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Category: Fee Dispute

Client Says Law Firm Can’t Collect Attorney Fee ‘Windfall’

March 31, 2020

A recent Law 360 story by Lauraann Wood, “Gaming Co. Says Jackson Lewis Can’t Collect Fee ‘Windfall’,” reports that a now-closed gaming terminal company has said that an Illinois state judge should vacate a $328,000 judgment against it and prevent Jackson Lewis PC from collecting a "windfall" of attorney fees based on a legally unenforceable engagement letter and unsupported charges.

LZ Entertainment LLC said on that the judgment entered against it in an underlying malpractice suit requires it to pay the New York-based firm $134,000 in purportedly unpaid attorney fees and $194,000 in service charges it was never legally entitled to seek or recover.  The entertainment company says the court should vacate the judgment and let it fight the charges, arguing that the order is rooted in a "self-serving" engagement letter it never received and charges the firm can't support with invoice documentation.  LZ Entertainment also claims it didn't know its prior counsel hadn't responded to the underlying summary judgment request that resulted in the judgment's entry.

LZ claims that after Jane McFetridge, now the firm's Chicago office principal, told company manager Stefen Lippitz that Jackson Lewis' work could cost "as much as $80,000," it agreed to let the firm defend it in a June 2014 lawsuit over an employee who worked for a rival.  The company says Jackson Lewis began performing legal work on its behalf that June, but the firm never sent it an engagement letter and didn't send out its first invoice until two months later.

Lippitz received a copy of the engagement letter in December 2014, "well after" the firm's engagement and litigation in the rival's lawsuit had ended, according to the petition.  The firm purportedly sent the letter through physical mail, even though all of the parties' correspondence had been through email, according to the petition.  "Critically and surprisingly," LZ claims, the firm's engagement letter included a provision stating that the firm would assume its terms were acceptable unless the company responded in writing to the contrary.

"Attempting to bind a client to the terms of an engagement letter without the client executing the letter is unusual and problematic, to say the very least," the company said.  LZ also said Jackson Lewis had already billed it for more than $130,000 by the time it received its first invoice in August 2014.  That invoice reflected a purported prior balance of more than $61,000, but "it would make no sense for there to be a prior balance" if that was the firm's first invoice since its June 2014 engagement, LZ said.

Jackson Lewis produced a copy of its July 2014 invoice in February, while responding to an investigation that LZ launched after receiving the firm's citation to discover assets, according to the petition. That invoice reflected a $61,000 balance for attorney fees and disbursements incurred for the month of June 2014, but the firm "could not provide any evidence whatsoever demonstrating that Jackson Lewis ever sent the July 2014 Invoice to LZ," the company claimed.  "Indeed, LZ never received the July 2014 invoice from Jackson Lewis," the company said.

The company said the invoices for its June 2014 and July 2014 fees also "raise more questions about what actual services were performed, as there are multiple entries by the same attorneys for the same days on both invoices."  And because Jackson Lewis never sent LZ its July invoice, the company never got the opportunity to "pump the brakes" on the fees the firm was assessing, the petition argued.

Jackson Lewis sought payment of the fees LZ allegedly owed as a counterclaim in a malpractice suit relating to a revenue share agreement it helped the company enter with its rival, Accel Entertainment Gaming LLC.  The firm didn't attach the July 2014 invoice to a summary judgment bid it renewed on that claim in March 2019, submitting only its August 2014 bill and various other invoices reflecting "service charges," according to the petition.

Law Firms Win Suit Over Pelvic Mesh Attorney Fees

March 27, 2020

A recent Law 360 story by Bill Wichert, “NJ, Texas Law Firms Beat Suit Over Pelvic Mesh Atty Fees,” reports that a New Jersey federal judge nixed a proposed class action against Potts Law Firm, Nagel Rice LLP and other firms over allegedly excessive attorney fees in pelvic mesh litigation against Johnson & Johnson and its Ethicon unit, saying Texas law governed the claims and permitted the fees.  U.S. District Judge Madeline Cox Arleo granted the firms' motions to dismiss an amended suit from plaintiffs Debbie Gore and Doris Lance-Smith over claims their retainer agreements ran afoul of a New Jersey rule capping contingent fees, noting that the fees were paid as part of settlement awards approved by a special master and a state judge in the Lone Star State.

The Garden State rule "does not apply and the fees awarded to defendants were entirely consistent with Texas law," Judge Arleo said in her written opinion.  The fee arrangements allowed the women's lawyers to receive 40% of their settlements, but Texas law has no particular cap on contingent fees, the judge said.  Under the 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, and those fees must be based on the "net sum recovered" after deducting expenses.

Gore and Lance-Smith cited no authority for extending that rule "to litigation settled in a foreign court by out-of-state lawyers representing out-of-state plaintiffs who sustained injuries outside of New Jersey," according to the judge's opinion.  Nagel Rice, which is based in New Jersey, did not receive any of the fees in question, but Potts and other Texas firms did, the opinion said.

Gore, a Texas resident, and Lance-Smith, an Alabama resident, both retained Texas firms to pursue claims they suffered injuries from allegedly defective pelvic mesh products, the opinion said.  Lance-Smith retained Potts in June 2012 to litigate such claims, the opinion said.  The following May, Gore retained a firm then known as Steelman & McAdams PC and partner Annie McAdams to pursue similar claims, the opinion said.

About two months later, Gore agreed to McAdams working and splitting attorney fees with a firm then known as Bailey Perrin Bailey LLP, the opinion said.  In July 2014, Gore and Lance-Smith each filed a master short-form complaint in New Jersey state court "as part of the New Jersey iteration of the mesh litigation," the opinion said.  Nagel Rice and firm partner Andrew L. O'Connor were listed as the women's attorneys, with Potts and firm partner Derek Potts listed as co-counsel, the opinion said.

Those complaints represent the only connection in the current matter to New Jersey, but beyond them being filed, state dockets indicate that "no litigation activities occurred" and that those matters are now closed, Judge Arleo noted.  The settlements and fee awards at issue stem from a master settlement agreement reached in August 2016 between Potts Law Firm, among other firms, and J&J and Ethicon, the judge said.  That deal was administered through a Texas state court case, the judge said.  Judge Arleo pointed to that Texas link in finding that that state's law governed the proposed class action.

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."

Adam M. Slater of Mazie Slater Katz & Freeman LLC, representing Gore and Lance-Smith, on Wednesday said they would appeal the judge's decision.  "When a case is filed in New Jersey, the New Jersey Court Rules apply, including the contingency fee rule.  According to this decision, the New Jersey contingency fee rule can be easily side stepped, allowing personal injury plaintiffs to be charged 40% contingency fees, in an MDL or any other New Jersey case," Slater told Law360.

Tech Firm Slams $24M Fee Request in IP Litigation

March 23, 2020

A recent Law 360 story by Hannah Albarazi, “Emerson Electric Slams BladeRoom’s $24M Atty Fee Bid,” reports that Emerson Electric told a California federal judge that BladeRoom doesn't deserve $24.5 million in attorney fees and costs, arguing that the data center manufacturer has gotten more than enough from a $77.4 million verdict in their favor over Emerson's use of stolen trade secrets to win a lucrative Facebook contract.  Emerson Electric Co. told U.S. District Judge Edward J. Davila via telephonic hearing that BladeRoom Group Ltd. overbilled for its work and shouldn't be granted its bid for $21 million in attorney fees and $3.5 million in costs.

BladeRoom also overredacted its billing statements, which made it impossible for Emerson to see what activity BladeRoom billed for and whether there was duplication of effort by counsel, said Emerson's counsel, Rudolph A. Telscher Jr. of Husch Blackwell LLP.  "Everything is blacked out," Telscher told the court. "The law does not allow redactions at this level."  But BladeRoom's counsel disagreed, arguing that they have worked hard to redact as little as possible.

Jeffrey M. Fisher of Farella Braun & Martel LLP, counsel for BladeRoom, told the judge that Emerson and Facebook's misconduct "overlapped so much" that it made it a challenge to differentiate the litigation, but that BladeRoom is only seeking to recover money for work that contributed to their victory against Emerson, not Facebook.

U.K.-based BladeRoom sued Facebook and Emerson five years ago, accusing the pair of stealing its method for manufacturing and installing prefabricated data centers, which it had pitched separately to Facebook and Emerson in 2011.  After those meetings, BladeRoom claimed the two larger companies began secretly working together to steal BladeRoom's proprietary techniques for the Facebook project.

Facebook settled BladeRoom's claims mid-trial in April 2018 and a month later, a jury found that Emerson owed BladeRoom $30 million for using its stolen trade secrets to land a $200 million contract to build a Facebook data center in Sweden.  Judge Davila ruled last year that Emerson owed BladeRoom $77.4 million comprising $30 million in compensatory damages, $30 million in exemplary damages and $17.4 million in prejudgment interest on the compensatory damages.

Emerson's counsel urged Judge Davila to adopt a special master's recommendations, which identified overbilling by BladeRoom from duplication of attorney effort and inefficient staffing.  The special master found last year that 40 percent of BladeRoom's billings were either improper or problematic, and recommended a 40 percent reduction in BladeRoom's lodestar, or a reduction of about $8.1 million.

Emerson's counsel told the court that the $77.4 million verdict more than makes BladeRoom whole.  Emerson also challenged BladeRoom's bid to recover in-house counsel fees, saying that they merely acted as a liaison and that BladeRoom failed to provide documentation to the contrary.  Emerson further expressed concern that the Facebook settlement may have funded part of BladeRoom's defense, and if so, that should be considered by the court in determining fees and costs.

$245M in Attorney Fees in Pinnacle Hip Implant MDL

March 12, 2020

A recent Law.com story by Amanda Bronstad, “Lawyers Suing Over DePuy’s Pinnacle Hip Implant Set to Receive $245M,” reports that a federal judge has approved an estimated $245 million in fees and costs to lawyers leading the multidistrict litigation over Pinnacle hip implants, of which more than 75% will go to the five firms in charge of allocating the award.  The order by U.S. District Judge Ed Kinkeade of the Northern District of Texas approved a special master’s report last month that recommended a disbursement of $215 million, which is the amount calculated from settlements so far, including $182.5 million in “common benefit” fees to about 40 law firms whose work assisted in 10,000 lawsuits over the Pinnacle.  The amount also includes nearly $7.9 million in expenses and $24.7 million for reimbursements of contributed assessments.

“This was unlike any litigation of my 35 years,” wrote Mark Lanier, whose firm, The Lanier Law Firm, is set to receive $77.2 million in fees after winning billions of dollars in verdicts against DePuy Orthopaedics Inc., a unit of Johnson & Johnson.  “Nine years of litigation; five trials, generally of three months each; over 30 million dollars spent; and a defendant that refused to engage in settlement discussions until the very end.  Many firms abandoned the litigation, as reflected by time entries and failure to pay assessments.  The judge’s distribution tracked carefully the time, money and level of work and commitment of firms.”

Lanier is one of five lawyers on a fee committee tasked with reviewing how much each firm should get.  He is co-lead counsel in the multidistrict litigation with Larry Boyd, of Houston’s Fisher, Boyd, Johnson & Huguenard, which is set to receive $17.2 million in fees.  Another firm, Neblett, Beard & Arsenault of Alexandria, Louisiana, is set to receive $47.9 million in fees.  Partner Richard Arsenault, who is on the plaintiffs executive committee, noted in an email that Kinkeade specifically mentioned in a Sept. 11 order that “the fee committee was composed of the primary hands-on lawyers.”

“Additionally, as a consequence of many firms abandoning the litigation, the fee committee members were required to bear over 90% of the litigation’s costs and contributed over 83% of the common benefit hours,” Arsenault wrote.  Another executive committee member, Jayne Conroy, is from Simmons Hanly Conroy in New York, to which the special master allocated $32.1 million, along with $11.4 million to its predecessor, Hanly Conroy Bierstein Sheridan Fisher & Hayes.  The fifth lawyer on the fee committee, Steve Harrison, is from Harrison Davis Steakley Morrison Jones, of Waco, Texas, which the special master ordered would receive nearly $2.7 million in fees.

In 2014, Johnson & Johnson won the first bellwether trial, but federal juries in Dallas followed with verdicts of $502 million, $1.04 billion and $247 million.  Johnson & Johnson agreed to pay nearly $1 billion to settle more than half of the cases in 2019.  In 2018, the U.S. Court of Appeals for the Fifth Circuit reversed the $502 million jury award, finding that Kinkeade had committed “serious evidentiary errors” and allowed Lanier to make “misrepresentations” before the jury.

In a prior ruling, a split Fifth Circuit also criticized Kinkeade for committing “grave error” in asserting jurisdiction over certain bellwether trials, which have featured plaintiffs in California and New York.  In a July 22 order approving a 10% holdback on all future settlements for common benefit fees following a contested fee fight, Kinkeade gave a stinging rebuke of Johnson & Johnson’s lawyers, whose “actions increased both time and expenses incurred for the common benefit throughout every phase of this litigation.”

He cited two motions for sanctions that plaintiffs attorneys had filed earlier last year that accused Johnson & Johnson’s lawyers of failing to disclose discovery that would have demonstrated “ghostwriting” of scientific studies, among other things.  “Those documents are a bombshell,” plaintiffs’ attorneys wrote in one of the sanctions motions, and represented a “long-standing problem” in the cases.  “Throughout the course of this MDL, defendants’ conduct has repeatedly followed a pattern of obfuscation and obstruction.”

Kinkeade also cited the novelty of the issues and the “undesirability” of the cases in approving the holdback.  “Plaintiffs could have agreed to a settlement that devalued their claims,” the judge wrote.  “Instead, plaintiffs’ counsel fought through years more discovery, three more trials, two mandamus proceedings, and three appeals just to reach this settlement.  The court is aware that some plaintiffs’ firms declined to participate in common benefit assessments after the first trial; those that stayed well deserve their fees and costs.”

Special Fee Master Appointed to Allocate $3B in Fees in Opioid MDL

March 10, 2020

A recent Law 360 story by Kevin Stawicki, “Opioid Judge Taps Harvard Prof to Guide $3B Fee Fight, reports that the Ohio federal judge overseeing multidistrict litigation over the opioid epidemic tasked a Harvard Law School professor with helping the court navigate "novel" legal issues about how to compensate attorneys, some of whom say their payday could amount to more than $3.3 billion.  U.S. District Judge Dan Aaron Polster said in a notice that William B. Rubenstein, who previously worked on the multimillion-dollar NFL concussion settlement and subsequent fee fight, is best positioned to help navigate the debate over how much attorneys will be able to take home after the dust settles on a wave of opioid-crisis lawsuits.

Rubenstein will assist with navigating both the plaintiffs' request to establish a common benefit fund and attorney fees generally, the judge said, adding that the pleadings "raise complex and novel fee issues," as several parties and non-parties oppose the motion for the common benefit.  "Professor Rubenstein has written extensively about attorney's fees issues in complex litigation, including common benefit fees," Judge Polster said.  "The court has accordingly asked professor Rubenstein to assist with questions posed both by the present motion and attorney's fees generally, as these may arise."

The idea of a common benefit fund, which would set a 7% fee against a global settlement, has come under fire in recent months. Opioid manufacturers and distributors — including Johnson & Johnson and McKesson Corp. — pounced on the proposal in February, saying it was nothing more than a "transparent" attempt by lawyers on the plaintiffs' executive committee to grab settlement funds.  Approving the proposal would favor the lawyers over the parties in the litigation, even their own clients, the companies said.

After four attorneys general in October unveiled a proposed $48 billion deal with major drug companies and the nation's largest drug distributor, drug companies said 7% of the settlement would amount to more than $3.3 billion in fees.  "The [plaintiffs executive committee] seeks to grab a piece of every opioid-related resolution across the country, including settlements with the state attorneys general and of the many other actions brought in state court," the companies said in a memo to the court in February.

A group of 37 attorneys general have also argued that the fee request could irreparably disrupt progress made toward reaching a large national settlement by only applying to certain parts of settlements reached by attorneys general as well as to state court actions that are beyond the district court's jurisdiction, violating state sovereignty.

Another part of the settlement that has come under mounting scrutiny is Judge Polster's certification of the negotiation class, a novel mechanism designed to help more than 30,000 local governments pursue deals with pharmaceutical companies accused of fueling the opioid crisis.  Rubenstein was among the first to suggest the negotiation class as a way of breaking down 13 sets of national defendants based on legal claims and then crafting settlements with individual drug companies and binding plaintiffs to a structured settlement before the terms are negotiated.

As envisioned, any settlement would be put to a vote and require approval by 75% of voting governments.  A group of states fired off warning shots against that idea in February, saying only they, not cities and counties, can sue on behalf of their citizens.  By letting those political subdivisions settle claims they lack state-law authority to litigate, Judge Polster created an "alternative to state government," the coalition of states argued.