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Category: Fee Issues on Appeal

Ninth Circuit Asked to Rule on Fee Awards in MDLs

February 23, 2018

A recent Reuters story by Alison Frankel, “VW, Class Counsel Ask 9th Circuit to Refuse Fees for ‘Ghost Lawyers’,” reports that the 9th U.S. Circuit Court of Appeals has never had to decide whether and under what circumstances trial judges overseeing multidistrict litigation can award fees to lawyers who weren’t part of court-appointed steering committees. It’s now facing those questions in one of the most epic MDLs in recent memory, the $15 billion litigation over VW clean diesel cars outfitted with devices to deceive emissions tests.

Scores of plaintiffs’ firms stampeded to lead the consolidated case after state and federal regulators issued word in late 2015 of VW’s so-called defeat devices.  In January 2016, U.S. District Judge Charles Breyer of San Francisco appointed Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein as lead counsel and named 21 additional firms as members of a steering committee.

As members of the plaintiffs’ team drafted a consolidated complaint and prepared for litigation against VW, Cabraser participated in whirlwind, tripartite negotiations with VW and regulators. Within months, VW agreed to a $15 billion deal to resolve private and federal government claims.

Judge Breyer granted final approval of the settlement, which was structured as a class action, in October 2016. He awarded fees of $175 million to Lieff Cabraser, members of the steering committee and other plaintiffs’ firms that executed legal work authorized by Lieff Cabraser for the benefit of class members. In all, about 100 firms shared in the fees, which VW paid.

Not everyone was satisfied with the outcome, however. Judge Breyer denied fee requests by nearly 250 plaintiffs’ lawyers who represented individual VW owners but weren’t authorized to work on behalf of the class. Those lawyers wanted VW to pay their fees, arguing, in particular, that their pre-consolidation efforts helped push the company into a settlement and that they’d expended time apprising class members – their clients - about the terms of the deal. Judge Breyer ruled last April that none of that work actually benefited the class and that it was not covered by VW’s agreement to pay the fees of Cabraser and her team.

Led by Nagel Rice and Hyde & Swigart, 18 firms appealed Judge Breyer’s decision to deny them fees to the 9th Circuit. (I’m going to focus on their joint brief and not on separate appeals by a class member alleging its lawyers weren’t compensated for suggesting an important edit to the settlement agreement and a Virginia plaintiffs’ lawyer protesting a since-dissolved injunction on filing a lien against clients’ recoveries.) The Nagel Rice brief contended that the federal rules for class actions allow fee awards to lawyers not named as class counsel, as both the 3rd and 10th Circuits have acknowledged in, respectively, In re Cendant and Gottlieb v. Barry. In this case, the brief said, the real work took place before Lieff Cabraser was named to lead the case: developing initial legal theories, “creating a massive offensive across the country resulting in upwards of 451 possible related filings in some sixty districts,” screening clients, filing motions to force VW to preserve evidence and coordinating with other plaintiffs firms doing the same thing.

Judge Breyer’s alternative view of their contributions to the settlement, they said, is just wrong. “The court’s attempt to attribute the success of the class as a whole as springing only from the heads of Class Counsel beginning on the first day of their appointment, some four months into the filing of the case, is wholly arbitrary and without any basis in fact,” the appellate brief said. “By the time class counsel was appointed on Jan. 21, 2016, there had already been 451 potentially related cases filed across the nation in some 60 federal districts; at least four motions to preserve evidence; at least three motions for interim lead counsel positions; various preliminary discovery attempts; and at least eight conferences for attorneys across the country to analyze, discuss and refine approaches to bringing the cases.” Basically, the brief argued, Lieff Cabraser and its team received all of the credit – and fees – when all they did was meld and duplicate the work other plaintiffs’ lawyers had already done.

VW and the Lieff team filed their response briefs this week. VW’s lawyers at Sullivan & Cromwell submitted a sober explanation of why it believes it owes nothing to lawyers who didn’t bother to follow Judge Breyer’s pre-trial orders for requesting fees. Among the reasons: There’s no common fund in the class settlement, and VW never agreed to pay lawyers other than those Lieff Cabraser identified.

Lieff Cabraser’s brief, which was also signed by the other firms on the VW plaintiffs steering committee and New York University professor Samuel Issacharoff, is a more entertaining read than VW’s, leading off with a memorable account of the long ago “ghost riders” of New Jersey buses and trains, who would appear out of nowhere to claim injuries whenever one of the vehicles was involved in an accident. A similar phenomenon occurs in mass tort litigation, the brief said: “Successful lawsuits spawned claims of parental rights by lawyers whose participation in the case came as a surprise to all. These ‘ghost lawyers’ would appear at the end of the litigation claiming that the work they performed on behalf of an individual client was indispensable to the success of the common enterprise.”

The plaintiffs’ firms asking the 9th Circuit to award them fees in the VW case are ghost lawyers, according to the Lieff brief, “emerging from the shadows only after the case has been resolved (to) claim credit for the result.” In fact, Lieff and its team argued, the lawyers offered “no work product evidence of having engaged in the actual prosecution or resolution of the consolidated case.”

MDL courts, like New Jersey transit systems, have adopted systems and protocols to dissuade claims by freeloaders, the brief said. Judge Breyer followed best practices when he picked a leadership team, ordered documentation of its work and awarded fees based on that documentation. To hold otherwise, the Lieff team said, the 9th Circuit would have to be convinced the judge abused his discretion.

“There is simply no basis for any such argument. Not only was the district court not clearly erroneous in its fact finding and case management, but the handling of this extraordinary litigation serves as a model for complex case oversight,” the brief said. “Appellants run headlong into well-documented findings by the district court below on how this litigation was handled and by whom.”

CA Appeals Court Rules on Discretionary Attorney Fee Awards

February 22, 2018

A recent Metropolitan News story, “Parties May Render Award of Attorney Fees Discretionary,” reports that a contract that provides that the court “may” award attorney fees to the prevailing party is outside the ambit of Civil Code §1717 and such an award is discretionary, the Fifth District Court of Appeal has held in a 2-1 decision.

Acting Presiding Justice Bert Levy wrote the majority opinion, along which Justice Jennifer R.S. Detjen.

Notwithstanding that the opinions came, as noted by dissenting Justice Kathleen Meehan, in a “a case of first impression,” they were not certified for publication.

The majority, in its opinion filed Tuesday, affirmed the decision of retired Tulare Superior Court Judge Lloyd L. Hicks, sitting on assignment, who denied attorney fees to Universal Biopharma Research Institute, Inc., the prevailing party in a dispute over a lease. Biopharma asserted that §1717 renders an award mandatory.

The lease in question provided:

“In the event of any proceedings brought by either party against the other under this lease, the prevailing party may be entitled to recover the fees of their attorneys in such action or proceedings for such amounts as may be adjudged reasonable attorney’s fees.”

Hicks reasoned that use of the word “may” rendered an award discretionary.

Agreeing, Levy said:

“The court noted that standard attorney fees contracts make an award of fees to the prevailing party mandatory by simply using the word ‘shall.’ Here, however, the contract states the prevailing party ‘may’ be entitled to fees.

“The trial court’s interpretation of the attorney fees provision is reasonable.”

Section 1717, relied upon by Biopharma—which sought fees of about $197,000—provides, in part:

“In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”

That section, Biopharma argued, prevails over the lease provision and renders the award of attorney fees mandatory.

Levy responded:

“[T]he text of section 1717 limits its reach to contracts with mandatory attorney fees provisions, i.e., where the contract specifically provides that attorney’s fees and costs shall be awarded. Thus, by its terms, section 1717 does not apply to the lease agreement at issue here.”

Cases relied upon by Biopharma proclaiming an award of fees to be mandatory did not involve contractual clauses specifying that an award would be discretionary, Levy noted.

He said the wording of §1717 “does not indicate that courts must construe discretionary contractual attorney fee provisions as mandatory” but “simply reflects the statute’s purpose of establishing mutuality of remedy and thereby preventing inequitable mandatory attorney fees awards.”

The jurist pointed to Code of Civil Procedure §1021 which provides: “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties….”

Levy continued:

“Section 1717 assumes parties have the right to enter into agreements for the award of attorney fees, a right derived from Code of Civil Procedure section 1021….However, section 1717 has a limited application. By its terms, it covers contract actions only where the contract sued upon includes a mandatory attorney fee provision.”

He went on to dispel the implication that a party, by inserting a provision rendering the award of attorney fees discretionary, could specify that such an award could be made only in favor of that party, declaring:

“Here, the parties agreed to a bilateral discretionary attorney fee provision, not a one-sided mandatory fee provision. Thus, this attorney fees clause does not contravene either the terms or purpose of section 1717. Section 1717 does not abolish the general rule that parties have the right to enter into contracts with either no attorney fee provision or a discretionary fee provision.”

Meehan said in her dissent:

“[T]he majority has created a class of contractual attorney fees provisions that will fall outside the statute enacted to govern them. Contracting parties may circumvent Civil Code section 1717 (section 1717), and undermine the public policies upon which it is based, by making the statute’s otherwise mandatory application discretionary in strategically drafted private agreements. Section 1717 governs a narrowly tailored category of attorney fees awards where a party prevails on causes of action to enforce the contract in which a fees provision is contained. Given the statute’s narrow focus, and its comprehensive definitions and requirements, it is unlikely the Legislature intended that it would be limited, much less optional, in its application.”

The case is City of Dinuba v. Universal Biopharma Research Institute, F072497.

NCAA Appeals $40M Fee Award to Ninth Circuit

February 16, 2018

A recent Courthouse News story by Nathan Solis, “NCAA Asks 9th Circuit to Strip $40M Fee Award From Student-Athletes” reports that the National Collegiate Athletic Association fought a $40 million attorney fee award at the Ninth Circuit on Thursday, in an antitrust class action by former student-athletes who said the organization forced students to sign their rights away while reaping the benefits of licensing and merchandise agreements.

The federal case played out in court for six years as the student-athletes challenged the makers of sports video games, a college licensing company and the NCAA.

Former UCLA basketball star Edward O’Bannon claimed in the 2009 federal class action that students were forced to sign away the rights to their own images if they wanted to play NCAA sports.

Like many other former athletes, O’Bannon’s collegiate career is archived in video footage, photographs and that content is sold through merchandising deals.

In their class action, the former athletes said NCAA’s backlog of archived footage is estimated to be valued in the billions of dollars.

Additional defendants included video game publisher Electronic Arts and Collegiate Licensing Company.

In 2015, a Ninth Circuit upheld U.S. District Judge Claudia Wilken’s finding that the NCAA violated antitrust laws with rules that were more restrictive than necessary. But the Ninth Circuit did not agree with Wilken’s order awarding college athletes $5,000 for each year they played in college.

The appeals court instead said NCAA schools could cover the cost of tuition, but the student-athletes were not entitled to additional cash.

In 2016, Wilken ordered the NCAA to pay about $42.3 million in attorneys’ fees and other costs – later lowered to just over $40 million – and the NCAA made a failed bid to bring the case the Supreme Court.

Fighting the fee award at the Ninth Circuit on Thursday, NCAA attorney Gregory Curtner from Riley Safer Holmes & Cancila said plaintiffs adopted a winner-take-all approach in their antitrust class action on Thursday before the three-judge panel.

“A Game of Thrones approach. There was no middle ground,” said Curtner, who noted the student-athletes sought to revolutionize intercollegiate sports, failed, and aren’t entitled to a fee award.

“They’re entitled to nothing,” Curtner said bluntly.

The student-athletes’ attorney Jonathan Massey from Massey & Gail said the case was a hard-fought class action that didn’t just end with “a narrow injunction.” When analyzing the degree of success in the for a fee award, Massey said the Ninth Circuit panel should keep in mind that not all claims need to be successful.

“We think this court has established that it’s OK to lose sometimes,” said Massey. “You don’t have to win every single claim in order to be entitled fees for all of the claims.”

The panel was made of Chief Circuit Judge Sidney Thomas, Circuit Judge Jay Bybee and Senior U.S. District Judge Gordon Quist sitting by designation from the Western District of Michigan. The panel did not say when they would make their decision.

Attorney Fees in Foreclosure Defense Before Florida Supreme Court

February 14, 2018

A recent Daily Business Review story by Samantha Joseph, “Attorney Fee Debate Heats Up as Florida Supreme Court Accepts Case” reports that a dispute over appellate attorney fees for prevailing borrowers in foreclosure cases is now before the state’s highest court.

At the heart of the issue: claims by some foreclosure defense attorneys that recent appellate rulings are a strategy from courts to discourage lawyers from representing homeowners who defaulted on their mortgages. The defense attorneys claim courts use their arguments against them to deny motions when they try to recoup fees for defending the suits.

Now it appears the Florida Supreme Court may weigh in. On Tuesday, the high court accepted discretionary jurisdiction over a challenge to a Fourth District Court of Appeal ruling against a homeowner seeking legal fees under the reciprocity provision in state law.

“This is all coming to a head,” said foreclosure defense attorney Roy Oppenheim, whose firm will ask to file an amicus curiae or “friend of the court” brief in the pending case. “The bottom line is this is very complicated, and it’s becoming a major issue.”

The dispute before the Florida Supreme Court pits borrower Marie Ann Glass against Nationstar Mortgage LLC, doing business as Champion Mortgage Co. It came to the high court from the Fourth DCA, where the lender challenged Broward Senior Circuit Judge Joel T. Lazarus’ dismissal with prejudice of its amended foreclosure complaint.

Nationstar sought to foreclose on Glass’ reverse mortgage on claims the borrower defaulted on the contract by failing to meet key requirements — not paying taxes and maintaining homeowner insurance on the property. Glass raised several defenses, including arguments that Nationstar lacked standing to foreclose on her debt and the line of equity from the reverse mortgage should have covered taxes and insurance expenses.

On appeal, Nationstar filed a notice of voluntary dismissal, leaving Glass to claim she was the prevailing party and eligible to recoup appellate legal fees from the financial institution that launched the legal action against her.

Glass argued Florida Statute Section 57.105(7) allowed for reciprocity, permitting borrowers to collect legal fees under contracts that make the provision only for lenders. But the state appellate court ruled against her, finding her own arguments shielded the Nationstar.

“The plain language of Section 57.105(7) has two requirements,” Fourth DCA Judge Jeffrey T. Kuntz wrote in the opinion issued April 12, 2017, with Judges Cory J. Ciklin and Judge Robert M. Gross concurring. “First, the party must have prevailed. Second, the party had to be a party to the contract containing the fee provision.”

By arguing Nationstar lacked standing to foreclose on her debt, Glass suggested the mortgage company was not a party to her loan contract, wiping out her ability to meet the law’s second requirement.

Glass’ court filings suggest the appellate court went too far in finding for Nationstar, which never opposed her request that the plaintiff cover her legal bills.

“The Fourth District denied an unopposed motion for attorneys’ fees,” Glass’ lawyer, Amy L. Fischer of The Cunningham Law Firm on West Palm Beach, told the Daily Business Review.

The issue of attorney fees has taken center stage in recent weeks as foreclosure defense attorneys face a Catch 22-scenario: Defendants won cases by arguing their lender was not the rightful owner of the real estate debt and therefore could not sue to foreclose. But they lost fee requests because appellate panels reasoned that financial institution that weren’t parties had no responsibility to pay the winner’s attorney fees.

Among those speaking out against appellate rulings is Oppenheim, a Weston attorney representing a couple who, like Glass, unsuccessfully sought appellate attorney fees in a foreclosure case.

“Whenever you’re dealing with attorney fees, it’s a very sensitive issue, so the court should have known that they were going to create a ruckus and a firestorm,” he said. “We’re being told that we shouldn’t be paid for our efforts in … cleaning up the banking mess. The whole thing is incredibly ironic, but it’s a red-hot issue, and that’s why the Supreme Court accepted jurisdiction over it.”

Oppenheim said his firm will appeal to the Florida Supreme Court in hopes the justices will accept the case and consolidate it with Glass.

“The ramifications of this are massive,” said foreclosure defense attorney Jacquelyn Trask of Oppenheim Pilelsky. “Attorneys are fully invested in it.”

ABA Urges Federal Circuit Not to Include Attorney Fees in Patent Case “Expenses”

January 24, 2018

A recent ABA Journal story by Lorelei Laird, “ABA Urges Federal Circuit Not to Include Attorney Fees in Patent Case ‘Expenses’” reports that the American Bar Association is urging the U.S. Court of Appeals for the Federal Circuit not to include the government’s attorney fees when awarding “all expenses of the proceedings” to the U.S. Patent and Trademark Office.  The ABA filed an amicus brief in NantKwest v. Joseph Matal, urging the full Federal Circuit to overturn a split decision of a three-judge panel.

The panel had ruled that language in a recent revision of patent law permits the PTO to recover not only $33,103.89 in expert fees, but also nearly $80,000 in attorney fees, according to an ABA press release. This is a departure from precedent in patent law, the ABA argues, and would make it difficult for people without deep pockets to seek court review of PTO decisions.

“The ABA submits that imposing governmental attorneys’ fees on patent applicants who choose civil actions under [patent law] will hamper equal access to justice and chill the assertion of meritorious claims,” the brief says. “It is also contrary to the express language of Section 145, which does not overcome the presumption of the American rule that each party pays its own fees.”

NantKwest, a biotechnology company, invoked its right under patent law to appeal a PTO decision to federal district court. Under federal law, this requires it to pay for “all expenses of the proceedings.” For nearly 200 years, the ABA brief says, courts have interpreted this to mean only out-of-pocket costs, such as expert fees or travel expenses. The Virginia district court awarded the PTO only expert fees.

But on appeal, a three-judge panel of the Federal Circuit added $80,000 in attorney fees. Unusually, the Federal Circuit then reopened the appeal on its own in order to review the case using the full Federal Circuit. The ABA’s brief supports NantKwest.

The panel made a “radical, novel” decision, the brief says. Traditionally, U.S. courts use the “American rule,” which says litigants must pay their own attorney fees unless a statute or contract expressly says otherwise. Those provisions are clearer then the patent statute’s call to pay “all expenses all of the proceedings,” the brief says, and they typically reward only the winner of a case. Here, by contrast, the statute applies regardless of who wins. Furthermore, the brief says, the PTO did not start asking for attorney fees until 2013, even though the statute has existed for nearly two centuries.

Furthermore, the brief says, fee-shifting is often used to provide access to the courts. Here, however, the ABA argues that it will achieve the exact opposite, by making it unduly expensive for patent applicants to challenge a PTO decision. Individuals, nonprofits and small businesses would be disproportionately affected by the Federal Circuit’s ruling if it is upheld, the brief says. Congress surely did not intend to create a way to resolve patent disputes that would be unavailable to many applicants, the ABA argues.

“The PTO’s newfound interpretation, if accepted, would have intolerable results,” the brief says. “The doors of justice should be open to all, regardless of individual prosperity.”

The ABA’s position comes from a 2016 resolution before the House of Delegates, Resolution 108A.  The resolution addressed this exact topic in reaction to a 4th U.S. Circuit Court of Appeals case, Shammas v. Focarino, which also granted attorney fees. The U.S. Supreme Court declined to review that case.