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Category: Legislation / Politics

Delaware Governor Seeks Fee Reduction in State Court Party Balance Case

January 12, 2018

A recent Delaware Law Weekly story by Tom McParland, “Carney Asks for Fee Reduction in Case Striking State Court Party Balance Mandate” reports that attorneys for Governor John Carney are asking a federal judge in Wilmington to slash a request for attorney fees in the case of a New Castle County lawyer who successfully challenged a provision of the Delaware Constitution requiring political balance on the state’s courts.

Carney, who has appealed the decision said that a ruling on James R. Adams’ fee request should be tabled until the U.S. Court of Appeals for the Third Circuit can weigh in.  But the governor also argued that any award the court grants should be reduced by 40 percent because Adams had only achieved partial success.

Adams, who is represented by Finger & Slanina partner David L. Finger, last month requested $22,900 to cover the cost of litigating the case through summary judgment.  U.S. Chief Magistrate Judge Mary Pat Thynge of the District of Delaware on Dec. 6, 2017, ruled in favor of Adams, a graduate of Widener University Delaware Law School, who argued the 120-year-old requirement violated the First Amendment of the U.S. Constitution by restricting government employment based on party affiliation.

Carney, who is responsible for nominating judges, did not dispute that Adams had prevailed in the case.  However, Carney challenged Adams’ assertion that he had secured a “complete victory,” saying that Thynge’s ruling did not specifically address constitutional provisions preventing one political party from being represented by more than a “bare majority” of the judges on Delaware’s courts.

“Because plaintiff did not achieve success in challenging the constitutional provisions relating to the Family Court and the Court of Common Pleas, or in challenging the bare majority provisions for the Delaware Supreme Court, the Superior Court or the Court of Chancery, defendant requests a 40 percent reduction in any award the court may choose to grant, as such a reduction would reflect plaintiff’s partial success in challenging Delaware’s constitutional provisions governing the composition of its courts” Carney’s Young Conaway Stargatt & Taylor attorneys wrote in an 8-page brief.

Finger, meanwhile, said in an interview that reduction of attorney fees was not warranted in any case where a plaintiff has won “substantial” relief from the court.  “We won a very substantial issue,” he said. “Moreover, the issue [of party balance] will apply to Family Court and the Court of Common Pleas because the bare majority requirement still requires making political party a determining factor [in nominating judges],” Finger said.

Adams, a registered independent, said he’s been prevented in the past from applying for judgeships because of the constitutional mandate that judicial seats be split between Republicans and Democrats.

Proponents of the provision—codified in Article IV, Section 3 of the state constitution—have said it safeguards a fair, independent and impartial judiciary that attracts talent to serve in its ranks.  But Adams and others have argued the mandate improperly boxes out independents and creates the impression the state’s judiciary is tinged with political bias.

Governor Cuomo Signs Attorney Fee FOIL Bill

December 13, 2017

A recent Times Union story by Brendan J. Lyons, “Cuomo Signs Bill Strengthening FOIL Law,” reports that Gov. Andrew Cuomo signed a bill that will require judges to award attorneys' fees to litigants who "substantially prevail" in Freedom of Information Law (FOIL) cases.

The governor acknowledged the legislation is important but said it falls far short of comprehensively reforming the state's antiquated Freedom of Information Law, including not requiring greater transparency from the Legislature that sent the bill to his desk.

"The bill before me continues to perpetuate a fractured and inequitable system of transparency by only applying to the executive (branch), and intentionally excluding other branches of government," Cuomo said in a memo filed in support of the measure.  "Notably, current law already provides courts with discretion to award attorney's fees in such situations, but they are not required to do so."

Still, advocates for more transparency in government have hailed the legislation as necessary to prevent agencies at all levels of New York government from deliberately withholding public records or delaying responses unnecessarily.

Cuomo vetoed similar legislation two years ago that stated courts must award attorney's fees when an agency denies access to FOIL requests in "material violation" of the law.  The governor said the earlier bill did not define the term "material violation," which could have created confusion for judges who could reach different conclusions on what the term means.

The bill requires that courts "shall" assess reasonable legal costs in FOIL cases in which a person "substantially prevailed" and the court finds there was no reasonable basis for denying access to a record.  Courts have sparsely awarded attorney's fees in FOIL cases.  But not always.

New Jersey Legislation Would Mandate Fee Retainers

August 23, 2017

A recent New Jersey Law Journal story by Michael Booth, “Bill, Spurred by Wray Representation, Would Mandate Retainers,” reports that one of Gov. Chris Christie's most persistent critics in the state Legislature is sponsoring a bill that effectively would have barred Christie's apparent hiring of high-profile lawyer Christopher Wray—now the FBI director—without a written retainer fee agreement.

Assembly Deputy Speaker John Wisniewski, D-Middlesex, has introduced A-5179, which would require retainer fee agreements between any state agency and private counsel to be memorialized in writing within 30 days of the attorney's retention.  The bill, which has not yet been assigned to a committee, would prohibit a firm from being paid with public funds if the 30-day requirement is not met.

Wray, according to reports, was Christie's personal attorney for 11 months during the Bridgegate investigation, and while Christie was gearing up to run for the Republican nomination for president—before Wray and the administration signed a retainer agreement.

Wray, then of the Washington, D.C., office of King & Spalding, began representing Christie in September 2014 but did not sign a retainer agreement until August of the following year.  Ultimately, Wray and other lawyers at the firm, which charged a blended rate of $340 an hour, racked up about $2 million in fees and costs, reports said.

New York public radio station WNYC first reported the arrangement between Wray and Christie on July 24.  A day later, Wisniewski voiced his concern about the lack of a retainer agreement, which he pointed out would have been a document available to the press and public.

"This is highly unusual and raises questions about whether Gov. Christie was trying to hide this cost and legal representation from the public," Wisniewski said in a statement at the time.  "Mr. Wray and his colleagues ended up costing taxpayers $2 million, yet the governor did not even take basic steps to provide public transparency and uphold ethics standards.

Florida Court Empowers Fee Agreements in Claims Bill Fee Disputes

June 30, 2017

A recent Daily Business Review story by Noreen Marcus, “Court Empowers Lawyers in Claims Bill Fee Disputesdiscusses Florida’s legislation on a victim’s claims bill and fee agreements.  The story reads:

Which comes first, the promise of a sizable contingency fee or the Florida Legislature's passage of a claims bill?  The answer is the fee agreement between, typically, one or more prominent personal injury law firms and a victim suing someone who enjoys the protection of sovereign immunity and damage caps.  The example from this past session is $3.75 million in private relief to Victor Barahona, the victim of hideous child abuse that his twin sister, Nubia, did not survive.

But would a claims bill ever get past go without the guarantee of a significant fee and costs to cover lobbyists and everything else it takes to succeed in the Legislature?  As a practical matter, probably not.  This reality irritates people who want to maximize payouts to victims as opposed to their lawyers.  That's the dilemma when claims bills turn into legislatively recognized damage awards and the money must be split between victims and attorneys.

To this point, Fourth District Court of Appeal Chief Judge Cory Ciklin penned a June 21 opinion in Grossman Roth v. Mellen that must seem to him like good karma.  In 2015, the influential jurist wrote a dissent that the Florida Supreme Court later adopted — the very precedent that dictated his ruling.

In the precedent-setting case of Searcy Denney Scarola Barnhart & Shipley v. State, a claims bill awarded $15 million to the victim in a medical malpractice case and capped all fees and costs at $100,000.  A Fourth District panel majority approved the formula; Ciklin's dissent called it "draconian."

Ultimately, the Supreme Court agreed with Ciklin that the Legislature cannot constitutionally impair fee contracts through a private relief act.  Access to courts might otherwise be chilled, the court reasoned in an unsigned opinion.

The claims bill could be saved by severing the fees and costs provision, the justices concluded.  Searcy Denney and other firms would get their contracted $2.5 million for fees and costs.  The guardianship trust for Aaron Edwards, a child who suffered a catastrophic brain injury due to hospital negligence, would get $12.5 million.

The decision drew two dissents from Justices Charles Canady and Ricky Polston, the latter joined by Chief Justice Jorge Labarga.  "Although this is a favorable result for the plaintiff and his attorneys, it is not what the law requires," Polston wrote.  "The Legislature was very clear that it was awarding only $100,000 for anyone other than Aaron Edwards."  But he noted the result was to take $2.5 million from the guardianship of Aaron Edwards for attorney fees, "a result that was explicitly rejected by the Legislature with its enactment of the claims bill."

Florida TaxWatch, a nonprofit government watchdog that keeps track of how taxpayer dollars are spent, sees a need to reform the claims bill system.  "The current process is a little too arbitrary," said Kurt Wenner, head of research for TaxWatch.  "It's more a factor of lobbying than the justification for the claim, so it's political, and lobbying plays too big of a role."

Not that TaxWatch would oppose passage of a claims bill in an obviously worthy case like Victor Barahona's. "Our whole thing is, make sure that people have access and are allowed to file just claims and get their compensation in a timely manner, but don't pay unnecessary costs where taxpayers have to foot the bill," Wenner said.

TaxWatch produced a 2013 briefing paper for a legislative committee reviewing claims bill procedures.  The committee accepted the group's suggestions, held hearings and drafted legislation that went nowhere.  TaxWatch's ideas are all about trying to avoid the court system and the Legislature in the kinds of tort cases that tend to result in claims bills.  It's hard to imagine PI lawyers and lobbyists would support this kind of change.

For instance, Wenner talked about raising the sovereign immunity cap from the current $200,000 to a figure that would be tougher to resist and therefore encourage settlements.  His research turned up four states with caps of $1 million per person.  Florida's current political climate suggests a $1 million cap would be a hard sell.

As for attorney fees and lobbying costs, Wenner praised the Legislature for combining the two into one number in claims acts.  He said TaxWatch recommended adding that concept to the law.  It didn't happen and, in fact, Ciklin was talking about a $100,000 total for fees and costs when he used the word "draconian" in his Searcy Denney dissent.

The recently decided Grossman Roth case is similar to the Searcy Denney case.  The Grossman Roth matter began in 2008 when Kristi Mellen and her husband Michael Mellen went to a public hospital because he showed symptoms of a heart attack.  In the waiting room he suffered a massive heart attack and died.

His widow sued the North Broward Hospital District for medical malpractice.  She signed a contingency fee contract with Grossman Roth that promised the firm what amounted to 25 percent of her total recovery.  After huddling with Mellen's lawyers, the hospital district agreed to a $3 million settlement and to support a claims bill.

The claims bill passed and apportioned $290,000 of the award to attorney fees and $2.8 million to Mellen.  The trial court approved the split — but this was before the Supreme Court handed down its Searcy Denney decision, Ciklin noted.  Grossman Roth will get its $750,000 fee.

Court Denies Fees to Notorious Whistle Blower

June 16, 2017

A recent Bloomberg BNA story by Michael Bologna, “Court Tosses Fees for ‘King of Qui Tam’, Business Model Done?” reports on the denial of attorney fees for a notorious whistle blower.  The article reads:

The profit motive driving hundreds of false claims lawsuits by a Chicago lawyer known as the “king of qui tam” may be drying up after an appeals court rejected the prolific whistle-blower’s demand for fees in a case involving unpaid sales and use taxes (Illinois ex rel. Schad, Diamond & Shedden PC v. My Pillow, Inc. , Ill. App. Ct., No. 152668, 6/15/17).

In a case of first impression, a three-judge panel of the Illinois Appellate Court reversed a portion of a circuit court ruling that granted Stephen B. Diamond attorney fees in an action under the Illinois False Claims Act (FCA) against the retailer My Pillow Inc.

Diamond had successfully demonstrated that My Pillow had failed to collect and remit tax on merchandise sold to Illinois customers from internet and telephone sales platforms.  After a bench trial in September 2014, a Cook County Circuit Court judge awarded a judgment of $1,383,627, with $782,667 in the form of damages and penalties, and $600,960 in the form of attorney fees.

The appeals panel upheld the circuit court’s judgment with regard to My Pillow’s failure to collect and remit taxes to Illinois, but it reversed on Diamond’s eligibility for attorney fees.  The court found Diamond, serving as relator on behalf of the State of Illinois, couldn’t achieve benefits in the litigation as both the whistle-blower and the attorney for the whistle-blower.

“We hold that the fee-shifting provision in the Act does not permit the award of attorney fees to relator, who served as its own attorney for much of this case,” Judge David Ellis wrote on behalf of the panel.  “To the extent that the trial court awarded relator fees for work performed by relator’s own attorneys, that fee award is reversed.”

The ruling—the first of its kind dealing with a whistle-blower also serving as his own counsel—could derail the false claims freight train that Diamond, and his law firm Stephen B. Diamond P.C., has steered through Cook County Circuit Court for more than a decade.  Diamond is regarded as the most prolific tax whistle-blower in the country, and his “cottage industry” of FCA actions has perplexed and annoyed retailers, policymakers, and legal scholars across the country.  All of the cases involve purported violations of the Illinois sales and use tax code.

“We think this could really solve the problem here in Illinois,” said Catherine A. Battin, a partner with McDermott Will & Emery in Chicago and counsel to My Pillow.  “There have been discussions about solving it legislatively.  This decision leaves the door open for legitimate insiders and relators, but not this kind of cottage industry where you have one lawyer filing a 1000 lawsuits.”

Diamond has served as relator in about 1,000 qui tam actions over the last 15 years.  A recent investigation by Bloomberg BNA revealed Diamond has collected almost $12 million through this pattern of litigation.  The Illinois General Assembly is considering various legislative fixes to address Diamond’ strategies.

Officials with Diamond’s law firm didn’t immediately respond to a request for comment.  Battin speculated that Diamond would likely appeal the ruling to the Illinois Supreme Court because it undermines the “abusive fee generation” component of his business model.