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Category: Prevailing Party Issues

Federal Circuit Doubtful of Second Attorney Fee Request in IP Case

June 17, 2021

A recent Law 360 story by Christopher Cole, “Fed. Circ. Doubtful of Ex-Worker’s 2nd Atty Fee Bid in IP Case,” reports that Federal Circuit judges seemed skeptical of a manufacturer's ex-employee returning to the court seeking attorney fees incurred in a spat over control of a machine patent that ended in a voluntary dismissal that made no mention of fee payment.  Larry Butterfield has appealed to the circuit a second time in his quest to recover some $200,000 in fees after battling patent, breach-of-contract and trade secret misappropriation claims in Oregon federal court from his former employer Keith Manufacturing Co.

But it didn't take long in oral arguments for U.S. Circuit Judge Todd M. Hughes to question Butterfield's contention that an Oregon federal judge abused his direction by denying the fee bid a second time on Federal Circuit remand.  The lower court judge found in his second ruling that Butterfield was not in fact a "prevailing party" entitled to recover attorney fees, as he had previously ruled.  "Wasn't it well within his discretion to [reconsider] his prior order?"  Judge Hughes asked a Butterfield lawyer.  "What's the legal basis that would prevent him from reconsidering the case after we vacated his order?"  "I don't understand your procedural objections here at all," he added.  "That try-again doesn't mean that he is precluded from reconsidering the prevailing party status."

Butterfield's attorney, Shawn Kolitch of Kolitch Romano LLP, noted that the Federal Circuit's remand order was aimed squarely at the judge's purported overreliance on the U.S. Supreme Court's 2017 Microsoft Corp. v. Baker decision, in which the justices rejected the notion that the voluntary dismissal of an individual's claims with prejudice amounted to a final decision that could be appealed.  The Federal Circuit found in April 2020 that Microsoft wasn't applicable to the Keith suit.  Kolitch maintained that on remand, the judge again went too far, this time by using a procedural rule to reconsider his client's "prevailing party" status, without a required motion from Keith to do so.

The new appeals court scrap is the latest in a suit that Keith lodged in 2015 accusing former employee Butterfield of improperly obtaining a patent by filing an application based on inventions he made during his employment at Keith.  The patent details a headboard used as part of a machine to clear asphalt from a truck.  After Butterfield sent Keith a covenant not to sue on the patent, both sides filed a joint stipulation to dismiss the case with prejudice without a court order, according to the panel opinion.

The stipulation did not mention fees, and Butterfield filed a motion for attorney fees shortly thereafter, according to the opinion.  But U.S. District Judge Michael H. Simon denied the bid in 2017 after determining that the stipulation was not an appealable order under the Microsoft ruling, prompting the first appeal at the Federal Circuit.  Keith's suit has long since been dropped, with a stipulation of voluntary dismissal with prejudice.  But the two sides disagree whether that means Butterfield is the "prevailing party" in the suit.

A key legal question with the case back in the Federal Circuit is whether Butterfield obtained prevailing party status under Oregon law when the parties reached a stipulation of dismissal with prejudice.  Kolitch told the three-judge panel that under Oregon rules of civil procedure, a dismissed party is the prevailing party.  "That is standard when dismissed voluntarily," he said.  "There were no circumstances in this case indicating otherwise."

He also argued that even though Oregon state courts have a "procedural requirement" to enter a judgment document in cases of voluntary dismissal, that does not apply to federal courts because of the Erie doctrine, which says that if state and federal procedures conflict, district courts must follow the federal rules as long as they follow statute and are constitutional.

An attorney for Keith, Bruce Kaser of Vantage Law PLLC, who noted that Butterfield is trying repeatedly to overturn the federal court, said the Oregon rule requiring judgment to be entered to confer prevailing party status "is a substantive requirement" that Butterfield has not met.  Kaser said the appellant "doesn't have any authority" for the positions he has been taking in the effort to recover fees.  If the panel takes Butterfield's side, it would represent a major decision requiring "new topics and continuing education classes for both accountants and lawyers," Kaser said.

Safeco Tells Eleventh Circuit Attorney Fees Aren’t Damages

May 3, 2021

A recent Law 360 story by Brett Barrauquere, “Safeco Tells 11th Circ. Atty Fees Aren’t Damages,” reports that Safeco Insurance wants the Eleventh Circuit to affirm a lower court ruling that another insurer is time-barred from seeking attorney fees on a $1.6 million judgment stemming from a fatal motorcycle accident.  Safeco Insurance of Illinois and Safeco Insurance Co. of America said in a brief said that Endurance American Specialty Insurance Co. waited eight months too long to request attorney fees.

Endurance should have either sought attorney fees within 14 days of the judgment as the prevailing party or presented evidence at trial to claim them as damages, Safeco argued.  Because it did neither, Endurance isn't entitled to anything, Safeco said.  "Endurance cannot circumvent the time requirement of the federal and local rules by arguing its fees were damages, either," Safeco said.

Endurance asked the federal appeals court in April to overturn a lower court decision that the insurer says improperly adopted recommendations by a magistrate judge that said Endurance had waited too long to argue it was due attorney fees.  A federal jury that had sided with Endurance decided that another insurer had violated an agency agreement, which included an indemnity provision that forces it to pay attorney fees to Endurance, according to the company's brief.  That jury finding supports Endurance's fee request, it says.

Safeco argues that under the controlling Florida law, attorney fees aren't recoverable as damages and that they are an ancillary claim based on a contractual provision.  And Endurance has no legal way of beating the 14-day deadline for claiming attorney fees, Safeco said.

Endurance didn't present evidence to back up its claim for attorney fees at trial, and it failed to move to appeal the final judgment and claim that the fees were wrongly excluded, Safeco said.  "Because Endurance never argued it's attorney's fees were damages to the magistrate judge, the district court was within its discretion to decline to consider the argument," Safeco said.

U.S. Magistrate Judge Christopher P. Tuite had issued a report and recommendation saying that Endurance filed its motion for fees almost a year after judgment was entered. The judge said the company "provides no rationale for its belated filings."  Judge Tuite's first denial was based on Florida statute.  The second one at issue is for recovery of fees "expended in enforcing the agency agreement's indemnification provision."  Judge Tuite said it looked like Endurance filed the second motion "after it gleaned from the [first report and recommendation] that it might not prevail on its first motion."

Federal Circuit Weighs in on EAJA Fee Awards in Partial Wins

April 29, 2021

A recent Law 360 story by Hailey Konnath, “Fed. Circ. Weights in on EAJA Fees in Partial Wins,” reports that the Federal Circuit issued a precedential decision clarifying that the government is still obligated to cover attorney fees stemming from initial case reviews for litigants who prevail against it in civil actions, even if the litigants did not succeed on all their claims. 

According to the underlying case, U.S. Army veteran Robert L. Smith partially won an appeal of a U.S. Department of Veterans Affairs decision on his benefits.  He then asked that his attorney fees for the appeal be covered under the Equal Access to Justice Act, which requires the government to pay attorney fees for those who prevail against it in court.

The Court of Appeals for Veterans Claims held that he should indeed receive an award, but reduced the portion of his award that stemmed from the time his attorney spent on an initial review of the case.  The court held that the reduction was needed because Smith only prevailed on one of the issues in his appeal.

But the Federal Circuit said that the veterans court had undervalued the importance of the initial review of Smith's case, holding that the review was "necessary before appellate counsel could determine what bases, if any, existed for an appeal."  The three-judge panel reversed in part and affirmed in part the veterans court's decision and remanded the case for an award consistent with its opinion.

The Veterans Court should have determined whether the time Smith's attorney spent reviewing the record could be reasonably understood as preparation for bringing the successful claim, the Federal Circuit said.  But instead, the court "assumed that, because such time must have been spent on both successful and unsuccessful claims, it therefore required a reduction in those hours," the panel said.

"This was an error," the panel said.  Specifically, the Veterans Court misinterpreted 28 U.S. Code § 2412, which governs the government's costs and fee obligations in civil actions brought against it, according to the decision.  "There is no statutory requirement that time reasonably expended in initial record review must be reduced, merely because there were eventually both successful and unsuccessful claims pursued in the case," the panel said.  "To the contrary, the law requires that Mr. Smith's counsel be compensated for time that was necessarily expended on the initial review of the record, regardless of whether some of the claims that came from that review ultimately were found not to prevail, if that time was necessary for a successful appeal."

The Federal Circuit noted that if Smith had only brought his successful claim before the court, his attorney would have been fully compensated for the 18 hours she spent on her initial review of the 9,389-page record.  "There may be instances in which the time spent on reviewing the record is unreasonable or could be apportioned.  This is not one of them," the panel added.

Harold Hoffman, who works for Veterans Legal Advocacy Group and represented Smith in the action, told Law360 that the non-profit organization relies on Equal Access to Justice Act fees to help disabled veterans.  "We are happy that the Federal Circuit recognized the importance of good representation for veterans forced to appeal bad VA decisions to the federal courts," Hoffman said.

Rachel Bayefsky, an attorney with Akin Gump Strauss Hauer & Feld LLP, added that the Federal Circuit opinion "laid down important principles for the Veterans Court to follow in this case and in the future."  "The Federal Circuit correctly recognized that the standards of proper appellate advocacy apply equally to veterans, and that attorney's fees should be awarded accordingly," she said.

Citing his partial victory, Smith requested a fees award of about $10,200 for 50 hours of attorney work, per the order.  The hours total included the 18 hours his attorney spent reading and taking notes on the administrative record for the case.

In November 2019, the Veterans Court granted Smith's request but only awarded him fees for six of those 18 hours spent reviewing the record.  At the time, the court reasoned that "[b]ecause counsel's review of the [record before the agency] in this case 'presumably pertained to both the prevailing and nonprevailing [sic] issues,' the court concludes that reductions are warranted to account for time spent reviewing and taking notes regarding evidence related to the six unsuccessful claims."

Fifth Circuit: FDCPA Plaintiff Not Entitled to Attorney Fees Post-Settlement

April 22, 2021

A recent article by Christopher P. Hahn, “Fifth Cir. Holds FDCPA Plaintiff Not Entitled to Attorney’s Fees Following Settlement,” reports on a recent case involving the federal Fair Debt Collection Practices Act (FDCPA) and attorney fee awards.  This article was posted with permission.  The article reads:

The U.S. Court of Appeals for the Fifth Circuit recently affirmed a trial court’s denial of an award of attorney’s fees to a debtor who settled his claims against a debt collector for purported violations of the federal Fair Debt Collection Practices Act and parallel state law consumer protection statutes.

In so ruling, the Fifth Circuit concluded that the fee-shifting provision under the FDCPA for a “successful action to enforce the foregoing liability” requires that a lawsuit generates a favorable end result compelling accountability and legal compliance with a formal command or decree under the FDCPA, 15 U.S.C. 1692, et seq., and that reaching settlement before any such end result does not entitle a plaintiff to an award of attorney’s fees under the statute.

A consumer sued a debt collector for purported violations of the FDCPA and parallel provisions of Texas state law.  After the parties’ cross-motions for summary judgment were denied on the basis that triable issues of fact existed, the parties reached a settlement before trial wherein the debt collector agreed to waive the outstanding debt (approximately $2,100) and pay $1,000 damages. 

After apprising the trial court of the settlement, the court entered sanctions against the debtor’s attorneys, ordering thousands of dollars in costs and fees and reporting them to the disciplinary committee of the U.S. District Court for the Western District of Texas for purportedly bringing the case in bad faith.  See Tejero v. Portfolio Recovery Assocs., L.L.C., 955 F.3d 453, 457. 

The debtor appealed, and the Fifth Circuit reversed the imposition of sanctions for abuse of discretion and remanded for the trial court to determine in the first instance whether the debtor’s favorable settlement entitled him to attorney’s fees under the FDCPA.  Id. at 462-463.  The district court said no, which led to the instant appeal.  In this appeal, the sole question before the Fifth Circuit was whether the trial court erred in refusing the debtor’s fee application under the FDCPA.

The United States generally employ the “American Rule” wherein “[e]ach litigant pays his own attorney’s fees, win or lose,” but this general rule can be altered or amended by statute or contract. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 253 (2010).  As you may recall, the FDCPA authorizes fee shifting, allowing a plaintiff to recover reasonable attorney’s fees as determined by the court with costs “in the case of any successful action to enforce the foregoing liability.”  15 U.S.C. § 1692k(a)(3).

To determine whether such an award was merited here, the Fifth Circuit first turned to the dictionary definition of “successful” — a “favorable outcome,” or favorable end result.  Successful, American Heritage Dictionary 1740 (5th ed. 2011); Outcome, Id. at 1251.  “Successful” modifies the word “action” in the statutory language—the “lawsuit” in this case—thus requiring a favorable end or result from a lawsuit, not merely success in vacuo.  Next considering the infinitive phrase “to enforce the foregoing liability,” “enforce” expresses the purpose of the “successful action,” and thus, the action must succeed in its purpose of enforcing FDCPA liability. 

Read together, the Fifth Circuit stated that a “successful action to enforce the foregoing liability” means a lawsuit that generates a favorable end result compelling accountability and legal compliance with a formal command or decree under the FDCPA.  Here, the appellate court determined that because settlement was reached before the lawsuit reached any end result, let alone a favorable one, the debtor won no such relief, and the debt collector avoided a formal legal command or decree from the lawsuit. 

The debtor argued that his “action” was “successful” because he settled for $1,000, which are the statutory damages allowed by the FDCPA.  The Fifth Circuit rejected this alternative interpretation because it was resolved by settlement agreement that did not “enforce” FDCPA “liability” because it did not compel the debt collector to do anything.  Adopting such a position would improperly rewrite Congress’s statute to authorize fee-shifting “in the case of any successful plaintiff.”

The Fifth Circuit also declined to apply the catalyst theory to the FDCPA’s fee-shifting provision, as a “successful action” under 15 U.S.C. § 1692k(a)(3) notwithstanding its inapplicability to “prevailing party” statutes.  As you may recall, the catalyst theory posits that a plaintiff succeeds “if it achieves the desired result because the lawsuit brought about a voluntary change in the defendant’s conduct” (Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Hum. Res., 532 U.S. 598, 601 (2001)). 

The Fifth Circuit declined to adopt that interpretation here because “prevailing party” and “successful party” are synonymous phrases carrying similar legal salience, requiring a formal lawsuit, success in that lawsuit, and some form of judicial relief (as opposed to private relief) that enforces the winner’s rights (Prevailing Party, Black’s Law Dictionary 1232), and such an interpretation would also disrupt recent circuit precedent and the Supreme Court’s mandate that fee-shifting statutes must be interpreted consistently.  Buckhannon, 532 U.S. at 603.

Because the debtor’s lawsuit was not a successful FDCPA action as defined by section 1692k(a)(3), the Fifth Circuit held that the trial court correctly determined that he was not entitled to fees, and its denial of attorney’s fees was affirmed.

TX Justices Toss Class Action Fee Award in Insurance Cases

April 18, 2021

A recent Texas Lawyer story by Greg Land, “Texas Justices Toss Class Action Ruling Against Insurer and $3.5M Fee Award,” reports that the Texas Supreme Court has ruled an insurer that stopped issuing “all risk” homeowners policies because it was paying out too much in mold claims did not violate the contracts of some 400,000 policyholders, and does not have to pay more than $3 million in attorney fees and nearly $487,000 in costs a jury awarded to the plaintiffs lawyers. 

Ruling in a class action that’s been percolating through the courts for nearly 20 years, the justices sent the fee award back to a Jefferson County judge with instructions to consider what is “equitable and just” to Farmers Insurance, given that the named plaintiff and class “have not prevailed in any regard and have obtained no favorable results.”  The April 9 ruling written by Justice Jimmy Blacklock overturns a 2019 ruling by the Thirteenth Court of Appeals that upheld the fee award and also said the plaintiffs in separate, though related litigation should have been allowed to intervene in order to seek their own fees. 

Farmers is represented by a team of Norton Rose Fulbright lawyers including Houston-based partners Layne Kruse, Carlos Rainer, Katherine Mackillop and Scott Incerto.  Lawyers for plaintiff Sandra Geter and the class are John Werner of Reud Morgan & Quinn and DeWayne Layfield of the Law Office of L. DeWayne Layfield, both in Beaumont.

As detailed in the order and other filings, the case began in 2000 when Farmers and other insurers sought permission from the Texas Department of Insurance to stop writing the all-risk policies and instead offer a less comprehensive “named peril” policy.  A Farmers executive told the TDI the move was necessary because of “dramatic increases that we have experienced for water, mold and foundation claims, and the resultant underwriting losses.”    

The decision was approved, and in 2002 Farmers sent all holders of the policies a notice that they would not be renewed but that the named peril policy would still be offered.  In 2002, policyholder Geter filed a class action seeking declaratory judgment that Farmers’ non-renewal violated the clause of her policy stating: “We may not refuse to renew this policy because of claims for losses resulting from natural causes.”

She also argued that the non-renewal notice was void because it “was based on a prohibited reason for non-renewal.”  The trial court granted Geter summary judgment, ruling that Farmers breached the contract by not renewing the policies.  Also in 2002, another class action was filed in Travis County claiming that Farmers “wrongfully raised premiums despite offering less coverage when it replaced the HO-B policy” with the slimmed-down coverage.  Claims mirroring Geter’s were later added to that suit as well.  In 2016 the Travis County suit settled with Farmers agreeing to compensate policyholders in “a package valued at over $100 million.”  But the non-renewal claims were carved out of that litigation, and the Geter case continued with both sides filing for summary judgment.  

The trial court granted summary judgment to the plaintiffs, ruling that Farmers breached its agreement by not renewing the policies and that each member should be allowed to renew their HO-B policy at a premium set by the trial court.  While that decision was on appeal, in 2016 the trial judge held a jury trial on attorney fees that ended with a jury awarding the plaintiffs lawyers $3,046,247 in fees and $486,790 in expenses.  The plaintiffs in the Travis County action filed to intervene for their attorney fees, arguing that their case benefitted the Geter class members.

The trial judge denied the motion, and both they and Farmers appealed.  The court of appeals affirmed the trial court’s holding that Farmers had breached its policyholders’ contracts and the fee award, but reversed the rulings denying the Travis County plaintiff’s motions to intervene and ordering Farmers to issue HO-B policies at a determined premium. 

Blacklock’s opinion said the key to the case was the interpretation of the policies’ bar to renewal “for losses resulting from natural causes.”  “The dispute comes down to what paragraph 6(a) of the policy means by ‘claims for losses,’” Blacklock wrote.  “If the language refers to ‘claims’ and ‘losses’ of the individual policyholder, then Farmers is correct that the policy does not preclude an insurer from terminating the policy’s use statewide because of systemic losses that make continued use of the policy financially untenable,” he said.  “If ‘claims’ and ‘losses’ also refers to statewide or systemic ‘claims’ and ‘losses,’ then Geter is correct that the policy prohibited Farmers from deciding to non-renew.”

The justices find it “highly implausible” that Farmers or the TDI would agree to language that would “undermine TDI’s regulatory authority to react to changing circumstances in the insurance industry and would bind Farmers to suffer statewide underwriting losses in perpetuity.”

“Because the individual plaintiff and class members were not entitled to a renewal of their HO-B policies, all the plaintiffs’ claims fail, and summary judgment for Farmers was proper,” the opinion said.  It follows, Blacklock wrote, that neither Geter nor the would-be intervenors are entitled to any award of fees.