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Category: Interest on Fees

Judge: $1700 Hourly Rate for the Richmond, VA Market is Unrealistic

November 24, 2023

A recent Law.com story by Allison Dunn, “Judge Rejects Quinn Emanuel’s $1700 Hourly Rate Request, Slashing Fees for Virginia Settlement By Nearly 80%”, reports that a federal judge in Virginia drastically reduced Quinn Emanuel attorneys’ requested fees related to enforcing a $6 million settlement agreement they successfully obtained for a client over a fraud scheme involving the Model Tobacco Building in Richmond, Virginia.  Some of the rates requested by Quinn Emanuel—$1,690 per hour for a lead partner or $1,385 per hour for associates—were unrealistic for the Richmond market in the present case, the court found.

Quinn Emanuel attorneys based out of Washington, D.C., who served as plaintiffs’ counsel, sought prejudgment interest at a rate of 6%, as well as $236,641.18 attorney fees and costs relating to enforcing a $6 million settlement agreement between the plaintiffs, SS Richmond and MK Richmond, against Christopher A. Harrison, the owner and manager of several entities including, The C.A. Harrison Cos., CAH Model Tobacco and the McKenzie Blake Development Co.  Under the settlement agreement, the Harrison defendants were obligated to pay the $6 million payment by June 8, but the plaintiffs maintain that they have failed to do so, according to the district court’s opinion.

The plaintiffs had accused the defendants of “‘a pattern of bank fraud, wire fraud, mail fraud and money laundering in an effort to seize control and interest in a project to purchase and refurbish’” the Model Tobacco Building, which previously served as a factory for the United States Tobacco Co.  Harrison’s counsel from midsize firms Mahdavi Bacon Halfhill & Young, as well as Fraim & Fiorella, opposed the plaintiffs’ request.  The defendants argue that the plaintiffs failed to establish the reasonableness for such hourly rates.

The judge agreed in part with the plaintiffs that, in addition to the prejudgment interest, they were also entitled to attorney fees and costs, but Novak also sided with the defendants in finding Quinn Emanuel’s more than $1,000-per-hour rates for both partners and associates in post-settlement motions were ”not reasonable in accordance with the Court’s prior decisions and the Richmond legal market,” the opinion said.  Considering the reasonable rates for attorneys in Richmond with comparable skills, experience, reputation, as well as other factors, Novak reduced Quinn Emanuel’s total fee award to $50,380.

“Our client is focused on the Model Tobacco project.  As to fees, we don’t agree with everything the judge wrote, but Judge Novak obviously took the time to write a thoughtful opinion,” said George R. A. Doumar, an attorney with Mahdavi Bacon, representing the defendants.  “The local market dictates hourly rates awarded, and Quinn Emanuel was seeking rates far higher than I’ve encountered for fee awards in Virginia courts.  The lawyers I see day in and day out are billing at much lower rates.  The judge also seemed to be aware of law firm billing practices such as block billing and multiple reviews, and took that into account.”

Novak concluded that a rate of $650 for the lead partner and $400 for associates was a reasonable rate based 12 factors such as time and labor expended; the novelty and difficulty of the questions raised; the customary fee for like work; the amount in controversy and the results obtained; the experience, reputation, and ability of the attorney; attorney fee awards in similar cases and more.

“Here, Plaintiffs have failed to rebut the presumption that the hourly rates should be derived from the community in which the court sits. While Plaintiffs argue that this case has factual connections to Washington, D.C., and that the underlying case involved ‘complicated, high-stakes claims in financial fraud and RICO claims,’ … they present no evidence that a local attorney could not have provided competent representation,” Novak wrote, citing Rehabilitation Association of Virginia, Inc. v. Metcalf (1998).  “Because Plaintiffs have not made the requisite showing to apply out-of-town rates, the Court will consider the proper market from which to determine reasonable hourly rates as the market where the Court sits—Richmond, Virginia.”

The plaintiffs failed to file any affidavits from other law firms regarding “the prevailing market rates in Richmond for similar work,” and said Quinn Emanuel proffered no cases concerning fee awards within the district, Novak held.  Additionally, the law firm cited a news article from Law.com publication The American Lawyer titled, “What $1,000 an Hour Gets You in the AM 200 Today.”  The judge, however, said the article didn’t weigh in the law firm’s favor since it “cut against the reasonableness of the Plaintiff’s requested fees.”

In one of the cases cited by the plaintiffs, Proofpoint v. Vade Secure, a 2020 opinion by the U.S. District Court for the Northern District of California, the requested hourly rates ranged from $590 to $675 per hour for associates, and $880 to $915 per hour for more senior attorneys, the opinion said.

“Here, in contrast, Plaintiffs charged $1,305 per hour (Paul Henderson) and $1,385 per hour (Nicholas Inns) for the associates who performed most of the work and $1,690 per hour (Keith H. Forst) for the lead partner. … Even after accounting for inflation and the 15 percent discount applied here, Proofpoint does not support the hourly rates requested in this case,” Novak wrote, further concluding no fee would be awarded for paralegal work because the plaintiffs failed to present evidence of the customary rates billed in Richmond.  Novak concluded that the majority of the plaintiffs’ expenses were reasonable and included them in the award, bringing the total to $51,271.86 in fees and costs.

IP Jury Win Grows to $120M in Fees, Interest

November 1, 2023

A recent Law 360 story by Lauren Berg, “Columbia Univ.’s IP Win Grows to $600M With Fees, Interest”, reports that Columbia University and NortonLifeLock Inc. told a Virginia federal judge that the university should receive nearly $120 million in attorney fees and interest in an infringement case over anti-malware patents, bringing Columbia's total award to just over $600 million.  U.S. District Judge M. Hannah Lauck on Sept. 30 nearly tripled a jury's $185 million willful infringement verdict, bringing the total to more than $481 million, while ordering Norton — now known as Gen Digital Inc. — to pay attorney fees for its litigation misconduct.  She also held its counsel at Quinn Emanuel Urquhart & Sullivan LLP in contempt for not complying with a court order involving a witness whose testimony has been controversial.

In a stipulation, Columbia and Gen Digital agreed the university would receive nearly $20.7 million in attorney fees, $4.8 million in supplemental damages, $71 million in prejudgment interest and $22 million in post-judgment interest, among other costs, for a total award of $600 million.  However, Gen Digital has appealed the judgment to the Federal Circuit, and the parties have agreed they retain all rights, in the event that the court's final judgment is reversed, modified or vacated, according to the stipulation.  Gen Digital has also obtained a $600 million bond to stay execution of the judgment while the appeal plays out, the parties said.

The unanimous jury reached its verdict in May 2022 after three days of deliberation, following a two-week trial in the case brought by Columbia in December 2013.  The jury found that Gen Digital infringed two patents related to cybersecurity safeguards developed by Columbia's professors.  They also found that the intellectual property theft was willful, allowing the court discretion to treble the damages up to $555 million.  In her final judgment in September, Judge Lauck elected to multiply the jury's verdict by 2.6.

In a sanctions opinion unsealed earlier this month, the judge outlined years of "abhorrent litigation conduct" by Gen Digital's attorneys at Quinn Emanuel and found that when Latham & Watkins LLP took over as lead counsel for the company it likewise "impeded" the litigation.  "Norton's second lead counsel, Latham, poured fuel on the fire," the opinion stated, adding soon after that "the pattern of questionable conduct thus outlasted Quinn's direction of the litigation."

While Latham escaped sanctions, Judge Lauck cited an "extensive and unprecedented record" of "disquieting conduct of both sets of Norton's attorneys."  Quinn has represented Norton in the nearly decade-long litigation, while Latham was brought in two weeks before trial.  In just a single paragraph of her 42-page opinion, the judge ripped into Latham, stating that its attorneys "hid key communications" regarding Saudi Arabia-based expert Marc Dacier, who was central to the pretrial misconduct dispute.  Latham joined the case two weeks before trial but was still found to have acted improperly.

Twitter’s $90M Attorney Fee Dispute Heads to Arbitration

October 19, 2023

A recent Law 360 story by Jack Karp, “Wachtell Wins Bid to Arbitrate X’s $90M Fee Dispute”, reports that a California state judge granted Wachtell Lipton Rosen & Katz's request to send to arbitration a dispute with X Corp. over $90 million in legal fees tied to the fight over Elon Musk's purchase of Twitter.  The master retention agreement between Wachtell and X, formerly called Twitter, clearly delegates all disputes over arbitrability issues to an arbitrator, Superior Court Judge Richard B. Ulmer said in minutes issued after a brief remote hearing at which neither party appeared for Wachtell's motion to compel arbitration.

"The master retention agreement only carves out actions 'enforcing claims for injunctive or equitable relief.'  It did not carve out any other issue or circumscribe the scope of the parties' broad delegation clause," the judge said in adopting the tentative order.  X sued the firm in July, accusing Wachtell of exploiting "lame duck fiduciaries" as it "ran up the tab" and earned a $90 million fee helping the company defeat Musk's effort to back out of a $44 billion deal to acquire the company.

The firm ultimately helped Twitter obtain an expedited trial that put pressure on Musk before he finally agreed to close the deal on its original terms.  Wachtell moved to compel arbitration of X's claims in September.  The arbitration clause in question delegates jurisdiction over what kinds of claims can be arbitrated to the arbitrator in two places, and uses language derived from a Ninth Circuit decision on the topic, undercutting X's claims that the issue was left unclear by the contract, Wachtell argued.

X pushed back in early October, arguing that it is seeking only equitable relief since it wants the court to void its closing-day letter agreement and any associated excess fee payment in addition to restitution or disgorgement of the fees charged by Wachtell.  X also sought attorney fees and pre- and post-judgment interest.

"Once this court has set aside the closing day letter agreement, X Corp. will recover its payment to Wachtell, less Wachtell's 'reasonable fee.'  What is 'reasonable' under the circumstances will necessarily encompass various considerations and equitable principles," it said.  That means the "sole method" for X to win relief in the case requires the "application of equitable principles" to determine Wachtell's reasonable compensation, it said.

But Wachtell countered that the rescission X is seeking is "an action in equity" only when the recovery sought by the plaintiff through rescission involves something other than the money paid by the plaintiff.  "Here, every dollar of the final fee that X Corp. seeks to recover from Wachtell Lipton is a dollar that Twitter paid. That is restitutionary disgorgement — which is legal relief," the firm said in its Oct. 10 motion to compel arbitration.

Former Client Owes $1M in Unpaid Legal Bills, Jury Finds

July 25, 2023

A recent Law 360 story by Brian Steele, “Ex-Client Owes McCarter & English $1M For Bills, Jury Finds”, reports that McCarter & English LLP won a clean sweep of a multiparty verdict in Hartford federal court when a jury awarded the law firm more than $1 million in its suit against a former client, which failed to pay a batch of legal bills after an adverse outcome in a trade secrets case in Kentucky.

A 10-person jury found that the California-based dietary supplement company Jarrow Formulas Inc. breached its contract with the law firm when it withheld payment on five invoices after the Kentucky federal trial ended in 2019, along with unrelated bills for intellectual property work.  Jarrow countersued, claiming that the bills were improperly inflated by undisclosed rate hikes and that McCarter & English botched the trade secrets suit, but the jury rejected each of the counterclaims.

The firm, which has offices in Hartford and Stamford, Connecticut, also should be awarded prejudgment interest and does not have to pay Jarrow anything, the verdict said.  The jury determined that Jarrow's breach of contract was willful and malicious, while McCarter & English's billing practices were the product of fair dealing.  After the courtroom deputy polled the jury, U.S. District Judge Michael P. Shea praised jurors for their punctuality and attentiveness throughout the trial.  "I can't remember a better jury that I've had," the judge said.

Caudill Seed & Warehouse Co. Inc. sued Jarrow in Kentucky in 2013 for misappropriation of trade secrets, and Jarrow was ordered to pay $2.4 million for willful and malicious misappropriation in July 2019.  A judge later added more damages and attorney fees.  Company founder and namesake Jarrow Rogovin testified in the Hartford case that he decided to fire McCarter & English and refused to pay outstanding bills, for which the firm quickly sued in the District of Connecticut.  Jarrow's insurer declined to provide coverage for McCarter & English's bills in the Kentucky case.  The firm's second amended complaint alleged that Jarrow owed $2.04 million.

Judge Shea had already granted partial summary judgment to McCarter & English and nearly $1 million in damages based on disbursements and the original hourly attorney rates before they rose, but left open the possibility of Jarrow receiving a refund after trial.  That ruling in March 2021 noted that rates rose early on in the Kentucky case, but Jarrow paid the bills for six years.

The jury's verdict awarded McCarter & English another $1,057,173.93, and the judge asked the parties for briefs on the issues of prejudgment interest and punitive damages.  The jury found in favor of the firm on Jarrow's claim under the Connecticut Unfair Trade Practices Act and on its legal malpractice claim, which sprung from McCarter & English's decision not to call Rogovin to testify live during the trial in Kentucky.

Rogovin first hired McCarter & English partner Mark D. Giarratana when the attorney worked at a different firm in 1996, and they maintained a professional relationship and friendship for 23 years, according to trial testimony from each.  Giarratana said Rogovin paid all the Kentucky bills without complaint until after the verdict, while Rogovin said he did not read them thoroughly and failed to notice when the rates rose.

Michigan Says $5M Fee Request is ‘Overreach’ in Flint Water Case

July 18, 2023

A recent Law 360 story by Carolyn Muyskens, “Mich. Blasts $5M Fee Ask in Flint Water Case as ‘Overreach’”, reports that the state of Michigan is urging the judge presiding over Flint water crisis litigation to deny residents' request for $5 million in settlement funds to be set aside for the future litigation expenses, with the state saying the settlement "was never intended to be a litigation fund for plaintiffs' counsel."  In a filing, the state opposed plaintiffs' requests for fee distributions from the $626 million settlement, which resolved claims against the state government and the city of Flint for their roles in the disaster set off when the city, under a state-appointed manager, changed its water source to save money.

The state said attorneys' new batch of fee requests, which follows their first payout from the settlement fund, were either premature or not authorized by the agreement.  Class counsel and liaison attorneys got the first payment from the settlement fund approved in May, when U.S. District Judge Judith E. Levy ordered a distribution of $40 million as a common benefit award to the attorneys, with an additional $7 million for litigation expenses.  Although the settlement was approved in November 2021, appeals have held up distribution of the funds until recently.

In June, the attorneys filed a motion for additional fees and expenses. The motion seeks reimbursement for post-settlement litigation expenses, a $5 million fund for future litigation expenses, and interest that had accumulated on the $47 million already disbursed — as well as on any awards moving forward.  It also seeks the disbursement of an already-approved fee award of 10% of the programmatic relief fund, which is a subcategory of money to be used for special education services for school children exposed to lead.

The state blasted the request, calling it an "egregious overreach" and saying settlement dollars should not be put toward the plaintiffs' litigation against the remaining defendants in the case — Veolia North America and Lockwood Andrews & Newnam PC. LAN said last week it had reached a tentative settlement with the plaintiffs.  The settlement is "not a litigation fund for plaintiffs' counsel's expenses pursuing non-settling defendants," the state said.

In its motion seeking expenses incurred since February 2021 and the $5 million fund, the residents said the settlement agreement stated plaintiffs' counsel "shall be reimbursed and paid solely out of the FWC qualified settlement fund for all expenses and fees, including but not limited to: attorneys' fees [and] past, current or future litigation and administration expenses," highlighting that the deal explicitly provided for future expenses.

The plaintiffs cited an Eastern District of Michigan case, In re Packaged Ice Antitrust Litig., in which the court "authorized class counsel to utilize up to $750,000 of the settlement fund to pay expenses incurred in the litigation going forward, including 'in prosecuting the claims against the remaining non-settling defendants.'"  The Flint plaintiffs said the judge would have oversight to approve any disbursements from the $5 million fund and that any money leftover that wasn't used for litigation expenses would revert to the settlement fund.

"Plaintiffs' counsel have incurred millions in additional lodestar in continuing to prosecute this case but are not presently seeking any additional award of attorneys' fees, nor requesting a disbursement related to future reasonable litigation expenses," the lawyers said.  "When additional common benefit expenses are incurred and become known, and in consultation with the special master, plaintiffs' counsel may make further applications for disbursements from the $5 million portion of the FWC qualified settlement fund requested herein to be set aside for continuing reasonable litigation expenses," they added.

The state also opposed the request for a 10% fee award from the special education services fund, arguing it can't be calculated until the claims administrator finalizes the list of claimants and the value of the main qualified settlement fund is determined.

The state also said the attorneys aren't entitled to interest on their fee awards, pointing to a provision in the settlement agreement that "requires that all interest earned by the FWC qualified settlement fund or the sub-qualified settlement funds become and remain part of each such fund and may be used to pay any fees and expenses incurred to implement this settlement agreement."

The state argued this provision means interest that accrues in the settlement fund should be put toward the costs of the administration process, not attorneys.  "If any interest remains after implementation of the settlement is complete, then those funds should enure to the benefit of the claimaints," the state argued.  Lawyers for the class are ultimately expected to receive about $200 million for their work on the case.