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State Judge: Hourly Rates Too Steep For North Carolina

September 2, 2022 | Posted in : Hourly Rates

A recent Law 360 story by Hayley Fowler, “Perkins Coie $2.35M Fee Bid Deemed Too Steep in NC Biz Spat” reports that a North Carolina state court judge has scrapped a request for more than $2.3 million in attorney fees by Perkins Coie LLP following a trial win, saying the requested rates are a far cry from what's typically charged in the state.

Superior Court Judge Adam Conrad said Wednesday that the rates proffered by Perkins Coie — which exceeded $700 per hour — "dwarf(ed)" that of their local counsel at Womble Bond Dickinson LLP for their representation of a North Carolina-based knitting machine maker in a lawsuit accusing its CEO of self-dealing.

"These rates may be typical of firms and attorneys based in California and Texas but are significantly higher than rates customarily charged in North Carolina for cases of this type," he wrote.

The judge consequently denied the attorneys' request but said they can renew it once post-judgment motions and appeals are completed.

Perkins Coie's fee bid follows a multimillion-dollar jury verdict in March on behalf of high-speed knitting machine manufacturer Vanguard Pai Lung LLC and majority owner Pai Lung Machinery Mill Co. Ltd.

The case centered on claims that Vanguard's former CEO and president William Moody had "orchestrated a long-running scheme of self-dealing and other misconduct designed to benefit himself, his family, and his friends," Judge Conrad wrote.

According to the judge's opinion, Moody was a minority owner of Vanguard through his company Nova Trading USA Inc. Both were named as defendants in Vanguard's 2018 lawsuit.

Moody had also filed counterclaims accusing Pai Lung of forcing him out of the business and seeking to have the company dissolved, the judge said, most of which were resolved before the case went to trial.

The jury ultimately issued a verdict for Vanguard and Pai Lung on their claims for fraud, conversion, embezzlement, unfair and deceptive trade practices and unjust enrichment. Court documents show the resulting damages totaled more than $3.4 million.

Shortly thereafter, attorneys with Perkins Coie and Womble Bond submitted their request for fees, saying state law in North Carolina allows parties to collect reasonable attorney's fees in a civil action for embezzlement.

The request outlined $2.35 million for Perkins Coie and $240,499 for Womble Bond.

Judge Conrad said Wednesday the motion was plagued by "several deficiencies," starting with the fact that state law only permits attorney's fees for the owner of property that was embezzled.

"Here, Vanguard is the owner of the property that Moody embezzled," he wrote. "Pai Lung is not the owner and had no claim for embezzlement. Plaintiffs have offered no reason why Pai Lung should recover attorneys' fees based on a claim it did not assert and property it did not own."

The law also does not allow parties to collect fees for claims unrelated to embezzlement unless they are "inextricably interwoven," the judge said, which he determined was not the case here. He also said the requested dollar amount was unreasonable, pointing in particular to two of the highest billing rates from counsel with Perkins Coie that exceeded $1,000 an hour.

Though Judge Conrad ruled the attorneys could collect fees on behalf of Vanguard for the embezzlement claim, he said they didn't submit any billing records to justify the amount requested.

"It is therefore impossible to determine whether Vanguard's attorneys spent a reasonable or unreasonable amount of time drafting or responding to motions, preparing for and conducting depositions, and handling other discovery matters," the judge wrote.

In denying the motion for fees with permission to renew, Judge Conrad also rejected a motion by Moody to dissolve Vanguard, which he said contained "no supporting evidence" and was "a glaring violation of the Business Court Rules."

Moody had contended in a post-trial motion that his company Nova Trading was powerless in the current operating agreement and dissolution was necessary to protect their rights.

But the judge said certain safeguards that prevent Pai Lung from making unilateral decisions are still in place, even if it has a "three-to-one advantage" over Nova Trading, he said.

"That is the division of authority that Nova Trading bargained for and agreed to when it signed the operating agreement," Judge Conrad wrote. "Being outvoted is not, by itself, a basis for dissolution."