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Category: Fee Clause

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 Allocation Dispute in MDL Moves to Texas Court

July 24, 2017

A recent Law 360 story by Michelle Casady, “RI Atty Must Face Fee Dispute Suit in Texas, Court Affirms,” reports that Texas' Fifth Court of Appeals affirmed a trial court's ruling in a fight between two plaintiffs firms, holding a Rhode Island-based attorney and his firm will have to face litigation in Texas stemming from a fee-sharing agreement with a Texas attorney and his firm.

John E. Deaton and Deaton Law Firm LLC had argued the trial court wrongly refused to dismiss him and his firm from the dispute with Texas attorney Steven M. Johnson and his firm, Steven M. Johnson PC.  Deaton, who served as local counsel for Johnson's firm in multidistrict litigation over alleged injuries from hernia mesh made by C.D. Bard Inc. subsidiary Davol Inc., argued he shouldn't have to litigate the fee dispute in Texas.

Johnson — who negotiated a global settlement for nearly 200 mesh cases the lawyers had worked on together — had argued that when Deaton signed a stipulation of nondisclosure related to the settlement amounts for Johnson's clients, Deaton became bound by the terms of the underlying attorney representation agreements Johnson signed with his clients, which stated disputes would be arbitrated in Texas.  That includes the agreement with Louisiana resident Rickie Patton, he argued.

Deaton, who argued his role in the case is defined by his fee-sharing agreements with Johnson that contain no arbitration clause, has claimed Johnson failed to pay him 5 to 10 percent of fees earned as part of the global settlement Johnson negotiated.

The Fifth Court of Appeals held that all of the Johnson law firm attorney representation agreements, including the one with Patton, contained clauses that disputes would be arbitrated in Texas.  The court rejected Deaton's argument that he wasn't a signatory to Patton's attorney representation agreement.

“We conclude that, by undertaking to represent Patton as 'associate counsel' under the attorney representation agreement and reaffirming his status by signing the stipulation as to nondisclosure, Deaton consented to personal jurisdiction in Texas under the terms of the attorney representation agreement,” the court wrote.

Deaton served as local counsel on 174 hernia mesh cases for Johnson in Rhode Island state court over a period of eight to 10 years, and worked on one case, Patton's, in federal court.  That case was initially filed in the Southern District of Texas but was transferred to Rhode Island District Court for pretrial proceedings.  Deaton hired a Texas expert witness for the Patton case, which would have been tried in Texas had it not been for the global settlement.

In oral arguments before the appellate court in May, an attorney for Deaton said while he had recommended the expert, it was Johnson who hired and paid the witness and Deaton never visited Texas during that time.

But Johnson's attorney told the panel Deaton spent eight years working on a Texas federal case, establishing jurisdiction in Texas for the fee dispute.  Although the Patton case's original pretrial proceedings were in Rhode Island, Deaton's pretrial work was all aimed at a trial in Texas, and he had availed himself of the protections of the state.

Firms Fight over Jurisdiction in Fee Allocation Dispute in MDL

May 22, 2017

A recent the Law 360 story by Jess Krochtengel, “Plaintiffs Firms Duel Over Texas Jurisdiction in Fee Fight,” reports that a Rhode Island attorney who served as local counsel for a Texas firm in multidistrict litigation over hernia mesh made by C.D. Bard Inc. subsidiary Davol Inc. told a Texas appellate court he shouldn’t have to litigate a fee dispute in Texas.

Attorney John E. Deaton and his Deaton Law Firm LLC, both based in Rhode Island, say a Dallas trial judge wrongly refused to dismiss them from a dispute over a fee-sharing agreement with Texas attorney Steven M. Johnson and his firm, Steven M. Johnson PC.  Deaton has claimed Johnson failed to pay him 5 to 10 percent of fees earned as part of a global settlement Johnson negotiated for nearly 200 mesh cases the lawyers had worked on together.

Johnson argues that when Deaton signed a stipulation of nondisclosure related to the settlement amounts for his clients, Deaton became bound by the terms of underlying attorney representation agreements Johnson signed with his clients, including their provision disputes, would be arbitrated in Texas.  Deaton argues his role in the case is defined by his fee-sharing agreements with Johnson, which don’t have an arbitration clause.  The case has “far-reaching implications for any local counsel hired by a Texas lawyer,” Deaton attorney Brian H. Fant of Law Offices of Brian H. Fant PC said during oral argument before the Fifth Court of Appeals.

Fant said Deaton served as local counsel on 174 hernia mesh cases for Johnson in Rhode Island state court over a period of eight to 10 years, and worked on one case in federal court.  That case, involving Louisiana resident Rickie Patton, was initially filed in the Southern District of Texas, but transferred to Rhode Island District Court for pretrial proceedings.

The panel pressed Fant on what Johnson has argued are Deaton’s ties to Texas. Justice Elizabeth Lang-Miers said 13 of the 174 clients were Texas plaintiffs, and asked whether Deaton had developed relationships with those clients over the years.  Justice David Evans pointed out Deaton had recommended the Patton case be tried in Texas and that Deaton be the lawyer to try it.  And Justice David Bridges questioned the weight of the fact Deaton hired a Texas expert witness for the Patton case, which would have been tried in Texas had it not been for the global settlement.

Fant said Deaton had recommended the expert, but it was Johnson who actually hired and paid the expert witness, and said Deaton never visited Texas during that time.  And he said the expert witness’ Texas residency isn’t relevant to jurisdiction over Deaton.

Arguing for Johnson, Thomas R. Needham of The Law Offices of Thomas R. Needham said Deaton spent eight years working on a Texas federal case, establishing jurisdiction in Texas for the fee dispute.  Although the Patton case’s pretrial proceedings were in Rhode Island, Deaton’s pretrial work was all aimed at a trial in Texas, and he had availed himself of the protections of the state.

And Needham said Deaton waived his right to contest jurisdiction in Texas when he signed the nondisclosure stipulation referencing Johnson’s attorney representation agreements.  Johnson’s position is that Deaton is equitably estopped from denying the applicability of the ARA’s arbitration clause because he’s claiming benefits under the ARAs in the form of legal fees.

The case is Deaton et al. v. Johnson et al., case number 05-16-01221-CV, in the Texas Court of Appeals for the Fifth District.

Court Remands Fee Award, Tackles Jury Waiver Language

February 8, 2017

A recent New Jersey Law Journal story by David Gialanella, “Court Remands $2M Fee Award, Tackles Jury Waiver Language,” reports that in a decision that sheds some light on the specificity of language required for waivers contained in employment contracts, a New Jersey appeals court has reversed an award of $2.06 million in attorney fees to Heartland Payment Systems Inc., though it appears the company will recover fees in some form.

The court remanded the case, holding that a claim lodged under the state Conscientious Employee Protection Act (CEPA) was not covered by a contract provision that waived the right to jury trial for disputes arising from "'this agreement.'"  That language, as well as the absence of language specifically referring to claims based in the statute, limited the provision's effect, the court ruled.  The panel also noted the high threshold for fee awards to employers under the CEPA.

"It was error for the trial judge to conclude the threshold was met based upon her finding that [the plaintiff] 'failed to set forth a viable claim against the defendant pursuant to CEPA,'" Appellate Division Judge Marianne Espinosa wrote in the Feb. 6 published opinion.

"There is a broad spectrum in the quality of proofs that fall between a claim that is not 'viable' and one that is 'without basis in law or in fact," she added.  The court directed the judge on remand, based on a fee-shifting provision in the employment contract, to apportion fees to the CEPA and contract claims.

The plaintiff, Greg Noren, was employed by Princeton-based Heartland Payment Systems from April 1998 to June 2005 as a "relationship manager," a role in which he sold payment processing services.  The contract he signed provided that he and Heartland both "'irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this agreement,'" according to the decision.  Another contract provision awarded fees and costs "'[i]n any suit, action or proceeding arising out of or related to this agreement,'" according to the decision.

Noren was terminated in 2005.  His suit was eventually whittled down to the two claims, breach of contract and the CEPA violation.  His jury trial demand was denied based on the waiver provision and, after 22 days of bench trial, Bergen County Superior Court Judge Susan Steele dismissed both claims.  She awarded Heartland $2.06 million in fees and costs for the defense of both claims, finding them so intertwined that the fees could not be apportioned, the decision stated.

In his appeal, Noren did not dispute the jury waiver's applicability to the contract claim, or the notion that fees may be awarded based on Heartland's success in defeating that claim.  But he did dispute the waiver's applicability to the CEPA claim, and the corresponding fee award based on the statute.

Espinosa, joined by Appellate Division Judges Clarkson Fisher Jr. and Garry Rothstadt, held the waiver inapplicable to the CEPA claim, and remanded the case for a jury trial on that claim.

The waiver, "by using 'this agreement' as the defining threshold for all suits, actions and proceedings, ... limits the category of disputes for which a jury trial is waived," Espinosa said, relying in part on the state Supreme Court's 2001 decision in Garfinkel v. Morristown Obstetrics & Gynecology Associates, which held that such provisions should specify that statutory claims, in addition to contract-based ones, are waived.

The fee award was vacated because, the court said, Steele wrongly found that CEPA's fee-shifting provision had been triggered.  "To lack any basis in law or in fact, there must be either no legal authority to support the claim or the absence of a factual basis for the claim," Espinosa said, noting that the CEPA claim's survival of summary judgment indicated that it was not without basis.

The court said it must be determined on remand what proportion of the fees are attributable to defense of the contract claim, which are awardable based on the employment contract's fee-shifting provision.

How to Get Reciprocal Contractual Attorney Fees in California

February 6, 2017

A recent CEBblog article, “How to Get Reciprocal Contractual Attorney Fees,” by Julie Brook, reports on reciprocal attorney fee shifting provisions under California’s § 1717.

This material is reproduced from the CEBblog™, How to Get Reciprocal Cotractual Attorney Fees (https://blog.ceb.com/2017/02/06/how-to-get-reciprocal-contractual-attorney-fees/) copyright 2017 by the Regents of the University of California.  Reproduced with permission of the Continuing Education of the Bar - California.  (For information about CEB publications, telephone toll free 1-800-CEB-3444 or visit our Web site CEB.com).

This article was posted with permission.  The article reads:

It’s like magic: California’s CC §1717 transforms a unilateral attorney fee provision in a contract into a reciprocal one!  When the contract provides for attorney fees to either a particular party or the prevailing party, the prevailing party “on the contract” is entitled to recover reasonable attorney fees regardless of whether that party was the party specified in the contract.  But taking advantage of this statute depends on meeting the following five requirements.

  1. There must be an attorney fees provision.  Section §1717 can convert a one-way attorney fee clause into a mutual and reciprocal clause, but it can’t create an attorney fee provision out of thin air.  The contract at issue must include at attorney fee provision for the statute to have any effect.
  2. Only the prevailing party gets fees.  A party’s right of recovery depends on whether that party is determined by the court to be the prevailing party.  There’s no prize just for participating.
  3. The action must be “on the contract.”  When it comes to CC §1717, courts have construed “on a contract” broadly to apply to any action that involves a contract.  But it doesn’t apply to tort claims such as fraud if the lawsuit doesn’t also seek to enforce or avoid enforcement of the contract.  And it also doesn’t apply to promissory estoppel claims, because they’re based on equitable principles.
  4. The fees recovered must be “reasonable.”  One of the purposes of CC §1717(a) is to assure uniform treatment of attorney fee recoveries in actions on contracts with attorney fee clauses and to eliminate disparities based on whether the recovery was authorized by contract or by statute.  PLCM Group, Inc. v Drexler (2000) 22 C4th 1084.  So §1717(a) limits the amount of fees recoverable to “reasonable” fees as “fixed by the court,” even if the contract clause doesn’t limit recovery to reasonable levels.
  5. Attorney fee clause applies to the whole contract.  If a contract has an attorney fee clause, that provision will be construed to apply to the entire contract unless each party was represented by counsel in the negotiation and execution of the contract and the fact of that representation is specified in the contract. CC §1717(a).

For more on recovery of attorney fees by contract, check out CEB’s California Law of Contracts, chap 9.  And when deciding whether to include an attorney fee provision in a contract, turn to CEB’s Drafting Business Contracts: Principles, Techniques and Forms §§15.18-15.20.

Other CEBblog™ posts you may find useful:

CEB is a self-supporting program of the University of California that is cosponsored by the State Bar of California.  CEB is the go-to source for lawyers on information about the law, and the practice of law, in California.  For more on CEB, visit https://blog.ceb.com/

Bloomberg News Covers NALFA Webinar

August 3, 2015

Bloomberg BNA Class Action Litigation Report reported on the recent NALFA webinar, “Attorney Fees in Class Actions: Fee Calculations, Hot Issues & Trends.”  The Bloomberg...

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