Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Prevailing Party Issues

How to Determine When Litigation Costs Include Attorney Fees

September 7, 2017

A recent Texas Lawyer article by Trey Cox and Jason Dennis, “How to Determine When Litigation Costs Include Attorney Fees,” covers attorney fee recovery in Texas.  This article was posted with permission.  The article reads:

Under the American Rule, a party may only recover attorney fees on certain narrow claims.  When a party has some claims that support the award of attorney fees and some claims that do not, then the party must segregate the recoverable attorney fees from the nonrecoverable attorney fees, as in Tony Gullo Motors I v. Chapa, 212 S.W.3d 299, 311 (Tex. 2006).  The need to segregate fees is a question of law, and the courts of appeals apply a de novo standard of review.

Similarly, when a plaintiff has multiple related claims against multiple defendants, the plaintiff is required to segregate the fees owed by one defendant from any fees incurred while prosecuting the claim against any settling defendants, according to Stewart Title Guaranty v. Sterling, 822 S.W.2d 1, 11 (Tex. 1991).

Generally, where a party has failed to properly segregate their claims, and an award of attorney fees has been erroneously awarded, the case requires remand in order to determine what attorney fees are recoverable.  However, it is important to note that the subsequent decision in Green International v. Solis, 951 S.W.2d 384, 389 (Tex. 1997), did state that a failure to segregate fees "can result in the recovery of zero attorneys' fees."  The court did not explain the circumstances under which an award of zero attorney fees would result from a failure to segregate.  The evidence of unsegregated fees requiring a remand on the issue of attorney fees is more than a scintilla of evidence.

The party seeking fees may only present evidence relating to services that were necessarily rendered in connection with the claims for which attorney fees are recoverable, as in Flint & Associates v. Intercontinental Pipe & Steel, 739 S.W.2d 622, 624 (Tex. App.—Dallas 1987).  If a party tries to present evidence relating to services that were rendered in connection with claims that attorney fees are not recoverable, a party must object.  Failure to object to nonrecoverable attorney fees constitutes waiver (see Green International, at 389).  The issue of failing to segregate is generally preserved "by objecting during testimony offered in support of attorneys' fees or an objection to the jury question on attorneys' fees," as in McCalla v. Ski River Development, 239 S.W.3d 374, 383 (Tex. App.—Waco 2007).

Inexorably Intertwined Damages

In Texas, an exception to segregating evidence of attorney fees developed over the years.  Where the attorney fees rendered were in connection with claims arising out of the same transaction, and were so interrelated that their "prosecution or defense entails proof or denial of essentially the same facts," it was held that the segregation requirement could be avoided (see Stewart Title at 11).  The initial exception was phrased such that if an attorney could claim that the "causes of action in the suit are dependent on the same set of facts or circumstances, and thus are 'intertwined to the point of being inseparable,' the parties suing for attorney fees may recover the entire amount covering all claims."

After the holding in Stewart, which first acknowledged an exception to the requirement of segregating fees for claims that are intertwined, the courts of appeals were flooded with claims that recoverable and unrecoverable attorney fees are so intertwined that they could not be segregated. (See, e.g., Tony Gullo at 312.)  For many years after the recognition of the exception to segregation, parties tried to escape the segregation requirement by generically claiming that they could not segregate the claims.  They relied on the recognized exception to the duty to segregate when the attorney fees rendered were in connection with claims arising out of the same transaction and were so interrelated that their prosecution or defense entailed "proof or denial of essentially the same facts."

The Texas Supreme Court has now reined in this exception, providing that if attorney fees relate solely to a claim for which such fees are not recoverable, a claimant must segregate recoverable from unrecoverable fees, but when discrete legal services advance both a recoverable and unrecoverable claim that they are so intertwined, they need not be segregated.

For example, the court explained that certain legal services such as: "requests for standard disclosures, proof of background facts, depositions of the primary actors, discovery motions and hearings, [and] voir dire of the jury" wouldn't be barred from recovering attorney fees just because they served multiple purposes.  However, the court was careful to point out that the mere presence of intertwined facts will not make tort fees recoverable. The new exception to the necessity of segregating fees is that "only when discrete legal services advance both a recoverable and unrecoverable claim" then they can be considered as being so intertwined as to not need segregation.  The segregation requirement can be met by offering expert opinion as to how much time was spent in relation to the recoverable claims versus the unrecoverable claims.

Defending Against Segregation

Whether supporting or attacking an award of attorney fees, the expert must deal specifically with segregation of fees.  The party must segregate fees incurred in connection with nonrecoverable claims, claims against other parties, or other lawsuits.

Trey Cox is a partner at Lynn Pinker Cox & Hurst.  He has spent nearly 20 years helping clients, from Fortune 500 corporations to entrepreneurs, resolve large, complicated and often high-profile business disputes.  Jason Dennis is a partner at the firm.  He has trial and appellate experience representing a diverse group of clients from Fortune 500 companies, to bankruptcy trustees, to individuals both as plaintiffs and defendants.

Tenth Circuit Affirms In Camera Only Review Rule of Billing Records

August 29, 2017

A recent Law 360 story by Christine Powell, “Tribal Co. Can Keep Atty Fees in $3M Gov’t Contract Row,” reports that the Tenth Circuit cemented an attorneys’ fee award given to one of the Fort Sill Apache Tribe's businesses and its leadership after escaping Team Systems International LLC’s lawsuit alleging that they breached an agreement for developing government contracts by failing to pay it nearly $3 million.

In a brief, unanimous ruling, a panel of three of the circuit court’s judges affirmed an Oklahoma district court’s award of $29,234 in attorneys’ fees to Fort Sill Apache Industries, its president and CEO Jeff Haozous and its board of directors as the prevailing party on TSI’s claims.

The attorneys’ fee award came after the Tenth Circuit last year separately affirmed the dismissal of TSI’s allegations that FSAI breached an agreement under which TSI supported FSAI’s work on government construction contracts by failing to fully pay it, concluding that TSI had failed to state a claim upon which relief could be granted.

When appealing the attorneys’ fee award, TSI had argued that the lower court abused its discretion by conducting an in camera review of certain unredacted billing and time records because TSI could not meaningfully challenge the reasonableness of the fee bid, but the panel rejected that contention.

“This court has held that a court reviewing a fee request did not abuse its discretion in denying the responding party access to the itemized time records and conducting in camera review of those records,” the panel said.  “Here, TSI did not pursue other avenues of discovery or contend on appeal that alternative discovery would have been inadequate.  Moreover, TSI has not shown that the district court’s reasons for its ruling were inadequate.”

The case is Team Sys. International v. Haozous et al, case number 16-6277, in the U.S. Court of Appeals for the Tenth Circuit.

Defense Win $18.5M in Fees in Antitrust Case

August 28, 2017

A recent Law 360 story by Carolina Bolado, “Patheon Gets $18.5M Fees After Prevailing in Antitrust Row,” reports that a Florida federal judge granted pharmaceutical manufacturer Patheon Inc.’s request for $18.5 million in attorneys' fees and defense costs related to former joint venture partner Procaps SA's $255 million antitrust suit, which the court said was “especially unpleasant and nasty.”

U.S. Magistrate Judge Jonathan Goodman said now that the Eleventh Circuit has upheld the summary judgment order ending Procaps' suit, Patheon is entitled to a fee award under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) in the “full-throttle lawsuit” that he noted has generated 1,165 docket entries since it was first filed in December 2012.

In the suit, Procaps alleged that Patheon's acquisition of Banner Pharmacaps Europe BV made the previously agreed-upon Procaps-Patheon collaboration on the development of a softgel capsule for pharmaceutical products a restraint on trade.  But the Eleventh Circuit in January said Procaps couldn't prove any harm that would justify a Sherman Act suit, such as a reduction in output, increase in prices or decrease in quality.

In the order, Judge Goodman ruled that though the FDUTPA claims were essentially “tag-along” claims based on Procaps' claims under the federal Sherman Act — which does not authorize prevailing party fees — the claims were all clearly related and the time Patheon spent defending the federal claims was time spent defending the state law claims.  Judge Goodman pointed to Florida Supreme Court precedent authorizing fees to a prevailing party under FDUTPA unless the non-FDUTPA claims were clearly unrelated to or clearly beyond the scope of the FDUTPA proceeding.  That is not the case in this dispute, he said.

“There is no dispute about the reality of the FDUTPA claim: it was an alternative theory of recovery to the Sherman Act claim, based in large part on the same transaction and facts,” Judge Goodman said.  “The antitrust claim work cannot fairly be described as being 'totally unrelated' to the FDUTPA claim.”  He had choice words for the parties, saying that counsel regularly launched personal attacks and that filings in the court were “routinely riddled with insults, allegations of bad faith and unprofessionalism, and, in general, purple prose.”

Judge Goodman awarded Patheon the full $18,494,846 it had requested, noting that Procaps had not objected to the amount and that Patheon's attorneys had already self-discounted.

Patheon's attorney Michael Klisch said his client appreciated the significant time and effort the district court spent on the case that lasted almost five years.  He said Patheon had invested significant time and money into the case, which required a forensic analysis of Procaps' computer system and “a nearly complete do-over after Procaps changed its antitrust theory years into the case.”

“Given all the circumstances and applicable law, we believed an award of fees and costs was entirely appropriate, and are pleased the court agreed with us,” Klisch said.

The case is Procaps SA v. Patheon Inc., case number 1:12-cv-24356, in the U.S. District Court for the Southern District of Florida.

In-House Counsel Can and Should Collect Attorney Fees

August 21, 2017

A recent Corporate Counsel article by Daniel K. Wiig, “In-House Counsel Can and Should Collect Attorney Fees,” writes about attorney fee entitlement for in-house counsel work.  This article was posted with permission.  The article reads:

When weighing his post-Senate career options, then-U.S. Sen. Howard "Buck" McKeon rejected an offer from a prominent law firm, opting not to "live his life in six-minute increments."  Indeed, it is with fair certainty to state a top reason lawyers in private practice transition to in-house is to escape the billable hour.  And while the imminent death of the billable hour may have been highly exaggerated (again and again), it remains the predominate metric for private-practice attorneys handling commercial work to track their time and collect fees.

Numerous reports suggest the in-house lawyer is "rising," with companies opting to retain more and more legal work within their law departments, and decreasing the amount of work they disseminate to outside counsel.  Sources cite various reasons from cost to the intimate knowledge in-house lawyers possess regarding their employer vis-à-vis outside counsel.  Whatever the genesis, it reasons that in-house lawyers morphing into the role traditionally held by outside lawyers should assume all such components of the role, which, when possible, can include recovering attorney fees for actual legal work performed, as noted in Video Cinema Films v. Cable News Network, (S.D.N.Y. March 30, 2003), (S.D.N.Y. Feb. 3, 2004), and other federal and state courts.

Recovering attorney fees is that extra win for the victorious litigant, whether provided by statute or governed by contract.  It leaves the client's bank account intact (at least partially) and gives the prevailing attorney additional gloating rights.  For the in-house lawyer, recovering attorney fees can also occasionally turn the legal department from a cost center to a quasi-profit center.  In-house lawyers can and should collect attorney fees.

To be clear, recovering attorney fees is not available for in-house lawyers functioning in the traditional role of overseeing outside counsel's work.  As noted in Kevin RA v. Orange Village, (N.D. Ohio May 4, 2017), a court will not award fees to in-house lawyers that are redundant, i.e., those which reflect work performed by outside counsel.  Indeed, when in-house counsel is the advisee of litigation status rather than drafter of the motion or attends the settlement conference as one with authority to settle rather than to advocate more advantageous settlement terms, she functions as the client rather than lawyer, of which attorney fee are unavailable.

Unlike their counterparts in private practice, in-house counsel do not have set billing rates, although an exception may exist if internal policies permit the legal department to invoice the department that generated the legal matter.  Even in such a situation, as with law firm billing rates, the actual fees/rates are considered by the court but not determinative in awarding fees, as noted in Tallitsch v. Child Support Services, 926 P2d. 143 (Colo. App. 1996).  In determining what constitutes an appropriate and reasonable attorney fee award, courts frequently apply the "reasonably presumptive fee" or the "lodestar" method.  Under the lodestar method, as explained in Earth Flag v. Alamo Flag, 154 F.Supp.2d 663 (S.D.N.Y. 2001), fees are determined by "multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate."

Reasonableness is a question of fact for the trial court.  In determining a reasonable hourly rate, federal courts look to those reflected in the federal district in which they sit, while state courts consider the prevailing rates in their respective city and geographical area.  Courts will also consider other factors such as the complexity of the case, the level of expertise required to litigate the matter, and the fees clients in similar situations would be willing to pay outside counsel in determining the appropriate hourly rate for the in-house lawyer.  Determining whether the tasks performed by the in-house lawyer were reasonable is left to the court's discretion.

Recognizing legal departments do not necessary operate in lockstep fashion as a law firm, courts will consider the "blended" rate in the lodestar calculation.  Here, a court will combine or "blend" the reasonable rates for associates, partners, counsel and paralegals in their locale to devise the appropriate hourly rate for the in-house lawyer.  The premise is in-house lawyers generally take on less defined roles in litigating a matter than their counterparts in private practice, performing a combination of litigation tasks that may be more clearly delineated among law firm staff.

In order to successfully receive an award of attorney fees, the in-house lawyer must maintain a record akin to a law firm's billing sheet of her time spent on the matter, as reflected in Cruz v. Local Union No. 3 of International Brotherhood of Electrical Workers, 34 F.3d 1148 (2d Cir. 1994).  Consequently, an excel spreadsheet, or similar document, enumerating the time and task, with as much detail as possible, is required to sustain a court's scrutiny in looking for tasks that were "excessive, redundant or otherwise unnecessary," as noted in Clayton v. Steinagal, (D. Utah Dec. 19, 2012).  Moreover, the in-house attorneys who worked on the matter must execute affidavits attesting to the accuracy of their time records, and include the same in their moving papers.

As the legal profession changes and corporate legal departments retain more of their work, in-house should take advantage of statutory or contractual attorney fees provisions, notably for the litigation they handle internally.  In so doing, the in-house lawyer may find a number of benefits, such as approval to commence litigation that they may have otherwise shied away from because of the possibility to recoup attorney fees and the benefit of essentially obtaining payment for the legal work performed.

Daniel K. Wiig is in-house counsel to Municipal Credit Union in New York, where he assists in the day-to-day management of the legal affairs of the nearly $3 billion financial institution.  He is also an adjunct law professor at St. John's University School of Law.  Wiig successfully moved for in-house attorney fees in Municipal Credit Union v. Queens Auto Mall, 126 F. Supp. 3d 290 (E.D.N.Y. 2015).

Judge Trims Hours Billed in Copyright Infringement Action

August 17, 2017

A recent Law 360 story by Sophia Morris, “Judge Reinstates, Then Trims Fees Award to ‘Obstinate’ Attys,” reports that a Florida federal judge ruled that Yellow Pages Photos Inc. was entitled to attorneys’ fees and costs totaling more than $1.4 million in a copyright infringement suit following an Eleventh Circuit ruling in its favor, but revised the amount downward based on the conduct of the company's counsel at Shumaker Loop & Kendrick LLP.

U.S. District Court Judge Richard A. Lazzara was ruling on the fee request following the remand of YPPI’s infringement suit against subcontractor Ziplocal and Yellow Pages Group LLC from the Eleventh Circuit.  He found that while YPPI was the prevailing party and thus entitled to fees and costs, the amount must be reduced given its attorneys' conduct during the litigation.

“Obstructing the rhythm of a case by throwing up roadblocks of schedules too busy to calendar depositions, just for the sake of being disagreeable and obstinate, particularly in view of the multiple attorneys working on the case, does not bode well in finding the number of hours incurred was reasonable or acceptable in any sense of the word,” Judge Lazzara said.

Yellow Pages Photos filed the long-running infringement suit in 2012 over Ziplocal and Yellow Pages Group’s use of copyrighted photos.  In 2014 a federal jury awarded YPPI $123,000 in damages.  Yellow Pages Group appealed and YPPI cross-appealed, and the Eleventh Circuit affirmed the judgment in 2015.  YPPI then appealed the district court’s lowered fee award, and the Eleventh Circuit ruled in January that it was entitled to a revised fee determination given that it had requested $1.4 million in fees from Ziplocal and had been awarded $69,354.76. 

Now, on remand after the January ruling, YPPI requested fees and costs for both the district court action and the appeal process.  But Judge Lazzara said that given the stonewalling behavior of YPPI’s attorneys during the course of the district court proceedings he cannot award fees and costs in the amount requested.

The court found that the lodestar for the district court action should be $1,280,395.57, a 10 percent reduction “representative of the excessive, redundant and otherwise unnecessary number of hours expended,” Judge Lazzara said.  He then reduced this lodestar by another 10 percent to $1,152,356.01, saying that YPPI had requested an excessive amount of damages in what was a simple case.  The damages that were awarded were much lower than what was initially requested and the court found that the fee award should reflect this.

YPPI’s attorneys also made a fee request of $57,419.50 for work expended on the appeal.  The court said that while the hourly rate was reasonable, the amount of hours expended on the appeal was not.  Judge Lazzara said that the fee request was not detailed and it appeared that the attorneys were duplicating each other’s work.  He therefore reduced the fee award to $50,794,50.  “The time of 136 hours seems excessive and unnecessary for researching and briefing the issue of attorneys’ fees and nontaxable costs,” the court said.

One Year Later: Kirtaeng v. Wiley

June 20, 2017

A recent Law 360 story by Bill Donahue, “2nd Circ. To Reduce Fee Award in $655M Madoff Settlement” reports that a year later, experts say the impact of the U.S. Supreme Court’s Kirtsaeng v. John...

Read Full Post

Fee Request Challenge Sought in IP Suit

June 2, 2017

A recent Law 360 story by Nicole Narea, “Stanford, ThermoLife Seek To Slash Fee Award in IP Suit” reports that Stanford University and ThermoLife International asked a California federal court to...

Read Full Post