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Category: Prevailing Party Issues

Ohio Supreme Court Cuts $4M in Fees; Redefines Lodestar

March 26, 2020

A recent Bloomberg Law story by Alex Ebert, “$4M Attorney Fee Award Cut in Half by Ohio High Court,” reports that a nearly $4 million payday for a prevailing group of attorneys was lopped in half by the Ohio Supreme Court, which ruled an “enhancement” that doubled the winning lawyers’ fees went too far.  Ohio’s lodestar calculation, the method for determining a reasonable attorneys fee, already factors in the complexity and time of litigation, and the expertise of the attorneys involved, the court said in its opinion issued.

A state trial and appellate court were wrong to look to these factors and double the more than $1.99 million in attorneys fees awarded to Phoenix Lighting Group LLC’s lawyers, the high court said.  The legal team won the lighting business a $5,518,335 judgment following years of litigation over claims that its value was reduced by unlawful actions by a competitor, Genlyte Thomas Group LLC, dating back to incidents that occurred in 2009.

“Today’s decision communicates the Ohio Supreme Court’s desire to limit an attorney’s ability to receive an enhancement in attorney fees in cases where his or her performance was exceptional or where the attorney, for the best interest of the client, took on a case with exceptional risk,” Phoenix Lighting Group’s attorney Jeffrey Witschey, a partner with Akron-based Witschey Witschey & and Firestine Co., LPA, said in an email.

“The danger with the decision is the potential chilling effect on attorneys taking cases for clients that are unable to financially support long legal battles with wealthier opponents,” he said.  The court made the “right decision and established appropriate limitations that will make enhancements rare in Ohio and require the rare enhancement to be based on objective evidence that is reviewable on appeal,” Genlyte Thomas Group’s attorney Benjamin Sasse, a partner in Tucker Ellis LLP’s Cleveland office, said in an email.

The court shouldn’t increase the fees just because the payoff took a long time, the justices said.  “Enhancements to the lodestar should be granted rarely and are appropriate when an attorney produces objective and specific evidence that an enhancement of the lodestar is necessary to account for a factor not already subsumed in the lodestar calculation,” Justice Melody Stewart wrote in the majority opinion signed by seven justices.

Justice Sharon Kennedy issued a concurring opinion that agreed with Stewart but said trial courts must weigh each reasonable-fee factor individually, and not believe all factors are bound-up perfectly in the lodestar analysis.  Justice Patrick Fischer also a separate concurring opinion saying that courts must also be mindful of the “time value of money” in cases that take years to resolve.  The underlying issues in this matter began in 2004.  “Prevailing plaintiffs who have paid their attorneys over the course of the lawsuit and attorneys working on a contingent-fee basis have been deprived of the use of their money throughout the lawsuit,” Fischer said in his concurrence.

Judge Rejects Math Error Claim in Attorney Fee Request

March 19, 2020

A recent Law 360 story by Pete Brush, “NY Judge Swats Down Sanford Heisler Math Error Claim,” reports that a Manhattan federal judge rejected a claim by the firm representing a former Columbia University professor in a sexual harassment trial that she made a math error in slashing its fee request by 75% to $1.34 million — a quick smackdown that followed a request for more money.  Sanford Heisler Sharp LLP's fee quibble, filed Wednesday, came after a bitter trial and aftermath in which its client, former Columbia finance scholar Enrichetta Ravina, won $750,000 of damages after prevailing against the Ivy League school and one of its professors, Geert Bekaert, on claims of retaliation.  Ravina's $30 million suit also brought claims of discrimination and harassment that a civil jury rejected.

On March 6 U.S. District Judge Ronnie Abrams slashed the firm's initial request for nearly $5.9 million of fees to $1.34 million, citing excessively billed hours and duplicative staffing, vague billing records and the fact that Ravina only prevailed on a single count of 22 brought before the trial jury.  "In sum, the court reduced Ravina's hours by seventy-five percent total: thirty-five percent to account for the excessive hours expended and inefficient staffing, five percent to account for the vague time entries and block billing, and thirty-five percent to account for Ravina's lack of success on her claims based on Columbia's conduct," Judge Abrams wrote.

But according to a filing from Sanford Heisler, Judge Abrams should have multiplied the three percentage reductions through one another.  "This results in an overall reduction of 59.8625%. (This is calculated as follows: 1 –(0.65 * 0.65 * 0.95) = 0.598625," the firm said.

That, it asserted, would have led to a lower reduction and a higher fee of about $2.15 million.  Not so, according to Judge Abrams.  "It was well within this court’s discretion to calculate Ravina’s total reduction in hours by adding the three categories of reductions together," the judge wrote.  In her March 6 order Judge Abrams used the word “sum” — which implies addition — in her findings to arrive at the “total” 75% reduction.  Judge Abrams said her slashing of the fee award was "not the result of inadvertence or mathematical error."

Article: Fee Rulings Show When to Litigate Wage Claims for Defense

March 9, 2020

A recent Law 360 article by Valerie K. Ferrier, “3 Rulings Show When Litigating Wage Claims Is Worth It,” reports on three recent fee rulings defense counsel should consider when deciding to litigate wage claims.  This article was posted with permission.  The article reads:

Wage and hour cases present a particular threat to small businesses. The hospitality industry is especially vulnerable to these claims.

Aside from incurring the legal costs of a defense, with one-way fee-shifting in favor of prevailing plaintiffs under the Fair Labor Standards Act and the New York Labor Law, it is often advisable for businesses to offer an early settlement before the other side incurs substantial attorney fees.

Yet, as some recent cases illustrate, there are situations when defendants may choose to fight it out at trial. Business owners may have multiple reasons they prefer to litigate: deterrence of future lawsuits, lack of concern because they are essentially judgment-proof, and of course moral outrage. Three recent decisions highlight instances in which businesses fought the good fight, and largely prevailed.

Offer of Judgment Under Federal Rule of Civil Procedure 68

A Rule 68 offer of judgment is a litigation tool meant to incentivize early settlement. Under the rule, at least 14 days before trial, a defendant may make an offer to settle on terms they specify.

If a plaintiff rejects the offer, and does not ultimately obtain a more favorable result at trial, the plaintiff must pay the defendant’s post-offer costs for things like transcript fees. In FLSA cases, the plaintiff's attorney may be incentivized to delay settlement discussions, knowing that if they prevail on any claim, in any amount, the FLSA’s fee-shifting provision will be triggered, and the defendant will have to pay the plaintiff's attorney fees, in addition to any judgment obtained by the plaintiff. A Rule 68 offer means that the plaintiff’s attorney, as well as the plaintiff, must think hard about whether to gamble on a more favorable outcome at trial.

A recent decision by a panel of the U.S. Court of Appeals for the Second Circuit in December 2019 made it easier for the parties to resolve cases early, without court approval. Prior to the ruling in Yu v. Hasaki Restaurant Inc., there was a split of authority about whether the parties to an FLSA action could privately settle the matter pursuant to a Rule 68 offer, or whether any FLSA settlement, including those under Rule 68, required court approval, as enunciated in Cheeks v. Freeport Pancake House Inc.

A two-judge majority of the panel held that "[a]ppeals to the broad remedial goals and uniquely protective qualities of the FLSA do not authorize us to write a judicial approval requirement into the FLSA, and thereby into Rule 68(a), when the text of both provisions is silent as to such a requirement." With this decision, parties are now free to more quickly resolve wage and hour cases, even prior to discovery.

Marcelino v. 374 Food

In Marcelino v. 374 Food Inc., following unsuccessful attempts at mediation and settlement, the U.S. District Court for the Southern District of New York held a bench trial, approximately a year and a half after the case was filed. The plaintiff, Domingo Castillo Marcelino, alleged he was underpaid over six months of employment.

His credibility was undermined on cross-examination when, among other things, he contradicted his starting date and was unable to identify one of the individual defendants in the courtroom, even though he testified that the man personally directed his work. The court dismissed the FLSA claims, holding that the plaintiff failed to establish either enterprise or individual coverage under the law.

Despite the defendant’s lack of time and pay records, the court assessed minimal damages under the New York Labor Law only, awarding the plaintiff $8,144, including statutory penalties and liquidated damages. However, noting that the plaintiff seemed to be "making up answers as he went along" during his testimony, the court concluded that the plaintiff perjured himself, and requested briefing from the parties as to whether, in light of that finding, the plaintiff was entitled to recover anything at all.

Thereafter, the plaintiff’s counsel, the subject of possible sanctions himself, withdrew from representation, and the plaintiff was unable to be located. He failed to appear at a hearing on the court’s order to show cause, and as a result, in addition to his "extensive perjury," on Jan. 24 the court forfeited the plaintiff’s award pursuant to its inherent power and closed the case.

Eduoard v. Nikodemo Operating

In Eduoard v. Nikodemo Operating Corp., the plaintiff, a former dishwasher and general helper sued his former employer, a restaurant, about a year after he had received approximately 150% of his total annual pay as a member of a class settlement against the restaurant. In his own lawsuit, he claimed that after the settlement the restaurant had improperly rounded his hours, and thus failed to appropriately pay him overtime.

He further alleged that an hour was improperly deducted from his time each day for a meal break that he claimed he never once took in all the years he worked there, and that he was fired in retaliation for complaining about it. He also brought spread-of-hours claims and claims for violation of the Wage Theft Prevention Act.

The defendants almost immediately made a Rule 68 offer, which was ignored and expired. Thereafter, without ever having conducted any class discovery, the plaintiff moved for class certification under Rule 23.

The court denied the motion, and the parties proceeded to a bench trial because the plaintiff failed to request a jury trial. Shortly before the trial was to commence, the plaintiff’s original counsel was substituted just before he was disbarred.

The plaintiff testified on his own behalf. One of the owners of the business testified on behalf of the defense. After the conclusion of the trial the court issued findings of fact and conclusions of law.

As in Marcelino, the U.S. District Court for the Eastern District of New York dismissed the FLSA claim because the plaintiff failed to prove either individual or enterprise coverage under the law. The court also found the defendant "much more credible than [the] plaintiff on several issues." Specifically incredible was the plaintiff's testimony that he never took a lunch break and never ate anything during his shifts, never got hungry, and never even once sat down while working during the relevant time period.

The court denied the plaintiff’s rounding, meal break deduction, retaliation and overtime claims, but granted the plaintiff’s claims as to spread-of-hours and the Wage Theft Prevention Act. As a result, after one year of litigation, the plaintiff was awarded a total of $3,419.32, including interest.

Because the defendants had previously made a Rule 68 offer before discovery commenced, the defendants moved for sanctions pursuant to the court’s inherent authority and under Title 28 of U.S. Code Section 1927 against the plaintiff’s former counsel. The motion was for unnecessarily multiplying the proceedings in bad faith by making a frivolous and factually unsupported motion for class certification, despite an explicit warning from the court regarding the consequences of doing so. A decision on this motion is pending.

Feuer v. Cornerstone Hotels

More recently, the Eastern District of New York issued a decision in Feuer v. Cornerstone Hotels Corp.[5] following a 2018 bench trial in the case of a married couple who worked and lived at a 12-room motel for six months in 2014. They alleged that they were either working or on-call 24/7, and were thus underpaid minimum wage and overtime. Shortly after the case commenced, the individual defendant chose to proceed pro se and left the corporate defendant unrepresented.

The court held that neither the husband nor wife, even combining their hours, ever worked more than 40 hours in a week. However, because they were underpaid during the first week of their employment the court awarded them $92 in unpaid wages, the same amount as liquidated damages, and statutory damages, for a total of $5,184, plus 2 cents interest per day until the judgment was paid.

Similar to Eduoard, the court credited the employer’s time and pay records, and found the plaintiffs’ testimony was not credible, especially when compared to that of the owner who testified and also lived on the premises.

Lessons for Counsel

As all three cases make clear, plaintiffs counsel must go beyond merely accepting their client’s word for how long they worked, or how much they were paid. Moreover, plaintiffs who take patently exaggerated positions do so at their peril.

Indeed juries are often instructed that if they determine that a witness has lied about anything, they are entitled to conclude that the witness has lied about everything. As the Latin saying goes, "falsus in uno, falsus in omnibus."

Even if a plaintiff is ultimately awarded a few thousand dollars after a year or more of litigation, other sanctions may be attached. In addition, plaintiffs counsel, who generally take wage and hour cases on contingency, may end up wasting an enormous amount of time, money, resources and good will, even if they are not sanctioned.

On the other hand, defendants who are confident that they have complied with the law, or have only minimal liability, may elect to pursue litigation to its conclusion in order to prove a point. Defendants are often loath to pay both their own attorney fees and at the same time accept the risk that they may be ordered to pay plaintiff fees, even if the award is small.

However, as Feuer demonstrated, in some instances, pro se individual defendants can save attorney fees and successfully defend themselves. In addition, strategic deployment of a Rule 68 offer of judgment at an early stage of the litigation may drastically curtail even a prevailing plaintiff’s entitlement to attorney fees.

Valerie K. Ferrier is a partner and head of the labor and employment practice group at Martin Clearwater & Bell LLP in New York, NY.

Full Federal Circuit Urged to Fix Divergent Attorney Fee Ruling

March 3, 2020

A recent Law 360 story by Dani Kass, “Full Fed. Circ. Urged to Fix Divergent Attorney Fee Ruling,” reports that the Federal Circuit deviated from nearly every other circuit court and U.S. Supreme Court precedent when it upheld a ruling that a settlement precluded BigCommerce Inc. from collecting attorney fees, the e-commerce company said in a bid for rehearing.  BigCommerce maintains that it was the prevailing party in its litigation with Diem LLC, as while Diem’s underlying patent infringement claims were settled, a contract dispute that came out of the deal was decided entirely in BigCommerce's favor.  Nearly every other circuit has allowed companies to prevail even if some claims are settled, the petition for rehearing by the panel or en banc states.

Diem, a nonpracticing entity, had accused BigCommerce of infringing its website-generation and -hosting patent with the storefront manager service offered on BigCommerce's website.  As part of a settlement, Diem and Commerce entered into a contract under which the district court would look only at whether Diem had a particular infringement theory in its original infringement allegations.  If so, BigCommerce would have to license the patent for $30,000, and if not, the case would be dismissed with prejudice, according to BigCommerce's appeal.  The district court ruled in favor of BigCommerce and dismissed Diem's suit.

BigCommerce maintains that it's the prevailing party because it escaped the litigation without having to license the patent it was accused of infringing, pay anything to Diem, or change its products or services.  Both the district court and Federal Circuit have disagreed.  The rehearing petition turns on the Supreme Court’s ruling in Buckhannon Board & Care Home Inc. v. West Virginia Department of Health & Human Resources, which struck down the so-called catalyst theory.  Under that theory, a party was considered “prevailing” if its lawsuit caused the defendant to voluntarily change conduct.

BigCommerce said that during oral arguments, the panel claimed it was being asked to stray from the justices' 2001 ruling, but the company said that’s not true.  In 2016's CRST Van Expedited Inc. v. EEOC, the justices said they hadn’t set a “precise test” on how to determine whether a party has prevailed, the petition states.

According to BigCommerce, the Federal Circuit read a test into Buckhannon that “virtually every circuit has squarely rejected.”  It provided examples from the First, Second, Third, Fourth, Fifth, Seventh, Eighth, Ninth and Eleventh circuits to back up that argument.  Buckhannon is just about the catalyst theory and “has no relevance” in a case that doesn't invoke that theory, the petition states.

“BigCommerce never cited any BigCommerce-led action that induced a voluntary change in Diem’s conduct in support of its ‘prevailing party’ arguments in the lower court or before this court,” the petition states.  “In fact, Diem refused to voluntarily do anything BigCommerce requested.  A district court had to retain enforcement jurisdiction over the parties’ settlement agreement, resolve the parties’ dispute, rule in favor of BigCommerce, rule against Diem, which finally caused the dismiss[al] of this case with prejudice.”

The 2006 Federal Circuit case cited by the district court when denying fees, Exigent Tech. Inc. v. Altrana Solutions Inc., was also decided incorrectly, BigCommerce said.  In that case, the court said merits-based relief is required to become a prevailing party, which BigCommerce said contradicts the high court’s ruling in CRST.  If the Federal Circuit doesn’t adjust its holding, then the term "prevailing party" will mean one thing under the Patent Act and something else under every other law, which can’t stand, BigCommerce said.

Article: Five Lessons for Recovering Attorney Fees in Texas

February 24, 2020

A recent BizLitNews article by Amanda Taylor, “Recovering Attorney’s Fees in Texas: Five Lessons,” reports on attorney fee recovery in Texas.  This article was posted with permission.  The article reads:

Obtaining an award of attorneys’ fees might be the final step in a long-waged litigation battle but to do so successfully requires careful planning and diligence from the outset of a case.  The Texas Supreme Court recently clarified the evidence required to obtain and affirm such an award.  Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019).  The Texas Supreme Court also recently confirmed that these evidentiary standards apply equally when fees are sought to be recovered as a sanction.  Nath v. Texas Children’s Hosp., 576 S.W.3d 707, 710 (Tex. 2019).  To best serve a client’s interests of recovering attorneys’ fees in Texas, whether as a prevailing party or as a sanction, lawyers should adhere to five lessons from Rohrmoos.

Lesson One:  Confirm a legal entitlement to recover fees.  “In Texas, as in the federal courts, each party must pay its own way in attorney’s fees … unless a statute or contract provides otherwise.”  Rohrmoos Venture, 578 S.W.3d at 484.  Certain claims, such as a breach of contract claim brought under Chapter 38 of the Texas Civil Practices and Remedies Code, entitle a prevailing party to recover attorneys’ fees.  Other claims, such as a common law fraud claim, do not afford such a remedy.  In establishing your initial case strategy, it is important to consider which claims will and will not allow for recovery of fees, and advise your client about the pros and cons of pursuing each claim accordingly.  Also, be aware of fee-shifting procedural tools (such a motion to dismiss under the Texas Citizens Participation Act) and various Texas statutes and rules that allow for recovery of fees as a sanction (such as Civil Practice and Remedies Code Chapters 9-10, and Texas Rule of Civil Procedure 215).

Lesson Two: Keep accurate, contemporaneous billing records.  Although billing records are not absolutely required to prove the amount of reasonable and necessary fees, it is “strongly encouraged” to submit such proof in support of attorneys’ fees.  Rohrmoos Venture, 578 S.W.3d at 502.  It is much easier to review, summarize, and testify about the work performed (often years later) if you have been diligent in your billing practices throughout.  Time should be kept in a manner that demonstrates the “(1) particular services performed, (2) who performed those services, (3) approximately when those services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing the services.”  Id.  It is also advisable to keep time in a manner that is specific enough to cover the topic but without legalese and without so much detail that heavy redactions become necessary.  Fact finders prefer to read invoices in plain English without the interruption of hidden text.

Lesson Three:  Your fee agreement does not control the amount awarded.  “[A] client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable or necessary.”  Id. at 488.  Translation: even if you have agreed to handle the matter for a flat fee or contingency fee, you still must demonstrate that the amount of fees sought for recovery are reasonable and necessary based on the work performed and the time incurred.  Regardless of the fee arrangement with your client, keeping accurate and contemporaneous billing records is important.

Lesson Four: Remember to timely designate fee experts.   “Historically, claimants have proven reasonableness and necessity of attorney’s fees through an expert’s testimony—often the very attorney seeking the award.”  Id. at 490.  “[C]onclusory testimony devoid of any real substance will not support a fee award.”  Id. at 501.  Because expert testimony will be required, the attorney must remember to designate herself and any other attorney who will offer an opinion about the reasonableness and necessity of the fee amount(s) as an expert witness in compliance with the scheduling order or discovery control plan governing the case.

Lesson Five: Understand the “Texas two-step” calculation method.  At step one, calculate the “base” or “lodestar” amount by multiplying the “reasonable hours worked” by a “reasonable hourly rate.”  Id. at 498.  This is an “objective calculation” that yields a “presumptively reasonable” amount.  Id. at 497-98, 502.  The determination of what is a reasonable market rate and what is a reasonable amount of time will typically include consideration of the following factors: (1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill required to perform the legal service properly, (4) the fee customarily charged in the locality for similar legal services, (5) the amount involved, (6) the experience, reputation, and ability of the lawyer or lawyers performing the services, (7) whether the fee is fixed or contingent and the uncertainty of collection, and (8) the results obtained.  Id. at 500.  At step two, “adjust[] the base calculation up or down based on relevant considerations … [that were not] subsumed in the first step.”  Id.  “If a fee claimant seeks an enhancement, it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award.”  Id. at 501.  Remember that only “rare circumstances” justify such an adjustment.  Id. at 502.

Following these five lessons from the outset of a case will be beneficial to the expert testifying about the amount of fees at the end of a case.  More importantly, it will benefit your client’s best interest in obtaining a monetary award and being able to have that award affirmed on appeal.

Amanda G. Taylor is a Board-Certified Civil Appellate attorney who practices from the Austin, TX office of Butler Snow LLP.  Her practice is focused on shaping successful case strategy for litigation clients from the outset of litigation through the end of an appeal.  She also frequently represents clients in matters regarding the Texas Citizens Participation Act (Texas’ anti-SLAPP statute).