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Category: Statutory Fees

Minnesota Supreme Court Rules Attorney Fees are Capped by Policy Limit

November 14, 2017

A recent Claims Journal article by Steven Plitt, “Minnesota Supreme Court Rules that Statutory Attorney’s Fees are Capped by the Policy Limit,” writes about the recent Minnesota Supreme Court decision in Wilbur v. State Farm Mutual Automobile Insurance Co.  This article was posted with permission.  The article reads:

The question of whether attorney’s fees awarded under Minnesota’s insurance unreasonable denial statute could exceed the policy limits of the policy was recently addressed by the Minnesota Supreme Court in Wilbur v. State Farm Mutual Automobile Insurance Co., 892 NW2d 521 (2017).  Under Minnesota statute, Minn. Stat. §604.18 (2016) courts were authorized to award “taxable costs” when an insurance company denies insurance benefits without a reasonable basis.  The issue of whether the taxable cost award was kept by the insurance policy limit recently came before the Minnesota Supreme Court.  The court in Wilbur concluded that §604.18 unambiguously capped “proceeds awarded” at the amount recoverable under the insurance policy and were therefore capped by the policy limit.

The issue turned on whether the phrase “proceeds awarded” referenced in §604.18 referred to an amount capped by the insurance policy limit or not.  The insured claimant argued that no policy limit cap was contemplated by the statute.  The court began its analysis of §604.18 by noting that the statute provided a remedy for an insured when an insurer denied a first party claim without a reasonable basis.  Under the statute, courts in Minnesota were authorized to award taxable costs to an insured who could demonstrate that there was an absence of a reasonable basis for denying the benefits together with proof that the insured knew of the lack of a reasonable basis or active and reckless disregard.  If the insured was able to establish that proof, the court was authorized to award under the statute as taxable costs an amount equal to one-half of the proceeds awarded on coverage that were in excess of the amount offered by the insurer at least ten days before the trial began or $250,000, whichever was less.  For three reasons, the Minnesota Supreme Court held that §604.18 referred to an amount that was capped by the insurance policy limit.

First, the court noted that the statute’s use of the word “proceeds” to refer to insurance policies in two other subdivisions of the statute demonstrated that the phrase “proceeds awarded” was constrained by the defined limits of the insurance policy.  Second, the court noted that subdivision 3(a)(1) of the statute contemplated a capped settlement offer, which indicated to the court that the phrase “proceeds awarded” was capped by the insurance policy limit.  The connection between the phrase “proceeds awarded” and the “amount offered by an insurer” before trial was telling to the court.  Insurance companies’ settlement offers before trial were almost always capped by the insurance policy’s limit according to the observation of the Minnesota Supreme Court.

Third, the court found that the timing of the §604.18 proceeding suggested to the court that the phrase “proceeds awarded” were capped by the insurance policy limit.  Under the statute, subdivision 4(b) states “an award of taxable costs under this section shall be determined by the court in a proceeding subsequent to any determination by a factfinder of the amount an insured is entitled to under the insurance policy . . .” Minn. Stat. §604.18, subdivision 4(b).  Thus, proceeds could be awarded under §604.18 only “subsequent to” a jury’s determination of the benefits to be paid “under the insurance policy.”  The benefits paid under the insurance policy were capped by the insurance policy’s limits.  This provided a link in establishing that “taxable costs” awarded under §604.18 could not exceed the policy’s limit.

Mr Plitt is the current author of Couch On Insurance 3d and is a nationally recognized insurance expert.  See www.insuranceexpertplitt.com for more information.

No Fee Enhancement in Prolonged Med Mal Case

November 10, 2017

A recent New York Law Journal story by Jason Grant, “Morelli Denied Enhanced Fee in Seven-Year Long Med Mal Case” reports that the Manhattan-based firm, led by famed civil litigator Benedict Morelli, was sufficiently compensated when it was paid $376,198.50 for 970 hours of legal services, in accordance with Judiciary Law § 474-a(2), which sets out a schedule for contingency fees earned by lawyers in medical, dental or podiatric malpractice actions.

The Morelli Law Firm is not due an increased contingency fee award based on alleged “extraordinary circumstances” in representing a client in a medical malpractice lawsuit for 7½ years, a state appeals court has ruled.  A unanimous Appellate Division, Second Department, panel ruled that, while the statute provides for higher fees based on extraordinary circumstances, Morelli had not made a “threshold showing” that the money collected by his firm was inadequate.

“The law firm expended approximately 970 hours, that included 9 days of trial, over the course of the 7½ years it represented the plaintiffs in this medical malpractice action,” wrote Justices John Leventhal, Betsy Barros, Valerie Brathwaite Nelson and Linda Christopher.  “The record is devoid of any evidence that the amount of time spent on the representation of the plaintiffs resulted in an exceptionally low hourly rate of compensation, or that it caused the law firm any financial detriment.”

“Inasmuch as the law firm failed to make the threshold showing that compensation in this case was inadequate, it is not necessary to reach the issue of whether extraordinary circumstances existed,” the panel added in a terse opinion issued Nov. 1, in Siu Kiu Lam v. Nelly Loo, et al.; Morelli Law Firm, PLLC, nonparty-appellant, 20028/09.  The panel’s opinion affirmed the June 2016 decision of Kings County Supreme Court Justice Bert Bunyan, who had denied the Morelli firm’s motion under Judiciary Law § 474-a for an increased contingency fee award.

Pfizer Settles Fee Dispute in $785M FCA Deal

May 10, 2017

A recent the Law 360 story by Brian Amaral, “Pfizer Settles Fee Dispute in $785M FCA Deal,” reports that Pfizer Inc. and a relator who blew the whistle on false claims have agreed to resolve their dispute over how much in attorneys’ fees the company should pay after its $785 million settlement.

Details of the arrangement between the company and Dr. William St. John LaCorte in Massachusetts federal court were not made public; on Tuesday, Senior U.S. District Judge Douglas Woodlock signed a stipulation dismissing LaCorte’s motion for attorneys’ fees because of a settlement.

LaCorte had asked for $7.7 million for his attorneys at the Sakla Law Firm for thousands of hours of work on the case, which alleged that Pfizer unit Wyeth had overbilled Medicaid for the heartburn drug Protonix.  Pfizer said previously that LaCorte’s lawyers were not intimately involved in the development of the suit, in which the government intervened, and that LaCorte’s attorneys therefore didn’t need $7.7 million.  The fees are called statutory fees, paid out by Pfizer to a successful qui tam plaintiff as part of the False Claims Act.

The suit alleged that Wyeth, in a scheme that ended three years before Pfizer acquired it, misrepresented to the government how much it gave in discounts to hospitals to buy Protonix.  Wyeth had to tell the government its “best prices” and would pay rebates to state Medicaid programs for the difference so that the program for poor and disabled people would get the best price possible.  Wyeth avoided paying hundreds of millions of dollars between 2001 and 2006 by misreporting the discounts it gave hospitals, the government said.

The government stepped into the case and settled it.  Lauren Kieff, a former hospital sales representative for AstraZeneca Pharmaceuticals LP, and LaCorte, a frequent qui tam plaintiff who practices medicine in New Orleans, split $100 million in service awards for their help blowing the whistle.

That set the table for another fee dispute, separate from the one that was settled Tuesday.  LaCorte and his attorneys agreed to split their service awards, with 62 percent going to LaCorte and 38 percent going to his attorneys.  But the three firms that represented him are still fighting it out over how to split the 38 percent, with two of them — LaCorte's former lawyers at Vezina & Gattuso LLC and Boone & Stone — arguing that the fees should be split evenly, and a third, the Sakla group, saying that the other two firms didn’t do enough to justify an even split.

The most recent filings show that the firms are asking Judge Woodlock for summary judgment on that dispute.  The statutory fees from Pfizer, at issue in Tuesday's order, were for work that the Sakla firm had done. 

The case is U.S. ex rel. LaCorte et al. v. Wyeth Inc., case numbers 1:03-cv-12366 and 1:06-cv-11724, in the U.S. District Court for the District of Massachusetts.