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Category: Fee Denial

State Judge: Hourly Rates Too Steep For North Carolina

September 2, 2022

A recent Law 360 story by Hayley Fowler, “Perkins Coie $2.35M Fee Bid Deemed Too Steep in NC Biz Spat” reports that a North Carolina state court judge has scrapped a request for more than $2.3 million in attorney fees by Perkins Coie LLP following a trial win, saying the requested rates are a far cry from what's typically charged in the state.  Superior Court Judge Adam Conrad said that the rates proffered by Perkins Coie — which exceeded $700 per hour — "dwarf(ed)" that of their local counsel at Womble Bond Dickinson LLP for their representation of a North Carolina-based knitting machine maker in a lawsuit accusing its CEO of self-dealing.

"These rates may be typical of firms and attorneys based in California and Texas but are significantly higher than rates customarily charged in North Carolina for cases of this type," he wrote.  The judge consequently denied the attorneys' request but said they can renew it once post-judgment motions and appeals are completed.

Perkins Coie's fee bid follows a multimillion-dollar jury verdict in March on behalf of high-speed knitting machine manufacturer Vanguard Pai Lung LLC and majority owner Pai Lung Machinery Mill Co. Ltd.  The case centered on claims that Vanguard's former CEO and president William Moody had "orchestrated a long-running scheme of self-dealing and other misconduct designed to benefit himself, his family, and his friends," Judge Conrad wrote.

Moody had also filed counterclaims accusing Pai Lung of forcing him out of the business and seeking to have the company dissolved, the judge said, most of which were resolved before the case went to trial.  The jury ultimately issued a verdict for Vanguard and Pai Lung on their claims for fraud, conversion, embezzlement, unfair and deceptive trade practices and unjust enrichment. Court documents show the resulting damages totaled more than $3.4 million.

Shortly thereafter, attorneys with Perkins Coie and Womble Bond submitted their request for fees, saying state law in North Carolina allows parties to collect reasonable attorney's fees in a civil action for embezzlement.  The request outlined $2.35 million for Perkins Coie and $240,499 for Womble Bond.

Judge Conrad said the motion was plagued by "several deficiencies," starting with the fact that state law only permits attorney's fees for the owner of property that was embezzled.  "Here, Vanguard is the owner of the property that Moody embezzled," he wrote. "Pai Lung is not the owner and had no claim for embezzlement.  Plaintiffs have offered no reason why Pai Lung should recover attorneys' fees based on a claim it did not assert and property it did not own."

The law also does not allow parties to collect fees for claims unrelated to embezzlement unless they are "inextricably interwoven," the judge said, which he determined was not the case here.  He also said the requested dollar amount was unreasonable, pointing in particular to two of the highest billing rates from counsel with Perkins Coie that exceeded $1,000 an hour.

Though Judge Conrad ruled the attorneys could collect fees on behalf of Vanguard for the embezzlement claim, he said they didn't submit any billing records to justify the amount requested.  "It is therefore impossible to determine whether Vanguard's attorneys spent a reasonable or unreasonable amount of time drafting or responding to motions, preparing for and conducting depositions, and handling other discovery matters," the judge wrote.

Seventh Circuit Tosses $11M Attorney Fee Award

May 20, 2022

A recent Law 360 story by Hailey Konnath, “Seventh Circ. Throws Out $11M Fee Award For Bernstein Litowitz” reports that the Seventh Circuit vacated an $11 million fee award for Bernstein Litowitz Berger & Grossmann LLP's work on a $45 million settlement between waste disposal company Stericycle and its shareholders, finding that the district court "did not give sufficient weight" to points raised in a class member's objection.  The three-judge panel said the Illinois federal court overseeing the case should've more seriously considered evidence of related fee agreements, all the work that Bernstein Litowitz inherited from earlier litigation against Stericycle and the early stage at which the settlement was reached.

"The cumulative effect of these issues leads us to conclude that the district court's analysis did not sufficiently 'reflect the market-based approach for determining fee awards that is required by our precedent,'" the Seventh Circuit said.  The panel added, "We vacate the fee award and remand for a fresh determination more in line with what an ex ante agreement would have produced."

Objector Mark Petri appealed a 25% cut that Bernstein Litowitz got from representing investors claiming that Stericycle falsely inflated its financial results through fraudulent pricing.  In particular, Petri argued that the attorney fees were potentially inflated by a pay-to-play scheme and the case never proceeded past the motion-to-dismiss stage.

In the underlying case, lead plaintiffs Public Employees' Retirement System of Mississippi and the Arkansas Teacher Retirement System had pointed to briefing in a study conducted by Nera Economic Consulting.  According to that study, for securities class action cases that settled between 2014 and 2018 in amounts ranging from $25 million to $100 million, the median attorney fee award was 25%, like the share awarded to Bernstein Litowitz.

Bernstein Litowitz asked the court to approve its $11 million fee request in June 2019, and the court gave its blessing in May 2020.  But the Seventh Circuit said that the district court's analysis was incomplete.  Notably, the court didn't address a 2016 retention agreement between the firm and the Mississippi attorney general, under which Bernstein Litowitz was authorized to represent the Mississippi fund and seek a percentage of the recovery achieved for the class as compensation.  That percentage, however, was supposed to be limited to the percentage corresponding to the fund's estimated individual recovery, the panel said.

At oral argument, Bernstein Litowitz had said that the sliding scale structure outlined in that agreement only applies to the amount recovered by the fund itself, not to the total amount recovered by the class.  The Seventh Circuit said that interpretation is "improbable, arbitrary, unreasonable and not consistent with a class representative's fiduciary duty to class members."

Additionally, the district court's assessment of the risk of non-payment also didn't give sufficient weight to prior litigation involving Stericycle, litigation that substantially reduced the risk of non-payment, the panel said.  The court had found that the risk of non-payment was "substantial," but that earlier litigation demonstrating Stericycle's billing practices and other settlements signaled that class counsel was not actually taking on much risk, the Seventh Circuit said.

And on top of that, the court didn't properly consider just how early on in the litigation the case was settled, according to the decision.  At the very least, the district court should've considered whether the preliminary stage of the litigation warranted a reduction in the requested fee, it said.  The Seventh Circuit also remarked that it wasn't convinced the settlement was a good outcome for the class, but that neither Petri nor anyone else was challenging that.

Fifth Circuit Erases $500K Fee Award to Liberty Mutual

February 15, 2022

A recent Reuters story by Barbara Grzincic, “5th Circuit Erases $526,000 Fee Award to Liberty Mutual” reports that Liberty Mutual made a six-figure mistake by suing the Housing Authority of New Orleans for breach of contract rather than using the dispute-resolution process both sides had agreed to, a federal appeals court.  The 5th U.S. Circuit Court of Appeals overturned a $526,000 attorney fee award to Liberty, saying the dispute provisions of the contract remained in full force even after the Housing Authority had wrongfully terminated it.

The clauses – which required Liberty to submit a detailed written claim for payment to the Housing Authority and wait 60 days for a response – are plainly “meant to be binding even after a breach,” and Liberty’s claim to the contrary would render them “useless just when they are needed the most,” Circuit Judge Andrew Oldham wrote for the 5th Circuit panel.

“In other words, Liberty says the dispute-resolution clauses are binding — until a dispute arises. That can’t be right,” Oldham wrote. He was joined by Circuit Judges E. Grady Jolly and Jennifer Walker Elrod.  According to the opinion, Liberty had acted as the surety to Parkcrest Builders, which had an $11 million contract with the Housing Authority to build affordable units. The initial completion date was in July 2014.

On remand, the judge set the fee award at $526,000. The Housing Authority filed a second appeal last year.  This time the panel agreed with the Housing Authority, noting that its contract with Liberty authorized fee-shifting “upon the receipt by (HANO) of a properly presented claim.”  “Because HANO never received a properly presented claim, it cannot be liable for fees,” the 5th Circuit concluded.

Court Tosses Mootness Fee Request in Microsoft Merger Case

February 8, 2022

A recent Law 360 story by Dean Seal, “Court Boots Mootness Fee Bid in Microsoft Merger Challenge,” reports that a New York federal judge denied Monteverde & Associates PC's $250,000 fee request for representing an investor whose challenge to Nuance Communications Inc.'s $19.7 billion acquisition by Microsoft wasn't found to have benefited other Nuance shareholders.  U.S. District Judge J. Paul Oetken issued a brief order rejecting the firm's motion for what is commonly referred to as a "mootness fee," siding with Nuance's argument that investor Albert Serion hadn't met his burden of showing that his suit, one of several challenging disclosures in the proxy statement for Nuance's merger, "conferred a substantial benefit on Nuance shareholders."

Monteverde had argued that its suit prompted Nuance to disclose certain previously withheld metrics used by financial adviser Evercore Group LLC when doing a comparative analysis of Nuance and its peer companies, but the judge said the Nuance proxy statement already provided investors with a detailed summary of that analysis.  "Numerous courts have concluded that prompting disclosure of underlying valuation metrics does not confer a substantial benefit on shareholders and that their disclosure is not required by law," the order said.

The law firm had also claimed that it spurred Nuance to disclose price targets from research analysts that were previously withheld, but Judge Oetken said the range of price targets that were already included in the proxy statement "provides a fair summary of Evercore's work and '[q]uibbles with a financial advisor's work simply cannot be the basis of a disclosure claim.'"

The order will be warmly welcomed by opponents of mootness fees, a controversial merger litigation practice in which plaintiff firms file objections to mergers and other large-scale transactions, many on the premise of seeking additional disclosures, and then request fee awards after defendant companies "moot" the investors' allegations by providing those additional disclosures.  Nuance, which specializes in tools that enable speech recognition and transcription services for doctor's offices, slammed the law firm's fee request last fall as a "demand to be compensated lavishly for filing a meritless copy-cat lawsuit."

In its opposition to the fee bid, Nuance said the firm didn't submit billing records but had conceded that it put in less than 100 hours of work on the case, meaning its $250,000 request would come out to a minimum $2,500 hourly rate.

The firm represents investors who appealed the decision to the Seventh Circuit and argued in April 2020 that the district court has no jurisdiction to rescind attorney fees for claims that have been voluntarily dismissed.  The federal appellate court has not yet rendered a ruling in the case, according to court records.

$5.7M ‘Audacious’ Fee Request Reduced to $2.5M Fee Award

January 26, 2022

A recent Law 360 story by Bonnie Eslinger, “UHS Investors Get $2.5M Fees After ‘Audacious’ $5.7M Bid,” reports that shareholders who accused Universal Health Services Inc. of misleading them about an overbilling scheme and agreed to a settlement secured a $2.5 million attorney fee award, less than half of the $5.7 million request called "audacious" by the Fortune 500 company.  In a single-page order, Judge Joel H. Slomsky of the U.S. District Court for the Eastern District of Pennsylvania granted the plaintiff's motion for the $2,500,000 fee award and closed the case.

The order, he said, derived from a letter the court received just days earlier from counsel for the shareholder plaintiffs and the defendants, saying "the parties are pleased to report" an agreement had been reached on the matter of fees and expenses to be awarded.  The $2.5 million sum resolves the dispute and brings an end to the litigation, according to the letter from Michael Barry of Grant & Eisenhofer PA, representing the plaintiffs, and Matthew Madden of Robbins Russell Englert Orseck & Untereiner LLP, a lawyer for Universal Health Services.

"We thank the court for its indulgence as the parties continued their discussions," the letter added.  The united tone was a far cry from arguments the parties had exchanged after the investor plaintiffs had urged the court in November to approve a $5.7 million award along with final approval for a settlement the shareholders had reached with UHS.

UHS and its officers and directors in a Nov. 29 memorandum to the court contended that the attorney fees request should be denied or reduced to a far lower amount.  "That audacious request should be rejected," UHS said at the time, adding that compliance measures touted by the plaintiffs as resulting from the settlement were "in most cases exceedingly minor" and in addition to corporate governance measures that UHS already had in place.

UHS also pointed out that the fee awards presented by the plaintiffs' lawyers for other cases were not comparable because none of the cases had been dismissed with prejudice, as had been in this matter.  They also involved "far more substantial" reforms, UHS said in their November memorandum of opposition.  Counsel for the shareholders fought back, telling the court in a Dec. 13 memo that UHS can't say in one breath that the settlement is strong and should be finally approved but then object to the fee award.

According to the court docket, settlement discussions were held on Dec. 20 before Judge Slomsky, who followed up with an order on Jan. 18 asking the parties for an update on their talks about the award for attorneys fees and expenses.  After telling the court that the parties had engaged in "extensive discussions" to resolve the issue, the two sides announced the $2.5 million fees agreement to the court on Jan. 21.