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Category: Fees & Judicial Discretion

Judge Needs More Data in $2.8M Attorney Fee Request

November 10, 2022

A recent Law 360 story by Leslie Pappas, “Chancery Oks Aerospace Co.’s Pay Suit Deal, Defers Fees” reports that a Delaware Chancery Court judge approved a settlement between aerospace parts manufacturer TransDigm Group Inc. and a stockholder who sued over excessive director pay, but postponed a decision on a requested $2.8 million attorney fee award, saying she lacked data to evaluate it.

At a bench ruling at the end of a virtual hearing, Vice Chancellor Lori W. Will told attorneys for plaintiff Matthew Sciabacucchi, represented by Farnan LLP and Levi & Korsinsky LLP, that she intended to award a fee but couldn't do it without more information.  "I don't have the full picture," she said. "I'm going to give counsel a better shot of submitting the information I'm asking for."  The attorneys had sought $2.8 million in fees and a $4,000 incentive award for the deal, which they estimated would save TransDigm $23.8 million in cash over the next four years.

Sciabacucchi sued in November 2021, claiming the company's top officers and directors were awarding themselves compensation that was 176% higher than their peers.  TransDigm's executive chairman W. Nicholas Howley and its president and CEO Kevin Stein, for example, received a "staggering" $68.1 million and $22 million respectively for the company's fiscal year ending September 2020, according to the complaint.

Vice Chancellor Will said she didn't know the net present value of the estimated $23.8 million savings, nor did she have enough information to assess the effects of reducing the strike price of the options.  "I do intend to award a fee," she said.  "This is a good settlement, and counsel should be commended for it."

First Circuit Deepens Circuit Split on SSA Fee Award Timing

November 3, 2022

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.

Delaware Court Wants More Info on Opioid Fee Award

October 26, 2022

A recent Law 360 story by Jeff Montgomery, “Del. Court Demands Info on $2.7M Atty Fee in Opioid Deal” reports that, citing unsatisfactory answers to questions about a flat, $2.7 million attorney fee payout request as part of Delaware's $100 million share of a nationwide opioid damage settlement, Delaware's chancellor cautioned she might sever the fee from the deal pending a fuller explanation.  In a letter to Cross & Simon LLC, Chancellor Kathaleen St. J. McCormick gave those seeking to wrap up the deal a choice between severing the fee award from the settlement for now or accepting a three-day deadline for briefs on the issue.

The chancellor said the request to direct the state's Prescription Opioid Distribution Commission to pay $2.7 million to unnamed outside attorneys "gave me pause for a few reasons."  Among the concerns, the chancellor said, is that "in analogous circumstances, this court exercises its own business judgment when approving attorneys' fees in representative litigation from a settlement fund."

At issue is Delaware's share of a $4 billion fund for state and local governments, carved out of an overall $26 billion settlement that, for Delaware, resolves investigations and litigation over the role that Johnson & Johnson and distributors Cardinal, McKesson and AmerisourceBergen played in creating and accelerating the opioid crisis.  Delaware Attorney General Kathleen Jennings announced the state's portion of the settlement in July 2021.  A complaint and final consent judgment were filed together in the Court of Chancery on Aug. 24, 2022.

Funds from the settlement will finance addiction treatment and prevention as well as other services and programs.  The agreement also mandates producer, distributor and health care reforms to prevent a recurrence of the crisis, including Johnson & Johnson's exit from opioid production.  Attorneys for Delaware told the chancellor that "court approval is not required," but said in a letter earlier this month that they are prepared to submit documents for a traditional court fee analysis if required.

Michael L. Vild of Cross & Simon said in a letter Oct. 13 that "this matter involves a two-party contract between the state and its counsel, unrelated to the state's agreement with the defendants.  There are no unrepresented or absent third parties."  That explanation, the chancellor said, "gave me pause."  Included in the overall settlement, the chancellor said, are provisions for establishment of an outside counsel fund, and statements in some parts of the settlement agreement say that payment of fees from the settlement fund is "disfavored."

A related agreement, "Remediating Opioids Across Delaware through State-Municipal Abatement Partnership," also discourages attorney fee payments from the settlement fund, the chancellor observed, adding that a multistep review and approval process is called for under some provisions.  "The parties effectively ask that I shortcut the statutory process for authorizing distributions by ordering the commission to distribute the $2.7 million to the state's outside counsel, without any opportunity for public comment or investigation by the commission, without any role of the consortium, and without the requisite approvals," the chancellor wrote.  "Maybe that is warranted and appropriate, but the parties did not expressly address this aspect of the relief requested."

Acknowledging concerns about delaying the payment, the chancellor suggested a three-day window for supplemental briefs on the issue or severing the fee provisions from the order, allowing the rest of the funds to go forward, pending a resolution on fee terms.

Ninth Circuit: Minimal Fee Award Upheld in ‘Abusive’ ADA Suits

October 25, 2022

A recent Law 360 story by Hanna Albarazi, “9th Circ. Slams ‘Abusive’ ADA Suits in Upholding Atty Fee Cut” reports that a Ninth Circuit panel on upheld a decision to slash attorney fees in an Americans with Disabilities Act lawsuit over a lack of accessible parking, suggesting in a scathing published opinion that the suit amounted to "abusive ADA litigation" by a serial litigant.  The circuit panel held that a California federal judge had not abused his discretion in reducing the attorney fees in an open-and-shut case over a lack of accessible parking spaces at a Los Angeles County shopping center, but the panel also used its opinion as an opportunity to rail against a perceived blight caused by serial ADA plaintiffs.

"The ADA satisfied the need for meaningful legislation for the protection of individuals with disabilities; however, one of the unforeseen consequences of this statute was the widespread abuse taking form due to the actions of serial ADA plaintiffs," wrote U.S. Circuit Judge Milan D. Smith Jr., who penned the unanimous opinion.  Smith wrote that the ability to recover attorney fees in ADA cases "has given rise to a wave of 'get-money quick' lawsuits brought by a small number of professional, serial plaintiffs."

However, enforcement of the ADA falls on persons with disabilities.  As a result, disabilities rights advocates frequently contend that bringing suit against violators increases accessibility.  Plaintiff James Shayler, who has physical disabilities that make walking and standing difficult, sued property owner 1310 PCH LLC in California federal court in November 2020, claiming its property in Hermosa Beach was in violation of the ADA and California's Unruh Civil Rights Act.

Shayler's suit went largely uncontested, resulting in summary judgment in his favor on the ADA claim and an award of injunctive relief. The court, however, declined to exercise supplemental jurisdiction over the Unruh Act.  Shayler then moved for over $34,000 in attorney fees and costs.

But U.S. District Judge George H. Wu concluded that the hourly rates and the time spent by his attorneys on the case were unreasonable given that the nature of the legal work was routine and because there had been a lack of meaningful opposition by the defendant.  Judge Wu adopted a $300 per hour blended billing rate for the work performed by Shayler's four attorneys and reduced the overall fee total by 65%.  In September 2021, Judge Wu ultimately awarded just under $10,000 in attorney fees and costs to Shayler.

Shayler quickly appealed the award, arguing that the downward reduction was unjustified.  The appellate panel affirmed the lower court's ruling.  "Given the repetitive nature of high-frequency ADA litigation, there was nothing irrational about the district court's conclusions that, in effect, much of the work here could have been performed by junior associates or even paralegals, or that much of the motion practice in the case was superfluous," Judge Smith wrote.

Judge Smith said the district court's choice of a $300 per hour blended billing rate was largely based on its finding that this was "a run-of-the-mill repeat-player ADA case lacking in legal, factual, or procedural complexity."  The district court cited decisions determining that serial ADA litigation, such as Shayler's, does not involve particularly complex work justifying partner-level billing rates, the panel said.  "A hallmark of abusive ADA litigation is the use of form complaints containing a multitude of boilerplate allegations of varying merit," the panel wrote.

Federal Circuit Urged to Toss IP Fee Award in ‘Exceptional Case’

October 20, 2022

A recent Law 360 story by Kelly Leinhard, “Reverse Dish, Sirius XM Fee Award in IP Row, Fed. Circ. Urged” reports that patent-holding company Dragon Intellectual Property LLC urged a federal appeals court to overturn a ruling that found a decade-long infringement fight exceptional, allowing counsel for Dish Network and Sirius XM to collect more than $3 million in attorney fees.  Dragon alleged that the Delaware district court abused its discretion when finding the case exceptional, which led to higher attorney fees, by misreading claim language and not fully considering Dragon's expert testimony.

"When it accepted the unreviewed determination as resolving the issues presented by the exceptional case motions, the district court disregarded Dragon's presentation, ignored the requirements of Supreme Court authority, and abused its discretion," Dragon said.  "The exceptional case finding should be reversed."

The district court had found that the case was exceptional and that the defense team was entitled to higher fees because the infringement allegations had no merit when faced with "one of the clearest cases of prosecution history disclaimer the court had ever seen."  Disclaimers are made by applicants during patent application reviews and can limit the scope of protection provided by a patent.

Even without the disclaimer, Dragon continued to pursue the "meritless" case for nearly a decade.  However, even though Dish's counsel, Baker Botts, and Sirius' counsel, Kramer Levin Naftalis & Frankel, netted a combined $3.3 million, the attorneys still were not awarded their full fee request and petitioned the court in August for the rest of the money.  Dragon said in a response brief that the case should never have been found to be exceptional because it was based on a flawed disclaimer ruling resulting from the district court's misreading of the claim language.

According to Dragon, the district court erred by misreading the claim language as a verb — "to begin a recording" — instead of a noun — "a recording."  By conflating the noun form of the claim language with the verb form, the court caused a series of events leading to a claim construction order finding that Sirius and Dish had included clear disclaimers of continuous recording devices in their products.

The patent-holding company hinted that Sirius and Dish pushed the court toward this thinking, saying the two companies wanted to pass off the idea of beginning a recording by initiating the storage of specific broadcast program information, which Dragon said is agnostic as to whether the overall recording process was underway.  "In this exchange, the district court equated the noun form of the claim language with a verb form requiring that the entire recording process, rather than the storage of specific broadcast program information of the invention, begin upon actuation of the key," Dragon said.

The court's disclaimer ruling based on this conflation resulted in "stipulated judgments of noninfringement," Dragon said, because the court found that Dish and Sirius had clearly included a disclaimer that their product contained continuous recording devices.  The disclaimer finding has remained the foundation for "many years of subsequent litigation" without review, despite the absence of evidence proving that Dish and Sirius included a clear disclaimer on their products, Dragon said.

According to Dragon, the U.S. Supreme Court found in 1990's Lewis v. Continental Bank Corp. that an interest in attorney fees is insufficient to claim an extraordinary case, and in Dragon's case, no other justiciable case or controversy has come forward since the cases became moot.  Dragon filed the suits against the companies nearly 10 years ago in December 2013, claiming both Dish and Sirius XM were infringing a patent on a keyboard equipped with audiovisual recording and playback technology.