Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes


News Blog

Category: Fees in Arbitration

Judge Denies Attorney Fees Over Lack of Billing Record

January 3, 2024

A recent Law 360 story by Matthew Santoni, “Pa. Judge Slices Investor’s Requested Attorney Fees”, reports that a Pennsylvania federal judge upheld an arbitrator's $258,000 judgment against an invention-marketing company, but declined to award the nearly $50,000 in additional attorney fees requested by the prevailing Texas-based inventor because his lawyers hadn't submitted billing records for the amount, which was nearly two-thirds of the fees they claimed in total.

U.S. District Judge Marilyn J. Horan reaffirmed an earlier order denying Davison Design & Development's bid to duck an arbitrator's award in favor of inventor Mario Scorza, but the day after a brief but contentious video hearing, the judge said Scorza's lawyers hadn't shown evidence supporting their request for fees and costs beyond the $17,837.83 they had billed through June.

"In the two months since this court scheduled this matter for hearing, Mr. Scorza's counsel provided no additional billing or time records beyond his conclusory reference to additional requested fees during his testimony at the January 2, 2024 hearing," Judge Horan wrote in her opinion.  "Such is not sufficient for Mr. Scorza to meet his burden for any additional fee award beyond $17,837.83."  Judge Horan entered a final judgment against Davison that included the original $258,000 award and arbitrator's fees, pre- and post-judgment interest, and the $17,837.83 she said was supported by the record.

Pittsburgh-based Davison had filed a lawsuit against Scorza in April, seeking to overturn the arbitration decision in his favor over the company's allegedly bungled refinement and patenting of his idea for a travel scale.  Davison said the arbitrator had improperly awarded Scorza attorney fees under the American Inventor's Protection Act and the Texas Regulation of Invention Development Services Act, even though Scorza had only sought those fees under the Pennsylvania Unfair Trade Practices and Consumer Protection Act.

But Scorza had countered that the Texas law had been acknowledged as applicable in his contracts with Davison, and in a November opinion denying Davison's request to toss out the attorney fees portion of the award, Judge Horan agreed.

"Davison's arguments, regarding vacatur of attorney fees, center on essentially a distinction without a difference.  Whether the arbitrator cited the UPTCPL or other statute, Davison had notice that Mr. Scorza was seeking attorneys' fees under his claims," she wrote in November. "Mr. Scorza's claims always contained an attorneys' fees component.  This was not a surprise to the litigants, and Davison has not argued that it would have disputed the attorneys' fees award differently through any defense under the AIPA and/or TIDSA.  Therefore, Davison has no basis to vacate or modify the award of attorneys' fees to Mr. Scorza."

Judge Horan held a video hearing to address Scorza's motion to confirm the arbitration award and to tack on additional attorney fees he had incurred while opposing Davison's bid to trim the award.  But the hearing started off on a contentious note, with Davison attorney Justin T. Barron noting that Scorza's attorneys had filed their exhibits for the hearing at 11 p.m. on New Year's Day, just 10 hours before the hearing.

Stacey Barnes of Kearney McWilliams & Davis, representing Scorza, noted that most of the exhibits had already been part of the record in the lawsuit and arbitration, and Judge Horan steered the discussion to an affidavit Barnes had signed regarding the alleged reasonableness of the fee request.

When arguing for his fee request — which he said had grown to an estimated $49,619.73 through the fight over fees in the underlying arbitration — Barnes was reined in repeatedly by the judge and by Barron's objections when he assailed Davison for allegedly delaying and litigating disputes in the hope that they would become too expensive for jilted inventors to fight.  "There is a playbook that has been run on Mr. Scorza," Barnes said. "They have concocted a procedural obstacle course for aspiring inventors."

Barron raised several objections to the relevance of such attacks, especially when Barnes claimed part of the reason for Davison's fighting the award was the hope that Scorza, who is in his 80s, might die before it was resolved. Judge Horan also admonished Barnes to focus on the reasoning for the post-arbitration fees.  "I'm inclined to grant fees, the question is, how much?" she said. "Let's get to the meat of it."

Barnes was sworn in to testify to his rates and his co-counsel's rates, and Barron questioned him on why his co-counsel had not filed their CVs as part of the record.  He also asked why Scorza's attorneys had not filed copies of their invoices with the court after June, even though they were asking for nearly $32,000 more since then.  That lack of additional information was what Judge Horan cited when she trimmed the requested fee award.

"The court will award only those fees which were necessary and reasonable and supported by the record evidence in this case," she wrote in her opinion.  Scorza's attorneys told Law360 they were disappointed by the reduced fee award and would discuss future steps with their client, but were pleased that the underlying arbitration award was upheld.

$46M Fee Award in Cancer Drug Patent Arbitration

November 28, 2023

A recent Law 360 story by Kelly Lienhard, “’Daiichi Awarded $46M Fees in Cancer Drug Patent Arbitration”, reports that Japanese drugmaker Daiichi Sankyo Ltd. has scored nearly $46 million in fees and costs in an arbitration initiated by rival Seagen in the companies' patent dispute over cancer drug technology after the arbitrator found that the U.S. biotech company did not file its infringement claims within the six-year statute of limitations.  According to documents filed in a federal court in Washington state, Daiichi was awarded $43.7 million in attorney fees, in addition to $1.9 million, plus ¥169,076 — or around $1,145 — in reasonable costs, for a total of just under $45.6 million.

Former Chief U.S. District Judge Garrett Brown Jr. served as an arbitrator in the dispute and sided primarily with Daiichi, with the exception of granting the company a full award for reasonable costs.  The final arbitration award made no changes to the August 2022 interim award, according to court documents, except to address Daiichi's request for attorney fees and costs.

In the interim award, Judge Brown rejected Seagen's arguments that it owned the patents in question since Daiichi had relied on Seagen's proprietary know-how to develop certain improved technology used in the drugs that the Japanese company had then sought to patent.  Judge Brown said in the final award that both Seagen's quiet title and breach of contract claims failed because they were outside the six-year statute of limitations.

According to Judge Brown, Washington state law requires Seagen to have filed its initial demand for arbitration before Oct. 11, 2018.  However, the biotech company didn't file until over a year later, on Nov. 12, 2019.  Judge Brown added that Seagen was unable to show that anything occurred in the case to merit an exception to the statute of limitations.  The judge said there was no evidence showing that Seagen had any procedures in place that would have flagged Daiichi's "improvement IP" and added that Seagen only began investigating Daiichi's new tech developments once it found out the company was likely to receive U.S. Food and Drug Administration approval.

"The arbitrator is not persuaded that those facts reasonably demonstrate diligence on Seagen's part. … Stated simply, the foregoing landscape does not support an exception to the six-year statute of limitations," Judge Brown said.  However, while Judge Brown found Daiichi to be the prevailing party in arbitration, he partially denied the company's request for reasonable costs.  Daiichi had requested a total award of around $58.1 million, plus ¥3.4 million, according to court documents, while Seagen argued that the award should be at most $10.2 million and ¥169,076.  Judge Brown said he found Daiichi's request reasonable, with the exception of its request to recover a total of $10.2 million and ¥3.3 million, about $22,163, in expenses related to arbitration.

According to the judge, Daiichi's expenses reimbursement request for items like airfare, lodging and meals does not match up with a reasonable understanding of arbitration costs.  Daiichi itself categorized arbitration costs in a March document as funds spent on invoices from the International Centre for Dispute Resolution, Judge Brown said.  Ultimately, Judge Brown ruled that Seagen had to pay Daiichi only $244,500 in arbitration costs.

Federal Court Asked to Confirm Attorney Fees in Arbitration Award

May 12, 2023

A recent Law 360 by Elliot Weld, “Spanish IT Provider Asks Court to Confirm $14M Award,” reports that a spanish information technology provider Amadeus IT Group asked an Atlanta federal court to confirm an arbitration award it was granted by the International Chamber of Commerce against technology firm Ebix, saying the court should reject Ebix's arguments that the award improperly includes attorney fees.  Amadeus said that the inclusion of attorney fees in the award was the only argument Ebix had advanced to challenge it, and that both parties had agreed to be bound by the rules of the ICC.

"Ebix's sole basis for challenging the arbitration award is the arbitral tribunal's award of attorney fees," a memorandum by Amadeus reads.  "Contrary to Ebix's argument, the tribunal did not exceed its scope or authority."  According to Amadeus, the parties entered into a global agreement in October 2019 for Amadeus to provide Ebix's Indian subsidiary EbixCash with access to the Amadeus Travel Platform, a software interface it provides to its clients, in the Asia-Pacific region.  As part of that agreement, Amadeus paid EbixCash $15 million that was repayable if EbixCash failed to produce international airline bookings in certain volumes within time frames depicted in the agreement, according to Amadeus.

EbixCash failed to meet the required numbers and Amadeus terminated the agreement and sought repayment in April 2020, the company said.  The parties entered arbitration after they were "unable to reach an amicable resolution," according to the petition.  Ebix argued in a response April 18 that the tribunal's inclusion of costs and fees in the final award was beyond the scope of its power.  Amadeus responded that in the 2019 agreement between the two companies, ICC rules were included that permit a tribunal to award fees.  Ebix also waived its right to challenge the fees when it failed to raise the issue during arbitration, Amadeus said.

Eleventh Circuit precedent dictates that courts defer to the decisions of a tribunal when the scope of an arbitration is in dispute, Amadeus said.  "Ebix cannot point to a clause limiting Amadeus' ability to recover fees because no such clause exists," Amadeus argued.  At minimum, the remainder of the final $14 million award excluding the legal costs is not contested, and the court should confirm that even if it finds the tribunal exceeded its own authority, Amadeus said.

"Ebix is opposing confirmation of the award solely for purposes of delay," the motion reads.  "The final award was issued well over a year ago, and Ebix is disputing only the fees and costs portion of the award.  Yet Ebix has yet to pay anything on the final award, including the undisputed principal amount."

IMF Says It’s Immune From Attorney Fee Dispute

December 10, 2021

A recent Reuters story by Mike Scarcella, “IMF Says It’s Immune From Legal Fee Fight -- Again,” reports that a lawyer for the International Monetary Fund told a federal appeals court that the organization is shielded from a case that seeks to have a judge hear a dispute over millions of dollars in legal fees.  Seyfarth Shaw's James Newland Jr, arguing for the IMF before a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit, asserted that the IMF has judicial immunity from the litigation and that the organization never "expressly waived" such immunity in a legal-services contract with one of its outside lawyers.  A lower court judge in March dismissed the lawsuit.

The plaintiff, Leonard A. Sacks & Associates, in 2017 filed an arbitration action against the IMF that questioned how much the organization had paid him to resolve a construction-related dispute with contractors who'd been hired for work on the IMF's office in Washington, D.C. Leonard Sacks said in court filings his work saved the IMF about $45 million.  Sacks contested in court an arbitrator's decision to award him about $39,000 in fees beyond the $2.36 million he had received in 2016.

Newland did not immediately return a message seeking comment.  A lawyer for Sacks, Donald Spence Jr of Spence & Becker, and Sacks did not immediately return messages seeking comment.  Sacks had a 20-year professional services relationship with the IMF.  He said in court filings that the IMF, without his input, had determined his fee for the legal services on the construction project would be $4.15 million.  Sacks said he asked for an accounting on the fees but did not receive one.  The IMF ended its contract with him in 2017, court filings show.

Spence, arguing for Sacks at the D.C. Circuit, said the courts should have a role in reviewing the arbitrator's fee award.  The contract at issue, Spence argued, referenced D.C. law and the American Arbitration Association rules, which permit lawsuits seeking to modify or vacate an award.  Sacks had a contractual right to a court's review, Spence told D.C. Circuit Judges Cornelia Pillard, Laurence Silberman and Karen Henderson.  "Without a remedy, the contract is essentially illusory," Spence wrote in a brief.

Article: Recovering Attorney Fees in Arbitration

November 1, 2021

A recent article by Charles H. Dick, Jr., “Recovering Attorney Fees in Arbitration,” reports on recovering attorney fees in arbitration.  This article was posted with permission.  The article reads:

An accurate assessment of damages is crit­ical for case evaluation, and the cost of dispute resolution plays an important role in deciding to pursue claims.  Even strong liability cases can fail to make economic sense.  That is why a thorough case appraisal should thoughtfully consider the attorney fees to be incurred.  And equally important, an objective case valuation should assess the likelihood of recovering attor­ney fees.

The “American Rule,” which specifies that each party must bear its own attorney fees, is a lesson for law school’s first year, and though the rule has been slightly modified to encour­age certain litigation in the public interest, fee-shifting remains the exception rather than the rule.  Against this background, professional responsibility obliges counsel to keep clients informed about litigation economics (Cal. Rules Prof. Conduct, rule 1.4)—something critically important as a case approaches the in­evitable mediation.  Unfortunately, experience teaches that an exacting analysis of litigation cost and exposure to fee-shifting often is an afterthought, and that the development of case strategies, discovery plans, and tactical maneu­vers occurs without thoughtfully weighing the implications of the American Rule and its ex­ceptions.  This is a recurring issue in arbitration.

Perhaps litigators approach attorney fee recovery casually, thinking there will be ample time to deal with the question before a final judgment is entered.  Arbitration, however, is different.  The binding nature of arbitration makes appellate relief unlikely.  An arbitrator’s award of attorney fees is unlikely to be sec­ond-guessed by a court, even if there is no stat­utory or contractual basis for the award. (See Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1, 33; id. at p. 11 [“it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.  In reaffirming this general rule, we recognize there is a risk that the arbitrator will make a mistake.”].)  When it comes to recovering attor­ney fees in arbitration, counsel needs to get the issue correct from the beginning.

California has codified the American Rule in Code of Civil Procedure section 1021.  Con­tractual arrangements can modify the rule and provide for fee-shifting, but a careful study of the parties’ language is critical. (See Valley Hard­ware, LLC v. Souza (Nov. 20, 2015, D067076) 2015 Cal.App.Unpub. Lexis 8347 [affirming arbitrator fee award in face of inconsistent contract provisions].)  Contractual language inevitably varies: Some agreements provide for recovery of fees “when permitted by law”; some say fees “actually incurred” are recoverable; some limit attorney fees to a percentage of the damages awarded; some say the prevailing party “shall” recover fees, while others use the uncertain “may.” Civil Code section 1717 de­fers to the contracting parties, subject to minor tweaks that limit fees to a “reasonable” amount and require that fee recovery be reciprocal.

In addition to carefully scrutinizing con­tract language, one also needs to know the procedural rules that will be applied in arbi­tration.  For example, in a Financial Industry Regulatory Authority (FINRA) arbitration regarding the investment brokerage industry, the arbitral panel is directed to determine the “costs and expenses,” yet absent some statutory exception to the American Rule, fee-shifting still depends on the parties’ underlying agree­ment (see FINRA rule 12902(c)).  Unless the parties’ agreement forbids fee-shifting, the rules of the International Institute for Conflict Prevention and Resolution (CPR) authorize the arbitration tribunal to apportion costs for “legal representation and assistance … incurred by a party to such extent as the Tribunal may deem appropriate” (see CPR 2019 Adminis­tered Arbitration Rules, rule 19.1(d) & 19.2). Rule 24(g) of the JAMS Comprehensive Arbi­tration Rules & Procedures is the mirror image: “[T]he Arbitrator may allocate attorneys’ fees and expenses … if provided by the Parties’ Agreement or allowed by applicable law” (ac­cord, Uniform Arbitration Act, § 21).

If all parties request an award of attorney fees, rule 47(d)(ii) of the American Arbitra­tion Association’s Commercial Arbitration Rules and Mediation Procedures authorize an award of attorney fees even if the underlying agreement is silent on the issue.  Throwing in a boilerplate prayer for attorney fees and costs without considering the consequences can result in fee-shifting.  And during arbitration, even casual discourse about attorney fees can be a basis for fee-shifting, absent an express agreement to the contrary.  (Marik v. Univ. Vill. LLC (Oct. 3, 2013, B247171) 2013 Cal.App. Unpub. Lexis 7143 [brief asserting entitlement to recover fees provided basis for arbitrator’s fee award]; see Prudential-Bache Securities, Inc. v. Tanner (1st Cir. 1995) 72 F.3d 234, 242-243 [“costs and expenses” under New York Stock Exchange Rules interpreted to permit award of attorney fees when both sides to dispute requested attorney fee award].)

Counsel should be mindful of an arbitra­tor’s predisposition to produce an award that is “fair to all concerned,” and this may include fee-shifting as an exercise in equity. (See Co­hen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 877 [absent parties’ agreement limiting arbitrator power, award of attorney fees on basis of equity and conscience affirmed].)  Further, misconduct of counsel may be a reason to “sanction” a party by reducing an attorney fee award. (E.g., Karton v. Art Design & Const., Inc. (2021) 61 Cal.App.5th 734 [fees reduced for incivility of counsel].)  And consider JAMS Comprehensive Arbitration rule 24(g), which authorizes an arbitrator to consider noncompliance with discovery orders when awarding attorney fees.

Attorney fees incurred prosecuting or defending a complaint to compel arbitration may be recoverable, but the procedural posture of the civil court action will determine when fee-shifting may occur. (E.g., Otay River Const. v. San Diego Expressway (2008) 158 Cal.App.4th 796.)  Though there is authority to the contrary (Benjamin, Weill & Mazer v. Kors (2011) 195 Cal.App.4th 40 [allowing recovery of fees even though liability on claim awaited arbitration]), the better-reasoned view is expressed in Roberts v. Packard, Packard & Johnson (2013) 217 Cal. App.4th 822.  In that case, clients filed suit against their former lawyers, alleging breaches of fiduciary duty and conversion in connection with settlement of qui tam litigation.  The law firm’s motion to compel arbitration was grant­ed, and the trial court awarded the firm its fees as the prevailing party.  On appeal, the court was persuaded the phrase “an action” means an entire judicial proceeding; procedural steps in the course of a lawsuit, such as a motion to compel arbitration, are steps in the prosecution or defense of an action, but they are not the entirety of an action on a contract.  The Roberts case stands for the proposition only one side can “prevail” in a lawsuit, and fee-shifting had to await the arbitrator’s final determination of the clients’ professional liability claims. (Id. at p. 843.)

Civil Code section 1717 defines the “pre­vailing party” as the person who recovers the greater amount on a contract.  Yet, Hsu v. Ab­bara (1995) 9 Cal.4th 863, makes it clear this involves more than a mathematical calculation.  The “court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their liti­gation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.” (Id. at p. 876.)  Thus, it is possible for a party to prevail by achieving litigation objectives, even though an opponent may have obtained a favorable verdict on liability theories.  Generally, however, when a verdict on contract claims is good news for one party and bad news for another, a court is obligated to treat the happy litigant as the prevailing party.

The identity of a prevailing party becomes more complicated when results of an arbitra­tion are mixed. In this regard, Marina Pacific Homeowners Association v. Southern California Financial Corp. (2018) 20 Cal.App.5th 191, is instructive.  This case between a homeowners’ association and a finance institution exempli­fies litigation that produces some wins and some losses for both sides.  The case involved a claim by the homeowners that they did not owe monthly fees the financial institution contended amounted to $97 million over the life of a lease.  The trial court found against the homeowners and declared there was an obligation to make monthly payments.  But the court also found the monthly payment rate was only 40% of the financial institution’s demand.  On appeal, the court declined to consider settlement communications as being a reliable expression of a party’s litigation objectives and concluded the “substance” of the result was a $58 million loss for the defendant.  Invoking the decision in the Hsu case, the court con­cluded there was no simple, unqualified result pointing to either side as a prevailing party, and the trial court had acted within its discretion in denying recovery of attorney fees.

One lesson regarding “prevailing parties” is the need for caution in over-pleading one’s case. Some counsel cannot resist converting a straight-forward breach of contract action into a fraud case with overtones of unfair business practices and assorted tort claims.  Pleading multiple claims that eventually are discarded for want of proof can be dangerous, especially unsubstantiated allegations of fraud.  In De La Questa v. Benham (2011) 193 Cal.App.4th 1287, 1295, an appellate court acknowledged the practice of overstating one’s claims, which makes it more difficult to determine the victor.  In a case producing mixed results, unsupported claims may lead to an opponent’s recovery of fees.

Counsel in arbitration need to address fee-shifting with a laser focus, beginning with the preliminary hearing, which is the first op­portunity to meet the arbitrator and learn his or her preferences.  Arbitrators can be expected to employ the lodestar method recognized as acceptable by a long line of California cases (e.g., PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1094).  Several issues can be dis­cussed at the hearing: What procedures will the arbitrator use to deal with attorney fee and cost issues?  Will these matters be bifurcated until an interim or tentative award on the merits is de­livered? Does the arbitrator have requirements for form, style, and specificity of time records? Will “block billing” be accepted? If more than one law firm will be appearing for a party, the conference also is an opportunity to explain why and set the stage to defuse a later argument about duplicated efforts.

In a case with both contract and tort claims, counsel should consider keeping a separate re­cord of time spent on matters that may not be entitled to recovery of attorney fees.  Counsel should be prepared to demonstrate that time records were prepared contemporaneously with the work reported, since there often is a lack of daily time recordation, let alone contem­poraneous reporting.  The fee application also should explain how the litigation team was de­ployed and why individual tasks were assigned to team members.

Proving the reasonableness of time and rates ordinarily can be accomplished by declarations of counsel regarding the usual, customary, and regular timekeeping and billing practices of the law firm.  Resumes of the personnel involved and a summary of the work may be useful.  (See, e.g., Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 702.)  And this informa­tion can be supplemented by the opinions of other lawyers objectively knowledgeable about actual practices within the community.  Survey data often is available for firms in metropolitan areas, and those reports also carry credibility.  But counsel should be alert to differences between posted or rack rates and hourly rates actually realized, because there often is a ma­terial difference.  As with hotels and rental cars, there may be a significant disparity between the advertised rate and what people actually pay.

Nemecek & Cole v. Horn (2012) 208 Cal. App.4th 641 makes it clear that a calculation of “reasonable fees” does not hinge on what fees actually were paid.  In that case, defense counsel had been compensated on the basis of negotiat­ed insurance panel rates.  The arbitrator refused to be controlled by such rate structures and declined to use the Laffey Matrix employed by the United States Department of Justice in de­termining rates the federal government believes are reasonable.  Instead, the award of attorney fees was based on an independent assessment of what would be reasonable, and the appellate court affirmed confirmation of that award. (See Chacon v. Litke (2010) 181 Cal.App.4th 1234, 1260 [awarding reasonable rate $50 greater than counsel’s regular rate].)

There are three important things to remember about recovering attorney fees in arbitration.  First, carefully study the parties’ agreement to understand the rights it extends and the limitations it imposes.  Second, avoid pleading unnecessary claims that make it seem the end result tips in favor of one’s opponent.  Third, vacating an erroneous fee award is unlikely, so make your best case regarding fee-shifting before the entry of a final award.

Charles H. Dick, Jr. is a neutral with JAMS, and he serves as a mediator and an individual arbitrator or member of multi-arbitrator panels in complex commercial matters, securities and investment disputes, professional liability cases, products liability issues, and other business-related controversies.