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Category: Fee Doctrine / Theory

Florida Supreme Court Undo Attorney Fees Over Settlement Offer

October 8, 2018

A recent Law 360 story by Carolina Bolado, “Fla. Justices Udo Attys’ Fees Ruling Over Settlement Offer” reports that the Florida Supreme Court quashed a decision deeming a settlement offer too ambiguous to warrant an attorneys’ fee award, ruling that the lower court’s “nitpicking” of offers adds to judicial workload, which is contrary to the purpose of the law.

In a 4-3 decision, Florida’s highest court said two settlement offers from W. Riley Allen to Gabriel Nunez and his father, Jairo Nunez, in a dispute over a car crash were clear and unambiguous and said Allen was entitled to the $343,590 in attorneys’ fees and costs under Florida’s offer-of-judgment statute after he prevailed in his suit.  Under the law, if a plaintiff makes a settlement offer that isn’t accepted and then wins a judgment of at least 25 percent more than the offer, the plaintiff can recover reasonable attorneys’ fees and costs.

In this case, Allen sent two separate identical $20,000 settlement offers to the two defendants that were rejected.  He then won a nearly $30,000 judgment and asked for an award of fees under the offer-of-judgment law.  The Fifth District Court of Appeal had ruled that one paragraph in the proposals for settlement were ambiguous because they did not make clear if $20,000 would resolve claims against just one or all of the defendants.

But the Supreme Court said the Fifth District had focused too much on one paragraph in the offers.  When read as a whole, the offers were not ambiguous, the Supreme Court said.  “If two codefendants each receive a proposal for settlement, in which they are specifically named, each codefendant should possess all the information necessary to determine whether to settle,” the high court said.  “In this context, it appears disingenuous to assert that there exists a legitimate question as to whether one codefendant’s acceptance could have settled the offeror’s claim against the other codefendant.”  The Fifth District “unnecessarily injected ambiguity into these proceedings and created more judicial labor, not less.”

In a concurring opinion, Justice Barbara Pariente noted the proliferation of litigation around proposals to settle and urged courts to refrain from “nitpicking” when assessing whether an offer is reasonable.  The three more-conservative justices signed on to a dissent by Justice Ricky Polston, who said the court did not have jurisdiction to review the case because the Fifth District’s decision did not expressly and directly conflict with other appellate opinions on the issue.

The case is Allen v. Nunez et al., case number SC16-1164, in the Supreme Court of Florida.

No Attorney Fees for Illinois Law Firm in Qui Tam Action

September 20, 2018

A recent Law 360 story by Lauraann Wood, “Ill. Firm Can’t Collect Fees for Work on Its’ Qui Tam Suit,” reports that the Illinois Supreme Court sided with an appellate panel's ruling rejecting fee awards for lawyers of a firm that brought whistleblower claims accusing My Pillow Inc. of failing to collect taxes on certain sales to Illinois customers, citing 150-year-old precedent that the court said puts the issue to bed.

The state's high court said it "expressly rejected" the notion that attorneys can charge for legal work they perform on their own behalf in its 1861 Willard v. Bassett ruling, which deemed the practice "forbidden by every sound principle of professional morality as well as by the policy of the law."  And while ideas of professional morality have evolved since that ruling came down, the court has still followed the principle that it defies state policy to allow lawyers to become their own clients and then charge for professional services that advance their cause, the Supreme Court said.

That means the unanimous state appeals court that reversed more than $600,000 in attorneys' fees awarded the firm Schad Diamond & Shedden PC for work its attorneys performed in bringing the firm's successful qui tam action against the upscale pillow manufacturer was right to do so, the opinion said.  "There was nothing that could fairly be characterized as an attorney-client relationship from which an obligation or need to pay an attorney fee might arise," Chief Justice Lloyd Karmeier wrote in the court's 14-page opinion.  "When Diamond the law firm made a legal decision, it was not counseling a client.  It was talking to itself."

The ruling constitutes a near-final reversal of a trial court ruling whose fee award to Diamond made up nearly all of the money My Pillow was ordered to pay on top of the $889,637 judgment it got slapped with after losing a bench trial over relator Stephen Diamond's claims.  The trial court also awarded the firm $266,891 as a statutory award for recovering those proceeds on behalf of the state, which declined to intervene in the case.

Diamond launched the suit in 2014, claiming My Pillow violated the state's False Claims Act and acted with reckless disregard in failing to collect and pay the state its fair share of taxes on products it sold to its Illinois customers, while also falsifying records to hide its conduct.

My Pillow lost its appeal of the trial court's damages award but, in the same ruling, won on its argument that the firm should not have been awarded attorneys' fees.  The ruling sided with My Pillow's argument that the firm was essentially acting as a pro se litigant in the suit and should therefore be held to the same fee standard, since self-represented litigants cannot recover attorneys' fees for their own work.

In agreeing with the appellate court, the Supreme Court noted there was "no factual or legal distinction between Diamond the relator and Diamond the law firm."  "They were one and the same," Justice Karmeier wrote.  "Their interests in the litigation were identical, and their contributions to the case were indistinguishable."

The case is The People ex rel. Schad Diamond & Shedden PC v. My Pillow Inc., case number 122487, in the Supreme Court of the State of Illinois.

Judge Approves Fee Enhancement in GNC Age Discrimination Case

August 22, 2018

A recent New Jersey Law Journal story by Charles Toutant, “Judge Approves Fee Enhancement, But Not ‘Dual Fee,’ in GNC Employee’s Case” reports that a federal judge in Camden, pointing to his concern that “hourly or relatively low salaried workers may not obtain the skilled representation they deserve,” granted a 25 percent fee enhancement to a lawyer after his client obtained a $258,926 jury verdict in an age discrimination suit against vitamin and supplement retailer General Nutrition Corp.  At the same time, the judge ruled out the possibility of the lawyer recovering a statutory and contingency fee simultaneously.

The enhancement of 25 percent above the $127,215 lodestar brings Vineland attorney Richard Pescatore’s fee to $159,018, warranted because he undertook representation of the plaintiff without assurance that he would be paid, U.S. Magistrate Judge Joel Schneider said in Andujar v. General Nutrition.  The judge also approved $1,823 in costs, prejudgment interest of $123,926, and a payment, in an amount to be determined, to offset negative tax consequences of a lump-sum award.  The amounts are to be paid by the defendant if the verdict is upheld on appeal.  The appeal to the Third Circuit is pending, according to the decision.

“Without the prospect of a potential high fee, the Court is concerned that hourly or relatively low salaried workers may not obtain the skilled representation they deserve,” Schneider said.  “Competent counsel should not only represent those with largesse,” he said, citing Norman v. Haddon Township, a July ruling granting a 33.33 percent fee enhancement in a police excessive-force case.

Following the October 2017 jury verdict in his client’s favor, Pescatore sought the enhanced fee as counsel to a prevailing party in a New Jersey Law Against Discrimination claim.  His retainer agreement provided him a contingency fee of 45 percent of the net recovery, the decision noted.  Initially, Pescatore contended he was entitled to the full amount of his court-awarded fee, in addition to his contingency fee, which Schneider termed “a dual fee recovery.”  Counsel for GNC did not object to the prospect of a dual recovery but said any such recovery should be taken into account when determining whether a lodestar enhancement was warranted.

After Schneider asked for supplemental briefing on whether a dual recovery was permissible, Pescatore submitted a new proposal to calculate his attorney fee, seeking 45 percent of the jury award ($115,695), plus his court-awarded lodestar ($127,215), for a total of $242,910. GNC opposed that proposal.

Later, Pescatore sought 45 percent of the total sum of the judgment plus the court-awarded fee.  Those two amounts totaled $386,141, and his 45 percent share would have been $173,763.  He also sought a 50 percent enhancement of the court-awarded fee, which would bring the total fee award to $237,000.  But Schneider rejected those terms as inconsistent with Pescatore’s written fee agreement and applicable case law.  Pescatore did not cite any case law approving such an arrangement, while GNC’s lawyer cited persuasive case law to the contrary, Schneider said.

Case law provides that “unless a fee agreement specifically refers to a statutory fee award, a lawyer may receive either the agreed upon contingency fee based on the jury award or the statutory award, whichever is greater.  Counsel may not, as is requested here, receive a portion of both,” Schneider said.  The judge awarded the $127,215 lodestar, since it was slightly greater than the contingency fee of 45 percent of the net jury award.  And since Pescatore sought a 50 percent enhancement, and GNC proposed an enhancement of 5 percent at most, Schneider settled on a “mid-range” enhancement of 25 percent.

“While the Court believes the plaintiff is entitled to an enhancement, it need not be excessive.  This was not an unduly complex case.  Nor did counsel spend an inordinate amount of time on the case.  It is unlikely plaintiff’s counsel had to [forgo] potentially lucrative work on account of his handling of this case,” Schneider said.

$100K in Attorney Fees Awarded Under Catalyst Theory in California

August 1, 2018

A recent Metropolitan News story, “$100,000 Sufficient Attorney Fees for Catalysts of Impound Rule Change,” reports that plaintiffs whose lawsuit prompted the City of Los Angeles to change its policy of impounding cars driven by holders of drivers’ licenses issued by foreign countries have lost a bid in this district’s Court of Appeal to increase their award of attorney fees from $100,000 to $1.7 million.  Los Angeles Superior Court Judge John S. Wiley Jr., sitting on assignment to Div. Seven, wrote the unpublished opinion.  It affirms a judgment by Judge Elihu Berle in three appeals from the same case.

In two of the challenges, the plaintiffs contend the award was unjustifiably meager.  The City of Los Angeles cross-appealed, arguing that no fees should have been awarded at all.  The opinion also rejects the protest by three other plaintiffs to the dismissal of their causes of action against the cities of Escondido and Long Beach on the ground that disputes with those defendants were resolved in prior actions.

The underlying case concerns the cities’ policies in interpreting Vehicle Code §14602.6(a)(1), which allows police to impound a car when it is driven by a person who has never “been issued a driver’s license.”  All plaintiffs in the case had cars impounded despite having driver licenses issued in foreign countries.  In 2007, a federal class action was brought against various California government entities in the case of Salazar v. Schwarzeneggar.  The Salazar litigation involved many plaintiffs and defendants at different times, most of whom were not parties to the present appeal.

That case was unsuccessful for the plaintiffs.  The court dismissed with prejudice their claim under Art. I, §13 of the California Constitution—the right to be secure from unreasonable seizures—ruling that the section “does not provide a private cause of action for damages.”  The court also declined to take supplemental jurisdiction over the remaining state claims, and several of the plaintiffs and others sued various cities in state court in 2011.  Two of the plaintiffs in the state case, Laurencio Marin and Vincent Soltero, settled with Los Angeles for $4,000 each.  Berle awarded the two men $100,000 in attorney fees under Code of Civil Procedure §1021.5, the private attorney general statute.

Wiley explained that the award of fees was proper under a catalyst theory, which allows for attorney fees when a plaintiff prompts the defendant to change its behavior, even if there was no judicial resolution of the dispute.  In 2012, before the city settled with Marin and Soltero, then-Los Angeles Police Chief Charlie Beck, since retired, issued “Special Order No. 7,” which changed the LAPD’s impound policy.  The order—which drew considerable controversy—removed from officers discretion as to whether a vehicle driven by an unlicensed vehicle should be impounded, directing that it not be under specified circumstances.  The order provided that a driver’s license issued “by any jurisdiction (foreign or domestic)” would be recognized.

(The Court of Appeal for this district held in 2014 “that Special Order 7 is within the wide discretion of the police chief.”)  Wiley said:  “The catalyst theory required Marin and Soltero to establish (1) that their lawsuit was a catalyst motivating the City of Los Angeles to provide the primary relief sought; (2) that the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense; and (3) that Marin and Soltero reasonably attempted to settle the litigation before filing their suit…

“The trial court found Marin and Soltero satisfied these three requirements and thus were entitled to a fee award.  The court expressly identified each factor and made appropriate findings.”  Although Berle found that Marin and Soltero had been successful, he noted that it was a limited success.  The settlement amount they had each received was minute, and they had suffered many failures throughout the litigation, including a failure to obtain class certification.  Wiley said:

“The court acknowledged the plaintiffs contributed in some degree to the advent of Special Order No. 7, but noted even that success was mixed.  Special Order No. 7 was a move in the right direction, as far as plaintiffs were concerned, but plaintiffs continued to challenge Los Angeles Police Department’s impound policies even as embodied in Special Order No. 7.  The trial court dryly remarked ‘[i]t is unusual to argue that plaintiffs have been successful in remedying a state of affairs which they continued to attack.’ ”

For this reason, Wiley explained that Berle had appropriately denied the plaintiffs their requested lodestar and multiplier.  As to the third appeal in the case, Wiley noted that Escondido and Long Beach had shown the three elements of claim preclusion applied to the three plaintiffs challenging the award of summary judgment to those cities.

“Claim preclusion applies when a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit,” he wrote.  The three plaintiffs and both cities had all been parties to the Salazar litigation, which had included a cause of action for the California Constitution claim which was the only claim in their state case.  The federal court had dismissed that claim with prejudice, which is a final judgment on the merits.

The case is Sancandi v. City of Los Angeles, B268839.  Counsel for the plaintiffs were Barrett S. Litt of Pasadena; Cynthia Anderson-Barker of Los Angeles; and Robert Mann and Donald W. Cook of Los Angeles.  The cities were represented, respectively, by Assistant City Attorney Gabriel S. Dermer for Los Angeles, Deputy City Attorney Adam C. Phillips for Escondido, and Deputy City Attorney Howard D. Russell for Long Beach.

Jones Day Warns of ‘Protracted’ Fee Actions if Circuit Ruling is Upheld

July 25, 2018

A recent NLJ story by Erin Mulvaney, “Jones Days Warns of ‘Protracted’ Fee Fights if Circuit is Upheld,” reports that Jones Day lawyers, representing CVS Pharmacy Corp., are raising alarms that a federal appeals court decision that erased a fee award misapplied legal standards and will invite “protracted” litigation over compensation in future cases.  The U.S. Court of Appeals for the Seventh Circuit in June overturned a $307,000 fee award for the law firm, which had successfully challenged U.S. Equal Opportunity Commission claims that a CVS severance agreement unlawfully interfered with protected workplace rights.

The appeals court, finding the EEOC’s case against CVS wasn’t fruitless, vacated the legal fees awarded to Jones Day.  The applicable fee statute, the court said, “does not punish a civil rights litigant for pursuing a novel, even ambitious theory.”  The law firm asked the court to reconsider the decision stripping fees.  Jones Day’s Eric Dreiband, leading the team for CVS, took issue with how the appeals panel resolved the fee dispute.  The Seventh Circuit, according to lawyers for CVS, should not have granted “fresh” review but instead should have approached the dispute using a standard that gives greater deference to the trial court.

“Although this particular fee award may not be of great importance, the standard of review for all fee awards assuredly is,” Dreiband wrote in court papers.  “The panel opinion gets it wrong and, worse, invites protracted fee litigation by promising de novo appellate review.”  Citing an earlier Seventh Circuit case, Dreiband, who is the Trump administration’s nominee to lead the U.S. Justice Department’s civil rights division, said it would be “’wasteful’ for appellate courts to ‘redo’ a lower court’s analysis of ‘how far from the correct legal position’ a party strayed.”

The lawyers for CVS also are urging the Seventh Circuit to correct an alleged “legal misstatement” that could lead other courts astray.  The Jones Day lawyers, including partner Yaakov Roth, argue the panel decision incorrectly stated the EEOC can litigate certain types of employment cases without an underlying charge.  The attorneys also contend the appeals court strayed in saying it was “questionable” whether legal fees can ever be awarded in scenarios where the EEOC violated a duty to try to resolve disputes before any lawsuit is filed.

The case is rooted in a 2014 lawsuit filed by the EEOC over a severance agreement the agency said limited the rights of employees to file complaints.  The EEOC called the severance agreement “overly broad” and argued it was part of a CVS “pattern or practice of resistance” to restrict the civil rights of employees.  The agency lost in the U.S. District Court for the Northern District of Illinois.

Dreiband, formerly the head of Jones Day’s labor and employment group, in 2016 identified his hourly rate at $560, according to court papers in the case.  Dreiband earlier served as general counsel to the EEOC from 2003 to 2005.  Roth, a former clerk to the late Justice Antonin Scalia, billed at $475 per hour in 2016, and Nikki McArthur at $275 per hour, according to court records.