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Category: Defense Fees / Costs

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.

Insurer on Hook for Failing to Pay $4M in Legal Fees in Email Scanning Case

October 19, 2018

A recent Corporate Counsel story by Ian Lopez, “Insurer on Hook for Failing to Foot Yahoo’s $4M Outside Counsel Bill in Email Scanning Case,” reports that a federal judge in California has ruled that Yahoo’s insurer failed to defend and indemnify the company by refusing to foot $4 million in outside counsel fees from litigation over the tech company’s practice of scanning user emails for advertising purposes. 

In an order on motions for summary judgment, U.S. District Judge Edward Davila of the Northern District of California wrote Yahoo was “largely correct” in assuming legal fees incurred in a consolidated 2016 class action were covered under a “personal injury” policy purchased from National Union.  The insurer had argued Yahoo’s costs didn’t fit within the policy’s definition of a personal injury as damages accrued via the “oral or written publication … of material that violates a person’s right to privacy,” a view that Davila said is “incorrect.”

Settled in 2016, the consolidated case is one of three over which the liabilities under Yahoo’s National Union policies were in debate.  The other two, class actions undertaken in Marin County Superior Court and San Jose District Court in 2012, accused Yahoo of having “wiretapped … or eavesdropped upon and recorded” emails between class members, all Yahoo account holders, and other users of the company’s email services.  These actions, plaintiffs alleged, were invasions of the California Invasion of Privacy Act.

“The key finding was that [Yahoo was] not only scanning these emails, but they were sharing that private information with others for profit so that their privacy was not only violated, but it was considered personal injury because it was published to a third party,” said Joshua Bevitz, a Newmeyer & Dillion partner not affiliated with the case.

Yet Davila granted National Union’s motions that it didn’t breach the duty to indemnify in costs associated with the earlier two class actions, given the suits ended in voluntary dismissals and without any evidence of resulting payments from Yahoo.  Davila wrote that because Yahoo was never “legally obligated” to pay damages under the two earlier lawsuits, National Union couldn’t have breached its duty to indemnify under the personal injury policy.  So why bother pursuing the matter in later litigation?  Especially because, as Bevitz puts it, “someone spent a lot of money on attorney fees to get [litigation] to this point.”

Michigan Has Paid $35M in Defense Fees in Flint Water Crisis

September 4, 2018

A recent Crain’s Detroit Business story by Chad Livengood, “Flint Water Legal Bills Could Top $34.5 Million,” reports that three years after lead was discovered in Flint's water, there's no end in sight for the legal bills the state is paying private law firms to represent state officials in civil litigation and criminal prosecutions.  Private attorneys representing state health director Nick Lyon have billed taxpayers more than $1.6 million to defend a high-ranking member of Gov. Rick Snyder's cabinet facing involuntary manslaughter charges stemming from Flint's water crisis — and his trial date hasn't even been set yet.

That number is only a small part of amount the state has spent on Flint water crisis-related legal bills.  Through mid-August, the state had spent $26.5 million, while three state departments have current capacity in contracts to make that total top $34.5 million, according to public records compiled by Crain's.  Three days after a Genesee County judge ordered Lyon to stand trial last month for the suspected water-related deaths of two elderly Flint-area men, the state's Administrative Board increased the contract for Lyon's primary defense attorneys at the Grand Rapids firm Willey & Chamberlain by $1 million to $2.75 million.

The state Department of Health and Human Services, which Lyon remains in charge of while facing prosecution, has additional contracts of $400,000 each with two other law firms working to keep him out of prison — Bursch Law PLLC in Caledonia and Chartier & Nyamfukudza PLC in Lansing.

The $3.55 million budgeted for Lyon's criminal defense in a high-stakes and politically tinged criminal case brought by Attorney General Bill Schuette is seen by longtime Lansing observers as an unprecedented expense of taxpayer money.  Lyon's legal bills alone over three fiscal years exceed what Genesee County spends annually for defense attorneys who represent indigent residents.

"It's unheard of. It's beyond exorbitant," said William Whitbeck, a retired Court of Appeals judge who was paid nearly $300,000 by Schuette to evaluate charges leveled by a special prosecutor.  "If you or I were to commit a crime or even be charged with committing a crime, we'd pay our own way.  There's no reason in God's green earth why a similarly situated citizen who happens to be a state employee should be treated differently."

Schuette, the Republican nominee for governor, has run up some big bills himself in pursuit of criminal convictions of state officials he says are culpable for Flint's tainted water.  To date, Schuette's investigation, run by the Royal Oak law firm of attorney Todd Flood, has spent $6.9 million.  The Legislature has approved an additional $3.1 million for the prosecutions over the next 13 months.

Three years have passed since elevated levels of toxic lead were discovered in the city's drinking water, and, despite deep distrust from residents, public health officials have since declared the Vehicle City's tap water safe to drink again.  But there's no end in sight for the legal recriminations from the crisis that are keeping some private attorneys in Michigan busy.

Not a single trial from Schuette's litany of charges against 15 current and former local and state officials has begun, with Lyon just getting bound over for trial two weeks ago in Genesee County Circuit Court after a laborious 11-month preliminary examination in district court.

Gov. Rick Snyder's administration has spent at least $13.75 million to date on private attorneys hired to produce some 2 million pages of records for Schuette and Flood's investigation and represent the governor and at least 30 state employees in the criminal probe and subsequent court proceedings, state records show.

Richard McLellan, a Lansing attorney and ally of Lyon, said the outgoing Republican governor is "doing the right thing" using taxpayer money to defend "his people" in court.  "Yeah, it costs money.  But what is the cost of maybe going to prison for 15 years for something you didn't do?" McLellan said, referencing the prison sentence Lyon faces for involuntary manslaughter. "... What's Snyder supposed to do? Say, 'Oh, it's too much. You're just going to have to be on your own.'"

NJ Justices Hears $2M Fee Dispute in Employment Case

January 3, 2018

A recent New Jersey Law Journal story by Michael Booth, “Justices Hear Dispute Over $2 Million Fee Award in Employment Case” reports that a Princeton financial services company asked the New Jersey Supreme Court to reinstate a more than $2 million attorney fee award for defeating an ex-employee's lawsuit.

Noren was employed by Heartland from April 1998 to June 2005 as a “relationship manager,” a role in which he sold payment processing services.  The contract he signed provided that he and Heartland both “irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this agreement,” according to court documents.  Another contract provision awarded fees and costs “[i]n any suit, action or proceeding arising out of or related to this agreement.”

Noren was fired in 2005.  His suit was eventually whittled down to the two claims: breach of contract and the CEPA violation.  His jury trial demand was denied based on the waiver provision and, after 22 days of bench trial, Bergen County Superior Court Judge Susan Steele dismissed both claims.  She awarded Heartland $2.06 million in fees and costs for the defense of both claims, finding them so intertwined that the fees could not be apportioned, the decision stated.

In his appeal, Noren did not dispute the jury waiver’s applicability to the contract claim, or the notion that fees may be awarded based on Heartland’s success in defeating that claim.  But he did dispute the waiver’s applicability to the CEPA claim, and the corresponding fee award based on the statute.