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AIG Unit Can’t Repeal Attorney Fees in Yahoo Jury Win

November 25, 2019 | Posted in : Billing Practices, Billing Record / Entries, Coverage of Fees / Duty to Defend, Ethics & Professional Responsibility, Fee Award, Fee Reduction / Fee Denial, Fee Request, Fees as Sanctions / Bad Faith, Legal Bills / Legal Costs, Litigation Management

A recent Law 360 story by Dave Simpson, “AIG Unit Can’t Overturn Atty Fees in Yahoo Jury Win,” reports that Yahoo Inc. presented enough evidence to back a jury finding that it can recover the $618,000 in attorney fees it spent trying to establish that an AIG subsidiary breached its policy by failing to cover its losses in underlying privacy class actions, a California federal judge said.

U.S. District Judge Edward J. Davila nixed AIG unit National Union Fire Insurance Co. of Pittsburgh, Pa.’s bid to deny Yahoo's attorney fees award or grant a new trial, finding that the federal jury had been presented with “substantial evidence” when it decided in May that the unit acted in bad faith by failing to cover Yahoo’s costs to defend the consolidated class action, which accused it of unlawfully scanning customers' emails.  Judge Davila also said that the AIG unit waited too long to claim that the attorney fees stemming from the breach of contract suit were too high or unnecessary.

“At trial, National Union chose not to cross-examine [Yahoo’s counsel] about the reasonableness or accuracy of the figures…” he said.  “National Union did not challenge any invoice entries as unwarranted or excessive.  National Union cannot now contend for the first time that Yahoo is entitled to only $9,500.”

In October 2018, Judge Davila found that the insurer largely failed to defend and indemnify Yahoo for $4 million in attorneys' fees from multiple class actions accusing it of scanning customers' emails, but said it was up to a jury to decide whether the insurer's failures to come to Yahoo's aid were coverage errors or evidence of bad faith.  In May, following a five-day trial, the jury said the tech giant  was entitled to attorney fees stemming from the breach suit but rejected Yahoo’s request for a bad faith award equal to the full $7 million it spent defending and settling the underlying action.  It also spurned the company’s bid for punitive damages after concluding that National Union didn’t act with “malice, oppression, or fraud.”

In July, National Union argued that Yahoo presented no evidence to support a finding that it had acted in bad faith.  And because Yahoo failed to prove National Union withheld policy benefits in bad faith, it cannot recover any fees, it said.  “Finally, even if the court believes the record supports an award of … fees in some amount, the jury’s $618,000 award is plainly excessive,” National Union said in July.

That award includes fees for services unrelated to the case, such as “communications with excess carriers,” “fees incurred to establish bad faith” — which are not recoverable — and “fees for ‘mixed’ services that require allocation,” National Union said.  The insurer asked the court to deny the fees as a matter of law or grant a new trial limited to the issue of fees.  Judge Davila declined, noted that the jury saw enough evidence to determine bad faith and also that Yahoo presented enough evidence to support the fee award.