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Category: Fee Issues on Appeal

$100K in Attorney Fees Awarded Under Catalyst Theory in California

August 2, 2018

A recent Metropolitan News story, “$100,000 Sufficient Attorney Fees for Catalysts of Impound Rule Change,” reports that plaintiffs whose lawsuit prompted the City of Los Angeles to change its policy of impounding cars driven by holders of drivers’ licenses issued by foreign countries have lost a bid in this district’s Court of Appeal to increase their award of attorney fees from $100,000 to $1.7 million.  Los Angeles Superior Court Judge John S. Wiley Jr., sitting on assignment to Div. Seven, wrote the unpublished opinion.  It affirms a judgment by Judge Elihu Berle in three appeals from the same case.

In two of the challenges, the plaintiffs contend the award was unjustifiably meager.  The City of Los Angeles cross-appealed, arguing that no fees should have been awarded at all.  The opinion also rejects the protest by three other plaintiffs to the dismissal of their causes of action against the cities of Escondido and Long Beach on the ground that disputes with those defendants were resolved in prior actions.

The underlying case concerns the cities’ policies in interpreting Vehicle Code §14602.6(a)(1), which allows police to impound a car when it is driven by a person who has never “been issued a driver’s license.”  All plaintiffs in the case had cars impounded despite having driver licenses issued in foreign countries.  In 2007, a federal class action was brought against various California government entities in the case of Salazar v. Schwarzeneggar.  The Salazar litigation involved many plaintiffs and defendants at different times, most of whom were not parties to the present appeal.

That case was unsuccessful for the plaintiffs.  The court dismissed with prejudice their claim under Art. I, §13 of the California Constitution—the right to be secure from unreasonable seizures—ruling that the section “does not provide a private cause of action for damages.”  The court also declined to take supplemental jurisdiction over the remaining state claims, and several of the plaintiffs and others sued various cities in state court in 2011.  Two of the plaintiffs in the state case, Laurencio Marin and Vincent Soltero, settled with Los Angeles for $4,000 each.  Berle awarded the two men $100,000 in attorney fees under Code of Civil Procedure §1021.5, the private attorney general statute.

Wiley explained that the award of fees was proper under a catalyst theory, which allows for attorney fees when a plaintiff prompts the defendant to change its behavior, even if there was no judicial resolution of the dispute.  In 2012, before the city settled with Marin and Soltero, then-Los Angeles Police Chief Charlie Beck, since retired, issued “Special Order No. 7,” which changed the LAPD’s impound policy.  The order—which drew considerable controversy—removed from officers discretion as to whether a vehicle driven by an unlicensed vehicle should be impounded, directing that it not be under specified circumstances.  The order provided that a driver’s license issued “by any jurisdiction (foreign or domestic)” would be recognized.

(The Court of Appeal for this district held in 2014 “that Special Order 7 is within the wide discretion of the police chief.”)  Wiley said:  “The catalyst theory required Marin and Soltero to establish (1) that their lawsuit was a catalyst motivating the City of Los Angeles to provide the primary relief sought; (2) that the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense; and (3) that Marin and Soltero reasonably attempted to settle the litigation before filing their suit…

“The trial court found Marin and Soltero satisfied these three requirements and thus were entitled to a fee award.  The court expressly identified each factor and made appropriate findings.”  Although Berle found that Marin and Soltero had been successful, he noted that it was a limited success.  The settlement amount they had each received was minute, and they had suffered many failures throughout the litigation, including a failure to obtain class certification.  Wiley said:

“The court acknowledged the plaintiffs contributed in some degree to the advent of Special Order No. 7, but noted even that success was mixed.  Special Order No. 7 was a move in the right direction, as far as plaintiffs were concerned, but plaintiffs continued to challenge Los Angeles Police Department’s impound policies even as embodied in Special Order No. 7.  The trial court dryly remarked ‘[i]t is unusual to argue that plaintiffs have been successful in remedying a state of affairs which they continued to attack.’ ”

For this reason, Wiley explained that Berle had appropriately denied the plaintiffs their requested lodestar and multiplier.  As to the third appeal in the case, Wiley noted that Escondido and Long Beach had shown the three elements of claim preclusion applied to the three plaintiffs challenging the award of summary judgment to those cities.

“Claim preclusion applies when a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit,” he wrote.  The three plaintiffs and both cities had all been parties to the Salazar litigation, which had included a cause of action for the California Constitution claim which was the only claim in their state case.  The federal court had dismissed that claim with prejudice, which is a final judgment on the merits.

The case is Sancandi v. City of Los Angeles, B268839.  Counsel for the plaintiffs were Barrett S. Litt of Pasadena; Cynthia Anderson-Barker of Los Angeles; and Robert Mann and Donald W. Cook of Los Angeles.  The cities were represented, respectively, by Assistant City Attorney Gabriel S. Dermer for Los Angeles, Deputy City Attorney Adam C. Phillips for Escondido, and Deputy City Attorney Howard D. Russell for Long Beach.

Minnesota Supreme Court Rules Employers Must Pay Attorney Fees

July 26, 2018

A recent Business Insurance story by Louise Esola, “Minn. High Court Rules Squabbling Employers Must Pay Attorney Fees,” reports that the Supreme Court of Minnesota upheld a Workers’ Compensation Court of Appeals decision that ruled both a man’s current and former employers must pay reasonable attorney fees after arguing over who is responsible for an aggravation of an earlier back injury.  Certified nursing assistant Janet Hufnagel filed a workers compensation claim in 2015 for work-related aggravations to a low-back condition that resulted from an admitted work-related injury in 2009 while working for Deer River Health Care Center in Deer River, Minnesota, according to documents in Janet Hufnagel v. Deer River Health Care Center and MHA Insurance Co., respondents, and Essentia Health-Deer River and Berkley Risk Administrators Co., relators, and Midwest Spine & Brain Institute and Essentia Health, intervenors.

In 2013, after Ms. Hufnagel recuperated and was back on the job, Deer River was acquired and became Essentia Health-Deer River, or Essentia, and also changed its workers compensation insurer, court records state.  In August 2014, while working for the newly named and acquired facility, Ms. Hufnagel experienced increased low-back pain, which required time off work and medical treatment.  When notified of this injury, Essentia denied liability, concluding that Ms. Hufnagel's "current need for medical treatment is a continuation of the prior work injury from 2009 which is under a different insurer."  Ms. Hufnagel then suffered an additional aggravation to her low-back condition in June 2015.  In July 2015, Ms. Hufnagel filed a claim petition, seeking temporary total disability and medical benefits for the 2014 and 2015 injuries, court records state.

After nearly two years of legal proceedings that included six medical examinations, a Workers’ Compensation Court of Appeals judge ruled that Essentia was liable for the 2014 and 2015 aggravated injuries.  Following the October 2016 ruling, Ms. Hufnagel and her attorney filed a motion to recover $31,120.47 in attorney fees.  A compensation judge concluded that the dispute presented by Ms. Hufnagel's 2015 claim petition was only whether the 2009 injury "continued to be a substantial contributing factor" to her later aggravations, and was not a dispute between employers.  Accordingly, the compensation judge denied the motion for fees under state law.

The Workers' Compensation Court of Appeals then reversed, “holding that the compensation judge failed to fully consider the extent to which each employer sought to shift liability to the other employer and that it was error to deny the motion for fees” under state law, concluding that the attorney had not been adequately compensated for the time spent providing effective representation for Ms. Hufnagel.

The state Supreme Court affirmed: “We agree with the WCCA that the efforts by each employer to shift responsibility to the other employer ‘greatly increased the burden on (Ms. Hufnagel’s) counsel to provide effective representation…  We therefore hold that (Ms.) Hufnagel was entitled to receive reasonable attorney fees.

Jones Day Warns of ‘Protracted’ Fee Actions if Circuit Ruling is Upheld

July 25, 2018

A recent NLJ story by Erin Mulvaney, “Jones Days Warns of ‘Protracted’ Fee Fights if Circuit is Upheld,” reports that Jones Day lawyers, representing CVS Pharmacy Corp., are raising alarms that a federal appeals court decision that erased a fee award misapplied legal standards and will invite “protracted” litigation over compensation in future cases.  The U.S. Court of Appeals for the Seventh Circuit in June overturned a $307,000 fee award for the law firm, which had successfully challenged U.S. Equal Opportunity Commission claims that a CVS severance agreement unlawfully interfered with protected workplace rights.

The appeals court, finding the EEOC’s case against CVS wasn’t fruitless, vacated the legal fees awarded to Jones Day.  The applicable fee statute, the court said, “does not punish a civil rights litigant for pursuing a novel, even ambitious theory.”  The law firm asked the court to reconsider the decision stripping fees.  Jones Day’s Eric Dreiband, leading the team for CVS, took issue with how the appeals panel resolved the fee dispute.  The Seventh Circuit, according to lawyers for CVS, should not have granted “fresh” review but instead should have approached the dispute using a standard that gives greater deference to the trial court.

“Although this particular fee award may not be of great importance, the standard of review for all fee awards assuredly is,” Dreiband wrote in court papers.  “The panel opinion gets it wrong and, worse, invites protracted fee litigation by promising de novo appellate review.”  Citing an earlier Seventh Circuit case, Dreiband, who is the Trump administration’s nominee to lead the U.S. Justice Department’s civil rights division, said it would be “’wasteful’ for appellate courts to ‘redo’ a lower court’s analysis of ‘how far from the correct legal position’ a party strayed.”

The lawyers for CVS also are urging the Seventh Circuit to correct an alleged “legal misstatement” that could lead other courts astray.  The Jones Day lawyers, including partner Yaakov Roth, argue the panel decision incorrectly stated the EEOC can litigate certain types of employment cases without an underlying charge.  The attorneys also contend the appeals court strayed in saying it was “questionable” whether legal fees can ever be awarded in scenarios where the EEOC violated a duty to try to resolve disputes before any lawsuit is filed.

The case is rooted in a 2014 lawsuit filed by the EEOC 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 employees.  The agency lost in the U.S. District Court for the Northern District of Illinois.

Dreiband, formerly the head of Jones Day’s labor and employment group, in 2016 identified his hourly rate at $560, according to court papers in the case.  Dreiband earlier served as general counsel to the EEOC from 2003 to 2005.  Roth, a former clerk to the late Justice Antonin Scalia, billed at $475 per hour in 2016, and Nikki McArthur at $275 per hour, according to court records.

NJ Supreme Court Sets ‘Hard Limit’ on Additional Fees in High-Low Settlements

July 20, 2018

A recent New Jersey Law Journal story by Michael Booth, “High-Low Agreement Sets ‘Hard Limit,’ Court Says in Barring Additional Fee Award,” reports that the New Jersey Supreme Court ruled that parties who enter into a high-low agreement may not later seek additional counsel fees and litigation costs if the agreement is silent on the issue.  In a unanimous decision, the court ruled that a high-low agreement should be considered a contract and that, unless expressly agreed to, the award of counsel fees and costs permitted under the offer of judgment rule cannot be considered.

“We determine that the high-low agreement is a settlement subject to the rules of contract interpretation,” Justice Faustino Fernandez-Vina said for the court.  A high-low agreement “is not the sort of settlement contemplated by Rule 4:58; rather, it serves a different purpose and provides distinct benefits,” he wrote.

“An offer of judgment pursuant to Rule 4:58 is designed to encourage parties to settle claims that ought to be settled, saving time, expense, and averting risk, while the specter of the continued prosecution of the lawsuit remains,” he said.  “A high-low agreement, in contrast, only mitigates the risk faced by the litigants—it saves no time or expense related to litigation and requires the full panoply of judicial process, up to and including a jury verdict.”  “The agreement is a settlement contract ”that” superseded and extinguished the offer of judgment,” the court held.

The issue reached the court on a question of whether the estate of a deceased medical malpractice plaintiff could be awarded fees over and above the $1 million “high” after a jury verdict of $6 million.  The Supreme Court affirmed lower courts, which said the answer was no.

In the suit, plaintiff Benjamin Serico of West Caldwell claimed he was administered a colonoscopy by physician Robert Rothberg in December 2007, but two years later he was diagnosed with colon cancer that had spread to his liver.  Serico died two years after his diagnosis, in December 2011, at age 62, after which his wife, Lucia Serico, continued to pursue claims that Rothberg negligently failed to treat the cancer.

Lucia Serico made a pretrial offer of judgment of $750,000, to which Rothberg’s carrier never responded, according to documents.  According to the court, settlement negotiations began in earnest during the trial, and the parties entered a high-low agreement providing for a minimum recovery of $300,000 and a maximum of $1 million.  During the negotiations, neither side raised a possible fee award, or a reservation or waiver of rights, or the offer of judgment, the court said.

A jury found for the plaintiff after a two-week trial before Essex County Superior Court Judge James Rothschild Jr., and awarded $6 million, thus triggering the $1 million “high.”  The jury attributed 20 percent of the fault to the decedent’s pre-existing cancer, which, absent the high-low, would have set the recovery at $4.8 million.  Because the $1 million judgment was more than 120 percent of the previous $750,000 offer, Serico, citing Rule 4:58, moved for an award of fees and costs.  Each side acknowledged that the issue hadn’t been raised at the negotiations during trial.

Rothschild denied the motion.  He found there was no evidence of intent to determine that Serico’s rights to a fee sanction under the rule had been preserved.  He said high-low settlements are rarely if ever followed by fee applications under Rule 4:58.  In a February 2017 ruling, the Appellate Division affirmed, saying: “Without evidence that the parties agreed to allow plaintiff to seek amounts in excess of the high, [the plaintiff] was not entitled to any other payments.”

Fernandez-Vina and the other justices agreed.  “The resulting agreement set a hard limit of $1,000,000,” Fernandez-Vina said.  “We conclude that the parties intended $1,000,000 to be the maximum recovery, including all expenses and fees.  “The agreement on the record reveals a meeting of minds on both the floor and the ceiling of Serico’s recovery, including fees and expenses,” Fernandez-Vina said.  “A crucial aspect of any high-low agreement is finality; both parties benefit from the strict and explicit limitations of financial exposure that such agreements provide,” he added.

Rothberg’s attorney, James Sharp of Schenck, Price, Smith & King in Florham Park, issued a statement through another attorney, Benjamin Hooper of the same firm.  “We were confident in the correctness of our position, that the plaintiff was ineligible to collect fees and costs under the offer of judgment rule,” Hooper said.  “The high-low contract superseded the offer-to-take judgment.  “As a matter of policy the decision benefits all litigants.  High-low agreements assist both plaintiff and defendant to mitigate the risk of an unfavorable jury verdict,” Hooper said.

Third Circuit Cuts Attorney Fees in Faulty Nuclear Missile Parts Case

July 17, 2018

A recent Legal Intelligencer story by PJ D’Annunzio, “In Suit Over Faculty Nuclear Missile Parts, Court Shoots Down $3M Attorney Fee Request,” reports that, in a settled lawsuit over defective batteries sold to the U.S. government for use in intercontinental ballistic missile launch systems, a federal appeals court upheld a decision denying the government’s lawyers’ demand for millions of dollars in fees.  The case involved a contentious dispute over how much the firm representing the government should be paid for the time put into the case.  While the case settled for $1.7 million, lawyers for the government requested $3.11 million in fees.

Attorneys hurled insults and innuendo at one another during the case, prompting U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania, the trial judge handling the matter, to proclaim, “it is a hellish judicial duty to review and resolve disputed attorneys’ fee petitions, particularly in cases, like this one, where the adversaries fan the flames at virtually every opportunity,” according to an opinion from the U.S. Court of Appeals for the Third Circuit, which reviewed the case.

Pratter slashed the attorney fee amount to roughly $1.8 million, leading the plaintiff to file an appeal to get the full amount requested.  The government and its relator in the False Claims Act case, Donald Palmer, said it was unfair for the court to award an amount even less than the one suggested by the defendant, C&D Technologies.  “Relator does not cite any decision that requires a district court to award at a minimum the amount of attorneys’ fees that the opposing party contends is reasonable, and we decline to make such a ruling today,” Senior Judge Morton Greenberg of the U.S. Court of Appeals for the Third Circuit wrote in the court’s July 17 opinion.

“Rather, our case law provides district courts with substantial discretion to determine what constitutes reasonable attorneys’ fees because they are ‘better informed than an appellate court about the underlying litigation and an award of attorney fees is fact specific.’”  However, the court did remand the case for Pratter to review whether the government and Palmer were entitled to “fees on fees,” that is, fees to compensate lawyers for the time spent arguing over how much they should be paid.

“The district court should proceed in two steps: (1) as with all fee petitions, it must first determine whether the fees on fees are reasonable; and (2) once the reasonability analysis is complete, the court must consider the success of the original fee petition and determine whether the fees on fees should be reduced based on the results obtained,” Greenberg said.