Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fee Calculation Method

Quinn Emanuel Gets $185M in Attorney Fees in $3.7B ACA Win

September 16, 2021

A recent Law 360 story by Dave Simpson, “Quinn Emanuel Gets $185M Fee From $3.7B Win in ACA Suits,” reports that a U.S. Court of Federal Claims judge granted Quinn Emanuel Urquhart & Sullivan LLP's request for $185 million in fees stemming from two class actions against the federal government over so-called risk corridor payments under the Affordable Care Act, which resulted in a nearly $3.7 billion total win.  Judge Kathryn C. Davis said that despite the "at times hyperbolic" motions for fees, the law firm did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.  She granted its request for 5% of the winnings.

"At the end of the day, what is more important is that class counsel's legal theory resulted in a huge award to the classes here," Judge Davis said.  Quinn Emanuel was the first firm in the country to file a lawsuit on behalf of a qualified health plan insurer accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.

Health Republic Insurance Co. sued the government in 2016 and in July 2020 won a judgment for $1.9 billion alongside a subclass of insurers.  Common Ground Healthcare Cooperative sued the government in 2017 over similar claims and won a $1.7 billion judgment.  Those cases set off a firestorm of parallel litigation across the country, alleging similar claims.  Two of those cases ended up at the U.S. Supreme Court.  In April 2020, the justices reversed Congress' denial of $12 billion in "risk corridor" funding, which the ACA dangled as an incentive for insurers during the law's first three years of operation.

While Quinn Emanuel didn't work on those cases directly, the firm argued in its request for fees in July 2020 that the Supreme Court "adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step."  But in August 2020, objectors like Kaiser Foundation Health Plan Inc., UnitedHealthcare Insurance Co. and others argued that class counsel was entitled to just $8.8 million after a lodestar cross-check.

They said that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and argued that the firm was trying to walk away with an award that would work out to an hourly rate of $18,000 per attorney.  Class members signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the motion said, which the firm had eschewed.

Quinn Emanuel shot back in September 2020 that the $8.8 million award proposed would discourage attorneys in the future from taking on similarly ambitious cases.  The percentage model, which the insurers agreed to when choosing to join the class instead of pursuing individual claims, is favored by the courts for exactly this reason, the firm said.  According to the firm, despite the dozens of companies signing on to the fee objection, most of them Kaiser or United entities, almost 90% of the class members have not objected.

Judge Davis sided with the firm.  "These are not cases in which class counsel merely rode the coattails of other innovative litigators," she said.  The 5% fee is well below market value, and the objectors propose what would amount to a .22% fee, she said.  Further, the firm allocated 10,000 billable hours and might not have been paid for any of it had the outcome gone differently, the judge said.

Florida Supreme Court: No Interest on Attorney Fees

September 9, 2021

A recent Law 360 story by Carolina Bolado, “Fla. High Court Won’t Add Interest To Atty Fee Calculations,” reports that the Florida Supreme Court ruled that prejudgment interest should not be added to a judgment when determining if the judgment triggers a party's entitlement to attorney fees under the state's proposal-for-settlement statute.  In a 5-2 decision, the high court opted to stand by its precedent and found that prejudgment interest accrued after CCM Condominium Association Inc. made a settlement offer to Petri Positive Pest Control Inc. should not be included in the "net judgment" for the purposes of calculating whether CCM can be awarded attorney fees under the statute.

The court relied on its 2002 ruling in White v. Steak & Ale of Florida, which defined the plaintiff's total recovery as including only attorney fees, costs and prejudgment interest accrued up to the date of its settlement offer.  When considered against the text of the offer-of-judgment statute, the White ruling is not clearly erroneous, and the formula set out in that decision has been consistently applied by district courts around the state in the two decades since to exclude amounts that were not present on the date an offer is made, according to the opinion.

"We simply do not have a definite and firm conviction that this court's prior interpretation of the offer of judgment statute and the terms 'judgment,' 'judgment obtained,' and 'net judgment entered' is wrong," the high court said.  The ruling is a win for Petri, which was fighting CCM's attempt to recover attorney fees after prevailing in a dispute over a contract for termite extermination.  Under Florida's offer-of-judgment statute, a judgment needs to exceed a prior settlement offer by more than 25% to trigger an entitlement to attorney fees.

In this case, CCM had offered to settle its negligence and breach of contract suit against Petri for $500,000, but that offer was rejected.  After a trial in November 2016, a jury awarded CCM $551,881 in damages.  The trial court entered a judgment of $636,327, which included the jury's damages award plus $84,446 in prejudgment interest.  CCM then moved to recover attorney fees based on that figure, which exceeded its settlement offer by more than 25%.

Petri objected, pointing to the White decision, but the trial court disagreed and awarded CCM $73,579 in post-offer attorney fees and costs.  On appeal, the Fourth District Court of Appeal ruled that the prejudgment interest should not be included based on Supreme Court precedent, though the Fourth District said it would reach the opposite conclusion based on its own interpretation of the term "judgment entered" in the offer-of-judgment statute.

In a dissenting opinion, Chief Justice Charles T. Canady said the majority's result is "detached from the text of the statute."  "A fair reading of the text of the statute cannot support the interpretation articulated in the statements from White relied on by the majority," Justice Canady said.  "As the Fourth District explains, the authorities cited in White to support its discussion that is relevant to post-offer fees, costs and interest are cases interpreting a different statute, … which provides for the award of prevailing party fees to an insured in litigation against an insurer."

Petri's attorney, Thomas Hunker, told Law360 the language of the statute left much to the court's interpretation, but ultimately the court reached the right decision with an interpretation that is fair to the party receiving the offer.  "A contrary holding would've required an impossible amount of speculation on what might occur later in litigation, which would be unfair to a party who faces the prospect of sanctions when trying to evaluate whether or not to accept or reject a statutory proposal for settlement," Hunker said.

Article: New Attorney Fee Law May Be Boon To Florida Property Insurers

September 1, 2021

A recent article by Christine Renella and William Zieden-Weber, “New Fla. Atty Fee Law May Be Boon To Property Insurers,” reports a new law in Florida that amends Florida's attorney fees statutes, Sections 626.9373 and 627.428 of the Florida Statutes, as they apply to property insurance disputes.  This article was posted with permission.  The article reads:

Florida S.B. 76, designed to curb first-party property insurance litigation in Florida, took effect on July 1.  While the bill addresses several critical property insurance topics including roof-surface reimbursement schedules, regulation of contractors, proper notice, the right to inspect, and determination of whether abatement is applicable, the crown jewel of the bill amends Florida's infamous attorney fees statutes, Sections 626.9373 and 627.428 of the Florida Statutes, as they apply to property insurance disputes.

Background to Florida Attorney Fees Statutes

In most jurisdictions in the U.S., each party to insurance litigation pays its own attorney, regardless of the outcome of the litigation.  In fact, a court may only award attorney fees to the prevailing side if authorized by statute or agreement of the parties to the litigation.

Florida, however, is one of the minority jurisdictions that has allowed an insured to recover his or her own attorney fees if the insured prosecutes a lawsuit to enforce an insurance policy for more than a hundred years.  Florida has kept some version of this law on the books since 1893, and it reads in pertinent part as follows, with the underlined text added by S.B. 76:

Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which the recovery is had.  In a suit arising under a residential or commercial property insurance policy not brought by an assignee, the amount of reasonable attorney fees shall be awarded only as provided in s. 57.105 or s. 627.70152.

The Florida Supreme Court has historically supported the need for fee and cost reimbursement in the realm of insurance litigation as being deeply rooted in public policy.  The court has given the Legislature deference in this area of the law, recognizing its sentiment on how essential it is to level the playing field between the economically advantaged insurance companies and the individual citizen.  However, practicing Florida attorneys have seen a perversion of this intent play out in recent years.  In first-party coverage disputes specifically, an insured would often file a lawsuit in instances in which the dispute was simply over the scope of damages.

This created a situation in which, as long as an insured prevailed in its lawsuit with a judgment greater than any amount of the insurance proceeds originally paid by the insurer — even $1 — the insured would be entitled to attorney fees.  As such, insureds were often able to leverage larger settlements using the attorney fees statutes.

Section 627.70152 Notice Requirement

Florida's new legislation effectively puts an end to the attorney fees statutes as they pertain to property insurance, which historically established a strong presumption that using a "lodestar fee" to compensate attorneys for property insurance claims was considered sufficient and reasonable.  This presumption is only rebutted in rare and exceptional circumstances with evidence that competent counsel could not have been retained in a reasonable manner.

Instead, S.B. 76 creates a new statute, Section 627.70152, which establishes a scheme for attorney fees structured around a presuit notice requirement.  Now that S.B. 76 has passed, the path to attorney fees for an insured is less certain, and insurers are hopeful that the vast number of suits filed against insurers in Florida every year will decrease.  Specifically, the burden has essentially shifted to an insured to prove entitlement through the imposition of a judgment between 20%-50% higher than the presuit settlement offer in order to obtain fees.

Additionally, the notice requirement provides an additional hurdle for insureds in that a suit may not be filed prior to the issuance of a written notice of intent.  Specifically, the notice statute imposes a notice requirement on claimants, stating that as a condition precedent to filing suit under a property insurance policy, a claimant must provide the insurer with written notice of intent to initiate litigation.  Under the notice statute, this notice must be served by certified mail, return receipt requested, or electronic delivery at least 10 days before filing suit, but may not be served before the insurer has made a coverage determination under Section 627.70131.

The immediate effect of the statute is the prohibition of suit prior to a coverage determination being issued.  This alone will lead to less litigation as insurer's often file suit before the conclusion of the investigation of a claim and issuance of a coverage determination.  Additionally, the statute requires that each notice include the following information: (1) that the notice is being provided pursuant to this section; (2) the alleged acts or omissions of the insurer giving rise to the action;and (3) that the notice has been provided to the insured if represented by an attorney.

In cases in which the notice is provided following a denial of coverage, the notice must include an estimate of damages.  In cases in which the notice is provided following something other than a denial of coverage, the notice must include the disputed amount of damages and a presuit settlement demand itemizing damages, attorneys fees and costs.  The online form used to submit the notice can be found on the civil remedy and required legal notices webpage of Florida's Division of Consumer Services.

The additional information required per the statute including the disputed amount of damage and presuit settlement demand in cases other than a denial of coverage will provide insurers with the requisite information necessary to evaluate the claim prior to suit being filed.  Prior to the imposition of the statute, insureds were able to file suit at anytime without having ever provided insurers with supporting documentation that in many cases would obviate the need for suit altogether. However, after July 1, insurers are in a position to address disputed damages in an attempt to avoid lawsuits.

In response to the notice, an insurer is now required to respond in writing within 10 days.  Specifically, in the response to a notice regarding denial of coverage, the insurer must either (1) accept coverage, (2) deny coverage, or (3) assert the right to reinspect the property within 14 business days.  Conversely, in the response to a notice regarding something other than denial of coverage, the insurer must respond by making a settlement offer or requiring the insured to participate in an appraisal process.

As a check and balance on the presuit process, the notice statute allows a court to dismiss without prejudice any suit in which the claimant failed to provide notice or the presuit period did not properly conclude, again reducing the amount of frivolous lawsuits that insurers are forced to defend.  If a claimant commences an action in a Florida court based upon or including the same claim against the same adverse party that such insured has previously voluntarily dismissed, then the court may order the insured to pay the attorney fees and costs of the adverse party resulting from the action that had previously been voluntarily dismissed.

Finally, the notice statute states that the notice and other documentation is admissible as evidence in a civil action or an alternative dispute resolution proceeding.  The notice and submissions requirements do not limit the evidence of attorney fees, damages or loss that may be offered at trial.  They also do not relieve any obligation that an insured or assignee has to give notice under any other provision of law.  While the notice statute imposes more stringent requirements on policyholders, the effect in practice will likely be a dramatic reduction in the amount of suits filed.  Accordingly, litigation costs for insurers will decrease, while meritorious suits are likely take less time to filter through the courts.

Section 627.70152 Attorney Fees Scheme

Most importantly, the notice statute sets a forth a new scheme for calculating the amount of attorney fees allowed to be awarded, which is based on the difference between the amount ultimately obtained by an insured compared to the amount originally in dispute.  That difference can then result in three distinct scenarios:

  1. The claimant does not recover attorney fees — when the difference between the amount obtained by the insured and the presuit settlement offer by the insurer is less than 20% of the amount in dispute during the presuit notice period, a claimant may not be awarded attorney fees under Sections 626.9373 and 627.428.
  2. The claimant recovers 20%-50% in attorney fees — when the difference between the amount obtained by the insured and the presuit settlement offer by the insurer is between 20%-50% of the amount in dispute during the presuit notice period, a claimant may recover the same percentage of attorneys fees under Sections 626.9373 and 627.428.
  3. The claimant recovers all attorney fees — when the difference between the amount obtained by the insured and the presuit settlement offer is greater than 50% of the amount in dispute at the presuit during the presuit notice period, a claimant the full amount of attorney fees under Sections 626.9373 and 627.428.

With the applicability of fees now based on this mathematical formula, courts will have considerably less discretion to order payment of attorney fees and costs, and insureds will be less inclined to race to the courthouse.  Many Florida practitioners hope that the notice statute will tip the scales in favor of a more balanced scheme for the imposition of attorney fees and costs.  While previously insureds were able to recover fees upon the rendition of a judgment alone, now insureds will be forced to show entitlement through the imposition of a judgment at least 20% higher than the amount in dispute during the notice period.

Conclusion

In conclusion, the notice statute is expected to bring much needed change to the landscape of property insurance litigation in Florida by adding some semblance of balance to a historically hostile environment for property insurers.

Eighth Circuit Tosses $1 FLSA Attorney Fee Award

August 19, 2021

A recent Law 360 story by Max Kutner, “8th Circ. Axes $1 Atty Fee Award in FLSA Case”, reports that counsel for workers who settled overtime claims against a pipe manufacturer are set to get more attorney fees after the Eighth Circuit ruled that an Arkansas federal court's award of a single dollar was wrong, finding the judge hadn't made the required calculations.  In its opinion, a split three-judge panel vacated the fees award and remanded the Fair Labor Standards Act case against Welspun Pipes Inc. and related entities, saying that regardless of any concerns about attorney conduct, the lower court hadn't done necessary calculations when slashing the requested $96,000 to $1.

The lower court hadn't calculated the lodestar, which is the number of hours counsel worked times the prevailing hourly rate, the majority said.  The lower court had properly determined the prevailing rate at the attorneys' firm, but it hadn't multiplied the rate by the reasonable number of hours worked, the judges said.  "Without any reference to the lodestar amount, the district court said it awarded $1 because it could not award any less," the majority said.  "Without a supporting rationale based on the lodestar calculation and reduction, this was [an] error."

Under circuit precedent, a district court must calculate the lodestar in an FLSA settlement, the majority said.  When the lodestar is determined, "it is unlikely that a $1 attorneys' fee is reasonable," given that the counsel obtained a nearly $270,000 payout for the workers, the judges said.  Even the $25,000 fee award the lower court said it would approve if the $1 amount was shot down on appeal was not based on a lodestar calculation, the majority said.  The opinion added that any reduction to the award because of a party's conduct should come after the court determines the lodestar.

But the majority pushed back against the workers' argument that the district judge had also wrongly denied an earlier settlement motion on the grounds that the parties had not negotiated the wage claim settlement and attorney fees separately.  The lower court had said circuit precedent required the separate negotiations.  "There is sufficient evidence in the record for the district court to have determined that the wage claim and the attorneys' fees were not separately negotiated," the majority said.  The opinion cited emails showing the parties at certain points discussed the amounts as a single lump sum, among other factors.

The panel also denied the workers' request to reassign the district judge, saying they hadn't shown the judge was incapable of determining appropriate attorney fees due to a clear bias against them.  In a dissenting opinion, U.S. Circuit Judge Steven M. Colloton said the lower court had been right to issue the $1 award due to attorney conduct when negotiating the wage claim amount and the fee amount.  The focus on the lodestar issue is "misplaced," Judge Colloton said. "The whole point of the district courts' order is that the lodestar amount of fees was immaterial on this record, because counsel's egregious conduct warranted an award of a de minimis fee, if any at all."

The dispute stems from a proposed class and collective action that workers Anthony Vines and Dominique Lewis filed in August 2018.  They alleged that Welspun shorted manufacturing plant workers on overtime pay by not factoring bonuses and other incentives into the rate calculations, in violation of the FLSA and Arkansas law.  The two sides reached a settlement in which Welspun agreed to pay $211,666 to an initial class and an additional amount to a subsequent class.  The company also agreed to pay Sanford Law Firm $89,000 in fees and costs for the first class and an additional fee for the second class.

But in September 2019, the district judge partly denied the request, saying the court couldn't determine whether the deal was reasonable because information was missing.  In March 2020, the parties filed a new agreement, under which the first class would still get $211,666, the second class would get $57,673 and counsel would get $96,000 in fees and costs.  But the judge again denied the request, saying that the parties had failed to negotiate the wage claim and attorney fees separately.  Then that May, the two sides asked for final approval for only the wage claim, and the judge granted it.

The parties then asked for the $96,000 in attorney fees.  But in June 2020, the judge awarded just $1, citing the firm's "incorrigible" billing practices, such as "random increases" in hourly rates and rates that seemed "arbitrary and … unreliable."

Court Considers Sliding Scale for Attorney Fees in Antitrust Action

August 7, 2021

A recent Law 360 story by Celeste Bott, “Court Mulls Sliding Scale for Fees in Chicken Antitrust Suit”, reports that the Illinois federal judge overseeing price-fixing litigation against major broiler chicken producers said he's considering awarding fees on a sliding scale as class counsel seeks an interim payment of $57 million in attorney fees from a $155 million settlement.

U.S. District Judge Thomas Durkin, when granting final approval in June for a combined deal reached by a group of broiler chicken buyers and Tyson Foods and Pilgrim's Pride, held off on approving a bid by class counsel for that interim fee payment and for litigation expenses of $4.5 million, saying he may need more information before making a decision.

In a minute order, Judge Durkin said he was likely to apply a sliding scale approach in awarding class counsel fees, citing the Seventh Circuit's approach in In re Synthroid Marketing Litigation , where the amount being awarded fees went down as the settlement amount went up.  "Several courts in this district have applied the scale suggested in Synthroid.  The court's current intent is to apply such a scale to the fee award in this case," Durkin said in the order.

For example, that approach was used by an Illinois federal judge in awarding fees to class counsel who won a $34 million settlement on behalf of Chase Bank customers who claimed they were contacted on their cellphones without their permission, in one of the cases Judge Durkin cited in the district.  He ordered class counsel for the direct purchaser plaintiffs to file a brief addressing whether the application of a sliding scale is appropriate in the case and what the sliding scale should be if the court chooses to apply one, asking them to focus on any recent authorities on the issue, preferably in antitrust cases, the district and circuit.