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Earn A Certificate in Reasonable Attorney Fees

December 8, 2017

NALFA hosts CLE and professional development programs on attorney fees and legal billing topics.  Through our programs and podcasts, we are the nation’s leading content provider on attorney fee and legal billing subject matter.  All our programs are free for NALFA members, faculty, and fellows.  Since 2008, NALFA has hosted 24 different events and programs on a range of attorney fee and legal topics.  Hundreds of attorneys and other professionals from across the U.S. and in the UK have registered and participated in these programs.  Some of our faculty includes sitting federal judges.

NALFA is now offering a Certificate in Reasonable Attorney Fees for registered guests of multiple programs.  This is the nation’s first and only certificate of its kind.  Registered guests of 4 or more different programs (live or on-demand) will earn a Certificate in Reasonable Attorney Fees.  This certificate is open to attorneys, paralegals, and claims professionals.  Upon earning a Certificate in Reasonable Attorney Fees, recipients will qualify for CLE fellowship.

“Attorney fee issues have become a substantive area of law,” said Terry Jesse, Executive Director of NALFA.  “We’re excited about this new certification program.  Earning this designation will show that recipients have substantive knowledge on attorney fee issues, such as attorney fee ethics, fee agreements, fee entitlement, fee award factors, and fee disputes,” Jesse said.

NALFA: The Four Hourly Rate Factors

December 6, 2017

Hourly rates are the engine that drives attorney fees.  Hour rates are the most important single factor in determining attorney fee awards.  There are several factors that determine hourly rates.  NALFA has identified four hourly rate factors that have significant impact on prevailing market hourly rates.  At NALFA, these four factors are known as the primary variables and should be a part of any hourly rate survey.  We've ranked these hourly rates factors in order of importance:

Geography / Jurisdiction:  This is the most important of the factor in determining hourly rates.  Where an attorney practices matters the most.  Simply put, all things being equal, hourly rates in Manhattan are not the same as hourly rates in Oklahoma City.

Years in Practice / Position Title:  This is the second most important factor in determining hourly rates.  The more senior or experienced the attorney, the higher the hourly rate.  Simply put, all things being equal, hourly rates for partners are not the same as hourly rates for associates.

Practice Area / Complexity of Matter: 
Often overlooked and subtle, the nature of the underlying matters in determining hourly rates.  Hourly rates for more routine matters will not be the same as more complex areas of law.  Simply put, all things being equal, attorneys who practice in insurance defense or workers comp will charge different rates than attorneys who practice in antitrust litigation or white collar crimes.

Law Firm Size:  This is the least important of the factors, but still somewhat relevant.  Simply put, all things being equal, solo practitioners may have different rates than attorneys at very large law firms.

Fees for Defending Fees – Post-Asarco Cases

December 4, 2017

A recent article by Benjamin Feder, “Fees for Defending Fees – Recent Rulings Permit Contractual Circumvention of Supreme Court’s Baker Botts v. Asarco Decision,” reports on post-Asarco cases.  This article was posted with permission.  The article reads:

The Supreme Court two years ago ruled in Baker Botts v. Asarco that bankruptcy professionals entitled to compensation from a debtor’s bankruptcy estate had no statutory right to be compensated for time spent defending against objections to their fee applications.  Since then, “estate professionals,” i.e., those retained in a bankruptcy case by a trustee, debtor in possession or an official committee of creditors, have sought ways to limit the potentially harsh impact of that decision.  A subsequent opinion in a Delaware bankruptcy case, In re Boomerang Tube, declined to allow Baker Botts to be circumvented by contract.  However, decisions in another Delaware case, Nortel Networks, and more recently in a New Mexico case, Hungry Horse LLC, have distinguished Boomerang Tube and permitted contractual provisions that allow payment for the defense of fees.  The pragmatic approach taken in Hungry Horse in particular offers a template that other courts will likely be urged to adopt.

In every bankruptcy case, the retention of estate professionals must be approved by the bankruptcy court. Their fees and expenses are paid out of the debtor’s bankruptcy estate and are subject to review and approval by the bankruptcy court pursuant to Section 330 of the Bankruptcy Code.  Objections from other parties have always been a recognized hazard for such professionals.  Prior to Baker Botts a majority of courts permitted the recovery of fees incurred in defending against such challenges.

The Court’s analysis in Baker Botts was straight-forward.  Under American jurisprudence, each side in a litigated dispute bears its own attorneys’ fees unless there is an applicable statute or agreement that provides otherwise.  Section 330(a)(1) of the Bankruptcy Code states: “After notice to the parties in interest and . . . a hearing . . . the court may award to . . . a professional person . . . reasonable compensation for actual, necessary services[.]”  The Court ruled that the plain text of Section 330(a) does not support a deviation from the “American Rule” regarding attorneys’ fees.  The Court’s majority stated, “[t]he word ‘services’ ordinarily refers to ‘labor performed for another.’”  Since Baker Botts was litigating to defend its own fees, the Court reasoned that it was not providing an “actual, necessary service” to the bankruptcy estate and therefore was not entitled to compensation for such time.

Baker Botts makes clear that the Bankruptcy Code does not provide a statutory exception to the American Rule.  The question remaining is whether estate professionals can sidestep it by contract.

In Boomerang Tube, Judge Mary Walrath answered that question in the negative.  The law firm chosen in that case to represent the official committee of unsecured creditors, in its application to the bankruptcy court, asked for the approval order to include a provision that would entitle it to be compensated from Boomerang Tube’s bankruptcy estate for fees incurred in defending its fees against any challenges.  The firm pointed to Section 328 of the Bankruptcy Code, which allows for the retention of estate professionals “on any reasonable terms and conditions.”  It argued that the Supreme Court in Baker Botts had noted that parties could and regularly did contract around the American Rule.

Judge Walrath denied the request. She first held that Section 328 does not create a statutory exception to the American Rule, as it makes no mention of awarding fees or costs in the context of an adversarial proceeding. She observed in contrast that several discrete Bankruptcy Code provisions do contain express language providing for payment of fees to a prevailing party.  She next rejected the law firm’s argument that Section 328 permitted a contractual agreement for the payment of defense fees.  The retention agreement was between the law firm and the official creditors’ committee, but it would be Boomerang Tube’s bankruptcy estate, a non-party to such agreement, that would bear the costs.  Finally, she determined that the proposed fee shifting provisions were simply not “reasonable” terms of employment of professionals with the meaning of Section 328.

In view of the extent to which challenges to estate professionals’ fees (or at least the threat of doing so) are ingrained in chapter 11 practice, it was unlikely that Boomerang Tube would be the last word on this issue.  Recent decisions in two cases, Nortel Networks and Hungry Horse, have distinguished Boomerang Tube.

Judge Kevin Gross, a Delaware colleague of Judge Walrath, ruled in Nortel Networks that Baker Botts and Boomerang Tube did not apply to a fee dispute between an indenture trustee and certain bondholders, and permitted the trustee to recover its attorneys’ fees for defending against the challenge.  Although this case is not directly on point as it did not involve an estate professional, and Judge Gross was not opining on whether Section 328 would permit such an agreement, he held that the bond indenture qualified as a contractual exception to the American Rule, noting that, unlike the retention agreement in Boomerang Tube, it was an agreement directly between the debtor and the trustee.

In Hungry Horse New Mexico Bankruptcy Judge David Thuma looked to Nortel Networks for support in holding that a retention agreement in a chapter 11 case between proposed debtor’s counsel and the debtor could pass muster under Section 328, thereby permitting a contractual work-around to Baker Botts.  Judge Thuma first determined that nothing in Baker Botts prevented a bankruptcy court from finding a fee defense provision in a retention agreement to be “reasonable” within the meaning of Section 328.  In his reading of Baker Botts, the Court simply limited the compensation an estate professional could receive under Section 330 to fees for services to the client, rather than on its own behalf, and noted that Section 328 had no applicability to that issue.

He then considered various other provisions typical of retention agreements, and observed that several were “reasonable” under Section 328 even if they were intended to favor the professional, rather than the client. He pointed to provisions, among other things, setting out retainer requirements, permitting an attorney to withdraw under certain conditions, and granting a lien on certain recoveries.  “A typical employment agreement between a lawyer and a client has many terms; some benefit the client, while others benefit the lawyer.  Considered together, they may be reasonable.”  The overall effect, he noted, is that “the client obtains the services of needed, able professionals.”

Judge Thuma concluded that Section 328 therefore can permit contractual exceptions to the American Rule, and outlined the terms of a fee defense provision in a retention agreement that he believed was “reasonable” and “violat[ed] neither the letter nor spirit of [Baker Botts].”  He stated that, among other things, it needed to be agreed to by the bankruptcy estate, in order to avoid the issue highlighted by Judge Walrath in Boomerang Tube, and provided also that it extended to the creditors’ committee’s professionals, in order to “level the playing field.”  He suggested sample language that he believed could be acceptable under Section 328:

The Client agrees to pay all reasonable legal fees and expenses incurred by the Firm, and also by any counsel retained by the unsecured creditors’ committee (if one is formed in the Client’s bankruptcy case) for successfully defending their respective fee applications. The bankruptcy court must approve all of such fees as reasonable. The Client will have no obligation to pay for any fees or expenses the Firm incurs defending fees that are not allowed.

Disputes over payment of estate professionals’ fees will invariably remain part of the bankruptcy landscape. Estate professionals in chapter 11 cases are likely to ask bankruptcy judges in other jurisdictions to follow the pragmatic approach of Judge Thuma in Hungry Horse in order to blunt the detrimental impact of Baker Botts.

Benjamin Feder is Special Counsel at Kelley Drye & Warren LLP in New York.

Ninth Circuit Backs Attorney Fees in ERISA Appellate Work

November 28, 2017

A recent Law 360 story by Adam Lidgett, “9th Circ. Backs Appellate Attys’ Fees for Benefit Plan,reports that a Ninth Circuit panel reversed a lower court’s denial of appellate attorneys' fees for an employee benefit plan in its dispute with Sun Life Assurance Co. of Canada Inc., saying the district court failed to take into account the whole course of litigation in analyzing the fee request. 

The panel reversed and remanded the denial of the fee request from the Group Disability Benefits Plan for California-based Gynecologic Oncology Associates Partners LLC.  The plan sought attorneys' fees and costs it incurred defending an earlier award of attorneys' fees in an Employee Retirement Income Security Act (ERISA) case filed against the plan and Sun Life.

The Ninth Circuit said the district court has to take into account the entire course of litigation and that it was clear the plan is entitled to the appellate attorneys' fees after weighing five factors outlined in the case Hummell v. S.E. Rykoff & Co. in light of Sun Life’s conduct.  Those factors included Sun Life's denial of a claim for disability benefits from a cancer surgeon with Gynecologic Oncology Associates Partners, the move that kicked off the initial lawsuit.

The appellate judges said the plan was forced into litigation after Sun Life wrongfully denied Dr. John Paul Micha’s claims and that Sun Life doesn’t dispute it can pay the fee award.  The panel remanded the issue to the district court to calculate reasonable fees.

“A party like Sun Life should not be able to appeal from a litigation fee award, even on an issue justifying appellate review, and thereby impose significant costs on the appellee in defending the fee award, while taking comfort in the knowledge that any potential appellate fee award against it will be judged solely on the basis of its appellate arguments on the fee issue,” the published decision said.

The case dates back to 2009 when Micha filed the suit after he was denied disability benefits by Sun Life.  The benefits of the plan were insured under a policy purchased from Sun Life, the plan has said.  After Sun Life settled Micha’s suit, the plan said it moved for attorneys' fees, and the district court agreed, awarding more than $38,000.  Sun Life appealed that award to the Ninth Circuit, but the appellate court affirmed the plan's win, prompting Sun Life to file a petition for a writ of certiorari in the U.S. Supreme Court, court papers show.

The Supreme Court denied the petition, however, and the plan sought an award for attorneys' fees and costs it incurred on appeal, according to court documents.  However, it first filed with the Ninth Circuit to transfer consideration of appellate attorneys' fees to the district court, the plan has said.  But when the issue went back to the lower court, the court denied the plan’s request for attorneys' fees incurred in defending the earlier award, the plan said.

The case is John Micha v. Sun Life Assurance of Canada et al., case number 16-55053, in the U.S. Court of Appeals for the Ninth Circuit.

Attorneys Get Fraction of Fee Request in FACTA Settlement

November 27, 2017

A recent Law 360 story by Melissa Daniels, “UCLA Shoppers’ Attys Get Fraction of Fees Ask in FACTA Deal,” reports that a California judge said he’d award plaintiffs’ attorneys only about 6 percent of their requested fees for representing consumers in the settlement of a Fair and Accurate Credit Transaction Act class action against UCLA, after noting in his tentative ruling that “when lawyers accomplish little, they deserve little.”
 
Los Angeles County Superior Court Judge John Shepard Wiley Jr. had already granted preliminary approval to a settlement over receipts printed at the University of California, Los Angeles with a projected total value of nearly $1.2 million.  But after an underwhelming number of claims yielded about $20,000 in payouts, the parties negotiated to have about $830,000 of unclaimed funds be designated as cy pres awards to support privacy- and finance-related programs at the university.

After reviewing this outcome, Judge Wiley issued a tentative ruling on that took issue with the fact that the funds were staying within the realm of the university instead of benefiting any class members.  “This isn’t even a revisionary settlement, the money doesn’t revert,” he said. “It just stays.”

As a result of the perceived puffed-up value, Judge Wiley calculated the attorneys’ fees off of a $40,000 settlement value, awarding $13,333 instead of the $227,000 that was requested.  Judge Wiley’s tentative ruling, which he said he would adopt after making a few grammatical tweaks, also cut named plaintiff Cindy Fernandez’ class representative award from $5,000 to $500.  A final report will be due next year.

The suit, filed in March, said UCLA accepted credit and debit cards from at least 1,000 putative class members who made purchases at its establishments in Los Angeles, but that the machines at its points of sale gave receipts that showed an unlawful amount of card number digits — including some receipts that showed the first six and last four numbers of shoppers’ cards and others that showed the first and last four digits.

UCLA said the misprints stemmed from software vendors that the university reasonably relied upon to comply with applicable law — and it also cited its possible immunity as a public institution. Yet the school agreed to settlement without admitting liability to avoid the burdens of litigation, according to settlement documents.

The motion for final approval said the parties determined four programs to benefit from the nearly $830,000 in unclaimed funds: programs for privacy awareness and financial wellness, counselors for students in economic crises, funding for academic courses on privacy and funding and a security audit for the ASUCLA, the student-controlled, nonprofit organization that provides retail and student union services.

Daniel Gaines of Gaines & Gaines APLC, who represents the plaintiffs, defended the “important, worthy goals” of the cy pres programs and said that while he understood Judge Wiley’s point, he still sees the value of the deal at approximately $1.2 million.  “When you’re talking about the university, it’s a little different than when you’re talking about a private corporation,” Gaines said. “This money that’s being spent on projects, it’s projects that otherwise wouldn’t have been expended on.”

The case is Cindy Fernandez v. The Regents of the University of California et al., case number BC656256, in the Superior Court of the State of California for the County of Los Angeles.

4 Reasons to Get Help on a Fee Requests

November 24, 2017

A recent CEBblog article by Julie Brook, “4 Reasons to Get Help on a Fee Motion,” reports on attorney fee requests.  This article was posted with permission.  The article reads: Just because...

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