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Category: Interest on Fees

Third Circuit: No Attorney Fees After ‘Outrageously Excessive’ Fee Request

September 12, 2018

A recent Legal Intelligencer story by PJ D’Annunzio, “3rd Circ.: Judge Was Right to Award Nothing After ‘Outrageously Excessive’ $1M Fee Request, reports that a federal appeals court has upheld the denial of a $1 million fee request by a Scranton attorney in an auto insurance case that produced a verdict almost a tenth of the requested legal compensation.  In its denial, the U.S. Court of Appeals for the Third Circuit, joining other circuit courts, also held that it is within a judge’s discretion to award no attorney fees at all, especially if the fee request is deemed “outrageously excessive.”

The ruling stems from plaintiff Bernie Clemens’ bad-faith case against New York Central Mutual Fire Insurance over its handling of his auto accident case.  The claims went before a jury and ended with a $100,000 punitive damages award.  The defendants had settled Clemens’ uninsured motorist claim for $25,000.

The case was handled by Mike Pisanchyn of the Pisanchyn Law Firm in Scranton.  After the case was resolved, Pisanchyn asked the court to award the seven-figure fee amount.  However, U.S. District Judge Malachy Mannion of the Middle District of Pennsylvania was taken aback by the sheer size of the number—so much so that he awarded Pisanchyn and his firm nothing and referred Pisanchyn for disciplinary review.

Reached for comment, Pisanchyn disagreed that his firm’s fee request was excessive.  “In essence, despite us obtaining a $100,000 award on a zero written offer case while we represented the plaintiff over eight to nine years of litigation, the court has determined the plaintiff’s attorney should be awarded nothing,” he said in an email.  “However, we do take comfort in the fact that our clients have been compensated and are extremely happy with our representation of them through this almost decade of litigation.”

James Haggerty of Haggerty, Goldberg, Schleifer & Kupersmith in Philadelphia represented Clemens on appeal.  “The decision is important in that it addresses an issue regarding the award of counsel fees which had not heretofore been considered by the Third Circuit,” Haggerty said, “The court issued a well-reasoned and well written opinion, finding that the district court did not abuse its discretion in refusing to award counsel fees to trial counsel following his successful recovery of bad faith damages from the defendant insurer.”

Mannion’s 100-page opinion went line-by-line through the request, slashing billed fees he deemed vague, duplicative and excessive.  Mannion also took issue with how the firm recreated its timesheets, saying that, while recreating timesheets is allowable if the attorneys did not make them contemporaneously, a number of the entries appeared to be based on guesswork.

The Third Circuit agreed with Mannion’s handling of the request, which found that Pisanchyn and his firm were entitled to recover only 13 percent of the fees they asked for.  “In light of that substantial reduction, the district court deemed Clemens’s request ‘outrageously excessive’ and exercised its discretion to award no fee whatsoever,” Third Circuit Judge Joseph Greenaway wrote for the panel, which also included Judges Luis Felipe Restrepo and Stephanos Bibas.

“Although it was unusual, we cannot say that this decision was an abuse of discretion,” Greenaway added.  ”Review of the record and the district court’s comprehensive opinion makes clear that denial of a fee award was entirely appropriate under the circumstances of this case.  Counsel’s success at trial notwithstanding, the fee petition was severely deficient in numerous ways.”  Mannion had said one of the most “egregious” requests included billing 562 hours for trial preparation, with the plaintiffs attorneys entering between 20 and 22 hours per day on some days.  The Third Circuit examined that figure in detail.

“All the more troubling is the fact that counsel’s (supposedly) hard work did not appear to pay off at trial.  As the district court explained, counsel had ‘to be repeatedly admonished for not being prepared because he was obviously unfamiliar with the Federal Rules of Evidence, the Federal Rules of Civil Procedure and the rulings of th[e] court,” Greenaway said.  “Given counsel’s subpar performance and the vagueness and excessiveness of the time entries, the district court did not abuse its discretion in disallowing all 562 hours.”

Greenaway continued, “Aside from the problems with the hours billed for individual tasks, counsel also neglected their burden of showing that their requested hourly rates were reasonable in light of the prevailing rates ‘in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.’”

Davis Wright Tremaine Files Action Against Former Client for Unpaid Legal Fees

August 8, 2018

A recent The Recorder story by Ross Todd, “Cheesy Dispute: Davis Wright Tremaine Sues Mac & Cheese Restaurant Claiming $37K in Back Fees,” reports that Davis Wright Tremaine has sued the company behind popular Oakland macaroni and cheese restaurant Homeroom, claiming that the eatery owes more than $40,000 in unpaid legal fees and interest.  The lawsuit, filed late last month in San Francisco Superior Court, claims that Little Mac LLC, which does business as Homeroom, hired the firm in September 2016, but has refused to pay its bills for work done from May through June 2017.

“Excluding interest, Little Mac still owes DWT $37,690.23 for services rendered,” wrote firm partner Sanjay Nangia in the July 26 complaint.  This balance is now more that six (6) months past due.”  The firm claims that interest has accrued at the rate of $12.44 per day and is asking for $41,421.58 in fees and interest.

Just why the fee dispute is playing out in public wasn’t immediately clear.  The engagement agreement between the firm and the restaurant, which was included as an attachment to the complaint, includes a provision that each side has the right to request arbitration under the California Business & Professions Code in the case of a “fee dispute.”

In response to an email sent to Nangia and Davis Wright’s Don Buder, the partner who signed off on the engagement letter with the restaurant, a firm spokesman declined to comment beyond the court papers.

According to the September 2016 engagement letter, Buder charged Homeroom $675 per hour for work on “pending business and real estate matters.”  Buder’s firm bio says that he serves as “a strategic legal advisor and corporate counsel to food and beverage, food tech, and ag tech innovators, entrepreneurs, and investors.”  The engagement letter also said that then-associate Vipul Kumar charged $435 per hour and associate Drew Patterson charged $420 per hour, although the firm reserved the right to change rates and assign other lawyers to work for Homeroom.

Judge Denies Fee Request, Refers Matter to Ethics Board

September 6, 2017

A recent Legal Intelligencer story by Max Mitchell, “Judge Tosses $1M Fee Request, Refers Matter to Ethics Board,” reports that a Scranton attorney who recovered $125,000 for his client in a bad-faith case wanted $1.12 million in fees, costs and interest, but the presiding judge has instead awarded his firm nothing and referred the case to the Disciplinary Board of the Supreme Court of Pennsylvania.

U.S. District Judge Malachy E. Mannion of the Middle District of Pennsylvania issued an order chiding attorneys Michael Pisanchyn and Marsha Lee Albright over their handling of the case Clemens v. New York Central Mutual Fire Insurance, and saying their request for fees and costs was "outrageous and abusively excessive."

Mannion's 100-page opinion went line-by-line through the request, slashing billed fees he deemed vague, duplicative and excessive.  Mannion also took issue with how the firm recreated its timesheets, saying that, while recreating timesheets is allowable if the attorneys did not make them contemporaneously, a number of the entries appeared to be based on guesswork.

Mannion ended his opinion by saying that, "given the conduct of the plaintiff's counsel and the exorbitant request for fees in this case, a copy of this memorandum will be referred to the Disciplinary Board of the Supreme Court of Pennsylvania for their independent determination of whether disciplinary action should be taken against attorney Pisanchyn and/or attorney Albright."

Pisanchyn, the name partner of Pisanchyn Law Firm, said that, while he tried the case, he had not been involved in preparing the attorney fees petition.  However, he said, both he and Albright conducted themselves according to the Rules of Professional Conduct.

"I believe that either no action will be taken, or if a complaint is opened, it will be dismissed," Pisanchyn said.  He added he did not think the fees were unreasonable, since the case had been litigated for nearly nine years.  "The defendants took the position of a scorched earth litigation, and we had to go toe-to-toe with them every step of the way," he said.  "I certainly tried the case to the jury. I didn't try the case to the judge.  The jury obviously liked my presentation and obviously thought it was effective."

According to Mannion, plaintiff Bernie Clemens' bad-faith claims came before a jury in November 2015, and ended with a $100,000 award.  The defendants had settled Clemens' uninsured motorist claim for $25,000.  When it came to the attorney fees, according to Mannion, the plaintiff's attorneys sought $48,050 for their work on the UIM claim, $827,515 for working on the bad-faith claim and $27,090 for preparing the fee petition, for a total of $902,655 in fees.  Except for awarding $4,986 in interest, Mannion denied the requests entirely.

"In addition to the unconscionable number of vague entries which had been billed for (or more accurately guessed about) by the plaintiff's counsel, there also appear to be a number of duplicative entries in the bad faith time logs for which no explanation is provided," Mannion said.  Mannion said one of the most "egregious" requests included billing 562 hours for trial preparation, with the plaintiff's attorneys entering between 20 and 22 hours per day on some days.

"If counsel did nothing else for eight hours a day, every day, this would mean that counsel spent approximately 70 days doing nothing but preparing for the trial in this matter—a trial in which the only issue was whether the defendant had committed bad faith in its handling of the UIM claim; a trial which consisted of a total of four days of substantive testimony; a trial which involved only five witnesses; a trial during which trial counsel had to be repeatedly admonished for not being prepared because he was obviously unfamiliar with the Federal Rules of Evidence, the Federal Rules of Civil Procedure and the rulings of this court," Mannion said.  "For this, the plaintiff's counsel are billing $196,700."

Attorneys Earn $18.5M in Fees in Dole Securities Action

July 21, 2017

A recent Law 360 story by Jeff Montgomery, “Dole Shareholders Garner $18.5M in Fees in Securities Cases, reports that attorneys for a Dole Food Co. stockholder class secured an $18.5 million fee award as part of a $74 million settlement in a Delaware federal securities suit targeting insider efforts that artificially depressed Dole’s stock price in 2013.

The fee, along with about $694,000 for expenses and costs, went to lead counsel Bernstein Litowitz Berger & Grossmann LLP and Entwistle & Cappucci LLP and liaison counsel Friedlander & Gorris LLP, in a case focused on damage to those who relinquished their shares before Dole sold the company into private ownership for $1.6 billion.

U.S. District Court Judge Leonard P. Stark said the uncontested settlement terms were both fair and reasonable, and reflected the significant risk taken by attorneys in pursuing damages to former investors unable to receive shares of a separate, $101 million Chancery Court award in a related Dole stockholder case.

“The claims on behalf of persons who sold stock before the closing were going to be released, but they were not going to receive any consideration,” class attorney Vincent R. Cappucci of Entwistle & Cappucci said.  He added later that suit required “tremendous work by experts in analytics.”

In August 2015, Vice Chancellor J. Travis Laster found that Dole CEO David Murdock and General Counsel C. Michael Carter breached their fiduciary duties to shareholders in connection with the take-private deal.  Both were said by Vice Chancellor Laster to have acted in “intentional bad faith,” with Carter alleged to have engaged in fraud and the two found jointly and severally liable for $148.19 million in damages.  The award covered both holders of stock in the run-up to the go-private closing and parties who launched a separate suit challenging Dole’s appraised value.

In the August opinion, Vice Chancellor Laster concluded that Murdock and Carter’s effort to drive down Dole’s share price and their alleged misrepresentations during negotiations reduced the company deal price by 16.9 percent, or $2.74 per share.

Judge Stark said the subsequent $74 million federal court settlement was large “not only in the abstract, but more importantly it represents a substantial percentage of what the plaintiffs believe is the maximum possible recovery — right around a third of the best scenario in the plaintiffs' estimate.”

Class attorney Katherine M. Sinderson of Bernstein Litowitz said interest also will be applied to both the fee award and the class payment, which will be distributed proportionally to investors.  The $639,000 in legal expenses approved by the court, Sinderson said, were well below the $1.3 million possible for the case.

Judge Stark said the case involved many complex issues, some novel or unprecedented, as well as statute of limitation concerns.  The complications in the contingent fee case created a significant risk that the stockholders and attorneys “may have had nothing had the case proceeded all the way through trial and an inevitable appeal,” the judge said.

The case is San Antonio Fire and Police Pension Fund et al. v. Dole Food Co. Inc. et al., case number 1:15-cv-01140, in the U.S. District Court for the District of Delaware.

Former Enron Unit Failed to Justify Fee Request

June 29, 2017

A recent Law 360 story by Natalie Olivo, “Nigeria Knocks Ex-Enron Unit’s Fee Bid in $21M Award Row,” reports that a former Enron subsidiary has failed to justify its request for hundreds of thousands of dollars in legal fees for the solo practitioner who netted the company confirmation of a contract breach arbitral win against the Nigerian government now topping $21 million, the country told a D.C. federal court.

In pushing for the fees this month, Enron Nigeria Power Holding Ltd. — sold off by Enron in the wake of its 2001 scandal and collapse — said the $276,752.64 in attorneys’ fees and $4,025.69 in costs was well-earned by Texas attorney Kenneth R. Barrett, who overcame stiff opposition from experienced opposing counsel who put up a complex legal defense.  Legal fees are appropriate, ENPH said, in part because Nigeria refused to abide by the underlying award and because the underlying agreement requires compensation by “the party resisting enforcement.”

But the Nigerian government pushed back, arguing that instead of using the Washington, D.C., rate to calculate his fees, Barrett should have used the lower rate of Houston, Texas, because that was mainly where he worked.  In addition, the government said, while Barrett has nearly three decades of legal experience, he has not provided any evidence to show that he has experience regarding international arbitration award disputes with foreign governments.

“The fact that plaintiffs’ counsel has been licensed as an attorney for almost 30 years, does not necessarily translate to 30 years [of] experience in every area of law,” Nigeria said.  “Plaintiffs’ counsel has not shown that he has the requisite experience and reputation in international arbitration enforcement to justify the billing rate and hours spent on this matter.”

ENPH’s total award was up to more than $21.2 million after a D.C. federal judge added on exchange rate fluctuations and interest in April.  The International Chamber of Commerce arbitration award of $11 million plus fees had already been confirmed, and in December the D.C. Circuit also rejected Nigeria’s appeal of that ruling.

Nigeria had argued that it could cancel its deal with ENPH because of then-parent company Enron Corp.’s accounting scandal, and said enforcing the award would endorse fraudulent conduct and conflict with U.S. public policy, despite ENPH rebuttals that Nigeria failed to provide any evidence of wrongdoing on the subsidiary's part.

But the D.C. Circuit noted the courts’ tendency to defer to arbitration.  It also found that while the public policy issue of award enforcement was a question for the courts, interpreting the agreement between Nigeria and ENPH was a question for the ICC.  The panel also remarked that Nigeria began trying to back out of the deal in 1999 out of apparent economic convenience — before the Enron scandal broke.  As of the April judgment Nigeria still had not paid any of the award to ENPH.

ENPH in March asked the court for the $18.7 million in award and award interest as well as for exchange rate consideration and post-award/prejudgment interest on legal fees and arbitration costs.  The final judgment confirmed the $18.7 million and added $1.1 million based on ENPH arbitration legal fees and costs — converted from pounds at the November 2012 rate — along with $870,000 for ICC fees and $529,000 in prejudgment interest.

ENPH followed up with the court this month, noting that due to an “oversight,” prejudgment interest should actually be about $33,000 more.  The company first sought compensation for its legal costs late last month, asking for more than $630,000 total when combining its U.S. and United Kingdom court enforcement efforts.

In a June 3 brief, ENPH argued the rates charged by Barrett are reasonable, with the attorney having performed work both as lawyer and legal assistant.  For the attorney work, Barrett charged between $770 and $820 an hour, while he charged between $175 and $185 an hour for legal assistant efforts, for a total of 413.57 hours in all.

Hitting back against ENPH’s fee request, the Nigerian government said Barrett should actually be using the average Houston rate for comparable attorneys of about $300 an hour for attorney work and about $127 per hour for legal assistance efforts.  During the four years of the dispute, ENPH’s counsel made only two trips to Washington, D.C., the government said, one for mediation and the other for oral arguments before the circuit court.

The government also argued Barrett’s fee request should be reduced due to its documentation.  “The plaintiffs’ counsel in the matter has presented invoices rife with serial or blocked bill entries that impermissibly intermix time spent on multiple activities,” Nigeria said.  “It renders the task of determining how much time plaintiffs’ counsel reasonably spent on particular activities difficult.”

The case is Enron Nigeria Power Holding Ltd. v. Federal Republic of Nigeria, case number 1:13-cv-01106, in the U.S. District Court for the District of Columbia.