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Category: Fee Shifting

Ninth Circuit Upholds Fees for Fees Under Statute

April 24, 2017

A recent Metropolitan News story by Kenneth Ofgang, “Panel Upholds Award of ‘Fees-on-Fees’ Under Statute” reports that a statute that permits federal judges to sanction attorneys for vexatious litigation permits an award of fees to opposing counsel for litigating the right to fees, the Ninth U.S. Circuit Court of Appeals ruled.

In a published order, the panel—Judges Alex Kozinski, Richard A. Paez, and Marsha S. Berzon—denied reconsideration of the appellate commissioner’s ruling calculating sanctions against Boston attorney Michael J. Flynn and his client, Timothy Blixseth.  The two were ordered to pay nearly $192,000 in fees and costs incurred by several creditors of Blixseth, a co-founder of the bankrupt Yellowstone Mountain Club.  Blixseth was found jointly liable for all but around $34,000 of the award, for which Flynn was found separately liable by statute.

Blixseth and one of his ex-wives developed the Yellow Mountain Club as an exclusive resort for “ultra-wealthy” golfers and skiers.  He has blamed the 2008 mortgage crisis for the collapse of his finances.  His wealth was estimated by Forbes magazine at $1.3 billion when it named him one of the 400 wealthiest Americans in 2006.  Creditors have claimed Blixseth has hidden assets.

Blixseth, represented by Flynn, appealed the denial of a motion to recuse the District of Montana bankruptcy judge assigned to his case.  The Ninth Circuit affirmed, agreeing with the district judge that Blixseth’s accusations were “a transparent attempt to wriggle out of an unfavorable decision by smearing the reputation of the judge who made it.”

In August 2015, the Ninth Circuit panel said Blixseth and Flynn were subject to attorney fees incurred by creditors on that appeal, citing Rule 38 of the Federal Rules of Appellate Procedure and 28 U.S.C. §1927.  “If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.”

Section 1927 provides: “Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”

In the order, the panel agreed with the appellate commissioner that fees incurred in litigating the right to fees, or “fees on fees,” cannot be awarded under Rule 38, but may be awarded under §1927.  The panel also denied, without comment, Flynn’s motion that the judges recuse themselves.

Because Rule 38 refers to “damages,” the judges said, it is not a fee-shifting statute, and the only attorney fees that may be awarded under the rule are those “incurred in defending against the frivolous issues or frivolous portions of an appeal.”

Section 1927, by contrast, “may be characterized as a fee-shifting provision, despite its sanctions trigger,” the panel said.  The legislation’s purpose, the judges said, it to shift the burden of the vexatious litigation onto the vexatious lawyer, noting that fee-shifting statutes generally are interpreted as permitting the award of “fees on fees.”

The case is Blixseth v. Yellowstone Mountain Club, LLC, 12-35986.

US Airways Defends $122M Fee Request in Sabre Antitrust Case

April 20, 2017

A recent Law 360 story by Rick Archer, “US Airways Defends $122M Fee Bid in Sabre Antitrust Suit” reports that US Airways defended its request for $122 million in attorneys' fees for its $15 million victory against trip-planning giant Sabre Inc. in a suit over a contract giving booking access to all of the airline's seats, saying the fees are reasonable and in line with Sabre’s own legal costs.

Refuting Sabre’s argument that the fee request should be trimmed by nearly 90 percent because of unnecessary expenses, failure to get the full award sought and the dismissal of three-fourths of its claims, US Airways said the recommendation would make its fee award $40 million less than Sabre’s own reported defense costs.

“Although Sabre begrudgingly concedes that US Airways is entitled to some of what it incurred in this lengthy and aggressively defended case, reading Sabre’s opposition, one would think that Sabre — not US Airways — had won,” US Airways said.

The airline won a $5 million verdict, automatically tripled to $15 million, late last year in its case accusing Sabre — which controls 58 percent of the ticket distribution market — of restraining trade by forcing unfavorable terms on US Airways in a 2011 contract that required the airline to give Sabre access to all of its seats in order to reach the large cadre of travel agents that use the Sabre system.

US Airways has requested $122 million in attorneys’ fees and costs, arguing last month that the lengthy and complex nature of litigation justified fees that are more than eight times the amount of damages.  Sabre had argued US Airways should receive only $13 million in fees, noting three of its four original claims were rejected and the award was less than US Airways had asked for, and claiming a number of specific decisions in the airline’s legal strategy had generated unnecessary fees.

US Airways replied that the claim it ultimately won on was always the focus of their efforts, saying two of the claims were dismissed at the beginning of the case when minimal work had been done and the third had required only a fraction of the work.  “The Clayton Act does not require a plaintiff to prevail on all motions and claims in order to be entitled to a full recovery, particularly where it wins what it set out to achieve,” the airline said.

The airline said the reasonableness of the fees was justified by Sabre’s own $53 million in reported attorneys' fees, and argued this number was deceptively low because defense counsel Bartlit Beck Herman Palenchar & Scott LLP agreed to work at a discount in exchange for a success fee.

“Sabre refused our request to see Bartlit’s success-fee rate, but it appears to be nearly 50 percent based on the bonus Sabre paid for defeating declaratory relief,” it said.  “Even a 30 percent bonus would have increased Sabre’s fees to roughly $70 million had it, not US Airways, won.  That approximates US Airways’ roughly $85 million in attorneys’ fees.”

The case is US Airways Inc. v. Sabre Holdings Corp. et al., case number 1:11-cv-02725, in the U.S. District Court for the Southern District of New York.

NALFA Hosts CLE Program with Sitting Federal Judges

March 24, 2017

Today, NALFA hosted the CLE program “View From the Bench: Awarding Attorney Fees in Federal Litigation”.  This program featured a panel of sitting federal judges.  This is the third CLE program NALFA has hosted with an all-judicial panel of sitting federal judges. 

The U.S. District Court Judges, the Honorable Frederic Block, Senior Judge from the U.S. District Court for the Eastern District of New York and the Honorable David R. Herndon, District Judge from the U.S. District Court for the Southern District of Illinois, discussed a range of attorney fee and legal billing issues in federal litigation.  The panel addressed fee shifting cases, prevailing party issues, and fee calculation methods. The panel also took questions from the audience.

This live and remote CLE program was approved for CLE credit hours in California, Florida, Illinois, and Texas.  CLE credit hours are still pending in Ohio and Pennsylvania.  Over 75 attorneys from across the U.S. registered for this multi-state CLE program.  This 120-minute CLE program was recorded and is available for purchase on-demand.

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.