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Category: Fee Statute

Consumer Can Recover Attorney Fees in Florida Debt Collection Action

September 17, 2018

A recent Law 360 story by Carolina Bolado, “Consumer Can Get Fees for Winning Debt Collection Suit,” reports that a Florida appeals court ruled that a consumer who fends off an "account stated" lawsuit seeking to collect on an unpaid credit card balance can collect attorneys' fees under Florida law.  Florida's Second District Court of Appeal reversed a trial court's order denying Katrina Bushnell's request for attorneys' fees after debt buying company Portfolio Recovery Associates LLC voluntarily dismissed its suit over an unpaid credit card bill.

Bushnell had asked for attorneys' fees under the credit card agreement, which contains a provision authorizing the creditor to recover its attorneys' fees as part of its collection costs.  Under Florida Statute 57.105(7), if a contract has a provision allowing attorneys' fees to a party that has to take action to enforce the contract, the court can also allow attorneys' fees to the other party if it prevails in the dispute.

The trial court ruled against Bushnell but asked the appellate court to address the issue and answer the question of whether an "account stated" action that seeks to collect an unpaid debt is considered an action to enforce a contract.  The Second District said that it is such an action and ruled that the account stated lawsuit could not have happened if the credit card contract did not exist.  "Simply put, if there had been no credit card contract, the amount due would not have accrued in the first place," the appeals court said.  "The credit card contract and the account stated cause of action are therefore inextricably intertwined such that the account stated cause of action is an action 'with respect to the contract' under section 57.105(7)."

The appeals court relied on the Florida Supreme Court's 2002 decision in Caufield v. Cantele, in which the court concluded that the prevailing party in a lawsuit for fraudulent misrepresentation was entitled to fees under the state's reciprocity provision.  The Supreme Court reasoned that the existence of the contract and the misrepresentation claims in the case were "inextricably" linked.  The Second District applied this reasoning to the case against Bushnell and concluded that the reciprocity provision in 57.105(7) applies.  The appeals court reversed the order denying Bushnell's fees and remanded it to the trial court to determine a reasonable fee award for her counsel.

Bushnell’s attorney Jennifer Jones of McIntyre Thanasides Bringgold Elliott Grimaldi Guito & Matthew PA called the decision “a big win for the little guy in Florida.”  She said the litigation tactic used against Bushnell is common among debt buyers, who often buy charged-off credit cards accounts for pennies on the dollar and then sue without proper documentation.  The customers often cannot secure legal representation to defend themselves against these lawsuits, according to Jones.

The case is Bushnell v. Portfolio Recovery Associates LLC, case number 2D17-429, in the Second District Court of Appeal of Florida.

Judge Erred By Limiting Attorney Fees in Probate Matter in California

September 7, 2018

A recent Metropolitan News story, “Judge Erred By Limiting Fee to 10 Percent of Minors’ Recovery,” reports that the law firm founded by veteran personal injury Ian “Buddy” Herzog was shortchanged by a Los Angeles Superior Court who awarded it only 10 percent of the $18 million settlement it negotiated for its minor clients, despite a contingency fee agreement calling for 40 percent, the Court of Appeal for this district has held.

The unpublished opinion was filed Wednesday.  In it, Presiding Justice Frances Rothschild of Div. One noted that under Probate Code §3600 and §3601, a court, in approving the compromise of a minor’s claim, must determine what are “reasonable” attorney fees, and pointed to California Rules of Court, rule 7.955, which sets forth guidance for trial judges in determining reasonableness.  A 10 percent fee, she said, was unreasonable in light of the contingency fee agreement, the risk the company took in taking the case on a contingency basis, and other factors.

Herzog, Yuhas, Ehrlich & Ardell of Santa Monica represented the wife and four minor children of Rainer Schulz in a wrongful death suit, after the wealthy German businessman crashed his Cessna 750 jet while attempting to land at a small German airport.  The action against various companies was brought on a products liability theory.  Los Angeles Superior Court Judge William F. Fahey apportioned $1 to Schulz’s widow, Silke Schulz, and the remainder of the $18,125,000 to the couple’s four minor sons.

He did not credit the contingency fee agreement which the widow and the chief executive of a company the Schulzes owned negotiated with the Herzog firm.  Under it, the firm was to receive 31 percent of the proceeds if the case were settled at least 30 days before trial and 40 percent after that point.  Although settlement came a few days before trial, the Herzog firm indicated its willingness to accept a 31 percent share.

Fahey said:  “Turning to the issue of attorney’s fees, the Court is not bound by a contingency agreement when considering the best interests of the minors.  Attorney fees must be carefully scrutinized and adjusted if warranted.  Here, the attorneys hired by Silke did a good job in investigating this case.”  He added:“But paying these attorneys their requested $5 million in fees out of the settlement proceeds would be excessive, to the substantial detriment of Rainer’s sons and contrary to this Court’s duty [to] assure that no injustice is done to them.”

Two of the Schulzes’s sons have permanent disabilities as a result of being born prematurely.  Rule 7.955(a)(2) sets forth: “The court must give consideration to the terms of any representation agreement made between the attorney and the representative of the minor.…”

Rule 7.955(b) lists 14 non-exclusive factors for courts to consider when determining what fee will be reasonable, including the amount of the fee in proportion to the value of services, the experience of the attorney and the amount of time and labor involved.

Rothschild declared: “We conclude the trial court gave too little consideration to California Rules of Court, rule 7.955(a)(2).…In addition, the court did not acknowledge the factors listed in California Rules of Court, rule 7.955(b).  Although these factors are not mandatory, they provide a guide to the considerations relevant to determining whether a fee protects the interests of a minor while allowing an attorney to obtain a fair recovery.”

She continued: “All of these factors support a recovery greater than 10 percent.  One of the two attorneys who primarily worked on the case, Ian Herzog, had 47 years of experience in aviation accident cases, and the other, Thomas Yuhas, had 37 years of experience.  Both attorneys also have many years of experience as pilots, which undoubtedly gave them insight as to the causes of the crash.  In this case, both sides agree that the risk of loss was substantial.  When viewed from the perspective of the time it was signed, the representation agreement thus realistically evaluated the high risk that there could be no recovery at all or one substantially lower than was achieved.”

She noted that the firm advanced more than $300,000 in costs.  In determining the potential for a minor being taken advantage of, the rule counsels, the court should look to the “relative sophistication of the attorney and the representative of the minor.  Rothschild said that Silke Schulz is a highly sophisticated executive who took over the company after her husband’s death.  And who made an informed decision to enlist the services of a firm willing to take the case on a contingency basis.

The jurist noted that rule 7.955 had superseded prior local rules setting the baseline contingency award for minor clients, often at 25 percent.  She drew an analogy to class action attorney fee awards, which have a 25 percent starting point in the Ninth U.S. Circuit and some California courts.  She wrote: “We acknowledge that what is reasonable in applying the factors in California Rules of Court, rule 7.955 in any particular case may comprise a range of percentages.  Under the facts of this case, however, 10 percent was not within that reasonable range.  Although the trial court would be acting within its discretion to award less than 31 percent, we note that 31 percent is not out of line with awards in class actions, which, like this case, involve attorney fees to be paid by a protected class and that require court approval.”

The case is Schulz v. Jeppesen Sanderson, Inc., B277493.

Judge Approves Fee Enhancement in GNC Age Discrimination Case

August 22, 2018

A recent New Jersey Law Journal story by Charles Toutant, “Judge Approves Fee Enhancement, But Not ‘Dual Fee,’ in GNC Employee’s Case” reports that a federal judge in Camden, pointing to his concern that “hourly or relatively low salaried workers may not obtain the skilled representation they deserve,” granted a 25 percent fee enhancement to a lawyer after his client obtained a $258,926 jury verdict in an age discrimination suit against vitamin and supplement retailer General Nutrition Corp.  At the same time, the judge ruled out the possibility of the lawyer recovering a statutory and contingency fee simultaneously.

The enhancement of 25 percent above the $127,215 lodestar brings Vineland attorney Richard Pescatore’s fee to $159,018, warranted because he undertook representation of the plaintiff without assurance that he would be paid, U.S. Magistrate Judge Joel Schneider said in Andujar v. General Nutrition.  The judge also approved $1,823 in costs, prejudgment interest of $123,926, and a payment, in an amount to be determined, to offset negative tax consequences of a lump-sum award.  The amounts are to be paid by the defendant if the verdict is upheld on appeal.  The appeal to the Third Circuit is pending, according to the decision.

“Without the prospect of a potential high fee, the Court is concerned that hourly or relatively low salaried workers may not obtain the skilled representation they deserve,” Schneider said.  “Competent counsel should not only represent those with largesse,” he said, citing Norman v. Haddon Township, a July ruling granting a 33.33 percent fee enhancement in a police excessive-force case.

Following the October 2017 jury verdict in his client’s favor, Pescatore sought the enhanced fee as counsel to a prevailing party in a New Jersey Law Against Discrimination claim.  His retainer agreement provided him a contingency fee of 45 percent of the net recovery, the decision noted.  Initially, Pescatore contended he was entitled to the full amount of his court-awarded fee, in addition to his contingency fee, which Schneider termed “a dual fee recovery.”  Counsel for GNC did not object to the prospect of a dual recovery but said any such recovery should be taken into account when determining whether a lodestar enhancement was warranted.

After Schneider asked for supplemental briefing on whether a dual recovery was permissible, Pescatore submitted a new proposal to calculate his attorney fee, seeking 45 percent of the jury award ($115,695), plus his court-awarded lodestar ($127,215), for a total of $242,910. GNC opposed that proposal.

Later, Pescatore sought 45 percent of the total sum of the judgment plus the court-awarded fee.  Those two amounts totaled $386,141, and his 45 percent share would have been $173,763.  He also sought a 50 percent enhancement of the court-awarded fee, which would bring the total fee award to $237,000.  But Schneider rejected those terms as inconsistent with Pescatore’s written fee agreement and applicable case law.  Pescatore did not cite any case law approving such an arrangement, while GNC’s lawyer cited persuasive case law to the contrary, Schneider said.

Case law provides that “unless a fee agreement specifically refers to a statutory fee award, a lawyer may receive either the agreed upon contingency fee based on the jury award or the statutory award, whichever is greater.  Counsel may not, as is requested here, receive a portion of both,” Schneider said.  The judge awarded the $127,215 lodestar, since it was slightly greater than the contingency fee of 45 percent of the net jury award.  And since Pescatore sought a 50 percent enhancement, and GNC proposed an enhancement of 5 percent at most, Schneider settled on a “mid-range” enhancement of 25 percent.

“While the Court believes the plaintiff is entitled to an enhancement, it need not be excessive.  This was not an unduly complex case.  Nor did counsel spend an inordinate amount of time on the case.  It is unlikely plaintiff’s counsel had to [forgo] potentially lucrative work on account of his handling of this case,” Schneider said.

Federal Circuit Tosses Fee Award Under New USPTO Policy

August 14, 2018

A recent Law 360 story by Bill Donahue, “After Big Ruling, Fed. Circ. Nixes USPTO Fee Award,” reports that, citing a ruling last month striking down the U.S. Patent and Trademark Office’s controversial policy on attorneys' fees, the Federal Circuit started tossing out such awards against other patent applicants.  Although a three-judge panel affirmed a district court’s decision to reject an application from a company called Realvirt LLC for a patent on network switching technology, it also vacated an order that required the company to repay $48,000 in attorneys' fees the USPTO spent litigating the case.

That’s because the fee award was granted under a USPTO policy adopted in 2013 requiring that patent and trademark applicants that appeal to a district court must always repay the agency's legal bills — a policy struck down by the en banc Federal Circuit last month.  As court watchers wonder whether the USPTO will appeal the so-called NantKwest ruling to the U.S. Supreme Court, the Federal Circuit applied the ruling to wipe out the fee award against Realvirt.

“In light of this court’s decision in NantKwest Inc. v. Iancu, the court hereby lifts the stay in [Realvirt’s case], vacates the judgment of the district court, and remands this case for further proceedings consistent with NantKwest,” the court wrote in a per curiam opinion.

There are other cases pending on the fee rule, most notably an appeal from Booking.com after it was ordered to repay $76,000 in attorneys’ fees even after winning a trademark appeal against the agency.  That case represents the most extreme outcome of the USPTO’s policy, which says applicants must pay the office’s legal bills no matter who wins the case.  Booking.com has already pointed to the NantKwest ruling, but the company's case is pending in the Fourth Circuit, where a panel upheld the USPTO’s approach to fees in 2015.  Barring an en banc appeal, the Fourth Circuit is compelled by precedent to side with the USPTO.

That clear circuit split — the Federal Circuit saying the rule is illegal and the Fourth Circuit saying it’s fine — might entice the U.S. Supreme Court to tackle the case if the USPTO files a petition to the high court.  Whether that’s a step that will be taken by the agency, which has come under new leadership since the policy was first rolled out, remains to be seen.  The fee policy at issue is the result of a new interpretation of old statutory language.

Both the Patent Act and the Lanham Act say that unsuccessful applicants who file a so-called de novo appeal to a district court — as opposed to a more streamlined record appeal directly to the Federal Circuit — must pay “all expenses of the proceeding.”  But for decades, the USPTO interpreted that language to mean relatively minor expenses, like travel costs and expert fees, not the substantially larger attorneys’ fees.

The case is Realvirt LLC v. Iancu, case numbers 17-1159 and 16-2669, in the U.S. Court of Appeals for the Federal Circuit.

Jones Day Warns of ‘Protracted’ Fee Actions if Circuit Ruling is Upheld

July 25, 2018

A recent NLJ story by Erin Mulvaney, “Jones Days Warns of ‘Protracted’ Fee Fights if Circuit is Upheld,” reports that Jones Day lawyers, representing CVS Pharmacy Corp., are raising alarms that a federal appeals court decision that erased a fee award misapplied legal standards and will invite “protracted” litigation over compensation in future cases.  The U.S. Court of Appeals for the Seventh Circuit in June overturned a $307,000 fee award for the law firm, which had successfully challenged U.S. Equal Opportunity Commission claims that a CVS severance agreement unlawfully interfered with protected workplace rights.

The appeals court, finding the EEOC’s case against CVS wasn’t fruitless, vacated the legal fees awarded to Jones Day.  The applicable fee statute, the court said, “does not punish a civil rights litigant for pursuing a novel, even ambitious theory.”  The law firm asked the court to reconsider the decision stripping fees.  Jones Day’s Eric Dreiband, leading the team for CVS, took issue with how the appeals panel resolved the fee dispute.  The Seventh Circuit, according to lawyers for CVS, should not have granted “fresh” review but instead should have approached the dispute using a standard that gives greater deference to the trial court.

“Although this particular fee award may not be of great importance, the standard of review for all fee awards assuredly is,” Dreiband wrote in court papers.  “The panel opinion gets it wrong and, worse, invites protracted fee litigation by promising de novo appellate review.”  Citing an earlier Seventh Circuit case, Dreiband, who is the Trump administration’s nominee to lead the U.S. Justice Department’s civil rights division, said it would be “’wasteful’ for appellate courts to ‘redo’ a lower court’s analysis of ‘how far from the correct legal position’ a party strayed.”

The lawyers for CVS also are urging the Seventh Circuit to correct an alleged “legal misstatement” that could lead other courts astray.  The Jones Day lawyers, including partner Yaakov Roth, argue the panel decision incorrectly stated the EEOC can litigate certain types of employment cases without an underlying charge.  The attorneys also contend the appeals court strayed in saying it was “questionable” whether legal fees can ever be awarded in scenarios where the EEOC violated a duty to try to resolve disputes before any lawsuit is filed.

The case is rooted in a 2014 lawsuit filed by the EEOC over a severance agreement the agency said limited the rights of employees to file complaints.  The EEOC called the severance agreement “overly broad” and argued it was part of a CVS “pattern or practice of resistance” to restrict the civil rights of employees.  The agency lost in the U.S. District Court for the Northern District of Illinois.

Dreiband, formerly the head of Jones Day’s labor and employment group, in 2016 identified his hourly rate at $560, according to court papers in the case.  Dreiband earlier served as general counsel to the EEOC from 2003 to 2005.  Roth, a former clerk to the late Justice Antonin Scalia, billed at $475 per hour in 2016, and Nikki McArthur at $275 per hour, according to court records.