A recent Law 360 by George Woolston, “NJ Firm Keeps Victory In Retainer Fee Billing Challenge,” reports that the New Jersey state appeals court has backed Arbus Maybruch & Goode LLC's win in an ex-client's suit alleging it failed to disclose the incremental billing structure of its retainer fee, reasoning in a published decision that the firm's bimonthly invoices showed the terms were spelled out.  A three-judge panel affirmed a Monmouth County trial judge's decision to award summary judgment to the firm on breach of contract claims against Daniel Cohen and his company Cohen Capital Management over $142,000 in unpaid attorney fees and costs.

Cohen challenged the lower court's decision, claiming that the New Jersey firm's fee and retainer agreements were illegal and unethical under the state's rules of professional conduct for attorneys, according to the opinion. Cohen argued that attorneys are required to include language defining what unit of incremental billing the attorneys planned to use in retainer agreements, despite hourly rates and initial deposits being otherwise clearly defined.  The firm had been billing Cohen in increments of one-tenth of an hour, according to the opinion.

In its review of two retainer agreements between the firm and Cohen and the relevant rules and case law, the panel found "no rule as rigorous as the one defendants urge us to adopt" and reached the same conclusion as the trial court — the firm's legal fees were reasonably presented and agreed to by the parties.

"The fees awarded here were based upon a reasonable hourly rate, as determined by the trial judge, who made detailed findings regarding the type of matter involved, the rates charged by other New Jersey attorneys possessing similar experience in like matters, and regional considerations regarding the amount billed," Judge Maritza Berdote Byrne wrote for the panel.  The panel also found Cohen's argument that he was not aware of the firm's incremental billing was not supported by the record in the case.

"Further, based upon the parties' course of dealing, where defendants availed themselves of AMG's legal services for more than two years without objecting to any invoices or raising the incremental billing issue, defendants' claim suggests an improper motive," Judge Berdote Byrne wrote.

Arbus Maybruch & Goode represented Cohen and his company for more than two years, starting in 2018, in a negligent construction suit as well as in a separate lawsuit against Cohen by a law firm seeking unpaid attorney fees, according to the appellate opinion.  In July 2020, the firm ended its representation of Cohen and a month later filed its breach of contract suit over the unpaid attorney fees.  According to the opinion, the first time Cohen argued that the agreements did not permit billing on an "incremental" basis was in its answer to the lawsuit, filed in Oct. 2020.

A recent Reuters article by Alison Frankel, “Appeals Court Will Decide If Lawyers Can Evade Common Fund Fees in Consolidated Cases,” reports on common fund fees in class actions and MDLs.  The story reads:

Can a plaintiffs lawyer who was a member of the steering committee in consolidated multidistrict litigation get out of paying common benefit fees for cases resolved outside of the MDL’s confines?  That’s the question that will be argued before the 9th U.S. Circuit Court of Appeals in a case arising from consolidated litigation over C.R. Bard Inc’s blood clot filter implants.  The 9th Circuit punted last year in a similar case addressing common fees in the Roundup MDL because the fee ruling on appeal was not a final order.

But assuming there are no jurisdictional problems in the Bard case – as both parties assured the appeals court in a joint supplemental brief filed earlier this month – the 9th Circuit will be just the third federal appeals court in the last decade to offer answers to vexing questions about the scope of MDL judges’ power to order fees in cases they do not oversee.

Common benefit fees, as you know, are intended to compensate MDL lead counsel who expend significant time and money to conduct discovery and litigate legal issues that affect all of the cases in the MDL.  The fees address what might otherwise be the problem of “free-riding” by lawyers trying to capitalize on the efforts of MDL leaders without paying for it.

There’s little doubt that MDL judges have the authority to order plaintiffs lawyers whose cases are part of the consolidated proceeding to turn over a share of their clients’ settlements to MDL leadership.  (In the Bard MDL, common benefit fees have been held back in an escrow account before ever reaching plaintiffs and their lawyers.)  But what about cases outside of the MDL, such as state-court lawsuits, claims that were settled before they were formally filed or cases filed after the closure of the MDL?  Can MDL judges require plaintiffs lawyers to pay common benefit fees in those cases?

Federal circuits have reached different conclusions.  In 2014, the 8th Circuit ruled in In re Genetically Modified Rice Litigation that the MDL judge did not have authority to order fees from plaintiffs’ lawyers in state-court GMO suits.  But in 2015’s In re Avandia, the 3rd Circuit ruled that MDL courts are entitled to enforce their own orders, so an MDL judge had authority to order a plaintiff’s firm that participated in the MDL to pay a common benefit fee on all of its settled cases.

Two highly-regarded MDL judges also recently diverged on the scope of their authority. U.S. District Judge Jesse Furman of Manhattan ruled in 2020’s In re: General Motors that his MDL orders required lawyers who had litigated before him to pay common benefit fees from settlements of unfiled cases.  But U.S. District Judge Vince Chhabria of San Francisco held in 2021’s In re: Roundup that his power to order fees was limited to cases within the MDL.

Like I said, this is a vexing issue.  The twist in the Bard case is that plaintiffs lawyer Ben Martin of Martin Baughman was appointed to the MDL’s steering committee at the very beginning of the case in 2015.  He and the lawyers at his firm settled about 200 cases in the MDL.  But they also settled an additional 300 or so cases that were never formally filed, were brought in state court, or were filed after U.S. District Judge David Campbell of Phoenix closed the Bard MDL.

Martin’s counsel, Howard Bashman of the indispensable How Appealing blog, told the 9^th Circuit that Campbell erred when he ruled in 2022 that all of Martin’s cases – and not just those settled within the MDL -- were subject to a fee holdback.  Bashman argued that MDL judges simply do not have a right, under their inherent case management power or common fund doctrine, to order fees in cases that are not before them.

In a phone interview, Bashman acknowledged the free rider problem, but said that the 9th Circuit must distinguish between the legitimate goal of deterring abusive case-filing by plaintiffs lawyers who want to avoid common benefit fees and the limited power of MDL judges to accomplish that end.  “Those are two different questions,” Bashman said. (He emphasized that Martin and his firm were not trying to avoid common benefit fees by settling cases outside of the MDL.)

The other lawyers on the Bard MDL steering committee, who are represented by Shannon Clark of Gallagher & Kennedy, assert that MDL judges have inherent power to assess fees on cases outside of their court.  But the lawyers' primary argument is that Martin and his firm agreed to common benefit fee holdbacks for all of their cases when Martin accepted an MDL leadership role, based on a participation agreement attached to a Campbell case management order. (Martin has also received common benefit fees under those orders.)  Clark, who did not respond to my email query, argued that Martin waived his right to challenge the fees by failing to object to Campbell’s orders.

Bashman told the 9th Circuit that there is no evidence Martin signed the relevant participation agreement.  And even if he did, Bashman said, the MDL judge is not entitled to exceed his authority by imposing an impermissible condition on Martin’s ability to represent his clients.

In some ways, the stakes in the Bard appeal are small. Martin’s briefing does not say precisely how much money has been held back but says his clients’ 2% share amounts to less than $1 million.  The overall holdback is 10%, so this fight seems to involve between $5 and $10 million.  On the other hand, common benefit fees affect every MDL, and surely total hundreds of millions of dollars across all of the consolidated multidistrict cases being litigated in U.S. court.

Moreover, Bashman said, the 9th Circuit panel – 9th Circuit judges John Owens and Bridget Bade and Judge Miller Baker of the U.S. Court of International Trade – might not be the last word on the fee question, regardless of who wins.  “This does seem like the kind of issue the U.S. Supreme Court would be interested in,” he said.

A recent Law 360 by Elliot Weld, “Spanish IT Provider Asks Court to Confirm $14M Award,” reports that a spanish information technology provider Amadeus IT Group asked an Atlanta federal court to confirm an arbitration award it was granted by the International Chamber of Commerce against technology firm Ebix, saying the court should reject Ebix's arguments that the award improperly includes attorney fees.  Amadeus said that the inclusion of attorney fees in the award was the only argument Ebix had advanced to challenge it, and that both parties had agreed to be bound by the rules of the ICC.

"Ebix's sole basis for challenging the arbitration award is the arbitral tribunal's award of attorney fees," a memorandum by Amadeus reads.  "Contrary to Ebix's argument, the tribunal did not exceed its scope or authority."  According to Amadeus, the parties entered into a global agreement in October 2019 for Amadeus to provide Ebix's Indian subsidiary EbixCash with access to the Amadeus Travel Platform, a software interface it provides to its clients, in the Asia-Pacific region.  As part of that agreement, Amadeus paid EbixCash $15 million that was repayable if EbixCash failed to produce international airline bookings in certain volumes within time frames depicted in the agreement, according to Amadeus.

EbixCash failed to meet the required numbers and Amadeus terminated the agreement and sought repayment in April 2020, the company said.  The parties entered arbitration after they were "unable to reach an amicable resolution," according to the petition.  Ebix argued in a response April 18 that the tribunal's inclusion of costs and fees in the final award was beyond the scope of its power.  Amadeus responded that in the 2019 agreement between the two companies, ICC rules were included that permit a tribunal to award fees.  Ebix also waived its right to challenge the fees when it failed to raise the issue during arbitration, Amadeus said.

Eleventh Circuit precedent dictates that courts defer to the decisions of a tribunal when the scope of an arbitration is in dispute, Amadeus said.  "Ebix cannot point to a clause limiting Amadeus' ability to recover fees because no such clause exists," Amadeus argued.  At minimum, the remainder of the final $14 million award excluding the legal costs is not contested, and the court should confirm that even if it finds the tribunal exceeded its own authority, Amadeus said.

"Ebix is opposing confirmation of the award solely for purposes of delay," the motion reads.  "The final award was issued well over a year ago, and Ebix is disputing only the fees and costs portion of the award.  Yet Ebix has yet to pay anything on the final award, including the undisputed principal amount."

A recent Law 360 by Ganesh Setty, “11th Circ. Says No Attorney Fees for Cos. In Tossed Insurance Suit,” reports that a home builder and contractor accused of faulty stucco work can't seek attorney fees from their insurance company after a Florida federal court found the insurer lacked standing to litigate whether it had a duty to defend the companies, the Eleventh Circuit ruled.  Under the circuit's 1984 decision in Certain British Underwriters at Lloyds of London v. Jet Charter Serv. Inc. , statutory attorney fees are an element of damages and are therefore part of the merits of a case itself, U.S. Circuit Judge Elizabeth L. Branch wrote in the court's unpublished opinion.

Thus, when U.S. District Judge Timothy J. Corrigan tossed Southern-Owners Insurance Co.'s suit because it failed to meet the federal $75,000 amount-in-controversy threshold, the court lacked the subject-matter jurisdiction to hear any ensuing dispute over attorney fees, Judge Branch found. U.S. Circuit Judge Gerald Bard Tjoflat penned a separate concurrence, while U.S. Circuit Judge Britt C. Grant issued a dissent.

According to the decision, the dispute began in August 2013, when the home builder, Maronda Homes Inc. of Florida, sold a house to a couple who later complained of various construction defects related to the home's stucco installation. Maronda had hired JROD Plastering LLC to perform the installation, which held a commercial general liability policy with Southern-Owners that listed Maronda as an additional insured.

The insurer subsequently sued Maronda and JROD in Florida federal court seeking a declaration it had no coverage obligations over the alleged construction defects.  But Judge Corrigan dismissed the suit for lack of subject-matter jurisdiction, finding that the insurer failed to meet the $75,000 amount-in-controversy threshold for federal litigation.

Maronda and JROD sought attorney fees under the now-repealed Florida statute § 627.428, which allowed a court to award attorney fees to insureds who prevailed in coverage litigation against their insurer.  The district court further dismissed those motions, citing in part the Jet Charter decision.  In that case, the Eleventh Circuit ruled that "attorney's fees recovera[bl]e by statute are to be regarded as 'costs' only when made so by statute," and are otherwise "treated as an element of damages," according to excerpts included in Friday's decision.

Though the Eleventh Circuit in Prime Insurance Syndicate Inc. v. Soil Tech Distributors Inc. ruled the opposite way in 2008, finding that attorney fees are "collateral issues" within the court's purview even if the underlying case isn't, that decision was not published, Judge Branch noted.  And even if it were, circuit precedent holds that in the case of conflicting published panel decisions, the oldest one controls, she said.

"All in all, while some Florida courts have reached a different result than we did in Jet Charter, these decisions are too varied to constitute a definitive change in law," Judge Branch added in a footnote.  "As such, we decline to exercise our discretionary power to rewrite our circuit's precedent which means that we are bound to follow Jet Charter."

A recent Law 360 by Gina Kim, “Joint Juice Maker Rips Class Attys’ ‘Overstated’ $8.3M Fee Bid,” reports that Premier Nutrition asked a California federal judge to cut $2.4 million from class counsel's "bloated and unreasonable" $8.3 million fee request in litigation over allegedly misleading advertising claims about its Joint Juice, citing block billing, overstaffing, lavish hotel stays and fringe expenses for "boba and coffee runs dating back to 2013."  In a 33-page opposition, Premier Nutrition's attorney Steven E. Swaney of Venable LLP accused class counsel, except for Iredale & Yoo, of presenting to the court "a bloated and unreasonable application asking this court to award $8,274,516" in combined fees, expenses and costs.

Premier argued the lodestar calculation of the two other class counsel firms, Blood Hurst & O'Reardon and Lynch Carpenter "betray a lack of 'billing judgment,'" as they propose a fee award that doesn't approximate what a paying client is willing to approve.  Their lodestar calculation is "massively overstated" since it includes time spent for other related Joint Juice class actions, Premier argued, pointing out the plaintiffs only prevailed in one of 11 related cases but are now submitting a fee bid as if they prevailed on all of them.

Excluding Eugene Iredale and Grace June of Iredale & Yoo, Premier complained that Blood Hurst and Lynch Carpenter's billing records are riddled with inefficiencies, including "top-heavy administration of work," block billing, billing in quarter-hour increments, overstaffing, nontravel work billing and other things.  Examples include Blood Hurst lawyers billing 24 or more hours per day and submitting several duplicative entries on a single day, staffing six lawyers on the trial, "two of whom sat passively in the gallery of the courtroom" and charging $575 per hour for a contract attorney, Craig Straub, doing document review, the opposition states.

"As explained in the declaration of Premier's fee expert Steven Tasher, a 40% across-the-board percentage reduction to BHO's and Lynch Carpenter's lodestar is warranted to account for these inefficiencies," Premier said.  "The total lodestar for class counsel should be reduced to $2,406,809.  This constitutes approximately 29% of the judgment amount, which aligns with the Ninth Circuit's 25% benchmark for reasonable fees."

Premier balked at class counsel's suggestion for the court to apply a multiplier to pump their fee award if their lodestar is reduced, and also took issue with their "extravagant expenses" that it said warrants an across-the-board cut in their claimed charges.

"Class counsel also seek reimbursement from Premier for every sundry or fringe expense they encountered over this decade-long litigation, including boba and coffee runs dating back to 2013," the opposition states. "Class counsel even tries to bill Premier for hundreds of dollars in laundry expenses incurred during trial — even though they apparently traveled back home to San Diego that same day."

The opposition references defense's expert, Tasher, who reviewed the billing entries and opined the class counsel's requests costs also reveal "a 'spare no expense' approach" to the case along with double billing and "phantom charges."  "In my opinion, while the dollar value for many of these items may seem small, they reflect a big attitude of no cost being too great to throw onto the bill and eat, drink and be merry on someone else's dime," Tasher wrote.  "No paying client would tolerate class counsel's lifestyle expenses or lavishness."

Premier said that Blood Hurst and Lynch Carpenter's proposed lodestar figure was grossly inflated and warrants dramatic cuts across the board, arguing that the firms can't include time spent on class representative depositions in other related actions in their calculation.  Blood Hurst's proposed lodestar also includes nearly 1,000 hours for trial prep spent in Mullins, which Premier said should be removed since the Mullins trial never occurred.  It's inappropriate for Blood Hurst to get 100% of the fees for work common to the related cases based on the successful outcome of just one case, the opposition states.

Premier also sought a 40% cut to Blood Hurst's remaining lodestar account for several deficiencies in their billing practices, noting that  the firm's Timothy Blood and Thomas Joseph O'Reardon billed for work done in 2013 at their current hourly rate, which is significantly higher.

While Blood, partner Paula Brown and Straub billed 1,000 hours for trial prep, Blood was the only one who had an active role at trial, and O'Reardon and Straub "sat passively in the gallery," Premier alleged.  Premier also accused Straub and O'Reardon of billing extra hours after trial each day and erroneously adding entries that exceed 24 hours a day "or are obvious duplicates," totaling $62,207.50.

Premier also attacked Lynch Carpenter's fee bid of $392,392.50, arguing the billed work was entirely spent on Mullins.  The fee should be apportioned among the related cases and then cut by 40% due to excessive time and top-heavy administration work, Premier said.  That should leave Lynch Carpenter with $20,842.77.  "As an initial matter, in what can only be described as a shocking act of chutzpah, Mr. Carpenter — who has not worked on these cases since 2020 — includes in his fee petition 13.7 hours to fly to San Francisco to observe one day of trial on May 25, 2022," the opposition states.

Nor should class counsel recover fees and deposition costs for experts that weren't used in the Montera suit, Premier said.  Furthermore, several charges from the two firms weren't only lavish and extravagant, but also "purely wasteful," Tasher said.

"Each of these issues is exacerbated by the level of staffing," Tasher wrote. "Had the trial been staffed with attorneys Iredale, Jun and Blood, (the three attorneys who actually appeared on the record to try the case), the expenses would also have been much more modest.  However, given the excessive staffing (and related trial expenses) of attorneys [Todd] Carpenter, O'Reardon and Straub, the costs grew exponentially, considering the additional flights, Uber/taxi charges, meals/alcohol, and snacks brought about by these three additional timekeepers (essentially double the trial team.)"

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