Toyota Motor Corp. has agreed to pay more than $1 billion to settle litigation over claims that its vehicles suddenly and unintentionally accelerated, according to court filings made public. Toyota has recalled more than 14 million vehicles worldwide due to acceleration problems in several models and brake defects with the Prius hybrid.
The settlement, pending approval from U.S. District Judge James V. Selna, is valued between $1.2 and $1.4 billion, which includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles. The total value of the settlement amounts to the largest settlement of this type in U.S. history in terms of dollars paid out and number of vehicles involved.
Toyota will pay no more than $200 million in attorney fees and $27 million in expenses to plaintiffs’ lawyers, pending final court approval. The total will be paid out to 25 law firms and about 85 attorneys.
The case is In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, U.S. District Court, Central District of California (Santa Ana).
For more information, visit http://www.toyotaelsettlement.com/.
Jim King of the King Law Corporation in San Diego joined NALFA’s Attorney Fee Practice Group. Jim King is a qualified attorney fee expert and fee dispute arbitrator and mediator. Jim King learned the intricacies of attorney fee disputes – and how to view them from the viewpoint of the attorney and the client – through long hours of arbitrating hundreds of these disputes. He was first appointed a fee arbitrator by the State Bar of California in the mid-1980s. A decade later, as Co-Chair of the San Diego County Bar Association Fee Arbitration Committee, he reviewed and approved every fee award in San Diego County for over a year.
Through this work and through his own practice, Mr. King developed a deep understanding of the State Bar’s Guidelines for deciding attorney fee disputes, and his understanding of the attendant case law concerning such is second to none. Outside of California, Mr. King has handled an eight-figure legal fee award dispute in Mississippi, and the American Arbitration Association once selected Mr. King to be Panel Chair (Chief Arbitrator) in a $50 million fee claim in Pennsylvania.
Mr. King has testified in trial, arbitrators, depositions, motions, and declarations about the reasonableness, or lack thereof, of fee requests in virtually every imaginable context. His testimony has concerned fee disputes involving some of the most prominent attorneys and law firms in the U.S., as well as Fortune 100 companies. The total amount of attorneys’ fees which he has considered as either an advocate, expert witness, or arbitrator exceeds $100 million.
For more information, please visit http://www.kinglawfirmcorporation.com/
A recent Thomson Reuters Legal story, “Should State AGs be Allowed to Use Contingency Fee Lawyers?” reported on the relationship between state AGs and outside counsel in public interest litigation. The article cites “tort reform” sources (i.e. U.S. Chamber of Commerce) who think this is a huge problem and are challenging the use of contingency fee lawyers in court. In fact, the tort reform lobby is even considering federal legislation to regulate states’ ability to hire contingency fee lawyers.
In a report, “Contingency Fee Plaintiffs’ Counsel and the Public Good? (pdf),” published by Husch Blackwell, reports that 10 states have passed legislation addressing AGs’ use of contingency fee lawyers – and six of them (Texas, Wyoming, Arkansas, Kansas, North Dakota and Alabama) have imposed limits on the use of contingency fee counsel. And judges in the half-dozen cases in which defendants challenged state governments’ use of outside counsel have overwhelmingly rejected arguments that defendants’ due process rights violated by such arrangements.
But the tort reform lobby is challenging the use of outside contingency fee lawyers in court. In Kentucky, tort reform advocates are challenging Democratic Kentucky Attorney General Jack Conway’s authority to hire contingency fee lawyers in Commonwealth of Kentucky ex rel. Conway v. Merck & Co., Inc. In that case, Kentucky had entered into a contract (pdf) with Garmer & Prather to investigate and litigate any Vioxx-related claims the state might have against Merck under its consumer protection act. Merck claimed the AG violated his duty to serve the public interest by ceding control of the case to private lawyers incentivized to maximize the recovery against Merck. As a result, Merck claimed its due process rights were compromised. Merck is represented by John Beisner of Skadden Arps, a noted tort reform advocate.
"The private attorney general doctrine is a fundamental principle in American jurisprudence. We need the plaintiffs' bar to take on these important public interest cases. This is a pure partisan effort to weaken the doctrine and serve corporate interests. Of course state AGs should be allowed to use outside contingency fee lawyers. In fact, with state budgets stretched thin it makes economic sense to only hire outside lawyers who work on a contingency fee basis,” said Terry Jesse, Executive Director of NALFA. “Working on a contingency fee basis saves taxpayers millions of dollars and ensures the people are protected against corporate wrongdoers,” Jesse concluded.
NALFA also reported on these issues in “House GOP Targets Contingency Fees in State AGs Contracts” and "Mississippi Bill Limits Fees for Outside Lawyers and AG's Powers"
A recent New Jersey Law Journal story, “Venable’s Fees Slashed in FTC Suit Settled Without Liability Admission” reports that a judge who balked at $2 million Federal Trade Commission settlement that included no admission of wrongdoing by the defendant, and then approved it with unusual conditions, has ordered that some of the money go to defense counsel Venable for fees. But U.S. District Judge Renee Bumb slashed the fee request by almost half, finding misplaced the firm’s reliance on a National Law Journal survey of billing rates to show its fees were reasonable, rather than submitting affidavits from lawyers practicing in the relevant market: southern New Jersey.
“[T]his court affords no value to that value to the survey because it (1) is unsworn and based on self-reported figures by firms; (2) provides only a broad range of attorney’s fees, without regard to the nature of the work performed or experience or skill of those performing it; and (3) contains no information as to reasonable rates for non-attorney personnel,” Bumb said in a decision handed down Monday. She held Venable was entitled to $129,095 in fees, a bit more than half the $250,077 it sought, on top of the $150,000 in retainer fees already paid.
The case, FTC v, Circa Direct, accused Circa Direct and its principal, Andrew Davidson, of using fake online news sites to market acai berry diet products. The sites, with addresses like onlinenews6.com, were designed to resemble legitimate news portals, featuring purportedly objective reports by fictional reporters and commentators about dramatic weight loss achieved using acai berry.
In February, the FTC asked Bumb to approve a settlement that would make an injunction permanent and impose an $11.5 million judgment, which would be suspended if the defendants provided honest information about their financial condition and turned over assets valued at more than $2 million. The settlement said it was without admission or finding of wrongdoing or liability. Although judges routinely approve settlements where no one admits doing anything wrong, Bumb balked.
On Sept 11, Bumb approved the Circa Direct settlement, swayed by the FTC’s argument that otherwise it would have to spend a lot of time and money trying the case. But she conditioned approval on the FTC creating a web page by Oct. 12 that would put the allegations “before the public for evaluation and discussion.” The settlement said a portion of the client funds Venable was then holding in escrow could be used to pay its “fees and costs reasonably incurred” for work in the case, contingent on FTC approval or court order.
The fee request included charges for Edwin Larkin, who typically bills at $800 per hour, fellow partner Thomas Cohn, $650, and associate Heather Maly, $416, all of them in New York. Venable discounted those rates to $600 for partners and $300 for associates, but they were still too high for Bumb. Saying she was exercising her discretion, she set rates of $400 an hour for Larkin and Cohn, $375 for a less-experienced partner, and $275 for Maly and another fourth-year associate.
She called those rates reasonable in light of other fee applications granted in the district and what the FTC conceded was reasonable in declarations it submitted opposing Venable’s fee request. She concluded that Venable was entitled to a total of $279,095, $150,000 of which had already been paid, resulting in the $129,095 award.
A recent Penn Record story, “Judge Awards $7.5 Million in Lawyers’ Fees in Processed Egg Products Antitrust MDL,” reports that the federal judge in Philadelphia who is overseeing the Processed Egg Products Antitrust Litigation has granted a plaintiffs’ motion seeking $7.5 million in lawyers’ fees and nearly a half-million dollars in costs and expenses tied to the multi-litigation, class action litigation. In a Nov. 9 memorandum and order, U.S. District Judge Gene E. K. Pratter, sitting in the Eastern District of Pennsylvania, awarded counsel representing the direct purchaser plaintiffs in the case $7.5 million along with accrued interest, and also awarded reimbursement of expenses in the amount of $443,944, along with accrued interest.
The plaintiffs in the litigation, director purchasers such as grocery stores, commercial food manufactures, restaurants and other food service providers, alleged a conspiracy among egg producers and trade groups to manipulate the supply of egg producers, thereby affecting the domestic prices of those goods. The attorneys’ fees represent 30 percent of the common fund created by the settlement agreement between the direct purchaser and defendants Moark, LLC, Norco Ranch Inc. and Land O’ Lakes Inc.
Final approval of the settlement was given by the court about four months later, with the agreement providing $25 million in monetary relief to the class members, and obligating Moark to cooperate with the plaintiffs’ preparation for and prosecution of their case, the judicial memorandum states.
The judicial ruling states that the antitrust litigation has been exceedingly complex, expensive and lengthy. The memorandum states that the court determined that lawyers with 35 different firms spent a collective 22,772.81 hours working on the litigation through Fed. 28, 2011, which was the day the court held a final fairness hearing on the Moark settlement.
“Given the complexity that necessarily accompanies consolidated antitrust litigation and the duration of the case, the Court finds that this factor favors granting the motion,” for attorneys’ fees, the judge wrote. “The amount of time spent on this case prior to final approval of the settlement most likely reflects the complexity of Plaintiffs’ claims, not the inefficiency of their counsel. “Presumably, the thousands of hours counsel spent working on this matter prevented those individuals from litigating other cases.” The judge continued. “This factor thus strongly favors granting the motion for attorneys’ fees.”
A recent BLT Blog post “Jones Day Sues Former Client Vizio for $6 Million in Fees” reports that Jones Day is suing former client Vizio Inc. in Washington federal court, claiming that the consumer electronics corporation owes the law firm more than $6 million in attorney fees. According to a complaint filed in U.S. District Court for the District of Columbia, Jones Day did intellectual property work for Vizio from May 2008 to October 2012. The firm alleged that Vizio, proportedly unhappy with how a patent prosecution had played out, refused to pay invoices from June through November of this year.
Jones Day is seeking $6,725,981 in fees, plus interest. According to the suit, about $1.7 million of those fees were for work unrelated to the patent matters. According to the complaint, Vizio hired Jones Day in May 2011 to bring complaints for patent violations against nine entities before the International Trade Commission. After filing the ITC action, some respondents settled with Vizio, but others did not. Two respondents filed a countersuit against Vizio; Jones Day said in the complaint that firm lawyers warned Vizio of the possibility of a countersuit.
Before Vizio’s case and the countersuit were suppose to go to trial, Jones Day said that it negotiated a settlement that would pay $4 million Renesas Electronics Corporation and Renesas Electronics America, which had pursued the countersuit. Vizio was unhappy about having to pay Renesas and argued that Jones Day should have to cover the cost of the settlement. Jones Day says that Vizio claimed they were never told that Renesas would be named in the original complaint, an allegation that Jones Day denied.
“This excuse for not paying has no basis in fact. Jones Day lawyers who worked on the ITC action and the Renesas countersuit recall clearly and specifically informing Vizio management on more than one occasion who would be named as respondents in the ITC action and why,” the firm claimed in its suit.
The U.S. Supreme Court has agreed to decide whether a party whose petition under the National Vaccine Injury Compensation Program was dismissed as untimely may recover an award of attorney fees and costs from the government.
In the underlying case, the plaintiff claimed she developed multiple sclerosis after receiving a series of Hepatitis-B vaccinations. In 2005 she filed a claim under the Act, but the claim was dismissed because it was filed more than 36 months after the first symptoms of MS occurred in 1997. She appealed to the Federal Circuit, which reversed the district court and ruled that her claim was not time barred because at the time her symptoms began the medical community at large did not recognize the link between vaccines and her injury.
On en banc review, the court held that the Act’s statute of limitation is not jurisdictional and that some claims brought under the Vaccine Act are subject to equitable tolling. However it concluded that the plaintiff’s claim did not meet the equitable tolling criteria and reversed again, dismissing her petition as untimely.
The plaintiff then sought an award of attorney fees and costs, arguing that although she did not untimely prevail on the merits of her claim her appeal led to a precedential ruling that potentially opens the door for others who would have been precluded from seeking redress under the Act.
The Federal Circuit agreed, holding that “a petitioner who asserts an unsuccessful but non-frivolous limitations argument should be eligible for a determination of whether reasonable attorneys’ fees and costs incurred in proceedings related to the petition should be awarded,” and remanded the case. The Supreme Court granted the government’s petition for certiorari and will hear the case later this term.
Sebelius v. Cloer, No. 12-236. Certiorari granted: November 20, 2012. Ruling below: 675 F.3d 1358 (Fed. Cir. 2012).
NALFA also reported on attorney fees in vaccine cases in, “Federal Circuit Denies Laffey Matrix Rates in Vaccine Cases.”
NALFA would like to welcome Steven Tasher, Co-CEO and Managing Director of Wyatt Partners, LLC as the newest member of the Attorney Fee Practice Group.
Wyatt Partners’ primary focus is its program aimed at the evaluation and control of legal fees and costs. In the field of Legal Fee Expert Analysis, Wyatt has the expertise and credentials to testify as an expert and provide opinions on law firm’s/law firm’s clients’ behalf in areas including, but not limited to:
Overall reasonableness of legal fees and costs;
Detailed analysis of legal fees and expenses;
Law firm billing rates;
Issues regarding law firm retention/selection processes; and
Issues involving coordinating counsel/liaison counsel.
Wyatt Partners’ expertise also encompasses a program to review and audit corporate legal fees in complex litigation – a program that has been highly successful in cost savings and cost avoidance. Additionally, the company has developed a litigation budget and support program that has a proven track record of dramatically reducing litigation spend. Wyatt Partners offers a comprehensive, focused, and structured program to control litigation costs and includes:
Comprehensive evaluation of the current litigation process and costs;
Creating fee agreements and guidelines which incorporate cost saving and methodologies;
Establishment of a litigation planning process and monitoring system;
Creating a dedicated Budget Group to track and trend legal spend;
Implementing a Budget Charter committed to cost savings;
Utilizing appropriate cost-effective technology solutions; and
Establishing programs to review and control the cost of third party vendors.
For more information, please visit Wyatt Partners at http://www.wyattpartners.com/
Federal courts routinely determine fee petitions for prevailing parties in various fee-shifting cases. A recent opinion from Magistrate Judge Denise LaRue illustrates guiding principles here. In M.T. v. Accounts Recovery Bureau Inc., LaRue issued a report and recommendations on fees in a Fair Debt Collection Practices Act (FDCPA) case. Plaintiff was a prevailing party based on accepting defendant’s offer of judgment, and sought fees and costs pursuant to the act totaling $3,230. Over objections challenging the claimed hourly rate of $250 and the reasonableness of some of the work, LaRue determined and recommended that the total award be $2,710. That much is unremarkable, but the 13-page opinion provides a good current summary of this area of federal practice and some useful insights for plaintiff and defense alike.
First, the court explained the general standards, writing “The Supreme Court has recognized that the lodestar method – the product of a reasonable hourly rate and the number of hours reasonably expended on the litigation – yields a fee amount that is presumptively reasonable. The Court may exercise flexibility to ‘adjust that figure to reflect various factors including the complexity of the legal issues involved, the degree of success obtained, the public interest advanced by litigation.’ The party seeking the fee award bears the burden of proving the reasonableness of the hours worked and the hourly rates claimed.” LaRue also noted that the “Seventh Circuit recognizes that fee awards should include time that attorneys reasonably spend on fee disputes.”
Second, as the reasonableness of hourly rates, LaRue observed, “Generally, a reasonable hourly rate for an attorney is based on what the attorney charges and receives in the market from paying clients for the same type of work. Plaintiff bears the burden of producing satisfactory evidence that the hourly rate is reasonable and in line with those prevailing in the community. If plaintiff satisfies this burden, the opposing party must offer evidence setting forth ‘a good reason why a lower rate is essential.’”
Third, as to the reasonableness of the hours spent on the matter, LaRue went through each aspect of defense objections and recommended:
The time charged for preparation of the form complaint and for undefined “research” should be reduced;
The time charged for secretarial or clerical tasks should not be charged as attorney or paralegal time; and
The time spent in creating billing records after the fact to support a fee award is not compensable.
Finally, and notably for those on the defense side who confront this issue with insurers or corporate clients, LaRue determined that while filing matters in court is administrative time that was not compensable, e-filing is another matter. She explained, “However, the Court views the filing of electronic documents differently. Plaintiff points out that electronic filing requires court training and is not available to everyone.”
This article was written by John R. Maley of Barnes & Thornburg, LLP.
A recent Metropolitan News story, “Appeals Court Finds That ‘Legal Expense’ Connotes Attorney Fees,” reports that a contract providing that in the event of a dispute, the prevailing party would receive recompense for its “legal…expenses” is sufficiently certain as to require an award of attorney fees to the victor, the Court of Appeals for Division Two held. Justice Judith Ashmann-Gerst wrote the opinion.
In Dickerson Associates v. ShinYoung 3670, the appellate, Donald F. Dickerson Associates, Inc, successfully sued ShinYoung 3670, LLC, for unpaid fees incurred in connection with a construction project, but Los Angeles Superior Court Judge John A. Kronstadt declined to award attorney fees. He ruled that the fee-shifting provision in the parties’ contract would not support such an order.
Wording of Contract
The contract read: “In the event of legal of collection expenses in connection with this agreement, [defendant] agrees to pay such expenses.” Kronstadt relied on the wording of California Civil Code 1717(a) which provides:
“(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the prevailing party on the contract, whether he or she is the party specified on the contract or not, shall be entitled to reasonable attorneys’ fees in addition to other costs.”
The jurist noted that the contract does not “specifically” provide for an award of attorney fees.
Explaining the reversal, Ashmann-Gerst wrote: “We cannot imagine what the phrase ‘legal…expense[s]’ would include if not attorney fees. At the hearing on plaintiff’s motion, defendant’s counsel suggested that ‘[l]egal expense’ could be limited to litigation costs, but we are not convinced. Litigation costs are recoverable by a prevailing party as a matter of right…Thus, a contractual provision allowing solely for the recovery of costs would be unnecessary, rendering this paragraph ineffectual and superfluous…
In Evanston Ins. Co. v. MGA Entertainment Inc., the Central District of California dismissed Evanston Insurance Company’s subrogation claim against Mattel in the long-running trade secrets dispute between Mattel and Evanston’s insured, MGA Entertainment Inc., concluding that because an insurer stands in the shoes of its insured with respect to subrogation, Evanston was bound by the 14-day time limit on seeking attorney fees prescribed by Federal Rule of Civil Procedure 54(d)(2)(B). In so holding, the court rejected Evanston’s argument that it’s insured regarding payment of attorney fees.
MGA tendered defense of the underlying litigation to Evanston in October 2007. Following the April 21, 2011 jury verdict in the underlying litigation, the court ordered the parties to file any motions seeking attorney fees by May 5, 2011. MGA did so, and ultimately was awarded attorney fees and costs.
Following the February 2012 decision, in March 2012 Evanston and MGA entered into a settlement agreement to resolve Evanston’s obligations to its insured for attorney fees and costs. Later 2012, Evanston filed a complaint against Mattel seeking attorney fees, seeking a declaration that it was entitled to fees, and seeking a declaration that Mattel should be required to pay into court or into escrow a fee award.
The court dismissed Evanston’s claim for fees in light of the plain language of Rule 54(d)(2) (B). In particular, the rule requires a party seeking fees to file a motion for fees within fourteen (14) days of entry of judgment, in the absence of a statute or order providing otherwise. Because Evanston stood in the shoes of its insured MGA, and MGA was required to have filed any motion for fees by May 5, 2011, Evanston was required to do the same.
The court rejected Evanston’s argument that its cause of action for fees did not accrue until its March 2012 settlement agreement with MGA, an argument it seemed to find disingenuous. In particular, the court noted that Evanston had deliberately refused to pay its insured until after it was twice held to owe a duty to defend. Moreover, Evanston’s position would undermine the reasonable expectations of insureds and, as the court explained, would have the undesirable consequence of incentivizing insurers to defend their insureds until the insurer is confident that it can recover its expenses from the insured’s opponent in the underlying litigation.
A recent New York Law Journal story, “U.S. Trustee Program Narrows Proposal for Disclosure of Law Firm Bankruptcy Fees,” reports that the U.S. Trustee Program announced that its proposals extensive disclosure related to law firm fee requests would apply only to very large Chapter 11 bankruptcies. In narrowing the scope of cases to which the proposals would apply—to those with $50 million or more in assets and $50 million or more in liabilities as opposed to cases with a combined $50 million in assets and liabilities—the agency was responding to intense criticism from firms calling “burdensome” and “ethically unacceptable” the agency’s new recommendations for attorneys’ fee applications.
The trustee program has modified proposed guidelines (pdf) for disclosure of rates in non-bankruptcy practices, and said it would continue to seek budgets and staffing plans, either by consent of the parties or court order. Unchanged from the originally proposed guidelines, firms would still have to submit in their fee applications the number of rate increases since the inception of the case and disclose the effect of any rate increases on the total compensation a firm is seeking.
Some significant updates to the proposed rules are:
The increase in the asset and liability threshold. The agency also said that single asset real estate cases should be excluded, an exception not specified in the original guidelines.
Elimination of the proposal that firms disclose high, average and low rates and rates billed by other practices within the firm. That has been replaced by disclosure of group blended rates, and blended rates for non-bankruptcy matters, based on time billed or revenue collected.
Budget and staffing plans would be used only by consent of the parties or a court order and would not be mandatory.
The agency is encouraging the use of co-counsel for better staffing and fee efficiency. “These arrangements include using less expensive co-counsel for certain routine, commoditized, or discrete matters to avoid duplication, overlap, and inefficiencies.” It said.
As lawyers often advise their clients, any litigation involves some element of risk, and “there is no such thing as a slam dunk.” A recent California case illustrates that when attorney fees are on the line, the stakes are increased and litigants—and their counsel—need to evaluate carefully the risks before going all-in.
In Nemecek & Cole v. Horn (pdf), the California Second District Court of Appeals affirmed an attorney fees award, concluding a string of cases that started with a lot boundary line dispute between neighbors. By the end, the attorney at the center of these cases was more than $600,000 in debt after being ordered to pay attorney fees three separate times—once by an arbitrator and twice by two different trial court judges.
Attorneys Pursuing Unpaid Fees Risk More Than Just Losing the Case
Attorney Steven Horn was initially retained to represent a couple in a lot line dispute against their neighbors. Horn’s clients lost and failed to pay Horn’s invoice. Horn than sued his clients for unpaid fees. They counterclaimed for fraud.
“It’s almost universally the case that when attorney sue clients over fees, the clients think of something they didn’t like that their attorneys did, and they counterclaim,” observes Betsy P. Collins, Mobile, AL, co-chair of the ABA Section of Litigation’s Pretrial Practice and Discovery Committee. “Then you have a malpractice claim instead of just a fee claim,” adds Collins.
“Many attorneys and law firms are reticent to enter into fee disputes because of the danger of their reputations—if not their financial well being—from counterclaims,” notes Thomas J. Donlon, Stamford, co-chair of the Section of Litigation’s Appellate Practice Committee. “Even if the counterclaim is unsuccessful, the negative publicity that arises from allegations of fraud, malpractice, or malfeasance is more damaging than the amount recovered,” explains Donlon.
Horn retained Nemecek & Cole to represent him in litigation against his former clients. The case resulted in Horn being awarded $42,282.56 on his fee claim and a matching award for his former clients on their fraud counterclaim. These awards offset, resulting in a net judgment of zero dollars. Horn’s former clients, however, sought and were ultimately awarded $380,000 in attorney fees because “they were the prevailing defendants on the complaint.” Horn settled the case for $250,000 while it was on appeal.
Know When to Fold When Attorney Fees Are in Play
Horn, undeterred by his loss to his former clients or the hefty fee award, made another litigation gamble. This time Horn initiated arbitration against his former counsel, Nemecek, asserting that the firm’s negligence was the cause of the “disastrous results” in the litigation with his former clients. Nemecek counterclaimed for unpaid attorney fees that Horn owed to the firm.
“Having lost that first case so substantially, to then turn around and sue his next lawyer, really indicates that he didn’t analyze his situation very closely,” concludes Donlon. “When professionals are going to sue over fees, they better decide carefully what their risk is,” Collins warns. “When you’re not prevailing in a variety of forums, you are usually better off finding a different battle to spend your time on,” adds Bruce A. Rubin, Portland, OR, co-chair of the Section’s Alternative Dispute Resolution Committee.
Horn and Nemeck were awarded nothing on their respective claims asserted in the arbitration. The arbitrator, however, found that Nemeck was entitled to $289,028.95 in attorney fees and denied any offset claim by Horn, finding that “Nemeck was the prevailing party since they were granted virtually all the relief they sought on Horn’s claim.”
Know When to Run From a Fee Dispute
Horn, still determined despite his mounting loss, pressed on and filed a petition to vacate the arbitration award and to oppose Nemeck’s confirmation petition. The arbitration award was confirmed and, for the third time, Horn was ordered to pay fees. This time, he was required to pay his opponent’s “reasonable attorneys’ fees” in connection with the confirmation proceedings in the amount of $42,207.31.
After losing at arbitration and in the confirmation case, Horn played his last card and appealed the confirmation decision. He argued that the trial court abused its discretion because the fee award from the confirmation proceedings “was more than double the amount actually incurred” and the fee award should have been capped at the amount actually incurred. The appellate court disagreed, affirmed the trial court’s judgment, and permitted Nemeck to recover its costs for the appeal from Horn, which made Horn a four-time loser in litigation that all began with a lot boundary line dispute between neighbors.
While this case is exceptional, it teaches litigants fundamental lessons to keep in mind when attorney fees are on the table. “You need to talk to your client whether you’re on the plaintiff’s side or the defense side about the risks of being exposed to an attorney fee award to the other side. That’s a discussion that I’m not sure happens as often as it should,” says Edward A. Salanga, Phoenix, co-chair of the Section’s Expert Witness Committee.
“It’s not as simple as, well if we don’t win, my client doesn’t recover anything and maybe I don’t get paid it I’m on a contingency fee agreement. In some cases, there is an additional ramification actually exposing your client to a fee award,” explains Salanga. When attorney fees are in play, recognize, evaluate, and know the risks before gambling on litigation.
This article, “Attorney Gambles Chasing Fees and Loses Big” was written by M. Derek Harris of Carlton Fields and published in Litigation News. © American Bar Association. Reproduced with permission. All Rights Reserved.
A recent Legal Intelligencer story, “Judge Approves Nearly $144 Mil. in Avandia MDL Attorney Fees,” reports that the federal judge presiding over the diabetes drug Avandia MDL has approved the dispersal of up to $143.75 million in attorney fees. The fees make up to 6.25 percent of the estimated aggregate value of the settlements in the litigation. U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania also authorized that $10.1 million be held in reserve for the payment of future administrative fees and expenses.
Over 150 lawyers from over 50 plaintiffs law firms sought approval of the dispersal of attorney fees and costs undertaken for the common benefit of the entire mass tort litigation, including cataloging more than 30 million pages of documents, taking or defending 220 depositions, working with more than 20 expert witnesses, and “becoming educated on, and adept at addressing, complex medical and scientific issues,” Rufe said.
Between October 16, 2007 and February 14, 2012, “common benefit counsel and other members of their firms spent more than 134,000 hours preparing and litigating this case for the common benefit of all claimants,” Rufe said. “The time that common benefit counsel devoted to this case supports the reasonableness of the requested attorneys’ fees, as shown by a comparison to the hours spent in other super-mega-fund cases in which requests for attorneys’ fees have been approved.”
The judge conducted a cross-check of the lodestar of $55.3 million, which was calculated by multiplying the number of hours worked on the case by counsel’s reasonable hourly rates. The plaintiffs counsel billed $185 an hour for paralegals and rates for attorneys starting at $225 an hour and ranging up through $285, $380, $475 and $595 an hour, according to the 23-page opinion (pdf). Rufe said the plaintiffs counsel’s fees were reasonable in comparison to billable hourly rates in the Philadelphia market.
Rufe said the fee is reasonable when measured under any of the possible frameworks that the U.S. Court of Appeals for the Third Circuit would use to judge the fees. Rufe looked at the common fund analysis under Gunter v. Ridgewood Energy and In re Prudential Insurance Co. of America Sales Practices Litigation, which involved weighting factors such as the skill and efficiency of the attorney involved and the complexity and duration of the litigation; the Third Circuit’s common benefit attorney fees may be awarded if substantial benefit was conferred on every claimant and the fees were proportional; the managerial powers doctrine under which the federal judiciary has the power to manage docket and fashion a way to compensate attorneys who provide “class-wide services” and which also was discussed by the Third Circuit in Diet Drugs.
One way that the plaintiffs common benefit work was of substantial benefit was that the Food and Drug Administration’s “actions did not secure the payment of damages by [Avandia drugmaker GlaxoSmithKline] to injured claimants,” Rufe said. “Rather, payment was secured by the independent efforts of common benefit counsel, and only after a hard-fought battle with a well-represented opponent.” It was also reported that the individual plaintiffs steering committee members were each carrying costs of $750,000 to $1 million.
A recent The Recorder story, “Grewal Takes Red Pen to Legal Bills in Apple-Samsung Feud,” reports that U.S. Magistrate Judge Paul Grewal ordered Samsung Electronics Co. to pay $21,554 to Apple Inc. and Apple to pay $160,069 to Samsung as sanctions for separate discovery violations in their epic patent suit, Apple v. Samsung. To arrive at his sums, the San Jose magistrate slashed the hourly rates sought by Samsung’s lawyers at Quinn Emanuel Urquhart & Sullivan, which exceeded the rates requested by Apple’s lawyers at Morrison & Foerster.
It was clear from his 21-page-order (pdf) that Grewal, a former IP litigator, also had a sharp eye on sloppy billing practices. “Unfortunately, despite two opportunities to submit detailed and accurate supporting invoices, the parties have left the court to parse through bare descriptions of their attorney activities,” Grewal scolded. The magistrate appointed in 2010, specifically took issue with block billing that failed to detail how attorneys spent the hours they worked and with apparent overstaffing.
Grewal noted that one Quinn Emanuel associate, Curran Walker, billed 93.5 hours for “substantial assistance with all aspects of the preparation” of pleadings from Samsung. “How were those hours divided among the various tasks?” Grewal wrote. “Is it reasonable that Walker spent nearly two work weeks on a motion for sanctions when two partners, three other associates and innumerable contract attorneys were also staffed on the motion? The court can only guess at the answers to those questions because Samsung offers only the barest description of Walker’s activities.
Grewal also scrutinized 50 hours of work billed at $1,035 an hour by London-based Quinn Emanuel partner Marc Becker. “The court tends to find it unreasonable that a partner with almost 25 years of experience needed 50 hours to draft a 14-page motion and to review a 15-page reply, especially when five associates also billed 85.8 hours for the same motion,” Grewal wrote. Becker’s hourly rate fee settled at $800, after Grewal deflated his firm’s rates based on an annual survey from the American Intellectual Property Law Association. The highest hourly rate from a Quinn Emanuel associate was reduced from $620 to $470.
Attorney fees are a multi-billion dollar practice area in the U.S.
The attorney fee practice area is a new, highly specialized practice area that covers a range of matters where attorney fees at issue. This practice area covers 4 main areas:
Supporting or Challenging Attorney Fee Requests
Attorney Fee Dispute Litigation
Attorney Fee Dispute Mediation
Litigation Management & Legal Spend Programs
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A recent New Jersey Law Journal story, “J&J Shareholders’ Suit Settles; $10M in Fees, Costs Expected,” reports that Johnson & Johnson has agreed to ramp up oversight of subsidiaries and to pay up to $10.5 million in attorney fees and costs to settle a shareholders’ fraud and misconduct suit. The evaluative factors “strongly suggest that the proposed settlement is fair, reasonable and adequate,” U.S. District Judge Freda Wolfson said in approving the deal, In Re Johnson & Johnson Derivative Litigation on Oct.26.
In the underlying case, shareholder plaintiffs claimed the board of directors ignored red flags such as criminal investigations, civil suits, subpoenas and Food and Drug Administrative warnings over product recalls and alleged off-label drug marketing, kickback schemes and flouted manufacturing standards. The parties reached a settlement. Among other changes, J&J will have to centralize its compliance oversight and assign ultimate authority to its chief quality officer, rather than leave those functions to the subsidiaries.
Wolfson noted that judges have approved fee awards close to and, sometimes exceeding, $10 million in corporate governance cases. But she made no determination on the reasonableness of the fee request, instead appointing a special master to make a recommendation. As for the settlement, Wolfson said the factors in Girsch v. Jepson (3d Cir. 1975) – the goals of cutting down on time-consuming and expensive litigation – favor approval.
Plaintiff lawyers from six firms claimed more than 10,000 hours, and requested a total of $6.61 million in fees and $452,017 in costs. They are Carella, Byrne, Cecchi, Olstein, Brody & Agnello, with an $841,769 request; Robbins Geller Rudman & Dowd, $659,066; Kantrowitz Goldhamer & Graifman, $511,635; Bernstein Litowitz Berger & Grossmann, $1.15 million; Morris and Morris, $2.26 million; and Abraham Fruchter & Twersky, $1.65 million. The lawyers also asked the court to apply a multiplier of 1.5 to the lodestar, bringing the total fee request to $10 million.
A recent New York Law Journal story, “Civil Rights Firms Accused of Failing to Honor Fee Agreement,” reports that two prominent civil rights firms in New York are accused by a Washington, D.C. firm of cheating it out of a significant fee as part of a $3.75 million settlement in a wrongful death case. Catalano & Plache claims that Neufeld Scheck & Brustin and Emery Celli Brinckerhoff & Abady submitted court documents on settlement terms without naming Catalano as a participating firm.
The Catalano firm said it was asked to represent the estate of Emil Mann in a civil rights, negligence and wrongful death claim on behalf of his estate. The three firms signed a joint retainer letter, along with Mann’s son, who was the executor of his estate, according to the complaint. A retainer letter (pdf) attached to the complaint, dated May 23, 2006, provides that the client agrees “that any attorneys’ fees will be divided among the Firms,” which it named as Cochran Neufeld, Emery Celli and Catalano & Plache.
Specifically, the retainer agreement, on Emery Celli’s letterhead, provides that Catalano & Plache would receive 16.65 percent of the 33.3 percent attorney fees on the first $500,000 recovered; 15 percent of the 30 percent of the fees on the next $500,000; 12.5 percent on the 25 percent of fees on the next $500,000; and 10 percent of the 20 percent of fees recovered in the next $500,000.
In the wrongful death case, the parties agreed to about $2.37 million for compensatory damages; $1.19 million for legal fees; and $185,359 for attorney disbursements, for a total settlement of $3.75 million, according to court documents. But the Catalano firm alleges the New York firms claimed it was not entitled to a share of fees. Neufeld Scheck and Emery Celli filed documents in support of the settlement in Orange County, NY, Surrogate’s Court, and the New Jersey court “that failed to name Catalano & Plache LLC as counsel to the estate,” Catalano argues.
In June 2012, the U.S. District Court for the Northern District of Illinois entered partial judgment in favor of an insured against its insurer for unpaid defense expenses in Philadelphia Indemnity Ins. Co. v. Chicago Title Ins. Co. Among the defenses raised by the insurer in response to the insured’s motion for judgment was the unreasonableness of the defense expenses, and that the insured’s defense attorney had not complied with the insurer’s billing guidelines.
The court rejected the insurer’s argument regarding billing guidelines, observing that the insurer “provides no support for its indication that later-provided conditions can govern the amount to which an insured is entitled when those guidelines were not part of the original insurance contract” and, therefore, “any noncompliance with the billing guidelines does not render the fees legally unreasonable and does not otherwise affect the amount that [the insurer] owes.”
In ruling that the defense expenses were not unreasonable, the Philadelphia Indemnity court followed the reasoning of the court in Taco Bell Corp. v. Continental Cas. Co., and held that close review of the invoices was unnecessary because at the time the insurer incurred the defense expenses, it was “vigorously” denying that they had a duty to defend, thereby “providing a significant market incentive [for the insured] to minimize defense costs.”
In what the Philadelphia Indemnity court described as a “similar situation,” the Taco Bell court had held that when an insured incurs defense costs at a time when the insurer is contesting its duty to defend, the “resulting uncertainty about reimbursement” provides the insured with “an incentive to minimize its legal expense (for it might not be able to shift them); and where there are market incentives to economize, there is not occasion for painstaking judicial review.” The Philadelphia Indemnity court also awarded prejudgment interest on unpaid defense invoices.
A recent Connecticut Law Tribune story, “Firms Grow Bolder About Suing Clients for Unpaid Legal Fees,” reports that suing clients for unpaid legal fees could become routine as firms are growing more assertive about collecting overdue bills. “There was a time when a lot of firms would feel it was unseemly to bring an action against a client” regardless of the amount owed, said Martin Wasser, a partner at Phillips Nizer. “Firms are more aggressive in following up with bills than they’ve ever been,” said Wasser, whose firm is among the many that have filed suit to collect fees from former clients this year.
The New York Law Journal reviewed law firm collection suits against former clients filed in the past two months in Manhattan Supreme Court. Each week, between three and seven such suits were filed during the period. Several attorneys said lawsuits are a last resort and that whether to sue a client is decided on a case-by-case basis depending on factors such as amount owed, the length of the relationship, risk of counter malpractice suit, and whether the client can afford to pay.
Not all fee disputes wind up in court. The number of cases closed in arbitration and mediation programs overseen by the state court’s Attorney-Client Fee Dispute Resolution Program increased to 1,179 last year from 579 in 2004. The figures don’t capture disputes going to private ADR providers. Generally, attorneys can’t file suit against clients who have chosen to use the ADR program. The amount in dispute must be between $1,000 and $50,000, although it could be more if the attorney and client consent to arbitration.
Howard Koh of Meister Seelig & Fein which has sued clients for fees in the last year, said that before initiating litigation, the firm considers the client’s ability to pay, what the firm considers to be the value of its work and the client’s expectations of cost. “If we honestly and genuinely believe we had” not served the client well, “we would not bring suit,” Koh said. “When we bring a lawsuit we have made a decision that despite what the client may say after the fact, no malpractice occurred.”
Koh drafts and oversees collections suits at his firm in addition to his commercial litigation practice. “It’s not the most glamorous but it’s the straw I drew,” Koh said. Time spent on these cases, he recognized, is “time that could be spent billing existing clients and generating revenue that way.”
A recent Los Angeles Times story, “JP Morgan Sets Aside an Additional $684 Million for Lawsuits,” reports that JP Morgan Chase & Co., bracing for higher legal costs, set aside an additional $684 million in the third quarter for litigation expenses. Jamie Dimon, the bank’s chairman and chief executive declined to specify what led the bank to up its litigation reserves. “Obviously we’re in a litigious society,” Dimon said in a conference call with reporters Friday morning. “We’ve got a lot of mortgage suits coming, and others.” “We expect some litigation expenses going forward but hopefully it’ll come down over time,” he added.
The disclosure of the pre-tax expense, reported as the bank posted a 34% jump in third-quarter profits Friday, comes a week after New York Attorney General Eric Schneiderman hit JP Morgan with a lawsuit. The suit, brought as the first major action by a federal task force aimed at mortgage fraud and its role in the financial crisis relates to mortgage bonds sold by Bear Sterns, the investment bank JP Morgan purchased when it ran into trouble during the financial crisis.
Szaferman Lakind Blumstein Blader & Lehman v. Parise in Superior Court of New Jersey, Appellate Division, is summarized as follows:
Facts: Defendants retained Plaintiff attorneys in an underlying residential construction matter. Upon the submission of summary judgment motions in the underlying matter, defendants instructed their attorney to cease all legal work. The attorneys advised of the need to prepare for upcoming court events and trial.
Prior to trial, however, the underlying litigation was dismissed upon entry of a mutual release, which included the parties’ agreement to satisfy their respective counsel fees and costs. Despite this agreement, defendants paid only half of the outstanding legal fees and costs. In response to Plaintiff’s efforts to collect the remainder of their fees, Defendants filed an action for malpractice. Specifically, Defendants disputed the reasonableness of certain time entries, cited to alleged billing irregularities, and asserted that the fees charged were excessive for the work performed.
The lower court dismissed the malpractice claim for failure to obtain an expert report. Defendants appealed.
Issue: Is the reasonableness of attorney’s fees an issue of “common knowledge” or is an expert opinion necessary?
Ruling: An expert opinion is necessary:
Expert testimony is required of professional malpractice where the matter to be address is so esoteric that the average juror could not form a valid judgment as to whether the conduct of the professional was reasonable. This is because the duties a lawyer owes to his client are not known by the average juror.
The court concluded that Defendants’ alleged dissatisfaction with the amount of legal fees charged, supported only by their personal experience in paying other attorneys was not a sufficient factual basis for their malpractice claim. The court also rejected Defendants’ argument that the jury ought to disallow all contested charges, unless Plaintiff provides sufficient justification.
Lesson: An expert opinion is necessary to successfully dispute the reasonableness of attorney’s fees.
Hat Tip to: http://www.legalmalpracticelawreview.com
A recent Thomson Reuters story, “Plaintiffs’ Firms Plan for $150M in Fees in BofA Case,” reports that plaintiffs’ law firms at the center of the $2.43 billion class action settlement with Bank of America Corp are expected to apply for $150 million in attorney fees, a spokesman for the Ohio attorney general said Friday. The sum, while hefty, only amounts to 6 percent of the settlement, a relatively modest contingency fee rate for what is the largest recovery in a securities class action arising out of the financial crisis.
The firms have yet to file a formal fee request, which like the settlement, would be subject to approval by U.S. District Judge Kevin Castel in Manhattan. The law firms include Bernstein Litowitz Berger & Grossman, Kessler Topaz Meltzer & Check, and Kaplan Fox & Kilsheimer. The firms are expected to split the fees.
The litigation itself centered on allegations that Bank of America made false statements and omitted facts related to its 2008 acquisition of Merrill Lynch, subsequent losses it suffered and plan to award $5.8 billion in bonuses. Bank of America’s stock subsequently fell when facts about the merger emerged, the action claimed. Bank of America denied the allegations.
Attorney fee experts said the expected fee, while large was within the range of past massive class action settlements, if not smaller percentage-wise. The fee, if approved, works out to 6 percent of the settlement fund. The percentage is lower than the median in securities class action settlement of more than $500 million, or 11.1 percent, according to Renzo Comolli, a senior consultant with NERA Economic Consulting.
The case is In re Bank of America Corp Securities, Derivative, and Employee Retirement Income Securities Act (ERISA) Litigation.
A recent The New York Times story, “Adding Up the Government’s Legal Bills for Fannie and Freddie,” reports that the legal bills from former executives at Fannie Mae and Freddie Mac continue to pile up for the government. A decision last week by Judge Richard J. Leon of the U.S. District Court for the District of Columbia to dismiss a shareholder lawsuit against former Fannie Mae CEO Franklin D. Raines may provide a bit of relief from the legal bills. But more recent cases will require the government to pay to defend executive accused of misleading investors about subprime mortgages on the companies’ books that all likelihood will take years to resolve.
Like most public companies, Frannie Mae had a broad indemnification policy requiring it to advance the legal fees for executives accused of misconduct based on their work for it. When the government took over the company in September 2008, it affirmed that position and has continued to pay for the lawyers.
A report (pdf) issued in February by the inspector general of the Federal Housing Finance Administration, which oversees Fannie Mae and Freddie Mac, estimated that the legal fees paid on behalf of Mr. Raines and other executives totaled $97 million to that point, of which the government had paid approximately $37 million. Judge Leon has not yet decided whether to dismiss the case against the two other Frannie Mae executives. In addition, plaintiffs can appeal his decision on Mr. Raines, so the legal bills can certainly continue to add up.
A recent WSJ Law Blog post, “Ex-Goldman Programmer Seeks Legal Fees from Investment Bank,” reports that a one-time Goldman Sachs computer programmer, Sergey Aleynikov, sued his former employer for attorney fees and expenses. Aleynikov was charged in August with two felony counts by the Manhattan district attorney’s office related to his taking of the proprietary codes. His conviction was later overturned by a federal appeals court in February.
The suit, filed in New Jersey federal court against Goldman, seeks $2.38 million in attorneys’ fees and expenses for his prior criminal case and the advancement of legal fees for his current case. In the lawsuit, Kevin Marino, Mr. Aleynikov’s lawyer, said his client is entitled to have legal fees paid by Goldman because he was an officer of the company at the time of the alleged incident.
“Aleynikov exhausted his financial resources prior to his trial on the federal charges and owes a substantial sum of legal fees and expenses he incurred in his successful defense of those charges in the Southern District of New York and the Second Circuit Court of Appeals,” Mr. Mario said in complaint. “Thus, unless the court orders Goldman Sachs to honor its legal obligation to advance his legal fees and expenses to defend the State Charges, Aleynikov’s ability to defend those charges will be irreparably harmed.”
A recent BLT blog post, “Lawyers in Black Farmers Case Renew Request for $90M in Fees,” reports that the attorneys who secured a $1.25 billion settlement for black farmers in a high-profile discrimination case in Washington renewed their fee request for $90.8 million in legal fees, the highest amount allowed under the deal. The lead class counsel filed an updated fee request (pdf) in Washington’s federal court, arguing that the amount constitutes “fair and appropriate compensation for the enormous amount of work class counsel have performed” and for the results achieved in the deal.
The settlement, which Congress approved and the president signed, provides money to tens of thousands of black farmers who missed out on an earlier deal with the U.S. Department of Agriculture over claims of discrimination in loan processing. “The complexity of the settlement agreement that was reached demonstrates the skill level required by counsel to establish terms that would ensure that the claims of class members are resolved fairly, efficiently and with integrity,” the plaintiffs’ lawyers wrote in their fee petition.
The Justice Department has said in court papers in the litigation that the government opposes an award of $90.8 million in fees. In the updated fee petition, the plaintiffs’ lawyers said they conducted 380 group meetings in 66 cities during the claim process. The petition said class counsel have reported more than 80,000 attorney hours in litigation and in the implementation of the claims process.
U.S. District Judge Paul Friedman last year approved the settlement, kicking off the claims process. The settlement set the fee award between 4.1 percent and 7.4 percent. The law firms and solo practitioners in the case have a separate fee allocation agreement (pdf) to divide up any fee award. The lead class counsel firm, Crowell & Moring is in the group that would keep and divide 75 percent up of any fee award.
For more information, visit https://www.blackfarmercase.com//
There's been a lot of hand-wringing by the WSJ and Thomson Reuters News over big attorney fee awards in recent shareholder class actions. See “Foretelling the End of Money-for-Nothing Class Actions,” and “Dealpolitik: Delaware Supreme Court Should Revisit $304M Legal Fee.” These news stories cherry-pick a handful of class actions from across the country that have resulted in large fee awards for winning plaintiffs’ lawyers. To the untrained eye, these multi-million dollar fee awards seem jaw-dropping, but if you drill down in each particular case, the criticism is unwarranted.
Criticism over these big fee awards fluctuates between the work and the results of winning plaintiffs’ counsel. When winning plaintiffs’ lawyers obtain favorable non-monetary judgments, they criticize the results, not the work. When winning plaintiffs’ lawyers obtain big monetary judgments, they criticize the work, not the results. The reality is, these relatively "big" fee awards are determined by a whole range of factors, which include, among other things, the work AND the results.
Criticism of Moody's $4.5 million fee award focused on the lack of monetary judgment and all-but-ignored the over 28,000 hours of work by plaintiffs' counsel. Not all class actions are about obtaining cash judgments. You can’t always calculate the economic dollar value of public benefits that extent well beyond class members. In these types of class actions, plaintiffs’ counsel act as private attorneys general for important public interest matters. Winning plaintiffs' lawyers in these cases shouldn't be penalized by not being fairly compensated. In fact, there's empirical research that class counsel don't make enough money in these cases. See: "Do Class Action Lawyers Make Too Little?"
Criticism of Southern Copper's $305 million fee award focused on the plaintiffs' counsel work of $35,000 per hour and all-but-ignored the $2 billion judgment obtained for class members. When winning plaintiffs’ counsel obtains large settlements in class actions, they ought not be penalized for working efficiently. When class actions drag on year after year, it is often the result of a high-priced, work-churning defense. Just because large settlements can happen quickly, doesn’t mean winning plaintiffs’ counsel should be penalized by not being fully compensated.
“Whether big or small, attorney fee awards are determined by a range of factors,” said Terry Jesse, Executive Director of NALFA. "Work and results are but just two factors we've considered here. But judges and qualified attorney fee experts look at the other range of factors and they are in the best position to judge these fee awards because they do the in-depth forensic analysis that’s required in underlying cases,” Jesse said.
A recent Reuters story, “Delaware Supreme Court Won’t Revisit Record $305 Million Attorneys’ Fee,” reports that the Delaware Supreme Court declined to consider a challenge to the $305 million fee award, believed to be the biggest ever fee award by the Delaware’s Court Chancery. It is also one of the largest attorney fees awarded in securities class actions nationwide. The fee award was awarded in December for plaintiffs’ attorneys who brought a shareholder lawsuit on behalf of Southern Cooper Corp.
The court’s chief judge, Leo Strine, calculated the fee as 15 percent of the $2 billion judgment to be paid to Southern Cooper. Strine said at the time that the fee was meant as an incentive for lawyers to achieve good outcomes for their clients. The judgment and fee award were affirmed by the Delaware Supreme Court in August. Strine ruled that defendant Grupo Mexico could satisfy the judgment by returning to Southern Cooper an equivalent value of the Southern Cooper shares it held, but that the fee award had to be paid out of the judgment in cash.
The defendants asked the Delaware Supreme Court to change its ruling on the fee because the high court did not consider the limited impact of the judgment on minority shareholders. The defendants argued the minority shareholders will get just $386 million of actual benefits. On that basis, they argued the fee award was not 15 percent, but 79 percent. An appeal to the U.S. Supreme Court is possible, but unlikely. The judgment is increasing by $212,000 a day due to interest costs, according to court records.
The judgment is due immediately, said plaintiffs’ attorney Ronald Brown of Pickett Jones. He said after 20 days of the judgment is not paid, it can be satisfied by cancelling shares of Southern Cooper stock held by Grupo Mexico. Brown said a bond for the attorneys’ fee had been posted by Grupo Mexico. If the company did not pay the plaintiffs’ attorneys next week the bond would be used to cover the payment.
A recent The Legal Intelligencer story, “Avandia Plaintiff Counsel Seek Approval of Nearly $144 Mil. in Fees,” reports that as the federal Avandia MDL draws to a close after 65,000 claims have been winnowed down to between 500 to 600 cases, over 150 lawyers from over 50 plaintiffs law firms are seeking court approval of the dispersal of up to $143.75 million in attorney fees as well as costs undertaken for the common benefit of the entire mass tort litigation. The attorney fee request is estimated to be 6.25 percent of the settlements reached in the litigation. The five-year-old litigation is over the diabetes drug Avandia, made by drugmaker GlaxoSmithKline (GSK).
Joseph J. Zonies, a Denver plaintiffs attorney with Reilly Pozner who was part of the Plaintiffs Steering Committee (PSC), testified that the work undertaken in the Avandia litigation meets the requirements under Gunter v. Ridgewood Energy of a fee that is appropriate to the risk of the undertaking, to the quality of the lawyers involved, to the quality of the work involved, and to the benefit conferred upon the mass tort claimants. Another Gunter factor is the risk of nonpayment, Zonies said.
The individual PSC members were each “carrying costs” of $750,000 to $1 million, Zonies said. The plaintiffs also formed a virtual law firm in order to handle the litigation. Over 30 million documents were produced by GSK, which were all online and accessed by lawyers around the country through a secure portal, Zonies said. Close to 147,000 hours were submitted for common benefit work, and over 134,000 work hours were approved by the forensic account retained by the plaintiffs counsel.
As an example of the in-depth work required in the litigation, Zonies described the PSC visiting defense counsel Pepper Hamilton’s law office to go through 400 dusty boxes of GSK documents related to its initial new drug application for Avandia to the federal Food and Drug Administration. Trips were taken to take depositions at GSK’s London offices, Zonies said, and multiple experts in the fields of biostatistics, cardiology, epidemiology, endocrinology, federal regulations and marketing were worked with around the country and even aboard.
A recent New York Law Journal story, “Judge Slashes Kramer Levin’s ‘Breathtaking’ Request for Fees,” reports that a federal judge has rejected a “breathtaking” $3.1 million fee request submitted by Kramer Levin Naftalis & Frankel, awarding the firm only a fraction of the money sough for winning a fight over a down payment on a luxury apartment co-operative. Southern District Judge William Pauley said he conducted a “mind-numbing review” of Kramer Levin’s billing records in Campbell v. Mark Hotel Sponsor (pdf), but declined “to recapitulate that review” in his opinion to “avoid undue embarrassment to a fine law firm like Kramer Levin” in his opinion.
Kramer Levin represented defendant Mark Hotel Sponsor LLP in the effort of Roberta Campbell to recover a $4.68 million down payment she made on an $18.75 million co-op apartment at the Mark Hotel on East 77th Street between Madison and Fifth avenues. Pauley conducted a bench trial and, on Aug 20, issued an opinion finding that the parties’ contract entitled Mark Hotel Sponsor to keep the down payment and recover its reasonable legal fees and expenses.
“Astonishingly, Kramer Levin attorneys, paralegals, and staff amassed 5,536.4 billable hours on this matter, employing four partners, three special counsel, ten associates, eight paralegals and a summer associate,” he said, with partners billing range of $680 per hour to $1025 per hour, associates from $440 per hour to $745 per hour, paralegals from $250 per hour to $295 per hour, and “last but not least,” a summer associate for $335 per hour. On Sept. 13, Pauley allowed only a total award of $475,000 in legal fees and expenses.
In the plaintiff’s memorandum in opposition of the fee request (pdf), while the matter involved a dispute over millions of dollars, Amos Alter called the case a “simple contact action.”
In a recent Thomson Reuters story, “Lawyers Under Fire for Boosting Fees on Bankrupt Companies,” reports that in June, members of the U.S. Trustee Program (USTP) met to discuss proposed guidelines that would increase government oversight of Chapter 11 filings. The USTP is an arm of the Department of Justice that oversees how companies spend money during a court-supervised liquidation or restructuring. The proposed guidelines (pdf) would require law firms working on bankruptcy cases to disclose their billing rates and fee applications, stop rounding up billable hours and work within budgets.
The government claims the new disclosure rules are necessary because bankruptcy lawyers’ ever-rising fees, which frequently top $1,000 per hour, unfairly target companies when they are financially fragile. The government also says bankruptcy lawyer’s fees are rising disproportionately to other lawyers’ fees.
The new disclosure rules will require law firms to notify their clients of rate increases, calculate how much clients’ bill will rise and supply the Trustee’s office with statements from clients saying they agreed to the higher fees. With any luck, the changes will curb rising legal costs among floundering companies that are routinely paying fees of hundreds of millions of dollars in large bankruptcy cases. For example, the liquidation of Lehman Brothers Holdings, which is the largest Chapter 11 case in U.S. history, has netted $1.6 billion in fees, so far.
More than 100 law firms, including Foley & Lardner and Weil Gotshal, are against the Trustee’s office’s new rules, saying they are too burdensome and could increase costs even more.
A recent NLJ story, “First Circuit Finds Appeal of Fees Timely, Deepening Circuit Split,” reports that the U.S. Court of Appeals for the First Circuit has deepened the circuit split on the deadline for filing civil appeals involving attorney fees. On September 12, in a case involving a collective bargaining dispute at a landscape supply company, a unanimous panel ruled that an appeal was timely. The ruling resolved an issue of first impression in the circuit.
The First Circuit revived the union’s appeal, which was filed on August 15, 2001, less than 30 days after the court’s ruling on attorney fees due the plaintiffs for prevailing on a collective bargaining contract. The defendants claimed the appeal was invalid because it was filed more than 30 days after the District of Massachusetts ruled on the underlying claim, on June 17, 2011.
The appeals court found that the attorney fees were an element of the plaintiffs’ contractual damages, so the judgment was not final until the court issued the fee award on July 25, 2011. Senior Judge Bruce Selya wrote the opinion in Central Pension Fund of the International Union of Operating Engineers and Participating Employers v. Ray Haluch Gravel Inc. (pdf)
Ray Haluch Gravel argued that a 1988 Supreme Court case, Budinich v. Becton Dickinson & Co., meant that International Union’s appeal was untimely. The plaintiff in Budinich sought attorney fees under a state fee-shifting statute after prevailing on an employment claim. The court rejected the appeal of fees because it was filed more than 30 days after the judgment in the case.
“We do not believe that Budinich should be read mechanically to apply to all claims for attorneys’ fees, whatever their genesis,” Selya wrote. “This acknowledgement unmistakably signals that, although the Budinich Court determined that attorneys’ fees generally should be considered a collateral matter, they may sometimes be considered as part of the merits,” Selya wrote.
Selya observed that International Union brought suit at least partly to enforce the collective bargaining agreement, which provided for attorney fees as part of damages for contract breach. “Viewed through this prism, the attorneys’ fees must be considered an element of the plaintiffs’ contractual damages.”
In a recent Courthouse New Services story, “Nice Try, But Attorneys’ Fees are for Counsel Only,” reports that a man who held Chicago police liable for excessive force cannot keep 60 percent of the amount meant for his attorneys, the seventh circuit ruled. In a February 2006 complaint against Chicago and several officers, Morad Elusta claimed that police used excessive force while searching his home and falsely arresting him. The city offered to settle Elusta’s claim for $100,000, but Elusta refused the offer because he was unwilling to award his attorneys, David Cerda and John DeLeon, a 40 percent share.
Eventually, Elusta hired new counsel – Zane Smith and Shelia Genson – who took the case to trial before a jury that awarded him $40,000. The court later awarded Smith and Genson $83,000 in fees and ruled that Elusta owed his former lawyers, Cerda and DeLeon, $15,000 for their services. Elusta then moved to have Chicago pay Cerda and DeLeon, but give him 60 percent of the amount. He also said Smith and Genson should turn over 60 percent of their fee award to him.
A federal judge denied Elusta’s motion, and the seventh circuit affirmed last week, poking fun at Elusta’s interpretation of his agreement with his second set of lawyers. “Elusta argues that the phrase ‘the attorney’s fees’ does not clearly cover all of the attorney’s fees,” Judge Diane Wood wrote for a three-member panel.
“We agree with the district court that this argument ‘defies logic,” Wood wrote. “The court awarded $15,000 to Cerda and DeLeon precisely because it concluded that it would be unjust for Elusta to keep that money after he had received the benefits of Cerda and DeLeon’s services. Elusta is thus, by definition, not entitled to keep any of it.”
Today, NALFA Executive Director, Terry Jesse met with U.S. Trustee, Patrick S. Layng of the DOJ’s U.S. Trustee Program in Chicago. Mr. Layng is the U.S. Trustee who oversees Region 11 which includes U.S. Bankruptcy Courts in the Northern District of Illinois, the Western District of Wisconsin, and the Southern District of Wisconsin.
The U.S. Trustee Program (USTP) is a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. § 586 and 11 U.S.C. § 101, et seq. Part of the responsibilities of the USTP is to ensure attorney fees paid in underlying bankruptcy cases are reasonable. The USTP seeks to improve efficiency when reviewing attorney fees for reasonableness. When the USTP reviews attorney fees, they are looking for block billing, overstaffing, and other litigation inefficiencies, that can quickly add up.
“It was great to visit with the U.S. Trustee, meet with the staff, and get a better understanding of the work they do,” said Jesse. “We talked about our mutual interests in reviewing attorney fees for reasonableness and ways to improve that process. I look forward to working with them in the future,” Jesse concluded.
A recent New York Law Journal story, “Fee Request Found ‘Grossly Inflated’ Denied in Entirety,” reports that four law firms that submitted a “grossly inflated” $2.7 million fee request after winning $12,500 for their client should go away empty-handed, a federal judge ruled. Eastern District Judge Joanna Seybert, sitting in Central Islip, NY, condemned the fee application submitted by real estate investor Robert Toussie’s attorneys, including $2.65 million for Chadbourne & Parke, as “outrageously excessive” and done in “bad faith.”
“Counsel have so grossly inflated their fee application to a figure more than 200 times Toussie’s recovery—by ignoring prior directive of [Magistrate Judge Arlene] Lindsay, seeking fees related to claims on which Plaintiffs obviously did not prevail, misrepresenting the total number of hours billed, and providing extraordinary vague descriptions of billable hours in block time entries such that the Court cannot even begin to determine how many hours were actually spent on Toussie’s successful claims—in the hopes that the Court would award a small fraction of that.
In their request for legal fees, Toussie’s attorneys submitted more than 400 pages of billing records. They maintained the case was “extremely complex in all aspects,” and further complicated by the case’s “vast record.” They argued Toussie had won more than nominal damages and his constitutional rights had been vindicated.
But Suffolk County claimed Toussie’s attorneys were not entitled to fees because the jury award was “de minimus” and the request was “so unreasonable and grossly excessive.” At most, the county said, Toussie’s attorneys should get $25,000, representing twice the amount of the jury award. The judge observed the sought-after hourly rates ranged from $375 to $905, but those “greatly exceed” the rates now being awarded in the Eastern and Southern districts. She also faulted the attorneys for not breaking out travel time and asking 100 percent compensation though Lindsay previously ordered that travel time was compensable at 50 percent.
A recent NLJ story, “Texas Lawyer Wins Hard-Fought Fees in Bitter Disability Case,” reports that a Louisiana appeals court has awarded $2 million in fees and costs to a Houston lawyer who has spent more than a decade in a bitter battle against Louisiana’s attorney general over the lack of handicapped-accessible restrooms at a public university. The Louisiana Third Circuit Court of Appeal on September 5 entered the fee award for Seth Hopkins in a case he brought on behalf of Collette Covington, a student at McNeese State University. Hopkins helped Covington obtain summary judgment in her 2001 federal civil rights case against the Lake Charles, La., college after she was unable to use the restrooms at the student union.
Covington, who suffers from epilepsy and uses a wheelchair, urinated on herself while unsuccessfully trying to enter the restroom in January 2001 as an undergraduate. In its September 5 decision, the appeals panel issued scathing criticism against the Louisiana attorney general’s office and outside counsel who defended Covington’s American with Disabilities Act claim. They had appealed an earlier award of fees to Hopkins, a solo practitioner. The trial court granted Hopkins and four other attorneys representing Covington a rate of $240 per hour. The appeals court rejected the challenge and raised the rate to $265 per hour.
“This has been an emotional case,” Hopkins said. “Our intention has always been to make the campus and community better.” The fee award included $265 per hour for 5,490 billable hours, at an interest rate of 9.5 percent beginning on Feb. 24, 2011. The court also awarded Hopkins about $89,700 in appeals fees. It assessed $57,250 in appeals costs against the university.
A recent NLJ story, “Ninth Circuit Rewrites Rejection of Kellogg’s Settlement, but Result is the Same,” reports that a federal appeals court that struck down a consumer class action settlement based in part on “impermissibly high” attorney fees has withdrawn its opinion, issuing a revised version that nevertheless denied the fee request.
The settlement, reached last year, resolved claims that Kellogg Co. misled a nationwide class of consumers into believing that children who ate its Frosted Mini-Wheats cereal for breakfast improved their attentiveness by 20 percent. The settlement, valued by the parties at $10.64 million, included a $2.75 million fund to provide class members with $5 to $15 off future cereal purchases. It provided at least another $5.5 million in donations under the cy pres doctrine, which allows donations to charities of money unclaimed from legal settlements.
In both opinions, the Ninth Circuit questioned the $5.5 million figure given for the cy pres, since it was unclear how the food donation was being valued. Senior Judge Stephen Trott wrote: “Not only does the settlement fail to identify the cy pres recipients of the unclaimed money and food, but it is unacceptably vague and possibly misleading in other areas as well.” In the revised opinion, he added: “This deficiency raises in turn serious issues about the alleged dollar value of the product cy pres award, an important number used to measure the appropriateness of attorneys’ fees.” Subtracting the $5.5 million in food donations from the total settlement, the court conclude that the $2 million fee award would represent 38.9 percent of the settlement fund.
In its original opinion, the Ninth Circuit called such an award “extremely generous” given the number of hours and amount of money spent by plaintiffs’ counsel – going as far as calculating a billing rate of $2,100 per hour. In his petition for rehearing, Timothy Blood of Blood, Hurst & O’Reardon in San Diego, the lead plaintiffs’ attorney, disputed the $2,100 figure, which he said was an average that excluded additional billings for work spent seeking final approval of the settlement, the appeal and hours spent handling the claims process.
He also argued the Ninth Circuit did not have to analyze law firm billings to determine whether the attorney fee request was reasonable, particularly when basing it on a settlement amount different from the one that was approved. “Attorneys’ fees in a class action suit cannot be evaluated in a vacuum, but he panel nonetheless did so,” wrote Blood. “Having vacated and remanded the panel should have left it to the parties to litigate or renegotiate a settlement, including attorneys’ fee provisions.”
NALFA also reported on this case in, “Ninth Circuit Rejects Attorney Fees in Kellogg Case”
A recent Thomson Reuters story, “J&J Faces Settlement Objection From Ted Frank,” reports that Ted Frank, a professional fee objector and tort reform lobbyist, who frequently seeks to knock down attorney fees in class action settlements, has now inserted himself into the middle of a shareholder derivative lawsuit. Frank is asking a federal court in New Jersey to dismiss an entire action brought against Johnson & Johnson board members and executives, arguing that the settlement, in which the plaintiffs’ attorneys could receive $10 million, provides no benefit for shareholders and should have never been filed.
In July of this year, Johnson & Johnson, represented by attorneys at Sidley Austin, and members of its board and other company leaders, represented by Patterson Belknap Webb & Tyler, agreed to settle multiple derivative actions filed in 2010 and 2011. The plaintiffs alleged that the individual defendants breached their fiduciary duties and caused the company regulatory and legal problems relating to drug marketing and medical product and device quality control.
The proposed settlement agreement, submitted to U.S. District Judge Freda Wolfson in Trenton, New Jersey, requires the defendant to adopt certain governance reforms, to spend the funds necessary to carry out the reforms, and to maintain the provisions of the agreement for five years from the effective date. The settlement agreement states that the company has agreed to pay plaintiffs’ attorney, led by Carella, Byrne, Checchi, Olstein, Brody & Angello and Bernstein Litowitz Berger & Grossman, “not more than $10 million for their fees and $450,000 for their expenses, subject to court approval.”
“Not all professional fee objectors are actual qualified attorney fee experts, because they don’t do the expert work required for each case,” said Terry Jesse, Executive Director of NALFA. “The work of a fee expert requires in-depth analysis that considers a range of factors that determine reasonable attorney fees. Our fee experts are independent experts that rely on underlying billing statements and work product. Most class action fee objectors don’t put in the time to do the in-depth analysis required in cases, instead they only file general, boilerplate fee objections that cherry pick data and case law that suits their agenda,” Jesse concluded.
A recent ABA Journal story, “Ex-Client Sues Firm re ‘Massive Overbilling,’ Partner Says ‘Meritless’ Suit a Bill Dispute Tactic,” reports that a former client has sued a New York-based law firm in federal court for malpractice, accusing Wilk Auslander of “massive overbilling for needless work” while defending several securities. In the suit (pdf), which was filed in the Central District of California, ex-client Westport Capital Inc. and two individual plaintiffs also accuse the law firm of revealing confidential information related to the representation and harming the defense of the cases by attaching unredacted copies of law firm billing statements to a New York state court suit filed last month.
The Westport Capital plaintiffs say they were not told by Wilk Auslander of the automatic discovery stay that applies to securities class actions. Instead, they contend, the law firm “pursued at full throttle overblown discovery,” racking up substantial costs even as its clients sought to keep a lid on costs and have the firm perform only reasonably necessary work.
However, name partner Jay Auslander told the ABA Journal in a telephone interview that the law firm and its attorneys had done nothing wrong, had informed its client of the stay and had looked into the facts of a complex securities matter in order to understand the litigation, the appropriate defenses that could be pursued and its settlement value, if any. “We sued them, and this is surely a tactical response to that litigation,” he said, adding that the $200,000 amount at issue in the New York state court legal bill dispute is very reasonable for this type of representation.
A recent WSJ Law Blog story “Check, Please: Experts Say Apple, Samsung Face Sky-High Legal Fees,” reports that the attorney fees in the largest patent verdict in history should top tens of millions or even hundreds of millions for each side in the Apple-Samsung trial.
The nine-member federal court jury setting in San Jose rendered a verdict of $1.05 billion against Samsung after just two-and-a-half days of deliberations. The four-week trial featured attorneys from Morrison & Foerster and Wilmer Culter Pickering Hale and Dorr for Apple, and Quinn Emanuel Urquhart & Sullivan for Samsung.
Court documents show that some Morrison Foerster partners and of counsel billed a median rate of $582 an hour for work on portions of the case, while some Quinn Emanuel partners billed on average $821 per hour. Money well spent, give the stakes. “This is big, high-stakes litigation,” said Donald R. Dunner, a patent law expert and senior partner at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. “They’ve got the best lawyers they could find, and they charged fees that are commensurate with their talent.”
A recent ABA Journal story, “Top Del. Court OKs Record $300M Attorney Fee Award,” reports that, in an en banc decision Monday, the Delaware Supreme Court upheld a record $300 million attorney fee award in a shareholder derivative suit. In a 4-1 opinion (pdf) written by Justice Randy Holland, backed Chancellor Leo E. Stine’s (who serves as chief judge of the state’s highly regarded chancery court) judgment. “The challenge of quantifying fee awards is entrusted to the trial judge and will not be disturbed on appeal in the absence of capriciousness or factual findings that are clearly wrong,” the opinion states.
The attorney fee award in the Southern Peru Copper Co. case reportedly is the largest amount ever approved in a shareholder derivative action. The case concerned a claimed deal by the company’s biggest shareholder to sell one of its own holdings to Southern Peru Cooper in exchange for company stock that had risen significantly in value by the time the transaction concluded.
Strine said at a December hearing that corporate lawyers, like investment bankers, sometimes deserve a big payday. “There’s an idea that when a lawyer or law firms are going to get a big payment, that there’s something somehow wrong about that, just because it’s a lawyer. I’m sorry, but investment banks have hit it big, a lot of the bigger plaintiffs’ lawyer firms have hit it big. They’ve hit it big many times,” said Strine. “And to me, envy is not an appropriate motivation to take into account when you set an attorney fee. It’s not.”
Multidistrict litigation (MDL) functions similar to class action lawsuits, with several key differences, including how courts address attorneys’ fees. However, as more mass tort cases are being directed toward MDL instead of class action lawsuits, courts are encouraging that attorneys’ fees in MDL should be handled in a quasi-class action manner. According to Jeremy Hays, in his article, “The Quasi-Class Action Model for Limiting Attorneys’ Fees in MDL Litigation,” despite some drawbacks in using the quasi-class action approach in determining attorneys’ fees in aggregate multidistrict tort litigation, the quasi-class action approach might be the best option for courts at this time.
Courts are favoring MDL over class action litigation as a way to resolve mass tort cases. Courts have held that the interests and injuries of the potential members of a class make certification inappropriate, and the class action lawsuits may result in a limited fund for reimbursing victims of the torts, which means class action litigation is not the superior vehicle for achieving a just outcome for the parties. Also, changes to Rule 23 of the Federal Rules of Civil Procedure have made class certification more difficult in mass tort cases.
However, unlike in class action lawsuits, courts do not have control over attorneys’ fees in MDL. Attorneys take the cases in a contingency basis, but the plaintiffs often have to do much of the paperwork for the case. In contrast, Rule 23(h) allows the courts to award “reasonable” attorneys’ fees in class action litigation. Because the attorneys’ fee issues create inefficiencies in MDL, the quasi-class action lawsuit was created.
Instead of discarding the idea of quasi-class actions, courts should allow the quasi-class action model to evolve. The quasi-class action was proposed principally to bring the protections of Rule 23(h) into the MDL context. The quasi-class action, which is still developing, will present a more efficient approach for dealing with attorneys’ fees, but the quasi-class action may not be accepted by all courts as it continues its development.
A recent BLT Blog story, “Appeals Court Sets Guidelines for Attorney Fees in FOIA Cases,” reports that for the first time since the District of Columbia adopted its Freedom of Information Act (FOIA) in 1976, the D.C. Court of Appeals has spelled out when prevailing parties in FOIA cases can recover attorney fees and how judges should weight those fee requests. In an opinion (pdf), a three-judge panel explained that while the city’s FOIA law is different from the federal FOIA statute, local trial judges should use the four-factor test that federal judges rely on to decide whether to award attorney fees.
The ruling is a loss for the city’s police union, which appealed a D.C. Superior Court judge’s decision denying attorney fees after the union prevailed in a FOIA case against the city. The appeals court found that Judge Anita Josey-Herring correctly used the four-factor test and upheld her finding that the union failed to satisfy enough of the criteria. The court also rejected the union’s argument that prevailing parties should be automatically entitled to fees.
The four-factor test asks judges to consider any public benefit from the FOIA case, commercial benefit from the plaintiffs, the plaintiff’s interest in the case and the government agency’s reasonableness in withholding the information requested. Under the four-factor test, Josey-Herring found that there wasn’t a strong public benefit in the union’s request and that the fee request was very much in the union’s own interest. Writing for the appeals panel, Judge Catherine Easterly, wrote, “…we presume that the trial court found that the lack of public benefit simply outweighed the unreasonableness of the government’s behavior in this case.”
A recent NLJ story, “Fee Enhancement Limits Don’t Extend to Bankruptcy, Fifth Circuit Rules,” reports that a recent appellate holding that bankruptcy cases aren’t governed by a U.S. Supreme Court ruling limiting district courts’ fee enhancement power will help lawyers seek bonus fees when they get good results for creditors, according to practitioners who reviewed the opinion. The U.S. Court of Appeals for the Fifth Circuit on Aug. 10 affirmed a Northern District of Texas Bankruptcy Judge Russell Nelms April 2011 award of a $1 million fee enhancement to turnaround consulting firm CRG Partners Group.
CRG sought $5.98 million in attorney fees, plus a $1 million fee enhancement recommended by the debtors’ board of directors. That April, the bankruptcy court awarded CRG the fee enhancement but certified its order for direct appeal to the Fifth Circuit. The U.S. trustee argued that the Supreme Court’s 2010 ruling in Perdue v. Kenny A. sharply curtailed the bankruptcy court’s discretion to grant fee enhancements.
Circuit Judge Jennifer Walker Elrod wrote the opinion (pdf) in CRG Partners Group LLC v. Neary. Elrod analyzed numerous Fifth Circuit rulings and concluded that “we have consistently held that bankruptcy courts have broad discretion to adjust the lodestar upwards or downwards when awarding reasonable compensation to professionals employed by the estate.” While the courts’ “discretion is far from limitless,” she wrote, upward adjustments are permissible in rare and exceptional circumstances when “the applicants had provided superior services that produced outstanding results – that are supported by detailed findings from the bankruptcy court and specific evidence in the record.”
Additionally, because bankruptcy courts have the discretion to enhance fees for professionals’ superior performance, “we affirm fee awards that would have been proscribed under Perdue,” she wrote. Bankruptcy cases are unlike section 1988 cases, in which taxpayers foot the bill for any fee enhancements, she added. “The Debtors are the only party whose bottom-line was reduced by the enhancement and, because their own board of directors recommended paying the enhancement, we can hardly compare the Debtors’ situation to that of the non-consenting taxpayers.”
A recent Thomson Reuters story, “Plaintiffs’ Lawyers to Receive all the Cash in Moody’s Derivative Settlement,” reports that plaintiffs’ firms asked U.S. District Judge George Daniels of Manhattan to grant final approval to the settlement and fee award in the consolidated shareholder derivative litigation against Moody’s. Moody’s agreed to settle the case last month, in a deal that requires the rating agency to institute corporate governance reforms. If approved, the $4.95 million may well be the only cash Moody’s shells out in any of the shareholder litigation accusing the agency of misrepresenting its role in rating subprime mortgage-related securities.
Moody’s settlement of five derivative suits would provide for governance provisions aimed principally at promoting “independence, rigor, professional skepticism, and credit judgment” in the agency’s credit rating processes, according to the motion to approve the accord filed in court. Plaintiffs’ lawyers argued that the reforms would address core claim in their suit that Moody’s failed to properly manage the quality and independence of its ratings because issuers of mortgage-backed securities paid the agency to rate their offerings.
Co-lead plaintiffs’ lawyer Richard Greenfield of Greenfield & Goodman said the settlement was notable, given the tough standards derivative plaintiffs have to meet in litigation, in addition to the difficulty of pursuing claims against rating agencies, which have largely avoided liability in the financial crisis. Greenfield said the corporate governance reforms Moody’s agreed to adopt are worth a lot to shareholders and justify the fee request. “The nature of the relief is of substantial value,” he said.
The plaintiffs’ firm asserted in their fee request (pdf) that they would have earned $15.8 million had they billed by the hour. They argued that $4.95 million is a “modest fraction” of those hourly billings, so the fee award is “presumptively reasonable.” The plaintiffs’ lawyers cited at least four derivative cases in which larger fee requests have been approved, including a 2008 case against Home Depot in which a Georgia state court awarded $14.5 million to Robbins Geller Rudman & Dowd.
A recent ABA On-Line Journal story, “UK Insurers Mull Taking Work In-House and Setting Up Their Own Law Firms as Latest Cost-Cutting Move,” reports that after a change ushered in with the United Kingdom’s Legal Services Act allowing non-attorneys to have an ownership interest in law firms, a number of insurance companies are planning to either bring legal work in-house or set up their own law firms as a cost-cutting move, a study has found.
If the research by Espirito Santo Investment Bank proves to be correct, private law firms could wind up losing a substantial amount of the approximately 5 billion pounds in legal fees that the insurance industry currently antes up each year, Legal Week reports. Those legal fees amount to about $7.84 billion in U.S. dollars at the current exchange rate. Law firms that do continue to get such work could face increased pressure to cut their own costs as insurers look for law firms willing to agree to fixed-rate fees.
“The problem many insurers are facing is the massive number of personal injury claims and so an attempt to bring some of this in-house or look for other ways of managing it would make sense,” an unidentified managing partner in a London insurance firm tells the legal publication. However, specialist law firms in London likely will not be as much effected by the potential change as those doing high-volume elsewhere, he continued, saying that it will take time for insurers to develop alternatives to provide representation at the same level.
A recent The Recorder story, “Whyte Takes a Bite out of Attorney Fees in Apple Settlement,” reports that a class action Apple Inc., claiming that faulty antennas in the iPhone 4 caused bad cellular reception, has settled. But plaintiffs’ attorneys aren’t getting everything in their fee request. U.S. District Senior Judge Ronald Whyte approved a settlement that gives consumers some cash and a device to attach to the phone. He slashed by about half of plaintiffs’ attorney fees, citing a low number of claims by class members and an oversized group of lawyers.
Plaintiffs in In Re Apple iPhone 4 Products Liability Litigation had moved, unopposed by Apple’s counsel at Morrision & Foerster, for $5.9 million in fees. That was more than double the plaintiffs’ documented lodestar, or fees for time worked. Whyte, in cutting the fees to $2.2 million, wrote that the lodestar calculation was already “very generous,” and that it included the time of more attorneys than necessary to efficiently handle the case. Whyte also noted that the plaintiffs’ attorneys billed at “high-end rates” based upon “liberally kept time records.”
Co-lead counsel Ira Rothken of the Rothken Law Firm in Novato, called the judge’s ruling “fair.” He and other co-lead counsel, including lawyers from Gardy & Notis in New Jersey, Robbins Geller Rudman & Dowd in Florida and Kirkland & Packard in El Segundo,“understand and respect the decision not to award a multiplier,” he said.
A recent Forbes story, “Roger Goodell Seeks Attorney’s Fees and Discovery Stay in Jonathan Vilma’s Defamation Suit,” reports that the National Football League Commissioner Roger Goodell filed a motion to dismiss in a defamation suit filed by New Orleans Saints player Jonathan Vilma and to strike Vilma’s complaint pursuant to the Louisiana Anti-SLAPP Statute. SLAPP stands for “Strategic Lawsuit Against Public Participation.”
Certain states, including Louisiana, have explicitly sought to curb the filing of such lawsuits by enacting anti-SLAPP statutes. If Commissioner Goodell is able to prove that the claims asserted against him arose from an act in furtherance of the exercise of his right of petition or free speech under Louisiana or the U.S. Constitution in connection with the alleged bounty scheme (certainly considered a public issue) and Vilma is not capable of demonstrating a probability of success on the merits of his defamation action, then Commissioner Goodell shall be awarded reasonable attorney fees and costs.
It would be fair to say that Goodell has hired attorneys who bill at a very high hourly rate and do not skimp on the amount of time they appropriate to their research and drafting. However, if Vilma is able to defeat Commissioner’s Goodell’s motion to dismiss based on Louisiana’s Anti-SLAPP statute, Vilma could be entitled to recoup his own attorney fees and costs.
Congressman Peter Defazio (D-OR) recently introduced H.R. 6245 (pdf). The working title of the house bill is the “Saving High-Tech Innovators Egregious Legal Dispute Act of 2012” also known as the SHIELD Act. The bill would permit the award of attorney fees to successful defendants (but not successful plaintiffs) accused of infringing a computer hardware or software patent if the action “did not have a reasonable likelihood of succeeding.” Currently attorney fees are only awarded in “exceptional cases” under 35 U.S.C. 285 or as a sanction for violation of Fed. R. Civ. Pro. R. 11.
The statute would read:
(a) In General – Notwithstanding section 285, in an action disputing the validity or alleging the infringement of a computer hardware or software patent, upon making a determination that the party alleging the infringement of the patent did not have a reasonable likelihood of succeeding, the court may award the recovery of full costs to the prevailing party, including reasonable attorney’s fees, other than the United States.
Most jurisdictions around the world follow a loser-pays rule in civil litigation. In theory (and with certain assumptions) a loser pays rule results in more meritorious claims and fewer non-meritorious claims. The system (again in theory) allows a legally vindicated party to walk away without direct financial loss due to litigation. A major difference between those systems and that proposed here is that the normal loser-pays system is a two-way while this bill proposes a one-way system that only injures patentees. The stated purpose of the legislation is to reduce the amount of patent litigation brought by “patent trolls.”
A recent NLJ story, “Prius Plaintiffs Attorneys ask Ninth Circuit to Rescue Their Fee Award,” reports that five plaintiffs firms that obtained a class action settlement over alleged headlight defects in the Toyota Prius have petitioned a federal appeals court to overturn a trial judge’s rejection of $4.7 million in attorney fees as “highly unreasonable.” Girard Gibbs, which took the lead in the case, told the U.S. Court of Appeals for the Ninth Circuit in a brief that U.S. District Judge Manuel Real had abused his discretion in arbitrarily cutting the fees in the case, resolved claims by consumers against Toyota Motor Corp.
Real approved the Prius settlement on Oct. 17. In determining attorney fees, however, he repeatedly noted the simplicity of the case, concluding that the legal work amounted to “just a few short months of discovery, settlement negotiations, and a one day mediation.” He noted that the National Highway Traffic Safety Administration has dropped its investigation into potential headlight defects in Prius automobiles, giving Toyota a distinct advantage in the case, and that the records of that investigation were public.
Real, in determining that the fee request should be reduced, referred to the plaintiffs attorneys as “negotiation agents,” who typically takes a 20 percent cut for their work. As a result, he calculated the fees at about $760,000, or 20 percent of the total value of the settlement, which he estimated at $3.8 million. He awarded 65 percent of that amount to Girard Gibbs, which was to distribute the remaining 35 percent to the other firms.
In his brief, partner Eric Gibbs argued the value of the settlement was “hypothetical” and that, at any rate, Real should have at least considered the lodestar amount in double checking his fee calculation. Gibbs noted that his firm spent 2,900 hours on the case for a lodestar of $1.25 million. Furthermore, Gibbs wrote, because the case involved the California Consumer Legal Remedies Act and the state’s private attorney general statute, Real should have relied on more than a percentage analysis of the fees.
He disagreed with Real’s valuation of the settlement and the percentage assessed against the fees. “The percentage paid to sports and entertainment agents is not an appropriate consideration for an award of attorney fees in a class action case,” he wrote. He also took issue with Real’s characterization of the case as a “simple breach of warranty” action based on “boilerplate class action complaint” that relied on NHTSA’s investigation. “Where NHTSA was unable or unwilling to act, Plaintiffs achieved a settlement that addressed a problem that had bemused and alarmed thousands of Prius owners,” Gibbs wrote.
A recent Thomson Reuters story, “Attorney Fees in Air Cargo Case Near $93 Million,” reports that a Brooklyn federal judge has awarded $54.4 million to plaintiffs’ counsel in a class action over air cargo shipping rates, bringing the fee awarded in the antitrust case to $92.9 million. The fee award, the third in the ongoing case was approved by U.S. District Judge John Gleeson. Unlike some class actions, in which plaintiffs’ counsel submit fee applications when the case is nearing a final resolution, the attorney fees the air cargo case have been processed in a piecemeal manner.
The fee award will be paid to 73 firms involved in the litigation and allocated by four lead plaintiff firms – Kaplan Fox & Kilsheimer; Labaton Sucharow; Hausfeld and Levin Fishbein Sedran & Berman. Between December 2006 and December 2011, the 73 firms spent 199,510 hours litigating the antitrust action, according to court filings.
The class action was brought in 2006 on behalf of companies that purchased air cargo freight shipping services from dozens of airlines. The plaintiffs accused the airlines of participating in a global conspiracy to artificially inflate shipping prices. Gleeson approved $224.4 million in new settlement payments, which included the $54.4 million fee award. That brings the total to be paid by 17 airlines to $485 million.
The case remains ongoing against 11 other airlines. Depending on the outcome, plaintiffs and their lawyers could see the settlement funds and accompanying fee awards increase. Gleeson cautioned plaintiffs’ firms that if the settlement fund balloons, they may need to revisit their method for computing fees in relation to the size of the settlement fund. “In megafund cases such as this one, courts typically decrease the percentage of the fee as the size of the fund increases to avoid an unjust windfall,” Gleeson wrote.
The case is In re Air Cargo Shipping Services Antitrust Litigation, U.S. District Court for the Eastern District of New York, No. 06-1775.
A recent NLJ story, “First Circuit Tosses $30 Million Fee Award Volkswagen Case,” reports that a federal appeals court threw out a Boston federal judge’s $30 million attorney fee award for plaintiffs’ lawyers in multidistrict litigation over oil-sludge damage to Volkswagen cars. In a unanimous ruling on July 27, the U.S. District Court of Appeals for the First Circuit vacated U.S. District Judge Joseph Tauro’s March 2011 fee award, plus nearly $1.2 million in costs. The First Circuit panel ruled that Tauro erroneously based the fee award on federal law. The court remanded Volkswagen Group of America Inc. v. Petel J. McNulty Law Firm (pdf) so that the fees could be calculated based on Massachusetts law.
The underlying lawsuit claimed that defects caused the 1.8-liter turbo engines in some Volkswagen Passet and Audi Cabriolet model were susceptible to damaging engine sludge. The settlement provided for free oil changes and extended warranties. A special master valued the deal at about $223 million for a potential class of about 480,000 car owners. On appeal, Volkswagen argued that the plaintiffs’ attorney fees should have been about $7.7 million. The class counsel sought $37.5 million in fees and about $1.8 million in costs.
The First Circuit ruling cited U.S. Supreme Court precedents to conclude that state law governs the interpretation of settlement agreements. Chief Judge Sandra Lynch wrote the opinion. “The basis for the award here is the agreement itself, a contract under state law, and not federal law. The fact that attorneys’ fees are provided for by the settlement agreement is one of several reasons why there is no basis to resort to these federal equitable doctrines,” Lynch wrote.
Under Massachusetts law, Lynch continued, a trial can use either the lodestar approach or a multifactor analysis. The latter weights factors including the attorney’s ability and reputation; the matter’s importance; the time spent; fees usually charged for similar services by other lawyers in the area; the value of the property affected; and the results. If the lower court opts for the lodestar approach, it should adopt $7.7 million as the bases figure “given the absence of any direct challenge to the number,” Lynch wrote. That number does not include work by plaintiffs’ attorneys who were not class counsel, work performed after the district court’s fee award and any possible contingency enhancement.
NALFA also reported on this case in "Volkswagen Challenges Fee Calculation in $30M Attorney Fee Award"
A recent Thomson Reuters Legal story, “Lawyers’ Fees Cut in FedEx Wage-and-Hour Case: Is this a Trend,” reports that in a recent case against FedEx, a federal judge in Los Angeles cut fees for class counsel, in what may be the beginning of a movement toward stricter scrutiny of contingency deals in wage-and-hour cases. Earlier this month, Federal Express agreed to pay $8.25 million to settle a 2010 class action in which employees alleged that information in their pay stubs wasn’t properly displayed.
Plaintiffs’ lawyers at Jackson Hanson in San Diego had signed retainer agreements with FedEx employees that would give them 33 percent of the settlement. But in an order (pdf) approving the deal, U.S. District Judge Gary Feess awarded Jackson Hanson 25 percent, or just over $2 million, rather than the $2.75 million the plaintiffs’ attorneys said they were entitled to. Feess found no reason to elevate beyond 25 percent, which he said is an established benchmark for class action fees in cases in the Ninth Circuit.
The plaintiffs’ lawyers argued that they’d taken a risk and achieved a positive result, but the judge said that wage-and-hour litigation “is not as legally complex as other types of litigation that often generate a common fund.” He noted that the fees were still an improvement over hourly rates: Class counsel projected that their total hours on the case would be around $1,050 to $1,100, and market rates are $550 to $600 an hour. If they were paid by the hour, the judge said, plaintiffs’ lawyers would have brought in approximately $640,000.
Gregory Mersol of Baker Hostetler, who wrote about the case for the firm’s Employment Class Action blog and is currently defending about half a dozen wage-and-hour cases in California, said Feess’s order reflects an “evolutionary trend.” Judges, he said, are taking a closer look at settlements in garden variety wage-and-hour cases and balking at fee awards that would permit plaintiffs’ attorneys to walk away with over-the-top hourly rates. Stricter scrutiny of fees, both in wage-and-hour and other common fund cases, is not yet rountine, Mersol said, but judges are beginning to resist rubber-stamping fee requests even when the defendants don’t object to them.
A recent NLJ story, “Arguments Swirl Over Fairness of Ticketmaster Settlement,” reports that eight lawyers representing more than a dozen of the nearly 100 fee objectors to a consumer class action settlement with Ticketmaster urged a Los Angeles judge on July 24 to reject the deal, which they called the latest example of paying cash to the lawyers while the class members make do with coupons.
Addressing Los Angeles Superior Court Judge Kenneth Freeman, the lawyers took turns during a fairness hearing to argue against final approval of the deal, which would grant $16.5 million in fees and costs to plaintiffs attorneys and discounts off the future ticket purchases to the nationwide class of consumers.
Under the deal, each class member would receive an e-mail discount code worth $1.50 against each future ticket purchase and a $5 discount code for each UPS delivery fee – both capped at 17 transactions. The estimated class encompasses customers who bought tickets from Oct. 21, 1999 through Oct. 19, 2011.
Under the deal, plaintiffs’ attorneys would receive $15 million in attorney fees and about $1.5 million in costs. W. Michael Hensley, a shareholder in the Santa Ana, Calif., office of AlvaradoSmith, a plaintiffs firm in the case, said attorneys has laid out their costs and fees in “excruciating detail.” “We have not asked for all the fees that we have actually generated,” he said, noting that the lodestar amount came to $6.5 million. He said that this case, unlike others cited by the fee objectors, took nearly nine years to litigate.
Google wants $4 million from Oracle to cover the legal costs it incurred during the infringement litigation over the Android mobile operating system. In a brief (pdf) of Google’s Bill of Costs filed in federal court, Google lead counsel Robert Van Nest of Keker & Van Nest, LLP in San Francisco argued that Oracle is required to pay Google’s legal costs because the judge and jury ruled in favor of Google on almost every claim during the six-week trial. The $4 million figure includes only the legal (i.e. administrative costs) expenses of the litigation and not the attorney fees (i.e. billable hours) associated with the case.
“Google prevailed on a substantial part of the litigation,” read Google’s brief. “[Oracle] recovered none of the relief it sought in this litigation. Accordingly, Google is the prevailing party and is entitled to recover costs.” Google has not publicly revealed an itemized list of its expenses, but the total bill included $2.9 million spent copying and organizing documents. According to the brief, the company juggled 97 million documents during the case.
In the underlying litigation, Oracle lost an infringement case against Google concerning various Java APIs and the way they were utilized in the Android operating system. The judge decided that the structure, sequence, and order of these APIs wasn’t covered by existing copyright law and threw out the majority of the claims against Google.
A recent NLJ story, “Ninth Circuit Rejects Mini-Wheat Settlement of Attorney Fees, Cy Pres Award,” reports that a federal appeals court has rejected a class action settlement over alleged false advertising of a breakfast cereal, ruling that a plan to contribute some of the payout to charity bore no relation to the case and that the plaintiffs attorneys’ fee award was excessively generous.
The U.S. Court of Appeals for the Ninth Circuit on July 13 reversed the trial judge who’d approved the settlement between Kellogg Co. and a nationwide class of consumers who alleged false advertising of its Frosted Mini-Wheats cereal. Citing its 2011 decision in In re Bluethooth Headsets Litigation, the three-judge panel ruled that the settlement did not survive the heightened scrutiny that should be applied to class action settlements.
The ruling in Dennis v. Kellogg Co. (pdf) was the latest in which the Ninth Circuit has struck down a class action settlement based on excessive attorney fees or fear of collusion between counsel who crafted the deal. “There is a lot of case law on attorney fees out there: Bluetooth, and now this case, are certainly adding to that body of case law,” said plaintiffs counsel Timothy Blood, managing partner of Blood, Hurst & O’Reardon in San Diego.
The court cited its Bluetooth decision in finding the fee request unreasonable, particularly given the number of hours and amount of money spent by plaintiffs counsel in light of what class members would receive. “The settlement yields little for the plaintiff class,” wrote Senior Judge Stephen Trott. “In comparison, the $2 million award is extremely generous to counsel – even if we were to accept their assertion that the value of the common fund is $10.64 million.
Had the case been litigated on an hourly basis, the fees would have totaled $459,203, Trott wrote, so a $2 million fee award would translate to $2,100 per hour. “Not even the most highly sought after attorneys charge such rates to their clients,” he wrote.
A recent BLT Blog post, “Mayer Brown Sues Pacific Seafood Group for $5M in Fees,” reports that Mayer Brown filed a breach of contract lawsuit (pdf) in D.C. Superior Court against former client Pacific Seafood Group, claiming unpaid attorney fees in excess of $5 million. The firm represented Pacific, a global seafood processing and distribution company based in Clackamas, Ore., against a series of antitrust claims, including a class action in U.S. District Court for the District of Oregon. According to the claimant, the firm stopped representing the company in February because of nonpayment of fees.
Mayer Brown claims Pacific paid part, but not all of the fees it owed. The firm is suing for more than $5 million, which includes $3.8 million in fees, an additional $1.3 million for a discount the firm has originally provided, and interest. According to the claimant, Pacific hired Mayer Brown attorneys from the Washington office in July 2010. From the fall of 2010 through the summer of 2011, Pacific never fully paid invoices sent the firm. The company “requested that Mayer Brown be patient and continue rendering professional services,” the firm said in its complaint.
Mayer Brown reached a breaking point early this year and told Pacific it would be ending its representation, according to the complaint. “Mayer Brown is now informed and believes that Pacific intentionally misled Mayer Brown and caused it to provide legal services, while intending not to pay for such services and informed Mayer Brown of its intent,” the firm wrote in the complaint.
A recent Thomson Reuters News story, “Analysis: Lawyers Eye Payday in Record Credit Card Settlement,” cited the National Association of Legal Fee Analysis (NALFA) as the leading authority on attorney fee awards. NALFA was asked to provide statistics on the largest attorney fee awards in U.S. history.
The largest single attorneys' fee award to date was $688 million, doled out in 2008 in the Enron case. In second and third place was $492 million in fees resulting from Tyco litigation and about $336 million in fees in the WorldCom case.
This is the second time NALFA has been cited by Thomson Reuters. In 2011, NALFA was quoted on a news story concerning legislation on fee objectors in New York. See “NALFA in News: Quoted As Industry Source in Reuters News”
Attorney fee disputes are often a result of a breakdown in the attorney-client relationship. Mediation is the quickest, simplest, and most cost effective way to resolve attorney fee disputes. NALFA offers a mediation program specifically designed for attorney fee disputes of all sizes.
Our fee dispute mediators are uniquely qualified to sit down with both parties and settle a fee dispute in a cost effective and confidential manner. Our fee dispute mediators are trained to handle simple attorney-client fee disputes and larger, more complex multi-party fee disputes. Our fee dispute mediators are trained neutrals who understand the underlying issues in fee dispute cases. They include former judges, seasoned litigators, and in-house counsel. NALFA uses a customized approach for each fee dispute case.
“Attorneys don’t want to be in the business of suing clients over unpaid fees. So before filing a suit in court, attorneys should attempt fee dispute mediation. In fact, participating in fee dispute mediation, in good faith, can only strengthen your legal action in court, if the case is not resolved in mediation,” said Terry Jesse, Executive Director of NALFA.
A recent FindLaw.com post, “5 Ways to Collect Unpaid Fees From Clients” by Andrew Lu of Top Floor Legal reports that a recent survey found that most attorneys only get paid for a fraction of the hours they work during the day. The reason weren’t given as to why the attorneys don’t get clients to pay up. So, what can attorneys do to collect unpaid legal fees from clients?
Here are five steps from Top Floor Legal that attorneys can take when looking to get paid:
- Ask the Client to Pay: Passive aggressiveness does not work. Let your client know that he or she owes you money. Oftentimes, your client may not know or may have forgotten that they owe you.
- Have Someone Call the Client: If you are not comfortable with confrontation over money, you can hire a third party bill collector to call the client. Outside pressure may convince your client to pay up, and can signal to your client that you’re serious.
- Understand Your Client’s Situation: Talk to your client and understand why he or she cannot pay. If there is a momentary financial crisis, you may forebear from collecting for a few weeks or agree upon a partial payment plan.
- Draft a Formal Demand Letter: If you can’t get a hold of the client of if the client is not willing to work with you, you may want to draft a formal demand letter asking for payment. This can be the basis of any legal action.
- File a Lawsuit: You don’t want to be in the business of suing your clients, so this is definitely a last resort. But if your client owes you a significant sum and refuses to pay, you may be left with no resort but to seek legal action.
A recent Madison Record story, “Tillery Seeks at Least $18K in Fees From Third Party to Litigation – University of Chicago” reports that an attorney who will share close to $35 million in attorney fees by way of a recent class action settlement in federal court, is seeking at least $18,000 in fees from the University of Chicago in related state court litigation. Stephen Tillery filed a motion for reimbursement of costs and attorney fees in an eight-year-old Madison County, Illinois class action against Syngenta Crop Protection involving the weed killer atazine.
The University of Chicago and its scientist Don Coursey, who was hired as an expert by Syngenta, were brought into the litigation as third parties. For years, they fought Tillery’s discovery requests. In a motion, Tillery chided the University for being “uncooperative” by delaying production of subpoenaed documents. He seeks reimbursement on grounds that the University repeatedly filed motions without substantial justification and for its “significant” delay in conducting a search and compiling responsive documents.
“But for the University’s lack of cooperation and unjustified habitual defiance, it would not have undertaken seven months to compile 952 documents,” Tillery’s motion states. “[P]laintiffs should not be forced to pay thousands of dollars to cover the University’s irresponsible inaction and delay,” Tillery wrote. A footnote to the $18,050 in fees Tillery seeks from the University, states that the figure does not include “Mr. Steve Tillery’s time, nor does it include paralegal time.”
According to a May 22, 2012 article in Corporate Counsel Magazine, “…as the next generation of general counsel takes charge, evaluations of outside counsel will rely more and more on metrics assessing efficiency and productivity.”
Whenever NALFA member and attorney fee expert Ken Moscaret, Esq. opines in support of the efficiency of multimillion-dollar legal fees billed by major law firms in large, complex litigation, he customarily focuses on five court-tested factors:
- Concentration of workflow in the hands of a core team of attorneys
- Appropriate mix of attorneys by skill, experience, and ability
- Delegation of workflow to less-expensive but competent timekeepers
- Case staffing continuity
- Exercise of billing judgment
As one example, in the Enron litigation in 2008, the presiding federal judge cited and relied in part on Mr. Moscaret’s “efficiency factors” to support her record-setting $700 million fee award in that case to a large, well-known California law firm, as follows:
“[Mr.] Moscaret also examines the fee request for “efficient” case staffing, i.e., using as few attorneys as necessary doing as much of the legal work on a case as possible. In large complex cases like this one, he looks for a ‘tight compact litigation team of attorneys doing the majority of the work on the case,’ i.e., ‘core’ attorneys billing at least 75% of the hours on the case… He also identifies and discusses in detail other indicia demonstrating reasonableness and efficiency of overall staffing in this litigation, including an appropriate mix of attorneys for the demands of a complex litigation, reasonable delegation of work flow, continuity of case staffing,…” 586 F.Supp.2d at 785.
NALFA’s Law’s Top Civil Litigators is a new membership category for a select group of plaintiffs’ lawyers who’ve achieved record settlements and verdicts in areas of tort litigation: consumer, personal injury, environmental, employment, and securities. Nomination is based on results obtained for the client and the community. Our motto is “Winning for the Client and the Community.”
Law’s Top Civil Litigators will be among the first to put their lawyering stats on a baseball card. Members will be able to choose from 4 different baseball card style formats. On the front, lawyers will be pictured “in action” or a simple head shot with name, firm name and logo, along with position in the firm.
On the back, lawyers can display lawyering stats such as year, case name, type of case, court, and settlement and/or verdict amount. Like baseball cards, we’ll also include other biographical information such as law school, court admissions, and contact information. And because this is a “virtual” baseball card, users will be able to click on the stats to learn more case details.
This new app, (for online, ipad, iphone, and android users), is an effective way for plaintiffs' lawyers to promote their record of success in a familar format. “This new app is a simple, fun, and familar way for trial lawyers to share their winning record with potential clients, the media, and others in the legal profession,” said Terry Jesse, Executive Director of NALFA.
Beyond this new app, Law’s Top Civil Litigators is also a pro-plaintiffs’ advocacy group that seeks to combat the efforts of the tort reform lobby. “There are scores of positive stories from the plaintiffs' bar. We want to promote these positive cases at a national level and correct much of the misinformation from the tort reform lobby,” said Jesse.
For more information, please call Terry Jesse at 312.854.7158 (direct) or e-mail email@example.com.
Disclaimer: NALFA owes the creative concept, proprietary rights, and all technology associated with this app.
A recent Corporate Counsel story, “Fee Fight the Next Battle in Oracle and Google’s Smartphone War?,” reports that while nothing has been filed in court, observers say the next battle in Oracle v. Google could be over attorney fees. A fight over legal bills would offer tantalizing details of the fee arrangement between Google and its legal team, and put a public price tag on what it can cost to engage in complex, high-stakes IP cases.
Oracle Corp. took Google Inc. to court on a quest for eye-popping damages in the first of the smartphone wars to go to jury trial. Oracle lost on almost every claim and can only get a fraction of the billions it once sought. So observers say they expect Google to try to recoup the small fortune it surely paid Keker & Van Nest and two other firms to do battle with the likes of David Boies and top Morrision & Foerster IP litigators.
Google would likely petition for fees after U.S. District Judge William Alsup issues a final order in the case, which could come some time after a hearing held today. If Oracle makes its own bid to pursue attorney fees, which observes said isn’t entirely out of the question since it prevailed on two small claims, it could expose hourly rates and fee arrangements to famed litigator David Boies and other top litigators at Morrision & Foerster.
The fee petition would come under a provision of the Copyright Act. Unlike in other areas of civil litigation, either the prevailing defendants or plaintiff can seek reimbursement for reasonable attorney fees in copyright cases.
A recent ABA Journal story, “7th Circuit Nixes ‘Feeable’ Sears Class Action, Says Its ‘Only Goal’ is Fees for Plaintiffs Lawyers,” reports that a federal appeals court said a shareholder derivative suit’s “only goal” appeared to be generating fees for plaintiffs counsel. The appeals court not only held a federal district judge had erred in refusing to permit a professional fee objector to intervene, but directed the judge to dismiss the case on remand.
“The suit serves no goal other than to move money from the corporate treasury to the attorneys’ coffers, while depriving Sears of directors whom its investors freely elected,” wrote Chief Judge Frank Easterbrook in a three-judge panel’s unanimous opinion (pdf).
The plaintiffs in this suit contented that antitrust law was violated by having two directors sit on competing boards of other companies following the 2005 merger of Sears, Roebuck & Co. with Kmart Corp. However, as Sears pointed out to the district court in a motion to dismiss, “Delaware usually allows investors to sue derivatively only if, after a demand for action, the board cannot make a disinterested decision.” The plaintiffs made no such demand prior to suit, the Seventh Circuit says, although they argued it would have been futile to do so.
Antitrust suits are notoriously expensive and Sears was willing to settle for $925,000 in attorney’s fees to opposing counsel rather than likely pay over $1 million in defense costs. But Easterbrook says, shareholders would derive no benefit from this and neither the Department of Justice not the Federal Trade Commission, which ordinarily enforce antitrust violations, have shown any interest in pursuing enforcement action here.
A Lexis Nexus Law Firm Billable Hours Survey, (pdf) out on Friday looked at billing efficiency among firms of one to 50 lawyers. The report, from legal technology company, LexisNexis, is based on responses from 499 law firms and law departments polled in May.
On average, respondents worked nine hours a day but only billed six hours, it found. That’s a 33% gap, which LexisNexis chalked up to general lawyerly inefficiency or not using staff to cover non-billable functions. Other factors: hours attorneys spend networking or cozying up to prospective clients, plus some intentional discounting of hours worked to keep existing clients happy.
Bigger law firm often have armies of support staff and sophisticated billing systems that boost efficiency and let “attorneys be attorneys,” said Loretta Ruppert, senior director of community management for LexisNexis Legal and Professional. “But at the smaller end of law, they typically wear multiple hats.”
Among the subset of smaller firms, billing efficiency is all over the place. For example, lawyers in Delaware (at least those who responded to the survey) lead the pack, billing 94% of hours worked. Other states in the top quadrant included New York, Colorado, Utah, Louisiana, and Mississippi. Less distinguished were respondents in Oregon, who billed a scant 40% of hours worked.
A recent Reuters story, “Judge Limits Attorneys’ Fees in BP Oil Spill Case,” reports that a federal judge overseeing the massive litigation stemming from the 2010 Gulf of Mexico oil spill issued an order on Friday capping the amount attorneys can charge plaintiffs who participate in a settlement with BP. U.S. District Judge Carl Barbier in New Orleans gave preliminary approval last month to an estimated $7.8 billion settlement BP reached to resolve more than 100,000 claims by individuals and businesses affected by the oil spill.
In his order, Barbier ruled that attorneys for plaintiffs who settle claims through the settlement must limit their contingency fee arrangements to 25 percent of any recovery a plaintiff receives plus “reasonable costs.” Barbier stressed that the 25 percent figure was a ceiling and that attorneys were free to charge less.
“In many cases, a reasonable fee may be less than 25 percent, particularly for a relatively simple claim by an individual,” he wrote. “This Order is not intended to allow or encourage attorneys to charge more than a reasonable fee under any circumstance.”
A group of attorneys who negotiated the settlement with BP, known as the Plaintiffs’ Steering Committee, are seeking $600 million for their work. Those fees, which would be paid by BP under the terms of the settlement, must be approved by Barbier.
A recent WSJ story, “Panel Rules Investors Must Pay Goldman $500K in Legal Fees,” reports that two investors must pay $500,000 in legal fees to a Goldman Sachs unit after losing an arbitration case against the firm involving a options trading strategy, an arbitration panel has ruled. Eric Snyder, a former real estate investment trust executive, and his wife Barbara, filed “clearly erroneous” claims against Goldman Sachs, according to a Financial Industry Regulatory Authority (FINRA) arbitration award.
The Snyders originally sought $10 million for allegedly recommending unsuitable investments, misrepresenting information and breaching the duty of fair dealing to them, among the misdeeds. The FINRA panel not only rejected those claims, but ordered the Snyders to pay $500,000 to cover Goldman’s legal fees and costs. A law in Tennessee, where the Snyders lived at the time of the dispute, authorized the panel to award legal fees to Goldman.
The outcome in the case is a rare instance in which an arbitration panel has ordered investors who lost the case to pay a brokerage firm’s legal fees, say lawyers. “It’s a head turner,” said Andrew Stoltmann, a Chicago-based lawyer who represents investors in arbitration cases.
A recent BLT Blog post, “D.C. Appeals Court Hears Fee Dispute in TV Writers’ Discrimination Case,” reports that the D.C. Court of Appeals heard arguments in a fee dispute between attorneys who worked on the same side of a decade-long class action on behalf of older television writers. Local solo practitioners Daniel Wolf and Maia Caplan content that an arbitrator hired to divide up more than $23 million in fees awarded to class counsel based his decision on issues that were outside his authority. The class counsel had agreed that the fee petition submitted to the court wouldn’t be binding on arbitration, they argued, but the arbitrator nonetheless rejected the idea that the parties could object to the petition and claim different fees in arbitration.
Wolf and Caplan represented a group of television writers who sued studios, network and talent agencies for age discrimination in Los Angeles County Superior Court. Their co-counsel included attorneys from Sprenger + Lang and Kator, Parks & Weiser, both in Washington, DC. The writers reached a $70 million settlement with a balk of the defendants in 2010. The court awarded the class counsel one-third of the settlement.
The parties agreed to bring any fee dispute to mediation and arbitration to avoid a public scene that might delay or jeopardize the settlement. The parties went to mediation, and when that failed, to arbitration. The arbitrator issued a decision in late 2010. Wolf and Caplan sued in D.C. Superior Court to vacate the award, and Judge Michael Rankin denied their motions, prompting the appeal.
Wolf’s attorney, William Stein of Hughes Hubbard & Reed, argued that the problem is that the arbitrator never made a finding about the reasonableness of the attorney fees, instead finding that he was bound to use the fee petition because of language in the contracts signed by co-counsel. Wolf and Caplan’s former co-counsel argued that the arbitrator had no legal authority to base his decision on his reading of the original co-counsel agreement. Contract provisions gave him the right to base his decision on the fee petition submitted to the court, even if the parties disagreed.
For more information visit www.writerscase.com
A recent Insurance Journal story, “Judge to Insurer: Pay Legal Fees in Pending Insider Trading Fraud Case” reports that a federal judge in New York order an insurance company to keep paying the attorney fees of several former hedge fund managers and traders caught up in an insider trading investigation. U.S. District Court Judge Paul Engelmayer said irreparable harm could be done to the employees of Global Investors, if XL Specialty Insurance did not keep paying attorney fees for their defense. But the judge said he would give XL enough time to appeal his decision of the insurer wanted.
In March, XL sued Level Global, claiming if did not have to pay the attorney fees for employees implicated in the insider trading ring because a former analyst for the now-closed hedge fund had been secretly cooperating with federal authorities. XL is arguing that since the cooperating witness, Spyridon Adondakis, knew he had committed fraud at the time the insurance policy was signed, any changes stemming from or related to his crime aren’t covered by the policy.
Level Global lawyers argue that the fund’s general counsel, who signed the policy application, didn’t know about the crime and did not learn of it after making a reasonable inquiry among Level Global’s employees into possible facts or circumstances that could lead to charges. They also argue that since the attorney fees XL has been paying are not for Adondakis himself, and only Adondakis is actually a convicted criminal, the exemption shouldn’t apply.
As part of its policy, XL agreed to cover $10 million in claims for Level Global. It has paid out all but $2.7 million in claims so far, and Level Global spent an amount equivalent to the remaining balance before it received word of XL’s suit. The case is XL Specialty Insurance Company v. Level Global Investors.
Last Friday, the Republican controlled U.S. House held hearings on cy pres awards in class action litigation. Cy pres awards are final surplus funds left over from class action cases. The tort reform lobby seeks to repeal cy pres awards under the Class Action Fairness Act of 2005 (CAFA).
During a hearing by the U.S. House Subcommittee on the Constitution, Northwestern Law Professor Martin Redish testified about the problems with such awards, saying class members are unaware of the lawsuit or can’t be found, or the award is so small that it doesn’t make sense for them to seek payment.
According to the U.S. Chamber of Commerce’s Institute for Legal Reform, cy pres awards in class actions help pump up attorney fees for plaintiffs’ lawyers. Testifying last week from the Institute’s viewpoint was John Beisner of Skadden Arps. Beisner said cy pres awards help inflate the size of the award and justify higher attorney fees.
"At NALFA, we oppose the repeal of cy pres awards under the Class Action Fairness Act. Unclaimed funds in class actions are better served with charities and non-profits than returned to the defendants, the very individuals who just conceded wrongdoing. This is like allowing a bank robber to keep some of the stolen money after he's been found guilty," said Terry Jesse, Executive Director of NALFA.
A recent Reuters Legal story, “Preview: Lawyers to Defend Fee Award by Delaware Judge,” reports that a team of plaintiffs’ attorneys will defend their $304 million attorney fee award before Delaware’s Supreme Court in a case that put the spotlight on the new chief judge on the state’s high-profile business court. The attorney fees stems from a $2.03 billion judgment awarded by Delaware Chancery Court Judge Leo Strine in October in a case brought by shareholders of Southern Copper Corp, who accused the company of overpaying in a takeover.
The two law firms, Kessler Topaz Meltzer & Check and Prickett Jones & Elliott, logged 8,597 hours on the case, which was spread among 45 lawyers and paralegals, according to court records. The attorney fees, if award by the lodestar calculation, instead of the percentage of fund (POF) method, would amount to $35,000 per hour. By comparison, the plaintiffs’ legal team that recovered $3.2 billion for Tyco shareholders spent 488,000 hours on the case, according to a brief on Southern Copper, receiving $1,010 per hour.
Judge Leo Strine amended his original judgment a few days after awarding the fees, and as a result the fee award was increased to $304 million from $285 million. Stine said the payment was based on the size of the recovery and was meant to encourage entrepreneurial plaintiffs’ attorneys. The judgment and the fees were stayed pending appeal, although the judgment will accrue interest.
“The message I think he is sending is that if you have a meritorious case and your lawyers add true value to the shareholders you will be appropriately rewarded,” said John Coffey, a former plaintiff’s lawyer who is a managing director with BlackRobe Capital Partners, which advises investors in legal claims. “I would be surprised if the Supreme Court disagreed with his basic premise,” Coffey said, though he said the fees could be trimmed on appeal.
The DOJ’s United States Trustee Program (USTP), which monitors bankruptcy proceedings, has been pressing for new rules and guidelines on attorney fees in Chapter 11 bankruptcies. On Monday, members of the agency’s U.S. Trustee Program convened a public meeting to discuss proposed guidelines that would increase government oversight of Chapter 11 filings by companies with more than $50 million in assets.
Under new rules, law firms working these cases would have to disclose their Chapter 11 billing rates and fee applications, stop rounding up billable hours and work within present budgets. Clifford J. White III, director of the U.S. Trustee Program, said in an email statement that the proposed changes to the 16-year-old fee guidelines would help “add transparency to the bankruptcy ststem.”
Government officials contend that bankruptcy lawyers charge higher attorney fees than other attorneys—sometimes in excess of $1000 an hour—because their clients are less apt to negotiate discounts. The DOJ also examined whether law firms justify exorbitant rates by devoting unnecessary hours and personnel to bankruptcy cases.
Law firms and other professional groups argue the proposed changes would actually increase the already high price tag for Chapter 11 cases and create unnecessary work for professionals at a time when their clients are in crisis. More detailed rate disclosures would be especially tough for law firms, which can be secretive about hourly rates.
CLICK HERE to read New Proposed Fee Guidelines (pdf) and for more information visit http://www.justice.gov/ust/eo/rules_regulations/guidelines/proposed.htm
A recent Reuters story, “MF Global Trustee’s Law Firm Bills $17 Million So Far,” reports that the legal team unwinding MF Global Holdings’ broker-dealer billed more than $17 million in attorney fees in the first four months of the bankruptcy. The team from the law firm Hughes Hubbard & Reed, led by trustee James Giddens, has been paid from the estate of MF Global Inc., according to court documents filed on Monday in U.S. Bankruptcy Court in Manhattan.
Giddens’ team has billed for roughly $20.1 million for the four-month period, but is withholding 15 percent of the total under an agreement with the Securities Investor Protection Corp (SIPC), an insurance fund for securities customers that taps trustees like Giddens to liquidate failed brokers. Giddens’ own rate is about $894 an hour, which incorporates a 10 percent reduction from his normal rate under the agreement with SIPC, according to the filing. Giddens billed 424 total hours in the four months.
Some of the key partners on Giddens’ team have billed more hours. James Kobak, who charged the same rate as Giddens, put in 749 hours, while bankruptcy partner Christopher Kiplok logged about 675 hours at $691 per hour. The full team, which includes nearly 130 lawyers and another 28 paralegals, has racked up more than 43,000 hours, according to the fee submission.
A recent NLJ story, “Mattel Argues Huge Bratz Award was Built Upon Errors,” reports that the $310 million judgment against Mattel, Inc. in its long-running litigation against Bratz doll maker MGA Entertainment Inc. should be revered because it was based on inaccurate damages calculations and erroneous billing invoices from 11 law firms, Mattel argued in its latest appellate filing.
The judgment includes nearly $140 million in attorney fees and costs, all but $2.5 million of which were related to MGA’s defense against claims that it infringed on Mattel’s copyright by hiring away the Bratz doll’s designer. Mattel’s reply, filed with the U.S. Court of Appeals for the Ninth Circuit sets the stage for oral arguments on whether the $310 million judgment issued by U.S. District Judge David Carter in Santa Ana should be reversed or remanded for a new trial.
MGA, in opposing Mattel’s brief, said the award was justified against “one of the largest and most aggressively litigated cases ever tried in this Circuit.” “Mattel launched litigation warfare to obliterate upstart MGA and seize MGA’s competing Bratz brand,” wrote attorney Clifford Sloan, a partner in the Washington office of Skadden Arps. Sloan argued that the attorney fees and costs paled in comparison to the more than $400 million that Mattel reportedly spent on the litigation, which began in 2004.
In its reply, Mattel challenged the attorney fees, even after Carter subtracted $24 million from a total of $129 million that MGA purportedly spent on defending Mattel’s copyright claims. “The district court’s mistaken assumption that MGA spent all $129 million on defensive fees infects it entire award,” wrote Kathleen Sullivan, a New York partner at Los Angeles-based Quinn Emanuel Urquhart & Sullivan. She cited tens of millions in duplicative billings, discounts and work contracted out to other firms. At a minimum, the fee award should be remanded for recalculation, with Mattel given the chance to review invoices that so far have been redacted, Sullivan wrote.
This week a WSJ article, “Should Lawyers Get Paid for a Win Without a Fight?” by Peg Brickley takes issue with large fee awards earned in securities class actions. The answer to Peg’s question is…YES!
In her article, Peg takes issue with a handful of shareholder suits filed in Delaware’s Court of Chancery. She asks weather plaintiffs’ lawyers representing shareholders deserve “hefty fees” for filing suits that resulted in quick changes to company bylaws.
“Attorney fee awards are determined, in part, by the results they achieve. Is it any surprise that winning big settlements (and/or verdicts) earn big attorney fees? Of course not, it's simple economics. Because a settlement was achieved quickly only adds to the value of the case,” said Terry Jesse, Executive Director of NALFA. “The efficient work of the plaintiffs’ lawyers resulted in benefits to shareholders; that should earn them significant compensation," Jesse concluded.
The Republican controlled Michigan House of Representatives introduced legislation that would limit attorney fee compensation in civil litigation. The proposed law would restrict any attorney from contracting with a client on a contingency fee basis, if his/her fees exceed $1 million.
The 2-page legislation, House Bill No. 5702 (pdf), would cap attorney fees at $1 million for all personal injury and wrongful death cases. The proposed legislation reads: “the attorney shall not receive, retain, or share a fee that is more than $1,000,000, regardless of the percentage of the amount recovered involved.”
"At NALFA, we are opposed to this legislation. Two private citizens should be able to contract without government interference. The right to contract is not only one of the principles of our free market economy, but it is one of the hallmarks of the attorney-client relationship," said Terry Jesse, Executive Director of NALFA.
A recent Jurist story, “Supreme Court to Consider Challenge to Attorney’s Fees,” reports that the U.S. Supreme Court granted certiorari in Marx v. General Revenue Corp. to determine whether a defendant may be awarded attorney’s fees in a Fair Debt Collection Practice Act (FDCPA) [15 USC § 1692] where the plaintiff brought the lawsuit in good faith.
The FDCPA allows a court to award attorney’s fees “[o]n a finding by the court that [the] action…was brought in bad faith and for the purpose of harassment,” while the Federal Rules of Civil Procedure (FRCP) allow such an award “[u]nless a federal statute…provides otherwise.” The U.S. Court of Appeals for the Tenth Circuit upheld the fee award, holding it was justified under the FDCPA and the FRCP. CLICK HERE (pdf) to read the Tenth Circuit ruling.
Plaintiffs’ counsel, who negotiated a $3.2 billion settlement of securities claims against Tyco International, Ltd. in 2007 were awarded $464 million in attorney fees (or 14.5% of the settlement fund) and $28.9 million expenses from a federal court in New Hampshire.
After extensive discovery and litigation, the class reached a historic settlement with Tyco for $2.975 billion, the single largest payment from any corporate defendant in the history of securities class action litigation. Plaintiffs’ class counsel include Grant & Eisenhofer, P.A., Milberg, LLP and Barroway, Topaz, Kessler, Meltzer & Check, LLP.
For more information, visit www.tycoclasssettlement.com
A recent Reuters Legal story, “Comments Oppose OCA Proposal on Fee Dispute Program” reports that the state Office of Court Administration (OCA) proposed preventing disbarred or suspended attorneys from participating in fee dispute programs. Under the proposal, resolution of fee disputes involving attorneys facing disciplinary action would be delayed until the disciplinary proceedings were complete. But a number of attorneys say the proposed rule change could harm clients and clog small claim courts with new cases.
The fee dispute program was created as an inexpensive and efficient to litigation for clients who feel they’ve been overcharged for legal services. A number of attorneys, some of who arbitrate fee disputes, wrote in public comments that the proposal could block clients with legitimate cases from using the program and that an attorney’s misconduct is irrelevant unless it is directly related to a client’s fee dispute.
Louis Kash, Rochester attorney and chair of Monroe County Bar Association’s fee dispute program, said the proposal could steer some attorney-client fee dispute cases into the courts, which would undermine the purpose of the arbitration program. Others took issue with the provision that would bar attorneys who are the subjects of open complaints from participating in the fee dispute programs. Claims of professional misconduct are kept confidential until an attorney is formally disciplined, but the fee dispute rule, several people said, could force attorneys to out themselves as the subjects of complaints.
“The mere fact of a complaint is hardly compelling evidence that the lawyer actually engaged in misconduct,” wrote Richard Supple, the chair of the New York City Bar Association’s Professional Discipline Committee. NYCBA opposes the proposed rule. Under the current program, arbitrators are allowed to determine only whether a fee was reasonable and are barred by state regulations from considering “claims involving substantial legal questions, including professional malpractice or misconduct.”
“Arbitrators understand that they cannot resolve issues of malpractice or other legal questions,” wrote Malvina Nathanson, an arbitrator with the New York County Lawyers’ Association’s fee dispute program. “However, whether the fees were reasonable in terms of the services rendered can be determined without regard to malpractice.”
A recent Sun Herald story, “High Court: Legal Fees are Public Funds,” reports that the Mississippi Supreme Court ruled last today in two cases that legal fees paid to private lawyers to represent the state are public funds. Justices said because the money belongs to the public, it should’ve been paid out to lawyers from the attorney general’s contingent fund or from other money appropriated to the attorney general.
In 2010, a Hinds County judge ruled the $14 million in attorney fees paid to two attorneys for handling a state lawsuit against telecommunications giant MCI was properly handled. Another Hinds County judge ruled the same case in 2010 involving $10 million in attorney fees paid to lawyers for handling a state lawsuit against computer software maker Microsoft.
The Supreme Court rejected arguments from Mississippi Attorney General Jim Hood and the attorneys involved in the cases that the attorney fees were property of the lawyers, not the state. The Supreme Court said the settlement funds paid by MCI and Microsoft belong to the state. The court said state law clearly “mandates that outside retained by the attorney general can be paid only from the attorney general’s ‘contingent fund’ or from funds appropriated to the attorney general by the Legislature.”
“That is where it must be paid – and distributed,” wrote Presiding Justice Jess Dickinson. “The statute does not allow direct payment of attorney fees.” But Justice Jim Kitchens said the law firms had a valid contract with the state and were entitled to their fees being paid from the settlement. Kitchen said a better approach would have been to submit all of the settlement proceeds to the attorney general, have him deposit them into his contingency account and then write a check to the law firms.
Hood said the private attorneys’ fees are part of the settlement of the lawsuit and should not be counted in the money the state receives. Hood enters into contracts with private attorneys when his office does not have the expertise, resources, or staff to pursue the litigation.
CLICK HERE to read the Miss. Supreme Court decision
Today, Republican Governor Phil Bryant signed into law restrictions on the state’s use of outside, contingency fee lawyers. The “sunshine” law would require all outside counsel representing the state to keep detailed time and expense records and limit contingency fee lawyers to a total fee of $50 million.
The law imposes hourly rates not exceed “recognized bar rates” (whatever that means). The bill imposes strict limits on contingency fee awards. Attorney fees are limited to 25% of a $10 million recovery, 20% for amounts between $10 million and $15 million, and only 5% for amounts over $25 million with a cap of $50 million. The state will also establish an Outside Counsel Oversight Commission to review contingency fee contacts and require those contracts to be posted on the AG’s website.
Mississippi Attorney General Jim Hood’s office is considering challenging the constitutionality of the new law in court. In a statement (pdf) Hood’s office projects the bill will cost the State about $11 million a year because the average private lawyer is paid $145 per hour and the AG only charges $65 per hour for the same services and that difference will be paid for by Mississippi taxpayers. The current system works. Over the past 7 years Jim Hood’s office has recovered over $500 billion for the taxpayers of the state and it did not cost the taxpayers a single dime. In addition, the law of the state already allows state agencies to file suit should the attorney general decline, or file suit even if the attorney general opposes such.
“Mississippi Attorney General Jim Hood is one of the most successful attorneys general in U.S. history. He was one of the first AGs to bring a suit against the tobacco companies. Throughout his career, he has taken on powerful industries such as insurance companies, big tobacco, and drug companies. Hood has tallied up record settlements against a host of corporate wrongdoers including Entergy, State Farm, MCI/World Com, and BP, thus securing hundreds of millions of dollars for Mississippians,” said Terry Jesse, Executive Director of NALFA.
A recent AM Law Daily story, “Tallying Up the TARP-Related Legal Fees Racked Up By AM Law Firms,” reports that the U.S. Department of Treasury’s Troubled Asset Relief Program (TARP) may have expired, but some of the initiatives that grew out of that massive federal effort to bail out ailing banks and cope with other financial crisis fallout live on.
Several AM Law 100 firms have amassed significant legal tabs over the past four years. Treasury has a breakdown on those firms and the “obligated value” of their TARP contracts, which extend for various time periods between 2008 and 2015, through the procurement section of its FinancialStability.gov website.
Copies of contacts – which are mostly boilerplate agreements for legal advice on investments, asset-backed security deals, debt transactions, mortgage loan modifications, other mortgage-related issues, or restructuring matters visit http://www.treasury.gov/initiatives/financial-stability/procurement/Contracts/Pages/contract-detail.aspx
Simpson Thacher: $10,310,139
Hughes Hubbard: $5,293,856
Paul Weiss: $4,799,741
SNR Denton: $4,639,402
For more on this visit “Legal Fees Paid Under TARP Questioned”
A recent New Jersey Law Journal story, “Firm Wins $2.3M in Fees in Suit Over Insurance Coverage of Eating Disorders,” reports that Nagel Rice, LLP was awarded $2.3 million in attorney fees and expense for its work toward a $1.18 million settlement over insurance coverage for eating disorder treatments. U.S. District Judge Faith Hochberg in Newark made the award to Nagel Rice based the recommendation of attorney fee expert Douglas Wolfson, who arrived at an adjusted lodestar of $1.57 million and an allowance of $112,505 for expenses.
That sum was reached after the deduction of $73,405 from records submitted by Nagel Rice for work that it admitted was excludable or what Wolfson found duplicative or related to its dispute with Mazie, Slater, Katz & Freeman. Nagel Rice requested a lodestar multiplier of 1.4, citing the case’s complexity and amount of relief obtained, and Hochberg granted it, bringing the fee award to $2,196,580. With expenses, the total comes to $2,309,086.
Fee expert Wolfson praised Nagel Rice’s efforts to pursue the litigation in an efficient manner, noting that of 32 depositions, only one was attended by two attorneys from the firm. “Counsel’s avoidance of an excessive presence at depositions is in keeping with the best interests of the profession,” Wolfson said. He gave careful attention to many instances when the firm’s attorneys conferred with each other. But he concluded that such entries “simply reflected the fact that the suit was complicated, involving many complex issues…necessitating constant oversight by senior attorneys.”
The settlement, in Drazin v. Horizon Blue Cross Blue Shield of New Jersey, represents the spoils of a battle Nagel Rice waged with Mazie Slater. The firms are the remnants of the former Nagel Rice & Mazie, which broke into two in a partnership dispute in 2006. The firms each brought a series of nearly identical class actions against insurers over restrictions on eating disorder coverage, and hostility between the firms prevented consolidation of the cases. The Drazin settlement provides $1.2 million in reimbursements from past denied claims, allows future claims to receive parity with treatment for biologically based mental disorders.
Hochberg instructed Wolfson to deduct time for fees or expenses that were incurred as part of the conflict between the firms and that did not confer a benefit on the class. Mazie Slater sought 50 percent of the fees from the settlement, but Hochberg ruled the firm was not entitled to attorney fees. She said it played no role in the recovery obtained for the class. Mazie Slater has appealed that decision to the U.S. Court of Appeals for the Third Circuit.
A recent New Jersey Law Journal story, “Philips/Magnavox Settles Class Action Over Malfunctioning TVs for $4 Million,” reports that a federal court has given final approval to $4 million class action settlement that resolves consumer fraud claims against Philips/Magnavox over overheating plasma and liquid crystal display flat-screen televisions. U.S. District Judge Claire Cecchi in Newark signed off Monday on the deal, which in addition to the cash gives class members an uncapped number of vouchers. It also provides $1.575 million for the plaintiffs’ attorney fees and expenses.
The $1.575 million approved for attorney fees and expenses is based on a $2,101,955 lodestar, with a multiplier of 0.75. Cecchi, noting that the sum did not include fees for the fairness hearing, said there was no reason to reduce the lodestar given the degree of risk and high quality representation and thus concluded that the $1.575 million fee request was reasonable. It also pass muster under the percentage of recovery cross-check, given that the fees comprised 39 percent of the cash portion alone, that class counsel spent nearly 4,000 hours over three years working on a contingent basis and that it fit within the range of fee awards in comparable cases.
The consolidated complaint, In re Philips/Magnavox Television Litigation, was filed in Dec. 2009, on behalf of 14 plaintiffs from New Jersey, California, Texas, Florida and elsewhere who paid as much as $5,100 for a 50-inch model. The action alleged that Philips Electronics North America Corp. knowingly sold Philips and Magnavox TVs with defective power boards.
Class counsel were Andrew Friedman of Cohen Milstein Sellers & Toll in Washington, DC, Michael Schwartz of Horwitz Horwitz & Paradis in New York and Steven Schwartz of Chimicles & Tikellis in Haverford, Pa.
For more information, visit www.philipsplasmatvsettlement.com
A recent AM Law Daily report, “Facebook Lists $2.6 Million in Legal Fees Ahead of Friday IPO,” reports that when Facebook lists legal fees and expenses related to its hotly anticipated IPO at $2.6 million, according to a company filing with the SEC on Tuesday. The estimated fees are a rough approximation and not a precise tabulation of invoices related to the myriad legal costs in bringing a company public.
Fenwick & West chairman Gordon Davidson and securities group co-chair Jeffrey Vetter are leading a team from the firm representing Facebook, while Simpson Thacher & Bartlett corporate partners William Hinman Jr. and Daniel Webb in Palo Alto are advising underwriters on the IPO led by Morgan Stanley, Goldman Sachs, Bank of America/Merrill Lynch, Barclays Capital, and JPMorgan Chase.
Fenwick represented the company on its April acquisition of photo-sharing service Instagram for $1 billion, as well as on its $550 million purchase of what had been AOL patent portfolio from Microsoft late last month. In previous years, Fenwick also handled Facebook’s purchase of London-based mobile application developer Snaptu and a $200 million investment in Facebook by Russia’s Digital Sky Technologies.
A recent NLJ story, “Volkswagen Challenges Fee Award Method in MDL Settlement,” reports that an award of $30 million in attorney fees and nearly $1.2 million in costs to plaintiffs’ lawyers who worked on multidistrict litigation came under fire at the U.S. Court of Appeals for the First Circuit on May 10. Volkswagen claimed that the district court should have used the lodestar method. Instead, the court used the percentage-of-the fund method. Volkswagen said if the lodestar method was used, the plaintiffs’ fee award would have been $7.7 million.
The underlying litigation concerned oil-sludge damage to Volkswagen cars. A special master settlement specialist estimated the value of settlement at about $223 million for a potential class of about $480,000 cars. The settlement included oil changes and extended warranties. Three firms were leading plaintiffs class counsel and parties to the appeal, Volkswagen Group of America Inc. v. Peter J. McNulty Law Firm. They were the McNulty Firm, Denver’s Irwin & Boesen and Philadelphia’s Berger & Montague.
Volkswagen claimed that the New Jersey fee-shifting statute, which state’s courts have said requires use of the lodestar method, should have applied. New Jersey state law governs the attorney fee calculations because the case centers on alleged violations of the New Jersey Consumer Fraud Act. Volkswagen also noted that the agreement does not language that would create an entitlement to fees independent of the fee-shifting statute. The agreement stated that the fee calculation “shall not…be derived” from the benefits awarded to the class, so applying the percentage method was inappropriate, Volkswagen claims.
The McNulty firm argued that, under well-settled principles of class action law, courts have discretion when awarding attorney fees. The firm also disputed that it fees were awarded under New Jersey’s Consumer Fraud Act. Instead, its brief stated, fees “were asserted on numerous theories, including breach of contract, breach of implied warranty of merchantability, unjust enrichment, declaratory judgment under federal law, and violations of the consumer fraud statutes of several states.” The court “properly used lodestar methodology solely as a cross check of the reasonableness of its award,” stated the McNulty firm in its brief.
The McNulty firm further claimed that Volkswagen’s agreement to pay fees was part of the settlement and “memorialized in the class notice.” Class counsel agreed in a lower court hearing not to seek more than $37.5 million in fees and about $1.8 million in costs.
A recent New York Law Journal story, “Judge Backs Firm’s Demand for $414,000 in Fee Dispute,” reports that Manhattan Supreme Court Justice Joan Madden has ruled that Emery Celli Brinkerhoff & Adaby is due more than $414,000 in attorney fees from a disgruntled client who contended the law firm mishandled the accounting of a stock transfer transaction and other matters in what became an acrimonious attorney-client relationship. She ruled that the “account stated rule,” in which a client pays part of a bill is generally deemed to have accepted the entire billing as valid.
In Emery Celli Brinckerhoff & Adaby v. Michael Rose, Madden said she agreed with Emery Celli’s contention that the account stated rule makes Rose liable for the outstanding legal bills. She ruled that Rose cannot invoke legal malpractice as a defense against account stated in this matter because he failed to show how Emery Celli had actually committed malpractice.
Rose hired Emery Celli for an initial retainer of $50,000 and the law firm agreed to bill the real estate company for the hourly service of its attorneys thereafter. Emery Celli said it represented Rose or Broadside Realty in three subsequent suits stemming from Rose’s efforts to gain control of the company. In April 2008, Emery Celli negotiated a settlement with the other shareholders under which Rose would get back all outstanding stock for $12 million. Emery Celli alleged that Rose, after some sporadic payments to the law firm, stopped payments altogether in 2009.
Richard Emery said yesterday in an interview that the ruling is “especially appropriate in light of the fact that we achieved success for our client, who then decided not to pay us.”
A recent AM Law Daily story, “Court Slashes Baker & Hostetler Fees in Maine Redistricting Litigation,” reports that a three-judge panel has ruled that the attorney fees by lawyers for plaintiffs in a suit that forced the redrawing of Maine’s two congressional district lines should be cut by about 53 percent, from roughly $150,000 to about $70,400. The lawyers in question – Timothy Woodcock of Eaton Peabody and four Baker & Hostetler attorneys, including election law counsel E. Mark Braden—represented William Desena and Sandra Dunham who sued the state of Maine, Governor Paul LePage, three other state officials, and the state’s Bureau of Corporations, Election and Commissions in March 2011.
The plaintiffs and defendants agreed on the constitutionality issue at the heart of the suit, but the question of what legal fees and expenses the plaintiff and their counsel could recover as the lawsuit’s prevailing party was much more contentious. Plaintiffs counsel asked for about $150,000 in fees and expenses, broken down as follows: about $41,200 for Woodcock and his paralegal, $6,200 for data analyst Clark Bensen, and approximately $103,000 for Baker and Hostetler attorneys, including about $25,000 for redistricting litigation veteran Braden.
The defendants balked at the fee request, claiming the request was excessive and constituted overstaffing and redundancies. The defendants argued that the associates only deserved to get $175 an hour, the prevailing rate in Maine for a similarly credentialed attorney. Taking all their objections into account, the defendants asked the court to reduce the plaintiffs’ request for fees and costs from about $150,000 to $47,200. In the end, the three-judge panel didn’t cut quite that much. In their March 21 order, the judges ruled the plaintiffs’ lawyers were entitled to only $70,400 of the requested amount, because the “plaintiffs’ overall staffing pattern was excessive, resulting in the billing of duplicative and unproductive hours.”
A recent NLJ story, “$7.8 Billion BP Settlement Wins Judge’s Preliminary OK,” reports that a federal judge gave preliminary approval to a settlement between BP PLC and individuals and businesses that suffered economic harm or medical costs associated with the Deepwater Horizon oil spill – and clarified that BP, and not the claimants themselves, would pay the lawyers who spearheaded the litigation. In approving the deal, estimated to be worth $7.8 billion, U.S. District Judge Carl Barbier rejected nearly a dozen objections by parties including Halliburton Energy Services Inc., which is a remaining defendant in the MDL over the spill, and the states of Mississippi and Florida.
“The Court preliminarily and conditionally finds, for settlement purposes only, that the terms of the Proposed Settlement are sufficiently fair, reasonable, adequate, and consistent with governing law,” Barbier wrote. “At this stage, the Settlement Agreement appears fair, has no obvious deficiencies, doe not improperly grant preferential treatment to the Class Representatives or to segments of the Class, and does not grant excessive compensation to attorneys.”
He noted some unusual terms in the deal – primarily, that claims be paid ahead of final settlement approval and that BP, not the class members, would be responsible for paying the plaintiffs steering committee’s attorneys fees and costs, referred to as “hold back” fees. In a subsequent order on May 3, Barbier clarified that no “hold back” fees would be deducted from settlement payments. Plaintiffs would still be responsible for paying their individual attorneys.
A recent article by Adam Freed of Los Angeles-based Proskauer Rose, “California Supreme Court Denies Fee-Shifting on Meal and Rest Period Claim,” reports that the California Supreme Court issued its decision in Kirby v. Immoos Fire Protection, Inc. (pdf), holding that attorney fees may not be awarded under California Labor Code § 218.5 to a party that prevails on a claim for meal and rest break violations. Section 218.5 provides that attorney’s fees are to be awarded to the prevailing party “[i]n any action brought for the nonpayment of wages…” (thus, a two-way fee-shifting statute, awarding fees whether one is the plaintiff or defendant). However, the statute exempts from its scope any action for which attorney’s fees are recoverable under Labor Code § 1194, which entitles prevailing employees to attorney’s fees in an action for any unpaid “legal minimum wage or…legal overtime compensation.”
Here, the defendant moved for attorney’s fees under section 218.5 upon plaintiffs’ dismissal of their meal and rest break causes of action. Thus, the Court set out to determine two questions: (i) whether meal and rest break claims fall within the ambit of section 1194 and are thereby excluded from section 218.5 attorney’s fees and, if not (ii) whether section 218.5 authorizes an award for meal and rest break claims. Justice Liu, writing for a unanimous Court, held that while section 1194 does not apply to meal and rest break claims, such claims are not authorized by section 218.5. As such, the Court reversed the Court of Appeal’s decision affirming attorney’s fees for the defendant.
The Court first determined that neither the text nor the history of section 1194 indicated that the statute is meant to refer to anything other than “ordinary minimum wage and overtime obligations,” which do not encompass meal and rest break claims. Second, the Court found that an employer’s alleged failure to provide meal and rest periods does not constitute an “action brought for the nonpayment of wages” within the meaning of 218.5. While the Court acknowledged defendant’s argument that the remedy for meal and rest has been interpreted to constitute “wages,” the Court held that section 218.5 envisions an action on account of the nonpayment of wages, not an action for which the remedy is a wage.
A recent NLJ story, “Huge Award was Justified by Mattel’s Scorched-Earth Tactics, MGA Argues” reports that MGA Entertainment Inc. told an appellate court that the $310 million judgment it won against competitor Mattel Inc. in the Bratz doll litigation was justified against “one of the largest and most aggressively litigated cases ever tried in this Circuit.”
The $310 million judgment included an $85 million verdict, $85 million in exemplary damages, and nearly $140 million in attorney fees and expenses, most of which related to MGA’s successful defense against claims that it infringed on Mattel’s copyright by hiring away the Bratz doll’s designer. Mattel, in petitioning the U.S. Court of Appeals for the Ninth Circuit, called the judgment “the largest copyright fee award in history.”
Clifford Sloan, a partner in the Washington office of Skadden Arps noted that U.S. District Judge David Carter actually excluded $24 million before awarding the attorney fees and costs related to the copyright claim. “The amount that the district court awarded, $105.6 million in attorney’s fees and $31.6 million in costs, is a small fraction of what was at stake for MGA in this suit and what the litigation has cost, and it pales in comparison to the more than $400 million that Mattel reportedly spent on its prolonged litigation warfare against MGA,” he wrote.
A recent Texas Lawyer story, “Firm at War Over $10 Million Contingency Fee in Patent Suit,” reports that The Matthews Firm has sued Laminack, Pirtle & Martines and two clients they jointly represented, alleging Laminack, Pirtle and the clients refused to recognize The Matthews Firm’s interest in a contingency fee arising from a nearly $50 million judgment. Fred Hagans, who represents the plaintiff in The Matthews Firm v. Laminack, Pirtle & Martines, et al., says his client is entitled to about $10 million.
The plaintiff, a Houston firm that handles intellectual property work, brings breach of contract and quantum meruit causes of action against the defendants and seeks a declaratory judgment that it is entitled to a 22.5 percent fee in the underlying case. But Rick Laminack, a partner in Houston’s Laminack, Pirtle, says he’s surprised The Matthews Firm sued his firm and its client over the contingent fee, since the underlying suit, Wellogix Inc. v. Accenture, is on appeal before the 5th 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 11th 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
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 5th 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 5th 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 5th 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.
New Article: When the American Rule Doesn't Apply: Attorney's Fees as Damages in California Litigation
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 9th 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 9th 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 9th 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 9th 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 9th 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.
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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.
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If you are interested in joining, please contact us at 312-907-7275.
A recent The Legal Intelligencer story, “GSK Seeks to Limit Contingency Fees in Avandia MDL” reports that drugmaker GlaxoSmithKline has asked a judge overseeing the federal multidistrict litigation over the diabetes drug Avandia to limit the contingency fees of attorneys representing individual plaintiffs to 25 percent of client account or awards. The motion is still pending before U.S. District Judge Cynthia M. Rufe of the Eastern District of Pennsylvania.
In litigation in which many plaintiffs have already settled, the court should limit “individual plaintiffs’ attorneys’ fees where, as here, the attorneys did not perform a substantial portion of the work, but rather benefited from coordinated discovery and other work performed by plaintiffs’ steering committee,” GSK said in court papers. District courts capped contingency fees from 20 percent to 35 percent in pharmaceutical and medical device MDLs involving Medtronic, Vioxx, Guidant and Zyprexa, GSK said in their motion.
In response, one of the plaintiffs’ law firms with individual cases said that while it was not one of the firms involved in the litigation earlier and did not participate in the plaintiffs’ steering committee, it has and will continue to conduct “extensive work” on behalf of its clients and deserves to be compensated according to the contingency fee agreements it has with its clients. Weitz & Luxenberg said the case law cited by GSK involved cases in which the parties had already entered into global settlement agreements and that there are hundreds of MDL litigations beyond the five cited by GSK that did not involve such judicial intervention on the issue of attorney fees.
In a motion filed by Paul J. Pennock and Jaime M. Farrell, Weitz & Luxenberg said the firm is already dealing with reduced fees. Under the Avandia common benefit fund set up to compensate and reimburse attorneys for services performed and expenses incurred in prosecuting the MDL, the plaintiffs will be assessed 7 percent of their gross monetary recovery, of which 4 percent will be deducted from attorney fees, Weitz & Luxenberg said in court papers. The firm would ordinarily receive 33.3 percent in contingency fees, but because of the common benefit fund, the firm will receive 29.3 percent, according to court documents.
A recent Thomson Reuter story, “Record $285M Fee Award is Strine’s Message to Plaintiffs’ Bar” reports that in a footnote at the end of his October 14 ruling granting Southern Peru shareholders $1.3 billion from majority stockholder Grupo Mexico, Delaware Chancery Court Chancellor Leo Strine Jr. had cautionary words for the plaintiffs’ firms that won the recovery. Prickett, Jones & Elliott and Kessler Topaz Meltzer & Check, the judge said, had been too slow to prosecute the derivate suit when it was filed back in 2005. He instructed the firms to confer with defense counsel from Milbank Tweed (for Grupo Mexico) and Ashby & Geddes (for Southern Peru, now Southern Cooper) to see if they could agree on a “reasonable” fee request, “with the plaintiffs’ counsel taking into account the reality [that] their delays affected the remedy and are a basis for conservatism in any fee award.”
Kessler Topaz and Prickett Jones had originally asked for 22.5 percent of the recovery they obtained. In a Oct. 28 brief that liberally quoted Strine’s own words from previous cases, the plaintiffs’ firms argued that they should be rewarded for the “huge risk” of hard-fought derivative litigation. The firm said they’d kept Strine’s admonition in mind, which is why they were asking for 22.5 percent instead of the customary 33 percent. But they asserted that if the chancellor refused to award a big percentage just because it amounted to hundreds of millions of dollars, he would encourage plaintiffs’ firms to settle quickly rather than fight for the best possible recovery.
“Limiting fee awards in large cases would create a strong disincentive to take the huge risk of trying large cases,” the brief said. “For example, how would lawyers be incentivized to take a potential billion dollar case to trial it they know that they win a billion dollar they will get the same fee award as they would have if they settled the case for $200 million? It is clear that such a declining percentage approach would misalign the interests of the lawyers and those they represent.”
So why did Strine agree to grant such a large fee award? Because he was sending a message not just to lawyers in the Southern Cooper case, but to the entire securities class action bar. The chancellor spoke about rewarding plaintiffs’ lawyers for taking risks – and chided defense lawyers for being envious when those risks pay for in big fee awards. If lawyers are willing to litigate big cases through discovery and trial, he suggested, we’ll make sure they’re compensated for their efforts.
A recent Courthouse News Service story, “Foreign Attorney Sue for Share of $100M Fee” reports that Argentinean attorneys claim a Miami law firm stiffed them for a 23 percent consulting fee from a $410 million consumer class action settlement “and one of the largest attorney’s fee awards in such a case, over $100 million.” Raponi & Hunter Abogados claim Jeremy Alters of Alters Morelli Ranter “sold off or assigned interests in the recovery from the class action lawsuits to fund his law firm and lavish lifestyle.”
The underlying class action involved U.S. banks’ chronologically rearranging debit transactions from largest to smallest, to generate “billions of additional overdraft fees.” According to the Argentinean partners, Osvaldo Raponi and Jaime Hunter, In August 2008, Raponi, and expert in banking law, and Hunter, bought to Alters and his firm the most significant case in Alters’ legal career. This was the first consumer banking class action in which Alters or his firm were involved. Raponi and his firm were the architects of the claims bought by Alters, which resulted in one of the largest consumer class action settlements in history, $410 million and one of the largest fee awards in such a case, $100 million.
Alters acknowledges that Raponi consulted in the overdraft case in a “meaningful way that deserves compensation for his work and that he has done work, a lot of it.” In exchange for originating the case and providing his assistance, Alters agreed that Raponi and Hunter would receive 23 percent of his firms’ fee from the litigation. Years later, after the Bank of America case settled, Alters betrayed Raponi and Hunter and misrepresented that the fee agreement was unenforceable and that they could receive a mere fraction of the agreed upon fee as “consultants,” not as foreign lawyers, or they would receive nothing at all.
A recent NLJ story, “Federal Circuit Upholds $4.7M Fee Award to Cordis Over MarcTec’s Litigation Misconduct” reports that the U.S. Court of Appeals for the Federal Circuit has upheld a lower court’s award of nearly $4.7 million in attorney and expert fees to patent defendant and Johnson & Johnson subsidiary Cordis Corp. for its opponent’s litigation. On Jan. 3, a unanimous panel in MarcTec LLC v. Johnson & Johnson affirmed rulings by Chief Judge David Herndon of the Southern District of Illinois.
Herndon granted Cordis’ motion to declare the case exceptional under the U.S. Patent Code and award Cordis $3.8 million for attorney fees and expenses and $809,000 for expert fees and expenses. Judge Kathleen O’Malley, who authored the ruling, wrote that the trial court did not err in finding the case exceptional and did not abuse its discretion by awarding expert witness fees.
In the underlying case, MarcTec filed suit in 2007 claiming Cordis’ Cypher stent infringed two of MarcTec patents for “heat bondable material” that is “bonded” to a surgical device or implant. The district court granted Cordis’ motion for summary judgment. Cordis then asked the court to declare MarcTec’s suit exceptional and to award Cordis its attorney and expert witness fees. The trial court found that MarcTec’s infringement allegations were “baseless” and “frivolous” and that it acted in “bad faith”.
On appeal, the federal appeal panel found that MarcTec filed an “objectively baseless lawsuit in bad faith.” The panel also supported the lower court’s expert witness fee award because Cordis was forced to incur expert witness expenses “to rebut MarcTec’s unreliable and irrelevant expert testimony,” and it’s spending wasn’t recoverable under the section of the Patent Code that allows the recovery of attorney fees in exceptional cases.
A recent BLT Blog post, “Heller Attorney Awarded $1.1M in Fees, One-Third of Their Request” reports that after 3 years of the Supreme Court’s landmark decision in District of Columbia v. Heller and a length fight with the District of Columbia, the attorneys for Dick Heller have been awarded their attorney fees. In a ruling, U.S. District Judge Emmet Sullivan in Washington awarded Heller’s attorneys, led by Alan Gura of Alexandria, Va.’s Gura & Possessky, just over $1.1 million – about one-third of what they had requested.
Gura and his team had requested about $3.1 million in attorney fees. By contrast, the District of Columbia had argued that Heller’s attorneys merited just over $840,000. Sullivan said determining the lawyers’ hourly rate alone was difficult, as three of the six attorneys on the case – Clark Neily III of the Institute for Justice, and Robert Levy and Gene Healy with the Cato Institute – work for nonprofit groups. And the other three, including Gura, Laura Possessky and Thomas Huff, do not have standard fixed hourly rates, in part because they charge lower rates to clients who otherwise couldn’t afford them.
Both side argued to Sullivan that various matrixes and formulas should be used to determine the correct hourly rate. The plaintiffs’ team concluded that the rates should be $589 per hour for all the attorneys except Huff, who had less experience. They argued Huff should be compensated $361 per hour. Sullivan called those rates “extraordinary” and not appropriate for this case. “[T]he Court is unwilling to award the high rates requested by plaintiff absent specific evidence that those are, indeed, the prevailing market rates for attorneys engaged in complex federal litigation outside the District of Columbia’s largest law firms,” Sullivan wrote.
In a joint statement said they “respectfully” disagreed with Sullivan’s determination of the hourly rates calculated in this case, which they submitted was based on an outdated U.S. Attorney’s Office Fee Matrix. “As has become increasing apparent in recent years, that matrix bears little if any relationship to prevailing hourly rates for complex litigation in the Washington, D.C. market,” the attorneys wrote. “nor do we believe the rates provided in the USAO matrix accurately reflect the exceptional quality of the legal work performed by Plaintiff’s counsel in securing this historic win.”
A recent The Wall Street Journal blog story, “How Much is $300 Million in Attorneys’ Fees?”, recognizes NALFA as the industry source for attorney fee and legal billing matters. The Wall Street Journal is one of the nation’s most respected newspapers and an authoritative news source on business and financial information.
The Wall Street Journal turned to NALFA for information on the largest class action attorney fee awards in U.S. history. This is not the first time NALFA has been cited by the national press. In September 2011, NALFA was quoted in a Thomson-Reuters story, "Cuomo Considering Law Change on Class Action Attorneys' Fees".
“We are pleased to be recognized by the WSJ as the industry source on attorney fee and legal billing issues,” said Terry Jesse, spokesman for NALFA. “We were happy to provide the WSJ with the information and look forward to working with other media outlets in the future,” Jesse concluded.