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Category: Fee Jurisprudence

Seventh Circuit Upholds Attorney Fee Win in FMLA Action

August 25, 2022

A recent Law 360 story by Caleb Drickey, “7th Circ. Upholds Teacher’s Win In FMLA Suit” reports that the Seventh Circuit upheld a pair of lower courts' decisions to declare that a Wisconsin governmental entity violated the Family and Medical Leave Act by de facto demoting a concussed teacher, and to grant her attorney fees for her bench trial victory.  In a published opinion, a three-judge panel ruled that the lower court was within its authority to issue a damages-free declaration that the Cooperative Educational Service Agency 5 violated the FMLA by taking away teacher Sarah Simon's work responsibilities after she returned from medical leave. The panel further held that the law mandated the payment of attorney fees in the case of a judgment in favor of workers.

"If this case involved an accomplished neurosurgeon returning from leave to a position that required only tracking the hospital's inventory, we doubt that anyone would question whether the surgeon suffered prejudice," U.S. Circuit Judge Thomas Kirsch said on behalf of the panel. "Simon … suffered harm for which the FMLA provides a remedy."

The opinion stems from the Cooperative's retraction of Simon's job responsibilities after she returned to work in the wake of a workplace concussion.  Although the Cooperative, which provides staff and equipment to 35 school districts in the state, maintained Simon's previous salary, a district court found that Simon's effective demotion to a support staffer prejudiced her, and it granted her a declaratory judgment and roughly $60,000 in attorney fees after a bench trial.

The panel ruled that a court-issued declaration of FMLA violations absent any monetary damages or injunctions to re-hire Simon, who has since taken another job, was within scope of the relief promised by the law.  The FMLA authorized courts to dispense "equitable relief," an undefined term that courts have interpreted to encompass binding orders to hire or promote workers.

The authority to grant declaratory judgments, the panel therefore concluded, could reasonably be inferred.  "It would make little sense for the FMLA to permit courts to grant these heavy-handed remedies yet bar them from using a lighter touch through entry of a declaratory judgment," the panel held.

The panel also affirmed the lower court's finding that the Cooperative prejudiced and harmed Simon even without suffering any cuts to her pay or benefits.  Citing the U.S. Supreme Court's 2002 decision in Ragsdale v. Wolverine World Wide Inc. , the panel held that the demotion of workers returning from medical leave to positions for which they were overly qualified caused injury.

The Commission's remission of Simon's ability to plan lessons and lead classes, the panel therefore concluded, unfairly created a gap in her resume, prejudiced her, and put her employer on the hook for remedies including declaratory judgments and the payment of attorney fees.

The panel affirmed the lower court's separate order of a $59,773.62 attorney fee bill, too.  That fee bill was not an improper imposition of punitive damages, the panel ruled, but was required by the text of the FMLA in the case of a judgment in favor of workers.  "The district judge merely applied the FMLA as written, which expressly requires attorney's fees after a judgment entered in the plaintiff's favor," the panel held.

Article: Judge Posner Called It a ‘Racket’

August 3, 2022

A recent article, “Judge Posner Called It a ‘Racket’” by Gregory Markel, Daphe Morduchowitz, and Sarah Fedner reports on mootness fees in federal merger litigation.  This article was posted with permission.  The article reads:

In a recent decision from the United States District Court for the Southern District of New York, a federal Judge pushed back against the common but abusive practice of “mootness fee” payoffs in public M&A deals. In the February 2022 opinion, Judge Oetken denied a $250,000 attorneys’ fee demand by plaintiff’s counsel in an investor challenge to Microsoft’s $19.7 billion acquisition of Nuance Communications. The decision is by a court which took the opportunity to both consider and reject a widespread phenomenon that many call a meritless shakedown or transaction tax on public M&A deals. This decision is significant in that it is fairly rare for mootness fee payments to be subject to court scrutiny despite the increasingly common voluntary dismissals by plaintiffs in this type of case. For more information about the history of mootness fee and disclosure only settlements and the need for reform click here. 

The Delaware Court of Chancery’s 2016 decision in In re Trulia, Inc. Stockholder Litigation, which criticized so called “disclosure only settlements” paid to plaintiffs’ counsel in exchange for supplemental disclosures that do not provide any material additional information, led to a steep decline in filings of merger litigation in the Delaware Court of Chancery.[1] Following the Trulia decision,  there was a sharp increase in merger challenges filed in  federal court. A number of plaintiffs’ firms filed cases in federal court very similar to the ones criticized in Trulia with the apparently sole purpose of obtaining attorneys’ fees in exchange for voluntary dismissals and non-material supplemental disclosures. These voluntary dismissal cases, because they are dismissed prior to class certification, generally are not subject to court approval.

Background

Beginning in 2009, filings of class action claims challenging mergers increased substantially. As of 2015, the year before the Trulia decision, roughly 95% of merger transactions valued at more than $100 million were challenged.[2] 60% of these challenges were filed in Delaware courts, and more often than not in Chancery Court, while only 19% were filed in federal courts in other states.[3]

These cases were typically resolved in early settlements with corrective disclosures and broad releases of future class claims for defendants that required court approval. Plaintiffs’ attorneys’ fee requests were often approved by the courts under the common law, corporate benefit doctrine. The disclosures supposedly provided shareholders with information material to making an informed investment decision. In reality, however, the added disclosure they provided  was not meaningful and most often a makeweight to justify plaintiffs’ counsels’ attorneys’ fees. In many cases, the corrective disclosures were nearly pointless and did not affect many shareholder votes. Thus, many class actions filed in connection with M&A deals became a vehicle for plaintiffs’ firms to obtain attorneys’ fees with little, if any, meaningful benefit for shareholders. Since class actions were created to benefit a class of injured claimants, there was a fairly obvious disconnect between the theoretical purpose and the reality of the motive behind many merger cases. Judge Posner of the Seventh Circuit referred to this practice by plaintiffs as “no better than a racket.” [4]

The Trulia Decision

The Delaware Chancery’s Court decision in Trulia sought to put an end to this practice by limiting disclosure-only settlements to those that resulted in disclosures that added significant value to class members and provided releases of sensible scope. The Trulia court refused to approve a proposed settlement, which included supplemental disclosures and attorneys’ fees in exchange for a broad release, finding that the proposed disclosure was not “plainly material” as defined under Delaware law.[5] The Trulia court cautioned that, unless there was “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available,”[6] proposed disclosure-only settlements and accompanying attorney’s fees would not be approved going forward by the Chancery Court.[7]

Federal Merger Litigation Post-Trulia

Trulia came as the culmination of several then recent Delaware Chancery Court decisions and it made clear there was a new regime in Delaware Chancery Court for settlements of merger cases. However, Trulia did not apply in other forums. As a result, certain plaintiffs’ firms took advantage of this by challenging mergers in alternative jurisdictions. In 2016, the rate of merger litigation plummeted in Delaware state court by almost 50% and continued to decrease thereafter.[8] This trend was accompanied by an immediate uptick in merger litigation in federal courts.[9] As of 2018, only 5% of completed deals were challenged in Delaware Chancery Court, while 92% were challenged in federal court.[10]

Not only did the rate of filings increase in federal court, but the number of class action cases resolved through voluntary dismissals before a class was certified skyrocketed. Starting in 2016, many merger case filings were followed by voluntary dismissals and a payment of attorneys’ fees to plaintiffs. By 2018, 92% of the federal merger challenges resulted in  voluntary dismissals and payment of mootness fees.[11]

These mootness fees cases generally do not require court approval as the cases are generally dismissed prior to class certification, and therefore without a requirement of court approval, and the fees are infrequently challenged by defendants who often elect to pay the mootness fee demands, even in  the often frivolous cases, in order to avoid delays in completing merger transactions and the costs of  fully litigating  a case on the merits.

Serion v. Nuance Communications, Inc.

In the recent Nuance decision, Judge Oetken denied plaintiff’s counsel’s fee petition, finding that  plaintiff’s counsel had not shown a “substantial benefit” to shareholders from the supplemental disclosures finding that the additional disclosure which was provided of  underlying metrics for data already disclosed did not confer a substantial benefit.” The holding is notable because the supplemental disclosures demanded by plaintiffs are typical of the truly marginal information added in connection with most cases involving mootness fee dismissals.

Conclusion

The payment of plaintiff's baseless fee demands, which individually are not large but in total are much more than trivial, to end frivolous deal challenges continues despite the Trulia decision that criticized a nearly identical practice. The cost of this frivolous deal tax is borne not just by the companies who pay them but also are passed along to consumers and other companies who do business with the payor company and the practice provides little or no benefit to shareholders in most instances. The Nuance ruling is an exception to the more common result of no court review of mootness fee settlements.  Plaintiffs, because of the procedural posture, were required to petition for court approval of the fee. Because mootness fees are not typically reviewed by the courts,  there is a strong need for legislative reform to deal with this practice. In the meantime, the “racket”  in Judge Posner’s terms likely will continue.

Gregory Markel and Daphne Morduchowitz are partners and Sarah Fedner is a senior associate at Seyfarth LLP in New York.  Partners Giovanna Ferrari, Andrew Escobar and associate Meryl Hulteng also contributed to this article.

NALFA Releases 2021 Litigation Hourly Rate Survey & Report

July 19, 2022

Every year, NALFA conducts an hourly rate survey of civil litigation in the U.S.   Today, NALFA released the results from its 2021 hourly rate survey.  The survey results, published in The 2021 Litigation Hourly Rate Survey & Report, shows billing rate data on the very factors that correlate directly to hourly rates in litigation:

City / Geography
Years of Litigation Experience / Seniority
Position / Title
Practice Area / Complexity of Case
Law Firm / Law Office Size

This empirical survey and report provides micro and macro data of current hourly rate ranges for both defense and plaintiffs’ litigators, at various experience levels, from large law firms to solo shops, in regular and complex litigation, and in the nation’s largest markets.  This data-intensive survey contains hundreds of data sets and thousands of data points covering all relevant billing rate categories and variables.  This is the nation’s largest and most comprehensive survey or study on hourly billing rates in litigation.

This is the second year NALFA has conducted this survey on billing rates.  The 2021 Litigation Hourly Rate Survey & Report contains new cities, additional categories, and more accurate variables.  These updated features allow us to capture new and more precise billing rate data.  Through our propriety email database, NALFA surveyed thousands of litigators from across the U.S.  Over 8,400 qualified litigators fully participated in this hourly rate survey.  This data-rich survey was designed to aid litigators in proving their lodestar rates in court and comparing their rates to their litigation peers.

The 2021 Litigation Hourly Rate Survey & Report is now available for purchase.  For more on this survey, email NALFA Executive Director Terry Jesse at terry@thenalfa.org or call us at (312) 907-7275.

Should Judges Police The Gender Hourly Rate Disparity?

June 1, 2022

A recent Law 360 story by Andrew Stricker, “Should Judges Police The Legal Industry Pay Gap?” reports that as the pay gap between male and female attorneys persists despite industry pledges to do better, the power of judges to potentially bridge the divide is coming into sharper focus.  Following an unusual decision by a federal magistrate, some members of the Philadelphia bar have endorsed the idea that other judges should follow suit and help police gender pay inequities, or at least call them out from the bench.

U.S. Magistrate Judge Timothy R. Rice recently issued the order critiquing elements of a notable employment firm's request and awards that put attorney "status" over performance.  "I don't think it's always my role, but in this instance, I felt I had to set the rates based on the performance of the attorneys who really tried the case, and not a rate that was maybe based more on age or seniority," Judge Rice told Law360 Pulse.

In April, Judge Rice was overseeing the last stage of an age discrimination case brought by Alison Ray, a former sales director at AT&T Mobility Services who was let go at age 49 after more than two decades at the company.  Following a five-day trial, Ray last year secured a $2.3 million award after a jury determined that a company restructuring plan had targeted older employees as "surplus."

In February, lawyers at the firm representing Ray, Console Mattiacci Law LLC, asked for $847,945 in "shifted" fees from AT&T.  That lodestar calculation, based on a 40% contingency agreement, was justified by the complexity of the plaintiff's case, Ray's counsel argued, as well as a "complete and total victory" on her claims that AT&T had willfully violated federal age discrimination law.  The fee petition included nearly 1,570 hours from partners Susan Saint-Antoine and Laura C. Mattiacci, a highly experienced lead trial counsel, and associate Daniel S. Orlow. Saint-Antoine and Mattiacci, who have practiced since 1989 and 2002, respectively, both listed their "usual and customary" rate of $730 an hour. Orlow, who has practiced since 2011, was at $320 an hour.

The petition also included 37 hours contributed by firm principal Stephen G. Console. Console, a nationally recognized employment law expert, charged $900 an hour for consulting on strategy decisions and filings, as well as settlement demands and other key elements of the case.  In an order granting a handful of reductions totaling about $83,000, Judge Rice said Saint-Antoine and Mattiacci should be entitled to the same per-hour rate as Console, who has been practicing for three decades.

"Historically, women in law earn less than their male counterparts, a discrepancy that may reflect hidden bias," he said, citing a 2020 report that found widening pay discrepancies at large law firms.  Referring to a fee schedule used widely in the Third Circuit to determine market rates for Philadelphia-area lawyers, Judge Rice said Saint-Antoine and Mattiacci should be in line for a "premium" over those numbers that put them in line with Console.  Even if the fee schedule "serves as a useful guide on setting hourly rates, its reference to experience should not serve as a cap that precludes exceptionally talented trial lawyers from receiving fair compensation simply because of age or gender," Judge Rice said.

The legal industry pay gap, and its role in women reaching firm leadership and a lack of diversity in many areas of the profession, has been under intense scrutiny for years, but without much in the way of real progress.  In the 2020 report cited by Judge Rice, legal recruiting firm Major Lindsey & Africa found that partner compensation soared between 2010 and 2018.  But in that same period, the pay disparity between male and female equity partners widened significantly, from 24% to 35%.

Nancy Ezold, a veteran Philadelphia employment lawyer, said it was "absolutely" appropriate for Judge Rice to consider rate disparities for lawyers in his court, even though AT&T counsel hadn't raised the issue in its fee-award opposition.  "I don't know of anything in the law that says you have to consider what a law firm pays people," Ezold said.  "But Judge Rice looks at the bigger picture and asks, 'Am I going to do something to perpetuate an inequality and authorize a fee for a male partner over two female partners who really handled this case?'"

Ezold, who once sued her own former law firm in the late 1980s for denying her a partnership based on her gender, argued that fee petitions often provide a substantive overview of who did what work over the history of a litigation.  Depending on the nature of the case, they can also be an opportunity for judges to compare requested rates across different firms and legal teams comprising different gender and experience makeups.

"Here the judge couldn't overlook a difference between male and female in this case because it related directly to the responsibility to decide what would be allowed for each of these attorneys," Ezold said.  "Judges speak out on a lot of things, and I don't see why this should be any different."  Judge Rice served as an assistant U.S. attorney for the Eastern District of Pennsylvania before being appointed as a federal magistrate in 2005.  He retired in April, just after issuing the Ray opinion.

In an interview with Law360 Pulse, Judge Rice said the timing was coincidental, noting that the issue of male-female pay disparities had never before been "so squarely presented" to him in a fee petition.  "From the [fee] affidavits I see, and from all I know about law firm pay structures, I do think the pay gap is huge, and there are just so many variables out there that have cut against giving women equal pay," such as lack of trial experience and other opportunities to advance, he said.

"When I see lawyers perform in an exemplary fashion, it's appropriate they be paid at higher rates commensurate with their skills, not just based on the years they've practiced," Judge Rice added.  Alice Ballard, another veteran Philadelphia employment lawyer who provided a fee affidavit in the Ray case, said Judge Rice's prior time as a trial lawyer was evident in the opinion, including in his positive assessment of the hours Console Mattiacci dedicated to mock trial runs and other "essential" advocacy preparation.

Judge Rice "really understands what it means to prepare for a trial like this, and everyone on my beat really appreciates that," she said.  But Ballard took issue with Judge Rice's ultimate reliance on what she described as an outdated fee schedule, rates that don't well reflect the special skills of trial work, Mattiacci's successful track record or the contingency fee model.

She also cautioned against reading the opinion as a critique of the hourly rate request for Console, whom she called a "lion" of the city's employment bar.  Regarding his reference to the legal industry's gender pay disparities,"it's great that he took the opportunity to bring it up, but I just don't think it has much to do with this specific case," Ballard said.

FTC’s ‘Holder Rule’ Doesn’t Bar Attorney Fee Award

May 31, 2022

A recent Metropolitan News story, “FTC’s ‘Holder Rule’ Doesn’t Bar Attorney Fee Award” reports that the Federal Trade Commission’s “Holder Rule”—under which an assignee of a consumer credit contract cannot be held liable for a breach by the seller for more than what the purchaser has paid—does not preclude the award of attorney fees in excess of that amount under California’s “lemon law,” the California Supreme Court held.

Justice Goodwin H. Liu authored the opinion which affirms a Jan. 29, 2021 decision by Div. Five of this district’s Court of Appeal. Div. Five, in an opinion by Presiding Justice Laurence D. Rubin, upheld a $169,602 award of attorney fees against TD Auto Finance, LLC, declaring that “the Holder Rule does not limit the attorney fees that a plaintiff may recover from a creditor-assignee.”  Yesterday’s opinion resolves a conflict among the courts of appeal.

Under a provision of the Code of Federal Regulations, a consumer credit contract must include this notice: “Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.”

The contract that Tania Pulliam signed when she purchased a used Nissan from HNL Automotive Inc. in Beverly Hills contained that language.  Dissatisfied with the vehicle she purchased, Pulliam sued HNL and the assignee of the contract, TD Auto Finance, under the Song-Beverly Consumer Warranty Act (the “lemon law”) and was awarded $21,957.25 in damages.  TD insisted that the award against it of attorney fees, under the act’s fee-shifting provision, was improper because Pulliam was entitled to nothing in excess of what she had paid under the credit contract.

Disagreeing, Liu wrote: “We conclude that the Holder Rule does not limit the award of attorney’s fees where, as here, a buyer seeks fees from a holder under a state prevailing party statute.  The Holder Rule’s limitation extends only to ‘recovery hereunder.’  This caps fees only where a debtor asserts a claim for fees against a seller and the claim is extended to lie against a holder by virtue of the Holder Rule.  Where state law provides for recovery of fees from a holder, the Rule’s history and purpose as well as the Federal Trade Commission’s repeated commentary make clear that nothing in the Rule limits the application of that law.”

Before the FTC enacted its rule in 1975, Liu recited, a consumer was liable to the holder in due course of a note even for goods that were not delivered.  The rule places the holder in the shoes of the seller, subjecting it to all claims against, and defenses available to, the seller, limiting damages against the seller, and consequently against the assignee, he explained.  In formulating the rule, Liu said, “the FTC had damages in mind when limiting recovery under the Rule, and there is no indication that attorney’s fees were intended to be included within its scope.”

Attorney fees, in California, where awardable, are costs, not an element of damages, he noted.  The FTC, itself, has issued an advisory opinion declaring, “the Holder Rule does not limit recovery of attorneys’ fees and costs when state law authorizes awards against a holder,” Liu said.  The justice pointed out: “Were attorney’s fees part of the Holder Rule’s limit on recovery, the effective result for many, if not most, consumers would be the same as their options were under the holder in due course rule that the FTC sought to supplant.”