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Archive: 2019

Article: Rohrmoos Highlights Steps to Securing Attorney Fees in Texas

July 8, 2019

A recent Law 360 article by Amy Anderson, Tiffany Raush and Joshua Norris, “Rohrmoos Highlights Steps to Securing Atty Fees in Texas,” reports on the recent Texas Supreme Court case, Rohrmoos Venture v. UTSW DVA Healthcare.  This article was post with permission.  The article reads:

In Rohrmoos Venture v. UTSW DVA Healthcare LLP, the Supreme Court of Texas has finally thrown down the gauntlet for attorney fees claims: Submit your billing records or else!

While the court’s opinion issued April 26, 2019, stopped short of actually mandating submission of billing records in support of an attorney fees request, “billing records are strongly encouraged.”  In reality, nothing short of contemporaneous billing records would likely satisfy the stringent evidentiary requirements articulated in Rohrmoos.

In Rohrmoos, the lessee prevailed in a lease dispute against its landlord; however, it supported its attorney fees claim only with the testimony of its attorney.  The attorney testified as to the mountain of documents, emails and depositions he reviewed, prepared for and completed in addition to time spent in trial.  He also testified regarding his rate, why that rate was reasonable and why the fees in this case (about $800,000) were so high compared to the total amount in dispute (about $300,000).

He did not introduce his billing records, which would have certainly been voluminous, and instead asserted before the court that the billing records would give the jury no additional basis on which to award his client attorney fees.  The jury awarded the lessee $800,000 for fees incurred in addition to conditional amounts for appeal.  The landlord challenged the fee award and, in particular, the failure to produce billing records in support.  The court of appeals affirmed the award concluding that billing records were not required to prove attorney fees in this case.

The Supreme Court of Texas disagreed.  The court issued a lengthy, 20-plus page opinion to address the issue of the attorney fees claim, apparently flummoxed that practitioners, parties and lower courts did not understand that Texas exclusively subscribed to the lodestar method following City of Laredo v. Montano.

The lodestar method requires the calculation of reasonable hours multiplied by a reasonable rate, producing the “lodestar.”  From there, adjustment up or down is possible depending on particular circumstances not already accounted for in the lodestar calculation.  If it was unclear before, it is clear now — the lodestar method applies to every claim for attorney fees in Texas.  And, as the Rohrmoos court sees it, there is little to no reason for an award to ever deviate from the lodestar.

Attorney fees claims are valuable to parties because they constitute an entirely separate claim for damages.  An award of fees is meant to compensate the winning party and make that party whole.  The award is not intended to punish the losing party, nor is it intended to benefit the attorney.  The contours of the court’s Rohrmoors opinion provide important clarifications, reminders and cautions on the issue of attorney fees, several of which are highlighted in the following practice pointers.

Get Your Ducks in a Row Ahead of Time — Chapter 38 (Probably) Won’t Save You

Texas follows the “American Rule” regarding attorney fees recovery — each party pays its own way.  To “shift” the payment of attorney fees, parties must point to either a contract provision or a statute.  In Texas, we have long revered Chapter 38 as the attorney fees saving grace for oral contracts or the occasional contract without an attorney fee provision.  But Chapter 38 has fallen from grace over the past decade following several state and federal court opinions holding that it does not apply to limited liability companies or limited partnerships.

Even before that spate of decisions, however, Chapter 38 had its limitations.  As discussed in Rohrmoors, to prevail on an attorney fees claim under Chapter 38, parties have to show (1) they prevailed on a claim entitling them to attorney fees, and (2) they recovered damages for that claim.  Thus, while a party who successfully pursued a breach of contract claim for damages can recover attorney fees under Chapter 38, a party who successfully defended a breach of contract claim cannot.

It is imperative that attorney fees are properly addressed in a contract. Among other things, the Rohrmoors decision demonstrates that contractual fee-shifting provisions should specify when a party is a “prevailing party.”  If the contract is silent, the trial court will likely apply Chapter 38 prevailing party law — meaning that your successful defense of a breach of contract claim will not yield an attorney fee award.

Parties should also consider whether fee recovery should be limited to fees “incurred.”  In Rohrmoors, the court explained that use of the word “incurred” limits the amounts of fees to only those fees for which the requesting party is liable.  Without using “incurred,” a party may recover attorneys’ fees that are reasonable and necessary to the representation without a showing that they were “incurred.”  While broader is better if you are seeking the fees, and limited is better if you are defending against fees, what is best is to predictably know how the fee provision will be interpreted and applied by the court.  Therefore, clarity is king.

Litigation Is Nigh — Now What?

When the parties to a contract find themselves staring down inevitable litigation, the focus is naturally on the claims giving rise to the litigation: breach of contract, breach of warranty, fraudulent conduct, etc.  Early on, attorney fees may not be foremost in mind, but they should be.  Informed consideration of likely avenues for recovery of attorney fees will help the parties evaluate their potential damages and their potential risks in litigating.

In addition, Chapter 38 has “presentment” requirements and other fee-shifting statutes, such as the Deceptive Trade Practices Act, may have similar preconditions.  Developing your attorney fees claim, or defending against the opposing party’s fee claim, is often overlooked until trial approaches when the costs have already been incurred and discovery is coming to a close.  Understanding the fee claim and developing or defending it alongside the core claims will pay dividends in the long run.

Proving It Up for the Win

Rohrmoors clears up any lingering mystery: Plan to submit your attorneys’ billing records to support your fee claim.  “Sufficient evidence [to support a fee claim] includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time require to perform the service, and (5) the reasonable hourly rate for each person performing such services.”

From that, the factfinder determines the reasonable hours times the reasonable hourly rate resulting in the lodestar.  Only in extremely limited and unusual circumstances may the factfinder apply a multiplier upward or downward to account for factors not otherwise baked-in-the-cake of the lodestar.

Thus, when proving up your attorney fees, it is critical to provide accurate and complete billing records in support of your claim.  The Supreme Court of Texas stated this was “strongly encouraged” in Rohrmoos, but the clear implication of that opinion as a whole is that it is indispensable to recovery of fees.

That means the attorneys’ time entries should be detailed enough to provide sufficient information for review and payment, but not so detailed that extensive redacting is going to be required to protect work product or attorney-client privileged information.  Such extensive redaction may fall short of the Rohrmoors’ requirement that the evidence show the particular services performed and may also fail to satisfy segregation requirements.

Also consider whether a fee claim will require a separate, retained expert.  The attorney in Rohrmoors opted to testify as his own expert, which is fairly common.  There are multiple schools of thought on this.  The attorney who generated the fees is going to have a better grasp on the facts and nuances of the case, especially in complex litigation where the total hours and requested award might be especially large.  Most judges know that a retained expert is no less self-interested than the lawyer in the case.  On the other hand, to a jury, a retained expert may appear at least somewhat less self-serving.  If the attorney’s rate is particularly high, it may be helpful to have another attorney explain why that rate is reasonable.  Finally, if there is a great degree of tension between opposing lawyers related to the litigation, cross examination of the lawyer in the case on the issue of fees could get heated.  In that case, it may be better to have one degree of separation with a retained expert.

Amy K. Anderson and Tiffany C. Raush are associates and Joshua A. Norris is a partner at Jones Walker LLP in Houston.

Novartis Attacks $3M Fee Request in Whistleblower Case

July 5, 2019

A recent Law 360 story by Bill Wichert, “Novartis Attacks $3M Atty Fees Bid in Whistleblower Case,” reports that counsel for Novartis told a New Jersey state court that an attorney fees award to a former company executive who prevailed on a whistleblower claim at trial should be cut in half because the pharmaceutical giant succeeded on its unjust enrichment counterclaim against her.  More than three months after jurors handed a roughly $1.8 million whistleblower award to Min Amy Guo, Novartis Pharmaceuticals Corp.'s attorneys said her lawyers' more than $3 million in proposed fees should be reduced for various reasons, including because the jury also awarded nearly $350,000 to Novartis on the counterclaim after concluding she violated company policy.

"There is nothing in New Jersey jurisprudence, there is nothing in American jurisprudence that supports a fee-shifting provision being applied to compensate plaintiff's counsel on a count that she was not successful in," Novartis attorney Patricia Prezioso told Superior Court Judge Louis S. Sceusi during oral arguments on the fees application.  Beyond the 50% "limited success" reduction, Novartis is seeking additional cuts in the proposed fees.

The judge acknowledged he "can't pay the plaintiff for losing the unjust enrichment claim," but questioned the company's proposed 50% reduction for Guo's limited success at trial.  "How do you come up with 50%?  How is that more justified than 20%, 30%?” Judge Sceusi asked Prezioso.

Prezioso pointed to the substantial amount of trial testimony that focused on Guo's policy violations, saying "unjust enrichment and the policy violations ... was far more than 50% of the case."  "It was more like 80% of the case," said Prezioso, adding that "asking for 50%, in light of the fact that we prevailed on that and there's no support for fee-shifting ... when they lost on a claim, is fair."

But Guo attorney James K. Webber countered that she is entitled to reasonable attorney fees as the prevailing party on her state Conscientious Employee Protection Act claim, and the award should not be cut because she lost on the unjust enrichment counterclaim.  Webber argued that the issues underlying both claims were the same, since Guo's purported policy violations constituted the company's defense to her whistleblower claim.  "There's certainly no support for defendant's position," Webber told the judge.

The former executive director of the health economics and outcomes research group at Novartis, Guo said she was fired in retaliation for objecting to a proposed study by pharmaceutical distribution company McKesson Corp. of Afinitor's use as a breast cancer drug. Novartis ultimately did not move forward with the study.  Among her claimed objections to the proposed McKesson study was that it appeared to be a kickback to the company to help sell Afinitor.

Guo said she believed the study would violate a corporate integrity agreement that Novartis entered into in 2010 as part of a settlement with the U.S. Department of Justice.  That agreement required Novartis to comply with federal health care program requirements, including a federal anti-kickback statute, court documents state.  Novartis claimed Guo was terminated for violating company policies.

At the end of the more than seven-week trial, the jury in a 7-1 vote on Feb. 26 awarded about $1.8 million to Guo on her CEPA claim.  The jurors then unanimously awarded nearly $350,000 to Novartis on its counterclaim for unjust enrichment.  On Feb. 27, the jury denied Guo's bid for punitive damages.

On March 26, Judge Sceusi rejected the company's bid to set aside the CEPA verdict and, about a month later, Guo's attorneys submitted their fees application.  During a hearing, however, the judge pushed back against the fees request.  For example, Judge Sceusi pointed to Novartis' criticism of Guo attorney Richard J. Murray's request of fees for more than 1,200 hours spent on the case over less than a year, whereas Webber is requesting fees for nearly 1,400 hours spent over five years on the suit.  In that regard, the company has called Murray's fees request "simply glutinous."

$75M Fee Award Draws Judicial Scrutiny in State Street Case

July 4, 2019

A recent Law 360 story by Aaron Leibowitz, “$75M Fee Award in State Street Row Faces Judge’s Scrutiny,” reports that a Boston federal judge heard arguments on whether to reduce a $75 million attorney fee award for three firms that brokered a $300 million class action settlement with State Street Corp., saying the firms may have misled him about how fees are typically calculated in massive deals like this one.

In the first of up to three days of hearings, lawyers representing Labaton Sucharow LLP, Thornton Law Firm and Lieff Cabraser Heimann & Bernstein LLP said the 25% cut of the settlement that they received was reasonable under the circumstances, even in a so-called "megafund" settlement worth hundreds of millions of dollars   Some experts have suggested attorneys should receive a relatively smaller percentage of the total award when a settlement is that large.  Richard Heimann, an in-house attorney representing Lieff Cabraser, said the firms made note of those expert opinions when they first filed their fee request in 2016, and never had any intention of leading the judge astray.

"We discussed all this in the briefs," Heimann told U.S. District Judge Mark L. Wolf. "We were hardly hiding from your honor."  But Judge Wolf wondered why the firms had failed to mention in those briefs that a study they cited found that, in settlements ranging from $250 million to $500 million, the average fee award was 17.8%, well below the 25% they requested after their $300 million settlement.  The judge said he "basically trusted" the firms' own calculations at the time, suggesting it would have been difficult to reject their proposal given that multiple regulatory agencies had already reviewed it.

But a lot has changed since then, the judge noted. He has since vacated his original attorney fee award in the wake of a Boston Globe report that raised questions about the double-billing of attorneys' hours and a special master's investigation that found additional billing issues.

"I know much more than I knew in 2016," the judge said.  The special master, retired U.S. District Judge Gerald Rosen, held in his report that the 25% figure the firms used for attorney fees was proper, a point that his attorney emphasized again in court.  But Judge Rosen has maintained that Judge Wolf should lower the fee award by as much as to $10.6 million, including more than $4 million for hours that were allegedly double-billed and $2.3 million for so-called contract attorneys at Thornton who were paid a higher rate than he said they should have earned.

As the hearing wore into the late afternoon, attorneys for the three firms described their billing practices in detail and grappled with the varying definitions of contract attorneys versus staff attorneys.  Judge Rosen has suggested only that the billing for contract attorneys was improper, but the arguments also addressed rates charged for some staff attorneys who pored over documents in the case.

Joan Lukey of Choate Hall & Stewart LLP, representing Labaton, said the firm defines staff attorneys as those who are not on track to become partners but receive full benefits and do in-depth document work. In the State Street case, some received more than $400 an hour, she said.  "It troubles me when I hear suggestions that they should be treated as something other than what they are, which is very skilled and talented attorneys," Lukey said.

Frank Bednarz, a representative of the Hamilton Lincoln Law Institute — a nonprofit firm that has provided amicus guidance to Judge Wolf in the case — countered that those rates were far higher than what staff attorneys should be charged.  A more appropriate figure, he said, would be around $200 an hour.

A representative for Labaton told Law360 after the hearing that the firm hopes Judge Wolf ultimately accepts the special master's recommendations.  "Counsel for Special Master Rosen highlighted some of the factors supporting the reasonableness of the court’s original award of a 25% fee to class counsel," the firm said.  "That included the special master’s view that the underlying State Street action hinged on a complex and challenging case, with novel legal issues, at substantial risk of success, and the excellent work done by counsel in obtaining a record recovery for the class — against a highly formidable adversary."

Representatives for other parties in the case did not immediately return requests for comment after the hearing.  The underlying suit, filed in 2011, alleged that State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade.

The hearing will continue with witness testimony on some of the key issues that Judge Rosen flagged in his report, including allegedly false representations made to the court by Thornton's Garrett Bradley, a former Massachusetts state representative.  Judge Rosen's attorney, William Sinnott of Barrett & Singal PC, said that there was "no legitimate basis" for Bradley to sign the fee declaration he submitted in the case, in part because the firm did not have any hourly clients.  "It was just so outrageously inaccurate," Sinnott said.

The case is Arkansas Teacher Retirement System v. State Street Corp. et al., case number 1:11-cv-10230, in the U.S. District Court for the District of Massachusetts.

Attorney Fee Dispute Litigation in Pelvic Mesh Case

July 3, 2019

A recent Law 360 story by Bill Wichert, “NJ, Texas Firms Unlawfully Pocketed Mesh Funds, Suit Says,” reports that law firms including Nagel Rice LLP and Potts Law Firm improperly pocketed attorney fees and expenses from the settlements of roughly 1,450 pelvic mesh cases in New Jersey state court by using invalid retainer agreements or no agreements at all, according to a proposed class action made available.  The lawsuit, filed in Bergen County Superior Court, says the firms unlawfully retained excessive fee percentages, deducted those fees "off the top" of gross settlement amounts, took expenses out of clients' portions of the recovery, and engaged in invalid fee-sharing.

"The defendants were negligent in that their conduct fell below and breached the applicable standard of care, because they failed to ensure that all the cases were retained, filed, litigated, settled and disbursed in accordance with New Jersey law,” according to the complaint filed by Mazie Slater Katz & Freeman LLC.  The alleged misconduct was "reckless and undertaken with willful and wanton disregard" for the rights of plaintiff Debbie Gore and the proposed class members, the complaint said.

In addition to New Jersey-based Nagel Rice and Texas-based Potts Law Firm, the defendants include Texas-based firms Bailey Cowan Heckaman PLLC, Junell & Associates PLLC, Burnett Law Firm and Houston attorney Annie McAdams.  The complaint, which includes legal malpractice, breach of fiduciary duty and other claims, asserts that the defendants should be ordered to disgorge all attorney fees and expenses from the cases and be limited to collecting attorney fees on a quantum meruit basis.

"On information and belief, defendants performed very little, if any, actual legal services of value on behalf of plaintiff and the proposed class members, thus entitling defendants to little or no recovery in quantum meruit," the complaint said.

Gore, a Texas resident, has demanded that the defendants provide "a full accounting" of the retainer agreements in the cases, the settlements, and the attorney fees and expenses deducted from those settlements.  Superior Court Judge Rachelle Lea Harz ordered the defendants to appear in court on July 11 to show cause why the court should not issue an order requiring them to turn over that information.  Gore entered into an invalid retainer agreement with one or more of the defendants in May 2013 that provided for 40% in attorney fees that would be deducted from the gross settlement amount and for expenses to be taken out of her share of the recovery, the complaint says.

Those provisions ran afoul of a New Jersey rule governing contingent fees, the complaint says.  Under that rule, an attorney can collect a fee of 33.33% of the first $750,000 recovered and then smaller percentages for subsequent amounts, and those fees must be based on the "net sum recovered" after deducting expenses.

The retainer agreement also "failed to disclose that some or all of the defendants were sharing the legal fees, and New Jersey law requires that all attorneys sharing in the legal fees — and the fee-sharing arrangement — be disclosed to and approved by the client in writing," the complaint said.  The agreement "allowed for the sharing of legal fees to attorneys who provided no legal services," the complaint said.

Nagel Rice and Potts — even though they were not "retained to act as legal counsel pursuant to a retainer agreement compliant with New Jersey law" — filed a suit on Gore's behalf in July 2014 as part of multicounty litigation against Johnson & Johnson and C.R. Bard Inc., according to the complaint.  Following settlements in the roughly 1,450 cases filed by Nagel Rice and Potts, the defendants improperly retained attorney fees and expenses and took part in the unlawful fee-sharing, the complaint says.

Florida Tribe Wins Attorney Fees in Malicious Prosecution Case

July 2, 2019

A recent Law 360 story by Nathan Hale, “Fla. Tribe Wins Atty Fees in Malicious Prosecution Suit,” reports that the Miccosukee Tribe of Indians of Florida won its bid to collect attorney fees after fending off a malicious prosecution lawsuit from Miami law firm Lewis Tein PL, as a state appeals court found that the tribe had previously made a good-faith offer to settle the case.  The Third District overturned findings from the trial court that the tribe's offer, which the firm rejected, was made in bad faith because it was for a nominal amount and not made until nine months into the litigation.

"Here, the tribe had a well-founded, good faith, and legally correct belief that sovereign immunity divested the trial court of subject matter jurisdiction," the appeals court said in its opinion, adding, "Given these circumstances, the nominal offers had a reasonable foundation, namely the tribe's nominal exposure."

The tribe moved to recover attorney fees after successfully arguing that sovereign immunity shielded it from the damages claims brought by Lewis Tein and name partners Michael Tein and Guy Lewis.  The lawyers, who had served as outside counsel for the tribe, accused the Miccosukee of spending five years attempting to smear their reputations with a series of meritless lawsuits accusing them of participating in a purported embezzlement and kickback scheme with former tribal leaders, among other allegations.

The fees bid was based on state law that entitles a party to recover reasonable costs and fees if it has served a demand or offer for judgment that is rejected by the other side and it later obtains a judgment of at least 25% more than the amount rejected, according to the opinion.

The tribe offered to settle the case for $7,500 — $2,500 each to Lewis, Tein and their firm — shortly after the parties made oral arguments before the Third District on the tribe's appeal of the trial court's denial of its motion to dismiss.  About three months later, the appeals court dismissed the case on the grounds of sovereign immunity. Lewis Tein ultimately petitioned the U.S. Supreme Court but was denied review.  The tribe moved for fees in the state circuit court, but was denied based on the court's finding that it had made the settlement offer in bad faith.

In its opinion, the Third District also said that the trial court erred in finding the timing of the tribe's offer signaled bad faith.  It noted that the relevant law anticipates offers being made well after the inception of a case, specifying that potential awards should be for fees "incurred from the date the offer was served."  The judges also noted that the offers were made within time restrictions contained in the law and after a major event in the case.

"The tribe may well have left the oral argument believing the appellate court was persuaded by its arguments.  While we do not comment on the reliability of a prediction of the outcome of an appeal based on the discussion at oral argument, these circumstances do not support a finding that the timing of the offers reflected bad faith," the panel said.  The panel remanded the case to the trial court to determine the fees.

Attorney Curtis B. Miner of Colson Hicks Eidson PA, who is representing Lewis, Tein and their firm, lamented the decision Thursday, given the tribe's past conduct toward his clients, which resulted in millions of dollars in sanctions against the tribe and several of its attorneys.  "In its original opinion the Third District Court of Appeal stated that Lewis and Tein had to 'suffer from the squeeze' of the doctrine of tribal sovereign immunity, which left them with no recourse for the tribe's actions.  It is disappointing that, after all the Miccosukee Tribe has put Lewis and Tein through, that it would seek to have them suffer further through the imposition of attorney's fees," he told Law360.