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Consumer Can Recover Attorney Fees in Florida Debt Collection Action

September 17, 2018

A recent Law 360 story by Carolina Bolado, “Consumer Can Get Fees for Winning Debt Collection Suit,” reports that a Florida appeals court ruled that a consumer who fends off an "account stated" lawsuit seeking to collect on an unpaid credit card balance can collect attorneys' fees under Florida law.  Florida's Second District Court of Appeal reversed a trial court's order denying Katrina Bushnell's request for attorneys' fees after debt buying company Portfolio Recovery Associates LLC voluntarily dismissed its suit over an unpaid credit card bill.

Bushnell had asked for attorneys' fees under the credit card agreement, which contains a provision authorizing the creditor to recover its attorneys' fees as part of its collection costs.  Under Florida Statute 57.105(7), if a contract has a provision allowing attorneys' fees to a party that has to take action to enforce the contract, the court can also allow attorneys' fees to the other party if it prevails in the dispute.

The trial court ruled against Bushnell but asked the appellate court to address the issue and answer the question of whether an "account stated" action that seeks to collect an unpaid debt is considered an action to enforce a contract.  The Second District said that it is such an action and ruled that the account stated lawsuit could not have happened if the credit card contract did not exist.  "Simply put, if there had been no credit card contract, the amount due would not have accrued in the first place," the appeals court said.  "The credit card contract and the account stated cause of action are therefore inextricably intertwined such that the account stated cause of action is an action 'with respect to the contract' under section 57.105(7)."

The appeals court relied on the Florida Supreme Court's 2002 decision in Caufield v. Cantele, in which the court concluded that the prevailing party in a lawsuit for fraudulent misrepresentation was entitled to fees under the state's reciprocity provision.  The Supreme Court reasoned that the existence of the contract and the misrepresentation claims in the case were "inextricably" linked.  The Second District applied this reasoning to the case against Bushnell and concluded that the reciprocity provision in 57.105(7) applies.  The appeals court reversed the order denying Bushnell's fees and remanded it to the trial court to determine a reasonable fee award for her counsel.

Bushnell’s attorney Jennifer Jones of McIntyre Thanasides Bringgold Elliott Grimaldi Guito & Matthew PA called the decision “a big win for the little guy in Florida.”  She said the litigation tactic used against Bushnell is common among debt buyers, who often buy charged-off credit cards accounts for pennies on the dollar and then sue without proper documentation.  The customers often cannot secure legal representation to defend themselves against these lawsuits, according to Jones.

The case is Bushnell v. Portfolio Recovery Associates LLC, case number 2D17-429, in the Second District Court of Appeal of Florida.

Over $1B in Attorney Fees in Madoff-Related Matter

September 14, 2018

A recent American Law story by Scott Flaherty, “Madoff-Related Fees Top $1B for Baker & Hostetler,” reports that when Baker & Hostetler partner Irving Picard, the trustee of funds recovered for victims of Bernie Madoff’s infamous fraud, announced earlier this summer that a recent settlement had pushed investor recoveries above the $13 billion mark, he and his firm also edged toward a milestone of their own—$1 billion in legal fees.  They’ve now surpassed that mark as they approach 10 years of work on the case.

Picard and his team, including lead counsel David Sheehan, secured an interim fee award worth some $33.5 million as a result of a Manhattan federal bankruptcy court order on Aug. 30.  That most recent award, which covered work completed between Dec. 1 and March 31, brought Baker & Hostetler up to a total of $1.026 billion in fees awarded in connection with the Madoff trustee work, according to court records.  Picard has served since late 2008 as the Securities Investor Protection Act trustee for Bernard L. Madoff Investment Securities LLC (BLMIS).

The Aug. 30 fee award follows an announcement in July of court approval for a $280 million settlement with Madoff “feeder funds”—investment funds that funneled money into Madoff’s Ponzi scheme—tied to money manager J. Ezra Merkin. Merkin and the funds, Ascot Partners LP, Ascot Fund Ltd. and Gabriel Capital Corp., had reached the deal with Picard in June.

The Merkin settlement brought Picard’s total recovery on behalf of Madoff victims to more than $13.26 billion.  That amounts to more than 75 percent of an estimated $17.5 billion in losses among Madoff customers that have filed claims, Picard and his team said in a July 5 statement.  The recovered money has gone directly to Madoff victims, while the Securities Investor Protection Corp. has covered administrative costs related to the recovery efforts, as well as trustee, legal and accounting fees.

As the trustee and his team have continued to recover money for Madoff’s victims, Baker & Hostetler has, in turn, benefited from a steady stream of income in connection with Picard’s role.  Picard joined the firm Gibbons shortly after a court in December 2008 appointed him to oversee funds recovered for Madoff victims and the liquidation of BLMIS.  While Baker & Hostetler will likely see that revenue stream dry up eventually—and may have to grapple, at that point, with its impact on the firm’s finances—it doesn’t appear that an end to the Madoff trustee work is imminent.

Even nearly 10 years in, Picard’s most recent semi-annual status report filed in May detailed hundreds of ongoing matters, including investigations and litigation outside of the U.S. in Austria, Bermuda, the Cayman Islands, U.K. and other countries.  Baker & Hostetler’s fee awards throughout the case also provide clues to how much work Picard and his team have taken on, since their fee applications are based in part on billable hours.  Including the most recent award approved on Aug. 30, the past seven awards—all of which covered a four-month period—have remained within a $33 million to $36 million range, indicating that the trustee’s work has not dissipated over the past couple years.

Those amounts are, however, lower than some of the four-month fee awards to Picard and his team made earlier in the Madoff engagement.  Looking back to 2014, for instance, interim fees awarded to Baker & Hostetler were often more than $40 million and, in 2012, some of the four-month awards were higher than $60 million.

NJ Court: Attorneys Must Advise Clients of Billing Options in Fee-Shifting Litigation

August 30, 2018

A recent New Jersey Law Journal story by Michael Booth, “Lawyers Must Advise Clients of Other Options Before Billing Hourly on Fee-Shifting Case, Court Says,” reports that a New Jersey appeals court voided a retainer agreement between a lawyer and his longtime friend, saying he did not properly disclose hourly fees he would be charging for representing her in a discrimination case.  The three-judge Appellate Division panel, in a published ruling, said Somerville solo Brian Cige did not adequately explain the arrangement, which provided for an hourly billing rate and litigation costs, to his client, Lisa Balducci.

The panel said lawyers who wish to charge hourly fees for work on discrimination or other fee-shifting cases must explain to their clients that there are other competent counsel who will accept those cases on a contingency basis, and who also will advance any litigation costs.

“Ethically then, must an attorney whose fee for undertaking an LAD case that includes an hourly rate component explain both the consequences on a recovery and the ability of other competent counsel likely willing to undertake the same representation based on a fee without an hourly component?  We conclude the answer is yes,” Appellate Division Judge William Nugent said.

The lawsuit filed by Balducci claimed she never fully reviewed the retainer agreement offered by Cige but was shocked when she began receiving bills for hourly services and costs, which included a $1 fee for reviewing incoming emails and sending responses, the court said.  Balducci eventually fired Cige and hired another attorney to represent her and her son in a Law Against Discrimination claim.  The decision didn’t reveal the details of that matter,

Nugent, writing for the court, said a Somerset County Assignment Judge Yolanda Ciccone properly found that Cige violated his professional responsibility to explain the agreement’s material terms to Balducci so that she could reach an informed decision as to whether to retain him.  Thus the retainer agreement was void.  “The hearing recording in this case includes adequate, substantial, credible evidence support the court’s decision,” said Nugent.  Judges Carmen Alvarez and Richard Geiger joined in the ruling.  “There is no dearth of competent counsel attorneys willing to litigate LAD and other fee-shifting cases that do not include an hourly component.

Balducci retained Cige in September 2012 to represent her and her child in the LAD case.  Cige presented her with what he said was a standard retainer agreement stating he could charge up to $7,500 up front, plus $450 an hour.  Balducci signed the agreement despite having “concerns,” according to the decision.  Balducci began complaining when she began receiving bills from Cige for hourly services plus expenses.  He told Balducci to not worry about the bills, because he was using them for purposes of a future fee petition he would demand at the conclusion of what he believed was a successful case.

“We are friends,” Balducci, in depositions, quoted Cige as saying, according to the decision.  “I was at your wedding.  I would never do this to you.  Ignore that.  Don’t worry about.  It is standard info.”  Balducci also complained that she was devoting her time to preparing for depositions while Cige was away attending chess tournaments, the ruling said.  Balducci fired Cige after she complained that it would be impossible for her to advance tens of thousands of dollar for expert witnesses.  Balducci filed a lawsuit against Cige, and he filed a counterclaim seeking more than $286,000 in fees for work he already had done.

“The trial court properly found the agreement was unenforceable and void,” Nugent said.  “There is no dearth of competent, civic-minded attorneys willing to litigate LAD and other statutory fee-shifting cases under fee agreements that do not include an hourly component.  The number of such cases litigated in our trial courts and reported in the case law evidence this, as does—at least as to numbers—advertising on television and radio, in telephone books and newspapers, and on billboards and other media,” Nugent wrote, noting that Balducci’s current counsel in the LAD case is not charging hourly fees.

Investors Seek $63M in Attorney Fees in Latest LIBOR MDL Settlements

August 28, 2018

A recent Law 360 story by Jon Hill, “Investors Seek $63M in Fees in Deutsche, HSBC Libor Deals,” reports that investors who reached $340 million in settlements earlier this year with Deutsche Bank and HSBC in multidistrict litigation over alleged manipulation of the London Interbank Offered Rate have asked a New York federal judge to award nearly $63.4 million in fees and expenses for their counsel, Susman Godfrey LLP and Hausfeld LLP.

The so-called over-the-counter investors told U.S. District Judge Naomi Reice Buchwald that they’re seeking a nearly $62.8 million interim award of attorneys’ fees and a little more than $600,000 for unreimbursed litigation expenses, to be paid out of the fund created by their settlements with Deutsche Bank AG and HSBC Bank PLC.  Those settlements, which Judge Buchwald preliminarily approved in April, put Deutsche Bank and HSBC on the hook for cash payments of $240 million and $100 million, respectively, and come with agreements for them to provide cooperation to the OTC investors as they press forward with their claims against other major banks, like Bank of America and JPMorgan Chase Bank.

“Both the Deutsche Bank and HSBC settlements are excellent results for the OTC class, which has now recovered more than half a billion dollars in total settlements and the right to substantial cooperation from Deutsche Bank and HSBC,” the investors said.  “This outstanding recovery, achieved by class counsel working entirely on a contingent basis, and incurring substantial expenses on behalf of the OTC class, undoubtedly merits the attorneys’ fee award and expense reimbursement requested here.”

The Deutsche Bank and HSBC settlements followed on the heels of deals reached with Citigroup Inc. and Barclays PLC, which agreed to pay a combined $250 million to OTC investors who say they purchased Libor-tied financial instruments during a time when multiple major banks are alleged to have worked together to manipulate the rate.  Those previous two settlements received final approval at the beginning of August from Judge Buchwald, who subsequently approved almost $43.5 million in attorneys’ fees and nearly $14.9 million in expenses to be awarded from the deals.

That fee award represented 18.5 percent of the net amount of the two settlements, and was less than the $50 million that the investors had originally requested.  Although Judge Buchwald acknowledged the case had been complex, risky and time-consuming, she said the larger requested amount “would incur the risk of providing an unwarranted windfall to class counsel at the expense of the class.”  But the investors told Judge Buchwald that their latest requested fee award works out to the same relative size as the one she approved earlier this month.

“OTC plaintiffs’ application for an interim award of 18.5 percent of the net settlement fund is in line with this court’s fee award for the Barclays and Citibank settlements and is well within the range of awards found to be reasonable under the Second Circuit’s prior orders and precedents, aligned with awards regularly approved in comparable multi-defendant antitrust class actions, and will reward class counsel for the outstanding result they have obtained for the OTC class,” the investors said.

The case is Mayor and City Council of Baltimore et al. v. Credit Suisse AG et al., case number 1:11-cv-05450, and the MDL is In re: Libor-Based Financial Instruments Antitrust Litigation, case number 1:11-md-02262, both in the U.S. District Court for the Southern District of New York. 

For more on this MDL, visit https://www.usdollarliborsettlement.com/

Appeals Court Upholds Multiplier in Insurance Coverage Fee Award

August 24, 2018

A recent Law 360 story by Nathan Hale, “Fla. Insurer Loses Appeal of Multiplier of Atty Fees Award,” reports that a Florida appeals court rejected Citizens Property Insurance’s appeal of an order applying a multiplier to an attorneys' fees award for a homeowner who obtained a favorable settlement in a coverage dispute, finding the insurer's argument relied on a decision recently rejected by the Florida Supreme Court.  The Third District Court of Appeal concluded that the trial judge had not abused his discretion in applying a 2.0 contingency fee multiplier, which resulted in a fee award of $120,250 for homeowner Agosta Laguerre.

Citizens Property Insurance Co., which is Florida's insurer of last resort, did not dispute that state law entitled Laguerre to collect attorneys' fees after they settled the underlying suit, in which she contested an $8,400.77 coverage payment she argued significantly undervalued her December 2005 claim for wind damage caused by Hurricane Wilma.  Citizens argued against the multiplier based on the Third District's 2015 decision in State Farm Ins. Co. v. Alvarez, which held that courts can apply contingency fee multipliers “only in 'rare' and 'exceptional' circumstances,” according to the opinion.

The appeals panel pointed out, however, that it had held the Laguerre case in abeyance after hearing oral arguments to await the Florida Supreme Court's ruling in Joyce v. Federated National Insurance Co., an appeal of a decision by the Fifth District that had relied on the Alvarez decision.  In its ruling last year, the Florida Supreme Court rejected the idea that contingency fee multipliers are appropriate only in rare and exceptional circumstances, disapproving of that element of the Alvarez decision, the opinion said.

The Third District quoted the high court's statement that “the contingency fee multiplier provides trial courts with the flexibility to ensure that lawyers, who take a difficult case on a contingency fee basis, are adequately compensated.  Citizens had argued that Laguerre's request did not meet the “rare” and “exceptional” requirement because there was no evidence presented at the fee hearing that Laguerre had difficulty finding an attorney who would take her case, that the results she obtained were not enough to warrant a multiplier, and that a multiplier cannot be based on the complexity of the case, the Third District recounted.

The appeals panel found that while the testimony provided by Laguerre's expert fee witness was thin, Citizens' decision not to cross-examine him about the application of a multiplier and its failure to present evidence that there were competent attorneys who would have taken the case without a multiplier meant the trial judge had not abused his discretion in reaching the conclusion that the relevant market required a fee multiplier.  “Although we find that the testimony supporting the trial court’s conclusion was minimal, a trial court generally may rely on 'expert testimony that a party would have difficulty securing counsel without the opportunity for a multiplier' in support of the imposition of the multiplier,” the panel said.

The panel also rejected Citizens' argument that the “relatively small recovery” did not justify a multiplier, pointing to the difference between a $2,000 offer the insurer made and the appraisal umpire's ultimate award of $27,367.63 minus the money already paid to Laguerre.  Finally, the Third District said the Florida Supreme Court made clear in the Joyce decision that it was not wrong for the trial court to consider the complexity and difficulty of a case in weighing application of a multiplier.

“Turning to whether the complexity of the instant case warrants a contingency fee multiplier, we again note that a contingency fee multiplier analysis 'is properly analyzed through the same lens as the attorney when making the decision to take the case,'” the panel said.  “For this reason, the fact, in hindsight, that this case ultimately consisted of two summary judgment proceedings and minimal discovery and did not proceed to trial is not determinative on this issue.”

The case is Citizens Property Insurance Co. v. Laguerre, case number 3D15-2411, in the Third District Court of Appeal of Florida.