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Category: Fee Doctrine / Fee Theory

Pre-Suit Demand Can’t Serve as ‘Catalyst’ in Justifying Fee Award

October 6, 2020

A recent Metropolitan News story, “Pre-Suit Demand Can’t Serve As ‘Catalyst’ For Public Benefit, Justifying Fee Award,” reports that an attorney fee award may not be made based on a pre-litigation demand having been the “catalyst” for bringing about alterations to a public accommodation which caused it to be accessible to persons in wheelchairs, Div. One of the First District Court of Appeal held.

Richard Skaff, who is wheelchair bound, sued the Rio Nido Roadhouse in Sonoma County, owned by Lowbrau, LLC, for injunctive relief and damages based on his inability to gain access to the facility on the night of Oct. 18, 2012.  However, that was before he complained to the owner, who was in the process of effecting renovations which provided access to the handicapped when suit was filed in 2013, with the work having been completed by the time of trial in 2017.

Skaff sued under Health and Safety Code §19955 et seq., pertaining to accessibility of public accommodations to the handicapped, and the Unruh Civil Rights Act. Civil Code §55 provides that where a suit is brought under §19955, “[t]he prevailing party in the action shall be entitled to recover reasonable attorney’s fees.  Sonoma Superior Court Judge Allan Hardcastle ruled against Skaff on the Unruh claim, finding there was no access barrier that needed to be remediated.  He held in his favor under §19955, however, awarding Skaff $242,672 in attorney fees and costs.

Hardcastle reasoned that the §19955 claim “would have entitled him to obtain injunctive relief for all non-compliant conditions at the Rio Nido Roadhouse relative to his disability” had they not already been remediated, but since they had been, he “already obtained all the injunctive relief he sought in his pre-litigation correspondences and in his complaint,” rendering him the prevailing party. 

Justice Gabriel P. Sanchez wrote the opinion reversing the judgment on the §19955 cause of action and the fee award. He wrote: “It is axiomatic that plaintiff cannot prevail on a cause of action in which no violation of law was ever demonstrated or found.  Nor is the catalyst theory available when a claim lacks legal merit.  That a pre-litigation demand may have spurred action that resulted in positive societal benefit is not reason alone to award attorney fees under the Civil Code.”

Sanchez said the catalyst theory originated in connection with the private attorney general statute, Code of Civil Procedure §1021.5, but has been applied since 2010 to attorney fee awards under Civil Code §55.  However, he pointed out, the theory “requires a causal connection between the plaintiff’s lawsuit and the relief obtained.”  The jurist said the pre-litigation demand, not the lawsuit, prompted the remediation and, in any event, remediation was not required under §19955 which requires remediation only where certain other repairs or alterations were made—which weren’t.

Sanchez set forth: “Plaintiff cannot be deemed the prevailing party because no evidence was adduced at trial establishing a violation or potential violation of section 19955.  Nor can plaintiff be awarded his attorney fees under a catalyst theory because the claim on which it is based was objectively without legal merit.  While Lowbrau accomplished all the remediation plaintiff sought in his pre-litigation demands, plaintiff concedes that none of that remediation was required by section 19955.  The fee award must therefore be reversed.”

Fifth Circuit: Former Employee Owes $2.3M in Attorney Fees

September 4, 2020

A recent Law 360 story by Clark Mindock, “5th Circ. Rules Ex-Stryker Worker Owes Co. $2.3M in Atty Fees,” reports that a former Stryker Corp. employee can't ditch his obligation to pay nearly $2.3 million in attorney fees after a seven-year "scorched-earth" legal fight over his alleged trade secrets theft, the Fifth Circuit ruled.  In a published opinion, a three-judge panel affirmed that Christopher Ridgeway owes Stryker millions in legal fees despite his argument that many of the company's costs were unrelated to its claims he stole trade secrets when he moved to a competing medical device company in 2013.

Ridgeway, who filed for bankruptcy after a judgment against him, repeatedly wasted the bankruptcy court's time by failing to comply with a court order to comb through a list of billed hours to identify what he thought he shouldn't have to pay, the panel said.  And it found "frivolous" his argument that only juries can award attorney fees in his type of trade secret case, saying statutes are clear that a judge may make those calls.

The panel disregarded Ridgeway's argument that he somehow complied with the bankruptcy court's orders even though he didn't provide a fee breakdown.  It said he repeatedly and intentionally failed to learn from the mistake despite clear direction from the court.  "It's a time-consuming activity, and it's certainly not fun.  But a party's unwillingness to engage in unglamorous work does not make that work impossible," the circuit said of the order to go through the attorney fees.

Stryker accused Ridgeway, a former district sales manager at the company, of an "ill-conceived and long-planned scheme" to steal trade secrets when he transferred to a new company after nearly 12 years, according to the original complaint.  A Michigan federal court found Ridgeway had breached his contractual obligation, breached his fiduciary duty and violated Michigan's Uniform Trade Secrets Act when he left Stryker to join a competing medical equipment company and brought along business secrets with him.

In court, Stryker argued that Ridgeway should pay for all of the attorney fees related to the case by virtue of the so-called Common Core doctrine that entitles fees for claims that are related to the MUTSA claim.  Stryker sued Ridgeway in 2013, leading to a judgment on March 23, 2016, by the Michigan district court.  The court at that time gave Stryker 14 days to request attorney fees.

But Ridgeway filed for bankruptcy in Louisiana on the last day of that 14-day period, staying the Michigan proceedings and prohibiting Stryker from making the fee request there, according to court documents.  So, Stryker then filed a proof of claim for $2.27 million in fees in the Louisiana court.

While considering whether to force Ridgeway to pay up for attorney fees that stemmed from non-MUTSA claims, the court ordered him to provide a detailed list of which attorney fees provided by Stryker were acceptable or not with three distinct categories just in case the Common Core doctrine was decided not to be applicable in the case.  Ridgeway never provided that list, though, and instead repeatedly insisted that he complied with the order when even the court told him he had not, according to the Fifth Circuit ruling.

Article: The Attorney Fee Key to Unlocking Additional Insured Coverage

August 24, 2020

A recent New York Law Journal article by Julian D. Ehrlich, “The Attorney Fee Key to Unlocking Additional Insured Coverage” reports on a new decision awarding attorney fees in a declaratory judgment to the party successful in obtaining additional insured coverage which if followed, could change existing risk transfer preferences.  This article was posted with permission.  The article reads:

The two well-worn paths to risk transfer in tort cases are contractual indemnity and additional insured coverage.  Typically, contractual indemnity obligations run to owners and general contractors, often referred to as upstream parties, from tenants or lower tier contractors, the downstream parties.  In contrast, additional insured (AI) status can provide coverage to upstream parties to downstream parties’ insurers.

While the paths are not mutually exclusive, many upstream insurers are reluctant to start declaratory judgment (DJ) coverage actions to enforce AI rights because of concerns that their attorney fees will not be recoverable.  These insurers prefer instead to rely exclusively on contractual indemnity claims where recovery of attorney fees is thought to be easier.  However, there are distinct advantages of AI over contractual indemnity to upstream parties and emerging case law suggests that DJ attorney fees can be recoverable.

Attorney Fees Rules

The American rule is that, win or lose, each side in litigation pays its own attorney fees absent a right in statute or contract.  Thus, in U.S. tort litigation, claimants typically pay their own attorney fees.  However, recovery of attorney fees between defendants is common.  This is because contractual indemnity provisions usually require the downstream party to both defend and indemnify the upstream party.  Similarly, additional insured (AI) status on a downstream party’s policy status includes coverage for the upstream parties’ defense.  However, the rules for recovering defense costs are convoluted. See, Julian D. Ehrlich, “Recovering Attorneys’ Fees in Construction Site Cases,” NYLJ, (May 25, 2007).

For example, the indemnitee generally is not entitled to reimbursement of its fees for enforcing its contractual indemnity rights, i.e. “no fees for fees.” Hooper Assoc. v. AGC Computers, 74 N.Y.2d 487 (1989). However, there is an exception for costs incurred in “defensive” third party and cross claims against the indemnitor. Springstead v. Ciba-Geigy Corp., 27 A.D.2d 720 (2d Dept. 2006).

Similarly, the general rule is that attorney fees for pursuing AI coverage in a DJ action are not recoverable even if the DJ is ultimately successful, Mighty Midgets Inc. v. Centennial Ins. Co. 47 N.Y.2d 12, 21 (1979).  However, an insured is entitled to recover fees if it wins a DJ brought by an insurer seeking to avoid coverage, U.S. Underwriters Insurance Co. v. City Club Hotel LLC, 3 N.Y.2d 592 (2004).  However, there is noteworthy reasoning in a new decision awarding attorney fees in a DJ to the party successful in obtaining AI coverage which if followed, could change existing risk transfer preferences.

A New Approach

In Houston Cas. Co. v. Prosight Specialty Ins. Co., 2020 U.S. Dist. LEXIS 927 28 (S.D.N.Y. May 27, 2020), an injured E.J. Electric employee brought a Labor Law claim against the owner, construction manager Turner and Nouveau Elevator Industries alleging a fall due to a misleveled elevator.  E.J.’s insurer, Houston Casualty Co. (HCC) accepted AI coverage for the owner and Turner.  However, Prosight, the insurer for the elevator contractor, refused to provide AI coverage to those parties.  Accordingly, HCC brought a DJ action seeking a declaration that Prosight owed primary non-contributory AI coverage to the owner and Turner.  The court in Houston held that Prosight owed primary non-contributory AI coverage and awarded HCC’s attorney fees notwithstanding the American rule and existing caselaw.

The Reasoning

Houston relies on a “thoughtful and persuasive” 2019 Report and Recommendation by U.S. Magistrate Judge Paul Davidson which has now been cited in several reported decisions.  The report finds that an insureds’ right to D.J. attorney fees can be found in the policy’s coverage grant because an insurer’s duty to defend extends to any action arising out of the occurrence including a defense against the insurer’s coverage suit.

The report notes longstanding case law which permits a prevailing insured to recover attorney fees from an insurer when the latter starts a DJ seeking to free itself of its duty to defend under the policy.  The report then suggests that the fortuity of who starts the DJ should not matter for fee recovery if the litigated issue is the insurer’s duty defend an insured in an underlying tort case.

The court in Houston extends this reasoning to award one insurer fees from another insurer which “persistently, reflexively and sequentially” wrongfully denied tenders for AI coverage.  If the reasoning in Houston is followed by other courts, risk transfer may be clearer, and settlements facilitated in the future.

Impact

Although Houston is a trial level decision and an appeal was filed June 24, 2020, there is now authority in a reported federal case holding that the losing defendant must pay attorney fees to the winning plaintiff insurer in the AI DJ context.

Accordingly, Houston may help ease upstream insurers’ hesitancy to bring DJ’s for AI coverage. Moreover, if downstream insurers realize they may face more severe consequences for unreasonably resisting AI, they may accept more tenders leading to an overall net decrease in coverage litigation.

In addition, AI can have advantages over contractual indemnity to upstream parties.  For example, in states like New York upstream parties may insure away via AI coverage active negligence which may not be contracted away due to anti-indemnity statues, see e.g. General Obligations Law § 322.1.

Accordingly, a strategy of foregoing AI coverage can result in an upstream party losing out on rights which contractual indemnity alone cannot provide.  Moreover, questions regarding whether the upstream was actively negligent can delay risk transfer and settlements.

Tenders for AI coverage often go answered by downstream insurers and until now have not always been aggressively pursued by upstream insurers.  However, arguably, when it is clearer that risk transfer will result in the downstream party being legally and financial responsible in a case, it may also be easier to settle multi-defendant litigation with claimants.

Finally, attorney fees may be substantial and are often the last obstacle to resolve before a settlement can be reached.  To the extent Houston streamlines a path to resolutions, it is most welcomed.

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 Arroyo 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

Article: Recovering Attorney Fees Under ‘Tort of Another’ in California

June 2, 2020

A recent article by Gregory G. Brown, “Recovery of Attorneys’ Fees in CA Under the ‘Tort of Another’” reports on the recovery of attorney fees under the Tort of Another doctrine in California.  This article was posted with permission.  The article reads:

Under the “American Rule” each party to a lawsuit is responsible for their own attorney’s fees and costs absent a contractual agreement or statutory exception. (Cal. Code Civ. Proc. § 1021).  This rule can often lead to inequitable results, particularly where the cost of defending a lawsuit exceeds the damages at issue.  One exception to the “American Rule” which allows a defendant to recovery their attorney’s fees is the “tort of another doctrine.”

What is the Tort of Another Doctrine?

The tort of another doctrine is an exception to the “American Rule” which allows for recovery of attorney’s fees which are incurred as a result of another party’s wrongful actions.  Consider the following scenario: a real estate agent lists a property for sale.  Buyer makes an offer to the agent, and the agent tells Buyer that the Seller has accepted.  Several months later however, the agent tells Buyer that Seller has pulled out of the deal, resulting in Buyer filing a lawsuit against Seller and the agent.  At trial the Court finds that the Seller never accepted Buyer’s offer, and the agent had lied when he had made that claim to Buyer.  Under that scenario, the tort of another doctrine would allow Buyer to recover its attorney’s fees from the real estate agent for causing Buyer to incur attorney’s fees by suing the innocent Seller.

When Does the Tort of Another Doctrine Apply?

In order for the tort of another doctrine to apply, an actual tort claim must be committed by the party required to pay attorney’s fees. If there is no tort by a third party, the tort of another doctrine does not apply.  Further, the doctrine only applies where “exceptional circumstances” are present and not where attorney’s fees are incurred by a party solely in defense of their own alleged wrongdoing.  Thus if a party’s own wrongful conduct is part of the reason it is forced to defend a lawsuit, the doctrine would not be applicable.

Who Can Seek Fees Through the Tort of Another Doctrine?

Both Plaintiffs and Defendants in a lawsuit can seek fees through the tort of another doctrine.  The doctrine applies to any person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person.