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Category: Fee Reduction / Fee Denial

Eleventh Circuit: No Added Attorney Fees for Defending Fees

April 12, 2019

A recent Law 360 story by Nathan Hale, “No Added Atty Fees in Nationstar Case, 11th Circ. Says,” reports that a Florida woman who won a judgment against Nationstar Mortgage LLC for charging improper fees is not entitled under state law to collect appellate attorney fees for her counsel's work defending an initial attorney fees award in the case, the Eleventh Circuit ruled.  The federal appeals court backed a lower court's decision to deny Sara Alhassid's request for attorney fees covering Nationstar's appeal based on a finding that the benefit would be purely for her attorneys and that she has no obligation to pay them for this work.

The appeals panel said it agreed with the district court that the controlling case on the issue is the Second District of Florida's ruling in B & L Motors Inc. v. Bignotti.  In that case, the state appeals court found that if a plaintiff has no interest in a fee award because it would not affect her payment obligation to her attorneys, then the plaintiff may not receive a fee award under the Florida Deceptive and Unfair Trade Practices Act, according to the opinion.

“B & L Motors is exceedingly clear that a prevailing plaintiff may receive fees under FDUTPA only if a 'fee award is found to be in the interests of the client and if the fee arrangement is found to have contemplated payment for that work,'” the Eleventh Circuit said.  “Because we do not lightly disregard binding, on-point decisions of intermediate state appellate courts, we hold that B & L Motors compels the denial of appellate attorneys’ fees in this case.”

Alhassid's counsel, Reuven T. Herssein of Herssein Law Group PA, said that his side intends to seek an en banc rehearing of the decision, which he said promotes meritless appeals by mortgage companies and other large institutions and has a chilling effect on plaintiffs who bring and litigate these cases.  "In light of this decision, plaintiffs attorneys will shy away from taking on these kind of cases since we won on the merits of the appeal and the appellate court’s decision means we are not paid for the successful result we obtained for our client in the appellate court," he said.

According to the opinion, Alhassid's attorneys had said that they “took this case on a contingency basis,” and the district court found that meant that any fees resulting from the appeal of the fee award would “inure solely to the benefit of plaintiff's attorneys and not to plaintiff herself.”

The dispute stems from Bank of America's decision to place Alhassid’s reverse mortgage in default for failure to pay flood insurance on her property.  After acquiring Alhassid’s mortgage and note in April 2013, Nationstar called her loan due and payable and started a foreclosure action on the property in January 2014, according to case records.  Alhassid filed the suit as a proposed class action against Bank of America NA and Nationstar in February 2014 and was joined by Sarah Drennen in August 2014.  The two women filed their third amended complaint in December 2014, bringing three breach-of-contract claims, a claim for breach of the covenant of good faith and fair dealing, the FDUTPA claim and a claim of violation of the Fair Debt Collection Practices Act.

They alleged the two companies charged improper fees, placed loans in default when borrowers did not pay those fees and then charged more unlawful fees after the defaults, according to the opinion.  The district court in Miami denied class certification in August 2015, finding that the nine class definitions didn’t show commonality and only individualized evidence could prove wrongdoing.  The claims against Bank of America were ultimately dismissed voluntarily, but Alhassid won summary judgment against Nationstar on all but the good-faith and fair-dealing claim, which the court found to be duplicative, the opinion said.

Alhassid was awarded $5,000 in actual damages and $1,000 in statutory damages under the FDCPA, according the opinion.  The district court also found that she was entitled to attorney fees as the prevailing party under the FDUTPA and awarded her $435,704 in fees.  The Eleventh Circuit affirmed the award on appeal.  The case is Alhassid v. Nationstar Mortgage LLC, case number 18-11985, in the U.S. Court of Appeals for the Eleventh Circuit.

Second Circuit Upholds Attorney Fee Reduction in FACTA Settlement

April 10, 2019

A recent New York Law Journal story by Colby Hamilton, “Second Circuit Upholds Judge’s Slashing Attorney Fees in Fair Credit Law Settlement,” reports that the U.S. Court of Appeals for the Second Circuit affirmed a Manhattan federal judge’s order to cut down a fee request in a Fair Credit Reporting Act lawsuit, finding she had properly exercised her discretion, over arguments to the contrary from the plaintiff’s attorneys.  The Second Circuit ruling upheld a decision entered last May in which U.S. District Judge Valerie Caproni of the Southern District of New York refused to allow attorneys to collect approximately $83,000 in fees in their Fair and Accurate Credit Transactions Act (FACTA) case.

The plaintiff in the underlying matter, Joan Pasini, had brought two other suits in Manhattan federal court under the exact same premises.  In the Godiva suit, she ultimately secured a $5,500 settlement with the chocolate maker, after opting out of a class action settlement that would have awarded her up to $80.

As Caproni noted in her order, the Godiva action involved “no motion practice, no discovery, no contested hearings, a single status conference, which lasted less than 30 minutes, two telephone conferences, which also lasted about 15 to 30 minutes each, and one mediation session.”

The district court found there was “nothing reasonable” about the $83,000 figure submitted by Glendale, California, attorney Chant Yedalian and local counsel, attorney Sameer Birring.  Rather, the litigators were using FACTA as a “cudgel to attempt to extract an unreasonable fee.”

“Attorneys who take on consumer protection lawsuits are sometimes pursuing a public good—the individual damages are generally quite modest but there is a public interest in ensuring compliance with federal consumer protection laws,” the district court wrote.  “Counsel is entitled to recover reasonable fees, but this court will not aid and abet extortion.”

The 10-page complaint in the underlying suit replicates claims similar to the other FACTA suits brought by Pasini.  She claimed the chocolatier printed out a receipt for a credit card transaction that included the first six digits and the last four digits of the card number.  Under FACTA, no more than the last five digits of the card number are allowed to be on a receipt provided to the cardholder.

After opting out of the settlement and an initial figure from the chocolatier of the statutory settlement maximum of $1,000, Pasini demanded a $75,000 payment from Godiva, according to court papers.

The suit was filed March 10, 2017. On Sept. 29, the parties alerted the court that the settlement amount for the plaintiff had been agreed to for the far smaller sum of $5,500, but Godiva stated to the court that attorney fees remained an issue.  Attorneys for Godiva argued in opposition to the fees that counsels’ “aim throughout this case has been to generate the maximum amount of attorneys’ fees possible.”

Caproni agreed, finding the hourly rates proposed by opposing counsel in the “exceedingly straightforward case” exorbitant.  She cut Yedalian’s requested fee range of $550 to $650 an hour down to a “generous” $350 an hour, while bringing Birring’s $350 an hour requested rate down to $275.

Similarly, Yedalian’s 152 hours of billable work was “so out of proportion to the tasks he purportedly undertook” that Caproni said she had to “question the accuracy of the bills.”  All but five hours of the claimed time “was spent on low-level work that could have been accomplished by an associate or paralegal; tasks any competent attorney (much less one with 15 years of experience practicing in an area of the law that is neither sophisticated nor intellectually challenging) could have accomplished far more quickly.”

Caproni ultimately cut Yedalian’s hours billable at the new rate by 90 percent, leaving him with an entitled fee of $5,325.83, while Birring was, at a reduction of 65 percent to his hours, granted $1,020.25 in fees.  With the reduced costs of $620 provided to the plaintiff, Caproni’s order amounted to less than 10 percent of what Pasini sought.

On appeal, the panel of Circuit Judges John Walker Jr., José Cabranes and Robert Sack said Caproni was within her right to the substantial reduction “in light of the pervasive errors and exaggerations in the fee application.”  The panel went on to likewise support the district court’s gutting of travel fees for Yedalian, as “there was no reason local counsel could not attend the initial status conference instead of lead counsel from California.”

$19M Fee Award in Long Running Shareholder Class Action

April 5, 2019

A recent Law 360 story by Jeff Montgomery, “Prickett Jones, Grant Eisenhofer, Kessler Topaz Win $19M Fee,reports that the Delaware Chancery Court awarded $18.7 million in fees to Prickett Jones, Grant & Eisenhofer and Kessler Topaz attorneys who waged an unprecedented, nearly six-year stockholder battle over allegedly outsized stock bonus awards to software company Ebix's CEO.  During a hearing in Wilmington, Vice Chancellor Joseph R. Slights III approved the award — pruned from a requested $25 million — after summarily rejecting a last-minute claim by Ebix Inc. that the court should deny any fee payment based on stockholder attorney failure to acknowledge a purported defect involving two of three class representatives' standing, or eligibility to sue.

Ebix's allegation unsuccessfully invoked the legal doctrine of "unclean hands," a defensive assertion of an ethical failure that could bar a plaintiff from winning a court judgment.  “The litigation was as intense as one could imagine,” the vice chancellor said of the multiyear dispute, adding later that “plaintiffs took risks time and again to prosecute a very complex case,” gaining in the end substantial benefits for stockholders, who alleged breaches of fiduciary duties involving disclosure and corporate governance in addition to the compensation issues.

In addition to the $18.7 million, the court ordered reimbursement for $951,896 in expenses incurred by Prickett Jones & Elliott PA, Kessler Topaz Meltzer & Check LLP and Grant & Eisenhofer PA. The court also awarded $10,000 payouts to two stockholder representatives and $5,000 to a third.

During a trial in August 2018, stockholder attorneys argued that phantom approvals and disclosure failures propped up a potential $825 million in allegedly backdated stock appreciation awards to CEO Robin Raina beginning in 2009 in the event of a company sale.  The stockholder suit took shape during an eventually scuttled, management-led buyout financed by Goldman Sachs, morphing into a battle over stock rights Raina began nailing down in 2006.  Raina’s benefit became in time what Michael Hanrahan of Prickett Jones said was the largest change-of-control agreement in the nation, until the settlement.

“The settlement is fair and reasonable for Ebix and the class,” Hanrahan told Vice Chancellor Slights.  “It gives broad release of specific claims in this litigation, which involves hundreds of millions of dollars.  The court has to decide if the get is commensurate with the give.”

Under the settlement, Raina agreed not to resign as Ebix CEO for at least two years after the agreement is finalized. Ebix meanwhile dropped a CEO benefit provision that would have paid a “gross-up” supplement to offset any tax amounts owed by Raina for the stock award.  Instead, the company agreed to provide 5,953,975 stock appreciation rights at the base value of $7.95 per share with a determination to be made each year prior to any acquisition if he is owed more rights.

Kevin H. Davenport of Prickett Jones said the provision assured that Raina “can’t ever get a bonus on a bonus” by way of the gross-up, reducing the cost of the benefit by $245 million at an $80-per-share price, or $155 million at $55 per share.  The proposed agreement also includes conditions on Raina’s stock appreciation vesting rights if he is involuntarily terminated and offers full vesting rights if he is still employed at the time of any acquisition. Ebix also agreed to develop a “CEO succession plan” within 180 days of the settlement being finalized and will be obliged to hire a “nationally recognized independent compensation consultant to advise annually on director and officer compensation,” according to court filings.

Paul Fioravanti of Prickett Jones said three attorney teams spent 13,339 hours on the case, including taking 27 depositions on three continents, and accumulated nearly $8.6 million in uncompensated expenses.  The requested award would have totaled about 2.2 times that expense.  The case, Fioravanti said, involved “an unprecedented change in control agreement which was terminated shortly before trial in direct response to this litigation, which was replaced with yet another unprecedented change in control agreement which we litigated through trial.  There is not another case like it.”

The bulk of the vice chancellor’s reductions to the $25 million fee request focused on throttling back assumed benefits from changes to the stock awards to better reflect contingencies and the possibility that Ebix would never have to make a payout anyway.  The court accepted a request for $2 million to reflect the benefit of corporate governance reforms, however, in the second-largest of the fee components, with all other adjustments trimming the award to $18.61 million, which the court then used its discretion to round up to $18.7 million.

The case is In Re Ebix Inc. Stockholder Litigation, case number 8526, in the Court of Chancery of the State of Delaware.

Federal Circuit Wants Reasons for Mediator’s Fee Denial in EEOC Case

April 1, 2019

A recent Law 360 story by Braden Campbell, “Fed. Circ. Wants Reasons for EEOC Mediator’s Fee Denial,” reports that the Federal Circuit told an arbitrator to reconsider denying fees to a U.S. Equal Employment Opportunity Commission mediator whose firing for a violent outburst the arbitrator reversed, directing him to explain his ultimate decision.  The panel said arbitrator John Dorsey should have explained why he denied mediator David Hamilton's request for fees while granting his request for reinstatement, saying it couldn't do its duty of deciding whether Hamilton abused his discretion with the fee denial because he didn't share his reasoning.

"In some instances, the matter may be so clear that the failure of the adjudicator to provide an explanation for its action will be harmless error, so that this court can enter judgment in accordance with the ruling below despite the absence of an explanation for that ruling," the panel said.  "But this is not such a case."

The EEOC fired Hamilton in 2017 following a mediation in which he "suddenly began to act erratically," hurling racial epithets and "engaging in physical violence" toward the parties in the dispute, according to the ruling.  Hamilton filed a grievance through his union, the American Federation of Government Employees Local 3599, and argued for reinstatement in arbitration.  Dorsey attributed the outburst to a one-time "major physical and/or mental breakdown" and ordered Hamilton be reinstated with back pay.  But Dorsey denied the union's request for arbitration costs and fees without explanation, and, after he reaffirmed his ruling following the EEOC's request for reconsideration, the union appealed to the Federal Circuit.

The panel frames the union as making three arguments on appeal: that Dorsey had to award fees "under the applicable standards," that he deviated from his merits decision by denying fees, and that his failure to explain the denial means it must be reversed.  The panel dispensed with the union's first two arguments briefly, saying the first amounted to a request that it find Dorsey abused his discretion "regardless of any findings," and that arbitrators can consider other factors than those behind their merits ruling in denying fees.  The panel said the third argument "has more force," discussing it in detail.

The panel said appeals ordinarily require that the adjudicator explain their reasoning "even on a matter as to which the adjudicator is given broad deference" because the reviewing body otherwise can't say whether the ruling was well reasoned.  This case illustrates why such reasoning "is typically critical to judicial review," the panel said.

The panel noted the EEOC argued in its bid for reconsideration that Dorsey rightly denied fees for two reasons: awarding fees would have been unjust, and its collective bargaining agreement with Local 3599 holds that parties in arbitration bear "fees and expenses" equally.  The EEOC later backed off the second argument, which omitted that this portion of the CBA spoke to arbitrators' fees only.  But because Dorsey did not explain his reasoning, it's unclear whether that argument factored into his fee decision, the panel said.

"Because the EEOC invited the arbitrator to deny fees on that ground, the agency is not well situated to argue that the arbitrator must have denied fees based on a valid ground, rather than on the invalid ground that the agency itself proposed," the panel said.

Barbara Hutchinson, who represents the union, said the panel's ruling "is consistent with the law, which requires an arbitrator state the findings and conclusions when ruling on a request for attorney fees and costs in arbitration cases appealable to MSPB." 

Firm’s Fee Request Cut By 20 Percent in NFL Concussion Settlement

March 28, 2019

A recent Law 360 story by Rick Archer“Firm’s 20% Fee Bid Slashed in NFL Concussion Settlement,” reports that the Pennsylvania federal judge overseeing the National Football League’s concussion settlement significantly trimmed a 20 percent fee request by a class member's former counsel, rejecting current counsel's argument that the firm should be cut out entirely.  U.S. Magistrate Judge David R. Strawbridge gave Leeland McElroy’s former attorney at Pope McGlamry Kilpatrick Morrison & Norwood a 6 percent fee, leaving current counsel at Steckler Gresham Cochran with a 12 percent fee.

The judge said Steckler’s post-settlement work was more substantial, but he didn’t buy the firm’s argument that Pope deserves nothing.  “While Steckler correctly points out that it — not Pope — was responsible for the claim package, Pope accurately states that McElroy would not have been eligible to submit a claim package but for Pope’s advice to remain a class member,” he said.

The concussion settlement covers about 20,000 former NFL players who may be suffering from brain injuries stemming from their years on the field.  Under the terms of the deal, players can submit claims for monetary awards that may reach up to $5 million depending on the player's age and the severity of his condition.

In his order, Judge Strawbridge said McElroy’s award would work out to nearly $919,000.  According to the order, McElroy retained Pope in September 2012, after the concussion cases had been consolidated into multidistrict litigation.  McElroy terminated Pope in March 2015, a month before the settlement received final approval, and retained Steckler in August 2016.

Pope requested a 20 percent fee award for its work, and Steckler objected, saying Pope’s case filing had been on behalf of more than 200 class members, not McElroy specifically, and that its work on McElroy’s medical records was minimal.  Judge Strawbridge said Pope’s work on McElroy’s medical records did not play a “significant” role in qualifying him for an award, but the firm had provided individual services to McElroy, including counseling him to stay in the suit.

“As counsel pointed out at the hearing, like many players, McElroy felt a degree of frustration in the process that led to the final settlement," the judge said.  "Had he acted on that frustration and opted out of the class, he would not have been in the position to claim the benefits he ultimately received from this settlement.”  He did say Steckler’s post-settlement work was more substantial, involving assembling and submitting McElroy’s claim, successfully appealing a denial of the claim and resolving a dispute over medical lien reductions.  “These were not ‘mundane legal chores,’ but rather quality work performed that advanced McElroy’s individual interest,” he said.

The case is In re: National Football League Players' Concussion Injury Litigation, case number 2:12-md-02323, in the U.S. District Court for the Eastern District of Pennsylvania.