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Category: Ethics & Professional Responsibility

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.

Law Firm Ends Client Relationship Citing Fixed Fee Rates that Aren’t ‘Financially Viable’

July 25, 2017

A recent The Recorder story by Jennifer Williams-Alvarez, “Quinn Emanuel Fired Uber, Citing Fixed Fee Rates That Aren’t ‘Financially Viable’,” reports that last fall, Quinn Emanuel Urquhart & Sullivan notified Uber Technologies Inc. of the firm’s decision to end their attorney-client relationship, according to a recently filed document in the ongoing legal battle between the ride-hailing giant and Alphabet Inc. subsidiary Waymo.

In a July 20 filing from Uber, it’s revealed that Quinn Emanuel, which now represents Waymo in the dispute over driverless car technology, emailed a number of top attorneys in Uber’s legal department, including current chief legal officer Salle Yoo, to cut off the relationship.  The email from Quinn Emanuel partner Stephen Swedlow, dated Sept. 23, 2016, noted that, since the firm entered into Uber’s preferred counsel program with fixed fee arrangements, the cases and tasks it has been hired for have “been at rates that are not financially viable” for the firm.

“As we have discussed many times, if QE was also getting the cases with larger amounts in dispute involving more significant budgets, the smaller tasks on smaller cases would be part of the overall relationship,” Swedlow, who is co-managing partner of the firm’s Chicago office, wrote in the email.  “But we have not gotten any of the larger disputes for Uber under the preferred counsel program.”

Quinn Emanuel’s relationship with Uber spanned four and a half years, according to the email, and included representing the company in a dispute with Yellow Cab in Chicago, a class action suit that alleged Uber unlawfully took a cut of driver gratuities and a suit claiming the ride-hailing service charges unfair ride cancellation fees.  While this was a difficult decision for the firm, Swedlow added, “it is no longer feasible to serve the role we have been relegated to in the context of representing Uber.”

Uber’s reason for seeking Swedlow’s email can be found in a June 21 filing in which the company moved to compel production of a number of documents by Waymo, including communications that would establish when the possibility of legal action against Uber or former Waymo manager Anthony Levandowski was first discussed with Quinn Emanuel.

“With no prior notice, Quinn Emanuel fired Uber as a client one month before Waymo filed its arbitration action against
 Mr. Levandowski,” the filing stated.  “If Quinn fired Uber as a client knowing that Mr. Levandowski or Uber was going to be sued by Waymo, that would present serious ethical issues that could lead to Quinn’s disqualification.”

Quinn Emanuel, in a June 27 filing, said there is no “’Quinn Conflict,’” adding that there “are no responsive documents from Quinn Emanuel prior to October 2016 because Waymo did not contact Quinn Emanuel regarding this case until 2017.”

NALFA’s Fee Dispute Mediation Program Achieves 86% Success Rate

July 19, 2017

NALFA’s Fee Dispute Mediation Program is the nation’s only program devoted exclusively to resolving attorney-client fee disputes.  NALFA’s Fee Dispute Mediation Program recently reached an achievement:  Since the program began, NALFA’s Fee Dispute Mediation Program has achieved an 86% success rate—parties who mediate in a session are resolved six out of every seven times.  This rate is significantly higher than most bar-administered fee dispute programs.  NALFA has settled over $5 million in disputed attorney fees between parties in over 40 cases.  The cases were brought by corporate clients and law firms ranging from fee disputes of $32,000 to $975,000 from across the U.S.  One fee dispute case was from the UK.

Attorney fee disputes are the result of a breakdown in the attorney-client relationship.  This breakdown may be a misunderstanding in the fee agreement or confusion over the law firm billing records.  Whatever the cause, mediation is the quickest, simplest, and most cost-effective way to resolve these attorney fee disputes.  NALFA fee dispute program is a private mediation service specifically designed to resolve attorney fee disputes of all types and sizes.

NALFA's fee dispute mediators are uniquely qualified to resolve fee disputes between parties in a cost effective and confidential manner.  These fee dispute mediators are trained neutrals who understand the underlying issues in fee and billing dispute matters.  Our fee dispute mediators are highly knowledgeable on reasonable attorney fees and proper legal billing practices.  They understand the array of issues in fee dispute cases such as fee agreements, hourly rates, billing practices and attorney fee ethics.

Unburden by bar association rules, NALFA provides parties with a mediation process that is flexibility, responsive and cost-effective.  Parties control when and where the mediation will occur, who will serve as the mediator, and whether they will accept a settlement offer.  Unlike most bar-administered programs, NALFA stays with the fee dispute case as long as necessary to bring it to a resolution.

"Our 86% success rate belongs to the outstanding work of our members, some of the nation's top rated fee dispute mediators," said Terry Jesse, Executive Director of NALFA.  "Their understanding of fee issues and their mediation skills are the reason we're celebrating this achievement," Jesse concluded.

Contingency Fee Agreement Approved in Opioid Marketing Litigation

July 5, 2017

A recent NLJ story by Kristen Rasmussen, “N.H. High Court OKs Contingency Fee Agreement in Opioid Marketing Litigation,” reports that the New Hampshire Supreme Court recently dealt Big Pharma another blow as it challenges the government's practice of hiring attorneys on a contingency fee basis in litigation accusing the companies of deceptively marketing opioid painkillers.

In a recent spate of lawsuits across the country, plaintiffs lawyers have teamed with state and local governments, suing pharmaceutical companies through contingency fee agreements for their alleged role in creating the prescription opioid and heroin addiction epidemic.  Such litigation is pending in federal, state and county courts in Ohio, New York, Mississippi, New Hampshire, Chicago and two California counties.

In many of these cases, the pharmaceutical companies challenged the public-private contingency fee arrangements with little success.  And a ruling by the New Hampshire Supreme Court on June 30 means they won't have success there either.  The state's high court ruled that the pharmaceutical companies do not have standing to challenge the agreement, reversing the trial court's prior decision.

In March 2016, that lower court — the Merrimack Superior Court — ruled that New Hampshire state law requiring the Legislature to approve the hiring of outside counsel by the Attorney General's Office doesn't allow the use of a contingency fee arrangement to make "an end run to avoid the statutory approval process."

The pharmaceutical companies — Actavis Pharma Inc., Endo Pharmaceuticals Inc., Janssen Pharmaceuticals Inc., Purdue Pharma Inc. and Teva Pharmaceuticals USA Inc. — successfully argued that then-New Hampshire Attorney General Joseph Foster's contingency fee agreement with successful plaintiffs firm Cohen Milstein Sellers & Toll was thus invalid.

Interpreting state law in this manner "would contravene the Legislature's clear intent to exercise control over additional appropriations for hiring outside counsel and recovery funds obtained by the [AG's Office] on behalf of the state," presiding Judge Diane Nicolosi wrote.  "In executing the retainer agreement with Cohen Milstein, the OAG acted outside its statutory authority to hire outside counsel and the retainer agreement is therefore ultra vires and void."

On June 30, however, the state Supreme Court reversed — largely on standing grounds — the lower court and sent the case back to it.  The state Supreme Court found that the pharmaceutical companies did not have standing to make an ultra vires challenge to a government contract that they are not a party to and that is based on their allegation that the AG Office's conduct in entering a contingency fee agreement violated statutory requirements.  In so ruling, the court rejected the pharmaceutical companies' argument that standing principles do not apply to them because they were not the party that initiated the lawsuit.

"Contrary to their representations otherwise, the defendants are themselves seeking affirmative judicial relief ... " Chief Justice Linda Stewart Dalianis wrote in the eight-page opinion.  The court also ruled that the pharmaceutical companies did not have standing to sue under the state's ethics code, noting that "there is nothing in the ethics code to support a conclusion that the Legislature intended to create a private right of action for its violation."

4th Circuit: In Awarding Fees, Judges Must Consider Risk and Results

June 1, 2017

A recent Reuters story by Allison Frankel, “4th Circuit: In Fee Awards, Judges Must Consider Risk and Results,” reports on a case involving contingency fee risk in awarding attorney fees.  The story reads:

In 2010, the law firm Gilbert, working on contingency, went to trial and won a $26 million judgment for Alpha, a specialized U.S. tire maker suing foreign competitors for stealing its trade secrets.  Before Gilbert could attempt to enforce the judgment, Alpha fired the firm, replacing Gilbert with a new firm co-founded by two former Gilbert lawyers.  The new firm went on to defend Alpha’s judgment on appeal and, eventually, to reach a $15.5 million settlement with the defendants.

How much money does Alpha owe Gilbert?

The 4th U.S. Circuit Court of Appeals awarded Gilbert $3.1 million in fees.  The award, as I’ll explain, is not a contingency fee – but it is a stern reminder to trial judges that when lawyers assume risk in contingency fee cases, they deserve a fair reward for successful results.

Under the terms of Gilbert’s engagement agreement with Alpha, had the firm represented Alpha all the way through settlement, Gilbert would have been due a 40 percent contingency fee.  But if Alpha fired Gilbert before any recovery, the contract said, the law firm was entitled only to its hourly billings.

Before U.S. District Judge T.S. Ellis of Alexandria, Virginia, Gilbert claimed its lawyers worked nearly 11,000 hours on the case, at hourly rates ranging from $375 to $900, for a total lodestar of about $4.5 million.  That did not fly with Judge Ellis, to say the least.  The judge said that under Virginia state law, the fee award must be based on quantum meruit, or “as much as deserved.”  Judge Ellis said Gilbert had inflated its hours and charged unreasonable hourly rates.  He ended up awarding the firm only $1.2 million.

In January 2016, the 4th Circuit vacated and remanded the award, reminding Judge Ellis that decades-old precedent from Virginia’s highest court requires judges to consider, among several other factors, the size of the case, the risk borne by lawyers working on contingency and the results obtained.  The appeals court instructed the judge to re-analyze the fee question with those considerations in mind.

On remand, Gilbert cut its claimed hours to 6,700 (perhaps mindful of Judge Ellis’ extremely skeptical assessment of the firm’s billing records).  It nevertheless said it was entitled to twice or three times its lodestar billings because of the contingency fee risk of its engagement with Alpha and the $26 million judgment it won.

The judge held his line.  He declined to apply a multiplier, in part because he said Gilbert had not reported fees he considered excessive in its engagement letter with Alpha.  The judge once again slashed Gilbert’s rates and hours and calculated the same award as in his previous ruling: just $1.2 million.

That was an abuse of his discretion, 4th Circuit Judges Roger Gregory, Allyson Duncan and Henry Floyd held in an unpublished opinion by Judge Gregory, the circuit’s chief judge.  “The district court focused on the engagement letter when it should have concentrated its efforts on determining the reasonable value of Gilbert’s services given the contingent nature of the representation,” the 4th Circuit said.  “The lodestar fee the district court awarded is inappropriate under the circumstances of this case and inadequately explained.”

The 4th Circuit said contingency fee lawyers, under Virginia precedent, are entitled to consideration for betting on a successful result.  “We cannot ignore the amount of work that Gilbert did without any guarantee of recovery, and the district court’s sharp reduction of Gilbert’s rates simply did not reflect that risk,” the court said.  “The facts in this case justify awarding Gilbert’s customary rates without reduction.”

Rather than send the case back to Judge Ellis for a third go-round, the 4th Circuit made its own calculations, crediting Gilbert with its reported 6,700 or so hours and an average hourly rate of about $460, for a total of about $3.1 million in fees.  (The firm has also been awarded about $1.7 million in costs.)

The opinion is unpublished and the circumstances of Gilbert’s dispute with Alpha are unusual.  But it’s heartening to see an appellate court recognize that entrepreneurial lawyers who get good results deserve to be compensated for their enterprise.

Five Tips for Fee Agreement ADR Clauses

April 4, 2017

A recent The Recorder article by Randy Evans and Shari Klevens, “5 Tips for Fee Agreement ADR Clauses,” address ADR clauses in fee agreements.  This article was posted with permission.  The...

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