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Category: Defense Fees / Costs

Harvard Sues Insurer Over Attorney Fees

September 20, 2021

A recent Law 360 story by Eli Flesch, “Harvard Sues Insurer For Legal Fees in Affirmative Action Suit,” reports that Harvard University sued Zurich American Insurance Co. for excess coverage of costs it incurred fighting a lawsuit challenging its affirmative action policies, saying the insurer wrongly denied coverage on the basis that it didn't get a timely notice of the suit.  The Ivy League school told a Massachusetts federal court that Zurich was ducking its obligation under a $15 million excess insurance policy to pay for legal fees connected to allegations that it has engaged in illegal racial balancing to the detriment of Asian American applicants.  Harvard defeated the underlying suit in two lower courts but still faces a government investigation and a potential U.S. Supreme Court fight.

In an 11-page complaint, one of Harvard's governing boards told the court that it had already maxed out its $25 million coverage limit under its policy with AIG unit National Union Fire Insurance Co. of Pittsburgh.  The university said it would continue to accrue legal fees because of a pending U.S. Department of Justice inquiry and the writ of certiorari that could bring the Title VI allegations of discrimination to the Supreme Court.

Harvard said it provided notice to Zurich of its claim in May 2017, far before its coverage under the AIG policy had been exhausted.  Despite that, the university said, Zurich denied its claim in October 2017 on the basis of "purported" late notice.  The insurer told Harvard in several letters that it would have been entitled to coverage under the policy had timely notice been given, according to the complaint.

But Harvard argued that the Zurich policy, which carried much the same terms as the AIG policy, required the university to tender notice of the claim "as soon as practicable," which it did.  Moreover, Zurich personnel were well aware of the discrimination suit, the university said, pointing out the considerable media attention drawn by the allegations.  The university is seeking a declaration of coverage and a finding of breach of contract.

The underlying suit, brought by Students for Fair Admissions, claimed that Harvard violated Title VI of the Civil Rights Act.  The group lost its case in 2018 after a closely watched three-week bench trial, a finding that the First Circuit upheld in November.  In June, the U.S. Supreme Court signaled it might take up the landmark challenge to Harvard's affirmative action admissions policy when it invited President Joe Biden's administration to weigh in on whether the school's race-conscious system is legal.

Insurer Overpaid Policyholder’s Attorney Fees, Judge Finds

August 25, 2021

A recent Law 360 story by Daphne Zhang, “Insurer Overpaid For Policyholder’s Legal Bills, Judge Finds,” reports that a New York federal judge said that an insurer's decision to stop paying a GoPro accessory maker's attorney fees was reasonable, finding the policyholder's defense counsel billed administrative work at partner rates and logged excessive working hours.  U.S. District Judge Mae D'Agostino denied 360Heros Inc.'s motion for summary judgment against Main Street America Assurance Co., saying the carrier's payment of more than $2 million in attorney fees fully satisfied its defense obligations.

The judge sided with Main Street in finding that 360Hero's defense counsel, Gauntlett & Associates, repeatedly charged "unreasonable and excessive" legal fees in an underlying patent infringement suit with GoPro.  The camera company sued 360Heros alleging the harness maker used its copyrighted pictures and infringed two of its trademarks.  The suit was settled in May 2018. 360Heros sued Main Street in 2017 after the insurer stopped paying for its defense costs.

"Based on Gauntlett's repeated practice of billing excessive, redundant or otherwise unnecessary hours the court finds that a 15% reduction in Gauntlett's fees is warranted," the judge said.  According to the order, a Main Street attorney found in 2017 that the insurer overpaid for defense costs after retroactively reviewing the payment history.  Main Street subsequently stopped paying the policyholder's legal bills, which 360Hero claimed violated its insurance policy.  "The amount of unpaid fees is significantly less than the amount that the court finds were reasonably expended," Judge D'Agostino found, saying that Main Street was fully entitled not to pay because the defense counsel overcharged on legal bills.

Some of Gauntlett's invoices were billed without any tasks designated to a paralegal, the judge pointed out, and the firm repeatedly charged administrative work at partner rates. Gauntlett also charged full rates for travel, which should have been billed at half of their hourly rates, Judge D'Agostino said.  "For travel to a one-day out-of-town settlement conference, [one Gauntlett attorney] billed for $418.48 in meals," she said.

Small Law Firm Accused of Overbilling in Bribery Case

June 19, 2021

A recent Law 360 story by Kevin Penton, “Cognizant Says Firm Overbilled It In Ex-CLO’s Bribery Case,” reports that a small New York law firm is facing allegations that it overbilled Cognizant Technology Solutions Corp. for representing the technology consulting company's former chief legal officer in several underlying cases related to an alleged foreign bribery scheme.  Jeremy Bohrer and his namesake firm charged Cognizant $23.3 million for representing Steven Schwartz from January 2019 to last April, outpacing co-counsel Paul Weiss Rifkind Wharton & Garrison LLP's nearly $20 million bill for the same period, despite the smaller firm lacking expertise in white collar defense and having a total of four lawyers, according to the complaint by the company in the Southern District of New York.

The complaint says that Bohrer and his firm, Bohrer PLLC, charged Cognizant a 600% markup for document reviews conducted by contract attorneys, that the attorney hired vendors in which he has an ownership stake to work on the Schwartz cases without disclosing the conflict, and that Cognizant was charged millions of dollars for work that was either not performed as invoiced or that was performed at a fraction of the cost of what was billed, according to the complaint.

Cognizant told the court that it was contractually obligated to pay Bohrer and his firm after Schwartz retained them in July 2018 to work together with Paul Weiss — and later Gibbons PC — on several related matters connected to the alleged scheme.  But Cognizant has balked at the fees charged by Bohrer and his firm, noting that they are nearly double the $13 million that Jones Day and a smaller firm charged Cognizant for representing Gordon Coburn, the company's former president and Schwartz's co-defendant in the criminal proceeding.

"Defendants' conduct is unethical, unconscionable, criminal, and has caused Cognizant significant harm," the complaint read.  "Even though Cognizant was contractually required to advance fees and costs for Schwartz's defense, Bohrer and Bohrer PLLC took advantage of that obligation in the extreme."

Federal prosecutors in February 2019 accused Schwartz and Coburn of conspiracy and multiple Foreign Corrupt Practices Act violations for allegedly approving a $2 million bribe to secure a construction permit for the IT company's campus in Chennai, India, in 2014.

Cognizant wants the Southern District of New York to order Bohrer and his firm to repay all the money they have charged the company, according to Wednesday's complaint. The company is also seeking punitive damages, pre- and post-judgment interest, and its attorney fees and costs, according to the complaint.

In a statement, Bohrer blasted the legal action.  "This is a malicious lawsuit filled with outrageous and false allegations and represents another attempt to interfere with Mr. Schwartz's defense against a prosecution that should never have been brought," Bohrer said in a statement.  "Bohrer PLLC is honored to represent Steven Schwartz and will remain focused on his defense."

Six Flags Wants Insurer to Cover $2.89M in Attorney Fees

May 19, 2021

A recent Texas Lawyer story by Angela Morris, “Six Flags Wants Insurer Travelers Casualty to Cover $2.89 Million in Attorney Fees, reports that the Texas-based theme park filed new litigation seeking to force its insurance company to reimburse millions of dollars in attorney fees that it paid to some of the nation’s largest law firms—like Kirkland & Ellis and Perkins Coie.  In the new federal court lawsuit in Dallas, Six Flags Entertainment Corp. has alleged that its insurer, Travelers Casualty and Surety Co. of America, has wrongfully denied the park its insurance coverage for attorney fees and legal expenses.

Six Flags spent the money to defend itself from a probe by the U.S. Securities and Exchange Commission into its business dealings in China, and from a class action and shareholder litigation related to the China dealings.  Six Flags operates 26 parks in the U.S., Mexico and Canada, including four parks each in California and Texas, and two parks each in Georgia, New Jersey and New York, according to its website.

But COVID-19 has hit Six Flags hard: $82 million revenue in the first quarter of 2021 represents a 38% drop compared to the same time period in 2019, according to the company’s most recent performance report.  The park’s legal troubles started in February 2020 with the SEC subpoena, according to the complaint in Six Flags Entertainment Corp v. Travelers Casualty and Surety Co. of America, filed in the U.S. District Court for the Northern District of Texas.

Six Flags had to pay more than $2.5 million in fees to law firms Kirkland & Ellis, Lionbridge, Parker Lynch and Fayer Gipson to defend itself against the subpoena, which asked for information about a partnership with a Chinese real estate developer regarding Six Flags parks in China, and a negative $15 million revenue adjustment.  Insurance coverages for directors and officers and for organizational liability should have covered the company’s legal expenses, the complaint said.

Also in February 2020, two securities class-action complaints were filed against the company and two former executives over the same partnership and negative revenue adjustment.  Substantively the same allegations arose in shareholder derivative lawsuits in federal and state courts against the company, executives and board members, said the complaint.  Six Flags had to spend more than $290,000 in fees for lawyers at Perkins Coie to represent two company executives who were defendants in a class action, since there could be a conflict if the same attorneys represented the company and those individuals.

According to a search of federal court records on PACER, plaintiffs filed three shareholder derivative lawsuits that were consolidated into one case, and U.S. District Judge Mark Pittman on April 28 granted a motion to dismiss by Six Flags in the case, In Re Six Flags Entertainment Corp. Derivative Litigation. The defendants—Six Flags’ executives and board members—were represented by Kirkland & Ellis lawyers Jeremy Fielding of Dallas, and New York-based Daniel Cellucci, Sandra Goldstein and Stefan Atkinson.  Pittman on March 3 granted Six Flags’ motion to dismiss in a consolidated class action matter, according to an opinion and order in that case, Electrical Workers Pension Fund v. Six Flags Entertainment Corp.  Those defendants–Six Flags and two executives–had the same Kirkland & Ellis attorneys, said PACER.

In a different case—unrelated to the Chinese Six Flags parks–Six Flags had told its insurance company about a “crucial event matter” dealing with a potential proxy fight with a shareholder. Six Flags tapped Kirkland & Ellis to represent it, and the matter eventually reached an amicable agreement, said the complaint.  Six Flags incurred more than $100,000 in legal fees for this outcome, and the complaint alleged that Travelers has refused coverage.

Aside from these legal actions, the complaint alleged that at other times, Travelers has tried to recharacterize and reallocate legal fees and expenses, that should have been covered by insurance. It alleged the insurer looked to lessen exposure and to decrease policy benefits paid to Six Flags.

The theme park company is suing its insurer for breach of contract, violation of a Texas insurance law that requires prompt and fair payment of claims, and breach of the duty of good faith and fair dealing.  Six Flags has asked the court for a declaratory judgment that finds the Travelers policy should cover attorney fees and legal expenses.  In addition to recovering those amounts from Travelers, it wants to be paid back for the legal fees it is spending to sue the insurance company, said the complaint.

Quinn Emanuel Defends Billing Practices, Expenses

May 5, 2021

A recent Law 360 story by Rachel Schart, “MiMedx Slams Quinn Emanuel Fees As 2 Other Firms Settle,” reports that MiMedx has accused Quinn Emanuel of seeking unreasonable fees, including for lawyers' luxury hotel stays and fine dining, as part of the cost of defending two former company executives who were convicted of securities fraud.  The allegation, in court papers, comes after the life sciences company settled claims with two other law firms seeking payment of fees as part of the same dispute.

Quinn Emanuel Urquhart & Sullivan LLP, Freshfields Bruckhaus Deringer LLP and Kobre & Kim LLP initially filed suit in New York state court on April 15 alleging MiMedx Group Inc. shirked its obligations to indemnify the firms' clients, company President William Taylor and ex-CEO Parker "Pete" Petit.  Both men were sentenced to a year in prison in February after being convicted of one of two counts each at trial.

Freshfields and Kobre & Kim said in court filings that they had settled their claims against MiMedx.  Without disclosing the terms, the firms wrote in similar notices that their "claims in this proceeding do not make, and never were intended to make, a charge of deception against MiMedx or its general counsel, Butch Hulse, and that the filed action in this matter was a good faith fee dispute, which now has been swiftly and amicably resolved."

But Quinn Emanuel has yet to drop its claims in the lawsuit, and MiMedx took aim at the law firm in an answer filed in a related Florida state court legal fee dispute with the former executives.  In response to the men's counterclaims seeking additional fees to appeal their convictions, MiMedx accused Quinn Emanuel of overbilling Petit and Taylor and then unfairly attempting to collect from the company.

"Quinn Emanuel will have to explain its billing and expense practices," MiMedx wrote.  "These include staffing its trial team with over ten professionals, mostly from out-of-town despite having a large New York office within a few miles of the courthouse; staying in a luxury boutique hotel; having meals catered by a Michelin-starred chef (and supplementing them with separate orders of crab legs and sushi to boot); and charging MiMedx tens if not hundreds of thousands of dollars on a 'last-minute' motion to adjourn the trial that the court found 'border[ed] on the frivolous.'"

MiMedx said Quinn Emanuel has refused to provide it with invoices for its expenses in the case, and that it and the other criminal defense firms have already been paid more than $18 million for their work defending the former executives.  MiMedx's counsel told Law360 that the company has indemnified its former executives where required, but that the law firms can't force it to pay unwarranted fees.  "The company has been reasonable.  It paid pursuant to the indemnity," said Louis M. Solomon of Reed Smith LLP.  "It always reserved the right to make sure that the fees were reasonable, and even now with the convictions in place, we're not obliged to advance any more costs."

Quinn Emanuel's in-house counsel defended the firm's billing practices to Law360.  "Quinn Emanuel tried this case during the pandemic and achieved an acquittal for its client on the most serious count," Marc Greenwald, who is representing the law firm in the New York case, said.  "Quinn Emanuel expects to get paid at the rates that MiMedx agreed, and our work was outstanding.  All the charges were appropriate and reasonable."

MiMedx lodged its Florida state court claims against Petit and Taylor in January seeking permission to stop indemnifying the former executives upon sentencing, as well as reimbursement for millions of dollars in already paid fees.  Petit and Taylor fired back with counterclaims soon after they were sentenced, arguing in April that the company must continue indemnifying them in the upcoming appeal.  Quinn Emanuel, Freshfields and Kobre & Kim filed their separate New York state court suit in April, alleging that MiMedx has violated its contractual duty to pay Petit and Taylor's criminal defense costs.