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Category: Fee Issues on Appeal

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.

Attorney Fees Not Subject to Damages Cap in Wage Case

March 8, 2017

A recent Legal Intelligencer story by Zack Needles, “Attorney Fees Not Subject to Damages Cap in Wage Case, Court Says,” reports that attorney fees can be awarded under the Pennsylvania Wage Payment and Collection Law (WPCL), even if they cause the total recovery to exceed a voluntary $25,000 damages cap, the Pennsylvania Superior Court ruled in a case of first impression.

Under Pennsylvania Rule of Civil Procedure 1311.1, a plaintiff can elect to limit the maximum amount of damages recoverable to $25,000 in exchange for looser evidence admission requirements at a trial following compulsory arbitration.  In a published opinion in Grimm v. Universal Medical Services, a three-judge Superior Court panel unanimously ruled that such a cap does not preclude an award of attorney fees under the WPCL that pushes the total recovery above $25,000.

The decision affirmed a Beaver County trial court's award of $43,080.66, comprising an $11,683.92 jury award, plus $2,920.98 in liquidated damages and $28,475.76 in attorney fees and costs under the WPCL.  The appeals court upheld Beaver County Court of Common Pleas Judge James J. Ross' ruling, which reasoned that attorney fees in excess of the damages cap should be permitted because "a prevailing plaintiff in a [WPCL] claim must be made whole and not be required to expend his or her award to pay his or her attorney."

Judge John T. Bender, writing for the Superior Court, agreed with Ross' rationale, noting that Rule 1311.1 is intended to streamline litigation in order to make it more economically feasible for plaintiffs, while the WPCL is meant to allow plaintiffs to collect unpaid wages and compensation without having to spend their entire recovery on legal fees.

"In this way, both Rule 1311.1 and the WPCL aim to make litigation more accessible and affordable to aggrieved litigants, particularly those with meritorious claims," Bender said.  "In this case, we believe we are promoting this overarching policy by interpreting 'damages recoverable' in Rule 1311.1(a) to exclude attorneys' fees under the WPCL."  Bender was joined by Judges Mary Jane Bowes and Carl A. Solano.

In Grimm, plaintiff Jeffrey P. Grimm sued defendants Universal Medical Services Inc. and Roderick K. Reeder, alleging breach of contract against Universal for failure to reimburse business expenses and a WPCL claim against both defendants on the same basis, according to Bender.

The case proceeded to compulsory arbitration, with an award in favor of the defendants.  Grimm appealed to the Beaver County Court of Common Pleas, electing to cap damages at $25,000 under Rule 1311.1, and the case proceeded to a jury trial, Bender said.

The jury awarded damages to Grimm in the amount of $11,683.92 and, finding that Universal acted in bad faith in failing to reimburse him, the court added 25 percent, or $2,920.98, to the jury award, resulting in a total of $14,604.90, according to Bender.  Grimm then sought attorney fees in the amount of $25,946.25 and litigation costs in the amount of $2,529.51 under the WPCL.

While the defendants argued that the phrase "damages recoverable" in Rule 1311.1 encompassed attorney fees, Grimm contended that attorney fees are payments in addition to a jury award intended to make the plaintiff whole.

Bender noted that Ross, in his analysis, looked first at the analogous 2001 Pennsylvania Supreme Court case Allen v. Mellinger, in which then-Justice Ralph Cappy wrote in a concurring and dissenting opinion that delay damages in cases involving bodily injury, death or property damage under Pa.R.Civ.P. 238 should not be subject to the statutory cap of $250,000 when the state is a defendant in a bodily injury claim.

In the 2005 case LaRue v. McGuire, as Ross also noted in his opinion, the Superior Court relied on Cappy's reasoning in Allen to find that delay damages under Rule 238 were not subject to the Rule 1311.1 damages cap.

While the defendants attempted to distinguish Grimm from Allen and LaRue by arguing that delay damages are an extension of compensatory damages intended to make the plaintiff whole, while attorney fees serve no such purpose, Bender disagreed.

"It is clear that the award of attorneys' fees under the WPCL accomplishes the purpose of making a plaintiff whole, just like the delay damages in Allen and LaRue," Bender said.

Texas High Court to Hear $42M Fee Dispute

March 6, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court to Hear $42M Atty-Client Fee Dispute,” reports that the Texas Supreme Court on granted a request from the owner of a water supply company, who argued a lower court ignored a jury's findings and wrongly granted a new trial to his two former lawyers in a contingency fee dispute lawsuit involving their right to a stake in his company.
 
In October 2013, a jury rejected the claims of solo practitioners Thomas C. Hall and F. Blake Dietzmann that they were entitled to $42 million in damages under a contingency agreement with Dean Davenport, who won full ownership of a water supply company in an underlying suit.  But about 105 days after rendering judgment, the trial court vacated the judgment and granted the attorneys' request for a new trial.  After an appellate court directed the trial court to provide specific reasons for granting a new trial, it did so in March 2015, holding that the agreement unambiguously provided that fees would be paid out of the ownership in any business recovered, and that the jury's findings weren't supported by the evidence, Davenport told the court.  The high court has scheduled oral arguments in the matter for March 23.

In his petition for writ of mandamus, filed in November 2015, Davenport told the high court it should take the case because the dispute raises the important issue of when a trial court should be allowed to grant a new trial.  In this case, Davenport argued, the trial court disregarded a jury's findings, misstated the record, ignored evidence, credited disputed testimony and “substituted its judgment and credibility decisions for the jury's” in granting his former attorneys' request for a new trial. 

Davenport also argued that the court should weigh in on the “narrow circumstances” under which lawyers and clients can become business partners under contingent fee agreements.  Rule 1.08(a) of the Texas Disciplinary Rules of Professional Conduct allows for that only if the transaction is fair, reasonable and fully disclosed; the client is given a chance to seek advice from outside counsel; and the client consents to it in writing. None of those safeguards were met in this case, Davenport told the court.

“Nonetheless, the trial court concluded as a matter of law — eleven months after a jury verdict in favor of the client (and after the trial court determined the fee agreement was ambiguous) — that the fee agreement was unambiguous and supposedly entitled the lawyers to become partners in businesses the client purchased in settling his lawsuit,” Davenport wrote.  “In so doing, the trial court ignored the plain language of the fee agreement at issue and the special rules and ethical principles underlying the interpretation of attorney-client fee agreements and attorney-client business transactions, as set forth in Levine, Anglo-Dutch, and Rule 1.08.”

In a February 2016 response arguing against granting the mandamus petition, Hall and Dietzmann told the court that Davenport wants the court to “greatly expand Texas law in ways that would substantially reduce the significance and reliability of all written contracts.”  Their agreement with Davenport, the attorneys told the court, “expressly contemplates paying fees out of the recovery of a business ownership.”

“The trial court did not clearly abuse its discretion by granting a new trial for the reasons stated. As it relates to the payment of attorneys’ fees out of the recovery of an ownership of a business, the agreement is unambiguous,” the brief reads.  “Furthermore, the trial court did not abuse its discretion in concluding the evidence was insufficient to support findings that Hall and Dietzmann had waived or should be equitably estopped from asserting their right to be paid under their unambiguous fee agreement with Davenport.”

Hall and Dietzmann filed suit in February 2012, claiming that after the settlements because Davenport was “paid” through his former partners' ownership interests in Water Exploration Co Ltd., they were owed a percentage of the company, instead of the about $400,000 in cash he paid them in December 2009.  They sought about $24.6 million in damages, equivalent to what they said would be the current value of their alleged ownership interest in WECO, plus $18 million in punitive damages.

But the jury found Davenport's contingent fee agreement with the two attorneys did not include a potential ownership stake in WECO, and found the attorneys had waived their rights to seek ownership of WECO and were each estopped from trying to claim a stake in the company.  Jurors also found both attorneys complied with their fiduciary duties to Davenport.

The case is In Re Dean Davenport et al., case number 15-0882, in the Supreme Court of Texas.

Insurer Fights Fee Discovery in Texas

February 22, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court Told to Nix Attys’ Fee Discovery Ruling,” reports that National Lloyd's Insurance Co. urged the Texas Supreme Court to upend a lower court ruling compelling discovery of its attorneys’ fee information in litigation with property owners who allege the insurer underpaid their damage claims, contending that information is privileged.

The justices heard arguments on whether National should be able to keep that fee information under wraps — a fight that stems from four property insurance cases in which the property owners argued they had been shortchanged on claims following two hailstorms in Hidalgo County, Texas, in March and April 2012.

Scot Doyen, arguing on behalf of the insurer, told the court that siding with the property owners would “add layers of complexity to an area of the law that is otherwise clear and workable,” that the information sought is privileged and that the “relational nature” of fee consideration renders its fees irrelevant.  Such fees hinge on "the relationship between the party and the lawyer, not the relationship between the party and the other party,” he told the court.  “It is relational to that specific lawyer to client relationship," Doyen said.

Arguing on behalf of the insured property owners, Jennifer Bruch Hogan rejected the notion that an opposing counsel's fee information, including hourly rates and total hours billed, is “patently irrelevant,” though she said the tasks themselves may be privileged information subject to redaction.

“The second point I want to make is that the defendants have voluntarily designated their lead trial lawyer as a testifying expert, and not as a testifying expert on their own attorneys' fees, but as a testifying expert who can challenge the plaintiffs' attorneys' fees as unreasonable and unnecessary,” she also told the court, adding that the arrangement had put the case in "an unusual posture." 

In its petition for writ of mandamus filed with the state high court in August 2015, National argued that a defendant's fees are irrelevant, and that there are other methods in place — including the lodestar method and Arthur Andersen factors — that can be used without compelling a party to turn over rate and fee information it argues is privileged.

National's petition said the Thirteenth Court of Appeals decision caused a split among state appellate courts over whether a plaintiff can discover a defendant's attorneys' fee information, which it said is reflective of a split in other state and federal courts as well.  It said that the state high court has never adjudicated the issue and the Thirteenth Court erroneously relied on Chief Justice Nathan Hecht's concurring opinion in the 2012 case El Apple I v. Olivas in justifying its holding that the fee information is both relevant and discoverable.

As part of the underlying legal battle, the property owners were seeking damages and attorneys' fees on their breach of contract and Texas Insurance Code claims, according to court documents.  The cases were consolidated with thousands of others in a multidistrict litigation in Texas, and special master Roberto Ramirez was appointed to resolve any disputes.  In March 2015, according to the petition, the property owners in this case moved for additional discovery on attorneys’ fee information, including rates, invoices, payments and audits.  The insurers objected.

In April 2015, the special master permitted the additional discovery, which resulted in requests for the information being served to National Lloyds, Wardlaw Claims Service Inc. and Ideal Adjusting Inc., which objected to the requests.  After a hearing, the special master overruled each objection, according to the petition, and an appeal to the Thirteenth Court of Appeals followed.

The case is In re: National Lloyds Insurance Co et al., case number 15-0591, in the Supreme Court of the State of Texas.

Attorneys Challenge Low Fee Award Before Ninth Circuit

February 21, 2017

A recent Law 360 story by Dorothy Atkins, “Kraft Buyers’ ‘Greedy’ Attys Fight Low Fee Award at 9th Circ,” reports that attorneys who extracted a confidential settlement from Kraft Foods over mislabeling claims defended their $1.8 million fee request before the Ninth Circuit, saying the $11,000 award by a district judge who called them “greedy” didn’t come close to compensating them for hundreds of hours spent on the case.

Gregory S. Weston of The Weston Law Firm, who represented buyers of Kraft Foods Inc. snack products, argued that U.S. District Judge George H. Wu didn’t explain exactly how he determined that counsel was owed for only 200 hours of work, or how he arrived at the $11,000 figure.  Weston said the consumers prevailed in the case’s pleading stage, which he said involved three-years of litigating six different hearings and required much more than 200 hours of work.  “There’s no way that gets done in 200 hours,” he said.

Judge Wu rejected the $1.8 million fee request in June 2014, calling the consumers’ attorneys “greedy.”  At the time, the consumers had reached a confidential settlement with Kraft that ended the suit, which had been filed by lead plaintiffs Evangeline Red and Rachel Witt in 2010.  They alleged the company violated false advertising provisions of the Lanham Act by making misleading claims that several Kraft products were nutritious when they actually contained trans fats.

Weston said that state law requires courts to compile submitted hours carefully to determine attorneys’ fees, but that Judge Wu appeared to use an “arbitrary” and nonspecific method to determine the fees owed.  There’s also “no indication” Judge Wu actually reviewed counsel’s hours, or used an initial lodestar calculation or a negative multiplier to calculate the fees, he said.

But the three-judge panel pressed Weston on his argument, asking him why he believes he’s entitled to higher fees when it’s not apparent the consumers were the prevailing party in the case.  U.S. Circuit Judge Richard C. Tallman said that keeping the lawsuit alive for as long as the consumers did didn’t make them the prevailing party, especially, he said, when they basically lost on their theory of the case.

Weston disputed that view, arguing that the consumers, having won an injunction against Kraft, didn’t lose on their theory of the case at all.  Additionally, he said, even if the case’s merits didn’t go to trial, the consumers prevailed on six motions, including two motions to dismiss.  The only thing the consumers didn’t succeed at was achieving monetary relief for the class, he said.

And regardless, Weston said, case law has established that only awarding fees to parties who are successful on their theories would end up undercompensating attorneys, and it wouldn’t recognize the “inevitable exploratory nature of litigation.”

Meanwhile, Kraft attorney Dean N. Panos of Jenner & Block LLP said Judge Wu applied the correct, pragmatic approach to “trimming the fat” by broadly determining that the consumers’ “outrageous” fee request was too high and awarding a lower fee.  Panos argued that there’s no precise formula to calculate fees, and the court is not required to conduct an hour-by-hour analysis of time spent on a case.  Judge Wu had presided over three years of litigation and therefore he was in the best position to determine how much counsel should be paid, Panos said.

The case is Evangeline Red v. Kraft Foods Inc., case number 15-55760, in the U.S. Court of Appeals for the Ninth Circuit.