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.

But he was not the first.  According to this article, several lawyers and even a judge were similarly disbarred, and two of those lawyers were convicted on federal charges and remain behind bars. 

Unfortunately, the general public tends to assume that a few bad apples spoil the whole bunch.  And so it goes.  The general reputation of lawyers continues to suffer.

http://adverselling.typepad.com/how_law_firms_sell/2013/02/how-profitable-are-alternative-fee-arrangements-part-2-of-2.html

Joseph and Darla Padgett filed a civil rights complaint against eight defendants arising from a dispute with the City of Monte Sereno, California, and enforcement of a fence height ordinance. Plaintiffs claimed violation of their First Amendment rights to free speech and their Fourteenth Amendment rights not to be subjected to selective enforcement of the law (as well as other claims).  

Defendants chipped away at the claims and by the time of trial only two claims survived and only two defendants remained.  By the time it reached the jury only one claim remained.  Ultimately, only one plaintiff prevailed on one claim against one defendant.  The jury awarded $1 in nominal damages and $200,000 in punitive damages. 

The prevailing plaintiff then sought attorneys' fees under 42 U.S.C. section 1988. Judge Ware properly held that some of his claims were not successful, so fees for the entire litigation may be excessive. The District Court eventually reduced plaintiff's $3.2 million fee request to $500,000, and reduced the $900,000 request for costs to $100,000. 

However, because the District Court did not explain how it determined these figures, the Ninth Circuit panel was unable to review the court's reasoning and vacated and remanded for a more complete explanation. While the lower court properly recognized that plaintiff did not prevail on the vast majority of his claims, without a calculation, the appellate panel was unable to review the decision for an abuse of discretion. 

We have long held that district courts must show their work when calculating attorneys fees," citing several previous cases for that conclusion.

Moreover, the lower court must "specify reasons" for not awarding costs. This rule is particularly important when, as here, there are many overlapping claims and a very mixed result. In these types of cases, work often bears on multiple claims, only some of which are successful. Fees for work which relate only to unsuccessful claims should not be awarded. The difficult test, of course, is work which proves to be beneficial to both successful claims and unsuccessful claims. Generally, the court should award fees for work contributing to the successful result even if the work is also useful to an unsuccessful claim. Finally, the fees must also be reasonable. 

Because the lower court did not show it's work, the court vacated the award of both costs and fees and remanded for an explanation of how it used the lodestar method to reduce Padgett's fees and costs.

The American Bar Association (ABA) issued a new formal opinion (11-458, Changing Fee Arrangements During Representation, Aug. 4, 2011) which may help answer that question.  11-458 clarifies the circumstances wherein a lawyer may modify an existing fee agreement during the representation, or "change horses midstream."  

Generally, modifications of fee arrangements are permissible under the Model Rules, but the lawyer must show any modification was (1) reasonable under the circumstances [ABA Model Rule 1.5(a), hereinafter "Rule"], (2) communicated and explained to the client [Rule 1.4 and 1.5(b)], and (3) accepted by the client. 

Being a contract between two parties, fee arrangements are generally governed by simple rules of contract law.  However, counsel has special burdens due to the lawyer's fiduciary duty to the client.  Thus, any changes in the arrangement will be initially regarded as suspect, and lawyers are not free to change the existing relationship by only giving notice to the client.  First and foremost, the new arrangement must be fair and reasonable for the client in light of the circumstances, under Rule 1.5(a).      

• For example, many firms increase their hourly billing rates annually without negotiating every rate increase with the client.  If clearly communicated to the client this may be permissible, so long as (1) the client is informed, (2) the client consents, and (3) the increase is reasonable under the circumstances;   
   
• A lawyer and client also may agree to change an hourly fee agreement to a contingent fee agreement, or vice-versa, provided that the lawyer complies with Rule 1.5(c) (requirements for a contingent fee agreement include a writing signed by the client);
   
• However, a lawyer may not unilaterally impose a "success fee" on a client, in essence altering the arrangement from an hourly rate to a contingency fee, without the client's informed consent; and
   
• An attorney may request new security for a fee, provided that Rule 1.8(a) is complied with (disclosure and consent requirements of doing business with a current client).

Consequently, it is possible to change horses midstream, but the jump from one horse to the other should be done carefully, and with both eyes wide open.

Generally, in certain civil rights cases the "prevailing party" may be entitled to "reasonable attorneys' fees" under 42 U.S.C. 1988.  Typically, the plaintiff is in the position of requesting it's fees, but when the defendant prevails courts have held defendants may be entitled to it's fees only when the claims are frivolous, unreasonable or without foundation.  Can the defendant in such a mixed case seek all of it's fees from the plaintiff?

The United States Supreme Court recently answered that question "no."  However, defendant may seek a portion of it's fees; but only those attributable solely to the frivolous portion of the suit.

In Fox v. Vice (June 6, 2011), ___ U.S. ___, 10-114, the newly elected police chief of Vinton, LA, claimed he was subjected to dirty tricks during his campaign, and filed suit against the incumbent chief based on state law claims (defamation) as well as federal civil rights violations under 42 U.S.C. 1983.  Once the defendant filed a motion for summary judgment, plaintiff admitted that his federal civil rights claims were not valid.  

The District Court then granted defendant his request for attorneys fees under Section 1988 based on all of the hours incurred in the suit, on the grounds that the federal claims were frivolous.  However, plaintiff's state law claims had yet to be determined, and therefore had not been determined to be frivolous.  No differentiation was made between the fees incurred for the state law vs. the federal claims.

The Supreme Court reversed, holding defendant would be entitled to only those costs defendant would not have incurred but for the frivolous claims.  Stated without the double negative, defendants may be entitled to fees in a case of both frivolous and non-frivolous claims, but the entitlement goes to those fees incurred for the frivolous claims only. 

The court reasoned since plaintiffs may be entitled to fees even though they do not prevail on every claim, so too should defendants be entitled to a portion of their fees if some of the claims are frivolous. 

The critical question, then, is one of allocation.  The Supreme Court provided us with some guidance on that process as well:

• The fees attributable to non-frivolous claims are not recoverable;
• The fees attributable exclusively to frivolous claims are recoverable;
• The difficult questions, of course, arise from the fees for defense against non-frivolous and frivolous claims alike (such as depositions which involve both issues);
  • Defendants are entitled to the fees incurred because of, but only because of, the frivolous claims;
  • If the deposition, for example, would have taken the same amount of time regardless of the existence of the frivolous claims, then the fees incurred for that deposition should not be recovered;
  • If the frivolous claims created the right to remove to federal court, thereby increasing the litigation costs, then those fees may be recoverable; and
  • If the frivolous claims triggered a new area of the law, requiring specialized counsel, the increased marginal costs and fees of new counsel may be recoverable.

In R.P. v. Prescott Unified School District, 09-15651 (9th Cir., Feb. 4, 2011), the parents of an autistic child brought an administrative action under the Individuals with Disabilities Education Act (IDEA) against the School District, alleging the District failed to provide their child with free, appropriate public education. 

When an administrative law judge ruled against them, the parents appealed to the District Court alleging the same IDEA violations, but also included claims under the Americans with Disabilities Act (ADA) and the Rehabilitation Act. 

The District Court not only found for the School District, but also found the parents' action both without foundation and brought for an improper purpose, consquently awarding the District its attorneys' fees and costs. 

While the Ninth Circuit generally affirmed the substantive portion of the lower court's decision, it reversed the fee award.  

The court determined the action was not unfounded, citing to the parents' claim for additional education, which was a remedy available to them under the IDEA statutory scheme. The parents had made plausible arguments; the fact that their arguments did not carry the day did not make those arguments automatically frivolous.

Similary, the court determined the action was not brought for an improper purpose. 

If the claims were not frivolous, then as a matter of law they could not have been filed for an improper purpose. Moreover, the non-IDEA claims were not frivolous either, because the parents would have had plausible claims under the ADA and Rehabilitation Act, but they were not allowed to amend their complaint after the cutoff date for amended pleadings.

While it is not impossible for a prevailing defendant to collect its statutory fees from a plaintiff, the burden of proof can be daunting in most instances.

Judge Bybee's dissent strikes to the heart of the matter.  Does the "new rule" from the majority render a defendant's ability to recovery attorneys' fees almost impossible?

Vernon Harris brought a civil rights action against the Superior Court of Maricopa County alleging gender and race discrimination as well as state law claims of breach of contract and defamation.  Harris' claims were ultimately dismissed when defendant's pre-trial summary adjudication motions were granted. 

The court held it improper to allocate the general fees across the ten claims and then determining one-tenth of the fees were incurred for each claim.  This strikes at the heart of the civil rights policy. which is to encourage victims of discrimination to seek judicial relief and avoid self-help actions.  First, if defendant is seeking fees in a civil rights case, exceptional circumstances must be demonstrated.  Then, only the amount of attorneys' fees attributable exclusively to a plaintiffs' frivolous claims will be awarded.  When, as here, both non-frivolous and frivolous claims were brought, the burden rests with the fee claimant -- the defendant -- to show certain work performed which would not have been necessary but for the inclusion of the frivolous claims.  The Ninth Circuit then acknowledged that when, again as here, the complaint lists various legal theories all based on essentially the same facts, the burden on the defendant to establish which specific fees were attributable solely to the frivolous claims is, from a practical viewpoint, extremely difficult to prove.  At any rate, the Ninth Circuit held the burden is not carried by allocating fees in the pro rata fashion which was employed here.

I do not believe the burden is impossible, as Judge Bybee has intimated in his dissent.  But the amount of specificity is certainly important to a prevailing party, fee claimant defendant.

The author argues, however, that such strategy may, in some cases, be a tactical mistake.  The tactic of negotiating the fees simultaneously with the substantive claims may arguably avoid the inherent conflict that usually arises. 

The answer is, of course, that it all depends on your case.  Negotiating the issues simultaneously, and demanding an excessive amount of fees (at least in the eyes of the defendant) could cause a stumbling block in the negotiations over the substantive claims.  Creating such an obstacle to the settlement talks at that point would mean plaintiff gets nothing, so the conflict could be real at that point.  Because many actions are driven by the fee claim -- the recovery of fees being the primary motivation for bringing suit in the first place -- the conflict of interest should always be considered.  The avoidance of that conflict is no doubt heavily dependent upon the case and the particular circumstances in each negoatiation.   

An intersting article, and worth your time to read; especially if you find yourself confronting this conflict question.

A recent example can be found in Mepco Services, Inc. v. Saddleback Valley Unified School District (2010) 10 C.D.O.S. 13918, where the Fourth Appellate District affirmed an award of $366,916.63 in attorneys' fees.  A contractor agreed to perform work for a school district, but the construction contract did not contain an attorneys' fees provision to the prevailing party in any dispute.  The contract did, however, require the contractor to obtain a performance bond.  The performance bond contained a one-way attorneys' fees provision, entitling only the school district to its attorneys' fees in the event of a claim for enforcement of the bond.

When a dispute arose between the contractor and the district, the district named the bonding company and alleged both the bonding company and the contractor had breached the terms of the performance bond.  More importantly, the district alleged its entitlement to attorneys' fees under the bond.

When the jury found in favor of the contractor, the trial court ordered the district to pay the contractor $366,916.63, representing its reasonable attorneys fees.  The appellate court affirmed.  Consequently, the school district was obligated to pay the contractor's fees, even though the construction contract between those two parties did not contain an attorneys' fees provision. 

Moreover, the school district was responsible for the contractor's fees even though the performance bond entitled only the district to its fees.  The court reasoned that if the district had prevailed on its bond claim, the contractor and bonding company would have been jointly and severally liable for the district's fees.  Since Civil Code section 1717 makes a one-way attorneys' fees provision reciprocal by statute, then it stands to reason that the district, as the losing party, should be obligated to cover the contractor's fees.

So parties to litigation should always use caution, both when deciding whether to mention certain specific contracts, but especially when alleging their entitlement to fees under any contract mentioned. 

Just because a defendant is voluntarily dismissed from the litigation does not automatically designate the party as a prevailing party entitled to attorneys' fees.  It depends upon all of the facts and circumstances.  

For example, in Lorillard Tobacco Company v. Engida, 61 F.3d 1209 (10th Cir., 2010), Lorillard Tobacco filed suit against Isaac Engida for selling counterfeit cigarettes.  The tobacco company alleged Engida violated the Lanham Act as well as enganged in unfair competition and violated other Colorado common laws.  First, the district court granted the tobacco company’s request for a temporary restraining order (TRO), but then later dissolved the TRO and denied Lorillard’s motion for preliminary injunction.  Engida eventually obtained representation on a pro bono basis.

When Lorillard appealed, the United States Court of Appeals for the Tenth Circuit affirmed the lower court’s rulings.  The tobacco company then filed a petition for certiorari, but the Supreme Court denied that petition.  Upon return to the district court, Lorillard voluntarily dismissed the case before Engida filed his answer.  

Engida then moved for an award of $126,000 in attorneys’ fees, claiming he was the prevailing party.  The district court agreed and awarded Engida his fees, concluding Lorillard had filed unnecessary and vexatious appeals.  Lorillard again appealed.

But this time the Tenth Circuit reversed, concluding that Engida was not a prevailing party under the Lanham Act.  While it is true that under the Lanham Act a court may award reasonable attorney fees to the prevailing party in "exceptional cases," the 10th Circuit held that Engida was not a prevailing party because he did not receive any "merits-based relief."   The action was dismissed voluntarily, so there was no "judicially sanctioned change in the legal relationship of the parties." 

Engida had argued -- and indeed the district court relied upon -- the fact that the tobacco company had lost the preliminary injunction motion, but the 10th Circuit concluded Lorillard had failed to carry its burden of proof on the issue of irreparable harm, rather than on its likelihood of prevailing on the merits.  The determination was, consequently, not merits based, and Engida was not entitled to his fees.  

The 10th Circuit also disagreed with the lower court's conclusion that the tobacco company had acted vexatiously or filed unnecessary appeals.  Engida was therefore not entitled to fees under Colorado common or statutory law.

The City of Oceanside, RiverWatch and the Pala Band of Mission Indians filed petitions in mandate against the County of San Diego Department of Environmental Health ("DEH") contending the DEH violated, among other statutes, the California Environmental Quality Act ("CEQA").  

1. First, the DEH argued that Claimants experienced limited success since the petition was denied in part and granted in part by the trial court, and thus RiverWatch and Pala Band were not prevailing parties under the statute.  But the court disagreed, noting that RiverWatch and Pala Band prevailed on three significant issues.
    
2. DEH also argued Claimants failed to show that the cost of their victory was "out of proportion to [their] individual stake in the matter," one of the requirements for a fee award under section 1021.5.  DEH claimed the litigation costs did not outweigh Claimant's personal interests and they, therefore, failed to advance a significant public interest.  The court disagreed, however, finding evidence in the record that Pala Band's actions protected the interests of all Luiseno people by protecting sacred sites and protecting their ability to engage in their religion.  In fact, the court held the burden shifted to the DEH and that they failed to prove the victory involved only Claimant's individual stake in the matter.
    
3. Finally, DEH argued Claimants failed to show "the ligitation has had a beneficial impact on the public as a whole," another requirement before a claimant is entitled to its section 1021.5 fees.  But again, the court found the action addressed traffic impacts from the project, involved the water supply and generally ensured that environmental impacts from the project were adequately mitigated.

In Porter v. Winter, 10 C.D.O.S. 5541 (June 5, 2010), a former civilian employee of the Navy complained to the Equal Employment Opportunity Commission (EEOC) of the Navy's gender discrimination against him.  The EEOC found the Navy liable to Porter for retailiation but not for gender discrimination.

However, when the EEOC granted only a small portion of Porter's fees, he sued the Navy in district court challenging the amount of the attorneys' fees awarded.  The district court dismissed the case for lack of subject matter jurisdiction, but the Ninth Circuit reversed. 

The Ninth Circuit was asked to reconcile the seemingly contradictory U.S. Supreme Court decisions of North Carolina Dept. of Trans. v. Crest Street Community Council, Inc., 479 U.S. 6 (1986) and New York Gaslight Club, Inc. v. Carey, 447 U.S. 54 (1980).  In Crest Street the Supreme Court held that 42 U.S.C. section 1988 did not allow such claims "solely to recover attorneys' fees."  In contrast, in Carey the Supreme Court decided that Title VII allows such a civil suit, "solely to obtain an award of attorneys' fees for legal work done in state and local proceeedings." 

The Ninth Circuit, citing slightly different statutory language and legislative history between section 1988 and Title VII, relied upon Carey and reversed the District Court's dismissal.  The court also reasoned that imposing such a limitation would be inconsistent with the responsibility of federal courts to ensure that TItle VII claimants received complete relief for their injuries.

In a much anticipated legal fee decision, the U.S. Supreme Court ruled on April 21, 2010, that trial courts may award fee enhancements above the “lodestar” amount to lawyers for superior performance, but only in rare and well-documented circumstances. 

The case of Perdue v. Kenny A. was one which had been carefully watched by civil rights and public interest groups, many of which rely on fee-shifting statutes when they prevail in litigation. 

The Supreme Court’s 5-4 majority rejected the fee enhancement request of $6 million by plaintiffs’ lawyers in a successful class-action suit on behalf of 3,000 children in Georgia, which the court recognized had helped reform the Georgia foster care system.

The trial judge awarded the lawyers $6 million using the lodestar method of calculating legal fees — hours worked multiplied by the local hourly market rate for lawyers of comparable experience and skill. The judge then added an “enhancement” of $4.5 million for what he said was work of exceptionally high quality.

Justice Alito, writing for the majority, said fee enhancements for superior attorney performance are permissible, but only in exceptional cases. In this case, however, he believed that the trial judge did not provide “proper justification” for the enhancement under a series of factors listed in the opinion. 

Justice Alito made it clear that the purpose of fee enhancements was not to enrich the lawyers.  He said that federal fee-shifting law,

... serves an important public purpose by making it possible for persons without means to bring suit to vindicate their rights.  But unjustified enhancements that serve only to enrich attorneys are not consistent with the statute’s aim. 

In a footnote, Alito added that if the $4.5 million fee enhancement that was awarded by the trial judge had remained in place, the attorneys representing the foster care plaintiffs “…would earn as much as the attorneys at some of the richest law firms in the country.” 

In conclusion, the 5-4 majority opinion overturned the trial court’s award of a $4.5 million lodestar enhancement to plaintiffs’ attorneys and remanded the case back to the district court.

The judicial imprimatur must also be an enforceable entitlement to relief: 

"To receive what one sought is not enough to prevail: the court must require one's opponent to give it."

Consequently, a lawsuit which brings about a voluntary change in defendant's conduct would "lack a judicial sanction or imprimatur."  In Klamath, Plaintiffs Klamath Siskiyou Wildlands Center, et al. ("Klamath") sued the Bureau of Land Mangement ("BLM") alleging that a timber sale in the Willy Slide area was illegal.  Klamath sought an injunction against the sale taking place.  During the pendency of the suit, however, the BLM vacated its earlier rulings and granted Klamath's protest of the Willy Slide timber sale.  

The BLM then moved to dismiss the case, and the District Court agreed, dismissing the action as unripe or moot due to BLM's voluntary actions.  Since this order did not conclude that Klamath was entitled to relief, it did not confer prevailing party status upon Klamath.  Because it did not "require one party to do something it otherwise would not be required to do," the District Court's grant of attorneys fees was reversed.

This seems to be a valid strategy.  If you find yourself a defendant in a suit where plaintiff would be entitled to her fees, consider a voluntary change to the status quo -- even if it occurs after the action has been commenced -- so long as it is prior to the plaintiff's ability to obtain a court order granting any kind of relief.  This would, if successful, avoid any claim for attorneys' fees from the plaintiff in the future.   

In Riordan v. State Farm, No. 08-35874 (9th Cir., 2009), the insured husband and wife were involved in an auto accident and tendered the claim to State Farm Mutual Auto Insurance Company under their uninsured motorists' coverage.  After filing suit against State Farm, and after State Farm paid the remaining benefits under the policies just before trial, the Riordan's sought their attorneys' fees from the carrier. 

First, the Ninth Circuit allowed the attorneys' fees claim to be raised for the first time on a motion, as opposed to being plead in the complaint, based upon Federal Rule 52(d)(2). 

Next, although Montana follows the "American Rule" that each party is obligated to pay its own attorney, Montana recognizes an exception to this rule when "the insurer forces the insured to assume the burden of legal action to obtain the full benefit of the insurance contract."  Mountain W. Farm Bureau  Mut. Ins. Co. v. Brewer, 69 P.3d 652, 660 (Mont. 2003).  (In California, these are known as "Brandt Fees," due to the Brandt v. Superior Court, 37 Cal.3d 813 (1985) California Supreme Court decision).

Finally, the Ninth Circuit also found that the District Court could award the full amount agreed upon under a contingency fee agreement so long as the ultimate amount of the fee is reasonable.  

An insurer's duties become complicated when litigation is pending against more than one of its insureds. In general, an insurer may have a duty to accept a settlement offer made within policy limits, but in the case where more than one of the insureds is sued, how is that duty affected when a CCP Section 998 settlement offer is made to only one of the insureds? 

The question was answered by the First Appellate District in Kauffman v. California State Automobile Association (2009) No. A123494 (unpublished). The son and his parents were all insured under an automobile policy, so when he caused an accident, the plaintiffs sued not only the son, but the parents for "negligent entrustment of the car" to their son.

Plaintiffs then made a policy limits demand to the son alone, using an offer of compromise under CCP Section 998. The offer was rejected. Plaintiffs eventually entered into a complex settlement agreement where the son assigned any rights he may have had against the carrier to the Plaintiffs. In Plaintiffs' subsequent suit against the insurer, the appellate court decided, first, that the 998 Offer did not create the requisite conflict of interest triggering the carrier's duty to appoint separate counsel, or Cumis counsel, under Civil Code section 2860. 

More importantly, the court rejected the argument that the carrier acted in bad faith by refusing to accept the 998 Offer. In fact, the carriers' acceptance of the 998 Offer for the full policy limits would have been bad faith to the remaining insureds; i.e., the parents. The insurer's duties extend to all of its insureds, and the carrier cannot favor one insured over another. Because the 998 Offer was for the full policy limits, agreeing to settle on the son's behalf would have left the parents completely exposed. Consequently, the court found no bad faith under these facts. 

In an action against the San Bernardino County Sherriff's Department for false arrest and an illegal seach and seizure, many of the claims were dismissed at the summary adjudication stage.  Plaintiff eventually obtained a jury verdict for a nominal $2 in compensatory damages and $5,000 in punitives for the claims which survived.  

The first federal judge denied the fees altogether finding them to be so excessive that they failed to pass muster under the "shocks the conscience" test.  The Court denied the fees altogether.  The Ninth Circuit then reversed and remanded back to the District Court for another determination of the Plaintiff's reasonable fees.  Mendez v. The County of San Bernardino, 540 F.3d 1109 (9th Cir. 2008).

On remand, Plaintiff sought approximately $837,000 in fees and $49,000 in costs.  Judge Wilson performed an excellent analysis of the fees requested, finding:

1. A 10% reduction is appropriate for the block billed entries, which made it difficult to determine the amounts billed for some activities, and citing other Ninth Circuit authority for the percentage reduction;

2. The firm's use of 2005 hourly rates was reasonable due to the delay in payment, and since they may be overcompensated for the 2003 and 2004 time, but undercompensated for the time incurred 2006 - 2009;

3. However, the Court reduced the hourly rates (e.g., from $550 to $400 per hour for some partners) due to the lack of evidence -- other than counsel's own affidavits -- regarding the prevailing rates for similar work in the community.

Thus, the initial requested lodestar of $837,000 was reduced to $696,923.  The Court then considered additional Kerr factors (Kerr v. Screen Extras Guild, Inc., 526 F.2d 67 (9th Cir. 1975) to find, inter alia:

A.  Six individuals, including two partners and two associates, billing a total of 2,064 hours, was deemed excessive for a straightforward civil rights case; and

B.  The award of $2 in nominal damages and $5,000 in punitive damages demonstrated plaintiffs' limited success on the merits.

The Court therefore concluded the $696,923 lodestar should be reduced by 75%.  Plaintiffs were awarded fees in the amount of $174,230.

The appellate court reversed, citing Penal Code section 1202.4's requirement that restitution may include "actual and reasonable attorneys' fees and other costs of collection."  Accordingly, the victim was certainly entitled to restitution of his attorneys' fees, but only to the extent those fees were reasonable.  The appellate court felt this was an abuse of discretion and remanded the issue back to the trial court for further proceedings regarding the amount of reasonable attorney fees incurred.     

The interesting question, of course, is this:  "Who should pay that portion of the fees which are deemed unreasonable?"  If the trial court is unable to transfer the entire contingency fee to Millard, the victim, presumably, would bear the burden of paying the unreasonable portion of the fees. 

The class members sued West Publishing Corporation for violation of anti-trust statutes arising out of its BAR/BRI review courses.  The District Court approved a $49 million settlement between the parties, and granted class counsel a generous 1.75 multiplier up to twenty five percent of the settlement fund.  Moreover, the District Court denied fees claimed by certain Objectors, concluding Objectors played no significant role in securing the denial of any incentive awards.  Objectors claimed that certain incentive retainer agreements between class representatives and class counsel were not disclosed to the remaining class members.  These "ex ante incentive agreements" were ultimately insufficient for the 9th Circuit to reject the entire settlement, but they were held to be relevant to the question of fees.  

First, with respect to class counsel's fees, on remand the District Court was ordered to consider the effect, if any, of the conflict of interest arising out of the incentive agreements on the request for fees.  Objectors claimed the 1.75 multiplier and the twenty five percent cap were grossly excessive.  The 9th Circuit declined to address that due to the inadequacy of the record, and so directed that argument to the District Court on remand.

With respect to the Objectors' fees, the 9th Circuit also reversed and remanded the denial of fees.  The Court of Appeals ordered the District Court to determine the reasonable amount of fees to Objectors, given their contribution to the denial of the requests for incentive awards. 

This decision is a "must read" for any class action litigators.