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Category: Fee Shifting

SCOTUS Stays Out of Fee Dispute in Humana ERISA Suit

June 22, 2020

A recent Law 360 story by Adam Lidgett, “High Court Stays Out of Fee Fight in Humana ERISA Suit” reports that the U.S. Supreme Court said it won't review the Fifth Circuit's finding that health insurer Humana doesn't have to foot a patient's six-figure attorney fees tab incurred in a suit over eating disorder treatment coverage.  The high court denied a petition from a plan beneficiary only referred to as Ariana M. that had asked the justices to review an appellate ruling that she wasn't entitled to attorney fees after she ultimately lost her attempt to get full coverage for a stay at a Utah treatment center.

A Texas federal court initially ruled in favor of Humana in the Employee Retirement Income Security Act case, and a Fifth Circuit panel later affirmed that decision.  Then in March 2018, a majority of the full Fifth Circuit breathed new life into the case when it adopted a lower standard for reviewing decisions by benefits plan administrators to deny coverage to workers.

Specifically, eight of 14 judges said in that 2018 decision that courts should apply de novo review — analyze a denial of benefits anew — unless the plan's documents explicitly give its administrator sole discretion to consider claims.  They overturned the court's 1991 Pierre v. Connecticut General Life Insurance Co. ruling, which held that de novo review applies to appeals challenging an administrator's interpretation of plan language but only lets courts analyze an administrator's interpretations of facts for abuse of discretion.

But even after Ariana M.'s case was kicked back down, Humana won summary judgment when the district court again said the insurer's denial was correct.  After she lost her bid to get about $140,000 in attorney fees, she again appealed to the Fifth Circuit.  The appellate court affirmed the second summary judgment ruling in Humana's favor, and also affirmed the denial of Ariana M.'s attorney fees bid.

She asked the high court for review earlier this year, arguing she could collect attorney fees under ERISA.  Ariana M.'s petition said the Supreme Court has already found that "an applicant need not be a 'prevailing party'" to be able to collect attorney fees under the applicable provision of ERISA.  She said she "need only achieve 'some success on the merits'" to be eligible for such fees.

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.

Article: Fee Rulings Show When to Litigate Wage Claims for Defense

March 9, 2020

A recent Law 360 article by Valerie K. Ferrier, “3 Rulings Show When Litigating Wage Claims Is Worth It,” reports on three recent fee rulings defense counsel should consider when deciding to litigate wage claims.  This article was posted with permission.  The article reads:

Wage and hour cases present a particular threat to small businesses. The hospitality industry is especially vulnerable to these claims.

Aside from incurring the legal costs of a defense, with one-way fee-shifting in favor of prevailing plaintiffs under the Fair Labor Standards Act and the New York Labor Law, it is often advisable for businesses to offer an early settlement before the other side incurs substantial attorney fees.

Yet, as some recent cases illustrate, there are situations when defendants may choose to fight it out at trial. Business owners may have multiple reasons they prefer to litigate: deterrence of future lawsuits, lack of concern because they are essentially judgment-proof, and of course moral outrage. Three recent decisions highlight instances in which businesses fought the good fight, and largely prevailed.

Offer of Judgment Under Federal Rule of Civil Procedure 68

A Rule 68 offer of judgment is a litigation tool meant to incentivize early settlement. Under the rule, at least 14 days before trial, a defendant may make an offer to settle on terms they specify.

If a plaintiff rejects the offer, and does not ultimately obtain a more favorable result at trial, the plaintiff must pay the defendant’s post-offer costs for things like transcript fees. In FLSA cases, the plaintiff's attorney may be incentivized to delay settlement discussions, knowing that if they prevail on any claim, in any amount, the FLSA’s fee-shifting provision will be triggered, and the defendant will have to pay the plaintiff's attorney fees, in addition to any judgment obtained by the plaintiff. A Rule 68 offer means that the plaintiff’s attorney, as well as the plaintiff, must think hard about whether to gamble on a more favorable outcome at trial.

A recent decision by a panel of the U.S. Court of Appeals for the Second Circuit in December 2019 made it easier for the parties to resolve cases early, without court approval. Prior to the ruling in Yu v. Hasaki Restaurant Inc., there was a split of authority about whether the parties to an FLSA action could privately settle the matter pursuant to a Rule 68 offer, or whether any FLSA settlement, including those under Rule 68, required court approval, as enunciated in Cheeks v. Freeport Pancake House Inc.

A two-judge majority of the panel held that "[a]ppeals to the broad remedial goals and uniquely protective qualities of the FLSA do not authorize us to write a judicial approval requirement into the FLSA, and thereby into Rule 68(a), when the text of both provisions is silent as to such a requirement." With this decision, parties are now free to more quickly resolve wage and hour cases, even prior to discovery.

Marcelino v. 374 Food

In Marcelino v. 374 Food Inc., following unsuccessful attempts at mediation and settlement, the U.S. District Court for the Southern District of New York held a bench trial, approximately a year and a half after the case was filed. The plaintiff, Domingo Castillo Marcelino, alleged he was underpaid over six months of employment.

His credibility was undermined on cross-examination when, among other things, he contradicted his starting date and was unable to identify one of the individual defendants in the courtroom, even though he testified that the man personally directed his work. The court dismissed the FLSA claims, holding that the plaintiff failed to establish either enterprise or individual coverage under the law.

Despite the defendant’s lack of time and pay records, the court assessed minimal damages under the New York Labor Law only, awarding the plaintiff $8,144, including statutory penalties and liquidated damages. However, noting that the plaintiff seemed to be "making up answers as he went along" during his testimony, the court concluded that the plaintiff perjured himself, and requested briefing from the parties as to whether, in light of that finding, the plaintiff was entitled to recover anything at all.

Thereafter, the plaintiff’s counsel, the subject of possible sanctions himself, withdrew from representation, and the plaintiff was unable to be located. He failed to appear at a hearing on the court’s order to show cause, and as a result, in addition to his "extensive perjury," on Jan. 24 the court forfeited the plaintiff’s award pursuant to its inherent power and closed the case.

Eduoard v. Nikodemo Operating

In Eduoard v. Nikodemo Operating Corp., the plaintiff, a former dishwasher and general helper sued his former employer, a restaurant, about a year after he had received approximately 150% of his total annual pay as a member of a class settlement against the restaurant. In his own lawsuit, he claimed that after the settlement the restaurant had improperly rounded his hours, and thus failed to appropriately pay him overtime.

He further alleged that an hour was improperly deducted from his time each day for a meal break that he claimed he never once took in all the years he worked there, and that he was fired in retaliation for complaining about it. He also brought spread-of-hours claims and claims for violation of the Wage Theft Prevention Act.

The defendants almost immediately made a Rule 68 offer, which was ignored and expired. Thereafter, without ever having conducted any class discovery, the plaintiff moved for class certification under Rule 23.

The court denied the motion, and the parties proceeded to a bench trial because the plaintiff failed to request a jury trial. Shortly before the trial was to commence, the plaintiff’s original counsel was substituted just before he was disbarred.

The plaintiff testified on his own behalf. One of the owners of the business testified on behalf of the defense. After the conclusion of the trial the court issued findings of fact and conclusions of law.

As in Marcelino, the U.S. District Court for the Eastern District of New York dismissed the FLSA claim because the plaintiff failed to prove either individual or enterprise coverage under the law. The court also found the defendant "much more credible than [the] plaintiff on several issues." Specifically incredible was the plaintiff's testimony that he never took a lunch break and never ate anything during his shifts, never got hungry, and never even once sat down while working during the relevant time period.

The court denied the plaintiff’s rounding, meal break deduction, retaliation and overtime claims, but granted the plaintiff’s claims as to spread-of-hours and the Wage Theft Prevention Act. As a result, after one year of litigation, the plaintiff was awarded a total of $3,419.32, including interest.

Because the defendants had previously made a Rule 68 offer before discovery commenced, the defendants moved for sanctions pursuant to the court’s inherent authority and under Title 28 of U.S. Code Section 1927 against the plaintiff’s former counsel. The motion was for unnecessarily multiplying the proceedings in bad faith by making a frivolous and factually unsupported motion for class certification, despite an explicit warning from the court regarding the consequences of doing so. A decision on this motion is pending.

Feuer v. Cornerstone Hotels

More recently, the Eastern District of New York issued a decision in Feuer v. Cornerstone Hotels Corp.[5] following a 2018 bench trial in the case of a married couple who worked and lived at a 12-room motel for six months in 2014. They alleged that they were either working or on-call 24/7, and were thus underpaid minimum wage and overtime. Shortly after the case commenced, the individual defendant chose to proceed pro se and left the corporate defendant unrepresented.

The court held that neither the husband nor wife, even combining their hours, ever worked more than 40 hours in a week. However, because they were underpaid during the first week of their employment the court awarded them $92 in unpaid wages, the same amount as liquidated damages, and statutory damages, for a total of $5,184, plus 2 cents interest per day until the judgment was paid.

Similar to Eduoard, the court credited the employer’s time and pay records, and found the plaintiffs’ testimony was not credible, especially when compared to that of the owner who testified and also lived on the premises.

Lessons for Counsel

As all three cases make clear, plaintiffs counsel must go beyond merely accepting their client’s word for how long they worked, or how much they were paid. Moreover, plaintiffs who take patently exaggerated positions do so at their peril.

Indeed juries are often instructed that if they determine that a witness has lied about anything, they are entitled to conclude that the witness has lied about everything. As the Latin saying goes, "falsus in uno, falsus in omnibus."

Even if a plaintiff is ultimately awarded a few thousand dollars after a year or more of litigation, other sanctions may be attached. In addition, plaintiffs counsel, who generally take wage and hour cases on contingency, may end up wasting an enormous amount of time, money, resources and good will, even if they are not sanctioned.

On the other hand, defendants who are confident that they have complied with the law, or have only minimal liability, may elect to pursue litigation to its conclusion in order to prove a point. Defendants are often loath to pay both their own attorney fees and at the same time accept the risk that they may be ordered to pay plaintiff fees, even if the award is small.

However, as Feuer demonstrated, in some instances, pro se individual defendants can save attorney fees and successfully defend themselves. In addition, strategic deployment of a Rule 68 offer of judgment at an early stage of the litigation may drastically curtail even a prevailing plaintiff’s entitlement to attorney fees.

Valerie K. Ferrier is a partner and head of the labor and employment practice group at Martin Clearwater & Bell LLP in New York, NY.

Article: Five Lessons for Recovering Attorney Fees in Texas

February 24, 2020

A recent BizLitNews article by Amanda Taylor, “Recovering Attorney’s Fees in Texas: Five Lessons,” reports on attorney fee recovery 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 is a Board-Certified Civil Appellate attorney who practices from the Austin, TX office of Butler Snow LLP.  Her practice is focused on shaping successful case strategy for litigation clients from the outset of litigation through the end of an appeal.  She also frequently represents clients in matters regarding the Texas Citizens Participation Act (Texas’ anti-SLAPP statute).

Fifth Circuit Asked to Clarify ‘Prevailing Party’ in Maritime Law

February 12, 2020

A recent Law 360 story by Michelle Casady, “5th Circ. Asked to Clarify Prevailing Party in Maritime Law,” reports that the Fifth Circuit was urged during oral arguments to provide lawyers clarity on what it means to be the prevailing party entitled to attorney fees and costs in a maritime contract dispute.  Presenting it as an "undecided issue in federal law," Marty McLeod of Phelps Dunbar LLP, who represents Genesis Marine in a dispute against Hornbeck Offshore Services, asked the court to consider establishing a "bright-line rule" based on who prevails on the "main issue" in a case.

"I'm not asking the court to do anything other than apply what it's already done in other cases … to federal maritime law," he said.  In the underlying dispute, Genesis is seeking $102,789 in attorney fees and costs, arguing it was the prevailing party in the lawsuit it filed in the Eastern District of Louisiana in July 2017 against Hornbeck, which it had chartered its vessels to.

As Genesis sees it, because it prevailed on the main issue in the case — which asked whether it provided appropriate notice to terminate ship management agreements after about $722,000 in invoices went unpaid — it's entitled to recover the fees and costs. Hornbeck unsuccessfully argued the termination was not proper and therefore it was entitled to $2.95 million in unpaid ship management fees.

But Hornbeck contends that while Genesis prevailed on the main issue of the case, Hornbeck similarly prevailed on the "main issue" of its counterclaim, which was its entitlement to about $117,000 for fuel, lube and shoreside services under the master charter agreement that allows for the recovery of fees and costs.  According to court records, Genesis stipulated to that amount it owed Hornbeck at the end of trial and the judge reduced Genesis' award by that amount, which Hornbeck said means it, too, is a prevailing party.

Circuit Judge Gregg J. Costa said the record seems to support the trial judge's contention that both sides prevailed and the requests for fees offset each other. McLeod said that can't be.  "There cannot be more than one prevailing party under the contract," he said, explaining the contract allows for fees to be recouped by "the prevailing party," which is singular, rather than "a prevailing party," which could mean multiple parties.

A bench trial in the case began in June 2018.  In August 2018, U.S. District Judge Ivan L.R. Lemelle issued a ruling that Hornbeck pay Genesis about $722,000, minus $117,000 for fuel, lube and shoreside services.  He also dismissed with prejudice Hornbeck's counterclaims.

In March 2019, Judge Lemelle issued an order denying the motion for attorney fees, explaining in a seven-page order that the parties had agreed the main issue in the case was whether Genesis had improperly terminated the ship management agreements, which would have allowed Hornbeck to offset its invoices for unpaid ship management fees. The court ruled for Genesis on the issue but decided that because the dispute didn't fall under the master time charter agreement — the only agreement that allowed for fee recovery — it couldn't award Genesis attorney fees.

"Simply put, the agreed-upon main issue of this case was found to not fall under the master time charter — the only relevant contract that provides recovery of attorneys' fees and costs," Judge Lemelle wrote.  "The master time charter provides recovery of reasonable attorneys'  fees and costs from the other party for not just any dispute, but only disputes falling under the master time charter."