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Category: Fee Disgorgement

Lieff Cabraser Can’t Freeze $1M Fee Reduction During Appeal

March 14, 2021

A recent Law 360 story by Brian Dowling, “Lieff Cabraser Can’t Freeze $1M State St. Fee Cut Amid Appeal,” reports that Lieff Cabraser Heimann & Bernstein LLP failed to persuade a Massachusetts federal judge to freeze $1.1 million of its fee slated for repayment in the wake of an overbilling scandal connected to a $300 million settlement with State Street Corp.  The firm, one of three ordered to repay seven-figure sums to the settlement fund, had sought to keep the money in escrow as it asks the First Circuit to review Senior U.S. District Judge Mark L. Wolf's reallocations of the fee award.

Denying Lieff Cabraser's motion in a 57-page order, Judge Wolf said the firm isn't likely to succeed on appeal and also faces no threat of irreparable harm if the money isn't frozen.  Instead of facing the tough odds of potentially having to recoup distributed settlement funds from the class, Lieff Cabraser would get any increase ordered by the First Circuit from its co-counsel, Labaton Sucharow LLP and Thornton Law Firm LLP.

Labaton Sucharow and Thornton received the bulk of the blame for improprieties and overbilling practices and repaid much higher sums to the settlement fund when Judge Wolf slashed the fee award from $75 million to $60 million in February 2020.  The two firms did not appeal the reallocation but supported Lieff Cabraser's request for a stay, Judge Wolf noted.

"The repeated, egregious misconduct of Labaton and Thornton alone caused the court to decide that it was most appropriate to award $60,000,000," Judge Wolf said. "If the court had allocated an additional $1,140,000 to Lieff, it would have reduced the awards to Labaton and Thornton by that amount."

Judge Wolf disputed Lieff Cabraser's arguments that the court violated noticing requirements in sanctioning it with the lower fee award.  There was no sanction, Judge Wolf said, just the court taking into account "proven misconduct of Labaton and Thornton in deciding to make a new fee award."  The court explained that its review of the attorney overbilling referred to Lieff Cabraser's conduct as "deficient" rather than as "misconduct" delineating that the firm's shortcomings were not critical to the new lower fee award.

The underlying suit, filed in 2011, alleged that Boston-based State Street swindled millions of dollars a year from its clients on their indirect foreign exchange trades over the course of a decade. State Street settled the claims in 2016 for $300 million.  Judge Wolf approved the initial $75 million fee in 2016 but vacated that order after allegations of double-billing surfaced in a 2016 Boston Globe report.  He appointed retired U.S. District Judge Gerald Rosen as a special master to investigate the fee.  The firms admitted to overstating their billing but contended the $75 million fee was still proper.

Judge Rosen in 2018 recommended the firms disgorge just over $10 million, but Judge Wolf's 160-page order in late February ruled that the cuts should be even deeper and took the firms to task in the process.  Also before Judge Wolf is a legal fight between Thornton and its liability insurer over whether the company, Continental Casualty, can avoid covering the firm's attorney fees stemming from the court-ordered overbilling probe.

Texas Court Lets Lawyer Keep Fees, Despite Unethical Fee Agreement

December 30, 2020

A recent Texas Lawyer story by Angela Morris, “Court Lets Houston-Area Lawyer Keep $70,000 Fee, Despite Unethical Contract, reports that a Houston-area attorney won’t have to pay back more than $70,000 in fees to two clients who argued the lawyer’s fee agreement was unconscionable, after Texas’ 14th Court of Appeals ruled that the clients’ defensive argument wouldn’t support a recovery.  But one of the justices on the three-judge panel disagreed, explaining that Bellaire lawyer Joe Alfred Izen Jr. had an unconscionable fee agreement with his clients, which breached the attorney’s ethical duties, and that it was right for the trial court to make him return the money.

“In Texas, attorneys are held to the highest standards of ethical conduct in their dealings with their clients.  As a result, attorneys must conduct their business with their clients with inveterate honesty and loyalty, and they must always keep the client’s best interest in mind,” said a concurring and dissenting opinion by Justice Jerry Zimmerer.  “The question of Izen’s fees must be viewed through that prism.”

Izen, who represented himself pro se in the appeal, didn’t immediately respond to a call seeking comment.  And Ralph Kraft, member in Kraft Lege Anseman in Lafayette, Louisiana, who represented Izen’s past clients Brian and Kimberly Laine, declined to comment.

Izen represented the Laines in a 2002 personal injury settlement agreement over Brian Laine’s injury at work, said the 31-page majority opinion by Justice Kevin Jewell, joined by Justice Bourliot.  His employer took care of him after the injury and initiated a settlement for two lump sum payments and a monthly annuity for 30 years, and then the Laines hired Izen to look over the settlement agreement.  The Laines also wanted Izen to research if they may have a claim against any third-party entities—but not to sue Brian Laine’s employer.

An attorney-client agreement between Izen and the Laines was for a 35% contingency fee of the settlement with the employer.  Izen testified at trial they paid him between $70,000 and $90,000 and eventually he expected nearly $229,000 total.  Izen wasn’t licensed to practice in Louisiana and he contracted with an attorney there to represent the Laines in litigation against a third-party entity.  However, Brian Laine eventually dismissed that litigation and he did not owe any contingent fee for it.

In 2007, Brian Laine terminated Izen’s representation because he didn’t need it anymore.  He also quit paying Izen 35% of his monthly annuity payments from the settlement with his employer.  In 2010, Izen sued the Laines alleging they still owed him 35% of the annuity payments.  In response, the Laines argued his fee agreement was unconscionable and filed counterclaims seeking the return of the fees they already paid him.

After a jury trial, the judge granted a directed verdict in favor of the Laines, ruling the fee agreement was unconscionable.  But Izen also got a favorable ruling dismissing the clients’ counterclaims because they weren’t filed within the four-year statute of limitations.  Later, the trial court ordered Izen to disgorge all his fees to the Laines and to pay prejudgment interest spanning back to 2002.  In the appeal, Izen attacked the notion that his attorney fee agreement was unconscionable.

The appellate court ruled that Izen’s work reviewing the Laines’ settlement agreement with Brian Laine’s employer, and going to a meeting where the parties signed the agreement, was representation with little risk or expense to Izen.  His work on litigation against the third-party entity did have some risk, that there would be no recovery—which did happen in the end.

The 14th Court rejected Izen’s “attempt to combine the two separate jobs he was hired to perform.”  He was insisting his 35% fee on the settlement wasn’t unconscionable because the money financed the third-party litigation.  “Any fees Izen collected under the guise of financing the litigation against the Louisiana third party defendants were collected under false pretenses in violation of an attorney’s duty of honesty and loyalty to his clients,” said the opinion.  “Izen is not entitled to any fee on the Louisiana third-party litigation because there was no recovery.”

The appellate court upheld a trial court ruling that said that the Laines should not have to pay Izen any more money under that agreement.  But it also determined that Izen shouldn’t have to pay back the fees the clients had previously paid him.

The clients didn’t file their counterclaims seeking fee forfeiture within the four-year statute of limitations, explained the ruling. It said they couldn’t get back the fees based on an affirmative defense that the agreement was unconscionable.  While the Laines’ defense did defeat Izen’s claims, it could not advance their own claims for relief, the ruling said.

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA