Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Ethics & Professional Responsibility

Client Drops Attorney Fee Dispute Against Law Firm

May 16, 2022

A recent Law 360 story by Caroline Simson, “Taiwanese Co. Says It Won’t Arbitrate Fisch Sigler Fee Dispute” reports that a Taiwanese manufacturer of smartphone camera lenses is pressing a DC federal court to quash arbitration initiated by intellectual property boutique Fisch Sigler LLP seeking millions in additional fees for its work on a "meandering, inconclusive" and expensive patent lawsuit that settled last year.  Largan Precision Co. Ltd. told the court in the lawsuit filed May 10 that it never gave its informed consent to arbitrate the dispute with Fisch Sigler, which is set to be heard by the DC Bar Attorney/Client Arbitration Board, or the ACAB.

The company noted that while the DC Court of Appeals requires any attorney who is a DC Bar member to submit to arbitration before the ACAB if a client chooses that venue to pursue a fee dispute in matters with some connection to DC, there has never been any such rule for clients.  Largan argued that since it intends to challenge the validity of an arbitration agreement that was "quietly added" to its engagement agreement with the firm near the end of their negotiations, that question should be left to the court.

"[G]overning precedent makes plain that only a court, and not an arbitration panel, can decide the threshold issue of whether a valid agreement to arbitrate exists, unless there is clear and unmistakable evidence that the parties agreed to have that question decided by the arbitrators," the company wrote.  "There is nothing here to suggest that the parties ever discussed, let alone agreed to, the ACAB deciding the specific issue of arbitrability."

Largan alleges in the litigation that the firm has already gotten $4.5 million in "fixed fee" payments.  It's now seeking an additional $5.6 million in success fees — despite the fact that Largan agreed to settle the litigation in Texas due to the outcome of parallel litigation in Taiwan that Fisch Sigler had not worked on, according to the brief.  The underlying dispute for which Largan engaged Fisch Sigler involved another Taiwanese company called Ability Opto-Electronics Technology Co. Ltd., which Largan accused of misappropriating its trade secrets in 2013.

While litigation was ongoing in Taiwan, Largan hired Fisch Sigler to file a patent infringement lawsuit in the U.S. against Ability Opto-Electronics Technology and two other entities in Texas.  Largan alleges that while the lawsuit was ongoing, Fisch Sigler charged a fixed fee despite not doing all the work that was supposed to be included under that fee.  That included depositions and a hearing in mid-2020 that Largan says never took place.

Largan won some $50 million in the Taiwanese litigation in early 2021, and it subsequently approached Fisch Sigler about settling the Texas litigation.  The company claims that the litigation had gone poorly, and that there was no reason to continue with it at that point.  It was then that the firm attempted to collect the success fee "based on the resolution of a litigation in Taiwan in which it had no role — and despite achieving nothing resembling success from the meandering, inconclusive, yet very expensive litigation it had pursued for Largan against [Ability Opto-Electronics Technology] and others in Texas and, later, California," according to the suit.

Hagens Berman $31M Fee Objection Heads to Ninth Circuit

April 19, 2022

A recent Law 360 story by Dorothy Atkins, “Hagens Berman Must Forfeit $31M Fee Win, 9th Circuit Told” reports that an objector's counsel urged the Ninth Circuit to force Hagens Berman Sobol Shapiro LLP to forfeit or reduce a revised $31 million fee award for securing deals worth $205 million in multidistrict litigation over optical disk drive price-fixing, arguing that the law firm violated multiple professional rules of ethics.  During a hearing before a three-judge panel, objector Connor Erwin's counsel, Robert Clore of Bandas Law Firm PC, argued that Hagens Berman violated multiple California Rules of Professional Conduct in securing its eight-figure fee award before a trial court, including by never placing the disputed funds into a client trust account, despite class members' objections and appeals pending.

But U.S. Circuit Court Judges Morgan Christen and Carlos T. Bea asked how class members have been harmed by the firm's failure to hold the funds in a client trust account.  "What harm, what foul?" Judge Bea asked.  Clore replied that as a result, the class has been denied up to $600,000 in interest that would have been collected on the disputed money.  At least a portion of that interest should have gone back to the class when a Ninth Circuit panel vacated Hagens Berman's previous $52.8 million fee and expense award, the attorney said.

"Why should they be entitled to interest on fees that don't belong to them?" Clore asked the panel.  The trip to the Ninth Circuit is the latest chapter in a decade-old multidistrict litigation claiming that Samsung Electronics Co. Ltd., Toshiba Corp. and other disk drive makers participated in an industry-wide conspiracy to fix optical disk drive prices.

Hagens Berman beat out other firms for lead class counsel in 2010, and the firm later struck multimillion-dollar deals to resolve the disputes.  After U.S. District Judge Richard Seeborg took over the case from U.S. District Court Judge Vaughn Walker, Judge Seeborg awarded the law firm $47.8 million in attorney fees for securing the settlements.  But in May 2020, a pair of Ninth Circuit panels vacated the fee awards after Clore argued before the appellate court that Judge Seeborg erred by keeping Hagens Berman's initial proposal for lead class counsel under seal and not properly taking it into account in awarding fees, among other objections.

On remand, in July, Judge Seeborg awarded Hagens Berman a revised $31 million fee, finding that the firm was entitled to a 20% premium on top of the $25.9 million it would be allotted under the firm's interpretation of the fee grid in its initial class counsel proposal.  Judge Seeborg also awarded Erwin's counsel $1.5 million in fees in September for their work helping to convince the Ninth Circuit to throw out the initial fee award.

But Erwin again challenged the fee award, with Clore arguing before the appellate court that Hagens Berman took too long to return the fees after the previous panel vacated the award, and did not place the funds in a client trust account, as required by professional rules of conduct.  Clore added that the trial court also erred in miscalculating the "starting point" for setting reasonable attorney fees on remand by using a flat rate instead of the sliding scale specified in the firm's initial proposal, resulting in an adjusted $25.9 million for the firm.  That amount should be $22.2 million, he said.

In light of the alleged violations, Clore asked the Ninth Circuit to send a message that class counsel are not immune to the California state bar's professional rules, and require the law firm to either forfeit its fees, or at the very least reduce the fees to keep in line with the firm's initial $22.2 million fee proposal.  As support, Clore cited the Ninth Circuit's 2012 decision in Rodriguez v. Disner, which held that a court has "broad equitable powers to … require an attorney to disgorge fees already received" for a serious ethical violation.

But class counsel Shana E. Scarlett, of Hagens Berman Sobol Shapiro LLP, argued that $31 million in fees is justified given the length of litigation and how fiercely the litigation was fought.  She also argued that the judge properly awarded additional fees on top of the initial $25.9 million proposal based on his discretion and understanding of the case.

But Judge Bea asked why the trial judge used a flat rate instead of the sliding scale methodology specified in the firm's initial bid proposal.  "Why isn't Judge Seeborg wrong in using a flat basis rather than a sliding scale basis based on the schedule we have before us?" the judge asked the attorney.  Scarlett replied that the firm's initial bid proposal was just one part of what informed the trial judge's decision. But Judge Bea appeared skeptical.

"You're talking about extrinsic evidence that was used by Judge Seeborg to interpret the writing, which we have before us?" Judge Bea asked.  "What factual evidence was there?  Are you saying that the written document is ambiguous and requires factual findings interpreted?"  Scarlett replied that the initial proposal was clear that the fees should use a flat rate, and not a sliding scale, but Judge Seeborg "went further and made the finding that we intended to be flat rate structure."

Brown Rudnick Accused of $22M in Overbilling

February 25, 2022

A recent Reuters story by David Thomas, “Ex-Client Wans $22 mln From Brown Rudnick, Saying Lawyers Overbilled” reports that an Austrian multinational construction company went on the offensive in a fee dispute with U.S. law firm Brown Rudnick, claiming the firm routinely overbilled it and demanding $22 million.  Brown Rudnick sued Christof Industries Global GmbH in September, alleging the industrial plant builder owed $8 million in attorney fees and interest from an international arbitration over a failed construction project.

But the law firm racked up more than $6 million in fees after promising in writing to not exceed a $2 million fee estimate, Christof alleged in its countersuit, filed in Boston federal court.  The law firm improperly overbilled, Christof alleged, saying one attorney billed more than $145,000 for 231 hours preparing to examine one witness.  The law firm billed more than 40 hours for assembling binders, the company said.

"In a number of time entries that verge on satire, Brown Rudnick attorneys even billed for drafting and corresponding about a proposal for their 'binder compilation strategy,'" Christof said in its suit.

The dispute stems from Brown Rudnick's work arbitrating a conflict arising from a Christof subsidiary's work as a contractor during the construction of a fiberboard production plant in South Carolina.  Christof said it signed an agreement with the firm so that its legal costs would not exceed $40,000 a month, plus a $200,000 retainer up front.  But it said Brown Rudnick billed more than $250,000, not including the retainer, just in its first month.

A panel awarded Christof more than $24.5 million in damages in the underlying arbitration, which was offset by about $20 million in advanced contract payments the company had received.  The final award was for $6.68 million.

Hagens Berman Defends $31M Fee Award Before Fifth Circuit

February 16, 2022

A recent Law 360 story by Emma Cueto, “Hagen Berman Defends $31M Fee Award at 9th Circ.” reports that Hagens Berman told the Ninth Circuit that its fee award from a $205 million settlement in a multidistrict class action over alleged optical disk drive price-fixing is valid, as the class member objecting to it chimed in too late and failed to prove the firm acted improperly.  In a brief, Hagens Berman Sobol Shapiro LLP said that objector Connor Erwin, who previously convinced the Ninth Circuit to throw out the first fee award in the case, was attempting to challenge the settlement itself under the guise of challenging the award, that he had not demonstrated the revised $31 million fee award was unreasonable, and that he had no basis for accusing the firm of misconduct for not immediately returning the vacated award.

Erwin's arguments, the firm said, were based on poor assumptions and misunderstandings of the law.  "Erwin's main theory is that class counsel should be paid nothing despite recovering $205 million in settlements on antitrust claims the district court held worthless on the merits," the brief said.  "For his Draconian remedy, however, Erwin's charged characterizations ... entirely assume what he fails to prove."

The dispute stems from a decade-old, multidistrict litigation claiming that Samsung Electronics Co. Ltd., Toshiba Corp. and other disk drive makers participated in an industry-wide conspiracy to fix optical disk drive prices. Hagens Berman was appointed lead class counsel in 2010 and later struck multimillion-dollar deals to resolve the disputes.  After U.S. District Judge Richard Seeborg took over the case, he awarded the law firm $47.8 million in attorney fees for securing the settlements. 

But in May 2020, a pair of Ninth Circuit panels vacated the fee awards after Erwin's attorney argued before the appellate court that Judge Seeborg erred by keeping Hagens Berman's initial proposal for lead class counsel under seal, among other objections.

In July, Judge Seeborg awarded Hagens Berman a revised $31 million in attorney fees, finding it was entitled to a 20% premium on top of the $25.9 million it would be allotted under a fee grid in its proposal.  Judge Seeborg also awarded Erwin's counsel $1.5 million in fees in September for their work helping to convince the Ninth Circuit to throw out the initial fee award.

Hagens Berman told the appellate court that Erwin's latest challenge, and his claims that the firm acted improperly when it did not immediately return its initial $47.8 million fee after the Ninth Circuit tossed the award, are baseless.  Because the fee award was vacated — not reversed or modified — Hagens Berman was not ethically required to return the amount until a new fee award had been calculated, which it promptly did, it said.

First Circuit Affirms Sanctions in Long-Running Fee Dispute

February 10, 2022

A recent Law 360 story by Hailey Konnath, “1st Circ. Backs Sanctions Against Lieff Cabraser in Fee Tiff,” reports that the First Circuit left intact a Massachusetts federal judge's sanctions against Lieff Cabraser Heimann & Bernstein LLP in a fees spat, finding that the lower court didn't abuse its discretion in punishing the firm for misrepresenting a study regarding fee awards in similar cases.  A three-judge panel affirmed a decision from U.S. District Judge Mark L. Wolf, who sanctioned the firm for misrepresentations it made to the court while justifying a $75 million fee award for Lieff Cabraser and co-counsel at Labaton Sucharow LLP and Thornton Law LLP. 

The fees stemmed from their work securing a $300 million settlement with State Street Corp., and they were later slashed to $60 million following a lengthy investigation into allegations of overbilling and other improprieties.  The First Circuit said that Judge Wolf had provided notice to the firm that it was facing possible violations of Rule 11 in several instances, rejecting the firm's argument to the contrary.

"The court repeatedly explained to Lieff, over the course of two years, that it would consider whether any misconduct in the original fee application warranted sanctions — specifically flagging 'the accuracy and reliability of the representations' made by class counsel in its filings," the panel said.  It added that Lieff Cabraser "certainly responded as if it well understood what was at stake."  Thus, Judge Wolf met the important requirement of giving the firm both notice of the basis for a possible sanction and a fair opportunity to show why there shouldn't be any sanction, the First Circuit panel said.

The panel had hinted that the firm's appeal may be futile at oral arguments in November, saying that Judge Wolf may just double down if the appeals court held that he unfairly punished the firm.  Lieff Cabraser received far less flak from Judge Wolf than the other two firms but fought a $1.1 million reduction in its fees, arguing that reversing the rule violation finding is even more important than the money.

In the decision, the First Circuit noted that the district court had found that Lieff Cabraser and its co-counsel used a template for their fee declaration that misleadingly indicated that they regularly charged paying clients the rates supporting its lodestar.  The court also held that the firms failed to exercise reasonable care in contributing to a suspect $4.1 million payment to a lawyer in Texas and for misrepresenting a study regarding typical fees awarded in similar cases, according to the opinion.  Lieff Cabraser was formally sanctioned for misrepresenting the study, but not for the other criticisms, the panel said.

No other firm joined Lieff Cabraser in the appeal and no parties to the underlying litigation wanted to participate either, the First Circuit said.  That led Judge Wolf himself to try to lawyer up to defend his ruling.  However, the appellate court refused to let Judge Wolf participate and instead permitted amicus Hamilton Lincoln Law Institute to file a brief in the dispute.  While Lieff Cabraser didn't challenge the fee award in its appeal, it argued that if the appellate court set aside all of the district court's criticisms, it may be entitled to some money out of the funds awarded to the class if any funds are unclaimed, according to the decision.

But the First Circuit said it found no basis for deviating from the circuit's general rule that a district court's criticism of counsel unconnected to any challenge to a judgment or order on appeal is not itself reviewable on appeal.  The panel also rejected Lieff Cabraser's argument that it didn't sign the memorandum in support of the fee award underlying the dispute and thus cannot be held liable for any misrepresentations contained in it.  That contention "goes nowhere," the First Circuit said.  The firm's name and the names of three of its attorneys were placed on the signature page of the challenged papers and the firm advocated for the fee at a hearing, the panel said.