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Category: Fee Entitlement

Eleventh Circuit Reverses Entitlement to Fees in Miami Construction Dispute

November 29, 2018

A recent Daily Business Review story by Katheryn Tucker, “11th Circuit Reverses Fee Award in Miami Construction Dispute,” reports that, in a ruling that the winning lawyer said saved the construction industry from being “turned on its head,” the U.S. Court of Appeals for the Eleventh Circuit has reversed an award of $155,000 in legal fees in a dispute over the superstructure at Miami’s $1 billion Brickell CityCentre.  Senior Circuit Judge Frank Hull wrote the decision joined by Judges Robin Rosenbaum and Julie Carnes.  The panel reversed a ruling from U.S. District Judge Marcia Cooke of the Southern District of Florida granting $154,536 in attorney fees to International Fidelity Insurance Co. and Allegheny Casualty Co. — referred to jointly by the court as Fidelity.

On the winning side is Americaribe-Moriarty Joint Venture, a general contractor on the massive mixed-use development.  The dispute arose when the contractor replaced a subcontractor, Certified Pool Mechanics, called “CPM” in the opinion.  The contractor contended the sub failed to perform and then sought relief under a Fidelity performance bond.  Fidelity sought a declaratory judgment that Americaribe was not entitled to assert a claim against the performance bond and won at the district court level. The Eleventh Circuit upheld that ruling.

But then Fidelity asked for the fee award, which the district judge granted.  “In the first appeal, we affirmed the district court’s grant of summary judgment to Fidelity, holding Fidelity had no liability under its performance bond,” Hull wrote.  “Subsequently, the district court awarded attorney’s fees to Fidelity against Americaribe.”

On a second appeal, Americaribe argued Fidelity wasn’t entitled to recover fees  because the performance bond and the subcontract didn’t provide for it, and the panel agreed.  Richard Chaves of Ciklin Lubitz in West Palm Beach represented the Americaribe-Moriarty Joint Venture, or AMJV.  “The unchecked effect of the district court’s decision would impact not just our client (AMJV) but contractors and subcontractors across the state of Florida,” Chaves said in an email.

“Contractors and subcontractors routinely enter into bonded contracts which contain prevailing party attorneys’ fee provisions and/or separate indemnity provisions, and have asserted (and likely will assert in the future) claims against performance bonds which are typically challenged by the issuing surety,” he said.  “Fidelity’s position that — despite not having performed their surety obligations under their performance bond — they were entitled to prevailing party attorneys’ fees from AMJV under the indemnity provision of the underlying subcontract (to which Fidelity was not a party) is contrary to Florida’s public policy and, if made into legal precedent, would have turned the construction industry on its head.”

Chaves also suggested Hull’s decision may have helped avoid trouble beyond disputes over performance bonds.  “Contracts are governed by common law,” Chaves said. “An errant decision can create havoc in existing commercial relationships and create uncertainty in future ones.”

The case is Fidelity v. Americaribe-Moriarty JV, No. 17-10814.

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.”

Seventh Circuit: EEOC Should Not Be Sanction with Attorney Fees in CVS Win

November 15, 2018

A recent Law 360 story by Emma Cueto, “7th Circ. Again Rejects CVS’ Atty Fee Win Against EEOC,” reports that a Seventh Circuit panel has preserved its rejection of an attorneys' fee award in favor of CVS Pharmacy Inc. against the U.S. Equal Employment Opportunity Commission in a suit over the company’s severance agreements, saying that using a novel legal theory that was ultimately shot down did not make the suit frivolous.

Despite arguments that the decision would extend fee fights, the panel reiterated that the district court made an error in awarding $307,000 in attorneys' fees to CVS.  The panel said that even though the EEOC did not prevail in its argument that the regulatory language allowed it to file the suit without going through an initial conciliation process, the commission has a “legal hook on which to hang its case,” and that it should not be sanctioned for bringing the suit.

“[The district court] reasoned that the EEOC should have realized even before filing the suit that EEOC regulations required initial conciliation before it could proceed with an enforcement action,” the decision said.  “But that was not at all clear at the time the EEOC acted.”

The dispute between CVS and the EEOC stems from an employee agreement that the agency claimed was meant to confuse employees and to have a chilling effect on employees' rights to lodge discrimination claims with the agency.  The agency sued over the agreement in February 2014.  The district court granted CVS summary judgment in September 2014, finding that the EEOC hadn't met its obligations to conciliate the dispute before suing and therefore wasn't authorized to bring the action in court.  Another Seventh Circuit panel affirmed the dismissal in 2015, and a full Seventh Circuit declined to hear the case.

On remand, the trial court awarded CVS $307,902 in attorneys' fees, finding that the EEOC should have known before suing that its regulations required initial conciliation before it could proceed with an enforcement action.  In June, a new Seventh Circuit panel threw out the attorneys' fees, saying it took more than a loss on the merits to justify awarding the fees and that the district court's decision "impermissibly rested on hindsight,” a phrase it used again in its decision.

The panel was asked to revisit the case in July, when attorneys with Jones Day argued that the court used an improper standard and that the decision would unleash a wave of prolonged fee fights.  The EEOC argued in favor of the panel’s original decision, saying it was in keeping with past case law.  In its amended decision, the panel ruled that it had been correct to use a more permissive standard instead of reviewing the district court ruling only for an abuse of discretion, explaining that the lower court had made a legal error, meaning the abuse of discretion standard was not the correct one to use.

It then said that the question as to whether the EEOC should have to pay attorneys' fees rested on whether its legal theory — which relied on a novel interpretation of the unique wording in a subsection of Title VII of the Civil Rights Act of 1964 — was “far enough afield” as to be unreasonable.  The panel noted that there was a difference in the wording of the subsection the EEOC highlighted and no clear precedent that shut down its theory.  In addition, it added, CVS by its own admission spent more than 800 hours defending against the suit and specifically told the district court the questions required a deep understanding of Title VII.

The case is the U.S. Equal Employment Opportunity Commission v. CVS Pharmacy Inc., case number 17-1828, in the U.S. Court of Appeals for the Seventh Circuit.

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.