A recent Law 360 story by Katie Buehler, “’Petition Watch: NLRB GC Authority, Copyright Atty Fees”, reports that Toy maker Hasbro Inc. asked the justices in a Nov. 20 petition to reverse a First Circuit panel's June refusal to award its lawyers $1.9 million in attorney fees after defeating a copyright suit over the Game of Life.  The appellate panel found the copyright claims brought against Hasbro and heirs of the game developer Reuben Klamer were not objectively "unreasonable," and therefore didn't warrant the requested attorney fees under Section 505 of the Copyright Act.

Lorraine Markham, widow of game developer BIll Markham, and her husband's company, Markham Concepts Inc., had sued Hasbro and Klamer's heirs for royalties for the iconic 1960s board game and control of its intellectual property.  The First Circuit panel uses a highly restrictive test to determine whether prevailing parties in copyright lawsuits are entitled to attorney fees and costs, Hasbro argued in its petition.  Unlike the Fifth, Seventh, Eighth and Ninth circuits, the First Circuit views fees as available "only if the plaintiff's position was 'objectively quite weak,'" according to the company's petition.

The Supreme Court should address this circuit split and determine the proper standard for reviewing attorney fee requests under Section 505 of the Copyright Act, Hasbro said.  "The conflict is intractable, and the only resolution is this court's intervention," the company said.  Lorraine Markham and Markham Concepts haven't filed a response to the Hasbro and Klamer high court petition yet.

At the First Circuit, the Markham entities argued against the attorney fee awards by pointing to a Rhode Island federal judge's ruling, which sided with Hasbro and found the game was made on a "work for hire" basis, but also found the claims "objectively reasonable."

The case is Hasbro Inc. et al. v. Markham Concepts Inc. et al., case number 23-565.

A recent Law 360 story by Kelly Lienhard, “Traxcell Asks High Court To Review Atty Fee Fight”, reports that Traxcell Technologies LLC has asked the U.S. Supreme Court to take up an appeal concerning attorney fees owed to Sprint and Verizon after the telecommunication companies beat its infringement suit, arguing that the alleged "exceptional" litigation conduct occurred before a final ruling.

A  petition for a writ of certiorari from Traxcell, which filed for bankruptcy earlier this year, claimed that the Federal Circuit erred when it affirmed attorney fee awards to units of Sprint Corp. and Verizon Communications Inc. based on so-called "baseless" litigation conduct from Traxcell's attorney, William Ramey III of the Houston firm Ramey LLP, as the conduct in question occurred before the court adopted a magistrate judge's ruling.

"It is black letter law that a Magistrate's ruling is not final until approved by a district court.  It was [an] error for the Panel to base its fee award entirely upon rulings that were not final and could not have been final until December 11, 2019," Traxcell said.  "None of the conduct that was found to be "exceptional" under [federal law] occurred after the Magistrate Judge's recommendation was made final on December 11, 2019."

Texas-based Traxcell, which has been accused of being a "patent troll" by groups like the Electronic Frontier Foundation, is on the hook for about $784,000 in fees owed to Sprint and $132,000 in fees owed to Verizon, after the companies won rulings that Traxcell's patent lawsuits were legally frivolous.  AT&T Inc., which had also been named in those lawsuits, did not request any fees, as it ended its litigation with Traxcell back in 2019.  A panel of Federal Circuit judges ruled in July without comment that the lower court was right to order Traxcell to pay legal fees incurred by lawyers for the major telecom firms.

Traxcell is now appealing that decision based on arguments that the Federal Circuit departed from typical proceedings and court precedent by issuing fee awards based on conduct that occurred before U.S. Magistrate Judge Roy Payne's ruling in a separate, but related, case was finalized.

Traxcell is asking the high court to either vacate or reverse the attorney fees granted to both Sprint and Verizon and find that the case was not exceptional.  Verizon and Sprint, the latter now owned by T-Mobile, moved to dismiss the bankruptcy attempt, telling the court that it was filed in bad faith.

A recent Law 360 story by Ryan Boysen, “Gibson Dunn Fees Halved in NY Eviction Law Dispute”, reports that attorneys from Gibson Dunn & Crutcher LLP can recover $385,000 in fees for successfully blocking a pandemic-era anti-eviction law on behalf of New York landlords, after a federal judge rejected arguments that they should not be paid at all, but found their initial request of $735,000 "unreasonably excessive."

In a 26-page ruling, U.S. District Judge Gary R. Brown said the Gibson Dunn team in question deserves credit for four months of frenzied work that finally led the U.S. Supreme Court to enjoin New York's COVID-19 Emergency Eviction and Foreclosure Prevention Act, or CEEFPA, in August 2021 — even though a new, nearly identical law was then passed shortly thereafter.

Judge Brown slashed the initial $735,000 fee request nearly in half after finding the 10-attorney team was too big, too "top-heavy" and billed too many hours, some of them at too-high hourly rates.  That decision came even though the Gibson Dunn attorneys had argued the $735,000 figure already reflected "significantly discounted" rates and some pro bono hours for which they did not bill at all.  "Upon review of the billing records, the court … finds that the number of hours expended by Gibson Dunn on this litigation to be unreasonably excessive for several reasons," Judge Brown said.

In civil rights cases the "prevailing party" is able to seek legal fees from their opponent, on the grounds that when a plaintiff "succeeds in remedying a civil rights violation," the benefits of doing so inure to the rest of society as well, according to the ruling.  Judge Marks, the defendant in the landlords' initial lawsuit, had argued that the Gibson Dunn team should not receive any fees because its efforts only resulted in enjoining a law that had been set to lapse just days later.

"The stark truth is that plaintiffs failed to recover a judgment against [Marks] at all, rendering this fee application null," Judge Marks said in a brief opposing Gibson Dunn's fee request.  Judge Brown said that analysis was not quite on the money, however.  Even if a party receives only a stay or preliminary injunction, and never obtains a final judgment in its favor, it can still be considered a "prevailing party" if the court ruled in its favor on the merits, the ruling said.

"Moreover, 'a party prevails under [Section 1988 of the Federal Rules of Civil Procedure] where it obtains a preliminary injunction against enforcement of a law that is later amended or repealed,'" Judge Brown said, quoting the 2021 ruling in HomeAway.com Inc. v. City of New York.  Nonetheless, Judge Brown declined to award the Gibson Dunn team the entirety of the fees it asked for.

His reductions began with the hourly rates sought by the Gibson Dunn team.  Randy M. Mastro and Akiva Shapiro billed $550 each per hour; senior associates Jessica C, Benvenisty and William J. Moccia billed $375; midlevel associates Erich A. Bruhn, Lauren K. Myers and Seton Hartnett O'Brien $287.50; and junior associates Lavi M. Ben Dor, Bina Nayee and Maxwell A. Peck $200.  These are the rates Gibson Dunn said had already been "significantly discounted" from the firm's "customary rates," the ruling said.

Judge Brown gave Mastro his $550 an hour rate given his widely acknowledged status as a towering figure of the New York Bar and his extensive experience with civil rights litigation, but reduced Shapiro's rate to $450 an hour.  Judge Brown also reduced the senior associates' rates to $325 an hour, the midlevel associates' rates to $250 an hour, and the junior associates' rates to $150 an hour.  Most of the reduction in the overall dollar amount received by the Gibson Dunn team came in the form of hours, however.

The attorneys claimed they spent nearly 2,000 hours on the CEEFPA case, but Judge Brown said that after he reviewed their billing records it seemed to him that Mastro, Shapiro and the senior associates spent too much time doing work that could have been done by lower-level associates, too much time in meetings, and too much time on "vague and block-billed" entries.

The entries with which he took issue included items such as "conference with team," "various correspondence with team members," "participate in team strategy call," "work on various issues going forward," "emails regarding status," and "work on various issues."  "In sum … the court finds that an across-the-board reduction of 50% of the hours billed by plaintiffs' counsel is appropriate," Judge Brown wrote.

A recent Law 360 article by Theodore Boutrous, Lee Crain, and Randi Kira Brown of Gibson Dunn LLP, “How NY SLAPP Defendants Can Recover Fees in Fed. Court”, reports on attorney fee recovery in New York SLAPP suits in federal court.  This article was posted with permission.  The article reads:

Meritless defamation lawsuits have long plagued media defendants.  These strategic lawsuits against public participation, often called SLAPP suits, are designed to chill speech.  States across the country have been experimenting with statutes to address this problem for over 30 years. New York — a jurisdiction that many newspapers, magazines, publishing houses and television networks call home — did not have a strong solution to this problem for many years, but the 2020 amendments to New York's anti-SLAPP law were meant to change that.

Among other things, New York's anti-SLAPP law protects defamation defendants by raising the standard of proof on defamation claims for plaintiffs and by providing for fee shifting, allowing victorious defamation defendants to recover the costs they spent in their defense.  Fee-shifting provisions are essential components of anti-SLAPP laws, as the purpose of SLAPP suits is often to punish and chill the exercise of speech rights by imposing litigation costs.

There is so far no federal anti-SLAPP law. Defamation defendants therefore often must consider whether, and to what extent, state anti-SLAPP laws apply in federal court.  If not, a litigious SLAPP plaintiff need only forum-shop to try to avoid any of the provisions of state anti-SLAPP statutes, including state anti-SLAPP fee-shifting rules.  In other words, if that plaintiff files a defamation claim in federal court, she can argue she is no subject to the specter of fee-shifting because the anti-SLAPP law only applies in state court.

Federal courts have been split as to whether certain anti-SLAPP laws apply in federal court under the U.S. Supreme Court's Erie doctrine from the 1938 case Erie Railroad Co. v. Tompkins.  Under that doctrine, courts consider whether an anti-SLAPP law is procedural or substantive and, if procedural, whether it conflicts with the Federal Rules of Civil Procedure.  

New York's anti-SLAPP law was specifically designed to avoid this problem.  How?  Legislative innovation.  Unlike other anti-SLAPP laws, New York law doesn't only create a motion-based procedural vehicle for a defendant to defeat a defamation claim and recover attorney fees.  Instead, a key innovation New York adopted to help SLAPP defendants was to establish a substantive cause of action for defendants to seek fee shifting for SLAPP lawsuits — effectively an anti-SLAPP tort.

Specifically, New York's fee-shifting provision provides a defendant the right to "maintain an action, claim, cross claim or counterclaim to recover damages, including costs and attorney's fees, from any person who commenced or continued [a SLAPP] action," according to Section 70-a(1) of the New York Civil Rights Law.

So far, though, federal courts in New York have not consistently allowed parties to recover these fees, seemingly due to confusion about how the statute works and the best ways to invoke it in federal court.  For example, in Executive Park Partners LLC v. Benicci Inc. in May, the U.S. District Court for the Southern District of New York refused to apply the fee-shifting provision of the anti-SLAPP statute, holding that the plaintiff cannot file a motion for fees in federal court.

An anti-SLAPP motion, brought under Rule 3211(g) of the New York Civil Practice Law and Rules, conflicts with the Federal Rules of Civil Procedure, the court said, and is thus inapplicable in federal court.  By contrast, in 2021, the U.S. District Court for the Northern District of New York applied the fee-shifting provision in Harris v. American Accounting Association, though without addressing the difference between an anti-SLAPP fee-shifting motion and a cause of action to seek those same fees.

The Southern District of New York appears to have suggested last year in Carroll v. Trump that even a counterclaim is not cognizable in federal court because a Section 3211(g) motion is inapplicable, though the court failed to specifically address why a substantive claim was subject to the same Erie analysis as a state-law motion.  By contrast, in March, the Southern District of New York expressly recognized in Max v. Lissner that an anti-SLAPP claim is cognizable in federal court, even if an anti-SLAPP motion is not.

Given this conflicting backdrop and the state of uncertainty, defamation defendants seeking to invoke New York's anti-SLAPP law in federal court need to tread carefully in deploying it.  Simply filing a motion under the statute for fees may well result in a denial under Erie.  But New York law doesn't limit defendants to mere motion practice.  When a defendant prevails on a defamation claim, they should invoke their rights under the anti-SLAPP statute to counterclaim or bring a new action entirely under the statute to recover their fees — as the New York anti-SLAPP statute expressly allows.

And bringing such a substantive cause of action — essentially a substantive anti-SLAPP tort — will effectuate the Legislature's intent to ensure that the anti-SLAPP statute's protections are available in federal or state court.  It will ensure that courts will see the New York anti-SLAPP statute for what it is: A statute that confers substantive rights on defendants that plaintiffs can't try to forum-shop their way out of simply by filing in federal court.

A recent Law 360 story by Vince Sullivan, “Trustee Asks High Court To Wait On Petition For Fee Remedy”, reports that the Office of the U.S. Trustee asked the U.S. Supreme Court to hold off on its petition for certiorari until other cases seeking rulings on how to address trustee fee overpayments under an overturned fee schedule can be adjudicated, saying it hopes to achieve a nationwide remedy to the issue.  U.S. Trustee William K. Harrington said the Second Circuit was wrong to order the refund of $375,000 in payments made to the U.S. Trustee's Office by debtor Clinton Nurseries between 2018 and 2020, when the fees were increased by an amendment that was later found to be unconstitutionally non-uniform by the Supreme Court in Siegel v. Fitzgerald.

The petition cites other rulings on this issue finding that refunding overpayments is preferred over seeking increased fee payments from debtors who benefited from the lower fee schedule, or in doing nothing and only changing the payment program prospectively.  The trustee argues that while there is no split among circuit courts yet, resolving the question left open by Siegel would create a remedy that could be deployed nationwide.

"If the court, however, prefers to await the potential development of a circuit split, it should, at a minimum, hold this petition, as well as those in other cases presenting the same question, for as long as that question remains pending before other courts of appeals," the petition said.  "That would preserve the court's ability to effectuate a nationwide remedy if it later grants review."

A petition seeking similar relief in the case of debtor John Q. Hammons Hotels & Resorts has already been accepted by the high court, and there are hundreds of cases with the same issue of finding an appropriate remedy currently in the Second Circuit, where the Clinton Nurseries case originated.

During oral arguments in the Siegel case, attorneys for the trustee's office said the total amount of excess fees paid by debtors during the relevant period was as high as $324 million.  The trustee fee schedule was altered by a 2017 law designed to bolster the account used to fund the trustee program, which is sustained mostly by fees paid by Chapter 11 debtors.

The increase initially applied only to the 88 districts that employ the U.S. Trustee system, which is funded by the U.S. Department of Justice primarily through the fees charged to Chapter 11 debtors.  The hike was designed to help sustain the department's trustee fund and was triggered in the first quarter of 2018 because the fund balance dropped below the $200 million threshold established in the law.

Bankruptcy administrator districts in North Carolina and Alabama are funded by the judiciary, and rules in place before the hike permitted — but did not require — the administrator districts to charge the same fees as trustee districts.  It wasn't until October 2018 that these six districts adopted the fee increase.  Congress amended the governing statute in 2021 to require the same fee structure regardless of whether a debtor filed in a trustee or administrator district.

The trustee fees are charged based on the amount of disbursements made by a debtor to its creditors in a given quarter.  Before the increase, a debtor's maximum fee bill could only be $30,000 per quarter, but the 2017 law raised that cap to $250,000 per quarter.

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