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Category: Fee Issues on Appeal

CA Appeals Court: Cutting Fee Award By 28 Percent Was Warranted

April 2, 2020

A recent Metropolitan News story, “Slashing Fee Award to 28 Percent of Amount Claimed Was Warranted,” reports that the Court of Appeal for this district has affirmed Los Angeles Superior Court Judge Randolph Hammock’s award of $95,900 in attorney fees to the successful plaintiff in a “lemon law” case, holding that there was no abuse of discretion in spurning the trial lawyers’ request for $344,639.

Plaintiff Lorik Mikhaeilpoor was represented in the trial court by Strategic Legal Practices, APC (“SLP”), a Century City firm that is headed by Payam Shahian and specializes in actions under the Song Beverly Consumer Warranty Act.  Its telephone number is 888-SLP-LEMON and the firm promotes itself as providing services of “Lemon law attorneys for the toughest cases.”  Mikhaeilpoor sued BMW of North America LLC and Finchey Corporation of California alleging failed efforts to repair her 2013 BMW 328i and a refusal to replace the vehicle or make restitution.

A jury on Feb. 28, 2018, awarded her $17,902.54 in compensatory damages, which was doubled, as provided for by the Song Beverly Act, for a total of $35,805.08.  The act also mandates an award of attorney fees “reasonably incurred”—although, under case law, an award may be denied where the amount sought is unconscionable.  In his Sept. 21, 2018 order granting $95,900 in attorney fees—reduced to $94,864 in light of awards of attorney fees and costs to the defendants—Hammock said “that the amounts billed” by SLP “are unreasonable, including dual billing of attorneys when the work of only one (at times) was reasonably required.”

The SLP attorneys sought fees at rates ranging from $325/hour to $595 an hour.  Those rates, the judge found, are “reasonable in the community,” but added that attorneys who bill at such rates “should not need to research routine issue of law and should resort to boilerplate when it will serve the client’s purposes.”

Hammock commented:  “This was not a complicated case. Plaintiff was lucky, in this Court’s opinion, to win anything.  This Court will not compound the generosity of the jury.”  He added: “Plaintiffs attorneys should be forewarned: This Court did seriously consider denying the motion for fees in its entirety, since the request of almost $350,000 was quite shocking and ‘unreasonably inflated.’

“This Court is aware of the substantial fees and costs which are incurred in bringing a case to trial before a jury.  It is also aware of the pro-consumer rationale of the Song Beverly Act in liberally awarding such fees and costs….A request of almost $350,000 in fees for this particular case— which this Court has essentially handled from beginning to end—is simply unacceptable.  Indeed, the request for a multiplier was specious.”

Mikhaeilpoor argued on appeal that Hammock  acted arbitrarily in setting the fee award and had neglected to begin his analysis by setting a lodestar amount.  “In finding that $95,900 was the reasonable amount of attorney fees in this case, the trial court expressly invoked the lodestar method.”  White wrote.

The order says: “In light of the foregoing, the Court finds that the lodestar amount of attorney’s fees is $95,900.00, which includes the fees incurred in connection with bringing the instant motion.  This was calculated by finding a total amount of 274 hours which were reasonably incurred to  date, at the average rate of $350 per hour.”

White remarked: “Despite the trial court’s clarity, Mikhaeilpoor mischaracterizes the analysis the court employed in order to create the illusion of error where there is none.”  The jurist pointed to Hammock’s findings and declared, in agreement with him: “Plaintiff ’s counsel spent an unreasonably excessive amount of time dealing with this non-complex case.”

Rejecting Mikhaeilpoor’s contrary contention, she said Hammock did not impermissibly tie the attorney fee award to the amount of compensatory damages that were recovered.  The $344,639 award proposed by Mikhaeilpoor was comprised of $226,426 in fees allegedly earned, with a .50 multiplier enhancement—or $113,213—plus $5,000 for work in connection with the defendants’ objection to the amount that was sought.  Hammock’s award included recompense for time spent on the fee motion but there was no enhancement.

“While the court’s rationale for the lodestar reduction also  influenced the denial of a multiplier, the court went further as to  the multiplier issue, emphasizing that this was ‘not a complicated  case,’ and the ‘request for a multiplier was specious,’ ” White wrote.  This, she said, has a bearing on the issue of whether an enhancement is warranted based on the “novelty and difficulty of the  questions involved.”  That the case was a simple one, White noted, is borne out by evidence that Shahian only becomes personally involved in a case if it’s complex, and there was no billing for his time.

Christine Haw was lead counsel in the case. Haw, who is no longer with SLP, had been an attorney for only about five years, but, it was claimed, she had handled “hundreds of automotive defect cases involving Song-Beverly.” Hourly rates were sought for her at $365 and $375.

White said that despite that experience, Hammock “reasonably found that Haw did not leverage her experience to produce efficient litigation,” noting: “Haw personally billed more than 240 hours, and required the help of nine other attorneys at various points in the litigation.”  She said Hammock was in the best position to determine the reasonableness of the amount sought, substantial evidence supported his decision, and there was no abuse of discretion.

Ohio Supreme Court Cuts $4M in Fees; Redefines Lodestar

March 26, 2020

A recent Bloomberg Law story by Alex Ebert, “$4M Attorney Fee Award Cut in Half by Ohio High Court,” reports that a nearly $4 million payday for a prevailing group of attorneys was lopped in half by the Ohio Supreme Court, which ruled an “enhancement” that doubled the winning lawyers’ fees went too far.  Ohio’s lodestar calculation, the method for determining a reasonable attorneys fee, already factors in the complexity and time of litigation, and the expertise of the attorneys involved, the court said in its opinion issued.

A state trial and appellate court were wrong to look to these factors and double the more than $1.99 million in attorneys fees awarded to Phoenix Lighting Group LLC’s lawyers, the high court said.  The legal team won the lighting business a $5,518,335 judgment following years of litigation over claims that its value was reduced by unlawful actions by a competitor, Genlyte Thomas Group LLC, dating back to incidents that occurred in 2009.

“Today’s decision communicates the Ohio Supreme Court’s desire to limit an attorney’s ability to receive an enhancement in attorney fees in cases where his or her performance was exceptional or where the attorney, for the best interest of the client, took on a case with exceptional risk,” Phoenix Lighting Group’s attorney Jeffrey Witschey, a partner with Akron-based Witschey Witschey & and Firestine Co., LPA, said in an email.

“The danger with the decision is the potential chilling effect on attorneys taking cases for clients that are unable to financially support long legal battles with wealthier opponents,” he said.  The court made the “right decision and established appropriate limitations that will make enhancements rare in Ohio and require the rare enhancement to be based on objective evidence that is reviewable on appeal,” Genlyte Thomas Group’s attorney Benjamin Sasse, a partner in Tucker Ellis LLP’s Cleveland office, said in an email.

The court shouldn’t increase the fees just because the payoff took a long time, the justices said.  “Enhancements to the lodestar should be granted rarely and are appropriate when an attorney produces objective and specific evidence that an enhancement of the lodestar is necessary to account for a factor not already subsumed in the lodestar calculation,” Justice Melody Stewart wrote in the majority opinion signed by seven justices.

Justice Sharon Kennedy issued a concurring opinion that agreed with Stewart but said trial courts must weigh each reasonable-fee factor individually, and not believe all factors are bound-up perfectly in the lodestar analysis.  Justice Patrick Fischer also a separate concurring opinion saying that courts must also be mindful of the “time value of money” in cases that take years to resolve.  The underlying issues in this matter began in 2004.  “Prevailing plaintiffs who have paid their attorneys over the course of the lawsuit and attorneys working on a contingent-fee basis have been deprived of the use of their money throughout the lawsuit,” Fischer said in his concurrence.

Second Circuit Affirms $15M Fee Award in Dam Breach Action

March 16, 2020

A recent Law 360 story by Morgan Conley, “2nd Circ. Affirms $15M Fee Award for Dam Breach Deal Attys,” reports that the Second Circuit ruled attorneys from Robbins Geller Rudman & Dowd LLP and Pomerantz LLP earned their $15 million cut of a $50 million deal between investors and mining giant BHP Billiton Ltd. despite an objector’s argument they were overpaid.

In a unanimous summary order, a three-judge panel found the lower court did not err when it approved the attorneys receiving 30% of the $50 million fund they secured for investors in a consolidated suit alleging BHP lied to investors about lax safety standards at a Brazilian processing facility prior to a massive dam breach.  The panel shut down claims from investor John W. Davis, a regular class action objector, that the attorneys were unfairly paid at a “roughly 172% premium” on top of their usual hourly rates.

The court explained that plaintiffs’ counsel spent more than 10,000 hours working on the case, which it described as having “a complicated procedural and factual history, difficult legal issues, and a settlement amount that was statistically above- average.”  “On this record, we cannot say that the district court exceeded its considerable discretion in awarding attorneys’ fees,” the court said.

Davis had contended the attorneys' normal hourly rate of between $400 and $1,030 would have been sufficient but that the New York district court wrongfully applied a 2.72 multiplier to raise the payment window to $1,088 and $2,800.  The panel said a lodestar multiplier is appropriate when attorney fees are being paid from a common fund.  Davis also alleged the lower court did not adequately defend its reasoning for the fee award.  The court again disagreed, citing evidence in the record of how much work went into the case.

Fourth Circuit: Recalculate $10M Fee Award in Lumber Liquidators MDL

March 13, 2020

A recent Law 360 story by McCord Pagan, “4th Circ. Tosses $10M Fee Award in Lumber Liquidators Deal,” reports that a Fourth Circuit panel ordered a recalculation of a $10 million award for attorneys representing consumers who claimed their Lumber Liquidators wood flooring had excessive formaldehyde, disagreeing with the way a lower court classified part of the value of the $36 million settlement.  In a published opinion, the three-judge panel affirmed the $36 million settlement of multidistrict litigation alleging Lumber Liquidators falsely stated its laminate wood flooring complied with the California Air Resource Board’s formaldehyde emissions limits.  But the panel sided with objectors over the $10 million attorney fee award, finding it was not properly calculated under the Class Action Fairness Act.

CAFA requires attorney fees to be based on the total value of a settlement, and if part of the settlement involves coupons, the respective portion of the attorney fee award can only be based on the value of the coupons that are actually redeemed by class members.  The $36 million settlement, which was approved by a Virginia federal court in 2018, included $22 million in cash and $14 million in vouchers for discounted or free flooring to members of the two classes.  The $10 million fee award represented about 28% of the deal’s total value, and would be paid out of the $22 million in cash, according to the opinion.

The objectors argued that the vouchers count as coupons under CAFA, meaning the law’s coupon settlement provisions should apply, resulting in a lower fee award.  However, a federal judge disagreed in November 2018, finding that the vouchers were essentially gift cards, not coupons.

While Congress didn’t define “coupon” for the purposes of CAFA, the appellate panel concluded that under a Ninth Circuit standard, the Lumber Liquidators vouchers are actually coupons.  Unlike gift cards to a large retailer such as Walmart, which can be used to buy a variety of products, the vouchers can only be used to purchase a limited range of items, such as flooring and flooring tools, the panel said.

“Notably, only about 15% of class members selected the vouchers over the cash award, which demonstrates that class members do not view the vouchers as having the diverse purchasing power of cash,” it said.  The panel also pointed out that the vouchers alone may not be enough to enable a class member to entirely replace their flooring, and therefore they might also need to spend some of their own money to accomplish that.

“Of course, in having to spend more money to obtain sufficient relief, the class members will be forced to benefit the company that allegedly lied to and injured them,” the panel said.  “That arrangement is precisely the type about which Congress was concerned."  Numerous proposed class actions were filed starting March 3, 2015, shortly after “60 Minutes” aired an investigation that found Lumber Liquidators misrepresented that its Chinese-made laminate flooring complied with Golden State formaldehyde emissions limits, according to court documents.

On average, the level of formaldehyde in the company’s flooring ranged from at least six times the state standard, with some samples nearly as high as 20 times the standard, the investigation found.  In June of that year, the U.S. Judicial Panel on Multidistrict Litigation consolidated the formaldehyde emissions cases.  Other consumers who bought the flooring said it scratched, chipped, warped and stained.  These consumers also filed proposed class actions, which were consolidated in October 2016, according to court documents.

Full Federal Circuit Urged to Fix Divergent Attorney Fee Ruling

March 3, 2020

A recent Law 360 story by Dani Kass, “Full Fed. Circ. Urged to Fix Divergent Attorney Fee Ruling,” reports that the Federal Circuit deviated from nearly every other circuit court and U.S. Supreme Court precedent when it upheld a ruling that a settlement precluded BigCommerce Inc. from collecting attorney fees, the e-commerce company said in a bid for rehearing.  BigCommerce maintains that it was the prevailing party in its litigation with Diem LLC, as while Diem’s underlying patent infringement claims were settled, a contract dispute that came out of the deal was decided entirely in BigCommerce's favor.  Nearly every other circuit has allowed companies to prevail even if some claims are settled, the petition for rehearing by the panel or en banc states.

Diem, a nonpracticing entity, had accused BigCommerce of infringing its website-generation and -hosting patent with the storefront manager service offered on BigCommerce's website.  As part of a settlement, Diem and Commerce entered into a contract under which the district court would look only at whether Diem had a particular infringement theory in its original infringement allegations.  If so, BigCommerce would have to license the patent for $30,000, and if not, the case would be dismissed with prejudice, according to BigCommerce's appeal.  The district court ruled in favor of BigCommerce and dismissed Diem's suit.

BigCommerce maintains that it's the prevailing party because it escaped the litigation without having to license the patent it was accused of infringing, pay anything to Diem, or change its products or services.  Both the district court and Federal Circuit have disagreed.  The rehearing petition turns on the Supreme Court’s ruling in Buckhannon Board & Care Home Inc. v. West Virginia Department of Health & Human Resources, which struck down the so-called catalyst theory.  Under that theory, a party was considered “prevailing” if its lawsuit caused the defendant to voluntarily change conduct.

BigCommerce said that during oral arguments, the panel claimed it was being asked to stray from the justices' 2001 ruling, but the company said that’s not true.  In 2016's CRST Van Expedited Inc. v. EEOC, the justices said they hadn’t set a “precise test” on how to determine whether a party has prevailed, the petition states.

According to BigCommerce, the Federal Circuit read a test into Buckhannon that “virtually every circuit has squarely rejected.”  It provided examples from the First, Second, Third, Fourth, Fifth, Seventh, Eighth, Ninth and Eleventh circuits to back up that argument.  Buckhannon is just about the catalyst theory and “has no relevance” in a case that doesn't invoke that theory, the petition states.

“BigCommerce never cited any BigCommerce-led action that induced a voluntary change in Diem’s conduct in support of its ‘prevailing party’ arguments in the lower court or before this court,” the petition states.  “In fact, Diem refused to voluntarily do anything BigCommerce requested.  A district court had to retain enforcement jurisdiction over the parties’ settlement agreement, resolve the parties’ dispute, rule in favor of BigCommerce, rule against Diem, which finally caused the dismiss[al] of this case with prejudice.”

The 2006 Federal Circuit case cited by the district court when denying fees, Exigent Tech. Inc. v. Altrana Solutions Inc., was also decided incorrectly, BigCommerce said.  In that case, the court said merits-based relief is required to become a prevailing party, which BigCommerce said contradicts the high court’s ruling in CRST.  If the Federal Circuit doesn’t adjust its holding, then the term "prevailing party" will mean one thing under the Patent Act and something else under every other law, which can’t stand, BigCommerce said.