September 29, 2023
A recent Law 360 story by James Mills, “Auditor’s Atty Wins $2.4M Fees in Bank Whistleblowing Case”, reports that an attorney representing a former BofI Federal Bank employee was mostly successful in winning more than $2.4 million in fees for work on a suit that resulted in a jury finding the employee was illegally fired from the bank, with a California federal judge applying a multiplier of 1.1 "to account for contingency risk."
Plaintiff Charles Matthew Erhart had sued the bank for whistleblower retaliation and wrongful termination, with the suit taking seven years to reach a jury. After he won his case, Erhart asked the court to recover $3 million in attorney fees for an estimated 4,470 hours of work, but also requested the court enhance the fee award to a total of $7.3 million.
"The court agrees Erhart is entitled to recover fees," U.S. District Judge Cynthia Bashant wrote in the order. "That said, some of the hours his counsel spent will not be included in the lodestar. And the motion stumbles when it comes to justifying counsel's hourly rates. Ultimately, the court awards $2,405,559.20 in attorneys' fees."
Erhart worked for Bank of the Internet Federal Bank, now known as Axos Bank, as an auditor for about 18 months, starting in 2014. According to the order, when he found evidence of wrongdoing, he reported it to a federal regulator. Soon after, he was terminated, with the bank saying he was incompetent at his job. Erhart filed a lawsuit for whistleblower retaliation with 10 causes of action which described over a dozen instances of alleged wrongdoing. His attorney tipped off The New York Times, which wrote about Erhart's lawsuit. The bank's stock plummeted 30% and several securities class actions were filed.
The bank responded by suing Erhart, contending it was his intention to "bring down the bank." With that suit came countless motions by the bank. Over the next several years, the parties and the court whittled down all the claims to the essence of the case: Erhart's whistleblower retaliation and wrongful termination claims.
In spring 2022, the case was finally heard in a three-week trial with Erhart prevailing. The jury found the bank violated the Sarbanes-Oxley Act, California Labor Code section 1102.5 and California public policy when it terminated Erhart. The jury awarded him $1 million for emotional distress and harm to his reputation, and another $500,000 on a California state law defamation claim.
The jury also said Erhart was entitled to punitive damages, but was deadlocked over an amount. A second trial to determine an amount resulted in the jury saying punitive damages were not appropriate. Erhart's estimate of 4,470 hours of attorneys work breaks down to lead counsel expending approximately 1,581 hours, associate counsel spending 2,069 hours, their paralegals working for 780 hours, and one additional attorney working 40 hours. However, the bank argued these hours are unreasonable and asked the court to exclude 1,265 hours.
The court noted the case took seven years to get to trial and most of the hours were justifiable, but did eliminate some of the hours the bank requested. Similarly, it ruled the attorney's rates were higher than standard for San Diego and the Southern District of California. "The prevailing rates in the Southern District of California are generally lower than the Central District of California," wrote Judge Bashant. "And it is commonplace for attorneys based in one district to solicit work in the other. Courts nevertheless reject attorneys' attempts to cherry-pick and run with higher rates from the Central District."