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Category: Fee Agreements

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).

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.

Law Firms Dispute Attorney Fees in Nearly 200 NFL Concussion Cases

August 15, 2017

A recent Legal Intelligencer story by Max Mitchell, “Fla. Firms Challenge Fee Liens in Nearly 200 NFL Concussion Cases,” reports that four Florida law firms that banded together into a limited liability company are disputing attorney fees in nearly 200 cases that resolved under the National Football League's settlement over concussion-related conditions.

The firms, which formed a professional limited liability company called Neurocognitive Football Lawyers PLLC, filed objections to attorney liens filed in 184 cases pending in the U.S. District Court for the Eastern District of Pennsylvania.  The objections contend that the attorneys who filed the liens at issue do not currently represent the 184 former players, and those attorneys failed to properly file those liens with the court, or provide any material benefits to their former clients.

"The vast majority of the liens were asserted by former individual counsel who filed boilerplate lien notices with no detail, or with scant detail reflecting any beneficial service that may have been performed for each listed NFL player before the effective date of the settlement," the objection, filed by Theodore Karatinos of Holliday Karatinos Law Firm in Tampa, Florida, said.  "While prior counsel may assert a quantum meruit lien after being discharged, most of the discharged counsel failed to prove that their legal services conferred substantial benefits to their clients, the former NFL players."

In 2013, the NFL agreed to settle the roughly 20,000-plaintiff multidistrict litigation for about $1 billion.  Some players sought—and failed--to challenge the accord, and some opt-out plaintiffs were recently given permission to outline a new set of claims against a company that made football helmets.

In February, lead attorneys in the litigation also filed a request asking the court to award $112.5 million in legal fees.  Since that time numerous attorneys have sought to score their piece of the potential fees.

The objection filed was not the first time the Neurocognitive Football Lawyers have disputed with others over the fees.  In March, the group asked the court to appoint a special fee master to look into the proposed fee agreements, and challenged the amount proposed be set aside for the lawyers.

The latest objection for the four firms focused on the argument that the prior counsel could not show the plaintiffs received any benefit from their former attorneys' representation, and contended that some of the discharged firms did not register the player with the claims administrator.

"Sending emails and form letters to the former NFL players with updates on the progress of the concussion class action before the claims process opened constituted an immaterial legal service," the objection said. "Where the former NFL player could simply Google the case website or secondary news source for updates on the progress of the case, legal services which merely updated the clients provide no 'reasonable value.'"

The objections also said that Pennsylvania law does not allow a discharged attorney to assert a lien on an unmatured contingency fee, and that many of the firms were unable to produce a fee agreement for the court to evaluate the claims.

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.

Fee Dispute Between Firms in SAC Capital Case

August 2, 2017

A recent New York Law Journal story by Christine Simmons, “Reed Smith Battles Rival Firms Over Fees, Conflicts in SAC Capital Case,” reports that two plaintiffs firms are urging New York judges to deny Reed Smith's claim to $6.75 million in attorney fees for its work as co-counsel in a securities class action, claiming the traditionally defense-side firm misled them in stating it was free from conflicts.

Wohl & Fruchter, a four-attorney firm that was class counsel with Pomerantz, contends Reed Smith should not be allowed any portion of a $27 million attorney fee award obtained in May in the class action against SAC Capital Advisors and other defendants.  "No reasonable attorney would have supported Reed Smith's continued representation of the plaintiffs," said the class counsel firms, represented by Paduano & Weintraub in the fee dispute, in explaining why the firm was terminated.

The fee dispute became heated in June when Reed Smith filed a lawsuit in Manhattan Supreme Court against Wohl & Fruchter and name partner Ethan Wohl, alleging tortious inference with a contract and unjust enrichment.  Reed Smith claims that Wohl & Fruchter, when looking for co-counsel, realized that it was a small firm "overmatched by the resources available to the SAC defendants," represented by Paul, Weiss, Rifkind, Wharton & Garrison, Willkie Farr & Gallagher, Goodwin Procter and Bracewell.

Under its engagement letter, Reed Smith said it immediately committed significant resources to the SAC action.  And soon after Reed Smith filed notices of appearance in the case, the SAC defendants reached out to Wohl for settlement discussions, Reed Smith said.  "Reed Smith's appearance was the obvious catalyst for the settlement discussions, which proved to be successful," the firm claims.

But Reed Smith asserts that when counsel for the SAC defendants at Paul Weiss mused about a possible conflict involving Reed Smith before Southern District Judge John Koeltl, the Wohl firm saw an opportunity to eliminate Reed Smith.  "[Wohl] intentionally exploited Paul Weiss' statements in order to malign Reed Smith and to induce the lead plaintiffs to terminate the engagement agreement," Reed Smith said.

Wohl and his firm deliberately blocked and excluded Reed Smith from any interactions with the lead plaintiffs or opposing counsel in the SAC case, Reed Smith claims.  Reed Smith's engagement agreement states if the firm is terminated for any reason other than good cause," Reed Smith will continue to be entitled to the contingent fees," the firm notes.

Reed Smith was originally represented in the fee dispute by Marc Kasowitz at Kasowitz Benson Torres.  Earlier this month, Dechert partners Gary Mennitt and Andrew Levander replaced Kasowitz as Reed Smith's counsel.  Hitting back, the Wohl firm has moved to dismiss Reed Smith's case in state court.  It also brought a motion in the federal securities case last week, urging Koeltl to deny the fee claims and enjoin the state lawsuit.

Wohl and Pomerantz said Reed Smith should be barred from asking for fees because it chose not to apply for fees before the federal court and because its claim is too late.  The firms argue Reed Smith represented the plaintiffs "for less than a week," and the firm was dismissed after admitting it was not free from conflict.  "Its conflicts of interest and lack of candor fully justified class counsel's determination that it should be terminated," they said.