Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Fees as Sanctions

Zurich to Pay Attorney Fees as Sanctions in Coverage Action

April 20, 2021

A recent Law 360 story by Mike Curley, “Zurich to Pay $1.5M For Sanctions in Fluor Coverage Suit,” reports that a Missouri federal judge ordered Zurich American Insurance Co. to pay $1.5 million in sanctions for disobeying court orders to turn over documents in a coverage dispute stemming from lead poisoning and pollution suits against Fluor Corp.  The sum is meant to cover the amount Fluor spent in its efforts to get certain documents relating to a period in 2010 while Fluor was fighting the pollution suits, which it said would have enabled it to settle the suits at a lower cost than the $300 million deal it initially struck.

Though Fluor had requested either $7.1 million or $15.4 million for the sanctions using two different methods of calculations, U.S. District Judge E. Richard Webber found that Fluor had both overstated the amount of work the sanctions should cover and its fees.  The order stems from a finding in December, in which Judge Webber sanctioned the insurer over its failures to find and turn over documents illuminating a period in 2010 when Fluor might have been able to settle the numerous suits.

At the time, the judge did not state the amount of the sanctions, but in a February filing ordered Zurich to pay Fluor's attorney fees and costs to obtain the discovery at issue, and Fluor filed a statement of fees, asking for between $7.1 million and $15.4 million.  According to the order, Zurich disputed the amounts, saying Fluor improperly included in its calculation fees for work performed unrelated to the discovery dispute, such as expert fees and briefing of unrelated motions.

Judge Webber rejected the $15.4 million sum, as it included all attorney fees Fluor incurred between February 2019, when the court issued its first sanction order, and the December 2020 hearing, and thus went against his order, which directed Fluor to calculate the fees related to the discovery dispute specifically.

While Fluor argued that the entirety of those 21 months of litigation would not have been necessary if Zurich had complied, the judge rejected the argument, saying it would be "excessively punitive," as it includes fees that would've been incurred regardless of Zurich's sanctioned conduct.

For the $7.1 million sum, which comes from a more itemized list of fees, the judge first slashed it by 60% to about $3 million, saying Fluor's proposed attorney fee rates of $840 and $930 per hour are far above the reasonable rates for the St. Louis market, while $350 per hour is more reasonable.  The $7.1 million request also includes work unrelated to the discovery dispute, Judge Webber said, and he cut it in half again, resulting in the $1.5 million sanction.

Zurich sued Fluor in March 2016, claiming it doesn't have to indemnify the engineering company after it reached a roughly $300 million settlement in 2014 over lead poisoning and pollution suits encompassing 63 cases — known as "Bronson/Smoger" cases — from residents in Herculaneum, Missouri, which is home to a lead smelter.

Fluor, in turn, countersued, saying Zurich's failure to strike a deal caused the construction and engineering conglomerate to go to trial on the residents' claims, resulting in the hefty verdict, when the insurer could have ended the case with a settlement of under $7 million.

Zurich had previously been sanctioned in February 2019 when Judge Webber found Zurich willfully didn't comply with his orders to turn over documents and eventually awarded $244,000. Later the same year, Fluor requested sanctions again, in response to which the judge ordered Zurich in August 2019 to turn over an extensive list of documents to Fluor.

Attorney Raises Concerns of Hourly Rates for K&L Gates

March 21, 2021

A recent Law 360 story by Rachel Scharf, “Atty in Failed WWE Case Blasts ‘Suspect’ K&L Gates Fee Bid,” reports that a lawyer who was previously sanctioned for his conduct in pursuing now-dismissed claims that World Wrestling Entertainment Inc. hid the risks of head injuries said that the company can't score more than half a million dollars in legal fees, calling K&L Gates LLP's billing rates "suspect."  Attorney Konstantine W. Kyros of Kyros Law Offices PC, who was sanctioned in 2018 for overly lengthy and frivolous filings, told a Connecticut federal judge that the nearly $574,000 fee requested by WWE and its CEO, Vince McMahon, is based on K&L Gates partner Jerry S. McDevitt's "patently unreasonable" $950 hourly rate, or nearly twice that of his co-counsel from Day Pitney LLP. Kyros also said McDevitt had overbilled for his time.

"WWE chose to provide this Court with suspect fees.  Mr. McDevitt spent far too much time performing basic work, numerous entries exist for nonrecoverable subjects, including research, drafting and conferencing over the crime-fraud exception, and over $20,000 for a PowerPoint presentation," Kyros said.  "These suspicious fees may require audit so the Court can properly discern any appropriate percentage reduction."

The fee fight stems from consolidated litigation dating back to 2014 alleging that WWE hid the risks of brain injuries from wrestlers, causing star wrestlers including Jimmy "Superfly" Snuka and Harry Masayoshi "Mr. Fuji" Fujiwara to develop chronic traumatic encephalopathy, or CTE.  The lawsuit was put to bed in September 2020 by a Second Circuit panel, after U.S. District Judge Vanessa Lynne Bryant tossed out a number of the actions in 2018 and ordered Kyros to pay WWE's attorney fees as a sanction for failing to heed the court's repeated warnings against frivolous filings.

Reached for comment, McDevitt denied Kyros' overbilling allegations and said the attorney is trying to duck paying for the time that WWE's counsel was forced to spend uncovering the "unethical tactics" that got him sanctioned.  "Mr. Kyros' deceptive and frivolous allegations are emblematic of his pattern throughout the case," McDevitt told Law360.  "He is now saying it should not have taken so much time and expense to expose his fraud on the court and serial misconduct, which he attempted to hide in mountains of deceptive and false pleadings and papers with the court."

But Kyros argued that WWE's fee application wrongly stretches the so-called Rule 11 sanction from 2018 in an attempt to recoup expenses far outside the order's scope, including an additional $39,000 for costs tied to applications following the Second Circuit appeal.

"This is not a sweeping sanctions award. It does not provide for all bills tangentially related to the sanctions motions," Kyros said in Friday's brief.  "WWE's fight to justify their unconscionable fee applications is too attenuated from the sanctioned conduct to warrant granting."  In a comment to Law360, Kyros said he is continuing to pursue the litigation, including by lodging a petition asking the U.S. Supreme Court to review the Second Circuit's dismissal.  "Our team is proud to have stuck with the wrestlers in pursuit of their important claims, and despite WWE's liberal use of misguided Rule 11 filings we have stayed with the case to its conclusion," Kyros said.

Judge Orders Attorney Fee Dispute to Arbitration

March 9, 2021

A recent Law 360 story by Emma Whitford, “Atty Must Arbitrate Fee Dispute With Racehorse Trader,” reports that a California judge ordered an attorney to arbitrate her dispute with a U.K. racehorse auctioneer company, her former client, over fees allegedly due when she represented the company accusing a financier of failing to pay for a racehorse.  Attorney Diana Courteau of California claimed in her April complaint that Tattersalls Ltd., the racehorse company, failed to pay her $73,255.34 for the months of February and March 2020, after firing her that March.  The six-claim complaint also accused Tattersalls and Bracher Rawlins LLP, the company's English counsel, of fraud and intentional misrepresentation.

But Tattersalls and Bracher Rawlins pushed back with a motion to dismiss, pointing to an arbitration provision in their contract with Courteau and claiming that she failed to give them proper notice under the California Mandatory Fee Arbitration Act, which lays out rules for the handling of attorney-client fee disputes.  "Here, it is undisputed that [the] plaintiff did not provide the mandatory notice form to defendants," U.S. District Judge Dolly M. Gee ruled, adding that the case will be stayed while arbitration goes forward.

"Moreover," Judge Gee added, "the agreement between plaintiff and Tattersalls contains a broad arbitration provision governing the very dispute at issue."  Specifically, a "dispute over legal bills that alleges breach of contract and related claims."  Courteau had argued that Bracher Rawlins could not compel her to arbitrate because the firm is not a signatory to her agreement with Tattersalls.  But Judge Gee disagreed, saying that Bracher Rawlins will be part of the arbitration as an "agent" of Tattersalls.

It is "well settled that a nonsignatory may compel a signatory to arbitrate based on agency principles," Judge Gee wrote, adding that Bracher Rawlins "was only in a position to direct or authorize plaintiff to perform legal work for Tattersalls in its capacity as Tattersalls' agent."  The order is just the latest development in the litigious fallout of Tattersalls' working relationship with Courteau, who represented the company in various matters from 2011 until March of last year.

Last June, in the case Courteau worked for Tattersalls until they fired her, U.S. District Judge Karen S. Crawford ordered Courteau to pay $31,772.62 in sanctions to defendants Gerald Wiener and his entity Finance California Inc., court records show.  The sanctions covered attorney fees for a two-day deposition last January in which the court found that Courteau coached the witness, as well as the cost of preparing the sanctions motion, court records show.

Wiener and Finance California had also sought termination sanctions, a serious sanction that would have ended the case, for Courteau's alleged "abusive" and "hardball" tactics.  But Judge Crawford denied that motion, saying the "worst of this conduct has been addressed" and "monetary sanctions have been imposed which should be enough to deter future misconduct."  Courteau has yet to pay the sanctions, court records show.  Attorneys for Wiener filed a notice of lien in the instant suit on Jan. 15.

In a Feb. 4 declaration to the court, Courteau urged Judge Gee to proceed with a trial for her fee dispute or, in the alternative, send the case to "global mediation" along with the Wiener case, which is currently on appeal to the Ninth Circuit.  "Plaintiff is willing to stipulate (notwithstanding meritorious grounds for appeal) that ... the $31,772,62 (sanctions) can be paid from fees owed by defendants," Courteau wrote.

Fee Request Reduced in Hospital Whistleblower Action

February 23, 2021

A recent Law 360 story by Nathan Hale, “Hospital Whistleblower’s $1M Fees Award Falls Short of Goal, reports that a whistleblower whose complaint against now-defunct hospital chain Health Management Associates Inc. helped the federal government secure more than $260 million to settle fraud charges will receive less than one-twelfth of his $12 million attorney fees request but may get more for himself, a Florida federal judge ruled.  Fort Myers-based U.S. District Judge John E. Steele's award of $952,480 to relator Bradley Nurkin, who was previously chief executive officer of the HMA-owned Charlotte Regional Medical Center, ended Nurkin's lengthy fight with HMA over how much Nurkin should recover under the fee-shifting provision of the False Claims Act.

"The Supreme Court has stated that 'a request for attorney's fees should not result in a second major litigation.'  That ship sailed long ago in this case," Judge Steele said.  In a 51-page order, the judge rejected HMA's argument that he should eliminate the fees award as a sanction against Nurkin for alleged "grossly excessive" or "outright fictitious" billing estimates, but also rejected several of Nurkin's arguments for how to calculate the proper amount.

"While the court will make reductions to the requested attorney fees and expenses, it will not do so as a sanction under its inherent authority," the judge said.  But the court also rejected the position taken by Nurkin and his lead counsel Edward Sanders that any award should go directly to Nurkin's attorneys.

"If Nurkin owes Sanders fees for services not encompassed by the FCA representation, then obviously he may use any of his resources, including these awarded fees, to pay his obligations.  However, this award of attorney fees does not belong to Sanders, but to Nurkin, as the relator," Judge Steele said.

"By all accounts, the recovery made by the government attributable to Nurkin's case was excellent.  The resulting dollar amount of Nurkin's share was substantial enough to result in a contingent attorney fee which was ample and did not need to be supplemented to arrive at a 'reasonable' amount," the judge added, explaining why this case was not one where the award belongs to the relator's counsel.

Nurkin, who received just under $15 million of the $93.5 million the government attributed to his specific case from the 2018 settlement — it had consolidated eight cases against HMA as a multidistrict litigation — already has paid his attorneys one-third of that amount, more than $4.9 million, under a contingency fee contract, according to the order.  In his motion, he presented the court with three figures based on it awarding fees using either a contingency fee basis, a lodestar or and enhanced lodestar method.

His request under the contingency fee basis came out the highest at more than $11.9 million, which represented 15% of the $79.5 million recovered by the government after paying Nurkin his share, but Judge Steele said the U.S. Supreme Court has ruled that courts should use the lodestar method to calculate a reasonable attorney fee in FCA cases.

Judge Steele also pointed out that Nurkin's contingency fee request, based on an expert witness's suggestion, would be grossly excessive, coming out to an hourly rate of $2,581 based on the number of hours he estimated his lawyers worked on the case — on top of the nearly $5 million they already received from him.  Under the lodestar method, in which a court determines a prevailing market billing rate and then multiplies that by a reasonable number of hours expended on the case, Nurkin requested $4.1 million and also suggested applying a multiplier of 2.23 for an "enhanced lodestar" request of $9.2 million.

Judge Steele rejected Nurkin's argument for $894 as a reasonable hourly rate, which he based on the case having been transferred to the District of Columbia, where it was settled, and instead found it should be based on Fort Myers, where it was first filed and the majority of his attorneys' work was performed.

The court instead concluded on a rate of $400 an hour for Sanders and co-counsel Robert Branning and $300 for Bethany Johnson, a younger attorney who helped prepare the application for attorney fees.  Judge Steele declined the HMA's request to reduce the hourly rate for work that a larger firm would have assigned to an associate, saying he would make any needed adjustments on the number of hours allowed.

On that front, Judge Steele broke down Nurkin's total request of 4,618.55 hours into the periods spent prior to filing the complaint, litigating prior to the government's intervention, after government intervention and on the attorney fee application, looking at specific tasks within those periods.  In total, the court approved 2,391.2 hours.  In terms of the time spent preparing the attorney fee application, the judge allowed 40 hours out of 457.8 asserted by Nurkin.

Judge Steele also denied Nurkin's request for a multiplier, saying he found the lodestar calculation "takes into account all factors which may be properly considered in this case."  The judge also declined to award prejudgment interest on the fees award. He awarded $7,232.70 in cost and expenses.  While far from the high point of Nurkin's request, Judge Steele's award still was several times the $229,544 suggested by HMA, according to the order.

Article: Since When Do Attorneys Have to Pay the Opposing Counsel Fees?!

February 20, 2021

A recent article by Deena Duffy, “Since When Do Attorneys Have to Pay the Opposing Counsel Fees?! reports on how attorneys can be held responsible for opposing counsel fees in Ohio.  This article was posted with permission.  The article reads:

Attorneys can be Held Responsible for Opposing Legal Fees if Discovery Rules are Neglected

This may be a question that has never crossed your mind.  If so, then good for you. It means you’ve likely never been faced with sanctions.  However, just because you haven’t, doesn’t mean you shouldn’t be aware of the possibility.

What happens when your client is served discovery requests that require review of a large number of documents prior to production to the other side, yet, your client refuses to be involved in the review?  What if not only does your client refuse to engage in the review, but also refuses to engage in any negotiations aimed at making the review more manageable?  Quite clearly, these actions likely won’t bode well for your client.  Even more unfortunately for you, as this client’s attorney, you yourself could land in hot water with the court, even resulting in you being personally responsible for a portion of opposing counsel’s fees.

As we all know, some jurisdictions are more lenient when it comes to discovery rules while others – not so much.  To that extent, it is crucial to be familiar with not only the discovery rules for the jurisdiction you’re in.  Moreover, the growing importance of becoming aware of the potential ramifications of not complying with those discovery rules cannot be understated.

In a recent case out of Second District Court of Appeals of Ohio, an attorney learned the hard way what happens when you let the client run the show.  As attorneys, our duty is obviously to be zealous advocates for our clients and to provide them with advice and guidance related to their case.  However, we need to recognize that during the course of our representation, it becomes our responsibility to ensure that the client is doing what the court has ordered.

This particular discovery and sanctions issue arose out of a civil action where Plaintiff alleged that Defendant engaged in tortious interference with business relationships, defamation, invasion of privacy, intentional infliction of emotional distress, and civil conspiracy.  During the discovery phase, which began in December 2017, the Defense served Plaintiff with several requests for document production.  In Plaintiff’s interrogatory responses, Plaintiff identified 68 witnesses as having information related to his claims.  Defense counsel proposed that Plaintiff provide his multiple email accounts and their passwords to the Defense’s expert, who would then run searches for the 68 witness names.  The Court approved of the plan; however, the Plaintiff did not, arguing that this approach did not account for the protection of privileged information.

On appeal, the case was remanded and the parties came to an agreement regarding production wherein the first search the expert would conduct would be the names of privileged individuals.  The results of that search would go to Plaintiff counsel to review and produce a privilege log related to those documents.  The remainder of the non-privileged emails that hit on the 68 witness names would then be produced.  Defense counsel provided a list of potential search terms to Plaintiff counsel, who had no objections or modifications to the list.  Herein appears to be the end of Plaintiff’s cooperation in the discovery process.

The search for privileged names returned roughly 3,200 emails.  Plaintiff’s counsel identified roughly 2,700 of them as actually being privileged and produced a privilege log, though woefully insufficient.  The second search, for the 68 witness names, returned roughly 50,000 emails.  Following the second search, Defense counsel requested that Plaintiff modify their discovery responses.  This would assist in modifying the search term list in an attempt to cull out potentially non-responsive results to make the potentially responsive population easier to manage.  Defense counsel didn’t hear anything from Plaintiff counsel for two weeks, at which point the Plaintiff refused to modify the discovery responses.  Plaintiff did suggest that Defense counsel somehow modify the search term list to be able to discern between “material” and “relevant” discoverable information, yet provided no suggestion on how this might be accomplished.  Plaintiff counsel also informed Defense counsel that Plaintiff blatantly refused to review any emails prior to 2013, arguing that there is no way they could be relevant.  Defense counsel continued attempting to negotiate with Plaintiff to methodically deal with the large population of emails; however, Plaintiff counsel never responded to Defense counsel’s suggestions.

After roughly 15 months, the Defense filed a motion for sanctions, arguing that Plaintiff (1) refused to provide a sufficient privilege log, (2) refused to review or provide any emails from pre-2013, (3) refused to review or provide any emails related to the second search, and (4) failed to respond or negotiate regarding any suggestions made by the Defendant to move forward in the discovery phase.  At the sanctions hearing, Plaintiff counsel wasn’t in any position to help himself or his client.  Plaintiff admitted that he didn’t review a single email out of the 50,000 that resulted from the search, saying that he glanced at the list but found it overwhelming, repeatedly stating that the expert never actually ran the search terms.  In response to being asked about the pre-2013 emails, Plaintiff said, “I did not even [expletive] know the defendant during that time and it wasn’t relevant to this particular action.”  The Defense claimed they were relevant for two reasons – first to prove that Plaintiff routinely engaged in vexatious litigation, and second to prove that Plaintiff had been engaging with the witnesses as early as 2010 due to his involvement with the Defendant’s church business.

Eventually, Judge Hall granted the sanctions motion, finding Plaintiff in contempt for failing to comply with the December 2018 agreed discovery order.  A few months later, a hearing was held on the matter of attorneys’ fees, of which the court ordered Plaintiff and Plaintiff counsel, jointly and severally, to pay Defense counsel’s attorney fees, totaling $11,835.00.

In its analysis, the Court routinely returned to the fact that Plaintiff not only failed to review any of the documents, but that he blatantly refused to do so.  The Court noted that the discovery order to which the parties had agreed did not give Plaintiff the option to choose to review the emails but rather the duty to do so.  Plaintiff alleged more than once that the list of documents to review was overwhelming; however, Plaintiff refused to engage in any negotiations with the Defense regarding potential modifications to make the population more manageable.

In Ohio, the civil rules allow for an attorney to be sanctioned for failing to comply with discovery orders per Civ. R. 37(B)(3).  The Court, in granting sanctions against Plaintiff counsel, argued that Plaintiff counsel continued to repeat baseless allegations about Defense counsel’s motives and that it was “especially egregious” for Plaintiff counsel to continually blame the Defendant for Plaintiff’s negligent conduct regarding discovery.

This case, while unfortunate for Plaintiff and Plaintiff counsel, should serve as a reminder to attorneys of the need to be genuine in their efforts regarding discovery.  It should go without saying that, due to attorney ethics and candor requirements, attorneys are responsible for following orders issued by the court and that failure to do so could result in the misbehaving attorney being found personally responsible for a portion of opposing counsel’s fees.

Moral of the Story

Not only is it important to understand what is required with regard to jurisdictional discovery rules, but also to understand what could happen the rules aren’t followed.

Deena Duffy is staff attorney at Spencer Fane LLP in Minneapolis.