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Category: Coverage of Fees / Duty to Defend

AIG Unit Can Recover Attorney Fees in Coverage Litigation

July 21, 2020

A recent Law 360 story by Mike LaSusa, “AIG Unit Nabs $212K in Atty Fees After Coverage Row” reports that AIG unit National Union can collect nearly $212,000 in attorney fees after fending off a medical services company's coverage claims stemming from a pair of employee harassment complaints, with a Florida federal judge shooting down several objections to the final fee figure.  U.S. District Judge Roy B. Dalton Jr. accepted a magistrate judge's recommendation to order TMH Medical Services LLC to pay $211,720.50 in attorney fees to National Union Fire Insurance Co. of Pittsburgh, Pa. — a slight reduction from National Union's request for $223,143.50 in fees.

Judge Dalton swept aside TMH's argument that National Union couldn't collect fees for litigation that happened after July 17, 2019, when the judge issued an order saying National Union would be entitled to attorney fees while leaving the amount undetermined.  TMH had argued that Florida law doesn't allow litigants to collect attorney fees racked up while fighting over the amount of attorney fees owed.  But Judge Dalton said his order last year didn't specify an amount and didn't end the battle over whether National Union was entitled to fees.

Judge Dalton noted that TMH had asked the court to reconsider its decision.  The judge rejected that request on March 20, meaning that date — not July 2019 — marked the end of litigation over entitlement to fees and start of the litigation over the final amount, he said.  The judge also wasn't convinced by TMH's arguments that the rates offered by National Union were unreasonable.  He said the rates of $285 per hour for of counsel and $355 for partners seemed reasonable, citing similar cases in which attorneys were paid as much as $550 per hour.

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Fox Rothschild LLP
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
Los Angeles, CA
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA

California Insurer Fights $6M Attorney Fee Award

April 14, 2020

A recent Law 360 story by Cara Salvatore, “Calif. Insurer Fights $21M Jury Verdict, $6m Fee Award,” reports that Cypress Insurance Co. asked a Georgia federal court to hold rare oral arguments on post-trial motions regarding a $21 million award for the family of a pedestrian run over by a trucker, saying a $6 million special verdict for legal fees should be argued orally because it “equates to paying counsel at a rate of $5,500 an hour.”

The insurer wants oral argument on motions for judgment as a matter of law or for a new trial after a jury awarded $21 million in February to the family of Kip Holland.  Holland died on Dec. 8, 2016, after being hit by a trailer that had detached and rolled away from a semi-tractor being driven by James Harper.

In the two-phase trial in February, the jury first awarded $15 million and found that Harper committed “bad faith in the transaction” by misrepresenting medical information for his federal trucking license.  The finding of bad faith made Holland’s family eligible to recover litigation expenses, and the trial went to a second phase, where the jury awarded $6 million for that component.

Cypress, which insured the tractor-trailer, said Wednesday that oral argument is “warranted regarding the propriety of plaintiffs’ $6,000,000 attorneys’ fees award, which equates to paying counsel at a rate of $5,500 an hour,” Cypress said.  It suggested that this may violate Georgia law concerning “reasonable” attorney fees.

The jury found that Harper had misrepresented his medical history and status during a medical examination necessary to obtain his license under the Federal Motor Carrier Safety Regulations.  Cypress also said that oral argument “would aid the court with respect to its analysis of the 2015 amendments to Georgia’s Direct Action statute” — amendments Cypress claims may impact whether the insurer can even be a party to the suit.  The amendments in question preserve legal action against insurers of “intrastate” motor carriers, and Cypress asked rhetorically whether the language was intended to apply as well to insurers of interstate motor carriers.

Article: The Need For Attorney Fee Expertise

February 20, 2020

A recent AI article by John D. O’Connor, “The Need For Attorney Fee Expertise (pdf),” reports on the need for attorney fee expertise to prove reasonable attorney fees and proper billing practices in underlying litigation.  This article was posted with permission.  The article reads:

Most corporate clients today have access to excellent litigation counsel in each particular area of concern.  However, as attorney fee disputes are increasingly becoming a by-product of the main litigation event, few clients and few otherwise excellent litigators truly understand when and how to use attorney fee experts.

Although the “American Rule” provides that each litigating party bears its own fees, there are exceptions to this rule.  Successful class actions; employment and governmental discrimination cases; eminent domain suits; RICO claims; and other cases result in legally-sanctioned attorney fees claims.  Promissory notes, guarantees, real estate purchase agreements, and corporate acquisition contracts often contain attorney fee clauses.  High-stakes insurance coverage litigation usually features a battle over fees incurred in the underlying case(s).  It is common for a case with a small monetary award to result in an extremely high request for fees.

Typically in fees proceedings, the party with a claim to fees files a motion detailing the amount it requests, accompanied at a minimum by a Declaration of the main litigating attorney attaching a statement of his billings, detailing hours and rates for which payment is sought.  The main billing attorney will normally justify the requested billing rate, which can be his actual rate or a rate claimed to be prevailing in the community for one of similar skill and experience. The motion, usually accompanied by a brief summarizing the law of fees in that type of case, includes the statutory or contractual authority for same.

When the responding party files its submission, the contours of the ultimate dispute take shape.  It is common for the respondent to challenge the billing rates as unduly high; the number of lawyers assigned as excessive; the hours spent as inefficient; the number and length of conferences and meetings as unnecessary; the billing form as improperly “blocked” and “vague” in description; many of the tasks billed as being unwisely or improvidently chosen; certain work as not related to prevailing claims; and generally excessive fees for the type of litigation involved.  Often this opposition is accompanied by a request for limited discovery regarding fees.

As objections are detailed in various cases, the challenging lawyer is usually able to write an impressive brief in support.  These objections can be made without an expert witness, except as to prevailing billing rates, which the responding lawyer is qualified to opine.  The responding party will have made a serious mistake, however, if it did not bolster its objections with a detailed opinion of an experienced fee expert.  Often, the reviewing Court has witnessed the work of the petitioning lawyers and formed a positive opinion of them. Indeed, the reviewing Court in the underlying case would often have ruled in favor of the petitioner and against the respondent.  Even if not, the respondent must labor against the human assumption that established, competent lawyers have billed in accordance with community standards.

However, surprisingly, it is common for responding parties to put forth objections without an expert.  We have seen cases where fees sought into eight figures, where no expert has been retained, with unenviable results. Most experts have the capability of presenting a computer analysis isolating hours and tasks, which can claim to isolate amounts of “block” entries, incompensable “clerical” time, and other practices.  Such a presentation, though, is often superficial, and may not impress a reviewing Court seeking a principled basis upon which to reduce fees for the prevailing party.

Whatever the case, any attack on the requested fees should call for a rebuttal by a qualified attorney fee expert on behalf of the petitioner.  However, this guideline is frequently observed in the breach.  Even if the Court had been inclined to a favorable opinion of the petitioning firm, even a superficial attack on the petitioning lawyers’ fees can be facially effective, and thus the petitioner would need to blunt effectively any such attack.

A qualified expert can help by suggesting needed discovery from the responding party of information regarding that party’s billings which supports the petitioner’s request.  More importantly, an expert employed correctly will go beyond the glittering generalities put forth in these disputes.  They would show why a particular billing rate is justified with specific reference to specific firms doing nearly identical work or why a particular task was necessarily and properly time-consuming.

Most reviewing Courts are experienced at resolving factual disputes based on a presentation of specific compelling facts.  A wise litigation party, in short, should employ an expert to do just that. 

John D. O’Connor is a NALFA member and the Principal of O’Connor & Associates in San Francisco.  For more on John D. O’Connor, visit www.joclaw.com.

FL Law Firm: Insurer Must Cover $14M in Defense Fees

February 17, 2020

A recent Law 360 story by Hailey Konnath, “Fla. Law Firm Says Insurer Must Cover Defense of $14M Suit,” reports that a Florida law firm and its shareholders said that they're owed damages from an insurance company that refused to cover their defense in a $14 million suit over a loan transaction, urging the Eleventh Circuit to overturn a lower court's finding that they lacked sufficient evidence of lost profits.  Kluger Kaplan Silverman Katzen & Levine PL and shareholders Abbey Kaplan and Steve Silverman say that Nautilus Insurance Co. has wrongly refused to cover their defense costs in a 2011 suit brought by a trust that claimed it lost $14 million in a loan transaction with the attorneys' former client.

In 2017, an arbitration panel found that the insurance company indeed breached its duty to defend them and awarded contractual damages, but the panel didn't consider or award extracontractual damages the attorneys and firm said they were also owed, according to the attorneys and firm.  The attorneys and Kluger Kaplan then sued Nautilus in an attempt to recover those additional damages.  But a Florida federal judge sided with the insurance company in November, ruling that the plaintiffs were attempting to relitigate issues that had been decided and lacked sufficient evidence to prove the extracontractual damages.

Silverman, Kaplan and the firm argued that the issues at the heart of their suit "have never been litigated, much less to judgment."  The arbitration panel had addressed Kaplan and Silverman's contractual damages, which included reasonable attorney fees, but that determination doesn't prevent them from seeking to hold Nautilus liable for other damages, the attorneys and firm said.

And the evidence they'd presented to the district court is "more than sufficient" to show lost profit damages when taken in the light most favorable to Kaplan, Silverman and the firm, they argued.  That evidence includes Kaplan's and Silverman's investing track records, as well as the firm's historical data showing it lost profits because it was unable to realize revenue from paying clients while fighting the suit, they said.

"Not even Nautilus disputes that Kaplan, Silverman, and KKSKL had to shift resources that could have been deployed to profit-making activities because they were in the fight of their lives with Cordell after Nautilus abandoned them," they said, referring to the trust.  "If affirmed, the lower court's order will create an impossible bar for businesses to recover lost profits under the bad faith statute's tort-like causation standard," they added.

According to the brief, Kaplan and Silverman — at the time working for Kluger Peretz Kaplan & Berlin — represented businessman Edward Okun and his affiliated entities from 2006 to 2007.  In 2009, Okun's companies filed for bankruptcy after he was indicted for operating a Ponzi scheme, the attorneys said.  In 2011, KPKB and its former attorneys were sued over $14 million that a trust purportedly lost in a loan transaction with Okun that occurred while the firm was representing him, per the brief.  Kaplan and Silverman then requested a defense and indemnification under an insurance policy issued by Nautilus, but Nautilus denied them coverage, they said.

Kaplan and Silverman personally spent $2 million in legal fees and costs defending themselves in the suit.  Amid that litigation, the trust asked for leave to file an amended complaint that also named their new firm, Kluger Kaplan, as a defendant.  Ultimately, Kluger Kaplan was never made a party to the action, but the firm spent more than $134,000 defending itself and $475,000 assisting with Kaplan and Silverman's defense, it said in the brief.  In the end, the attorneys and KPKB won the case, according to court filings.

The attorneys and Kluger Kaplan took their coverage dispute with Nautilus to arbitration.  In March 2017, an arbitration panel found that the insurance company breached its duty to defend them under the policy and owed them a reimbursement for "reasonable defense costs," according to the brief.  But the panel awarded the attorneys and Kluger Kaplan less than they were after, an award that "did not make Kaplan, Silverman or KKSKL whole," they said.

Silverman, Kaplan and the firm then lodged the present action in late 2017 in Florida federal court.  According to the brief, they're after damages, including unrecovered fees, defense costs and lost profits that Kluger Kaplan sustained as a result of time spent on the case — none of which was awarded in arbitration.  Late last year, the Florida district court granted Nautilus' summary judgment motion, ruling that Silverman, Kaplan and the firm were collaterally estopped from seeking the unrecovered amounts they paid or incurred in defending themselves.  The court also held that the attorneys and firm had failed to present sufficient evidence that would prove that the damages were caused by Nautilus' lack of good faith, according to a November order.