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Category: Fee Reduction / Fee Denial

No Attorney Fees for Cruise Line Despite Win in $5M Diamond Sale

November 26, 2018

A recent Law 360 story by Carolina Bolado, “No Fees for Starboard Despite Win in $5M Diamond Sale Row,” reports that a Florida appeals court affirmed the denial of an attorneys’ fee award for Starboard Cruise Services Inc., ruling that the company’s offer to settle a dispute over the onboard sale of a $5 million diamond was not valid and therefore Starboard is ineligible for fees under Florida’s offer-of-judgment statute.  Florida’s Third District Court of Appeal said that because the settlement offer from Starboard, which operates retail concessions on cruise ships, was conditioned on plaintiff Thomas DePrince releasing all claims, including those for monetary damage and equitable relief, the offer was not valid under Florida Supreme Court precedent.

“The proposal for settlement was meant to resolve all claims, no matter their nature, arising from the parties’ transaction,” the appeals court said.  “Although the structure of the proposal directed payment to only counts II and III (breach of contract and conversion), the proposal was conditioned upon a release and dismissal of DePrince’s equitable claim seeking specific performance as well as his damages claims.”  Starboard therefore cannot collect fees under Florida’s offer-of-judgment law, which allows a defendant that offered to settle earlier in the litigation an opportunity to collect attorneys’ fees and costs if there is a defense verdict or if a judgment for the plaintiff is at least 25 percent less than the settlement offer.

DePrince sued after Starboard unilaterally reversed the credit card charges for his 2013 purchase of a 20.64-carat diamond for the listed price of $235,000.  That price was actually the price per carat, not for the rock as a whole, which is valued at $4.85 million.  The incident arose during a 2013 cruise out of Miami. DePrince visited an onboard jewelry store wholly owned by Starboard and expressed his interest in buying a loose diamond of 15 to 20 carats, according to the opinion.  Starboard salesperson contacted the company’s supplier, which said two diamonds were available that met those specifications and emailed descriptions that listed prices of $235,000 and $245,000.

After he was quoted the prices, DePrince consulted with his partner and his sister, both of whom are gemologists and said the price was too good to be true.  But he decided to move forward with the purchase and arranged to have the stone shipped to the Gemological Institute of America laboratory in New York for verification.  But that shipment would never be made.  Starboard soon discovered that the price quoted by the supplier was per carat and contacted DePrince.  The company offered him discounted cruise fares as compensation for the inconvenience, but DePrince insisted the deal stay in place.

Starboard then unilaterally reversed the charges and rejected the sales agreement, prompting DePrince’s lawsuit.  In October 2015, Starboard offered to settle the breach of contract and conversion claims for $75,000, according to the opinion.  The proposal required a release and dismissal with prejudice of all of DePrince’s claims.  He never responded to the offer, according to the opinion.

Just before trial, DePrince voluntarily dismissed his claims for specific performance and conversion, leaving only the breach of contract claim for trial.  The jury returned a verdict in favor of Starboard.  After the defense verdict, Starboard moved for fees based on the offer-of-judgment statute, but the trial judge said the settlement proposal was invalid under the Florida Supreme Court’s 2013 decision in Diamond Aircraft Industries Inc. v. Horowitch.

In that case, over a disputed contract to buy an airplane, the Supreme Court found that the statute does not apply to cases that seek both equitable relief and money damages and that there is no exception to this rule for equitable claims that lack merit, according to the opinion.  Starboard argued that the Diamond Aircraft case did not apply because the offer was not a general one and was directed only at DePrince’s monetary claims, but the Third District disagreed because the offer clearly was a proposal to settle all claims with prejudice.

Eric Isicoff of Isicoff Ragatz, who represents Starboard, said he was disappointed that fees were not awarded after all of the expenses the company had to incur to fight this lawsuit, but said they plan to pursue a cost award “which will not be insignificant.”  DePrince’s attorney Mario Ruiz of McDonald Hopkins LLC said that the Third District’s ruling confirms that though offers of judgment are important tools in promoting settlement, they have to be used correctly.

The case is Starboard Cruise Services Inc. v. DePrince, case number 3D16-2009, in the Third District Court of Appeal of Florida.

Fifth Circuit ‘Stunned’ Over Fee Request in FDCPA Case

November 19, 2018

A recent Texas Lawyer story by John Council, “5th Circuit ‘Stunned’ Over $130,000 Fee Request by 2 Texas Lawyers in $1,000 FDCPA Case, Awards Them Zero,” reports that the U.S. Court of Appeals for the Fifth Circuit has slammed two Texas lawyers and their client in a recent decision, writing that it was “stunned” by the trio’s $130,000 attorney fee request in connection with a $1,000 Fair Debt Collection Practices Act award concerning a $107.29 unpaid water bill.

According to the decision in Davis v. Credit Bureau of the South, Crystal Davis filed the suit in an Eastern District of Texas federal court, alleging that the debt collection agency had violated the federal debt collection law, with its fee-shifting provision, in contacting her over the water bill because it has misrepresented itself as a “credit bureau,” which it isn’t.

A U.S. magistrate judge later ruled in Davis’ favor, awarding her $1,000 in statutory damages after finding the defendant had violated federal law.  Davis later filed an opposed motion requesting $130,410 in attorney fees based on her status as a prevailing party in the litigation.  But the magistrate judge ruled against Davis and awarded her lawyers nothing, explaining that he was “stunned” by the request, noting there were duplicative and excessive fees charged by the attorneys, Jonathon Raburn and Dennis McCarty.  The magistrate judge also noted that the case was simple and on point, and the nearly 300 hours spent on the case at an hourly rate of $450 demanded by the lawyers was “excessive by orders of magnitude.”

Davis later appealed the attorney fees request to the Fifth Circuit, where it was met by equal disbelief.  “As an initial matter, we join the magistrate judge’s stunned reaction to Davis’ request for $130,000 in attorneys’ fees and concur that the record reflects neither the quality of legal work necessary for the requested hourly billing rate ($450.00 per hour), nor the quantity of work to support the 156.55 hours claimed by Jonathon Raburn and the 133.25 hours claimed by Dennis McCarty,” the Fifth Circuit wrote in a per curiam opinion.

“The pleadings filed by McCarty and Raburn, including the brief on appeal, are replete with grammatical errors, formatting issues, and improper citations, and is certainly not the caliber of work warranting such an extraordinary hourly rate,” the decision noted.  While the FDCPA gives courts little option but to award attorney fees to prevailing parties unless there are extraordinary circumstances, the Fifth Circuit agreed with the lower court that the lawyers should be awarded nothing.  The decision notes a U.S. District Court judge’s finding of bad-faith conduct on the part of Davis and her attorneys, in which he concluded that it appeared that the cause of action “was created by counsel for the purpose of generating, in counsel’s own words, an ‘incredibly high’ fee request.”

“The record suggests that McCarty and Raburn—in an attempt to receive an unwarranted and inflated award—impermissibly treated the $130,410 fee request as an ‘opening bid’ in an attempt to negotiate the attorney’s fee award,” according to the decision.  “This simply cannot be tolerated.  Bottom line: the FDCPA does not support avaricious efforts of attorneys seeking a windfall.  Because grossly excessive attorney’s fee requests directly contravene the purpose of the FDCPA, these tactics must be deterred,” the court concluded in its decision.

In a statement, McCarty and Raburn said they were disappointed in the ruling but respect the Fifth Circuit’s decision.  “We know these judges would not be in the position they are without outstanding legal careers.  However, we want to be clear that we did not file this lawsuit in bad faith.  It was over a debt collector using an illegal name that is prohibited by the FDCPA,” the lawyers said.  “We feel that it is a sad day for the consumer as this ruling may encourage debt collectors to break the law without any fear of consequence other than a statutory fine,” the statement notes.  “Because the majority of FDCPA cases do not carry damages, we feel that attorneys will be hesitant to take on these cases, which leaves the consumer exposed to bad debt collection practices.”

Attorneys Awarded $300M in Fees in Forex Price Fixing Settlement

November 8, 2018

A recent New York Law Journal story by Colby Hamilton, “Attorneys Awarded $300M in Fees in Bank Exchange Fee Settlement” reports that U.S. District Judge Lorna Schofield of the Southern District of New York knocked more than three-and-a-half percentage points off the requested attorney fees in the blockbuster $2.3 billion settlement over price-fixing by banks in the foreign exchange market, but that still left the lawyers for the 15 consolidated cases with more than $300 million in approved fees.  As the court noted, the litigation involved several hundred attorneys working over the course five years, resulting in what the plaintiffs claim is the third largest antitrust class action settlement in history.

Class counsel, led by co-lead counsel from Scott + Scott and Hausfeld LLP, were already awarded $22.5 million for litigation expenses.  Schofield granted counsel 13 percent of the settlement fund for attorney fees—which was less than the 16.51 percent sought.  Schofield noted that two class members objected to the proposed fee as being “grossly excessive,” while requesting a fee of no more than 8 percent.  Schofield found that the experts presented by the plaintiffs ultimately showed that comparable settlements of such size had a regressive percentage attached to them, noting that a pair of settlements that exceeded $3 billion had the smallest fee percentages, under 10 percent.

In looking at risk, results and policy consideration, the judge also found that “nothing in the record … indicates that this case is exceptional” when compared with similar cases.  Notably, Schofield pointed to government investigations and criminal prosecutions relating to price-fixing in the foreign exchange market that laid substantial groundwork ahead of the litigation.  Finally, Schofield’s cross-check against the lodestar multiplier, which she said stood at 1.72 and was “within the typical range for megafund cases.”

Class Counsel Lose Share of Fee Award in Dow Pollution Class Action

October 12, 2018

A recent Law 360 story by Juan Carlos Rodriguez, “10th Circ. Tosses Dow Pollution Class Attys’ Fee Appeal,” reports that the Tenth Circuit rejected a bid by three individual class counsel to snag a share of $150 million in attorneys' fees paid as part of a $375 million settlement with Dow Chemical Co. and another company in a nuclear pollution lawsuit.  While acknowledging that Louise Roselle, Paul De Marco and Jean Geoppinger McCoy, attorneys who used to work at the now-defunct firm of Waite Schneider Bayless & Chesley, “significantly contributed” to the litigation, a unanimous three-judge panel said they did not have standing to appeal a Colorado federal judge’s fee award.

“The WSBC attorneys argue they have been injured because they were not allocated personal bonuses separate and apart from the fees allocated to WSBC for their hourly work,” the panel said.  “Although pecuniary injury of that kind usually satisfies the injury requirement of standing ... such is not the case here because the WSBC attorneys do not have a ‘legally protected interest’ in any portion of the common fund.”

Because the attorneys were employees, not partners or other equity shareholders at WSBC, “all proceeds corresponding to their work on the Cook litigation belong to the firm,” the panel said.  And it said the attorneys never showed they were parties to any other contract or agreement with the firm that would have granted them a legal interest in WSBC’s share of the common fund.  “Even assuming a deficiency in lead class counsel’s fee allocation, any injury is to WSBC, not to its employees,” the panel said.  “And because the WSBC attorneys ‘cannot bring suit to vindicate the rights of others,’ they do not have a legally protected right for purposes of standing.”

The attorneys say they spent more than 4,500 hours working on the case at WSBC.  The long-running case, brought by Colorado residents who claimed injuries from exposure to waste from a nuclear weapons facility, was settled with Dow and a former Rockwell subsidiary now owned by The Boeing Co. in 2016.  The residents claimed they were exposed to plutonium releases from the Rocky Flats nuclear production facility, increasing their cancer risks, contaminating their properties and lowering property values.

The Colorado federal court issued final judgment on the suit in April 2017, the same day it granted $150 million in attorneys' fees and ordered lead counsel Berger & Montague PC to allocate them to various class counsel as reflected by their contributions.  The attorneys filed an objection to Berger & Montague’s distribution in July 2017, which was denied by the district court in August of that same year.

According to Berger & Montague, WSBC, although operating in bankruptcy, submitted a timely fee application — including for time worked by the objectors — and WSBC was allocated some of the fee award.  But the three former WSBC attorneys never filed a separate petition on their own behalf.  Berger & Montague had also asked the Tenth Circuit to sanction Roselle, De Marco and Geoppinger McCoy, calling their appeal frivolous, but the panel denied that motion in a footnote of the opinion.

Merrill Davidoff, Berger & Montague's chairman emeritus and managing shareholder, said the Tenth Circuit reached the correct decision.  "The appellants were attempting to collect personal bonuses on the same time for which their prior firm had been paid.  As such they had no 'legally protectable interest' in their time charges and so lacked standing," he said.

The case is Roselle et al. v. Berger & Montague PC, case number 17-1328, in the U.S. Court of Appeals for the Tenth Circuit.

Attorneys Awarded Fraction in Vietnam Veteran’s Experimentation Case

October 10, 2018

A recent Bloomberg Law story by Joyce Cutler, “Vietnam Vets’ Law Firm Awarded Only $3.4M in Experimentation Case,” reports that the law firm that spent nine years fighting and winning health care for veterans subjected to government-administered human testing of chemicals including sarin, mustard gas, and LSD was awarded $3.4 million in fees.  U.S. District Judge Claudia Wilken approved Oct. 4 the fee award Morrison & Foerster LLP negotiated with the U.S. Army that’s $16 million less than the value of the hours the firm said it put into the case.

“For MoFo it’s represents a continuation of the commitment we’ve had over the 43 years I’ve been with this firm doing pro bono cases” that’s the “latest but not the last on the long line of work we’ve done on behalf of veterans,” James P. Bennett, Morrison & Forester partner in San Francisco, told Bloomberg Law.

“The larger impact of the case is we’re proud to have given these class members a small measure of relief through the court system that they were entitled to and the Army was wrongfully withholding.  We’re glad to have thrown further light on this history,” Bennett said in September. “It’s important that the government remember its history so A) as not to repeat and B) to recognize its moral and legal obligations to people who have been victims of our mistakes.”

The fee award is the latest and nearly last chapter in the litigation by soldiers subjected to the government’s decades-long human testing program who were seeking recognition and health care above what they could get at the Veterans Administration for injuries they suffered.  “The settlement amount of $3.4 million is a fraction of the fees actually incurred by Class Counsel.  After over nine years of contentious litigation, the total amount of Plaintiffs’ attorneys’ fees exceeds $20 million,” the firm’s motion said.

Wilken agreed, finding the fees were reasonable “because they were substantially discounted from the original total amount of $20 million down to $4.5 million” under the Equal Access to Justice Act rates and discounting hours.  The amount was further reduced to the stipulated $3.4 million.

Wilken, however, rejected plaintiffs’ requests contained in letters from the class seeking a formal apology and raising concerns about whether the government will abide by the agreement.  “These are not valid objections to the motion for attorneys’ fees and cost and service awards.  Ordering an apology is likewise not within the jurisdiction of the Court.”  The $20,000 award per named plaintiff is higher than what is presumptively reasonable in the Northern District “and a higher amount will not be ordered,” Wilken said in rejecting requests plaintiffs made in letters to the court.  The request for a change in tax treatment isn’t within the court’s jurisdiction.

Thousands of former service members over decades were unwitting subjects of medical testing that left lasting physical and mental injuries from drugs, chemicals, and electrocutions, Bennett, the lead attorney, said in a brief supporting the fee petition.  Until the lawsuit was filed in 2009, the government denied the vets additional care for injuries suffered and held them to secrecy oaths with threat of punishment so they couldn’t even discuss the testing they endured.

“As a result of this case, the Army set up a program to provide ongoing medical treatment for class members, and the Army continues to work toward sharing newly acquired information.  Plaintiffs were also released from their secrecy oaths.  Accordingly, Plaintiffs have obtained excellent and lasting benefits for the class,” the attorney’s supplemental brief for fees said.

The San Francisco-based firm negotiated for the fees and $20,000 each in awards to eight veterans and named plaintiffs who were subjected to experiments.  “After an extensive effort to voluntarily narrow the fees requested, Plaintiffs submitted contemporaneous billing records for attorneys’ fees and costs totaling more than $9 million.  More specifically, Plaintiffs submitted billing records for 16,309 hours and $836,864.71 in costs.”  The amount was further whittled down and doesn’t affect the injunctive relief for the class.

MoFo partner Gordon Erspamer filed the lawsuit for Vietnam Veterans of America, Swords to Plowshares: Veterans Rights Organization, and vets over injuries suffered by soldiers who were subjects in government-conducted tests.  The tests were conducted from World War II to the Vietnam War.  Erspamer died in 2014.  “This action chronicles the chilling tale of human experimentation, covert military operations, and heretofore unchecked abuses of power by our own government,” the January 2009 lawsuit said.

Some 7,800 soldiers between the 1950s and into the mid-1970s volunteered to participate in experiments on the effects of chemical and biological weapons, and research on mind-control methods, plaintiffs said.  “For decades, the Army ignored its legal obligation under its own regulations to provide medical care for class members and to notify them of newly acquired information that may affect their well-being,” the attorneys’ supplemental fee motion said.

Wilken in April 2017 granted the soldiers summary judgment and ordered the Army to provide medical care to those who participated in the chemical and biological substance testing program.  The judgment and fee award are final.

A total of 204 Morrison & Foerster staffers and e-discovery specialists worked on the case.  Plaintiffs in August were seeking fees for time spent by 19 attorneys and six paralegals, totaling $4,515,868, including $422,739 in expert costs before further negotiation.  The fees don’t include work done after the initial June 2017 filing.

The case is Vietman Veterans of America v. Central Intelligence Agency, N.D. Cal., No. 4:09-cv-00037, order filed 10/4/18.