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Category: Fee Entitlement

Investor Seeks Attorney Fees in Compensation Savings Matter

September 26, 2017

A recent Law 360 story by Vince Sullivan, “Puma Investor Seeks Fees for $20M in Director-Pay Savings,” reports that a shareholder of Puma Biotechnology Inc. filed suit in Delaware seeking the payment of attorneys’ fees and expenses for his efforts in pursuing changes to the compensation packages of non-employee directors, which he says ultimately saved the company more than $20 million.  In a complaint, shareholder Paul Alan Leafstedt said Puma made changes to its director compensation plans that saved the company millions after he sent a demand letter to the board in February, but the sides could not work out a deal on compensation for attorneys he brought on in the effort.

As a result of Leafstedt’s demand letter, the company engaged an independent compensation consultant and amended its director packages to reduce awards to non-employee directors significantly.  The demand letter was spurred by the board awarding itself what Leafstedt described as “grossly excessive levels” of compensation that were allegedly nine times greater than what was appropriate.

Puma also capped director stock award and allowed shareholders to provide input on compensation procedures at annual meetings.  The company also added information about the program into its proxy statement, which were reviewed by Leafstedt’s attorneys before filing, and instituted additional corporate governance reforms relating to pay practices.

“Plaintiff’s efforts directly conferred a substantial and quantifiable benefit to Puma and its stockholders — with the compensation reductions and limits alone amounting to a savings of up to $20 million over the next five years,” the complaint said.  Leafstedt cites Delaware law that allows for fee awards where a corporate benefit results from a meritorious demand on the board in asking for attorneys’ fee and expenses related to the effort.

The compensation packages for non-employee directors of the company resulted in average annual awards in the amount of more than $1.4 million each, with each director receiving a $50,000 cash retainer and options to purchase 10,000 shares of Puma stock.  Directors who sat on a committee of the board were granted an additional option for 10,000 shares, while committee chairs could buy up to 20,000 shares.  Each newly appointed director would also receive a one-time option to buy 30,000 shares.

“The demand letter asserted that the compensation program constituted a waste of corporate assets, a breach of fiduciary duty and an unjust enrichment for the non-employee directors who agreed to accept the excessive levels of compensation they granted themselves,” the complaint said.

Puma made changes to the program that cap the annual compensation for non-employee directors at $1 million and shifted the stock option award metrics from a specific number of shares to a dollar amount.  So directors still receive a $50,000 cash retainer each year, but the annual stock option award is capped at $300,000, and committee service retainers have been switched to cash amounts ranging from $20,000 to $5,000.  Newly appointed directors will have the option to purchase stock up to an amount of $700,000.

These changes resulted from negotiations between the company and Leafstedt’s attorneys and were accomplished in May without the need to file a lawsuit.  Leafstedt filed the current complaint because the parties could not come to an agreement on reasonable attorneys’ fees for achieving the benefit that will save Puma more than $20 million over the next five years.

“Plaintiff’s counsel has expended considerable time and expense, completely at risk of loss and without remuneration, in pursuit of making the demand and subsequent negotiations, the resolution of which conferred substantial benefits to Puma and its stockholders,” the complaint said.  Leafstedt is asking for an equitable apportionment of attorneys’ fees and payment of legal expenses incurred in the pursuit of the demand and the negotiations, as well as the costs of bringing the current action.

The case is Leafstedt v. Puma Biotechnology Inc., case number 2017-0659, in the Court of Chancery for the State of Delaware.

Banks Can Seek Attorney Fees in RICO Action

September 22, 2017

A recent Law 360 story by William Gorta, “Banks Can Seek Fees in Dana Transport RICO Suit: Judge,” reports that a New York federal judge on said a group of banks, including PNC Bank and Wells Fargo & Co. can pursue a claim for legal fees and expenses against Dana Transport Inc., which had sued the banks for RICO violations but voluntarily dismissed the case.

After hearing more than an hour of arguments, U.S. District Judge Ronnie Abrams denied Dana’s motion to dismiss the suit and also shot down the company’s request to stay the suit while awaiting the resolution of a suit Dana filed against the banks in New Jersey state court.  That suit is substantially similar to the suit Dana filed and dismissed in the Southern District of New York in 2015, alleging conversion, breach of contract and Racketeer Influenced and Corrupt Organizations Act violations.  The SDNY suit alleged lenders worked in tandem with consultants and other companies to force Dana Transport into default on a debt facility it was still making payments on, costing millions and putting the business in jeopardy.

Last year, the banks sued Dana for their legal expenses and attorneys' fees, citing an indemnity clause in the lending agreement that obligated Dana to cover them for lawsuits and other legal proceedings.  Dana argued that the indemnity clause did not include intra-party lawsuits and, should the New Jersey court find that the banks had acted with willful misconduct, the company would not be obliged to indemnify the banks.

Caroline F. Bartlett of Carella Byrne, arguing for Dana, told Judge Abrams that the case in New Jersey was essentially the same as the one it chose to dismiss in the Southern District of New York and there was no harm in letting it play out there since legal fees would continue to accrue, should the banks be eligible to receive them.

Wells Fargo’s attorney, Richard G. Haddad of Otterbourg PC, said the “expressly broad” indemnity clause —“any claim, any person whatsoever” — on its face included intra-party claims, such as foreclosures and liens.  Haddad said there can be no finding of willful misconduct in the dismissed federal RICO case, for which his client seeks to recover fees.

The case is PNC Bank, National Association et al. v. Dana Transport Inc., case number 1:16-cv-07797, in the U.S. District Court for the Southern District of New York.

Texas Attorney Sues Former Firm Over His Share of Fees

September 18, 2017

A recent Law 360 story by Michelle Casady, “Texas Atty Sues Firm Over Slice of Possible Million Dollar Pie,reports that a Houston-area lawyer has sued his former firm Walne Law PLLC for allegedly violating a fee agreement and denying his right to a share of fees from an underlying contract dispute that could yield millions of dollars in damages.

Andrew Raish, who now works in the legal department for Texas convenience store chain Buc-ee's, alleges in his Sept. 8 petition in Texas court that when he started at Walne Law in August 2013, he entered into an agreement with principal Tracy Walne where Raish would receive 75 percent of the resulting fees if he did the work for clients and 25 percent of the resulting fees if other lawyers at Walne Law or elsewhere did the work.

In September 2014, Raish allegedly brought Charles Dresser IV and Highmark Production Co. LLC to the firm as clients and performed work for them on oil and gas transactional matters and in a commercial dispute.  On the Dresser commercial case, Raish worked closely with Tracy Walne's son, Kelly Walne, and determined Dresser would be better served by teaming up with a larger law firm, Porter Hedges LLP, the petition says.

Raish left Walne Law in July 2015 but was assured by Tracy Walne that the fee agreement would continue to apply to the Dresser case even after his departure, and Walne's son left the firm a few months later to start his own firm, according to the petition.

“Upon information and belief, Kelly Walne negotiated with Tracy Walne for Walne Law to terminate its representation of Dresser on the Dresser matter so Kelly Walne alone could engage and represent Dresser and attempt to secure the anticipated fee from the Dresser matter for himself alone,” the petition alleges.  “To that end, and unbeknownst to Raish, defendant drafted a termination letter.  The termination letter purports to 'confirm' the termination of Dresser as a client of Walne Law and the understanding that Dresser intends to engage Kelly Walne as separate legal counsel to pursue the Dresser matter.”

Raish alleges that once he found out Kelly Walne was handling the Dresser matter, he contacted Walne Law to confirm it intended to honor the agreement to pay Raish 25 percent of any fee collected on the Dresser matter.  The firm indicated it would not and “did not believe Raish had any interest in the Dresser matter," the petition says.

The case is Raish v. Walne Law PLLC, case number 2017-58913, in the 11th Judicial District Court of Harris County, Texas.

Law Firm Settles $20M Fee Dispute in Antitrust Case

September 14, 2017

A recent Law 360 story by Dan Packel, “Ballard Spahr Settles $20M Antitrust Fee Suit With Symphony,” reports that Ballard Spahr has settled a Pennsylvania state court lawsuit aimed at recouping $20 million in fees the firm said it was owed by Symphony Health Solutions Corp. for work on a now-settled antitrust case against IMS Health Inc., according to a court filing.

The terms of the settlement are confidential, according to a Ballard Spahr attorney.  The Philadelphia-based firm sued Symphony in June 2016, alleging it was owed money pursuant to a fee agreement entitling the firm to a share of any recovery from the antitrust case, which accused IMS of illegally dominating the market for pharmaceutical and health care industry data.

Symphony filed the underlying suit in Pennsylvania federal court in July 2013 accusing IMS of preventing would-be competitors from accessing drug and health care data by entering into exclusive long-term agreements with pharmacies and providers.  A month before the antitrust suit was filed, the complaint said, Ballard Spahr and Symphony reached an agreement to substantially reduce month-to-month charges in return for a share in any recovery.

Symphony agreed to pay a monthly fee of 65 percent of fees incurred by Ballard Spahr attorneys capped at $125,000, with any excess carried over to the following month.  The complaint said Ballard Spahr was then entitled to 25 percent of any recovery below $25 million, and 15 percent of any recovery above $25 million.  The firm said its attorneys spent 53,000 hours on the case over two years.  Though Ballard Spahr blacked out the amount it believes it was owed in its complaint, Symphony said in preliminary objections in July 2016 that the law firm is seeking $19.9 million for a contingency fee payment.

The settlement inked in November 2015 to end the underlying case included the sale of AlphaImpactRx, a business spun off from Symphony, to IMS, according to the complaint.  The closing of that transaction was announced in February 2016.

However, Symphony argued in the preliminary objections that Ballard Spahr was not entitled to any money from the AlphaImpactRx sale because the company and stakeholders that made the sale to IMS were not the firm’s clients and not a party to any engagement letter.

Ruling on the preliminary objections in October 2016, Judge Patricia McInerney in the Philadelphia County Court of Common Pleas agreed to dismiss claims against certain Symphony shareholders after concluding Ballard didn't say it had provided legal services for them directly.  But she left the core of the suit intact, saying it was unclear precisely who had been a party to the fee agreement.

The case is Ballard Spahr LLP v. Symphony Health Solutions Corp. et al., case number 160501565, in the Court of Common Pleas of Philadelphia County.

Insurer’s Fee Request Challenged by Film Producer

September 8, 2017

A recent Law 360 story by Rick Archer, “Producer Fights Insurer’s $1.9M Fee Bid in Film Accident Row,” reports that the producer of an Allman Brothers biopic objected to a demand it pay $1.9 million in attorneys’ fees for its unsuccessful attempt to win more insurance coverage for a fatal filming accident, saying it had done nothing worthy of sanction.

Film Allman LLC denied accusations by New York Marine and General Insurance Co. Inc. that the producer’s suit seeking additional coverage for the 2014 accident had been filed in bad faith, saying it had good-faith arguments for all its claims it was owed more coverage than New York Marine provided and should not be expected to pay the insurer’s claimed legal fees.

“Film Allman has a good faith belief in each of its claims, and there is evidence to support them.  Moreover, even if New York Marine is unhappy about some of the results, there is absolutely no evidence that Film Allman did anything for an improper purpose such as harass New York Marine or to cause undue delay or cost,” it said.

An Occupational Safety and Health Administration investigation showed Film Allman didn’t warn crew members working on the film “Midnight Rider” in February 2014 that they were filming on live train tracks or that CSX had denied a filming permit for the tracks prior to an accident on the first day of shooting that killed 27-year-old Sarah Jones and seriously injured several other workers.

In March 2015, the film’s director, assistant director and executive producer, respectively, pled guilty to, was found guilty of and entered an Alford plea to charges of involuntary manslaughter and criminal trespass.  A defendant entering an Alford plea acknowledges that the prosecution has the evidence necessary to prove guilt beyond a reasonable doubt, but nevertheless maintains that he is innocent.  New York Marine provided a defense to Film Allman, paid $5 million of a $6.5 million settlement to Jones' family, and then bowed out because policy limits were exhausted.

Film Allman filed suit against New York Marine in September 2014.  In May U.S. District Judge Otis Wright II ruled New York Marine was entitled to bow out under the terms of the commercial general policy, despite the fact that there are other suits remaining.  In December he had found coverage under a separate motion picture producers policy was barred by a criminal acts exclusion.  In August, New York Marine moved for more than $1.9 million in attorneys’ fees, claiming that as there was no dispute of either the criminal convictions or the policy limits, Film Allman had brought the suit in bad faith.

“As reflected by the record in this case, including in the court’s summary judgment rulings, Film Allman’s claims were fundamentally lacking any legal or evidentiary support and were, instead, based on assertions that it knew were false,” New York Marine said.

Film Allman, however, argued it did have good-faith arguments that Jones’ death did not trigger the exclusion because it had evidence there was genuine confusion over whether permission had been granted to film on the tracks and the death was not directly caused by an intentional criminal act.  It said it also had good-faith arguments that California insurance law required New York Marine to defend it from all of the suits arising from the accident, regardless of the policy limit.

“New York Marine asserts that if Film Allman had only accepted the fact that there was no coverage, it could have saved New York Marine all of its exorbitant litigation expenses.  But the same could be true of any policyholder seeking defense or coverage that an insurer denies,” it said.

The case is Film Allman LLC v. New York Marine and General Insurance Co. Inc., case number 2:14-cv-07069, in the U.S. District Court for the Central District of California.