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Category: Fee Statute

Federal Judges Question Attorney Fee Formula in Florida Coverage Cases

December 12, 2019

A recent Daily Business Review story by Steven Meyerowitz, “Florida Split: Should Attorney Fees Count Toward Federal Amount in Controversy?,” reports that a decision by a Miami federal judge highlights a split among Florida district courts on whether to include statutory attorney fees when calculating whether an insurance coverage case removed from state court meets the federal minimum for the amount in controversy.

On Sept. 10, 2017, Hurricane Irma struck South Florida and damaged the home owned by Jaclyn and Xavier Caceres. The Cacereses submitted a claim to their insurer, Scottsdale Insurance Co.  Scottsdale assigned a claim number and issued the Cacereses a check for $10,975, reflecting a wind deductible in the amount of $5,854.

In May 2019, after renewing their policy, the Cacereses submitted a separate claim for property damage due to heavy rain and roof collapse. Scottsdale assigned a claim number and issued the Cacereses a check for $7,975.  On June 22, 2019, the Cacereses presented Scottsdale with a repair estimate for $91,863 that covered the estimated damages for both claims.

On Sept. 5, 2019, the Cacereses sued Scottsdale in state court. Their complaint alleged they were seeking damages in excess of $15,000, and they sought to recover attorney fees and costs under Florida Statutes Section 627.428.  Scottsdale removed the state court action to federal court, indicating among other things that the amount in controversy was $75,034 based on the $91,863 repair estimate minus the $10,975 check paid and the wind deductible.

The Cacereses moved to remand, arguing the amount in controversy did not exceed $75,000.  Specifically, they contended Scottsdale could not use a pre-suit damage estimate as a basis for establishing the amount in controversy and, even using the pre-suit damage estimate, Scottsdale failed to account for the second check to the Cacereses, which decreased the amount in controversy from $75,034 to $67,059.

For its part, Scottsdale countered the amount in controversy requirement was satisfied because the Cacereses sought to recover attorney fees and costs, which through trial could easily exceed the remaining $7,941 needed to establish the amount in controversy under the Cacereses’ interpretation.  U.S. District Judge Beth Bloom granted the Cacereses’ motion to remand.  In her decision, she ruled  district courts may consider pre-suit demands in evaluating whether a case has been properly removed.

The district court then observed the Cacereses’ total estimate of damages for the claims from both the Sept. 10, 2017 loss and the May 13, 2019 loss amounted to $91,863, Scottsdale issued two checks to the Cacereses for the losses, and the wind deductible of $5,853.68 was applied to the 2017 claim.  The district court said it was “clear” the amount in controversy was $67,059.

Bloom next considered whether the Cacereses’ bid for attorney fees counted toward the amount in controversy.  She noted the issue has caused a split in district courts within the U.S. Court of Appeals for the Eleventh Circuit, citing a 2017 Middle District of Florida decision discussing the divide and a 2010 Southern District of Florida case discussing the “conflicting case law” on whether the amount of  should be calculated on the date of removal or through the end of the case.

The district court then ruled the amount in controversy did “not include highly speculative, prospective amounts” of attorney fees but rather only those fees accrued at the time of removal.  According to the district court, this ruling was in line with a 1994 Eleventh Circuit precedent establishing “jurisdictional facts are assessed on the basis of plaintiff’s complaint as of the time of removal.”

The district court noted Scottsdale provided no evidence to establish the Cacereses accrued $7,941 in attorney fees by the removal.  Accordingly, the district court concluded Scottsdale had not satisfied its burden of establishing the amount in controversy exceeded $75,000.

Attorney Fee Award Analysis in Section 285

December 10, 2019

A recent Mintz law firm blog post by Andrew H. DeVoogd and Kara E. Grogan of Mintz Levin PC, “Counterproductive and Cost-Increasing Litigation Tactics are Objectively Unreasonable in Section 285 Attorney Fee Award Analysis,” reports on attorney fee awards under Section 285.  This story was posted with permission.  The post reads:

Nearly six years ago, the Supreme Court in Octane Fitness v. ICON Health & Fitness promulgated a “totality of the circumstances test” for awarding reasonable attorney fees to the prevailing party in exceptional cases under 35 U.S.C. §285.  As lower courts have applied this standard, it has become clear that the motivation and conduct of the losing party is a focal point of the exceptionality analysis.  However, two recent decisions emphasize that bad faith arguments and litigation tactics—by both parties and in all stages of litigation—are critical to the exceptionality analysis in Section 285 attorney fee awards. 

By way of background, Section 285 permits courts, in exceptional cases, to award reasonable attorney fees to the prevailing party.  Using the totality of the circumstances test, courts consider factors such as frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case).  However, exceptional cases are rare—reserved for circumstances where a party’s unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so “exceptional” as to justify an award of fees. 

First, the Western District of Louisiana in Total Rebuild Inc. v. PHC Fluid Power, LLC, concluded that although the plaintiff’s patent was found unenforceable due to inequitable conduct, the case was not exceptional, due to the defendant’s “counter-productive and cost-increasing litigation tactics.”  The defendant’s unscrupulous actions included: (1) not informing the court in its opening brief that the plaintiff proposed a “walkaway” settlement offer; (2) evidence suggesting that the defendant’s motive was to deny the “walkaway” settlement, seek judgment against the plaintiff, and file a motion for sanctions to hit the plaintiff—a competitor—with a large judgment; and (3) not engaging in any meaningful settlement discussions.  This amounted to “objective unreasonableness.”  Due these bad faith litigation tactics, the court refused to allow the defendant to “benefit from fueling an environment that increased the cost to litigate this case.”  

Second, a magistrate judge in the Southern District of New York in EMED Technologies v. Repro-Med Systems, recommended finding the case exceptional and granting nearly $1 million in attorney fees due to the plaintiff’s bad faith shortly after granting a summary judgment of noninfringement.  Surprisingly, the magistrate judge based its attorney fee analysis in large part on the plaintiff’s claim construction position.  According to the magistrate, based on Federal Circuit precedent and the patent’s prosecution history, it was bad faith to initiate the litigation despite knowing the “conventional” construction of the claim term “consisting of” as used in the claim.  And, although the court ruled in plaintiff’s favor on other claim terms, “EMED’s success in that regard does not render any less unreasonable its objectively baseless construction and application of the closed mechanical fastener element.”  The court also cited additional examples of the plaintiff’s bad faith, including: (1) filing the action in the incorrect venue; (2) filing a motion for preliminary injunction; and (3) pressing on with the litigation “even after claim construction and the Court’s ruling against it.”  Although the district court judge has yet to affirm this report and recommendation, the magistrate’s opinion is instructive.

Taken together, these cases illustrate that practitioners should be mindful of reasonableness and decorum.  Courts are unlikely to find a case exceptional and award attorney fees if the prevailing party refuses reasonable requests for extensions of time or calls opposing counsel inappropriate names, as in Total Rebuild.  Along those same lines, practitioners should also avoid counterproductive and cost-increasing litigation tactics.  Tactics such as filing useless motions, taking objectively unreasonable positions, refusing to engage in meaningful settlement discussions, and excessive billing are all not only unprofessional (and potentially unethical), but may be used as fodder by an adversary to support an exceptional case fee award.  It is important to also remember that the entire record is scrutinized in a Section 285 analysis.  Baseless or unsupportable motions or positions, even at the start of a case, may come back to bite you and your client.

Andrew H. DeVoogd is a Member at the Boston office of Mintz Levin. Drew is an experienced intellectual property litigator and trial attorney whose work encompasses a broad range of technologies.  He regularly represents clients in high stakes patent disputes, including at the International Trade Commission, involving some of the world's largest technology companies. Kara E. Grogan is an Associate at the Boston office of Mintz Levin.  Kara focuses her practice on Section 337 cases in the International Trade Commission and district court patent litigation.  She has experience in, for example, motion practice, written discovery, and drafting license agreements.

Eleventh Circuit: Arbitration Fee Clause Violates FLSA

November 26, 2019

A recent Law 360 story by Adam Lidgett, “11th Circ. Says Arbitration Fee Clause Violates FLSA,” reports that a clause in a Florida pest-control company’s employment agreement requiring each side to cover their own attorney fees in arbitration can’t be enforced because it conflicts with a Fair Labor Standards Act (FLSA) provision that allows workers who win suits to recoup legal costs, the Eleventh Circuit ruled.

A three-judge panel agreed with a lower court’s finding that the attorney fee and cost provisions in the arbitration pact contained in employee commission agreements allegedly signed by a trio of PIP Inc. technicians weren’t enforceable.  The panel said that under the FLSA, workers are allowed to collect attorney fees and expenses as part of a possible award.  “A mandatory ‘pay your own’ fees and costs clause removes the arbitrator’s ability to award a plaintiff what is provided by statute if the plaintiff is successful,” the panel wrote.

The lower court had found that the attorney fee and cost provision’s inclusion had doomed the entirety of the arbitration clause.  But the appellate panel said that the lower court needs to take another look at whether Florida law allows for the offending language to be severed from the rest of the arbitration provision.  “Our law does not support that an arbitration provision is unenforceable in its entirety if it contains an offending clause and lacks a severability provision,” the appellate panel wrote.  “The district court did not go on to the next step to address whether the unenforceable clauses were severable as a matter of Florida law.”

According to a single-count, third amended complaint from the former PIP service technicians, the company improperly didn’t pay them time-and-a-half when they worked more than 40 hours a week.  They sought damages and also interest, and attorney fees and costs, according to court documents.  The company pushed for arbitration in January, citing the arbitration clause in the employee commission agreements it said the workers signed.

But U.S. Magistrate Judge Barry S. Seltzer found in February that the arbitration provision couldn’t be enforced because it denies plaintiffs their right under the FLSA to collect fees and costs and because there wasn’t any severability provision, according to court documents.  About a month later U.S. District Judge Federico A. Moreno adopted the magistrate judge’s recommendation in the case and denied the company’s bid to compel arbitration.

In California, Attorney Fees May Be Awarded in ‘Reverse-CPRA’

November 18, 2019

A recent Metropolitan News story, “Attorney Fees May Be Awarded in ‘Reverse-CPRA’ Case,” reports that a newspaper that intervened in an action brought by a department of the City of Los Angeles seeking a declaration that certain of its records are non-disclosable, and succeeded in effecting the release of those records, is entitled to its attorney fees under the private attorney general doctrine, the Court of Appeal for this district has held.

Justice Maria Stratton of Div. Eight wrote the opinion.  It affirms a $136,645.82 award of attorney fees under the private attorney general statute, Code of Civil Procedure §1021.5, to the San Diego Union and tacks on $12,350.33, bringing the total to $148,996.15.

The records relate to pay-outs by the Department of Water & Power (DWP) to customers in the 2014-2015 fiscal year—rebates totaling nearly $18 million—for tearing up their lawns and replacing them with fake grass.

The San Diego Union on May 19, 2015, made a request under the California Public Records Act (CPRA) for records relating to the rebates.  That request was directed to the Metropolitan Water District (MWD), a cooperative water wholesaler with 26 utilities, including DWP, as its members.

MWD failed to adhere to the statutory time limits for responding, but on June 29, 2015, did release information to the Union—but with the names and addresses of DWP customers redacted.  The newspaper pressed for particularized information.  DWP on July 31, 2015, brought an action in mandate to block MWD from releasing records pertaining to rebates to approximately 7,800 of its customers. Three other water districts intervened, seeking non-disclosure.

The Union, too, intervened, urging denial of the DWP’s petition. It also filed a cross petition under the CPRA.  Meanwhile, the significance of release of the records intensified.  The Office of City Controller on Nov. 20, 2015 released an audit showing that the program cost more and was less effective than cheaper measures to deal with the drought.

City Controller Ron Galperin, in a letter on that date to the mayor, city attorney, members of the City Council, and “All Angelenos,” reported on an “Audit of DWP Customer-Based Water Conservation Programs,” saying:  “Auditors found that DWP does not adequately prioritize water conservation projects based on which are the most cost effective.  The key component of DWP’s conservation program last year-turf replacement-targeted outdoor water use, which constitutes about half of residential water use.  But evidence suggests that the turf replacement program, called ‘Cash in Your Lawn,’ was largely a gimmick—a device intended to attract attention and publicity.

“It in some ways worked as intended.  By paying more to provide customers an initial opportunity to get involved in water conservation-in hopes that participation and behavior might continue—it had value as an advertising campaign that helped stimulate major public interest in the drought.  But this came at a rather high cost and, arguably at the cost of some fairness.  Aid was distributed Citywide but was most concentrated in the western San Fernando Valley.  As well as ordinary ratepayers, beneficiaries included some affluent households and some private golf courses. One particular contractor benefited handsomely.”

Los Angeles Superior Court Judge James C. Chalfant on Jan. 15, 2016, denied the DWP’s petition and granted that of the Union. Those decisions were not appealed.  The DWP and the three water districts did appeal the attorney fee award against them.  Chalfant’s award of $25,319 against the MWD in connection with the cross-petition, pursuant to a provision in the CPRA, was not in issue in the appeal.

Stratton said that DWP’s action to block release by MWD of records “is not specifically authorized by CPRA, but this District Court of Appeal has permitted non-statutory actions to prevent disclosure of records requested under CPRA, that is reverse-CPRA actions.”

She cited Div. Seven’s 2012 decision in Marken v. Santa Monica-Malibu Unified School District, and explained:  “Such reverse actions have been viewed as necessary to protect the privacy rights of individuals whose personal information may be contained in government records, because CPRA provides no mechanism for notifying such individuals of the requested disclosure and does not specifically authorize actions to prevent disclosure.”

The jurist observed:  “This case highlights many of the issues that have emerged from permitting reverse-CPRA actions, like DWP’s, to prevent disclosure of public records.  The issue most directly implicated in this case, and the only issue we consider on appeal, is the availability of attorney fees in reverse-CPRA actions.”

She declared: “We conclude Union was eligible for attorney fees under CPRA for work on the CPRA cross-petition and for attorney fees under Code of Civil Procedure section 1021.5 for its work opposing the petition for writ of mandate….The trial court did not abuse its discretion in finding Union met the requirements of Code of Civil Procedure section 1021.5 for attorney fees.  Union was the prevailing party and its action resulted in the enforcement of an important right affecting the public interest, conferring a significant benefit on the general public.”

Stratton elaborated: “DWP’s action, if successful, would have established or expanded the ability of utilities to withhold information from the public and curtailed the public’s ability to obtain information on how the DWP, and potentially all public utilities, spends public funds. The expenditure of public funds is a matter of clear public interest….If, as DWP argued, its customers’ privacy rights outweighed the public’s clear and well-established interest in monitoring the expenditure of public funds, it is difficult to imagine when disclosure of customer information could ever be warranted.”

She went on to say: “DWP sought to block the public’s access to records necessary to monitor and assess the use and alleged misuse of public funds, and potentially to shield its customer information from disclosure in all circumstances.  That is sufficient for purposes of Code of Civil Procedure section 1021.5.”

DWP relied on the decision in Marken, which established the recognition of reverse-CPRA actions.  That case, it contended, supports its position that attorney fees may never be awarded in such cases.  There, Presiding Justice Dennis Perluss said that “a requesting party who participates in a reverse-CPRA lawsuit would not be entitled to the recovery of attorney fees, as would be the case if the party had successfully litigated his or her right to access to documents against a public agency.”

Stratton pointed to factual differences between that case and the one at hand, adding: “Further, Marken’s statement about attorney fees was part of the court’s general discussion of the viability of reverse-CPRA actions and so was dicta; no attorney fees were sought in that appeal.”

She did ascribe significance to an April 12, 2018 opinion by this district’s Div. One in Pasadena Police Officers Assn. v. City of Pasadena.  The underlying facts were that a police union sought an order in the trial court barring the public release of a report relating to a police shooting; the Los Angeles Times intervened, seeking the release of the entire report; the Los Angeles Superior Court found the report partially disclosable; the union sought a writ in the Court of Appeal; Div.  One on Sept. 10, 2015, denied the petition and directed that, on remand, disclosure of additional portions be considered; the trial court ordered further disclosures.

The Times then sought $350,422 in attorney fees under the CPRA and the private attorney general statute. It received an award of $45,472, only under the CPRA.  In the 2018 opinion, Div. One, in an opinion by Justice Jeffrey Johnson, reversed the denial of fees under §1021.5, and remanded the case.

DWP maintained that the Pasadena Police Officers Assn. case (“PPOA”) is distinguishable. Stratton responded: “We disagree.  PPOA is quite similar factually to this case. Both PPOA and this appeal involve records related to a matter of public interest; the PPOA reverse-CPRA action was brought by a union representing the interests of its large number of members, and this reverse-CPRA action to prevent disclosure was brought by a public agency, DWP, representing a large number of its customers.”

Florida Court: Exception to Attorney Fee Rule Misapplied

November 15, 2019

A recent Law 360 story by Nathan Hale, “Exception to Attys’ Rule Misapplied, Fla. Court Says,” reports that a Florida state appeals court ruled that a lower court erred when it applied an exception to a general rule against awarding attorneys' fees incurred litigating the amount of a fees award and made such an award to a homeowner who prevailed in a mortgage foreclosure suit.

Florida's Fifth District said in its opinion that language in three attorneys' fees provisions in the note and mortgage at issue in the case between Bayview Loan Servicing LLC and homeowner Jason Cross lacked the kind of “broad and undefined language” that two other state appeals courts found warranted exceptions to the general rule against “fees for fees” awards.  But the appeals panel sided with Cross on his cross-appeal and found that the trial court erred in finding he was not entitled to collect prejudgment interest for the period when Bayview was contesting the amount of attorneys' fees to be awarded.

The panel ordered that the Orange County Circuit Judge Kevin B. Weiss should award Cross prejudgment interest for the period from Dec. 27, 2016 — when he orally pronounced that Cross entitled to attorneys' fees — through the entry of a new final judgment in the case.  “We find untenable the suggestion that a party against whom attorney’s fees are assessed may avoid the opposing party’s entitlement to the award from being fixed by merely continuing to dispute entitlement,” the Fifth District said.

Bayview's and Cross' appeals arose from a final judgment that awarded Cross contractual attorneys' fees after the Fifth District affirmed the involuntary dismissal of Bayview's mortgage foreclosure action against Cross, according to the opinion.  The Fifth District said in its opinion that it was affirming without discussion several other issues raised by the parties on appeal.  On the “fees for fees” issue, the appeals court said that as a general rule, attorneys' fees incurred while litigating the amount of an attorneys' fees award in a case are not recoverable, but exceptions have been found in two rulings by its sister district courts.

In 2012's Waverly at Las Olas Condo Association v. Waverly Las Olas LLC, the Fourth District found that a provision authorizing the award of prevailing party fees “[i]n the event of any litigation between the parties under [the agreement],” was broad enough “to encompass fees incurred in litigating the amount of fees,” according to the opinion.

The Second District reached a similar conclusion in 2017 in the case Trial Practices Inc. v. Hahn Loeser & Parks LLP, where a contractual fees provision said: “prevailing party in any action arising from or relating to this agreement will be entitled to recover all expenses of any nature incurred in any way in connection with the matter ... including, but not limited to, attorneys’ and experts’ fees.”  The Second District found the language permitting recovery of “all expenses of any nature incurred in any way” was “broad enough to encompass fees incurred in litigating the amount of the fees,” according to the opinion.

In contrast, the contractual language in the mortgage and note in this case contained more limited authorization for recovery of attorneys' fees, including those incurred “in enforcing th[e] note” and “to the extent not prohibited by applicable law,” and in connection with acceleration or foreclosure of the note and appeal and bankruptcy proceedings, according to the opinion.

A representative for Cross praised the Fifth District's consideration of the case, if not all its findings.  “We believe the court carefully considered the matter and correctly ruled on many of the issues raised on appeal and cross-appeal.  We, however, respectfully disagree with the court’s decision to limit our client’s right to recover certain fees and costs,” said attorney Michelle Branch of Ghantous & Branch PLLC, which represented Cross.