A recent Law 360 story by Ryan Boysen, “Gibson Dunn Fees Halved in NY Eviction Law Dispute”, reports that attorneys from Gibson Dunn & Crutcher LLP can recover $385,000 in fees for successfully blocking a pandemic-era anti-eviction law on behalf of New York landlords, after a federal judge rejected arguments that they should not be paid at all, but found their initial request of $735,000 "unreasonably excessive."

In a 26-page ruling, U.S. District Judge Gary R. Brown said the Gibson Dunn team in question deserves credit for four months of frenzied work that finally led the U.S. Supreme Court to enjoin New York's COVID-19 Emergency Eviction and Foreclosure Prevention Act, or CEEFPA, in August 2021 — even though a new, nearly identical law was then passed shortly thereafter.

Judge Brown slashed the initial $735,000 fee request nearly in half after finding the 10-attorney team was too big, too "top-heavy" and billed too many hours, some of them at too-high hourly rates.  That decision came even though the Gibson Dunn attorneys had argued the $735,000 figure already reflected "significantly discounted" rates and some pro bono hours for which they did not bill at all.  "Upon review of the billing records, the court … finds that the number of hours expended by Gibson Dunn on this litigation to be unreasonably excessive for several reasons," Judge Brown said.

In civil rights cases the "prevailing party" is able to seek legal fees from their opponent, on the grounds that when a plaintiff "succeeds in remedying a civil rights violation," the benefits of doing so inure to the rest of society as well, according to the ruling.  Judge Marks, the defendant in the landlords' initial lawsuit, had argued that the Gibson Dunn team should not receive any fees because its efforts only resulted in enjoining a law that had been set to lapse just days later.

"The stark truth is that plaintiffs failed to recover a judgment against [Marks] at all, rendering this fee application null," Judge Marks said in a brief opposing Gibson Dunn's fee request.  Judge Brown said that analysis was not quite on the money, however.  Even if a party receives only a stay or preliminary injunction, and never obtains a final judgment in its favor, it can still be considered a "prevailing party" if the court ruled in its favor on the merits, the ruling said.

"Moreover, 'a party prevails under [Section 1988 of the Federal Rules of Civil Procedure] where it obtains a preliminary injunction against enforcement of a law that is later amended or repealed,'" Judge Brown said, quoting the 2021 ruling in HomeAway.com Inc. v. City of New York.  Nonetheless, Judge Brown declined to award the Gibson Dunn team the entirety of the fees it asked for.

His reductions began with the hourly rates sought by the Gibson Dunn team.  Randy M. Mastro and Akiva Shapiro billed $550 each per hour; senior associates Jessica C, Benvenisty and William J. Moccia billed $375; midlevel associates Erich A. Bruhn, Lauren K. Myers and Seton Hartnett O'Brien $287.50; and junior associates Lavi M. Ben Dor, Bina Nayee and Maxwell A. Peck $200.  These are the rates Gibson Dunn said had already been "significantly discounted" from the firm's "customary rates," the ruling said.

Judge Brown gave Mastro his $550 an hour rate given his widely acknowledged status as a towering figure of the New York Bar and his extensive experience with civil rights litigation, but reduced Shapiro's rate to $450 an hour.  Judge Brown also reduced the senior associates' rates to $325 an hour, the midlevel associates' rates to $250 an hour, and the junior associates' rates to $150 an hour.  Most of the reduction in the overall dollar amount received by the Gibson Dunn team came in the form of hours, however.

The attorneys claimed they spent nearly 2,000 hours on the CEEFPA case, but Judge Brown said that after he reviewed their billing records it seemed to him that Mastro, Shapiro and the senior associates spent too much time doing work that could have been done by lower-level associates, too much time in meetings, and too much time on "vague and block-billed" entries.

The entries with which he took issue included items such as "conference with team," "various correspondence with team members," "participate in team strategy call," "work on various issues going forward," "emails regarding status," and "work on various issues."  "In sum … the court finds that an across-the-board reduction of 50% of the hours billed by plaintiffs' counsel is appropriate," Judge Brown wrote.

A recent Law 360 article by Theodore Boutrous, Lee Crain, and Randi Kira Brown of Gibson Dunn LLP, “How NY SLAPP Defendants Can Recover Fees in Fed. Court”, reports on attorney fee recovery in New York SLAPP suits in federal court.  This article was posted with permission.  The article reads:

Meritless defamation lawsuits have long plagued media defendants.  These strategic lawsuits against public participation, often called SLAPP suits, are designed to chill speech.  States across the country have been experimenting with statutes to address this problem for over 30 years. New York — a jurisdiction that many newspapers, magazines, publishing houses and television networks call home — did not have a strong solution to this problem for many years, but the 2020 amendments to New York's anti-SLAPP law were meant to change that.

Among other things, New York's anti-SLAPP law protects defamation defendants by raising the standard of proof on defamation claims for plaintiffs and by providing for fee shifting, allowing victorious defamation defendants to recover the costs they spent in their defense.  Fee-shifting provisions are essential components of anti-SLAPP laws, as the purpose of SLAPP suits is often to punish and chill the exercise of speech rights by imposing litigation costs.

There is so far no federal anti-SLAPP law. Defamation defendants therefore often must consider whether, and to what extent, state anti-SLAPP laws apply in federal court.  If not, a litigious SLAPP plaintiff need only forum-shop to try to avoid any of the provisions of state anti-SLAPP statutes, including state anti-SLAPP fee-shifting rules.  In other words, if that plaintiff files a defamation claim in federal court, she can argue she is no subject to the specter of fee-shifting because the anti-SLAPP law only applies in state court.

Federal courts have been split as to whether certain anti-SLAPP laws apply in federal court under the U.S. Supreme Court's Erie doctrine from the 1938 case Erie Railroad Co. v. Tompkins.  Under that doctrine, courts consider whether an anti-SLAPP law is procedural or substantive and, if procedural, whether it conflicts with the Federal Rules of Civil Procedure.  

New York's anti-SLAPP law was specifically designed to avoid this problem.  How?  Legislative innovation.  Unlike other anti-SLAPP laws, New York law doesn't only create a motion-based procedural vehicle for a defendant to defeat a defamation claim and recover attorney fees.  Instead, a key innovation New York adopted to help SLAPP defendants was to establish a substantive cause of action for defendants to seek fee shifting for SLAPP lawsuits — effectively an anti-SLAPP tort.

Specifically, New York's fee-shifting provision provides a defendant the right to "maintain an action, claim, cross claim or counterclaim to recover damages, including costs and attorney's fees, from any person who commenced or continued [a SLAPP] action," according to Section 70-a(1) of the New York Civil Rights Law.

So far, though, federal courts in New York have not consistently allowed parties to recover these fees, seemingly due to confusion about how the statute works and the best ways to invoke it in federal court.  For example, in Executive Park Partners LLC v. Benicci Inc. in May, the U.S. District Court for the Southern District of New York refused to apply the fee-shifting provision of the anti-SLAPP statute, holding that the plaintiff cannot file a motion for fees in federal court.

An anti-SLAPP motion, brought under Rule 3211(g) of the New York Civil Practice Law and Rules, conflicts with the Federal Rules of Civil Procedure, the court said, and is thus inapplicable in federal court.  By contrast, in 2021, the U.S. District Court for the Northern District of New York applied the fee-shifting provision in Harris v. American Accounting Association, though without addressing the difference between an anti-SLAPP fee-shifting motion and a cause of action to seek those same fees.

The Southern District of New York appears to have suggested last year in Carroll v. Trump that even a counterclaim is not cognizable in federal court because a Section 3211(g) motion is inapplicable, though the court failed to specifically address why a substantive claim was subject to the same Erie analysis as a state-law motion.  By contrast, in March, the Southern District of New York expressly recognized in Max v. Lissner that an anti-SLAPP claim is cognizable in federal court, even if an anti-SLAPP motion is not.

Given this conflicting backdrop and the state of uncertainty, defamation defendants seeking to invoke New York's anti-SLAPP law in federal court need to tread carefully in deploying it.  Simply filing a motion under the statute for fees may well result in a denial under Erie.  But New York law doesn't limit defendants to mere motion practice.  When a defendant prevails on a defamation claim, they should invoke their rights under the anti-SLAPP statute to counterclaim or bring a new action entirely under the statute to recover their fees — as the New York anti-SLAPP statute expressly allows.

And bringing such a substantive cause of action — essentially a substantive anti-SLAPP tort — will effectuate the Legislature's intent to ensure that the anti-SLAPP statute's protections are available in federal or state court.  It will ensure that courts will see the New York anti-SLAPP statute for what it is: A statute that confers substantive rights on defendants that plaintiffs can't try to forum-shop their way out of simply by filing in federal court.

A recent Law.com story by Avalon Zoppo, “Attorney Fees Cannot Exceed Value to Class, 9^th Circuit Makes Clear in Copyright Case,” reports that the U.S. Court of Appeals for the Ninth Circuit made clear its view that class action plaintiffs lawyers generally should not be awarded fees that exceed the amount their clients get from a settlement as the court struck down a $1.7 million fee award in which the class received less than $53,000 in a royalties dispute settlement.

The three-judge panel, in a presidential decision last week, said the lower court wrongly calculated fees for plaintiffs’ counsel in a copyright case based on a settlement that provided for a fund of up to $20 million for class payouts.  The district court should have instead looked at the amount actually obtained by those who made claims, here $52,841.05, the Ninth Circuit said.

Judge Kenneth Lee, writing for the panel, said the $1.7 million award is one that will “likely make the average person shake her head in disbelief.”  “Except in extraordinary cases, a fee award should not exceed the value that the litigation provided to the class,” Lee wrote.  ”No rational person would spend, say, $1 million in legal fees— and endure the hassles and headaches of litigation — to recover only relief that is a small fraction of that amount.”

‘A Significant Decision’

Alexander Smith, a class action defense partner at Jenner & Block, said the opinion is the circuit’s clearest statement so far that the main principle for determining the reasonableness of attorney fees under Federal Rule of Civil Procedure 23 is the benefit to the class.  “It’s certainly a significant decision, and sort of crystallizes a point that the Ninth Circuit indirectly made over the years, which is that we are not going to tolerate class settlements that pay a disproportionate benefit to attorneys as opposed to the class members that they purport to represent,” said Smith, noting that the court has made similar rulings over the past few years.

Michelman & Robinson represented a class of musical composition holders in the lawsuit against streaming service Rhapsody International, now branded as Napster, accusing the company of infringing their copyrights by sharing songs without a license.  The district court approved $1.7 million in fees based on Rhapsody’s promise to set aside up to $20 million for class members who submit claims.  But the Ninth Circuit said the lower court should have focused its analysis on how much the class ended up taking home, adding that there was no meaningful injunctive or non-monetary relief justifying the fee award.

In a statement to Law.com, Mona Hanna, Michelman & Robinson’s Orange County office managing partner, said the court did not give enough weight to non-monetary benefits for plaintiffs that resulted from the lawsuit and that the firm is “considering our options moving forward.”

“There is no dispute that after years of failing to pay artists their legally mandated royalties, Rhapsody ceased that practice, entered into a settlement with the National Music Publishers’ Association, and created an internal artist board to watch over Rhapsody’s conduct and confirm compliance with the new procedures.   This lawsuit contributed to these significant changes and resulted in a settlement providing up to $20 million to eligible class members and other non-monetary benefits,” Hanna said.  “We believe the Ninth Circuit opinion does not appropriately acknowledge the benefits to the class and does not comport with prior authority.”

In reversing the award, the panel pointed to its 2021 holding in Kim v. Allison that courts must compare the amount anticipated to be paid and not the maximum payable amount.  In the civil rights class action against Tinder where a $1.2 million award was vacated, the company agreed to a theoretical settlement cap of up to $6 million but only $45,000 was paid out.

But leading plaintiffs class action lawyer Jay Edelson said lower courts, and the magistrate judge here in particular, did not view the circuit’s past rulings in this area as establishing a bright-line rule on the question.  The circuit now has cleared up that confusion, he said.  The panel, composed of Lee and Judges Milan Smith and Daniel Collins, said explicitly that “what matters most is the result for the class members.”

Edelson said the decision will have an outsized effect beyond the Ninth Circuit, where plaintiffs lawyers will be forced to grapple with the court’s logic.  “It’s very hard now for [class action plaintiffs lawyers] to make arguments in other courts, even outside the Ninth Circuit, and say, ‘No, it’s OK that we’re keeping 95% of the money,’” said Edelson, founder of Edelson PC.  “They’re going to have to try to explain why the Ninth Circuit’s logic was wrong.  And I don’t think that’s possible to do.”  Meanwhile, Smith predicted that the decision may push class action plaintiffs attorneys to negotiate common fund settlements over claims-made settlements.

Beyond Copyright?

Kian Hudson of Barnes & Thornburg said the court’s decision also touches beyond copyright cases.  But Hudson also said the court gestured toward a possible narrow exception for civil rights class actions.  The panel noted that fees awarded in civil rights cases “need not be strictly proportional to monetary damages” because they can benefit society through non-monetary relief such as ending civil rights abuses.

“Although this case arose in the copyright context, it’s important to note that the Ninth Circuit was applying Rule 23(h), which imposes a ‘reasonableness’ requirement to attorney fee awards in class-action cases regardless of the nature of the lawsuit,” Hudson said in an email.  “It thus seems clear that the court intends its approach to be applied across many substantive areas of law.”

Edelson said the Ninth Circuit made a similar holding in the context of a consumer class action against ConAgra over alleged false labeling on its Wesson vegetable oil as “100% all natural.”  Lee also authored that 2021 opinion, in which the court reversed $7 million in attorney fees for plaintiffs counsel based on a claims-made settlement where the food company put up a maximum of $70 million for claims but a little less than $1 million was paid out.

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

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

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

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

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

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

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

A recent Law 360 story by Matthew Santoni, “Ex-Client Fights Buchanan Ingersoll’s $1.9M Fee Lien” reports that a former client of Buchanan Ingersoll & Rooney PC has said the firm isn't entitled to $1.9 million from a settlement in a patent dispute, but it offered to put a smaller amount aside while the parties litigate whether the firm overcharged for its work.  Best Medical International Inc. opposed Buchanan Ingersoll's motion for an attorney's lien on its settlement with Varian Medical Systems Inc., arguing in a brief to a Pennsylvania federal court that its former firm wasn't as instrumental as it claimed in securing the settlement and couldn't seek fees for the work while the reasonableness of those fees was at the heart of the current lawsuit.

"BIR has produced no evidence whatsoever that any settlement discussions began because of the quality of or the quantity of BIR's work," Best's reply brief said.  "Settlement discussions which resulted in an actual settlement did not result until after a substantial amount of additional work was done by other law firms once BIR withdrew from, or were substituted as to, representation of BMI in the Varian case."  Best urged the federal court to deny Buchanan Ingersoll's motion to enforce the $1.9 million lien and offered to put $700,000 in escrow with the court "as a good faith gesture, and without admitting liability in any amount."

Best had sued Buchanan Ingersoll in July 2020, alleging the Pittsburgh-based firm had overcharged for representing the medical device maker in a pair of patent disputes, including the fight with Varian.  Best broke off its relationship with Buchanan Ingersoll in March 2020.  Best and Varian announced a settlement in Delaware federal court April 18, and Buchanan Ingersoll filed a motion with the Pennsylvania court to enforce a lien on the settlement proceeds April 26, expressing concern that its former client would spend or otherwise dispose of the funds before the firm could claim its share.

Although the law firm claimed its engagement contract with Best included a clause saying it would be governed by Virginia law, Best argued that the Federal Rules of Civil Procedure regarding liens superseded the choice of law provision and that the law of the state where the lien was brought should apply.  And under Pennsylvania law, Best claimed that Buchanan Ingersoll had failed to make the necessary showing that its work contributed substantially to the settlement it sought the lien against.

Buchanan Ingersoll said it did most of the work on the Varian case in Delaware and on six "inter partes review" challenges that Varian had filed with the U.S. Patent and Trademark Office.  But Best countered that more was done by the successor law firms, including a "substantial amount of discovery, the taking and defending of depositions, significant briefing and oral argument before the USPTO … and appeals of the IPR final decisions to and currently pending in the U.S. Court of Appeals for the Federal Circuit."

"It is this substantial work by others, not BIR, that ultimately led to the Varian case settlement more than two years after BIR's representation was terminated," Best's reply said.  Even if the court agreed with Buchanan Ingersoll that Virginia law applied, the firm had not given all parties to the settlement — including Varian — that state's required notice that a lien might be applied to the settlement proceeds, Best said.

Moreover, Best said that Virginia law required Buchanan Ingersoll to show that the fees it sought to recover were reasonable, and the current lawsuit contended that they were not.  Best cited the Virginia Supreme Court's 1997 ruling in Seyfarth Shaw Fairweather & Geraldson v. Lake Fairfax Seven Limited Partnership to support its argument.

"Similar to issues in the instant case, the issues in Seyfarth involved the law firm expending an unreasonable amount of time in the performance of legal services and, therefore, the total amount of legal fees charged was unreasonable," Best's reply said.  "Any fees recoverable must be reasonable and … the party claiming legal fees has the burden of proving prima facie that the fees are reasonable and necessary.  Clearly, BIR has not met its burden of proof, nor has there been any adjudication, that the fees in dispute allegedly owed BIR were reasonable and necessary."

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