved through arbitration.  “The attorney fees awarded to (Colin) at the conclusion of the litigation were not shared…in violation of the agreement,” the suit states.  Colin has refused to comply with the agreement and that “on multiple occasions (the consortium) has requested that (Colin) comply with the…agreement and arbitrate the dispute regarding fees.”

The St. Louis Business Journal story, “Blitz Bardgett to Share in $21M in Legal Fees in A.G. Edwards Case” reports that St. Louis based law firm Blitz Bardgett & Deutsch will share $21 million in legal fees for the five-year legal battle in the class action lawsuit against A.G. Edwards.  Three law firms served as co-lead counsel, including Stull Stull & Brody and Milberg LLP, both are expected to receive a larger portion of the attorney fees.  Seven other law firms will receive smaller amounts.  The $21 million in attorney fees would comprise 35 percent of the $60 million settlement.  Documents on how the law firms are splitting the fees are not including in the court records.

The underlying case alleged that the brokerage company inappropriately received kickbacks from “preferred mutual fund” providers.  The suit claimed the revenue-sharing arrangements amounted to a conflict of interest and breach of fiduciary duties, and that the firm should have disclosed the arrangements to its clients.  The suit claims A.G. Edwards gave bad investment advice as a result, such as telling people to hold on to certain stocks when they would have been better off selling them.

A recent WSJ News Blog story, “New York Judge Signs Off on Hefty Legal Fee” reports that a New York federal court resolved a fee dispute in a pending securities fraud class action against Comverse Technology.  The company agreed last year to pay $225 million to settle the case.  Pomerantz Haudek, the lead plaintiffs’ law firm in the case, sought 25% of the settlement, or about $56 million in legal fees.  In the Comverse case, the Pennsylvania State Employees’ Retirement System, which owned shares in the company, claimed in court papers that the 25% attorney fee request was “unreasonable”.  But a Pomerantz Haudek lawyer said the firm’s client agreed to a 25% fee and that such an amount is “well within the normative range of these types of cases.”

U.S. District Court Judge Nichoals Garaufis agreed that the 25% fee was well within the norm of “megafund” securities fraud cases.  “While it may be that a lower percentage would also be sufficient, this court will not pretend that it has the expertise necessary to divine the ideal percentage,” the judge added.  “This court is particularly unwilling to undertake an endeavor in a case where the fee award was set on the open market, and where an improperly calibrated fee would provide a disincentive to future counsel to take risks and pursue large class settlements that the SEC cannot.”

A recent article, “Workers’ Comp Code Set 15 Years in the Making” in DRI’s For the Defense, written by Toronto law professor John G. Kelly brings readers up to date on the new initiatives underway for the Uniform Task Based Management System (UTBMS) and Legal Electronic Data Exchange Standard (LEDES).  The article provides a brief history of UTBMS and LEDES.  “In 1998, Internet e-billing was emerging as the preferred method for transmitting invoice data from outside law firms to corporate clients.  This led to the development of LEDES.  It is intended to serve as a standard file format to be used by the legal industry for the electronic exchange of information.  UTBMS is digital based, making it ideal for e-billing.  It has become synonymous with LEDES supported e-billing applications.  Insurance defense litigation has emerged as the dominant user of UTBMS/LEDES/E-Billing applications with task based billing.”

“The UTBMS Workers’ Compensation Code Team has completed the development of the model code set and is in the process of validating it through a series of bill review tests and presentations.  A presentation session is scheduled for the upcoming DRI Annual Meeting.  Official rollout of the code set with the posting on the ABA website is scheduled for January 1, 2011.”

CLICK HERE for the UTBMS Litigation Code Set

CLICK HERE for the LEDES website.

Recent stories by the Denver Post and The American Lawyer report that Denver-based Qwest Communications is still trying to reach an agreement with former CEO Joe Nacchio over repayment of legal fees that the company advanced on his behalf before his insider trading conviction in April 2007.  Qwest has recovered the legal fees it paid for Nacchio between the conviction and sentencing in July 2007 and any money doled out to his trial attorney Herb Stern, for the appeal.  Nacchio has agreed to foot the bill of Maureen Mahoney, lead appellate counsel at Latham & Watkins for his appeal case.

According to Qwest’s by-laws, the company is required to advance reasonable attorney fees and expenses to current and former officers who may be involved in any criminal of civil legal proceeding stemming from their employment.  A conviction, if it holds up on appeal, allows the company to recoup those costs.  Qwest continues to cover Nacchio’s legal fees for the ongoing civil fraud lawsuit filed by the SEC and litigation related to the company’s failed joint venture, KPNQwest.  The total legal cost in Nacchio’s defense may be as high as $75 million.

A recent law.com story, “Facing Possible Sanctions, Plaintiffs Lawyer Slams Defense Lawyers’ Rates” reports that plaintiffs’ attorney Wayne A. Schaible of McCann Schaible & Wall is crying foul, saying the defense bills are excessive, that some lawyers’ hourly rates are bloated and unjustified, and that the defense team included lavished expenses that should never be in such a fee petition.  The attorney fee petition, filed by attorneys at Ballard Spahr and Akin Gump, shows that the five-lawyer defense team was billing at rates of $265 to $645 per hour and claims to have logged more than 100 hours working on the canceled trial.  Akin Gump attorney Michele A. Roberts billed at $645 per hour and her partner, Michael C. Starr, billed at $500 per hour, but the Ballard Spahr lawyers were considerably cheaper, with John B. Kearney billing at $373.50 per hour and Paul F. Jenkins and David M. Stauss each billing at $265.50 per hour.  When all five lawyers were on the clock, along with a paralegal billing at $171 per hour, the combined hourly rate was more than $2,200.  The attorney fee petition says the defense team racked up fees of more than $43,000 for the three-day trial.  Added to the grand total of $67,725 in attorney and paralegal fees is $38,783 in costs, such as hotel rooms and travel expenses for all five lawyers, $12,578 in fees for a jury consultant and more than $13,000 for an audio-visual team and equipment from Trial Technologies.

Schaible’s lawyers are taking aim at the defense fees, labeling them excessive and redundant.  Even if U.S. District Judge Mary A. McLaughlin were inclined to approve the hotel bills for the Washington lawyers, the plaintiffs team says there is no justification offered by the defense for “why local counsel at the Ballard office could not commute to the courthouse from their nearby homes, just as they commute to their daily work place [in Voorhees, NJ] or their Philadelphia office where they took depositions.”  “The hours submitted by Valero’s defense six member ‘defense team’ comprised of five different attorney and one paralegal from two different cities is clearly excessive and involves redundancies, multiplicity of tasks, and unnecessary services,” the brief says.  “Five lawyers clearly were not necessary to assist in the picking of the jury since only Mr. Kearney was actively involved in questioning jurors.  Likewise five attorneys were not necessary on the only day of testimony to witness the opening of Ms. Roberts and the direct examination of two witnesses.  Only fees of one attorney, per task, per day would comply with Section 1920’s limitation.”

On June 24, 2010, NALFA hosted the 2nd Annual L.A. Attorney Fee Conference: “It Pays To Be Reasonable” at Southwestern Law School in Los Angeles, California.  The conference featured 10 panelists covering a host of attorney fee and legal billing topics.  The program received great reviews.  Some of the comments included:

“Excellent to get a judicial perspective on attorney fee awards”

“Judge Lichtman provided valuable insight on attorney fees”

“Great topics, outstanding panelists, and a good discussion from the audience”

“I walked away from the program with a better understanding of attorney fees/legal billing issues”

The 2010 L.A. Attorney Fee Conference course book is available for purchase for only $195 plus shipping and handling.  CLICK HERE for course book order form.

To view pictures of the conference, visit our Facebook fan page! 

A recent Law.com story, “9^th Circuit Lifts Attorney Sanctions in FedEx Discrimination Case” reports that U.S. District Judge Susan Illston fined San Francisco plaintiffs lawyer Waukee McCoy $25,000 in sanctions in connection with fee petitions he submitted after winning discrimination verdicts against FedEx.  Illston turned down McCoy’s $2 million attorney fee request, calling his behavior “among the most egregious that this court has ever seen in almost 14 years on the bench.”  A 9^th Circuit panel found Illston was correct in denying McCoy’s attorney fee petitions, but she did not give McCoy a proper chance to defend himself.

The attorney fee dispute began after McCoy won jury verdicts against FedEx for workplace discrimination.  Illston appointed a special master to deal with the fee issues and FedEx accused McCoy of fabricating many of his hourly estimates.  McCoy got into deeper trouble with the special master, and Illston, after he failed to produce contemporaneous time records he had been ordered to turn over.  In addition, Illston found that the vast majority of McCoy’s fee petitions were not actually based on such time records, contrary to what McCoy had repeatedly represented in sworn declarations.  However, the 9^th Circuit also ruled that Illston was wrong to bar McCoy from resubmitting correct attorney fee applications.  “We note that in deciding whether to deny McCoy permission to refile a request for attorney’s fees, the district court may wish to consider the possible effect of such a denial on McCoy’s clients,” the panel wrote.  “It is possible that if McCoy is unable to collect statutory attorney’s fees from FedEx he may be able to collect contractual attorney’s fees from the clients.  In that event, it would be the clients rather than McCoy who would suffer the adverse consequences of McCoy’s misconduct in seeking fees.”

A recent BLT Blog story, “Lawyers in D.C. Gun Case Want $3.12 Million in Fees” reports that the lawyers who successfully challenged the District of Columbia’s handgun ban, securing a victory in the U.S. Supreme Court in 2008 are asking for more than $3.1 million in attorney fees and costs.  Alan Gura, a lead attorney for the plaintiffs in Heller v. District of Columbia, said in a motion that the fee request is a lower amount than the more than $3.5 million in fees the attorney first requested in August 2008.  The new lower amount stems from Gura’s application of the U.S. Supreme Court’s ruling in Perdue v. Kenny A.  Gura of Alexandria’s Gura & Possessky said in court papers that the high court’s decision in Perdue “provided significant new guidance regarding the issue of lodestar adjustments in exceptional cases such as this.”  The net effect of the adjustments – including one for market rates and another for “excessive delay” in payment – produces an overall lower fee request, Gura said.

The total amount sought is $3,126, 397.  Gura said three attorneys performed the bulk of the work.  The hours remain unchanged from the first motion for attorney fees: Gura, Clark Neily III, a senior attorney at the Institute for Justice and The Cato Institute’s Robert Levy, who finances the case, clocked 1,661 hours, 808.3 hours, and 595.6 hours, respectively.  Gura said that his firm does not have standard, fixed hourly rates.  Instead, Gura performs work typically on a flat-fee contingency basis.  Gura noted his hourly billing rate for Heller, before adjustment, is $589.

A recent story in The American Lawyer, “Judge Refuses to Toss Fraud Charges Against Quinn Emanuel Over Legal Fees” reports that former Quinn Emanuel client Tele Atlas sued the law firm for fraud, breach of fiduciary duty, overcharging, and legal malpractice in February 2009 alleging that Quinn Emanuel underestimated the costs it would incur in an antitrust case against rival Navteq.  Tele Atlas claims Quinn Emanuel incorrectly advised the company that it could recover its legal fees and costs, and that its estimated legal bill would come in at $4 to $5 million.  In the end, Quinn Emanuel racked up a $15 million tab.

San Francisco Superior Court judge Peter Busch denied most of Quinn Emanuel’s motion for summary judgment, concluding that there was evidence that the firm partner David Eisman had told Tele Atlas that the legal fees were recoverable.  The judge brushed aside Quinn Emanuel partner Terry Wit’s argument that the firm had told Tele Atlas that its damages claims were weak.  “Damages and attorneys’ fees are different,” Judge Busch reportedly said.  According to court records, Quinn Emanuel claims that Tele Atlas still owes the firm $2 million.  “The dispute is really over the outstanding bills” said Quinn Emanuel partner Christopher Tayback.

A recent Law.com story, “Lawyers’ Fees Slashed by $2.2 Million in Suit Over Blue Cross Claims Practices” reports that New Jersey Superior Court Judge Stephen Bernstein reduced $2.2 million from the fee award to the plaintiffs lawyers.  The underlying case, Sutter v. Horizon Blue Cross Blue Shield of New Jersey, a class action bought on behalf of doctors who alleged the giant insurer denied legitimate claims and, when it did pay, paid slowly, increasing providers’ administrative costs.  The health insurer was prepared to pay $6.5 million in legal fees to class action lawyers when the case settled, but nine doctors groups objected to the deal, remanding the case to the Essex County judge who approved the settlement in 2007.  In 2007, Bernstein found 16.7 percent contingency fee rate fell within the range of reasonable attorney fees in class actions.  The appeals court said Bernstein should have used the lodestar method.

On remand, Bernstein found that the 5,056 hours expended by the lawyers was warranted, but rejected New Jersey law firm Mazie Slater Katz & Freeman’s argument that he should consider the firm’s effective rates – its traditional recovery rates for contingency work.  He approved a blended rate of $550 per hour for work by Eric Katz and partner David Mazie and $100 per hour for work by law clerks, for a total of $2.7 million.  He added a 35 percent multiplier for the difficulty of the case and the risk the firm took pursuing it and added the $600,000 in out-of-pocket costs expended.  The total: $4.3 million.

A recent Law.com story, “More Attorneys Exploring Third-Party Litigation Funding” reports that more corporate clients are considering litigation funding to help finance their legal claims.  Third-party litigation funding is a relatively recent phenomenon in the United States, after establishing itself in Australia, then later in the United Kingdom.  Two litigation funds have in the last three years launched initial public offerings, and both are on the lookout for U.S. litigants who would allow them to finance their case in return for a portion of any settlement or judgment.  Juridica Investment Ltd, which launched in 2007, last month reported that through March it had committed almost $123 million to 15 investments in 22 cases, one of which is in New York, according to a spokesman.  Burford Capital Ltd., which went public in October, has so far invested $40 million across 10 cases, many of them international arbitrations.  Juridica and Burford are two of the largest funds dedicated solely to litigation finance.

In regulatory filings, one of Burford’s earliest investments was a trade secret theft and breach of contract matter in an undisclosed U.S. federal court that was schedule for trial last month.  Burford invested $2 million to cover the costs of getting it to trial and cover some of the outstanding legal fees.  Burford stands to receive 35 percent to 67 percent of any recovery from that lawsuit. 

A recent NLJ story, “High Court Lets Government Take Fee Awards for Clients’ Debts” reports that the U.S. Supreme Court, in an unanimous decision, ruled in Astrue v. Ratliff (No. 08-1322) that attorney fee awards under the Equal Access to Justice Act (EAJA) are payable to the client, not the attorney, and can be offset to pay a client’s debt to the federal government.  This decision will affect primarily lawyers and law clinics who successfully represent clients seeking Social Security or veterans benefits who earn attorney fee awards under EAJA.

In Astrue, Justice Clarence Thomas, writing for the Court, rejected Ratliff’s argument that language in the EAJA supported payment of attorney fees directly to the prevailing party’s attorney, thus protecting the fees from a government offset.  “We have long held that the term ‘prevailing party’ in fee statutes is a ‘term of art’ that refers to the prevailing litigant,” wrote Thomas, adding that other sections in the fee-shifting law underscore the “usual and settled” meaning of prevailing party.  Although it is true, he said that the Social Security Act makes attorney fee awards under the law directly payable to a prevailing party’s attorney, Thomas wrote, that contrasts with the EAJA and shows “that Congress knows how to make fee awards payable directly to attorneys where it desires to do so.”

In her concurrence, Justice Sotomayor expressed concern that the Court’s ruling would undermine the purpose of EAJA, whose attorney fee awards were created by Congress to reduce the financial barriers associated with challenging unreasonable government actions.  Thus, she warned, by subjecting EAJA awards to administrative offsets for litigants with debts, the Court’s ruling will inevitably make it more difficult for persons of limited means to obtain legal representation.

According to recent reports, BP’s litigation costs are expected to run in the billions.  It has been seven weeks since the oil spill in the Gulf of Mexico and there are already 6,000 lawsuits filed against BP.  A good number of the suits have been filed by Robert Gordon, chief trail lawyer at Weitz & Luxemberg, a New York law firm representing hundreds of fisherman affect by the oil spill.  But the pool of claimants is not just limited to fishermen.  Many business owners, restauranteers, shareholders, and the attorney generals of the Gulf states have filed suit as well.

Overall, the total legal cost could run in the billions for BP, especially if punitive damages are delivered in a court verdict.  A case that brings stiff punitive damages is the worst case scenario for BP, who would have to pay out claims from a general fund and keep a jury from awarding what would sure to be a multi-billion dollar verdict.

A recent NLJ story, “D.C. Circuit Rules for Winston & Strawn in Fee Dispute” reports that Winston & Strawn won its fee dispute with form client Doley Securities, Inc., which allegedly owes the firm about $85,000 in legal fees.  In April 2007, Doley Securities signed an engagement letter stating an hourly rate for partner Thomas Buchanan at $595 and partner ranges of $405 to $845 and associate ranges of $200 to $590.  Doley’s new lawyer, Claude Roxborough, a name partner at Washington’s Kimmel & Roxborough called the ranges of fees unenforceably vague and said the dispute belonged in arbitration, not in a court of law.

The D.C. Circuit said in its judgment that the fee agreement between Winston and Doley specifies the lawyers may bill “within a range of possible fees” and that Doley’s “presentment of a prior oral agreement that they would only be charged fees at the low end of the ranges is inconsistent” with the written agreement.

Lawmakers, Governor Charlie Chist, and Attorney General Bill McCollum handcuffed current and future Florida attorneys general right before the oil spill in the Gulf of Mexico started.  Six days before the Deepwater Horizon rig exploded and the wellhead a mile beneath it began gushing oil, Chist signed into law a cap on attorney fees.  The law that goes into effect July 1, 2010 caps attorney fees at $50 million in contingency cases on contract work for the Office of the Attorney General.

“You’re not going to get the best lawyers to come in on a Dream Team where you’ve capped the attorney’s fees,” said Fred Levin, the renowned Pensacola trial lawyer.  He said preparation and expert witnesses could easily run to $100 million.  McCollum’s law does provide a provision to pay “reasonable costs and expenses,” but it’s not up front.  You may recognize Levin’s name, not only because it graces the University of Florida’s School of Law, but because Levin was the linchpin in the state’s $13 billion big-tobacco settlement.  For his part of the litigation, his firm got $250 million – that’s only part of the $3 billion tobacco companies paid (separately, and without costing the state a dime in attorney fees).

A recent Law.com story, “Bankruptcy Trustee Settles With Former Rothstein Firm Lawyers Over Future Fees” reports that the trustee in the bankruptcy case of Ponzi operator Scott Rothstein’s defunct law firm has settled disputes with seven attorneys over future legal fees from cases they handled while employed at Rothstein Rosenfeldt Adler (RRA).  RRA dissolved last November following disclosures that Rothstein was running a Ponzi scheme based on phony settlement financing out of his Fort Lauderdale law office. 

The settlement agreement, submitted to U.S. Bankruptcy Judge Raymond Ray, provides for the trustee, Herbert Stettin to get a percentage of the recoveries on unresolved cases the former RRA attorneys are handling for clients in the door before Rothetein’s $1.2 billion fraud collapsed last November.  No dollar amounts are listed, but Gary Farmer, a former RRA attorney, said the total uncollected fees could exceed $10 million.

A recent Law.com story, “Disbarment Urged for Lawyer Who Billed Fake Clients” reports that the New Jersey Disciplinary Review Board (DRB) is recommending disbarment for a lawyer who manufactured fake billings for nonexistent clients, first at Fox Rothschild and then at Margolis Edelstein.  The board found that Kenneth Denti violated ethics rules against fraud by drawing a salary while pretending he had done $350,000 worth of work and submitting phony expense reports. 

According to the DRB, Denti was a contract partner at Fox Rothschild with a salary of about $200,000.  He brought work with him, or so Fox Rothschild thought when it saw time sheets he entered for clients listing services rendered.  The law firm became suspicious when he submitted no invoices for payment.  An internal Fox Rothschild investigation showed that Denti’s clients didn’t exist and he was told to leave after 14 months.   Fox Rothschild then filed a confidential grievance with the New Jersey Office of Attorney Ethics.  But because the grievance was confidential, Denti was able to continue the fraud at Margolis Edelstein.  Later, Margolis Edelstein found out Denti left Fox Rothschild under and cloud and filed its own grievance with the state.

A recent Law.com story, “Schwab Settlement to Generate $20 Million Fee for Hagens Berman” reports that U.S. District Judge William Alsup has given preliminary approval to two deals that would furnish $235 million to class members in a class action securities fraud case against Charles Schwab.  Of that $235 million, Hagens Berman will be awarded about $20 million in attorney fees: 8 percent of the $200 million set aside for federal claims, and 11 percent of the $35 million to resolve state law claims.

Led by partners Steven Berman and Reed Kathrein, the plaintiffs successfully battled Schwab’s outside counsel Morrison & Foerster over the investment company’s so-called YieldPlus plan.  Plaintiffs say Schwab violated securities law by telling investors it would only put up to 25 percent of the assets in its YeildPlus fund in any one industry.  But Schwab allegedly changed the rules midstream and concentrated more than 45 percent in mortgage-backed securities. The SEC filed briefs supporting the plaintiffs, and the company quickly agreed to settle after Alsup recently issued a series of summary judgment rulings that went against them.

A recent NLJ article, “Justices Make it Easier for Employees to Win Legal Fees in Disability Cases” reports that in a unanimous ruling, the U.S. Supreme Court held that workers suing over disability and other benefits under the federal law known as ERISA may win attorney fees and expenses if they achieve “some degree of success on the merits” of their case.  In Hardt v. Reliance Standard Life Insurance Co., the Supreme Court rejected a tougher standard imposed by the U.S. Court of Appeals for the 4^th Circuit where fee claimants must be a “prevailing party” before seeking an attorney fee award.

In the underlying case, Reliance objected to paying Hardt’s attorney fees and expenses, arguing she was not the “prevailing party” because the insurance company had agreed to pay the benefits.  Hardt incurred $58,920 in attorney fees to recover $55,250 in disability benefits.  The district court awarded attorney fees, but the 4^th Circuit reversed.  In the Supreme Court, Justice Clarence Thomas wrote that the words “prevailing party” do not appear in ERISA’s fee-award provision.  That provision, he said, “expressly grants district courts ‘discretion’ to award attorney’s fees ‘to either party’.”  Because the Court’s “prevailing party” precedents did not apply here, Thomas said a line of fee precedents that do not rely on prevailing-party status should apply, with 1983’s Ruckelshaus v. Sierra Club being the principal case.  Under Ruckelshaus, success, before a court may award attorney fees must be more than “trivial” or a “purely procedural victory”.

A recent Law.com article, “Judge: Lead Paint Companies Must Cover Own Defense Costs” reports that three paint manufactures, including Cleveland-base Sherwin Williams cannot recover money they spent defending themselves in a lawsuit.  In 1999, the state of Rhode Island became the first state to sue paint manufactures over lead-based paint.  In 2008, the state Supreme Court threw out a verdict that would have forced the three companies to spend billions of dollars to remove lead paint from homes and buildings in the state.  After throwing out the verdict, the companies asked the state to reimburse them for legal expenses.

But Superior Court Judge Michael Silverstein denied that request, saying the lawsuit was bought in good faith and focused public attention on problems associated with lead-based paint.  The judge said ordering the companies to be reimbursed could deter the state from bringing public health lawsuits in the future.  State law allows the winning side of the lawsuit to recoup legal costs, though at the judge’s discretion.  Attorney General Patrick Lynch called the judge’s decision “courageous” and said the companies’ request for reimbursement was about more than just costs.  “It was meant to intimidate and silence any attorney or jurisdiction that would dare to demand that they be accountable for the products they put into the marketplace,” Lynch said in a written statement.

A recent article in the Salt Lake Tribune, “Attorneys want $7 million in Navajo Trust Fund Case” reports that attorneys for the plaintiffs in Pelt, et. Al v. Utah seek $7 million in attorney fees and expenses.  The underlying class action, originally filed in 1991, claims the state government mismanaged the Utah Navajo Trust Fund.  The trust was established in 1933 by the federal government to manage 37.5 percent of royalties from oil wells on Utah’s portion of the Navajo Nation for San Juan County Navajos.  The case settled earlier this year for $33 million.  The attorney fees sought are 21 percent of the proposed award.

San Juan County Commissioner Lynn Stevens, who is not a Navajo, said that’s too much.  “I think that’s excessive,” Stevens said.  Brian Barnard of Salt Lake City is one of four attorneys seeking payment for work on the case over the past two decades.  “We haven’t been paid for 18 years,” Barnard said.  The normal rate for such contingency cases is 33 percent, Bernard noted.  Further, Barnard said the proposed legal bills are itemized so that plaintiffs can see exactly all the time accrued and expenses incurred since 1991.  Barnard, along with 3 other attorneys mailed notices to 11,000 Navajo beneficiaries to explain the settlement and legal bills.  Various meetings will be held in and around the reservation in the coming weeks, Barnard said, to answer plaintiffs’ questions.

A recent article, “The Beginning of the Demise of the American Rule” in the DRI’s For the Defense, written by Jodie Steinberg of Ericksen Arbuthnot in Oakland, California advises counsel to consider whether an award of attorneys’ fees though the “tort of another” doctrine might apply to their case. 

The article concludes, “Since most state courts across the nation have been willing to award attorneys’ fees as damages under the “tort of another” doctrine, counsel should consider pleading the “tort of another” doctrine as a cause of action in their lawsuits.  Especially when dealing with professional liability cases, counsel should carefully consider whether an award of attorneys’ fees through the “tort of another” doctrine might apply.  If you believe that the doctrine might apply, this will greatly impact how you evaluate a case for your client.

Lastly, give forethought to some other significant implications of pleading the “tort of another” doctrine.  First, an insurance company involved in defending a case may not consider attorneys’ fees under the doctrine covered under the terms of the applicable insurance policy.  Also, if a party seeks attorneys’ fees in a cause of action through the “tort of another” doctrine, then arguably the attorney’s billing records would become discoverable during litigation and subject to attack.  Counsel should take care in deciding whether to plead the “tort of another” doctrine and may want to agree to stipulate to post-judgment consideration by the judge to protect billing from discovery until after a trial.”

Disclaimer:  This article is provided for informational purposes only.  Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your own unique circumstances.

A recent article in Insurance Journal, “Ohio Supreme Court: Attorney Fees Distinct from Punitive Damages” reports that the Ohio Supreme Court ruled that attorney fees are distinct from punitive damages and that public policy does not prevent an insurance company from covering legal fees on behalf of an insured.  In Neal-Pettit v. Lahman, Allstate Insurance argued that the automobile policy does not cover awards of attorney fees.  Allstate argued that the “attorney fee award is an element of the punitive damages award because both are made in cases of malicious conduct.”  Allstate’s policy doesn’t cover punitive damages, therefore the award for attorney fees is not covered either, the insurer reasoned.

In the underlying case, Kimberly Neal-Pettit filed suit against Linda Lahman for compensatory and punitive damages due to personal injuries sustained in a car accident.  The complaint alleges, Lehman struck Neal-Pettit’s car when she was intoxicated.  At trial, the jury returned a “verdict against Lahman for compensatory damages totaling $113,800 and punitive damages totaling $75,000.  In addition, the jury awarded attorney fees for Neal-Pettit at $46,825 and $10,085 in expenses.  After Allstate declined to pay punitive damages and attorney fees, Neal-Pettit filed suit.  The Eighth District rejected Allstate’s argument, holding that attorney fees are “conceptually distinct” from punitive damages.  The Ohio justices affirmed the lower court’s ruling, citing previous case law that established that although “an award of attorney fees may stem from an award of punitive damages, the attorney fee award itself is not an element of the punitive damages award.”

A recent Find Law article, “Caps on Attorney Fees Only Hurt the Injured” provided by Silvers, Langsam & Weitzman, P.C. in Philadelphia opines on recent debate surrounding an amendment to the health care bill that would have limited attorney fees that plaintiffs’ attorney could have collected in medical malpractice lawsuits.  In the amendment proposed by Sen. John Ensign (R-NV), attorney fees would have been limited to one-third of the first $150,000 recovered in any medical malpractice case.  If the damage award exceeded $150,000, then the attorneys’ could receive an additional one-fourth of any amount over $150,000.  For example, if the total damage award was $300,000, then the attorneys would be entitled to a total of $87,500 for their fees.

“Had this measure past, it would have done nothing more than limit the legal rights of victims of medical malpractice.  It is impossible to overstate the importance of contingency fee arrangements in personal injury cases, particularly in medical malpractice suits.  These fee arrangements allow those who otherwise would not be able to afford legal representation to still receive their day in court.  Contingency fee arrangements also allow attorneys to take on costly and risky medical malpractice actions.  It costs a lot of money and takes a lot of time to challenge big insurance companies and health care providers.  Without the possibility of receiving a fair share of the damage award, many attorneys only could afford to take on the most lucrative of the medical malpractice cases – which would limit the access of victims with less serious injuries to the legal system.”

A recent NLJ story, “Interim Attorney Fees Awarded in Consumer Fraud Suit Over Mortgage” reports that a New Jersey judge has awarded counsel fees during a pending Consumer Fraud Act suit.  Superior Court Judge Kenneth Levy made the award after granting preliminary injunctive relief for the plaintiffs, saying “the question is…can the court award counsel fees at this stage in the proceeding, and there is really no case law that’s been presented to me that says I cannot do that.”  In his motion for the pre-judgment fee award, plaintiffs lawyer Abraham Borenstein said there is precedent for interim fee awards in other fee-shifting cases though none under the applicable Consumer Fraud Act, section, N.J.S.A. 56:8-19. 

Ruling on April 23 from the bench, Levy found the preliminary injunction –based on a probability of success on the merits—was sufficient to trigger that section, which provides for fees and costs to anyone granted equitable relief under the Act.  “Although I’m not in a position to order final judgment, I think that the plaintiffs should be awarded counsel fees for at least the work that they had to do through obtaining the preliminary injunction,” the judge said in Pena v. Newell Funding, LLC, ESX-C-16-09.  Borenstein called the fee award “groundbreaking” and says it means that “litigants—who previously could not afford to initiate a lawsuit are now empowered.”

A recent NLJ story, “N.J. Supreme Court Spares Partner From Disbarment Over Fee Dispute With Firm” reports that the New Jersey Supreme Court suspended attorney David Gross for three months for not telling his law firm partners about a $50,000 bonus from a satisfied client.  The court found a lack of “clear and convincing” evidence that Gross failed to safeguard funds or knowingly misappropriated funds in violation of Rule of Professional Conduct 1.15 (a) and (b), as the Disciplinary Review Board had found.  The court’s action is significant because it seems to carve an exception to In re Siegel, 133 N.J. 162 (1993), which made misappropriation of law firm funds a ground for automatic disbarment.

In 1998, Gross, then a managing partner at Budd Larner accepted the $50,000 bonus from Keene Creditors Trust, but never informed his partners.  Gross’ secretary Claudette McCarthy testified that she was instructed by Gross to delete a letter from her computer setting up Keene payment.  In arguing before the court, Gross’ attorney, Justin Walder insisted that the firm had no right to the money.  “This was a payment over and above legal fees,” he said.  “It was intended for David Gross, not the firm.”  When Justice Roberto Rivera-Soto said that “at the very least” Gross should have told his partners, Walder agreed, saying it was a mistake.  “But he had a good-faith belief that there was no policy,” Walder added.

On May 5, 2010 the Internal Revenue Service (IRS) approved the National Association of Legal Fee Analysis (NALFA) as a 501(c)(6) federal tax-exempt organization.  According to the IRS, NALFA meets all the qualifications of a 501(c)(6) business league under the Internal Revenue Code. 

A business league, under the Internal Revenue Code, is organized around a common business interest, which the organization typically promotes.  Business leagues also seek to improve a line of business in a particular field.  NALFA meets all these provisions.

As a 501(c)(6) organization, NALFA is exempt from federal income taxes.  More importantly, as a result of NALFA’s 501(c)(6) federal tax-exempt status, membership dues and contributions to our CLE programs may be tax deductible as a business expense!!!

A recent NLJ story, “Madoff Judge Awards Another $25 Million in Fees” reports that a federal judge has awarded trustee Irving H. Picard and his team of lawyers liquidating Bernie Madoff’s investment firm $24.6 million in interim attorney fees.  Southern District of New York Bankruptcy Judge Burton Lifand awarded about $627,000 in fees to Picard and $23.9 million in fees to Baker & Hostetler for October through January 31.  All told, the judge has awarded Picard and his team about $62 million in attorney fees.

Last month, Picard reported that “notwithstanding the monumental and unprecedented task faced by the Trustee, substantial progress” has been made in “reviewing and determining customer claims.”  However, he has come under fire from many investors who have protested his “cash-in/cash-out” approach to calculating claims.  As of April 30, Picard has allowed 2,061 of 12,453 claims, and the Securities Investor Protection Act had committed some $682 million in funds to satisfy customer claims.

A recent NLJ story, “Sued Over Unpaid Legal Fees, Client Hits Squire Sanders with Malpractice Suit” reports that after suing a client for $1.2 million in unpaid legal fees, Squire Sanders & Dempsey has been hit with a legal malpractice lawsuit and is now running up its own bills by hiring an outside law firm to defend itself.  The case exemplifies why some law firms refuse to file lawsuits against clients for non-payment of fees and why law firms should keep a close eye on outstanding invoices.  The underlying litigation involves a patent case between two competing window screen manufacturers.  After spending millions in fees, the client, Armor Screen ultimately had its patent deemed invalid by the U.S. Patent and Trademark Office.

Several attorneys said they would never allow a client to get so far behind on its legal bills and keep a tight rein on accounts receivable.  Others said they would never sue a client for non-payment of fees in any case.  “Whenever an account falls 30 days past due, I get an e-mail.  Then I will send an e-mail to the client, and if he doesn’t pay we pull the plug.  I also try to screen clients effectively”, said one managing partner, who did want to be identified.  When an unpaid legal bill climbs to a range of $30,000 to $50,000, “alarm bells go off,” said the partner, who called $1.2 million “a very big number.” 

A settlement of $3.4 billion was announced this week in one of the largest class actions ever filed against the U.S. government.  The case, Cobell v. Salazar, involves a 14-year claim against the federal government over the mismanagement of Indian trust funds.  The lead plaintiffs’ attorneys, Dennis Gingold and Keith Harper seek attorney fees between $50 million and $99.9 million.  After Senator John Barrasso (R-WY) suggested there should be a $50 million cap on attorney fees and costs, Gingold said if Congress tries to reduce attorney fees, the case would revert back to litigation.

Elouise Cobell, a former treasurer of the Blackfeet Tribe of Montana defended her attorneys’ $99.9 million attorney fees, saying that would be less 3 percent of the total settlement.  She said 3 percent is a “very low percentage for attorney fees in class action lawsuits.”  “Consider that attorneys representing tribes under Indian Claims Commission Act generally received 10 percent as mandated by statute and attorneys involved in suits related to Enron received 9.5 percent,” or almost $700 million in attorney fees.

A recently New York Times expose, “Who Knew Bankruptcy Paid So Well” by Nelson D. Schwartz and Julie Creswell reports on legal fees and expenses in bankruptcy cases that have arisen as a result of the Wall Street financial crisis.  Many of these mega bankruptcy cases (i.e. Lehman Brothers, GM, Chrysler, and Washington Mutual) have produced steady revenue for law firms and consulting agencies.  In the legal invoices are the usual suspects…

$263,000 in photocopies in four months
Over $2,100 in limousine rides by one partner in one month
$364.14 in dry-cleaning
More than a week at the Sherry-Netherland hotel in Manhattan (one lawyer’s room cost $685 a night)

“The size of this case justifies the size of the fees,” says Bryan Marsal, co-founder of Alvarez & Marsal.  “The legal skill we used to sell Lehman’s North American capital markets business to Barclays saved 10,000 jobs and preserved the business itself, capturing value that otherwise would have been lost,” said Harvey Miller, a partner at Weil, Gotshal & Manges, and considered the dean of the bankruptcy bar.  Many people in the industry agree that Lehman, in particular, is a huge case that tests even the most experienced lawyers.  “Lehman is a sufficiently complicated company that it would be safe to assume that if it weren’t for equally sophisticated professionals running the Chapter 11 case, that creditors would essentially receive nothing,” says Stephen J. Lubben, a professor at Seton Hall Law School.

Recent reports by Daily Finance and the Washington Post estimate that the legal fees in defending Goldman Sachs against six private shareholder lawsuits as well as the SEC investigation could reach $100 million.  Troy Eid, a former U.S. Attorney General for Colorado says that even before a company hires a law firm, the legal bills start piling up.  A simple grand jury subpoena, done before a formal investigation gets underway, can cost $100,000 just to get documents ready, he says.  Eid, who oversaw the prosecution of Qwest Communications Chair and CEO Joe Nacchio in 2005, says “This is a tremendously big deal in terms of legal costs”.

Jon May, chairman of the White Collar Crime Section for the National Association of Criminal Defense Lawyers, couldn’t help but notice that during live Senate testimony, Goldman executives were each represented by several attorneys.  Conservative estimates place hourly rates at $550, but it’s more likely closer to $1,000.  “You have a multiple of law firms representing individuals, and all kinds of specialists”, May said.

Investment News reports that Morgan Keegan’s legal fees have skyrocketed during the past two years to $251 million.  Morgan Keegan’s legal costs are largely the result of defending itself from investor claims stemming from poorly performing bond fund that held toxic mortgage-back securities.  In 2008, the firm’s legal expenses accounted for 6% of the firm’s total revenue.  But in 2009, legal expenses doubled, accounting for 12% of the firm’s total revenue.  In all Morgan Keegan had revenue had revenue of $1.28 billion last year and spent $161 million in “professional and legal fees”.

Morgan Keegan is “potentially on the hook for tens of millions of dollars, if not more,” said Andrew Stoltmann, a plaintiff’s attorney.  He has about 15 clients suing Morgan Keegan.  Morgan Keegan faces hundred more arbitration claims from investors who bought the company’s bond funds only to see the funds lose as much as 95% of their value.  In January alone, the firm lost separate claims with awards of $2.5 million and $1.1 million.

A recent article, “Lawyer Says He Can’t Estimate Fees in Toyota MDL” reports that Dan Becnel Jr., the first attorney to submit his name for co-lead counsel of the multidistrict litigation (MDL) against Toyota Motor Corp., said in a court document that it would be impossible to predict the cost of attorney fees in the case.  Becnel filed the document to address the court’s request that attorneys applying for lead counsel status estimate possible fees.  In support of his position, Becnel cited the recent U.S. Supreme Court decision in Perdue v. Kenny A., in which the court ruled that attorney fees could be increased from a lodestar calculation, but only in extraordinary circumstances.  In the document, Becnel also suggests that time sheets should be filed monthly under seal and that an accountant audit those submissions.

The MDL involves nearly 200 federal lawsuits alleging that consumers were defrauded by Toyota or that sudden acceleration caused someone’s injuries or death.  Lawyers have until Friday to submit applications before the court’s committee.

A recent BLT Blog post, “D.C. Circuit Gets Interested in Fee Disputes” reports that the D.C. Circuit Court of Appeals currently has two fee dispute cases before it.  In D.C., bar rules generally require lawyers to arbitrate fee disputes at the client’s request before the D.C. Attorney/Client Arbitration Board.  But now, two cases are before the D.C. Circuit.  The first is a dispute between Zuckerman Spaeder and former client James Auffenberg, Jr.  The dispute centers around $843,000 in unpaid legal fees.  According to the engagement letter, Auffenberg agreed to pay partner Paula Junghans $675 per hour and an initial retainer of $100,000, which was to be replenished monthly.  The letter also lists ranges of hourly rates for each class of timekeepers at Zuckerman: Partners charged $365 to $825; associates $200 to $475; and legal assistants $145 to $265.  Auffenberg agreed to raise the retainer to $500,000, but only agreed to pay the firm a total of $1.5 million.  According to the complaint, the firm improperly exceeded that amount by $843,000.

The other fee dispute now before the D.C. Circuit pits Winston & Strawn against its former clients Harold Doley and Doley Securities.  (NALFA reported on this story in a previous blog entry)  CLICK HERE for more details.

A recent article, “Waiting Game Continues in Stanford Legal Fee Dispute” reports that a hearing to determine who will pay the attorney fees for the defense in the Stanford Ponzi scheme is set for September.  R. Allen Stanford and three other executives are accused of bilking $7 billion from investors in a massive Ponzi scheme.  The appeals court last month ruled legal fees for Stanford and the other executives must continue being paid by British insurer Lloyds of London under an insurance policy that covers such expenses.  So far, Lloyds has paid more than $9 million in legal fees for the Stanford case.  Lloyds argues that its policy doesn’t pay on charges of money laundering, which Stanford and others are accused of doing.  The dispute over the payment of legal fees is part of a civil lawsuit filed by Stanford and the executives against Lloyds and is separate from the criminal case.  Earlier this month, Harvard law professor and defense lawyer Alan Dershowitz joined Stanford’s legal team as an adviser.

A recent article, “Lehman Brothers Bankruptcy Bill Approaches $750 Million – and Counting” reports that the latest legal bill in the Lehman Brother bankruptcy is in and it’s approaching $750 million and might possibly be on it way to $1 billion, according to documents Lehman filed with the SEC.  Through January 2010, law firms had billed about $311 million of the $649 million total paid out to advisers since Lehman filed for Chapter 11 in 2008.  The biggest biller continues to be Lehman’s lead debtor counsel at Weil, Gotshal & Manges, which has billed the estate just short of $165 million.  Weil’s bill breaks down to about $300,000 a day since Lehman’s bankruptcy filing.  Other top billers include: Jenner & Block at $48.4; Milbank Tweed at $47.7 million; Jones Day at $20 million; and Curtis Mallet-Prevost Colt & Mosle at $15.8 million

On Wednesday, the U.S. Supreme Court decided the most important attorney fees cases in years: Perdue v. Kenny A. (08-970).  In a 5-4 majority opinion, the Court overturned a lodestar multiplier of $4.5 million in attorney fees.  Under federal fee-shifting statutes, judges can award enhanced attorney fees (i.e. multiplier) above the lodestar amount.  However, the court in the Georgia case did not provide “proper justification” for the [fee] enhancement.  The underlying case involved a successful class action, challenging deficiencies in Georgia’s foster care system.  The prevailing attorneys sought more than $14 million in attorney fees.  Half was based on the lodestar calculation – about 30,000 hours multiplied by the hourly rates of $200 to $495.

One the one hand, the Court ruled that a strong performance can lead to a fee enhancement, but the Court also used words like “rare” and “exceptional”.  The Court offered no test for what constitutes an “extraordinary circumstances” for a fee enhancement, only writing that “the burden of proving that a [fee] enhancement is necessary must be borne by the fee applicant…producing “specific evidence” that supports the award” and that such [fee] enhancements should be “objective and reviewable”.

Court observers, reading in-between the lines of the spare 15-page ruling, see a deep-seated skepticism about “superior performance” – unless it can be measured by hard, objective, and measurable factors.  Prevailing attorneys who provide better-than-usual performances will no doubt seek ways to quantify performance as a lodestar “entry”, rather than a lodestar “bonus”.  This may be done by increasing the hourly rate or perhaps quantifying “lawyering” into numbers.  What is clear from this ruling is that prevailing attorneys will require additional supporting evidence (i.e. expert opinion) in order to justify a fee enhancement.

A recent article, “Del. Chancery Court Awards Plaintiffs Fees Based on Defendants’ Pre-litigation Conduct” reports that Delaware Chancery judge ordered defendants to pay their opponents’ attorney fees and costs and part of their expert witness fees.  The underlying litigation dates back to 2003, involving a contested sale of a motel.  In a letter ruling in Saliba v. William Penn Partnership, Chancellor William B. Chandler III wrote “Because defendants conducted the sale in a clearly conflicted manner that resulted in a breach of fiduciary duty, I find and conclude that it would be unfair and inequitable to require plaintiffs to shoulder the costs incurred in demonstrating the unfairness of this sale process.  For that reason, I award plaintiffs all of their attorneys’ fees and the portion of costs that they have paid in connection with the court-appointed expert witness.”

Although it’s not unprecedented for the Delaware chancery court to award legal fees for egregious pre-lawsuit conduct, “it is rare,” said Francis Pileggi, a litigation partner at Philadelphia’s Fox Rothschild who isn’t involved in the case.  “Parties involved in U.S. litigation generally pay their own attorney fees unless a statute or agreement dictates otherwise or the case is a class action or a derivative case with a common fund to pay the legal costs,” Pileggi added.

A recent NLJ article, “Winston’s Fee Dispute Gets Lofty Scrunity” reports that Winston & Strawn will square off against its former client Doley Securities, Inc. in the U.S. Court of Appeals for the D.C. Circuit over an unpaid legal bill of $84,412.19.  The fee dispute rests on an April 2007 engagement letter which gave a range of hourly rates for partners, associates, and legal assistants.  The letter listed ranges of hourly rates for each class of timekeepers at the firm: partners charged $405 to $845; associates $200 to $590; and legal assistants $135 to $285.  Winston attorneys Thomas Buchanan, Michael Mancusi, and John Court logged 215.25 hours before the investigation was dropped after Doley’s deposition. 

Doley Securities argues that except for Buchanan’s fees, it only agreed to pay the lowest rate in the ranges.  Doley, represented by Claude Roxborough of Washington-based Kimmel & Roxborough, said the engagement letter “appears to be nothing more than a rate sheet.”  Doley was prepared to pay $20,000 to resolve the fee dispute, but according to Buchanan, attempts to settle “didn’t go very far”.  “It seems like a lot of strife over $84,000” said Arthur Burger who chairs Jackson & Campbell’s professional responsibility practice group in Washington.  In fact, two experienced Washington appellate lawyers estimated that taking a fee litigation case to the D.C. Circuit can easily cost $100,000 or more.

According to a recent WSJ blog post, “Minneapolis Lawyer Accused of Stealing From Clients”, Michael Margulies, a former partner at Lindquist & Vennum has agreed to be disbarred for stealing up to $2 million from a half-dozen clients by double billing and submitting false expense reports for dinners.  Margulies, who specialized in real estate law is likely to face criminal charges.  The law firm’s managing partner, Daryle Uphoff said that Margulies’ dealing went undiscovered because they were done off the firm’s books and didn’t show up in routine audits.  Apparently, Margulies established Triad, a phony business through which he funneled clients’ money.  “He was extremely cleaver”, Uphoff said.  “We are stunned, of course.  Dismayed”, Uphoff added.

A recent article, “Judge Reverses Course, Approves Contingency Fee in Staten Island Ferry Disaster Case” reports that a federal judge ruled that a Manhattan attorney is entitled to the full one-third fees for his work in securing a $18.3 million verdict in a case stemming from the 2003 Staten Island Ferry disaster.  The attorney, Evan Togan, has been fighting for nearly two years to have his one-third retainer fee agreement upheld.  “The fee in the retainer agreement is confirmed and supported by the client as one he freely agreed to and now wishes to pay in full,” the judge wrote in McMillian v. City of New York. 

But the judge also ordered the difference between the reinstated fee and the reduced fee – i.e., 13 percent of the net award, or approximately $2.7 million – to be placed in escrow for possible payment to the attorneys who oversaw the liability phase of the ferry litigation.  There is pending litigation over claims for a portion of the fee by those attorneys, the judge said.  “Their work allegedly resulted in rejection of New York City’s claim of limited liability under maritime law,” Judge Jack B. Weinstein wrote.  “The benefits of that aspect of this quasi-class action litigation allegedly accrued to hundreds of injured claimants, including the client.”

A recent NLJ article, “Law Firms Resort to Suing Their Clients to Collect Fees” reports that many law firms are reluctantly suing their former clients to collect unpaid attorney fees.  “It’s not something we do lightly,” said Julia B. Morris, managing partner of O’Connell, Flaherty & Attmore in Hartford, Connecticut.  The firm has been suing clients in court since 2008 and has 29 pending cases seeking about $523,000 in unpaid fees.  In the past two years, the firm has closed at least 11 fee dispute cases seeking about $145,000, with some claims going to trial and other settling beforehand.  Another law firm, Pullman & Comlet has six fee dispute cases seeking at least $141,000 in unpaid attorney fees.  And the Hartford office of Bingham McCutchen is seeking $764,000 in fees from a former client. 

On top of the fight over fees, there is interest that has accrued over the years that firms are trying to recover as well.  Bill Jawitz, a law firm consultant strong argues against suing former clients over fees.  “Suing clients can lead to bad publicity for the firm and often invites counter-claims from clients suing for malpractice.”  Mediation or arbitration fee dispute programs are considered the best and most cost effective way to resolve a fee dispute.

A recent blog posting “Two Firms Sue Libya for $4.9M in Legal Fees” in BLT: The Blog of the Legal Times reports that two law firms filed suit against the government of Libya, seeking more than $4.9 million in unpaid legal fees and expenses related to defense work in a slew of terrorism-related cases.  The complaint claims Libya failed to make good on a 2008 settlement in which it promised to pay about $4.9 million to Paris-based Cabinet Sefrioui and Washington-based Arman Dabiri & Associates for their work handling lawsuits accusing the country of supporting terrorist attacks, including the 1988 bombing of Pan American Flight 103 over Lockerbie, Scotland.  The 2008 settlement agreement was intended to cover “all outstanding fees and expenses” for Cabinet Sefrioui and Dabiri & Associates.

Billing attorneys should submit his/her own opinion on the amount of a reasonable attorney fee.  The attorneys in the litigation are considered “experts” on the work they did and the reasonable value of it.  However, litigating attorneys are not experts on prevailing market rates, customary law firm billing practices, billing judgment, effective litigation management practices, and a host of other factors that affect reasonable attorney fees.  Qualified attorney fee experts have years of substantive experience on reasonable attorney fees and have provided expert reports, opinions, and testimony on the reasonableness of attorney fees in a variety of cases.  An expert opinion on the reasonableness of attorney fees from a qualified fee expert can move attorney fee figures significantly. 

Not only can a fee expert point out the strengths and weaknesses of your fee invoices and billing records, but can help you settle your case.  An expert opinion on the reasonableness of attorney fees from a qualified fee expert can be the biggest asset you have in settling the case.  Only an opinion from a well-credential, qualified fee expert can make the opposing counsel tell his/her client about the chances of taking the matter further.  If the case does not settle, your fee expert can help you win at trial.  Attorneys should tell their clients about the benefits of hiring and using an expert on attorney fees early in a case and how those benefits outweigh the expense.  

Source:  Leonard Bucklin, Attorney Fee Awards: A Handbook for Attorneys

A court awarded $45,000 in attorney’s fees in an ERISA case in which the claimant recovered just $650.  In Tomasko v. Ira H. Weinstock, the U.S. Court of Appeals in Philadelphia ruled that attorney fees need not be proportional to the amount of the judgment in order to be reasonable.  Furthermore, the court observed, a considerable portion of the fees awarded in this case were incurred due to the employer’s choice to fight “tooth and nail” despite the minimal stakes involved. (Both parties were lawyers whose dispute began when one left the other’s employment to form his own practice.)  The court conceded that where an ERISA claimant achieves only a partial victory on the merits (as in this case), the attorney fee award must be reduced accordingly.  However, the record indicated that the district court did make the necessary reductions.

An article, “Jury Trials-Reasonable Attorney Fees and Expenses” in the DRI’s For the Defense written by Gene F. Zipperle and Timothy D. Martin of Martin Ogburn & Zipperle in Louisville, Kentucky raises this question.  The article concludes, “Although entitlement to attorneys’ fees may be a jury issue, most courts considering the right to a jury determination on the amount of attorneys’ fees pursuant to a contract have found the issue to be one traditionally viewed as equitable in nature and particularly appropriate for determination by the court”.

This week, NALFA registered as a 501(c)(6) tax-exempt organization with the I.R.S.  The 501(c)(6) is reserved for professional and trade organizations (associations and societies) characterized around a common business interest.  501(c)(6) organizations are business leagues specifically designed to promote and improve a particular line of business (i.e. legal fee analysis).  As a non-for-profit business league, annual membership dues and CLE sponsorship contributions may be tax deductible as a business expense, not as a charitable contribution.

L.A. Attorney Fee Litigation Conference: “It Pays To Be Reasonable”
Southwestern Law School
Los Angeles, CA
June 24, 2010
Noon-5pm

It’s back by popular demand!  NALFA is hosting the 2^nd Annual L.A. Attorney Fee Litigation Conference: “It Pays To Be Reasonable” this summer in Los Angeles.  This CLE conference is one of the nation’s most comprehensive programs on attorney fees.  Top trial lawyers, litigators, and attorney fee experts come together to network and discuss the latest issues and developments on attorney fees and legal billing.

The Chicago Tribune reports that its parent company, the Tribune Company, has amassed over $138 million in legal fees for its Chapter 11 bankruptcy protection.  That amount equals one quarter of the media company’s cash flow from last year.  According to the newspaper report, Sidley Austin, the company’s lead attorney, has billed over $25 million.  During the last 15 months, the law firm has had 160 people working on the case, who have collectively billed 4.6 years of time at an average hourly rate of $500.  The report also shows a handful of partners pulling down top hourly rates that range from $925-$965.  Included in the report, among other things, was $1.2 million billed to the Tribune Company for the time spent preparing the legal bills.

U.S. District Court Judge Alvin K. Hellerstein in Manhattan scuttled a proposed settlement of lawsuits filed by more than 10,000 Ground Zero workers seeking compensation for health problems triggered by their exposure to ash and dust spewed into the air after the 9/11 terrorist attacks.  The litigation has lasted over eight years and in the proposed settlement would have paid plaintiffs $657.5 million using money from a federally funded insurance company.  Judge Hellerstein said the settlement was not enough and he was taking “judicial control” over the settlement, according to reports by the New York Times.  Judge Hellerstein expressed concern over the attorney fees, saying the proposed one-third attorney fees would take “a very large bite” out of the settlement to go to thousand of rescue workers who braved their lives in this nation’s worst terrorist attack.

A recent NLJ article, “Former Associate Claims Sedgwick Shortchanged Her on Fee” reports that Megan Doan, a former associate at San Francisco based Sedgwick Detert Moran & Arnold sued her former employer over breach of contract, alleging the firm stiffed her out of money it owed her for bringing in a lucrative client.  The lawsuit claims that Sedgwick violated its associate fee sharing policy when it refused to pay her $32,000 for originating a commercial litigation matter from the renewable energy company UPC Solar Management, LLC.  According to the complaint, Sedgwick’s associate and special counsel fee sharing agreement called for originating attorneys to receive 10% of the collected fees with no more than 5% of the total written off.  The policy calls for fee sharing to be at the discretion of the managing partner when more than 5% of the total fees and disbursements are written off.

A recent article, “Greenberg to Repay $3.2 Million in Fees due to Ex-Partner’s Bill-Padding” reports that Greenberg Traurig agreed to pay Calumet Park, a southeastern suburb of Chicago $3.2 million for overbilling from its former government affairs partner Mark McCombs.  City attorney for Calumet Park Burt Odelson estimates that only 10 percent of the fees billed by McCombs were legitimate.  The fees date back to 2002 for McComb’s work as economic development counsel, special village attorney for investigations, and administrative hearing officer for Calumet Park.  McCombs immediately resigned from his position advising Calumet Park and was terminated by Greenberg after an internal investigation revealed the inflated legal bills.  Calumet Park Mayor Joseph DuPar said, “Greenberg Traurig made things right as it became aware of the problem.”  He added, “We believe everyone, including the law firm, was deceived by McCombs.  They are doing the right thing and helping a community that needs the help.”

The dispute over $12 million in attorney fees McGuire Woods claims it is owed for its work as plaintiff’s counsel in the Bar/Bri class action litigation has gone to the 9^th U.S. Circuit Court of Appeals.  The underlying class action alleged that Bar/Bri and its parent company West Publishing Corp. conspired with Kaplan to divide the legal testing market consumer base by reserving the LSAT market for Kaplan and the bar market for Bar/Bri.  The case eventually settled for $49 million with about 300,000 Bar/Bri test takers receiving $125.  The U.S. District Court in California eliminated all the firm’s attorney fees over an apparent conflict of interest.  McGuire Woods has received no attorney fees to date, but was granted payment for their expenses which total $1.2 million.

A recent article, “Quantum Meruit Gives N.J. Firm Clean Sweep in Fee Collection Suit” reports that a New Jersey Appellate Division court ruled recently that a New Jersey law firm, stiffed on its fees, can collect $116,000 from its corporate client.  The ruling overturned a low court that absolved four shareholders of liability.  The ruling applied the quantum meruit doctrine which requires that services were performed in good faith, that services were accepted by the person for whom they were rendered, that the plaintiff reasonably expected compensation for performing the services, and that the value of services is reasonable.  “To satisfy the element in question, it is only necessary to establish that the defendants accepted the benefit of the services; Cole Schotz was not required to show that each defendant intended to pay for the services rendered,” the appeals panel said.  The appeals court remanded the case for entry of a judgment finding the corporate and individual clients jointly and severally liable for the outstanding bill.

A recent article, “Former Client Sues Gibson Dunn Over $1.3 Million in Fees” reports that California venture capitalist Elliott Broidy has sued Gibson Dunn & Crutcher over $1.3 million in fees the firm seeks for representing him in a “pay-to-play” scheme involving his company, Markstone Capital Group, a private equity firm and New York state officials.  Broidy pleaded guilty in December to a felony count of rewarding official misconduct and admitted that he “orchestrated the investment by lavishing state officials and people connected to them with trips and gifts worth nearly $1 milion.”  In his suit, Broidy claims that any legal fee dispute should be handled in California, where his relationship with Gibson Dunn was initiated, not in New York where the conflict is set for arbitration proceedings.  Broidy, now represented by California-based Michelman & Robinson, also claims that Gibson Dunn is not entitled to any legal fees because it committed fraud by failing to obtain appropriate conflict waivers while representing him.

An recent NLJ article, “Law Firms Protest Lehman Fee Committee’s Cuts in Legal Bills” reports that three law firms (Milbank Tweed, Jones Day, and Curtis Mallet) filed papers this week objecting to cuts in their legal bills for their work in the Lehman’s bankruptcy.  Since Lehman filed for bankruptcy in September 2008, fifteen law firms have billed the Lehman Brothers estate more than $300 million in total fees and expenses.  The fee cuts were made by the Lehman’s fee committee, headed by Kenneth Feinberg, the Obama administration’s bailout pay czar.  Feinberg slashed Curtis Mallet’s $4.8 million bill for a four month period by about $178,000.  The firm protested the cuts and Feinberg agreed to put $29,000 back onto the firm’s bill.  Jones Day billed the Lehman estate $9 million over the same four month period.  Feinberg cut the Jones Day bill by $412,000 because his findings included nearly $8,000 in first-class flights when its lawyers were suppose to fly coach and the firm exceeded the $20 per person limit on overtime meals by nearly $2,500 over those four months.  Jones Day protested the cuts and Feinberg compromised with a reduction of $293,000.

Reuters reports that a federal appeals court ruled on Monday that insurer Lloyd's of London must pay claims related to alleged swindler Allen Stanford’s legal defense.  The article, “Court says Lloyd’s Must Pay Stanford Legal Fees” reports Stanford and three former colleagues sued Lloyd’s after the firm stopped providing coverage under a directors and officers policy citing a money laundering exclusion.  The appeals court upheld the district court’s ruling that Lloyd’s must continue to pay costs and expenses that had been submitted by Stanford and his attorneys, but the U.S. Court of Appeals for the Fifth Circuit in New Orleans sent the case back to the U.S. District Court in Houston for additional arguments on the coverage question.  “The underwriters are enjoined from refusing to advance defense costs as provided for in the D&O policy unless and until the court ‘determines in fact’ by clear and convincing evidence…” that money laundering occurred, the ruling said.

Acting on behalf of the attorney fee practice and in the interests of attorney fee jurisprudence, NALFA has filed an amicus curiae brief in the Supreme Court of California in support of the petition for review in Pipefitters v. Oakley.  The brief, written by NALFA panelist Aashish Y. Desai of Mower, Carreon & Desai, LLP in Irvine, California, expresses concern that the Courts of Appeal are conflating two distinct theories for awarding attorney fees.  Desai writes that the decision to require pre-suit settlement notification to receive attorney fees to the substantial benefit doctrine “would come as quite a surprise to most class action fee experts and would render this Court’s decision in Vasquez v. State of California, 45 Cal.4^th 243, 247 (2008) pointless.” 

Desai continues, “In California, the substantial benefit doctrine was ratified and recognized as “well established” by this Court’s analysis in Serrano v. Priest, 20 Cal.3d 25, 38 (1977).  While the private attorney’s general exception may be implicated by the common benefit rationale, it is not the same.  For example, there is no requirement that the attorney’s fees under the substantial benefit doctrine come from a separate fund, nor is there a requirement that the plaintiffs prove that they prevailed in the underlying lawsuit.  The substantial benefit theory is simply rooted on the equitable notion that if you benefit based upon someone else’s hard work, you should have to share in the costs and expense of the labor – no free riders.  This is where Oakley goes wrong.”

The Petition for Review was written by Kevin K. Green of Coughlin Stoia Geller Rudman & Robbins, LLP.

A recent article, “Court Tosses Fee Award, Saying Trustee Overpaid for Rolls Royce Defense” reported that a California appeals court has snatched away $5 million in fees from attorneys at three top law firms.  The 4^th District Court of Appeal ruled that the trail court erroneously “rubber stamped” the fee award from attorneys at Loeb & Loeb, Jones Day, and Greenberg Traurig.  The three-judge panel said that the firms’ client, Patrick Donahue, had embarked on a “spare no expense strategy” by hiring three firms at once.  The panel ruled that although the client’s strategy may have benefited him, it was questionable whether it benefitted the Donahue trust.

Regarding attorney fees that the firms amassed in defending Patrick Donahue, the appeals panel appeared skeptical. “[S]imultaneous representation by multiple law firms posed substantial risks of task padding, over-conferencing, attorney stacking and excessive research,” the panel wrote.  The judges noted that one Jones Day associate alone billed $1.5 million.  Richard Bridgford, who represented Michelle Donahue at trial, said that the defense fees were excessive.  “I’ve never understood how it benefited the trust to have three law firms representing the former trustee against my firm,” said Bridgford.

A recent article, “Legal Fees at Add to Toyota Recall Costs” reports that the Toyota recall “could cost Toyota more than $2 billion.”  The article reports at least 41 class action suits have been filed against Toyota, seeking damages for car value loss and at least 13 individual lawsuits claiming deaths and injuries caused by unwanted acceleration of vehicles.  “Toyota customers will demand cash”, said lawyer Michael Louis Kelly who has filed two such suits in California, but acknowledged “I don’t expect them to reimburse for the lost value of these cars.”  “It important to distinguish the personal injury cases from the product-disappointment or lemon cases”, said law professor Carl Tobias of the University of Richmond in Virginia.

Toyota Vice-President Mike Michels said the company did not have an estimate on the potential litigation costs.  He said the company has liability insurance, without elaborating on its extent, and that it doesn’t cover warranty costs, which were budgeted before the recalls.

A Los Angeles Superior Court judge ruled recently that over $9 million in Glaser, Weil, Fink, Jacobs, Howard & Shapiro legal fees/costs (formerly known as Christensen, Glaser) was reasonable compensation for handling large, complex underlying litigation.

Attorney fee expert and NALFA member Ken Moscaret, Esq. (who testified successfully in the Enron case in 2008) submitted expert testimony at trial in support of the reasonableness and efficiency of Glaser, Weil's multimillion-dollar fees.

Glaser Weil represented a national bank as a trustee in the underlying litigation. Certain trust beneficiaries later sued the bank, claiming the bank had paid Glaser, Weil unreasonable amounts of compensation for litigation services on behalf of the trust.

Ken Moscaret focused his expert testimony to the L.A. trial court on several "big-picture" fee issues, including the following points:

(1.) The total dollar value potentially at stake in the underlying litigation (involving a well-known waterfront shopping center in San Diego) was many times greater than the actual amount of Glaser, Weil's own fees. Mr. Moscaret opined that there was a rational cost-benefit relationship between the economic value at stake in the underlying litigation versus the legal fees expended.

(2.) Glaser, Weil had repeatedly obtained successful results and outcomes against its opponent in the underlying litigation over the 7-year pendency of the case.

(3.) The underlying litigation was extremely complex and demanding, and required very sophisticated, aggressive lawyering by Glaser, Weil against a tenacious opponent.

(4.) Glaser, Weil's bank client understood how expensive the underlying litigation would be, was kept fully informed and involved in litigation decisions by Glaser, Weil, and approved all of Glaser, Weil's fees.

(5.) Glaser, Weil took concrete, affirmative steps to handle, manage, and staff the underlying litigation in an efficient manner, and exercised billing judgment.

NALFA member and attorney fee expert Brand Cooper helped a California court identify unreasonable attorney fees and expenses in Alma Alfaro v. Nomad Village Inc. The prevailing plaintiffs were seeking over $2.5 million in fees and expenses including a 2.0 lodestar multiplier. Brand Cooper of Cooper & Bruning, LLP in Pasadena, California was retained by the non-prevailing defendants to analyze the plaintiffs' legal billing entries. In a Tentative Ruling, the court cited Brand Cooper's Expert Report & Opinion several times. The court agreed with Cooper's expert analysis and significantly reduced fees and expenses in several areas. Here are just a few:

"Cooper calculated that 2,798.7 hrs of the total 4,937.6 hours in the case were "block billing". That is nearly 57% of the time entries. The court will apply an across-the-board 15% reduction in requested fees (after other deductions) based on this impediment to the reasonableness review."

"Cooper has analyzed these entries [vague and ambiguous entries] and determined they consist of 624.10 hours or $158,872 in fees. The court will reduce the requested fees by this amount."

"Cooper identified 121.45 time and $21,485 in fees devoted to deposition scheduling. This task does not require professional services. Again, plaintiff do not respond to this assertion the court will reduce fees in this amount."

In the Final Ruling, the court award plaintiffs $600,000 in fees and $25,000 in costs, which represents a major reduction from the original $2.5 million fee application.

In a recent New York Times Blog, "When Legal Bills Become a Cause for Dispute" by Peter J. Henning, professor at Wayne State Law School reports that Lloyd's of London is now responsible for paying up to nearly $100 million for the defense of R. Allen Stanford who was charged with conspiracy, securities fraud, and money laundering at Stanford Financial Group. White collar defense is an enormous expensive to defend, requiring a "staffing with a phalanx of partners, associates, and paralegals" and "defense costs can reach the ten of millions of dollars fairly quickly."

In the Stanford case, the court rejected the Lloyd's argument it did not have to pay the costs of defending criminal and civil cases because the policy included an exclusion from coverage when the officers are charged with committing money laundering. The blog reports that the decision by U.S. District Court Judge David Hittner in Houston "is one in a growing line of cases requiring the payment of attorney's fees for corporate directors, officers, and employees accused of wrongdoing."

Too many prevailing attorneys miss discovery of good fee award evidence. The time and fees of the attorney for the losing party is discoverable to establish the fee award to the prevailing party. Read the Stastny and Blowers cases.

"Although no single factor usually controls an award of attorney fees, the fees and expenses of defense attorneys are a significant factor in deciding whether the hours worked by plaintiffs' attorneys were reasonable and necessary." Stastny v. Southern Bell Telephone & Telegraph Company, 458 F.Supp. 314, 318 (W.D. N.C. 1978). [See also significant discussion in Stastny v. Southern Bell Telephone & Telegraph Co., 77 F.R.D. 662, 663-664 (W.D.N.C.1978).]

"I am persuaded by the reasoning of Stastny.... The amount of time spent by defendants' attorneys on a particular matter may have significant bearing on the question whether plaintiff's attorney expended a reasonable time.... Of course, in deciding to adhere to Stastny, I reject the approach taken in Mirabal and Samuel [the two federal cases most often cited to deny discovery of the defending attorneys time records]... The latter cases are both premised upon considerations which do not concern whether the information plaintiff seeks to discover is relevant to her claim for attorney's fees, but which relate to the proper evidentiary weight to be accorded such information....The mere possibility that the significance of the information which plaintiff seeks to discover may be discounted ....does not, however, mean that plaintiff should be precluded from obtaining the information." Blowers v. Lawyers Cooperative Publishing Co., Inc., 526 F.Supp. 1324, 1327 (W.D. N.Y. 1981). [See also, to the same effect, Henson v. Columbus Bank and Trust Company, 770 F.2d 1566, 1675 (11th Cir. 1985)("The district court abused its discretion in denying Henson's motion to compel discovery. While the concerns noted earlier regarding the relevancy of evidence of the other side's hours and fees are still prevalent, the trial judge may consider them as going to the weight of the evidence rather than its discoverability and admissibility.")]

Source: Leonard Bucklin. Bucklin has supervised litigation in 34 states, and is the author of the compact Attorney Fee Awards: a Handbook for Lawyers.

A recent article, "Federal Judge Calls Second Circuit's Approach to Calculation of Attorney Fees ‘Condescending'" reports that faced with a remand of an attorney fee award ordering him to "apply a presumption in favor of" the prevailing fee rate for attorneys in the Eastern District, Brooklyn federal Judge Frederic Block has affirmed in Luca v. County of Nassau his earlier fee award of $400 per hour for Hempstead litigator Fredrick K. Brewington. In the decision, Block wrote "that a reasonable paying client would gladly pay $400 per hour for an attorney of Brewington's caliber."

This recent decision centers on last August's circuit decision in Simmons v. New York City Transit Authority which held that "when faced with a request for an award of higher out-of-district rates, a district court must first apply a presumption in favor of the district's own prevailing rates." The widely quoted sentence in the Simmons holding was from Judge John M. Walker who wrote that defendants "should not be required to pay for a limousine when a sedan could have done the job", suggesting that Manhattan attorneys are "limousines" and Brooklyn attorneys are "sedans".