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Category: Fee Agreements

Eleventh Circuit: No Added Attorney Fees for Defending Fees

April 12, 2019

A recent Law 360 story by Nathan Hale, “No Added Atty Fees in Nationstar Case, 11th Circ. Says,” reports that a Florida woman who won a judgment against Nationstar Mortgage LLC for charging improper fees is not entitled under state law to collect appellate attorney fees for her counsel's work defending an initial attorney fees award in the case, the Eleventh Circuit ruled.  The federal appeals court backed a lower court's decision to deny Sara Alhassid's request for attorney fees covering Nationstar's appeal based on a finding that the benefit would be purely for her attorneys and that she has no obligation to pay them for this work.

The appeals panel said it agreed with the district court that the controlling case on the issue is the Second District of Florida's ruling in B & L Motors Inc. v. Bignotti.  In that case, the state appeals court found that if a plaintiff has no interest in a fee award because it would not affect her payment obligation to her attorneys, then the plaintiff may not receive a fee award under the Florida Deceptive and Unfair Trade Practices Act, according to the opinion.

“B & L Motors is exceedingly clear that a prevailing plaintiff may receive fees under FDUTPA only if a 'fee award is found to be in the interests of the client and if the fee arrangement is found to have contemplated payment for that work,'” the Eleventh Circuit said.  “Because we do not lightly disregard binding, on-point decisions of intermediate state appellate courts, we hold that B & L Motors compels the denial of appellate attorneys’ fees in this case.”

Alhassid's counsel, Reuven T. Herssein of Herssein Law Group PA, said that his side intends to seek an en banc rehearing of the decision, which he said promotes meritless appeals by mortgage companies and other large institutions and has a chilling effect on plaintiffs who bring and litigate these cases.  "In light of this decision, plaintiffs attorneys will shy away from taking on these kind of cases since we won on the merits of the appeal and the appellate court’s decision means we are not paid for the successful result we obtained for our client in the appellate court," he said.

According to the opinion, Alhassid's attorneys had said that they “took this case on a contingency basis,” and the district court found that meant that any fees resulting from the appeal of the fee award would “inure solely to the benefit of plaintiff's attorneys and not to plaintiff herself.”

The dispute stems from Bank of America's decision to place Alhassid’s reverse mortgage in default for failure to pay flood insurance on her property.  After acquiring Alhassid’s mortgage and note in April 2013, Nationstar called her loan due and payable and started a foreclosure action on the property in January 2014, according to case records.  Alhassid filed the suit as a proposed class action against Bank of America NA and Nationstar in February 2014 and was joined by Sarah Drennen in August 2014.  The two women filed their third amended complaint in December 2014, bringing three breach-of-contract claims, a claim for breach of the covenant of good faith and fair dealing, the FDUTPA claim and a claim of violation of the Fair Debt Collection Practices Act.

They alleged the two companies charged improper fees, placed loans in default when borrowers did not pay those fees and then charged more unlawful fees after the defaults, according to the opinion.  The district court in Miami denied class certification in August 2015, finding that the nine class definitions didn’t show commonality and only individualized evidence could prove wrongdoing.  The claims against Bank of America were ultimately dismissed voluntarily, but Alhassid won summary judgment against Nationstar on all but the good-faith and fair-dealing claim, which the court found to be duplicative, the opinion said.

Alhassid was awarded $5,000 in actual damages and $1,000 in statutory damages under the FDCPA, according the opinion.  The district court also found that she was entitled to attorney fees as the prevailing party under the FDUTPA and awarded her $435,704 in fees.  The Eleventh Circuit affirmed the award on appeal.  The case is Alhassid v. Nationstar Mortgage LLC, case number 18-11985, in the U.S. Court of Appeals for the Eleventh Circuit.

Texas Legislation Would Limit Contingency Fee Contracts with Local Governments

April 8, 2019

A recent Texas Lawyer story by Angela Morris, “Bill Would Limit Some Attorney Contingency Fee Contracts with Local Governments,” reports that local governmental entities would have to follow a new procedure to hire contingent-fee plaintiffs law firms for cases involving engineering and architects under a bill that a Texas legislative committee passed.  Current law already restricts state agencies and departments from entering contingent-fee representations, and now the House Judiciary and Civil Jurisprudence Committee has passed a version of House Bill 2826, by Rep. Greg Bonnen, R-League City, that would make the procedure apply to governmental entities at the county and city level as well.

When the committee was considering the bill during a March 25 public hearing, a representative of the tort reform lobbying group, Texans for Lawsuit Reform, testified in support of the proposal along with seven other witnesses.  Meanwhile, testifying against the bill were two representatives of the plaintiffs attorney trade group Texas Trial Lawyers Association and five other witnesses.

The county- and city-level governmental entities, under the bill, would only be able to pick a contingent-fee lawyer or law firm if it was well qualified with demonstrated competence, qualifications and experience in the type of legal services at issue.  The governmental entity would have to negotiate for a fair and reasonable price.  It would be able to require the lawyer or firm to indemnify it from claims of acts or omissions of the lawyer, firm or firm employees.

Before hiring the lawyer or firm, the city or county officials involved would have to provide a notice for a public meeting to explain the reasons they wanted to pursue the legal matter for which they were hiring the lawyer or firm.  They’d have to explain their desired outcome, and explain why it was in the public’s best interests.  The notice would have to explain the lawyer’s competence, qualifications and experience in that type of matter.  Officials would have to reveal in the notice what relationship they had with the lawyer or firm, and how the relationship began.  They’d have to tell why they could not use their governmental entity’s own resources rather than hiring the outside contingent-fee law firm.  The officials would also have to say why they couldn’t get the same legal services from a lawyer charging an hourly fee, rather than a contingency.

When holding the public meeting regarding the contingent-fee representation, public officials would have to approve the contract in an open meeting where they considered the need for the legal services, terms of the contract, the lawyer’s or firm’s competence and experience, and why the contract served the public’s interest.  Once they approved the contract, officials would have to state in writing why they needed the legal services, why they couldn’t use their own resources for it, why they couldn’t hire an hourly rate lawyer for the job, and more.

Before the contract could become effective, the city or state governmental entity would have to submit it for review and approval by the Texas attorney general, along with documentation that it held a public meeting and officials approved it.  It would have to describe the matter and say whether the state or any other governmental entity may have an interest in the matter.  If the governmental entity had not followed the right procedure, the attorney general could refuse to approve the legal contract, and he could also disapprove if he found the matter was similar to a matter that the state was also pursuing, and the other governmental entity’s similar matter wouldn’t help resolve the dispute.  The bill lays out a 90-day deadline for the attorney general to make a decision, or else the contract would be considered approved.

When state governmental agencies or departments enter legal contracts, those lawyers or firms already have to reveal their time and expense records on request, and after the matter is resolved, they must provide a written statement about the outcome, recovery, the contingent-fee amount, final time and expense records and more.  The bill creates the same requirement for lawyers or firms representing city- or county-level governmental entities, and makes it clear that some of that information on time and expenses would be public records under the state’s open-records law, with some exceptions.

The bill places limits on expenses the contingent-fee lawyer and firm could collect from the city- or county-level governmental entity, with a requirement to ensure they’re reasonable and necessary, similar to limits in current law for state agencies or departments that contract with outside lawyers.  If a governmental entity didn’t follow the right procedures as laid out in the bill, then any legal services contract it improperly entered would be void under the bill, and it would be prohibited from paying any fees for work under the voided contract.

PG&E Legal Bills Already Top $84M in Chapter 11 Case

April 2, 2019

A recent The Recorder story by Xiumei Dong, “PG&E Legal Bills Already Top $84M for Chapter 11 Case,” reports that four outside law firms have billed Pacific Gas and Electric Co. at least $84 million for legal services related to the company’s January bankruptcy filing.  The utility company disclosed its legal spend in a series of court filings last month, as it sought approval from U.S. Bankruptcy Judge Dennis Montali to continue employing the law firms.  PG&E is seeking to retain Cravath, Swaine & Moore; Weil, Gotshal & Manges; Jenner & Block; and Keller & Benvenutti as its legal advisers for the Chapter 11 proceedings.

PG&E listed more than $50 billion in estimated liabilities when it filed for Chapter 11 protection.  According to the court docket, Montali is scheduled to consider PG&E and the firms’ motions at a hearing April 9.  The utility giant said it has paid Cravath, which is PG&E’s lead coordinating counsel in wildfire-related matters, roughly $75.7 million leading up to the bankruptcy filing.  According to court papers, PG&E’s payments to Cravath included a $10 million retainer from which the firm had drawn only about $3 million.

The firm intends to apply the rest of the retainer to any outstanding amounts for PG&E-related costs that it did not bill for before the filing, or as credit toward any services arising after the filing, the filing said.  In addition to representing PG&E in Chapter 11 proceedings, Cravath has advised the utility for over a year on corporate governance, strategic transaction and financing matters, court documents said.

Last year, PG&E hired a team from Cravath, including chairman Evan Chesler and litigation partners Timothy Cameron, Kevin Orsini and Damaris Hernández, as defense counsel in 200-plus suits stemming from fires in Northern California.  The company also turned to Wilson Sonsini Goodrich & Rosati and Quinn Emanuel Urquhart & Sullivan to handle those cases.

Cravath worked closely with Weil on PG&E restructuring alternatives, but Weil billed far less.  According to another court filing, Weil received over $4.7 million from PG&E in the 90 days leading up to the company’s bankruptcy filing, and also has a remaining balance of $1.5 million on a fee advance from PG&E, which the firm said it will use to pay for the outstanding amounts that it did not bill for before the filing.

PG&E has hired Chicago-based Jenner & Block as special corporate defense counsel for state and federal regulatory matters during the Chapter 11 proceedings.  Jenner & Block is also handling a criminal case involving PG&E, connected to a natural gas explosion that occurred in the city of San Bruno, California, in September 2010.  According to the court filing, PG&E has paid the firm $3.57 million during the year leading up to the Chapter 11 filing.

San Francisco based Keller & Benvenutti is also representing PG&E in bankruptcy court.  Since May 2018, the firm has advised PG&E on legal and financial matters regarding potential liabilities resulting from 2017 and 2018 Northern California wildfires.  Court papers said the firm has received $383,635 in the 90 days before the Chapter 11 filing.

In separate court documents supporting PG&E’s motion, the court papers also revealed the hourly rate of the four firms.  Cravath attorneys are charging at rates of $415 to $1,500 per hour, while Weil attorneys charge $560 to $1,600 per hour.  Jenner & Block attorneys charge PG&E at hourly rates ranging from $400 to $982 and Keller & Benvenutti attorneys are charging at $400 to $800 per hour.

Legal Fees in Puerto Rico Bankruptcy Under Review

March 13, 2019

A recent Caribbean Business story by Eva Llorens Velez, “Legal Fees in Puerto Rico Bankruptcy Drop,” reports that the examiner of fees charged by lawyers and professionals in Puerto Rico’s bankruptcy said fees have dropped to $71 million for the June to September period compared with the previous four-month period.  Fee examiner Brady C. Williamson resubmitted to the court a proposed order imposing additional standards to collect fees.  He also proposed an order setting procedures for interim compensation, all of which he said could be tackled in the omnibus hearing set for April.

At the Dec. 19, 2018, omnibus hearing, the court denied without prejudice the fee examiner’s motion to impose additional presumptive standards.  The new proposal incorporates comments from professionals.  However, it maintained a 5 percent a year limit on rate increases for partners/shareholders and a 7 percent-a-year presumptive limit on “step,” or seniority, increases for associates.

Through the interim period that ended in September, firms subject to the Puerto Rico Oversight, Management and Economic Stability Act’s (Promesa) fee-review process have requested more than $306 million in total interim compensation, at least $5.9 million of the total attributable solely to rate increases, Williamson said.  “That is the amount requested to date that, with or without specific client and Court approval, is the direct result of increases in the hourly rates charged at the outset of each professional’s engagement,” he explained.

Through the third interim period (February through May 2018), the collective and cumulative rate increases totaled almost $4 million.  While the 2018 cost increases for the 50 largest firms exceeded 7 percent, according to a Citi report, Williamson said the goal is not to try to regulate professional revenue or profit, but to suggest boundaries for prospective hourly rate increases that comply with Promesa’s reasonableness standards and seek to manage both the immediate and long-term impact on the cost of the proceedings.

At the December hearing, the court noted the “unique situation” presented to professionals by these proceedings, asking the fee examiner to reconsider the initial rate increase recommendations and noting a 2 percent annual rate of inflation in New York, where most of the law firms are located.

The fee examiner said the Feb. 15 decision by the U.S. Court of Appeals involving the composition of the Promesa-established fiscal oversight board for the island “does not conclude that constitutional litigation, nor have all of its consequences yet been felt or appreciated,” and that he “already has engaged professionals on the continuing need to avoid duplicative efforts with further appeals or related activity involving the legislative and executive branches of the federal or Commonwealth governments.”

Williamson also said a particular difficulty inherent in Promesa’s Title III structure, given the board’s role as debtor representative, has been identifying the “client” of each financial adviser.  For example, Deloitte Financial Advisory Services and Ernst & Young LLP are both financial advisers to the commonwealth, with Ernst & Young LLP reporting to the board and Deloitte FAS reporting to Puerto Rico’s Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym).  Many financial professionals, whether working for a flat fee or an hourly fee, provide advice on one or more aspects of a debtor’s finances.  However, for example, Ankura Consulting Group is the financial adviser to the Puerto Rico Electric Power Authority and no other debtor.

Fee Allocation Dispute in Citigroup 401K Class Action

March 12, 2019

A recent Law 360 story by Andrew Strickler, “Firm Ordered to Drop Arbitration Bid in $2.3M Atty Fee Fight,” reports that the New York federal judge who oversaw the settlement of a case focused on a Citigroup employee retirement plan ordered one of the plaintiff co-counsels to withdraw a request for court-ordered arbitration to resolve a dispute over $2.3 million in legal fees.  U.S. District Judge Sidney Stein's order arrives amid a scrap between the co-leads in the Citigroup case, McTigue Law LLP and Bailey & Glasser LLP, over the split of the January award.

Attorneys at the McTigue firm, a Washington, D.C. pension boutique, had asked the court to reject Bailey & Glasser LLP's call for arbitration as "premature and, arguably, nonsensical," because the dispute has "no legal existence" in terms of a motion pending before the court.  The previous day, Bailey & Glasser had asked the court to compel arbitration of the fee split dispute, saying the co-counsels had agreed to do so in a 2009 agreement.  That deal "was drafted by Mr. McTigue himself," the firm said in a motion.  "As such, any ambiguities in whether and to what extent the arbitration clause governs the dispute should be resolved in favor of Bailey & Glasser."

In January, Judge Stein put his final stamp of approval on a $6.9 million settlement for a class of over 300,000 Citigroup 401(k) plan participants who had argued that the company stacked the plan with Citigroup-affiliated funds in order to boost its own profits, even as other funds charged lower fees.  Judge Stein also signed an order awarding $2.3 million to the plaintiffs' attorneys, $15,000 to each of two class representatives, and putting $374,100 toward case-related expenses.  That left approximately $4.2 million for the class.

Last month, both firms filed letters with the court about a disagreement on the fee allocation.  In his letter, James Moore of McTigue Law accused Bailey & Glasser's Gregory Porter of holding the attorneys' fees hostage as leverage in negotiating for a bigger cut of the $2.3 million by refusing to give consent for any of the money to be distributed.  According to Moore, Porter is contesting an agreed-to allocation, because Bailey & Glasser paid roughly 10 percent more in expenses in the case than was anticipated.

Porter in turn said the McTigue firm breached their deal last spring by failing to pay its share of expert expenses and then refusing to respond to emails "to confer on the management and financing of the case given the McTigue firm's financial condition."  In a second set of tit-for-tat filings, Bailey & Glasser told the court that, after it filed its arbitration motion, the McTigue firm had agreed to proceed to mediation.  The McTigue firm responded with its own filings stating that the Bailey firm's notification was "unilaterally filed" and gives the "misleading impression" of being about a joint agreement of class counsels.

The case is Leber et al. v. The Citigroup 401(k) Plan Investment Committee et al., case number 1:07-cv-09329, in the U.S. District Court for the Southern District of New York

Article: Defense Costs Coverage 101

January 16, 2019

A recent New York Law Journal article by Howard B. Epstein and Theodore A. Keyes, “Defense Costs Coverage 101,” reports on defense fees and costs in the insurance coverage practice area.  This...

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