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Category: Trial / Jury / Verdict

Ninth Circuit Leaves Yahoo Jury Awarded Attorney Fees Intact

June 24, 2021

A recent Law 360 story by Melissa Angell“Ninth Circ. Leaves Yahoo Atty Fee Award Alone in Coverage Spat” reports that the Ninth Circuit left Yahoo Inc.'s jury award of more than $600,000 in attorney fees untouched after an AIG subsidiary accused the tech giant of not presenting the correct recoverable amount, with the panel finding that Yahoo shared adequate billing records.

A three-judge panel unanimously ruled that it would not "disturb" the jury award Yahoo received after hearing out National Union Fire Insurance Co. of Pittsburgh, Pa.'s challenge to the attorney fees. The insurer had argued that Yahoo lumped all legal fees together, including those that are not recoverable.

"Yahoo presented detailed billing records and made its associate general counsel, Daniel Tepstein, available to testify on the nature of the legal work those records referenced," the opinion said. "While Yahoo's request for virtually all of its fees through the summary judgment stage may have been ambitious, Yahoo fulfilled its obligation to 'demonstrate[] how the fees ... should be apportioned.'"

The coverage dispute goes back to January 2017, when Yahoo filed suit alleging National Union had breached its policy by refusing to cover the company in several class actions accusing it of scanning customers' emails.

In October 2018, U.S. District Judge Edward J. Davila found that National Union largely failed to defend and indemnify Yahoo for $4 million in attorney fees that resulted from the class actions. The judge said it was up to a jury, though, to decide whether the insurer acted in bad faith in denying coverage.

Following a five-day trial in May 2019, a jury returned a verdict finding that National Union had acted in bad faith and should foot the bill for Yahoo's attorney fees.

But on appeal, the insurer asked the Ninth Circuit to reverse the award of over $600,000 in attorney fees or grant a new trial altogether, arguing that the district court failed to guide a jury on how to allocate and award attorney fees. National Union explained that the tech giant was not able to show which portions of its legal fees were spent on bad faith claims.

Yahoo, however, argued that the record reflects "substantial evidence" in support of the jury's verdict and pointed out that the insurer didn't bother to cross-examine Tepstein about the accuracy of the figures provided.

And on Wednesday, the panel determined that National Union's attempt to overturn the jury's fee award is "unavailing." The challenge is also too little to late, with the panel observing that the insurer's argument was raised "for the first time on appeal regarding the content of Yahoo's billing records."

The appeals court also addressed Yahoo's argument that a lower court got it wrong in determining that it is only entitled to 30 days interest on defense and settlement costs under a previous 2011 contract.

"Here, had both parties fully performed their contractual obligations, National Union would have initially paid all defense and settlement costs, and Yahoo would have reimbursed those costs within thirty days of receiving an invoice," the panel wrote, concluding that Yahoo has not demonstrated that it deserves special damages.

Quinn Emanuel Defends Billing Practices, Expenses

May 5, 2021

A recent Law 360 story by Rachel Schart, “MiMedx Slams Quinn Emanuel Fees As 2 Other Firms Settle,” reports that MiMedx has accused Quinn Emanuel of seeking unreasonable fees, including for lawyers' luxury hotel stays and fine dining, as part of the cost of defending two former company executives who were convicted of securities fraud.  The allegation, in court papers, comes after the life sciences company settled claims with two other law firms seeking payment of fees as part of the same dispute.

Quinn Emanuel Urquhart & Sullivan LLP, Freshfields Bruckhaus Deringer LLP and Kobre & Kim LLP initially filed suit in New York state court on April 15 alleging MiMedx Group Inc. shirked its obligations to indemnify the firms' clients, company President William Taylor and ex-CEO Parker "Pete" Petit.  Both men were sentenced to a year in prison in February after being convicted of one of two counts each at trial.

Freshfields and Kobre & Kim said in court filings that they had settled their claims against MiMedx.  Without disclosing the terms, the firms wrote in similar notices that their "claims in this proceeding do not make, and never were intended to make, a charge of deception against MiMedx or its general counsel, Butch Hulse, and that the filed action in this matter was a good faith fee dispute, which now has been swiftly and amicably resolved."

But Quinn Emanuel has yet to drop its claims in the lawsuit, and MiMedx took aim at the law firm in an answer filed in a related Florida state court legal fee dispute with the former executives.  In response to the men's counterclaims seeking additional fees to appeal their convictions, MiMedx accused Quinn Emanuel of overbilling Petit and Taylor and then unfairly attempting to collect from the company.

"Quinn Emanuel will have to explain its billing and expense practices," MiMedx wrote.  "These include staffing its trial team with over ten professionals, mostly from out-of-town despite having a large New York office within a few miles of the courthouse; staying in a luxury boutique hotel; having meals catered by a Michelin-starred chef (and supplementing them with separate orders of crab legs and sushi to boot); and charging MiMedx tens if not hundreds of thousands of dollars on a 'last-minute' motion to adjourn the trial that the court found 'border[ed] on the frivolous.'"

MiMedx said Quinn Emanuel has refused to provide it with invoices for its expenses in the case, and that it and the other criminal defense firms have already been paid more than $18 million for their work defending the former executives.  MiMedx's counsel told Law360 that the company has indemnified its former executives where required, but that the law firms can't force it to pay unwarranted fees.  "The company has been reasonable.  It paid pursuant to the indemnity," said Louis M. Solomon of Reed Smith LLP.  "It always reserved the right to make sure that the fees were reasonable, and even now with the convictions in place, we're not obliged to advance any more costs."

Quinn Emanuel's in-house counsel defended the firm's billing practices to Law360.  "Quinn Emanuel tried this case during the pandemic and achieved an acquittal for its client on the most serious count," Marc Greenwald, who is representing the law firm in the New York case, said.  "Quinn Emanuel expects to get paid at the rates that MiMedx agreed, and our work was outstanding.  All the charges were appropriate and reasonable."

MiMedx lodged its Florida state court claims against Petit and Taylor in January seeking permission to stop indemnifying the former executives upon sentencing, as well as reimbursement for millions of dollars in already paid fees.  Petit and Taylor fired back with counterclaims soon after they were sentenced, arguing in April that the company must continue indemnifying them in the upcoming appeal.  Quinn Emanuel, Freshfields and Kobre & Kim filed their separate New York state court suit in April, alleging that MiMedx has violated its contractual duty to pay Petit and Taylor's criminal defense costs.

Quinn Emanuel Wins $14M in Attorney Fees in $5M Trial Case

April 30, 2021

A recent Law.com story by Nate Robson, “Quinn Emanuel Wins $14M in Legal Fees for Client’s $5M Case,” reports that Quinn Emanuel Urquhart & Sullivan landed nearly $14 million in legal fees and costs for a client, nearly three times the $5.4 million in damages awarded at trial in the underlying dispute.  The fees, granted by a federal judge in Minnesota, cap off an especially litigious case that came after most other parties settled once another defendant mortgage lender was hit with a $28 million verdict in 2018.

The recent trial involved ResCap Liquidating Trust, which was created in the wake of the 2012 bankruptcy of Residential Funding Corp. after it faced billions of dollars in liabilities tied to residential mortgage-backed securities it sold leading up to the 2008 housing collapse.  ResCap was formed to sue banks and mortgage lenders that sold the loans bundled into those mortgage-backed securities.

In the ruling against mortgage lender Primary Residential Mortgage Inc., U.S. District Judge Susan Richard Nelson repeatedly noted that PRMI’s litigation tactics were responsible for inflating ResCap’s legal fees as the case went to trial.  The judge said PRMI was aware “the parties would not ‘split the tab’ or ‘go Dutch’ on attorney’s fees and costs,” given its contractual agreement at issue in the case and the legal fees awarded in the first trial.  “Given all of this notice, PRMI cannot credibly express indignation now,” Nelson wrote.  “Its own poor judgment in relitigating settled issues throughout this litigation significantly drove up ResCap’s attorney’s fees and costs.”

Nelson said PRMI, represented by a team from Williams & Connolly, challenged relatively miniscule claims for damages and reargued items that were handled in the first trial against another lender.  Nelson pointed to one claim on a loan involving $30,000 in damages as an example.  PRMI’s stance on that loan required discovery, motion practice, expert and fact witness deposition testimony, and then trial testimony.  “While PRMI argues that ResCap’s fee request is out of proportion to its damages award, PRMI overlooks its own practice of litigating aspects of plaintiff’s damages claim in ways that were out of proportion to the amounts at issue, thereby driving up ResCap’s attorney’s fees,” Nelson wrote.

Nelson also rejected PRMI’s claim that paying nearly $14 million in legal fees and costs on a $5.4 million award is disproportionate, noting ResCap was also granted nearly $2 million in prejudgement interest, bringing the total to $7.4 million in damages.  The ruling, granting $10.5 million in attorney fees and $3.5 million in costs, also notes that fees don’t have to be proportional to the award.

Isaac Nesser, the lead attorney on the case for Quinn Emanuel, said neither side had cited a similar instance where legal fees so outpaced the award given.  Nesser said a key to landing the fees was building a record during court appearances of how much work was going into the case because of PRMI’s litigation strategy.

“It was important to us to build a record that we were being forced to spend time and money litigating issues that seemed disproportionate to the actual amount of damages in the dispute,” Nesser said.  “As a result, we came to the view that it was important for us to communicate that information clearly to PRMI and Judge Nelson.  And so we made a record of that any chance we could.”

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. 

Judge Says School District Overpaid Morgan Lewis

March 5, 2021

A recent Law 360 story by Lauren Berg, “Judge Says School District ‘Greatly Overpaid’ Morgan Lewis,” reports that a New York federal judge awarded millions of dollars in attorney fees to the NAACP after a Hudson Valley school district was found to be blocking minority voters' preferred candidates from the school board, while criticizing how much the school district paid its counsel at Morgan Lewis & Bockius LLP.

During a hearing, U.S. District Judge Cathy Seibel increased the $4.3 million in attorney fees and costs that a federal magistrate judge recommended be awarded to the NAACP's counsel at Latham & Watkins LLP and the New York Civil Liberties Union Foundation after they won a bench trial.  According to a transcript provided to Law360, the East Ramapo Central School District was found to have violated the Voting Rights Act.

Following the bench trial, Judge Seibel found that in the "unique" school district, in which 98% of private school students are white and 92% of public school students are Black or Latino, statistical analysis showed that both groups voted as blocs.  The minority group has been unable to get a single preferred candidate onto the board since 2007 due to highly organized resistance from the private school community, which is largely Jewish, the judge ruled.  The Second Circuit in January upheld the ruling.

In their objections to the magistrate judge's recommended award, the NAACP's counsel said they should at least be paid the same amount that the school district paid Morgan Lewis and asked for about $8.5 million — all of which they said they will donate to help the public schools in the district — while the school district said there shouldn't be a fee award because the attorneys are working pro bono, according to the transcript of the hearing.

Judge Seibel said the NAACP's counsel isn't entitled to the same rate that its corporate clients pay because they are working pro bono, but they are entitled to a fee.  She also noted that while the attorneys' plans to donate all of the money is "commendable," it will have no impact on her calculation of the fees.

The NAACP's counsel argued that the magistrate judge's award cuts their fees to half of what Morgan Lewis was paid, but Judge Seibel said it's not her job to compare what the plaintiffs seek with what the defendants were paid.  She noted that she must determine what a reasonable, paying client would pay by multiplying the reasonable number of hours by a reasonable hourly rate.

The judge said the school district is not an example of a "reasonable, paying client."  "I think the district greatly overpaid," Judge Seibel said.  "I have never heard of a school district in this area being charged or paying close to $650 an hour for partners or $450 an hour for associates, which is what Morgan Lewis charged."  The judge said that because this case was more complex than another more routine case, it's reasonable that the client might pay more than it usually would, but that the school district in this case paid about triple the normal rate.

"The record simply contains no indication that defendant's counsel's fee is, in fact, reasonable; and I think there are strong reasons to conclude it's not, so it doesn't make sense to try to match it," Judge Seibel said.  "Latham's work has obviously been more valuable to its clients than Morgan Lewis's was to its, but that does not mean defendant has to pay Latham what defendant paid Morgan Lewis."

The judge also noted that the school district could have avoided paying fees to the NAACP's counsel had it settled the case before it went to trial, but she also said the district was under no obligation to settle and might have sincerely believed it could win the case.  The judge also disagreed with the school district's assertion that the NAACP didn't really achieve anything because the school board is still 6 to 3 in terms of white private school members versus minority public school members.

"First, plaintiffs achieved something really big here.  They turned over a big rock and they exposed a years'-long violation of voting rights," Judge Seibel said.  "Second, even if there are only three minority/public school members on the board, they will be ones chosen by the voters, not by a secretive white slating organization."

In her calculations, the judge said she came out a little higher than the magistrate judge, citing the difficulty and complexity of the case that required a high level of skill from the attorneys, as well as the substantial resources needed to effectively prosecute the case.  "I think above what is typical in normal civil rights cases is appropriate and I'm going to bump up from Judge [Judith C.] McCarthy's numbers, although not up to what plaintiffs asked for," Judge Seibel said.

The judge didn't specify the total amount of fees and costs she awarded the NAACP but did say she would offer a higher rate of 25% compared to the 20% offered by the magistrate judge.  At the end of the hearing, Judge Seibel told the NAACP's counsel at Latham that it shouldn't take umbrage at a fee award that will probably come out to be less than what the school district's counsel got, according to the transcript.  She said she thinks the defense counsel got paid too much, but that "two wrongs don't make a right."

"Latham accomplished two very important things here: first, it got its associates some invaluable training and experience while also showing them how rewarding and satisfying public interest work can be; and second, it rectified a serious wrong in the community and restored the voting rights of thousands of people, and you cannot put a price tag on either of those things," Judge Seibel said.  "The firm ought to take pride in both of those accomplishments without diluting it by tying it to an arbitrary number paid to plaintiffs' counsel," she added.