Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes


News Blog

Category: UK / International

Judge Orders Attorney Fee Dispute to Arbitration

March 9, 2021

A recent Law 360 story by Emma Whitford, “Atty Must Arbitrate Fee Dispute With Racehorse Trader,” reports that a California judge ordered an attorney to arbitrate her dispute with a U.K. racehorse auctioneer company, her former client, over fees allegedly due when she represented the company accusing a financier of failing to pay for a racehorse.  Attorney Diana Courteau of California claimed in her April complaint that Tattersalls Ltd., the racehorse company, failed to pay her $73,255.34 for the months of February and March 2020, after firing her that March.  The six-claim complaint also accused Tattersalls and Bracher Rawlins LLP, the company's English counsel, of fraud and intentional misrepresentation.

But Tattersalls and Bracher Rawlins pushed back with a motion to dismiss, pointing to an arbitration provision in their contract with Courteau and claiming that she failed to give them proper notice under the California Mandatory Fee Arbitration Act, which lays out rules for the handling of attorney-client fee disputes.  "Here, it is undisputed that [the] plaintiff did not provide the mandatory notice form to defendants," U.S. District Judge Dolly M. Gee ruled, adding that the case will be stayed while arbitration goes forward.

"Moreover," Judge Gee added, "the agreement between plaintiff and Tattersalls contains a broad arbitration provision governing the very dispute at issue."  Specifically, a "dispute over legal bills that alleges breach of contract and related claims."  Courteau had argued that Bracher Rawlins could not compel her to arbitrate because the firm is not a signatory to her agreement with Tattersalls.  But Judge Gee disagreed, saying that Bracher Rawlins will be part of the arbitration as an "agent" of Tattersalls.

It is "well settled that a nonsignatory may compel a signatory to arbitrate based on agency principles," Judge Gee wrote, adding that Bracher Rawlins "was only in a position to direct or authorize plaintiff to perform legal work for Tattersalls in its capacity as Tattersalls' agent."  The order is just the latest development in the litigious fallout of Tattersalls' working relationship with Courteau, who represented the company in various matters from 2011 until March of last year.

Last June, in the case Courteau worked for Tattersalls until they fired her, U.S. District Judge Karen S. Crawford ordered Courteau to pay $31,772.62 in sanctions to defendants Gerald Wiener and his entity Finance California Inc., court records show.  The sanctions covered attorney fees for a two-day deposition last January in which the court found that Courteau coached the witness, as well as the cost of preparing the sanctions motion, court records show.

Wiener and Finance California had also sought termination sanctions, a serious sanction that would have ended the case, for Courteau's alleged "abusive" and "hardball" tactics.  But Judge Crawford denied that motion, saying the "worst of this conduct has been addressed" and "monetary sanctions have been imposed which should be enough to deter future misconduct."  Courteau has yet to pay the sanctions, court records show.  Attorneys for Wiener filed a notice of lien in the instant suit on Jan. 15.

In a Feb. 4 declaration to the court, Courteau urged Judge Gee to proceed with a trial for her fee dispute or, in the alternative, send the case to "global mediation" along with the Wiener case, which is currently on appeal to the Ninth Circuit.  "Plaintiff is willing to stipulate (notwithstanding meritorious grounds for appeal) that ... the $31,772,62 (sanctions) can be paid from fees owed by defendants," Courteau wrote.

Second Circuit: No Second Shot for Milberg in $12M Fee Dispute

February 9, 2021

A recent Law 360 story by Justin Wise, “2nd Circ. Says No 2nd Shot For Milberg in $12M Fee Dispute”, reports that the Second Circuit upheld a lower court's dismissal of Milberg Coleman Bryson Phillips Grossman PLLC predecessor Milberg LLP's pursuit of nearly $12 million in contingency fees from former clients, saying its petition failed to comply with a timing provision of federal arbitration law.  The decision came down in a long-running dispute between Milberg LLP, which has since merged with multiple firms, and clients it represented in Germany and Luxembourg in their suit for recovery on defaulted Argentine bonds.

The firm in 2019 sued in the Southern District of New York seeking to vacate an arbitration award that said it was entitled to only a fraction of a $11.9 million fee it claimed it earned for its work on the case.  However, the court dismissed the firm's effort over failing to adequately plead diversity of parties and for not serving proper notice of the petition within the three-month statute of limitations.  While a three-judge panel differed with the lower court on the subject of diversity, "nevertheless, we hold that Milberg failed to comply with the timing provisions of the Federal Arbitration Act."

An attorney for Milberg had previously argued in court that Hague Convention protocol made it impossible to serve notice to overseas adversaries within 90 days.  But the appeals court was not convinced, saying the firm did not "demonstrate diligence" when it came to the three-month deadline to warrant a "possible equitable extension."

"Milberg did not even notify opposing counsel of its petition to vacate the arbitral award until [the] three-month window closed, and only after opposing counsel stated it was not authorized to accept service did Milberg set the wheels in motion for service overseas," the panel wrote, citing the firm's after-hours attempt to serve notice on the day the statute of limitations expired.

Milberg had represented 10 Luxembourg and German retirement funds and two German individuals as they sought to enforce payment on defaulted Argentine bonds.  The clients stopped working with Milberg in 2016 and hired another firm before settling the dispute with Argentina for $162.3 million.  Court documents show that the settlement was similar to the terms Milberg had obtained before being discharged.

Milberg initiated arbitration seeking contingency fees in 2017, but a panel on Feb. 5, 2019, declined to award the firm what it sought. Milberg filed suit in court on May 6, 2019, and late that evening — the last day it could serve a notice for its motion — emailed counsel for their former clients asking whether it could accept service on their behalf.  The clients' counsel said it was not authorized to accept service, court documents show.

Legal Fees To Top £5M in Credit Suisse Espionage Suit

January 29, 2021

A recent Law 360 story by Christopher Crosby, “Legal Fees To Top £5M in Credit Suisse Espionage Suit,” reports that legal fees are expected to top more than £5 million ($6.9 million) as a former Credit Suisse employee heads to trial seeking £60.3 million from the lender after he was imprisoned in Romania on charges of espionage over his work.  Judge Roger ter Haar QC signed off the costs in a short judgment at the High Court, approving hourly rates of £780 for top-tier barristers and £515 for their lieutenants.

Credit Suisse had budgeted some £3.8 million in time and costs for defending itself against allegations by Vadim Benyatov that the bank is liable to cover his lost earnings and costs arising from his conviction in 2013 by Romanian authorities. He was sentenced to 10 years in prison on charges of espionage and establishing an organized criminal group.

Benyatov, meanwhile, has estimated spending in excess of £2.3 million for the lawsuit. But despite the complexity and "considerable skill" involved in the case the judge trimmed the bank's budget for costs nearer to £3.1 million and Benyatov's to £2.1 million.  There are "big issues" with the disparity between the two estimates, the judge told the court.

Most of the trimming — more than £300,000 — came from the Swiss bank's preparation and budget for trial, which is expected to begin in late April.  Benyatov, who ran the lender's emerging markets desk in Europe, inflated the size of the dispute to £60.3 million from £39 million in November, when Judge ter Haar said he could add 10 years onto his projected retirement age.

At the time, the former banker had also sought to amend his 2018 lawsuit against Credit Suisse Securities (Europe) Ltd.  He was prevented from adding claims that the bank breached its duty to undertake a risk assessment on work in Romania.

However the judge allowed him to claim loss over the Financial Conduct Authority's decision to revoke his authorization in 2013.  Judge ter Haar rejected the Swiss bank's attempt to strike out the allegations, saying in December that it had applied the wrong legal test.

The former director worked for the bank from around 2005 on the proposed privatization of a Romanian state-owned energy producer by an Italian company.  He alleges that Romanian officials were concerned about potential Russian influence in its energy sector and scrutinized him because of his Russian family name and birth place inside the former Soviet Union.

Benyatov also claims that the bank should have tipped off Romania's intelligence services about its business plans.  He said after he was arrested in 2006 that Credit Suisse paid for his legal expenses but failed to cover his "enormous losses."  The bank disputes Benyatov's claim for repayment, and has said there is no obligation for it to indemnify him simply because his work for the lender led to his arrest.

The case is Vadim Don Benyatov v. Credit Suisse Securities (Europe) Ltd., case number QB-2018-001043, in the Queen's Bench Division, the High Court of Justice of England and Wales.

UK Ruling Bolsters Contingency Fee Arrangements

January 21, 2021

A recent Law 360 story by Richard Crump, “Contingency Fee Ruling Paves Way For Hybrid Arrangements,” reports that a recent appellate ruling has made damages-based agreements in the U.K. more attractive and could herald a new era for litigation funding by permitting a wide array of hybrid arrangements that lawyers say would make it easier to take advantage of the contingency fee structure.  In a Jan. 15 ruling, three Court of Appeal judges unanimously found that a damages-based agreement — a form of retainer in which a lawyer working on the case can charge a share of the recoveries if the claim succeeds — can be enforced if it is terminated by the client.

"There can be little doubt that this is a seminal moment in litigation funding and that the road has now been paved for DBAs to be used more widely in appropriate cases," said Matthew Waszak, a barrister at Temple Garden Chambers.  "Undoubtedly, there is likely to be an increased appetite to consider and use DBAs in appropriate cases."  Judges Peter Coulson, Kim Lewison and Guy Newey dismissed an attempt by a Lexlaw Ltd. client to withhold payment from the London law firm for its work on a misselling claim against Royal Bank of Scotland by seeking to terminate the DBA before the case concluded.

In doing so, the Court of Appeal removed a long-standing source of uncertainty that had prevented the more widespread use of DBAs since they were introduced in 2013 as part of a sweeping overhaul of the funding arrangements for civil litigation.  "One key obstacle preventing their wider use has been the fear among the legal profession that if a client terminates a retainer, the lawyer will end up being paid nothing for what might have been months or even years of work," Waszak said.  "The Court of Appeal has now put that concern to bed."

The uncertainty in relation to termination was one of the reasons the Bar Council the and Law Society have yet to offer a model form for DBAs.  The Bar Council, which intervened in the appeal, said it expects to publish further guidance on DBAs shortly.  DBAs were created to let would-be litigants hire counsel who would share the risks of litigation in return for a percentage of the proceeds.  But flaws in the drafting of the regulations created confusion over whether a DBA could allow for other kinds of fees if terminated early.

Lexlaw filed its suit against former client Shaista Zuberi in February 2016 after she failed to pay a £125,123 invoice the firm issued in July 2015 when she reached a settlement with Royal Bank of Scotland to end her claim over an interest rate hedging product sold at the height of the financial crisis.  On appeal, Zuberi argued that the DBA, which gave Lexlaw 12% of any sum recovered plus expenses, was unenforceable because it violated DBA regulations by including an obligation to pay legal costs and expenses to Lexlaw on its hourly rates up to the date of termination.

The Court of Appeal held that the inclusion of termination provisions is not a breach of the regulations — which Judge Coulson said were "designed to encourage the use of DBAs, not make them commercial suicide for the lawyer" — but arrived at the conclusion by different routes.  In a majority decision, Judges Lewison and Couslon adopted a narrow interpretation of the meaning of a DBA, so that other elements of the retainer, such as termination provisions or the responsibility for a law firm's expenses, are not connected to the sharing of recoveries and fall outside the regulation's scope.

Judge Lewison recognized that this conclusion meant that the current regulations do not deal with a lawyer's fees in the event the client takes a case to trial and loses.  That, the judge said, is a matter that could be legislated separately so that a DBA could prevent or limit a lawyer from charging fees if the claim were lost.  The regulations, which Judge Coulson dryly observed that "nobody can pretend ... represent the draftsman's finest hour," appeared to preclude so-called hybrid DBAs, which combine a share of recovered proceeds with another form of payment, such as hourly rates.

4 New Square's George McDonald said this narrow interpretation has "startling consequences," most notably that opens the possibility of hybrid fee arrangements.  "This means that a solicitor can still charge a client time-based charges even if the claim is unsuccessful and in addition to the DBA payment," McDonald said.  "This is contrary to the widely held beliefs that DBAs were pure contingency agreements which fell under the 'no win, no fee' banner."

While the ruling is significant and will go a long way to putting DBAs back on the table, Signature Litigation LLP's Johnny Shearman said the regulations would benefit from revisions proposed in 2019 that have not yet been adopted.

"Definitive wording on the use of hybrid DBAs would still be welcomed along with a number of other revisions," Shearman said.

Among other things, the proposed switch from paying costs out of the DBA fee rather than on top of it to a success fee model would be helpful, he said.

"Further reforms are needed to the regulations before we get to the watershed moment that this judgment is being referred to as," Shearman said.

The case is Lexlaw Ltd. v. Zuberi, case number A3/2020/1270, in the Court of Appeal of England and Wales.

Insurers Refuse to Pay $18M in Defense Fees in Experian Class Actions

November 19, 2020

A recent Law 360 story by Joanne Faulkner, “Insurers Deny Liability in Experian’s $18M Legal Fees Suit,” reports that two insurers have told a London judge they are entitled to refuse to pay Experian's $18 million claim for coverage of its U.S. legal fees in a pair of class actions over errant credit reporting because the litigation stems from deliberate data erasure by staff at the company.  Zurich Insurance PLC and a subsidiary of SCOR said Experian's policy excludes "deliberate acts" such as those that allegedly form the basis of two major class action suits in the U.S., a newly public Nov. 13 defense said, after the company sued to claw back litigation fees.

The claims made against Experian — which said it has racked up millions of dollars in liabilities and legal costs defending the suits — were for statutory damages according to the U.S. Fair Credit Reporting Act.  If Experian is liable, it is the result of a "wilful (or reckless) failure on the part of an employee or employees … to comply with the FCRA," the defense said. 

Experian says in its October High Court suit that it paid a class of more than 100,000 payday loan customers $24 million to settle a lawsuit in January brought by lead plaintiff Demeta Reyes.  A $5 million deal was reached with consumers in the so-called Smith action.  The customers said they were harmed by inaccurate reporting of their credit history.  The insurers said that Experian's alleged liability in the Reyes action arises out of the deleting of loan records —  particularly those held by an entity called Delbert Services Corp.  In the Smith action, it is connected to the re-reporting of records relating to loans held by CashCall Inc.  Experian directors were involved in the decision-making in both incidents, the insurers said.

From April 2015 through April 2016, Experian held a complex multitiered insurance "tower" consisting of a primary policy from XL Specialty Insurance Co. and several layers of excess coverage, Experian says.  Zurich and SCOR unit General Security Indemnity Co. of Arizona are each liable for half of a $20 million excess policy, which kicked in once the underlying coverage was depleted, Experian says.  So far the insurers have only paid out a slice of the $20 million excess that Experian says it is entitled to, the company alleges.

Experian is also seeking a declaration from the court that the insurers will cover financial penalties that Experian may have to pay as a result of investigations into a 2015 cyberattack.  The two insurers said that coverage is provided for regulatory fines and penalties, but Experian must prove that any sanction is "lawfully insurable."

Experian says it has run up costs of more than $32 million defending two major related class suits.  Thousands of consumers successfully argued that Experian's failure to delete certain negative information in their consumer credit reports caused them harm.

Experian says it should be able to recover $18 million in legal costs from the insurers under its third-party liability and first-party insurance policies.  The suit also name-checks an action brought by Carolyn Clark alleging the company violated the FCRA, which ended up costing Experian more than $21 million. The company says it could be entitled to an indemnity of $14.3 million from the insurers to cover the costs from that case.