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Category: Challenging Fees

Defense Claims ‘Overreaching’ Fee Request in ERISA Case

December 5, 2018

A recent Law 360 story by Danielle Nichole Smith, “Hospital Plan Rips ‘Overreaching’ $2.4M Fee Bid in ERISA Suit,” reports that the retirement plan for a Montana hospital told a federal judge that a request for $2.4 million in attorneys’ fees was “grossly excessive” after a $293,946 settlement resolving claims that the plan flouted the Employee Retirement Income Security Act.  The Retirement Plan for Employees of Northern Montana Hospital said in its objection that the $2.4 million fee request was “plainly overreaching” and needed to be reduced, noting that the amount was more than eight times the amount of monetary recovery.  And the proposed class counsel’s lodestar was $2 million more than that of the defendants’ attorneys, the plan said.

“The plaintiff’s attorneys’ fee request is grossly excessive by any measure,” the plan said.  “The fee request exemplifies the problem that led the Supreme Court to mandate that attorneys’ fee awards remain ‘reasonable in relation to the results obtained.’”

The settlement in the case provided $125,776 to named plaintiff Dr. Joel Cleary for retirement benefits he was wrongly denied and $168,170 to a proposed class of 175 plan participants whose benefits had been miscalculated, according to the plan’s objection.  The settlement also provides injunctive relief, requiring the plan to comply with ERISA statutes governing benefit determination and claims procedure, the plan said.  The plan contended, however, that the injunctive measures didn’t provide any meaningful relief or benefit since the plan had already complied with ERISA.  So the injunctive relief didn’t have any monetary value to consider when calculating attorneys’ fees, the plan said.

The Keller Rohrback LLP attorneys representing the proposed class had asked for the fees in November after the settlement with the plan and administrative committee was reached.  In support of their motion, the attorneys described their experience with ERISA cases and the work they performed in the suit.  The attorneys said they devoted a significant amount of time and effort to the case and that the rates they charged were what they typically billed clients whose cases weren’t handled on a contingency basis and had been approved in complex ERISA cases.  The attorneys also requested $75,086 in costs.

In the fee request, the attorneys also noted that the time they devoted to the suit kept them from working on other cases or taking on other representations.  The attorneys said they spent nearly 3,600 hours on the case as of October.  But the plan said that the attorneys’ lodestar amount was unreasonable, arguing that the reasonable hourly rate in Montana for ERISA cases was a lot less than what the attorneys requested.  The defendants’ attorneys only billed a total of $270,500 through October, the plan said.

If the court chose to use the lodestar method, the class’s attorneys’ lodestar had to be adjusted downward considering the results obtained, the plan said.  Additionally, the case didn’t present novel or difficult questions since the defendants didn’t dispute that Cleary was owed benefits or that the proposed class’s benefits had been miscalculated, the plan said.

The plan told the court that the percentage-of-recovery method was the best way to calculate the fees and that the $293,946 should be treated as a “constructive common fund” for determining such a percentage.  Though 25 percent was the “benchmark” for attorneys’ fees in the Ninth Circuit, the plan said it wouldn’t object to a 50 to 75 percent award since the recovery was so modest.

The case is Cleary v. Retirement Plan for Employees of Northern Montana Hospital et al., case number 4:16-cv-00061, in the U.S. District Court for the District of Montana.

Defense Seeks $3.2M in Fees After $1M Jury Verdict in Whistleblower Suit

November 14, 2018

A recent Law 360 story by John Petrick, “Ex-UBS Analyst Seeks $3.2M in Atty Fees After $1M Jury Win,” reports that an ex-UBS analyst who won a nearly $1 million verdict in his whistleblower suit against his former employer asked a New York federal judge this week to award him $3.2 million in attorneys’ fees, saying that federal securities law requires the bank to fork over the funds.  Two law firms that represented former UBS analyst Trevor Murray, who emerged victorious from a nearly seven-year fight with the bank after he alleged he was fired in 2012 for complaining he was being pressured to falsely report better market conditions to boost UBS’ revenue numbers and impress investors, each asked for fees for their work on the case, according to filings.

Now that he’s won a jury verdict in the case, the Sarbanes-Oxley Act provides that the company cover his legal bills from Broach & Stulberg LLP and Herbst Law PLLC, he said in the petitions.  “For the entirety of Murray’s struggle, Broach & Stulberg has stood by his side, opposing every defense motion, persisting on his behalf and ultimately, winning and defending a favorable verdict,” Murray said in the petition on that firm’s fees.

Murray filed the lawsuit in February 2014, claiming UBS pressured him to skew his research to support the bank’s CMBS trading and loan origination activities and to report better conditions in the market because the commercial mortgage-backed securities line was a significant revenue generator.  In late 2011, Murray allegedly told the bank’s head CMBS trader he was concerned that certain CMBS bonds were overvalued, according to the suit.  But Murray was told not to publish anything negative about the bonds because they had been purchased by the UBS trading desk, he claims.

He was fired shortly thereafter, just a month after receiving what he said was an excellent performance review.  UBS had pushed back hard against Murray’s contentions in court, including arguing in March 2016 that the Sarbanes-Oxley claims should fail because Murray was terminated as part of a downsizing that resulted from the global financial downturn’s financial impact in 2011.  UBS also argued that Murray didn’t have a reasonable belief that the conduct he reported was a violation of applicable laws or regulations, and therefore the court should toss his claims.

But in March 2017, U.S. District Judge Katherine Polk Failla sided with Murray, finding he’d put forward sufficient evidence that he engaged in a protected activity and that the activity was a contributing factor to his termination, and sending the case to trial.  After a three-week trial, a jury in Manhattan awarded Murray nearly $1 million, finding he was fired for refusing to skew his research to impress investors, according to filings in the case.

The Herbst law firm in a petition asked for $638,950 to cover attorneys’ fees and another $1,160.55 plus interest in costs, court records show.  A day later, Broach & Stulberg filed a petition seeking about $2.6 million for their work on the case.

Peter Stack, a spokesman for UBS, told Law360 the company would challenge the fee bid, noting it was significantly higher than the verdict itself.  “The claim of Mr. Murray's attorneys that their efforts should be valued at more than triple the jury's award to Mr. Murray is wholly unwarranted,” Stack said.  “We look forward to addressing the matter in court.”

The case is Murray v. UBS Securities LLC et al., case number 1:14-cv-00927, in the U.S. District Court for the Southern District of New York.

Article: Challenge Calif. Insurer Limits on Independent Counsel Rates

November 12, 2018

A recent Law 360 article by Susan P. White, “Challenge Calif. Insurer Limits on Independent Counsel Rates,” reports on hourly rates and independent counsel in insurance coverage litigation in California.  Susan P. White is a partner at Manatt Phelps & Phillips LLP in Los Angeles.  This article was posted with permission.  The article reads:

When a liability insurer agrees to defend its insured after the insured has been sued, this is often cause for celebration, as the insured believes its defense will be paid.  The insurer may reserve its rights to deny coverage, and advise that such reservation creates a “conflict of interest” entitling the insured to “independent” counsel.  Thus, instead of the insurer selecting the insured’s defense counsel, which is common under a duty to defend policy, the insured gets to choose its own counsel.  Still reason to celebrate, right?  But, as you may suspect, this selection right comes with a catch.  The insurer advises that while the insured can choose its own counsel, the insurer only agrees to pay a very low hourly rate, maybe $225 or $250 per hour (it varies, sometimes dramatically so), which is much less than what is being charged by the insured’s independent counsel.  If the litigation against the insured is significant, the delta between the rate the insurer agrees to pay and counsel’s actual rate can add up to millions of dollars.

An insurer claims it need only pay these low hourly rates pursuant to the requirements set forth in California Civil Code section 2860(c), which governs the financial relationship between an insurer and an insured’s independent counsel. Section 2860(c) states:

The insurer’s obligation to pay fees to the independent counsel selected by the insured is limited to the rates which are actually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of similar actions in the community where the claim arose or is being defended.

While section 2860(c) allows an insurer to only pay independent counsel the same rates it pays to other lawyers to defend similar actions in the same locale, an insured should not simply accept the insurer’s say so on this.  There are several ways to both challenge an insurer’s unilaterally imposed rates.  This article addresses a few such ways.

First, an insured should demand that the insurer produce detailed information about the counsel to whom it is paying these low rates.  An insurer often imposes “panel counsel rates” in these situations, which are rates that an insurer pays to certain law firms that have special agreements with the insurer, often in writing.  In these agreements, the panel counsel often agree to charge the insurer reduced hourly rates, regardless of the type of case, or location of the litigation, typically in exchange for the anticipation of a large volume of work from the insurer.  Under such a situation, an insured can argue that there is no “similarity” of actions as mandated by the statute.  Instead, the panel counsel’s rates are unaffected by the complexity, sophistication, nature of the allegations, legal claims, factual circumstances, location or any other factors of the cases in which they are appointed.  Thus, such rates provide no support under the § 2860 requirements.

Second, an insured should demand that the insurer provide detailed information about the specific cases that the insurer is touting as “similar actions in the community where the claim arose or is being defended,” to support the low hourly rates imposed.  With this information, an insured can ascertain whether such cases are, in fact, “similar” or not.  For example, are these purported “similar” actions less complex than the lawsuit against the insured? Do they involve different legal and/or factual issues?  What about the amounts in controversy — are they dramatically less and thus, the exposure potentials are not even comparable?  Also, where are these other actions pending?  Are they in different communities?  The more an insured can demonstrate dissimilarities the better to demonstrate that the insurer cannot support the hourly rate it seeks to impose pursuant to § 2860.

Third, if the parties cannot informally agree on an acceptable hourly rate for independent counsel, either party can seek to resolve the dispute through final and binding arbitration pursuant to § 2860.  And, in any arbitration, if the arbitrator determines that insurer’s evidence does not satisfy the § 2860 requirements, the insured should argue that a “reasonableness” standard should be applied to determine the appropriate rate for the insured’s independent counsel (with evidence to support that independent counsel’s actual rates are “reasonable”).  Indeed, a “reasonableness” standard is a ubiquitous standard for attorneys’ fees in insurance litigation and other contexts.

An insured need not simply accept its insurer’s word when it imposes inappropriately low hourly rates on an insured’s independent counsel.  Instead, an insured should challenge such rates, when appropriate, either informally or in arbitration.

Susan P. White is a partner at Manatt Phelps & Phillips LLP in Los Angeles.  Susan resolves complex insurance coverage disputes through litigation, arbitration and mediation.  These include bad faith claims, as well as other commercial and contract matters.  She has also successfully recovered millions in attorneys’ fees and costs for her insured clients.

$21.3 in Fees in $142M Wells Fargo’s ‘Fake Accounts’ Settlement

November 9, 2018

A recent The Recorded story by Amanda Bronstad, “Objectors Appeal $142 Million Settlement Over Wells Fargo’s ‘Fake Account’ Scandal,” reports that at least eight objectors have appealed approval of the $142 million class action settlement over Wells Fargo’s “fake accounts” scandal, many alleging that plaintiffs lawyers were not entitled to $21.3 million in legal fees.

The objectors appeals, filed on Nov. 5 in the U.S. Court of Appeals for the Ninth Circuit, are the latest challenge to the settlement, which has been hamstrung by increased costs of administering the funds.  The objectors argued that class counsel at Seattle’s Keller Rohrback spent limited time litigating the case, which settled after several government investigations found that Wells Fargo and Co. had set up unauthorized bank accounts for 3.5 million of its customers.

Objectors raised issues with whether U.S. District Judge Vince Chhabria of the Northern District of California sufficiently analyzed the various state laws before certifying a nationwide class action settlement.  They cited In re Hyundai and Kia Fuel Economy Litigation, a Jan.23 order in which the Ninth Circuit de-certified a nationwide class action because the district judge had failed to analyze the consumer laws of several states before approving the deal.

The case alleged that Wells Fargo opened accounts on behalf of its customers without their consent beginning in 2009. Wells Fargo fired thousands of employees.  Several executives, including its CEO, resigned or appeared on Capitol Hill.  In 2015, Chhabria granted Wells Fargo’s motion to compel arbitration in one of the cases.  While that order was on appeal, the company reached settlements with government regulators, including the Consumer Financial Protection Bureau, totaling $190 million.  Only $5 million of that payment went to customers.

The consolidated class action originally settled for $110 million last year.  Wells Fargo later upped that figure to $142 million.  However, after Chhabria granted preliminary approval of the deal, an outside review discovered another 1.4 million unauthorized accounts, prompting a delay in final approval, which Chhabria eventually granted on June 14.  Chhabria also gave $21.3 million in fees to class counsel, concluding that the award, at 15 percent of the total settlement fund, was well below the Ninth Circuit’s benchmark of 25 percent.

But administering the Wells Fargo settlement has been a complicated task.  Court records indicate Chhabria as well as several state attorneys general raised concerns about the notices sent to potential class members.  As a result, the costs of administering the settlement, a task undertaken by Rust Consulting, had increased substantially and, at times, resulted in what Loeser called “downright fighting,” according to a March 22 hearing transcript.  Loeser predicted at that hearing that the costs of administering the settlement would exceed $10 million, though Wells Fargo had agreed to pay much of that.

The case raised what Chhabria called “a burgeoning concern about the administration of class action settlements.”  “I think it’s a real problem in class action settlements that the court grants final approval and then gets out of the process, in class action settlements,” he said at the March 22 hearing, according to the transcript.  “I’m increasingly thinking that there needs to be, maybe, in a certain category of class action settlements, or maybe in all class action settlements—I’m not sure yet—a third level of review.”

At the settlement’s final approval hearing, on May 30, Chhabria declared that in all his class action cases, he would require plaintiffs lawyers to file a “notice of completion of duties at the end, after the settlement has been fully administered and everybody’s gotten their checks and all the money’s been accounted for.”  Until those duties are completed, he noted he would withhold a certain percentage of attorney fees—in this case, 10 percent.

He followed that with an order on June 14.  The order is similar to new guidelines issued on Nov. 1 by the Northern District of California that include providing data about class action settlements after final approval.  On Nov. 2, Loeser filed a motion to withdraw 25 percent of the attorney fees from the settlement fund, promising to repay the amount should the Ninth Circuit vacate the settlement.

Law 360 Covers NALFA CLE Program

October 25, 2018

A recent Law 360 story by Bonnie Eslinger, “Excessive Attys’ Fee Bids Can Backfire, Judges Say,” reported on a NALFA CLE program hosted today, “View From the Bench: Awarding Attorney Fees in Federal Litigation”.  This live, remote, and multi-state CLE featured an all-judicial panel of sitting U.S. District Court judges.  The story reads:

A prevailing party seeking to recover legal fees should resist asking for excessive or unnecessary hours, federal judges said in a panel discussion Thursday, with one jurist noting such entries send up a red flag that makes him "skeptical of the entire application."  Speaking on a conference call organized by the National Association of Legal Fee Analysis, U.S. District Judges Virginia A. Phillips and Gene E.K. Pratter and Magistrate Judge William Matthewman all spotlighted examples of fee requests that didn't align with the U.S. Supreme Court’s opinion that fees should only be awarded for hours "reasonably expended" on a case.

Judge Phillips of the Central District of California said that judges spend substantial time combing through billing entries, adding, "Surprising things show up when you take a careful look at the bills."  Judge Pratter of the Eastern District of Pennsylvania agreed, saying the most amusing item she once found in an attorney's billing sheet was a calculation that he did 27 hours of work within one day.  It turned out the lawyer had failed to take into account the time zone changes when flying, she said.  The court's review of an attorney's fee request "sometimes requires a check on reality and then a check on Greenwich mean time," Judge Pratter said, chuckling.

Judge Matthewman of the Southern District of Florida said that lawyers shouldn't try to include excessive, redundant or unnecessary hours in their fee bid.  "That comes up constantly with me, where I will see perhaps excessive hours on reading a docket entry … or looking at the local rules, or opening mail, or doing administrative tasks, or really doing things that are unnecessary, such as preparing for a press conference, or perhaps there's a lot of client handholding in the case," Judge Matthewman said. "Things of that nature."

"Lawyers would do much better on these applications if they themselves would sort of police themselves and exclude excessive or redundant, unnecessary hours, so we see less of it or none of it, and we have more comfort in the application.  Once we start seeing a lot of these excessive and unnecessary requests for fees, it sort makes us skeptical of the entire application," the judge added.

Judge Phillips also noted that if an attorney is asking for a high hourly rate, based on his or her experience, then she's looking to see how much time the lawyer is spending on simple tasks.  "If you're entitled to a high hourly rate because of your immense experience, then you shouldn't really have to be spending a lot of time looking at the local rules of civil procedure," the judge said.

When fighting a fee request by the prevailing party, opposing counsel would do well to look for such concerns and make precise objections, Judge Matthewman said.  But avoid pejoratives, Judge Pratter suggested.  "There's no reason to call you opponent avaricious," she said.  Judge Matthewman agreed, saying those kinds of comments will hurt a party's fee request.

Attorneys seeking reimbursement of their fees also don't pay enough attention to requirements that they base their billing on reasonable, prevailing hourly rates, the judges said.  Often, attorneys don't provide enough information to justify their rates, Judge Phillips said.  "Ideally, under the case law, we should have a survey, some survey evidence, a declaration from someone who's qualified to opine on what the prevailing rate is in that community for this type of case," the judge said.  "But often I get nothing but the declaration of the party, of the attorney who's seeking the fees, saying, 'This is when I graduated and these are all the Best Lawyers awards I've ever gotten.'" 

Judge Matthewman added that it's irksome when attorneys from an expensive jurisdiction, such as New York City, come down to Florida for a case and then seek to be reimbursed for an hourly rate they would get in Manhattan.  Later in the discussion, Judge Matthewman said that when considering a fee request, he takes into consideration the quality of the attorney's work and representation.  "If you have a case where the fee applicant's attorney has been overly litigious, very difficult in the discovery process, very difficult on everything, agreeing on nothing, the court understands and knows that this increases the attorneys' fees that are incurred by both sides in the case," the judge said.  "And I think that's a factor that's taken into account."

On the flip side, an attorney who "makes the flow easy," gets rewarded by the court, he added.  Judge Phillips agreed, saying she frequently deals with top lawyers who may have high rates but get good results with "lean" hours.  "Lawyers who are really good, then, don't drop the ball on their fee petitions," Judge Pratter added.  "And lawyers who still have a ways to go somehow, miraculously, don't do so good on their fee petitions either."  The Pennsylvania judge also noted during the panel hearing that the Third Circuit guidelines direct judges to make fee reductions based on meritorious objections from the opposing party and not necessarily to rule sua sponte.

But later on in the discussion, Judge Pratter noted that there are times when the court should lean in with its own judgment, such as when there is a settlement in a class action lawsuit.  The court has a responsibility to look out for the class, she said.  "You cannot rely on the defendants to be acting as a brake on the fees," the judge said.  "The defendants come in, and they and the plaintiff's lawyers are all friendly and hugging each other about how important everybody's work was.  So that's always a flashing light for the court to become particularly attentive to its duties to the absent class members."

Ultimately, the judge said, attorneys should know that judges are not trying to be "mean-spirited" when they are scrutinizing attorney fee requests.  Nor are they jealous of the lawyers, she said.  They're just trying to carry out their duty.  "Most of us, we've been there," Judge Pratter said.  "We understand what it means to have to keep track of time.  I'll tell you, by the way, that's one of the best things about coming over to the other side, [giving] up time sheets."