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Category: Fee Jurisprudence

Federal Circuit Realizes District Judges Call Shots on Fee Awards

April 6, 2017

A recent NLJ story by Scott Graham, “Federal Circuit Faces Facts: District Judges Call Shots on Fee Awards,” reports that a District Court in Texas is on the verge of overruling the U.S. Court of Appeals for the Federal Circuit on exceptional case attorney fees.  Two Federal Circuit judges voiced serious displeasure that U.S. District Judge Rodney Gilstrap, of the Eastern District of Texas ignored their strong hint two years ago to award fees in a patent dispute between online retailer Newegg and Acacia Research Corp. subsidiary Adjustacam Inc.

But the judges recognized that sending the case back to the Eastern District of Texas a second time may not make any difference.  That's because even though appellate courts nominally have authority over trial courts, the U.S. Supreme Court has effectively reversed the balance of power on patent fee awards.  "It really seems what [Gilstrap] did here was pay lip service to our mandate, and it's very frustrating," Judge Todd Hughes said during arguments in Adjustacam v. Newegg.  "But if we send it back, he's probably going to deny fees again, and it's all going to be a big waste of time."

"It could be that we never find an exceptional case" unless the district judge does too, Judge Jimmie Reyna said.  "I'm looking at this case to see if there's any point where this court could say there's been an abuse of discretion."

Adjustacam is the latest round in a long-running battle between Acacia and Newegg over exceptional-case attorney fees.  Newegg's outspoken general counsel, Lee Cheng, left the company last year, but outside counsel Mark Lemley of Durie Tangri continued the fight, with Collins, Edmonds, Schlather & Tower partner John Edmonds representing Adjustacam.

Adjustacam sued 58 defendants in the Eastern District of Texas in 2010 over a patent on a rotatable camera mount.  Newegg insisted there was no basis for infringement, especially after U.S. District Judge Leonard Davis construed the claims in 2012.  Adjustacam dismissed its claims three months later because summary judgment briefs were imminent, according to Lemley; and because Adjustacam had settled with Newegg's suppliers, according to Edmonds.

Davis declined to award fees in 2013.  But the following year the U.S. Supreme Court eased the standard for awarding fees in its Octane Fitness decision, while giving district judges more discretion over whether to award them.  The Federal Circuit instructed Davis to reconsider Newegg's fee motion under the new standard.  Hughes' opinion for the court advised that Newegg's arguments "appear to have significant merit."

By then Davis had retired.  His successor Gilstrap adopted almost all of Davis' findings and conclusions.  In a footnote addressing the Federal Circuit opinion, Gilstrap wrote that he had tried "not to circumvent by hindsight the judgments and in-person evaluations that the trial judge who dealt with this case in the courtroom arena was best positioned to have made."

Lemley argued that Gilstrap willfully refused to follow the Federal Circuit's instructions.  "Judge Gilstrap didn't conduct his own evaluation of the facts, he block quoted and cited Judge Davis' previous determinations," Lemley said.  "He afforded no weight to this court's opinion remanding the case, even though this court went out of its way to say it saw significant merit in the frivolousness claim."  Hughes seemed to agree.  Gilstrap's decision "seems to ignore our mandate from our prior decision," he said.

But "even if we all agree" that Adjustacam's litigation position was baseless, Hughes said, "that alone doesn't entitle you to an award of the fees.  After Octane Fitness, the district courts get large discretion to look at the case and say, 'Does this stand out from all the others?'"  Lemley urged Hughes and his colleagues to simply declare the case exceptional, but Reyna also sounded hesitant.  "We have a situation here that let's say that I would find exceptional," he said.  "But yet I'm faced with this very rigorous standard of review" on appeal.

Edmonds argued that Adjustcam had solid grounds for its claims, having recovered as much as $3.7 million from one defendant.  There were "legitimate strategic reasons unrelated to the merits of the case of why Newegg was dropped," Edmonds said.  But that argument presumes that Adjustacam had a reasonable infringement theory, Hughes said.  "And post-claim construction, how can you possibly show any reasonable claim of infringement?" he said.  The Federal Circuit pointed that out in its previous opinion, and Gilstrap dismissed it "with that one-line throwaway sentence" about hindsight, Hughes said.

He was just getting started.  "We ordered the court to look at it all again, under the new standards, under Octane," Hughes said.  "And the court didn't do that.  It said I'm just wholesale adopting these factual findings and I'm not going to change the outcome."  Edmonds disagreed with that characterization.  But even if Gilstrap had found Adjustacam acted unreasonably, "within his discretion he could still find it not to be an exceptional case."

NALFA Hosts CLE Program with Sitting Federal Judges

March 24, 2017

Today, NALFA hosted the CLE program “View From the Bench: Awarding Attorney Fees in Federal Litigation”.  This program featured a panel of sitting federal judges.  This is the third CLE program NALFA has hosted with an all-judicial panel of sitting federal judges. 

The U.S. District Court Judges, the Honorable Frederic Block, Senior Judge from the U.S. District Court for the Eastern District of New York and the Honorable David R. Herndon, District Judge from the U.S. District Court for the Southern District of Illinois, discussed a range of attorney fee and legal billing issues in federal litigation.  The panel addressed fee shifting cases, prevailing party issues, and fee calculation methods. The panel also took questions from the audience.

This live and remote CLE program was approved for CLE credit hours in California, Florida, Illinois, and Texas.  CLE credit hours are still pending in Ohio and Pennsylvania.  Over 75 attorneys from across the U.S. registered for this multi-state CLE program.  This 120-minute CLE program was recorded and is available for purchase on-demand.

NALFA Podcast with Law Professor Charles Silver

March 17, 2017

NALFA hosts a podcast series on attorney fee issues.  We talk with thought leaders, attorney fee experts, and attorney fee newsmakers who’ve helped shape and influence the jurisprudence of reasonable attorney fees.  NALFA interviews members, faculty, judges, law professors, in-house counsel, and others on a range of attorney fee and legal billing issues.

NALFA’s second podcast featured an interview with Charles M. Silver, Professor of Law at the University of Texas at Austin School of Law.  The NALFA podcast with Professor Silver focused on his empirical research on the setting of attorney fees in securities class actions and economic principles at play in civil litigation.  The podcast discussion centered on fee calculation methods, judicial procedure for awarding fees, and private contingency fee agreements. 

Professor Silver also discussed the politics of class actions and the dynamics of the tort reform lobby.  In addition, Professor Silver also offered several recommendations for the class action world, including employing a more real world, market based approach to awarding fees in class actions.

“These podcasts are the perfect broadcast format to discuss attorney fee and legal billing issues,” said Terry Jesse, Executive Director of NALFA.  “In addition to his research, Professor Silver talked about a range of issues including the creation of a data set for judges to draw upon when awarding fees, fee allocation issues in MDLs, and setting attorney fees early in the class action process,” Jesse said.  Click on the link below to listen to the NALFA podcast:

https://soundcloud.com/thenalfa/nalfa-podcast-with-law-professor-charles-m-silver

Federal Circuit: EAJA Fee Awards Must Use Local Rates

March 16, 2017

A recent Law 360 story by Chuck Stanley, “Fed. Circuit Says EAJA Legal Fees Must Use Local Costs,” reports that awards for attorneys’ fees under the Equal Access to Justice Act (EAJA) must be calculated based on the location where the work was done, a Federal Circuit panel said in a precedential ruling.

The federal circuit rejected a veteran’s widow’s claim that ambiguity in the statute allows her to adjust upward the hourly rate for calculating attorneys’ fees in a benefits suit based on the consumer price index (CPI) in Washington, D.C., where the case was heard but little other work was done.

Instead, the panel ruled that Paula Parrott should have provided individual rates for work done in Dallas, San Francisco and Washington in order to win an adjustment from the statutory rate of $125 per hour, rather than using the CPI for a single city or the national CPI to calculate a single rate.

The decision upheld the Veterans Court’s decision to award Parrott fees based on the statutory rate because she failed to provide rates for each city where work had been done on the case.

“We think the local CPI approach, where a local CPI is available … is more consistent with EAJA than the national approach.  We therefore hold that the Veterans Court did not err in ruling that the local CPI approach represented the correct method of calculating the adjustment in Ms. Parrott’s attorney’s hourly rate,” the decision states.

Parrott had claimed more than $7,200 in legal expenses in a suit over benefits for her husband, a deceased veteran, based on an upward adjustment from the statutory hourly rate based on the cost of living in Washington, D.C.  Language in the EAJA, which provides for an award of attorneys’ fees to victorious parties fighting agency action, stipulates that a $125 cap on hourly rates can be adjusted upward due to an increase in the cost of living.

But Parrott argued the statute is ambiguous regarding the method used to calculate such an increase.  She further claimed the Veterans Court was obliged to accept her cost estimate because ambiguity in a statute related to veterans benefits must be construed in favor of the veteran.

However, the panel ruled the EAJA is not ambiguous because using the national CPI rather than local numbers would incentivize more attorneys to accept cases challenging government agencies in low-cost areas rather than pricier areas.  Further, the panel found Parrott’s claim the Veterans Court was required to side with her is not applicable to the EAJA since it is not a veterans benefit statute, but applies to all litigants against executive agencies.

The case is Parrott v. Shulkin, case number 2016-1450, in the U.S. Court of Appeals for the Federal Circuit.

Attorney Fees Not Subject to Damages Cap in Wage Case

March 8, 2017

A recent Legal Intelligencer story by Zack Needles, “Attorney Fees Not Subject to Damages Cap in Wage Case, Court Says,” reports that attorney fees can be awarded under the Pennsylvania Wage Payment and Collection Law (WPCL), even if they cause the total recovery to exceed a voluntary $25,000 damages cap, the Pennsylvania Superior Court ruled in a case of first impression.

Under Pennsylvania Rule of Civil Procedure 1311.1, a plaintiff can elect to limit the maximum amount of damages recoverable to $25,000 in exchange for looser evidence admission requirements at a trial following compulsory arbitration.  In a published opinion in Grimm v. Universal Medical Services, a three-judge Superior Court panel unanimously ruled that such a cap does not preclude an award of attorney fees under the WPCL that pushes the total recovery above $25,000.

The decision affirmed a Beaver County trial court's award of $43,080.66, comprising an $11,683.92 jury award, plus $2,920.98 in liquidated damages and $28,475.76 in attorney fees and costs under the WPCL.  The appeals court upheld Beaver County Court of Common Pleas Judge James J. Ross' ruling, which reasoned that attorney fees in excess of the damages cap should be permitted because "a prevailing plaintiff in a [WPCL] claim must be made whole and not be required to expend his or her award to pay his or her attorney."

Judge John T. Bender, writing for the Superior Court, agreed with Ross' rationale, noting that Rule 1311.1 is intended to streamline litigation in order to make it more economically feasible for plaintiffs, while the WPCL is meant to allow plaintiffs to collect unpaid wages and compensation without having to spend their entire recovery on legal fees.

"In this way, both Rule 1311.1 and the WPCL aim to make litigation more accessible and affordable to aggrieved litigants, particularly those with meritorious claims," Bender said.  "In this case, we believe we are promoting this overarching policy by interpreting 'damages recoverable' in Rule 1311.1(a) to exclude attorneys' fees under the WPCL."  Bender was joined by Judges Mary Jane Bowes and Carl A. Solano.

In Grimm, plaintiff Jeffrey P. Grimm sued defendants Universal Medical Services Inc. and Roderick K. Reeder, alleging breach of contract against Universal for failure to reimburse business expenses and a WPCL claim against both defendants on the same basis, according to Bender.

The case proceeded to compulsory arbitration, with an award in favor of the defendants.  Grimm appealed to the Beaver County Court of Common Pleas, electing to cap damages at $25,000 under Rule 1311.1, and the case proceeded to a jury trial, Bender said.

The jury awarded damages to Grimm in the amount of $11,683.92 and, finding that Universal acted in bad faith in failing to reimburse him, the court added 25 percent, or $2,920.98, to the jury award, resulting in a total of $14,604.90, according to Bender.  Grimm then sought attorney fees in the amount of $25,946.25 and litigation costs in the amount of $2,529.51 under the WPCL.

While the defendants argued that the phrase "damages recoverable" in Rule 1311.1 encompassed attorney fees, Grimm contended that attorney fees are payments in addition to a jury award intended to make the plaintiff whole.

Bender noted that Ross, in his analysis, looked first at the analogous 2001 Pennsylvania Supreme Court case Allen v. Mellinger, in which then-Justice Ralph Cappy wrote in a concurring and dissenting opinion that delay damages in cases involving bodily injury, death or property damage under Pa.R.Civ.P. 238 should not be subject to the statutory cap of $250,000 when the state is a defendant in a bodily injury claim.

In the 2005 case LaRue v. McGuire, as Ross also noted in his opinion, the Superior Court relied on Cappy's reasoning in Allen to find that delay damages under Rule 238 were not subject to the Rule 1311.1 damages cap.

While the defendants attempted to distinguish Grimm from Allen and LaRue by arguing that delay damages are an extension of compensatory damages intended to make the plaintiff whole, while attorney fees serve no such purpose, Bender disagreed.

"It is clear that the award of attorneys' fees under the WPCL accomplishes the purpose of making a plaintiff whole, just like the delay damages in Allen and LaRue," Bender said.

When Someone Else Pays the Legal Bills

March 7, 2017

A recent CEBblog article by Julie Brook, “When Someone Else Is Paying Your Fees,” writes about when a third party pays some of all of your legal fees in California.  This article was posted with...

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