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Category: Fees & Pro Bono

Eleventh Circuit: No Fees After Voluntary Dismissal in Copyright Case

March 8, 2024

A recent Law 360 story by Carolina Bolado, “11th Circ. Says Broker Can’t Collect Fees in Copyright Case”, reports that the Eleventh Circuit has ruled that a Florida real estate broker cannot collect attorney fees incurred for defending himself from a copyright infringement suit by an aerial photography company because the broker was not a prevailing party once the photography company voluntarily dismissed the case.

In an opinion issued Feb. 28, the appeals court affirmed a district court decision denying a request by real estate broker John Abdelsayed and his company Trends Realty USA Corp. for an award of their attorney fees and costs from Affordable Aerial Photography Inc.  That company had sued over the use of a copyrighted photograph on Trends Realty's website.

Abdelsayed and Trends Realty argued that they are entitled to fees under Federal Rule of Civil Procedure 68, which mandates a fee award if an offer to settle is not accepted and ends up being more favorable than the judgment obtained, and under the Copyright Act's cost-shifting provision.

But the Eleventh Circuit said they are not entitled to fees under Rule 68 because it only applies when a plaintiff has obtained a judgment for an amount less favorable than the defendant's settlement offer.  It does not apply in cases where the defendant wins a judgment, the appeals court said.  And because Abdelsayed and Trends Realty did not obtain a judgment, they are not prevailing parties in the suit and are therefore not eligible for a fee award under the Copyright Act, according to the Eleventh Circuit.

"The order of dismissal does not prevent AAP from refiling its claims," the appeals court said.  "And even assuming future action by AAP may be unlikely or now barred by the statute of limitations, those facts are irrelevant because the court did not rebuff or reject AAP's claims on any grounds."

Abdelsayed, who operates in the Palm Beach County market, was sued in August 2021 in the Southern District of Florida by Affordable Aerial Photography for using a copyrighted photograph on Trends Realty's site.  AAP moved to voluntarily dismiss the suit without prejudice a year later.

After briefing and a hearing, the district court granted the motion and dismissed the case without prejudice. The court ruled that if AAP were to refile its case, it would have to pay the defendants' reasonable attorney fees incurred in defending this case.  Two months later, Abdelsayed and Trends Realty asked the court to reconsider that order, claiming they were entitled to immediate recovery of their fees under Rule 68 and the Copyright Act. But the court denied the request.

On appeal, the defendants argued to the Eleventh Circuit that allowing this would create an incentive for a plaintiff to drop a case just before an expected adverse ruling, but the appeals court pointed out that the plaintiff can't do this unilaterally and that a dismissal must be approved by the court.  In this case, the district court held a hearing and found that the defendants would not suffer legal prejudice because their counsel was pro bono or on a contingency agreement, according to the appeals court.

Michigan Supreme Court: Pro Bono Status Not A Fee Award Factor

July 27, 2023

A recent Law 360 story by Carolyn Muyskens, “Mich. Justices Say Pro Bono Status Can’t Affect Fee Awards”, reports that pro bono representation should not be a factor in determining a reasonable attorney fee award, the Michigan Supreme Court said, finding a judge wrongly slashed Honigman LLP's fee award when it represented a pair of journalists for free in a public records case.  In a majority opinion written by Justice Kyra H. Bolden, the state's high court, considering the issue for the first time, held that whether a client is represented pro bono "is never an appropriate factor for a court to consider in determining the reasonableness of an attorney fee," and ordered the trial judge to reconsider Honigman's fee request.

Dan Korobkin, legal director of the American Civil Liberties Union of Michigan, called the ruling a "major victory" for Michigan's pro bono community in a statement.  "For the ACLU of Michigan and other nonprofit organizations like it, as well as private sector law firms that provide pro bono legal counsel to support important public interest work, it is vital that attorneys' fees be recoverable in cases involving civil rights, civil liberties, and government transparency," Korobkin said.

Honigman attorneys and Korobkin partnered to represent freelance journalists Spencer Woodman and George Joseph in litigation seeking the release of video footage of a fatal fight in a Michigan state prison after their Freedom of Information Act requests were denied.  After Woodman and Joseph secured the release of redacted versions of the video, Honigman and the ACLU each requested attorney fees under the Michigan FOIA law's fee-shifting provision.

The ACLU was awarded 100% of its request, but the judge awarded Honigman $19,000 of its $190,000 fee request because the firm represented the journalists for free.  While judges can consider a range of factors to adjust fee awards up or down, whether a client is paying for his or her representation is not one of them, the state Supreme Court said.

Factors such as the difficulty of the case, time limitations, and experience of the attorneys can help a judge analyze the reasonableness of attorney fees, but pro bono representation is "not relevant" to such an analysis, the majority said, in line with the principle that a reasonable fee award is not based on the actual dollars a client has paid to his or her lawyer.  "When an attorney agrees to represent a client pro bono, the pro bono nature of the representation should not have any effect on the quality of representation provided or the time spent on the case," Justice Bolden wrote.

In an email to Law360, Robert M. Riley of Honigman LLP, who represented Woodman and Joseph, said the ruling "puts Michigan in accord with every other state and federal court that has considered the issue."  "Attorneys willing to donate their time and energy rightly deserve to be treated the same as their paid counterparts.  We're grateful to the ACLU of Michigan for the opportunity to work together, and to the organizations who filed briefs in support of our position.  It's a historic moment for the Michigan pro bono community and we're honored to have played a role in this significant milestone," Riley said.

The majority said its conclusion aligns with the purpose of the fee-shifting provision in Michigan's FOIA law, which is to encourage government agencies to comply with the law and allow plaintiffs to pursue FOIA litigation they otherwise would not be able to afford.  "This case is a prime illustration of the 'private attorneys general' model working to vindicate the private rights of the litigants and the right of the public to access its government's information.  As recognized by other jurisdictions, a contrary ruling could have a chilling effect on the willingness of private attorneys to represent indigent litigants," the majority said.

Justice Brian Zahra, in a dissent joined by Justice David F. Viviano, disagreed that the majority should have taken up the issue of pro bono representation, calling it "premature" to review it because the Court of Appeals had declined to address the issue and had remanded the issue for reconsideration by the trial judge.  The majority was wrong to tie courts' hands and bar them from weighing pro bono status as a factor when it could be relevant to a fee award, Justice Zahra said.

Additionally, the majority's ruling "creates a strong, and seemingly perverse, incentive for lawyers and law firms to focus their pro bono activities in areas where they can expect to recover attorney fees rather than in the many diverse areas of the law where pro bono services are desperately needed," the dissenting justices said.

Although Justice Zahra did not reprise the suggestion he made during oral arguments that law firms could be required to donate their pro bono attorney fee awards to the state bar, he was concerned that the majority's opinion distorts the purpose of pro bono representation and pushed back on the majority's point that attorney fee awards help incentivize pro bono work.  "Let's not be afraid to acknowledge the elephant in the room.  If a lawyer or firm will not take a 'pro bono' case unless there is an opportunity to make money at the end, is it truly pro bono?" Justice Zahra wrote.

The majority also found Woodman and Joseph prevailed in full on their FOIA claims, which entitled them to a mandatory award of attorney fees instead of a discretionary award, which is available to plaintiffs who partially prevail.  Even though the freelance journalists received only redacted video with the faces of the prison staff blurred to protect their identities, the majority said the video was still "everything the plaintiffs initially sought" because the FOIA requests did not specify that the records must be unredacted and the journalists chose not to fight the redactions.  The dissenting justices also disagreed with that conclusion, saying it "defies common sense."

The journalists' FOIA requests can be assumed to have been requests for unredacted video because that is the default under FOIA and their complaint in the litigation specified they were seeking "complete, unredacted" footage.  "Perhaps redaction was not ultimately a major sticking point for plaintiffs, but it was an issue that they contested and lost," Justice Zahra wrote.  The dissenting justices said the majority's conclusion will allow FOIA litigants to manipulate the fee-shifting statute and win attorney fee awards by accepting less than the records they initially sought and using that concession to argue they fully prevailed and are entitled to attorney fees.

McDermott Will & Emery LLP partner Elizabeth Lewis, president of the Association for Pro Bono Counsel, told Law360 in a statement that APBCo was pleased the state supreme court "recognized the importance of ensuring that counsel who work on matters pro bono are still entitled to statutorily mandated fees."

"Pro bono counsel's eligibility for and receipt of fee awards are crucial in promoting equal access to justice — they ensure that pro bono and private representation are equally effective and support the work of legal services organizations — and the near-universal practice is to donate such fees to those legal services organizations and other charities to further facilitate these goals," Lewis said. APBCo filed an amicus brief in Woodman and Joseph's case.

Former AG’s Hourly Rate: $2,295

April 16, 2021

A recent Law.com story by Mike Scarcella, “Covington’s Eric Holder Bills at $2.295 Hourly, New Legal Services Contract Shows,” reports that Covington & Burling partner Eric Holder Jr., the Obama administration’s first U.S. attorney general and a veteran Washington lawyer, is billing at $2,295 hourly, according to a contract the law firm signed with a public university to conduct an internal investigation about workplace culture.  Holder is Covington’s lead partner on the legal services engagement with Oregon Health & Science University.  The school announced its retention of Covington in late March to lead a “comprehensive, independent investigation of institutional harassment, discrimination, retaliation and racism.”

Covington and other firms have long been hired to conduct internal investigations at companies and other institutions, but in many instances the engagement letters, revealing rates and the scope of legal services, are not matters of public record.  ALM obtained Covington’s contract through a public records request.  Holder’s $2,295 billing rate puts him at the high end of hourly figures.  Billing at other elite firms such as Weil, Gotshal Manges and Kirkland & Ellis have recently approached $2,000.

“Mr. Holder and Covington have conducted examinations of workplace culture and issues related to equity, diversity and inclusion for corporations including Uber, Starbucks and Airbnb,” the university said in announcing the retention of the Washington-based law firm.  The announcement noted that “Holder and the Covington team are also currently assessing race, equity, inclusion and diversity policies and practices at Seattle Children’s Hospital.”

Holder is working with Covington partner Nancy Kestenbaum, co-chair of the firm’s white-collar defense and investigations practice group and a former member of the firm’s management committee. Kestenbaum is billing at $1,445 an hour, the law firm’s engagement letter said.  Covington said it agreed to discount its rates by 10%.

“Hourly rates for other lawyers range from $595 for junior associates to $2,295 for senior partners; and for legal assistants from $290 to $545,” the firm said in its engagement letter.  The firm said it reviews and adjusts rates yearly as of Jan. 1, “although there are circumstances in which we may adjust rates at other times.”  Part of the contract contained information that the university would not release.  The information pertained to clients Covington is advising on clinical trials being conducted at the university.

“As you recognize, we are a large law firm with multiple practices in multiple offices throughout the world, and we represent many different clients in many different industries, including clients who are competitors of each other and sometimes adversaries in legal matters,” Holder wrote.  “In taking on this representation, we commit that we will not represent any other client in any matter adverse to you that is substantially related to this matter.”

A private law firm charging a public client is not rare.  Public records show major U.S. law firms have charged local or state government clients to take a case to the U.S. Supreme Court.  Not every engagement, however, is charged. Some work is done pro bono.

Judge Says School District Overpaid Morgan Lewis

March 5, 2021

A recent Law 360 story by Lauren Berg, “Judge Says School District ‘Greatly Overpaid’ Morgan Lewis,” reports that a New York federal judge awarded millions of dollars in attorney fees to the NAACP after a Hudson Valley school district was found to be blocking minority voters' preferred candidates from the school board, while criticizing how much the school district paid its counsel at Morgan Lewis & Bockius LLP.

During a hearing, U.S. District Judge Cathy Seibel increased the $4.3 million in attorney fees and costs that a federal magistrate judge recommended be awarded to the NAACP's counsel at Latham & Watkins LLP and the New York Civil Liberties Union Foundation after they won a bench trial.  According to a transcript provided to Law360, the East Ramapo Central School District was found to have violated the Voting Rights Act.

Following the bench trial, Judge Seibel found that in the "unique" school district, in which 98% of private school students are white and 92% of public school students are Black or Latino, statistical analysis showed that both groups voted as blocs.  The minority group has been unable to get a single preferred candidate onto the board since 2007 due to highly organized resistance from the private school community, which is largely Jewish, the judge ruled.  The Second Circuit in January upheld the ruling.

In their objections to the magistrate judge's recommended award, the NAACP's counsel said they should at least be paid the same amount that the school district paid Morgan Lewis and asked for about $8.5 million — all of which they said they will donate to help the public schools in the district — while the school district said there shouldn't be a fee award because the attorneys are working pro bono, according to the transcript of the hearing.

Judge Seibel said the NAACP's counsel isn't entitled to the same rate that its corporate clients pay because they are working pro bono, but they are entitled to a fee.  She also noted that while the attorneys' plans to donate all of the money is "commendable," it will have no impact on her calculation of the fees.

The NAACP's counsel argued that the magistrate judge's award cuts their fees to half of what Morgan Lewis was paid, but Judge Seibel said it's not her job to compare what the plaintiffs seek with what the defendants were paid.  She noted that she must determine what a reasonable, paying client would pay by multiplying the reasonable number of hours by a reasonable hourly rate.

The judge said the school district is not an example of a "reasonable, paying client."  "I think the district greatly overpaid," Judge Seibel said.  "I have never heard of a school district in this area being charged or paying close to $650 an hour for partners or $450 an hour for associates, which is what Morgan Lewis charged."  The judge said that because this case was more complex than another more routine case, it's reasonable that the client might pay more than it usually would, but that the school district in this case paid about triple the normal rate.

"The record simply contains no indication that defendant's counsel's fee is, in fact, reasonable; and I think there are strong reasons to conclude it's not, so it doesn't make sense to try to match it," Judge Seibel said.  "Latham's work has obviously been more valuable to its clients than Morgan Lewis's was to its, but that does not mean defendant has to pay Latham what defendant paid Morgan Lewis."

The judge also noted that the school district could have avoided paying fees to the NAACP's counsel had it settled the case before it went to trial, but she also said the district was under no obligation to settle and might have sincerely believed it could win the case.  The judge also disagreed with the school district's assertion that the NAACP didn't really achieve anything because the school board is still 6 to 3 in terms of white private school members versus minority public school members.

"First, plaintiffs achieved something really big here.  They turned over a big rock and they exposed a years'-long violation of voting rights," Judge Seibel said.  "Second, even if there are only three minority/public school members on the board, they will be ones chosen by the voters, not by a secretive white slating organization."

In her calculations, the judge said she came out a little higher than the magistrate judge, citing the difficulty and complexity of the case that required a high level of skill from the attorneys, as well as the substantial resources needed to effectively prosecute the case.  "I think above what is typical in normal civil rights cases is appropriate and I'm going to bump up from Judge [Judith C.] McCarthy's numbers, although not up to what plaintiffs asked for," Judge Seibel said.

The judge didn't specify the total amount of fees and costs she awarded the NAACP but did say she would offer a higher rate of 25% compared to the 20% offered by the magistrate judge.  At the end of the hearing, Judge Seibel told the NAACP's counsel at Latham that it shouldn't take umbrage at a fee award that will probably come out to be less than what the school district's counsel got, according to the transcript.  She said she thinks the defense counsel got paid too much, but that "two wrongs don't make a right."

"Latham accomplished two very important things here: first, it got its associates some invaluable training and experience while also showing them how rewarding and satisfying public interest work can be; and second, it rectified a serious wrong in the community and restored the voting rights of thousands of people, and you cannot put a price tag on either of those things," Judge Seibel said.  "The firm ought to take pride in both of those accomplishments without diluting it by tying it to an arbitrary number paid to plaintiffs' counsel," she added.

Defense Rates Expected to Rise at Lower Pace in 2021

January 15, 2021

A recent Legal Intelligencer story by Andrew Maloney, “Rate Pressure and Rising Expenses Are Expected to Challenger Firms in 2021,” reports that law firms may have weathered the COVID-19 financial storm last year, but firm leaders and legal observers say economic pressures could bear down again in 2021, including increased expenses, rate pressure and cash-strapped clients.

Big Law likely won’t be able to count on government loans this time , either.  Overall, firms and analysts are optimistic about business this year.  Firms mostly said they expect a return to some version of normalcy by the second or third quarter of the year, according to a report this week from Thomson Reuters and Georgetown Law’s Center on Ethics and the Legal Profession.

At the same time, the pandemic “is likely to continue to pose economic challenges for law firms” this year, the report said, even as vaccines are being distributed en masse.  “First, it is not clear that the same tools used by firms to address the crisis since March will be as readily available in 2021.  Some law firms may well not enter the new year with the same cash cushions they had from 2019,” the report stated.  It notes many firms used the pandemic to increase billing and collections efforts, and as a consequence, may not have as much on-hand heading into this year as usual.

In addition, there’s growing concern about the ability to raise rates this year, while corporate legal departments, with 2021 budget goals, are looking for areas to trim.  ”It may be harder to implement the same level of rate increases at the end of 2020 that firms enjoyed at the end of 2019,” the authors added.

James Jones, a senior fellow at the Georgetown Law Center on Ethics and the Legal Profession and lead author of the report, said he was “dubious” firms could boost rates at the same level they did last year—about 5%.  The average annual rate increase for firms since 2008 has been about 3%, he said.

Jones also pointed to a recent Thomson Reuters survey of more than 200 legal departments that found about 89% said holding down outside counsel costs was one of their highest priorities for 2021.  He noted that corporations have significantly increased personnel whose job is to oversee outside counsel agreements.  According to Reuters’ Legal Department Operations Index, about 57% of companies had people in those roles in 2019. In 2020 that number shot up to 81%.  “So, given the economic uncertainties and enormous pressure that companies are under, I would be surprised if they sit still for a 5% increase,” Jones said in an interview.

Joshua Lorentz, a partner at Dinsmore & Shohl who chairs the firm’s finance committee, said the firm ended 2020 “on a solid note” and expects 2021 to be a “net gain” for business.  But he said one wrinkle to the budgeting process this year is figuring out where to set rates, as clients try to forecast how much COVID-19 will alter their bottom lines again.  “I don’t know that a majority of companies are asking for discounts, but perhaps discounts for new work, COVID discounts. For some clients, we’re willing to lean into that,” Lorentz said.

He said the firm is evaluating which clients needed breaks in 2020 and having discussions about their projections for 2021.  ”And with all that information, we’re able to see who needs us to lean in, who appears to be weathering the COVID situation.  Then we try to budget conservatively on top of that,” he said.  As an example of that conservative budgeting approach, Lorentz said Dinsmore is preparing this year’s numbers as if expenses such as conferences and business travel will still go forward as they would in a pre-pandemic year.

“And if it ends up that things get canceled in February and March and in the summer, then it’s additional profit for the partnership and the attorneys,” he said.  “But if we don’t budget for it, and things suddenly get clear, it’s tough to go find the money.”

Rising Expenses

The Georgetown and Thomson Reuters report noted that “almost all firms” significantly reduced costs by being more efficient about physical office space, staffing, in-person meetings and business travel in 2020, and such drastic changes could amount to a “tipping point” that permanently alters how firms do business.

Lathrop GPM could be one of those firms. Managing partner Cameron Garrison said this week that while he hopes to have a firmwide return to in-person work later this year, “I do expect that our typical work week may look very different once we return to the office.”  He said in an email that’s a result of the firm likely continuing to leverage remote work options for its staff.

At the same time, for many firms, the savings created through remote work and reduced travel are likely a one-time deal.  “I think the challenge that we’re going to have in 2021 is the very sharp expense reductions that we saw when we went into lockdown.  Those expense reductions—they’re not going to repeat, and we’re going to see our expense numbers rising again,” said Michael McKenney, managing director of Citi Private Bank’s Law Firm Group.  “So that margin expansion that we saw is unlikely to repeat.”

However, McKenney said many firms are “very, very strong” in terms of how much cash they have on-hand entering 2021.  He noted rate increases have been “very steady” since the financial crisis of 2008, and there are plenty of signs COVID-19 won’t hamstring the market this year the way it did in 2020.  “The outlook, particularly if vaccine distribution is handled better than it has been initially, is for a fairly vigorous rebound in a level of activity,” McKenney said, noting that some of the most leveraged practices that were hit hard almost a year ago are starting to come back.

“We saw corporate M&A shut down, capital markets activity was reduced, litigation was hampered because it was very hard to take depositions.  Juries were not sitting,” he said.  “Those things have begun to reopen, and people are doing them very successfully virtually.  Corporate M&A is back up, capital markets is back up, so many of our leverageable practices—practices that generate strong hours—are coming back.”  Garrison, the Lathrop firm leader, said the long-term economic and societal effects of COVID-19 are still unknown.  But one area that could pick up as a result of economic pain in the short term is pro bono.

“While not an economic challenge, I also believe that firms will be challenged with increased pro bono requests due to an increase in people facing financial hardship,” he said.  “We are very focused on balancing the pro bono time we can offer to support our communities while increasing the support that we add to our clients.”