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Category: Legislation

Judge Highlights Excessive Billing in Sprint Litigation

March 15, 2017

A recent Wall Street Journal story by Joe Palazzolo and Sara Randazzo, “One Lawyer, 6,905 Hours Leads to $1.5 Million Bill in Sprint Suit,” reports that, Alexander Silow, a contract lawyer for a Pennsylvania plaintiffs’ firm, clocked 6,905 hours of work on a shareholder lawsuit against former executives and directors of Sprint Corp. related to its 2005 merger with Nextel.  Averaging about 13 hours a day, Mr. Silow reviewed 48,443 documents and alone accounted for $1.5 million, more than a quarter of the requested legal fees, according to court documents.

“Unbelievable!” is how Judge James Vano in Kansas described the billing records.  And he meant it.  “It seems that the vast amount of work performed on this case was illusory, perhaps done for the purpose of inflating billable hours,” Judge Vano, who sits in Olathe, Kan., wrote in a Nov. 22 opinion.

Courts often slash what they see as excessive billing in securities and other litigation, but rarely are they so scathing, legal experts said.  Judge Vano’s ruling might have gone unnoticed but for a recent disclosure about Mr. Silow by the law firm where he worked: He was disbarred in 1987 and practiced law illegally for decades.

The revelation, contained in a February letter to Judge Vano, could ​rupture​ a settlement in the Sprint case, and provide grist for corporate groups and others that have highlighted alleged abuses in the civil-justice system, fueling current momentum for legislative change.

A Republican bill passed by the House of Representatives would make it harder to file class actions, curtailing lawyer-driven litigation that provides little benefit to shareholders and consumers, its supporters say.  Plaintiffs’ lawyers and consumer-rights advocates say the legislation would reduce access to the courts and blunt litigation that has improved corporate governance and forced companies to pull unsafe drugs and faulty products from shelves.

Courts regularly bless multimillion-dollar fee awards in recognition of the risk plaintiffs’ firms take by fronting the costs for litigation.  But fee experts said bill-padding is pervasive in class actions and shareholder suits because billing records aren’t reviewed by clients and are scrutinized only when a judge needs to approve a settlement or award fees after trial.

William G. Ross, a law professor at Samford University in Alabama who has written two books on attorney billing, said his most recent survey of lawyers showed that two-thirds were personally aware of bill-padding and more than half admitted they sometimes performed work they otherwise wouldn’t have done had they been charging a flat fee.

Mr. Silow had been working as a contract attorney for at least eight years when staffing agency Abelson Legal Search placed him at the Weiser Law Firm PC in Berwyn, Pa., in 2008, according to a Feb. 3 letter from the firm to Judge Vano.  The law firm was contacted last month by a third party it declined to name and learned that no one with Mr. Silow’s name was listed in a state database of licensed lawyers, Robert B. Weiser, co-founder of the firm, said in the letter.

Mr. Weiser said Mr. Silow presented himself to the firm as Alexander J. Silow, but “was in actuality named Jeffrey M. Silow” and confessed he had been disbarred when the firm confronted him, the letter said.  The firm has since ended its relationship with Mr. Silow and alerted authorities, it said.

Pennsylvania’s attorney discipline office confirmed Mr. Silow was disbarred in 1987 but could provide no additional information.  Mr. Silow didn’t respond to emails and calls seeking comment.  Abelson Legal Search didn’t respond to requests for comment.

Mr. Weiser said in the letter that his firm stands by the accuracy of Mr. Silow’s billing records in the Sprint lawsuit, which alleged the company directors and officers concealed problems created by the merger with Nextel.  The company posted a nearly $30 billion loss as a result of the deal.

The lawsuit sought to claw back profits from former Sprint directors and officers, who it accused of incompetence and self-dealing.  But a settlement reached last year was more modest.  Sprint agreed to changes to its corporate governance and the composition of its board of directors.

Judge Vano approved the deal in his November ruling but slashed the proposed legal fees for plaintiffs’ attorneys from $4.25 million to $450,000.  “The focus appears to have been upon an easy, cheap settlement in the first instance,” Judge Vano wrote.

The plaintiffs’ lawyers—Mr. Weiser’s firm, Florida lawyers Alison Leffew and Bruce G. Murphy and the Kansas City firm Dollar Burns & Becker LC—have appealed Judge Vano’s ruling on the fees.  They argued the results of the settlement, rather than the hours billed, justified the amount sought.

In court documents, Mr. Weiser and the other plaintiffs’ lawyers representing a Sprint shareholder said Mr. Silow’s “extensive document review” enabled them to make “well-informed decisions.”

Michael Hartleib, a Sprint shareholder who objected to the settlement, asked the Kansas appeals court last month to return the case to Judge Vano’s court so he can reconsider the deal in light of the new evidence showing Mr. Silow had no license to practice law.

Legislation to Cap Attorney Fees Struck Down in Florida

February 2, 2017

A recent Daily Business Review story, by Celia Ampel, “Legislation Attorney Fee Cap in Claims Bill Struck Down,” reports that the Florida Legislature cannot limit attorney fees in a claims bill if it contradicts the client's contract, the Florida Supreme Court ruled in a 4-3 decision.

The opinion favors the West Palm Beach law firm Searcy Denney Scarola Barnhart & Shipley, which challenged the state after the Fourth District Court of Appeal ruled in 2015 that the firm and co-counsel could recover only $100,000 of a multimillion-dollar contingency fee award in a medical malpractice case.

Searcy Denney and other firms were set to receive $2.5 million in fees under a contract with the family of Aaron Edwards, who was seriously injured at birth because of negligence by employees of Lee Memorial Health System in Fort Myers.  The firms won a $28.3 million judgment for the Edwards family in 2007, which was capped at $200,000 because the public hospital was protected by sovereign immunity.  The attorneys pushed for a claims bill to allow a larger payout to the family, and the Legislature passed a $15 million claims bill in 2012 to benefit Edwards — but with a $100,000 cap on legal fees and costs.

A guardianship court backed the small fee for 7,000 hours of work and $500,000 in expenditures, and the Fourth District affirmed the decision on appeal.  But the Florida Supreme Court found the fee limitation unconstitutional as the Florida Constitution prohibits laws that impair preexisting contracts.  The decision was in line with a dissent in the Fourth DCA case from Chief Judge Cory Ciklin.

"The right to contract for legal services in order to petition for redress is a right that is related to the First Amendment, and any impairment of that right not only adversely affects the right of the lawyer to receive his fee but the right of the party to obtain, by contract, competent legal representation to ensure meaningful access to courts to petition for redress," the Supreme Court ruled in a per curiam decision.

The majority also accepted Searcy Denney's argument that the fee limitation wasn't in line with a statute that blocks attorney fees "in excess of 25 percent of any judgment of settlement."  The 25 percent limit should apply to the $28.3 million excess judgment, the court found, and instead the claims bill capped the fees at less than 1 percent of that judgment.

The court ruled that rather than striking the entire claims bill, it would sever the valid parts of the bill compensating the Edwards family from the fee limitation portion.  Justices Barbara Pariente, R. Fred Lewis and Peggy Quince formed the majority with Senior Justice James E.C. Perry, who retired at the end of last year.  He has since been replaced by Justice C. Alan Lawson, who joined the court too late to hear arguments in this case.

In a separate dissent, Justice Ricky Polston wrote the fee limitation did not impair Searcy Denney's contract, which said, "Florida law may limit the amount of attorney fees charged by" the firm.  He also disagreed with the majority's reasoning on severability.  "The result of the majority's ruling is to take $2,500,000 from the guardianship of Aaron Edwards for attorneys' fees, a result that was explicitly rejected by the Legislature with its enactment of the claims bill," Polston wrote.

Texas Tort Reform Group Pushes Legislation to Curb Attorney Fees

January 24, 2017

A recent Texas Lawyer story, “Tort Reform Group Aims New Push to Get Legislation to Curb Fees of ‘Storm-Chasing’ Lawyers,” by Miriam Rozen reports that the advocacy group Texans for Lawsuit Reform (TLR), after failing in previous sessions of the Texas Legislature to get state lawmakers to pass bills aimed at curtailing what its lobbyists characterize as "storm-chasing lawyers," defined as plaintiffs counsel pursuing hail-related claims against insurers, is planning a new push for such a measure during the new legislative session in Austin.

Even lawyers without a dog in the hail-litigation fight may want to pay attention to the TLR proposals because they target attorney fees.  Specifically, TLR talking points about the proposed bill call for a state law that limits attorney fees in property claim litigation if a plaintiff's demand is excessive.  As defined by the TLR proposal, such a demand would be deemed excessive if claims overstate by a multiple of five the damages, including attorney fees, a court ultimately rules is owed.

But critics complain that TLR's proposal dramatically overreaches and threatens contingency fee arrangements.  Those critics include well-known Houston plaintiff lawyer Steve Mostyn, but also, less predictably, counsel to Fortune 500 companies.  "I'm asking myself what is the purpose of this bill," said Ernest Martin, a partner in Haynes and Boone in Dallas, who has represented La Quinta Inn & Suites, Sovereign Bank, Centex Homes, NCH Corp., and Ericsson.

The proposal has identified not just homeowner and consumer claims, but all property claims, Martin noted.  Although TLR advocates purport to be focusing on curbing litigation abuse in connection with a hailstorm in South Texas, "Nothing in the bill has anything to do with homeowners' policies.  If that's the purpose, this is not the way to do it," Martin said.

Mostyn of Mostyn Law, with offices in Beaumont, Galveston, Houston and Austin, welcomes lawyers representing corporations in objecting to the TLR proposal.  A fight that pits Mostyn against tort reformers is much less winnable than a battle between TLR and corporate interests, he said.

Mostyn who has won millions for hundreds of homeowners whose property suffered hail damage plans to keep a low profile in the legislative battle.  He noted that his practice has recently shifted focus from hail litigation to transvaginal mesh litigation.

But he still voices opposition to the proposals.  The new proposal is "just as bad or worse" than what TLR previously attempted to get past the lawmakers, Mostyn said.  Both Martin and Mostyn agree that the TLR proposal threatens contingency fee arrangements.  "Reading between the lines, the new proposal makes no room for contingency fees," Martin noted.

"I'm not sure why other than tort-reform advocates running out of things to focus [on] why they are picking contingency fees," said Chuck Herring, an Austin attorney and a partner in Herring & Panzer, who follows fee dispute issues.

Florida State Senator Seeks to Limit Attorney Fee Entitlement

December 23, 2016

A recent Florida Record story, “State Senator Makes Second Attempt to Limit Attorney’s Fees,” reports that State Senator Greg Steube (R-Sarasota) gave action to the old adage “If at first you don’t succeed…” when he refiled Senate Bill 80.

SB 80 is intended to provide greater discretion to judges, who preside over public-records cases, on the amounts and types of attorney’s fees that can be awarded.  The version of SB 80 Steube filed was a revised version of one he filed in the last legislative session, when he was a state representative.  That version of the bill passed the Senate, but stalled in the House.

According to floridapolitics.com, the current law states that judges “shall award attorney’s fees” in these cases.  SB 80 makes a key change to the current legislation by amending the current language to “may award attorney’s fees.”

Organizations like the Florida League of Cities have advocated for providing judges with this decision-making power, believing that the change will refocus the number of lawsuits against public officials.  With the elimination of guaranteed fees for attorneys, people may not be as quick to file suit against a public official when an honest, clerical mistake has been made.

On the other side of the argument are organizations like the First Amendment Foundation, which argue that passage of the bill may have negative consequences, such as in cases that involve local governments that purposefully refuse to honor public-records requests.

“This bill seeks to impose a new burden on the right to obtain attorneys fees when a citizen is required to file a lawsuit to view public records," Lawrence G. Walters, an attorney at Walters Law Group, told the Florida Record.  "The attorney's-fee entitlement under existing law is an important element of the public-records regime because it creates an incentive for state agencies to keep government records open to the public.”

Steube told the Bradenton Herald that this change is necessary to curtail those who are looking to work the system.  There have been cases in the past where an individual files one public-records request after another with an agency.  This cycle continues until it becomes an impossibility for the agency to fulfill those requests in a “reasonable amount of time.”  The filer then moves forward with a lawsuit.

Walters wonders about the long-reaching effects of the bill should it pass into law.  “If the bill passes, it may well serve as a model for other states looking to mitigate the consequences for failing to honor certain public-records requests,” he said.

“By requiring a written demand for records before attorneys fees can be awarded, noncompliant state agencies will not face any meaningful consequence if they refuse to provide access to public records upon verbal request," Walters said.  "This may encourage certain officials or agencies to treat verbal requests as less important."

Arkansas Ballot Referendum Would Cap Attorney Fees in Medical Cases

September 7, 2016

A recent ABA Journal story, “Suits Seek to Block Arkansas Referendum that would Cap Attorney Fees and Damages in Medical Cases,” reports that two lawsuits filed this week seek to block an Arkansas ballot referendum that would cap noneconomic damages and attorney fees in medical injury cases with a state constitutional amendment.

Two Arkansas residents filed a lawsuit claiming the referendum should be tossed from the ballot because its title is misleading, according to a press release (pdf) by the Arkansas Bar Association.  One of the plaintiffs is Paula Casey, a retired dean of the University of Arkansas at Little Rock law school. Arkansas Online has a story.

“The ballot title fails to convey an intelligible idea of the scope and impact of the proposed amendment, is materially misleading to the voters, and omits material information,” the lawsuit says.

The measure, known as Issue 4, is opposed by the bar association.  It would require lawmakers to create a cap for noneconomic damages in medical lawsuits against health-care providers of at least $250,000, and would limit a contingency fee contract to one-third of any recovery after all costs of the litigation are deducted.

A group called the Committee to Protect Arkansas Families filed a second lawsuit on Thursday that seeks to block votes on the ballot measure from being counted, the Brown County Democrat reports.  The suit also claims the ballot title is misleading, and challenges the validity of signatures gathered to put the referendum on the ballot.  The committee was formed in July with the aim of defeating the proposed amendment.