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Category: Fee Entitlement

In-House Counsel Can and Should Collect Attorney Fees

August 21, 2017

A recent Corporate Counsel article by Daniel K. Wiig, “In-House Counsel Can and Should Collect Attorney Fees,” writes about attorney fee entitlement for in-house counsel work.  This article was posted with permission.  The article reads:

When weighing his post-Senate career options, then-U.S. Sen. Howard "Buck" McKeon rejected an offer from a prominent law firm, opting not to "live his life in six-minute increments."  Indeed, it is with fair certainty to state a top reason lawyers in private practice transition to in-house is to escape the billable hour.  And while the imminent death of the billable hour may have been highly exaggerated (again and again), it remains the predominate metric for private-practice attorneys handling commercial work to track their time and collect fees.

Numerous reports suggest the in-house lawyer is "rising," with companies opting to retain more and more legal work within their law departments, and decreasing the amount of work they disseminate to outside counsel.  Sources cite various reasons from cost to the intimate knowledge in-house lawyers possess regarding their employer vis-à-vis outside counsel.  Whatever the genesis, it reasons that in-house lawyers morphing into the role traditionally held by outside lawyers should assume all such components of the role, which, when possible, can include recovering attorney fees for actual legal work performed, as noted in Video Cinema Films v. Cable News Network, (S.D.N.Y. March 30, 2003), (S.D.N.Y. Feb. 3, 2004), and other federal and state courts.

Recovering attorney fees is that extra win for the victorious litigant, whether provided by statute or governed by contract.  It leaves the client's bank account intact (at least partially) and gives the prevailing attorney additional gloating rights.  For the in-house lawyer, recovering attorney fees can also occasionally turn the legal department from a cost center to a quasi-profit center.  In-house lawyers can and should collect attorney fees.

To be clear, recovering attorney fees is not available for in-house lawyers functioning in the traditional role of overseeing outside counsel's work.  As noted in Kevin RA v. Orange Village, (N.D. Ohio May 4, 2017), a court will not award fees to in-house lawyers that are redundant, i.e., those which reflect work performed by outside counsel.  Indeed, when in-house counsel is the advisee of litigation status rather than drafter of the motion or attends the settlement conference as one with authority to settle rather than to advocate more advantageous settlement terms, she functions as the client rather than lawyer, of which attorney fee are unavailable.

Unlike their counterparts in private practice, in-house counsel do not have set billing rates, although an exception may exist if internal policies permit the legal department to invoice the department that generated the legal matter.  Even in such a situation, as with law firm billing rates, the actual fees/rates are considered by the court but not determinative in awarding fees, as noted in Tallitsch v. Child Support Services, 926 P2d. 143 (Colo. App. 1996).  In determining what constitutes an appropriate and reasonable attorney fee award, courts frequently apply the "reasonably presumptive fee" or the "lodestar" method.  Under the lodestar method, as explained in Earth Flag v. Alamo Flag, 154 F.Supp.2d 663 (S.D.N.Y. 2001), fees are determined by "multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate."

Reasonableness is a question of fact for the trial court.  In determining a reasonable hourly rate, federal courts look to those reflected in the federal district in which they sit, while state courts consider the prevailing rates in their respective city and geographical area.  Courts will also consider other factors such as the complexity of the case, the level of expertise required to litigate the matter, and the fees clients in similar situations would be willing to pay outside counsel in determining the appropriate hourly rate for the in-house lawyer.  Determining whether the tasks performed by the in-house lawyer were reasonable is left to the court's discretion.

Recognizing legal departments do not necessary operate in lockstep fashion as a law firm, courts will consider the "blended" rate in the lodestar calculation.  Here, a court will combine or "blend" the reasonable rates for associates, partners, counsel and paralegals in their locale to devise the appropriate hourly rate for the in-house lawyer.  The premise is in-house lawyers generally take on less defined roles in litigating a matter than their counterparts in private practice, performing a combination of litigation tasks that may be more clearly delineated among law firm staff.

In order to successfully receive an award of attorney fees, the in-house lawyer must maintain a record akin to a law firm's billing sheet of her time spent on the matter, as reflected in Cruz v. Local Union No. 3 of International Brotherhood of Electrical Workers, 34 F.3d 1148 (2d Cir. 1994).  Consequently, an excel spreadsheet, or similar document, enumerating the time and task, with as much detail as possible, is required to sustain a court's scrutiny in looking for tasks that were "excessive, redundant or otherwise unnecessary," as noted in Clayton v. Steinagal, (D. Utah Dec. 19, 2012).  Moreover, the in-house attorneys who worked on the matter must execute affidavits attesting to the accuracy of their time records, and include the same in their moving papers.

As the legal profession changes and corporate legal departments retain more of their work, in-house should take advantage of statutory or contractual attorney fees provisions, notably for the litigation they handle internally.  In so doing, the in-house lawyer may find a number of benefits, such as approval to commence litigation that they may have otherwise shied away from because of the possibility to recoup attorney fees and the benefit of essentially obtaining payment for the legal work performed.

Daniel K. Wiig is in-house counsel to Municipal Credit Union in New York, where he assists in the day-to-day management of the legal affairs of the nearly $3 billion financial institution.  He is also an adjunct law professor at St. John's University School of Law.  Wiig successfully moved for in-house attorney fees in Municipal Credit Union v. Queens Auto Mall, 126 F. Supp. 3d 290 (E.D.N.Y. 2015).

Judge Trims Hours Billed in Copyright Infringement Action

August 17, 2017

A recent Law 360 story by Sophia Morris, “Judge Reinstates, Then Trims Fees Award to ‘Obstinate’ Attys,” reports that a Florida federal judge ruled that Yellow Pages Photos Inc. was entitled to attorneys’ fees and costs totaling more than $1.4 million in a copyright infringement suit following an Eleventh Circuit ruling in its favor, but revised the amount downward based on the conduct of the company's counsel at Shumaker Loop & Kendrick LLP.

U.S. District Court Judge Richard A. Lazzara was ruling on the fee request following the remand of YPPI’s infringement suit against subcontractor Ziplocal and Yellow Pages Group LLC from the Eleventh Circuit.  He found that while YPPI was the prevailing party and thus entitled to fees and costs, the amount must be reduced given its attorneys' conduct during the litigation.

“Obstructing the rhythm of a case by throwing up roadblocks of schedules too busy to calendar depositions, just for the sake of being disagreeable and obstinate, particularly in view of the multiple attorneys working on the case, does not bode well in finding the number of hours incurred was reasonable or acceptable in any sense of the word,” Judge Lazzara said.

Yellow Pages Photos filed the long-running infringement suit in 2012 over Ziplocal and Yellow Pages Group’s use of copyrighted photos.  In 2014 a federal jury awarded YPPI $123,000 in damages.  Yellow Pages Group appealed and YPPI cross-appealed, and the Eleventh Circuit affirmed the judgment in 2015.  YPPI then appealed the district court’s lowered fee award, and the Eleventh Circuit ruled in January that it was entitled to a revised fee determination given that it had requested $1.4 million in fees from Ziplocal and had been awarded $69,354.76. 

Now, on remand after the January ruling, YPPI requested fees and costs for both the district court action and the appeal process.  But Judge Lazzara said that given the stonewalling behavior of YPPI’s attorneys during the course of the district court proceedings he cannot award fees and costs in the amount requested.

The court found that the lodestar for the district court action should be $1,280,395.57, a 10 percent reduction “representative of the excessive, redundant and otherwise unnecessary number of hours expended,” Judge Lazzara said.  He then reduced this lodestar by another 10 percent to $1,152,356.01, saying that YPPI had requested an excessive amount of damages in what was a simple case.  The damages that were awarded were much lower than what was initially requested and the court found that the fee award should reflect this.

YPPI’s attorneys also made a fee request of $57,419.50 for work expended on the appeal.  The court said that while the hourly rate was reasonable, the amount of hours expended on the appeal was not.  Judge Lazzara said that the fee request was not detailed and it appeared that the attorneys were duplicating each other’s work.  He therefore reduced the fee award to $50,794,50.  “The time of 136 hours seems excessive and unnecessary for researching and briefing the issue of attorneys’ fees and nontaxable costs,” the court said.

Plaintiffs Firm Sues for Fees in Celgene $280M Settlement

August 16, 2017

A recent Bloomberg Big Law Business story by Max Siegelman, “Plaintiffs Firm Sues for Fees in Celgene $280M Settlement,” reports that court filings show plaintiffs law firm Grant & Eisenhofer is suing their former client and their former co-counsel from a $280 million settlement against pharmaceutical giant Celgene Corporation.

G&E claims it racked up a $7 million tab that has not been paid since the case was settled in July, and that it is entitled to a share of the contingency fee for the recovery effort.  Their original deal would have won the firm anywhere between $28 and $33 million, according to the complaint filed in California federal court.

In 2010, G&E filed a complaint against the pharmaceutical company Celgene on behalf of Beverly Brown, one of its former sales managers.  According to that complaint, the company pressured Brown and others to promote the drug Thalomid as a treatment for bladder, breast and brain cancer, despite lacking FDA approval for these uses.  As part of its marketing plan, the complaint alleged, Celgene dispatched over 100 “agents,” to hospitals and doctors offices around the country to aggressively push the drugs and their untested results.

The case was settled for $280 million in July, 2017.  Most of the settlement is earmarked for the federal government, 28 states and Washington D.C.  The payment is equivalent to about two weeks worth of sales of Revlimid, which generated $6.97 billion in revenue for Celgene last year, according to data compiled by Bloomberg News.

G&E is suing Brown, California firm Bienert, Miller & Katzman, and South Carolina based Richard Harpoolitan on the grounds that those firms and a former G&E director Reuben Guttman, poached Brown as a client after Guttman left the firm.  They are suing for breach of contract, intentional interference with contract, quantum meruit and declaratory relief in the U.S. District Court in the Central District of California.

The claims stem from a frayed relationship between the firm and Guttman, who took on the plaintiff Brown as a client in 2009, according to the complaint.  He left the firm in early 2015 and shortly after, Brown replaced the G&E legal team with Guttman and another former lawyer from the firm who later started a firm with Guttman called Guttman, Buschner & Brooks PLLC.

Despite the switch, G&E claims it should be compensated for the work it performed on behalf of Brown in the case.  According to the G&E complaint, whistleblowers typically receive 25 to 30 percent of the settlement.  Given the $280 million settlement with Celgene, that means Brown could receive anywhere from $70 to $84 million as a whistleblower “bounty,” some of which will go to her legal team.  According to G&E, their original deal with Brown would have won the firm a 40 percent contingency fee — anywhere between $28 and $33 million.

Bank Blocked From Billing for In-House Counsel Work

August 10, 2017

A recent Legal Intelligencer story by Lizzy McLellan, “Bank Blocked From Billing for In-House Counsel’s Work,” reports that Enterprise Bank has lost an appellate-level bid to charge counsel fees to a client in foreclosure for work completed by an in-house attorney and paralegal.  That work is not included in the description of legal fees contained in Enterprise's loan documents, the Pennsylvania Superior Court ruled Aug. 8, affirming a trial court decision.  However, the court did not address whether companies generally may bill clients for the work of in-house lawyers and legal staff.

"After careful consideration, we conclude that the language 'hire or pay someone else' is, at best, ambiguous," Judge Geoffrey Moulton wrote in a 10-page opinion.  "Frazier makes a strong case for the proposition that 'someone else' necessarily means someone not then in Enterprise's employ.  Otherwise, the meaning of the term is difficult to discern."

The Frazier family, a limited partnership, executed a business loan, promissory note and mortgage from Enterprise in 2012, the opinion said.  Within the agreement was a provision regarding attorney fees and expenses, which said Frazier would be responsible for all attorney fees, including those used to "hire or pay someone else" to enforce the mortgage agreement.

In January 2014, Enterprise filed a mortgage foreclosure nearly equal in amount to the principal on the three loans.  The foreclosure complaint included a request for reasonably incurred counsel fees.

Frazier filed preliminary objections, arguing that in-house counsel was not included in the attorney fee provision.  Enterprise provided documentation of the hours billed by an in-house lawyer and paralegal and argued that they were clearly counsel fees.  "Enterprise further asserted that it 'hired' in-house counsel 'to collect the debt and in this case, file a mortgage foreclosure' action," the opinion said.

But the Allegheny County Court of Common Pleas sided with Frazier, denying Enterprise's request for counsel fees.  The trial court said any ambiguity in the loan agreements should be construed against Enterprise, since Enterprise drafted the agreements.

The Superior Court agreed on appeal.  However, the court noted, there is a larger issue raised by the dispute on which the court was unable to rule.  "Because we find the contract language ambiguous, and construe it against Enterprise, we need not reach the broader question, briefed by the parties, of whether a lender in Pennsylvania may recover for the work of salaried, in-house counsel," Moulton wrote in a footnote.

Defense Fees Awarded in CEPA Claim Deemed Baseless

August 3, 2017

A recent New Jersey Law Journal story by Charles Toutant, “Hospital Award Fees After Plaintiff’s CEPA Claim Deemed Baseless,” reports that a federal judge has awarded legal fees to a hospital as the prevailing party in an ex-employee's whistleblower claim after the plaintiff could not name any laws or regulations broken by the defendant.

Capital Health Systems is entitled to fees for defending lab technician Janice Marrin's claims under the Conscientious Employee Protection Act (CEPA) because her claims about lax procedures at the defendant's microbiology lab are without basis in law or fact, U.S. District Judge Freda Wolfson ruled.  Wolfson said the plaintiff had failed to advance any argument to support her CEPA claims.  Wolfson said lack of support distinguished Marrin's CEPA claim from a situation where claims were merely not viable.

Capital Health sought reimbursement for efforts to oppose Marrin's whistleblower claim for more than three years, from the first filing of the complaint in March 2014, but Wolfson granted the defendant fees from after the close of discovery in September 2016 until the plaintiff withdrew the CEPA claim in November 2016.

Marrin first worked in the defendant's hospital in Trenton and later was transferred to its hospital in Hopewell.  Her suit claimed she was terminated for complaining to supervisors about improper procedures in the lab.  She met with Capital Health's director of human resources in February 2013 to discuss her concerns about her co-workers' deficient procedures.  In April 2013 she was terminated for failure to cooperate with an internal investigation into how she obtained emails between her supervisors and the human resources department that discussed her but were not addressed to her.

Besides the CEPA claim, Marrin's suit brought claims under the state Law Against Discrimination and the Family and Medical Leave Act.  Wolfson dismissed the remainder of the claims this May.  Capital Health sought fees for the entire duration of the litigation because it claimed Marrin admitted during the August 2015 deposition that she lacked a basis for her CEPA claim when she filed the suit, but Wolfson called that assertion "highly speculative."

"Plaintiff was entitled at the pleading stage to maintain both her CEPA and NJLAD retaliation claims, and defendants chose to wait until after the close of discovery to move on all of plaintiff's claims, rather than moving on the CEPA claim as soon as Defendants contend it became apparent that the claim lacked merit.  This Court, considering the foregoing and looking to the parameters of CEPA's safe harbor provision … finds that an appropriate threshold for the imposition of fees and costs in this case was the close of discovery," Wolfson said.

The lawyer for Capital Health, Kelly Bunting of Greenberg Traurig in Philadelphia, said she and her client were both "thrilled" with the decision, given the difficulty of winning motions for fees.  Bunting said she had yet to calculate how much she will seek on the CEPA issue, adding that her motions for legal fees under the LAD and for a bill of costs are still pending. Bunting said she had no disagreement with the court's limits on the scope of her CEPA fee award, which was based on a finding that some time spent on that motion could also apply to the plaintiff's LAD claim.

One Year Later: Kirtaeng v. Wiley

June 20, 2017

A recent Law 360 story by Bill Donahue, “2nd Circ. To Reduce Fee Award in $655M Madoff Settlement” reports that a year later, experts say the impact of the U.S. Supreme Court’s Kirtsaeng v. John...

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