A recent Law 360 story, “Texas House Floats 2 Bills Over Atty, Contingency Fees,” reports that two bills proposed in the Texas House would change the way litigants can recover attorneys’ fees from opposing parties and the way clients can challenge contingency fee agreements in court.
HB 230 would expand the possibility of recovering attorneys’ fees to include legal entities other than individuals and corporations, in reaction to a 2014 intermediate appellate ruling that barred recovery of fees from a partnership.
This bill is in reaction to a February 2014 ruling from the 14th Court of Appeals in a referral fee dispute between Fleming Nolen & Jez LLP and The Burton Law Firm. The ruling, currently on appeal to the Texas Supreme Court, narrowly construed the statute governing attorneys’ fees to eliminate a fee award against the Fleming firm because it was organized as an LLP, not a corporation.
HB 247 would limit contingent attorney fee agreement disputes such that a party may bring an action on a claim the agreement was obtained by corruption, coercion, force, fraud or other undue means or that the agreement was forged.
And in HB 247, lawmakers have been asked to limit claims against attorneys over contingency fee agreements unless a party to the agreement is asserting it was signed because of fraudulent or criminal conduct. The bill provides that a claim arising out of a qualified contingency agreement or the representation that is the subject of the agreement “shall be dismissed with prejudice” if the suit was brought on grounds other than the fraudulent conduct laid out in its subsection (d).
The bill would also provide that for aggregate settlements of multiple clients that meet certain disclosure requirements outlined in the statute, the settlement is irrebuttably presumed to be fully disclosed, read, understood and voluntarily entered into by all parties to the agreement, presumed to be fair, accepted, reasonable and made in the best interests of the parties by the parties or through their attorneys and presumed to be final and not subject to subsequent litigation.
A recent New Jersey Law Journal editorial, “Third Circuit Got It Wrong on Advancement of Defense Costs,” writes about the recent decision in the U.S. Court of Appeals for the Third Circuit, Aleynikov v. Goldman Sachs Group. The case raises serious questions about the effectiveness of advancement for individuals who may elect to litigate that issue in federal court in the Third Circuit. The editorial states:
Explicitly or by implication, the statutes allow companies to advance reasonable attorney fees and defense costs, subject to repayment if the individual is ultimately found to have acted wrongfully. Advancement is a natural corollary to the right of indemnification; if the individual cannot afford to pay an attorney to provide a defense from the outset of litigation, the right to indemnification at the end of the case is less meaningful.
In the underlying case, Goldman Sachs computer programmer Sergey Aleynikov was convicted of criminal offenses in federal court but the U.S. District Court of Appeals for Second Circuit reversed and directed an acquittal. Goldman refused to pay his legal fees. Aleynikov filed suit for indemnification as to his legal fees for his successful defense of the federal charges and for advancement of fees he was incurring in the case.
The key issue on the motion for advancement was whether the plaintiff was an “officer” entitled to the request relief. There are hosts of people called “vice president” at Goldman Sachs and the company argued that only those with executive supervisory authority and responsibility were “officers” entitled to advancement under the advancement clause of its bylaws. The third circuit found the term “officer” was ambiguous and the ambiguity could not be resolved and remanded the case to the trial court.
We believe the Third Circuit ignored the fundamental precept that the right to interim advancement is separate from the right to final indemnification, and that undue delay may moot the right to advancement. The district court understood it better. As it noted, “To stay advancement is to destroy its utility.”
We also believe that the opinion should have been nonprecedential. The policy considerations voiced by the district court were not captured by the Aleynikov majority, and the precedent may well deprive subsequent claimants of an effective remedy in federal court. Under the Third Circuit’s internal operating procedures, a precedential opinion is an unlikely candidate for en banc review; nor is there a path to consideration by the U.S. Supreme Court.
NALFA also reported on this case in “Jury to Decide if Goldman Sachs Pays Legal Bills”
NALFA would like to welcome DGT Costs Lawyers to our membership. DGT Costs Lawyers is Australia’s premium legal cost management firm. DGT Costs Lawyers is the first international firm to qualify to review fees/legal bills in the U.S.
DGT Costs Lawyers is a boutique law firm that specializes and offers services exclusively in the complex area of legal costs law and practice. Services include acting in and/or mediating fee disputes between practitioners and clients, acting in assessments to determine quantum of court ordered costs, consulting on fee arrangements for law firms and in-house counsel, as well as auditing of legal bills. DGT has been doing this type of work since the 1980's and are based on the east coast of Australia.
“We’re excited to have our first international member. Law costs firms from aboard deal with the same issues as our domestic member firms. Hourly rates, billing entries, fee disputes and litigation management are issues without borders,” said Terry Jesse, Executive Director of NALFA.
For more on DGT Costs Lawyers, visit http://www.dgt.com.au/
A recent NLJ story, “Lenovo Fights Legal Fee Request in Laptop Litigation,” reports that Lenovo Inc. is blasting as “fantasy” a fee request by plaintiffs attorneys for eight times the attorney fees the company says they are due for crafting a relatively simple class action settlement over laptops with WiFi connection problems.
Lenovo contends plaintiffs’ counsel in Kacsuta v. Lenovo have built their nearly $9 million fee request on “wildly unsupported assumptions,” including that all 83,201 class members will be eligible to make a claim and will actually do so, and that will opt to have their Ultrabook laptops repaired, at an estimated value of $600.
According to studies in “claims-made” settlements fewer than 10 percent of class members typically make claims, according to Lenovo’s Nov 7 memorandum opposing what it calls an “astronomical” fee request. That reduces the chance the settlement will reach the $50 million in value estimated by plaintiffs.
“Plaintiffs’ ‘value’ of $50 million is based on fantasy compounded by fantasy and cannot be accepted,” Lenovo argues. The company puts the settlement value at $1.06 million to $2.37 million.
The deal, provisionally approved Aug. 22 in U.S. District Court for the Central District of California, offers a menu of benefits for purchasers of Lenovo U310 and U410 Ultrabook IdeaPad laptops, which originally sold for between $729 and $1,200 each.
Under the terms of the proposed settlement, Lenovo will repair the wireless capability of devices that previously have not been returned to the company. Those who do not opt for repair will be eligible for either a $100 cash refund or $250 credit towards a purchase of any Lenovo product. The company also offers reimbursement of documented out-of-pocket repair costs.
The plaintiffs’ attorneys justify their fee request by citing the 8,628 hours they worked on the case, the complexity of the legal and technical issues involved, and the generous benefits negotiated for class members. They used the lodestar method to calculate the fees, and applied a 2.84 multiplier. They also are requesting $300,000 in expenses.
A recent article, “The Root Cause of Skyrocketing Defense Costs,” by Douglas W. Greene of Lane Powell’s blog, D&O Discourse, discusses the skyrocketing costs of defending securities class actions. He writes:
Why do the costs of defending securities class actions continue to increase? Because of my writings on the subject (e.g. here and here), I’m asked about the issue a lot. My answer has evolved from blaming BigLaw economics – a combination of rates and staffing practices – to something more fundamental. BigLaw economics is a consequence of the problem, not its cause. I believe the root cause is a convergence of two related factors:
The prevailing view, fueled by defense lawyers, that securities class actions are “bet the company” cases and threaten the personal financial security of director and officer defendants; and
As a result of these perceived threats, the reflexive hiring of BigLaw firms, which companies and their directors and officers feel are uniquely equipped to defend them – in other words, they go to what they perceive to be the “Mayo Clinic” of defense firms.
But it simply isn’t necessary, and is often even strategically unwise to turn to a BigLaw firm for most securities class actions. To be sure, securities class actions are serious matters that assert large theoretical damages. But the vast majority of cases, if defended effectively and efficiently by securities litigation specialists, are easily managed and settled within D&O insurance limits, with no real risk of any out-of-pocket payment by the company’s directors and officers.
Click Here for the entire article.
Douglas W. Greene is a Shareholder at Lane Powell in Seattle and co-chairman of the firm’s securities litigation group.
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