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Category: Fee Dispute

Texas Energy Companies Can’t Block Rival’s Attorney Fee Win

October 6, 2017

A recent Law 360 story by Jess Krochtengel, “Texas Energy Cos. Can’t Block Rival’s Atty Fee Win,” reports that a Texas appeals court affirmed a $280,000 attorneys’ fee award to Crawford Hughes Operating Co., rejecting arguments from a group of energy companies that formerly worked with Crawford that a trial court wrongly granted a new trial on the fee issue.

A panel of the Fourteenth Court of Appeals held Crawford’s pleadings support a recovery of defensive attorneys’ fees.  The court also determined it lacked jurisdiction to consider arguments from Anglo-Dutch Energy LLC, Explorer Investments LLC and Saxton River Corp. that a trial court had wrongly allowed Crawford a new trial on attorneys’ fees.

The trial court had initially ruled Crawford could not recover any fees despite winning a jury trial in a dispute between the energy companies over bills for operating expenses incurred under multiple joint operating agreements.  But it granted Crawford a partial new trial limited to the fee issue and ultimately awarded the company a total of about $280,000 in fees.

The Anglo-Dutch group had argued the new trial was improperly granted because there was no good cause to allow Crawford an opportunity to fix a “strategic mistake” in how it had initially requested attorneys’ fees.  But the appellate panel said its authority to review new trial orders is limited, and that the circumstances in the Crawford trial don’t merit appellate review.

“The working interest appellants’ arguments on appeal do not invoke any of the scenarios in which appellate review is permitted,” the court said.  “Because this challenge does not fall within one of the narrow exceptions identified by the Supreme Court of Texas, we lack appellate jurisdiction to entertain the working interest appellants’ challenge to the new trial orders.”

The dispute over operating expenses was tried in Harris County District Court in November and December 2014 and a jury awarded the Crawford entities about $44,000 in damages and $233,000 in legal fees.  The trial judge initially struck Crawford’s fee award, finding the group did not properly attribute the fees to reflect the different entities, claims and counterclaims involved in the case.  But Crawford asked the court to modify the judgment and requested a partial new trial limited to the amount of fees it could recover.  The trial court agreed, prompting an earlier appeal from the Anglo-Dutch parties.

In December 2015, the Anglo-Dutch group asked the Texas Supreme Court to block Crawford from getting a new trial on the attorneys’ fee issue.  They argued Crawford was trying to get a “mulligan” after making a strategic mistake in how it marshalled and presented its evidence.

When the case returned to the trial court, the parties stipulated the amount of fees Crawford Hughes Operating had incurred.  A modified final judgment issued in May 2016 awarded Crawford Hughes Operating about $42,000 in damages against Anglo-Dutch and $2,600 in damages against Explorer Investments and Saxton River.

The modified judgment awards Crawford Hughes Operating about $240,000 against Anglo-Dutch and $7,400 against Explorer and Saxton River for attorneys’ fees incurred in defending the case and another $31,000 in fees against Anglo-Dutch and $2,000 in fees against Explorer and Saxton River for what it incurred litigating its counterclaim.

The case is Anglo-Dutch Energy LLC et al. v. Crawford Hughes Operating Co. et al., case number 14-16-00635-CV, in the Texas Court of Appeals for the Fourteenth District.

Investor Seeks Attorney Fees in Compensation Savings Matter

September 26, 2017

A recent Law 360 story by Vince Sullivan, “Puma Investor Seeks Fees for $20M in Director-Pay Savings,” reports that a shareholder of Puma Biotechnology Inc. filed suit in Delaware seeking the payment of attorneys’ fees and expenses for his efforts in pursuing changes to the compensation packages of non-employee directors, which he says ultimately saved the company more than $20 million.  In a complaint, shareholder Paul Alan Leafstedt said Puma made changes to its director compensation plans that saved the company millions after he sent a demand letter to the board in February, but the sides could not work out a deal on compensation for attorneys he brought on in the effort.

As a result of Leafstedt’s demand letter, the company engaged an independent compensation consultant and amended its director packages to reduce awards to non-employee directors significantly.  The demand letter was spurred by the board awarding itself what Leafstedt described as “grossly excessive levels” of compensation that were allegedly nine times greater than what was appropriate.

Puma also capped director stock award and allowed shareholders to provide input on compensation procedures at annual meetings.  The company also added information about the program into its proxy statement, which were reviewed by Leafstedt’s attorneys before filing, and instituted additional corporate governance reforms relating to pay practices.

“Plaintiff’s efforts directly conferred a substantial and quantifiable benefit to Puma and its stockholders — with the compensation reductions and limits alone amounting to a savings of up to $20 million over the next five years,” the complaint said.  Leafstedt cites Delaware law that allows for fee awards where a corporate benefit results from a meritorious demand on the board in asking for attorneys’ fee and expenses related to the effort.

The compensation packages for non-employee directors of the company resulted in average annual awards in the amount of more than $1.4 million each, with each director receiving a $50,000 cash retainer and options to purchase 10,000 shares of Puma stock.  Directors who sat on a committee of the board were granted an additional option for 10,000 shares, while committee chairs could buy up to 20,000 shares.  Each newly appointed director would also receive a one-time option to buy 30,000 shares.

“The demand letter asserted that the compensation program constituted a waste of corporate assets, a breach of fiduciary duty and an unjust enrichment for the non-employee directors who agreed to accept the excessive levels of compensation they granted themselves,” the complaint said.

Puma made changes to the program that cap the annual compensation for non-employee directors at $1 million and shifted the stock option award metrics from a specific number of shares to a dollar amount.  So directors still receive a $50,000 cash retainer each year, but the annual stock option award is capped at $300,000, and committee service retainers have been switched to cash amounts ranging from $20,000 to $5,000.  Newly appointed directors will have the option to purchase stock up to an amount of $700,000.

These changes resulted from negotiations between the company and Leafstedt’s attorneys and were accomplished in May without the need to file a lawsuit.  Leafstedt filed the current complaint because the parties could not come to an agreement on reasonable attorneys’ fees for achieving the benefit that will save Puma more than $20 million over the next five years.

“Plaintiff’s counsel has expended considerable time and expense, completely at risk of loss and without remuneration, in pursuit of making the demand and subsequent negotiations, the resolution of which conferred substantial benefits to Puma and its stockholders,” the complaint said.  Leafstedt is asking for an equitable apportionment of attorneys’ fees and payment of legal expenses incurred in the pursuit of the demand and the negotiations, as well as the costs of bringing the current action.

The case is Leafstedt v. Puma Biotechnology Inc., case number 2017-0659, in the Court of Chancery for the State of Delaware.

Texas Law Firms Sue to Keep Contingency Fees

September 25, 2017

A recent Texas Lawyer story by Brenda Sapino Jeffreys, “Two Texas Firms Sue to Keep Contingency Fees,reports that two Texas firms are seeking a declaratory judgment that they are entitled to keep a contingency fee from a Travis County lawsuit they settled in July.  In separate petitions filed on Sept. 18 in Harris County, Chris L. Gilbert Law of Dallas, which does business as Gilbert PC, and Prebeg, Faucett & Abbott of Houston, allege that Austin-based The Yoga Lounge (TYL), which does business as Vosea Advisors, and five unnamed individuals tortiously interfered with a legal contract they had with some clients, and aided and abetted and/or conspired to tortiously interfere with the contract.

Gilbert and Prebeg Faucett each seek a declaratory judgment that TYL is not a party to their agreement with the clients, they owe no duties to TYL, TYL is entitled to no part of the contingency fee, the agreement is valid and enforceable, and they satisfied their contractual obligations to their clients.  Each firm seeks up to $500,000 in damages, including actual and punitive damages, from the defendants.

As alleged in Chris L Gilbert Law PC v. The Yoga Lounge LLC, two Texas companies and two individuals at the companies hired Gilbert on March 19, 2015, with a contingency fee agreement, to investigate a potential lawsuit and file it if the firm determined there was a basis to do so.  On July 31, 2015, Gilbert filed a suit in Travis County on behalf of the corporate clients.

Gilbert alleges in the petition that on June 6, 2016, TYL bought a minority interest in the corporate clients "but did not assume any rights in, or control over, the clients' lawsuit that was the subject of the agreement."

Gilbert alleges that on Feb. 22, the client retained Prebeg Faucett for the underlying suit and entered into an amended joint representation agreement that provided that once the suit was resolved, both firms would be entitled to a contingency fee.  The firm alleges TYL had knowledge of the agreement but was not a party to it.

Gilbert alleges the underlying suit was settled on a confidential basis on July 14, 2017, and both firms collected a confidential contingency fee.  On Sept. 15, Gilbert alleges in the petition, a lawyer purporting to represent TYL sent a demand letter to both firms and the clients, demanding, among many things, that the contingency fee be placed in a constructive trust.  Gilbert alleges the demand "threatens to somehow mollify the months-old settlement."

Gilbert alleges that other individuals acting on behalf of TYL have conspired to tortiously interfere with the agreement and the firms' fee.  Prebeg Faucett makes similar allegations in Prebeg, Faucett & Abbott v. The Yoga Lounge.

John Browning, an attorney at Passman & Jones in Dallas who represents Gilbert, said his client "absolutely" contends the firms are entitled to the contingency fee.  "Mr. Gilbert and his firm look forward to vigorously defending their hard-won reputations," Browning said.

Fee Allocation Dispute in NCAA Concussion Case

September 21, 2017

A recent American Lawyer story by Roy Strom, “High-Powered Plaintiff’s Lawyers Battle Over Fees in NCAA Concussion Case,” reports that a group of prominent plaintiff’s lawyers are battling for their cut of potentially $21 million in legal fees related to a pending concussion settlement with the National Collegiate Athletic Association, one of the many litigation battles that the governing body for collegiate sports now faces.  The dispute between Chicago-based Jay Edelson and Steve Berman, a co-founder of Seattle-based plaintiffs powerhouse Hagens Berman Sobol Shapiro, began as a strategy disagreement as late as 2014.

That’s when an Edelson client objected to a class action settlement led by Berman’s firm and others that would have the NCAA create a $70 million medical monitoring program for current and former college athletes, as well as put $5 million toward concussion research.  Edelson’s objection sought to preserve personal injury claims on behalf of former student athletes in a variety of sports, including football.

As part of the settlement, the lead counsel at Hagens Berman and Joseph Siprut, the founder and managing partner of Chicago’s Siprut PC requested $15 million in fees for themselves and about 10 other firms.  The fee request was made in January with the firms stating that they had worked 18,000 hours on the case and reached 4.2 million people to alert them to a preliminary approval of a settlement in July 2016.

Edelson’s firm objected to that amount last week in a court filing that takes aim at various aspects of the lead counsels’ work and argues for no more than $8 million in fees to be awarded to Hagens Berman and Siprut.  The Edelson objection states that the requested fees, which represent 21 percent of the amount of the settlement, are too high.  It also argues the lead counsels’ request takes credit for $50 million in settlement value that Edelson claims his objector added when a judge agreed to knock out a “reversion” provision that would have returned to the NCAA unused money in the concussion monitoring program.

Berman’s firm, which is disputing Edelson’s request for $6 million in fees, argues the reversion provision would not have added anything close to $50 million in value to the settlement and that U.S. District Judge John Zee decided to knock it out of the deal for reasons that had little to do with Edelson’s objections.

Edelson’s firm had originally sparred with the lead counsels’ tactics in the case by saying they were not providing monetary benefits for potentially injured college athletes.  Unlike the National Football League’s $1 billion class action settlement with retired players, which continues to have its own unique issues ahead of resolution, the NCAA’s accord does not provide a fund to compensate injured athletes.

Fearing the settlement would bar athletes from pursuing personal injury claims, Edelson objected to create a “carve-out” for those claims.  His firm, working with Sol Weiss of Philadelphia’s Anapol Weiss, is now leading a series of nearly 50 class action suits on behalf of athletes who played the same sport at the same school.  For instance, the widow of a former University of Texas football player is the named plaintiff in a class action on behalf of all Longhorns football players who played between 1952 to 2010.

In a filing last week, Berman’s firm argues that Edelson’s firm should receive fees in the NCAA settlement case that represent a “pro rata portion” of his fees tied to the issue of arguing for a personal-injury carve out in the case.  That amount would be something less than $1.4 million.

Mark Mester, global chair of the consumer class action practice at Latham & Watkins in Chicago, is representing the NCAA in the litigation. The Indianapolis-based organization paid nearly $8.2 million to Latham—and another $5.8 million to Skadden, Arps, Slate, Meagher & Flom—during 2014-15, according to the NCAA’s most recent federal tax filing.

Texas Attorney Sues Former Firm Over His Share of Fees

September 18, 2017

A recent Law 360 story by Michelle Casady, “Texas Atty Sues Firm Over Slice of Possible Million Dollar Pie,reports that a Houston-area lawyer has sued his former firm Walne Law PLLC for allegedly violating a fee agreement and denying his right to a share of fees from an underlying contract dispute that could yield millions of dollars in damages.

Andrew Raish, who now works in the legal department for Texas convenience store chain Buc-ee's, alleges in his Sept. 8 petition in Texas court that when he started at Walne Law in August 2013, he entered into an agreement with principal Tracy Walne where Raish would receive 75 percent of the resulting fees if he did the work for clients and 25 percent of the resulting fees if other lawyers at Walne Law or elsewhere did the work.

In September 2014, Raish allegedly brought Charles Dresser IV and Highmark Production Co. LLC to the firm as clients and performed work for them on oil and gas transactional matters and in a commercial dispute.  On the Dresser commercial case, Raish worked closely with Tracy Walne's son, Kelly Walne, and determined Dresser would be better served by teaming up with a larger law firm, Porter Hedges LLP, the petition says.

Raish left Walne Law in July 2015 but was assured by Tracy Walne that the fee agreement would continue to apply to the Dresser case even after his departure, and Walne's son left the firm a few months later to start his own firm, according to the petition.

“Upon information and belief, Kelly Walne negotiated with Tracy Walne for Walne Law to terminate its representation of Dresser on the Dresser matter so Kelly Walne alone could engage and represent Dresser and attempt to secure the anticipated fee from the Dresser matter for himself alone,” the petition alleges.  “To that end, and unbeknownst to Raish, defendant drafted a termination letter.  The termination letter purports to 'confirm' the termination of Dresser as a client of Walne Law and the understanding that Dresser intends to engage Kelly Walne as separate legal counsel to pursue the Dresser matter.”

Raish alleges that once he found out Kelly Walne was handling the Dresser matter, he contacted Walne Law to confirm it intended to honor the agreement to pay Raish 25 percent of any fee collected on the Dresser matter.  The firm indicated it would not and “did not believe Raish had any interest in the Dresser matter," the petition says.

The case is Raish v. Walne Law PLLC, case number 2017-58913, in the 11th Judicial District Court of Harris County, Texas.