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Category: Prevailing Party Issues

Federal Circuit: EAJA Fee Awards Must Use Local Rates

March 16, 2017

A recent Law 360 story by Chuck Stanley, “Fed. Circuit Says EAJA Legal Fees Must Use Local Costs,” reports that awards for attorneys’ fees under the Equal Access to Justice Act (EAJA) must be calculated based on the location where the work was done, a Federal Circuit panel said in a precedential ruling.

The federal circuit rejected a veteran’s widow’s claim that ambiguity in the statute allows her to adjust upward the hourly rate for calculating attorneys’ fees in a benefits suit based on the consumer price index (CPI) in Washington, D.C., where the case was heard but little other work was done.

Instead, the panel ruled that Paula Parrott should have provided individual rates for work done in Dallas, San Francisco and Washington in order to win an adjustment from the statutory rate of $125 per hour, rather than using the CPI for a single city or the national CPI to calculate a single rate.

The decision upheld the Veterans Court’s decision to award Parrott fees based on the statutory rate because she failed to provide rates for each city where work had been done on the case.

“We think the local CPI approach, where a local CPI is available … is more consistent with EAJA than the national approach.  We therefore hold that the Veterans Court did not err in ruling that the local CPI approach represented the correct method of calculating the adjustment in Ms. Parrott’s attorney’s hourly rate,” the decision states.

Parrott had claimed more than $7,200 in legal expenses in a suit over benefits for her husband, a deceased veteran, based on an upward adjustment from the statutory hourly rate based on the cost of living in Washington, D.C.  Language in the EAJA, which provides for an award of attorneys’ fees to victorious parties fighting agency action, stipulates that a $125 cap on hourly rates can be adjusted upward due to an increase in the cost of living.

But Parrott argued the statute is ambiguous regarding the method used to calculate such an increase.  She further claimed the Veterans Court was obliged to accept her cost estimate because ambiguity in a statute related to veterans benefits must be construed in favor of the veteran.

However, the panel ruled the EAJA is not ambiguous because using the national CPI rather than local numbers would incentivize more attorneys to accept cases challenging government agencies in low-cost areas rather than pricier areas.  Further, the panel found Parrott’s claim the Veterans Court was required to side with her is not applicable to the EAJA since it is not a veterans benefit statute, but applies to all litigants against executive agencies.

The case is Parrott v. Shulkin, case number 2016-1450, in the U.S. Court of Appeals for the Federal Circuit.

MetLife Faces $6.2M in Attorney Fees

March 9, 2017

A recent Law 360 story by Bonnie Eslinger, “MetLife Faces $6.2M in Atty Fees Over Ponzi Scheme Ruling,” reports that a California judge tentatively ordered MetLife Inc. and various subsidiaries to pay $6.2 million in attorneys’ fees on top of a $7.2 million judgment in a “hotly contested" case blaming the insurer for the loss of a retired woman’s savings in a Ponzi scheme.

Christine Ramirez claimed the insurer and its subsidiaries, along with an agent who ran MetLife’s Los Angeles operations, sold her unregistered securities alongside her insurance policies.  Those unregistered promissory notes put her money into an alleged $216 million Ponzi scheme, the suit said.

In August, a jury found the defendants liable for Ramirez's losses in the amount of $240,000 and awarded her $15 million in punitive damages saying MetLife owed $10 million, unit MetLife Securities owed $2.5 million and unit New England Life Insurance Co. owed $2.5 million.  A state court judge subsequently reduced the award to $7,196,710, telling Ramirez that if she didn’t consent to the remittitur, he would grant the insurer's motion for a new trial on grounds of excessive punitive damages.

A hearing was held on Ramirez’s motion for attorneys' fees of $7 million.  At the start, Los Angeles Superior Court Judge Kenneth Freeman issued a tentative written ruling, shaving fees related to attorney hours spent working on a separate, related case against MetLife, in which Ramirez was a putative class member, but finding the time invested in the case to be reasonable.

“In assessing reasonableness, the time required by the opposing party's tactics may also be highly probative,” Judge Freeman wrote in his written tentative opinion.  "Here, it goes without saying that this case was, and remains, very hotly contested.  The MetLife defendants litigated their clients’ case extensively, and there were never any frivolous arguments raised.”

The judge also doubled Ramirez’s lodestar attorneys' fees figure of $3,112,138, saying the requested 2.0 multiplier is appropriate in light of the novelty of the issues presented in the case, the skill of counsel, the extent that the case precluded the attorneys from taking on other clients, and the fact that the case was taken on a contingency basis.  Additionally, the results achieved in the litigation were notable, the judge said, even with the award reduction.  “The significant result warrants a multiplier in this case,” he wrote.

During oral arguments, an attorney for MetLife, Cheryl Haas of McGuireWoods LLP, disputed that any multiplier should be awarded, calling the $6 million a “windfall.”  “A multiplier is simply not justified,” Haas said.  “The prevailing party is only entitled to reasonable attorneys' fees.”

Judge Freeman said he would issue a final ruling after he considered supplemental filings from the parties, but he didn’t offer much hope for a different outcome.  "The tentative is very clear on the court’s reasoning and frankly I doubt there’s anything you’re going to offer in the way of a supplemental brief that will change the court’s tentative,” the judge said.

The case is Hartshorne et al. v. MetLife Inc. et al., case number BC576608, in the Superior Court of the State of California, County of Los Angeles.

Attorney Fees Not Subject to Damages Cap in Wage Case

March 8, 2017

A recent Legal Intelligencer story by Zack Needles, “Attorney Fees Not Subject to Damages Cap in Wage Case, Court Says,” reports that attorney fees can be awarded under the Pennsylvania Wage Payment and Collection Law (WPCL), even if they cause the total recovery to exceed a voluntary $25,000 damages cap, the Pennsylvania Superior Court ruled in a case of first impression.

Under Pennsylvania Rule of Civil Procedure 1311.1, a plaintiff can elect to limit the maximum amount of damages recoverable to $25,000 in exchange for looser evidence admission requirements at a trial following compulsory arbitration.  In a published opinion in Grimm v. Universal Medical Services, a three-judge Superior Court panel unanimously ruled that such a cap does not preclude an award of attorney fees under the WPCL that pushes the total recovery above $25,000.

The decision affirmed a Beaver County trial court's award of $43,080.66, comprising an $11,683.92 jury award, plus $2,920.98 in liquidated damages and $28,475.76 in attorney fees and costs under the WPCL.  The appeals court upheld Beaver County Court of Common Pleas Judge James J. Ross' ruling, which reasoned that attorney fees in excess of the damages cap should be permitted because "a prevailing plaintiff in a [WPCL] claim must be made whole and not be required to expend his or her award to pay his or her attorney."

Judge John T. Bender, writing for the Superior Court, agreed with Ross' rationale, noting that Rule 1311.1 is intended to streamline litigation in order to make it more economically feasible for plaintiffs, while the WPCL is meant to allow plaintiffs to collect unpaid wages and compensation without having to spend their entire recovery on legal fees.

"In this way, both Rule 1311.1 and the WPCL aim to make litigation more accessible and affordable to aggrieved litigants, particularly those with meritorious claims," Bender said.  "In this case, we believe we are promoting this overarching policy by interpreting 'damages recoverable' in Rule 1311.1(a) to exclude attorneys' fees under the WPCL."  Bender was joined by Judges Mary Jane Bowes and Carl A. Solano.

In Grimm, plaintiff Jeffrey P. Grimm sued defendants Universal Medical Services Inc. and Roderick K. Reeder, alleging breach of contract against Universal for failure to reimburse business expenses and a WPCL claim against both defendants on the same basis, according to Bender.

The case proceeded to compulsory arbitration, with an award in favor of the defendants.  Grimm appealed to the Beaver County Court of Common Pleas, electing to cap damages at $25,000 under Rule 1311.1, and the case proceeded to a jury trial, Bender said.

The jury awarded damages to Grimm in the amount of $11,683.92 and, finding that Universal acted in bad faith in failing to reimburse him, the court added 25 percent, or $2,920.98, to the jury award, resulting in a total of $14,604.90, according to Bender.  Grimm then sought attorney fees in the amount of $25,946.25 and litigation costs in the amount of $2,529.51 under the WPCL.

While the defendants argued that the phrase "damages recoverable" in Rule 1311.1 encompassed attorney fees, Grimm contended that attorney fees are payments in addition to a jury award intended to make the plaintiff whole.

Bender noted that Ross, in his analysis, looked first at the analogous 2001 Pennsylvania Supreme Court case Allen v. Mellinger, in which then-Justice Ralph Cappy wrote in a concurring and dissenting opinion that delay damages in cases involving bodily injury, death or property damage under Pa.R.Civ.P. 238 should not be subject to the statutory cap of $250,000 when the state is a defendant in a bodily injury claim.

In the 2005 case LaRue v. McGuire, as Ross also noted in his opinion, the Superior Court relied on Cappy's reasoning in Allen to find that delay damages under Rule 238 were not subject to the Rule 1311.1 damages cap.

While the defendants attempted to distinguish Grimm from Allen and LaRue by arguing that delay damages are an extension of compensatory damages intended to make the plaintiff whole, while attorney fees serve no such purpose, Bender disagreed.

"It is clear that the award of attorneys' fees under the WPCL accomplishes the purpose of making a plaintiff whole, just like the delay damages in Allen and LaRue," Bender said.

Judge Denies Fee Award to State AGs in Antitrust Case

March 2, 2017

A recent NLJ story by C. Ryan Barber, “Judge Refuses Fee Award to State AGs in Antitrust Case,” reports that nearly a year after striking down Staples Inc.’s proposed takeover of Office Depot, a federal judge in Washington refused to award $175,000 in legal fees to the Pennsylvania and District of Columbia attorneys general for their role in challenging the office supply chains’ $6.3 billion deal.

The two offices teamed up with the Federal Trade Commission (FTC) in a suit that alleged the proposed deal would hurt competition in the market for office supplies sold in bulk to large corporate clients.  In May, U.S. District Judge Emmet Sullivan sided with regulators and granted a preliminary injunction.  Staples and Office Depot abandoned their merger plans.

Pennsylvania and D.C. argued they were entitled to fees under a provision of the Clayton Act that allows for the reimbursement of legal costs when the plaintiff “substantially prevails.”  Sullivan said there was one problem: Regulators prevailed not under the Clayton Act but the FTC Act, which does not grant legal fees to winning plaintiffs.

"Simply put, moving plaintiffs cannot have it both ways,” Sullivan wrote in a 10-page opinion.  “They cannot ride the FTC’s claim to a successful preliminary injunction under the more permissive [FTC Act] standard and then cite that favorable ruling as the sole justification for fee-shifting under the more rigorous Clayton Act standard."

Pennsylvania and District of Columbia offices had argued that the preliminary injunction directly broke up the merger, allowing them to recoup costs under the so-called “catalyst rule.”  But Sullivan was not persuaded.

As Staples and Office Depot pointed out, Sullivan wrote, “the catalyst rule as a mechanism for obtaining attorneys’ fees in certain circumstances was rejected by the Supreme Court in 2001,” in the case of Buckhannon Board and Care Home, Inc. v. West Virginia Department of Health and Human Resources.

The FTC had taken the lead in the antitrust challenge—a fact Staples and Office Depot raised to belittle the two offices’ role in the case.  The two companies described the work from Pennsylvania and D.C. as duplicative of the FTC’s, poorly documented and “largely spent on non-determinative issues (to the extent it is possible to determine what they worked on with any specificity at all).”

The Pennsylvania attorney general’s office requested $142,548, the District of Columbia $33,547—amounts that, if granted, would have represented an “unprecedented windfall,” Staples and Office Depot argued.  Weil, Gotshal & Manges represented Staples, and Simpson, Thacher & Bartlett represented Office Depot.

Sullivan said Pennsylvania and D.C. “effectively ask this court to take an unprecedented step.”  The choice to challenge the deal under the FTC Act was a “strategic one,” Sullivan wrote.  “Nonetheless, moving plaintiffs cannot bring a petition for fee-shifting under a provision under which they did not prevail,” he wrote.

Attorneys Challenge Low Fee Award Before Ninth Circuit

February 21, 2017

A recent Law 360 story by Dorothy Atkins, “Kraft Buyers’ ‘Greedy’ Attys Fight Low Fee Award at 9th Circ,” reports that attorneys who extracted a confidential settlement from Kraft Foods over mislabeling claims defended their $1.8 million fee request before the Ninth Circuit, saying the $11,000 award by a district judge who called them “greedy” didn’t come close to compensating them for hundreds of hours spent on the case.

Gregory S. Weston of The Weston Law Firm, who represented buyers of Kraft Foods Inc. snack products, argued that U.S. District Judge George H. Wu didn’t explain exactly how he determined that counsel was owed for only 200 hours of work, or how he arrived at the $11,000 figure.  Weston said the consumers prevailed in the case’s pleading stage, which he said involved three-years of litigating six different hearings and required much more than 200 hours of work.  “There’s no way that gets done in 200 hours,” he said.

Judge Wu rejected the $1.8 million fee request in June 2014, calling the consumers’ attorneys “greedy.”  At the time, the consumers had reached a confidential settlement with Kraft that ended the suit, which had been filed by lead plaintiffs Evangeline Red and Rachel Witt in 2010.  They alleged the company violated false advertising provisions of the Lanham Act by making misleading claims that several Kraft products were nutritious when they actually contained trans fats.

Weston said that state law requires courts to compile submitted hours carefully to determine attorneys’ fees, but that Judge Wu appeared to use an “arbitrary” and nonspecific method to determine the fees owed.  There’s also “no indication” Judge Wu actually reviewed counsel’s hours, or used an initial lodestar calculation or a negative multiplier to calculate the fees, he said.

But the three-judge panel pressed Weston on his argument, asking him why he believes he’s entitled to higher fees when it’s not apparent the consumers were the prevailing party in the case.  U.S. Circuit Judge Richard C. Tallman said that keeping the lawsuit alive for as long as the consumers did didn’t make them the prevailing party, especially, he said, when they basically lost on their theory of the case.

Weston disputed that view, arguing that the consumers, having won an injunction against Kraft, didn’t lose on their theory of the case at all.  Additionally, he said, even if the case’s merits didn’t go to trial, the consumers prevailed on six motions, including two motions to dismiss.  The only thing the consumers didn’t succeed at was achieving monetary relief for the class, he said.

And regardless, Weston said, case law has established that only awarding fees to parties who are successful on their theories would end up undercompensating attorneys, and it wouldn’t recognize the “inevitable exploratory nature of litigation.”

Meanwhile, Kraft attorney Dean N. Panos of Jenner & Block LLP said Judge Wu applied the correct, pragmatic approach to “trimming the fat” by broadly determining that the consumers’ “outrageous” fee request was too high and awarding a lower fee.  Panos argued that there’s no precise formula to calculate fees, and the court is not required to conduct an hour-by-hour analysis of time spent on a case.  Judge Wu had presided over three years of litigation and therefore he was in the best position to determine how much counsel should be paid, Panos said.

The case is Evangeline Red v. Kraft Foods Inc., case number 15-55760, in the U.S. Court of Appeals for the Ninth Circuit.