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Category: Fee Issues on Appeal

Third Circuit Urged to Revive Pelvic Mesh Fee Dispute Case

June 26, 2020

A recent Law 360 story by Kevin Penton, “3rd Circuit Urged to Revive Pelvic Mesh Atty Fee Suit” reports that the Third Circuit should correct a mistake by a New Jersey federal court that allowed Texas law to be used to bless the collection of excessive attorney fees in pelvic mesh litigation against Johnson & Johnson and its Ethicon unit, two women have asserted.  According to a brief, the appellate court should recognize that if the underlying cases were filed in New Jersey, the attorneys should not be allowed to turn around and use Texas law to administer the settlements just so they could collect a higher percentage of the payouts, plaintiffs Debbie Gore and Doris Lance-Smith said.

"This manipulation of the process cannot be allowed by this court, as it would set a dangerous precedent that would allow contingency fee attorneys to file cases in New Jersey, then retreat to other jurisdictions in order to have the settlements 'administered' and 'approved' so that they can circumvent the New Jersey court rules and charge the clients excessive fees and expenses," the brief reads.  U.S. District Judge Madeline Cox Arleo in March nixed a proposed class action against Potts Law Firm, Nagel Rice LLP and other firms, saying Texas law governed the claims and permitted the fees.

The judge noted that "the complex settlement process, which plaintiffs consented to after ample opportunity for objection, was reached by negotiations between Ethicon and Texas law firms and was administered by the Texas state court and a Texas special master."  "Indeed, no New Jersey law firms or lawyers were even listed as receiving contingency-based attorneys' fees as part of plaintiffs' settlements," the judge said.  "As such, the state with the most significant relationship to the substantive claims at issue is Texas."

Gore, a Texas resident, and Lance-Smith, an Alabama resident, both retained Texas firms to pursue claims that they suffered injuries from allegedly defective pelvic mesh products, according to court documents.  While Gore and Lance-Smith each filed a master short-form complaint in New Jersey state court in 2014 as part of the litigation, Judge Arleo noted in March that "no litigation activities occurred" in the Garden State beyond those filings.

Fee arrangements in the case allowed the women's lawyers to receive 40% of their settlements, as Texas law has no particular cap on contingent fees, according to court documents.  Under a relevant New Jersey rule, an attorney can collect a fee of 33.33% of the first $750,000 recovered and then smaller percentages for subsequent amounts.  Those fees must be based on the "net sum recovered" after deducting expenses.

SCOTUS Stays Out of Fee Dispute in Humana ERISA Suit

June 22, 2020

A recent Law 360 story by Adam Lidgett, “High Court Stays Out of Fee Fight in Humana ERISA Suit” reports that the U.S. Supreme Court said it won't review the Fifth Circuit's finding that health insurer Humana doesn't have to foot a patient's six-figure attorney fees tab incurred in a suit over eating disorder treatment coverage.  The high court denied a petition from a plan beneficiary only referred to as Ariana M. that had asked the justices to review an appellate ruling that she wasn't entitled to attorney fees after she ultimately lost her attempt to get full coverage for a stay at a Utah treatment center.

A Texas federal court initially ruled in favor of Humana in the Employee Retirement Income Security Act case, and a Fifth Circuit panel later affirmed that decision.  Then in March 2018, a majority of the full Fifth Circuit breathed new life into the case when it adopted a lower standard for reviewing decisions by benefits plan administrators to deny coverage to workers.

Specifically, eight of 14 judges said in that 2018 decision that courts should apply de novo review — analyze a denial of benefits anew — unless the plan's documents explicitly give its administrator sole discretion to consider claims.  They overturned the court's 1991 Pierre v. Connecticut General Life Insurance Co. ruling, which held that de novo review applies to appeals challenging an administrator's interpretation of plan language but only lets courts analyze an administrator's interpretations of facts for abuse of discretion.

But even after Ariana M.'s case was kicked back down, Humana won summary judgment when the district court again said the insurer's denial was correct.  After she lost her bid to get about $140,000 in attorney fees, she again appealed to the Fifth Circuit.  The appellate court affirmed the second summary judgment ruling in Humana's favor, and also affirmed the denial of Ariana M.'s attorney fees bid.

She asked the high court for review earlier this year, arguing she could collect attorney fees under ERISA.  Ariana M.'s petition said the Supreme Court has already found that "an applicant need not be a 'prevailing party'" to be able to collect attorney fees under the applicable provision of ERISA.  She said she "need only achieve 'some success on the merits'" to be eligible for such fees.

Feds Urge DC Circuit to Deny Novel Fee Request in IP Case

June 12, 2020

A recent Law 360 story by Britain Eakin, “Gov’t. Urges Fed. Circ. To Deny Novel Fee Bid in IP Appeal” reports that after failing to fend off a $4.4 million fee award on top of a $200,000 judgment for infringing a metal treatment technology patent, the government has told the Federal Circuit it has no authority to grant an inventor's untested bid seeking supplemental fees for defending the fee award.

In a response filed to a May 29 request from Hitkansut LLC and Acceledyne Technologies Ltd. LLC for appellate fees — a matter the Federal Circuit hasn't addressed before under Section 1498 of the Patent Act — the government argued that only the U.S. Court of Federal Claims can grant fee requests under that provision of the law.  "There is no indication in the statute or its legislative history that Congress intended to include post-judgment attorneys' fees within the ambit of those recoverable.  By including the fees in the underlying compensation award, the statute is open to only one interpretation: that the ability to award ... attorneys' fees ends with the final judgment of the Court of Federal Claims," the response said.

The companies, owned by late inventor Donna Walker, who passed away in 2018, asked the appeals court for supplemental attorney fees after a three-judge panel on May 1 affirmed the U.S. Court of Federal Claims' March 2019 grant of fees.  The lower court found in 2017 that government researchers at the Oak Ridge National Laboratory directly took Hitkansut's patent-pending technology, which can be used to relax stressed metal in large metal structures like airplanes, without giving Walker any credit, funding or contracts.

Hitkansut and Acceledyne were able to recoup fees at the claims court under a provision of the Patent Act that allows independent inventors, nonprofits and small businesses to recover fees when the government infringes, provided they can show the position of the United States was not "substantially justified."  The Federal Circuit said in its May 1 opinion that the government's litigation position was not substantially justified because its arguments were contrary to the evidence in the case and the testimony of government employees, and that its invalidity argument was "contradicted by its own expert witness."  The court, however, instructed the parties to bear their own costs.

But Hitkansut and Acceledyne contend that the court has the authority to order the government to pay additional fees under Section 1498, which they argued is not limited to the claims court action and so entitles them to recoup all of their costs, including those associated with defending their initial fee bid.  And although the appeals court hasn't addressed whether fees for defending an initial fee bid can be recouped under Section 1498 before, Hitkansut and Acceledyne argued that the court has done so in Wagner v. Shinseki under an analogous law — the Equal Access to Justice Act.

The court in Wagner said that because he partially prevailed in defending against the government's challenge to his initial bid for fees, "he was entitled to supplemental fees."  The Wagner court reasoned that a prevailing party can recoup fees not just for underlying litigation but also for defending an initial EAJA fee request.  Hitkansut and Acceledyne urged the court to apply the same reasoning it did in Wagner to this case, but the government contends its reliance on Wagner is "misplaced" because it says the EAJA is "fundamentally different" from Section 1498, which it said doesn't give the Federal Circuit jurisdiction over supplemental fee requests.

Congress enacted the Section 1498 fee provision because it believed the EAJA was unavailable for such claims, the government said.  "Had it wanted to do so, Congress had a clear model in EAJA to insure recovery of appellate fees and costs.  But Congress selected a different path," the government said.

Federal Circuit Reverses Fee Award in Sippy Cup IP Case

June 10, 2020

A recent Law 360 story by Tiffany Hu, “Fed. Circ. Reverses Atty Fee Award in Sippy Cup IP Case” reports that the Federal Circuit ruled that a failed patent lawsuit over spill-proof sippy cups is not exceptional enough to merit attorney fees, finding in a precedential opinion that a lower court "abused its discretion" in awarding the fees without adjudicating the issues.  In a 16-page opinion, a three-judge panel overturned a California federal judge's decision that granted Luv N' Care Ltd.'s bid for $1 million in a patent dispute against Munchkin Inc.  The lower court had deemed the case exceptional because Munchkin concealed relevant prior art during litigation, and its amended trademark claims were so weak they were abandoned.

Following a 40-minute hearing in February, where attorneys for both companies told the Federal Circuit that the lower court didn't make factual determinations on either issue, the panel agreed the exceptionality finding was underdeveloped.  "None of these issues was fully adjudicated before the court on the merits, and given the limited arguments [Luv N' Care and another defendant] made in support of [their] fee motion, we hold that the district court abused its discretion in granting the motion and we reverse the exceptional-case determination," U.S. Circuit Judge Raymond T. Chen wrote for the panel.

The panel said the district court failed to explain why Munchkin's arguments concerning the validity of its patent were unreasonable, and was also "led astray" by Luv N' Care's claim that Munchkin improperly maintained the lawsuit after the Patent Trial and Appeal Board launched an inter partes review of the patent and found the patent invalid.  "That Munchkin's patent was ultimately held unpatentable does not alone translate to finding its defense of the patent unreasonable," Judge Chen wrote.

Munchkin sued Luv N' Care and Admar International Inc. for trademark infringement and unfair competition in 2013.  Munchkin moved to amend the trademark claim the following year, deciding to assert a different trademark in the case, and then added a patent infringement claim to the suit in 2015.  Luv N' Care later challenged the validity of Munchkin's patent at the PTAB, which invalidated all of the challenged claims.  After the board invalidated the patent, the district court ruled in favor of Luv N' Care and deemed it the prevailing party.  The district court tacked on the cost of the PTAB proceedings to the fee award, as well as Munchkin's appeal of the PTAB decision that was affirmed by the Federal Circuit in 2017.

Humana Does Want Attorney Fee Dispute in SCOTUS

June 8, 2020

A recent Law 360 story by Adam Lidgett, “Humana Says Atty Fee Fight Not Worth High Court’s Time” reports that health insurer Humana has urged the U.S. Supreme Court not to review the Fifth Circuit's decision rejecting a woman's push to make the company foot the bill for a six-figure attorney fees tab in a suit over coverage, saying her argument that the ruling created a circuit split doesn't hold water.

In a Friday brief, Humana Health Plan of Texas Inc. shot back at a petition from a plan beneficiary only identified as Ariana M. that had asked the high court to review an appellate finding that she wasn't entitled to attorney fees after she ultimately lost her attempt to get full coverage for a stay at a Utah treatment center.

Even though Ariana M. argued that the Fifth Circuit decision created a split with a First Circuit decision in which a separate plaintiff did get attorney fees, Humana said that there was no real appellate split. Unlike the First Circuit case, Ariana M. didn't win a remand back to a plan administrator, so the two cases are different, the insurer said.

And "even if there were a conflict, this case would present a particularly poor vehicle for resolving it," Humana argued.

"The unpublished decision below is fact-bound and does not bind any future panel or district judge in the Fifth Circuit (let alone any court outside that circuit)," Humana argued. "It therefore serves as no obstacle to future claimants."

Ariana M. had challenged a decision by Humana to stop paying for treatment of her eating disorder. The Southern District of Texas initially ruled in favor of Humana, and a Fifth Circuit panel later affirmed that decision, according to court documents.

But in March 2018, a majority of the full Fifth Circuit breathed new life into the case, adopting a lower standard for reviewing decisions by benefits plan administrators to deny coverage to workers.

Specifically, eight of 14 judges said in that 2018 decision that courts should apply de novo review — analyze a denial of benefits anew — unless the plan's documents explicitly give its administrator sole discretion to consider claims. They overturned the court's 1991 Pierre v. Connecticut General Life Insurance Company ruling, which held that de novo review applies to appeals challenging an administrator's interpretation of plan language but only lets courts analyze an administrator's interpretations of facts for abuse of discretion.

But after the Ariana M. case was kicked back down, Humana won summary judgment when the district court again said the insurer's denial was correct. And after Ariana M. lost her bid to get about $140,000 in attorney fees, she again appealed to the Fifth Circuit, which also affirmed the second summary judgment ruling in Humana's favor and affirmed the denial of Ariana M.'s attorney fee bid.

She asked the high court for review earlier this year, arguing she could collect attorney fees under the Employee Retirement Income Security Act. Ariana M.'s petition said that the Supreme Court has already found that "an applicant need not be a 'prevailing party'" to be able to collect attorney fees under the applicable provision of ERISA. She said that she "need only achieve 'some success on the merits'" to be eligible for such fees.

Amar Raval, an attorney for Ariana M., said in a statement to Law360 on Monday that he disagreed with Humana's brief on the merits.

"This case shows the fundamental difficulty that people like Ariana face when they sue under ERISA," he said. "Even though the law does not require her to be a 'prevailing party,' courts have interpreted ERISA in such a way that it's difficult to ever get attorney fees. We hope to change that, and we are encouraged that the Supreme Court asked for more briefing in this case."