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Category: Fee Dispute Litigation / ADR

Fee Allocation Dispute in BNY Mellon Settlement Can Be Litigated

September 20, 2019

A recent Law 360 story by Chris Villani, “Atty Can Sue for Fees in BNY Mellon Settlement, Judge Rules,” reports that a dispute between Bailey & Glasser LLP, the Howard Law Firm and McTigue Law LLP over a $3 million fee following a $10 million settlement with Bank of New York Mellon Corp. sounds like a breach of contract case to a Massachusetts judge, who invited McTigue on Thursday to sue if it wanted.  Chief U.S. District Judge Patti B. Saris said that, in approving the $3.33 million fee award for the lawyers representing a class of trustees who sued BNY Mellon over alleged excessive charges, she would not resolve a long-running dispute between the lead class attorneys and a lawyer for the named plaintiff in the case.

During a hearing earlier this month in her Boston courtroom, Judge Saris heard arguments from McTigue Law that it was entitled to a 20% cut of the fee under the terms of a co-counsel agreement between McTigue, Bailey & Glasser and Howard Law.  The latter two firms said McTigue violated that pact and should not get the 20% share, and Judge Saris invited McTigue to sort the issue out through a new suit.

“McTigue Law’s motion essentially raises a breach of contract claim against lead plaintiff’s counsel,” Judge Saris wrote in a brief order.  “The court did not resolve that claim in its ruling on lead plaintiff’s motion for attorneys fees and expenses.”  Judge Saris said she would deny McTigue’s motion for a 20% cut without prejudice to a separate breach of contract suit.

The order clarified Judge Saris’ more lengthy Wednesday order giving her blessing for the fee, after which a McTigue representative told Law360 it did not believe the judge’s fee award prevented the firm from going after Bailey & Glasser and Howard Law for the cut it believes it rightfully deserves.  The class of trustees reached a settlement with BNY Mellon in March on the eve of trial, but the accord with the bank did little to stem the disagreements between two class counsel firms and Brian McTigue, the personal lawyer for class representative Ashby Henderson.

Bailey & Glasser and Howard Law told the judge in their fee request that McTigue's firm "did not benefit the class, but rather caused disruption, delay and confusion."  McTigue countered by saying he performed "significant and material work" on the case and argued his cut was agreed to in 2016, when the firms signed a contract stating he “will be apportioned 20% of the lodestar work, awarded 20% of the fees and pay 20% of the expenses in this litigation, all on an ongoing basis, as measured from the beginning of the litigation.”

Texas Court Rejects $14M Fee Request After $21M IP Verdict

September 19, 2019

A recent Law 360 story by Michael Phillis, “Texas Court Rejects $14M Fee Bid After $21M IP Verdict,” reports that a Texas federal judge said that both sides were off-base in a fight over attorney fees after a jury found an EchoStar Corp. unit liable for $21 million for infringing on a defense contractor's satellite network patent.  The court rejected both Israel-based contractor Elbit Systems' request for nearly $14 million in fees and EchoStar unit Hughes Network Systems' calculation that it should owe only about $300,000.  Elbit said the high fee award was merited because of an alleged pattern of Hughes' misconduct, while Hughes said it should only have to pay fees for litigation misconduct specifically cited in a prior court order, including allegations it ignored discovery orders.

"To avoid becoming 'a green-eyeshade accountant,' the court orders the parties to meet and confer and file a joint notice consistent with the parameters set forth in this order," U.S. District Judge Robert W. Schroeder III said.  The order knocked arguments made by both sides in their joint motion to quantify attorney fees, which was filed in July.  The judge said the diverging amounts took into account either too little or too much of the case.

Judge Schroeder said Hughes' request for a smaller fee award — based on its argument that it should only be responsible for the four "specific acts" mentioned in a prior court order — didn't consider the full extent of the litigation misconduct.  "Elbit is entitled to fees that 'bear some relation to the extent of Hughes' misconduct,'" the court said.  "And, as the court found, that misconduct was extensive — affecting more than the four specific acts of misconduct or even the 22 acts Elbit listed as examples of misconduct."

Judge Schroeder also said Elbit's request was effectively for a "full fee award," with few exceptions.  But Elbit did not demonstrate a proper connection between "its fee request and Hughes' misconduct," and that link was needed, the judge found.  "Because Elbit's conduct does not justify a full-fee award, the court would need to go through Elbit's bills line-by-line to identify the fees Hughes' misconduct caused," the order said.  And since the judge has no interest in taking on that task, he told both sides to get together and within two weeks' time file a notice explaining the fees that Hughes' misconduct caused.

Article: Consider Attorney Fee Litigation When Drafting Business Contracts

September 2, 2019

A recent Daily Business Review article by Noah B. Tennyson, “Consider Potential Litigation Fees, Costs When Drafting Business Contracts,” reports on attorney fee dispute litigation in business contracts in Florida.  This article was posted with permission.  The article reads:

Before you sue someone, it may be prudent to consider potential litigation fees and costs.  This is because, unless your claim arises from a Florida statute or contract that entitles you to recoup attorney fees, each side will bear their own regardless of who prevails.  Thus, you may find that prevailing in court results in the type of victory lamented by Plutarch during the Pyrrhic war: “if we are victorious in one more battle with the Romans, we shall be utterly ruined.”

Ask yourself this question: If I wound up in a lawsuit, would I want there to be a basis for legal fees to be awarded to the prevailing party?  Of course, if you expect to prevail in future lawsuits, then the answer is easy.  But, few truly know what tomorrow brings and simply hoping that your side will prevail in future lawsuits is likely just wishful thinking.  So, to help mitigate the risk of an uncertain future, it may be helpful to consider various legal fee language to insert into some of your business’ most important documents—its contracts.

As a starting place, look at the agreements that you executed with your landlord, vendors, bank, and other parties in order to run your business.  What does the legal fee language say?  Does it provide that any party that prevails in any dispute arising from the contract can recoup its legal fees?  If not, to what extent did your counterpart create an attorney fees clause which favors its side?  Finally, which state laws are to be applied to the contract if there is a lawsuit?

You may have chafed at these terms but signed anyway, perhaps because you saw signing as but one more requirement to get your business up and running.  Whether you signed or not, in your future contract negotiations, consider using legal fee language which may favor your business as opposed to your counterpart’s.  Aside from your own scruples, the limit to how unfair you can be is the reasonable likelihood that a judge will enforce your contract as you intended.

To determine whether a judge will enforce your legal fee language, it can be helpful to look at what Florida courts have decided in the past.  For instance, let’s say your new business is a franchise.  As noted in prior Florida cases, Subway Restaurants (Subway) has written into in its contracts that its franchisee “agrees to pay the cost of collection and reasonable attorney fees on any part of its rental that may be collected by suit or by attorney, after the same is past due.”  In other words, Subway, and only Subway, can recoup its legal fees if they arise from the franchisee failing to pay rent.

This provision appears to be an illicit one-way fee clause which Florida courts have ruled permits either side to seek a fee award, so long as that side prevails in the lawsuit.  Thus, in a dispute between Subway and one of its franchisee Florida stores, the franchisee sought attorney fees from Subway after prevailing in its claim for wrongful eviction.  However, the Florida court ruled that the franchisee’s lawsuit never triggered an entitlement to attorney fees because the legal fee language limited awards to matters involving the collection of rental payments.  Put another way, even if this fee clause were a two-way street, the lanes would still be confined to matters involving the collection of the franchisee’s rent.  Therefore, the franchisee was not entitled to recoup its legal fees even though it won its case.

As seen above, a careful examination of contract language can uncover provisions that might go unnoticed by most, but are duly noted by those seasoned in business disputes.  As another example, contracts made in Florida can be written to have the laws of other states, such as New York or Virginia, be used to resolve disputes.  This might seem innocuous, but the impact can be severe because the treatment of one-way attorney fees clauses varies from state-to-state.

In one Florida case, stockbrokers put into their brokerage agreement that New York law would govern the agreement’s terms.  The agreement also stated that stock purchasers who signed it in order to purchase stock would reimburse the brokers for any debts owed, which included related attorney fees.

When a stock trading error cost a group of purchasers more than $70,000, the purchasers sued the brokers and won damages totaling $81,500.  Yet, the Florida court refused to award the purchasers their attorney fees even though the agreement’s legal fee clause applied to their lawsuit, and even though Florida law requires a two-way street for such fee clauses.

The Florida court’s reasoning was simple: New York law does not require that one-way fee clauses be made into two-way clauses.  Because New York—and not Florida—law applied, the Florida court had no authority to grant a fee award to the stock purchasers.

You should examine proposed contracts with care because established corporations have legal teams crafting contracts which benefit them.  Bear that in mind if you consider signing.  Conversely, when drafting your own contracts, heed your lawyer’s advice.  Otherwise, you, too, may fall victim to unintended consequences.

Noah B. Tennyson is an associate at Nason Yeager in Palm Beach Gardens.  His practice focuses on commercial and business litigation matters, including commercial foreclosures, business disputes, contract litigation, condominium and homeowners’ association issues, construction defect litigation and employment issues.

NALFA Announces The Nation’s Top Attorney Fee Experts of 2019

August 20, 2019

NALFA, a non-profit group, has a network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2019:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA
 
"Outstanding Skills Assessing Reasonable Attorney Fees in Class Actions"
Stephen J. Herman
Herman Herman & Katz LLC
New Orleans, LA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Fox Rothschild LLP
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA

Texas Attorney Fee Dispute Heads to Arbitration

July 29, 2019

A recent Law 360 story by Sarah Jarvis, “Texas Attys Must Arbitrate Dispute Over Referral Fees,” reports that a dispute between two Texas attorneys over fees stemming from a referral agreement for asbestos lawsuits will head to arbitration after a state appellate court ruled that the lower court erred when it denied an arbitration motion.  Judge Peter Kelly said Dennis Weitzel’s motion to compel arbitration with Brent Coon’s law firm was allowed under an agreement the two signed in 2010 after Weitzel left Coon’s firm.  The panel remanded the case to trial court with the direction that the court order Weitzel and Brent Coon & Associates to arbitrate.

The case arose from a dispute about a fee agreement between Brent Coon & Associates and a nonparty law firm that Coon alleges was supposed to receive portions of payments for referrals of certain asbestos, mesothelioma and lung cancer clients.  Michael T. Gallagher and The Gallagher Law Firm PLLC sued Coon and his firm in 2018 alleging breach of the referral agreement, and Coon filed a third-party claim against Weitzel, arguing he did not forward portions of payments to Gallagher that he received from Coon’s firm.

Weitzel moved to compel arbitration on the matter, under the 2010 separation agreement, but the trial court denied Weitzel’s motion in December 2018, according to the opinion.  The arbitration clause in that agreement stipulates that Weitzel and Brent Coon & Associates would resolve any disputes that arose under the agreement by arbitration, Judge Kelly said.

The law firm argued that the dispute was not covered by the scope of the 2010 agreement, but by another agreement from 2002 which outlined the percentage of fees Weitzel and Gallagher would receive upon a case’s favorable resolution if they referred certain clients.  The panel sided with Weitzel’s argument that the 2010 agreement applies, and that the 2002 agreement was incorporated into the 2010 agreement by reference.

“Because BCA and Weitzel agreed that the arbitrator would decide these questions, the trial court should have granted this aspect of Weitzel’s motion so that the dispute, including the extent to which the 2002 agreement was incorporated into the 2010 agreement, could be resolved in arbitration,” Judge Kelly said.  “The parties incorporated the AAA Rules into the 2010 agreement and thus agreed that the arbitrator, not the trial court, would decide gateway issues, including whether their dispute falls under the arbitration clause of the 2010 agreement.”

But the panel said Weitzel did not meet his burden to show the trial court abused its discretion by denying his motion to compel arbitration against Coon, because the signatory to the 2002 and 2010 agreements was Coon’s firm and not Coon himself.