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Category: SCOTUS

Harvard Sues Insurer Over Attorney Fees

September 20, 2021

A recent Law 360 story by Eli Flesch, “Harvard Sues Insurer For Legal Fees in Affirmative Action Suit,” reports that Harvard University sued Zurich American Insurance Co. for excess coverage of costs it incurred fighting a lawsuit challenging its affirmative action policies, saying the insurer wrongly denied coverage on the basis that it didn't get a timely notice of the suit.  The Ivy League school told a Massachusetts federal court that Zurich was ducking its obligation under a $15 million excess insurance policy to pay for legal fees connected to allegations that it has engaged in illegal racial balancing to the detriment of Asian American applicants.  Harvard defeated the underlying suit in two lower courts but still faces a government investigation and a potential U.S. Supreme Court fight.

In an 11-page complaint, one of Harvard's governing boards told the court that it had already maxed out its $25 million coverage limit under its policy with AIG unit National Union Fire Insurance Co. of Pittsburgh.  The university said it would continue to accrue legal fees because of a pending U.S. Department of Justice inquiry and the writ of certiorari that could bring the Title VI allegations of discrimination to the Supreme Court.

Harvard said it provided notice to Zurich of its claim in May 2017, far before its coverage under the AIG policy had been exhausted.  Despite that, the university said, Zurich denied its claim in October 2017 on the basis of "purported" late notice.  The insurer told Harvard in several letters that it would have been entitled to coverage under the policy had timely notice been given, according to the complaint.

But Harvard argued that the Zurich policy, which carried much the same terms as the AIG policy, required the university to tender notice of the claim "as soon as practicable," which it did.  Moreover, Zurich personnel were well aware of the discrimination suit, the university said, pointing out the considerable media attention drawn by the allegations.  The university is seeking a declaration of coverage and a finding of breach of contract.

The underlying suit, brought by Students for Fair Admissions, claimed that Harvard violated Title VI of the Civil Rights Act.  The group lost its case in 2018 after a closely watched three-week bench trial, a finding that the First Circuit upheld in November.  In June, the U.S. Supreme Court signaled it might take up the landmark challenge to Harvard's affirmative action admissions policy when it invited President Joe Biden's administration to weigh in on whether the school's race-conscious system is legal.

Quinn Emanuel Gets $185M in Attorney Fees in $3.7B ACA Win

September 16, 2021

A recent Law 360 story by Dave Simpson, “Quinn Emanuel Gets $185M Fee From $3.7B Win in ACA Suits,” reports that a U.S. Court of Federal Claims judge granted Quinn Emanuel Urquhart & Sullivan LLP's request for $185 million in fees stemming from two class actions against the federal government over so-called risk corridor payments under the Affordable Care Act, which resulted in a nearly $3.7 billion total win.  Judge Kathryn C. Davis said that despite the "at times hyperbolic" motions for fees, the law firm did show "foresight" in focusing on a successful legal theory months before other parties jumped on that bandwagon.  She granted its request for 5% of the winnings.

"At the end of the day, what is more important is that class counsel's legal theory resulted in a huge award to the classes here," Judge Davis said.  Quinn Emanuel was the first firm in the country to file a lawsuit on behalf of a qualified health plan insurer accusing the federal government of unlawfully reneging on a commitment to shield ACA insurers from heavy financial losses.

Health Republic Insurance Co. sued the government in 2016 and in July 2020 won a judgment for $1.9 billion alongside a subclass of insurers.  Common Ground Healthcare Cooperative sued the government in 2017 over similar claims and won a $1.7 billion judgment.  Those cases set off a firestorm of parallel litigation across the country, alleging similar claims.  Two of those cases ended up at the U.S. Supreme Court.  In April 2020, the justices reversed Congress' denial of $12 billion in "risk corridor" funding, which the ACA dangled as an incentive for insurers during the law's first three years of operation.

While Quinn Emanuel didn't work on those cases directly, the firm argued in its request for fees in July 2020 that the Supreme Court "adopted the exact legal theory Quinn Emanuel set forth in the initial Health Republic complaint and which it advocated at every step."  But in August 2020, objectors like Kaiser Foundation Health Plan Inc., UnitedHealthcare Insurance Co. and others argued that class counsel was entitled to just $8.8 million after a lodestar cross-check.

They said that Quinn Emanuel had little to do with the litigation that ended up at the Supreme Court, and argued that the firm was trying to walk away with an award that would work out to an hourly rate of $18,000 per attorney.  Class members signed on to the suit with a guarantee that the proposed 5% fee award would be subject to a lodestar cross-check, the motion said, which the firm had eschewed.

Quinn Emanuel shot back in September 2020 that the $8.8 million award proposed would discourage attorneys in the future from taking on similarly ambitious cases.  The percentage model, which the insurers agreed to when choosing to join the class instead of pursuing individual claims, is favored by the courts for exactly this reason, the firm said.  According to the firm, despite the dozens of companies signing on to the fee objection, most of them Kaiser or United entities, almost 90% of the class members have not objected.

Judge Davis sided with the firm.  "These are not cases in which class counsel merely rode the coattails of other innovative litigators," she said.  The 5% fee is well below market value, and the objectors propose what would amount to a .22% fee, she said.  Further, the firm allocated 10,000 billable hours and might not have been paid for any of it had the outcome gone differently, the judge said.

Article: Absent Explicit Statutory Language? The American Rule Still Applies

September 6, 2021

A recent article by Jiaxiao Zhang, “Absent Explicit Statutory Language? The American Rule Still Applies,” reports on attorney fee entitlement in patent litigation.  This article was posted with permission.  The article reads:

The U.S. Court of Appeals for the Federal Circuit vacated a district court’s award of attorney’s fees under the prevailing party rule but affirmed the district court’s denial of the U.S. Patent & Trademark Office’s (PTO) request for expert witness fees under 35 U.S.C. § 145. Hyatt v. Hirshfeld, Case Nos. 20-2321;–2325 (Fed. Cir. Aug. 18, 2021) (Hughes, J.).  The case involved prolific inventor Gilbert Hyatt and the latest chapter in his battles with the PTO.

Mr. Hyatt is known for his prolific patent and litigation filings (including hundreds of extraordinarily lengthy and complex patent applications in 1995 alone) and for often “’adopt[ing] an approach to prosecution that all but guaranteed indefinite prosecution delay’ in an effort to submarine his patent applications and receive lengthy patent terms.”  After the PTO denied some of his patent applications, Mr. Hyatt elected to pursue a district court appeal under 35 U.S.C. § 145 to challenge the PTO’s decisions.  The district court ordered the PTO to issue some of the patents and awarded Mr. Hyatt attorney’s fees as the prevailing party.  The PTO spent millions of dollars examining Mr. Hyatt’s applications and sought, under §145, reimbursement of its expert witness fees from the case.  The district court denied the PTO’s request for expert witness fees, holding that its shifting of “[a]ll the expenses of the proceedings” to the applicant does not overcome the American Rule presumption against shifting expert fees. The PTO appealed.

The PTO challenged both the award of attorney’s fees and the denial of expert fees.  In an earlier appeal by the PTO, the Federal Circuit held that the PTO correctly asserted prosecution laches as a defense against Mr. Hyatt, which “render[s] a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution that constitutes an egregious misuse of the statutory patent system under a totality of the circumstances.”  Accordingly, the Court vacated the district court’s decision ordering the issuance of patents, and in this appeal, the Court vacated the district court’s holding that Mr. Hyatt is entitled to attorney’s fees—since he is no longer the prevailing party—and remanded for further proceedings.

According to the statute, in an action under § 145, “[a]ll the expenses of the proceedings shall be paid by the applicant.”  However, the Federal Circuit agreed with the district court that the statutory language was not sufficiently explicit to overcome the presumption against fee-shifting under the American Rule and that litigants pay their own fees “unless a statute or contract provides otherwise.”  In doing so, the Court looked at statutory phrasing, dictionary definitions (e.g., Black’s and Webster’s), legislative history, relevant case law and similarly phrased statutes to confirm whether expert fees were specifically and explicitly contemplated as being included by US Congress in the statute.  The Supreme Court of the United States’ 2019 NantKwest decision (that “expenses” under §145 does not invoke attorney’s fees with enough clarity to overcome the American Rule) guided the Court’s analysis as did the many statutes that explicitly list “costs and fees” separately, suggesting that the legislature could have explicitly referenced fees should they have intended.  Having found this high bar to overcome the American Rule not met, the Court affirmed the district court’s denial of expert fees.

Jiaxiao Zhang is an associate at McDermott Will & Emery in Orange County, CA.

Second Circuit Urged to Undo Attorney Fee Denial in IP Action

August 16, 2021

A recent Law 360 story by Tiffany Hu, “2nd Circ. Urged to Undo Fee Denial in Instagram Picture Fight”, reports that the Second Circuit was urged to overturn a New York federal judge's refusal to award attorney fees to a sports publication that beat a copyright infringement lawsuit over an Instagram image of former professional tennis player Caroline Wozniacki.  In a 23-page brief, United Sports Publications Ltd. said that U.S. District Judge Allyne R. Ross applied the wrong standard for determining whether photographer Michael Barrett Boesen's litigation claim was objectively reasonable and warranted attorney fees. 

Boesen had accused United of infringing his copyrighted image when it embedded an Instagram post from Wozniacki that featured the photo, but the judge in November found that the news site was protected by copyright law's fair use doctrine, though she declined to grant United's request for fees.  Under the U.S. Supreme Court's Kirtsaeng v. Wiley ruling on when courts should grant attorney fees in copyright cases, Judge Ross should have analyzed whether Boesen's claim was unreasonable "in light of an obvious instance of fair use," United Sports said.

Instead, the judge improperly focused on the reasonableness of the underlying merits of the infringement, when those claims were "never briefed and were not before the court" on United's motion to dismiss.  In doing so, the judge conflated the arguments made in Kirtsaeng, it said.  "[W]hile it is possible that the factual circumstances of the underlying case may be unique in light of the ever-changing nature of social media and proliferation of embedding, the legal arguments presented to the court by the parties were focused on the issue of fair use, and the court's inquiry of the relative reasonableness of Boesen's litigation position ought to have ended there," United wrote in its brief.

Moish Pelz of Falcon Rappaport & Berkman PLLC told Law360 in an email that he and his client "believe that the legal and factual circumstances of this case are exactly the type that the Supreme Court has commanded deserve an award of [attorney] fees."  "If the Second Circuit were to affirm a denial of fees in this instance it is difficult to imagine a case where a successful defense of a copyright troll case on the pleadings would be awarded fees," Pelz said.  "District courts simply need to award attorney's fee awards in circumstances like these so successful copyright troll defendants are able to fight fire with fire."

SCOTUS Won’t Hear Dispute Over Patent Attorney Fee Awards

June 14, 2021

A recent Law 360 story by Tiffany Hu, “Justice Won’t Hear Dispute Over Atty Fees in Patent Cases,” reports that the U.S. Supreme Court declined to hear a question on courts' allegedly "inconsistent and contradictory" discretion over attorney fees in a patent case involving lost luggage technology.  The high court denied Roadie Inc.'s petition to take up its appeal of a Federal Circuit ruling that shot down its request for attorney fees, despite the company's arguments that the case should have been deemed exceptional because of procedural missteps by an attorney for rival Baggage Airline Guest Services Inc.  The Federal Circuit affirmed the invalidation of BAGS' patent, which BAGS alleged Roadie had infringed.

Roadie had argued that it was "forced to defend a case that should never [have] been brought" and that the lower courts should have considered the weakness of BAGS' case — and Roadie's "strong showing of noninfringement" — and awarded Roadie fees for fending off the suit.  "Since 2014, judicial 'discretion' has been inconsistent and contradictory in a way that frustrates the goal of [the Patent Act] which is to improve the efficiency of the judiciary by discouraging the filing of bogus lawsuits," Roadie said in its petition.

According to Roadie, the district court's decision not to consider the issue of noninfringement went against the high court's 2014 ruling in Octane Fitness LLC v. ICON Health & Fitness Inc. , which made it easier for prevailing parties to obtain fees, according to the petition.  Around that same time, the high court also ruled in Highmark Inc. v. Allcare Health Management System Inc. that because determining whether a case is "exceptional" is up to the district court's discretion, that decision can be reviewed on appeal for abuse of discretion, Roadie argued.

BAGS filed its opposition last month, contending that the Federal Circuit's decision to defer to the lower court's "reasoned analysis" did not meet the statutory requirements for certiorari.  Roadie's arguments before the Supreme Court did not "include anything persuasive not already considered by the district court and the Federal Circuit," it added.  Edward A. Pennington of Smith Gambrell & Russell LLP, an attorney for Roadie, told Law360 in an email that "every entity that tries to bring an important matter to the Supreme Court is disappointed when the court does not take the case," but that his client realizes few petitions are granted "no matter how important the fee reversal issue is."

"Fee reversal ... should be an important deterrent against ill-conceived patent suits, but as long as district courts have loosely defined factors to consider, we will continue to see inconsistent decisions," Pennington said.  The dispute dates to 2017, when BAGS accused Roadie, which pairs customers who need items shipped to drivers already headed in the correct direction, of developing an app that infringes the patent.

Roadie had asked a Delaware federal judge for judgment on the pleadings based on invalidity and noninfringement simultaneously.  The court granted the motion on invalidity, with the Federal Circuit later affirming the decision, finding BAGS' patent was directed to a patent-ineligible abstract idea of "coordinating and monitoring baggage delivery."

The district court declined to consider Roadie's noninfringement arguments, which were fully briefed, since it found the patent invalid. Had it factored the noninfringement issue into its exceptionality finding, Roadie argued, that would have supported the argument that the case was meritless and that Roadie deserved fees.  The district court denied Roadie's bid for fees, however, saying there was no evidence of nefarious intent despite the missteps by BAGS, which the district court chalked up to inexperience and mistakes.  The Federal Circuit affirmed the ruling in November.

Former AG’s Hourly Rate: $2,295

April 16, 2021

A recent Law.com story by Mike Scarcella, “Covington’s Eric Holder Bills at $2.295 Hourly, New Legal Services Contract Shows,” reports that Covington & Burling partner Eric Holder Jr., the...

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