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Article: Five Lessons for Recovering Attorney Fees in Texas

February 13, 2021

A recent article by Amanda G. Taylor, “Recovering Attorney’s Fees in Texas: Five Lessons” in BizLit News Blog reports on recovering attorney fees in Texas.  This article was posted with permission.  The article reads:

Obtaining an award of attorneys’ fees might be the final step in a long-waged litigation battle but to do so successfully requires careful planning and diligence from the outset of a case.  The Texas Supreme Court recently clarified the evidence required to obtain and affirm such an award.  Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019).  The Texas Supreme Court also recently confirmed that these evidentiary standards apply equally when fees are sought to be recovered as a sanction.  Nath v. Texas Children’s Hosp., 576 S.W.3d 707, 710 (Tex. 2019).  To best serve a client’s interests of recovering attorneys’ fees in Texas, whether as a prevailing party or as a sanction, lawyers should adhere to five lessons from Rohrmoos.

Lesson One:  Confirm a legal entitlement to recover fees.  “In Texas, as in the federal courts, each party must pay its own way in attorney’s fees … unless a statute or contract provides otherwise.”  Rohrmoos Venture, 578 S.W.3d at 484.  Certain claims, such as a breach of contract claim brought under Chapter 38 of the Texas Civil Practices and Remedies Code, entitle a prevailing party to recover attorneys’ fees.  Other claims, such as a common law fraud claim, do not afford such a remedy.  In establishing your initial case strategy, it is important to consider which claims will and will not allow for recovery of fees, and advise your client about the pros and cons of pursuing each claim accordingly.  Also, be aware of fee-shifting procedural tools (such a motion to dismiss under the Texas Citizens Participation Act) and various Texas statutes and rules that allow for recovery of fees as a sanction (such as Civil Practice and Remedies Code Chapters 9-10, and Texas Rule of Civil Procedure 215).

Lesson Two: Keep accurate, contemporaneous billing records.  Although billing records are not absolutely required to prove the amount of reasonable and necessary fees, it is “strongly encouraged” to submit such proof in support of attorneys’ fees.  Rohrmoos Venture, 578 S.W.3d at 502.  It is much easier to review, summarize, and testify about the work performed (often years later) if you have been diligent in your billing practices throughout.  Time should be kept in a manner that demonstrates the “(1) particular services performed, (2) who performed those services, (3) approximately when those services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services.”  Id.  It is also advisable to keep time in a manner that is specific enough to cover the topic but without legalese and without so much detail that heavy redactions become necessary.  Fact finders prefer to read invoices in plain English without the interruption of hidden text.

Lesson Three:  Your fee agreement does not control the amount awarded.  “[A] client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable or necessary.”  Id. at 488.  Translation: even if you have agreed to handle the matter for a flat fee or contingency fee, you still must demonstrate that the amount of fees sought for recovery are reasonable and necessary based on the work performed and the time incurred.  Regardless of the fee arrangement with your client, keeping accurate and contemporaneous billing records is important.

Lesson Four: Remember to timely designate fee experts.   “Historically, claimants have proven reasonableness and necessity of attorney’s fees through an expert’s testimony—often the very attorney seeking the award.”  Id. at 490.  “[C]onclusory testimony devoid of any real substance will not support a fee award.”  Id. at 501.  Because expert testimony will be required, the attorney must remember to designate herself and any other attorney who will offer an opinion about the reasonableness and necessity of the fee amount(s) as an expert witness in compliance with the scheduling order or discovery control plan governing the case.

Lesson Five: Understand the “Texas two-step” calculation method.  At step one, calculate the “base” or “lodestar” amount by multiplying the “reasonable hours worked” by a “reasonable hourly rate.”  Id. at 498.  This is an “objective calculation” that yields a “presumptively reasonable” amount.  Id. at 497-98, 502.  The determination of what is a reasonable market rate and what is a reasonable amount of time will typically include consideration of the following factors: (1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill required to perform the legal service properly, (4) the fee customarily charged in the locality for similar legal services, (5) the amount involved, (6) the experience, reputation, and ability of the lawyer or lawyers performing the services, (7) whether the fee is fixed or contingent and the uncertainty of collection, and (8) the results obtained.  Id. at 500.  At step two, “adjust[] the base calculation up or down based on relevant considerations … [that were not] subsumed in the first step.”  Id.  “If a fee claimant seeks an enhancement, it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award.”  Id. at 501. Remember that only “rare circumstances” justify such an adjustment.  Id. at 502.

Following these five lessons from the outset of a case will be beneficial to the expert testifying about the amount of fees at the end of a case.  More importantly, it will benefit your client’s best interest in obtaining a monetary award and being able to have that award affirmed on appeal.

Amanda G. Taylor serves as Practice Group Leader of Butler Snow LLP’s Appellate Group and practices from the firm’s Austin, TX office. As a Board-Certified Civil Appellate specialist, Amanda helps to shape successful case strategy from the outset of litigation through the end of an appeal.  Amanda is a detail-oriented lawyer who represents her clients with passion, stays current on emerging trends and issues, and brings a practical perspective to problem solving.  She has a broad range of experience handling complex civil disputes regarding contracts, fraud, tax, insurance, products, employment, real property, and trust and estates.  Amanda is also committed to community service through a number of positions in her State and Local Bar Associations.

$1.2B Valeant Settlement Earns Robbins Geller $157M Fee Award

February 2, 2021

A recent Law 360 story by Dean Seal “Final OK on $1.2B Valeant Deal Earns Robbins Geller $157M”, reports that a New Jersey federal judge gave final approval to a $1.2 billion settlement of an investor action against Valeant Pharmaceuticals, landing lead counsel Robbins Geller Rudman & Dowd LLP a hefty payday.  U.S. District Judge Michael A. Shipp overruled objections from two investor plaintiffs when he granted a special master's recommendation to approve the deal reached in December 2019 between investors and the pharmaceutical company that became known as Bausch Health Cos. Inc. in 2018.

The nearly five-year-old lawsuit claimed Valeant used a clandestine network of pharmacies to push high-priced drug prescriptions, sending the stock plummeting once price-gouging allegations surfaced.  Investor plaintiff Cathy Lochridge had lodged an objection to the 13% attorney award for Robbins Geller and local lead counsel Seeger Weiss LLP, arguing that the $157.3 million request was too high considering that the settlement "captures just 3% of class damages," but Judge Shipp said it was also the ninth-largest securities class action recovery ever.

"As Lochridge correctly notes, 'what is important is that the district court evaluate what class counsel actually did and how it benefited the class,'" the judge said.  "Here, lead counsel obtained a $1.21 billion all-cash recovery for the benefit of over 400,000 members."

The stock-drop litigation represents consolidated claims by investors who saw Valeant's stock price slide from more than $250 a share in 2015 to below $10 two years later.  The company has been fined by regulators and sued by investors who said it defrauded the market.  Investors claimed that Valeant had employees work under aliases for a company called Philidor Rx Services LLC that used deceptive practices to block generic alternatives from competing with Valeant's branded drugs.  Valeant allegedly duped insurers by changing prescription codes to ensure they were filled with Valeant-branded drugs and making claims for unrequested refills, investors said, and covered up the scheme by lying about the pharmacies' ownership and issuing a series of false statements to investors.

In December 2019, Bausch announced that it had agreed to resolve the case with a $1.21 billion settlement while admitting no liability and denying all wrongdoing.  Last June, a special master issued a report recommending final approval of the settlement, plan of allocation and attorney fees and expense reward, leading to objections from two plaintiffs.

The first, from brokerage firm Timber Hill LLC, objected to the settlement itself as well as the plan of allocation, arguing against the plan's imposition of an "arbitrary" 5% recovery cap on options investors while permitting common stock and debt investors to take the remaining 95%.  The cap demonstrated that options investors were not adequately represented in the settlement, Timber Hill said, asking that the cap be increased to around 9.5%.

Judge Shipp overruled the objection, saying that Timber Hill's expert had originally supported an options cap in the 5% range and that he found the plan to be "fair, reasonable and adequate."  The second objector, Lochridge, had asked that the attorney fee award be reduced to 6% of the settlement fund, or around $72.6 million, arguing that "this is the lowest ever return on class damages for a billion-dollar securities settlement."

Judge Shipp disagreed, saying Lochridge's low recovery argument was based on "new and inconsistent" analysis from Timber Hill's expert and speculation that Valeant could have agreed to a higher settlement amount despite its uncertain financial position.  The judge also found that the hefty settlement fund and low number of objectors and opt-outs weighed in favor of approving the award, as did the complexity and duration of the litigation and lead counsel's devotion of more than 75,000 hours to the case.

Lieff Cabraser to Appeal Attorney Fee Reduction Before Paying It

January 27, 2021

A recent Law 360 story by Chris Villani, “Lieff Wants To Appeal $1M State St. Fee Cut Before Paying It,” reports that Lieff Cabraser Heimann & Bernstein LLP asked a federal judge to hold off on ordering the firm to pay out a $1.1 million chunk of its fee for work on a years-old $300 million settlement with State Street Corp. so it can ask the First Circuit whether the repayment is justified.  In the latest salvo stemming from revelations of overbilling and other improprieties largely laid on its co-class counsel, Labaton Sucharow LLP and Thornton Law Firm LLP, Lieff Cabraser told U.S. District Judge Mark L. Wolf that once the money goes out, the firm is not likely to get it back.

Lieff Cabraser is appealing its part of the overall fee reduction order by Judge Wolf that slashed the tab owed to it, Labaton Sucharow and Thornton Law from $75 million to $60 million.  "Under the fee order, absent a stay, Lieff Cabraser's escrowed funds will be distributed to the class before the First Circuit can rule on the firm's appeal from the court's decision to penalize Lieff Cabraser," the firm said.  "Recovering those funds from the class, once distributed, will be impossible — effectively mooting the appeal."

But the vast majority of the money ordered repaid can go out right away, Lieff Cabraser argued, so the class of consumers who alleged they were swindled by State Street and Employee Retirement Income Security Act lawyers who worked on the case can get the rest of the money without any delay.  Putting a pause on the $1,139,4572 of Lieff Cabraser's money would not inconvenience anyone in line for a payout since it would take some time to distribute the funds even if the firm was not appealing, it said.

"Complete settlement distributions — especially those involving settlement funds in the hundreds of millions of dollars — commonly take years, not months," the firm said.  The case has wound through the court system since the suit, led by the Arkansas Teacher Retirement System, was first filed against State Street in 2011.  The parties reached a $300 million settlement and Judge Wolf approved a $75 million fee in 2016.  The order was vacated after allegations of double-billing surfaced in a Boston Globe report.

Judge Wolf appointed retired U.S. District Judge Gerald Rosen as a special master to investigate, and the probe ran up a seven-figure tab paid by the firms under investigation.  In a February order, Judge Wolf took Labaton Sucharow and Thornton Law to task, saying they repeatedly violated the rules of professional conduct by overbilling and failing to disclose a $4.1 million finder's fee paid to a lawyer who did not work on the case.  Lieff Cabraser's appeal is the only one to come from Judge Wolf's order and challenges a narrow set of issues pertaining only to findings related to the firm and alleged violations of Rule 11, which concerns representations made to the court in civil cases.

Judge Wolf indicated he would retain counsel to represent himself and his order before the First Circuit, but no attorney appearance has been entered on the First Circuit docket and no one filed an opposition to Lieff Cabraser's appeal.  It was also unclear, both to Lieff Cabraser and to the First Circuit, whether Judge Wolf's order last February was "final."  The firm told the appellate court it felt it had to treat the February order as "final" lest it lose the chance to appeal altogether, but Judge Wolf entered a "final judgment" on Jan. 19 of this year and Lieff Cabraser acknowledged to the First Circuit that the question of whether an actual appealable order existed last summer was murky.

In September, the First Circuit said it would dismiss the appeal without prejudice, writing that "the district court appears to have simultaneously treated its order as both final and non-final; that is, the court sought to retain counsel to file a brief in this court in support of its order and at the same time has issued several post-fee orders, the cumulative effect of which may well be to alter the fee ruling."  With the final judgment entered, Lieff Cabraser plans to revive its appeal, which has centered on due process issues and is a matter of first impression in the circuit.

A strict adherence to notice requirements in Rule 11 matters is necessary, Lieff Cabraser argued, because "sanctions imposed on the court's own motion circumvent the adversarial process, putting the district court in the position of being the 'accuser, fact-finder and sentencing judge all in one.'"  Five circuits, the firm has argued, have found that sanctions like the ones imposed by Judge Wolf are problematic "when a court fails to set out the precise issues to be considered."

"This issue has not directly been addressed by the First Circuit," the firm said, "although the circuit has noted that 'judges must be especially careful where they are both prosecutor and judge.'"  The underlying suit alleged Boston-based State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade.  The law firms admitted to overstating their billing but contended the $75 million fee award initially approved by Judge Wolf was still proper.  The special master, Rosen, recommended in 2018 that the firms disgorge just over $10 million, but Judge Wolf's 160-page order in late February ruled that the cuts should be even deeper.

Insurer Seeks to Dodge Attorneys Fees in Overbilling Matter

January 14, 2021

A recent Law 360 story by Kevin Penton, “Insurer Seeks to Dodge Mass. Firm’s Overbilling Probe Fees” reports that an insurance company asked a Massachusetts federal court to declare that it is not responsible for paying attorney fees incurred by Thornton Law Firm LLP when the firm faced an investigation over alleged overbilling in a $300 million State Street Corp. settlement.  Continental Casualty Co. should not be obligated to pay Thornton Law the unspecified amount of fees the firm paid to its legal counsel for representation throughout the investigation, along with the unspecified amount the court ordered to be deducted from the firm's fee award to help cover the investigation's costs, according to the complaint in the District of Massachusetts.

Continental argues that Thornton Law did not take out insurance that would require the insurer to defend or indemnify the firm in the investigation.  The company noted that the investigation was not a claim triggered by an "act or omission in the performance of legal services" by Thornton Law, nor does it leave open the possibility of covered damages, according to the complaint.  The investigation's findings — that Thornton Law and Labaton Sucharow LLP repeatedly violated the rules of professional conduct in part by overbilling — meant that the insurance policy's "intentional acts exclusion" is also triggered, according to the complaint.

"The acts or omissions at issue in the special master fee investigation are not services performed by Thornton as a lawyer," the complaint reads.  "To the contrary, the special master fee investigation arose from the insured's false and misleading submission regarding its billing rates and business practices in a declaration to the court."

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 class action resulted in a $300 million settlement between State Street and investors, and U.S. District Judge Mark L. Wolf approved $75 million in attorney fees for Thornton Law, Labaton Sucharow and Lieff Cabraser Heimann & Bernstein LLP in 2016.

The billing issues first came to light later that year in a Boston Globe report. The firms later acknowledged they overstated their billing, but claimed the $75 million fee was still proper.  Following the investigation by a special master, Judge Wolf in February reduced the firms' fees to $60 million.  Judge Wolf noted at the time that Thornton Law managing partner Garrett Bradley also signed a false fee declaration, which Bradley lamented as a "stupid mistake" when testifying in one of the case's hearings.

"The United States has a proud history of honorable, trustworthy lawyers," Judge Wolf wrote.  "However, this case demonstrates that not all lawyers can be trusted when they are seeking millions of dollars in attorneys' fees and face no real risk that the usual adversary process will expose misrepresentations that they make."

Law Firm Billing Tips For Good Client Relations

December 1, 2020

A recent Law 360 story by Aebra Coe, “Law Firm Billing Tips For Avoiding An Irate Client,” reports that a recent lawsuit filed against K&L Gates LLP by a client unhappy with a legal bill highlights some common pitfalls that law firms face when it comes to billing practices, but there are ways to avoid a similar situation, experts say.  The lawsuit against K&L Gates, which was filed in August by Chicora Life Center LC, accuses the firm of using several tactics to increase its bill for representing the bankrupt medical center in a Chapter 11 proceeding over a lease termination dispute.

Some of the alleged billing practices are not entirely uncommon among law firms, according to two experts who declined to comment directly on the lawsuit but provided their thoughts on client billing more generally.  The alleged practices include "block billing," where a lawyer "blocks" together a number of tasks over a set amount of hours; "hoarding," when an overqualified lawyer with a high billing rate retains work rather than passing it on to someone with a lower billing rate; and "multibilling," which occurs when multiple attorneys are tasked with performing the same work.

"All of those things mentioned have been going on for years and years.  This is not at all new," said James Wilbur, an expert on law firm billing at consulting firm Altman Weil Inc.  Regardless of how the K&L Gates suit shakes out in court, other law firms are likely looking for ways to avoid being in a similar position.  While such situations are not entirely preventable because clients can sometimes file bad-faith suits, there are steps firms can take to ensure clients are as happy as possible with a bill at the conclusion of a matter, Wilbur said.

He suggested firms rely on three things to accomplish this: technology, training and collaboration.  E-billing software can often catch double billing and block billing, he said, as well as phrases that might irk a client, like "reviewed phone notes," that may not indicate that the time spent added any value to the matter.

And that leads to training, which should be conducted at all levels on a regular basis so that any attorney or paralegal who puts together a bill is aware of best practices and is skilled in conveying the value brought to the client via the time the individual spent working, he said.  Senior attorneys billing for work that could be done by someone more junior is another beast, Wilbur said, and one that law firm management must work to dissuade by encouraging collaboration and the sharing of work.

Clients have many different rules when it comes to fees, but "no surprises" is a big one, said Toby Brown, chief practice management officer at Perkins Coie LLP.  "The bottom-line answer is more transparency.  And more real-time updates about what's going on," Brown said.  "The lawyers are uncomfortable talking about these things, and so they don't talk about them head-on."

He said lawyers and clients can often get wrapped up in the legal issues at hand, with fee issues taking a back seat.  For example, if the volume of discovery in a major case increases substantially, a conversation on cost might not always occur, but it should, he said.  Real-time sharing of information on the cost of a matter is vital, Brown said.  He said his firm has worked to incorporate the help of its project management team to flag when the scope of a matter has changed so that the attorney on the matter is aware a conversation is needed.

The firm has also implemented technology that goes beyond basic e-billing software to allow attorneys to better monitor their budget on a matter, he said.  Ultimately, according to Wilbur, having a strong relationship with a client to begin with will go a long way.

"Even in a firm that's highly ethical and has training around these issues, mistakes are going to happen. Something is going to creep through," he said.  "The first thing is you have to have a good enough relationship with the client so they know they can text or email you, pick up the phone and point out a problem in the bill, and you will deal with it without arguing."

When contacted by Law360 for comment about its case, K&L Gates described Chicora's claims as "a transparent attempt to re-litigate issues that were raised and rejected years ago through final orders in a concluded bankruptcy."  A third-party fee examiner, it said, expressly found that the fees requested by the firm were reasonable and should be recoverable, and then the bankruptcy court adopted that determination.  "We are confident the present claims also will be rejected," the firm said.