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Category: Fee Shifting

Federal Circuit: EAJA Fee Awards Must Use Local Rates

March 16, 2017

A recent Law 360 story by Chuck Stanley, “Fed. Circuit Says EAJA Legal Fees Must Use Local Costs,” reports that awards for attorneys’ fees under the Equal Access to Justice Act (EAJA) must be calculated based on the location where the work was done, a Federal Circuit panel said in a precedential ruling.

The federal circuit rejected a veteran’s widow’s claim that ambiguity in the statute allows her to adjust upward the hourly rate for calculating attorneys’ fees in a benefits suit based on the consumer price index (CPI) in Washington, D.C., where the case was heard but little other work was done.

Instead, the panel ruled that Paula Parrott should have provided individual rates for work done in Dallas, San Francisco and Washington in order to win an adjustment from the statutory rate of $125 per hour, rather than using the CPI for a single city or the national CPI to calculate a single rate.

The decision upheld the Veterans Court’s decision to award Parrott fees based on the statutory rate because she failed to provide rates for each city where work had been done on the case.

“We think the local CPI approach, where a local CPI is available … is more consistent with EAJA than the national approach.  We therefore hold that the Veterans Court did not err in ruling that the local CPI approach represented the correct method of calculating the adjustment in Ms. Parrott’s attorney’s hourly rate,” the decision states.

Parrott had claimed more than $7,200 in legal expenses in a suit over benefits for her husband, a deceased veteran, based on an upward adjustment from the statutory hourly rate based on the cost of living in Washington, D.C.  Language in the EAJA, which provides for an award of attorneys’ fees to victorious parties fighting agency action, stipulates that a $125 cap on hourly rates can be adjusted upward due to an increase in the cost of living.

But Parrott argued the statute is ambiguous regarding the method used to calculate such an increase.  She further claimed the Veterans Court was obliged to accept her cost estimate because ambiguity in a statute related to veterans benefits must be construed in favor of the veteran.

However, the panel ruled the EAJA is not ambiguous because using the national CPI rather than local numbers would incentivize more attorneys to accept cases challenging government agencies in low-cost areas rather than pricier areas.  Further, the panel found Parrott’s claim the Veterans Court was required to side with her is not applicable to the EAJA since it is not a veterans benefit statute, but applies to all litigants against executive agencies.

The case is Parrott v. Shulkin, case number 2016-1450, in the U.S. Court of Appeals for the Federal Circuit.

MetLife Faces $6.2M in Attorney Fees

March 9, 2017

A recent Law 360 story by Bonnie Eslinger, “MetLife Faces $6.2M in Atty Fees Over Ponzi Scheme Ruling,” reports that a California judge tentatively ordered MetLife Inc. and various subsidiaries to pay $6.2 million in attorneys’ fees on top of a $7.2 million judgment in a “hotly contested" case blaming the insurer for the loss of a retired woman’s savings in a Ponzi scheme.

Christine Ramirez claimed the insurer and its subsidiaries, along with an agent who ran MetLife’s Los Angeles operations, sold her unregistered securities alongside her insurance policies.  Those unregistered promissory notes put her money into an alleged $216 million Ponzi scheme, the suit said.

In August, a jury found the defendants liable for Ramirez's losses in the amount of $240,000 and awarded her $15 million in punitive damages saying MetLife owed $10 million, unit MetLife Securities owed $2.5 million and unit New England Life Insurance Co. owed $2.5 million.  A state court judge subsequently reduced the award to $7,196,710, telling Ramirez that if she didn’t consent to the remittitur, he would grant the insurer's motion for a new trial on grounds of excessive punitive damages.

A hearing was held on Ramirez’s motion for attorneys' fees of $7 million.  At the start, Los Angeles Superior Court Judge Kenneth Freeman issued a tentative written ruling, shaving fees related to attorney hours spent working on a separate, related case against MetLife, in which Ramirez was a putative class member, but finding the time invested in the case to be reasonable.

“In assessing reasonableness, the time required by the opposing party's tactics may also be highly probative,” Judge Freeman wrote in his written tentative opinion.  "Here, it goes without saying that this case was, and remains, very hotly contested.  The MetLife defendants litigated their clients’ case extensively, and there were never any frivolous arguments raised.”

The judge also doubled Ramirez’s lodestar attorneys' fees figure of $3,112,138, saying the requested 2.0 multiplier is appropriate in light of the novelty of the issues presented in the case, the skill of counsel, the extent that the case precluded the attorneys from taking on other clients, and the fact that the case was taken on a contingency basis.  Additionally, the results achieved in the litigation were notable, the judge said, even with the award reduction.  “The significant result warrants a multiplier in this case,” he wrote.

During oral arguments, an attorney for MetLife, Cheryl Haas of McGuireWoods LLP, disputed that any multiplier should be awarded, calling the $6 million a “windfall.”  “A multiplier is simply not justified,” Haas said.  “The prevailing party is only entitled to reasonable attorneys' fees.”

Judge Freeman said he would issue a final ruling after he considered supplemental filings from the parties, but he didn’t offer much hope for a different outcome.  "The tentative is very clear on the court’s reasoning and frankly I doubt there’s anything you’re going to offer in the way of a supplemental brief that will change the court’s tentative,” the judge said.

The case is Hartshorne et al. v. MetLife Inc. et al., case number BC576608, in the Superior Court of the State of California, County of Los Angeles.

Judge Denies Fee Award to State AGs in Antitrust Case

March 2, 2017

A recent NLJ story by C. Ryan Barber, “Judge Refuses Fee Award to State AGs in Antitrust Case,” reports that nearly a year after striking down Staples Inc.’s proposed takeover of Office Depot, a federal judge in Washington refused to award $175,000 in legal fees to the Pennsylvania and District of Columbia attorneys general for their role in challenging the office supply chains’ $6.3 billion deal.

The two offices teamed up with the Federal Trade Commission (FTC) in a suit that alleged the proposed deal would hurt competition in the market for office supplies sold in bulk to large corporate clients.  In May, U.S. District Judge Emmet Sullivan sided with regulators and granted a preliminary injunction.  Staples and Office Depot abandoned their merger plans.

Pennsylvania and D.C. argued they were entitled to fees under a provision of the Clayton Act that allows for the reimbursement of legal costs when the plaintiff “substantially prevails.”  Sullivan said there was one problem: Regulators prevailed not under the Clayton Act but the FTC Act, which does not grant legal fees to winning plaintiffs.

"Simply put, moving plaintiffs cannot have it both ways,” Sullivan wrote in a 10-page opinion.  “They cannot ride the FTC’s claim to a successful preliminary injunction under the more permissive [FTC Act] standard and then cite that favorable ruling as the sole justification for fee-shifting under the more rigorous Clayton Act standard."

Pennsylvania and District of Columbia offices had argued that the preliminary injunction directly broke up the merger, allowing them to recoup costs under the so-called “catalyst rule.”  But Sullivan was not persuaded.

As Staples and Office Depot pointed out, Sullivan wrote, “the catalyst rule as a mechanism for obtaining attorneys’ fees in certain circumstances was rejected by the Supreme Court in 2001,” in the case of Buckhannon Board and Care Home, Inc. v. West Virginia Department of Health and Human Resources.

The FTC had taken the lead in the antitrust challenge—a fact Staples and Office Depot raised to belittle the two offices’ role in the case.  The two companies described the work from Pennsylvania and D.C. as duplicative of the FTC’s, poorly documented and “largely spent on non-determinative issues (to the extent it is possible to determine what they worked on with any specificity at all).”

The Pennsylvania attorney general’s office requested $142,548, the District of Columbia $33,547—amounts that, if granted, would have represented an “unprecedented windfall,” Staples and Office Depot argued.  Weil, Gotshal & Manges represented Staples, and Simpson, Thacher & Bartlett represented Office Depot.

Sullivan said Pennsylvania and D.C. “effectively ask this court to take an unprecedented step.”  The choice to challenge the deal under the FTC Act was a “strategic one,” Sullivan wrote.  “Nonetheless, moving plaintiffs cannot bring a petition for fee-shifting under a provision under which they did not prevail,” he wrote.

Court Remands Fee Award, Tackles Jury Waiver Language

February 8, 2017

A recent New Jersey Law Journal story by David Gialanella, “Court Remands $2M Fee Award, Tackles Jury Waiver Language,” reports that in a decision that sheds some light on the specificity of language required for waivers contained in employment contracts, a New Jersey appeals court has reversed an award of $2.06 million in attorney fees to Heartland Payment Systems Inc., though it appears the company will recover fees in some form.

The court remanded the case, holding that a claim lodged under the state Conscientious Employee Protection Act (CEPA) was not covered by a contract provision that waived the right to jury trial for disputes arising from "'this agreement.'"  That language, as well as the absence of language specifically referring to claims based in the statute, limited the provision's effect, the court ruled.  The panel also noted the high threshold for fee awards to employers under the CEPA.

"It was error for the trial judge to conclude the threshold was met based upon her finding that [the plaintiff] 'failed to set forth a viable claim against the defendant pursuant to CEPA,'" Appellate Division Judge Marianne Espinosa wrote in the Feb. 6 published opinion.

"There is a broad spectrum in the quality of proofs that fall between a claim that is not 'viable' and one that is 'without basis in law or in fact," she added.  The court directed the judge on remand, based on a fee-shifting provision in the employment contract, to apportion fees to the CEPA and contract claims.

The plaintiff, Greg Noren, was employed by Princeton-based Heartland Payment Systems from April 1998 to June 2005 as a "relationship manager," a role in which he sold payment processing services.  The contract he signed provided that he and Heartland both "'irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this agreement,'" according to the decision.  Another contract provision awarded fees and costs "'[i]n any suit, action or proceeding arising out of or related to this agreement,'" according to the decision.

Noren was terminated in 2005.  His suit was eventually whittled down to the two claims, breach of contract and the CEPA violation.  His jury trial demand was denied based on the waiver provision and, after 22 days of bench trial, Bergen County Superior Court Judge Susan Steele dismissed both claims.  She awarded Heartland $2.06 million in fees and costs for the defense of both claims, finding them so intertwined that the fees could not be apportioned, the decision stated.

In his appeal, Noren did not dispute the jury waiver's applicability to the contract claim, or the notion that fees may be awarded based on Heartland's success in defeating that claim.  But he did dispute the waiver's applicability to the CEPA claim, and the corresponding fee award based on the statute.

Espinosa, joined by Appellate Division Judges Clarkson Fisher Jr. and Garry Rothstadt, held the waiver inapplicable to the CEPA claim, and remanded the case for a jury trial on that claim.

The waiver, "by using 'this agreement' as the defining threshold for all suits, actions and proceedings, ... limits the category of disputes for which a jury trial is waived," Espinosa said, relying in part on the state Supreme Court's 2001 decision in Garfinkel v. Morristown Obstetrics & Gynecology Associates, which held that such provisions should specify that statutory claims, in addition to contract-based ones, are waived.

The fee award was vacated because, the court said, Steele wrongly found that CEPA's fee-shifting provision had been triggered.  "To lack any basis in law or in fact, there must be either no legal authority to support the claim or the absence of a factual basis for the claim," Espinosa said, noting that the CEPA claim's survival of summary judgment indicated that it was not without basis.

The court said it must be determined on remand what proportion of the fees are attributable to defense of the contract claim, which are awardable based on the employment contract's fee-shifting provision.

How to Get Reciprocal Contractual Attorney Fees in California

February 6, 2017

A recent CEBblog article, “How to Get Reciprocal Contractual Attorney Fees,” by Julie Brook, reports on reciprocal attorney fee shifting provisions under California’s § 1717.

This material is reproduced from the CEBblog™, How to Get Reciprocal Cotractual Attorney Fees (https://blog.ceb.com/2017/02/06/how-to-get-reciprocal-contractual-attorney-fees/) copyright 2017 by the Regents of the University of California.  Reproduced with permission of the Continuing Education of the Bar - California.  (For information about CEB publications, telephone toll free 1-800-CEB-3444 or visit our Web site CEB.com).

This article was posted with permission.  The article reads:

It’s like magic: California’s CC §1717 transforms a unilateral attorney fee provision in a contract into a reciprocal one!  When the contract provides for attorney fees to either a particular party or the prevailing party, the prevailing party “on the contract” is entitled to recover reasonable attorney fees regardless of whether that party was the party specified in the contract.  But taking advantage of this statute depends on meeting the following five requirements.

  1. There must be an attorney fees provision.  Section §1717 can convert a one-way attorney fee clause into a mutual and reciprocal clause, but it can’t create an attorney fee provision out of thin air.  The contract at issue must include at attorney fee provision for the statute to have any effect.
  2. Only the prevailing party gets fees.  A party’s right of recovery depends on whether that party is determined by the court to be the prevailing party.  There’s no prize just for participating.
  3. The action must be “on the contract.”  When it comes to CC §1717, courts have construed “on a contract” broadly to apply to any action that involves a contract.  But it doesn’t apply to tort claims such as fraud if the lawsuit doesn’t also seek to enforce or avoid enforcement of the contract.  And it also doesn’t apply to promissory estoppel claims, because they’re based on equitable principles.
  4. The fees recovered must be “reasonable.”  One of the purposes of CC §1717(a) is to assure uniform treatment of attorney fee recoveries in actions on contracts with attorney fee clauses and to eliminate disparities based on whether the recovery was authorized by contract or by statute.  PLCM Group, Inc. v Drexler (2000) 22 C4th 1084.  So §1717(a) limits the amount of fees recoverable to “reasonable” fees as “fixed by the court,” even if the contract clause doesn’t limit recovery to reasonable levels.
  5. Attorney fee clause applies to the whole contract.  If a contract has an attorney fee clause, that provision will be construed to apply to the entire contract unless each party was represented by counsel in the negotiation and execution of the contract and the fact of that representation is specified in the contract. CC §1717(a).

For more on recovery of attorney fees by contract, check out CEB’s California Law of Contracts, chap 9.  And when deciding whether to include an attorney fee provision in a contract, turn to CEB’s Drafting Business Contracts: Principles, Techniques and Forms §§15.18-15.20.

Other CEBblog™ posts you may find useful:

CEB is a self-supporting program of the University of California that is cosponsored by the State Bar of California.  CEB is the go-to source for lawyers on information about the law, and the practice of law, in California.  For more on CEB, visit https://blog.ceb.com/

Attorney Fee Awards in the Lanham Act

January 19, 2017

A recent law firm blog post, “Attorney Fees Awards in Lanham Act,” by James Bikoff and Holly James of Smith Gambrell & Russell LLP in Washington, DC report on attorney on attorney fee awards...

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Loser Pays Court Rule First of a Kind

December 21, 2016

A recent Spokesman Review story, “'Loser Pay' Rule in Idaho Court System Could Make Justice Available Only to Those With Deep Pockets,” reports that the Idaho Supreme Court has launched the...

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