A recent Law 360 story by Matthew Santoni, “Pa. Enviro Board Can Weight ‘Bad Faith’ in Awarding Attorney Fees,” reports that the administrative board that hears appeals of decisions by Pennsylvania's Department of Environmental Protection was justified in denying attorney fees to environmental groups that reached a settlement with Sunoco over its Mariner East 2 pipeline, since the board found neither side acted in "bad faith," a state appellate court ruled.

A majority of the Commonwealth Court ruled the state's Environmental Hearing Board could deny a petition for fees from the Clean Air Council, The Delaware Riverkeeper Network and Mountain Watershed Association Inc. based on the so-called bad faith standard, since neither the environmental groups nor Sunoco had acted in bad faith through the groups' appeal of the DEP granting permits for the pipeline, which resulted in a settlement between the groups and the state.

The environmental groups had argued that the board should have applied the looser "catalyst test," which would have only required them to show that their appeal was the motivating factor behind some benefit conferred by the other side in order to trigger fee-shifting provisions in the state's Clean Streams Law and have Sunoco pay their nearly $230,000 legal bill.

"Contrary to objectors' assertions, the catalyst test is not the sole and exclusive standard that EHB may employ in disposing of a request for costs and fees against a permittee under ... the Clean Streams Law.  Indeed, we have specifically recognized that EHB's 'broad discretion includes the authority to adopt standards by which it will evaluate applications for costs and fees,'" wrote Judge Michael H. Wojcik for the majority.  "It was entirely within EHB's discretion, and eminently appropriate, to apply the instant bad faith standard in deciding whether or not to impose costs and fees upon a private party permittee."  The court ruled that the EHB had wide discretion when weighing whether and how to award fees, and in a separate decision it upheld another EHB ruling that had cut the fees awarded to a family that challenged the DEP permits for another part of the pipeline crossing their land.

The environmental groups had challenged 20 permits the DEP had granted Sunoco for construction of a pipeline linking gas wells in Western Pennsylvania to a refinery in the east. The matter wound its way through various proceedings before the EHB until the challengers reached a deal with the DEP in which it would establish a "stakeholder group" on pipeline construction and would put more of its permitting documents online in exchange for the groups dropping their challenge.  The DEP also agreed to pay $27,500 of the challengers' legal fees.

But the challengers then asked the EHB to make Sunoco pay additional legal bills related to their appeal, and Sunoco filed its own petition to make the environmental groups pay nearly $300,000 toward what it had spent defending the permits.  The EHB was split, with the majority saying it could apply the bad-faith standard and find that neither side had "engaged in dilatory, obdurate, vexatious, or bad faith conduct in the course of prosecuting or defending" the appeals.  The minority had agreed that neither side was entitled to fees, but said the bad-faith test was not necessary and the board had broad discretion to award fees as it saw fit.

The environmental groups and the DEP both appealed, though the Commonwealth Court found the DEP lacked standing and granted Sunoco's bid to quash that side of the appeal because the state agency hadn't formally intervened in the fee debate and would not have been affected by the EHB ruling against the private parties.

President Judge P. Kevin Brobson wrote a concurring opinion, joined by Judge Renée Cohn Jubelirer, expressing concerns that the EHB's discretion might be so broad that the particular section of the Clean Streams Law might run afoul of the state constitution's requirement that the law contain standards to "guide and restrain" the administrative board's decision-making.  But because that issue wasn't brought up on appeal, and the EHB had denied either side any fees, this wasn't the case to address that with, Judge Brobson wrote.  In this case, there was no reason Sunoco should have been required to pay, he said.

"There is absolutely no basis in the record upon which the EHB could have exercised its discretion below in such a way as to compel Sunoco to pay objectors' legal fees," he wrote. "Sunoco was not a party to the settlement agreement between objectors and DEP that essentially ended objectors' appeals.  Moreover, Sunoco gave up nothing in the settlement or otherwise.  Sunoco kept its permits, unaltered, as if objectors had not even filed their appeals with the EHB."

A dissenting opinion from Judge Ellen Ceisler said the courts shouldn't apply a tougher standard to permit holders when the DEP itself could have been made to pay fees under the catalyst test.  "It does not therefore seem reasonable that, in theory, the DEP could be saddled with fees and costs in response to inadvertent mistakes or good faith, negotiated compromises or settlements, while a permittee could get off scot-free under similar circumstances unless it has conducted itself in a dilatory, obdurate, or vexatious way," she wrote.

The court then applied its ruling to a separate appeal by the DEP of another EHB order, which said the state had to pay about $13,000 of a family's requested $266,000 in fees from the DEP and Sunoco.  Huntingdon County landowners Stephen and Ellen Gerhart had convinced the EHB in 2019 that the DEP had misclassified a wetland on their property and that Sunoco had to do more work to restore it after completing the pipeline's construction.  But the EHB held Sunoco to the bad-faith standard and the DEP to the catalyst test in parceling out who was responsible for the reduced fee award.

Following the same logic as its ruling in the Clean Air Council case, the court affirmed that the EHB had the discretion to apply both standards in awarding fees.  "We agree that the statute and the case law grant broad discretion to the EHB in setting the standard and applying it," said Robert Fox of Manko Gold Katcher & Fox LLP, representing Sunoco in both cases.  An attorney for the environmental groups said they were weighing the decision and their options.

The attorney for the Gerharts said he thought the court correctly balanced the different standards for fee-shifting against the state and against private actors, but noted that in cases like his where the DEP and Sunoco essentially worked together to defend the permits, the state would have to be mindful of whether it would need to build a record to establish that the permit-holder was acting in bad faith.

A recent Law 360 story by Carolina Bolado, “Litigation Funder Wants Cut of $350M Shire Deal,” reports that law firm lender Counsel Financial Services asked a Florida federal judge for permission to intervene in a dispute over divvying up attorney fees from a $350 million whistleblower settlement with biotech company Shire, alleging the law firm Barry A. Cohen PA should be forced to direct any fees it receives to pay back a $43.8 million line of credit.

Counsel Financial says it loaned money to the Cohen firm in February 2009 in exchange for a secured interest in the firm's assets, which includes legal fee proceeds.  In January 2019, the company obtained a $43,778,684 judgment against the Cohen firm, which previously represented whistleblower Brian Vinca in his suit against Shire.

"Counsel Financial thus has an interest in the legal fees that will be awarded to [the Cohen firm] in this action," the company said in the motion.  "Consequently, Counsel Financial seeks to intervene to ensure that its interest in the legal fees obtained by [the Cohen firm] in connection with this matter are rightfully directed by this Court to Counsel Financial directly from the court registry."

The motion is the latest development in a fight over fees from the $350 million settlement, which was announced in August 2016 and resolved claims stemming from Shire's sales and marketing practices around Dermagraft, a skin substitute the company picked up when it acquired Advanced BioHealing Inc. — now known as Shire Regenerative Medicine Inc. — as part of a $750 million deal in 2011.  Vinca and co-plaintiff Jennifer Sweeney filed the first of the six False Claims Act suits against Shire that led to the settlement.

Kevin J. Darken, who represents Vinca's former counsel, says Vinca's current attorneys, Noel McDonell of Macfarlane Ferguson & McMullen and Bryen Hill of Mahany Law, have tried to cut him and the Cohen firm out of a fee award.  Darken has asked the court to disqualify McDonell and Hill for allegedly using stolen confidential emails to challenge the charging lien filed by Darken, Cohen and Saady & Saxe PA for a cut of the attorney fees.

McDonell and Hill have accused Darken and Kevin M. Cohen, the representative for Barry Cohen's estate, of conspiring to a fee-splitting scheme of the proceeds.  Vinca, who fired his attorneys in March 2018, is suing Darken, the Cohen firm and Saady & Saxe for malpractice, claiming they cost him the full whistleblower's cut of the Shire settlement.  Vinca claims his former counsel's failures forced him to share the whistleblower award of the Shire settlement with the five other relators who filed FCA suits after he did.

Generally, the first whistleblower to file gets about 20% of the government's recovery, and any subsequent whistleblowers do not receive a cut. But in this case, U.S. District Judge James Moody Jr. decided to divvy up the proceeds, in part because of deficiencies in the initial eight-page complaint from Vinca and Sweeney, according to McDonell.  Vinca and Sweeney shared more than $50 million from the settlement, while the other whistleblowers shared approximately $30 million.

The six whistleblower lawsuits that led to the settlement all alleged misconduct by Shire from 2007 through the beginning of 2014, including that it paid illegal kickbacks to get health care providers to use or overuse Dermagraft, marketed Dermagraft for uses not approved by the U.S. Food and Drug Administration, inflated the price of the drug and spurred the coding of Dermagraft-related reimbursement claims for payouts higher than what was appropriate.

McDonell told Law360 that Counsel Financial's claim has no bearing on this lawsuit because Vinca was not a party to the financing contract between Counsel Financial and the Cohen firm.  "As Magistrate Judge Porcelli noted in June of 2019, the matter at issue is the merits of a charging lien filed against relator Brian Vinca by former counsel, and to what extent compensation is appropriate," McDonell said.  "Accordingly, on behalf of Brian Vinca, we are confident that CFS has, as Judge Porcelli so aptly put it, 'no dog in this fight.'"

A recent article by Amanda G. Taylor, “Recovering Attorney’s Fees in Texas: Five Lessons” in BizLit News Blog reports on recovering attorney fees in Texas.  This article was posted with permission.  The article reads:

Obtaining an award of attorneys’ fees might be the final step in a long-waged litigation battle but to do so successfully requires careful planning and diligence from the outset of a case.  The Texas Supreme Court recently clarified the evidence required to obtain and affirm such an award.  Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019).  The Texas Supreme Court also recently confirmed that these evidentiary standards apply equally when fees are sought to be recovered as a sanction.  Nath v. Texas Children’s Hosp., 576 S.W.3d 707, 710 (Tex. 2019).  To best serve a client’s interests of recovering attorneys’ fees in Texas, whether as a prevailing party or as a sanction, lawyers should adhere to five lessons from Rohrmoos.

Lesson One:  Confirm a legal entitlement to recover fees.  “In Texas, as in the federal courts, each party must pay its own way in attorney’s fees … unless a statute or contract provides otherwise.”  Rohrmoos Venture, 578 S.W.3d at 484.  Certain claims, such as a breach of contract claim brought under Chapter 38 of the Texas Civil Practices and Remedies Code, entitle a prevailing party to recover attorneys’ fees.  Other claims, such as a common law fraud claim, do not afford such a remedy.  In establishing your initial case strategy, it is important to consider which claims will and will not allow for recovery of fees, and advise your client about the pros and cons of pursuing each claim accordingly.  Also, be aware of fee-shifting procedural tools (such a motion to dismiss under the Texas Citizens Participation Act) and various Texas statutes and rules that allow for recovery of fees as a sanction (such as Civil Practice and Remedies Code Chapters 9-10, and Texas Rule of Civil Procedure 215).

Lesson Two: Keep accurate, contemporaneous billing records.  Although billing records are not absolutely required to prove the amount of reasonable and necessary fees, it is “strongly encouraged” to submit such proof in support of attorneys’ fees.  Rohrmoos Venture, 578 S.W.3d at 502.  It is much easier to review, summarize, and testify about the work performed (often years later) if you have been diligent in your billing practices throughout.  Time should be kept in a manner that demonstrates the “(1) particular services performed, (2) who performed those services, (3) approximately when those services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services.”  Id.  It is also advisable to keep time in a manner that is specific enough to cover the topic but without legalese and without so much detail that heavy redactions become necessary.  Fact finders prefer to read invoices in plain English without the interruption of hidden text.

Lesson Three:  Your fee agreement does not control the amount awarded.  “[A] client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable or necessary.”  Id. at 488.  Translation: even if you have agreed to handle the matter for a flat fee or contingency fee, you still must demonstrate that the amount of fees sought for recovery are reasonable and necessary based on the work performed and the time incurred.  Regardless of the fee arrangement with your client, keeping accurate and contemporaneous billing records is important.

Lesson Four: Remember to timely designate fee experts.   “Historically, claimants have proven reasonableness and necessity of attorney’s fees through an expert’s testimony—often the very attorney seeking the award.”  Id. at 490.  “[C]onclusory testimony devoid of any real substance will not support a fee award.”  Id. at 501.  Because expert testimony will be required, the attorney must remember to designate herself and any other attorney who will offer an opinion about the reasonableness and necessity of the fee amount(s) as an expert witness in compliance with the scheduling order or discovery control plan governing the case.

Lesson Five: Understand the “Texas two-step” calculation method.  At step one, calculate the “base” or “lodestar” amount by multiplying the “reasonable hours worked” by a “reasonable hourly rate.”  Id. at 498.  This is an “objective calculation” that yields a “presumptively reasonable” amount.  Id. at 497-98, 502.  The determination of what is a reasonable market rate and what is a reasonable amount of time will typically include consideration of the following factors: (1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill required to perform the legal service properly, (4) the fee customarily charged in the locality for similar legal services, (5) the amount involved, (6) the experience, reputation, and ability of the lawyer or lawyers performing the services, (7) whether the fee is fixed or contingent and the uncertainty of collection, and (8) the results obtained.  Id. at 500.  At step two, “adjust[] the base calculation up or down based on relevant considerations … [that were not] subsumed in the first step.”  Id.  “If a fee claimant seeks an enhancement, it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award.”  Id. at 501. Remember that only “rare circumstances” justify such an adjustment.  Id. at 502.

Following these five lessons from the outset of a case will be beneficial to the expert testifying about the amount of fees at the end of a case.  More importantly, it will benefit your client’s best interest in obtaining a monetary award and being able to have that award affirmed on appeal.

Amanda G. Taylor serves as Practice Group Leader of Butler Snow LLP’s Appellate Group and practices from the firm’s Austin, TX office. As a Board-Certified Civil Appellate specialist, Amanda helps to shape successful case strategy from the outset of litigation through the end of an appeal.  Amanda is a detail-oriented lawyer who represents her clients with passion, stays current on emerging trends and issues, and brings a practical perspective to problem solving.  She has a broad range of experience handling complex civil disputes regarding contracts, fraud, tax, insurance, products, employment, real property, and trust and estates.  Amanda is also committed to community service through a number of positions in her State and Local Bar Associations.

A recent Law 360 story by Celeste Bott, “Court Must Weigh if Ill. Wage Law Provides For Atty Fees”, reports that an Illinois appellate court held that a former police officer isn't entitled to attorney fees under the settlement reached in his wage suit with a Chicago-area village, instructing the circuit court to consider on remand whether he can recover the fees under the Illinois Wage Payment and Collection Act.

Former officer David Graham contends he's entitled to attorney fees under the Illinois wage law, which provides workers can recoup fees in a successful civil action brought by "any employee not timely paid wages, final compensation, or wage supplements by his or her employer." Graham, who reached a settlement with the village of Dolton after a benefits dispute, argues that Employee Disability Act benefits constitute "wages," according to the appellate court.

The village had countered that Employee Disability Act benefits are not considered "wages" because they do not compensate employees for work "actually performed," according to the opinion.  The panel said the circuit court never addressed Graham's arguments that he is entitled to attorney fees under the Wage Payment and Collection Act, remanding with directions to consider whether he could recover attorney fees and costs pursuant to the statute.

In Illinois, each party is responsible for his own attorney fees, and the settlement agreement didn't contain a contractual fee-shifting provision that puts the village on the hook for more than $100,000 in fees and costs, the panel said.  Graham had argued that the entire agreement constituted a "contractual undertaking," and that the lower court had relied on a section of that agreement that states that the parties acknowledged he was "the prevailing party for purposes of his petition for [attorney] fees and costs," according to the opinion.

"Although this provision provides that plaintiff is the prevailing party for purposes of his fee petition, it does not expressly provide that the parties agreed that plaintiff, as the prevailing party, is entitled to recover attorney fees from defendant in the underlying action," the panel said.  But in the very next section of the agreement, the parties did expressly set forth which party was responsible for attorney fees if either side has to file suit for a breach of the settlement deal, the court said.

"If a party is forced to file a breach of contract action, the agreement provides that the prevailing party in that action would be entitled to reasonable attorney fees," the court said.  "Because this case is not an enforcement action, section six of the agreement does not apply."

A recent Law 360 story by Justin Wise, “2nd Circ. Says No 2nd Shot For Milberg in $12M Fee Dispute”, reports that the Second Circuit upheld a lower court's dismissal of Milberg Coleman Bryson Phillips Grossman PLLC predecessor Milberg LLP's pursuit of nearly $12 million in contingency fees from former clients, saying its petition failed to comply with a timing provision of federal arbitration law.  The decision came down in a long-running dispute between Milberg LLP, which has since merged with multiple firms, and clients it represented in Germany and Luxembourg in their suit for recovery on defaulted Argentine bonds.

The firm in 2019 sued in the Southern District of New York seeking to vacate an arbitration award that said it was entitled to only a fraction of a $11.9 million fee it claimed it earned for its work on the case.  However, the court dismissed the firm's effort over failing to adequately plead diversity of parties and for not serving proper notice of the petition within the three-month statute of limitations.  While a three-judge panel differed with the lower court on the subject of diversity, "nevertheless, we hold that Milberg failed to comply with the timing provisions of the Federal Arbitration Act."

An attorney for Milberg had previously argued in court that Hague Convention protocol made it impossible to serve notice to overseas adversaries within 90 days.  But the appeals court was not convinced, saying the firm did not "demonstrate diligence" when it came to the three-month deadline to warrant a "possible equitable extension."

"Milberg did not even notify opposing counsel of its petition to vacate the arbitral award until [the] three-month window closed, and only after opposing counsel stated it was not authorized to accept service did Milberg set the wheels in motion for service overseas," the panel wrote, citing the firm's after-hours attempt to serve notice on the day the statute of limitations expired.

Milberg had represented 10 Luxembourg and German retirement funds and two German individuals as they sought to enforce payment on defaulted Argentine bonds.  The clients stopped working with Milberg in 2016 and hired another firm before settling the dispute with Argentina for $162.3 million.  Court documents show that the settlement was similar to the terms Milberg had obtained before being discharged.

Milberg initiated arbitration seeking contingency fees in 2017, but a panel on Feb. 5, 2019, declined to award the firm what it sought. Milberg filed suit in court on May 6, 2019, and late that evening — the last day it could serve a notice for its motion — emailed counsel for their former clients asking whether it could accept service on their behalf.  The clients' counsel said it was not authorized to accept service, court documents show.

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