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Category: Fees as Damages

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.

Indiana Bill Would Allow Recovery of Attorney Fees in Wrongful Death Actions

January 12, 2016

A recent the IndianaLawyer.com story, “Bill Would Allow Recovery of Attorney Fees in All Wrongful Death Actions” reports that a northern Indiana senator has introduced legislation to amend Indiana’s wrongful death statute to allow for surviving families to collect attorney fees.

Sen. Lonnie Randolph, D-East Chicago, has proposed in Senate Bill 124 that language be added to Indiana Code 34-23-1 that would enable a widow or widower, dependent children or dependent next of kin to receive reasonable attorney fees in wrongful death actions.

The measure comes after the Indiana Supreme Court ruled in August that under current law attorney fees do not qualify as damages when the deceased is survived by family.  In SCI Propace LLC; South Central Indiana Rural Electric Membership Corp.; Rush Shelby Energy Rural Electric Cooperative, Inc. v. Courtney Fredrick, as Personal Representative of the Estate of Stephan Fredrick, Deceased, 55S04-1508-PL-501, the unanimous court found the state’s General Wrongful Death Statute allows for attorney fees only when the decedent has no survivors.

Randolph’s bill specifies that in an adult wrongful death lawsuit, damages include “reasonable attorney’s fees” incurred by the estate or any person for bringing and maintaining the action.

The fiscal impact of the new language would depend on whether a state agency is found liable for an individual’s death, according to the Indiana Legislative Services Agency.  The maximum payment for a wrongful death from the state government is $700,000 but the average cost of attorney fees in such actions is unknown.

Government to Pay Attorney Fees in FLSA Suit

September 21, 2015

A recent Texas Lawyer story, “Government to Pay $1.5M in Attorney Fees in FLSA Suit,” reports that the U.S. Department of Labor has agreed to pay $1.5 million in attorney fees to Corpus Christi company and its owner after the U.S. Court of Appeals for the Fifth Circuit sanctioned the federal government for bad faith ruled that it owed fees to the company.

The wage and hour division of the U.S. Department of Labor will pay the money to Gate Guard Services and owner Bert Steindorf, according to the settlement agreement.  The money is for attorney fees and expenses.

The Department of Labor alleged in a 2010 complaint that Gate Guard violated overtime laws.  But according to a ruling in July issued by a three-judge Fifth Circuit panel, when the DOL investigated Gate Guard for alleged Fair Labor Standards Act (FLSA) violations, the federal agency violated its own internal procedures and ethical litigation practices.

The Fifth Circuit sanctioned the federal government for bad faith and found that it owed attorney fees and travel expenses to Gate Guard.  But instead of having U.S. District Senior Judge John Rainey of the Southern District of Texas determined that exact amount of fees and expenses, the DOL negotiated a settlement with Pipitone.

Earlier, in April 2014, Rainey had ruled that the DOL owed $565,227 in attorney and paralegal fees and travel expenses to Gate Guard.  In 2013, Rainey granted Gate Guard’s motion for summary judgment and dismissed all claims that the DOL brought against it in the FLSA enforcement action.

Pipitone said the $1.5 million the government is paying covers the $1.3 million in attorney fees Steindorf has paid over the years plus “$200,000 in what I’m going to call essentially an enhancement.”

Great Reviews for NALFA Webinars

June 3, 2015

NALFA is hosting a series of webinars on attorney fee and legal billing issues throughout 2015.  All our webinars are free for NALFA members and NALFA clients.  So far this year, NALFA has hosted 2 webinars: “Winning Attorney Fees in Court: Use of Experts, Case Strategies & Hot Issues” and “Bankruptcy Fee Examiners in Large Chapter 11 Cases.”  Dozens have registered for each of these CLE webinars.  Some of the comments from the registered guests include:

“The panel discussion [on bankruptcy fees] was very educational”

“Very impressed with the panel presentation and materials”

“Gained a great deal of insight and information. So many complex issues on these [fee] issues.”

“Learned valuable information”

"Great program...hope this becomes an annual thing"

For information on upcoming NALFA programs, visit http://www.thenalfa.org/CLE-Programs/

New Article: When the American Rule Doesn't Apply: Attorney's Fees as Damages in California Litigation

February 17, 2012

A recent article in the State Bar of California’s California Litigation, “When the American Rule Doesn’t Apply: Attorney’s Fees as Damages in California Litigation (pdf),” by Marc Alexander and William (Mike) Hensley looks at attorney fees in the context of damages in California litigation.  

The article discusses three judicially created exceptions under California law to the American Rule: The “tort of another” doctrine, Brandt recovery, and damage recovery in malicious prosecution/false imprisonment cases.  Where these exceptions apply, prevailing parties can be made whole by being compensated for attorney’s fees – but the relief, rather than being treated as fees, per se, is given as an item of damages.

Marc Alexander and William (Mike) Hensley are shareholders at Alvarado Smith in Santa Ana.  They run California Attorney’s Fees Blog located at www.calattorneysfees.com