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Category: Fee Discovery

Judge Won’t Destroy Hourly Rate & Attorney Fee Data

April 22, 2020

A recent Law 360 story by Andrew Stricker, “King & Spalding Denied Destruction of Fee Docs in FOIA Case, reports that a federal judge in Washington, D.C. refused to grant a request from King & Spalding LLP to "turn back the clock" and destroy court records that included the firm's billing rates and other fee data.  Partially denying a recent motion from the law firm in a Freedom of Information Act case with the federal government, U.S. District Judge Amit P. Mehta also said he would not order officials at the U.S. Department of Health and Human Services and the Department of Justice to destroy or return copies of the documents they were served.

King & Spalding "asks the court to turn back the clock and treat the sealed material as if [the firm] had never intentionally placed it on the court's docket," Judge Mehta said.  "That the court cannot do."  The decision springs from the firm's attempt to cloak the billing rates of King & Spalding lawyers who sued the HHS and DOJ after the agencies refused to hand over information related to an investigation into medical implant manufacturer Abiomed, a King & Spalding client.

After winning the FOIA case, King & Spalding petitioned for attorney fees early this year, and attached sealed exhibits containing billing rates and information about the work the firm had done to support the fee motion.  But on April 8, one day after Judge Mehta said it was "untoward" of the firm to keep the information out of the public domain as it sought federal dollars, the firm moved to withdraw its fee motion as well as the sealed exhibits.  The firm's motion also requested a court order for its clerk and the government to "destroy all copies of the sealed exhibits in their possession."

The defense opposed the request, telling the court that it was unaware of any authority requiring them "to destroy copies of non-privileged documents that, upon service on the government, became part of a government system of records."  In his decision, Judge Mehta agreed that the firm had offered no justification for destroying the records, despite its citation of a New York federal court decision about courts' inherent powers over their own processes to prevent injustices.

King & Spalding "does not assert that defendants must destroy or return their service copy to prevent abuse, oppression or injustice," the judge said.  "Indeed, it seems that plaintiff's demand for relief is premised on little more than its mistrust of defendant's continued retention of the records.  But that is not a sufficient reason."

While Judge Mehta had previously ruled that the fee exhibits could not remain sealed, he reasoned that the firm's about-face on the fee request "changes that calculus[.]"  "Although the court continues to believe that the likelihood of competitive harm is low if the exhibits were made public, that factor does not override the absence of any genuine public interest in their unsealing," he wrote.

King & Spalding filed FOIA requests in 2016 seeking correspondence within the government about Abiomed.  The agencies dragged their feet for years and cost the firm "hundreds of thousands of dollars" in fees and costs in the ensuing litigation, which the government ultimately lost at summary judgement, according to the firm's Feb 3 fee motion.

PNC’s Says Legal Bills Are Off-Limits to Assault Victim

April 13, 2020

A recent Law 360 story by Cara Salvatore, “PNC’s Legal Bills Are Off-Limits in Assault Case, Bank Says,” reports that PNC Bank told a New Jersey court that a former wealth manager who won $2.4 million after being attacked by a customer has no right to see billing records from two PNC-hired law firms as she prepares a motion to recover legal fees.  PNC Bank NA asked a court to block former employee Damara Scott's March 19 subpoenas for billing records from two firms that are outside counsel to PNC, Ronan Tuzzio & Giannone and Goldberg Segalla.

A jury awarded Scott $2.4 million in February in her lawsuit claiming the bank failed to protect her from an attack by a man known for targeting female employees and customers of the bank for harassment.  Scott served the document requests "without leave of court," PNC said.  "Post-trial discovery is not permitted without leave except in proceedings to enforce a judgment." Further, the requests "improperly seek information protected by the attorney-client privilege and attorney work-product doctrine," the bank said.

PNC expects Scott to file a request for legal fees, but it said there should be no need for Scott to see any of PNC's legal bills at this time.  PNC hired Ronan Tuzzio after Scott sued in the fall of 2015 and hired Goldberg Segalla in July 2019, it said.

Scott's lawyer, Nancy Erika Smith, said that PNC's likely future challenge to the reasonableness of Scott's future fee request would open the door for a view of PNC's legal bills as well.  "If PNC wants to claim that plaintiff spent [an] unreasonable amount of time winning the case, I am allowed by law to look at the amount of time PNC lawyers spent losing it," Smith said.

Plaintiffs’ Must Produce Billing Records in NCAA $45M Fee Request

August 21, 2019

A recent Law 360 story by Dorothy Atkins, “NCAA Athletes Must Produce Billing Records in $45M Fee Ask,” reports that a California magistrate judge granted the NCAA's request for attorneys representing student-athletes to produce five years of billing records to support their bid for $45 million in fees for winning a ban on certain pay restrictions but said the cost of producing records can be added to their fees.

During a hearing in San Jose, U.S. Magistrate Judge Nathanael Cousins ordered the athletes to produce the records so that the NCAA's attorneys can review them and ensure there aren't clerical errors, double billing or charges for time the attorneys spent doing media interviews.  He said the records can be subject to a protective order if necessary and he's not waiving any attorney-client privilege.

He also acknowledged that the time and expense it takes for the athletes' counsel to produce the records might not justify the amount of money the NCAA could potentially save in reviewing the records.  However, Judge Cousins said the athletes' counsel can charge the NCAA for the work.  "That's clearly what the defense has asked for," the judge said.

The judge's ruling came at the end of a hearing on the athletes' request for $45 million in fees for securing a permanent injunction in March after a weekslong landmark antitrust bench trial that bars the NCAA from restricting student-athletes' education-related compensation.  After the decision, counsel for the athletes sought to recoup the $30 million they said they sank into the long-running litigation, plus another $15 million based on a 1.5 multiplier, in light of "the exceptional nature of the outcome," and roughly $1.3 million in costs.

During the hearing, Karen Hoffman Lent of Skadden Arps Slate Meagher & Flom LLP, who argued on behalf of the NCAA defendants, said they wouldn't object to awarding the five lead plaintiffs between $10,000 and $15,000 each.  However, she complained that the athletes' attorneys only submitted a list of attorneys and their work hours, which totaled 51,000 hours, to support their $45 million fee request.  "It's a lot of money they're asking for, with virtually no evidence or support," she said.  Lent argued that the NCAA is entitled to more details about the records so that they can review them with a "much more critical eye."

However, the athletes' counsel, Jeffrey L. Kessler of Winston & Strawn LLP, pushed back, arguing that the NCAA is trying to conduct an unfair "fishing expedition" into their billing records.  Kessler said there's no evidence that lead counsel's hourly rates are excessive or they've duplicated their work.  He said it would also be "enormously burdensome" to redact five-years worth of billing records, which he argued contains privileged work-product material.

Kessler added that if they have to produce their billing records, then the NCAA's legal counsel should also have to produce their records, which he said they don't want to do.  Kessler pointed out that approximately a dozen law firms representing the NCAA defendants have "dwarfed" the athletes in their legal fees and those firms had charged the NCAA defendants $60.7 million as of June 2018, which was months before a trial was held before U.S. District Judge Claudia Wilkin in November.  "The idea the size of [our request] warrants it is just false," Kessler said of the NCAA's demand for its billing records.

Kessler also argued that the injunction they achieved against the NCAA is an extraordinary result for athletes.  He noted that the athletes' expert, University of San Francisco professor Daniel Rascher, conservatively estimates that the injunction will provide NCAA athletes with $235 million a year in additional benefits.  Therefore, he said, a 1.5 multiplier is on the low end, considering $45 million represents 12.7% of the $235 million a year in additional benefits.

Article: Texas Blocks Discovery of Insurer Attorney’s Billing Record

July 16, 2019

A recent Property Casualty Focus article by Amanda Proctor of Carlton Fields, “The Privilege Maintains Its Power: Texas Supreme Court Blocks Discovery of Insurer Attorney’s Billing Information,” reports on the recent Texas Supreme Court decision in In re Nat’l Lloyds Ins. Co.  This article was posted with permission.  The article reads:

When (if ever) are an insurer’s attorney’s fees and billing information discoverable in a coverage dispute?  Though the question is straightforward, the answer can vary from case to case and jurisdiction to jurisdiction.  The Texas Supreme Court recently weighed in on the issue and found that an insurer’s attorney-billing information is not discoverable merely because the insurer challenges the insured’s request for attorney’s fees in coverage litigation.  See In re Nat’l Lloyds Ins. Co., No. 15-0591 (Tex. June 9, 2017).

In Lloyds, insured homeowners sued the insurer and various claims adjusters alleging that they underpaid property damage claims in the wake of two hail storms that struck Hidalgo County, Texas in 2012.  The homeowners asserted statutory, contractual, and extra-contractual claims, including requests for attorney’s fees incurred by the homeowners in pursuing the relief sought against the insurers.  The lawsuits were eventually consolidated into a single multidistrict litigation (the “MDL”) for discovery and pretrial proceedings.  During the course of discovery, the homeowners sought leave to serve additional interrogatories and requests for production of documents, seeking information related to the insurer’s attorney-billing information despite the fact that the insurer was not asserting a claim for attorney’s fees.  In support of their request, the homeowners argued that the insurer’s attorney’s fees and billing information were discoverable because the insurer’s counsel testified as an attorney-fee expert in a related case, Amaro v. National Lloyds Insurance Co., Cause No. C-0304-13-H (206th Dist. Ct., Hidalgo County, Tex. Feb. 27, 2015), and admitted in his testimony that an opposing party’s fees could be considered as “a factor” in determining a reasonable fee recovery.  The same attorney was also designated as an expert in the MDL to rebut the homeowners’ fee requests.  The insurer later stipulated, however, that it would not rely on its own billing information to contest the reasonableness of the homeowners’ attorney’s fees.

At the trial court level, a special master found that an opponent’s attorney-billing information is relevant to the reasonableness of the attorney-fee request, granted the homeowners’ request for additional discovery, and noted that redaction of the records could preserve any privileged information in those documents.  The Court of Appeals denied the insurer’s petition for mandamus relief.

In a thorough opinion, the Texas Supreme Court granted the insurer’s petition for mandamus and found that the attorney-billing information was protected by the work productive privilege and otherwise irrelevant to the homeowner’s request for attorney’s fees.

With respect to the work product privilege, the court started with the notion that the privilege protects both “the attorney’s thought process, which includes strategy decisions and issue formulation” as well as “the mechanical compilation of information to the extent such compilation reveals the attorney’s thought processes.”  The court found that “as a whole, billing records represent the mechanical compilation of information that reveals counsel’s legal strategy and thought processes, at least incidentally” and, therefore, such records are generally protected by the privilege.  The court specifically rejected the homeowners’ argument that redaction of the records would be sufficient to protect any privileged information.  The court reasoned that “[t]he chronological nature of billing records reveals when, how, and what resources were deployed” by the attorney, and, as such, can reveal a lot about the attorney’s litigation strategy and thought processes even if substantive descriptions are redacted.  The court acknowledged, however, that a party can waive the privilege through offensive use of the information — i.e., by relying on its own billing records to contest the reasonableness of the opposing party’s request.  Given the insurer’s stipulation that it would not rely on its own billing records for that purpose, the court found that the insurer did not waive the privilege.

In addition to the privileged nature of the information sought, the court further held that the insurers’ attorney-billing information was generally irrelevant to the issue of the homeowners’ request for reasonable attorney’s fees.  In that regard, the court noted, Texas courts consider a list of eight nonexclusive factors articulated in Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812, 818 (Tex. 1997), to determine whether a fee request is “reasonable.”  These factors include “the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; the likelihood … acceptance of the particular employment will preclude other employment by the lawyer; [and] the fee customarily charged in the locality for similar legal services.” Id.  The court noted that an opposing party’s attorney’s fees are not “ipso facto reasonable or necessary” and do not bear on the reasonableness analysis because:

(1) the opposing party may freely choose to spend more or less time or money than would be “reasonable” in comparison to the requesting party; (2) comparisons between the hourly rates and fee expenditures of opposing parties are inapt, as differing motivations of plaintiffs and defendants impact the time and labor spent, hourly rate charged, and skill required; (3) “the tasks and roles of counsel on opposite sides of a case vary fundamentally,” so even in the same case, the legal services rendered to opposing parties are not fairly characterized as “similar”; and (4) a single law firm’s fees and hourly rates do not determine the “customary” range of fees in a given locality for similar services.

Even if the insurers’ attorney-billing information was relevant to the homeowners’ request for attorney’s fees, the court held that the information would not be discoverable because the danger of unfair prejudice resulting from its disclosure substantially outweighed its probative value.  In that regard, the court reasoned that the homeowners did not need the information to meet the burden of proof on their attorney-fee claims, but allowing the discovery could give rise to abusive discovery practices.

The court, however, was careful to limit its holding to the facts before it. In so doing, it cautioned: “[a]ttorney-billing information may be discoverable by virtue of the opposing party designating its counsel as a testifying expert.” Id.

The import of this case is clear: an insurer, or any another party for that matter, does not waive the work-product privilege for its attorney-billing information merely by contesting the reasonableness of an opposing party’s request for attorney’s fees.  The party, however, should exercise caution in designating its own attorneys as expert witnesses to testify regarding the reasonableness of any fee request.  Though the Texas Supreme Court held in favor of the insurer in this case, the facts demonstrate the inherent difficulty for insurers defending multiple coverage disputes.  Designating an attorney as an expert in one case could subject the work-product privilege for those records to an attack in a related case.

Wells Fargo Must Face Claim It Inflated Attorney Fee Request

June 19, 2019

A recent Law 360 story by Nathan Hale, “Wells Fargo Must Face Claim it Inflated Atty Fee Request,” reports that a Florida trial court erred in finding that borrowers could not sue Wells Fargo for expenses they allegedly incurred as a direct result of the bank "grossly" inflating its attorney fees claim after suing them for a loan default, a state appeals court said.  In its opinion, the Third District said the lower court's dismissal appeared to be the result of confusion over the issues and that Florida law clearly allows borrower 345 Carnegie Avenue LLC and loan backers Vladimir Galkin and Yakov Baraz to seek damages if the bank made an inaccurate fees claim.

"The hearing transcript reveals that the trial court conflated the issue of whether Wells Fargo was entitled to attorney's fees based on appellants' stipulated default on the loan documents, with the different issue of whether Wells Fargo's estoppel letter was inaccurate causing consequential damages to appellants," the appeals panel said. "It is clear to us that this confusion resulted in the dismissal of a cognizable claim."  The Third District said it was not weighing in on whether the borrowers could prove that Wells Fargo Bank NA breached their loan documents and Florida's covenant of good faith and fair dealing, but it said that at this stage in the litigation, the court must accept their allegations as true.

The dispute stems from a 2007 loan issued to 345 Carnegie by Wells Fargo's predecessor, Wachovia Bank.  The borrowers did not contest Wells Fargo's March 2014 claim that they committed several nonmonetary defaults, but they disputed the bank's claim that they also owed it more than $100,000 in attorney fees in connection with its enforcement and collection of the note, according to the opinion.  The borrowers claimed that amount was grossly inflated and inaccurate, but the bank refused to provide further proof justifying it, citing attorney-client privilege, the opinion said.

The borrowers attempted to pay the roughly $1.2 million amount the bank had demanded aside from the $100,000 in legal fees, but Wells Fargo refused to accept it.  As a result, the borrowers filed suit in May 2014 to try to prevent the bank from collecting on the note and foreclosing on a mortgage on commercial property owned by 345 Carnegie that partially secured the loan.  Wells Fargo filed a counterclaim, the borrowers stipulated to their liability on the loan default, and the trial court entered a partial final judgment in Wells Fargo's favor and released funds it was holding to the bank to cover those claims.  The court said it would rule separately on the reasonableness of the attorney fees claim, the opinion said.

In a second amended complaint, filed in October 2017, 345 Carnegie, Galkin and Baraz claimed that the fees dispute had caused them monetary damages because they were unable to refinance or sell the mortgaged property securing the loan, according to the opinion.  The trial court subsequently granted Wells Fargo's motion to dismiss that claim for failure to state a claim.

But the appeals court said the damages the borrowers claim they suffered as a result of Wells Fargo's deliberately inflating its fees request were separate and distinct from the question of their being required to pay attorney fees to the bank, and there is "little doubt" that Florida law recognizes such a claim.

State law requires a mortgage lender to provide the borrower with a written estoppel letter detailing not only the unpaid balance of the loans secured by the mortgage but also "any other charges properly due under or secured by the mortgage," the court pointed out.  And the legislature "expressly contemplated" a cause of action rising out of that obligation, including a line in the relevant statute that a prevailing party in a civil action arising from that section of law is entitled to attorney fees and cost, the opinion said.