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NALFA Hosts Second Program with Sitting U.S. District Court Judges

September 20, 2016

The National Association of Legal Fee Analysis (NALFA) is hosting an all judicial panel discussion on court awarded attorney fees.  The CLE program is entitled, “View from the Bench: Awarding Attorney Fees in Complex Litigation.”  This live, remote CLE program will take place via teleconference on Friday, October 28, 2016 from Noon-2:00pm (Central).

The panel of 3 sitting U.S. District Court Judges will discuss a range of issues in awarding attorney fees and expenses in large, complex litigation.  The panel is comprised of the Honorable Avern L. Cohn, Senior Judge in the U.S. District Court for the Eastern District of Michigan, the Honorable Frank Maas, Magistrate Judge in the U.S. District Court for the Southern District of New York, and the Honorable Lisa M. Smith, Magistrate Judge in the U.S. District Court for the Southern District of New York. 

NALFA is the nation's exclusive CLE provider of events and programs on attorney fee and legal billing topics.  This will be the sixteenth program NALFA has hosted on attorney fees and the second involving an all judicial panel.

“We’re excited to be hosting this all judicial panel again,” said Terry Jesse, Executive Director of NALFA.  “We want to provide our members, clients and others with outstanding CLE and professional development programming on legal fee analysis.  We also want to continue to lead the nation in thought leadership and expertise on reasonable attorney fees and expenses,” Jesse said.

For more on this program, visit http://www.thenalfa.org/CLE-Programs/

$10M in Fees in Sports Authority Bankruptcy

September 13, 2016

A recent Business Den story, “Legal Fees Crest $10M in Sports Authority Bankruptcy,” reports that legal bills for defunct retailer Sports Authority have topped $10 million.  A pair of law firms hired by the bankrupt retailer billed their client $1.5 million in June and $1.9 million in July, according to court documents filed on Aug. 31.

Since the Englewood-based chain skidded into bankruptcy in March, the firms have requested Sports Authority pay a combined $9.8 million for their services.  That number excludes the $4.4 million Sports Authority paid one of them, Gibson, Dunn & Crutcher, before filing bankruptcy in March.

Since Sports Authority’s lawyers work for a debtor-in-possession, both must come with hat (and invoices) in hand to ask the bankruptcy court permission for payments.  The court has granted Sports Authority the right to pay Gibson Dunn $5.2 million, a sum that amounts to 80 cents for every dollar the firm sought in hourly compensation, plus its expenses.  (The total does not include the bill for July, which the court has not yet reviewed.)

Of the Gibson Dunn lawyers working the Sports Authority case, nine attorneys bill north of $1,000 an hour.  The highest rate goes to partner Mitchell Karlan, who bills $1,295 an hour.  The court has not yet approved the fees booked by a second firm hired by Sports Authority, Young Conaway Stargatt & Taylor.  To date, the firm has sought payments totaling $1.7 million.

Young Conaway’s fees peaked in April at $430,000, while Gibson Dunn hit their apex in March with a $1.4 million payout approved by the court.  As it slipped into bankruptcy, Sports Authority initially said it would try to restructure and regroup as a smaller retailer.  But instead, the sporting goods chain has begun liquidating its assets.

And company leaders have already started to march out the door.  CEO Michael Foss as well as the company’s chief marketing officer and chief financial officer have already departed their posts, according to filings with the state of Colorado.  Remaining executives, like the debtor’s lawyers, are looking for a payday.  On Aug. 31, the court approved $1.4 million in bonuses for three remaining execs, despite the objections of the U.S. trustee in the case.

Ninth Circuit Restore Rates Cuts for Military Law Group

September 12, 2016

A recent Courthouse News story, “Appeal Puts Double Fee Award in Sight of Lawyers,” reports that the Ninth Circuit blasted a federal judge for stiffing a military-law group on half the fees it wanted after winning its government-records suit.  A subcommittee of the National Lawyers Guild, the Military Law Task Force initiated the underlying case in 2005.     

Fueled by the end of Operation Iraqi Freedom and the declassification of the documents, the task force substantially prevailed in its demand for Department of Defense records on an incident involving an Italian journalist in Iraq and the military's rules of engagement in Fallujah, Iraq.

Though the group wanted $381,633 in attorneys' fees, consistent with its attorneys' billing rates, the Northern District of California awarded it just $180,520 in fees and $1,059 in costs.  This award matched the government's argument about a $200-per-hour prevailing market rate. 

When U.S. District Judge Yvonne Gonzalez Rogers upheld that award later, she faulted the task force for not having submitted its own arguments about prevailing market rates.  Gonzalez Rogers said the task force doomed its request by demanding only its attorneys' current billing rate. 

Reversing 2-1, the Ninth Circuit said the task force in fact "provided substantial evidence of the prevailing market rate for the applicable periods."  "In justification of the rates that it found reasonable, the court below said that 'Plaintiffs fail to provide evidence of prevailing market rates in this forum during the time period at issue,'" the majority opinion states. "In view of the evidence in the record discussed above regarding MLTF's rates, we cannot agree with this conclusion.

As our case law makes clear, it is incumbent upon the district court to provide a "concise but clear explanation of its reasons for the fee award.  "Writing for the majority, U.S. Senior Circuit Judge Barrington Parker scoffed at the government's argument that the task force forfeited its opportunity to argue for historical rates by only advocating in its brief for current rates.  "From time to time, fee applicants request awards higher than that which the evidence may, upon close review by a neutral judge, fairly permit," said Parker, sitting on the panel by designation from the Second Circuit in Manhattan.

"But a fee applicant's decision to request a higher rate does not permit a court to disregard different rates if the evidence in the record supports them.  "Parker conceded that the task force "might have been more careful to alert the district court of the substantial evidence of prevailing historical rates in the declarations, but there is no question here that the evidence was properly submitted to the district court." 

"Furthermore, the fact that MLTF cited to the relevant declarations in its moving papers is not consistent with the government's position that the pertinent evidence was buried in an impenetrable record," Parker wrote, abbreviating the task force's name.

"Accordingly, we vacate the district court's fee award and remand for a recalculation of the appropriate rate.  "The 19-page opinion closes with another victory for the task force. Parker said the group is also entitled to seek attorneys' fees for the cost of its appeal.

Colleen Flynn, the Los Angeles-based lead attorney for the task force, said she to see looks forward to completion of the case.  "It's long overdue," Flynn added. "It's important to know you're going to get paid if you win.  "The task force was also represented by Arce Law Group.  "To us, it was a pretty clear abuse of discretion that resulted in a manifest injustice," Arce attorney Will Gordon Kaupp, of San Francisco, said about the reversal. 

Chris Ford, an attorney for the task force based in Phoenix, Ariz., added that the precedent "could be helpful for future litigants who seek public [records] under the Freedom of Information Act.  "In a 4-page dissent, U.S. Circuit Judge Johnnie Rawlinson said she would affirm because the task force made no mention of the underlying fee award in its notice of appeal. 

"Rather, it referenced only the district court's denial of the motion for reconsideration," Rawlinson wrote.  She added: "I am not persuaded that the 'fair inference' of an intent to appeal should be so facilely bestowed upon Appellants who have failed to comply with the rules of appellate procedure.  "Rawlinson also believes that the lower court acted within its discretion. 

"The district court was not required to accept these rates as prevailing market rates for 2006—2008, not only because the rates were for different years, but also for different types of cases," the dissent states. "Not one of the referenced cases arose under the Freedom of Information Act, as does this case. Rather, the rates cited were awarded in 'a recent large class-action First Amendment case,' 'a consumer class action,' and civil rights litigation.

Omnibus Insureds and Their Entitlement to Attorney Fees Under Florida Law

September 9, 2016

A recent Daily Business Review article, “Omnibus Insureds and Their Entitlement to Attorney Fees Under Florida Law,” by Christina M. Himmel, explores the third-party right to attorney fees under the Florida Insurance Code.  The article reads:

Let's face it, most lawsuits will require both significant time and money.  To that end, at the outset of litigation lawyers often look to the availability of recovering attorney fees from the adverse party.  In the United States under the American rule, litigants must pay their own attorney fees.  However, a party can recover attorney fees from the other side if authorized by contract or statute.

Florida's Insurance Code is one example of a statutory right to attorney fees.  Specifically, the code provides a right to attorney fees for certain classes of individuals, including named insureds and named beneficiaries.  Additionally, a provision in the code allows a third party that qualifies as an omnibus insured to recover attorney fees as the prevailing party in a dispute against an insurer.  Through this provision, a beneficiary that is not explicitly named in an insurance policy but is nonetheless expressly covered by a provision in that policy may be able to recover attorney fees from the insurer.

Pursuant to Section 627.428(1), Florida Statutes, a third party that qualifies as an omnibus insured is entitled to recover reasonable attorney fees from the insurer if he prevails in an action against the insurer.  The language of the section provides a right to reasonable attorney fees to "any named or omnibus insured or the named beneficiary under a policy."  Thus, according to the plain language of the statute, named insureds, omnibus insureds and named beneficiaries are entitled to the benefits of the section.

Prior to 1982, Section 627.428 only allowed "an insured or named beneficiary" to recover attorney fees.  Then in 1982, the Florida Legislature added the phrase omnibus insured to the statute to clarify and adopt a more expansive interpretation of insured that had developed in the lower courts.  However, despite this addition, the Florida Legislature did not define the phrase omnibus insured.

Instead, case law has developed that attempts to define the meaning of this phrase.  For example, the Fourth District Court of Appeal stated in State Farm Fire & Casualty v. Kambara in 1996 that omnibus insured is a phrase that is "frequently used to refer to an individual insured under an omnibus clause of an insurance policy."

The Florida Supreme Court has provided guidance as to the meaning of these various terms, noting in Continental Casuatly v. Ryan in 2008 that a named insured is a person who is "designated as an insured" under the policy, whereas an omnibus insured is a person "covered by a provision in the policy but not specifically named or designated."

Tenant Injury

To illustrate, in Kambara, a tenant suffered injuries in his apartment complex, which was insured by a premises liability policy issued by State Farm.  After State Farm denied the tenant's claim, the tenant sued State Farm for reimbursement of his medical expenses under a provision in the premises liability policy that stated the insurer would pay medical expenses for injury caused by an accident on the premises owned or rented by the insured during the relevant policy period.

The Fourth District Court of Appeal held that the tenant was entitled to attorney fees under Section 627.428 because he qualified as an omnibus insured under the premises liability policy.  The insurer argued that the tenant was merely a third party beneficiary of the policy, was therefore outside the purview of the section and was not entitled to fees.  The Fourth DCA rejected the insurer's argument, noting that the tenant's rights derived directly from the policy making him an omnibus insured.

In juxtaposing the distinction between a third-party beneficiary and an omnibus insured, the Fourth DCA noted that to qualify as an omnibus insured, the individual must derive his rights directly from a clause of the insurance policy without regard to the issue of liability.  A third-party beneficiary, on the other hand, derives his benefits only upon a finding of liability against the insured tortfeasor.

In short, a third party's qualification as an omnibus insured under Section 627.428 depends on whether the third party derives rights directly under a specific clause in the insurance policy.  If so and the claimant prevails against the insurer, the third party is considered an omnibus insured and entitled to recover fees.

Christina M. Himmel is an associate at Kluger, Kaplan, Silverman, Katzen & Levine in Miami.  Her practice focuses on complex commercial disputes in both state and federal court.

Attorney Fee Discovery Before Texas Supreme Court

September 8, 2016

A recent Law 360 story, “Texas Justices To Hear National Lloyds Fee Discovery Fight,” reports that the Texas Supreme Court agreed to hear a case brought to it by National Lloyds Insurance Co. in which the insurer argued that a lower court deviated from precedent in compelling discovery of its attorneys’ fee information by property owners who say National underpaid their damage claims.

In its petition for writ of mandamus filed with the high court last August, National argued that a defendant's fees are irrelevant, and that there are other methods in place — including the lodestar method and Arthur Anderson factors — that can be used without compelling a party to turn over rate and fee information that it argues is privileged.

National’s petition said the Thirteenth Court of Appeals decision caused a split among state appellate courts over whether a plaintiff can discover a defendant's attorney's fee information, which it said is reflective of a split in outside state and federal courts as well.  It said that the high court has never adjudicated the issue and the Thirteenth Court erroneously relied on Chief Justice Nathan Hecht's concurring opinion in the 2012 case El Apple I v. Olivas in justifying its holding that the fee information is both relevant and discoverable.

“Using this opinion, any plaintiff can now seek discovery of a defense lawyer’s hourly rates, invoices, payment receipts, and audits any time their claims for fees are contested.  Consequently, every defendant defending a claim for attorneys’ fees will be forced to choose between stipulating to the reasonableness of the plaintiff’s fees, or producing all of their attorney fee information as the price for challenging those fees,” the petition said.

“Certainly Chief Justice Hecht’s opinion in El Apple did not intend, as the Thirteenth Court has pronounced, to open this door to irrelevant and privileged attorneys’ fee information that will implicate almost every civil case in the state,” it said.  “Yet, until this court clarifies this issue, that is exactly what will happen.”

In arguing against high court review, the property owners told the court in a brief filed in November that the trial court was correct in permitting them to ask about the insurer's attorney fees because that information is not privileged from disclosure.

“Because [the insurers] are challenging the reasonableness of the hours, rates, and total charges of the plaintiffs’ attorneys in the underlying litigation, the trial court did not abuse its discretion in ordering the limited discovery it allowed,” the response said.  “As courts around the country have recognized, the discovery ordered by the trial court is not patently irrelevant.”

Dale Wainwright of Bracewell LLP, who represents National Lloyds, told Law360 he was pleased the Supreme Court agreed to review the case.  "National Lloyds does not believe the law allows or that it is rational to order defendants, who are not seeking an attorneys’ fee recovery from plaintiffs, to provide plaintiffs with descriptions of legal services provided or the amount of fees for those services," he said.  "Such information is irrelevant to the dispute and is a tactic to increase defense costs."

The underlying suit concerns four property insurance cases in which the property owners argued they had been underpaid on damage claims following two hailstorms in Hidalgo County, Texas, in March and April 2012.  The property owners were seeking damages and attorney's fees on their breach of contract and Texas Insurance Code claims, according to court documents.

The cases were consolidated with thousands of others in a multidistrict litigation in Texas and special master Roberto Ramirez was appointed to resolve any disputes.  In March 2015, according to the petition, the property owners in this case moved additional discovery on attorney's fee information, including rates, invoices, payments and audits.  The insurers objected.

But in April 2015 the special master permitted the additional discovery, which resulted in requests for the information being served to National Lloyds, Wardlaw Claims Service Inc. and Ideal Adjusting Inc., which objected to the requests.  After a hearing, the special master overruled each objection, according to the petition, and an appeal to the Thirteenth Court of Appeals followed.

The case is In re: National Lloyds Insurance Co. et al., case number 15-0591, in the Supreme Court of the State of Texas.

Nation’s Top Attorney Fee Experts

September 6, 2016

NALFA members provide a range of services on attorney fee and legal billing matters.  Our members include fully qualified attorney fee experts, special fee masters, bankruptcy fee examiners, fee...

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