A recent New York Law Journal story, “Legal Fees Charged in Asbestos Cases Deemed Reasonable,” reports that a New York federal magistrate judge has recommended that an insurer pay $8.8 million in legal fees and potentially as much as $4 million in interest incurred by a company defending asbestos claims around the country.
In approving billing rates for 14 law firms, including Sidley Austin, DLA Piper and Nixon Peabody, Magistrate Judge James Francis in Danaher v. Travelers, said that a reasonable fee must be based on a reasonable hourly rate. “It need not be the lowest possible rate, but, rather must merely fall within a range of reasonableness.” Francis said.
The fees stem from a dispute over insurance coverage for claims against Chicago Pneumatic Tool Co. The company has been the defendant in silica and asbestos related products liability claims throughout the U.S., many brought by individuals claiming to have lung injuries due to exposure from air compressors made by Chicago Pneumatic. The company was acquired by Danaher, which then sold its stock in Chicago Pneumatic to engineering firm Atlas Copco.
In January 2010, Danaher sued Travelers, contending the Travelers entities were disputing their obligations to fully defend Danaher and pay defense costs. Shortly after, Travelers sued Atlas Copco, seeking a declaration that Travelers was not required to defend or indemnify it in the underlying actions.
After more than two years of discovery, Judge Paul Oetken granted partial summary judgment in 2012 to Atlas Copco and Danaher, ruling that Travelers had a duty to defend. Last year, Danaher and Atlas Copco sought reimbursement from Travelers of about $8.8 million for the defense of the underlying claims, plus pre-judgment interest.
But Travelers complained that certain rates were unreasonably high. It identified 14 firms, litigating in 11 states, whose hourly rates purportedly exceed Travelers’ approved rates for those specific firms or the rates charged by similar firms defending bodily injury claims in their legal communities. Travelers said the 14 firms were responsible for more than half of the total defense costs generated.
“Travelers appears to misunderstand the issue here,” Francis said. For example, Travelers challenged the hourly rates at five firms that defended Danaher or its predecessors in litigation in California, including DLA Piper, Sidley Austin, Nixon Peabody, Gordon & Rees, and Prindle, Amaro, Goetz, Hillyard, Barnes & Reinholtz. After citing standard rates from a billing survey, Francis said he found five firms charged rates “within the range of reasonableness for attorneys in California.”
Francis also did not find issues with the hourly rates of several other firms from across the U.S. The firm of Hardin, Kundla, McKeon & Poletto in New Jersey defended Chicago Pneumatic in New York, with Danaher paying its partner rates of $180 an hour and associate rates of $155. The judge noted “these rates are significantly lower than rates Travelers routinely pays attorneys and staff litigating in New York.”
Atlas Copco sought about $234,000 from Travelers that it incurred to defend the declaratory judgment action though September 2012, plus interest. Atlas cited the work of several Reed Smith insurance recovery attorneys with hourly rates ranging from $730 for partner Ann Kramer and $550 for partner Paul Breene to an associate billing at $340, in addition to support staff charges.
“The fact that counsel and client agree to reduce certain rates does not necessarily mean, as Travelers argues, that the original rates were outside the realm of reasonableness,” the judge said. “I will not accept Travelers’ invitation to decrease each timekeeper’s hourly rates to the lowest rate that timekeeper charged.”
In all, Francis recommended that Atlas Copco be awarded $234,490 in attorneys’ fees and costs, plus statutory pre-judgment interest. He also recommended that Danaher and Atlas Copco be reimbursed $8.8 million plus statutory pre-judgment interest, which the companies reported was about $4.1 million.