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Category: Fee Denial

Court Can’t Bar Injured Workers’ Attorney Fees, PA Justices Told

September 24, 2021

A recent Law 360 story by Matthew Santoni, “Court Can’t Bar Injured Workers’ Atty Fees, Pa. Justices Told,” reports that a worker told the Pennsylvania high court that he should be allowed to seek attorney's fees from PennDOT after he won a workers' compensation case, arguing the lower court improperly shut the door on injured workers getting their employers to pay legal bills.  Arguing before the Supreme Court of Pennsylvania, an attorney representing injured PennDOT worker Vincent Lorino said Commonwealth Court Judge P. Kevin Brobson's opinion misstated that workers' compensation judges "shall" deny fees when an employer's challenge of a worker's claim for benefits is reasonable, when the law says "may."

"I was surprised at how blunt and direct Judge Brobson's opinion was, when it said 'despite the General Assembly's use of the word may, this court has always interpreted Section 440' this way," said George Badey of Badey Sloan & DiGenova.  "You can't do that, respectfully.  The courts can't do that."  Badey asked the justices to rule that Lorino could still ask for PennDOT to pay his legal fees and that the lower court had run afoul of the Statutory Construction Act in substituting its own wording for the legislature's.

According to court records, Lorino sprained his lower back and hip on the job in 2016 and started getting regular steroid injections that allowed him to return to work.  PennDOT, which was covering his medical costs but providing no missed-work benefits, sought to terminate the medical payments in 2017 and offered a doctor's opinion that Lorino's work-related injury had fully healed.  A workers' compensation judge reversed PennDOT's denial in 2018 but ruled that Lorino had to pay his own legal bills because PennDOT's challenge to his claim had been reasonable.  On appeal to the Commonwealth Court, Judge Brobson said in August 2020 that the workers' compensation judge was right and that the courts had always interpreted that section of the law as denying fees unless the challenge was unreasonable.

In the argument to the high court, Badey said courts had to interpret the law as it was written and could not change the wording.  He said siding with his client would affect only a narrow group of workers like him who were still working and not getting wage benefits that could be split with an attorney as part of a contingency fee agreement.  Chief Justice Max Baer pressed Badey on whether reopening the possibility of fees would just shift the debate to whether an employer's challenge was reasonable, which would be up to the workers' compensation judge's discretion.

Article: Absent Explicit Statutory Language? The American Rule Still Applies

September 6, 2021

A recent article by Jiaxiao Zhang, “Absent Explicit Statutory Language? The American Rule Still Applies,” reports on attorney fee entitlement in patent litigation.  This article was posted with permission.  The article reads:

The U.S. Court of Appeals for the Federal Circuit vacated a district court’s award of attorney’s fees under the prevailing party rule but affirmed the district court’s denial of the U.S. Patent & Trademark Office’s (PTO) request for expert witness fees under 35 U.S.C. § 145. Hyatt v. Hirshfeld, Case Nos. 20-2321;–2325 (Fed. Cir. Aug. 18, 2021) (Hughes, J.).  The case involved prolific inventor Gilbert Hyatt and the latest chapter in his battles with the PTO.

Mr. Hyatt is known for his prolific patent and litigation filings (including hundreds of extraordinarily lengthy and complex patent applications in 1995 alone) and for often “’adopt[ing] an approach to prosecution that all but guaranteed indefinite prosecution delay’ in an effort to submarine his patent applications and receive lengthy patent terms.”  After the PTO denied some of his patent applications, Mr. Hyatt elected to pursue a district court appeal under 35 U.S.C. § 145 to challenge the PTO’s decisions.  The district court ordered the PTO to issue some of the patents and awarded Mr. Hyatt attorney’s fees as the prevailing party.  The PTO spent millions of dollars examining Mr. Hyatt’s applications and sought, under §145, reimbursement of its expert witness fees from the case.  The district court denied the PTO’s request for expert witness fees, holding that its shifting of “[a]ll the expenses of the proceedings” to the applicant does not overcome the American Rule presumption against shifting expert fees. The PTO appealed.

The PTO challenged both the award of attorney’s fees and the denial of expert fees.  In an earlier appeal by the PTO, the Federal Circuit held that the PTO correctly asserted prosecution laches as a defense against Mr. Hyatt, which “render[s] a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution that constitutes an egregious misuse of the statutory patent system under a totality of the circumstances.”  Accordingly, the Court vacated the district court’s decision ordering the issuance of patents, and in this appeal, the Court vacated the district court’s holding that Mr. Hyatt is entitled to attorney’s fees—since he is no longer the prevailing party—and remanded for further proceedings.

According to the statute, in an action under § 145, “[a]ll the expenses of the proceedings shall be paid by the applicant.”  However, the Federal Circuit agreed with the district court that the statutory language was not sufficiently explicit to overcome the presumption against fee-shifting under the American Rule and that litigants pay their own fees “unless a statute or contract provides otherwise.”  In doing so, the Court looked at statutory phrasing, dictionary definitions (e.g., Black’s and Webster’s), legislative history, relevant case law and similarly phrased statutes to confirm whether expert fees were specifically and explicitly contemplated as being included by US Congress in the statute.  The Supreme Court of the United States’ 2019 NantKwest decision (that “expenses” under §145 does not invoke attorney’s fees with enough clarity to overcome the American Rule) guided the Court’s analysis as did the many statutes that explicitly list “costs and fees” separately, suggesting that the legislature could have explicitly referenced fees should they have intended.  Having found this high bar to overcome the American Rule not met, the Court affirmed the district court’s denial of expert fees.

Jiaxiao Zhang is an associate at McDermott Will & Emery in Orange County, CA.

Article: CA Ruling Shows That Prevailing Party Wins Can Be Pyrrhic

August 22, 2021

A recent Law 360 article by Warren Jackson, “Calif. Ruling Shows That Prevailing Party Wins Can Be Pyrrhic,” reports on a recent court ruling in California on prevailing party issues in fee-shifting litigation.  This article was posted with permission.  The article reads:

In the 1992 buddy movie, "White Men Can't Jump," Rosie Perez's character, Gloria Clemente, said, "Sometimes when you win, you really lose, and sometimes when you lose, you really win."  It provides a rambling life lesson: Victories can be pyrrhic, and even taking an "L" may not make you a loser.

In an interesting and novel recent opinion that would make Gloria proud, a California state appeals court, in affirming an order denying attorney fees to a self-described prevailing party, reaffirmed in a commercial litigation context that determining who's prevailed and is entitled to fees is not always clear.  The case, Harris v. Rojas, was decided on July 20 in the Court of Appeal of the State of California, Second Appellate District.  Justice John Shepard Wiley Jr., who authored the opinion, also gave a special, well-deserved shout-out to the alternative dispute resolution profession.

It's not unusual, particularly in individual discrimination, harassment, and wage and hour cases, for the potential attorney fees award to be substantially greater than the economic damages, e.g., in cases with a plaintiff who is a low-wage earner or who has successfully mitigated damages.  As a result, the settlement value is not simply economic damages, but attorney fees as well.

The policy goals behind statutory awards of attorney fees or fee-shifting provisions are clear.  A virtual guarantee of attorney fees to the prevailing plaintiff, even if the damages are nominal, is a powerful incentive for the plaintiffs bar to represent employees who have fewer means and less power, but were allegedly treated unfairly.  To put a finer point on it, that incentive is also not diminished by what's generally the case — no downside of having to pay a prevailing employer's fees.  More on this dynamic and its impact on mediating cases later, but first, the opinion.

George Harris leased commercial space from Abel Rojas, and the lease had a clause for attorney fees to the prevailing party in the event of litigation.  Harris sued Rojas for breach of contract, among other claims, and Rojas cross-complained for ejectment, breach of contract and nuisance.  There was also a separate unlawful detainer case by Rojas against Harris.  After nearly three years of litigation and a seven-day jury trial, the jury awarded $6,450 to Harris on his breach of contract claim (rather than his requested $200,000). Rojas also was awarded $6,450 against Harris on his negligence claim, and Harris was awarded $500 on his negligence claim against Rojas.

The harm was apportioned at 15% for Harris and 85% for Rojas, so when all the math was done, a net judgment was entered in Harris' favor for $5,907.50 or $5,882.50 — a discrepancy between the actual math result and the judgment, which only the court noticed.  Thereafter, Harris moved for an award of attorney fees under the lease, seeking $296,744.68.  The trial court — California Superior Court in Los Angeles County — denied Harris' motion, ruling there was no prevailing party, citing the California Supreme Court’s 1995 decision in Hsu v. Abbara — if a party obtains a "simple, unqualified victory" in an action with an attorney fee clause, the court is obliged to make an award, but where there is "good news and bad news" for each party in the outcome, there's discretion.  Harris appealed this order.

Justice Wiley, also relying upon Hsu v. Abbara, seized on the obvious: "When the demand is $200,000 and the verdict is $6,450 or less ... the 'victory' is pyrrhic and nobody won."  He went on to clarify, "Reaping merely five or six thousand dollars after spending three years pursuing $200,000 drastically falls short of the goal." Thus, the trial court properly exercised its discretion.

Justice Wiley had an alternative and novel theory for affirming the denial of attorney fees.  Looking to the result in Rojas' unlawful detainer action, where he was awarded some $13,000 or $17,000, "depending on the moment at which one calculates the rent and interest," Justice Wiley aggregated the two results, opining, "This war had two battles.  Harris decisively lost the war."  As Gloria Clemente remarked, "Sometimes when you tie, you actually win or lose."

Writing what could be characterized as a nod to mediators everywhere, Justice Wiley dogmatically declared: Determining a party's true litigation objective is no mean feat.  When the case is strictly about money, the litigation objective is a dollar figure.  The true value of a case is a matter of opinion, and parties normally conceal their true opinion on this vital topic.  That is why we call that look a poker face.  What economists call a reservation price usually is a carefully guarded secret; if the other side perceives this closeted sum, it will offer that amount in settlement negotiations and nothing more. So each side typically bluffs while searching the other side for clues.  Successful mediators use sustained efforts in a confidential setting to extract this private information from both sides.  By discovering previously hidden common ground, a mediator can settle the case.  But this exploration is often difficult, which is why successful mediators can command premium rates.

As mentioned above, courts have waded into the waters of who's a prevailing party in employment cases over the years.  In the seminal Chavez v. City of Los Angeles decision in 2010, the California Supreme Court upheld a trial court's rejection of a fee application under California Fair Employment and Housing Act, where the plaintiff recovered damages of $11,500 — less than the $25,000 that could have been recovered in a limited civil case — and sought an attorney fee award of $870,935.50.

Noting that under FEHA, the prevailing employee should ordinarily be awarded fees unless special circumstances would render such an award unjust, the court held that where a plaintiff brings an unlimited civil case but fails to recover $25,000, the trial court has discretion under Code of Civil Procedure Section 1033 (a) to deny an attorney fees application.  While Chavez is often cited where a verdict is substantially dwarfed by the attorney fee application, in my opinion it has not shifted the landscape dramatically.  Fee applications can be denied in their entirety.  However, more often the result is a reduction in the fee request.

Turning back to the challenge of mediating cases where attorney fee awards are available to a plaintiff, we mediators routinely hear from defense counsel that some plaintiffs lawyers have been incentivized to increase the settlement value of cases by aggressively working them up.  Of course, what may seem like overworking a case to counsel can simply be opposing counsel's diligence and due care.  Justice Wiley seems to suggest successful mediators have a secret sauce for settling cases. While past success can portend future success, unfortunately, there's no guaranteed formula.  One key to success is a tactic that parties often employ — early mediation.  By mediating a case early before significant attorney fees have been incurred, the fee-shifting issue is less problematic.

Of course, early mediations have their drawback in terms of equality of pertinent information or discovery and analysis, so parties should evaluate the relative merits of proceeding early versus later-stage scheduling.  In addition, defense counsel often employ the strategy of threatening or filing a California Code of Civil Procedure Section 998 offer to potentially place the attorney fee award at risk if the recovery at trial is less than the offer and the offer was properly drafted.

My experience, however, is that employers prefer a settlement to a 998 offer, and plaintiffs prefer a reasonable settlement over protracted or scorched-earth litigation.  Finally, the only secret sauce in getting difficult cases resolved might be the four Ps: patience, perseverance, persuasion and proposals from mediators.  But all parties should recognize that the logic and holding of Harris v. Rojas have implications in the employment law context.  And the case should be a reminder that verdict size and prevailing party determinations are necessarily intertwined, and that Gloria Clemente was more lucid that we thought.

T. Warren Jackson is a mediator and arbitrator at Signature Resolution.

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."

Second Circuit Urged to Undo Attorney Fee Denial in IP Action

August 16, 2021

A recent Law 360 story by Tiffany Hu, “2nd Circ. Urged to Undo Fee Denial in Instagram Picture Fight”, reports that the Second Circuit was urged to overturn a New York federal judge's refusal to award attorney fees to a sports publication that beat a copyright infringement lawsuit over an Instagram image of former professional tennis player Caroline Wozniacki.  In a 23-page brief, United Sports Publications Ltd. said that U.S. District Judge Allyne R. Ross applied the wrong standard for determining whether photographer Michael Barrett Boesen's litigation claim was objectively reasonable and warranted attorney fees. 

Boesen had accused United of infringing his copyrighted image when it embedded an Instagram post from Wozniacki that featured the photo, but the judge in November found that the news site was protected by copyright law's fair use doctrine, though she declined to grant United's request for fees.  Under the U.S. Supreme Court's Kirtsaeng v. Wiley ruling on when courts should grant attorney fees in copyright cases, Judge Ross should have analyzed whether Boesen's claim was unreasonable "in light of an obvious instance of fair use," United Sports said.

Instead, the judge improperly focused on the reasonableness of the underlying merits of the infringement, when those claims were "never briefed and were not before the court" on United's motion to dismiss.  In doing so, the judge conflated the arguments made in Kirtsaeng, it said.  "[W]hile it is possible that the factual circumstances of the underlying case may be unique in light of the ever-changing nature of social media and proliferation of embedding, the legal arguments presented to the court by the parties were focused on the issue of fair use, and the court's inquiry of the relative reasonableness of Boesen's litigation position ought to have ended there," United wrote in its brief.

Moish Pelz of Falcon Rappaport & Berkman PLLC told Law360 in an email that he and his client "believe that the legal and factual circumstances of this case are exactly the type that the Supreme Court has commanded deserve an award of [attorney] fees."  "If the Second Circuit were to affirm a denial of fees in this instance it is difficult to imagine a case where a successful defense of a copyright troll case on the pleadings would be awarded fees," Pelz said.  "District courts simply need to award attorney's fee awards in circumstances like these so successful copyright troll defendants are able to fight fire with fire."