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Category: Novel Fee Ruling / Award

Judge: Bad Faith Needed for Defense Fees in BIPA Class Action

July 31, 2023

A recent Law 360 story by Celeste Bott, “BIPA Defendants Must Show Bad Faith For Fees, Judge Says”, reports that an Illinois federal judge has rejected Christian Dior's argument that it should be the first defendant awarded attorney fees under Illinois' biometric privacy law, finding that a threshold showing of a plaintiff acting in bad faith would be required for such an award and that the luxury retailer couldn't meet that burden.

U.S. District Judge Elaine Bucklo in February dismissed the Illinois Biometric Information Privacy Act suit brought by lead plaintiff Delma Warmack-Stillwell, holding that an exemption under BIPA for data captured "from a patient in a health care setting" freed Christian Dior Inc. from the suit over its online tool for users to virtually try on sunglasses.

In May, Dior argued that Judge Bucklo should award it attorney fees and costs, saying BIPA's plain language makes clear that a "prevailing party" may recover its attorney fees and that the Illinois Supreme Court has held that prevailing parties include defendants.  But Judge Bucklo noted that the only way to enforce compliance with BIPA is through the statute's private right of action, and forcing plaintiffs who don't act in bad faith to foot the bill for a defendant's attorney fees would contradict that intent.

"Exposing plaintiffs bringing BIPA suits in good faith, even if ultimately unsuccessful, to attorneys' fees would unduly chill the sole enforcement mechanism for a law the legislature clearly intended to protect critical privacy interests and would defy BIPA's remedial purpose," the judge said.

Dior failed to establish Warmack-Stillwell had acted in bad faith by bringing her complaint, Judge Bucklo said, despite its arguments that she should have known better given two other similar lawsuits against other companies that were dismissed by Illinois federal judges under the same health care exemption — one before Warmack-Stillwell's case was filed and one tossed about a week after hers was filed.

Those district court rulings were not binding, Judge Bucklo said.  "Neither the Seventh Circuit nor the Illinois Supreme Court has expressed guidance on the matter, so it was not unreasonable for plaintiff to pursue her case," she said.  Judge Bucklo said it was "unnecessary" to decide whether BIPA allowed defendants to win attorney fees at all, because the law would still require a showing of bad faith, which Dior failed to meet.

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.

In a First, Prevailing Defendant Seeks Fees in BIPA Class Action

July 21, 2023

A recent Law 360 story by Celeste Bott, “In a First, Dior Wants Fee Award For Beating BIPA Suit”, reports that Christian Dior says it should be the first defendant awarded attorney fees in a case under Illinois' biometric privacy law, urging a federal judge who threw out class claims against it to reject the argument that the law only allows for the recovery of fees for prevailing plaintiffs.  U.S. District Judge Elaine Bucklo in February dismissed the Illinois Biometric Information Privacy Act suit brought by lead plaintiff Delma Warmack-Stillwell, holding that an exemption under BIPA for data captured "from a patient in a health care setting" freed Christian Dior Inc. from the suit over its online tool for users to virtually try on sunglasses.

Warmack-Stillwell qualified as a patient because Dior's virtual try-on tool "facilitates the provision of a medical device that protects vision," the judge said.  In May, Dior argued that Judge Bucklo should award it attorney fees and costs, saying BIPA's plain language makes clear that a "prevailing party" may recover its attorney fees and that the Illinois Supreme Court has held that prevailing parties include defendants.

Dior claimed those fees were particularly warranted in this case, citing two other lawsuits that were dismissed by Illinois federal judges under the same health care exemption — one before Warmack-Stillwell's case was filed and one tossed about a week after hers was filed.  "These decisions were dispositive of this case, such that pursuing these claims would necessarily be wasteful," Dior claimed. "Plaintiff filed and pursued a lawsuit premised on a repeatedly-rejected theory of liability and increased the costs of this lawsuit with wasteful discovery demands."

Warmack-Stillwell, meanwhile, contends that no BIPA case has ever awarded fees to a defendant and says that BIPA provides a "prevailing party" may seek to recover its fees "for each violation," a phrase that necessarily implies further the word "proven" and therefore applies only to plaintiffs, she said.

In Dior's response contesting that interpretation, it cited the Illinois Supreme Court's recent holding in Cothron v. White Castle, which said claims accrue each time data is unlawfully collected and disclosed rather than simply the first time.  There, the justices cautioned against an "interpretation-by-assumption approach in the context of BIPA itself" by forbidding parties from creating "new elements or limitations not included by the legislature."

"In Cothron, it acknowledged that its ruling could result in 'annihilative liability' and that 'there is no language in [BIPA] suggesting legislative intent to authorize a damages award that would result in the financial destruction of a business,'" Dior said.  "And yet, because it found the statutory language was clear, those sort of policy judgments are reserved for the legislature. The same result applies here."

Judge Bucklo should also reject the plaintiff's other argument that the term "prevailing party" in BIPA should exclude defendants because the law's purpose is to protect consumers, Dior said in its reply.  "Of course, the Illinois Consumer Fraud Act was also intended to protect consumers, but that did not stop the Supreme Court from holding that its prevailing party provision applied to prevailing defendants as well," Dior said.

Article: CA Ruling Shows That Prevailing Party Wins Can Be Pyrrhic

August 22, 2021

A recent Law 360 article by Warren Jackson, “Calif. Ruling Shows That Prevailing Party Wins Can Be Pyrrhic,” reports on a recent court ruling in California on prevailing party issues in fee-shifting litigation.  This article was posted with permission.  The article reads:

In the 1992 buddy movie, "White Men Can't Jump," Rosie Perez's character, Gloria Clemente, said, "Sometimes when you win, you really lose, and sometimes when you lose, you really win."  It provides a rambling life lesson: Victories can be pyrrhic, and even taking an "L" may not make you a loser.

In an interesting and novel recent opinion that would make Gloria proud, a California state appeals court, in affirming an order denying attorney fees to a self-described prevailing party, reaffirmed in a commercial litigation context that determining who's prevailed and is entitled to fees is not always clear.  The case, Harris v. Rojas, was decided on July 20 in the Court of Appeal of the State of California, Second Appellate District.  Justice John Shepard Wiley Jr., who authored the opinion, also gave a special, well-deserved shout-out to the alternative dispute resolution profession.

It's not unusual, particularly in individual discrimination, harassment, and wage and hour cases, for the potential attorney fees award to be substantially greater than the economic damages, e.g., in cases with a plaintiff who is a low-wage earner or who has successfully mitigated damages.  As a result, the settlement value is not simply economic damages, but attorney fees as well.

The policy goals behind statutory awards of attorney fees or fee-shifting provisions are clear.  A virtual guarantee of attorney fees to the prevailing plaintiff, even if the damages are nominal, is a powerful incentive for the plaintiffs bar to represent employees who have fewer means and less power, but were allegedly treated unfairly.  To put a finer point on it, that incentive is also not diminished by what's generally the case — no downside of having to pay a prevailing employer's fees.  More on this dynamic and its impact on mediating cases later, but first, the opinion.

George Harris leased commercial space from Abel Rojas, and the lease had a clause for attorney fees to the prevailing party in the event of litigation.  Harris sued Rojas for breach of contract, among other claims, and Rojas cross-complained for ejectment, breach of contract and nuisance.  There was also a separate unlawful detainer case by Rojas against Harris.  After nearly three years of litigation and a seven-day jury trial, the jury awarded $6,450 to Harris on his breach of contract claim (rather than his requested $200,000). Rojas also was awarded $6,450 against Harris on his negligence claim, and Harris was awarded $500 on his negligence claim against Rojas.

The harm was apportioned at 15% for Harris and 85% for Rojas, so when all the math was done, a net judgment was entered in Harris' favor for $5,907.50 or $5,882.50 — a discrepancy between the actual math result and the judgment, which only the court noticed.  Thereafter, Harris moved for an award of attorney fees under the lease, seeking $296,744.68.  The trial court — California Superior Court in Los Angeles County — denied Harris' motion, ruling there was no prevailing party, citing the California Supreme Court’s 1995 decision in Hsu v. Abbara — if a party obtains a "simple, unqualified victory" in an action with an attorney fee clause, the court is obliged to make an award, but where there is "good news and bad news" for each party in the outcome, there's discretion.  Harris appealed this order.

Justice Wiley, also relying upon Hsu v. Abbara, seized on the obvious: "When the demand is $200,000 and the verdict is $6,450 or less ... the 'victory' is pyrrhic and nobody won."  He went on to clarify, "Reaping merely five or six thousand dollars after spending three years pursuing $200,000 drastically falls short of the goal." Thus, the trial court properly exercised its discretion.

Justice Wiley had an alternative and novel theory for affirming the denial of attorney fees.  Looking to the result in Rojas' unlawful detainer action, where he was awarded some $13,000 or $17,000, "depending on the moment at which one calculates the rent and interest," Justice Wiley aggregated the two results, opining, "This war had two battles.  Harris decisively lost the war."  As Gloria Clemente remarked, "Sometimes when you tie, you actually win or lose."

Writing what could be characterized as a nod to mediators everywhere, Justice Wiley dogmatically declared: Determining a party's true litigation objective is no mean feat.  When the case is strictly about money, the litigation objective is a dollar figure.  The true value of a case is a matter of opinion, and parties normally conceal their true opinion on this vital topic.  That is why we call that look a poker face.  What economists call a reservation price usually is a carefully guarded secret; if the other side perceives this closeted sum, it will offer that amount in settlement negotiations and nothing more. So each side typically bluffs while searching the other side for clues.  Successful mediators use sustained efforts in a confidential setting to extract this private information from both sides.  By discovering previously hidden common ground, a mediator can settle the case.  But this exploration is often difficult, which is why successful mediators can command premium rates.

As mentioned above, courts have waded into the waters of who's a prevailing party in employment cases over the years.  In the seminal Chavez v. City of Los Angeles decision in 2010, the California Supreme Court upheld a trial court's rejection of a fee application under California Fair Employment and Housing Act, where the plaintiff recovered damages of $11,500 — less than the $25,000 that could have been recovered in a limited civil case — and sought an attorney fee award of $870,935.50.

Noting that under FEHA, the prevailing employee should ordinarily be awarded fees unless special circumstances would render such an award unjust, the court held that where a plaintiff brings an unlimited civil case but fails to recover $25,000, the trial court has discretion under Code of Civil Procedure Section 1033 (a) to deny an attorney fees application.  While Chavez is often cited where a verdict is substantially dwarfed by the attorney fee application, in my opinion it has not shifted the landscape dramatically.  Fee applications can be denied in their entirety.  However, more often the result is a reduction in the fee request.

Turning back to the challenge of mediating cases where attorney fee awards are available to a plaintiff, we mediators routinely hear from defense counsel that some plaintiffs lawyers have been incentivized to increase the settlement value of cases by aggressively working them up.  Of course, what may seem like overworking a case to counsel can simply be opposing counsel's diligence and due care.  Justice Wiley seems to suggest successful mediators have a secret sauce for settling cases. While past success can portend future success, unfortunately, there's no guaranteed formula.  One key to success is a tactic that parties often employ — early mediation.  By mediating a case early before significant attorney fees have been incurred, the fee-shifting issue is less problematic.

Of course, early mediations have their drawback in terms of equality of pertinent information or discovery and analysis, so parties should evaluate the relative merits of proceeding early versus later-stage scheduling.  In addition, defense counsel often employ the strategy of threatening or filing a California Code of Civil Procedure Section 998 offer to potentially place the attorney fee award at risk if the recovery at trial is less than the offer and the offer was properly drafted.

My experience, however, is that employers prefer a settlement to a 998 offer, and plaintiffs prefer a reasonable settlement over protracted or scorched-earth litigation.  Finally, the only secret sauce in getting difficult cases resolved might be the four Ps: patience, perseverance, persuasion and proposals from mediators.  But all parties should recognize that the logic and holding of Harris v. Rojas have implications in the employment law context.  And the case should be a reminder that verdict size and prevailing party determinations are necessarily intertwined, and that Gloria Clemente was more lucid that we thought.

T. Warren Jackson is a mediator and arbitrator at Signature Resolution.

Novel Ruling: Law Firm Awarded $10M in Fees After Withdrawing in NJ

April 17, 2021

A recent New Jersey Law Journal story by Charles Toutant, “Novel Holding in New Jersey: Law Firm Awarded $10M After Withdrawing From Case,” reports that a New Jersey judge has awarded $10 million to the law firm of Kirsch, Gelband & Stone in a fee dispute stemming from a $125 million personal injury settlement of a suit by a lawyer who was left paralyzed by a falling utility pole.  Although Kirsch Gelband was ultimately replaced by another firm, it had a key role in developing evidence that yielded such a large settlement, Essex County Superior Court Judge Thomas Vena said.

The ruling, giving a law firm that withdrew from representation a share of successor counsel’s legal fees, based on its contribution toward the recovery, is a novel holding in New Jersey, Vena said.  The ruling gives Kirsch Gelband a 40% cut of the $25 million awarded to its successor in the case, Mazie Slater Katz & Freeman.

Justifiable withdrawal

The case stems from a 2017 accident in which Maria Moser Meister was left paralyzed and brain damaged after a deteriorating utility pole fell on her on a street in Union City.  At the time of the accident, Meister was general counsel for finance firm Milberg Factors in New York, and previously had been an associate at Simpson Thacher & Bartlett.  David Mazie of Mazie Slater obtained the $125 million settlement in May 2020, calling it the largest settlement in New Jersey history.

Vena found that Kirsch Gelband’s Gregg Alan Stone had a stormy relationship with Meister’s husband, Peter, who would contact him at all hours. Finding that Stone had a justifiable cause to withdraw, the judge found that Kirsch Gelband was entitled to a calculation of how much of the fee the firm deserves.

Vena concluded that “the nature of and deterioration of the attorney/client relationship, exhibited throughout the hearing, justified Mr. Stone’s good-faith belief that the representation could not ethically be continued.” Vena said a “balancing of predecessor and successor contribution” was needed to decide Stone’s cut of the fees.  Bruce Nagel of Nagel Rice, who represents Kirsch Gelband, says that “in view of Mr. Mazie’s position that Kirsch Gelband was entitled to zero, we are extremely pleased with the $10 million award.”

But additional proceedings are underway between Mazie Slater and Kirsch Gelband.  Nagel and Mazie have a long history of acrimony.  The two are former law partners who frequently face each other as litigation adversaries.  Their rancor dates back to when Mazie split with Nagel to start his own firm in 2006. Mazie took cases with him that led to disputes over counsel fees.

Nagel said evidence in the case supported his claim, raised in a separate suit pending against Mazie Slater by Kirsch Gelband, that Mazie provided false information to Meister in order to get the case.  Mazie called that claim “nonsensical.”

Nagel also said he was filing an additional motion in the Verizon case to vacate a deal between Mazie and Philip Rosenbach, a lawyer who handled the case before Stone, in which Mazie purchased the other lawyer’s right to receive a referral fee from Kirsch Gelband.  Such a deal is “highly unethical and highly improper,” Nagel said.  But Mazie said Rosenbach “chose to resolve his claim for that one-third referral fee by settling with us rather than being embroiled in this frivolous litigation,” and added that there’s “nothing unethical about it.”