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Category: Interest on Fees

Hagens Berman $31M Fee Objection Heads to Ninth Circuit

April 19, 2022

A recent Law 360 story by Dorothy Atkins, “Hagens Berman Must Forfeit $31M Fee Win, 9th Circuit Told” reports that an objector's counsel urged the Ninth Circuit to force Hagens Berman Sobol Shapiro LLP to forfeit or reduce a revised $31 million fee award for securing deals worth $205 million in multidistrict litigation over optical disk drive price-fixing, arguing that the law firm violated multiple professional rules of ethics.  During a hearing before a three-judge panel, objector Connor Erwin's counsel, Robert Clore of Bandas Law Firm PC, argued that Hagens Berman violated multiple California Rules of Professional Conduct in securing its eight-figure fee award before a trial court, including by never placing the disputed funds into a client trust account, despite class members' objections and appeals pending.

But U.S. Circuit Court Judges Morgan Christen and Carlos T. Bea asked how class members have been harmed by the firm's failure to hold the funds in a client trust account.  "What harm, what foul?" Judge Bea asked.  Clore replied that as a result, the class has been denied up to $600,000 in interest that would have been collected on the disputed money.  At least a portion of that interest should have gone back to the class when a Ninth Circuit panel vacated Hagens Berman's previous $52.8 million fee and expense award, the attorney said.

"Why should they be entitled to interest on fees that don't belong to them?" Clore asked the panel.  The trip to the Ninth Circuit is the latest chapter in a decade-old multidistrict litigation claiming that Samsung Electronics Co. Ltd., Toshiba Corp. and other disk drive makers participated in an industry-wide conspiracy to fix optical disk drive prices.

Hagens Berman beat out other firms for lead class counsel in 2010, and the firm later struck multimillion-dollar deals to resolve the disputes.  After U.S. District Judge Richard Seeborg took over the case from U.S. District Court Judge Vaughn Walker, Judge Seeborg awarded the law firm $47.8 million in attorney fees for securing the settlements.  But in May 2020, a pair of Ninth Circuit panels vacated the fee awards after Clore argued before the appellate court that Judge Seeborg erred by keeping Hagens Berman's initial proposal for lead class counsel under seal and not properly taking it into account in awarding fees, among other objections.

On remand, in July, Judge Seeborg awarded Hagens Berman a revised $31 million fee, finding that the firm was entitled to a 20% premium on top of the $25.9 million it would be allotted under the firm's interpretation of the fee grid in its initial class counsel proposal.  Judge Seeborg also awarded Erwin's counsel $1.5 million in fees in September for their work helping to convince the Ninth Circuit to throw out the initial fee award.

But Erwin again challenged the fee award, with Clore arguing before the appellate court that Hagens Berman took too long to return the fees after the previous panel vacated the award, and did not place the funds in a client trust account, as required by professional rules of conduct.  Clore added that the trial court also erred in miscalculating the "starting point" for setting reasonable attorney fees on remand by using a flat rate instead of the sliding scale specified in the firm's initial proposal, resulting in an adjusted $25.9 million for the firm.  That amount should be $22.2 million, he said.

In light of the alleged violations, Clore asked the Ninth Circuit to send a message that class counsel are not immune to the California state bar's professional rules, and require the law firm to either forfeit its fees, or at the very least reduce the fees to keep in line with the firm's initial $22.2 million fee proposal.  As support, Clore cited the Ninth Circuit's 2012 decision in Rodriguez v. Disner, which held that a court has "broad equitable powers to … require an attorney to disgorge fees already received" for a serious ethical violation.

But class counsel Shana E. Scarlett, of Hagens Berman Sobol Shapiro LLP, argued that $31 million in fees is justified given the length of litigation and how fiercely the litigation was fought.  She also argued that the judge properly awarded additional fees on top of the initial $25.9 million proposal based on his discretion and understanding of the case.

But Judge Bea asked why the trial judge used a flat rate instead of the sliding scale methodology specified in the firm's initial bid proposal.  "Why isn't Judge Seeborg wrong in using a flat basis rather than a sliding scale basis based on the schedule we have before us?" the judge asked the attorney.  Scarlett replied that the firm's initial bid proposal was just one part of what informed the trial judge's decision. But Judge Bea appeared skeptical.

"You're talking about extrinsic evidence that was used by Judge Seeborg to interpret the writing, which we have before us?" Judge Bea asked.  "What factual evidence was there?  Are you saying that the written document is ambiguous and requires factual findings interpreted?"  Scarlett replied that the initial proposal was clear that the fees should use a flat rate, and not a sliding scale, but Judge Seeborg "went further and made the finding that we intended to be flat rate structure."

Brown Rudnick Accused of $22M in Overbilling

February 25, 2022

A recent Reuters story by David Thomas, “Ex-Client Wans $22 mln From Brown Rudnick, Saying Lawyers Overbilled” reports that an Austrian multinational construction company went on the offensive in a fee dispute with U.S. law firm Brown Rudnick, claiming the firm routinely overbilled it and demanding $22 million.  Brown Rudnick sued Christof Industries Global GmbH in September, alleging the industrial plant builder owed $8 million in attorney fees and interest from an international arbitration over a failed construction project.

But the law firm racked up more than $6 million in fees after promising in writing to not exceed a $2 million fee estimate, Christof alleged in its countersuit, filed in Boston federal court.  The law firm improperly overbilled, Christof alleged, saying one attorney billed more than $145,000 for 231 hours preparing to examine one witness.  The law firm billed more than 40 hours for assembling binders, the company said.

"In a number of time entries that verge on satire, Brown Rudnick attorneys even billed for drafting and corresponding about a proposal for their 'binder compilation strategy,'" Christof said in its suit.

The dispute stems from Brown Rudnick's work arbitrating a conflict arising from a Christof subsidiary's work as a contractor during the construction of a fiberboard production plant in South Carolina.  Christof said it signed an agreement with the firm so that its legal costs would not exceed $40,000 a month, plus a $200,000 retainer up front.  But it said Brown Rudnick billed more than $250,000, not including the retainer, just in its first month.

A panel awarded Christof more than $24.5 million in damages in the underlying arbitration, which was offset by about $20 million in advanced contract payments the company had received.  The final award was for $6.68 million.

$11.7M Attorney Fee Award in Home Depot Data Breach

January 5, 2022

A recent Law 360 story by Sarah Jarvis, “Home Depot Data Breach Attys Get $11.7M in Fees After Fight,” reports that an Eleventh Circuit panelordered a Georgia federal court to award $11.7 million in fees, plus interest, to attorneys representing banks and other financial institutions in litigation over Home Depot's 2014 data breach, ending a tumultuous, four-year fight over the attorney fees.  In a per curiam opinion, the panel said the Northern District of Georgia erred in opting to use a percentage method to award $14.5 million in attorney fees, including interest, after the appellate panel had previously found that a $11.7 million lodestar amount was "fully supported by the record."

The panel remanded the case and instructed the district court to enter an order requiring Home Depot Inc. to pay class counsel for the financial institutions $11.7 million plus interest from the date of the amended fee award in January 2020.  "The law of the case doctrine and Home Depot I's mandate precluded the district court from awarding class counsel an attorney's fee other than the $11.733 million lodestar plus interest," the panel said, referencing the previous appeal in the case.

Home Depot's 2014 data breach compromised 56 million credit and debit card numbers, and was one of the largest payment card data breaches in history, the trial judge had said.  The 2017 settlement agreement provided $27.2 million in cash to the class and required the retailer to improve its data security.  In addition, Home Depot gave money to the financial institutions affected by the breach, including an extra $14.5 million to obtain releases from putative class members of their claims in the litigation.

After settling, the class of financial institutions sought $18 million in attorney fees, comprising the $11.7 million lodestar and a multiplier of 1.55, which Home Depot opposed as excessive.  The retailer had argued that $5.6 million in fees was appropriate.  In September 2017, a Georgia federal judge set attorney fees at $15.3 million. But in July 2019, the Eleventh Circuit trimmed the award against Home Depot, saying U.S. District Judge Thomas W. Thrash Jr. improperly enhanced an $11.7 million lodestar amount by a multiplier of 1.3 to factor in attorney risk.

On remand, the trial judge sided with new arguments from the class of financial institutions and awarded in January 2020 $14.5 million in attorney fees, including interest, against Home Depot, plus about $730,000 in costs.  Home Depot appealed again, arguing the settlement agreement clearly states the retailer should pay the amount of attorney fees that were reduced on appeal, plus interest.

Cari K. Dawson of Alston & Bird LLP, an attorney for Home Depot, argued in December 2020 that the trial judge didn't have the authority to reconsider an appropriate attorney fees amount using a different calculation method because the appellate court affirmed all but the multiplier in his previous decision, including the $11.7 million lodestar.  She said that although the appellate panel did not explicitly state in its 2019 opinion that $11.7 million was the appropriate amount of attorney fees, that was implied by its affirmation of all but the risk multiplier.

But Kenneth S. Canfield of Doffermyre Shields Canfield & Knowles LLC, an attorney for the class, had argued that Judge Thrash did have discretion on remand to take a second look at what was appropriate, as long as he didn't use the 1.3 risk multiplier that appellate judges had rejected.  Canfield said the trial judge could instead apply a percentage method to calculate fees rather than rely on the $11.7 million lodestar, which is what he did.

Taylor English Seeks $2.8M in Fees From Former Client

December 15, 2021

A recent Law360 story by Emily Sides, “Taylor English Seeks $2.8M in Fees From Ex-Client,” reports that a Texas-based oil and gas corporation owes Taylor English Duma LLP over $2.8 million for nearly 3,000 unpaid billable hours, expenses and interest, according to a suit the law firm filed in Georgia state court.  Frontera Resources Corp. reneged on its February 2019 retainer agreement with the Atlanta-headquartered law firm, according to the six-page complaint by Taylor English.  In addition to the over $2.1 million for unpaid legal work and expenses and $721,655 in interest, Taylor English wants its ex-client to reimburse the firm's attorney fees for having to pursue the payment litigation.

The complaint alleges one count of breach of contract, one count of unjust enrichment and one count of account stated against Houston-based Frontera Resources.  As part of alleging account stated, Taylor English said that the total sum is the correct amount that Frontera Resources owes. Taylor English referred to a state law that states that a defendant in an action must either deny the debt or reply with how much is truly owed to the plaintiff.  According to Taylor English, the corporation had retained the firm and agreed to pay up to $795 an hour for legal services.

"At [Taylor English's] expense, [Frontera Resources] has been unjustly enriched through the conduct described above, and [Taylor English] is entitled to be compensated for the benefit that [Frontera Resources] has enjoyed and will enjoy as a result of its receipt of the services provided to it under the engagement agreement," Taylor English said in its complaint.  In a two-page letter dated Feb. 8, 2019, Bryce D. Linsenmayer of Taylor English thanked Levan Bakhutashvili of Frontera Resources for agreeing to retain the firm.  Linsenmayer outlined terms of their agreement, including how Frontera was responsible for paying for any legal services provided and for any interest accrued for an unpaid balance.

"Our firm customarily asks for a retainer at the outset for a new client engagement but we have agreed to forgo a retainer at this time," Linsenmayer said in the letter.  "In addition to our fees, you will be responsible for expenses in connection with this engagement, including travel, filing fees, courts costs, postage, online research fees and governmental filing fees, if necessary," Linsenmayer said in the letter.  "You may terminate this agreement with us at any time, but we are entitled to the full amount of fees earned."

Florida Attorney Gets Attorney Fees in Malpractice Action

December 3, 2021

A recent Law360 story by Carolina Bolado, “Buchanan Ingersoll Atty Gets Fees in Malpractice Suit,” reports that a Florida appeals court ruled that a Buchanan Ingersoll & Rooney PC attorney who dodged legal malpractice claims from a prominent Miami developer can collect attorney fees and costs under the state's offer-of-judgment statute.  Florida's Third District Court of Appeal affirmed the award of attorney fees and costs to Buchanan Ingersoll partner Richard A. Morgan, who had made a settlement offer to former client Avra Jain earlier in the litigation before he won on summary judgment.

Jain argues that Morgan, not the firm, made the settlement offer to her, and because he himself never incurred any attorney fees, he is not entitled to recover them under the offer-of-judgment statute.  But the appeals court disagreed, finding that fees and costs were incurred on his behalf by Buchanan Ingersoll, which was also named as a defendant in her legal malpractice suit stemming from an $11 million judgment against her.

"While we agree with Jain that Morgan himself did not incur attorney's fees, we disagree with Jain's contention that attorney's fees were not incurred on his behalf," the court said.  The appeals court in June already affirmed the summary judgment ruling for Morgan and Buchanan Ingersoll, denying Jain's bid to make them pay the millions in damages, interest and attorney fees she was found to owe a former business partner.