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Category: Fee Reduction / Fee Denial

DOJ Asks Federal Circuit to Toss $7M Fee Award

December 5, 2019

A recent Law 360 story by Tiffany Hu, “DOJ Asks Fed. Circ. To Scrap Dentons’ $7M Fee Award,” reports that the U.S. Department of Justice is asking the Federal Circuit to wipe out $7.4 million in attorney fees secured by Dentons in a lawsuit accusing the Navy of infringing a company’s patents in a combat ship, saying the lower court went “too far” in its analysis.  In an opening brief, the DOJ said that the U.S. Court of Federal Claims in July incorrectly awarded attorney fees to Dentons for its work on behalf of FastShip LLC, which claimed that some of the Navy’s combat ships infringed two of its patents.

Among other things, Judge Charles F. Lettow had found that the federal government’s opposition to FastShip’s lawsuit was not “substantially justified” under a federal provision governing the amount that can be recovered in a lawsuit against the government.  That provision says a patent owner can get reasonable compensation in a suit against the government unless the government's position was substantially justified.

The DOJ argued that Judge Lettow erred in considering the government’s conduct before litigation, as the provision in question restricts the patent owners’ compensation to costs incurred “in pursuing the action,” the department said in its brief.  But even if pre-litigation conduct could be considered, the DOJ said, the judge went “too far” when he relied on certain allegations that either had nothing to do with the present lawsuit or the claimed use of the invention.

“This construct is unduly broad even if some pre-litigation conduct could be considered,” the DOJ wrote.  “The CFC’s definition goes well beyond the ‘claim’ — i.e., the facts necessary to establish infringement — and into some ill-defined totality of facts that include the procurement actions of contractors in which the government was not involved.”  The department urged the Federal Circuit to toss the lower court’s award of fees and costs and to send the case back to the court to reconsider whether the government’s position in the present action was “substantially justified.”

Judge Lettow ruled partly in favor of FastShip in 2017, finding that one ship, LCS-1, had infringed, but that a second, LCS-3, and any that followed in the class had not because they were still being manufactured when the patents expired.  The Federal Circuit in June 2018 upheld Judge Lettow’s ruling and raised the damages award slightly to $7.1 million. FastShip ultimately recovered $12.36 million for the infringement, including delay damages, Judge Lettow wrote in his July order.

Judge Lettow’s July ruling said that the “conduct of the government, both before and throughout this litigation, belies its argument that it was ‘substantially justified.’”  The judge said that among his reasons for awarding the fees and costs was that FastShip met with Lockheed during the procurement process and shared its patent technology, but that FastShip was ultimately not included as a part of the team.

“Lockheed Martin would go on to manufacture the Freedom class of ships for the government, with a completion and infringement date for LCS-1, of September 26, 2006,” Judge Lettow wrote.  The judge also questioned if the government had done a proper investigation after FastShip filed an administrative claim with the Navy in 2008.  The Navy said it did a “thorough analysis” and found no infringement after the claim was filed, although it did not share the analysis with FastShip when it wrote the company a letter after it “sat” on the claim for two years, he wrote.

“At best, this was a perfunctory response to the concerns of FastShip that ultimately proved legitimate.  At worst, it may have delayed FastShip’s filing of its claim in this court by two years,” Judge Lettow wrote.  The judge made partial adjustments to the $8.72 million of fees and costs requested by FastShip, ultimately awarding more than $7.4 million, including over $6.17 million in attorney fees and related expenses, and over $1.2 million in costs.

PA Appeals Court: No ‘Fees for Fees’ in Trust’s $2.9M Fee Request

November 27, 2019

A recent Law 360 story by Matthew Santoni, “Pa. Appeals Court Snuffs Trust’s $2.9M Bid for ‘Fees on Fees’,” reports that a trust that sought $4 million in legal fees over a $9,000 property condemnation was not entitled to another $2.85 million in "fees on fees" to cover the cost of fighting for the first fee award, a Pennsylvania appellate court ruled.  A Pennsylvania Commonwealth Court panel said an Erie County judge was right to slash the Angela Cres Trust's request for fees by 90% because the trust had not sufficiently justified its 2015 request for the $2.85 million, and state law said property owners were not guaranteed to have their legal bills paid in condemnation proceedings if they were not justified.

"The Eminent Domain Code does not require that a condemnee be made whole, as the trust seems to presume," wrote President Judge Mary Hannah Leavitt for the unanimous panel.  "It was the trust's burden to prove that its fees and costs in litigating the fee petition were reasonable, and it did not do so."

The panel upheld the Erie County Court of Common Pleas' award of $285,000 in costs and fees, agreeing that winning just $682,000 of the underlying $4 million request for fees and costs was a "limited success" for the trust, and ruling that there had been no error in the judge's findings that the large request for fees-on-fees had not been fully supported.

Millcreek, Pennsylvania, had sought to condemn a piece of trust-owned property valued at $9,000 in 2005, but after four years the court sustained the trust's preliminary objections on the grounds that the township lacked authority to condemn the land for a water channel.  Appeals and an amended declaration of taking kept the underlying dispute going through 2012, and by 2014, the trust sought to make the township pay $3.4 million in attorney fees and costs and another $650,000 for its experts' testimony and reports.  The trial court awarded only $682,000 in total, which the Commonwealth Court affirmed in 2016.  While that appeal had been pending, the trust made its request for the fees-on-fees in 2015, according to the opinion.

After a three-day hearing on the trust's petition for the additional fees, the court awarded just $285,000, citing work that was allegedly duplicated or done by expensive partners when it could have been handled by less expensive attorneys; hourly rates for attorneys and paralegals that were higher than the market rate for Erie County; and vague "block billing" where a single time entry on the record covered multiple tasks.  The trust had claimed the trial court's award of 10% of its request was arbitrary and capricious, but the appellate court disagreed.

"Simply, the award of 10 percent of the actual fee incurred was the best the trial court could do given the block billing practice of the trust's attorneys and its inability to provide the court with the expected 'amplification,'" the court said, referring to a term used by the township's expert in the trial phase.  "Because the trust's witnesses did not provide a clarification of each task and the time spent, the trial court lacked the evidence needed to conclude that the fees and costs paid by the trust were reasonable."

The trial court had also found that the trust was billed for a "speculative" motion for reconsideration, a "superfluous" post-trial motion and a mediation process that dealt with stormwater problems, not the underlying condemnation or fee dispute, so the Commonwealth Court deferred to the lower court's judgment on those proceedings being unnecessary and ineligible to be charged to the township.

"We agree with the trust that the Eminent Domain Code should be given a broad reading when determining whether a particular legal task was caused by the condemnor's action," the appellate court said.  "However, causation is a matter for the trial court to decide. It decides whether certain tasks constitute a reasonable legal response to a condemnor's action or have an attenuated relation to the condemnation."

The Commonwealth Court also said the Erie County judge made no error in giving more credit to the township's expert on legal billing than the trust's expert and had properly considered the factors for whether a fee request is reasonable as set forth by the Supreme Court of Pennsylvania's 1968 ruling In re: LaRocca's Trust Estate.

The trust complained that the court improperly weighed the trustee's wealth as part of the "client's ability to pay," one of the 11 LaRocca factors that also include the amount of work done, the complexity of the task and the amount of money or property value in question.  The Commonwealth Court said that factor was ultimately irrelevant to the finding that the fee request was not adequately supported.

"In the end, it was not the trustee's wealth that caused the trial court to reduce the trust's request ... it was the trial court's holding that the trust did not prove that any specific part of that $2.85 million was reasonable," according to the opinion.  "The real point is that not every LaRocca factor is relevant and required to be considered by the court."

The appellate court noted that while the township claimed the trust wasn't entitled to any fees at all for litigating its earlier fee petition, the trial court disagreed and gave the trust its 10% award.  "The trust was entitled to pursue all means and any cost to save its land and recover its attorney fees.  It does not follow, however, that all those fees, costs and expenses were reasonable, as required by the Eminent Domain Code before the condemnor must reimburse the condemnee for fees and costs," the court said.

AIG Unit Can’t Repeal Attorney Fees in Yahoo Jury Win

November 25, 2019

A recent Law 360 story by Dave Simpson, “AIG Unit Can’t Overturn Atty Fees in Yahoo Jury Win,” reports that Yahoo Inc. presented enough evidence to back a jury finding that it can recover the $618,000 in attorney fees it spent trying to establish that an AIG subsidiary breached its policy by failing to cover its losses in underlying privacy class actions, a California federal judge said.

U.S. District Judge Edward J. Davila nixed AIG unit National Union Fire Insurance Co. of Pittsburgh, Pa.’s bid to deny Yahoo's attorney fees award or grant a new trial, finding that the federal jury had been presented with “substantial evidence” when it decided in May that the unit acted in bad faith by failing to cover Yahoo’s costs to defend the consolidated class action, which accused it of unlawfully scanning customers' emails.  Judge Davila also said that the AIG unit waited too long to claim that the attorney fees stemming from the breach of contract suit were too high or unnecessary.

“At trial, National Union chose not to cross-examine [Yahoo’s counsel] about the reasonableness or accuracy of the figures…” he said.  “National Union did not challenge any invoice entries as unwarranted or excessive.  National Union cannot now contend for the first time that Yahoo is entitled to only $9,500.”

In October 2018, Judge Davila found that the insurer largely failed to defend and indemnify Yahoo for $4 million in attorneys' fees from multiple class actions accusing it of scanning customers' emails, but said it was up to a jury to decide whether the insurer's failures to come to Yahoo's aid were coverage errors or evidence of bad faith.  In May, following a five-day trial, the jury said the tech giant  was entitled to attorney fees stemming from the breach suit but rejected Yahoo’s request for a bad faith award equal to the full $7 million it spent defending and settling the underlying action.  It also spurned the company’s bid for punitive damages after concluding that National Union didn’t act with “malice, oppression, or fraud.”

In July, National Union argued that Yahoo presented no evidence to support a finding that it had acted in bad faith.  And because Yahoo failed to prove National Union withheld policy benefits in bad faith, it cannot recover any fees, it said.  “Finally, even if the court believes the record supports an award of … fees in some amount, the jury’s $618,000 award is plainly excessive,” National Union said in July.

That award includes fees for services unrelated to the case, such as “communications with excess carriers,” “fees incurred to establish bad faith” — which are not recoverable — and “fees for ‘mixed’ services that require allocation,” National Union said.  The insurer asked the court to deny the fees as a matter of law or grant a new trial limited to the issue of fees.  Judge Davila declined, noted that the jury saw enough evidence to determine bad faith and also that Yahoo presented enough evidence to support the fee award.

Apple, Cisco Must Redo Fee Requests in ‘Reckless’ IP Actions

November 22, 2019

A recent Law 360 story by Tiffany Hu, “Apple, Cisco Must Redo Fee Request in ‘Reckless’ IP Fight,” reports that U.S. District Judge William Alsup is ordering Apple and Cisco to resubmit their bids for attorney fees from a tech company they say dragged them into “recklessly litigated” patent disputes, warning that he may deny relief entirely if the new calculations are unreasonable.  In an order, the California federal judge partially granted Apple and Cisco’s motions for attorney fees after they defeated patent lawsuits brought by Straight Path IP Group Inc. over internet voice and video calling technology, finding Straight Path’s “duplicitous machinations” rendered the cases exceptional and thus warrant such fees.

But Judge Alsup refused to approve the $10 million in attorney fees the tech giants sought after their summary judgment win against Straight Path. Apple sought $4.6 million in fees and litigation costs, while Cisco asked for $5.3 million, with the latter saying the lawsuit was "recklessly litigated" and "the poster child" for exceptional cases meriting such large fees.  Specifically, the judge said Apple’s request improperly included fees relating to an ex-parte reexamination for one of the patents at issue.  While the reexamination had put all proceedings involving that patent on hold, it was held in a separate forum and had “nothing to do with” Straight Path’s litigation misconduct, he found.

“Apple’s fee request well illustrates the evil of satellite litigation over attorney’s fees motions,” the judge’s order states.  “The court would be inclined to deny Apple’s request altogether on account of this overreaching.”  Judge Alsup said he would give the tech giants until Dec. 5 to resubmit their fee bids, adding that any items “unreasonably” included may lead to a deduction of up to three times the amount of that item from the total figure.  The court “may possibly deny relief altogether,” he added.

Judicial Review of ‘Mootness Fees’ Before Seventh Circuit

October 24, 2019

A recent Law 360 story by Rachel Graf, “’Mootness Fees’ Are Beyond Court’s Purview, 7th Circ. Hears,” reports that, in what appears to be a first, plaintiffs attorneys are asking a federal appellate court to allow a controversial practice in which they file merger objections that result in a few extra disclosures for investors and privately negotiated "mootness fees" for the lawyers, which they say are out of the lower courts' reach.

Investors represented by Monteverde & Associates and Geyser PC have asked the Seventh Circuit to review an Illinois federal judge’s order revoking $322,500 in attorney fees they had won after securing additional disclosures about Akorn Inc.’s planned merger with Fresenius Kabi AG, arguing the lower court no longer had a say in the proceedings.

As with many of these cases, the defendants’ disclosures “mooted” the investors’ allegations, and the plaintiffs then voluntarily dismissed their claims and negotiated fees with the defendants without the need for a judge’s approval.

In this instance, however, U.S. District Judge Thomas Durkin ordered the attorneys to return their fees, calling the disclosures sought by the plaintiffs “worthless to the shareholders.”  The judge reviewed the resolution after Akorn shareholder Theodore Frank, who founded the Center for Class Action Fairness, asked to intervene in the lower court proceedings to object to the attorney fees — a bid that ultimately failed.

The plaintiffs are now arguing that Judge Durkin had no right to issue the order because the allegations had already been voluntarily dismissed.  “At that point, the court’s jurisdiction had officially lapsed over the merits, and it had no authority to continue,” they said in a brief.  “Its decision to review the merits of the complaint — to determine whether it should ‘abrogate’ the parties’ resolution of the core dispute — is directly at odds with settled law.”  Even if the court did have jurisdiction, it applied the wrong standard when evaluating the significance of the disclosures, the investors argued.

Judge Durkin evaluated whether the disclosures sought by investors were “plainly material,” a standard established in a landmark 2016 Delaware Chancery Court opinion in a case called Trulia.  But the plaintiffs told the Seventh Circuit this standard applies only to settlements that give defendants a broad release of additional claims stemming from the merger, which their resolution did not.

Frank has asked the Seventh Circuit to appoint him as amicus curiae to argue in support of the district court’s ruling, since Akorn and its board don’t intend to defend the decision.  An attorney representing Akorn and its board confirmed they don’t intend to file a brief with the appellate court.

Frank has also argued for sanctions against the law firms and an injunction barring them from securing attorneys fees without court approval.  He said he can’t afford to intervene in each of the many dozens of cases that are resolved with mootness fees.

Mootness fees, like those at issue in the Akorn dispute, have generated a fair amount of controversy in recent years.  Law professors, defense attorneys and even other plaintiffs attorneys contend that everyone but the lawyers filing the complaint loses, because courts become more skeptical of legitimate allegations and defendants have to address frivolous lawsuits.  The significance of the disclosures is up for debate and, unlike in past resolutions, defendants aren’t protected against the possibility of future claims.  In court documents, attorneys have defended their lawsuits by saying that companies are being forced to disclose information that’s important to investors.

The Seventh Circuit seems to be the first federal appellate court to review the practice, said Jill Fisch, a professor at the University of Pennsylvania Law School and joint author of a draft paper about mootness fees.  “They are pretty conscientious in terms of policing what goes on in the court,” she told Law360.  “So to the extent they view this as an effort to evade judicial oversight, they might be skeptical of the claim.”  Either way, the ruling will likely shed some light on whether the practice will be dealt with in the courts or through an amendment to the Federal Rules of Civil Procedure, she said.