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Category: Fee Shifting

CSX Responds to $14M Fee Request in Norfolk Southern Case

May 18, 2023

A recent Law 360 by Piper Hudspeth Blackburn, “CSX Hits Back at $14M Atty Fee Bid in Norfolk Southern Case,” reports that CSX Transportation Inc. has urged a Virginia federal judge not to award Norfolk Southern Railway Co. and a smaller railroad $14 million in attorney fees for beating back its antitrust claims, arguing that Virginia's state law does not allow it.  In a memorandum, CSX also said that no contractual provision between the parties allows an award for attorney fees as Virginia law requires, and the Sherman Act does not mandate that a defendant obtain a fee award for prevailing on a suit.

According to CSX, Virginia law mandates that successful claims be supported by "a statutory or contractual right" to attorney fees.  Therefore, if at all possible, the only claims Norfolk Southern and Norfolk & Portsmouth Belt Line Railroad Co. can seek are those related to their defense of CSX's injunctive-relief request under the Virginia's business conspiracy law, CSX added.

However, CSX also noted that the railway companies did not cite "a single decision" in the history of the Virginia statute "in which a court has awarded a prevailing defendant attorneys' fees."  The years-long litigation ended in April, when U.S. District Judge Mark S. Davis sided with Norfolk Southern and Belt Line and dismissed the suit, finding that CSX's claims were time-barred.

The companies filed separate motions on May 3 in an effort to get the court to order CSX to pay their court costs and attorney fees.  While Norfolk Southern estimates its costs and fees at around $11 million, the Belt Line put forth a much lower estimate of $3 million.  Belt Line argued that CSX must pay because Virginia law says prevailing defendants in a conspiracy case where plaintiffs requested injunctive relief are entitled to costs and attorney fees.

"Whether CSX sought money damages or injunctive relief, its core set of facts was identical for all claims, and therefore the Belt Line's entitlement to costs and attorneys' fees encompasses its efforts to overcome them all," the interchange railroad said.  However, CSX disagreed Wednesday, claiming that the statute does not mandate that losing plaintiffs pay attorney fees.  Instead, CSX said, the law requires only "a potential discretionary fee award for those fees specifically attributable to the state-conspiracy injunctive-relief remedy."

Attorney Fee Entitlement Dispute in $1 US Airways Antitrust Win

April 26, 2023

A recent Law 360 by Piper Hudspeth Blackburn, “Sabre Says US Airways Not Entitled to Fees For $1 Win,” reports that Sabre urged a New York federal court to reject a magistrate judge's recommendation that the airline booking giant cover attorney fees for US Airways after a decade of antitrust litigation that resulted in a $1 jury award to the airline.  Sabre claims that U.S. Judge James L. Cott made a series of errors in his April 10 report, particularly in applying the Supreme Court's decision in Farrar v. Hobby, which established the standard for deciding whether a plaintiff prevailed in a civil rights case.  According to the report, Farrar applies only to the reasonableness of fee awards in civil rights cases and not mandatory fee statutes.

However, Sabre argued that the Supreme Court ruling shows that the "reasonable attorney's fee" due when a plaintiff obtains only nominal damages is no fee at all.  Courts have continued to apply this ruling in cases that include fee awards under the Clayton Act, Sabre continued.  US Airways, now owned by American Airlines, has insisted that the small amount of damages it received shouldn't affect its ability to recover costs and attorney fees.  Sabre also asked the court to reject Judge Cott's finding "that the meaning of 'reasonable attorney's fee' in the civil rights fee statute differs from the meaning of identical language in the Clayton Act."

In his report, Judge Cott pointed toward a Second Circuit decision on United States Football League v. National Football League because it contained issues nearly "identical" to this one.  In that case, the court had to determine whether a plaintiff is entitled to reasonable attorney fees "after decade-long antitrust litigation resulting in a $1 jury verdict only on Sherman Act Section 2 grounds."  Not only did the court decide that the plaintiff could recover attorney fees, it "further explained that civil rights cases are inapposite as they concern discretionary awards of fees, while Section 4 mandates them," the report continued.

However, Sabre said that the USFL decision is actually in line with its position, claiming that it bolsters the argument that Congress intended that the amount of fees awarded under "the civil rights statute 'be governed by the same standards which prevail in other types of equally complex Federal litigation, such as antitrust cases.'"

Ninth Circuit Rejects Fee Entitlement in Tribes’ Gambling Case

April 25, 2023

A recent Law 360 story by Dorothy Atkins, “9th Circ. Won’t Award $1.1M Atty Fee in Tribes’ Gambling Case,” reports that the Ninth Circuit rejected a request by five Native American tribes for $1.1 million in attorney fees for recently winning a federal Indian Gaming Regulatory Act suit against California for the state's bad faith negotiation tactics, finding that the federal statute does not authorize fee-shifting.  In a 14-page opinion written by U.S. Circuit Judge Daniel A. Bress, a three-judge panel rejected the tribes' argument that their suit, which only asserted federal claims under the IGRA, implicates "substantial and significant issues of state law" and entitles them to fees.

"We hold that because the plaintiffs prevailed on a federal cause of action, they are entitled to attorneys' fees only if federal law allows them," the opinion says.  "Because it does not, we deny the tribes' fee request."  The opinion noted that although the tribes "creatively" argue that the case is "highly unusual" because state law was supposedly "central and essential" to win its dispute, the tribes aren't entitled to fees because they only asserted and prevailed on a federal claim.

The panel additionally rejected the tribes' arguments that their position is supported by the Ninth Circuit's 2018 decision in Independent Living Center of Southern California Inc. v. Kent, which awarded attorney fees notwithstanding the fact that the action was not based on a state law cause of action.  The opinion pointed out that the facts of Kent were "somewhat knotty" and distinct from this litigation.

"Kent did not suggest that the prevalence of a state law backdrop could somehow justify applying a state law attorneys' fees provision to a purely federal claim," the opinion says.  "It did not create some kind of 'exception' to the usual rules, as the tribes maintain."

The Ninth Circuit's decision is the latest development in a lawsuit that was filed in January 2019 by the Chicken Ranch Rancheria, Chemehuevi Indian Tribe, Blue Lake Rancheria, Hopland Band of Pomo Indians and Robinson Rancheria, claiming that the state of California had acted in bad faith when the state allegedly insisted that the tribes negotiate unrelated topics for their soon-to-expire gambling agreements, which are required to operate games.

In the wake of that decision, in September, tribal leaders sought to recoup $1.1 million they estimated spending on the litigation, noting that the attorney fee estimate was based on reduced rates and reflected a proper "lodestar" amount, or the number of hours reasonably spent on the litigation and a reasonable hourly rate for the attorneys.  That calculation, on the high end, proposes $980 per hour for Lester J. Marston of Rapport and Marston, which represents all the tribes except the Blue Lake Rancheria.  At the low end, it proposes $300 per hour for Marston's son, a law clerk at the same firm, the tribes argued.

But California fired back in October, arguing that the tribes are ineligible to recover fees under the IGRA, because the federal statute contains no provision for recovering such expenses.  Even if the tribes were eligible to recoup such expenses, the state argued that it is immune from furnishing those funds under the 11th Amendment of the U.S. Constitution because it never waived its sovereign immunity in the litigation.

In the opinion, the panel concluded that the tribes aren't entitled to fees but also noted that the prior panel decision also found that California explicitly consented to the federal court's jurisdiction over the dispute, and therefore the state can't now invoke its sovereign immunity defense in avoiding fees if they had been allowed under the IGRA.

Warner Bros. Defends Fee Entitlement in Motor Trend Case

March 30, 2023

A recent Law 360 by Rose Krebs, “Warner Bros. Discovery Defends Fee Bid in Motor Trend Case,reports that Warner Bros. Discovery Inc. has rejected arguments from the minority owner of Motor Trend Group LLC that it doesn't have to pay Discovery's costs of defending litigation over an appraisal dispute, urging the Delaware Chancery Court to rule that the fees are justified.  In a filing made public, Warner Bros. Discovery and two subsidiaries assert that they have shown that they are entitled to reasonable attorney fees per an agreement with Global Automotive Holdings LLC.

The Discovery companies say in the filing that they have "prevailed on every issue that was actually litigated to a judgment," and thus, Global Automotive is obligated to pay its fees.  The amount being sought to pay for services for the Discovery defendants has been redacted in court filings.

"Global Automotive does not contest the reasonableness of the rates defense counsel charged or the hours they recorded," the Discovery companies assert.  "Instead, Global Automotive contends that the agreement does not provide for fees in actions seeking only equitable relief; defendants did not prevail; and that Global Automotive should get a discount because it did not lose even more decisively. None of those arguments has merit."

In a fee-shifting motion made public last month, Warner Bros. Discovery, Discovery Communications LLC and Discovery Extreme Holdings LLC asserted that per a "controlling agreement," Global Automotive, which owns 32.5% of Motor Trend, is obligated to pay their attorney fees because they are the prevailing parties.  This is based on a ruling in January in which Chancellor Kathaleen St. J. McCormick found against Global Automotive on most of its claims against Discovery Extreme Holdings, which owns 67.5% of Motor Trend.

New York-based Global Automotive sued the Discovery companies in August to preserve its rights under a 2017 joint venture operating agreement, which gives the company a put right to cash out its minority share of Motor Trend at its fair market value.  Under the agreement, if the parties can't agree on the fair market value, a third-party appraiser would make a determination.

Global Automotive alleged that after it requested more information to help it decide whether to exercise its put right, Discovery Extreme and its affiliates engaged in "bad faith conduct" to corrupt the appraisal process and drive down the joint venture's valuation.  The principal disputes in the case were related to long-range plans, synergies, and damages from alleged violations of the agreement.

Global Automotive argued that all of it was essential for the appraiser to determine Motor Trend's fair market value and alleged that the Discovery companies tried to interfere and prevent the appraiser from seeing or considering the information.  It said Discovery Extreme revised the long-range plans for Motor Trend to reflect lower financial forecasts and then tried to prevent the appraiser from seeing earlier long-range plans that reflected better prospects.  Discovery Extreme denied the allegations and argued that the earlier plans were outdated, and were irrelevant anyway since the board never approved them.

In her ruling on cross-motions for summary judgment, Chancellor McCormick found mostly in favor of the Discovery companies.  She handed down a mixed decision on one count, ruling that each side could present whatever material and arguments they wanted to the appraiser, and it would be up to the appraiser to decide how much weight to give to the information.

In their original fees motion, the Discovery companies argue that the court granting "judgment in Global Automotive's favor on an issue does not alter the equation or change the conclusion that defendants won the overall dispute and, thus, are the prevailing parties."  The motion also asserted that "Global Automotive should be held to its contractual obligations and must pay defendants' fees as the prevailing parties."

Global Automotive asked the court to rule that the Discovery companies "are not entitled to attorneys' fees, or, in the alternative, should award defendants only an equitable portion of their fees that reflects their limited success."

"Taken as a whole," a certain provision of the agreement "clearly provides for fee-shifting in any action under the agreement, regardless of the remedy," their filing said.  Also, the Discovery companies asked the Chancery Court to reject Global Automotive's suggestion "that the court should use its discretion to reduce the award to defendants because of their 'partial success.'"  They argued that they "prevailed on all of the contested issues" and "are thus entitled to 'all' the legal fees and expenses they incurred."

First Circuit Deepens Circuit Split on SSA Fee Award Timing

November 3, 2022

A recent Law 360 story by Hayley Fowler, “Abortion Protesters Keep Atty Fees in 4th Circ. Picketing Row” reports that the First Circuit deepened a circuit divide on how long attorneys have to seek fees in district court after winning a Social Security Administration benefits dispute, adopting a "reasonable time" standard also used in the Tenth Circuit rather than a more rigid limit used in four other circuits.  The court affirmed a finding that the attorney in question waited too long under either approach to seek fees for successfully representing a client in a benefits dispute with the agency.

But in a matter of first impression for the circuit, the court said fee petitions brought under 42 USC § 406(b), for representation in court on disability benefits challenges must be brought within a reasonable time.  That puts the First and Tenth Circuits on one side of a divide opposite the Second, Third, Fifth and Eleventh circuits, which say such fee petitions must be brought within 14 days of judgment.

The problem with that 14-day time limit is that after a district court decides a benefits dispute, often the case is remanded to the agency for a benefits determination, making it impossible to know how much the client will recover and thus impossible to calculate a contingency fee, the court noted in an opinion written by Judge O. Rogeriee Thompson.  "In scanning the out-of-circuit precedent, we have observed that in practice, accomplishing justice in most § 406(b) cases seems to inevitably require some exercise of the district court's discretion and powers in equity," the court said.

Some of the circuits that follow the 14-day rule toll that deadline until the SSA makes a final benefits determination.  Others recognize the district court's power to grant discretionary relief from that strict deadline.  The First Circuit said it makes more sense to use the "reasonableness" standard applied to fee motions made under Federal Rule of Civil Procedure 60(b) – the rule for relief from a final judgment – rather than the 14-day time limit that comes from Federal Rule of Civil Procedure 54(d)(2), the rule for judgments that include attorney fees.

Attorney fees in disability benefits cases are not comparable to "loser pays" types of attorney fee awards typically addressed in motions for judgment under Rule 54(d)(2), the court said. Instead, the disability benefits statute allows for attorney fees of up to 25% of the awarded benefits, in what the First Circuit said "implies that the fees are awarded as a part of a district court's judgment for the claimant, rather than as a separate judgment allowing the party to recuperate costs underlying the action."  "Here it is clear to all parties that, in the event of success before the agency on remand, a subsequent amendment to the district court's judgment to award attorneys' fees is highly likely," the court said.

The dispute arose from Green & Greenberg's successful representation of a client in court and before the SSA who eventually was recognized to have a disability and awarded benefits.  The firm represented client Jose Pais on a contingency basis for 25% of his award.  After he won, the SSA set aside just over $29,000 for potential legal fees.  When the firm sought to collect its fees through the SSA, it claimed only about $7,000 for its work at the administrative level. During oral argument, the firm's David Spunzo told the court a paralegal mistakenly claimed 25% of the money available for fees, rather than 25% of the total award.

The SSA then several times notified the firm that it was continuing to retain about $22,000 from Pais's total award as the contingency fee.  By the time the firm sought the remaining amount of the available attorney fees for its work in court, 26 months after the SSA notified Pais of the benefits award, the district court determined it was too late.  The SSA did not take a position in the litigation on which approach to the timing of fee motions is correct, in-house counsel Timothy Bolen told the court during oral argument.  Bolen said the agency's role is to act as quasi-trustee for the claimant and reserve 25% of the award for potential payment of attorney fees, while the question of how much in fees to award is left to the district court.