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Category: Prevailing Party Issues

UBS Balks at $3.2M in Attorney Fees in Whistleblower Action

December 12, 2018

A recent Law 360 story by John Petrick, “UBS Balks at Whistleblower Case’s $3.2M in Attys’ Fees,” reports that UBS Securities asked a New York federal judge to reject a “jaw-dropping” and “excessive” $3.2 million in attorneys' fees requested by a former analyst who won a $1 million verdict in his whistleblower trial under representation by Herbst Law PLLC and Broach & Stulberg LLP.  Attorneys for the bank argue that while the Sarbanes-Oxley Act allows for a winning party to recoup “reasonable” fees, this request is overstuffed with billable hours spent on claims that were lost at former analyst Trevor Murray's trial, duplication of work and extra time needed to make up for the attorneys’ own mistakes.

“The court should significantly reduce the amount of fees and costs that Murray’s counsel requests in order to prevent Murray’s counsel from reaping a windfall from their own limited success and inefficient, excessive work,” attorneys for UBS said in the motion.  Murray won only a “fraction” of what he sought at trial and his attorneys went after unreachable claims that a reasonable attorney would never have pursued, which prolonged the case needlessly, UBS attorneys said in the motion.

Murray won a nearly seven-year fight with the bank after he alleged he was fired in 2012 for complaining his superiors were pressuring him to falsely report better market conditions to boost UBS’ revenue numbers and impress investors.  The former analyst filed the lawsuit in February 2014, claiming UBS pressured him to skew his research to support the bank’s commercial mortgage-backed securities trading and loan origination activities, and to report better conditions in the market because that line of securities was a significant revenue source.

Murray allegedly told the bank’s head CMBS trader he was concerned certain CMBS bonds were overvalued, according to the suit.  But Murray was told not to publish anything negative about the bonds because they had been purchased by the UBS trading desk, he claimed.  He was fired shortly thereafter, just a month after receiving what he said was an excellent performance review.  UBS argued Murray was laid off as part of a mass downsizing sparked by the global financial downturn in 2011.

A jury in Manhattan awarded Murray nearly $1 million following a three-week trial, deciding he was fired for refusing to skew his research to impress investors, according to filings in the case.  The jury disagreed, however, on how long Murray would have remained at the firm, and awarded him much less than the amount of damages he was seeking.

Petitions filed last month asked for $638,950 to cover Herbst's attorneys’ fees and another $1,160.55 plus interest in costs, and $2.6 million to cover Broach & Stulberg's work in the case.  While Broach & Stulberg started out as lone counsel during several rounds of pretrial motions, Herbst “parachuted” into the case just a month before trial, applying to become lead counsel because it said it had more trial experience, according to the motion.

UBS attorneys maintained in their opposition motion that though a judge said Herbst could only assist in the case and not take over as lead counsel, for all intents and purposes, Herbst performed as if its attorneys were in fact lead counsel for the remainder of the case.

Herbst told Law360 his billable hours were reasonable and that he expects the court to think so, too.  "All of our firm’s time was spent on the Sarbanes-Oxley claim on which Mr. Murray prevailed and obtained what the jury decided was the full measure of his economic loss, special damages and compensatory damages," he said.  "Accordingly, based on UBS’s opposition, which does not attack our hourly rates and only presents picayune opposition to the hours we expended, our firm should hopefully receive a full lodestar recovery."

The case is Trevor Murray v. UBS Securities LLC et al, case number 1:14-cv-00927, in the U.S. District Court for the Southern District of New York.

Eleventh Circuit Reverses Entitlement to Fees in Miami Construction Dispute

November 29, 2018

A recent Daily Business Review story by Katheryn Tucker, “11th Circuit Reverses Fee Award in Miami Construction Dispute,” reports that, in a ruling that the winning lawyer said saved the construction industry from being “turned on its head,” the U.S. Court of Appeals for the Eleventh Circuit has reversed an award of $155,000 in legal fees in a dispute over the superstructure at Miami’s $1 billion Brickell CityCentre.  Senior Circuit Judge Frank Hull wrote the decision joined by Judges Robin Rosenbaum and Julie Carnes.  The panel reversed a ruling from U.S. District Judge Marcia Cooke of the Southern District of Florida granting $154,536 in attorney fees to International Fidelity Insurance Co. and Allegheny Casualty Co. — referred to jointly by the court as Fidelity.

On the winning side is Americaribe-Moriarty Joint Venture, a general contractor on the massive mixed-use development.  The dispute arose when the contractor replaced a subcontractor, Certified Pool Mechanics, called “CPM” in the opinion.  The contractor contended the sub failed to perform and then sought relief under a Fidelity performance bond.  Fidelity sought a declaratory judgment that Americaribe was not entitled to assert a claim against the performance bond and won at the district court level. The Eleventh Circuit upheld that ruling.

But then Fidelity asked for the fee award, which the district judge granted.  “In the first appeal, we affirmed the district court’s grant of summary judgment to Fidelity, holding Fidelity had no liability under its performance bond,” Hull wrote.  “Subsequently, the district court awarded attorney’s fees to Fidelity against Americaribe.”

On a second appeal, Americaribe argued Fidelity wasn’t entitled to recover fees  because the performance bond and the subcontract didn’t provide for it, and the panel agreed.  Richard Chaves of Ciklin Lubitz in West Palm Beach represented the Americaribe-Moriarty Joint Venture, or AMJV.  “The unchecked effect of the district court’s decision would impact not just our client (AMJV) but contractors and subcontractors across the state of Florida,” Chaves said in an email.

“Contractors and subcontractors routinely enter into bonded contracts which contain prevailing party attorneys’ fee provisions and/or separate indemnity provisions, and have asserted (and likely will assert in the future) claims against performance bonds which are typically challenged by the issuing surety,” he said.  “Fidelity’s position that — despite not having performed their surety obligations under their performance bond — they were entitled to prevailing party attorneys’ fees from AMJV under the indemnity provision of the underlying subcontract (to which Fidelity was not a party) is contrary to Florida’s public policy and, if made into legal precedent, would have turned the construction industry on its head.”

Chaves also suggested Hull’s decision may have helped avoid trouble beyond disputes over performance bonds.  “Contracts are governed by common law,” Chaves said. “An errant decision can create havoc in existing commercial relationships and create uncertainty in future ones.”

The case is Fidelity v. Americaribe-Moriarty JV, No. 17-10814.

Ninth Circuit: Big City Rates Proper Where Local Counsel Unavailable

November 21, 2018

A recent Metropolitan News story, “Award of Attorney Fees at ‘Big City’ Rate Proper Where Local Counsel Unavailable,” reports that the Ninth U.S. Circuit Court of Appeals has upheld a $135,876.75 attorney fee award to a special-needs student’s mother who prevailed in an administrative proceeding under the Individuals with Disabilities Education Act, rejecting the contention of the defendant, Tehachapi Unified School District, that fees should be set at a rate no higher than what local lawyers charge.

The district is located in a sparsely populated 522 square-mile mountainous area of Kern County, west of the Mojave Desert.  Plaintiff Charis Quatro, whose son suffers from a birth defect affecting the spine—resulting in his needing to use a walker and wear foot braces—engaged the services, on a contingency-fee basis, of attorney Andréa Marcus, whose office is in the City of Santa Barbara, to pursue remedies based on a refusal by the district to provide tutoring to the boy while recuperating from surgery.

District Court Judge Donald W. Molloy of the Eastern District of California set the fees for Marcus at $450 an hour, and the appeals court, in a memorandum opinion found that to be “a reasonable hourly rate” for her.  The panel was comprised of Circuit Judges Raymond C. Fisher and Milan D. Smith Jr., joined by District Court Judge Elaine E. Bucklo of the Northern District of Illinois, sitting by designation.

Marcus had sought $475 for her own work in connection with the administrative proceeding and her services in seeking an order for fees in the District Court, and less for hours put in by associates who devoted time to the case. Molloy found that that Marcus, in light of her experience in special education matters, was entitled to $450 an hour.  The judge multiplied the rate by the number of hours, but made some downward adjustments.

Responding to the district’s argument that it should not have to pay at big-city rates, and that fees should be set at $300 per hour or less, the opinion declares:  “The district court did not abuse its discretion in calculating the lodestar using rates from outside the local market.”  The opinion points to the Ninth Circuit’s 1997 decision in Barjon v. Dalton—which did not depart from the “local forum rule,” under which fees are ordered in accordance with the prevailing rates in the community—but it differentiates the factual circumstances.

The court in Barjon rejected the prevailing plaintiffs’ contention that their San Francisco attorney should be paid in accordance with the prevalent San Francisco rate—then $250 an hour—rather than the rate prevailing in the forum, Sacramento, which was $200 an hour. In that case, the plaintiffs did not show unavailability of local counsel capable of handling employment discrimination cases.  “Without evidence that Sacramento rates preclude the attraction of competent counsel, their argument remains too theoretical to warrant departure from the local forum rule…,” the 1997 opinion says.

By contrast, Monday’s opinion sets forth that Quatro provided her own declaration and that of two other persons, each a parent of a special needs pupil, to the effect that local counsel was unavailable to serve them.  It says Quatro presented “reports describing the limited access to legal representation in rural California and declarations describing the lack of local attorneys who were willing and qualified to represent clients in special education matters.”

In her trial brief, Marcus provided this factual summary: “The Defendant abandoned Plaintiff for 21-weeks (out of a 35-week school year), while he was recovering from multiple surgeries—dis-enrolling him from school, instead of providing home instruction while he recuperated from surgery, as is required by law.  This is the core of the dispute, as this child is bright and capable, yet lost most of a school year when the Defendant shrugged its legal duty to R.Q., a child with grave disabilities.  At the time of the underlying hearing, R.Q. was five years old, and had already undergone multiple complicated and painful surgeries in his short life.”  Following a four-day hearing, an administrative law judge awarded the boy 105 hours of instruction and ordered that Quatro be reimbursed for her transportation costs.

In an amicus curiae brief filed in the Ninth Circuit, the Council of Parent Attorneys and Advocates. Inc. said: “Here, Appellant Tehachapi Unified School District…seeks an outcome with potentially far-reaching and dangerous consequences for students with disabilities.  It seeks to slash the court-awarded hourly rate of $450 for an experienced special education attorney, by as much as two-thirds because it claims that $150-300 is the prevailing rate in Tehachapi without any proof that there was another equally qualified attorney in that underserved area willing to serve R.P. on a contingent basis….

“Essentially, the District is asking this Court to hold that, even when families cannot find local counsel willing and able to capably represent students in special education matters, attorneys who leave their own (more remunerative) markets to provide much needed legal support in underrepresented communities should never receive awards at their standard hourly rate.  Such a precedent would require attorneys working outside their standard markets to take on matters in underrepresented markets at a rate dramatically lower than they could command in their own markets, where attorneys are already in high demand.  Such a precedent would have a chilling effect on the willingness of qualified special education attorneys to take cases on in underrepresented markets.”

Both that brief and the one filed in the Ninth Circuit by Quatro make reference to a discovery response from the school district listing 35 attorneys it deemed qualified to handle special-needs cases; only four were located in Kern County, one having only four years’ experience in law practice, two with three years’ experience, and one who had resigned from the State Bar with charges pending.

Marcus asserted in her brief that the school district’s appeal “is pursued merely for the purpose of delay which has the real effect of discouraging other civil rights attorneys from practicing special education law on a pure contingency basis, further prejudicing families like the Quatro’s who would not have meaningful access to the judicial system otherwise.”

The case is Quatro v. Tehachapi Unified School District, 17-16210.  In a memorandum decision filed yesterday in Wright v. Tehachapi Unified School District, 17-16970, the same panel affirmed an award of attorney fees to parents who prevailed in an administrative action under the Individuals with Disabilities Education Act.  There, however, the school district acknowledged that local counsel was not available.  Marcus was also the attorney in that case.

Magistrate Judge Jennifer L. Thurston of the Eastern District of California made an award of $99,330.00 for services in the administrative proceeding and $39,087.50 for work done in the District Court.  She based the award on prevailing rates in the Central District.

Fifth Circuit ‘Stunned’ Over Fee Request in FDCPA Case

November 19, 2018

A recent Texas Lawyer story by John Council, “5th Circuit ‘Stunned’ Over $130,000 Fee Request by 2 Texas Lawyers in $1,000 FDCPA Case, Awards Them Zero,” reports that the U.S. Court of Appeals for the Fifth Circuit has slammed two Texas lawyers and their client in a recent decision, writing that it was “stunned” by the trio’s $130,000 attorney fee request in connection with a $1,000 Fair Debt Collection Practices Act award concerning a $107.29 unpaid water bill.

According to the decision in Davis v. Credit Bureau of the South, Crystal Davis filed the suit in an Eastern District of Texas federal court, alleging that the debt collection agency had violated the federal debt collection law, with its fee-shifting provision, in contacting her over the water bill because it has misrepresented itself as a “credit bureau,” which it isn’t.

A U.S. magistrate judge later ruled in Davis’ favor, awarding her $1,000 in statutory damages after finding the defendant had violated federal law.  Davis later filed an opposed motion requesting $130,410 in attorney fees based on her status as a prevailing party in the litigation.  But the magistrate judge ruled against Davis and awarded her lawyers nothing, explaining that he was “stunned” by the request, noting there were duplicative and excessive fees charged by the attorneys, Jonathon Raburn and Dennis McCarty.  The magistrate judge also noted that the case was simple and on point, and the nearly 300 hours spent on the case at an hourly rate of $450 demanded by the lawyers was “excessive by orders of magnitude.”

Davis later appealed the attorney fees request to the Fifth Circuit, where it was met by equal disbelief.  “As an initial matter, we join the magistrate judge’s stunned reaction to Davis’ request for $130,000 in attorneys’ fees and concur that the record reflects neither the quality of legal work necessary for the requested hourly billing rate ($450.00 per hour), nor the quantity of work to support the 156.55 hours claimed by Jonathon Raburn and the 133.25 hours claimed by Dennis McCarty,” the Fifth Circuit wrote in a per curiam opinion.

“The pleadings filed by McCarty and Raburn, including the brief on appeal, are replete with grammatical errors, formatting issues, and improper citations, and is certainly not the caliber of work warranting such an extraordinary hourly rate,” the decision noted.  While the FDCPA gives courts little option but to award attorney fees to prevailing parties unless there are extraordinary circumstances, the Fifth Circuit agreed with the lower court that the lawyers should be awarded nothing.  The decision notes a U.S. District Court judge’s finding of bad-faith conduct on the part of Davis and her attorneys, in which he concluded that it appeared that the cause of action “was created by counsel for the purpose of generating, in counsel’s own words, an ‘incredibly high’ fee request.”

“The record suggests that McCarty and Raburn—in an attempt to receive an unwarranted and inflated award—impermissibly treated the $130,410 fee request as an ‘opening bid’ in an attempt to negotiate the attorney’s fee award,” according to the decision.  “This simply cannot be tolerated.  Bottom line: the FDCPA does not support avaricious efforts of attorneys seeking a windfall.  Because grossly excessive attorney’s fee requests directly contravene the purpose of the FDCPA, these tactics must be deterred,” the court concluded in its decision.

In a statement, McCarty and Raburn said they were disappointed in the ruling but respect the Fifth Circuit’s decision.  “We know these judges would not be in the position they are without outstanding legal careers.  However, we want to be clear that we did not file this lawsuit in bad faith.  It was over a debt collector using an illegal name that is prohibited by the FDCPA,” the lawyers said.  “We feel that it is a sad day for the consumer as this ruling may encourage debt collectors to break the law without any fear of consequence other than a statutory fine,” the statement notes.  “Because the majority of FDCPA cases do not carry damages, we feel that attorneys will be hesitant to take on these cases, which leaves the consumer exposed to bad debt collection practices.”

Seventh Circuit: EEOC Should Not Be Sanction with Attorney Fees in CVS Win

November 15, 2018

A recent Law 360 story by Emma Cueto, “7th Circ. Again Rejects CVS’ Atty Fee Win Against EEOC,” reports that a Seventh Circuit panel has preserved its rejection of an attorneys' fee award in favor of CVS Pharmacy Inc. against the U.S. Equal Employment Opportunity Commission in a suit over the company’s severance agreements, saying that using a novel legal theory that was ultimately shot down did not make the suit frivolous.

Despite arguments that the decision would extend fee fights, the panel reiterated that the district court made an error in awarding $307,000 in attorneys' fees to CVS.  The panel said that even though the EEOC did not prevail in its argument that the regulatory language allowed it to file the suit without going through an initial conciliation process, the commission has a “legal hook on which to hang its case,” and that it should not be sanctioned for bringing the suit.

“[The district court] reasoned that the EEOC should have realized even before filing the suit that EEOC regulations required initial conciliation before it could proceed with an enforcement action,” the decision said.  “But that was not at all clear at the time the EEOC acted.”

The dispute between CVS and the EEOC stems from an employee agreement that the agency claimed was meant to confuse employees and to have a chilling effect on employees' rights to lodge discrimination claims with the agency.  The agency sued over the agreement in February 2014.  The district court granted CVS summary judgment in September 2014, finding that the EEOC hadn't met its obligations to conciliate the dispute before suing and therefore wasn't authorized to bring the action in court.  Another Seventh Circuit panel affirmed the dismissal in 2015, and a full Seventh Circuit declined to hear the case.

On remand, the trial court awarded CVS $307,902 in attorneys' fees, finding that the EEOC should have known before suing that its regulations required initial conciliation before it could proceed with an enforcement action.  In June, a new Seventh Circuit panel threw out the attorneys' fees, saying it took more than a loss on the merits to justify awarding the fees and that the district court's decision "impermissibly rested on hindsight,” a phrase it used again in its decision.

The panel was asked to revisit the case in July, when attorneys with Jones Day argued that the court used an improper standard and that the decision would unleash a wave of prolonged fee fights.  The EEOC argued in favor of the panel’s original decision, saying it was in keeping with past case law.  In its amended decision, the panel ruled that it had been correct to use a more permissive standard instead of reviewing the district court ruling only for an abuse of discretion, explaining that the lower court had made a legal error, meaning the abuse of discretion standard was not the correct one to use.

It then said that the question as to whether the EEOC should have to pay attorneys' fees rested on whether its legal theory — which relied on a novel interpretation of the unique wording in a subsection of Title VII of the Civil Rights Act of 1964 — was “far enough afield” as to be unreasonable.  The panel noted that there was a difference in the wording of the subsection the EEOC highlighted and no clear precedent that shut down its theory.  In addition, it added, CVS by its own admission spent more than 800 hours defending against the suit and specifically told the district court the questions required a deep understanding of Title VII.

The case is the U.S. Equal Employment Opportunity Commission v. CVS Pharmacy Inc., case number 17-1828, in the U.S. Court of Appeals for the Seventh Circuit.

Law 360 Covers NALFA CLE Program

October 25, 2018

A recent Law 360 story by Bonnie Eslinger, “Excessive Attys’ Fee Bids Can Backfire, Judges Say,” reported on a NALFA CLE program hosted today, “View From the Bench: Awarding Attorney Fees in...

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