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Category: Block Billing

Feds Push Back on $1.9M Fee Request in GMO Salmon Action

April 28, 2022

A recent Law 360 story by Mike Curley, “Feds Push Back On Bid For $1.9M Fees in GMO Salmon Suit” reports that the federal government has opposed a motion from environmental groups seeking $1.9 million in attorney fees and costs in a suit alleging the U.S. Food and Drug Administration wrongly approved the first genetically modified salmon for human consumption, saying the "excessive" fees request follows a "narrow" suit victory.  In an opposition brief, the government said the groups, led by the Institute for Fisheries Resources, saw limited success and repeated losses in the suit, prevailing narrowly on only three of the 14 claims, including losing all claims under the Food, Drug and Cosmetic Act.

That limited success should in turn limit the amount that the court awards in fees, according to the brief, and the government said if the court decides to award fees at all, they should be capped at $246,333.37, while expenses should max out at $1,135.91.  In particular, the government said, the groups should not be able to recover fees for their unsuccessful claims, such as the claims under the FDCA and the bulk of their claims under the National Environmental Policy Act.

The plaintiffs sued the FDA in March 2016, claiming the agency's groundbreaking 2015 approval of a genetically engineered salmon for human consumption poses unknown dangers to food, health and the environment.  AquaBounty used genetic material from a Pacific Chinook salmon and from another fish, the ocean pout, to create a line of fish that grow to full size in about half the standard time, according to court documents.  U.S. District Judge Vince Chhabria in November 2020 found the FDA should have looked deeper into regulating genetically modified salmon, saying the agency didn't meaningfully analyze what might happen to normal salmon if the genetically engineered salmon were able to establish a population in the wild.

The environmental groups asked for the $1.9 million in attorney fees in March, after a previous bid — seeking $2.9 million — was rejected in February.  In March's motion, the groups said they had cut down their billable hours to 3,190.6.  In the brief, the government further argued that the plaintiffs had used "unreasonable" hourly rates that go beyond the market standards in the attorneys' home markets by using the benchmark of San Francisco rates despite three out of four core counsel working out of Portland, Oregon and Seattle.

And the hours claimed are excessive, the government wrote, with the plaintiffs presenting vague time entries and block billing that make it impossible for the government defendants to figure out what hours apply to which claims.  In addition, the time sheets include hours that are not compensable, the government wrote, such as hours spent in separate regulatory proceedings, client solicitation, media activities and challenges to the FDA's deliberative processes.

In other cases, the attorneys' time sheets included duplicative time entries for overlapping efforts among multiple attorneys, resulting in excessive hours for which they should not be billed.  The government also challenged particular time entries linked to tasks that they say were well in excess of the actual time spent on those actions, such as 240 hours marked as being spent on a procedural motion that "did not necessitate so many hours."

Finally, the government argued that the plaintiffs should not be granted any fees under the Equal Access to Justice Act, which allows fees to be granted to the prevailing party unless the government shows its actions were substantially justified.  Both the FDA's approval decision and its conduct in the litigation were substantially justified, the government argued, saying the FDA had diligently examined AquaBounty's application and the U.S. Fish and Wildlife Service concurred with its determination.  That the government prevailed on the bulk of the claims in the suit is further evidence that its position was reasonable, according to the brief, and therefore no fees should be awarded under the EAJA.

Judge Reduces Billing Rates in FCRA Case

February 9, 2022

A recent Law 360 story by Vince Sullivan, “Ariz. Firm Gets Bulk of $370K Fee Bid in Mass. FCRA Case,” reports that an attorney with Arizona consumer protection firm Price Law Group APC was awarded $204,200 in fees that he earned while representing a former debtor in a Fair Credit Reporting Act lawsuit against a mortgage servicer in Massachusetts federal court.  In an order from U.S. Magistrate Judge M. Page Kelley, the court found that the $675 per hour rate sought by attorney David Chami was too high and wasn't reasonable given the rates generally charged by lawyers with similar experience in the Boston area.  The judge said a $350 per hour rate suggested by Selene Finance LP, which is on the hook for the fees under a settlement with plaintiff Robert Sullivan, was too low.

"From its overall sense of the suit … the court finds that Sullivan's proposed rates of $550-675/hour and Selene's proposed rate of $350/hour are unreasonable," Judge Kelley said in her order.  "It finds that a rate of $500/hour is reasonable."  The court further reduced the requested fees based on the time reports kept by Chami and another attorney that worked on the beginning phase of the case in 2016, saying that many entries submitted included block billing, which isn't permitted.

In fee-shifting cases, the court said, the party seeking the payment of their fees must keep contemporaneous time records so the court can accurately determine the reasonableness of the request using a lodestar method.  That method calls for the court to come up with a reasonable hourly rate for the attorney and then multiply by the number of hours worked on the case.  Using that method, Judge Kelley determined that Chami was entitled to payment of $248,550 in fees based on 497.1 hours of work, reflecting some reductions in the hours billed by Chami.  But the block-billing practice employed by Chami and co-counsel Nicola S. Yousif led the court to reduce the fee award by 10%.

"The block billing has prevented the court from applying separate rates for the 'core' and 'noncore' work performed by attorneys Chami and Yousif," Judge Kelley said in the order.  That reduction, coupled with other time adjustments made by the court, drops Chami's fee entitlement to $204,200 based on 408 hours of work.  Yousif is entitled to $13,825 in fees for 39.5 hours of work and a paralegal employed by Chami's firm is entitled to $1,250 in fees.  The court also approved $2,310 in expenses incurred during the case.

Class Counsel Earn $9.4M in Attorney Fees in Securities Action

December 8, 2021

A recent Law360 story by Clark Mindock, “Quinn Emanuel, Others Get $9.4M Atty Fee in Securities Suit,” reports that a Delaware federal judge has awarded $9.4 million in attorney fees to Quinn Emanuel and others representing energy management software company C3 Inc. in a shareholder suit alleging fraud in a stock-swap deal, trimming an originally requested amount.  U.S. District Judge Colm Connolly awarded the attorney fees after receiving recommendations from a special master overseeing the case who found just two out of five arguments raised by the investors against the award had merit.

The judge agreed with the special master that it was appropriate to trim $1 million from the original $10.1 million requested since the award for attorney fees shouldn't include fees related to litigated holdback claims.  Judge Connolly also determined that a further reduction of 3% was appropriate after the special master suggested the court consider whether block billing and redactions in the request were indicative of potential bad faith.  "I agree that defendants' block billing could obscure bad-faith expenditures related to the holdback claim," Judge Connolly said, before adding he was exercising his discretion to reduce the fee beyond the $1 million by 3%.

The C3 firms sought the fees after fending off a suit brought by investors accusing the company of securities fraud and breach of contract.  Seeking reimbursement for the attorney work, C3 said its lead counsel Quinn Emanuel Urquhart & Sullivan LLP billed 11,197 hours over five years, accounting for $9.7 million in fees.  Four other firms — Cooley LLP, Morris Nichols Arsht & Tunnell LLP, Potter Anderson & Corroon LLP and Parkowski Guerke & Swayze PA — accounted for another $400,000, they said.

In March, Judge Connolly rejected an initial attorney fee bid for the $10.1 million, saying an outside observer may need to review the matter.  He then punted the case to the special master who made the recommendations that have now been accepted by the court.

Judge May Not Base Fee Award On Previous Awarded Rates

November 8, 2021

A recent story by Metropolitan News, “Judge May Not Base Fee Award on Previous Awards to Firm,” reports that a judge must make a fresh determination in each case of whether attorney fees that are sought are in line with prevailing rates in the community, rather than comparing the amounts claimed with those awarded to the same law firm in other cases of the same nature, the Ninth U.S. Circuit Court of Appeals held.  Circumstances unique to that case must also be weighed, according to the memorandum opinion.  A three-judge panel—comprised of Ninth Circuit Judges Daniel Aaron Bress and Lawrence VanDyke, joined by Tenth Circuit Judge David M. Ebel, sitting by designation—reversed a $11,349 award in favor a client of the Center for Disability Access (“CDA”).  The amount sought was $20,459.

CDA—which files torrents of actions throughout the state under the federal Americans with Disabilities Act and Callifornia’s Unruh Civil Rights Act—is a division of the San Diego firm of Potter Handy, LLP.  The plaintiff, Brian Whitaker, according to defendants SMB Group and Yoon Jeong Row, has filed more than 1,100 for in the Central District of California since 2014 claiming disability discrimination.  In the present case, the Ninth Circuit declared, District Court Judge Michael W. Fitzgerald of the Central District made some reasonable downward adjustments in the amount awarded, but erred in relying on past awards in actions brought by CDA “instead of considering other evidence of the prevailing community rates.”

The opinion says: “We cannot discern that, in its explanation of why it reduced the hourly rates sought by CDA, the district court analyzed the complexity of the case, the type of work involved, rates for non-CDA lawyers of comparable skill in the relevant community, whether the legal work was performed by lawyers at the appropriate levels of seniority, or other relevant factors….  “It may be that the district court here considered the above factors and thus the hourly rates the district court applied were appropriate.  But we cannot make that determination on the current record.  Accordingly, the district court’s fee award is vacated and the case is remanded for review consistent with this memorandum.”

The appellate judges said Carter did justify his reduction in hours spent—including subtracting hours supposedly spent at a hearing that did not take place and on an unnecessary motion—and paring block-billed hours.  At oral argument on Aug. 8, Dennis J. Price II of Potter Handy argued that the lodestar system of calculating attorney fees—multiplying hours spent times the hourly rate—“is not advisor—it’s a mandatory system” that judges must use.  He alleged that Fitzgerald “effectively ignored these rules.”

The hourly rates that were sought ranged from $450 to $595.  Those awarded went from $350 to $425.  Bress questioned whether the rates that were set by the judge would have been supportable had Fitzgerald “put in more than he did in his order.”  Price responded that the evidence would not support the lower rates.  However, asked the same question by VanDyke, he said that if Fitzgerald had “done the leg work,” he “wouldn’t have any argument that the rate was incorrect,” later reverting to his original position that “the evidence doesn’t support” the rates that were set.  Janice Ryan Mazur of the El Cajon firm of Mazur & Mazur argued for SMB Group and Row.  She said Fitzgerald did apply the lodestar method, but then adjusted it downward.

Article: Recovering Attorney Fees in Arbitration

November 1, 2021

A recent article by Charles H. Dick, Jr., “Recovering Attorney Fees in Arbitration,” reports on recovering attorney fees in arbitration.  This article was posted with permission.  The article reads:

An accurate assessment of damages is crit­ical for case evaluation, and the cost of dispute resolution plays an important role in deciding to pursue claims.  Even strong liability cases can fail to make economic sense.  That is why a thorough case appraisal should thoughtfully consider the attorney fees to be incurred.  And equally important, an objective case valuation should assess the likelihood of recovering attor­ney fees.

The “American Rule,” which specifies that each party must bear its own attorney fees, is a lesson for law school’s first year, and though the rule has been slightly modified to encour­age certain litigation in the public interest, fee-shifting remains the exception rather than the rule.  Against this background, professional responsibility obliges counsel to keep clients informed about litigation economics (Cal. Rules Prof. Conduct, rule 1.4)—something critically important as a case approaches the in­evitable mediation.  Unfortunately, experience teaches that an exacting analysis of litigation cost and exposure to fee-shifting often is an afterthought, and that the development of case strategies, discovery plans, and tactical maneu­vers occurs without thoughtfully weighing the implications of the American Rule and its ex­ceptions.  This is a recurring issue in arbitration.

Perhaps litigators approach attorney fee recovery casually, thinking there will be ample time to deal with the question before a final judgment is entered.  Arbitration, however, is different.  The binding nature of arbitration makes appellate relief unlikely.  An arbitrator’s award of attorney fees is unlikely to be sec­ond-guessed by a court, even if there is no stat­utory or contractual basis for the award. (See Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1, 33; id. at p. 11 [“it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.  In reaffirming this general rule, we recognize there is a risk that the arbitrator will make a mistake.”].)  When it comes to recovering attor­ney fees in arbitration, counsel needs to get the issue correct from the beginning.

California has codified the American Rule in Code of Civil Procedure section 1021.  Con­tractual arrangements can modify the rule and provide for fee-shifting, but a careful study of the parties’ language is critical. (See Valley Hard­ware, LLC v. Souza (Nov. 20, 2015, D067076) 2015 Cal.App.Unpub. Lexis 8347 [affirming arbitrator fee award in face of inconsistent contract provisions].)  Contractual language inevitably varies: Some agreements provide for recovery of fees “when permitted by law”; some say fees “actually incurred” are recoverable; some limit attorney fees to a percentage of the damages awarded; some say the prevailing party “shall” recover fees, while others use the uncertain “may.” Civil Code section 1717 de­fers to the contracting parties, subject to minor tweaks that limit fees to a “reasonable” amount and require that fee recovery be reciprocal.

In addition to carefully scrutinizing con­tract language, one also needs to know the procedural rules that will be applied in arbi­tration.  For example, in a Financial Industry Regulatory Authority (FINRA) arbitration regarding the investment brokerage industry, the arbitral panel is directed to determine the “costs and expenses,” yet absent some statutory exception to the American Rule, fee-shifting still depends on the parties’ underlying agree­ment (see FINRA rule 12902(c)).  Unless the parties’ agreement forbids fee-shifting, the rules of the International Institute for Conflict Prevention and Resolution (CPR) authorize the arbitration tribunal to apportion costs for “legal representation and assistance … incurred by a party to such extent as the Tribunal may deem appropriate” (see CPR 2019 Adminis­tered Arbitration Rules, rule 19.1(d) & 19.2). Rule 24(g) of the JAMS Comprehensive Arbi­tration Rules & Procedures is the mirror image: “[T]he Arbitrator may allocate attorneys’ fees and expenses … if provided by the Parties’ Agreement or allowed by applicable law” (ac­cord, Uniform Arbitration Act, § 21).

If all parties request an award of attorney fees, rule 47(d)(ii) of the American Arbitra­tion Association’s Commercial Arbitration Rules and Mediation Procedures authorize an award of attorney fees even if the underlying agreement is silent on the issue.  Throwing in a boilerplate prayer for attorney fees and costs without considering the consequences can result in fee-shifting.  And during arbitration, even casual discourse about attorney fees can be a basis for fee-shifting, absent an express agreement to the contrary.  (Marik v. Univ. Vill. LLC (Oct. 3, 2013, B247171) 2013 Cal.App. Unpub. Lexis 7143 [brief asserting entitlement to recover fees provided basis for arbitrator’s fee award]; see Prudential-Bache Securities, Inc. v. Tanner (1st Cir. 1995) 72 F.3d 234, 242-243 [“costs and expenses” under New York Stock Exchange Rules interpreted to permit award of attorney fees when both sides to dispute requested attorney fee award].)

Counsel should be mindful of an arbitra­tor’s predisposition to produce an award that is “fair to all concerned,” and this may include fee-shifting as an exercise in equity. (See Co­hen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 877 [absent parties’ agreement limiting arbitrator power, award of attorney fees on basis of equity and conscience affirmed].)  Further, misconduct of counsel may be a reason to “sanction” a party by reducing an attorney fee award. (E.g., Karton v. Art Design & Const., Inc. (2021) 61 Cal.App.5th 734 [fees reduced for incivility of counsel].)  And consider JAMS Comprehensive Arbitration rule 24(g), which authorizes an arbitrator to consider noncompliance with discovery orders when awarding attorney fees.

Attorney fees incurred prosecuting or defending a complaint to compel arbitration may be recoverable, but the procedural posture of the civil court action will determine when fee-shifting may occur. (E.g., Otay River Const. v. San Diego Expressway (2008) 158 Cal.App.4th 796.)  Though there is authority to the contrary (Benjamin, Weill & Mazer v. Kors (2011) 195 Cal.App.4th 40 [allowing recovery of fees even though liability on claim awaited arbitration]), the better-reasoned view is expressed in Roberts v. Packard, Packard & Johnson (2013) 217 Cal. App.4th 822.  In that case, clients filed suit against their former lawyers, alleging breaches of fiduciary duty and conversion in connection with settlement of qui tam litigation.  The law firm’s motion to compel arbitration was grant­ed, and the trial court awarded the firm its fees as the prevailing party.  On appeal, the court was persuaded the phrase “an action” means an entire judicial proceeding; procedural steps in the course of a lawsuit, such as a motion to compel arbitration, are steps in the prosecution or defense of an action, but they are not the entirety of an action on a contract.  The Roberts case stands for the proposition only one side can “prevail” in a lawsuit, and fee-shifting had to await the arbitrator’s final determination of the clients’ professional liability claims. (Id. at p. 843.)

Civil Code section 1717 defines the “pre­vailing party” as the person who recovers the greater amount on a contract.  Yet, Hsu v. Ab­bara (1995) 9 Cal.4th 863, makes it clear this involves more than a mathematical calculation.  The “court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their liti­gation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.” (Id. at p. 876.)  Thus, it is possible for a party to prevail by achieving litigation objectives, even though an opponent may have obtained a favorable verdict on liability theories.  Generally, however, when a verdict on contract claims is good news for one party and bad news for another, a court is obligated to treat the happy litigant as the prevailing party.

The identity of a prevailing party becomes more complicated when results of an arbitra­tion are mixed. In this regard, Marina Pacific Homeowners Association v. Southern California Financial Corp. (2018) 20 Cal.App.5th 191, is instructive.  This case between a homeowners’ association and a finance institution exempli­fies litigation that produces some wins and some losses for both sides.  The case involved a claim by the homeowners that they did not owe monthly fees the financial institution contended amounted to $97 million over the life of a lease.  The trial court found against the homeowners and declared there was an obligation to make monthly payments.  But the court also found the monthly payment rate was only 40% of the financial institution’s demand.  On appeal, the court declined to consider settlement communications as being a reliable expression of a party’s litigation objectives and concluded the “substance” of the result was a $58 million loss for the defendant.  Invoking the decision in the Hsu case, the court con­cluded there was no simple, unqualified result pointing to either side as a prevailing party, and the trial court had acted within its discretion in denying recovery of attorney fees.

One lesson regarding “prevailing parties” is the need for caution in over-pleading one’s case. Some counsel cannot resist converting a straight-forward breach of contract action into a fraud case with overtones of unfair business practices and assorted tort claims.  Pleading multiple claims that eventually are discarded for want of proof can be dangerous, especially unsubstantiated allegations of fraud.  In De La Questa v. Benham (2011) 193 Cal.App.4th 1287, 1295, an appellate court acknowledged the practice of overstating one’s claims, which makes it more difficult to determine the victor.  In a case producing mixed results, unsupported claims may lead to an opponent’s recovery of fees.

Counsel in arbitration need to address fee-shifting with a laser focus, beginning with the preliminary hearing, which is the first op­portunity to meet the arbitrator and learn his or her preferences.  Arbitrators can be expected to employ the lodestar method recognized as acceptable by a long line of California cases (e.g., PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1094).  Several issues can be dis­cussed at the hearing: What procedures will the arbitrator use to deal with attorney fee and cost issues?  Will these matters be bifurcated until an interim or tentative award on the merits is de­livered? Does the arbitrator have requirements for form, style, and specificity of time records? Will “block billing” be accepted? If more than one law firm will be appearing for a party, the conference also is an opportunity to explain why and set the stage to defuse a later argument about duplicated efforts.

In a case with both contract and tort claims, counsel should consider keeping a separate re­cord of time spent on matters that may not be entitled to recovery of attorney fees.  Counsel should be prepared to demonstrate that time records were prepared contemporaneously with the work reported, since there often is a lack of daily time recordation, let alone contem­poraneous reporting.  The fee application also should explain how the litigation team was de­ployed and why individual tasks were assigned to team members.

Proving the reasonableness of time and rates ordinarily can be accomplished by declarations of counsel regarding the usual, customary, and regular timekeeping and billing practices of the law firm.  Resumes of the personnel involved and a summary of the work may be useful.  (See, e.g., Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 702.)  And this informa­tion can be supplemented by the opinions of other lawyers objectively knowledgeable about actual practices within the community.  Survey data often is available for firms in metropolitan areas, and those reports also carry credibility.  But counsel should be alert to differences between posted or rack rates and hourly rates actually realized, because there often is a ma­terial difference.  As with hotels and rental cars, there may be a significant disparity between the advertised rate and what people actually pay.

Nemecek & Cole v. Horn (2012) 208 Cal. App.4th 641 makes it clear that a calculation of “reasonable fees” does not hinge on what fees actually were paid.  In that case, defense counsel had been compensated on the basis of negotiat­ed insurance panel rates.  The arbitrator refused to be controlled by such rate structures and declined to use the Laffey Matrix employed by the United States Department of Justice in de­termining rates the federal government believes are reasonable.  Instead, the award of attorney fees was based on an independent assessment of what would be reasonable, and the appellate court affirmed confirmation of that award. (See Chacon v. Litke (2010) 181 Cal.App.4th 1234, 1260 [awarding reasonable rate $50 greater than counsel’s regular rate].)

There are three important things to remember about recovering attorney fees in arbitration.  First, carefully study the parties’ agreement to understand the rights it extends and the limitations it imposes.  Second, avoid pleading unnecessary claims that make it seem the end result tips in favor of one’s opponent.  Third, vacating an erroneous fee award is unlikely, so make your best case regarding fee-shifting before the entry of a final award.

Charles H. Dick, Jr. is a neutral with JAMS, and he serves as a mediator and an individual arbitrator or member of multi-arbitrator panels in complex commercial matters, securities and investment disputes, professional liability cases, products liability issues, and other business-related controversies.

Article: What is a Legal Fee Audit?

October 7, 2021

A recent article by Jacqueline Vinaccia of Vanst Law LLP in San Diego “What is a Legal Fee Audit?,” reports on legal fee audits.  This article was posted with permission.  The article...

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