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Category: Fee Discovery

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.

US Trustee: You Can’t Seal Attorney Fees in Chapter 11

April 24, 2019

A recent Law.com by Rose Krebs, “US Trustee Says White Eagle Can’t Keep Fee Bids Sealed,” reports that the Office of the U.S. Trustee told the Delaware bankruptcy court that insurance policy investor White Eagle Asset Portfolio LP should not be allowed to file under seal the fees to be paid to a special litigator the company wants to retain in its Chapter 11 to handle some insurance disputes.  The trustee asserts White Eagle has failed to show that information relating to compensation to proposed special counsel Reed Smith LLP is “protected as confidential commercial information” under bankruptcy code and should not be made public so that "creditors and other parties of interest" can review the fees.

“If such relief is granted, it would effectively mean that almost any objection a creditor or other party in interest may have to Reed Smith’s compensation would have to be made now, as an objection to the retention application, rather than upon review of Reed Smith’s fee applications,” the objection said.  And objecting to the fees is not possible now because the fees are unknown since they were filed under seal, the trustee asserted.  “Retention applications of all kinds, with all sorts of financial arrangements, are routinely filed in bankruptcy cases without any portion of them being sealed.  There is no reason to make an exception in this instance,” the objection said.

Last month, in a motion that was redacted in parts, White Eagle said it wanted to hire Reed Smith as special litigation counsel as the firm represents White Eagle’s nondebtor parent Emergent Capital Inc. in some insurance disputes and “may represent the debtors to the extent they have any claims.”  Compensation information was redacted in the motion, and White Eagle filed a separate motion asking the court to keep under seal terms of Reed Smith’s proposed deal claiming they include “sensitive commercial information” that is protected from having to be released per bankruptcy code.

“In light of the contentious nature of the litigation disputes the firm is handling, it is of critical importance to the debtors that the details of the fee structures set forth in the application be kept confidential so that other parties in the litigation disputes may not use the information contained therein to gain a strategic advantage over the debtors and other parties,” White Eagle asserted.

The trustee countered that White Eagle has not shown that the information should remain under seal.  The trustee cited case law findings that during Chapter 11 proceedings “a debtor’s affairs are an open book and the debtor operates in a fishbowl.”  In an objection filed last month, White Eagle’s lender LNV Corp. and its agent CLMG Corp. argued the proposal to hire Reed Smith as special counsel is an attempt by nondebtor parent Emergent to “transfer obligations from itself to the debtors without any commensurate benefit to the debtors’ estates.”

The case is In re: White Eagle Asset Portfolio LP, case number 1:18-bk-12808, in the U.S. Bankruptcy Court for the District of Delaware.

NCAA Seeks Billing Records in $45M Attorney Fee Dispute

April 22, 2019

A recent Law 360 story by Christopher Cole, “NCAA Demands Billing Records in $45M Atty Fees Fight,” reports that the NCAA is fighting a push for almost $45 million in attorney fees by the legal team that scored a March antitrust victory against the organization in California federal court on behalf of student athletes, saying the players’ lawyers won’t disclose their billing records.  The two sides filed joint legal papers laying out their positions on paying the lawyers after they won a groundbreaking decision that limits the college sports organization from enforcing rules that cap compensation for student athletes.

While the players’ side has asked the court for a baseline figure of $29.9 million to cover their fees, plus a multiplier of 1.5 based on the outcome, the NCAA’s lawyers said there is no way to justify that amount without actually seeing figures on paper as to how much the opposing lawyers worked on the case.  So far, they said, the plaintiffs have been unwilling to share those records.

The damages phase of the litigation has already wrapped up, with attorneys for the student athletes already getting more than $44 million from a settlement, the NCAA said.  Now the organization says it is critical to find out how much time the plaintiffs' lawyers spent on winning the injunction on grant-in-aid rules, as opposed to time spent on the earlier damages part of the lawsuit.  “Ninth Circuit law is clear that the burden is on the prevailing party to support their request for attorneys’ fees with detailed billing records,” the NCAA said.  “Plaintiffs’ failure to provide [them] is grounds to reduce their fee award or dismiss their motion entirely.”

In deciding what to do with the dueling stances on attorney fees, the court will have to figure out how to pin a dollar figure to the key injunction that the student athletes won in March.  U.S. District Judge Claudia Wilken in that 104-page order rejected the NCAA’s arguments that its compensation rules promote the demand for college sports and justify its antitrust violations.  She prohibited the association from enforcing rules that she considered “overly and unnecessarily restrictive.”

Following that major win, the players’ attorneys sought the compensation package of $29.9 million plus the multiplier for what they said was the economic value of the injunction, and submitted an economist’s declaration to bolster their argument.  But the NCAA said that wasn’t enough to show how much of the opposing legal team’s billable hours included in the requested total were actually spent on the injunction phase, and without the records, there is no way to tell for sure.  “Plaintiffs simply ask this court and defendants to take them at their word that all judgment calls have been made correctly, and seek to deny defendants the right to review and, where necessary, challenge the appropriateness of plaintiffs’ counsel’s assessments,” the NCAA said.

The players’ lawyers called the argument about the damages phase a “red herring” by the NCAA because they have already excluded time attributable to the damages portion of the case.  “Defendants never provided any compelling reason why [we] should be forced to turn over these voluminous records, which would require plaintiffs’ counsel to expend significant time and resources reviewing and redacting for attorney-client privilege and work product,” they said.

Insurer Fights Fee Discovery in Texas

February 22, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court Told to Nix Attys’ Fee Discovery Ruling,” reports that National Lloyd's Insurance Co. urged the Texas Supreme Court to upend a lower...

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