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How Rohrmoos Ruling Could Change Attorney Fees in Texas

May 16, 2019

A recent Law 360 story by Michelle Cassady, “4 Ways Rohrmoos Could Change Fee Fights in Texas,” reports that the Texas Supreme Court's recent opinion laying out what evidence is needed to prove up attorney fees already is being called by some practitioners the seminal case on the topic and one that could have a major impact on fee fights in the state.

In its Rohrmoos Venture v. UTSW DVA Healthcare LLP ruling, issued, the court sought to dispel what it said was confusion on the part of lawyers and courts about two methods of calculating fees: the Arthur Andersen eight-factor test and the lodestar method.  It said the lodestar method — determining fees by multiplying the number of hours spent working on the case by a reasonable hourly rate — should be the starting point for calculating fees.

The state's high court intended the 56-page opinion to be a "big black-letter case," said Jadd Masso of Clark Hill Strasburger PLC, characterizing it as "the conclusion of an evolution on the part of the court" that encompasses its 2012 opinion in El Apple I Ltd. v. Olivas and its 2013 opinion in City of Laredo v. Montano.  Masso said the lengthy opinion amounts to a "treatise on attorneys fees in Texas."  "It is the way, the truth and the life, and the only way to get fees is through the lodestar method," he said.  The El Apple decision was a signal from the court it wanted to encourage the use of lodestar, Masso said.  And with Rohrmoos, there's no more question about whether there's more than one way to prove up fees, he said.

Here are four ways that the ruling could change fee fights in Texas.

Detailed Billing Records Will Become the Norm

The Rohrmoos opinion didn't mandate real-time billing records to prove up attorney fees, but the court said they are "strongly encouraged to prove the reasonableness and necessity of requested fees when those elements are contested."  While most defense attorneys already do keep such records, the ruling will likely have a bigger impact on plaintiffs attorneys and others who work on a contingent fee or flat fee basis, said Frank Carroll of Roberts Markel Weinberg Butler Hailey.

"I think they have put the final nail in the coffin that anything short of contemporaneous billing records is sufficient," he said.  "People need to avoid the idea that 'this doesn't apply to me.'"  Carrol said lawyers doing simple, flat-rate cases for small amounts of money may not need to worry about keeping those records.  "But for everyone else: Proceed at your own peril if you don't follow the mandate of El Apple, City of Laredo, and this case."

Some defense lawyers, like Michelle Hartmann of Baker McKenzie, already are being pushed by clients into alternative fee arrangements rather than the hourly rate model.  "But we still enter all of the hours that go toward the case.  Not because we're going to bill the client for them, but to double check profitability and see if that was a good fit for both the client and the firm," she said.  "I think most defense attorneys do it now, even with flat-fee arrangements.  But this is a reminder you still need to keep good billing records."

Lawyers Could Face Lengthy Cross-Examinations on Fees

The attorney who represented UTSW in the Rohrmoos case, Wade Howard of Liskow & Lewis, said he tried at oral arguments before the high court to stress that putting hundreds of pages of detailed billing records before the jury would "do nothing" to help them determine what costs are actually reasonable and necessary.  Other practitioners have said that while the jury panel might not be going through those documents page by page, it does provide the other side "better ammunition to cross examine a lawyer," said Kelli Hinson of Carrington Coleman Sloman & Blumenthal LLP.

"They can then ask the tough questions, like, 'Why did you spend 50 hours on a motion for summary judgment that never got filed?' or 'Why were three attorneys doing this when one would have been sufficient?'" she said.  "So the jury gets the advantage of that even if they themselves don't pore through the record."  The Texas Supreme Court seemed to understand that the new guidance could have unintended consequences and warned in its Rohrmoos ruling that it was not "endorsing satellite litigation as to attorney's fees."

But courtroom opponents could easily use the records "as an opportunity to try and make the burden that the claimant has to meet even harder than this decision intended it to be," Hartman said.  And finding that sweet spot could be a years-long process, Hinson said.

"They said we don't want attorneys on the stand for days going through the bills bit by bit," she said.  "I think that's going to be where we struggle over the next few years — trying to find that fine line between what's enough and what's too much."

Outside Experts Could Be Used to Back Up Fee Requests

The ruling could also mean that attorney fees — which in many cases are the largest element of damages — will stop being treated like the "stepchild" of litigation, said John W. Bridger of Strong Pipkin Bissell & Ledyard LLP.  Bridger said that for years he's been advising other attorneys on the value of having an outside expert testify to the reasonableness of requested fees rather than the attorney on the case taking the stand.

For one, it can keep defense lawyers out of the sometimes awkward position of attacking the plaintiffs' attorney fees in front of a jury, and secondly, he said, it would encourage attorneys to spend more time developing the evidence to prove fees.  "This case only pushes us more and more toward outside experts, particularly where the attorneys' fees are larger than the amount in controversy," he said.

And the increasing amount of fees being sought is another reason calling in an outside expert could be worthwhile, said Kurt Kuhn of Kuhn Hobbs PLLC.  "It's inevitable that you're going to see people develop that evidence more. It clearly can't be an afterthought," he said.  "To get an outside expert is going to give you, in front of a jury, a little more credibility."

Counsel-to-Counsel Fee Agreements Could Proliferate

Hinson also speculated that the guidance could cause an uptick in attorneys agreeing to their respective fees ahead of time, keeping that issue out of litigation entirely.  "I do think it will be interesting to see if attorneys veer more that way so at least they know they won't get overturned for not having enough evidence," she said.

In the Rohrmoos opinion, the court "hints at" and "suggests" that stipulating to fees before trial in an agreement with opposing counsel could be a way to avoid contentious fee fights, Masso said.  Because the ruling could be interpreted as requiring "more work" on the part of attorneys trying to prove up fees, Masso said it's possible you'll see more negotiation and agreement on fees.  "This opinion makes the litigation of attorneys' fees a little more complex than it was before," he said.  "And there's no way that it doesn't result in that litigation getting a little more complex, and a little more involved and lengthy."

The cases is Rohrmoos Venture et al. v. UTSW DVA Healthcare LLP, case number 16-0006, in the Supreme Court of Texas.

Insurer Fights $1.6M Fee Coverage After Attorney Mishandled Suit

May 9, 2019

A recent Law 360 story by Kevin Penton, “Insurer Fights $1.6M Fee Coverage After Atty Mishandled Suit,” reports that an insurance company for a lawyer who was bench-slapped for the “incessant filing of absurdly lengthy and legally incorrect briefs” is arguing that it’s not responsible for covering nearly $1.6 million in fees awarded to insurance carriers on the winning side of the underlying case. 

Because Dougherty & Holloway LLC and attorney Josue Hernandez did not warn ALPS Property & Casualty Co. of any actual or potential claims against them when they applied for professional liability insurance in February 2018, the company should not be liable for the fees awarded by a Colorado federal judge in January and February, the insurance company argued in a complaint on Friday.

In January, U.S. District Judge John Kane awarded a host of insurance companies nearly $1.6 million in fees after they defeated allegations that they had unfairly denied coverage to homeowners, according to court documents.  In February, the judge held that Hernandez should be held personally responsible for just over $1 million of the amount, according to the order.

ALPS noted the long procedural history of the underlying case in its complaint, including that the insurance companies filed for attorney fees as early as May 2016.  Yet when Hernandez and the two attorneys who comprise Dougherty & Holloway applied for the liability insurance, they answered “no” to whether they were aware of any “fact, circumstance, act, error, or omission” that could be used as the basis for a claim, according to the complaint.

“Any claims for attorney’s fees asserted by claimants arising out of the January 2019 order and/or February 2019 order are outside the coverage afforded by the policy because, prior to the policy’s April 21, 2018 effective date, the insureds knew or reasonably should have known that its actions on behalf of its clients in the lawsuit might be the basis of a claim against the insureds,” the complaint reads.  Judge Kane held in January that Hernandez must be held personally responsible for a portion of the fees given “his incessant filing of absurdly lengthy and legally incorrect briefs” and vexatious conduct throughout the litigation, according to the judge’s order.

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.

Special Fee Master Defends Fee Allocation Work in $1.5B Syngenta MDL

May 8, 2019

A recent Law 360 story by Celeste Bott, “Special Master Defends Fee Divvy in $1.5B GMO Corn Deal,” reports that Heninger Garrison Davis LLC "ignored established law" when it asked for $50 million to $60 million in fees for its work on a $1.51 billion settlement over Syngenta's genetically modified corn, a special master tasked with divvying up the attorney fees told a Kansas federal court.  Special Master Daniel J. Stack, a retired Illinois judge, said the firm mischaracterized and misapplied a district court ruling on the $500 million attorney fee award when it objected to his recommendation it be paid $9.7 million.

The firm had argued it deserved a far bigger slice of the fees — between 65% and 85%of a pool of fees designated for Illinois attorneys, or between $50.7 million and $62.4 million.  An award that high would work out to an hourly rate of roughly $2,500 to $3,200 for Heninger Garrison’s work, Stack said.  “In a comparison that I am privy to from other work on common benefit fees, it is my recollection that the highest hourly rates for the very top leading attorneys is not more than $1,200 per hour,” Stack said.

Stack said that while Heninger Garrison focused its objection largely on litigation and in-court hours, U.S. District Judge John Watson Lungstrum made clear in a fee allocation order that compensable work includes other types of work that contributed to the eventual settlement.  “I did not simply give credit for all hours and weigh them equally, but considered whether they in fact truly contributed to the benefit of the class,” Stack said.  “Consistent with the allocation order, I discounted certain hours and recognized that other hours contributed enormously to achieving the settlement.”

Heninger Garrison objected to Stack’s fee recommendation in March, calling it “fundamentally flawed.”  The firm criticized his decision to award Clark Love & Hutson GP, Meyers & Flowers LLC and Phipps Anderson Deacon LLP — referred to in the report as “the Clark/Phipps group” — 80% of the Illinois portion of the fee pool, arguing that Heninger Garrison and several affiliates did the legwork in the case, including taking depositions, completing plaintiff fact sheets and voluminous discovery.  In addition, Heninger Garrison told the court that the Clark/Phipps group never submitted time entries, only summaries, making it impossible to verify the group’s claims for hours worked.

But that ignores established law that permits a court to rely on time summaries and affidavits submitted under penalty of perjury, Stack said. In this case, it was the “reasonable and efficient” approach, he said.  The firm’s argument that courts in Kansas and Minnesota awarded their attorneys fees differently was “beside the point,” Stack said, adding that the litigation was more advanced in those states and that a benefit determination in Illinois couldn’t build on a pre-existing common benefit process.

In April last year, Judge Lungstrum granted preliminary approval of a mediated $1.51 billion settlement agreement hashed out by farmers in all but four cases involved in the MDL.  The deal came after years of litigation over allegations that Syngenta should have delayed launching the seeds until Chinese authorities — controlling a major corn market for U.S. growers — approved importing the GMO corn.

$66M Fee Request in $800M Chrysler Emission Class Action Settlement

May 2, 2019

A recent The Recorder story by Amanda Bronstad, “Plaintiffs Lawyers in $800M Chrysler Emissions Settlement Want $66M,” reports that plaintiffs lawyers who helped craft an $800 million settlement with Fiat Chrysler this year over its “EcoDiesel” vehicles are asking for $66 million more in attorney fees and costs.  U.S. District Judge Edward Chen of the Northern District of California has scheduled oral arguments Friday about whether to grant final approval of the deal, which includes a $307 million class action settlement and $400 million to federal and state regulators to resolve claims that it installed software in 100,000 vehicles nationwide to cheat emissions tests.

In court papers, lead counsel Elizabeth Cabraser said the request for $59 million in attorney fees and $7 million in costs would be in addition to, and not deducted from, the settlement’s $800 million value.  She said the fees were reasonable in light of the complexities of the case.  “This significant result was not easily won,” wrote Cabraser, of San Francisco’s Lieff Cabraser Heimann & Bernstein, in an April 25 reply supporting the settlement.  “Plaintiffs’ claims were hotly contested and vigorously litigated for nearly two years.”

In the class action, Chen early on appointed Kenneth Feinberg, founder and managing partner of The Law Offices of Kenneth R. Feinberg in Washington, D.C., to serve as settlement master.  Last year, the judge allowed claims to go forward against Fiat Chrysler under the federal Racketeer Influenced and Corrupt Organizations Act.  Under the settlement’s terms, Fiat Chrysler Automobiles N.V. agreed to give individual cash payments of up to $3,075 and extended warranties to eligible consumers who brought their vehicles in for software fixes.  Fiat Chrysler agreed to provide $280 million, with software maker Robert Bosch GmbH contributing $27.5 million.

Class members have 18 months after the settlement’s final approval to make claims.  Unlike the $14.7 billion emission settlement in 2016 with Volkswagen, Chrysler agreed to provide a software fix for two years that would allow drivers to continue using their cars. Also unlike Volkswagen, Fiat Chrysler did not admit liability.  “We look forward to finalizing this agreement with the court, which will bring us another step closer to achieving the settlements’ goals: providing consumers the vehicles they were promised plus cash compensation, while also protecting our environment,” Cabraser said in a statement.

In the reply, Cabraser noted that only three out of 100,000 class members objected to the deal and, of the 3,461 who opted out, nearly 90 percent of them came from “vigorous marketing and solicitation campaigns by a handful of attorneys”—in particular, at Stern Law PLLC in Novi, Michigan, and Heygood, Orr & Pearson in Irving, Texas.  Ken Stern, of Stern Law, and Michael Heygood, of Heygood Orr, did not respond to questions about why they recommended their clients opt out.

“This high level of engagement and remarkably low level of opposition is a strong endorsement of the settlement terms,” Cabraser wrote in the reply.  “Under any circumstances, this extremely low objection rate would strongly favor final approval, and it does so with particular force here given the well-publicized nature of this litigation and the significant sums at stake.”  So far, she wrote, nearly 34,000 class members had registered on the settlement’s website.

In separate declarations, Robert Klonoff, a professor at Lewis & Clark Law School, and Brian Fitzpatrick, a professor at Vanderbilt University Law School, said the fee request represented between 10 to 18 percent of the settlement amount, depending on how benefits are calculated.  Both are reasonable and fall below the 25 percent benchmark established by the U.S. Court of Appeals for the Ninth Circuit.

Cabraser, in her initial motion for final approval, calculated the fee request at 13 percent, when based on a minimum required 85 percent participation rate in the cash fund and cutting the $239.5 million value of the extended warranties in half to account for the government’s role, plus $67.5 million in attorney fees and legal and administrative costs.  When assessed against the total potential value of the settlement—the entire cash fund and value of the extended warranties—the request was 9.6 percent, she wrote.

She estimated that class counsel would have spent more than 100,000 hours on the case upon completion of the claims process in two years, billing at a blended rate of $453 per hour.  “This is more than justified given the intensity of the litigation, the quality of the work, and most importantly, the results achieved,” she wrote.  In addition to Cabraser’s firm, the fees would compensate the other nine law firms on the plaintiffs’ steering committee, plus 10 additional firms who did work on the case, according to a declaration Cabraser submitted in support of final approval.

Judge May Get Involved in Pelvic Mesh Fee Allocation Dispute

April 23, 2019

A recent Law.com by Max Mitchell, “Pelvic Mesh Judge Isn't Obligated to Probe Allegations of 'Self-Dealing' in Fee Fight--But He Might Dive In,” reports that although allegations of fee-padding and self-dealing have roiled the pelvic mesh multidistrict litigation, the judge overseeing the consolidated lawsuits is under no obligation to investigate those claims.  But that does not necessarily mean U.S. District Judge Joseph Goodwin of the Southern District of West Virginia will turn a blind eye either.

According to court watchers, allegations that arose recently in the contentious fee dispute should give any judge pause, and may lead Goodwin, who is overseeing the vast litigation, to call for further investigation of the claims before he allocates an estimated $550 million in disputed fees.  “It seems to me the court more or less has to look into these allegations in deciding the fee dispute, and the fact that the court itself appointed this committee sounds like a further reason why the court should be interested in whether they’re behaving properly,” Rutgers University professor John Leubsdorf said.

Infighting Over Fees

The allegations arose in court filings late last month—about two weeks after the fee and compensation committee and Daniel Stack, a retired Illinois state court judge appointed to review the fee allocation process, issued their final recommendations on how to allocate the fees among 94 firms each claiming they did work for the “common benefit” of the MDL.

Specifically, Roseland, New Jersey, attorney Adam Slater of Mazie Slater Katz & Freeman wrote in a March 26 objection that plaintiffs attorney Bryan Aylstock pressured the chairman of the fee and compensation committee, Henry Garrard, to boost the amount of attorney fees to Aylstock’s Pensacola, Florida-based firm, Aylstock, Witkin, Kreis & Overholtz, which ultimately got $10 million more.  According to the objection, Aylstock threatened that his colleague, D. Renée Baggett, a member of the fee and compensation committee, would not sign off on its preliminary written recommendation if Garrard, of Blasingame, Burch, Garrard & Ashley in Athens, GA, refused to increase the fees for Aylstock’s firm.

Slater and fellow Mazie Slater partner David Mazie filed separate declarations insisting that Stack had relayed the information at a Jan. 3 meeting with them.  “Judge Stack stated that he ‘was sickened’ and ‘angered’ by this conduct, which he described as Mr. Aylstock pressuring the FCC chairman when he was particularly vulnerable,” Slater wrote in his firm’s objection.  “Judge Stack explained that he could not recommend the far lower amount he believed Aylstock deserved since he was, as he termed it, ‘put in a box’ since the agreement with the Aylstock firm included assurance that Judge Stack would not reduce the agreed-upon award.”

The objection also accused Motley Rice of padding its bills in the mesh litigation.  “Similarly, Judge Stack stated that he believed that Motley Rice (like some others in the litigation) had inflated its contributions and had ‘padded’ its time with thousands of phantom hours,” Slater wrote.  Stack told him that Motley Rice did that “in every litigation,” according to the objection.  Shanin Specter, of Kline & Specter, also filed a March 26 objection that raised similar concerns, contending that Stack “simply rubberstamped” the FCC’s recommendations.

When reached for comment, Specter said the filings raise serious allegations, and that attorneys should have a right to appeal decisions regarding the fee dispute—an issue that is currently being disputed before the U.S. Court of Appeals for the Fourth Circuit.  “As we said in our filing, firms, especially Mazie Slater, have raised troubling concerns about what’s occurred in relation to the attorney fee issue,” he said.  “Good lawyers are going to be deterred from getting involved in MDLs if they think that the rules can be changed in the middle of proceedings and there’s no right of appeal.”

Slater and Rice declined to comment about the dispute, and Aylstock did not return a message for comment.  Garrard said he could not comment beyond the FCC’s court filings.  The FCC, however, has made counterclaims against the objecting firms, accusing them of collectively making false attacks and submitting bills “riddled with excessive entries, duplicative billing” and other problems.  Garrard also specifically called Slater’s account of Alystock’s fee request false, stating that he “has never felt taken advantage of by this firm.”

“The FCC evaluated the Aylstock firm’s submission by the same criteria as every other firm, which included the opportunity to provide and receive feedback and to be heard,” Garrard wrote.  The use of such “caustic rhetoric” was “unfortunate,” he added.  “It serves no legitimate purpose for these objectors to air personal grievances or what they apparently believe to be ‘dirty laundry’ regarding alleged conversations with FCC members or with the external review specialist save perhaps to embarrass or insult,” he wrote.

But it is unlikely that response will be the end of the dispute.  Objecting attorneys have since filed replies, contesting the FCC’s accounts.  And, although the court has shot down previous requests for discovery regarding the fee allocations, attorney Benjamin H. Anderson of Anderson Law Offices in Cleveland filed a motion requesting a hearing.  “The eight members’ claims of having actually performed the work needed to justify their recovery of two-thirds of the common benefit fund are simply implausible and cannot withstand scrutiny,” Anderson said.

Where Can Courts Go From Here?

Several attorneys said that, although contentious fee disputes are commonplace in big cases, the allegations raised in pelvic mesh are outside the norm, and could lead to a variety of actions by the court depending on what allegations may get substantiated and what allegations might be shown to be false.  Court watchers noted that, unlike in class action litigations, there are no codified duties for judges presiding over MDLs to delve into the particulars of a fee dispute, and often courts simply follow the recommendations of the special master tasked with reviewing the dispute.

However, at least one attorney said there is some case law that might fall in favor of transparency, most recently a decision by U.S. District Judge Robert Kugler in In re Benicar Products Liability Litigation, which, earlier this month, issued an order saying, among other things, that all firms involved in the litigation will be given access to submissions made to the common benefit committee.

The statute governing MDLs is “barebones,” according to Penn Law professor Stephen Burbank, so disputes often arise about exactly what powers a court can exercise.  Courts are also generally reluctant to redo the work performed by special masters who oversee fee disputes, but still, Burbank said, courts generally want to review fee submissions thoroughly.  “The incentives for passing and for unfair allocation on the basis of what I’ll call politics rather than effort are pretty high, and most judges know this,” Burbank said.  “It would be very, very surprising if a judge in any context just accepted what a lawyer is proposing.”

Despite the lack of specific rules, courts generally seek to exercise broad discretion when it comes to fee disputes, Burbank said, and so a credible allegation of impropriety could set the whole fee allocation process back numerous steps.  “That might make me think, well maybe my assumption about the total amount is wrong,” Burbank said.

Among other things, judges facing serious allegations in fee disputes can hold hearings regarding the disputed hours and the rates, attorneys said.  Courts can also call for further evidence and depositions, and, depending on the findings, there could even be disciplinary implications.

Ethics attorney Thomas G. Wilkinson Jr. of Cozen O’Connor said there is little oversight regarding what exactly a “reasonable fee” should be, but, knowingly making false statements can run afoul of ethics laws regarding candor to the court.  “Any kind of knowingly false statement to the court could have disciplinary consequences,” Wilkinson said.

Federal courts are somewhat limited in what they can do if a violation has been found to have occurred, and generally their options are imposing monetary sanctions, or revoking an attorney’s pro hac vice admission.  Any proceedings regarding an attorney’s law license would have to first be initiated by the disciplinary body of the attorney’s home state.  Wilkinson said state disciplinary boards “most always will investigate further” if an issue has been brought to them via a judge’s opinion.

However, he noted that, without a request from attorneys, courts have no duty to sanction lawyers found to have run afoul of the ethics rules.  “There’s no duty on the part of a judge to send an issue to the disciplinary body,” Wilkinson said.  “Even if the judge concludes there was a violation.”