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Category: Fee Doctrine / Theory

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.

Jenner & Block Win Attorney Fees in Pro Bono Case

May 14, 2020

A recent Law 360 story by Lauraann Wood, “Jenner & Block Gets Fees For Prevailing in Pro Bono Suit” reports that Jenner & Block LLP should receive attorney fees under the Illinois Civil Rights Act after the firm prevailed in a pro bono lawsuit launched on behalf of individuals who'd been denied birth certificates with changed sex designations, an Illinois state appeals court said.

A three-judge panel said a lower court incorrectly hinged its fee rejection on the fact that Jenner & Block's attorneys agreed to represent the individuals pro bono and direct any fee award to the American Civil Liberties Union's Roger Baldwin Foundation.  When statutes like ICRA say prevailing parties "shall" be awarded fees, "courts interpret it to mean that an award of fees is mandatory" unless some further qualification is statutorily required, it held.

"Nothing in the language or context of the statute indicates that the legislature intended anything other than that a circuit court is required to award reasonable attorney fees to a plaintiff who qualifies as a prevailing party under the Illinois Civil Rights Act," the panel said.  "Any other interpretation would disregard the plain and unambiguous meaning of the statutory language."

Illinois residents Victoria Kirk, Karissa Rothkopf and Riley Johnson sued Damon Arnold, the former state registrar for vital records, in 2009 after he'd cited certain interpretations of the state's Vital Records Act to deny their applications for new birth certificates.  Arnold issued the certificates after the residents sued and told them the department had stopped the practices that resulted in their application denials, which resulted in their suit getting dismissed as moot, according to the order.

The plaintiffs argued in their fee request that their case's resolution made them the prevailing party under ICRA's fee shifting statute, since their lawsuit was the catalyst for the registrar's changed position.  Arnold didn't dispute that position, according to the order.  The lower court awarded Jenner & Block $6,168 in costs but said Jenner & Block's pro bono counsel status meant it couldn't collect fees it hadn't actually incurred, according to the order.  However, that reasoning incorrectly reads extra qualifications into the ICRA's fee-shifting statute, the panel said.

Section 5(c) of the ICRA requires courts to award "reasonable" attorney fees to prevailing parties, but the statute "contains no additional qualifying language indicating that the fees must be 'incurred' by a prevailing party to be recoverable," the panel said.

The lower court also incorrectly found that courts tend not to allow statutory attorney fees where no fees were actually incurred, the panel said.  Fee availability is controlled by the language of the statute at issue in a case, and state courts follow the basic rule that "whether the attorney charges a fee or has an agreement that the organization that employs him will receive any awarded attorneys' fees are not bases on which to deny or limit attorneys' fees or expenses," the panel said, quoting case law on the issue.  The panel remanded the case for further proceedings because the lower court didn't outline any specific number of hours or fee amount that it would have provisionally allowed if it would have granted fees at all.

Third Circuit Denies Fee Request in Owens Corning Suit

May 5, 2020

A recent Law 360 story by Bill Wichert, “3rd Circ. Nixes Consumers’ Fees Bid in Owens Corning Suit” reports that the Third Circuit said consumers weren't entitled to attorney fees for scoring a circuit opinion that nixed a bankruptcy bar on class claims against Owens Corning over allegedly defective roofing shingles, with judges finding that the consumers were overselling the impact of that earlier ruling.  In a nonprecedential opinion, a circuit panel upheld a Pennsylvania federal court decision last year in a settled class action that denied the plaintiffs' fees bid for securing the Third Circuit's 2012 opinion in Wright v. Owens Corning, which revived claims related to shingles installed before the company received confirmation of its Chapter 11 plan in 2006.

The panel reasoned that U.S. District Judge Joy Flowers Conti properly rejected the consumers' application seeking fees under any of three theories, including the common fund and common benefit doctrines, both of which permit fees to lawyers "whose work substantially benefits an ascertainable class of beneficiaries," according to the opinion.  "Even if we could ascertain these plaintiffs, however, Wright benefitted them only by removing one obstacle to overcoming summary judgment — not by helping them prove their shingles were defective," the panel said in an opinion authored by U.S. Circuit Judge Thomas M. Hardiman.  "Such a 'minimal' benefit cannot support an award of fees under either the common fund or common benefit doctrine," the panel said.

At the time of Owens Corning's plan confirmation on Sept. 26, 2006 — which discharged all existing claims against the company — the so-called Frenville rule held that the validity of a claim in the bankruptcy context hinged on when a right to payment arose under applicable state law, court documents state.  The rule came from the Third Circuit's 1984 opinion in Avellino & Bienes v. M. Frenville Co. [In re M. Frenville Co.]  For claims brought under the law of a state where the so-called discovery rule applies, the Frenville rule held that the claim arose when the suing party discovers the injury, court documents state.

In its 2010 decision in JELD-WEN, Inc. v. Van Brunt [In re Grossman's Inc.] , the Third Circuit overturned Frenville, holding that "a claim arises when the claimant is exposed to the debtor's product or conduct, no matter when the claimant discovers the injury," according to the opinion.  Based on Grossman's, Judge Conti in 2011 granted summary judgment to Owens Corning in a proposed class action from plaintiffs Patricia Wright and Kevin West, who installed their shingles before the Chapter 11 plan was confirmed in 2006 but did not discover the alleged defects until 2009, court documents state.

"Because plaintiffs' claims against Owens Corning arose prior to the time the confirmation order was entered in 2006, those claims were discharged," Judge Conti said.  The following year, the Wright panel reversed that decision, finding that the Frenville rule applied to matters where reorganization plans were confirmed before Grossman's, court documents state.

On remand, Wright and West's suit was consolidated with three other actions, and the parties settled after the plaintiffs unsuccessfully sought class certification, court documents state. The plaintiffs then filed the instant motion seeking counsel fees based on Wright, but Judge Conti denied the application in February 2019.

On the plaintiffs' appeal of that ruling, they suggested that Wright revived millions of warranties and "prohibited [Owens Corning] from asserting the bankruptcy bar ab initio to avoid warranty claims," according to the opinion. That description of the 2012 ruling, however, is unfounded, the panel said.  "In Wright, we merely held that the Frenville rule applies to cases in which courts confirmed reorganization plans before Grossman's," the opinion said.  "So Wright benefitted only plaintiffs whose claims would have been discharged under Grossman's but not Frenville. That class of plaintiffs is not ascertainable, because the Frenville analysis is so fact intensive."

The panel also said Judge Conti was right to reject the application under the catalyst theory, which permits fees "if a plaintiff's litigation activity 'pressured a defendant to settle or render to a plaintiff the requested relief,'" citing the Third Circuit's 2015 opinion in Templin v. Indep. Blue Cross.  "The catalyst theory requires 'some degree of success on the merits,'" the panel said. "But as the district court concluded, plaintiffs' victory in Wright was purely procedural; it shed no light on the merits of any putative plaintiff's claim."

Full Federal Circuit Urged to Fix Divergent Attorney Fee Ruling

March 3, 2020

A recent Law 360 story by Dani Kass, “Full Fed. Circ. Urged to Fix Divergent Attorney Fee Ruling,” reports that the Federal Circuit deviated from nearly every other circuit court and U.S. Supreme Court precedent when it upheld a ruling that a settlement precluded BigCommerce Inc. from collecting attorney fees, the e-commerce company said in a bid for rehearing.  BigCommerce maintains that it was the prevailing party in its litigation with Diem LLC, as while Diem’s underlying patent infringement claims were settled, a contract dispute that came out of the deal was decided entirely in BigCommerce's favor.  Nearly every other circuit has allowed companies to prevail even if some claims are settled, the petition for rehearing by the panel or en banc states.

Diem, a nonpracticing entity, had accused BigCommerce of infringing its website-generation and -hosting patent with the storefront manager service offered on BigCommerce's website.  As part of a settlement, Diem and Commerce entered into a contract under which the district court would look only at whether Diem had a particular infringement theory in its original infringement allegations.  If so, BigCommerce would have to license the patent for $30,000, and if not, the case would be dismissed with prejudice, according to BigCommerce's appeal.  The district court ruled in favor of BigCommerce and dismissed Diem's suit.

BigCommerce maintains that it's the prevailing party because it escaped the litigation without having to license the patent it was accused of infringing, pay anything to Diem, or change its products or services.  Both the district court and Federal Circuit have disagreed.  The rehearing petition turns on the Supreme Court’s ruling in Buckhannon Board & Care Home Inc. v. West Virginia Department of Health & Human Resources, which struck down the so-called catalyst theory.  Under that theory, a party was considered “prevailing” if its lawsuit caused the defendant to voluntarily change conduct.

BigCommerce said that during oral arguments, the panel claimed it was being asked to stray from the justices' 2001 ruling, but the company said that’s not true.  In 2016's CRST Van Expedited Inc. v. EEOC, the justices said they hadn’t set a “precise test” on how to determine whether a party has prevailed, the petition states.

According to BigCommerce, the Federal Circuit read a test into Buckhannon that “virtually every circuit has squarely rejected.”  It provided examples from the First, Second, Third, Fourth, Fifth, Seventh, Eighth, Ninth and Eleventh circuits to back up that argument.  Buckhannon is just about the catalyst theory and “has no relevance” in a case that doesn't invoke that theory, the petition states.

“BigCommerce never cited any BigCommerce-led action that induced a voluntary change in Diem’s conduct in support of its ‘prevailing party’ arguments in the lower court or before this court,” the petition states.  “In fact, Diem refused to voluntarily do anything BigCommerce requested.  A district court had to retain enforcement jurisdiction over the parties’ settlement agreement, resolve the parties’ dispute, rule in favor of BigCommerce, rule against Diem, which finally caused the dismiss[al] of this case with prejudice.”

The 2006 Federal Circuit case cited by the district court when denying fees, Exigent Tech. Inc. v. Altrana Solutions Inc., was also decided incorrectly, BigCommerce said.  In that case, the court said merits-based relief is required to become a prevailing party, which BigCommerce said contradicts the high court’s ruling in CRST.  If the Federal Circuit doesn’t adjust its holding, then the term "prevailing party" will mean one thing under the Patent Act and something else under every other law, which can’t stand, BigCommerce said.

Article: The Need For Attorney Fee Expertise

February 20, 2020

A recent AI article by John D. O’Connor, “The Need For Attorney Fee Expertise (pdf),” reports on the need for attorney fee expertise to prove reasonable attorney fees and proper billing practices in underlying litigation.  This article was posted with permission.  The article reads:

Most corporate clients today have access to excellent litigation counsel in each particular area of concern.  However, as attorney fee disputes are increasingly becoming a by-product of the main litigation event, few clients and few otherwise excellent litigators truly understand when and how to use attorney fee experts.

Although the “American Rule” provides that each litigating party bears its own fees, there are exceptions to this rule.  Successful class actions; employment and governmental discrimination cases; eminent domain suits; RICO claims; and other cases result in legally-sanctioned attorney fees claims.  Promissory notes, guarantees, real estate purchase agreements, and corporate acquisition contracts often contain attorney fee clauses.  High-stakes insurance coverage litigation usually features a battle over fees incurred in the underlying case(s).  It is common for a case with a small monetary award to result in an extremely high request for fees.

Typically in fees proceedings, the party with a claim to fees files a motion detailing the amount it requests, accompanied at a minimum by a Declaration of the main litigating attorney attaching a statement of his billings, detailing hours and rates for which payment is sought.  The main billing attorney will normally justify the requested billing rate, which can be his actual rate or a rate claimed to be prevailing in the community for one of similar skill and experience. The motion, usually accompanied by a brief summarizing the law of fees in that type of case, includes the statutory or contractual authority for same.

When the responding party files its submission, the contours of the ultimate dispute take shape.  It is common for the respondent to challenge the billing rates as unduly high; the number of lawyers assigned as excessive; the hours spent as inefficient; the number and length of conferences and meetings as unnecessary; the billing form as improperly “blocked” and “vague” in description; many of the tasks billed as being unwisely or improvidently chosen; certain work as not related to prevailing claims; and generally excessive fees for the type of litigation involved.  Often this opposition is accompanied by a request for limited discovery regarding fees.

As objections are detailed in various cases, the challenging lawyer is usually able to write an impressive brief in support.  These objections can be made without an expert witness, except as to prevailing billing rates, which the responding lawyer is qualified to opine.  The responding party will have made a serious mistake, however, if it did not bolster its objections with a detailed opinion of an experienced fee expert.  Often, the reviewing Court has witnessed the work of the petitioning lawyers and formed a positive opinion of them. Indeed, the reviewing Court in the underlying case would often have ruled in favor of the petitioner and against the respondent.  Even if not, the respondent must labor against the human assumption that established, competent lawyers have billed in accordance with community standards.

However, surprisingly, it is common for responding parties to put forth objections without an expert.  We have seen cases where fees sought into eight figures, where no expert has been retained, with unenviable results. Most experts have the capability of presenting a computer analysis isolating hours and tasks, which can claim to isolate amounts of “block” entries, incompensable “clerical” time, and other practices.  Such a presentation, though, is often superficial, and may not impress a reviewing Court seeking a principled basis upon which to reduce fees for the prevailing party.

Whatever the case, any attack on the requested fees should call for a rebuttal by a qualified attorney fee expert on behalf of the petitioner.  However, this guideline is frequently observed in the breach.  Even if the Court had been inclined to a favorable opinion of the petitioning firm, even a superficial attack on the petitioning lawyers’ fees can be facially effective, and thus the petitioner would need to blunt effectively any such attack.

A qualified expert can help by suggesting needed discovery from the responding party of information regarding that party’s billings which supports the petitioner’s request.  More importantly, an expert employed correctly will go beyond the glittering generalities put forth in these disputes.  They would show why a particular billing rate is justified with specific reference to specific firms doing nearly identical work or why a particular task was necessarily and properly time-consuming.

Most reviewing Courts are experienced at resolving factual disputes based on a presentation of specific compelling facts.  A wise litigation party, in short, should employ an expert to do just that. 

John D. O’Connor is a NALFA member and the Principal of O’Connor & Associates in San Francisco.  For more on John D. O’Connor, visit www.joclaw.com.