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Category: Unpaid Fees

Dentons Wants Out of Japanese Billionaire’s $50M Fee Dispute

December 18, 2021

A recent Law360 story by David Thomas, “Dentons Wants Out of Japanese Billionaire’s $50M Fee Fight With Law Firm,” reports that Global law firm Dentons asked to withdraw from representing a Japanese pachinko billionaire in a $50 million legal fee fight with Chicago-based litigation firm Bartlit Beck.  Dentons partners Alex Gude, Meaghan Klem Haller and Robert Richards told U.S. District Judge John Kness in Chicago that there was "an irretrievable breakdown" in their attorney relationship with client Kazuo Okada.

They did not say why the relationship soured but said Okada consents to the firm's withdrawal.  They asked for deadlines in the case to be extended by two months so Okada can find new counsel.  The Chicago-based 7th U.S. Court of Appeals last month appeared skeptical of Dentons' arguments that Okada shouldn't be forced to pay $50 million in legal fees to Bartlit Beck stemming from an earlier court fight with Wynn Resorts Ltd.

Okada hired Bartlit Beck to represent him in a lawsuit against Wynn Resorts after the U.S. casino giant forced Okada's Universal Entertainment Corp to sell back its stake in the company at a discount following an internal anti-corruption investigation.  That case settled in March 2018 for $2.6 billion.

Bartlit Beck, a firm specializing in high-stakes litigation founded by ex-Kirkland & Ellis partners, took Okada to arbitration after he failed to pay $50 million it claimed he owed in legal fees.  Okada withdrew from the arbitration proceedings days before a U.S.-based evidentiary hearing in October 2019, arguing his engagement agreement with the firm was invalid.  Okada also said he was unable to travel due to his health.  The arbitration panel awarded Bartlit Beck $50 million by default in 2019.  Kness ordered Okada to pay Bartlit Beck in March, sparking the appeal.  The 7th Circuit's decision is still pending.

Taylor English Seeks $2.8M in Fees From Former Client

December 15, 2021

A recent Law360 story by Emily Sides, “Taylor English Seeks $2.8M in Fees From Ex-Client,” reports that a Texas-based oil and gas corporation owes Taylor English Duma LLP over $2.8 million for nearly 3,000 unpaid billable hours, expenses and interest, according to a suit the law firm filed in Georgia state court.  Frontera Resources Corp. reneged on its February 2019 retainer agreement with the Atlanta-headquartered law firm, according to the six-page complaint by Taylor English.  In addition to the over $2.1 million for unpaid legal work and expenses and $721,655 in interest, Taylor English wants its ex-client to reimburse the firm's attorney fees for having to pursue the payment litigation.

The complaint alleges one count of breach of contract, one count of unjust enrichment and one count of account stated against Houston-based Frontera Resources.  As part of alleging account stated, Taylor English said that the total sum is the correct amount that Frontera Resources owes. Taylor English referred to a state law that states that a defendant in an action must either deny the debt or reply with how much is truly owed to the plaintiff.  According to Taylor English, the corporation had retained the firm and agreed to pay up to $795 an hour for legal services.

"At [Taylor English's] expense, [Frontera Resources] has been unjustly enriched through the conduct described above, and [Taylor English] is entitled to be compensated for the benefit that [Frontera Resources] has enjoyed and will enjoy as a result of its receipt of the services provided to it under the engagement agreement," Taylor English said in its complaint.  In a two-page letter dated Feb. 8, 2019, Bryce D. Linsenmayer of Taylor English thanked Levan Bakhutashvili of Frontera Resources for agreeing to retain the firm.  Linsenmayer outlined terms of their agreement, including how Frontera was responsible for paying for any legal services provided and for any interest accrued for an unpaid balance.

"Our firm customarily asks for a retainer at the outset for a new client engagement but we have agreed to forgo a retainer at this time," Linsenmayer said in the letter.  "In addition to our fees, you will be responsible for expenses in connection with this engagement, including travel, filing fees, courts costs, postage, online research fees and governmental filing fees, if necessary," Linsenmayer said in the letter.  "You may terminate this agreement with us at any time, but we are entitled to the full amount of fees earned."

Insurer Overpaid Policyholder’s Attorney Fees, Judge Finds

August 25, 2021

A recent Law 360 story by Daphne Zhang, “Insurer Overpaid For Policyholder’s Legal Bills, Judge Finds,” reports that a New York federal judge said that an insurer's decision to stop paying a GoPro accessory maker's attorney fees was reasonable, finding the policyholder's defense counsel billed administrative work at partner rates and logged excessive working hours.  U.S. District Judge Mae D'Agostino denied 360Heros Inc.'s motion for summary judgment against Main Street America Assurance Co., saying the carrier's payment of more than $2 million in attorney fees fully satisfied its defense obligations.

The judge sided with Main Street in finding that 360Hero's defense counsel, Gauntlett & Associates, repeatedly charged "unreasonable and excessive" legal fees in an underlying patent infringement suit with GoPro.  The camera company sued 360Heros alleging the harness maker used its copyrighted pictures and infringed two of its trademarks.  The suit was settled in May 2018. 360Heros sued Main Street in 2017 after the insurer stopped paying for its defense costs.

"Based on Gauntlett's repeated practice of billing excessive, redundant or otherwise unnecessary hours the court finds that a 15% reduction in Gauntlett's fees is warranted," the judge said.  According to the order, a Main Street attorney found in 2017 that the insurer overpaid for defense costs after retroactively reviewing the payment history.  Main Street subsequently stopped paying the policyholder's legal bills, which 360Hero claimed violated its insurance policy.  "The amount of unpaid fees is significantly less than the amount that the court finds were reasonably expended," Judge D'Agostino found, saying that Main Street was fully entitled not to pay because the defense counsel overcharged on legal bills.

Some of Gauntlett's invoices were billed without any tasks designated to a paralegal, the judge pointed out, and the firm repeatedly charged administrative work at partner rates. Gauntlett also charged full rates for travel, which should have been billed at half of their hourly rates, Judge D'Agostino said.  "For travel to a one-day out-of-town settlement conference, [one Gauntlett attorney] billed for $418.48 in meals," she said.

Law Firm Wants Attorney Fee Dispute in Arbitration

August 18, 2021

A recent Law 360 story by Caroline Simson, “King & Spalding Says Fee Fight Must Be Arbitrated”, reports that King & Spalding is urging a Texas court to force a former client to arbitrate allegations that the firm fraudulently colluded with Burford Capital to maximize fees while representing him ​​in a treaty claim​ against Vietnam, pointing to an arbitration clause in the underlying fee agreement.  Fighting back against Trinh Vinh Binh's arguments earlier this month that the clause is inapplicable because the firm didn't sign the funding agreement with Burford, King & Spalding argued in a brief that the clause is broad enough to encompass the dispute.

Binh, who's accused the firm and two of its international arbitration partners in Houston of making a "mockery of the fiduciary obligations an attorney owes to their clients," told the court that the funding agreement doesn't contain any reference to King & Spalding.  In fact, the firm had already inked a deal with him that laid out all the terms of their relationship and did not include an arbitration clause, he said.

But the firm pointed in its brief to the wording of the clause, noting that it applies to "any controversy or claim" that is "relat[ed] to" the funding agreement.  The clause also applies to "any other transaction document," which includes a "counsel letter" through which Binh instructed the firm to distribute any arbitration proceeds in accordance with the funding agreement, according to the brief.  "Plaintiff cannot reasonably dispute that his claims 'relate to' the [funding agreement] and the counsel letter," according to the brief, which notes that Binh is seeking damages based on the firm's alleged failure to allocate the arbitration proceeds in compliance with the funding agreement.

"While plaintiff attempts to characterize these claims as arising out of the engagement agreement, that agreement does not address the allocation of arbitration proceeds," the firm continued. "The terms cited in the petition were set forth in the [funding agreement] and 'agreed to' by defendants through the counsel letter, bringing those claims squarely within the ambit of the [funding agreement]'s arbitration agreement."

Counsel for Binh declined to comment, saying they will file a response with the court.  Binh sued King & Spalding and two of its partners, Reggie R. Smith and Craig S. Miles, in June, alleging they made a "mockery of the fiduciary obligations an attorney owes to their clients" by "colluding" with litigation funder Burford to take more of the arbitration proceeds than Binh had agreed to.

The law firm had represented Binh in a treaty claim against Vietnam over the confiscation of certain real estate that ended in a $45 million award against the country in 2019.  In the arbitration, filed in 2015, Binh accused the country of improperly taking several valuable properties he says were worth an estimated $214 million.  Under their deal, the law firm agreed to hold back 30% of billings for fees and defer the payment of those amounts until work had concluded in the arbitration.

At the same time, Binh entered into a funding agreement with Burford Capital with a $4.678 million spending cap, according to the suit.  Binh claims that King & Spalding told him the firm could complete the arbitration work within that cap.  But by May 2016, the firm had already billed and been paid some $1.9 million, leaving about $1.8 million after initial costs and expenses had been paid out.  Binh alleges that at that point the firm, "motivated by securing continued, guaranteed immediate payment of their fees, colluded with Burford" to contrive a scheme to increase the amount potentially owed by Binh by increasing the cap on King & Spalding's legal fees and, consequently, increasing Burford's potential entitlement to an increased return.

Binh says that the way the agreement worked was that the more King & Spalding billed against the cap amount in legal spending, the more he was at risk of paying a so-called success return, to be paid if he prevailed in the arbitration.  The success return was to be split between King & Spalding and Burford based on the relative portion of their investments in the arbitration, Binh said.  Binh alleges that King & Spalding tried to make him agree to increase the cap on expenditures for legal fees — and potentially, provide more of a return for Burford — but that he refused.  Thereafter, Burford and the law firm allegedly executed a side agreement between themselves.

In addition to accusing King & Spalding of breaching its fiduciary duty, Binh's lawsuit includes claims for negligence if the overpayment of fees was due to a mistake, as well as claims of misrepresentation and fraud.  He also accuses the firm of negligence after the tribunal in the case against Vietnam rejected an expert report the firm provided stating that Binh's property was worth some $214 million.  The tribunal instead awarded $45.4 million.

Insurers Fail to Disqualify Law Firms in Recovery of Attorney Fees

August 10, 2021

A recent Law 360 story by Pete Brush, “Effort By NHL Insurers to DQ Skadden, Proskauer Rejected”, reports that a New York judge declined to disqualify Skadden Arps Slate Meagher & Flom LLP and Proskauer Rose LLP from representing the NHL in its effort to recover tens of millions of dollars of legal fees from insurers for concussion litigation, finding no conflict between the firms and hockey.

During a video hearing, New York Supreme Court Justice Melissa A. Crane turned aside a motion by Chubb and other insurers to remove the BigLaw firms from a dispute over who will be on the hook for what insurers say are $92 million of legal bills associated with an underlying $19 million concussion settlement.  I'm denying the motion.  The interests of the NHL and Skadden are aligned and the underlying case is over," Judge Crane said.

The NHL sued insurers including TIG Insurance, Chubb and Zurich last year, alleging a refusal to fund fees stemming from litigation over retired hockey players' claims that they endured long-term injuries.  The suit seeks damages and interest for an alleged breach of duty under policies dating back to 1974.  The suit says only about 25% of fee requests have been paid.

The defendant insurers dispute liability and, in a 2021 motion, some claim that "Skadden and Proskauer's fees and expenses for the underlying litigation were, in large part, unreasonable and unnecessary."  In a later filing, they say fees and expenses have thus far totaled $92 million.  The law firms counter that the insurers are using a meritless disqualification bid as a "ploy" to further their effort to angle for a "lowball" settlement.

During brief argument counsel for the insurers, Andrew Poplinger, said the firms are unable to be "objective" about their own billing practices.  Counsel for Skadden, Lawrence Spiegel, said insurers are engaging in "gamesmanship," with a "borderline frivolous" motion.

Judge Crane rejected the insurers' contention that lawyers from the firms cannot be permitted to act as witnesses in a case that centers on "reasonableness and necessity of their own legal fees."  The judge found not only that the NHL has waived the conflict, but also that different groups of lawyers will be at work on the fee case than were at work in the underlying concussion litigation.  "You're just going to add more fees if we switch it up now," Judge Crane also observed.