Amount Requested Under Bad Faith Statute Was “Outrageously Excessive” Allowing District Court To Deny The Request Altogether As Thoroughly Explained In Its “Well-Reasoned One-Hundred-Page Opinion”
Ouch! Talk about learning a lesson the hard way! In a precedential opinion for a case decided by Justices Greenaway, Jr., Restrepo, and Bibas, and authored by Justice Greenaway, Jr., the Third Circuit Court of Appeals declares, in a very clear and unambiguous fashion, that the submission of a fee petition is not the “opening bid in the quest for an award.”
In Clemens v. New York Mutual Fire Insurance Company, [ Download Opinion here]No. 17-3150 (Fed. Cir., Sept. 12, 2018) (precedential), Plaintiffs sued insurer under a contractual underinsured motorist (UIM) claim and a claim under the Pennsylvania Bad Faith Statute following a serious car accident.
The UIM claim was settled for $25,000 after insurer removed the case to federal court, and the bad faith claim proceeded to a week-long jury trial wherein Plaintiff was awarded $100,000 in punitive damages.
Following the jury trial verdict, Plaintiffs filed a petition for $946,526.43 in attorneys’ fees and costs, and an additional $175,630 in interest on the claims. District court awarded only $4,986.58 in interest, finding Plaintiffs entitled to interest on only the $25,000 in UIM damages, and awarded not one penny of the requested fees/costs, denying $1,117,169.85 of Plaintiffs’ total request.
Plaintiffs appealed on the denial of fees/costs claiming the requested fees/costs were mandatory under the Pennsylvania Bad Faith Statute which provides that “[in[ an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions: (1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%; (2) Award punitive damages against the insurer; and (3) Assess court costs and attorney fees against the insurer.” Plaintiffs relied on the word “all” in the “, , , may take all of the following actions” language. Both the district and federal appeals courts relied on the same language, but focused on the word “may.” This one, tiny little three-letter word gave the district court discretion in awarding attorney’s fees or in denying them altogether under circumstances such as the ones involved in this case.
Here, Plaintiff’s counsel did not maintain contemporaneous time records. Instead, they had one attorney recreate the time records by retrospectively estimating the length of time spent on each individual task for not only herself, but for others – including colleagues with whom she could not consult because they had already left the firm. Ironically, Plaintiffs’ counsel included in the fee request $27,090 for the 64.5 hours spent recreating the time records.
Failure to maintain contemporaneous time records did not automatically kill the fees request, but caused the court to conduct a “more exacting scrutiny than we would bring to contemporaneous and detailed records.” Grendel’s Den, Inc. v. Larkin, 749 F.2d 945, 952 (1st Cir. 1984).
So, what did that more exacting scrutiny reveal? It revealed that Plaintiffs’ counsel was entitled to only thirteen percent (13%) of the requested fees after disallowing time entries that were so vague (e.g. “Communicate,” “Other” and “Review/Analyze” with no additional explanation) that there was no way to discern whether the hours billed were reasonable, and other entries the court found to be unnecessary and excessive, such as the 562 hours billed for “Trial Prep.”
Finally, Plaintiffs’ counsel failed to meet their burden of showing that their requested hourly rates were reasonable. They provided the court with no affidavits identifying their usual billing rates and levels of experience, and had only one of the five billing attorneys testify at the fee petition hearing about her background and experience.
Bottom line, the District Court found the request so “outrageously excessive,” it exercised its discretion to award no fees at all.
BLOG OBSERVATION: We agree with the Third Circuit’s conclusion. It is the duty of the requesting party in a fee petition to make a good faith effort to exclude hours that are excessive, redundant, or otherwise unnecessary.