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Category: Prevailing Party Issues

St. Luke’s Drops Appeal of $7.5M Fee Award in Antitrust Case

October 2, 2018

A recent Law 360 story by Danielle Nichole Smith, “St. Luke’s Drops Appeal of $7.5M Atty Fees in Antitrust Case,” reports that St. Luke’s Health System Ltd. has agreed to drop its appeal of a more than $7.5 million attorneys’ fees award to two hospitals that spearheaded an antitrust suit against the Idaho-based health organization, according to filings in the Ninth Circuit.

St. Luke’s submitted the stipulation to the Ninth Circuit, saying it had settled its fee dispute with Saint Alphonsus Medical Center-Nampa Inc. and Treasure Valley Hospital LP.  The stipulation, which gave no details of the settlement, ends St. Luke’s appeal over a federal district judge’s decision to grant the two hospitals attorneys’ fees after the judge sided with the Federal Trade Commission in their suit over St. Luke’s merger with Saltzer Medical Group PA.

The hospitals had sued St. Luke’s in November 2012, alleging that the health organization’s pending acquisition of Saltzer Medical Group would create a monopoly of certain health care markets in Idaho and could hike up the costs of health care while lowering its quality.  U.S. District Judge Lynn Winmill initially allowed the deal to move forward, denying Saint Alphonsus and Treasure Valley a preliminary injunction in December 2012.

However, after the FTC and Idaho attorney general intervened in the litigation in 2013 and took the case to trial, Judge Winmill ruled in 2014 that the acquisition would likely raise health care costs and have anti-competitive effects, even if that wasn’t its intention, and ordered St. Luke’s to divest from Saltzer Medical Group.  The Ninth Circuit affirmed the ruling in 2015, agreeing that there was evidence the deal would threaten competition.

Following that ruling, St. Luke’s and the FTC reached a deal that established the process for breaking Saltzer Medical Group out of the health organization, and Saint Alphonsus and Treasure Valley were eventually granted $7,247,878 and $335,382, respectively, in fees and costs for their roles in the judgment.  The state of Idaho was also granted $1,041,287, but St. Luke’s only appealed the fees granted to the private hospitals.

St. Luke’s argued on appeal that the hospitals hadn’t been the prevailing party in the suit since they didn’t have standing to bring the claims that the federal government ultimately prevailed on.  The court only ruled on the federal government's claims and never decided that the hospitals’ claims had merit, St. Luke’s said.

But the hospitals responded by arguing that it didn’t matter whether the court addressed their claims or not since they achieved the outcome they sought in bringing their case.  And the court said that the contributions from the hospitals’ attorneys had been crucial for obtaining that judgment, Saint Alphonsus and Treasure Valley said.

The case is Saint Alphonsus Medical Center-Nampa Inc. et al. v. St. Luke’s Health System Ltd. et al., case number 16-36044, in the U.S. Court of Appeals for the Ninth Circuit.

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.

Eleventh Circuit: Insurer Owes $1.2M in Attorney Fees in Coverage Matter

September 11, 2018

A recent Law 360 story by Anne Cullen, “Insurer Owes $1.2M Atty Fees in Construction Suit: 11th Circ,” reports that the Eleventh Circuit affirmed that Houston Specialty Insurance Co. will have to shell out $1.2 million in attorneys' fees to a construction firm and two of its employees after the insurer lost its coverage suit at trial over a contractor's injury.  The three-judge panel rejected the insurer’s argument that the district court shouldn't have awarded fees to All Florida Weatherproofing & Construction, the company's president and a sales representative while a separate suit Houston brought against the three was ongoing.

In its second suit, Houston claims the construction company and its employees forfeited their coverage when they rejected the insurer's defense in the underlying case, which was brought by a contractor who said he was paralyzed after falling through the roof of a mobile home that an All Florida sales representative had allegedly failed to inspect.  The ruling found that the outcome of the insurer's forfeiture suit doesn't matter.  The panel said that because the firm and its employees won the suit over coverage, which was affirmed on appeal, they are entitled to fees.

"Even if Houston Specialty ultimately wins in the forfeiture case, it would not negate the defendants' attorney's entitlement to fees for prosecuting and prevailing in the coverage case," the unpublished opinion said.  The panel also was not persuaded by the insurer's assertion that the lower court erred when it doubled the fees awarded to the attorneys representing All Florida — bringing the $565,000 award up to $1.13 million.  The appeals court found the construction company's poor financial condition and its low chance of winning the case meant it couldn't have secured competent defense in Houston's suit unless there was a possibility of a multiplier.

Houston appealed the fee award in June, a few months after the Eleventh Circuit upheld an earlier decision in the case backing a jury's finding that Houston had a duty to defend and indemnify All Florida and the two employees from the underlying action.  Houston's forfeiture suit is pending before a separate Eleventh Circuit panel, after the insurer appealed a district court ruling in late 2017 in favor of the All Florida defendants.

The case is Houston Specialty Insurance Co. v. Enoch Vaughn et al., case number 18-10635, in the U.S. Court of Appeals for the Eleventh Circuit.

Ninth Circuit Questions Reduced Attorney Fees After IP Trials

September 10, 2018

A recent Law 360 story by Cara Bayles, “9th Circ. Questions Halved Attys’ Fees After IP Trials,” reports that two Ninth Circuit judges questioned a lower court’s decision to halve the attorneys’ fees awarded to a sculptor who successfully sued a Hoover Dam cafe for copyright infringement and breach of contract, noting that even though the suit had to be retried, preparation for the first trial was used for its successor.

Last year, U.S. Magistrate Judge George Foley Jr. ordered the cafe’s owner, Bert Hansen, to pay the artist, Steven Liguori, a total award of $409,353 — less than half of the $900,000 in fees Liguori had sought.  The judge had found that during closing arguments in the first trial, Liguori’s counsel presented “an unreasonable interpretation” of a licensing agreement between the sculptor and the cafe.

During oral arguments in San Francisco, the Ninth Circuit panel questioned Judge Foley’s conclusion that because the second trial was necessitated by Liguori’s counsel’s improper conduct in the first trial, he could only award attorneys’ fees for work done after the first trial ended.  U.S. Circuit Judge Marsha Berzon noted that “people [can] lose a lot of things over the course of litigation” and still win the case.

“There must have been things done before the end of the first trial that lessened the amount of work that had to be done at the second trial because there was overlap.  That's one question,” she said.  “The other is whether it was proper to preclude everything in the first trial because the judge thought that they had a stupid theory.  Was this theory that was ultimately disallowed, is there some way it should have been handled so it got thrown out earlier?  And who was at fault for not doing that?”

A jury initially awarded Liguori more than $1.3 million in May 2015 after it found that Hansen breached a contract he inked with the artist governing payments for his use of images of the sculpture on souvenir items.  Liguori’s monument, called the “High Scaler,” is a large-scale statue of a Hoover Dam worker.  The jury awarded Liguori $1.2 million for breach of contract from Hansen’s unpaid licensing fees.  It also found that Hansen had used the image for branding and products not covered under their limited licensing agreement and owed an additional $150,000 for copyright infringement.

But Judge Foley in September 2015 ruled that the $1.2 million portion of the award was too high, saying the jury’s breach of contract and copyright infringement verdicts were irreconcilable.  He set aside the verdict and judgment and granted Hansen’s motion for a new trial.

In an order trimming Liguori’s attorneys' fees award, the judge said he’d granted Hansen’s bid for a second trial because Liguori and his counsel engaged in improper conduct via "overreaching and invalid arguments" related to their breach of contract claim.

But Liguori’s attorney, Michael Wall of Hutchison & Steffen LLC, told the Ninth Circuit panel that the ruling was the first his client had heard of any misconduct.  “We didn't do anything wrong in that first trial.  In fact, when the judge construed the contract and gave a new trial, he never suggested there had been any misconduct,” he said.  “The decision itself denying the damages was the first time we hear from Judge Foley that trial counsel during the first trial had engaged in improper conduct. ... It was argued the way it was presented. The theory was never questioned.”  He added, “All of the work and most of the discovery that had to do with the entire case was done before the first trial.”

In the second trial in June 2016, the jury said Hansen must pay Liguori a little less than $178,000, just a fraction of the seven-figure sum the previous jury awarded in the suit’s first trial.  The second jury awarded Liguori $130,000 on its finding that Hansen willfully breached the contract and $47,817 on its finding that Hansen willfully infringed Liguori's copyright.  At the hearing, Hansen’s attorney, Jeffrey J. Whitehead of Whitehead & Burnett, argued that his client had prevailed, since Liguori had sought millions of dollars from the litigation and ended up with thousands.

But U.S. Circuit Judge Michelle Friedland asked him to assume he hadn’t prevailed in the overall case.  “If we assume by the end of the second trial that they're the prevailing party, then why shouldn't they get reimbursed for at least some of the work they did leading up to and during the first trial?”

Whitehead countered that he didn’t think Liguori should be rewarded for “promoting a theory that was ultimately rejected.”  But he also said that even at the end of the second trial, Liguori didn’t prevail on all his claims and that the judge likely cut the fees in half “for simplicity’s sake,” rather than apportioning it out.

Law Firm Seeks $1.2M in Fees Against CFPB’s ‘Bad Faith’

August 27, 2018

A recent Law 360 story by Jon Hill, “CFPB’s ‘Bad Faith’ Merits $1.2M Atty Fees, Law Firm Says,” reports that a law firm that recently beat a Consumer Financial Protection Bureau (CFPB) lawsuit accusing it of illegal debt collection practices wants the agency to pay for its attorneys’ fees, asking an Ohio federal judge for more than $1.2 million because the agency “brought and prosecuted this case in bad faith.”  The CFPB was handed a rare defeat in July when U.S. District Judge Donald C. Nugent ruled against the agency in its suit alleging Weltman Weinberg & Reis Co. violated the Fair Debt Collection Practices Act and Consumer Financial Protection Act through the millions of collection letters it sent consumers. 

According to the CFPB, the letters gave the impression that attorneys were “meaningfully involved” in the debt collection process when they actually weren’t in most cases, but after a four-day trial before an advisory jury this spring, the judge ruled that the agency had “failed to prove its case by a preponderance of the evidence.”  But Weltman Weinberg argued that Judge Nugent should go further and sanction the CFPB for “abusing its unparalleled power to pursue a meritless case,” arguing that the agency knew its claims wouldn’t hold water long before it dragged the firm through more than a year of litigation.

“Though Weltman prevailed at trial, the bureau’s blind pursuit of its groundless case cost Weltman dearly, both in terms of the substantial expense Weltman incurred in its defense and the reputational harm that cost the firm valued clients and employees,” the firm said.  “Weltman, as the prevailing party, respectfully requests an award of its reasonable attorney’s fees of $1,207,481.25 … because the bureau brought and prosecuted this case in bad faith.”  The CFPB filed its suit against Weltman in April 2017, after what the firm said was more than two years of investigation that involved four civil investigative demands and extensive productions of documents and other materials.

“From that investigation, the bureau knew no consumer had been harmed, misled, or confused by Weltman’s practice of truthfully identifying itself as a law firm,” the firm said.  “Indeed, if the bureau had any evidence to support its claims, it surely would have presented it during motion practice or at trial.”

The complaint initially asserted six counts of FDCPA and CFPA violations, covering both the firm’s allegedly misleading collection letters as well as collection calls it placed to consumers.  According to the CFPB, these calls were also misleading because they referred to Weltman as a law firm, implying an attorney had reviewed a customer’s file beforehand when usually that wasn’t the case.  Yet the agency went on to drop its three claims related to the calls — half the case — as well as its request for disgorgement as the advisory jury trial cranked up, a move that Weltman argued underscored the CFPB’s awareness of how hollow its case was.

In July, Judge Nugent ultimately ruled in Weltman’s favor on the remaining three counts, finding that attorneys were meaningfully involved in the debt collection process and that there wasn’t any evidence showing the letters’ lawyerly trappings had improperly influenced anyone to make a payment.  But the damage was done, according to Weltman.  In addition to the legal expenses it incurred defending itself, Weltman said it lost clients and revenue from having its name dragged through the mud by the lawsuit, creating financial pressures that forced downsizing and layoffs at the firm.

“This case is the concrete example of what happens when the bureau ‘pushes too hard’ and subjects an innocent company to unwarranted scrutiny in an attempt to regulate by litigating, rather than by establishing rules before charging a company with allegedly breaking them,” Weltman said in its filing, alluding to CFPB acting Director Mick Mulvaney’s pledge earlier this year to shift the agency away from what he described as its “push the envelope” governing philosophy under former CFPB director Richard Cordray.

Cordray, who led the agency when the suit against Weltman was filed, knew about the firm’s debt collection practices from back when he was the attorney general of Ohio, according to Weltman  The firm said he approved very similar letters that it used to collect debts for the state.  “This court has the inherent authority to sanction the bureau for abusing its unparalleled power to pursue a meritless case, and the court should exercise that power to award Weltman its reasonable attorney’s fees,” the firm said.

The case is Consumer Financial Protection Bureau v. Weltman Weinberg & Reis Co., case number 1:17-cv-00817, in the U.S. District Court for the Northern District of Ohio.