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Category: Fee Calculation Method

Attorneys Awarded Bulk of $24.5M Fees Sought in IP Litigation

April 16, 2020

A recent Law 360 story by Hannah Albarazi, “BladeRoom Attys Awarded Bulk of $24.5M Sought in IP Row,” reports that a California federal judge awarded BladeRoom most of the $24.5 million in attorney fees and costs it sought after it won a $77.4 million trial verdict over Emerson Electric's use of stolen trade secrets to win a lucrative Facebook contract, while also ordering a minor reduction and recalculation.  U.S. District Judge Edward J. Davila, who presided over the jury trial, ordered a 10% reduction to the lodestar as well as other adjustments, instructing BladeRoom's counsel at Farella Braun & Martel LLP to resubmit new calculations reflecting the alterations to the court for approval.

Judge Davila said the reductions would be appropriate to account for the “deficiencies in the billing records ... primarily due to the block-billing.”  Upon conducting a de novo review of the special master’s report and recommendation, the judge said he disagreed with the special master’s conclusion that BladeRoom’s attorney billing records were “improper and in various ways problematic" and justified a 40% haircut.  Judge Davila said upon reviewing the billing records and other evidence, he found BladeRoom counsel’s representations in support of its fee request to be “trustworthy.”

However, the judge did agree with the special master on other issues.  For instance, Judge Davila agreed that BladeRoom should not recoup the entirety of attorney fees for its in-house counsel, saying the requested amount “is not completely substantiated and to some degree excessive” and reducing the award for BladeRoom’s general counsel Michael Joy from $3.3 million to $1.5 million.

U.K.-based BladeRoom sued Facebook and Emerson five years ago, accusing the pair of stealing its method for manufacturing and installing prefabricated data centers, which it had pitched separately to Facebook and Emerson in 2011. After those meetings, BladeRoom claimed the two larger companies began secretly working together to steal BladeRoom's proprietary techniques for the Facebook project.

Facebook settled BladeRoom's claims mid-trial in April 2018 and a month later, a jury found that Emerson owed BladeRoom $30 million for using its stolen trade secrets to land a $200 million contract to build a Facebook data center in Sweden.  Judge Davila ruled last year that Emerson owed BladeRoom $77.4 million comprising $30 million in compensatory damages, $30 million in exemplary damages and $17.4 million in prejudgment interest on the compensatory damages.

Emerson filed a notice of appeal challenging, among other rulings, the jury's verdict and the judge's denial of Emerson's bid to compel Facebook and BladeRoom to disclose the terms of their settlement.

At a hearing in March, Emerson's counsel, Rudolph A. Telscher Jr. of Husch Blackwell LLP, urged Judge Davila not to grant BladeRoom's bid for attorney fees and costs, saying BladeRoom overbilled for its work and overredacted its billing statements to a degree that made it impossible for Emerson to see which activities BladeRoom had billed.

Jeffrey M. Fisher of Farella Braun told the judge during the March hearing that Emerson's and Facebook's misconduct "overlapped so much" that it made it a challenge to differentiate the litigation, but that BladeRoom is only seeking to recover money for work that contributed to its victory against Emerson, not Facebook.

But Judge Davila said that BladeRoom's fees and costs are reasonable.  “As BladeRoom pointed out during the hearing, litigation can resemble a tennis game or war in that when one side hits the ball or shoots heavy artillery, the other side necessarily spends time hitting the ball or shooting heavy artillery back,” Judge Davila said in his order.

The judge found that the work described in BladeRoom’s billing records, “even if certain entries may appear duplicative or inefficient, was reasonably necessary in the context of this heavily contested and time consuming litigation,” further noting that Farella’s team of six attorneys at times went up against 23 attorneys who represented Facebook and Emerson.

Judge Davila said he didn't observe “across-the-board duplicative and inefficient efforts” that would justify a 40% reduction of BladeRoom’s lodestar, as recommended by the special master.  Instead, Judge Davila awarded BladeRoom 30% of the fees it incurred prior to the filing of its second amended complaint and ordered a 10% percent reduction to the award sought by BladeRoom for all fees incurred after the filing of that complaint.  The judge also ordered BladeRoom and Emerson to split 50-50 the special master’s fees.  BladeRoom was instructed to submit its recalculations of attorney fees and costs to the court within the next two weeks.

Ohio Supreme Court Cuts $4M in Fees; Redefines Lodestar

March 26, 2020

A recent Bloomberg Law story by Alex Ebert, “$4M Attorney Fee Award Cut in Half by Ohio High Court,” reports that a nearly $4 million payday for a prevailing group of attorneys was lopped in half by the Ohio Supreme Court, which ruled an “enhancement” that doubled the winning lawyers’ fees went too far.  Ohio’s lodestar calculation, the method for determining a reasonable attorneys fee, already factors in the complexity and time of litigation, and the expertise of the attorneys involved, the court said in its opinion issued.

A state trial and appellate court were wrong to look to these factors and double the more than $1.99 million in attorneys fees awarded to Phoenix Lighting Group LLC’s lawyers, the high court said.  The legal team won the lighting business a $5,518,335 judgment following years of litigation over claims that its value was reduced by unlawful actions by a competitor, Genlyte Thomas Group LLC, dating back to incidents that occurred in 2009.

“Today’s decision communicates the Ohio Supreme Court’s desire to limit an attorney’s ability to receive an enhancement in attorney fees in cases where his or her performance was exceptional or where the attorney, for the best interest of the client, took on a case with exceptional risk,” Phoenix Lighting Group’s attorney Jeffrey Witschey, a partner with Akron-based Witschey Witschey & and Firestine Co., LPA, said in an email.

“The danger with the decision is the potential chilling effect on attorneys taking cases for clients that are unable to financially support long legal battles with wealthier opponents,” he said.  The court made the “right decision and established appropriate limitations that will make enhancements rare in Ohio and require the rare enhancement to be based on objective evidence that is reviewable on appeal,” Genlyte Thomas Group’s attorney Benjamin Sasse, a partner in Tucker Ellis LLP’s Cleveland office, said in an email.

The court shouldn’t increase the fees just because the payoff took a long time, the justices said.  “Enhancements to the lodestar should be granted rarely and are appropriate when an attorney produces objective and specific evidence that an enhancement of the lodestar is necessary to account for a factor not already subsumed in the lodestar calculation,” Justice Melody Stewart wrote in the majority opinion signed by seven justices.

Justice Sharon Kennedy issued a concurring opinion that agreed with Stewart but said trial courts must weigh each reasonable-fee factor individually, and not believe all factors are bound-up perfectly in the lodestar analysis.  Justice Patrick Fischer also a separate concurring opinion saying that courts must also be mindful of the “time value of money” in cases that take years to resolve.  The underlying issues in this matter began in 2004.  “Prevailing plaintiffs who have paid their attorneys over the course of the lawsuit and attorneys working on a contingent-fee basis have been deprived of the use of their money throughout the lawsuit,” Fischer said in his concurrence.

Fourth Circuit: Recalculate $10M Fee Award in Lumber Liquidators MDL

March 13, 2020

A recent Law 360 story by McCord Pagan, “4th Circ. Tosses $10M Fee Award in Lumber Liquidators Deal,” reports that a Fourth Circuit panel ordered a recalculation of a $10 million award for attorneys representing consumers who claimed their Lumber Liquidators wood flooring had excessive formaldehyde, disagreeing with the way a lower court classified part of the value of the $36 million settlement.  In a published opinion, the three-judge panel affirmed the $36 million settlement of multidistrict litigation alleging Lumber Liquidators falsely stated its laminate wood flooring complied with the California Air Resource Board’s formaldehyde emissions limits.  But the panel sided with objectors over the $10 million attorney fee award, finding it was not properly calculated under the Class Action Fairness Act.

CAFA requires attorney fees to be based on the total value of a settlement, and if part of the settlement involves coupons, the respective portion of the attorney fee award can only be based on the value of the coupons that are actually redeemed by class members.  The $36 million settlement, which was approved by a Virginia federal court in 2018, included $22 million in cash and $14 million in vouchers for discounted or free flooring to members of the two classes.  The $10 million fee award represented about 28% of the deal’s total value, and would be paid out of the $22 million in cash, according to the opinion.

The objectors argued that the vouchers count as coupons under CAFA, meaning the law’s coupon settlement provisions should apply, resulting in a lower fee award.  However, a federal judge disagreed in November 2018, finding that the vouchers were essentially gift cards, not coupons.

While Congress didn’t define “coupon” for the purposes of CAFA, the appellate panel concluded that under a Ninth Circuit standard, the Lumber Liquidators vouchers are actually coupons.  Unlike gift cards to a large retailer such as Walmart, which can be used to buy a variety of products, the vouchers can only be used to purchase a limited range of items, such as flooring and flooring tools, the panel said.

“Notably, only about 15% of class members selected the vouchers over the cash award, which demonstrates that class members do not view the vouchers as having the diverse purchasing power of cash,” it said.  The panel also pointed out that the vouchers alone may not be enough to enable a class member to entirely replace their flooring, and therefore they might also need to spend some of their own money to accomplish that.

“Of course, in having to spend more money to obtain sufficient relief, the class members will be forced to benefit the company that allegedly lied to and injured them,” the panel said.  “That arrangement is precisely the type about which Congress was concerned."  Numerous proposed class actions were filed starting March 3, 2015, shortly after “60 Minutes” aired an investigation that found Lumber Liquidators misrepresented that its Chinese-made laminate flooring complied with Golden State formaldehyde emissions limits, according to court documents.

On average, the level of formaldehyde in the company’s flooring ranged from at least six times the state standard, with some samples nearly as high as 20 times the standard, the investigation found.  In June of that year, the U.S. Judicial Panel on Multidistrict Litigation consolidated the formaldehyde emissions cases.  Other consumers who bought the flooring said it scratched, chipped, warped and stained.  These consumers also filed proposed class actions, which were consolidated in October 2016, according to court documents.

Article: Five Lessons for Recovering Attorney Fees in Texas

February 24, 2020

A recent BizLitNews article by Amanda Taylor, “Recovering Attorney’s Fees in Texas: Five Lessons,” reports on attorney fee recovery in Texas.  This article was posted with permission.  The article reads:

Obtaining an award of attorneys’ fees might be the final step in a long-waged litigation battle but to do so successfully requires careful planning and diligence from the outset of a case.  The Texas Supreme Court recently clarified the evidence required to obtain and affirm such an award.  Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019).  The Texas Supreme Court also recently confirmed that these evidentiary standards apply equally when fees are sought to be recovered as a sanction.  Nath v. Texas Children’s Hosp., 576 S.W.3d 707, 710 (Tex. 2019).  To best serve a client’s interests of recovering attorneys’ fees in Texas, whether as a prevailing party or as a sanction, lawyers should adhere to five lessons from Rohrmoos.

Lesson One:  Confirm a legal entitlement to recover fees.  “In Texas, as in the federal courts, each party must pay its own way in attorney’s fees … unless a statute or contract provides otherwise.”  Rohrmoos Venture, 578 S.W.3d at 484.  Certain claims, such as a breach of contract claim brought under Chapter 38 of the Texas Civil Practices and Remedies Code, entitle a prevailing party to recover attorneys’ fees.  Other claims, such as a common law fraud claim, do not afford such a remedy.  In establishing your initial case strategy, it is important to consider which claims will and will not allow for recovery of fees, and advise your client about the pros and cons of pursuing each claim accordingly.  Also, be aware of fee-shifting procedural tools (such a motion to dismiss under the Texas Citizens Participation Act) and various Texas statutes and rules that allow for recovery of fees as a sanction (such as Civil Practice and Remedies Code Chapters 9-10, and Texas Rule of Civil Procedure 215).

Lesson Two: Keep accurate, contemporaneous billing records.  Although billing records are not absolutely required to prove the amount of reasonable and necessary fees, it is “strongly encouraged” to submit such proof in support of attorneys’ fees.  Rohrmoos Venture, 578 S.W.3d at 502.  It is much easier to review, summarize, and testify about the work performed (often years later) if you have been diligent in your billing practices throughout.  Time should be kept in a manner that demonstrates the “(1) particular services performed, (2) who performed those services, (3) approximately when those services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services.”  Id.  It is also advisable to keep time in a manner that is specific enough to cover the topic but without legalese and without so much detail that heavy redactions become necessary.  Fact finders prefer to read invoices in plain English without the interruption of hidden text.

Lesson Three:  Your fee agreement does not control the amount awarded.  “[A] client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable or necessary.”  Id. at 488.  Translation: even if you have agreed to handle the matter for a flat fee or contingency fee, you still must demonstrate that the amount of fees sought for recovery are reasonable and necessary based on the work performed and the time incurred.  Regardless of the fee arrangement with your client, keeping accurate and contemporaneous billing records is important.

Lesson Four: Remember to timely designate fee experts.   “Historically, claimants have proven reasonableness and necessity of attorney’s fees through an expert’s testimony—often the very attorney seeking the award.”  Id. at 490.  “[C]onclusory testimony devoid of any real substance will not support a fee award.”  Id. at 501.  Because expert testimony will be required, the attorney must remember to designate herself and any other attorney who will offer an opinion about the reasonableness and necessity of the fee amount(s) as an expert witness in compliance with the scheduling order or discovery control plan governing the case.

Lesson Five: Understand the “Texas two-step” calculation method.  At step one, calculate the “base” or “lodestar” amount by multiplying the “reasonable hours worked” by a “reasonable hourly rate.”  Id. at 498.  This is an “objective calculation” that yields a “presumptively reasonable” amount.  Id. at 497-98, 502.  The determination of what is a reasonable market rate and what is a reasonable amount of time will typically include consideration of the following factors: (1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill required to perform the legal service properly, (4) the fee customarily charged in the locality for similar legal services, (5) the amount involved, (6) the experience, reputation, and ability of the lawyer or lawyers performing the services, (7) whether the fee is fixed or contingent and the uncertainty of collection, and (8) the results obtained.  Id. at 500.  At step two, “adjust[] the base calculation up or down based on relevant considerations … [that were not] subsumed in the first step.”  Id.  “If a fee claimant seeks an enhancement, it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award.”  Id. at 501.  Remember that only “rare circumstances” justify such an adjustment.  Id. at 502.

Following these five lessons from the outset of a case will be beneficial to the expert testifying about the amount of fees at the end of a case.  More importantly, it will benefit your client’s best interest in obtaining a monetary award and being able to have that award affirmed on appeal.

Amanda G. Taylor is a Board-Certified Civil Appellate attorney who practices from the Austin, TX office of Butler Snow LLP.  Her practice is focused on shaping successful case strategy for litigation clients from the outset of litigation through the end of an appeal.  She also frequently represents clients in matters regarding the Texas Citizens Participation Act (Texas’ anti-SLAPP statute).

NJ Justices Toss ‘Unsound’ Attorney Fee Ethics Rules

January 29, 2020

A recent Law 360 story by Bill Wichert, “NJ Justices Throw Out ‘Unsound’ Ethics Rules for Atty Fees,” reports that the New Jersey Supreme Court upended new ethics rules from an appellate panel with respect to attorney fees in discrimination and related cases, saying they could have “far-reaching and negative effects” on lawyers and their clients.  The justices reined in those “ethical pronouncements” from the panel's 2018 published decision affirming a trial court’s orders declaring Brian M. Cige’s agreement with Lisa Balducci unenforceable.  The Supreme Court said a new ad hoc committee of judges and attorneys will be created to address such issues and make recommendations to the court.

“Some of those pronouncements appear too broad and some unsound, and others are worthy of the deliberative process by which new ethical rules are promulgated by this Court,” Justice Barry T. Albin wrote in the unanimous opinion.  The ethical obligations set forth by the panel covered attorneys handling New Jersey Law Against Discrimination and other fee-shifting cases when a retainer agreement includes hourly fees.  In fee-shifting actions, a defendant is responsible for a prevailing plaintiff’s reasonable attorney fees.

Among those rules, the Supreme Court rejected the panel’s finding that such attorneys must provide clients with “‘examples of how much hourly fees have totaled in similar cases.’”  That requirement “imposes a difficult, if not impossible, task,” the justices said.  “The attorney would have to know whether the ‘similar case’ settled or was tried, the nature and length of the discovery process, the number of depositions conducted and expert witnesses retained, the overall complexity of the litigation, and many other factors,” Justice Albin wrote.

The justices challenged the panel’s directive that attorneys inform clients that “‘other competent counsel represent clients in similar cases solely on a contingent fee basis, without an hourly component,’” noting that clients may benefit more from an hourly-fee deal than a contingent-fee arrangement.  The Supreme Court also expressed doubts about the panel’s pronouncement that attorneys “‘disclose other competent counsel who represent clients in similar cases advance litigation costs.’”

“Must an attorney refer a potential client to a competitor who may be less experienced or skilled merely because that attorney advances litigation costs?” the justices said.  “The answer to that question suggests that the Appellate Division’s disclosure requirement must be considered critically.”  The panel further asserted that “‘if the attorney has no such experience with similar cases ... consideration should be given to referring the case to a certified civil trial attorney,’” but the Supreme Court questioned whether that was correct as well.

The justices noted that “an attorney who has represented a client in one particular species of LAD cases may be no less capable of handling another species of such cases.”  “In addition, without in any way diminishing the value or importance of the designation of certified civil trial attorney — a special designation that signals that an attorney has recognized competence and experience as a litigator — certification is a voluntary, lawyer-initiated process, and some of the finest attorneys in their respective fields have decided not to seek certification,” the Supreme Court said.

The Supreme Court, however, upheld the panel’s finding that Cige’s retainer agreement was invalid.  Balducci retained Cige in 2012 to represent her son in an LAD lawsuit against a school district over bullying he had faced, court documents state.  The retainer agreement stated that Cige was entitled to the greater of three fee calculation methods: his hourly rate, a contingent fee or an award of statutory attorney fees, court documents state.

Balducci has claimed that Cige told her she would not have to pay his hourly fees, although the retainer agreement indicated otherwise, court documents state.  She has said Cige assured her the attorney fees would be covered by the school board, court documents state. Cige has denied making any statements that conflicted with the written agreement, according to the court documents.

The agreement also did not specify what Cige would charge Balducci for expenses, including $1 for every email sent or received, court documents state.  After Balducci terminated his services in 2015, Cige billed her for about $286,000 in fees and expenses, court documents state.  Balducci then filed the instant action seeking to have the agreement declared unenforceable, court documents state.

A trial court heard testimony from Balducci, her son and Cige, and sided with Balducci in invalidating the agreement, court documents state. The appellate panel upheld that decision.  In affirming the invalidation ruling, the Supreme Court concluded there was “sufficient credible evidence in the record” to back up the trial court’s findings.

“The court accepted Balducci’s assertion that she would not have retained Cige had he informed her that she would be responsible for his hourly fees if the lawsuit failed.  The court, moreover, determined that ‘a reasonable client’ would have viewed the retainer agreement as a typical contingent-fee arrangement, obligating the client to pay a percentage of a monetary recovery only if the lawsuit succeeded,” the justices said.