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Category: Fee Issues on Appeal

Sixth Circuit Tosses Hourly Rates Citing ‘Community Market Rule’

August 12, 2020

A recent Law 360 story by Emily Field, “6th Circ. Wipes Out Atty Fee Award in Vita-Mix Blender Deal” reports that the Sixth Circuit vacated a nearly $4 million attorney fees award in a class action settlement over plastic flecks in Vita-Mix Corp. blenders, finding that a lower court used the wrong billing rates to determine the award.  The appeals panel said that in its circuit, a "community market rule" is used to calculate a reasonable billing rate.  Under that rule, the billing rate should not be more than what than what competent lawyers in the relevant community charge.  However, the lower court departed from Cincinnati rates, saying that the practice of law is increasingly more national, according to the opinion.

Attorneys have to show why they deserve to recover fees equivalent to those charged by out-of-town specialists, the panel said.  "And here class counsel would be hard-pressed to make such a showing since they are very much in-town attorneys," the panel said.  "Local lawyers litigating a case in a local courthouse should receive local billing rates.  The district court erred when it concluded otherwise."

The rates used by the lower court were based on both local rates and rates requested by the class counsel, attorneys from Markovits Stock DeMarco LLC, Finney Law Firm LLC and Goldenberg Schneider LPA, according to the opinion.  "As a result, a majority of the attorneys received rates of around $500 per hour and the most senior attorneys received rates exceeding $600 per hour," the panel said.

The appeals court also noted that class counsel attorneys with similar experience levels often requested very different billing rates, with some attorneys with less experience reporting significantly higher rates.  "An attorney with twelve years of experience reported a billing rate $450 per hour, while an attorney from the same law firm with nine years of experience reported a billing rate of $530 per hour," the panel said.  "Neither class counsel nor the district court explained these discrepancies — i.e., by unique expertise or the like."  The panel directed the lower court to recalculate the billing rates.

Federal Circuit Backs Cap on Attorney Fees in IDEA Cases

August 11, 2020

A recent Law 360 story by Andrew Karpan, “DC Circ. Backs Atty Fee Cap in Civil Rights Row” reports that the D.C. Circuit rejected the efforts of attorneys representing hundreds of parents in a civil rights case to collect over $5 million in fees from Washington, D.C., and ruled that a congressional cap that strictly limited the amount they could collect in those cases was perfectly valid.

The opinion, authored by U.S. Circuit Judge Gregory Katsas, found that an appropriations rider Congress passed in 2009 did not violate the Takings Clause of the Fifth Amendment nor was it an illegal intervention into the court's power to award fees.  The rider expressly forbade Washington from paying more than $4,000 in attorney fees in any single civil rights case filed under the Individuals with Disabilities Education Act, which mandates special education services for kids.

Crucially, Judge Katsas wrote, Congress started limiting the city's ability to pay out legal fees in IDEA cases in 1999, which was before the parents in these cases filed suit.  "The fee cap does not interfere with any reasonable expectations, for each of the awards at issue was entered at a time when Congress had already limited the District's ability to pay IDEA fee awards," the judge said.  The ruling covered eleven separate IDEA cases, all of which preceded 2009 and all of which successfully alleged that Washington didn't provide a special needs education to students who qualified for one.

Back in 2015, a magistrate judge calculated the city's tab in those cases at about $3.7 million, along with another $1.3 million in interest, according to Tuesday's ruling.  Two years later, a D.C. federal judge used the cap to trim the fee award to $220,000 but left the interest, which had notched up to $1.4 million by then.  Both the parents and the city challenged that ruling.

Congress, which provides funding to public schools in Washington through the District of Columbia Appropriations Act, had every reason to be concerned about using that budget to pay lawyers in IDEA cases, Judge Katsas observed.

The city's "long struggle" to comply with IDEA was costing it $10 million a year by the time Congress began limiting how much of that funding could be spent on fee payments in those cases, the ruling noted.  An appropriations rider passed in 2009 had instituted the permanent $4,000 cap on the awards.

The parents argued, in part, that the rider violated their rights to fees that a court had awarded them but the panel said shaving a fee award isn't "a per se taking."  Deciding to trim an award that had already been issued didn't misappropriate the powers of Congress either, the panel added.  Lawyers for the parents should also have known they wouldn't be able to collect more than $4,000 a case because the initial rider dated to 1999, Judge Katsas added.

But in addition to ruling that the cap was perfectly legal, the D.C. Circuit also scratched the $1.4 million in interest the parents had won.  "This principle is as old as the Republic," Judge Katsas mused on this point, citing a ruling the Supreme Court made in 1789, in Hoare v. Allen, and in which the court similarly scratched the interest on debts owed to a British creditor during the Revolutionary War, as the Constitutional Congress had expressly banned paying debts to British subjects.

Similarly, Judge Katsas wrote, Congress had banned Washington from paying lawyers in IDEA cases fees above a certain amount: interest couldn't be collected on fees above that amount either.  The panel sent the award back to a lower court to recalculate using the capped award instead.  The D.C. Circuit ruled on an IDEA fee bid in a different case just last year, when a panel initially rejected a nearly $7 million fee award in a class action suit leveled under that law, ruling in that case that a lower court had used an invalid matrix for calculating fees.

Virgin Urges Ninth Circuit to Vacate Attorney Fees in Wage Case

July 30, 2020

A recent Law 360 story by Linda Chiem, “Virgin Asks 9th Circ. To Ax $6M Atty Fee in Wage Spat” reports that Alaska Airlines and Virgin America asked the Ninth Circuit to vacate nearly $6 million in fees awarded to attorneys for a certified class of flight attendants who won $77 million in a long-running dispute over pay and rest breaks.  Virgin America Inc., which merged with Alaska Airlines Inc., filed an opening brief with the Ninth Circuit claiming that U.S. District Judge Jon S. Tigar in January signed off on $5.7 million in fees for the plaintiffs' attorneys without digging into whether their hours and calculations were properly justified.

The attorneys, who initially requested $13.2 million, but were awarded less than half that, are representing named plaintiff Julia Bernstein and flight attendants alleging Virgin America flouted California labor laws by not paying them for all hours worked, including overtime, and denying them state-mandated meal and rest breaks.  Judge Tigar had acknowledged that the attorney fee application was too vague, saying "the level of specificity at which plaintiffs have documented their time makes it difficult or impossible for Virgin to raise certain challenges that courts have found justified partial reductions in other cases."

Despite that critical flaw, according to the airline, the court accepted all of the hours that the plaintiffs' counsel claimed and awarded a $5.7 million fee award, subject to only a 5% general reduction in hours.  "That decision cannot stand," the airline said in the brief.  "Because the lack of detail in the fee application deprived Virgin of a fair adversarial process and did not allow meaningful judicial review, the fee award must be vacated for that reason alone."

Moreover, the class counsel's flawed lodestar consisted of nearly 4,500 hours of billable time, most of which was billed at an absolute "top of the market" rate of $750 per hour, according to the brief.  On top of that, Judge Tigar improperly approved $251,000 in court-related expenses for the plaintiffs' attorneys, Virgin argued.  "Most of the expenses that the district court awarded were for 'expert fees,' which are not recoverable under black-letter California law," the airline said.  "In addition, the district court erred by ignoring the rule that a party cannot recover expenses without submitting an itemized list and accompanying receipts.  The district court did not identify any exception to this rule, and it candidly acknowledged that plaintiffs' counsel failed to comply with it.  But the court awarded expenses anyway."

CA Appeals Court Affirms Fee Award with High Rate But No Multiplier

July 16, 2020

A recent Metropolitan News story, “C.A. Affirms Attorney-Fee Award Not Boosted by Multiplier reports that a California Court of Appeal has affirmed a decision by a Los Angeles Superior Court judge who declined to apply a multiplier to an attorney fee award in an action that produced a $1 million judgment for a plaintiff who sued his employer for racial harassment, saying it assumes that the high hourly rate that was applied takes into account that the case was taken on a contingency basis.  However, the judge who made the award—Victor E. Chavez—made no such indication, saying in his order that the attorneys were worth the rates they proclaimed for themselves, but the nature of the case did not warrant an enhancement.

Justice Dorothy Kim of Div. Five wrote the unpublished opinion.  It upholds a post-judgment order by Chavez assessing attorney fees in favor of the Law Offices of Kyle Todd, located in downtown Los Angeles, in the amount of $592,075, the total lodestar amount the firm claimed based on 1,392.5 hours of work on the case over a three-year period.  The award was made under Government Code §12965(b) which provides for attorney fees to a prevailing party in an action brought—as was the that of the Todd firm’s client, Tracy Scudder—under the state’s Fair Employment and Housing Act.

In particular, Chavez granted Todd the $500-per-hour figure he claimed as reasonable for the 904.3 hours he said he devoted to the case, rejecting the defendant’s protest that such a rate exceeded the $360.27 norm for lawyers in Los Angeles County during the relevant period, from 2015-18.  The judge also honored the rate of $400-per-hour which, it was contended, represented the value of services of an associate in the office, Maximilian Lee, who said he spent 250.5 hours pursuing the interests of the client.

Chavez said that $360.27-per-hour figure, contained in the United States Attorney’s Office fees matrix “is not sufficient to compensate Mr. Todd based on his experience and the facts showing that he is an exceptional attorney” and also found that $400-an-hour was “a reasonable rate to bill for the legal services” that Lee provided.  The amount sought by Todd’s firm, with a multiplier of 200 percent, was $1,184,150. The award which the defendant, the state Department of Transportation, asserted would be appropriate was $289,458.04.

Chavez, a former presiding judge of the Superior Court, said in his Sept. 11, 2018 order: “There is no evidence that the questions in this case were novel or difficult.  This case concerned workplace harassment and discrimination based on race and there were no unusual or complex issues that required exceptional skill to resolve.

“Further, a review of the Court file does not reveal any exceptional skill displayed by counsel that far exceeds the quality of representation that would have been provided by an attorney of comparable skill and experience.  The Plaintiff’s attorneys identify the time that they spent or the case and the above amount of $592,075 will compensate them for their legal services.”  The judge found that Todd “does not provide specific facts to demonstrate that his attorneys were precluded from other employment” by virtue of devoting their concerted efforts to Scrudder’s case. He viewed as inadequate a declaration from Victoria Rolon, a legal assistant in the firm, who said:

“This case took up a large portion of our firm’s time since I joined in early 2016, and by November 2017, as the first genuine trial date approached, our firm’s work on other matters went down significantly.  From then through the end of trial on March 9, 2018, our firm was almost exclusively engaged in work on this case, at the expense of taking in new cases.  For example, I typically provide the first-line intake of new case matters, and for the preparation of trial and during, we were telling prospective clients we were simply too busy to accept new cases at the firm.”

Chavez remarked: “[A]lthough Victoria Rolon states in paragraph 6 that, as the trial date approached, the Plaintiffs firm was telling prospective clients that it was too busy to accept new cases, Ms. Rolon provides no specific facts to show that the Plaintiff’s firm was precluded from accepting such a substantial amount of business that a multiplier should be applied.”

Kim said that some of the assaults by the Todd firm on Chavez’s ruling cannot be addressed owing to the lack of a transcript of the fee-hearing before the judge.  But, she declared, based on the record that was presented, it is clear that the firm is in error in asserting that Chavez “refused to consider the relevant ‘contingency and delay factors’ present in this case” in declining to apply a multiplier.

She wrote: “[W]e…reject any argument by plaintiff that the trial court did not adjust the fee amount in any ‘manner to reflect the fact that the fair market value of legal services provided on [a contingent basis] is greater than the equivalent non-contingent hourly rate.’…The court rejected defendant’s request to lower counsel’s fees to the Los Angeles market rate as calculated by an attorney fee matrix, finding that the full rates sought by plaintiff’s counsel were reasonable.  Further, the court found that counsel, who worked on a contingency basis, would be ‘fully compensated’ by the lodestar amount.  We presume the court concluded that its lodestar calculation already accounted for the contingent nature of the fee award.”

It was conceded by the Todd firm, Kim noted, that Chavez did allude in his order to the contingency-fee arrangement.  He said in his order: “[A]lthough the Plaintiffs attorneys took this case based on a contingent fee retainer agreement, the above analysis of the Plaintiffs fee request demonstrates that the Plaintiff’s attorneys will be fully compensated for the time they spent on this case and this offers no grounds to award a multiplier.”

Kim said the Todd firm is in error in asserting that Chavez was legally obliged to apply a multiplier, and remarked: “The trial court was in the best position to evaluate the reasonableness of plaintiff’s requested attorney fees.  We find the court did not abuse its discretion.”

Ninth Circuit Urged to Uphold $7M Fee Award in ConAgra Case

July 15, 2020

A recent Law 360 story by Kevin Penton, “9th Circ. Urged to OK $7M Atty Fees in ConAgra Label Fight” reports that the Ninth Circuit should affirm a California federal court's blessing of a settlement in which attorneys received nearly seven times what class members obtained in a dispute over ConAgra Foods Inc.'s labeling on oil products, as the deal conforms with legal precedent, the class has argued.  The deal, in which the class received $993,919 while its attorneys received $6.85 million, was fair and reasonable, as the case involved more than eight years of litigation, ConAgra agreed to pay up more than $68 million depending on the participation of class members, and the lawyers received compensation for only a portion of the work they put in, according to the brief by the class.

Objector M. Todd Henderson fails to recognize that the U.S. Supreme Court determined in a 1986 case known as City of Riverside v. Rivera that attorney fees may not only be based on a percentage of what their clients receive, but also based on statutory fees, according to the brief.  The class notes that Henderson's counsel at the Hamilton Lincoln Law Institute Center for Class Action Fairness repeatedly challenge class action settlements, alluding that lawyers and defendants collude to strike deals in which attorneys get paid and companies get to walk away.

"Appellant is eager to continue a crusade that finds plaintiffs' lawyer misconduct anywhere that plaintiffs prevail," the reads.  "No doubt there will be other windmills to tilt at, but this appeal concerns fees governed by specific state laws with statutory fee-shifting provisions, not appellant's 'high-level concerns.'"  In the suit, the buyers alleged that ConAgra mislabeled its Wesson oil products as "100% natural" even though they contain genetically modified ingredients. U.S. District Judge Margaret M. Morrow certified 11 classes in the case in 2015, and the settlement was given final approval in December, according to court records.

In the settlement, class members were eligible to receive 15 cents for up to 30 units of Wesson essential oils product they purchased without having to submit a proof of purchase, according to the brief.  Class members who sought reimbursement for more than 30 units would need to submit a proof of purchase.  Henderson told the Ninth Circuit in April that the Central District of California did not consider the deal's true value to the class when it granted the attorney fees — giving value to an injunction in the deal that is, in reality, worthless.