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Archive: 2017

Four Season’s $11M Fee Dispute in Arbitration

June 5, 2017

A recent the Law 360 story by Natalie Olivo, “Four Seasons Hotel’s $11M Fee Spat Sent to Arbitration,” reports that the owners of a Four Seasons-branded hotel in Los Angeles will have to arbitrate their request for the hotel chain to return an award of nearly $11 million in legal fees stemming from a contract dispute over split loyalties, after a California judge cited the companies’ arbitration agreement.

In sending Burton Way Hotels LLC’s fee request to arbitration, U.S. District Judge Philip S. Gutierrez noted that Ontario-based Four Seasons Hotels Ltd. has contended that the parties’ arbitration agreement covers the fee request, which should be decided by a new arbitration panel.  In addition, Judge Gutierrez said, Burton Way has indicated that it was also willing to have the fee request decided in arbitration.

“In light of the clear language in the parties’ arbitration agreement providing for the arbitrators’ power to adjudicate the questions presented in Burton Way’s fees motion, and the parties’ mutual agreement to bring the fees motion before the new arbitration panel, the court concludes that the fees motion is to be decided by the new arbitrators pursuant to the parties’ arbitration agreement,” Judge Gutierrez said.

The award at issue was handed down in underlying arbitration that dismissed Burton Way’s claims accusing Four Seasons Hotels of breaching their deal for the exclusive use of the brand and ordering Burton Way to pay Four Seasons $10.2 million in fees and costs.  However, after the Ninth Circuit vacated the award in October, Burton Way sought to have the payment returned, saying it is now owed more than $10.9 million with interest.

Neal Marder, an Akin Gump Strauss Hauer & Feld LLP attorney representing Burton Way, told Law360 that "we advised the court that Burton Way was comfortable with the panel deciding this issue so the decision was welcomed and not unexpected."

The dispute over Four Seasons' decision to manage and operate the nearby Regent Beverly Wilshire Hotel, which Burton Way says is a direct competitor, has been barreling back toward arbitration at least since Judge Gutierrez refused Burton Way's bid last month to void an agreement to arbitrate the dispute over a licensing deal under which Four Seasons has managed the Burton Way-owned Four Seasons Hotel Los Angeles since the late 1980s.

Burton Way had claimed the arbitration agreement was void because the hotel owner agreed to it only if a certain judge — who recused himself in January under a request from Burton Way alleging improper ex parte communications — was involved in the arbitration.  But Judge Gutierrez instead ruled that the provisions did not reference the judge in a way that would render the agreement void now that he has recused himself.

Following Judge Gutierrez’s order declining to void the agreement, the parties have squared off over remaining issues in the dispute.  Four Seasons in April told the court that Burton Way could not relitigate the entire contract case, arguing that the Ninth Circuit issued a very limited mandate for still-live issues to be contested when the case returns to arbitration.

According to Judge Gutierrez’s order, Four Seasons had noted that Burton Way’s fee request depends on a determination of which party is the “prevailing party, which is a question reserved for the arbitrators.

While Burton Way had also agreed to arbitrate its fee request, the company claimed that Four Seasons was trying to keep the district court from ruling on the fees motion on the grounds that it has no jurisdiction under the parties’ arbitration agreement, while at the same time asking the court to rule on the scope of the Ninth Circuit’s order, rather than allowing both issues to be arbitrated.

The case is Burton Way Hotels Ltd. et al. v. Four Seasons Hotels Ltd., case number 2:11-cv-00303, in the U.S. District Court for the Central District of California.

NALFA Offers Certificate in Reasonable Attorney Fees

May 30, 2017

NALFA is the nation's leading CLE provider of events and programs on attorney fee and legal billing topics.  Since 2008, NALFA has hosted 20 different events and programs on attorney fee and legal billing matters.  Hundreds of attorneys and other professionals from across the U.S. have registered and participated in these programs.  Our faculty has included some of the nation's top attorney fee experts, scholars of attorney fee jurisprudence, and sitting federal judges.

NALFA is now offering a Certificate in Reasonable Attorney Fees for registered guests of multiple programs.  Attorneys who register for 4 or more programs within a year will earn the Certificate in Reasonable Attorney Fees.  This is the nation’s first and only certification of its kind.

“Attorney fee issues have become a substantive area of law,” said Terry Jesse, Executive Director of NALFA.  “This certification is an excellent way for attorneys to show clients and courts they're accredited in reasonable attorney fees.  Attorneys who earn this certification are highly knowledgeable in areas such as attorney fee ethics, fee agreements, fee entitlement, fee award factors, and fee disputes.” Jesse said.

For more on NALFA CLE and professional development programs, visit http://www.thenalfa.org/CLE-Programs/.

$15M in Legal Fees in Archdiocese Bankruptcy

May 24, 2017

A recent the Star Tribune story by Jean Hopfensperger, “Judge Laments $15M in Legal Fees in St. Paul-Minneapolis Archdiocese Bankruptcy,” reports that the judge overseeing the bankruptcy of the Archdiocese of St. Paul and Minneapolis expressed concern over the legal fees being racked up in the case — about $15 million to date.

“It bothers me so much that all these attorney fees are being run up,” U.S. Bankruptcy Judge Robert Kressel said at a hearing, adding that legal fees are consuming funds that could be directed to survivors of archdiocese clergy sex abuse.

In an attempt to curb the spending, Kressel ordered that no expert witnesses be hired for the time being.  He also ordered a tighter schedule for both parties to argue their legal objections to each other’s compensation plans.  “I’m trying to save money and time and get this decided,” Kressel said.

Kressel’s remarks came in response to the archdiocese’s proposal to “retain certain experts” to advise on the competing victim compensation plans before the court, on the value of parish contributions to the settlement, on insurance settlements and other issues, according to a motion before the court.

During the first three months of this year, the archdiocese bankruptcy rang up $1.28 million in attorney and professional fees, according to documents filed with the court.  The bills are from three law firms representing the archdiocese, one representing parishes and one representing victims, according to operating budgets filed with the court.  Average monthly legal and professional fees were $420,000 from January to March, the last month for which figures were available.

The fees are high compared to other bankruptcies nationally, and the process in the Twin Cities has been long, said Chuck Zech, a church finance expert at Villanova University in Pennsylvania.  The Milwaukee Diocese, considered the “mother of all bankruptcies,” spent $23 million in a protracted battle to settle with abuse victims, plus $7 million for the victims’ attorneys, he said.  “Milwaukee is the poster boy for a disastrous way to do a bankruptcy,” said Zech.  “It seems to me that St. Paul is approaching that status.”

The fee issue surfaced during what was supposed to be a routine hearing to schedule the next steps in the two-year-old case, including approving a compensation plan and insurance settlements.

Jenner Wins Fees in Contingency Agreement

May 23, 2017

A recent the NLJ story by Marcia Coyle, “Skadden Loses a Tax Dispute, and Jenner Wins Fee Fight,” reports that Jenner & Block won fees in a case, Parallel Networks v. Jenner & Block, that stemmed from a 2007 contingency fee arrangement in which Jenner agreed to represent Parallel Networks in two patent cases.

The fee arrangement contained a provision that allowed the law firm to withdraw from the representation and still get fees whenever it “determine[d] at any time that it is not in its economic interest to continue the representation.”  If the firm withdrew, Parallel Networks was to pay “an appropriate and fair portion of the Contingent Fee Award” at “the conclusion of any” patent lawsuit.  The agreement also called for arbitration of any disputes.

Jenner & Block did withdraw.  New counsel entered and settled the two patent cases.  In 2011, Jenner submitted a $10 million fee request that Parallel Networks would challenge.  The dispute went to arbitration and Jenner was awarded $3 million and a 16 percent future contingent stake.  On appeal, Parallel Networks argued the withdraw-and-still-pay provision was prohibited under Texas law.  Texas state courts upheld the award.

In the high court, Parallel Networks, represented by Daniel Geyser of Stris & Maher, argued the circuit courts were divided over whether public policy challenges are viable under the Federal Arbitration Act and also are confused about the permissible grounds for vacating arbitration awards following the Supreme Court’s 2008 decision in Hall Street Associates v. Mattel.  “There is simply no indication that Congress intended to intrude on the power of state courts, acting under settled state law, to resist arbitration awards that violate core state public policies,” Geyser wrote.

Jenner & Block waived its right to respond to Parallel Network’s petition.  In earlier litigation, the law firm had argued that it had invested 24,000 hours in the patent litigation, which formed the basis for the later successful outcome.  The firm said it had reason to withdraw because Parallel Networks was habitually late reimbursing litigation expenses.

“We’re obviously disappointed,” Geyser said.  “There was an acknowledged conflict on an important issue that has caused substantial confusion in the lower courts.  This case was an appropriate vehicle, and we wish the court had decided to take it up.”

Firms Fight over Jurisdiction in Fee Allocation Dispute in MDL

May 22, 2017

A recent the Law 360 story by Jess Krochtengel, “Plaintiffs Firms Duel Over Texas Jurisdiction in Fee Fight,” reports that a Rhode Island attorney who served as local counsel for a Texas firm in multidistrict litigation over hernia mesh made by C.D. Bard Inc. subsidiary Davol Inc. told a Texas appellate court he shouldn’t have to litigate a fee dispute in Texas.

Attorney John E. Deaton and his Deaton Law Firm LLC, both based in Rhode Island, say a Dallas trial judge wrongly refused to dismiss them from a dispute over a fee-sharing agreement with Texas attorney Steven M. Johnson and his firm, Steven M. Johnson PC.  Deaton has claimed Johnson failed to pay him 5 to 10 percent of fees earned as part of a global settlement Johnson negotiated for nearly 200 mesh cases the lawyers had worked on together.

Johnson argues that when Deaton signed a stipulation of nondisclosure related to the settlement amounts for his clients, Deaton became bound by the terms of underlying attorney representation agreements Johnson signed with his clients, including their provision disputes, would be arbitrated in Texas.  Deaton argues his role in the case is defined by his fee-sharing agreements with Johnson, which don’t have an arbitration clause.  The case has “far-reaching implications for any local counsel hired by a Texas lawyer,” Deaton attorney Brian H. Fant of Law Offices of Brian H. Fant PC said during oral argument before the Fifth Court of Appeals.

Fant said Deaton served as local counsel on 174 hernia mesh cases for Johnson in Rhode Island state court over a period of eight to 10 years, and worked on one case in federal court.  That case, involving Louisiana resident Rickie Patton, was initially filed in the Southern District of Texas, but transferred to Rhode Island District Court for pretrial proceedings.

The panel pressed Fant on what Johnson has argued are Deaton’s ties to Texas. Justice Elizabeth Lang-Miers said 13 of the 174 clients were Texas plaintiffs, and asked whether Deaton had developed relationships with those clients over the years.  Justice David Evans pointed out Deaton had recommended the Patton case be tried in Texas and that Deaton be the lawyer to try it.  And Justice David Bridges questioned the weight of the fact Deaton hired a Texas expert witness for the Patton case, which would have been tried in Texas had it not been for the global settlement.

Fant said Deaton had recommended the expert, but it was Johnson who actually hired and paid the expert witness, and said Deaton never visited Texas during that time.  And he said the expert witness’ Texas residency isn’t relevant to jurisdiction over Deaton.

Arguing for Johnson, Thomas R. Needham of The Law Offices of Thomas R. Needham said Deaton spent eight years working on a Texas federal case, establishing jurisdiction in Texas for the fee dispute.  Although the Patton case’s pretrial proceedings were in Rhode Island, Deaton’s pretrial work was all aimed at a trial in Texas, and he had availed himself of the protections of the state.

And Needham said Deaton waived his right to contest jurisdiction in Texas when he signed the nondisclosure stipulation referencing Johnson’s attorney representation agreements.  Johnson’s position is that Deaton is equitably estopped from denying the applicability of the ARA’s arbitration clause because he’s claiming benefits under the ARAs in the form of legal fees.

The case is Deaton et al. v. Johnson et al., case number 05-16-01221-CV, in the Texas Court of Appeals for the Fifth District.