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Category: Fee Dispute Litigation / ADR

Law Firms Win Suit Over Pelvic Mesh Attorney Fees

March 27, 2020

A recent Law 360 story by Bill Wichert, “NJ, Texas Law Firms Beat Suit Over Pelvic Mesh Atty Fees,” reports that a New Jersey federal judge nixed a proposed class action against Potts Law Firm, Nagel Rice LLP and other firms over allegedly excessive attorney fees in pelvic mesh litigation against Johnson & Johnson and its Ethicon unit, saying Texas law governed the claims and permitted the fees.  U.S. District Judge Madeline Cox Arleo granted the firms' motions to dismiss an amended suit from plaintiffs Debbie Gore and Doris Lance-Smith over claims their retainer agreements ran afoul of a New Jersey rule capping contingent fees, noting that the fees were paid as part of settlement awards approved by a special master and a state judge in the Lone Star State.

The Garden State rule "does not apply and the fees awarded to defendants were entirely consistent with Texas law," Judge Arleo said in her written opinion.  The fee arrangements allowed the women's lawyers to receive 40% of their settlements, but Texas law has no particular cap on contingent fees, the judge said.  Under the New Jersey rule, an attorney can collect a fee of 33.33% of the first $750,000 recovered and then smaller percentages for subsequent amounts, and those fees must be based on the "net sum recovered" after deducting expenses.

Gore and Lance-Smith cited no authority for extending that rule "to litigation settled in a foreign court by out-of-state lawyers representing out-of-state plaintiffs who sustained injuries outside of New Jersey," according to the judge's opinion.  Nagel Rice, which is based in New Jersey, did not receive any of the fees in question, but Potts and other Texas firms did, the opinion said.

Gore, a Texas resident, and Lance-Smith, an Alabama resident, both retained Texas firms to pursue claims they suffered injuries from allegedly defective pelvic mesh products, the opinion said.  Lance-Smith retained Potts in June 2012 to litigate such claims, the opinion said.  The following May, Gore retained a firm then known as Steelman & McAdams PC and partner Annie McAdams to pursue similar claims, the opinion said.

About two months later, Gore agreed to McAdams working and splitting attorney fees with a firm then known as Bailey Perrin Bailey LLP, the opinion said.  In July 2014, Gore and Lance-Smith each filed a master short-form complaint in New Jersey state court "as part of the New Jersey iteration of the mesh litigation," the opinion said.  Nagel Rice and firm partner Andrew L. O'Connor were listed as the women's attorneys, with Potts and firm partner Derek Potts listed as co-counsel, the opinion said.

Those complaints represent the only connection in the current matter to New Jersey, but beyond them being filed, state dockets indicate that "no litigation activities occurred" and that those matters are now closed, Judge Arleo noted.  The settlements and fee awards at issue stem from a master settlement agreement reached in August 2016 between Potts Law Firm, among other firms, and J&J and Ethicon, the judge said.  That deal was administered through a Texas state court case, the judge said.  Judge Arleo pointed to that Texas link in finding that that state's law governed the proposed class action.

The judge noted that "the complex settlement process, which plaintiffs consented to after ample opportunity for objection, was reached by negotiations between Ethicon and Texas law firms and was administered by the Texas state court and a Texas special master."

"Indeed, no New Jersey law firms or lawyers were even listed as receiving contingency-based attorneys' fees as part of plaintiffs' settlements," the judge said.  "As such, the state with the most-significant relationship to the substantive claims at issue is Texas."

Adam M. Slater of Mazie Slater Katz & Freeman LLC, representing Gore and Lance-Smith, on Wednesday said they would appeal the judge's decision.  "When a case is filed in New Jersey, the New Jersey Court Rules apply, including the contingency fee rule.  According to this decision, the New Jersey contingency fee rule can be easily side stepped, allowing personal injury plaintiffs to be charged 40% contingency fees, in an MDL or any other New Jersey case," Slater told Law360.

$6.8M Chinese Drywall Fee Allocation Dispute Heads to Arbitration

February 26, 2020

A recent Law 360 story by McCord Pagan, “Firm in Chinese Drywall MDL Must Arbitrate $6.8M Fee Tussle,” reports that a Louisiana federal judge has sent part of a $6.8 million fee dispute stemming from a settlement over allegedly defective Chinese drywall to arbitration, finding some of the firms making competing claims had agreed to arbitrate disputes in their co-counsel agreement.  U.S. District Judge Eldon Fallon granted the motion from Art Edge PC to invoke arbitration in the fee dispute between the Bryson Group of law firms and Collins Group of law firms — of which Art Edge is a member — that represented certain homeowners in the multidistrict litigation, according to an order signed Feb. 18 and entered Feb. 20.

In Judge Fallon’s order, he ignored arguments from the Bryson Group that it should get more than $1 million of the $6.8 million, as well as an argument from one of the Collins Group firms that it's entitled to all of the fee award, which it suggests it would use to honor its co-counsel agreement.  Yet on the arbitration issue, Judge Fallon sided with Art Edge, saying the firms did, in fact, agree on how to address any dispute arising from their co-counsel arrangement.

“The parties’ intention to arbitrate disputes such as this one could not be more clear,” Judge Fallon wrote.  The co-counsel agreement between the two groups of firms was created in 2009 in order to represent 174 homeowners in the massive Chinese drywall multidistrict litigation.  The $6.8 million at issue comes from a $1.1 billion settlement from Knauf Gips KG and a subsequent $111 million attorney fee award over the defective drywall.  The fee award dispute was sent to the court by the claims administrator when the firms couldn’t agree on the proper distribution.

Art Edge, a member of the Collins Group of law firms, had argued the Bryson Group didn’t fulfill its side of the representation agreement.  More specifically, Art Edge said most of the Bryson Group’s work was done by paralegals, and that it didn’t inform the other firms of any settlements or negotiations, among other things.  The Bryson Group includes Whitfield Bryson & Mason LLP, Rhine Law Firm PC, Pendley Baudin & Coffin and Luckey & Mullins PLLC, according to the filing.  The Collins Group includes the Collins Law Office — also known as Collins & Horsley PC — and Art Edge PC and Gentle Turner Sexton & Harbison LLC, according to the order.

At the same time, William Brian Collins of Collins & Horsley asked for the entire $6.8 million fee award he said the firm deserves for its work on the cases, which Art Edge and the Bryson Group opposed.  Art Edge and the Collins law firm are involved in a secondary fee dispute which at least partially involves fees from the Chinese drywall case, according to the order.

To make matters more complicated, another firm is involved and seeking its cut of the $6.8 million fee award.  The Law Offices of Joseph Buffington LLP is arguing it has a fee interest in several of the cases due to parallel co-counsel and fee-sharing agreements with members of both the Collins and Bryson groups, namely Whitfield Bryson & Mason and Collins' law firm.

Article: The Need For Attorney Fee Expertise

February 20, 2020

A recent AI article by John D. O’Connor, “The Need For Attorney Fee Expertise (pdf),” reports on the need for attorney fee expertise to prove reasonable attorney fees and proper billing practices in underlying litigation.  This article was posted with permission.  The article reads:

Most corporate clients today have access to excellent litigation counsel in each particular area of concern.  However, as attorney fee disputes are increasingly becoming a by-product of the main litigation event, few clients and few otherwise excellent litigators truly understand when and how to use attorney fee experts.

Although the “American Rule” provides that each litigating party bears its own fees, there are exceptions to this rule.  Successful class actions; employment and governmental discrimination cases; eminent domain suits; RICO claims; and other cases result in legally-sanctioned attorney fees claims.  Promissory notes, guarantees, real estate purchase agreements, and corporate acquisition contracts often contain attorney fee clauses.  High-stakes insurance coverage litigation usually features a battle over fees incurred in the underlying case(s).  It is common for a case with a small monetary award to result in an extremely high request for fees.

Typically in fees proceedings, the party with a claim to fees files a motion detailing the amount it requests, accompanied at a minimum by a Declaration of the main litigating attorney attaching a statement of his billings, detailing hours and rates for which payment is sought.  The main billing attorney will normally justify the requested billing rate, which can be his actual rate or a rate claimed to be prevailing in the community for one of similar skill and experience. The motion, usually accompanied by a brief summarizing the law of fees in that type of case, includes the statutory or contractual authority for same.

When the responding party files its submission, the contours of the ultimate dispute take shape.  It is common for the respondent to challenge the billing rates as unduly high; the number of lawyers assigned as excessive; the hours spent as inefficient; the number and length of conferences and meetings as unnecessary; the billing form as improperly “blocked” and “vague” in description; many of the tasks billed as being unwisely or improvidently chosen; certain work as not related to prevailing claims; and generally excessive fees for the type of litigation involved.  Often this opposition is accompanied by a request for limited discovery regarding fees.

As objections are detailed in various cases, the challenging lawyer is usually able to write an impressive brief in support.  These objections can be made without an expert witness, except as to prevailing billing rates, which the responding lawyer is qualified to opine.  The responding party will have made a serious mistake, however, if it did not bolster its objections with a detailed opinion of an experienced fee expert.  Often, the reviewing Court has witnessed the work of the petitioning lawyers and formed a positive opinion of them. Indeed, the reviewing Court in the underlying case would often have ruled in favor of the petitioner and against the respondent.  Even if not, the respondent must labor against the human assumption that established, competent lawyers have billed in accordance with community standards.

However, surprisingly, it is common for responding parties to put forth objections without an expert.  We have seen cases where fees sought into eight figures, where no expert has been retained, with unenviable results. Most experts have the capability of presenting a computer analysis isolating hours and tasks, which can claim to isolate amounts of “block” entries, incompensable “clerical” time, and other practices.  Such a presentation, though, is often superficial, and may not impress a reviewing Court seeking a principled basis upon which to reduce fees for the prevailing party.

Whatever the case, any attack on the requested fees should call for a rebuttal by a qualified attorney fee expert on behalf of the petitioner.  However, this guideline is frequently observed in the breach.  Even if the Court had been inclined to a favorable opinion of the petitioning firm, even a superficial attack on the petitioning lawyers’ fees can be facially effective, and thus the petitioner would need to blunt effectively any such attack.

A qualified expert can help by suggesting needed discovery from the responding party of information regarding that party’s billings which supports the petitioner’s request.  More importantly, an expert employed correctly will go beyond the glittering generalities put forth in these disputes.  They would show why a particular billing rate is justified with specific reference to specific firms doing nearly identical work or why a particular task was necessarily and properly time-consuming.

Most reviewing Courts are experienced at resolving factual disputes based on a presentation of specific compelling facts.  A wise litigation party, in short, should employ an expert to do just that. 

John D. O’Connor is a NALFA member and the Principal of O’Connor & Associates in San Francisco.  For more on John D. O’Connor, visit www.joclaw.com.

Hotel Group Seeks Attorney Fee Reductions

February 7, 2020

A recent Law 360 story by Kelly Zegers, “Hotel Wants Four Seasons’ $1M Atty Fee Request Slashed,” reports that Burton Way Hotels Ltd. asked a California federal court on to slice by more than half Four Seasons Hotels Ltd.'s requested $1 million in supplemental attorney fees and interest, accusing the hotel owner of overstaffing and overcharging in an arbitration suit.  Burton Way, which owns a Four Seasons-branded hotel, said although Ontario-based Four Seasons Hotel requested fees amounting to $1.38 million including prejudgment interest, it should be awarded no more than $476,800.

It is also calling for the court to completely deny about $219,000 in prejudgment interest on an arbitration panel's award in a contract dispute in which Burton Way claimed Four Seasons breached their deal for exclusive use of the hotel brand at the Beverly Wilshire hotel.  "Some of the attorneys' fees that Four Seasons seeks to recover are patently unreasonable and unnecessary," Burton Way said.

That included staffing nine attorneys who spent more than 1,000 hours on proceedings with a narrow scope, Burton Way said.  That led to "duplicative" work that wasn't proportionate to the litigation, Burton Way said.  Additionally, Burton Way said there is no justification for Four Seasons to pay a paralegal $420 per hour, triple the rate of other courts in the district.

The hotel company also said Four Seasons sought legal fees from its post-arbitration efforts to undermine injunctive relief the arbitration panel granted Burton Way, which outlined where the Four Seasons' logo could appear at the Beverly Wilshire hotel after the panel found that the brand name was misused.  Four Seasons' pursuit of a motion to correct how the arbitration award addressed font sizes racked up more than $300,000 in fees, Burton Way said.  The requested fees also included some $19,000 for failure to comply with the court's page limits, which Burton Way said it shouldn't have to pay.

Fee Allocation Dispute in Antitrust Case in Seventh Circuit

January 15, 2020

A recent Law 360 story by Celeste Bott, “Attys Spar Over Fees From Antitrust Row at 7th Circ.,” reports that a Seventh Circuit panel took issue with an attorney’s arguments that the allocation of attorney fees from an underlying case should have been settled in arbitration and that Cozen O'Connor wasn’t entitled to its share of a $4 million deal for representing that attorney in the fee dispute.  Judges Amy J. St. Eve, Diane P. Wood and Ilana Rovner said attorney Michael Needle appeared to waive arbitration, noting that he didn’t move to compel it and had previously stated that the district court was the proper forum to resolve all claims in a dispute over a $4.2 million settlement fund.

“How can you come in and argue now there’s no jurisdiction because it should have gone to arbitration, when you argued the opposite in the district court?” Judge St. Eve asked.  The panel heard argument in two related cases, both stemming from a Racketeer Influenced and Corrupt Organizations Act case alleging that International Profit Associates Inc. and its affiliates bilked small businesses into buying expensive but useless consulting.

Needle and Merle L. Royce were co-counsel on a contingent fee basis representing 16 plaintiffs in the RICO case, and in 2013 obtained a $4.2 million settlement, then disagreed over the fees for their work, according to court documents.  Cozen O'Connor represented Needle in the fee dispute and later sought a lien to get paid.

After the settlement, Royce said the fees should be limited to one-third of the settlement proceeds, while Needle sought a much larger sum of $2.5 million, according to briefs in the case.  In 2015, Royce filed an interpleader complaint to determine how the fees should be allocated, and a lower court ruled that the pair were entitled to one-third of the settlement, with 60% to Needle and 40% to Royce.  Needle argued on appeal that the fee dispute should have been decided in arbitration under a binding mediation provision in the fee agreement.  That provision means there’s no jurisdiction to proceed, said Frank C. Fusco, arguing for Needle.

The judges pushed back on that argument and against Needle’s assertion that he was wrongfully sanctioned for asking for an extension that was ultimately granted.  They said he waited “until the last minute” and that the district court had the right to grant him extra time yet still find his actions sanctionable.

Alan R. Borlack of Bailey Borlack Nadelhoffer & Carroll, arguing for Royce, said the sanctions were warranted, noting that even the lower-court judge had said he had “never encountered” anyone so “unrelentingly obstructionist” as Needle in more than six decades of practicing law.  Needle had asked for the added time allegedly because he had failed to file time sheets and was seeking a transcript from a status hearing, Borlack said.

“These were disingenuous reasons for an extension,” Borlack said.  “This case goes to whether a district court can have control of a courtroom so it can administer justice.”  And in the Cozen O'Connor appeal, Fusco told the panel the firm was wrongfully granted a lien because the fee agreement didn’t provide for compensation if the firm withdraws, and that the firm’s work didn’t help Needle recover funds.