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Federal Circuit Denies Fee Entitlement to NLRB

May 24, 2016

A recent Corporate Counsel story, “D.C. Circuit Knocks NLRB Bid for Attorney Fees” reports that, after proving that a company violated labor laws, can the National Labor Relations Board (NLRB) force the wrongdoer to pay its costs and attorney fees as a punishment?  Not according to the U.S. Court of Appeals for the D.C. Circuit.

The appeals court recently heard an appeal by HTH Corp, a hospitality company that the NLRB had found liable for a litany of labor violations, like illegally firing a union activist and banning union representatives from hotel premises.  HTH didn’t appeal the NLRB’s finding of liability, but it did challenge the extraordinary remedies imposed by the NLRB, including a requirement that HTH pay the labor board and the labor union involved in the case for attorney fees incurred.

In a ruling, the D.C. Circuit vacated the board’s decision to grant attorney fees.  The court rejected the NLRB’s argument that its request was permissible under the bad faith exception to the American rule, which allows federal courts to shift attorney fees to parties when one party acts in bad faith or in a particularly egregious manner.

Senior Circuit Judge Stephen Williams emphasized in the court’s opinion that as “a creature of statute” the NLRB only has “those powers conferred upon it by Congress.”  Unlike a federal court, he writes, the board or one of its administrative law judges cannot apply the bad-faith exception and demand attorney fees unless the NLRA grants it power to do so.

Jim Walters, a partner at Fisher Phillips, says that because HTH was a repeat offender this was a good case for the NLRB to use to test whether it could get attorney fees.  “But at the end of the day, the agency just didn’t have the authority,” Walters says.

If the board ever did manage to get court approval for charging the opposing party with attorney fees under the NLRA, it would be a windfall for the agency, says Howard Wexler, an associate at Seyfarth Shaw.  He pointed out that other employment statutes provide for payment of attorney fees to prevailing plaintiffs, like Title VII of the Civil Rights Act and the Fair Labor Standards Act.

“I guess you can’t fault them for trying,” says Wexler of the labor board. “But at least here the D.C. Circuit didn’t give it to them.”

Sixth Circuit: Briefing Error Leads to “Non” Fee Award

May 23, 2016

A recent ABA Journal story, “Citing Brief Error, 6th Circuit OKs $6,800 in Legal Fees; Counsel Sought $180K in Coffeemaker Suit,” reports that plaintiff Pamella Montgomery still gets the $250 settlement she was promised after a more than two-year legal battle with Kraft Foods Global Inc. and Starbucks Corp. over her purchase of a single-serve coffee maker.

But the Michigan woman’s lawyer is receiving $6,800 in attorney fees and costs rather than the $180,000 he had sought under a federal trial court ruling that was OK’d by the Cincinnati-based 6th U.S. Circuit Court of Appeals.

Citing a briefing error in the appeal of the Grand Rapids case, the three-judge panel said counsel for Montgomery had waived the right to argue for a bigger award.  Although Montgomery’s counsel did point out that the trial court award represented only about 3 percent of the attorney fees and costs requested, calling the amount a “nonaward,” counsel didn’t present arguments for an increase, explains the 6th Circuit’s written opinion:

“By positing only that the modest size of the award (as compared to the request) amounts to a ‘non-award,’ she presents the court with a gripe, unaccompanied by legal reasoning in support of judicial relief.  We therefore agree with defendants that Montgomery forfeited this issue by inadequately briefing it.”

As far as the merits of the breach-of-warranty case were concerned, Montgomery argued that “Featuring Starbucks Coffee” language on the box of Kraft’s single-cup coffee machine implied continued availability of compatible Starbucks pods.  However, as Kraft was aware was likely to occur, the Starbucks T-Discs were discontinued soon after she bought the Tassimo machine, her lawsuit said.

Nonetheless, the machine made Starbucks coffee as promised, while it was available, and other coffee merchants offered compatible pods for use with the machine.  Hence, the trial judge did not err by dismissing her breach-of-warranty claims for this and other reasons and refusing to certify a claimed class of similarly situated consumers, the 6th Circuit wrote.

SCOTUS Allows Attorney Fee Award Without “Prevailing”

May 20, 2016

A recent NLJ story, “Justices Allow Attorney Fee Awards Without Victory on Merits,” reports that, in a ruling that could mean more attorney fee awards for employers in workplace discrimination cases, the U.S. Supreme Court said defendants don’t have to win on the merits to be counted as the “prevailing party.”

The court’s unanimous ruling (pdf) in CRST Van Expedited v. Equal Employment Opportunity Commission was a victory for the trucking company accused of sexual harassment, and for Paul Smith of Jenner & Block, who represented the company.

At issue was whether the Equal Employment Opportunity Commission was obliged to give the Iowa trucking company an attorney fee award when its sexual harassment claims against the company were dismissed because the commission bungled the case.

Title VII of the Civil Rights Act calls for awarding attorney fees to a defendant in an employment discrimination case only when the plaintiffs' claims are "frivolous, unreasonable or without foundation."

After a district court dismissed the EEOC's claims, the parties went through several rounds of litigation over legal fees.  CRST Van Expedited Inc. has already paid the fees to Jenner & Block, so the company would receive the $4.5 million fee award from the EEOC, not the law firm, after the Eighth Circuit reviews the fee on remand.

In its second decision on the issue, the U.S. Court of Appeals for the Eighth Circuit in 2014 sided with the EEOC, ruling that it is not possible to determine that the EEOC's case against the company was frivolous "without a judicial determination of the plaintiff's case on the merits."  But the Supreme Court rejected that interpretation.

“A favorable ruling on the merits is not a necessary predicate to find that a defendant has prevailed,” Justice Anthony Kennedy wrote for the court.  “Common sense undermines the notion that a defendant cannot ‘prevail’ unless the relevant disposition is on the merits.”

For a defendant, Kennedy said, prevailing can take many forms, including dismissal of claims for reasons other than the merits of the case.  “The defendant has … fulfilled its primary objective whenever the plaintiff’s challenge is rebuffed, irrespective of the precise reason for the court’s decision,” Kennedy wrote.

Mari Henry Leigh Discusses Flat Fees in Bankruptcy Cases

May 19, 2016

Legal Fee Solution’s Mari Henry Leigh was quoted in a recent NLJ story "In Bankruptcy, Flat is Fine." The story reads:

Bankruptcy lawyers across the country learned this lesson in 2015: A fine year can be a flat year.

The number of bankruptcies themselves may have fluctuated, especially with corporate suffering in the energy industry.  But a lack of volatility in bankruptcy lawyers' billing rates, evidenced by a collection of almost 3,000 attorney fee disclosures in bankruptcy records, have calmed practitioners.  In major markets, bankruptcy partners make $1,000 an hour or more.

"Looking back at last year, it was a slow year.  Most bankruptcy ­practitioners will agree with that," said Jason Gold, chairman of the bankruptcy practice at Nelson Mullins Riley & Scarborough. That's not necessarily bad, though, especially since bankruptcy practices went on a roller coaster of demand during and after the recession.  "It's almost like we don't know we're that busy until we're busy for awhile," Gold said.

The experience of the practice area falls in line with the on-the-whole flat panorama of the legal industry in 2015.

The National Law Journal's findings came from a study by ALM Legal Intelligence that collected attorneys' hourly billing rates as reported in bankruptcy filings in the largest 20 federal bankruptcy courts.  Although some of the rates may apply to lawyers who focus on other practices, most are bankruptcy law practice rates.  Firms that appeared in the NLJ 350, the ranking of the nation's 350 largest law firms by head count, are included, for a total of 2,307 lawyer rates. ALM also surveyed about 25 law firms independently about their rates. 

In 2015, small law firms nationwide with fewer than 25 attorneys charged, at the median, $350 an hour for partners and $300 for associates, according to bankruptcy filings from the 20 largest federal bankruptcy jurisdictions last year.  Medium-sized law firms, with up to 150 lawyers, hit $460 an hour as a median price for partners, and $300 for associates. Law large firms reported partner rates of $595 at the median and associate rates at $325.

Last year, the NLJ reported partner rates at bankruptcy practices averaging about $475 an hour from 2012 to 2014.

Gold said even he noticed that most bankruptcy lawyers' rates held steady in 2015 — whereas rates had jumped during the recession years then declined until 2014 — and some elite bankruptcy lawyers in major markets ticked up.  The comprehensive data collected by the NLJ in bankruptcy records highlights the disparity between legal markets.

Nine firms in the NLJ data, for instance, disclosed rates of more than $1,000.  Those firms were Pachulski Stang Ziehl & Jones; Kirkland & Ellis; Young Conaway Stargatt & Taylor; Klee, Tuchin, Bogdanoff & Stern; Akin Gump Strauss Hauer & Feld; Stroock & Stroock & Lavan; Debevoise & Plimpton; Bracewell; and Ropes & Gray.

The District of Columbia earned the status of highest-priced market where bankruptcy cases were filed, according to the median rates ranked by state.  The median in Washington for partners was $1,035, while the median rate for associates was $750.

Bankruptcy filings in New York had the largest disparity between highest and lowest rates for partners. At most, those partners made $1,295, and at least, $100.

In the states with the four biggest U.S. legal markets — Chicago, New York, San Francisco and Washington — on average partners made at most $1,113 and at least $368.  Associates made at most $822 and at least $222, while of counsel lawyers made at most $855 and at least $273 in those markets, on average.

The numbers speak to the truism that clients will still pay more for high-stakes legal work — the types that many firms in those premium markets offer like intellectual property litigation, corporate transactions, even bankruptcy.

"But they're still asking for discounts off of standardized rates," according to Mari Henry Leigh of Legal Fee Solutions, a billing-rate consulting business that's owned by the law firm Cozen O'Connor.

Attorneys have responded to clients' pressure to keep legal fees low.  Gold said he was able to reduce his rates last year. Wiley Rein, the Washington firm, cut its bankruptcy practice at the end of 2014, so Gold's group landed at Nelson Mullin's office across town.

The Columbia, South Carolina-based firm carries less overhead than Wiley Rein, so Gold held steady on his profitability while reducing his billable hour rates by about 20 percent, he said.

"The idea is to expand your business to do better," he said.  "Maybe I could have kept my rates the same, but I probably wouldn't have as much work."

Across the board, law firm ­consultants and attorneys say that although billing rates aren't changing much, the approach to billing is.

Alternative fee arrangements and discounts have crept into the market, however slowly.  Although more and more firms discuss their attempts to offer alternative fee arrangements, the approach hasn't piled up cash.

Sharon Quaintance of HBR Consul­ting said only 15 percent of revenues at law firms come from these types of fee arrangements.  "They're still spending a lot more money on traditional billable hour work," she said, about corporate clients.

Guilford Thornton Jr., who is based in Nashville as the managing partner of Adams and Reese, said his firm had heard of consultants' push to focus on project management.  That approach allows attorneys to give clients more exact cost estimates at the beginning of an engagement.  It also allows clients to track fees more closely while the private practice lawyers' work is ongoing.

"Lawyers themselves have to get better.  The rate becomes less important if the lawyer can demonstrate competence and predictability," Leigh of Legal Fee Solutions said.

Thornton said he has also focused on certain practices that set the firm apart, like its timber and forestry-industries practice in several Southern offices.  Those practices don't necessarily invite pressures from clients to lower rates.

For some clients, Thornton said the firm negotiates rates differently, such as with discounts for large volumes of work or for long-time, reliable clients.  "Generally speaking, outside legal spend by corporate America was flat.  That suggests in the aggregate that services from private law firms was not growing," he said. So what to do now?  "There's always something to worry about."

More Scrutiny of Billing Rates in Bankruptcy Cases

May 18, 2016

A recent American Lawyer story, “Latham Lands Latest Energy Bankruptcy as Fees Draw Scrutiny,reports that Latham & Watkins is the latest Am Law 100 firm to find a silver lining in the energy industry’s ongoing turmoil, snagging a role as lead debtor’s counsel for Oklahoma City’s Chaparral Energy LLC in the 10th-largest bankruptcy so far this year.

Chaparral filed for Chapter 11 protection in Delaware federal bankruptcy court on Monday, adding to a growing list of energy companies to succumb to slumping oil and gas prices.  The petition listed debts between $1 billion and $10 billion.

The independent oil and gas company tapped Latham’s Richard Levy and Keith Simon as lead debtor’s counsel, along with local counsel Mark Collins and John Knight of Richards, Layton & Finger.

Chaparral said in court filings that it first hired Latham in February as restructuring counsel.  With help from the law firm and financial advisers, the company said, it has tried to reach a debt-for-equity deal with lenders and bondholders that would reduce the company’s debt by about $1.2 billion, but the two sides failed to reach an agreement.

Chaparral’s filing continues a string of recent bankruptcies in the energy industry, driven in part by a drop-off in commodities prices over the past two years.  As The Am Law Daily has reported, those companies’ financial struggles have spawned restructuring work for a number of major law firms.  Skadden, Arps, Slate, Meagher & Flom, Kirkland & Ellis and Jones Day are among the Am Law 100 firms to have recently landed key debtor’s-side roles in energy sector bankruptcies, while Akin Gump Strauss Hauer & Feld has emerged as a go-to firm for creditors.

Led by global restructuring head Jay Goffman, Skadden serves as debtor’s counsel in the biggest bankruptcy to date this year, SunEdison Inc.’s Chapter 11 case in Manhattan federal bankruptcy court.  The bankruptcy, filed on April 21, could also turn out to be one of the most litigation-heavy.  SunEdison already faces lawsuits on multiple fronts, including breach of contract claims lodged in early April by subsidiary TerraForm Global Inc. and a separate breach of contract suit filed in March over a scuttled $2.2 billion bid to acquire Vivant Solar Inc.

SunEdison filed its formal application on April 26 to hire Skadden for the bankruptcy case.  Skadden’s Goffman wrote in a declaration the same day that the company had paid his firm more than $12.1 million prior to the Chapter 11 petition.  Skadden plans to charge hourly rates between $935 and $1,425 for partners, $925 to $1,040 for counsel, and between $390 and $920 for associates.

The U.S. Trustee’s Office overseeing the SunEdison bankruptcy has since indicated that it’s likely to keep a close eye on the legal fees in the case.  In a May 5 filing, the trustee’s office wrote that Skadden offered discounted rates to SunEdison prior to the Chapter 11 petition, but that the firm wouldn’t provide discounts during the bankruptcy.

“Although the United States Trustee does not object to the application, the United States Trustee reserves all rights to object to any and all of Skadden’s fee applications on any and all grounds, including … the billing rate(s) charged in such fee applications,” the trustee’s office wrote in its May 5 filing.

As for Kirkland, the firm and partner James Sprayregen landed new debtor’s-side roles in late April for Houston-based Ultra Petroleum Corp. and Tulsa-based Midstates Petroleum Co. Inc.

Ultra and Midstates have yet to disclose their legal fees in court.  But Kirkland's fees have drawn scrutiny in another energy sector bankruptcy, Sabine Oil & Gas Corp.'s Chapter 11 in Manhattan federal bankruptcy court.  In response to Kirkland's latest fee application in the Sabine case, the trustee's office wrote on Monday that the firm appeared to be billing at premium rates—with partners charging a "blended" hourly rate of $146 more than the firm's partners charge outside of bankruptcy.

"K&E is not only charging higher blended rates for this case than it charges its nonbankruptcy clients,” the trustee’s office wrote, "but it is also charging a higher rate for its bankruptcy professionals than it charges for its nonbankruptcy professionals of similar or greater experience.”

As with Skadden's case, the trustee's office didn't lodge a formal objection on Monday, but said that it would seek more information to determine whether to oppose the fee request.