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Category: Offer of Judgment (Rule 68)

Eleventh Circuit: No Fees After Voluntary Dismissal in Copyright Case

March 8, 2024

A recent Law 360 story by Carolina Bolado, “11th Circ. Says Broker Can’t Collect Fees in Copyright Case”, reports that the Eleventh Circuit has ruled that a Florida real estate broker cannot collect attorney fees incurred for defending himself from a copyright infringement suit by an aerial photography company because the broker was not a prevailing party once the photography company voluntarily dismissed the case.

In an opinion issued Feb. 28, the appeals court affirmed a district court decision denying a request by real estate broker John Abdelsayed and his company Trends Realty USA Corp. for an award of their attorney fees and costs from Affordable Aerial Photography Inc.  That company had sued over the use of a copyrighted photograph on Trends Realty's website.

Abdelsayed and Trends Realty argued that they are entitled to fees under Federal Rule of Civil Procedure 68, which mandates a fee award if an offer to settle is not accepted and ends up being more favorable than the judgment obtained, and under the Copyright Act's cost-shifting provision.

But the Eleventh Circuit said they are not entitled to fees under Rule 68 because it only applies when a plaintiff has obtained a judgment for an amount less favorable than the defendant's settlement offer.  It does not apply in cases where the defendant wins a judgment, the appeals court said.  And because Abdelsayed and Trends Realty did not obtain a judgment, they are not prevailing parties in the suit and are therefore not eligible for a fee award under the Copyright Act, according to the Eleventh Circuit.

"The order of dismissal does not prevent AAP from refiling its claims," the appeals court said.  "And even assuming future action by AAP may be unlikely or now barred by the statute of limitations, those facts are irrelevant because the court did not rebuff or reject AAP's claims on any grounds."

Abdelsayed, who operates in the Palm Beach County market, was sued in August 2021 in the Southern District of Florida by Affordable Aerial Photography for using a copyrighted photograph on Trends Realty's site.  AAP moved to voluntarily dismiss the suit without prejudice a year later.

After briefing and a hearing, the district court granted the motion and dismissed the case without prejudice. The court ruled that if AAP were to refile its case, it would have to pay the defendants' reasonable attorney fees incurred in defending this case.  Two months later, Abdelsayed and Trends Realty asked the court to reconsider that order, claiming they were entitled to immediate recovery of their fees under Rule 68 and the Copyright Act. But the court denied the request.

On appeal, the defendants argued to the Eleventh Circuit that allowing this would create an incentive for a plaintiff to drop a case just before an expected adverse ruling, but the appeals court pointed out that the plaintiff can't do this unilaterally and that a dismissal must be approved by the court.  In this case, the district court held a hearing and found that the defendants would not suffer legal prejudice because their counsel was pro bono or on a contingency agreement, according to the appeals court.

Article: Exploring the American Rule on Attorney Fees

November 27, 2023

A recent Law.com article, “’Exploring the American Rule on Attorney Fees”, reports on the American Rule doctrine and the limits of the offer of judgment rule in New Jersey.  The article reads:

In the recent J.P. Electric, Inc. v. LPMG Construction Management, LLC case, approved for publication on Nov. 2, a trial judge granted defendant’s motion for involuntary dismissal at the conclusion of plaintiff’s proofs.  Prior to trial, defendant had made an offer for judgment to be taken against it under the offer of judgment rule, R.4:58.  After dismissal of plaintiff’s case, defendant filed a motion to have plaintiff pay its fees and costs.  The trial judge denied the motion, holding that where a plaintiff’s claim is dismissed, without plaintiff having secured a favorable verdict and money judgment, as required by the rule, defendant had no right to collect its fees from the plaintiff. Defendant appealed the court’s denial of its fee application.

The Appellate Division opinion, affirming the trial judge, held that for a defendant who has invoked R.4:58 by offering to have judgment taken, it would be necessary for plaintiff to have recovered a money judgment to compare the amount of the judgment with the monetary offer made by defendant.  That comparison requirement is specifically set forth in R.4:58-2 and R.4:58-3 but, of course, there was no money judgment because of the dismissal as a matter of law.

The Appellate Division’s two-page opinion affirming the trial court contained emphatic language: “Lest there be any doubt, a mid-trial involuntary dismissal does not entitle a defendant offeror to fee-shifting under the Rule.”  No doubt the reason for a two-page opinion to be published.  A forceful reminder to trial courts and trial bar of the specific limitations of the offer of judgment rule.

The appellate court held that the policy reasons inherent in the rule’s language would be undermined if such fee shifting were permitted, because the rule is not one designed to transform an offer of judgment into a general fee-shifting rule.  Further, R.4:58-3(c) also provides that no allowances shall be granted if a plaintiff’s claim is dismissed or if a no-cause verdict is returned.

Of course the Supreme Court by rule or the Legislature by statute could provide that in an offer-of-judgment context, dismissal of plaintiff’s case after an offer of judgment is made might also allow defendant to recover fees and costs on post-trial application to the trial judge by creating a new exception to the American Rule of fee payment.

Under the American Rule, the prevailing party is ordinarily not entitled to collect fees from the adversary.  This is based upon the policy that, “Sound judicial administration will be best advanced if litigant’s bear their own counsel fees.” See, Guarantee Insurance Co. v. Saltman, 217 N.J. Super. 604, 609-610 (App. Div. 1987), which furnishes a concise history of the rule and its application.  There are some exceptions to the ordinary application of the American Rule, as when it is permitted by court rule or statute; or pursuant to the terms of a contract; or when counsel fees are a traditional element of damages in the action; or where an insured has incurred counsel fees in defending an action under a disclaimed liability or indemnity policy.

The first reported case in which counsel for plaintiff made application for fees from the insurer after plaintiff’s success in requiring the insurer to defend and indemnify a workers’ compensation claim against its insured because of convoluted policy language was Gerhardt v. Continental Ins. Co., 48 N.J. 291 (1966).

In Gerhardt, Justice Jacobs, writing for a unanimous court, rejected arguments that Ms. Gerhardt should qualify for reimbursement of her fees in the successful coverage action under the inherent equitable power of the court and by analogy to fee payments where a coverage claim on a liability policy had been successful.  Justice Jacobs pointed out that exceptions to the American Rule, that each party bear its own fees, generally rests on statutory provisions which have no counterpart in New Jersey law.  He wrote that when the New Jersey rules were originally adopted, they embraced the view that sound judicial administration would be best advanced by having each litigant bear counsel fees incurred, except in a few specially designated instances.

The American Rule and its exceptions have been argued to the court over the years.  The argument for awarding fees to a successful plaintiff is based on equitable considerations, i.e., to give the successful party full benefit of the sums to which it was found entitled. Sears Mortgage Corp. v. Rase, 134 N.J. 326, 3540356 (1993); Shore Orthopedic Group v. Equitable Life Assur. Soc., 199 N.J. 310 (2009); In re Estate of Vayda, 184 N.J. 115 (2005).  “The American Rule prohibits recovery of counsel fees by the prevailing party against the losing party … The purposes behind the American Rule are threefold: (1) unrestricted access to the courts for all persons; (2) ensuring equity by not penalizing persons for exercising their right to litigate a dispute, even if they lose; and (3) administrative convenience.” Occhifinto v. Olivo Constr. Co., 221 N.J. 443, 449 (2015).

On through the years and to present, the courts as indicated have expressed their support of the American Rule.  If there are proceedings in J.P. Electric seeking relief from the Supreme Court, chances for success are indeed bleak based on the judicial history of New Jersey.

Plaintiffs' Counsel Concerned With 'Value-Added' Fee Cuts in Georgia

November 9, 2023

A recent Law.com story by Cedra Mayfield, “Lawyers Are Watching as Attorney Fees Slashed Over ‘Value-Added’ Calculation”, reports that a Fulton County State Court judge has rejected a plaintiff firm’s request for a contingency fee-based award of attorney fees under Georgia’s offer-of-settlement statute.  After taking issue with Brodhead Law’s approach used to calculate its seven-figure request, Judge John R. Mather opted to adopt defense counsel Webb Daniel Friedlander’s “reasonable hours and rate” proposal, and award plaintiff counsel just over $424,000.

The ruling is now catching the attention of lawyers, as it could have implications on a $549 million fee request based on a similar approach in the unrelated, yet high-profile Hill v. Ford case currently pending in Gwinnett County State Court.

40% Contingency

The underlying auto tort dated to a 2010 injury wreck between plaintiff Joao Junior and defendant Sharon Graham.  Represented by Brodhead Law’s Ben Brodhead and Ashley Fournet, Junior sought compensatory damages, punitive damages, attorney fees and litigation costs under OCGA 13-6-11 in an amended complaint.  However, prior to trial, plaintiff counsel served the defendant with a document styled “Plaintiff’s Offer to Settle Tort Claim to Defendant Pursuant to OCGA 9-11-68” that proposed to settle their client’s claims against Graham for $600,000.

Robb Cruser and former Cruser, Mitchell, Novitz, Sanchez, Gaston & Zimet colleague R. Russell Grant II handled Graham’s initial defense.  Rather than agreeing to the proposed resolution, defense counsel failed to accept the settlement offer within 30 days of its issuance, rendering it rejected by operation of law, per court records.

When the case proceeded to trial before Mather in July 2019, Fulton State Court jurors found in Junior’s favor.  The jury awarded the plaintiff $3 million in compensatory damages, $1.2 million in attorney fees and more than $51,500 in litigation expenses pursuant to 13-6-11.  The attorney fee award aligned with the plaintiff’s fee agreement with Brodhead Law to pay counsel 40% of any compensatory damages award.

With the awarded compensatory damages exceeding plaintiff counsel’s $600,000 settlement offer by more than 125%, Brodhead Law filed a post-trial motion for attorney fees and litigation expenses under 9-11-68.  However, defense counsel opposed the motion on grounds the plaintiff’s settlement offer had not been made in good faith.  They also challenged that an award under 9-11-68 would give Junior a prohibited “double recovery.”

Siding with defense counsel, Mather concluded that allowing the plaintiff “a further award of attorney’s fees would permit a double recovery.”  The trial judge contended 9-11-68 (b) (2) and 13-6-11 contemplated awards based on different conduct, but that the total of attorney fees and litigation expenses used to measure the awards had been ”incurred as to the same cause of action against the same defendant.”

In addition to concluding that the plaintiff had already been “fully compensated” for the entire amount of attorney fees and litigation expenses incurred in the underlying suit, Mather determined 9-11-68 (b) (2) permitted no additional recovery before denying the plaintiff’s motion.  However, Mather did not conduct an evidentiary hearing before issuing his denial, prompting a plaintiff appeal.

Brodhead Law plaintiff counsel teamed with Darrell Hinson of Shiver Hamilton Campbell and Lawrenceville attorney John Wesley Ingram Nichols on appeal.  Across the aisle, Cruser Mitchell defense counsel joined forces with Laurie Webb Daniel and Matt Friedlander of Webb Daniel Friedlander.

Junior’s appellant counsel argued the trial court erred in its determination that the jury award under 13-6-11 precluded the imposition of an award under 9-11-68 (b) (2), but the Georgia Court of Appeals affirmed Mather’s ruling, albeit on a different basis.  The intermediate appellate court rejected the trial court’s rationale that receiving attorney fee and litigation expenses awards under both statutes in the same proceeding amounted to a double recovery.

However, the panel made up of Presiding Judges Sara Doyle and Christopher McFadden and Judge Kenneth Hodges II concluded the plaintiff could not demonstrate entitlement to an award under 9-11-68 (b) (2).  “This is because by the time that Junior filed his motion pursuant to OCGA § 9-11-68 (b), he had no longer ‘incurred’ the $1,251,554.95 in attorney fees for which he was awarded additional damages by the jury—those costs had been compensated,” wrote Doyle in the October 2020 opinion.

After challenging the intermediate appellate affirmation, plaintiff counsel received a decision from the Supreme Court of Georgia in March 2022.  After assessing whether 9-11-68 (b) (2) required the trial court “to deduct from the sanction any amount awarded by the jury as damages under OCGA § 13-6-11,” justices issued a 20-page opinion reversing the Court of Appeals’ affirmation.

“Contrary to the decision of the Court of Appeals, we hold that the statutory schemes at issue do not provide for or compel any such set-off because they address different conduct of the defendant despite using a similar measure—attorney fees and litigation expenses—to calculate their respective amounts,” read the decision written by Justice Charles Bethel. “Accordingly, we reverse the decision of the Court of Appeals and remand this case with direction that the case be remanded to the trial court for reconsideration of the plaintiff’s claim for attorney fees and litigation expenses pursuant to OCGA § 9-11-68 (b) (2) in a manner consistent with this opinion.”

‘Value-Added’ Model

Upon the reversal and remand traveling down from the Court of Appeals to the trial court, Maher held a hearing on plaintiff counsel’s motion for attorney fees on Sept. 22.  After considering supplemental briefs from opposing counsel, Mather issued an order rejecting plaintiff counsel’s motion for attorney fees under 9-11-68.  In determining on remand whether plaintiff counsel made its $600,000 settlement offer in good faith, the trial judge said he couldn’t make a definite determination.

“[T]he Court is unable to say that this offer was not made in good faith.  The amount of Plaintiff’s special damages alone exceeded the amount of available coverage.  While the Court’s visibility into the subjective motivations of Plaintiff are limited on the present record, he was permanently impaired and his ability to continue in his career was severely impacted.  In relation to the damages actually suffered, it therefore appears that $600,000 was objectively reasonable,” Mather’s order read.  “Further, while Defendant contends that the offer was beyond her financial capability to meet, the operative language of the statute gives no indication that the financial circumstances of the parties may be considered in determining whether an offer is made in good faith.”

Mather determined that an award is not precluded by a lack of good faith under 9-11-68(d)(2) but concluded plaintiff counsel had failed to provide “a reasonable basis” for its submitted attorney fee award calculation.

“Plaintiff advances a method of calculation that calculates his contingency percentage, 40 percent, based on the amount ultimately recovered—less the amount offered by either Plaintiff or Defendant pursuant to the procedure of O.C.G.A. § 9-11-68.  Under this ‘value added’ calculation, the contingency rate would be applied against either $4,379,066.87 or $4,879,066.87—which represents a subtraction from the amount ultimately recovered either by the amount offered by Defendant ($100,000) or the amount offered by the Plaintiff ($600,000),” Mather wrote.  “The problem with Plaintiff’s value added model is that this calculation does not necessarily bear any relation to the amount of work actually expended in the case between the time of the settlement rejection and judgment.  Further, while Plaintiff’s counsel testified that ‘roughly a few thousand’ hours were required and pointed to twelve thousand electronic files generated during litigation, these metrics are too imprecise to determine what was reasonably expended during the relevant period.”

Based on testimony from a defense expert, Mather concluded plaintiff counsel had “reasonably spent” 780 hours in its prosecution of the case ”at a reasonable rate of $495 per hour.”  “With expenses of $37,936.46, the amount hereby awarded by the Court is therefore $424,036.46,” Mather ordered.

‘Direction From the Supreme Court Is Needed’

When reached for comment about the trial ruling, plaintiff counsel Brodhead noted the disparate trial and appellate court rulings.  “This case again shows that direction from the Supreme Court is needed. Rulings from the trial courts and the Court of Appeals are inconsistent,” Brodhead told the Daily Report. “Here, the defense argued for, and the trial court followed, the Lodestar method of multiplying hours times rates to reach its decision. Georgia law, however, specifically disapproves the use of that method.”

He reiterated that 9-11-68(b) “required the fees to be measured by the fees ‘incurred’ by the plaintiff.”  “In this case, the ruling from the trial court did not follow the methodology mandated by the statute, and the judgment bears no resemblance to the actual fees that were incurred by Plaintiff Junior,” Brodhead said. “Plaintiff Junior did not incur fees based on an hourly rate at all; he incurred fees based on a contingency, and those fees, which have already been paid, exceeded $2,000,000.”

He maintained that the plaintiff should be entitled to the recovery of the attorneys’ fees he incurred after the defendant rejected his offer of settlement.  “We believe that, if presented to the Supreme Court, the Supreme Court would mandate that the plain language of the statute be followed,” Brodhead told the Daily Report. “We believe clear direction from the Supreme Court would help provide consistency in the application of the law.”

Ohio Courts Clarify ‘Prevailing Party’

November 2, 2023

A recent Law.com story by Riley Brennan, “Ohio Courts Clarify ‘Prevailing Party’ Owed Attorney Fees in Deceptive Trade Practices Case”, reports that, in a question of first impression for Ohio courts, the First Appellate District looked to define the meaning of the term “prevailing party” in terms of attorney fees pursuant to the Ohio Deceptive Trade Practices Act.  The meaning of “prevailing party” was at the center of a case before the court, with the question arising after a jury found in favor of the plaintiffs, Niv Goomai and Bar Hajbi, on their allegations that the defendants, H&E Enterprise and Avi Ohad, violated the Deceptive Trade Practices Act (DTPA) and breach of contract claims.  The jury only awarded damages on the breach of contract claim, and therefore, as there were no damages awarded on the DTPA claim.

The trial court denied “statutorily-available attorney fees,” citing the plaintiff’s failure to prevail on the deceptive trade practices claim and denied attorney fees as a result.  On appeal, Goomai claimed the lower court erred in failing to properly interpret and apply the DTPA attorney fee provision found in Ohio Revised Code 4165.03(B).  Goomai argued that “he was a prevailing party under the DTPA by virtue of the jury’s verdict finding that H&E violated the DTPA,” while H&E argued that in order to be a prevailing party under R.C. 4165.03(B), “a party must obtain not only a judgment in its favor, but also a remedy,” according to the appellate court’s Oct. 27 opinion. 

The Court of Appeals for the First Appellate District of Ohio agreed, holding the question in the case regarded the applicability of a statutory fee-shifting provision. In looking at what it means to be a “prevailing party” under R.C. 4165.03(B), the court used “ordinary principles of statutory interpretation” to guide its resolution, according to the opinion authored by Judge Jennifer Kinsley.  As the term isn’t defined by the statute, the court looked to Black’s Law Dictionary definition, which defines “prevailing party” as “[a] party in whose favor a judgment is rendered, regardless of the amount of damages awarded.”

According to the court, under this definition, “the relief obtained is immaterial to a party’s status; what matters is whether the party obtained judgment in its favor.”  “Our review of R.C. 4165.03 supports this conclusion. In construing statutory terms, courts read statutes as a whole and do not dissociated words and phrases from their context. … Looking at the language of R.C. 4165.03 as a whole, we are persuaded that ‘prevailing’ in the context of the DTPA means that the party obtained judgment in its favor, regardless of whether the party obtained a remedy in furtherance of that judgment,” Kinsley wrote.

“For one, the DTPA permits recovery of attorney fees from a plaintiff who knowingly pursues a groundless DTPA claim,” the judge continued.  “In such circumstances, a prevailing defendant would obtain no relief other than a judgment in its favor, but that defendant would still be entitled to attorney fees from the plaintiff under R.C. 4165.03(B).  If we were to read the statute as requiring a party to obtain a remedy in order to prevail, we would effectively eliminate the ability of prevailing defendants to obtain attorney fees and undermine the intent of the legislature in the process.  And courts do not read language out of statutes.”

According to the court, Subsection B specifies that courts “may award in accordance with this division reasonable attorney’s fees to the prevailing party in either type of  civil action authorized by division (A) of this section.”  “This clear statutory language defines attorney fees eligibility by the type of action, not by the type of remedy.  If the legislature intended to make prevailing party status dependent upon obtaining one of the remedies outlined in R.C. 4165.03(A), it could easily have said so,” Kinsley wrote.  “Its decision not to do so is indicative of its intent to untangle attorney fees from any other type of remedy recovered in a DTPA case.”

In 2017, Ohad helped Goomai purchase a property in the Camp Washington neighborhood of Cincinnati, with the two entering into an agreement that Ohad and H&E would renovate the property for $50,000, with the project set to be completed by January 2018.  However, after H&E failed to deliver on their promises, and the renovation project never materialized, Goomai sold the property for $50,000, which was at a loss on his investment.  Goomai went on to sue H&E, including claims for breach of contract, fraudulent misrepresentation, and violation of the DTPA. H&E filed a counterclaim against Goomai for breach of contract, with only the DTPA claim permitting the recovery of statutory attorney fees if Goomai prevailed.

The jury didn’t receive instructions about the applicability of the attorney fees provision, or the implications of its allocation of damages if it decided to award no damage on the DTPA claim, said the court.  The jury ultimately found against Goomai on the fraudulent misrepresentation claim, and agaisnt H&E on its counterclaim, awarding $30,604.09 in damages on the breach of contract claim and no damages on the DTPA claim.  However, a Hamilton County judge denied Goomai’s motion for an award of attorney fees, “on the basis that Goomai was not a prevailing party within the meaning of the DTPA, because the jury did not award damages on that claim,” the opinion said.

The three-judge appellate panel court concluded that the term “prevailing party” in R.C. 4165.03(B) “supports the conclusion that obtaining a judgment, even one without an award of damages, entitles a party to see attorney fees.” Judges Robert C. Winkler and Ginger Bock concurred.  In reaching this determination, the court sustained Goomai’s assignment of error, reversed the trial court’s decision, and remanded the case back to the trial court to consider the amount of attorney fees Goomai is entitled.

Florida Supreme Court: Offer-of-Judgment is ‘Not Prevailing Party Statute’

June 19, 2023

A recent Law 360 story by Lynn LaRowe, “RJ Reynolds Faces Fees Bid Despite Beating $16M Fla. Verdict, reports that the Florida Supreme Court said that R.J. Reynolds Tobacco Co.'s rejection of a woman's prior settlement offers means it can't walk away from her bid for attorney fees in her wrongful death action even though the company has defeated a $16 million punitive damages award she won in the case.  More than five months after upholding a state appellate ruling nixing the punitive award, the Supreme Court provisionally granted Brinda Coates' motion for "reasonable appellate attorney's fees," finding that she didn't need to prevail on appeal to be entitled to fees under Florida's offer-of-judgment statute.

The statute "operates to penalize a party who refuses to accept a good-faith, reasonable proposal for settlement as reflected in the ensuing final judgment," the court said.  "The statute has this effect even if the party seeking fees does not prevail at trial or in appellate proceedings, but is otherwise entitled to fees pursuant to the offer-of-judgment statute," the court said.

Coates sued the company after her sister, Lois Stucky, died of lung cancer.  She had twice offered to settle the matter before trial — once for $75,000 and a second time for $749,000, according to the opinion.  R.J. Reynolds declined the offers, and a jury awarded Coates $300,000 in compensatory damages and $16 million in punitive damages.  The trial court reduced the compensatory damages by half because the jury had found that Stucky's negligence caused half of the damages, but left the punitive damages amount intact.

The state's Fifth District Court of Appeal found the punitive award to be excessive and, in January, the Florida Supreme Court affirmed that decision.  The high court agreed that the case should go back to the trial court for further proceedings in keeping with state law that says any award for punitive damages exceeding a 3-1 ratio with compensatory damages is presumed to be excessive, unless the claimant can show the award is not too high in light of the facts and circumstances of the case.  The high court said that the state's offer-of-judgment law is a "penalty statute" that "contemplates fee awards to non-prevailing litigants."

According to the opinion, a plaintiff who offers to settle a case in advance of trial is entitled to fees under the statute if that plaintiff is awarded at least 25% more than the offer.  A defendant is entitled to recover fees if found not liable or if the award to the plaintiff is at least 25% less than the offer, the opinion said.  "Thus, the text of the offer-of-judgment statute contemplates a situation where the defendant is entitled to fees even if the plaintiff prevails on the most significant issues at trial and ultimately recovers a substantial judgment," the high court said.  "It is not reasonable to hold that the Legislature created a prevailing-party requirement when the statute's text allows for awards to litigants who do not prevail."

The amount of fees awarded to Coates will be determined by the trial court "conditioned on its finding, at the end of the case, that Coates is entitled to attorney's fees under a valid proposal for settlement," the court said.