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Category: Fee Award Factors

Minnesota Supreme Court Sets Attorney Fee Award Factors

June 11, 2018

A recent Minnesota Lawyer story by Barbara L. Jones, “Supreme Court Sets Fee Award Factors,” reports on the recent Minnesota Supreme Court decision in Faricy Law Firm v. API Inc. Asbestos Settlement Trust.  The story reads:

When a contingent-fee client fires a law firm shortly before settlement, the court should consider not only the contingent fee agreement but also other factors including the timing of the termination and the contributions of others when making a quantum meruit fee award.

That’s the ruling of the Supreme Court in Faricy Law Firm v. API Inc. Asbestos Settlement Trust, decided June 6 by a 4-2 court. Chief Justice Lorie Gildea dissented, joined by Justice G. Barry Anderson, and Justice Paul Thissen did not participate.

The court remanded the matter to the District Court for determination of an appropriate quantum meruit award.

“The set of factors that we adopt today should guide district courts faced with the task of balancing the equities in determining the quantum meruit value of the services of a discharged contingent-fee attorney,” wrote Justice Margaret Chutich for the court.

Evidence to calculate fee award

For 10 years, the plaintiff Faricy represented API Trust and its predecessor, API in connection with indemnification claims for asbestos-related verdicts and settlements. This case concerns work performed in a case with Home Liquidator under a 33 1/3 percent contingent fee after January 2009. While Faricy represented API Trust, Home Liquidator offered $11 million to settle the case. Shortly thereafter, API fired Faricy. About two months later, the case settled for $21.5 million.

API had acknowledged that Faricy was entitled to a fee but later refused to pay the contingent fee or any fee at all. Faricy filed a lien seeking the entire one-third fee.

However, the District Court evaluated the case under quantum meruit. It said that Faricy’s work product, advice and recommended negotiation strategy led to the settlement in significant part. But it also said that Faricy, because it was sticking to its claim for one-third of the settlement, failed to provide significant evidence to calculate a fee award.

“Although the district court ‘implored Faricy’ to provide more evidence of the value that its legal work conferred on API Trust, the lack of evidence of the hours that Faricy had worked stymied the district court’s efforts,” Chutich wrote.

The Court of Appeals said it was error to award nothing and remanded for a quantum meruit analysis. Both sides sought review. The court granted both petitions — how to calculate a quantum meruit award in contingent-fee cases and whether the remand was appropriate in light of the evidence submitted to show the value of the legal services provided by Faricy. It did not rule on the second issue.

Walking away empty-handed

A discharged attorney may not sue for breach of contract because the client always has the right to terminate the relationship. For similar reasons, an attorney may not sue for the contingent fee but “should not necessarily walk away empty-handed,” Chutich wrote. Instead, the attorney is entitled to pursue a quantum meruit recovery, which is an equitable remedy. The discharged attorney must prove the value of the attorney services.

The question thus becomes how to value the services and whether to consider the contingent-fee agreement. The Court of Appeals has provided various factors but never explicitly designated the contingent fee award as one of them.

The court delineated eight factors (see sidebar) including the contingency fee, and added two that have not been announced previously—the contributions of others and the timing of the termination. “We have chosen these factors because they combine considerations that we have previously applied to determine the value of an attorney’s services in other contexts with concerns that are specific to the context of a discharged contingent-fee attorney,” explained Chutich.

The first six factors derive from the considerations for determining the reasonable value of legal services owed in the condemnation context and under the lodestar method.

But those factors do not suffice to determine the value conferred upon the client, the court continued, particularly where representation is terminated after a firm has substantially contributed to a successful end.

“These factors allow the court to measure the value of the services depending on how the timing of the termination related to the ultimate result and whether the discharged attorney added value compared to other contributors in the case. … Considering the timing of the termination is especially crucial to prevent a client from avoiding a contingent fee when it becomes apparent that the client will recover or reach a successful result,” Chutich wrote.

They are also consistent with principles of equity, which requires a balance of equities and not a bright line rule, the court continued.

Accordingly the court remanded the case for consideration of all the factors, including the contingent fee. The court went on to explain that it was not holding that Faricy was “automatically” entitled to its full contingent fee, but it also held that evidence of hours worked was not the only measure of value. The court has the discretion to open the record on remand.

Dissent: Absence of proof

The dissent was dissatisfied with the majority opinion because Faricy provided no evidence that could be used to compute fees. The District Court was correct when it refused to compute fees. “Even if the equities weighed in favor of Faricy, there is still an absence of proof on the fundamental element of the claim—reasonable value of services provided,” Gildea wrote. The firm should not get a second bite at the apple via a reopened record on remand, she added.

Quantum meruit factors

(1) Time and labor required;

(2) Nature and difficulty of the responsibility assumed;

(3) Amount involved and the results obtained;

(4) Fees customarily charged for similar legal services;

(5) Experience, reputation, and ability of counsel;

(6) Fee arrangement existing between counsel and the client;

(7) Contributions of others; and

(8) Timing of the termination.

Law Firms Question Expert’s Analysis of Attorney Fees

January 4, 2018

A recent Legal Intelligencer story by Max Mitchell, “NFL Concussion Lawyers Questions Expert’s Analysis of Attorney Fees” reports that several leading law firms in the NFL concussion settlement litigation are taking issue with an expert report that suggested slashing attorney fee recoveries.

More than 10 law firms have filed responses to a December expert report that recommended capping attorney fees.  Attorneys questioning the report’s conclusions included both Chris Seeger of Seeger Weiss and Sol Weiss of Anapol Weiss, who are co-lead class counsel in the litigation that came to a $1 billion settlement with the National Football Association in early 2015.  Most responses from the attorneys questioned the assumptions underpinning the report Harvard professor William Rubenstein issued last month, and some said that capping attorney fees could damage some of the former players’ ability to recover under the settlement.

Seeger’s response, specifically took issue with Rubenstein’s determination that, since the litigation settled relatively quickly, it was reasonable to recommend that the court reject a proposed 5 percent set-aside that would go toward a common benefit fund for class counsel attorneys.  “Any suggestion that class counsel did not invest sufficient time in this litigation to warrant the requested $106.8 million in common benefit fees is simply wrong,” Seeger said.  “Although this may not have been a typical MDL involving extensive discovery bellwether trials, and the like, all kinds of labor, resources, and ingenuity went into resolving this litigation.”

Last year, class counsel asked U.S. District Judge Anita Brody of the Eastern District of Pennsylvania, who is overseeing the litigation, to approve $112.5 million for attorney fees and costs stemming from the settlement, which is intended to compensate about 20,000 former players suffering from concussion-related injuries.  The NFL has agreed to pay the money in addition to the money for the class members.

The fee request included a 15.6 percent rate for attorneys representing claimants directly, along with the 5 percent set-aside that would be paid to the common benefit fund either from attorney fees, if the claimant had individual representation, or from the claimants’ recovery if they were unrepresented.  Rubenstein, who Brody asked to review the fee request, issued a 47-page expert report in mid-December recommending a presumptive 15 percent cap on contingency fees and that the court not adopt the 5 percent set-aside.

Responses largely took issue with the class participation rate Rubenstein used, and said the report did not take into account how vigorously the NFL would contest some of the claimant’s petitions.  A filing by X1Law said attorneys also said that cutting the fees could have a chilling effect on attorneys wanting to represent claimants who have difficult cases.

“Capping attorney’s fees at 15 percent would cut the legs out from under independently retained plaintiff’s attorneys (IRPAs) due to the time and risk involved in this complex and contentious claims process, essentially gutting their ability to represent class members by making the representation financially dangerous,” X1Law attorney Patrick Tighe said in the filing.  “Professor Rubenstein’s proposed cap would severely chill access to IRPAs, limiting IRPA advocacy and oversight, resulting in a lack of oversight in any otherwise dangerous claims process for class members.”

When reached for comment, Tighe said a 15 percent cap on fees would specifically impact players whose symptoms do not presently show up on tests, but may manifest in a few years.  “It’s going to eliminate a vast majority of class members from being able to present a claim,” he said.

Attorneys Want to Depose NFL Fee Expert

December 22, 2017

A recent Legal Intelligencer story, by Max Mitchell, “Lawyers Want to Depose NFL Fee Expert Over Slashed Attorney Fees,” reports that attorneys from five law firms have asked the court presiding over the consolidated NFL concussion litigation to depose the Harvard professor who recently recommended that fees for attorneys representing individual players be capped at 15 percent.

Attorneys filed two motions with the U.S. District Court for the Eastern District of Pennsylvania, asking the court to reconsider an order it issued last week that barred attorneys from seeking to depose Harvard Law School professor William Rubenstein about his recommendation to limit their attorney fees.  The order that U.S. District Judge Anita Brody issued Dec. 11 had changed course from a prior ruling that had said attorneys representing the ex-players would be able to seek to depose Rubenstein after he issued his opinion.

The motion that Philadelphia firm Locks Law Firm filed said that the deposition would be aimed at probing “the basis for professor Rubenstein’s assumptions and whether his recommendations would change if the assumptions, in whole or in part, were shown to be incorrect,” but the motion filed by Texas attorney Lance Lubel of Lubel Voyles said that allowing attorneys the change to depose Rubenstein was a due process issue.

“Without that process, a deposition and a facts-and-circumstances assessment of a particular fee contract, the cap is a denial of a contracted interest, that is, the benefit of the parties’ bargain, without an opportunity to be heard,” Lubel said in the motion, which was joined by attorneys from Washington & Associates, the Canady Law Firm and Provost Umphrey Law Firm—all of which are based in Texas.  “For the court to consider professor Rubenstein’s report without allowing interested parties to test the methodology, the conflict of interest, or the data will deprive interested parties of their right to participate in this process.”

Lubel’s filing also noted that Rubenstein had previously disclosed to the court that he had done some consulting work for attorneys at Anapol Weiss, which is the firm of attorney Sol Weiss, who is co-lead class counsel in the case.

Earlier this year, class counsel asked Brody to approve $112.5 million for attorney fees and costs stemming from the $1 billion settlement intended to compensate about 20,000 former players suffering from concussion-related injuries.  The NFL has agreed to pay the money in addition to the money for the class members.

The fee request included a 15.6 percent fee for attorneys representing claimants directly, along with the 5 percent set-aside that would be paid to the common benefit fund either from attorney fees, if the claimant has individual representation, or from the claimants’ recovery, if they are not represented by an attorney.

When it came to the 15 percent cap, Rubenstein’s 47-page report issued Dec. 11 gave several reasons for why he recommended limiting the fees.  The report noted that some contingency fees date back to 2011—four years before the settlement was given final approval in 2015—and some agreements are also as high as 45 percent.  He further noted that some players have more than one attorney, aggregate attorney fees in class actions are typically less than 15 percent, the case settled following little litigation, and many of the ex-players—most of whom are suffering from cognitive impairments—will receive “relatively small” recoveries.

NALFA: The Four Hourly Rate Factors

December 6, 2017

Hourly rates are the engine that drives attorney fees.  Hour rates are the most important single factor in determining attorney fee awards.  There are several factors that determine hourly rates.  NALFA has identified four hourly rate factors that have significant impact on prevailing market hourly rates.  At NALFA, these four factors are known as the primary variables and should be a part of any hourly rate survey.  We've ranked these hourly rates factors in order of importance:

Geography / Jurisdiction:  This is the most important of the factor in determining hourly rates.  Where an attorney practices matters the most.  Simply put, all things being equal, hourly rates in Manhattan are not the same as hourly rates in Oklahoma City.

Years in Practice / Position Title:  This is the second most important factor in determining hourly rates.  The more senior or experienced the attorney, the higher the hourly rate.  Simply put, all things being equal, hourly rates for partners are not the same as hourly rates for associates.

Practice Area / Complexity of Matter: 
Often overlooked and subtle, the nature of the underlying matters in determining hourly rates.  Hourly rates for more routine matters will not be the same as more complex areas of law.  Simply put, all things being equal, attorneys who practice in insurance defense or workers comp will charge different rates than attorneys who practice in antitrust litigation or white collar crimes.

Law Firm Size:  This is the least important of the factors, but still somewhat relevant.  Simply put, all things being equal, solo practitioners may have different rates than attorneys at very large law firms.

Ninth Circuit Backs Attorney Fees in ERISA Appellate Work

November 28, 2017

A recent Law 360 story by Adam Lidgett, “9th Circ. Backs Appellate Attys’ Fees for Benefit Plan,reports that a Ninth Circuit panel reversed a lower court’s denial of appellate attorneys' fees for an employee benefit plan in its dispute with Sun Life Assurance Co. of Canada Inc., saying the district court failed to take into account the whole course of litigation in analyzing the fee request. 

The panel reversed and remanded the denial of the fee request from the Group Disability Benefits Plan for California-based Gynecologic Oncology Associates Partners LLC.  The plan sought attorneys' fees and costs it incurred defending an earlier award of attorneys' fees in an Employee Retirement Income Security Act (ERISA) case filed against the plan and Sun Life.

The Ninth Circuit said the district court has to take into account the entire course of litigation and that it was clear the plan is entitled to the appellate attorneys' fees after weighing five factors outlined in the case Hummell v. S.E. Rykoff & Co. in light of Sun Life’s conduct.  Those factors included Sun Life's denial of a claim for disability benefits from a cancer surgeon with Gynecologic Oncology Associates Partners, the move that kicked off the initial lawsuit.

The appellate judges said the plan was forced into litigation after Sun Life wrongfully denied Dr. John Paul Micha’s claims and that Sun Life doesn’t dispute it can pay the fee award.  The panel remanded the issue to the district court to calculate reasonable fees.

“A party like Sun Life should not be able to appeal from a litigation fee award, even on an issue justifying appellate review, and thereby impose significant costs on the appellee in defending the fee award, while taking comfort in the knowledge that any potential appellate fee award against it will be judged solely on the basis of its appellate arguments on the fee issue,” the published decision said.

The case dates back to 2009 when Micha filed the suit after he was denied disability benefits by Sun Life.  The benefits of the plan were insured under a policy purchased from Sun Life, the plan has said.  After Sun Life settled Micha’s suit, the plan said it moved for attorneys' fees, and the district court agreed, awarding more than $38,000.  Sun Life appealed that award to the Ninth Circuit, but the appellate court affirmed the plan's win, prompting Sun Life to file a petition for a writ of certiorari in the U.S. Supreme Court, court papers show.

The Supreme Court denied the petition, however, and the plan sought an award for attorneys' fees and costs it incurred on appeal, according to court documents.  However, it first filed with the Ninth Circuit to transfer consideration of appellate attorneys' fees to the district court, the plan has said.  But when the issue went back to the lower court, the court denied the plan’s request for attorneys' fees incurred in defending the earlier award, the plan said.

The case is John Micha v. Sun Life Assurance of Canada et al., case number 16-55053, in the U.S. Court of Appeals for the Ninth Circuit.