Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Issues on Appeal

Ninth Circuit Backs Attorney Fees in ERISA Appellate Work

November 28, 2017

A recent Law 360 story by Adam Lidgett, “9th Circ. Backs Appellate Attys’ Fees for Benefit Plan,reports that a Ninth Circuit panel reversed a lower court’s denial of appellate attorneys' fees for an employee benefit plan in its dispute with Sun Life Assurance Co. of Canada Inc., saying the district court failed to take into account the whole course of litigation in analyzing the fee request. 

The panel reversed and remanded the denial of the fee request from the Group Disability Benefits Plan for California-based Gynecologic Oncology Associates Partners LLC.  The plan sought attorneys' fees and costs it incurred defending an earlier award of attorneys' fees in an Employee Retirement Income Security Act (ERISA) case filed against the plan and Sun Life.

The Ninth Circuit said the district court has to take into account the entire course of litigation and that it was clear the plan is entitled to the appellate attorneys' fees after weighing five factors outlined in the case Hummell v. S.E. Rykoff & Co. in light of Sun Life’s conduct.  Those factors included Sun Life's denial of a claim for disability benefits from a cancer surgeon with Gynecologic Oncology Associates Partners, the move that kicked off the initial lawsuit.

The appellate judges said the plan was forced into litigation after Sun Life wrongfully denied Dr. John Paul Micha’s claims and that Sun Life doesn’t dispute it can pay the fee award.  The panel remanded the issue to the district court to calculate reasonable fees.

“A party like Sun Life should not be able to appeal from a litigation fee award, even on an issue justifying appellate review, and thereby impose significant costs on the appellee in defending the fee award, while taking comfort in the knowledge that any potential appellate fee award against it will be judged solely on the basis of its appellate arguments on the fee issue,” the published decision said.

The case dates back to 2009 when Micha filed the suit after he was denied disability benefits by Sun Life.  The benefits of the plan were insured under a policy purchased from Sun Life, the plan has said.  After Sun Life settled Micha’s suit, the plan said it moved for attorneys' fees, and the district court agreed, awarding more than $38,000.  Sun Life appealed that award to the Ninth Circuit, but the appellate court affirmed the plan's win, prompting Sun Life to file a petition for a writ of certiorari in the U.S. Supreme Court, court papers show.

The Supreme Court denied the petition, however, and the plan sought an award for attorneys' fees and costs it incurred on appeal, according to court documents.  However, it first filed with the Ninth Circuit to transfer consideration of appellate attorneys' fees to the district court, the plan has said.  But when the issue went back to the lower court, the court denied the plan’s request for attorneys' fees incurred in defending the earlier award, the plan said.

The case is John Micha v. Sun Life Assurance of Canada et al., case number 16-55053, in the U.S. Court of Appeals for the Ninth Circuit.

NJ Supreme Court: Pledge of Expected Attorney Fees is an Account Receivable

November 16, 2017

A recent New Jersey Law Journal story by Michael Booth, “Lawyer’s Pledge of Expected Fee is an Account Receivable, Court Says,” reports that an attorney’s pledge of anticipated counsel fees to pay off a debt can be considered an account receivable under the Uniform Commercial Code, the New Jersey Supreme Court ruled.  The court’s unanimous, per curiam ruling affirmed an Appellate Division panel reaching the same conclusion in upending a $1.6 million award in a legal malpractice case involving a corporate whistleblower and his former law firm, and an unrelated malpractice case against his second attorney.

The court agreed with Appellate Division Judges Michael Guadagno, Joseph Yannotti and Jerome St. John that a creditor, OKS Realty, should be placed first in line of a series of creditors to a New Jersey attorney since it filed a financing statement under Article 9 of the Uniform Commercial Code with the U.S. Treasury Department.  The court said OKS should be prioritized before other creditors, a law firm and an accounting firm, because of the pledge by the now-retired attorney, Woodland Park solo Diane Acciavatti, to use an anticipated fee to pay off a loan.

“An attorney’s pledge of anticipated counsel fees can be considered an account receivable,” Guadagno previously wrote for the Appellate Division panel, in August 2016.  The ruling means that a company that loaned $125,000 to Acciavatti moves ahead of two other creditors since it was the only one to file a financing statement with the Treasury Department.

“OKS met the requirements … for its security interests to attach to Acciavatti’s counsel fees,” Guadagno said.  “Whether an attorney’s pledge of anticipated counsel fees can be considered a security interest under Article 9 of the Uniform Commercial Code … is an issue of first impression in New Jersey.  We hold that it can.”

OKS’s attorney, Robyne LaGrotta, said she will now move to claim funds that already have been paid to two other creditors—Springfield’s Gourvitz & Gourvitz, and an accounting firm, now called RotenbergMeril. Gourvitz has been paid $83,284 and RotenbergMeril has been paid $133,652.

The multipronged litigation stretches back to 2007 when a plaintiff, John Granata, retained Acciavatti to represent him in legal malpractice lawsuit against his former lawyer, Edward Broderick Jr., and his firm, Broderick Newmark & Grather in Morristown.

Broderick had represented Granata in a whistleblower action against his former employer, Prudential Insurance Co. of America.  Granata, a salesman, claimed he was fired in 2006 because he had complained to superiors that the company was improperly discriminating against agents like himself who served inner-city areas with large minority populations, through such practices as “redlining.”  The company said it fired Granata for allegedly signing a client’s name to a form authorizing a transfer of the client’s funds from a money market account to mutual bonds.

Granata had been seeking $3 million in damages from Prudential, which forced the lawsuit into arbitration.  An panel of arbitrators award Granata $28,000, but assessed him $12,530 in fees and costs.

Class Counsel for Pharmacies Challenge Attorney Fee Reductions

November 15, 2017

A recent Law 360 story by Diana Novak Jones, “Class Attys Fight Fee Cut at 7th Circ. In Pharmacy TCPA Row,” reports that counsel for a class of pharmacies asked the Seventh Circuit to allow them to collect what a pharmaceutical distribution company agreed to pay after a federal judge slashed attorneys’ fees and the plaintiffs’ incentive awards negotiated as part of a settlement in a Telephone Consumer Protection Act (TCPA) class action.

Counsel for the class of pharmacies that say they received unsolicited faxes from Cochran Wholesale Pharmaceutical Inc. told the appellate court the district court’s decision to reduce their fees and the named plaintiffs’ incentive awards unfairly allowed Cochran to dodge the full amount it said it would pay to exit the suit.

Class counsel Phillip Andrew Bock of Bock Hatch Lewis & Oppenheim LLC told the courtmthat U.S. District Judge Staci Yandle’s decision to base the fees on the amount class members actually claimed and not the amount Cochran agreed to pay put money back in Cochran’s pocket.  Cochran agreed to pay $233,333 in attorneys’ fees and $15,000 to each named plaintiff, but Judge Yandle reduced the fees to just more than $73,000 and the incentives to $1,000 each.

The incentive award in this case is “actually a disincentive,” Bock told the Seventh Circuit, “because the amount is actually less than the person could get [if they sued] as an individual.”  The 2016 suit accused Cochran, a Georgia-based pharmaceutical distribution company, of sending unsolicited faxes advertising its services to pharmacies in violation of the TCPA.

The parties went to mediation not long after the suit was filed, and some discovery revealed that the company may have sent the advertisements to 16,846 different fax numbers between April 19, 2012, and Nov. 1, 2016.  A settlement was reached, and Cochran agreed to pay up to $700,000. That cash would cover $125 per claim from each class member, $233,333 in attorneys’ fees and $15,000 to each named plaintiff, according to the settlement agreement.

Judge Yandle granted the deal preliminary approval, and notice was sent to the more than 16,000 class members.  Of those, 1,765 submitted claim forms, resulting in $220,625 in payments.

In April, Judge Yandle granted the settlement final approval but reduced the fees and incentives.  She used the amount paid out to class members to calculate the one-third portion going to attorneys, resulting in a fee award of $73,468, and cut the plaintiffs’ incentives down to $1,000 because the case didn’t require much of their input.

Sitting on the panel, Circuit Judge Diane Sykes told Bock she thought the court’s holding in another TCPA junk fax case made it so class counsel couldn’t collect on the full $700,000 Cochran agreed to pay.  The ruling found that TCPA cases create discrete injuries, so calculating attorneys’ fees based on a common fund doesn’t work here, she said.

The case is Camp Drug Store, Incorporated v. Cochran Wholesale Pharmaceutical Inc., case number 17-2086, in the Seventh Circuit Court of Appeals.

Minnesota Supreme Court Rules Attorney Fees are Capped by Policy Limit

November 14, 2017

A recent Claims Journal article by Steven Plitt, “Minnesota Supreme Court Rules that Statutory Attorney’s Fees are Capped by the Policy Limit,” writes about the recent Minnesota Supreme Court decision in Wilbur v. State Farm Mutual Automobile Insurance Co.  This article was posted with permission.  The article reads:

The question of whether attorney’s fees awarded under Minnesota’s insurance unreasonable denial statute could exceed the policy limits of the policy was recently addressed by the Minnesota Supreme Court in Wilbur v. State Farm Mutual Automobile Insurance Co., 892 NW2d 521 (2017).  Under Minnesota statute, Minn. Stat. §604.18 (2016) courts were authorized to award “taxable costs” when an insurance company denies insurance benefits without a reasonable basis.  The issue of whether the taxable cost award was kept by the insurance policy limit recently came before the Minnesota Supreme Court.  The court in Wilbur concluded that §604.18 unambiguously capped “proceeds awarded” at the amount recoverable under the insurance policy and were therefore capped by the policy limit.

The issue turned on whether the phrase “proceeds awarded” referenced in §604.18 referred to an amount capped by the insurance policy limit or not.  The insured claimant argued that no policy limit cap was contemplated by the statute.  The court began its analysis of §604.18 by noting that the statute provided a remedy for an insured when an insurer denied a first party claim without a reasonable basis.  Under the statute, courts in Minnesota were authorized to award taxable costs to an insured who could demonstrate that there was an absence of a reasonable basis for denying the benefits together with proof that the insured knew of the lack of a reasonable basis or active and reckless disregard.  If the insured was able to establish that proof, the court was authorized to award under the statute as taxable costs an amount equal to one-half of the proceeds awarded on coverage that were in excess of the amount offered by the insurer at least ten days before the trial began or $250,000, whichever was less.  For three reasons, the Minnesota Supreme Court held that §604.18 referred to an amount that was capped by the insurance policy limit.

First, the court noted that the statute’s use of the word “proceeds” to refer to insurance policies in two other subdivisions of the statute demonstrated that the phrase “proceeds awarded” was constrained by the defined limits of the insurance policy.  Second, the court noted that subdivision 3(a)(1) of the statute contemplated a capped settlement offer, which indicated to the court that the phrase “proceeds awarded” was capped by the insurance policy limit.  The connection between the phrase “proceeds awarded” and the “amount offered by an insurer” before trial was telling to the court.  Insurance companies’ settlement offers before trial were almost always capped by the insurance policy’s limit according to the observation of the Minnesota Supreme Court.

Third, the court found that the timing of the §604.18 proceeding suggested to the court that the phrase “proceeds awarded” were capped by the insurance policy limit.  Under the statute, subdivision 4(b) states “an award of taxable costs under this section shall be determined by the court in a proceeding subsequent to any determination by a factfinder of the amount an insured is entitled to under the insurance policy . . .” Minn. Stat. §604.18, subdivision 4(b).  Thus, proceeds could be awarded under §604.18 only “subsequent to” a jury’s determination of the benefits to be paid “under the insurance policy.”  The benefits paid under the insurance policy were capped by the insurance policy’s limits.  This provided a link in establishing that “taxable costs” awarded under §604.18 could not exceed the policy’s limit.

Mr Plitt is the current author of Couch On Insurance 3d and is a nationally recognized insurance expert.  See www.insuranceexpertplitt.com for more information.

Jones Day Seeks Fees from EEOC After “Baseless Suit”

November 13, 2017

A recent NLJ story by Erin Mulvaney, “Jones Day Seeks $446K in Fees From EEOC After ‘Baseless Suit’ Goes Nowhere” reports that Jones Day lawyers are seeking hundreds of thousands in legal fees from the U.S. Equal Employment Opportunity Commission, saying federal regulators unfairly targeted CVS Pharmacy Inc. for alleged employment abuses that no judge sustained.  Eric Dreiband, the lead partner for CVS in the litigation, is the Trump administration's pick to lead the U.S. Justice Department's Civil Rights Division.

The EEOC sued CVS in 2014 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 the company’s employees.  The agency lost its case, EEOC v. CVS Pharmacy, in the U.S. District Court for the Northern District of Illinois and in its appeal in the U.S. Court of Appeals for the Seventh Circuit.  The appeals court concluded the agency too broadly interpreted its enforcement powers.

The dispute is back in the Seventh Circuit as Jones Day--led by partner Eric Dreiband—seeks attorney fees for the work the firm did for CVS.  The district court said CVS was entitled to legal fees.  Dreiband and the Jones Day team want $446,339 for 250 hours of work.

The dispute provides a glimpse at the billing practices at Jones Day.  In court filings, Dreiband requested legal fees for himself and Jones Day associates.  Dreiband identified his hourly rate at $560.  Ninth-year associate Jacob Roth, a former clerk to the late Justice Antonin Scalia, billed at $475 per hour; Nikki McArthur at $275 per hour; and staff attorney Adria Villar at $175 per hour.

“These rates are significantly less than what Jones Day actually billed, and was paid, for the firm’s work on this matter,” Dreiband said in a declaration.  “These rates are also lower than what Jones Day typically bills for these timekeepers on other similar matters.”

Dreiband argued in the request for legal fees that the EEOC “concocted what it admits to be a novel interpretation of Title VII that would give the agency vast power” to challenge employment practices that it doesn’t like.  He argued the EEOC exceeded its authority in filing the suit—refusing any conciliation with CVS—and issuing a press release announcing the case.

“The EEOC instead rushed to file a baseless lawsuit, and blasted CVS with an inflammatory press release falsely accusing the company of interfering with Title VII rights,” Dreiband told the appeals court.  EEOC lawyers, responding to the claims, said the agency had reason to believe it would prevail and that the fees awarded were an abuse of direction.

“Although the EEOC did not prevail, this theory—which was consistent with the statutory language and this court’s precedents—was entirely plausible, and the EEOC had no reason to believe with any certainty that it would not succeed,” EEOC lawyers told the Seventh Circuit.

John Darrah, the federal trial judge who said Jones Day was entitled to fees, concluded the EEOC had violated its own internal regulations in the case against CVS.  “The EEOC’s own regulations require the agency to use informal methods of eliminating an unlawful employment practice where it has reasonable cause to believe that such a practice has occurred or is occurring,” Darrah wrote in his ruling.