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Law Firms Win Attorney Fees in ‘Exceptional’ IP Case

August 9, 2018

A recent Daily Business Review story by Raychel Lean, “Billing Rates: This Miami Just Help Win a Nearly $1M Fee Award for Benihana Suit,” reports that federal Judge Paul Engelmayer in the Southern District of New York found that Aventura-based restaurant company Benihana Inc. was entitled to nearly $937,000 in attorney fees and costs for work between 2014 and 2018 by Stearns Weaver Miller Alhadeff & Sitterson in Miami and Clarick Gueron Reisbaum in New York.

The case was a trademark infringement counterclaim launched by Benihana Inc. and its sister company, Noodle Time Inc., against New York-based restaurant chain Benihana of Tokyo LLC, Keiko Aoki, the widow of Benihana’s founder, and former Benihana director Takanori Yoshimoto.  It’s one of nine different pieces of litigation between Benihana Inc. and Benihana of Tokyo that have played out since 2010, when BOT sued BI in Delaware over a separate trademark dispute.

Benihana Inc. and Benihana of Tokyo stem from the same founder, Rocky Aoki, now deceased, but the entities parted ways in 1995 and split their trademark licenses geographically.  In this case, BI claimed that information on BOT’s website violated the Lanham Act as it allegedly misled the public into believing it had the right to operate Benihana restaurants worldwide, which it does not.

The New York-based judge, Engelmayer, awarded $866,488.72 in fees for four years of litigation and $70,216.52 in costs — a figure 25 percent shy of what Benihana Inc. had requested.  In order to qualify for the nearly $1 million fee and cost award, the court had to find that the case was “exceptional.” 

Two factors in particular caught the judge’s attention.  First, Richard Feldman, the lawyer who originally filed the case, testified on June 6, 2017, that Aoki had directed him on numerous occasions that “it was her strategy for BOT to challenge and contest the validity of (the agreement between BOT and BI), whether there was merit to those challenges or not,” according to the July 25 opinion.  Feldman was able to testify against his former client after the two had a falling out and Aoki sued him for malpractice, rendering their attorney-client privilege obselete.  According to Feldman, Aoki’s plan was to “drive up BI’s litigation costs even by means of legally unjustified conduct.”  Second, Engelmayer pointed out that opening statements of Benihana Inc. and Benihana of Tokyo at trial were “lopsided” in strength.”  Immediately after opening statements, BOT backed out of the trial, and the case settled.

A total of 10 Stearns Weaver employees worked on the case.  Shareholder Alan H. Fein, who’s worked at the firm for almost 40 years, spent the most  time and charged the highest rate. Fein billed $625 per hour at the beginning of the case and $795 by the end.  Clarick Gueron Reisbaum brought six attorneys in on the case, of whom partner Nicole Gueron, who has been featured on the New York Super Lawyers list every year since 2011, was paid the most at $595 to $640 per hour.

Benihana of Tokyo balked at these costs and petitioned the court to consider cutting any potential fee award in half, arguing that Stearns Weaver did not try the case efficiently and that its rates were too high.  It also argued that Stearns Weaver had too many senior lawyers working on the case, but Benihana Inc. pointed out that some lawyers had began as associates and were partners by the time the case was over.

Engelmayer sided with Benihana Inc.  “This matter surely required at all stages the expenditure of substantial time by senior lawyers.  And Mr. Fein’s knowledge of the controversy, client, adversary and governing agreement was unparalled,” the opinion said.

Davis Wright Tremaine Files Action Against Former Client for Unpaid Legal Fees

August 8, 2018

A recent The Recorder story by Ross Todd, “Cheesy Dispute: Davis Wright Tremaine Sues Mac & Cheese Restaurant Claiming $37K in Back Fees,” reports that Davis Wright Tremaine has sued the company behind popular Oakland macaroni and cheese restaurant Homeroom, claiming that the eatery owes more than $40,000 in unpaid legal fees and interest.  The lawsuit, filed late last month in San Francisco Superior Court, claims that Little Mac LLC, which does business as Homeroom, hired the firm in September 2016, but has refused to pay its bills for work done from May through June 2017.

“Excluding interest, Little Mac still owes DWT $37,690.23 for services rendered,” wrote firm partner Sanjay Nangia in the July 26 complaint.  This balance is now more that six (6) months past due.”  The firm claims that interest has accrued at the rate of $12.44 per day and is asking for $41,421.58 in fees and interest.

Just why the fee dispute is playing out in public wasn’t immediately clear.  The engagement agreement between the firm and the restaurant, which was included as an attachment to the complaint, includes a provision that each side has the right to request arbitration under the California Business & Professions Code in the case of a “fee dispute.”

In response to an email sent to Nangia and Davis Wright’s Don Buder, the partner who signed off on the engagement letter with the restaurant, a firm spokesman declined to comment beyond the court papers.

According to the September 2016 engagement letter, Buder charged Homeroom $675 per hour for work on “pending business and real estate matters.”  Buder’s firm bio says that he serves as “a strategic legal advisor and corporate counsel to food and beverage, food tech, and ag tech innovators, entrepreneurs, and investors.”  The engagement letter also said that then-associate Vipul Kumar charged $435 per hour and associate Drew Patterson charged $420 per hour, although the firm reserved the right to change rates and assign other lawyers to work for Homeroom.

Watts Guerra Seeks $150M in Fees in $1.5B Corn Settlement

August 7, 2018

A recent Texas Lawyer story by Amanda Bronstad, “Mikal Watts Wants One-Third of Expected $500M Fee Corn Settlement,” reports that Texas plaintiffs attorney Mikal Watts is asking for at least $150 million in legal fees from the $1.5 billion settlement with Syngenta AG, citing his firm’s “unique position in this litigation.”  The Watts Guerra attorney’s fee request, filed last month but updated on Aug. 3, sets up a potential clash over what could be an estimated $500 million in fees in the class action settlement, which resolves claims by more than 600,000 farmers who alleged Syngenta sold genetically modified corn seed that China refused to import, causing farmers to lose billions of dollars.  In a separate request for fees, lead counsel in the federal multidistrict litigation in Kansas are seeking that amount—about 33 percent of the total settlement fund.

“This fee request is based on Watts Guerra’s enormous investment in this litigation,” Watts wrote in his motion.  “It is on the high end of the range, perhaps, but not unprecedented.”  Watts claims to represent 57,000 farmers who could be entitled to between $345 million and $750 million under the settlement.  The requests come as at least four other lawyers have challenged the fees in the deal, particularly those going to Watts.  Oppositions to the fee requests are due Aug. 17.

The Syngenta litigation was coordinated in both federal multidistrict litigation in Kansas and in two proceedings in Minnesota and Illinois state courts.  In their fee request, the lead lawyers in Syngenta want 50 percent of the $500 million, plus about $6.7 million in costs and expenses, which would go to a total 44 law firms.  They want another 12.5 percent to go to the lead lawyers in the Minnesota state court, and 17.5 percent to attorneys in Illinois state court.  The remaining $100 million would be reserved for other lawyers.

The dispute mirrors fee fights that have erupted in mass torts between plaintiffs attorneys appointed to represent members of a class action and those who have brought individual suits on behalf of their clients.  The vast majority of the farmers Watts represents have retainer agreements with him and filed individual suits in Minnesota state court.  Last year, as part of the federal multidistrict litigation, a jury awarded $217.7 million to a class of Kansas farmers in the first bellwether trial.  It was one of eight subclasses of farmers planned for trials.  A second, on behalf of Minnesota farmers, was ongoing when both sides struck a deal.

Watts Guerra partner Francisco Guerra was co-lead plaintiffs counsel in Minnesota state court, but no one from the firm had a lead role in the federal multidistrict litigation.  The firm did work on the Minnesota trial, however, and Watts was one of four lawyers appointed to the plaintiffs’ negotiating committee.  “That trial forced Syngenta finally to accept that it faced not just hundreds of millions of dollars in compensatory damages but a likely multibillion-dollar judgment based on intentional misconduct—for the farmers in a single state,” Watts wrote.  “Then, in an instant, it was over.”

The initial settlement called for two agreements—one on behalf of the class, and one on behalf of the individual plaintiffs, according to court filings.  But the negotiated deal encompassed four subclasses—two on behalf of farmers, one for grain handling facilities and another for ethanol producers.  Final approval of the settlement is set for Nov. 15.

Earlier this year, two attorneys in Beaumont, Texas, claiming to represent 9,000 farmers filed a motion to delay approval of the settlement, insisting the lead lawyers who negotiated the deal kept their clients in the dark on “how the settlement would be divided and distributed between the class actions and the individual producer plaintiffs.”  In particular, they claimed Watts and another lawyer on the plaintiffs settlement negotiation committee, Clayton Clark of Clark, Love & Hutson in Houston, dropped a more favorable settlement for farmers with individual lawsuits in exchange for higher fees.

Another lawyer, D. Allen Hossley of Hossley & Embry in Tyler, Texas, who claimed to represent 650 farmers, joined the motion, filed by Mitchell Toups, of Weller, Green, Toups & Terrell and Richard Coffman of The Coffman Law Firm (Toups and Coffman are now seeking $34 million in fees, while Hossley wants nearly $2.7 million).

On April 24, Minneapolis attorney Doug Nill sued Watts.  He claimed Watts, firm partner Guerra and Jon Givens, of counsel, who lives in Alaska, and 13 other small law firms or solo practitioners conspired to convince 60,000 farmers not to participate in the class action, and now could end up with $200 million in fees.  The suit asked to void the retainer agreements, which included a contingency fee rate of 40 percent.  In his fee request, Watts said he would drop his contingency fee to 33.3 percent.  When accounting for what he had agreed to pay lead lawyers in the federal multidistrict litigation—referred to as a common benefit assessment—his contingency fee would drop to less than 24.2 percent, he wrote.

But, anticipating that “some of the other common benefit counsel” may demand one-third of the settlement for themselves, he insisted that his fees come out of the $500 million and that he get reimbursed for the $12.8 million in common benefit expenses he paid in the Minnesota state court litigation.  He cited a 2015 joint prosecution agreement that was designed to resolve future fee disputes among lawyers in both the Minnesota state court cases and federal multidistrict litigation.

Watts backed up his fee request, which also includes 332 law firms that worked on his cases, with expert reports from six prominent legal scholars, including Brian Fitzpatrick of Vanderbilt Law School and Geoffrey Miller of New York University School of Law.

Federal Judge: Midwest Lawyers, Stuck with Midwest Rates

August 6, 2018

A recent American Lawyer story by Scott Flaherty, “Midwest Lawyers, Stuck with Midwest Rates, Federal Judge Tells Arent Fox,” reports that a lateral move to a firm with roots in a more expensive city doesn’t mean a judge is going to award that lawyer a bump in attorney fees in litigation, even if some of the work then gets done in that pricier hub, a recent court ruling shows.

Ruling on a fee request by Arent Fox after a $130,000 settlement with the U.S. government on behalf of a group of Florida landowners, U.S. Court of Federal Claims Judge Patricia Campbell-Smith held that the firm deserves attorney fees based on the St. Louis market rates the lead attorney initially charged while working out of St. Louis-based Lathrop Gage’s headquarters.  She rejected the argument that he should earn the higher rates charged by Washington, D.C.-based Arent Fox after the lawyer switched to that firm’s St. Louis office.  Arent Fox had sought more than $1.1 million in fees plus more than $14,000 in costs.  As the judge explained in her opinion, the fee issue arose in a “rails to trails” lawsuit that dates back to 2009.

A team from Lathrop Gage, led by Mark “Thor” Hearne II, served as plaintiffs lawyers in the suit, representing a group of Florida landholders whose property included railway tracks formerly used by CSX Transportation Inc.  CSX stopped using the railroad lines in 2004, and soon after, a federal agency proposed to set aside a strip of land near the tracks for recreational trails.  The landowners alleged that amounted to an unlawful seizure of their land and sought compensation, according to court documents.

Shortly after the suit was filed, Hearne and his team moved to the Arent Fox, still working primarily from that firm’s St. Louis outpost.  The litigation started as a putative class action, but was winnowed down to a smaller case with some 14 landholder plaintiffs.  Following a summary judgment ruling in the government’s favor, the case was narrowed further to claims from three plaintiffs.  In 2013, the two sides struck the $130,000 settlement.

Since then, they’ve been litigating Arent Fox’s potential fees in light of a settlement in favor of its clients.  The firm has argued for an award based on current market rates in Washington, D.C., while the government has urged lower St. Louis rates, adjusted to take account of the years in which the work was actually performed.  Campbell-Smith awarded $14,362 in costs to Arent Fox.  But her ruling, made public on Aug. 1, faults the firm’s fee request for $1.1 million in part because it relied on the legal market rates in Washington, D.C.—where the firm is based and the federal claims litigation took place.

Instead, the judge ruled, most of the lawyers’ work happened in St. Louis, and since there’s a significant difference between billing rates in Washington and St. Louis, the St. Louis rates should win out.  To illustrate the differences in billing rates between the two cities, Campbell-Smith pointed to the proposed hourly rate for the lead partner in the case, Hearne.  Arent Fox sought an hourly rate of $826 for Hearne, while the likely St. Louis market rate would be more like $504 per hour for a partner with Hearne’s amount of experience, the judge wrote.

Campbell-Smith detailed several reductions she would impose when figuring out what to award Arent Fox in the case, according to her decision.  Still, she didn’t set a final fee award, concluding that the firm and the government needed to provide more information about the average St. Louis market rates for lawyers at different seniority levels, as laid out in billing rate surveys conducted by the publication “Missouri Lawyers Weekly.”

The Federal Claims judge also sided with the government on another key issue related to Arent Fox’s fee request—whether the award should be based on current or historical market rates for legal services.  “The attorney billing rates shall be calculated based on the average hourly rates as reflected in the ‘Missouri Lawyers Weekly’ surveys, and shall be awarded historically,” Campbell-Smith wrote.

Labaton Attorney Fee Deal Prompts Arkansas Legislative Inquiry

August 3, 2018

A recent American Lawyer story by Scott Flaherty, “Labaton Fee Deal in State Street Case Prompts Arkansas Legislative Inquiry,” reports that Arkansas’ state Legislature is looking into a $4.1 million fee that Labaton Sucharow paid to a Texas-based lawyer who helped the plaintiffs firm attract an Arkansas public pension fund as a client in securities class actions, according to court documents made public.  The existence of a legislative investigation in Arkansas was referenced in a letter to U.S. District Judge Mark Wolf in Boston from a lawyer representing Gerald Rosen—a retired federal judge who, as a special master, has been reviewing a $75 million attorney fee awarded to Labaton Sucharow and other firms after they secured a $300 million securities class action settlement with State Street Corp.

Rosen’s counsel, William Sinnott of Barrett & Singal, wrote that Rosen had received inquiries from Arkansas lawmakers and was looking for guidance from Wolf on how to respond.  “He will not, of course, conduct discussions or provide sealed documents to legislative, law enforcement or other requestors without the express direction of the court,” Sinnott wrote of Rosen.  “However, he does wish to alert the court to these inquiries as they implicate access to matters of public concern.”

Sinnott’s letter was initially filed confidentially, but Wolf unsealed it, making it public.  The judge also issued an order directing that people interested in information or documents about the case should make those requests directly to Wolf.  If Rosen receives further questions, Wolf wrote, the special master should respond with a copy of the judge’s order.

Word of the Arkansas legislative probe follows a mammoth special master report released publicly in June in which Rosen found “questionable” a number of billing practices carried out by Labaton Sucharow and other plaintiffs firms involved in the State Street litigation.  The special master recommended that Labaton Sucharow, The Thornton Law Firm and San Francisco’s Lieff Cabraser Heimann & Bernstein return more than $10 million.

Labaton Sucharow, represented by Choate Hall & Stewart, has strongly contested Rosen’s findings in the special master report.  It also has sought to have Wolf removed from the State Street case but on July 25, the U.S. Court of Appeals for the First Circuit denied Labaton Sucharow’s request for an order forcing Wolf’s recusal.

Among the concerns Rosen detailed in his report was evidence that Labaton Sucharow paid a Texas-based lawyer named Damon Chargois to help the firm secure an Arkansas state teachers’ pension fund as an institutional investor client.  Chargois, who had connections to the pension fund and made an introduction, didn’t actually work on the State Street case, though he earned about $4.1 million from Labaton Sucharow under a referral agreement, according to Rosen.  The Arkansas pension fund, represented by Labaton Sucharow, ultimately served as lead plaintiff in the State Street securities case.

Labaton Sucharow did not disclose the Chargois payment to the court or to other members of the settlement class and its co-counsel in the case during the period when Wolf was considering whether to approve the $75 million fee award, according to the special master report.  Rosen wrote that the lack of disclosure about the Chargois payment “kept the court in the dark and denied it the very information it needed” to determine the proper amount to award plaintiffs lawyers leading the State Street litigation.

In objections to Rosen’s findings, Labaton Sucharow has maintained that the payment to Chargois qualifies as a “bare referral” fee and that lawyers are allowed to enter such arrangements under the Massachusetts rules of professional conduct.  “Judge Rosen may be offended by a ‘bare referral’ fee—one where the referring attorney does not have to do any work in order to receive the referral fee, but it is the law in Massachusetts,”  Labaton Sucharow said in a June statement after Rosen’s report became public.

The Chargois payment now appears to be at the center of the Arkansas legislative probe.  In the letter made public Wednesday, Rosen’s counsel quotes from an email sent by Arkansas state Rep. Mark Lowery, who co-chairs the state Legislature’s Joint Performance Review Committee.  “We are extremely concerned about references to ‘political favors’ that brought about the relationship between ATRS, Labaton Sucharow and the Chargois … law firm,” Lowery wrote in the email to Rosen’s representatives.

In a statement, Labaton Sucharow acknowledged that it is among a small group of law firms that regularly represent the Arkansas Teacher Retirement System (ATRS) in securities cases, saying it was selected only after “a public request for qualifications and based on our long track record as one of the country’s pre-eminent class action law firms on behalf of institutional investors.”  The statement went on to say there was nothing to indicate that any money paid to Chargois was used improperly.

“We are confident that our work with ATRS yielded positive results for the state of Arkansas and strenuously object to any inference of political influence associated with our work.  Moreover, there is no evidence that any of the referral payment made to Mr. Chargois was used inappropriately,” the statement said.

Law’s $1,000-Plus Hourly Rate Club

July 23, 2018

A recent Wall Street Journal story by Vanessa O’Connell, “Big Law’s $1,000-Plus an Hour Club,” reports that leading attorneys in the U.S. are asking as much as $1,250 an hour, significantly...

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