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Archive: 2020

Third Circuit Urged to Revive Pelvic Mesh Fee Dispute Case

June 26, 2020

A recent Law 360 story by Kevin Penton, “3rd Circuit Urged to Revive Pelvic Mesh Atty Fee Suit” reports that the Third Circuit should correct a mistake by a New Jersey federal court that allowed Texas law to be used to bless the collection of excessive attorney fees in pelvic mesh litigation against Johnson & Johnson and its Ethicon unit, two women have asserted.  According to a brief, the appellate court should recognize that if the underlying cases were filed in New Jersey, the attorneys should not be allowed to turn around and use Texas law to administer the settlements just so they could collect a higher percentage of the payouts, plaintiffs Debbie Gore and Doris Lance-Smith said.

"This manipulation of the process cannot be allowed by this court, as it would set a dangerous precedent that would allow contingency fee attorneys to file cases in New Jersey, then retreat to other jurisdictions in order to have the settlements 'administered' and 'approved' so that they can circumvent the New Jersey court rules and charge the clients excessive fees and expenses," the brief reads.  U.S. District Judge Madeline Cox Arleo in March nixed a proposed class action against Potts Law Firm, Nagel Rice LLP and other firms, saying Texas law governed the claims and permitted the fees.

The judge noted that "the complex settlement process, which plaintiffs consented to after ample opportunity for objection, was reached by negotiations between Ethicon and Texas law firms and was administered by the Texas state court and a Texas special master."  "Indeed, no New Jersey law firms or lawyers were even listed as receiving contingency-based attorneys' fees as part of plaintiffs' settlements," the judge said.  "As such, the state with the most significant relationship to the substantive claims at issue is Texas."

Gore, a Texas resident, and Lance-Smith, an Alabama resident, both retained Texas firms to pursue claims that they suffered injuries from allegedly defective pelvic mesh products, according to court documents.  While Gore and Lance-Smith each filed a master short-form complaint in New Jersey state court in 2014 as part of the litigation, Judge Arleo noted in March that "no litigation activities occurred" in the Garden State beyond those filings.

Fee arrangements in the case allowed the women's lawyers to receive 40% of their settlements, as Texas law has no particular cap on contingent fees, according to court documents.  Under a relevant New Jersey rule, an attorney can collect a fee of 33.33% of the first $750,000 recovered and then smaller percentages for subsequent amounts.  Those fees must be based on the "net sum recovered" after deducting expenses.

Study: Speed Paying Legal Bills Matters Most to Law Firms During Pandemic

June 25, 2020

A recent Law 360 story by Aebra Coe, “Clients’ Speed Paying Bills Could Make or Break Law Firms” reports that a report out shows law firms have fared "surprisingly well" financially during the coronavirus pandemic so far, but experts say there is still a danger that some firms could run out of cash because of difficulty collecting payments from struggling clients.

Most law firms do not have deep cash reserves and rely on monthly collections from client payments to continue operating.  With the possibility those payments could dry up due to clients' lack of ability or willingness to pay, liquidity is a major concern for some law firms right now, according to Michael Blanchard, managing director of the Law Firm Advisory Team at Aon.  "A lot of firms now are starting to realize that productivity may not be the issue but that liquidity from clients paying in a timely fashion is a bigger challenge to a lot of firms," Blanchard said.

According to the report released by Wells Fargo Private Bank Legal Specialty Group, "the legal industry has fared surprisingly well" so far financially during the coronavirus pandemic when compared to other industries, with demand for the surveyed law firms' services down just 1.4% from the start of the year through June 1 compared to the same five-month period last year.

But that modest decline in demand is skewed by a very strong start to the year, with steep declines in demand in April and May, according to Joe Mendola, senior director of sales for the bank's legal specialty group.  That could result in corresponding declines in the payments law firms receive from clients over the next three to four months since there is a lag between when firms perform work and when they are paid, he said.  Demand appears to have "bottomed out" in May, which would likely translate to the largest dip in cash in hand from payments by around August, Mendola said.

In addition to the problem of fewer bills owed in the second half of the year because of declines in demand during April and May, law firms could also face trouble collecting in a timely fashion and being paid in full as clients themselves struggle financially and seek steep discounts, which could lead to cash-flow difficulties for law firms.  "Certainly, through the first five months of 2020, the legal industry has fared better than most industries. But I think the more challenging months will be ahead of us," Mendola said.

The Wells Fargo survey found that while demand was down during the first five months of the year, the amount of money in the pipeline owed to firms, called inventory, was actually up by 7%, suggesting that collections are lagging, Mendola said.  Additionally, 54% of the firms surveyed said client requests for discounts increased in May over the previous month, and 52% said they saw more payment extension requests from clients in May.

"I think the key to 2020's final results [for law firm financials] will be how collections play out," Mendola said.  While firms have taken a hit and likely will continue to when it comes to collecting bills, the damage has not been as substantial as the industry first predicted, according to Gretta Rusanow, managing director at Citi Private Bank's Law Firm Group.

Surveys her bank conducted found that at the start of April, firms anticipated that they would see a 15% drop in demand, a 15% drop in revenue and an 11% lengthening in the collections cycle.  But the actual numbers for April and May, according to Rusanow, ended up showing an average decline in demand of 6.2%, a decline in revenue of 1.3% and a slowdown in collection times of 3.4%.

"The bottom line is: Going into this there was very much a concern that not only would activity levels drop, but it would be hard to collect from clients, and in fact what's happened is it hasn't been as bad as anticipated at the industry level," Rusanow said.  But Rusanow and Mendola both noted that there was significant dispersion in the industry during the first few months of the year, with some firms performing well and others performing poorly, all of which is wrapped up in those averages.

Actions that firms have taken during this time — likely as a result of fear of major drops in revenue and demand — have made a big impact on preserving their financial health, the experts said.  "Probably the thing resounding across the industry in the past few months has been a very much disciplined approach around billing and collections," Rusanow said.

That means firms have buckled down on attorneys getting their time tracked and bills promptly sent out to clients, and many are having conversations with clients about their ability to pay, she said.  Some firms have drawn on their lines of credit for cash flow, according to Mendola.

In addition, GLC Business Services CEO Michael Hayes said that smaller firms have been able to rely on the federal government's Paycheck Protection Program for loans that are either forgivable or are to be paid back at a very low interest rate.  "The Paycheck Protection Program has added liquidity to small firms and their clients," Hayes said.  "It pushes off the potential for danger at least until the end of year."

In addition to turning a closer eye to getting paid for the work they do and finding ways to keep money flowing in, law firms have also cut costs in anticipation of a dip in revenue, according to Aon's Blanchard.  That has meant reduced partner draws, reductions in associate and staff pay, some layoffs, some cuts in real estate expenses as attorneys and staff work from home, and less money spent in areas like travel, training and firm retreats.

"I think firms have started looking at different ways to improve their margins," Blanchard said.  Mendola said the belt-tightening has helped.  His survey found that at the end of May the industry has reported good liquidity with almost 90% of the responding firms showing three months or more coverage of monthly expenses excluding partner draws.  "I think those cost-cutting measures are paying off.  It's better to be prudent and readjust than not be ready," he said.  "Once money is out the door, you're not going to get it back."

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Fox Rothschild LLP
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA

Judge Approves $2.2M Fee Request in Life Insurance Case

June 23, 2020

A recent Law 360 story by Lauraann Wood, “Ill. Judge Oks $2.2M Fee Bid in Life Insurance Billing Case” reports that an Illinois federal judge gave final approval to a class action settlement and a $2.2 million attorney fee award for a group of Accordia Life and Annuity Co. customers who claimed their life insurance policies unlawfully lapsed during a system transition.  U.S. District Judge Colin Bruce said both the monetary and injunctive relief outlined in the deal between Accordia, its electronic payment collector and nearly 500,000 policyholders are fair and reasonable outcomes for the lawsuit that four policyholders launched in 2017.

The policyholders claimed their guarantees were cut on purpose when Accordia and its electronic payment collector, Alliance One Services Inc., allowed life insurance policies previously owned and guaranteed for life by Athene Annuity & Life Co. to either lapse or be canceled by not automatically debiting those customers' monthly premiums and applying them to their accounts.

Judge Bruce also said class counsel's request for $2.2 million in attorney fees shakes out to compensate the policyholders' attorneys for about 2,261 hours of work at $495 an hour, which "is a reasonable blended rate for counsel of this substantial experience engaged in complex civil litigation of a national scope in the Central District of Illinois."  The settlement, which Judge Bruce initially approved in June 2019, faced challenges from five class members who objected to either the nature of the settlement, its monetary relief or class counsel's fee request.

The judge approved the deal over the challenges, saying the settlement and its monetary relief aren't perfect, but "a settlement is a compromise, and, again, the court believes plaintiffs have attempted to achieve the best possible relief for the class when weighed against the risks of trial or summary judgment."

SCOTUS Stays Out of Fee Dispute in Humana ERISA Suit

June 22, 2020

A recent Law 360 story by Adam Lidgett, “High Court Stays Out of Fee Fight in Humana ERISA Suit” reports that the U.S. Supreme Court said it won't review the Fifth Circuit's finding that health insurer Humana doesn't have to foot a patient's six-figure attorney fees tab incurred in a suit over eating disorder treatment coverage.  The high court denied a petition from a plan beneficiary only referred to as Ariana M. that had asked the justices to review an appellate ruling that she wasn't entitled to attorney fees after she ultimately lost her attempt to get full coverage for a stay at a Utah treatment center.

A Texas federal court initially ruled in favor of Humana in the Employee Retirement Income Security Act case, and a Fifth Circuit panel later affirmed that decision.  Then in March 2018, a majority of the full Fifth Circuit breathed new life into the case when it adopted a lower standard for reviewing decisions by benefits plan administrators to deny coverage to workers.

Specifically, eight of 14 judges said in that 2018 decision that courts should apply de novo review — analyze a denial of benefits anew — unless the plan's documents explicitly give its administrator sole discretion to consider claims.  They overturned the court's 1991 Pierre v. Connecticut General Life Insurance Co. ruling, which held that de novo review applies to appeals challenging an administrator's interpretation of plan language but only lets courts analyze an administrator's interpretations of facts for abuse of discretion.

But even after Ariana M.'s case was kicked back down, Humana won summary judgment when the district court again said the insurer's denial was correct.  After she lost her bid to get about $140,000 in attorney fees, she again appealed to the Fifth Circuit.  The appellate court affirmed the second summary judgment ruling in Humana's favor, and also affirmed the denial of Ariana M.'s attorney fees bid.

She asked the high court for review earlier this year, arguing she could collect attorney fees under ERISA.  Ariana M.'s petition said the Supreme Court has already found that "an applicant need not be a 'prevailing party'" to be able to collect attorney fees under the applicable provision of ERISA.  She said she "need only achieve 'some success on the merits'" to be eligible for such fees.