Litigation Management & Attorney Fee Analysis Blog : Attorney Fee Analysis & Litigation Management Lawyer : Barger & Wolen Law Firm : Litigation Management, Legal Fees, Billing Guidelines

In Higher Taste Inc. v. City of Tacoma the Ninth Circuit Court of Appeals awarded fees to a non‑profit religious organization arising from a civil rights dispute. The non‑profit sold T‑shirts adorned with a religious/spiritual message along the walkway to a public zoo.

The public entity who owned the zoo subsequently banned the sale of all merchandise along the walkways leading to the zoo’s entrance. The non‑profit sued the public entity. 

The organization alleged civil rights violations and also sought an injunction to maintain the status quo. The district court granted the non‑profit a preliminary injunction. The parties then reached a settlement and the non‑profit moved for attorney fees on the ground that they were the prevailing party in the litigation. The lower court rejected the fee award in its entirety.

The Ninth Circuit reversed the denial of the fee petition. The court noted that for purposes of the applicable civil rights statutes (42 U.S.C. Section 1988(b)), the plaintiff is entitled to attorney fees when actual relief on the merits of his claim “materially alters” the parties’ legal relationship in a way that benefits the plaintiff. 

The Ninth Circuit noted that the preliminary injunction was granted on a finding that the non‑profit was likely to succeed in the litigation. The Ninth Circuit reasoned that because this in turn led to a “settlement” of the controversy, that settlement paved the way for a finding that the non‑profit was a prevailing party under controlling law. The court concluded that the lower court erred in declining to award reasonable fees.

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Tags: 42 U.S.C. Section 1988(b), Appeals, Attorney Fees, Higher Taste Inc. v. City of Tacoma, Prevailing Party Suits, attorneys' fees, prevailing litigant

In Sebelius v. Cloer, the United States Supreme Court decided a closely watched attorney fee case arising under the National Childhood Vaccine Injury Act of 1986 (“the Act”). That Act established a no‑fault compensation system to speed compensation to any injured parties.

In Sebelius, the Court concluded that so long as the claimant’s petition was filed in “good faith and with a reasonable basis,” attorney fees were proper, even to a losing party. The Plaintiff received a hepatitis immunization. Shortly thereafter, the Plaintiff began to experience symptoms that ultimately led to multiple sclerosis (“MS”). Subsequently, the Plaintiff alleged a link between her MS diagnosis and the vaccine.

The Plaintiff then filed a claim for compensation under the Act. The Act requires claims to be adjudicated before a Special Master. 

After hearing the matter, the Special Master concluded that the Plaintiff’s filing was untimely as the claim was filed after the three year period set forth in the Act. The Federal Circuit agreed with the Special Master that the claim was not timely. Nonetheless, the Plaintiff sought attorney fees, and the Federal Circuit ultimately found she was entitled to recover reasonable fees.

On appeal, the Supreme Court affirmed the fee award. The Court noted that a court may award attorney fees and costs incurred by a claimant in any proceeding brought under the Act, even for an unsuccessful petition. A fee award is proper so long as the petition was brought in “good faith” and there was a “reasonable basis” for the claim. On that basis, the Court affirmed the grant of fees to the claimant.

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Tags: Appeals, Attorney Fees, Class Actions, National Childhood Vaccine Injury Act of 1986, Sebelius v. Cloer, United States Supreme Court, attorneys' fees

J.R. Marketing LLC v. The Hartford Cas. Ins. Co., A133750 (May 17, 2013)(unpublished), was just recently decided by the California Court of Appeal for the First District. This is a fascinating case from an insurance perspective, with Cumis counsel issues, attorneys' fees claims, Buss allocation of fees between matters and waivers of Civil Code Section 2860 protections. This case has it all.   

A carrier issued two CGL policies, and when the insured tendered their defense of a lawsuit under the policies the carrier initially denied a duty to defend, claiming the occurrences took place prior to the policy periods.  After the insureds filed a lawsuit against their insurer, the carrier agreed to defend under a reservation of rights, but declined to provide and pay for independent counsel, or Cumis counsel, pursuant to the California Supreme Court decision in San Diego Fed. Credit Union v. Cumis Ins. Society Inc. (1984) 162 Cal.App.3d 358.

When the court granted the insureds’ motion for summary adjudication, it held that the carrier not only had a duty to defend, but also had a duty to retain independent Cumis counsel.  The carrier then paid over $15 million in fees and costs incurred by Cumis counsel, but in an effort to seek reimbursement of certain fees, the carrier then filed a cross-complaint against the Cumis firm for reimbursement of fees incurred in unrelated, uncovered matters, fees incurred for uninsured entities, pre-tender fees and any unnecessary and unreasonable fees. 

The Court of Appeal first recognized that certain protections were normally available to the carrier under Civil Code Section 2860, including a provision limiting the hourly rates paid to independent counsel, and the right to arbitrate the fee issues.  But the carrier was deemed to have forfeited those 2860 protections due to its refusal to accept tender of the defense.

Secondly, the Court recognized that an insurer may very well have a right of reimbursement under Buss v. Superior Court, (1997)16 Cal.4 35, but the novel question before the Court was, “from whom?”  

Reasoning that due to the important policies created by 2860, the court held that the breach of 2860 meant that the carrier lost all right to control the defense, and that consequently the carrier should not be able to obtain the same result by seeking reimbursement from the firm after the fact.  The insured was left to negotiate the fee arrangement with the firm on its own, and otherwise control the defense of the action, so the carrier was not allowed to seek reimbursement in a direct action against the firm. 

But the Court also limited its holding to the facts of the case, explicitly stating that the decision did not apply to carriers seeking reimbursement from the insureds directly, and did not apply to those situations where the carrier may be claiming that independent counsel utilized fraudulent billing practices.

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Tags: Allocation Between Claims, Attorney Fees, Cumis, Cumis Doctrine, J.R. Marketing LLC v. The Hartford Cas. Ins. Co, Reasonably and Necessarily Incurred

David McMahon wrote an article, Litigation: Drafting And Implementing Effective Litigation Management Guidelines, published in Inside Counsel on May 30, 2013, that stresses the importance of drafting and putting into practice effective litigation management guidelines.

As McMahon outlines in his article, litigation management guidelines "supplement the judgment of counsel by enabling the client to exercise the right and duty to control the costs of litigation while at the same time allowing counsel to have a voice in the strategic direction of the handling of the matter.”

McMahon also discusses how important it is to have billing guidelines in order to manage costs and address clients' concerns about billable hours. He notes that most billing guidelines prohibit billing for actions performed for more than one client at the same time, known as “double billing,” require notice of staff changes, require the attorney to get advance notice from a client when performing certain types of work and mandate effective use of technology, among other things.

"In general terms, billing guidelines memorialize the economic relationship between the client and retained counsel,” he wrote. “These guidelines tend to cover the costs of handling the defense and attempt to prevent exposure to the client to what might be perceived as unreasonable or unnecessary fees.”

Billing guideline can help to foster communication between attorney and client, according to McMahon.

It is imperative that in-house counsel put into place clear, concise and express billing guidelines to govern outside counsel billing practices, particularly in major litigation,” he added. “In-house counsel should require your counsel and every member of his or her team to read them and acknowledge the rules.”

Related litigation management articles: Litigation: How to Get Paid On Time, Inside Counsel, May 16, 2013.

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Tags: David McMahon, Litigation Management

In In re: HP Inkjet Printer Litigation, 2013 DJDAR 6149 (2013) the Ninth Circuit Court of Appeals reversed the approval of an attorney's fee award. The Ninth Circuit concluded that the fee award did not comply with the provisions of the Class Action Fairness Act (CAFA). Specifically, the Ninth Circuit found that the district court awarded fees that were “attributable” to the coupon relief offered in the settlement, but failed to first calculate the redemption value of the coupons as required by applicable law.

Plaintiffs filed three class actions alleging that HP engaged in unfair business practices relating to the use of ink cartridges. HP reached a settlement with the consumers, who purchased inkjet printers. The district court approved the settlement, which provided for coupons for the class members as well as injunctive relief. In addition, the district court approved an award of attorney fees of $1.5 million and a significant award of costs. 

The district court reviewed the fee request and awarded lodestar fees based on its conclusion that the settlement value to the class was $1.5 million. Recognizing that it would be improper to award fees that were higher than the class benefit, the court ordered HP to pay a reduced lodestar of $1.5 million down from a potential of $7 million in fees. Two class members objected, contending the reduced fee award still violated the provisions of CAFA.

The Ninth Circuit reversed the lower court’s decision on fees. The Ninth Circuit noted that under CAFA, when a settlement provides for coupon relief, the court must first calculate the redemption value of the coupon, as a prerequisite to considering the claim for attorney fees. As such, the Ninth Circuit concluded that under the provisions of CAFA, the district court was required to first calculate the redemption value of the e-credits in making its determination of attorney fees. 

Because the record did not reflect such an analysis, the Ninth Circuit remanded the case to the District Court to make a determination consistent with the required analysis under CAFA.

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Tags: Appeals, Attorney Fees, Business and Professions Code section 17200, CAFA, Class Action Fairness Act, Class Actions, In re: HP Inkjet Printer Litigation, Lodestar, Lodestar Enhancements

In Khavarian Enterprises Inc. v. Commline Inc.,2013 DJDAR 6107 (2013) the California Court of Appeal for the Second Appellate District overruled the trial courts denial of a fee claim arising out of a settlement agreement. 

The court of appeal concluded that parties to a settlement agreement can validly specify that one party is a potentially prevailing party. The court also stated that the “prevailing party” issue can be reserved by the parties for later determination by the trial court.

The Plaintiff filed an action for trade secret misappropriation against several defendants, seeking damages, restitution and injunctive relief.

After almost two years of litigation that parties engaged in mediation, and entered into a settlement agreement that specifically reserved the issue of whether the Plaintiff was entitled to recover attorney fees and to file a cost bill. The parties filed a notice of settlement and the action was dismissed. 

The Plaintiff, then filed a memorandum of costs and a motion for attorney fees. After a hearing, the trial court denied the motion for attorney fees and also struck the Plaintiffs memorandum of costs. The trial court concluded that the Plaintiff was not the prevailing party in the litigation. The trial concluded that the settlement precluded an award of fees as the “matter was resolved in a settlement.”

The Court of Appeal reversed noting that when interpreting a settlement agreement, the court’s goal is to objectively determine the mutual intention of the parties from the provisions contained in the agreement. In this case the court focused on the parties’ objective intent from the terms of the contract.  The court concluded that the Plaintiff’s potential entitlement to fees was specifically reserved for further handling. The trial court’s decision to deny the Plaintiff’s motion for attorney fees and costs was reversed on that basis.

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Tags: Appeals, Attorney Fees, Khavarian Enterprises Inc. v. Commline Inc., Prevailing Party Suits, settlement

In Nevis Homes LLC v. CW Roofing Inc., 2013 DJDAR 6187(2013) the California Court of Appeal for the Second Appellate District decided a procedural issue pertaining filing a memorandum of costs. The court clarified the rules and stated that no statute or rule of court specifically exempts cost memoranda from the five-day extension rule for pleadings served by mail under California Code of Civil Procedure section 1013(a).

An association filed a lawsuit against a builder alleging defects in construction. The builder filed a cross action against a roofing company, one of the subcontractors on the project. The homeowners’ association later settled with the builder, and the builder soon thereafter settled with the roofer. 

After dismissal of the cross-complaint against the roofer, the builder mailed a notice of dismissal. However, counsel for the roofer did not file the cost bill until 19 days after the notice of dismissal was entered. 

The builder moved to strike the cost bill as untimely, arguing that the cost bill should have been filed within 15 days after the dismissal with no extension for mailing. The trial court granted the motion to tax costs in its entirety.

The Court of Appeal noted that California Rules of Court Rule 3.1700(a)(1) provides that a party who claims costs, must serve and file a memorandum of costs within 15 days after the date of service of written notice of entry of judgment.

The court also noted that Code of Civil Procedure Section 1013 provides an extension of five days for cases of service by mail. 

The builder argued that costs memoranda were exempt from the five-day mailing extension pointing out that any reference to CCP§1013 was “conspicuously absent” from Rule 3.1700.  

However, the court of appeal could find no statute or rule of court which specified that the normal five-day extension for service by mail did not apply to a memorandum of costs. 

On that basis the court of appeal clarified the rule and stated that the five-day extension under CCP§1013(a) was fully applicable.

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Tags: Appeals, California Rules of Court Rule 3.1700(a)(1), Code of Civil Procedure section 1013(a), Nevis Homes LLC v. CW Roofing Inc., five-day extension rule for pleadings, memorandum of costs

By David J. McMahon & Jeevan Subbiah

Introduction

Many of our litigation management audits involve complex environmental cleanup cases. In these cases, it is important to first evaluate the underlying matter, including the fact patterns of the various lawsuits, in relation to the contested coverage provisions. Then we examine the manner in which the tendered fees and expenses were incurred, including the legal and consultant work performed. Many of our audits involve excess liability indemnity policies with large self insured retentions often in excess of $30 million. Subject to the terms and conditions of the policies, the insurer typically has no payment obligation until and unless the self insured retention is appropriately exhausted by the appropriate payment of covered claims. The insurers obligation arises for expenses in excess of the policy’s self insured retention.

Evaluation of the Policy

It is important to thoroughly evaluate the definition of "Defense Costs" when reviewing the applicable policy language. In addition, the policies may also contain exclusions for property damage which is owned, occupied by or rented to the insured. These claims need to be carefully evaluated.

An insurer may find it beneficial to hire an independent consultant or expert to assist in the review of the insured’s fee and cost claim. We can analyze the back-up submitted by the insured, including information contained in databases which may have been submitted in support of insured’s claim. In addition, we can review any independent investigation of the facts and circumstances concerning the underlying incident.

Burden of Proof is on the Insured

Generally, the burden is on the insured to demonstrate that a loss falls under the coverage provisions of the insurance contract. (“The burden is on the insured to prove that a loss falls within the policy’s coverage”; “An insured seeking to recover for a loss under an insurance policy has the burden of proving that a loss occurred and also that the loss was a covered event within the terms of the policy.”). 

When part of the loss is covered under a policy and part is not, the insured typically has the burden of proving the proper allocation.

Reviewing Costs

In our audits, we often find that many questionable costs require further investigation. For example:

1. Inefficient and Unreasonable Cleanups – The environmental cleanup conducted by the insured and the insured’s contractors may have been conducted in an inefficient manner, resulting in potentially unreasonable costs. We can review the total dollar amount expended in comparison to the work performed in other similar environmental cases to see if inefficiencies exist.
2. Work Conducted by Specific Contractors - Specific contractors (vendors) may need particular scrutiny. For example, environmental remediation work performed by a particular vendor may need to be validated in detail and distinguished from other work. Also, specific work may be excluded by the policy (such as work conducted on a right of way) or may be covered under the primary coverage obtained by the insured.
3. Community Information – Our review of underlying documents related to the matter may result in finding a document, such as a letter from a neighbor or community member, that highlights the inefficient nature of the environmental cleanup. In addition, the insured may cleanup property that was not impacted by the event or was not in the immediate vicinity. Such “aggressive” cleanup work may have been done for “public relations purposes” to ward off potential lawsuits. If so, this work may not be covered by the policy since it may not be a covered defense cost. In addition, contractors sometimes overcharge for inefficient work.
4. Vendor Documentation - The documentation submitted by the insured in support of the charges for environmental remediation contractors may be deficient and the insured may fail to meet its burden of establishing that these particular charges are covered by the policy. Often a review of one contractor will result in findings that are equally applicable to the other contractors.
5. Charges Previously Submitted to First Party Insurers – A review of the invoices may also show that the charges were previously submitted to the insured's first party insurers before submission to the liability carrier. This may be an attempt to “double dip” on recoverable costs or fees.

The examples set forth above are just a few illustrations of the potential unreasonable costs and activities that may be identified from a careful analysis of the bills and supporting documentation. 

Conclusion

After reviewing all the foregoing, including the applicable correspondence relating to the claim, we often are able to reach conclusions on whether the expenses are reasonable and were necessarily incurred as required by the applicable policy provisions. We can also determine whether a portion of the expenses were also incurred for activities which are excluded from coverage. We can quantify this amount in both our charts and report. These documents may provide support for negotiation, settlement or the insured to submit additional information for review. 

Please feel free to contact us if you have questions about the protocol referenced above.

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Tags: Attorney Fees, Complex Environmental Fee Claims, Litigation Management, environmental cleanup

In Duchrow v. Forrest, 2013 DJAR 5534 (2013) the California Court of Appeal for the Second Appellate District decided a unique fee claim arising in a procedural context.

An attorney, the Plaintiff, retained counsel to sue her employer for employment‑related claims. Under the retainer agreement, the Plaintiff and the lawyer agreed that the lawyer would be compensated on an alternative fee arrangement involving both hourly rates and on a contingency fee basis.

At the beginning of the trial, Plaintiff’s counsel moved to withdraw from the case. The Plaintiff did not oppose that request and the court granted the motion to withdraw. The Plaintiff apparently could not find another attorney to represent her. The case was subsequently dismissed. 

After the dismissal was entered, counsel sued the Plaintiff for breach of the retainer agreement, alleging he was entitled to approximately $40,000 in fees. Near the end of a week long trial, the lawyer then filed a motion to amend the complaint, increasing the amount of fees at issue to over $300,000. Counsel claimed the new sum was valid as it represented compensation for additional work on the file. The trial court granted the motion to amend and the jury awarded the lawyer $140,057 in fees.

The Plaintiff filed an appeal and the Court of Appeal reversed the trial court’s decision under Code of Civil Procedure Section 473(a)(1).

The court noted that a trial Judge has discretion to determine whether to grant an amended complaint. Despite the discretion, the court of appeal also noted that a trial court must still consider mitigating factors, such as untimely presentation of the amendment. The court of appeal noted that unexplained lengthy delay in seeking the amendment is a valid reason for denying a motion for leave to amend. 

The court of appeal concluded that the lawyer should have included the true amount sought in the original complaint or should have sought leave to amend at an earlier date, not during trial. The panel stated that the delay in seeking the amendment deprived the Defendant of the ability to prepare for trial and the motion should have been denied on that basis alone.

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Tags: Appeals, Attorney Fees, Code of Civil Procedure Section 473(a)(1), Contingency Fees, Duchrow v. Forrest