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Category: Fee Expert / Member

Legal Fees in Puerto Rico Bankruptcy Under Review

March 13, 2019

A recent Caribbean Business story by Eva Llorens Velez, “Legal Fees in Puerto Rico Bankruptcy Drop,” reports that the examiner of fees charged by lawyers and professionals in Puerto Rico’s bankruptcy said fees have dropped to $71 million for the June to September period compared with the previous four-month period.  Fee examiner Brady C. Williamson resubmitted to the court a proposed order imposing additional standards to collect fees.  He also proposed an order setting procedures for interim compensation, all of which he said could be tackled in the omnibus hearing set for April.

At the Dec. 19, 2018, omnibus hearing, the court denied without prejudice the fee examiner’s motion to impose additional presumptive standards.  The new proposal incorporates comments from professionals.  However, it maintained a 5 percent a year limit on rate increases for partners/shareholders and a 7 percent-a-year presumptive limit on “step,” or seniority, increases for associates.

Through the interim period that ended in September, firms subject to the Puerto Rico Oversight, Management and Economic Stability Act’s (Promesa) fee-review process have requested more than $306 million in total interim compensation, at least $5.9 million of the total attributable solely to rate increases, Williamson said.  “That is the amount requested to date that, with or without specific client and Court approval, is the direct result of increases in the hourly rates charged at the outset of each professional’s engagement,” he explained.

Through the third interim period (February through May 2018), the collective and cumulative rate increases totaled almost $4 million.  While the 2018 cost increases for the 50 largest firms exceeded 7 percent, according to a Citi report, Williamson said the goal is not to try to regulate professional revenue or profit, but to suggest boundaries for prospective hourly rate increases that comply with Promesa’s reasonableness standards and seek to manage both the immediate and long-term impact on the cost of the proceedings.

At the December hearing, the court noted the “unique situation” presented to professionals by these proceedings, asking the fee examiner to reconsider the initial rate increase recommendations and noting a 2 percent annual rate of inflation in New York, where most of the law firms are located.

The fee examiner said the Feb. 15 decision by the U.S. Court of Appeals involving the composition of the Promesa-established fiscal oversight board for the island “does not conclude that constitutional litigation, nor have all of its consequences yet been felt or appreciated,” and that he “already has engaged professionals on the continuing need to avoid duplicative efforts with further appeals or related activity involving the legislative and executive branches of the federal or Commonwealth governments.”

Williamson also said a particular difficulty inherent in Promesa’s Title III structure, given the board’s role as debtor representative, has been identifying the “client” of each financial adviser.  For example, Deloitte Financial Advisory Services and Ernst & Young LLP are both financial advisers to the commonwealth, with Ernst & Young LLP reporting to the board and Deloitte FAS reporting to Puerto Rico’s Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym).  Many financial professionals, whether working for a flat fee or an hourly fee, provide advice on one or more aspects of a debtor’s finances.  However, for example, Ankura Consulting Group is the financial adviser to the Puerto Rico Electric Power Authority and no other debtor.

Court Ends Fee Dispute in Acacia Derivative Action

February 5, 2019

A recent Law 360 story by Aaron Leibowitz, “Acacia Shareholders’ Attys End Up with $725K in Fee Fight,” reports that the attorneys who brought a derivative suit against Acacia Communications Inc. and its executives will receive $725,000 in fees and expenses in the litigation after reaching a compromise on the amount with the company, according to a Boston federal court order approving the deal.  Lawyers for the suing shareholders and the fiber optics company reached the compromise before U.S. District Judge William G. Young could bring in a Harvard Law School scholar to testify, a step the judge said he was prepared to take at a December hearing about the fee dispute.

The shareholders initially requested $1.75 million in fees plus more than $30,000 in expenses, a figure that Acacia contended was outlandish.  In putting forward that number, the shareholders' attorneys said the internal reforms proposed at Acacia in the settlement of the case, which involved insider trading allegations, would increase stockholder value.  But Acacia pointed to a settlement in a similar case involving internal reforms in which the plaintiffs' team was awarded about $200,000.

Now, the two sides have reached a middle ground.  "The parties have engaged in extensive arms-lengths negotiations, as per the court’s directive, on the attorneys’ fees and expense award and have reached an agreed fee award of $690,633 and an agreed expense award of $34,367," the shareholders' attorneys said in a proposed order.  Judge Young accepted the order as it was proposed the next day.

The shareholders' attorneys had filed a declaration by Harvard Law School scholar Matthew D. Cain, estimating the internal reforms at Acacia would net between $68 million and $82 million for the company's shareholders. Judge Young said in December that he would like to hear from Cain in person as he took on the difficult task of determining a fee amount for a settlement that isn't monetary, but involves changes to the oversight of insider trading at Acacia.

"You say you are the catalyst that caused [these reforms] to be put in place," Judge Young said to the shareholders' attorneys at the December hearing.  "How are you gonna value it?"  The consolidated cases allege that Acacia executives and private equity backers obtained early releases from so-called lockup agreements, allowing them to sell off their shares two weeks before announcements from the company's two largest customers led to a significant drop in Acacia's stock price.

The settlement, which Judge Young approved in part in December while the fee dispute dragged on, mandates the creation of a trading compliance committee to oversee Acacia's insider trading policy, review requests to waive stock sale lockups and report quarterly to the company's audit committee, which will approve any waivers.  Acacia also agreed to amend its insider trading policy to give the company the right to terminate employees and disgorge profits if the policy has been violated.  And the board will be required to add a new independent director.

Geoffrey Johnson of Scott & Scott Attorneys at Law LLP -- co-lead counsel for the shareholders along with Robbins Arroyo LLP – said in December that finding the right fee amount is more art than science, but he said the Harvard expert used "very conservative assumptions" on how the reforms would boost Acacia's worth.  The shareholders' attorneys said they expended nearly 1,690 hours on the case and used a multiplier of 1.72 to calculate the award.

Acacia countered by citing a settlement in a recent case involving internal reforms at Aveo Pharmaceuticals, in which the plaintiffs requested over $800,000 in attorneys' fees but were instead awarded about $200,000 by U.S. District Judge Denise J. Casper, also in Boston.  "The requested fee here is just way too high," Daniel Halston of WilmerHale, representing Acacia, told the judge last month.  "It's just out of bounds."  In addition to the internal reforms and the fee award, the settlement provides $2,500 to each of the five shareholder plaintiffs who brought the case, to be pulled from the larger attorney fee pool.

The case is Tharp et al. v. Acacia Communications et al., case number 1:17-cv-11504, in the U.S. District Court for the District of Massachusetts.

Judge Blasts Attorney for Wasting Time, Awards $1.6M in Fees

January 29, 2019

A recent Law 360 story by Daniel Siegal, “Judge Blasts Atty for Wasting Time, Awards $1.6M in Fees,reports that a Denver federal judge awarded a host of insurance companies nearly $1.6 million in attorneys' fees for defeating allegations that they unfairly denied coverage to homeowners, holding the plaintiffs’ attorney personally liable for most of the fees and blasting his “prolix, redundant and meandering” filings that wasted the insurers’ time.  In a 22-page ruling, U.S. District Judge John Kane granted the consolidated bid for attorneys' fees filed by dozens of defendants, including Allianz Life Insurance Co. of North America Inc., Chubb Corp. and insurance standards organization ACORD, finding that their request for about $1.6 million in fees was “fully foreseeable” and reasonable given the sprawling allegations.

“Plaintiffs initiated this litigation and were in control of its course.  There is no indication defendants’ counsel acted unreasonably or stepped outside the bounds of competent representation of their clients,” Judge Kane wrote.  “Plaintiffs cannot now complain that the fees incurred by defendants are excessive because such an inordinate number were forced to take part … They have imposed costs on virtually the entire insurance industry, and under the law, they must shoulder the result.”

Judge Kane wrote that the plaintiffs’ attorney, Josue David Hernandez of the Law Office of Josue David Hernandez, must personally bear liability for the attorneys' fees incurred by the defendants in the district court, given “his incessant filing of absurdly lengthy and legally incorrect briefs” and vexatious conduct throughout the litigation.  Some fees were incurred by the defendants on appeal, and Judge Kane asked them to file only the amount of fees that applied to the district court proceeding.

Judge Kane said he analyzed the plaintiffs' positions only to the extent that he could “extract them from the morass” of the briefing filed by Hernandez.  “I have struggled to decipher plaintiffs’ legal arguments throughout this case,” Judge Kane wrote.  “Those that pertain to the attorney fee award are no exception.”  The judge sided with the defendants’ expert witness’ testimony that the hours of legal work they expended defending the case were reasonable and necessary over the plaintiffs’ argument, which was based not an expert’s testimony but an “unreliable and bewildering” 24-factor test of Hernandez’s own concoction.

Judge Kane also noted that throughout the litigation, the plaintiffs had repeatedly made extra work for the defendants, such as filing a 40-page motion for more time to respond to the defendants’ motion to dismiss.  After the defendants filed a seven-page opposition to that motion, the plaintiffs followed with a 47-page reply brief that “illustrates a system gone mad,” the judge said.

Terence Ridley of Wheeler Trigg O’Donnell LLP, who represented First American Property and Insurance Co. and argued on behalf of all fee-seeking defendants, told Law360 that he was honored to argue the motion for the numerous insurers, saying that “the language of the order is important, and the order is important.”  Hernadez told Law360 via email that Judge Kane's ruling had failed to address key issues, including whether Colorado's attorneys fee statute was preempted by federal law, and the fact that the defendants had filed more papers and other documents in the case than the plaintiffs. 

"If one were to take the time to review the actual documents on the public record (which is something I would encourage anyone truly interested in the case to do), they would likely find that the ruling failed to include the necessary treatment of at least eight extremely significant issues raised," he said. 

Named plaintiff Dale Snyder and 17 others filed suit in June 2014, and in a 260-page amended complaint asserted 23 claims against 113 defendants, alleging a broad, multi-decade conspiracy to deny homeowners coverage of damages from floods and fires.  In January 2016, Judge Kane dismissed the suit due to the plaintiffs' failure to include a “short and plain statement of the claim showing that the pleader is entitled to relief” in the complaint.  The Tenth Circuit affirmed that ruling in May 2017 and ordered appellate attorneys' fees to be awarded to the defendants.

The case is Dale Snyder et al. v. ACORD Corporation et al., case number 1:14-cv-01736, in the U.S. District Court for the District of Colorado.

Fee Expert John O’Connor Helps Resolve Fee Dispute in Class Action

January 22, 2019

In a case in the U.S. District Court for the Eastern District of California, Everett Jewett, et. al. v. Shasta County Sheriff Department, et. al., John D. O’Connor, a NALFA member, of O’Connor & Associates in San Francisco was engaged as an expert witness by defense counsel to analyze attorney fees and expenses in the class action.  The underlying case involves the alleged abuse of disabled prisoners in the Shasta County Prison.

The parties settled the class action for $850,000.  Plaintiffs’ total requested lodestar was $1.185M.  The expenses requested were &132,000.  Class counsel also sought a lodestar multiplier was $592,000.  Parties settled the fee dispute matter based largely on John O’Connor’s expert declaration on reasonable attorney fees and expenses.

For more on attorney fee expert John O’Connor, visit www.joclaw.com.

Fee Expert John O’Connor Wins 60 Percent Fee Reduction in Federal Court

January 11, 2019

In a case in the U.S. District Court for the Central District of California, Jayantibhai Patel, et al. v. City of Long Beach et. al., NALFA member John D. O’Connor of O’Connor & Associates in San Francisco served as an expert witness on the reasonable of attorney fees on behalf of the non-prevailing party, the City of Long Beach.  Plaintiffs’ attorney Frank Weiser requested $344,000 in fees for prevailing in a claim against the City of Long Beach that its ordinance allowing unannounced inspection of hotel records amounted to an unreasonable search and seizure. 

Attorney fee expert John O’Connor recommended the fee request at $122,000.  The court ultimately awarded $143,880 in attorney fees, reducing plaintiffs’ fee request by 60 percent.  The court keyed in on several issues raised by O’Connor.  U.S. District Judge Andre Birottee cited John O’Connor’s expert declaration several times in the fee ruling.  On hourly rates, Judge Birotte, said, “The Court finds Mr. O’Connor analysis more compelling”. 

For more on John O’Connor, visit www.joclaw.com.