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Category: Fee Dispute Litigation / ADR

New Jersey Legislation Targets Fee-Shifting in Arbitration

November 14, 2019

A recent New Jersey Law Journal story by Suzette Parmley, “Exception to Attys’ Rule Misapplied, Fla. Court Says,” reports that legislation that would establish certain consumer protections related to arbitration organizations cleared the Senate Commerce Committee by a 3-2 vote.  Among the proposed protections is prohibiting any arbitrator from requiring a consumer to pay fees and costs incurred by an opposing party if the consumer does not prevail in arbitration.

S-1490 states: “Under New Jersey’s current law, there are rules governing arbitrators and arbitration generally, but there are no rules pertaining to the regulation of arbitration organizations.  This bill prohibits a neutral arbitrator or arbitration organization from administering any consumer arbitration that requires a non prevailing consumer who is a party to the arbitration to pay the opposing party’s costs or fees.”

The measure would also prevent arbitration organizations from administering cases in which the organization has, or has had, a financial interest.  It would apply to any arbitration administrator who provides services for any disputes that may arise and result in forced arbitration between a consumer and a company, according to a Nov. 14 release on the bill’s committee passage.

“Unlike administrative or judicial proceedings, arbitration proceedings are not made public, making it difficult for the state to monitor these cases to ensure they are being carried out fairly,” said Sen. James Beach, D-Burlington, the bill’s primary sponsor, in a statement.

“More often than not, a private arbitrator is chosen by the company involved in the dispute, giving them an unfair advantage over the consumer,” added Beach.  “Through this bill, the state will have a better understanding of what is truly happening in these proceedings, allowing us to ensure consumers are being treated fairly."

Insurers Want REIT Attorney Fees Resolved in Arbitration

October 30, 2019

A recent Law 360 story by Joyce Hanson, “Insurers Say REIT’s Atty Fees Must Be Resolved in Arbitration,” reports that Lloyd's of London underwriters and other insurers have asked a Florida federal court to deny a real estate investment trust's bid for attorney fees after closing out the REIT's lawsuit over a $20.6 million insurance claim, saying an arbitration panel should decide fees.

The underwriters and insurers said that The Cornfeld Group LLC wrongly asserts that the question of attorney fees must be decided by the court and not by the arbitration tribunal that has reviewed all coverage and loss issues between the parties in the REIT's suit seeking coverage for five properties damaged during Hurricane Irma.  They pointed to The Cornfeld Group's insurance policy in making their argument, saying the parties signed off on an agreement that all matters related to the policy would be referred to an arbitration tribunal.

"This court previously found that this agreement constituted a valid delegation clause, representing the parties' clear and unmistakable intent to allow issue of arbitrability to be decided by the arbitration tribunal," the underwriters and insurers said.  "Indeed, the court specifically ruled that the arbitration tribunal shall review all issues between the parties and held that the arbitration tribunal will have the power to issue any orders on any matter."

The Cornfeld Group on Oct. 15 asked for $39,108.50 in total fees, calculating that Stephen A. Marino Jr. of Ver Ploeg & Marino PA was due $23,820 for 39.7 hours of work at an hourly rate of $600, while his colleague, S. Alice Weeks, was due $13,200 for 44 hours at an hourly rate of $300.  In addition, The Cornfeld Group sought $2,088.50 for about eight hours of paralegal work.

According to the January complaint, The Cornfeld Group submitted proof of loss to support its estimate of approximately $20.6 million in damages caused by the 2017 hurricane at five properties.  However, the insurers only paid out $1.25 million in coverage under the commercial property insurance policy — which ran from March 22, 2017, through March 22, 2018 — and indicated there were coverage issues, although they had yet to specify what they are, according to case records.

The five South Florida properties covered collectively by the insurer defendants were: Margate Commerce Center-Lakeview Warehouse and Banks Road Commerce Center, both in Margate, Newport Beachside Resort in Sunny Isles Beach, Peary Court Units 101-149 in Key West and Stock Island Business Center on Stock Island near Key West.  On March 15, the insurers said they agreed with the REIT that the suit should be arbitrated, but they claimed they do not owe coverage under the policy.

U.S. District Judge William P. Dimitrouleas appointed Cornfeld's nominee to serve as the third member of an arbitration panel and break an impasse over the REIT's $20.6 million claim for insurance coverage for hurricane property damage.  In selecting Florida-based independent umpire, appraiser and adjuster Paul E. Middleton to join the arbitration panel, Judge Dimitrouleas said he chose the Cornfeld candidate over the professionals suggested by the insurers, because Middleton's "experience and qualifications appear to meet the requirements of the policy's language and spirit, as well as the interests set forth by the parties."

The Cornfeld Group moved on July 22 for entry of final judgment, and Judge Dimitrouleas on Aug. 16 signed an order partly granting the REIT's motion.  The motion asked for an award of attorney fees and costs, but Judge Dimitrouleas said any request for attorney fees and costs would have to be filed in compliance with local rules and referred to a magistrate judge.  The insurers reiterated in opposing Cornfeld's fees motion that they don't believe they owe coverage under the policy, and they also asserted that "there is simply no basis" for the fee claim.

Cornfeld can't sue in Florida, because the policy calls for New York law to apply, and the REIT is falsely attempting to establish itself as the "prevailing party" in the Florida suit, the insurers said.  They also questioned Marino's proposed $600 hourly rate, calling it "excessive."

Dentons Preps for $10M Attorney Fee Dispute Trial

October 28, 2019

A recent NLJ story by C. Ryan Barber, “Dentons Preps for Trial in $10M Fee Suit Against Republic of Guinea, reports that, more than five years after the law firm Dentons sued the Republic of Guinea, claiming the West African country had failed to pay more than $10 million in legal fees, a federal judge pressed the two sides to prepare for a trial in early 2020—and to consider the “pure economics” of a settlement.

At a hearing in Washington, U.S. District Judge Randolph Moss of the District of Columbia appeared eager to bring the fee dispute to a conclusion, suggesting that a bench trial begin early next year.  When a defense lawyer for Guinea, Schertler & Onorato partner David Dickieson, said complications with taking depositions in Europe could push the trial to the summer, Moss balked at the suggestion.  “That’s pretty far out,” Moss said.  “It seems we ought to be able to get that done in less than nine months,” he added.  Moss set an Oct. 16 deadline for Dickieson and Dentons’ lawyer, Williams & Connolly partner Ana Reyes, to propose a schedule for pretrial proceedings.

In the years-long dispute, Guinea has argued it should be protected against the lawsuit under the Foreign Sovereign Immunities Act, a federal law that establishes the circumstances under which foreign governments are shielded from litigation in U.S. courts.  The hearing came a month after Moss rejected Guinea’s latest bid to get the law firm’s claims dismissed.

In August 2017, Dickieson argued Guinea’s engagement letters with Dentons were invalid because they were signed by the country’s minister of mines, who lacked authority to approve public contracts. Under Guinean procurement law, only the minister of finance at the time, Kerfalla Yansané, would have had authority to approve the contract. (Yansane is now Guinea’s ambassador to the U.S.)

Dickieson said Dentons could not use the engagement letters to claim that its work for Guinea fell under the Foreign Sovereign Immunity Act’s exception for commercial activity.  In September, Moss denied Guinea’s request for summary judgment, ruling that there is “no dispute that Guinea requested and accepted extensive legal services from Dentons.”

The fee dispute stems from Guinea’s plans to develop large iron ore mines in the southeastern region of the country.  As part of that effort, known as the Simandou Project, Dentons was hired in 2012 to provide legal services in connection with the mining project and negotiations with one of its investors, Rio Tinto.  In its 2014 complaint, Dentons said its invoices totaled more than $12 million, but Guinea had only paid the firm $2 million.  Guinea has argued in a counterclaim against Dentons that the law firm charged “outrageously inflated” fees and failed to live up to its promise to obtain outside funding for its legal work.

Dickieson said Dentons had tucked language into the “fineprint” of its retainer agreements allowing it to seek payment from Guinea if it could not secure that third-party funding.  At one point, Moss urged the two sides to consider a settlement and the “pure economics” of avoiding further costs in a dispute over legal fees.  Dickieson said that attempts at a settlement have been complicated by the financial condition of Guinea, an impoverished country that was ravaged by the Ebola epidemic.

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.