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Archive: 2021

Billing Record Proves Defense Fees as Sanctions in Bad Faith Litigation

January 23, 2021

A recent Texas Lawyer story by Angela Morris, “$1.8M in Attorney Fees Awarded to Vinson & Elkins, Norton Rose Fulbright Clients,” reports that a plastic surgeon who has litigated a dispute for 14 years with a Houston hospital and medical school must pay over $1.81 million of their lawyers’ fees for sanctions for filing frivolous litigation.  The large fee award will go to lawyers at Vinson & Elkins and Norton Rose Fulbright, who since 2006 have defended Texas Children’s Hospital and Baylor College of Medicine against claims by Dr. Rahul Nath, in seemingly never-ending litigation that has twice landed on the Texas Supreme Court’s doorsteps.

During multiple appeals, the defense lawyers have succeeded in upholding the hefty sanctions, levied because the surgeon filed suit for an improper purpose and in bad faith.  Now, the Fourteenth Court of Appeals again affirmed the sanctions award: $644,500 for Baylor and for Texas Children’s Hospital, $726,000 in trial fees and nearly $439,500 in appellate fees.

The hospital’s attorneys in the trial court were Vinson & Elkins partners Pat Mizell and Stacey Vu and associate Brooke Noble, and the appellate lawyer was counsel Cathy Smith.  The medical school’s trial lawyers were Norton Rose Fulbright partners Shauna Clark and Jamila Mensah, and its appellate lawyer was of counsel Joy Soloway.

The Fourteenth Court opinion explained that Nath used to work for Baylor and he was affiliated with Texas Children’s Hospital. The working relationship started deteriorating in 2003 because colleagues said Nath billed too much, did unnecessary procedures and was unprofessional.

He sued in 2006 for defamation and tortious interference with business relationships. In addition to Baylor and Texas Children’s Hospital, another defendant was a plastic surgeon who had been Nath’s supervisor at work. Later, Nath abandoned those claims and filed a new one for intentional infliction of emotional distress.

But the trial court granted the defendants a summary judgment win. Later, the judge granted sanctions against Nath for filing the case with an improper purpose and bad faith, without having facts to back the claims. Nath’s sanctions related to his pleadings against his former supervisor.

The sanctions award has been tied up in appeals ever since it came down. Two times, his arguments went all the way to the Texas Supreme Court. First in 2014, the high court found it was correct to sanction Nath for using litigation to uncover damaging personal information about his supervisor and put it into the public domain, just because he wanted for force a favorable settlement. But the justices still sent the case back to the trial court to determine if the hospital and medical school’s litigation tactics had caused higher fees.

The trial court later ruled the defendants hadn’t done anything to bump up expenses.

Nath appealed again. In 2019, the Supreme Court determined that even when a party must sanction for frivolous litigation, a trial court needs to have detailed evidence so that it can rule on how much of the fee was reasonable. The case again went back down so the defendants could prove up their fees with more evidence.

The hospital and medical school filed new fee applications and attached 350 pages of billing records to back up the amounts.

Again appealed by Nath, the 14th Court found the hospital and medical school’s evidence of fees was good enough: the billing records had dates, times, descriptions and amounts for lawyers who who worked on the case.

The appellate court did change one thing. As for future appellate fees, the hospital had evidence that based on the amount of time that various levels of Vinson & Elkins lawyers would spend, each billing between $420 and $850 per hour, the fees would come to $439,425. For some reason the trial court awarded $489,800.

The Fourteenth Court determined the additional $50,375 wasn’t backed by evidence, and sent the case back to the trial court with a suggestion to cut that amount.

Polsinelli Sued Over Billing Issues

January 22, 2021

A recent Law 360 story by Craig Clough, “Polsinelli Says Clients’ ‘Slacking Off’ Claims are “Meritless”, reports that Polsinelli PC urged a Pennsylvania federal judge Friday to toss a lawsuit accusing the firm of overcharging and underperforming while representing a pharmacy and its former CEO in an investigation by the U.S. Securities and Exchange Commission, saying claims the firm "slack[ed] off" are not plausibly alleged.

Philidor Rx Services LLC and former CEO Andrew Davenport said in the suit that Polsinelli shifted much of its legal work to another firm and added unnecessary third-party legal fees, but those arguments don't belong in a breach of contract claim, Polsinelli said.

"Plaintiffs do not allege that Polsinelli breached any specific provision of the engagement letters but instead allege that it negligently performed its obligations such that Philidor allegedly paid more than it should have," Polsinelli said. "That is a negligence claim. And as explained below, plaintiffs' negligence claim fails for multiple reasons."

Philidor and Davenport alleged in their November lawsuit that Polsinelli transferred much of its legal work to another firm working on their case, WilmerHale, which charged by the hour and added unnecessary third-party fees. This way, Polsinelli received the same $14 million capped flat fee, and WilmerHale billed more hours than anticipated, the complaint said.

Davenport was convicted in 2018 for his involvement in a $9.7 million kickback scheme after the SEC investigated Philidor's relationship with Valeant Pharmaceuticals International Inc.

Philidor hired Polsinelli and former partner Jonathan N. Rosen in 2016 when the SEC investigation was first launched. Gary Tanner, a former Valeant executive who was a co-defendant in the investigation and trial, hired WilmerHale. Tanner and Davenport agreed to have a joint defense with WilmerHale and Polsinelli attorneys, with Philidor agreeing to pay the flat fee for Polsinelli and the hourly fees for WilmerHale.

The investigation eventually led the government to charge Davenport and Tanner with honest services wire fraud and conspiracy to commit money laundering in 2017. Philidor claims that once Polsinelli realized the case would likely face trial, the capped flat fee agreement was looking "less and less lucrative" to the firm.

Polsinelli began pushing work to WilmerHale and adding third-party legal fees for work the plaintiffs say the firm should have been able to do in-house and should've been included in the $14 million they paid, such as hiring an outside counsel for Davenport's defense, the complaint alleges.

Philidor was charged over $5 million in expert fees instead of the $2 million initially agreed to and more than $13 million in counsel fees instead of the $2 million agreed to, among other millions of dollars in third-party fees, the complaint alleges.

The company is accusing Polsinelli of one count of breach of contract, one count of unjust enrichment and a third count of mismanagement of litigation. Philidor is asking for damages in the form of the costs of suit and the counsel fees they were charged because the firm's effort "represented a slacking off and willful rendering of imperfect performance."

Polsinelli said all the claims are "meritless," including the negligence claim, which is time-barred and fails even if it wasn't. Under Pennsylvania law, there is a two-year statute of limitations for tort claims, and because the trial wrapped in May 2018, all of the alleged breaches occurred before then and the claim is untimely, Polsinelli said.

Under Pennsylvania law, the plaintiffs must also allege Polsinelli failed to "exercise ordinary skill and knowledge" to properly plead the negligence claim, but the claim does not make that allegation, Polsinelli said.

The firm also argued, among other things, that the unjust enrichment claim should be tossed because it "is a quasi-contractual doctrine that does not apply in cases where the parties have a written or express contract."

UK Ruling Bolsters Contingency Fee Arrangements

January 21, 2021

A recent Law 360 story by Richard Crump, “Contingency Fee Ruling Paves Way For Hybrid Arrangements,” reports that a recent appellate ruling has made damages-based agreements in the U.K. more attractive and could herald a new era for litigation funding by permitting a wide array of hybrid arrangements that lawyers say would make it easier to take advantage of the contingency fee structure.

In a Jan. 15 ruling, three Court of Appeal judges unanimously found that a damages-based agreement — a form of retainer in which a lawyer working on the case can charge a share of the recoveries if the claim succeeds — can be enforced if it is terminated by the client.

"There can be little doubt that this is a seminal moment in litigation funding and that the road has now been paved for DBAs to be used more widely in appropriate cases," said Matthew Waszak, a barrister at Temple Garden Chambers. "Undoubtedly, there is likely to be an increased appetite to consider and use DBAs in appropriate cases."

Judges Peter Coulson, Kim Lewison and Guy Newey dismissed an attempt by a Lexlaw Ltd. client to withhold payment from the London law firm for its work on a misselling claim against Royal Bank of Scotland by seeking to terminate the DBA before the case concluded.

In doing so, the Court of Appeal removed a long-standing source of uncertainty that had prevented the more widespread use of DBAs since they were introduced in 2013 as part of a sweeping overhaul of the funding arrangements for civil litigation.

"One key obstacle preventing their wider use has been the fear among the legal profession that if a client terminates a retainer, the lawyer will end up being paid nothing for what might have been months or even years of work," Waszak said. "The Court of Appeal has now put that concern to bed."

The uncertainty in relation to termination was one of the reasons the Bar Council the and Law Society have yet to offer a model form for DBAs. The Bar Council, which intervened in the appeal, said it expects to publish further guidance on DBAs shortly.

DBAs were created to let would-be litigants hire counsel who would share the risks of litigation in return for a percentage of the proceeds. But flaws in the drafting of the regulations created confusion over whether a DBA could allow for other kinds of fees if terminated early.

Lexlaw filed its suit against former client Shaista Zuberi in February 2016 after she failed to pay a £125,123 invoice the firm issued in July 2015 when she reached a settlement with Royal Bank of Scotland to end her claim over an interest rate hedging product sold at the height of the financial crisis.

On appeal, Zuberi argued that the DBA, which gave Lexlaw 12% of any sum recovered plus expenses, was unenforceable because it violated DBA regulations by including an obligation to pay legal costs and expenses to Lexlaw on its hourly rates up to the date of termination.

The Court of Appeal held that the inclusion of termination provisions is not a breach of the regulations — which Judge Coulson said were "designed to encourage the use of DBAs, not make them commercial suicide for the lawyer" — but arrived at the conclusion by different routes.

In a majority decision, Judges Lewison and Couslon adopted a narrow interpretation of the meaning of a DBA, so that other elements of the retainer, such as termination provisions or the responsibility for a law firm's expenses, are not connected to the sharing of recoveries and fall outside the regulation's scope.

Judge Lewison recognized that this conclusion meant that the current regulations do not deal with a lawyer's fees in the event the client takes a case to trial and loses. That, the judge said, is a matter that could be legislated separately so that a DBA could prevent or limit a lawyer from charging fees if the claim were lost.

The regulations, which Judge Coulson dryly observed that "nobody can pretend ... represent the draftsman's finest hour," appeared to preclude so-called hybrid DBAs, which combine a share of recovered proceeds with another form of payment, such as hourly rates.

4 New Square's George McDonald said this narrow interpretation has "startling consequences," most notably that opens the possibility of hybrid fee arrangements.

"This means that a solicitor can still charge a client time-based charges even if the claim is unsuccessful and in addition to the DBA payment," McDonald said. "This is contrary to the widely held beliefs that DBAs were pure contingency agreements which fell under the 'no win, no fee' banner."

While the ruling is significant and will go a long way to putting DBAs back on the table, Signature Litigation LLP's Johnny Shearman said the regulations would benefit from revisions proposed in 2019 that have not yet been adopted.

"Definitive wording on the use of hybrid DBAs would still be welcomed along with a number of other revisions," Shearman said.

Among other things, the proposed switch from paying costs out of the DBA fee rather than on top of it to a success fee model would be helpful, he said.

"Further reforms are needed to the regulations before we get to the watershed moment that this judgment is being referred to as," Shearman said.

The case is Lexlaw Ltd. v. Zuberi, case number A3/2020/1270, in the Court of Appeal of England and Wales.

Judge Shaves Fee Request After Not Proving Rates

January 20, 2021

A recent NLJ story by C. Ryan Barber, “Ballard Spahr Wins $122K in Legal Fees in FOIA Suit Over PPP Loan Secrecy, reports that Ballard Spahr will receive $122,347 in legal fees for its work in an open records lawsuit that forced the U.S. government to release detailed information about who received hundreds of millions of dollars through a COVID-19 emergency loan program.  The law firm asked for nearly $154,842 in fees and costs, but U.S. District Judge James Boasberg of the District of Columbia said Ballard Spahr failed to support its billing rates and hours worked, and subsequently shaved off nearly $32,000.

Ballard Spahr, representing The Washington Post and other media outlets against the Small Business Administration and U.S. Treasury Department, sought to use the higher rates available under the Legal Services Index Matrix.  The federal government countered that Boasberg should use the lower rates detailed in a matrix used by lawyers at the U.S. Attorney’s Office for the District of Columbia.

Boasberg ultimately found Ballard Spahr failed to show how its preferred rates were in-line with rates used within the legal community for similar FOIA litigation, and granted the government’s request.  “They offer no evidence whatsoever—such as surveys or billing-rate tables—of rates charged and received by lawyers of comparable skill and experience in the D.C. market generally, let alone when handling FOIA cases,” Boasberg wrote.  “Indeed, their declarations do not even assert that their requested figures are in line with prevailing community rates for similar litigation.”

Boasberg shaved off another $6,710 due to an error in the hours billed, ultimately settling on $122,347 in legal fees and costs.  According to the USAO matrix listed in the ruling, Ballard Spahr partner Charles Tobin’s hourly rate came to $665. Associates Maxwell Mishkin and Kristel Tupja’s rates came to $388 and $369 an hour, respectively.

Tobin said the award highlights the public importance of the case in ensuring there’s accountability of a program that handed out nearly half-a-billion dollars.  “Overall, the fee award is higher than most, and fully justified in this case,” Tobin said.  ”We are hopeful it serves as a powerful deterrent for government agencies that aren’t transparent enough on issues like this one.”

$11M Fee Request in Home Health Care FCA Case

January 19, 2021

A recent Law 360 story by Sarah Jarvis, “Attys Want $11M After Record Home Health Care FCA Deal,” reports that a whistleblower is seeking more than $11 million in attorney fees and costs for a $57 million deal in his suit alleging the Visiting Nurse Service of New York defrauded the government, saying the figure is reasonable for the scope and outcome of the case.

Former VNSNY executive Edward Lacey asked a New York federal court for an order requiring the agency to pay him more than $11,147,000 in fees, costs and expenses incurred in Constantine Cannon LLP's successful litigation of the case, which resulted in a record deal last June to resolve Lacey's False Claims Act suit.  Lacey had claimed that VNSNY, the largest not-for-profit home health care agency in the U.S., billed for services it never provided and disregarded patients' formal treatment plans.

"Relator is seeking payment for a total attorneys' fee lodestar of $10,110,337.50," Lacey said. "This amount is reasonable by any objective measure based on [Constantine]'s hourly rates and the hours the firm worked to secure this historic result."  Lacey said the firm spent 17,374 hours in attorney and legal support time on the case and used the smallest team possible to avoid duplicating resources, noting that only two lawyers worked on the case for its first 18 months. After that, another lawyer joined in October 2015 and another in January 2016, but that principal team didn't expand again for almost two years to handle an accelerated schedule, according to Lacey's memorandum.

In support of his request, Lacey also noted the quality of the result, saying the $57 million settlement is one of the largest home health care fraud settlements ever and the only one to successfully challenge the failure to comply with patient plans of care.  Lacey said the settlement "hopefully remedies — or at least turns a regulatory spotlight on — a practice that adversely affects millions of sick and elderly patients across the country."

June's settlement ended Lacey's claims that VNSNY billed Medicare and Medicaid for therapy and services that doctors never provided and maintained an "accept all referrals" policy regardless of capacity constraints. VNSNY did not admit liability as part of the deal and maintains that it didn't bill for visits doctors never provided.

As part of the settlement, the federal government was stipulated to receive $50.1 million of the settlement, with New York state getting about $6.8 million. Lacey was then awarded a 29% share of the total $57 million award, his counsel said, and Lacey noted in his memo that this amount was the outer limit of what the government was allowed to award.