Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Dispute Litigation / ADR

Fee Allocation Dispute in MDL Moves to Texas Court

July 24, 2017

A recent Law 360 story by Michelle Casady, “RI Atty Must Face Fee Dispute Suit in Texas, Court Affirms,” reports that Texas' Fifth Court of Appeals affirmed a trial court's ruling in a fight between two plaintiffs firms, holding a Rhode Island-based attorney and his firm will have to face litigation in Texas stemming from a fee-sharing agreement with a Texas attorney and his firm.

John E. Deaton and Deaton Law Firm LLC had argued the trial court wrongly refused to dismiss him and his firm from the dispute with Texas attorney Steven M. Johnson and his firm, Steven M. Johnson PC.  Deaton, who served as local counsel for Johnson's firm in multidistrict litigation over alleged injuries from hernia mesh made by C.D. Bard Inc. subsidiary Davol Inc., argued he shouldn't have to litigate the fee dispute in Texas.

Johnson — who negotiated a global settlement for nearly 200 mesh cases the lawyers had worked on together — had argued that when Deaton signed a stipulation of nondisclosure related to the settlement amounts for Johnson's clients, Deaton became bound by the terms of the underlying attorney representation agreements Johnson signed with his clients, which stated disputes would be arbitrated in Texas.  That includes the agreement with Louisiana resident Rickie Patton, he argued.

Deaton, who argued his role in the case is defined by his fee-sharing agreements with Johnson that contain no arbitration clause, has claimed Johnson failed to pay him 5 to 10 percent of fees earned as part of the global settlement Johnson negotiated.

The Fifth Court of Appeals held that all of the Johnson law firm attorney representation agreements, including the one with Patton, contained clauses that disputes would be arbitrated in Texas.  The court rejected Deaton's argument that he wasn't a signatory to Patton's attorney representation agreement.

“We conclude that, by undertaking to represent Patton as 'associate counsel' under the attorney representation agreement and reaffirming his status by signing the stipulation as to nondisclosure, Deaton consented to personal jurisdiction in Texas under the terms of the attorney representation agreement,” the court wrote.

Deaton served as local counsel on 174 hernia mesh cases for Johnson in Rhode Island state court over a period of eight to 10 years, and worked on one case, Patton's, in federal court.  That case was initially filed in the Southern District of Texas but was transferred to Rhode Island District Court for pretrial proceedings.  Deaton hired a Texas expert witness for the Patton case, which would have been tried in Texas had it not been for the global settlement.

In oral arguments before the appellate court in May, an attorney for Deaton said while he had recommended the expert, it was Johnson who hired and paid the witness and Deaton never visited Texas during that time.

But Johnson's attorney told the panel Deaton spent eight years working on a Texas federal case, establishing jurisdiction in Texas for the fee dispute.  Although the Patton case's original pretrial proceedings were in Rhode Island, Deaton's pretrial work was all aimed at a trial in Texas, and he had availed himself of the protections of the state.

NALFA’s Fee Dispute Mediation Program Achieves 86% Success Rate

July 19, 2017

NALFA’s Fee Dispute Mediation Program is the nation’s only program devoted exclusively to resolving attorney-client fee disputes.  NALFA’s Fee Dispute Mediation Program recently reached an achievement:  Since the program began, NALFA’s Fee Dispute Mediation Program has achieved an 86% success rate—parties who mediate in a session are resolved six out of every seven times.  This rate is significantly higher than most bar-administered fee dispute programs.  NALFA has settled over $5 million in disputed attorney fees between parties in over 40 cases.  The cases were brought by corporate clients and law firms ranging from fee disputes of $32,000 to $975,000 from across the U.S.  One fee dispute case was from the UK.

Attorney fee disputes are the result of a breakdown in the attorney-client relationship.  This breakdown may be a misunderstanding in the fee agreement or confusion over the law firm billing records.  Whatever the cause, mediation is the quickest, simplest, and most cost-effective way to resolve these attorney fee disputes.  NALFA fee dispute program is a private mediation service specifically designed to resolve attorney fee disputes of all types and sizes.

NALFA's fee dispute mediators are uniquely qualified to resolve fee disputes between parties in a cost effective and confidential manner.  These fee dispute mediators are trained neutrals who understand the underlying issues in fee and billing dispute matters.  Our fee dispute mediators are highly knowledgeable on reasonable attorney fees and proper legal billing practices.  They understand the array of issues in fee dispute cases such as fee agreements, hourly rates, billing practices and attorney fee ethics.

Unburden by bar association rules, NALFA provides parties with a mediation process that is flexibility, responsive and cost-effective.  Parties control when and where the mediation will occur, who will serve as the mediator, and whether they will accept a settlement offer.  Unlike most bar-administered programs, NALFA stays with the fee dispute case as long as necessary to bring it to a resolution.

"Our 86% success rate belongs to the outstanding work of our members, some of the nation's top rated fee dispute mediators," said Terry Jesse, Executive Director of NALFA.  "Their understanding of fee issues and their mediation skills are the reason we're celebrating this achievement," Jesse concluded.

Texas High Court to Hear $7.2M Fee Dispute

June 26, 2017

A recent Texas Lawyer story by John Council, “Texas High Court Picks Up Oil Family’s $7.2M Attorney Fee Fight,” reports that one of Dallas' wealthiest families has frustrated federal courts with their bitter trust fund dispute for nearly a decade.  Now the Texas Supreme Court wants to jump in with a $7.2 million attorney fee dispute.

Hunt v. Hill involves a fight between the heirs of the Hunt family's oil fortune.  The case was settled in a U.S. District Court in Dallas in 2010 but continues to live on in numerous federal appeals over the distribution of trust funds and fee disputes among family members and their attorneys.  The Texas high court recently decided to hear one such fee dispute, Albert G. Hill Jr. v. Shamoun & Norman.

In this case, Dallas' Shamoun & Norman sued former client Albert G. Hill Jr. in state court alleging he owed them a multimillion-dollar "performance incentive bonus" for helping settle Hunt v. Hill.  But Hill countered he never signed a contract agreeing to pay that attorney fee.

A Dallas jury later awarded Shamoun & Norman $7.2 million in attorney fees under the theory of quantum meruit for the reasonable value of the services it rendered to settle those suits.  But the trial court set aside the jury's verdict and rendered a take-nothing judgment in Hill's favor — a decision the Fifth Court of Appeals reversed.

Hill appealed the verdict arguing he shouldn't have to pay for a bonus that was never put in writing.  The Texas Supreme Court agreed June 16 to hear the case to determine whether attorneys can recover fees under the theory of quantum meruit if their oral contract is unenforceable.

The opposing parties will bring two of the biggest guns in Texas appellate law with them to the high court's oral arguments.  Shamoun & Norman is represented by former Texas Supreme Court Justice Wallace Jefferson, who is now a partner in Austin's Alexander Dubose Jefferson & Townsend.

Hill is represented by James Ho, a former Texas solicitor general and partner in the Dallas office of Gibson Dunn & Crutcher, who's mentioned as a potential candidate for the U.S. Court of Appeals for the Fifth Circuit.

"This lawsuit exemplifies why so many Texans have such disdain for lawyers.  Texas law prevents attorney fraud and abuse by requiring lawyers to reduce contingency fee agreements to writing," said Ho, who has lined up considerable amici support for Hill's position.  "It is a simple requirement, and we agree with the district judge, the solicitor general, and the business community that it should be enforced, not nullified by lawsuits like this."

Texas Supreme Court Rules in $42M Contingency Fee Dispute

June 19, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court Nixes New Trial in $42M Attys’ Fee Row,” reports that the Texas Supreme Court sided with the owner of a water supply company who argued a trial court wrongly stripped away a jury verdict in his favor and awarded his former attorneys a new trial in a contingency fee dispute in which the lawyers argued they were entitled to $42 million in damages.
 
Dean Davenport was granted state high court review in February after arguing it was an abuse of the trial court's discretion to order a new trial 105 days after the jury returned its verdict in his favor, finding that solo practitioners Thomas C. Hall and F. Blake Dietzmann were not entitled to a stake in his company.  In October 2013 the jury rejected the attorneys' claims they were entitled to the damages stemming from an underlying suit in which Davenport won full ownership of the water supply company.

In its opinion, the court concluded that the agreement is unambiguous in stating the lawyers are only entitled to fees from a monetary recovery, and it directed the trial court to vacate its new trial order and render final judgment in favor of Davenport.  The court wrote that it did not believe the new trial order was “issued for valid reasons.”

“After examining the agreement’s language, we find no support for the lawyers’ assertion.  The contract unambiguously allows for Hall and Dietzmann to only recover money in exchange for their legal services,” the court held. “ ... The court must read contractual provisions so none of the terms of the agreement are rendered meaningless or superfluous.  But the lawyers request that we infer a positive from a clear negative.”

In a concurring opinion, Justice Jeffrey Boyd wrote that he concludes the agreement is ambiguous because it can “reasonably support” the position of both parties, explaining the trial court erred by deciding the agreement unambiguously entitles the attorneys to a stake in the company and that the Texas Supreme Court erred by holding it unambiguously does not.

“Instead, the agreement’s meaning presents a jury issue.  The trial court was initially correct to submit it to the jury, and the jury found that the agreement does not require the client to give the attorneys the [Water Exploration Co.] interests,” the concurring opinion reads.  “I join the court’s judgment ordering the trial court to vacate its new-trial order and enter judgment for the client, but I would order the trial court to enter the judgment based on the jury’s verdict, not because the agreement unambiguously favors the client as a matter of law.”

Hall and Dietzmann filed suit in February 2012, claiming that after the settlements in the underlying suit, because Davenport was “paid” through his former partners' ownership interests in Water Exploration Co. Ltd., they were owed a percentage of the company instead of the approximately $400,000 Davenport paid them in December 2009.  They sought about $24.6 million in damages, equivalent to what they said would be the current value of their alleged ownership interest in WECO, plus $18 million in punitive damages.

But the jury found that Davenport's contingency fee agreement with the two attorneys did not include a potential ownership stake in WECO, and found the attorneys had waived their rights to seek ownership of WECO and were each estopped from trying to claim a stake in the company.  Jurors also found both attorneys complied with their fiduciary duties to Davenport.

When an appellate court in March 2015 directed the trial court to provide reasoning for vacating the jury's verdict, Judge Peter Sakai responded that the parties' agreement unambiguously provided the fees would be paid out of the ownership in any business recovered, and that the jury's verdict wasn't supported by evidence.

The case is In re: Dean Davenport et al., case number 15-0882, in the Texas Supreme Court.

Four Season’s $11M Fee Dispute in Arbitration

June 5, 2017

A recent the Law 360 story by Natalie Olivo, “Four Seasons Hotel’s $11M Fee Spat Sent to Arbitration,” reports that the owners of a Four Seasons-branded hotel in Los Angeles will have to arbitrate their request for the hotel chain to return an award of nearly $11 million in legal fees stemming from a contract dispute over split loyalties, after a California judge cited the companies’ arbitration agreement.

In sending Burton Way Hotels LLC’s fee request to arbitration, U.S. District Judge Philip S. Gutierrez noted that Ontario-based Four Seasons Hotels Ltd. has contended that the parties’ arbitration agreement covers the fee request, which should be decided by a new arbitration panel.  In addition, Judge Gutierrez said, Burton Way has indicated that it was also willing to have the fee request decided in arbitration.

“In light of the clear language in the parties’ arbitration agreement providing for the arbitrators’ power to adjudicate the questions presented in Burton Way’s fees motion, and the parties’ mutual agreement to bring the fees motion before the new arbitration panel, the court concludes that the fees motion is to be decided by the new arbitrators pursuant to the parties’ arbitration agreement,” Judge Gutierrez said.

The award at issue was handed down in underlying arbitration that dismissed Burton Way’s claims accusing Four Seasons Hotels of breaching their deal for the exclusive use of the brand and ordering Burton Way to pay Four Seasons $10.2 million in fees and costs.  However, after the Ninth Circuit vacated the award in October, Burton Way sought to have the payment returned, saying it is now owed more than $10.9 million with interest.

Neal Marder, an Akin Gump Strauss Hauer & Feld LLP attorney representing Burton Way, told Law360 that "we advised the court that Burton Way was comfortable with the panel deciding this issue so the decision was welcomed and not unexpected."

The dispute over Four Seasons' decision to manage and operate the nearby Regent Beverly Wilshire Hotel, which Burton Way says is a direct competitor, has been barreling back toward arbitration at least since Judge Gutierrez refused Burton Way's bid last month to void an agreement to arbitrate the dispute over a licensing deal under which Four Seasons has managed the Burton Way-owned Four Seasons Hotel Los Angeles since the late 1980s.

Burton Way had claimed the arbitration agreement was void because the hotel owner agreed to it only if a certain judge — who recused himself in January under a request from Burton Way alleging improper ex parte communications — was involved in the arbitration.  But Judge Gutierrez instead ruled that the provisions did not reference the judge in a way that would render the agreement void now that he has recused himself.

Following Judge Gutierrez’s order declining to void the agreement, the parties have squared off over remaining issues in the dispute.  Four Seasons in April told the court that Burton Way could not relitigate the entire contract case, arguing that the Ninth Circuit issued a very limited mandate for still-live issues to be contested when the case returns to arbitration.

According to Judge Gutierrez’s order, Four Seasons had noted that Burton Way’s fee request depends on a determination of which party is the “prevailing party, which is a question reserved for the arbitrators.

While Burton Way had also agreed to arbitrate its fee request, the company claimed that Four Seasons was trying to keep the district court from ruling on the fees motion on the grounds that it has no jurisdiction under the parties’ arbitration agreement, while at the same time asking the court to rule on the scope of the Ninth Circuit’s order, rather than allowing both issues to be arbitrated.

The case is Burton Way Hotels Ltd. et al. v. Four Seasons Hotels Ltd., case number 2:11-cv-00303, in the U.S. District Court for the Central District of California.

Five Tips for Fee Agreement ADR Clauses

April 4, 2017

A recent The Recorder article by Randy Evans and Shari Klevens, “5 Tips for Fee Agreement ADR Clauses,” address ADR clauses in fee agreements.  This article was posted with permission.  The...

Read Full Post