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Category: Fees more than Damages

Ninth Circuit: $260K Fee Award Proper Where Damages Were $2500

April 26, 2022

A recent Metropolitan News story, “$260,000 Fee Award Proper Though Damages Were $2,500” reports that the Ninth U.S. Circuit Court of Appeals has affirmed an attorney fee award of nearly $260,000 in a case in which a prison inmate was awarded $2,500 based on ill-effects from a chemical grenade having accidentally been discharged, with fumes seeping into the area of the cells.  District Court Judge Haywood S. Gilliam Jr. of the Northern District of California made the award under California’s private attorney general statute, Code of Civil Procedure §1021.5, ruling that the statutory criteria were met, including a benefit to the public that overshadows the personal benefit to the prisoner, Daniel Manriquez.

The incident underlying Manriquez’s suit occurred on June 4, 2015.  According to allegations of the operative complaint, two employees at Pelican Bay State Prison, defendants Justin Vangilder and Juan Vasquez, while inside a control booth, were “horse playing” with a “military-grade” grenade which is “designed to quickly release oleoresin capsicum (‘OC’) into the air.”  One of them dropped the grenade, it went off, and the employees “opened the windows to the control booth, allowing a fog of OC to quickly fill the surrounding space.”

The inmate prevailed at trial and his lawyers sought an award of a fee in the amount of $467,425, arguing that the California Department of Corrections and Rehabilitation had “insisted on using this case as a ‘test case’ for prisoners who have been indirectly exposed to oleoresin capsicum,” had rejected reasonable settlement offers, and “forced Plaintiff to heavily litigate this case for going on three years now.”  Gilliam awarded $259,237.50.

 A three-judge panel—composed of Judge M. Margaret McKeown and Senior Judges A. Wallace Tashima and Sidney Thomas—upheld the award, saying that there was, as Gilliam found, a “significant benefit” conferred on the general public. Their memorandum opinion declares: “To be sure, the primary effect of Manriquez’s $2,500 judgment is arguably an enforcement of his personal interests against two correctional officers for an isolated incident, as there was no injunction or statewide policy changes.  But we hold that the district court did not clearly err* in its determination that Manriquez’s verdict has “larger implications” beyond his individual case. The district court explicitly took into consideration the fact that indirect exposure to chemical agents is not uncommon among inmates and that Defendants’ own witnesses testified at trial about the frequency with which chemical agents are used in prison facilities.  Moreover, the district court highlighted that there are approximately 95.000 men and women incarcerated in California, including approximately 1.900 inmates in Pelican Bay, where Manriquez was in custody.”

The Ninth Circuit judges also agreed with Gilliam that the public benefit transcends Manriquez’s personal interests, saying: “In the end, Manriquez was awarded a total of $2,500 while his counsel requested a total of $467,425 in attorneys’ fees for over 1,100 hours of work.  Had counsel not agreed to represent Manriquez on contingency, the value of the recovery for Manriquez’s pain and panic would not have justified the costs in litigating this case.  For the same reason—comparing the modest sum of the total damages to the attorneys’ fee requested—we agree with the district court that the interests of justice require the fees to not be paid out of Plaintiffs’ recovery.”

The defendants argued that even though Gilliam awarded less in fees than was sought, the amount is 84 times that allowed by the Prison Litigation Reform Act (“PLRA”).  The PLRA caps attorney fees 150 percent of any monetary which would mean a maximum award of $3,750.

The panel responded: “[T]he PLRA cannot be used as a basis to limit the attorneys’ fees granted under California Code of Civil Procedure § 1021.5.  In this case. Manriquez prevailed on both his state law negligence claim as well as his Eighth Amendment claim against Defendants.  The state law claim thus served as an independent basis for awarding attorneys’ fees, the amount of which is not governed or limited by the PLRA….Moreover, the district court is not required to apportion the work between Manriquez’s Eighth Amendment claim and his negligence claim because his claims are intertwined and based on the same common core of facts.”

Third Circuit Bars Attorney Fees For ‘Limited Success’

June 12, 2021

A recent Law 360 story by Mike LaSusa, “3rd Circ. Bars Atty Fees For ‘Limited Success’ in NJ Wage Suit,” reports that the attorneys who won an unpaid wage suit on behalf of a pair of cooks in New Jersey can't recover nearly $120,000 in attorney fees after their "limited success" in the six-year case netted their clients less than $7,000, the Third Circuit ruled.  Attorneys from Troy Law PLLC had sought more than $118,000 for their work on behalf of Weigang Wang and Hailong Yu in their suit against fast-food chain company Chapei LLC, which does business as Wok Empire.  But the three-judge appeals panel said in a nonprecedential opinion that a lower court was right to block the plaintiff lawyers from shifting the burden of paying attorney fees to Wok Empire.

The lower court shot down Wang and Yu's claims under the federal Fair Labor Standards Act, which requires fee-shifting when plaintiffs win.  And although Wang and Yu won their claims under a New Jersey state wage and hour law, that statute only allows for but doesn't require fee shifting, the appeals panel said.  "Fee-shifting statutes can be abused by attorneys who over-litigate a case once they have confidence that their client will receive an award — no matter how small," the judges said. "Here, where the result was very limited success for the clients, and where the deficiencies identified by the district court compromised a meaningful review of the claimed fees under the lodestar method, it was not an abuse of discretion to deny fees altogether."

Wang and Yu brought the case in New Jersey federal court in 2015, seeking more than $180,000 in damages.  A bench trial eventually resulted in the dismissal of the workers' FLSA claims and their victory on claims brought under the New Jersey law.  The lower court awarded the workers about $6,600 in back wages and around $3,000 in costs, but declined to award any attorney fees, sparking the appeal to the Third Circuit.

The panel, however, said the lower court was "fully within its discretion" to block the attorneys' six-figure fee request, noting it amounted to about 18 times more money than their clients received.  "The declaration that accompanied the fee petition referred more to the plaintiff in [a] prior default judgment case than to the actual plaintiffs in this case.  Moreover, one of the attorneys had misstated his $350 hourly rate as $3550," the judges said.  "Most troubling was that one of the attorneys failed to provide a detailed bill for his time."

Heng Wang of Wang Gao & Associates, who represented Wok Empire, said he was excited by the ruling.  "The Third Circuit's ruling is a wakeup call to the plaintiff's bar," he said.  "There is no silver bullet for the plaintiff's lawyers to always obtain significant attorney's fees in wage-and-hour litigation."

Quinn Emanuel Wins $14M in Attorney Fees in $5M Trial Case

April 30, 2021

A recent Law.com story by Nate Robson, “Quinn Emanuel Wins $14M in Legal Fees for Client’s $5M Case,” reports that Quinn Emanuel Urquhart & Sullivan landed nearly $14 million in legal fees and costs for a client, nearly three times the $5.4 million in damages awarded at trial in the underlying dispute.  The fees, granted by a federal judge in Minnesota, cap off an especially litigious case that came after most other parties settled once another defendant mortgage lender was hit with a $28 million verdict in 2018.

The recent trial involved ResCap Liquidating Trust, which was created in the wake of the 2012 bankruptcy of Residential Funding Corp. after it faced billions of dollars in liabilities tied to residential mortgage-backed securities it sold leading up to the 2008 housing collapse.  ResCap was formed to sue banks and mortgage lenders that sold the loans bundled into those mortgage-backed securities.

In the ruling against mortgage lender Primary Residential Mortgage Inc., U.S. District Judge Susan Richard Nelson repeatedly noted that PRMI’s litigation tactics were responsible for inflating ResCap’s legal fees as the case went to trial.  The judge said PRMI was aware “the parties would not ‘split the tab’ or ‘go Dutch’ on attorney’s fees and costs,” given its contractual agreement at issue in the case and the legal fees awarded in the first trial.  “Given all of this notice, PRMI cannot credibly express indignation now,” Nelson wrote.  “Its own poor judgment in relitigating settled issues throughout this litigation significantly drove up ResCap’s attorney’s fees and costs.”

Nelson said PRMI, represented by a team from Williams & Connolly, challenged relatively miniscule claims for damages and reargued items that were handled in the first trial against another lender.  Nelson pointed to one claim on a loan involving $30,000 in damages as an example.  PRMI’s stance on that loan required discovery, motion practice, expert and fact witness deposition testimony, and then trial testimony.  “While PRMI argues that ResCap’s fee request is out of proportion to its damages award, PRMI overlooks its own practice of litigating aspects of plaintiff’s damages claim in ways that were out of proportion to the amounts at issue, thereby driving up ResCap’s attorney’s fees,” Nelson wrote.

Nelson also rejected PRMI’s claim that paying nearly $14 million in legal fees and costs on a $5.4 million award is disproportionate, noting ResCap was also granted nearly $2 million in prejudgement interest, bringing the total to $7.4 million in damages.  The ruling, granting $10.5 million in attorney fees and $3.5 million in costs, also notes that fees don’t have to be proportional to the award.

Isaac Nesser, the lead attorney on the case for Quinn Emanuel, said neither side had cited a similar instance where legal fees so outpaced the award given.  Nesser said a key to landing the fees was building a record during court appearances of how much work was going into the case because of PRMI’s litigation strategy.

“It was important to us to build a record that we were being forced to spend time and money litigating issues that seemed disproportionate to the actual amount of damages in the dispute,” Nesser said.  “As a result, we came to the view that it was important for us to communicate that information clearly to PRMI and Judge Nelson.  And so we made a record of that any chance we could.”

California Appeals Court Clarifies Law on Attorney Fees

March 13, 2021

A recent The Recorder story by Alaina Lancaster, “Appeals Court Rules on ‘Curious Gap’ in State Law Over Attorney Fees,” reports that a California appeals court ruling underlined “a curious gap” in the state law over the recoverability of unpaid fees when attorneys sue clients for breach of contract.  A decision from California’s Second District Court of appeal noted that in 1993, a state bar committee raised the issue of how Business and Professions Code Section 6148 clarifies that an attorney may recover a reasonable fee for services absent a valid fee agreement, but fails to set a standard for fees when clients breach a fee agreement.  Nearly a decade later, the appeals court said it was unable to find a clear standard in the statutory or case law.

In an opinion authored by Associate Justice Anne Egerton, the court held that the terms of the fee agreement control the amount of recoverable fees when an attorney sues a client for a breach of a valid and enforceable contract—even if it exceeds what a lodestar analysis, which measures the number of hours expended multiplied by the hourly rate, would consider a reasonable fee.

“The trial court correctly held a lodestar determination is not required in a breach of contract action where an attorney’s hourly rate is specified in a fee agreement,” wrote Egerton on behalf of Associate Justice Halim Dhanidina and Presiding Justice Lee Smalley Edmon.  “To hold otherwise would ignore the statutorily recognized difference between instances where the attorney has entered into a valid fee agreement with his or her client, and those where the attorney has failed to do so and is limited to a ‘reasonable fee’ under Section 6148.”

In the underlying case, Santa Monica, California, attorney Richard Pech sued owners of a mobile home park to recover more than $1 million in attorney fees and interest he claimed he was owed for representing them in several matters. Los Angeles Superior Court Justice Mary Strobel granted Pech’s applications for attachment of defendants’ assets on the grounds that the attorney had established the probable validity of his breach of contract claims.

The owners of the mobile home park contended that the fees were excessive and unreasonable and that the trial court should have considered the lodestar determination to determine the reasonableness of the fees.  Instead, the court decided to turn to the standard adopted by the 1993 bar committee, which was applied to mandatory fee arbitration, to address “this apparent gap in our law.”  The standard mandates that a fee agreement is not enforceable if it is unconscionable; the attorney’s performance must be consistent with the implied covenant of good faith and fair dealing; and a court must determine if the attorney used “reasonable care, skill, and diligence” in responding to the contract.

The ruling determines that the bar standard is consistent with Section 6148’s “implicit recognition” that an attorney and client can agree to a fee that might not be considered “reasonable,” as long as the rate and legal services are disclosed in the contract.  “The standard articulated in Advisory 1993-02 sensibly balances the competing interests that arise when a client breaches a fee agreement by refusing to pay an agreed upon fee,” the opinion states.

Joshua Furman of Joshua Furman Law, which represented the mobile home park owners, said, “While we are gratified that the Court of Appeal recognized the gap in the law concerning standards for attorney fee claims against former clients under written fee agreements, and largely adopted the position we argued—that the standards established by State Bar arbitration advisories should apply—we remain concerned that the standard as articulated by the court is both unclear and too low to effect the public policy of client protection.  Under the standards articulated in this decision, an attorney could bill any number of hours and obtain an attachment order against the former client’s assets without significant scrutiny as long as the hourly rate matched the rate in the fee agreement.  This unfairly disadvantages the client, who may be unable to defend against the attorney’s lawsuit while the client’s assets are subject to attachment.  We remain concerned that the court’s decision does not protect consumers from unscrupulous billing practices by attorneys and continue to evaluate our options moving forward.”

Facebook Challenges $12M Fee Request in Data Breach Case

March 11, 2021

A recent Law 360 story by Hailey Konnath, “Facebook Slams $12M Atty Fees Request in Data Breach Row, reports that Facebook opposed a $12 million attorney fees request from counsel representing users who settled a dispute with the company over a 2018 cyberattack, slamming the lawyers for accruing a hefty bill while pursuing claims that didn't win money for their clients.  The users sued Facebook Inc. in California federal court alleging it negligently allowed the cyberattack, which affected roughly 29 million individuals.  The social media giant and the class of users reached a nonmonetary settlement resolving the case last year, and U.S. District Judge William Alsup gave it his blessing in November.

Under the deal, Facebook agreed to reform its security protocols but not to pay monetary damages.  The users' attorneys at Tadler Law LLP, Cohen Milstein Sellers & Toll PLLC and Morgan & Morgan Complex Litigation Group asked for $12 million in fees and costs, including a $2.1 million bonus.  But Facebook said in its opposition that such a request for a settlement that yielded no monetary recovery to the class is not supported by law.  In just over 16 months, the users' attorneys managed to assemble a "very sizable bill" that they now ask be paid without scrutiny, according to Facebook's motion.

Notably, the class' attorneys have refused to provide project-level or even chronological time records, Facebook said.  But even the figures they have submitted show the dispute wasn't handled efficiently, it argued.  Facebook said that more than 100 timekeepers from 17 different firms billed the matter, with partners billing for tasks like "document management."

"This top-heavy staffing yields a blended hourly rate that is 35.8% higher than the average awarded in other recent data breach settlements, and stands in stark contrast to the court's instructions," Facebook said.  The company added that "there can be no doubt that substantial swaths of [the class counsel's] litigation efforts were unsuccessful." 

Named plaintiffs in the case went from 17 to one, only two out of 10 claims survived Facebook's dismissal bid, a star identify theft expert was struck from the record and no damages class was certified, Facebook said.  "Any award to class counsel should be commensurate with the reasonable level of effort necessary to secure the specific settlement achieved here -- and should not reward wasteful efforts that did not benefit the class," it said.