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Category: Ethics & Professional Responsibility

Texas Law Firm Accused of ‘Gross Fee Churning’

March 4, 2019

A recent Texas Lawyer story by Brenda Sapino Jeffreys“Former Houston Energy Exec Sues Trail Firm AZA Alleging ‘Gross Fee Churning’, reports that Houston trial firm Ahmad Zavitsanos Anaipakos and three of its name partners were sued by a former Houston energy executive who alleges the firm engaged in “gross fee churning” when representing him in an employment dispute.  “The several Houston lawyers breached their agreement with their client by over-charging, padding their bills for services and providing unreasonable and unnecessary charges solely to place their interests ahead of their client’s interest so they could improperly line their pockets at their client’s expense,” Paul A. Bragg, the former chairman and former chief executive officer of Vantage Drilling, alleges in a petition filed in state district court in Houston.

Bragg seeks more than $1 million from the defendants including actual and punitive damages and fee forfeiture.  He brings negligence, breach of duty of fair dealing, breach of fiduciary duty, and fraud causes of action against the defendants, who include the firm partners John Zavitsanos, Demetrios Anaipakos and Joseph Ahmad.  Bragg alleges that AZA’s representation provided him with “no benefit whatsoever,” because he ended up agreeing to a settlement during an arbitration that was essentially the same as what his former employer offered him initially when he was terminated.

In a written statement, the law firm defendants said the allegations don’t deserve to even be characterized as meritless.  “We will defend it, of course, and we will win. There is no payday coming for Mr. Kassab, the lawyer who filed this lawsuit.  We categorically deny his lawsuit’s allegations which we consider pure fiction,” the defendants wrote in the statement.

They wrote that Bragg’s lawsuit is retaliation by his attorney, Lance Kassab, because AZA is working pro bono, defending the estate of a Houston attorney who was sued for barratry by Kassab.  Lance Kassab could not be reached for immediate comment, but his nephew, David Kassab, who works with his uncle at Kassab Law Firm, said he is not surprised the defendants would say that.

“It’s absolutely ludicrous. We are happy to represent Mr. Bragg in his lawsuit against AZA because of the conduct as alleged in the petition,” David Kassab said.  In their statement, the law firm defendants also said that if Michael Cohen, President Trump’s former lawyer, still had a law license, “even he would have refused to take this case.”

‘Questionable’ Billing

As alleged in Bragg v. Zavitsanos, Bragg hired AZA shortly after Vantage Drilling International, a successor to Vantage Drilling, fired him on March 21, 2016, and Anaipakos and Ahmad were the main lawyers at AZA representing him.  “After reviewing the employment agreement, both lawyers told Bragg he had a ‘slam dunk’ case and that Vantage would be held responsible for severance pay, MIP [management incentive plan] awards, legal fees and expenses,” Bragg alleges in the petition.

Bragg alleges Vantage offered him severance, excluding the MIP, when he was terminated, but he declined the offer. He also alleges that on the advice of AZA counsel, he declined a similar offer during mediation in September 2016 and also one just prior to an arbitration in July 2017.  “Importantly, each time the offer was made, AZA counsel reacted with disdain to the offer and held firm that Bragg would prevail on the MIP award,” Bragg alleges in the petition.

Bragg claims that on the third day of the arbitration, his AZA lawyers were “suddenly very negative about the likelihood of prevailing on the MIP award,” and they encouraged him to accept the Vantage offer on the table, to which he “reluctantly agreed.”  Bragg alleged that his employment agreement required Vantage to pay him up to $300,000 in legal fees for any dispute with the company, but it paid only $108,000 because that is all AZA had invoiced prior to the time of settlement.

He alleges as the settlement was finalized, AZA informed him that the fees would total between $400,000 and $500,000, but later revised that to $750,000 and Vantage eventually paid AZA $875,000 in fees and expenses.  He alleges that despite assurance from the firm that it would rebate any excess fee payment from Vantage to him, Bragg said he received no final accounting or rebate from the firm for several months.

Bragg further alleges that AZA encouraged him to continue with the arbitration, “promising” him he would recover his MIP and treble damages, but he ended up with a settlement that was equal to the settlement Vantage offered before Bragg hired AZA.  “He would have received the same result and eliminated 90 percent of the legal fees he incurred at the hands of AZA,” Bragg alleges in the petition.  Bragg further claims that AZA used “block billing”—billing multiple tasks as a single billing entry—which he alleges is a “known tool used to inflate fees.”

Also, Bragg alleges, there were instances of duplicative billing that led to $22,148 in fees,  “questionable and vague billing entries” for communication, preparation and general tasks totaling $148,554, clerical work for $23,475, research services for $5,273, and “undocumented disbursements” totaling $196,160.  Bragg also alleges that Zavitsanos billed nearly $40,000 to depose a witness in Greece to “enjoy an all-expense paid trip to his villa in Greece at the cost of his client.”  “Only after getting caught with his hand in the proverbial ‘cookie jar,’ did AZA refund a portion of these charges,” Bragg alleges.

In addition to the firm’s statement, Zavitsanos, in an interview, disputed allegations related to fees and billing.  He said the litigation settled at Bragg’s insistence and Bragg “did not pay a penny out of his pocket on his fees.”  He also said that because Vantage was paying Bragg’s legal bills, under a provision in his employment contract, AZA provided Vantage with general billings because “we did not want to give them a roadmap” to legal strategy.

FL Lawyer Claims Eight Step Plan to Boost Attorney Fees in BP Oil Spill

February 25, 2019

A recent Law.com story by Amanda Bronstad, “Fla. Lawyer Says Lead Plaintiffs Attorney Drafted BP Oil Spill Settlement to Get $3B in Fees,” reports that a Florida attorney has alleged that a lead plaintiffs lawyer in the Deepwater Horizon oil spill litigation colluded with BP in drafting a class action settlement that gave more than $3 billion in legal fees.  Attorney Brian Donovan, of The Donovan Law Group in Tampa, filed the suit Feb. 12 in Florida’s 13th Judicial District in Hillsborough County against Steve Herman, co-lead counsel for the multidistrict litigation against BP over the 2010 spill.  Donovan claims that Herman, of New Orleans-based Herman Herman & Katz, was negligent and breached his duties to class members through an “eight-step plan to maximize his compensation” while reducing BP’s liability over oil spill claims.

Herman, in an email to Law.com, stood by his handling of the Deepwater Horizon case, noting that he had addressed many of Donovan’s concerns about the settlement in emails and in court during the original litigation.  But Donovan called the multidistrict litigation “an example of Louisiana judicial homecookin’ at its very worst” in which both sides put the interests of the blowout’s victims on the back burner.

“Justice for the BP oil well blowout victims was never considered by defendant Herman,” wrote Donovan in a 130-page complaint.  Donovan claimed in the lawsuit that the 19 lawyers on the plaintiffs’ steering committee, including Herman, stood to earn more than $3 billion in fees, including both the common benefit fund and separate contingency fees they had with their clients.  “It is beyond cavil that a reasonable, objective observer would not conclude that this amount is out of proportion to the value of the professional services rendered,” he wrote in the complaint.

Herman questioned the validity of Donovan’s numbers, and said he was apprised of his clients’ full range of options.  In one 2012 email that was referenced in Donovan’s complaint, Herman advised him on available procedures for his clients who opted out of the settlement.  Herman took note of that conversation in an emailed statement to Law.com.  “Seems like that was pretty good advice,” Herman wrote.  “No idea the extent to which he or his clients may or may not have followed it.”

As to the allegations about fees, Herman wrote, “The common benefit fees are a matter of record.  Neither Donovan, nor any of his clients (assuming he has any), nor anyone else objected to them.  Nor did Donovan, nor any of his clients (assuming he has any), nor anyone who settled in the GCCF or the class settlement program ever pay one cent to the PSC or any other common benefit attorneys any common benefit fees.”

The suit is the latest skirmish over fees between leadership attorneys in multidistrict litigation and lawyers representing individual clients.  In November, Philadelphia’s Kline & Specter alleged that lawyers leading lawsuits over pelvic mesh devices had settled cases on the cheap, despite much larger jury verdicts.  A federal judge in West Virginia rejected those allegations and approved $500 million in common benefit fees Jan. 30.

BP initially set up a claims process for individuals and businesses along the Gulf of Mexico who had lost money due to the 2010 spill and were entitled to compensation under the Oil Pollution Act of 1990. Attorney Kenneth Feinberg initially doled out claims, under the Gulf Coast Claims Facility, but plaintiffs lawyers criticized the process for lengthy delays and inconsistencies.  In 2012, BP agreed to settle the class action, estimated to cost $7.8 billion, while a new administrator continued to process claims.

Over the years, BP revised its settlement cost estimate several times and even attacked portions of the deal for contributing to what it called a flood of fraudulent claims.  Last month, BP, which also paid $20 billion to the U.S. Justice Department in 2015, raised its total projected oil spill costs to $65 billion, in large part due to outstanding claims in the class action settlement.

Donovan’s suit alleged that Herman’s “eight steps” involved limiting BP’s liability in the class action settlement by restricting claims based on geography and other factors and, before that, encouraging claimants to drop their lawsuits in favor of quick cash under Feinberg’s Gulf Cost Claims Facility.  Donovan called the leadership lawyers “cooperative dealmakers,” not adversaries to BP, who shut out 220,000 claimants in favor of their own clients.  “This deal was consummated behind closed doors,” he wrote.  “In sum, plaintiff, plaintiff’s clients, and all others similarly situated are being indefinitely held hostage by defendant Herman. Escape is impossible.”

Herman, in his email, defended his advocacy efforts, noting that he challenged the fairness of Feinberg’s claims process in 2011.  Feinberg, of The Law Offices of Kenneth R. Feinberg in Washington, D.C., defended his Gulf Coast Claims Facility as a “great success.”  “The idea that I coerced anybody is preposterous,” he said, noting that in 16 months, he distributed $6.5 billion to about 220,000 individuals and businesses in the Gulf of Mexico.  “Now, years later, a very creative, determined, unenlightened plaintiffs lawyer decides to throw allegations around that are simply rejected by the facts.”

Donovan’s suit estimated that lead lawyers would get $3.035 billion in fees.  In the complaint, he based that figure on an estimated $2.4 billion in contingency fees, $600 million in common benefit fees, and co-counsel and holdback fees assessed on claims prior to the settlement.  He said more than $321 million went to members of the common benefit cost and fee committee and $277 million to other members of the plaintiffs’ steering committee.  “I don’t have any idea what any firm earned in individual client contingency fees,” Herman wrote in his email.

In 2012, U.S. District Judge Carl Barbier of the Eastern District of Louisiana capped contingency fees at 25 percent.  Four years later, the judge appointed special master John Perry of Perry, Balhoff, Mengis & Burns of Baton Rouge, Louisiana, to review the allocation of $600 million in common benefit fees, paid for by BP.

In 2017, the common benefit cost and fee committee submitted a proposed allocation plan for 122 law firms.  Herman and Jim Roy, a partner at Domengeaux Wright Roy & Edwards in Lafayette, Louisiana, who both were co-lead counsel in the multidistrict litigation and co-chairmen of that fee committee, recommended that each of their firms receive more than $87 million.  In 2017, Perry recommended approving the fee request, which grew to $700 million when including settlements with Halliburton and Transocean.  Barbier adopted the special master’s recommendation.  Soon afterward, Donovan filed a motion on behalf of three clients.  The motion sought a public record of all compensation paid to the plaintiffs’ steering committee, legal experts, special masters and the settlement claims administrator.

Article: Fresh Takes on Seeking Costs and Fees Under Rule 45

February 22, 2019

A recent Pepper Hamilton blog post article by Donna Fisher, Matthew Hamilton, and Sandra Hamilton, “Fresh Takes on Seeking Costs and Fees Under Rule 45,” reports on fee-shifting incurred in responding to a Federal Rules of Civil Procedure 45 subpoena.  This article was posted with permission.  The article reads:

Recent case law reveals that courts vary widely in their approaches to shifting the costs and fees incurred in responding to a Federal Rule of Civil Procedure 45 subpoena.  Some courts view shifting costs and fees as mandatory in situations where a nonparty is forced to bear “significant” costs.  Others may shift costs and fees only to the extent those costs are “unreasonable,” which is measured by (1) the nonparty’s size and economics, despite its lack of connection to the dispute, (2) defining “reasonable costs” so narrowly that the nonparty bears substantial costs or (3) eliminating attorneys’ fees from the cost-shifting calculation.  The relief a nonparty may be awarded may depend on factors that are not specifically identified in Rule 45 but that are nonetheless included in the court’s concept of fairness.  As the cases discussed below demonstrate, nonparties responding to Rule 45 discovery requests should consider the following best practices:

Know and understand the applicable jurisdiction’s rules pertaining to Rule 45’s protections. 

Be able to demonstrate that the non-party has attempted to respond to Rule 45 discovery in the most efficient manner available.

If possible, demonstrate that review for compliance with regulations or attorney-client privilege is consistent with any applicable protective order or local rule and, therefore, not just for the non-party’s benefit. 

In order to increase the likelihood of recovering costs of any motion practice, attempt to cooperate with the requesting party and demonstrate a willingness to resolve or mitigate the costs and the dispute.

The cases discussed below evaluate motions for costs and fees in two broad categories: (1) those incurred when litigating the scope of the subpoena itself and (2) those incurred in compliance.

Costs and Fees Incurred Litigating the Scope of the Subpoena Itself

The district court in In re Aggrenox Antitrust Litigation considered the motion of a nonparty, Gyma Laboratories of America, to recover $72,778.20 in costs and fees incurred in response to a Rule 45 subpoena from the direct purchaser plaintiffs.  Gyma objected to the requests as overbroad and asserted that production would be unduly burdensome.  At the hearing on cross-motions to compel and to shift costs and fees, the court expressed concern that Gyma had not made a record establishing the alleged difficulties in production, but directed that Gyma would be eligible for reimbursement of reasonable costs incurred.

In reviewing Gyma’s subsequent motion for costs and fees, the court reasoned that Rule 45 makes cost-shifting “mandatory in all instances in which a non-party incurs significant expense from compliance with a subpoena,” but that it did not require the requesting party to bear the entire cost of compliance.  Further, the court held that only “reasonable” costs are compensable under Rule 45 and that the moving party bears the burden of proof.  The court found that Gyma had not established that a reasonable client would use its “expensive” New York counsel to handle the subpoena, and further that costs and fees incurred prior to the date it provided an estimate of costs to the plaintiffs and the court were not fairly chargeable.

Moreover, the court found that many of the costs and fees were incurred in connection with Gyma’s efforts to resist compliance with the subpoena, which the court found was a unilateral “decision to litigate the subpoena zealously.”  Finding that Gyma was “notably intransigent and dilatory in its response,” and considering the admonition of the U.S. Court of Appeals for the Second Circuit, that courts should “not endorse scorched earth tactics” or “hardball litigation strategy,” the district court denied Gyma’s motion for fees in bringing the motion, and awarded only $20,000 in reasonable costs and fees for compliance with the subpoena.

The court in Valcor Engineering Corp. v. Parker Hannifin Corp. considered the motion of non-party MEDAL, to shift the entire cost of production pursuant to a subpoena, $476,000, to the requesting party.  The court found that the costs and fees were objectively unreasonable, and that much of the cost resulted from MEDAL’s tactical decision to aggressively challenge every aspect of the subpoena, which led to two separate motions to compel.  Moreover, the court found that MEDAL demonstrated little interest in minimizing expenses or preventing further motion practice.  For example, after the court granted the first motion to compel, MEDAL withheld nearly 90 percent of the documents identified by search terms as non-responsive, without providing any explanation.  The court also found that MEDAL’s aggressive tactics tended to demonstrate that it was not a truly disinterested non-party, and that it had been intimately involved in the acts giving rise to the litigation.  Finding that MEDAL’s motion came “close to wielding the shield of Rule 45 as a sword,” the court denied its motion for cost-shifting.

By contrast, the court in Linglong Americas Inc. v. Horizon Tire Inc. granted, in full, a similar request by non-party GCR Tire & Service for costs and fees associated with a Rule 45 subpoena served by Horizon.  GCR objected to the scope of the subpoena, and its counsel spent several months negotiating with Horizon’s counsel to narrow the request.  GCR moved to recover its costs and fees, and Horizon objected to allocation of fees incurred in narrowing the scope of the subpoena.  Reviewing Rule 45 case law, including Aggrenox, the court reasoned that it was required to protect the non-party from significant, reasonable expenses incurred in compliance.  The court found that narrowing the subpoena took several months of work by GCR’s attorneys and that the charges were reasonable, particularly since GCR had already paid them.  The court further found that expenses incurred in litigating the fee dispute were reasonable and incurred in compliance with the subpoena.  Accordingly, the court awarded the full $24,567 sought for responding to the subpoena and another $15,338 in fees for filing the fee dispute.

Costs and Fees Incurred in Collection, Processing and Review

In Sands Harbor Marina Corp. v. Wells Fargo Insurance Services of Oregon, the plaintiffs alleged that EVMC Real Estate Consultants, Inc. and others conspiring with EVMC fraudulently induced the plaintiffs to pay advance loan commitment fees when, in fact, no financing was available.  Wells Fargo, the employer of one of the defendants, served a subpoena on Dogali Law Group, a nonparty law firm that had represented EVMC in connection with the loan transactions at issue.  Dogali withheld multiple documents on the basis of attorney-client privilege.  Several years later, the court ruled that a defendant law firm could not withhold documents on the basis of attorney-client privilege because no surviving entity had standing to invoke the privilege on EVMC’s behalf.  Wells Fargo then renewed and expanded its earlier subpoena to Dogali, seeking the withheld documents.  When Dogali argued that an electronic production would be time-consuming, Wells Fargo proposed to use its own vendors to reduce time and costs.  After unsuccessful negotiations about the payment of costs and fees for the production, the court ordered production of the previously withheld privileged documents, as well as all documents responsive to the expanded subpoena.  Dogali later filed a motion for costs and fees in the amount of $39,709.

Weighing the mandate of Rule 45, the court held that Dogali was entitled to an award of fees.  While the court generally agreed that the legal services rates charged were reasonable, it found that the legal time spent responding to the second subpoena and renewed subpoena included time for tasks that were unreasonable, such as time spent researching whether Dogali had standing to assert the attorney-client privilege, reviewing the documents for privilege, creating privilege logs for documents reviewed previously, and researching privilege and waiver issues.  In addition, the court held that time spent communicating with former partners, preparing file memoranda, and conferring with Wells Fargo’s counsel about costs and production was not reasonable.

Finally, the court looked at the attorney time spent researching and preparing the motion for costs as well as the paralegal time spent reviewing documents for production.  The court denied Dogali’s request for the costs of drafting and reviewing the application as unnecessary and excessive.  As to time billed for the paralegal and cost of production, the court noted Wells Fargo’s offer to allow Dogali to utilize its vendor and determined that “rather than explore a more efficient and economical approach for the production, [Dogali] opted to have [its] paralegal print each email individually and convert it into a pdf…[Wells Fargo] should not be required to bear the cost of [Dogali’s] unilateral decision to utilize a more time-consuming approach.”  After carving out costs and fees determined to be unreasonable, the court awarded Dogali fees and costs in the amount of $10,537.33.

In Nitsch v. Dreamworks Animation SKG Inc., the court determined that attorneys’ fees and costs associated with protecting the confidentiality of affected non-parties were reasonable and therefore compensable.  Non-party Croner Company, a consulting company that conducted annual compensation benchmarking, moved for reimbursement of costs incurred in responding to the plaintiffs’ subpoena, which sought survey data that Croner obtained from companies in the animation and visual effects industry over several years.  Before Croner responded to the subpoena, its counsel conferred with plaintiffs’ counsel, advised that it would seek reimbursement of costs, and provided an initial estimate of those costs.

Because all surveys Croner conducted were subject to confidentiality provisions, Croner notified affected clients about the subpoena and devised a form of production to produce the information for the plaintiffs but preserve the anonymity of the survey participants.  The process was more time-consuming than expected, and Croner sought costs, including outside attorneys’ fees, in the amount of $67,787.55.  The plaintiffs objected on the basis that the request was unreasonable, arguing that Croner had produced only 16 documents and that the requested sum was grossly over-inflated and unreasonable.

Citing Rule 45(d)(2)(B)(ii)’s requirement that a court must protect a person who is neither a party nor a party’s officer from “significant expense resulting from compliance,” the court stated that the “shifting of significant expenses is mandatory, but the analysis is not mechanical; neither the Federal Rules nor the Ninth Circuit has defined ‘significant expenses.’”  The court then discussed whether costs tied to Croner’s confidentiality concerns were compensable, as “resulting from compliance” with a subpoena.

The court noted that reimbursable fees include those incurred in connection with legal hurdles or impediments to production, such as ensuring that production does not violate federal law or foreign legal impediments, but reimbursable fees do not include fees incurred for services for the non-party’s sole benefit and peace of mind.  The plaintiffs argued that Croner’s efforts to protect client confidentiality were purely business interests that inured solely to Croner’s benefit and that the protective order was sufficient to address Croner’s confidentiality issues.  The court disagreed, finding that the efforts to address confidentiality issues were reasonable and compensable.

Significantly, the court held that Croner’s efforts were consistent with the protective order entered into by the parties, stating that: Croner’s efforts to protect client confidentiality were not made to be obstreperous, but were the result of compliance with the subpoena.  Indeed, if any of the parties in this case were asked to produce a non-party’s confidential information, the stipulated protective order requires them to do what Croner did.

In Steward Health Care System LLC v. Blue Cross & Blue Shield of Rhode Island, however, the court reached the opposite conclusion when the non-party, Nemzoff & Company LLC, requested reimbursement for costs and fees associated with complying with a subpoena from Blue Cross, which included a review for relevancy and privilege.  Nemzoff initially refused to comply due to the costs involved, resulting in a court order compelling compliance and a warning that Nemzoff should minimize expense as it may bear the cost.  The court explained that only “reasonable expenses” incurred — and not all expenses — may be shifted.

The court held that attorneys’ fees have traditionally been awarded as sanctions in the most egregious circumstances or when the requested fees were for work that benefited only the requesting party.  Since it was not presented with any argument for sanctions, the court found that Nemzoff’s use of its own attorneys to review the documents for relevancy, confidentiality and privilege matters was only for Nemzoff’s benefit, and conferred an unwanted benefit upon Blue Cross.  Nemzoff’s attorneys were protecting its own interests.  As such, the court denied Nemzoff’s request.

While cost-shifting remains within the discretion of the court, courts have consistently been more likely to award costs and fees when a non-party has worked in good faith to narrow the scope of a subpoena and responded in an efficient fashion.  To the contrary, when a non-party attempts to obstruct the discovery process, courts have refused to shift costs and fees.  As demonstrated by the case law, the potential for cost-shifting must necessarily turn on the particular facts and circumstances of each case.

Donna Fisher is a member of the health sciences department at Pepper Hamilton LLP.  Matthew Hamilton is a member of the health sciences department at and partner at the firm.  Sandra Adams is a discovery attorney at the firm.  For a full list of end notes, visit https://www.pepperlaw.com/publications/fresh-takes-on-seeking-costs-and-fees-under-rule-45-2019-02-13/

PA Justices Consider Privilege of Legal Bills in Estate Cases

February 13, 2019

A recent Law 360 story by Matt Fair, “Pa. Justices to Mull Privilege for Atty Bills in Estate Dispute,” reports that the Pennsylvania Supreme Court agreed to wade into a dispute over whether attorney-client privilege barred the release of legal bills from K&L Gates LLP and another firm as part of a case over the management of the estate of a deceased Allegheny County man.  The appeal comes as two beneficiaries of the estate pursue claims that the trustee, William H. McAleer, who is the dead man's son, had spent too much money on legal fees and other administrative costs in connection with management of the estate.

In a one-page order, the justices agreed to consider whether “the attorney-client privilege and work product doctrines protect communications between a trustee and counsel from discovery by beneficiaries when the communications arose in the context of adversarial proceedings between the trustees and beneficiaries.”

According to court records, McAleer has been acting as trustee of an estate established by his father, William K. McAleer, in November 2012.  But after the son filed an accounting of the estate a little less than a year after his father’s May 2013 death, court records say his stepbrothers, Michael and Stephen Lange, filed objections and sought additional information related to two bank accounts.

In response, court records say that McAleer tapped K&L Gates for legal assistance to back up counsel from Julian Gray Associates who was already representing him.  After a second accounting of the estate, court records say the Langes claimed that McAleer had been paying excess trustee and attorney fees in connection with management of the trust.  When the Langes sought billing statements for all attorney fees, however, McAleer turned over redacted copies.

An Allegheny County trial judge eventually ordered McAleer to turn over unredacted copies of the bills, which led to an appeal to the state’s Superior Court.  The Superior Court ultimately quashed the appeal in June after finding that the trial judge’s order compelling discovery could not be challenged independently before the case was resolved in its entirety.  While issues of attorney-client privilege and work product protections are often allowed to be appealed even before a case is resolved, the Superior Court noted that McAleer had only raised questions about privilege during oral argument before a trial judge on whether to compel discovery of the billing records.

“Our review of the record reflects that, prior to the trial court’s order compelling [McAleer] to produce the discovery documents in question, [he] did not provide any facts to support his attempt to invoke the attorney-client privilege and work-product doctrine protections,” the Superior Court said.

The case is In re: the Estate of William K. McAleer, case number 6 WAP 2019, before the Pennsylvania Supreme Court.

Judge Blasts Attorney for Wasting Time, Awards $1.6M in Fees

January 29, 2019

A recent Law 360 story by Daniel Siegal, “Judge Blasts Atty for Wasting Time, Awards $1.6M in Fees,reports that a Denver federal judge awarded a host of insurance companies nearly $1.6 million in attorneys' fees for defeating allegations that they unfairly denied coverage to homeowners, holding the plaintiffs’ attorney personally liable for most of the fees and blasting his “prolix, redundant and meandering” filings that wasted the insurers’ time.  In a 22-page ruling, U.S. District Judge John Kane granted the consolidated bid for attorneys' fees filed by dozens of defendants, including Allianz Life Insurance Co. of North America Inc., Chubb Corp. and insurance standards organization ACORD, finding that their request for about $1.6 million in fees was “fully foreseeable” and reasonable given the sprawling allegations.

“Plaintiffs initiated this litigation and were in control of its course.  There is no indication defendants’ counsel acted unreasonably or stepped outside the bounds of competent representation of their clients,” Judge Kane wrote.  “Plaintiffs cannot now complain that the fees incurred by defendants are excessive because such an inordinate number were forced to take part … They have imposed costs on virtually the entire insurance industry, and under the law, they must shoulder the result.”

Judge Kane wrote that the plaintiffs’ attorney, Josue David Hernandez of the Law Office of Josue David Hernandez, must personally bear liability for the attorneys' fees incurred by the defendants in the district court, given “his incessant filing of absurdly lengthy and legally incorrect briefs” and vexatious conduct throughout the litigation.  Some fees were incurred by the defendants on appeal, and Judge Kane asked them to file only the amount of fees that applied to the district court proceeding.

Judge Kane said he analyzed the plaintiffs' positions only to the extent that he could “extract them from the morass” of the briefing filed by Hernandez.  “I have struggled to decipher plaintiffs’ legal arguments throughout this case,” Judge Kane wrote.  “Those that pertain to the attorney fee award are no exception.”  The judge sided with the defendants’ expert witness’ testimony that the hours of legal work they expended defending the case were reasonable and necessary over the plaintiffs’ argument, which was based not an expert’s testimony but an “unreliable and bewildering” 24-factor test of Hernandez’s own concoction.

Judge Kane also noted that throughout the litigation, the plaintiffs had repeatedly made extra work for the defendants, such as filing a 40-page motion for more time to respond to the defendants’ motion to dismiss.  After the defendants filed a seven-page opposition to that motion, the plaintiffs followed with a 47-page reply brief that “illustrates a system gone mad,” the judge said.

Terence Ridley of Wheeler Trigg O’Donnell LLP, who represented First American Property and Insurance Co. and argued on behalf of all fee-seeking defendants, told Law360 that he was honored to argue the motion for the numerous insurers, saying that “the language of the order is important, and the order is important.”  Hernadez told Law360 via email that Judge Kane's ruling had failed to address key issues, including whether Colorado's attorneys fee statute was preempted by federal law, and the fact that the defendants had filed more papers and other documents in the case than the plaintiffs. 

"If one were to take the time to review the actual documents on the public record (which is something I would encourage anyone truly interested in the case to do), they would likely find that the ruling failed to include the necessary treatment of at least eight extremely significant issues raised," he said. 

Named plaintiff Dale Snyder and 17 others filed suit in June 2014, and in a 260-page amended complaint asserted 23 claims against 113 defendants, alleging a broad, multi-decade conspiracy to deny homeowners coverage of damages from floods and fires.  In January 2016, Judge Kane dismissed the suit due to the plaintiffs' failure to include a “short and plain statement of the claim showing that the pleader is entitled to relief” in the complaint.  The Tenth Circuit affirmed that ruling in May 2017 and ordered appellate attorneys' fees to be awarded to the defendants.

The case is Dale Snyder et al. v. ACORD Corporation et al., case number 1:14-cv-01736, in the U.S. District Court for the District of Colorado.