We Tell You Below.
Based on an article in the June 30, 2014 edition of the Orange County Business Journal, the average cost to take a patent litigation through trial exceeds $4 million!
We Tell You Below.
Based on an article in the June 30, 2014 edition of the Orange County Business Journal, the average cost to take a patent litigation through trial exceeds $4 million!
Patent Trolls First.
Although patent troll legislation has stalled for now in Congress, the dual U.S. Supreme Court decisions in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S.Ct. 1744 (2014) may have given some impetus to defendants obtaining fees against unsuccessful trolls in patent infringement suits. That follows for the “exceptional case” definition under the patent fee-shifting provision, with some appellate rulings remanding to consider attorney’s fees on behalf of the defense against unsuccessful patent trolls. (See, e.g., SiteUpdate Solutions, LLC v. Accor North America, Inc., 2014 WL 1910424 (Fed. Cir. 2014); see also FindTheBest.com, Inc. v. Lumen View Tech, LLC, 2014 WL 2440867 (S.D.N.Y. May 30, 2014).)
Criminal Restitution Orders Next.
A criminal restitution order can provide for recovery of attorney’s fees incurred to establishe the victim’s right to restitution. (Penal Code, § 1202.4(f)(3)(H).) This means that the victim may recover attorney’s fees incurred in a related civil case. (People v. Pinedo, 60 Cal.App.4th 1403, 1406 (1998).) A good illustration is provided in the article, and the article appears to suggest that a settlement in a civil action cannot release a restitution order obligation and is not bankruptcy dischargeable—but you read the article to see what conclusions you reach in this area of the law.
David Boies, Too, Pans the Billable Hour.
In a June 26, 2014 post at the on-line version of the ABA Journal, David Peer has written an article suggesting a proposal to amend ABA Model Rules of Professional Conduct, Model Rule 1.5 to list factors which would promote alternative billing arrangements in lieu of the hourly rate paradigm. For example, he would increase the factors placing emphasis on value provided to the client and risks taken by both attorney/client. He also suggests requiring attorneys to have comprehensive discussions to understand client goals and pricing to get them were they want to be. Finally, he wants to limit an attorney’s ability to offer hourly billing arrangements out of habit, ignorance, or laziness, except where the client is extremely sophisticated, the risks of the matter are too variant, or the clients request hourly billing after full disclosures on alternative fee arrangements.
David Boies, too, apparently has labeled the billable hour "as a problem" that "creates a conflict of interest between the lawyer and the client."
Nonetheless, only 29% of firms responding to Altman Weil’s 2013 Law Firms in Transition Flash Survey changed their strategic approach to pricing since the recession, with alternative fee arrangements accounting for a mere 10% of fees collected.
This article has drawn conflicting comments from readers. However, one general counsel of a Fortune 500 company likes the proposal, because FMC Technologies successfully implemented alternative billing arrangement requirements for outside counsel. The reader reported that, at time of creation, the $1.8 billion company had a total legal spend, inside and out, of $14.8 million. However, in 2013 after the company had grown to $7.1 billion, the total legal spend went down to $9.8 million based on use of value-focused, performance based fee structures. Interestingly, the general counsel reported that this reduced legal spend still paid the company’s law firm alliance firms, on average, 107% of the particular firm’s invoice.
$15 Million is the Stipulated Fees/Costs To Plaintiffs’ Counsel Under Clear Sailing Provision.
Oracle Corp., the largest marker of database software, has signed a June 13, 2014 settlement agreement with shareholders challenging its merger with Pillar Data System, a company in which Oracle founder Larry Ellison had a 55% interest—claiming the merger unfairly benefited Mr. Ellison. Under the settlement stipulation filed with the Delaware Chancery Court, a copy of which we link to here, Mr. Ellison agreed to pay 95% of his earn-out share from the merger, and Oracle agreed to pay $15 million in fees and costs under a clear sailing provision with a wrinkle we have not seen often: the underlying settlement is still good even if the fees are not awarded as requested under the clear sailing clause. Earlier, Oracle had lost a bid to have insurers pay out $20 million in fees, but the denial was without prejudice.
Alexander coercing the Delphic Oracle. Andre J. Castaigne, artist. 1898. Library of Congress.
BLAWG BONUS: “Alexander the Great visited the Delphic Oracle wishing to hear a prophecy that he would soon conquer the entire ancient world. To his surprise the oracle refused a direct comment and asked him to come later. Furious, Alexander the Great dragged Pythia by the hair out of the chamber until she screamed ‘Let go of me; you’re unbeatable’. The moment hearing this words he dropped her, saying ‘Now I have my answer’.” List of oracular statements from Delphi, Wikipedia.
Jewel v. Boxer Found To Be Inapt, With Reasoning Indicating It May No Longer Be Viable California Law.
On February 22, 2014, we reported on a bankruptcy court decision where Heller Ehrman’s Chapter 11 trustee had obtained a successful “clawback” of hourly fee matter proceeds going to third-party firms which took over Heller cases when it could no longer do the work because of its bankruptcy and dissolution.
We can now provide an update: U.S. District Judge Charles R. Breyer effectively reversed this prior decision in Heller Ehrman LLP v. Davis, Wright, Tremaine, LLP, et al., Case Nos. C 14-01236 et al. CRB (Order re Summary Judgment June 11, 2014).
In doing so, District Judge Breyer found Jewel v. Boxer, 156 Cal.App.3d 171, 178-179 (1984)—which held that former partners in a law firm must “account” to firm for unfinished partnership business taken to two new firms made up of the same former partners--was different for five key reasons: (1) Heller’s dissolution was forced by a creditor unlike the voluntary dissolution in Jewel, with the former Heller partners forced to seek new employment and service cases so clients were not harmed; (2) the departing partners in Heller serviced clients through new retainer agreements, while the former partners in Jewel kept providing services under the former firm’s retainers; (3) Heller partners joined new third-party firms versus the former partners in Jewel which simply formed two new firms with the same constituency; (4) Jewel dealt with hourly and contingency matters, although the Heller situation only involved hourly work; and (5) Jewel was decided under partnership law which has since been superseded and undermined by new partnership law provisions.
The equities factored heavily in District Judge Breyer’s decision that the third-party law firms could keep collections on the unfinished Heller hourly work. The third-party firms did the work to the benefit of the client, such that they should retain the fees given that Heller could not service the clients anymore. He also found that the unfinished cases were not partnership property given that a law firm never owns it client matters: it is the client who can decide where they go. Finally, the contrary result would discourage third-party firms from hiring former partners of dissolved firms and discourage third-party firms from accepting new clients formerly represented by dissolved firms, something not in the public interest—augmented by the admission that Heller had no ability to do continuing legal work for the clients.
BLOG UNDERVIEW—Co-contributor Mike did litigate a case with Jewel issues and can point out that an unpublished California appellate decision also distinguished it as well as determining that it was somewhat undermined by the change in partnership law. District Judge Breyer’s decision likely lays the seeds for abrogation of Jewel at some stage by California state courts.
HISTORICAL FOOTNOTE: The McAuliffe of Heller, Ehrman, White & McAuliffe, was Florence McAuliffe, California State Bar No. 4273. Florence McAuliffe became a partner of the firm in 1921. The McAuliffe Honor Society of the University of San Francisco is named after McAuliffe, who graduated from USF in 1905. In 1929, she negotiated the financing for the construction of the San Francisco – Oakland Bay Bridge.
Palmdale Fault: City Suffers Fee/Costs Hit In Voting Rights Act Violation Matter.
Recently, the City of Palmdale was ordered to pay plaintiffs $3,563,259 in fees and costs related to a California Voting Rights Act lawsuit following City’s loss of an appeal, given that the Voting Rights Act has a pro-plaintiff fee shifting provision. This order may put some impetus on the Santa Clarita Community College District to informally resolve a similar Voting Rights Act case brought by the same plaintiffs. In a June 6, 2014 on-line post by Perry Smith, he makes an interesting observation: “No California Voting Right Act lawsuit has been successfully defended in California,” with this law focusing on the disenfranchising of minorities by certain district’s at-large elections due to the existence of alleged racially polarized voting.
Our colleagues at NALFA recently posted on one case and a subsequent development we now share with you.
Massachusetts Appellate Court Finds In-House Counsel Fees Are Recoverable.
In Holland v. Jackmann, Mass. App. No. 13-P-0280 (May 14, 2014), an appellate court determined that in-house counsel work could be recoverable as attorney’s fees for the defense after it prevailed in a Massachusetts fair trade practice act case. It found no reason to find any difference between a company “incurring” fees to outside counsel as compared to having to pay for the in-house work of corporate attorneys. In this regard, Massachusetts is similar to California, which finds in-house attorneys can be compensated and are not within the ambit of the Trope prohibition. (See PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1093 (2000) [one of our Leading Cases]; Soni v. Wellmike Enterprise Co. Ltd., a recent 2014 Second District case discussed in our March 26, 2014 post.)
Delaware Senate Bill Pending to Partially Abrogate ATP Tours Decision.
In our May 31, 2014 post, we discussed ATP Tours, Inc. v. Deutscher Tennis Bund, a recent Delaware Supreme Court decision which upheld the validity of a Delaware company’s bylaw indicating that a shareholder could be liable for attorney’s fees and costs should the shareholder not prevail in a shareholder suit. Well, this has drawn some quick action in Delaware through the introduction of Senate Bill 236. This bill would add new section 331 to Title 8 of the Delaware General Corporation Law to prohibit stock corporations from shifting fees and costs onto shareholders in such suits. However, private companies not issuing stock (non-stock corporations) could still have such a prohibitive bylaw under the pending bill.
Recently, Oscar-winning actress Halle Berry, who probably did not feel very adored, was ordered by a Los Angeles family law judge to pay her ex-boyfriend Gabriel Aubry—pursuant to an agreement between the two sides--$300,000 in attorney’s fees to cover the costs of their child custody dispute. She also was ordered to pay Mr. Aubry $16,000 per month to support their daughter and to pay her daughter’s tuition, although the parties agreed to split health care expenses.
May Have Profound Impact for Delaware Corporations and Shareholder Litigation Fee-Shifting.
Though occurring in a Delaware non-stock corporation context, the Delaware Supreme Court in ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis Federation), Del. Sup. Ct. Case No. 534, 2013 (May 8, 2014) addressed whether Delaware corporations can adopt bylaws requiring shareholders/LLC members who sue the corporation to pay its legal costs should be shareholder/members obtain no relief or not achieve their main litigation objectives. The issue arose from a federal court certification request after a lower federal court decided that the bylaw was preempted under antitrust law (because the underlying suit involved antitrust issues).
Surprising to some, the answer was “yes,” such a bylaw is enforceable and can be used to modify the “American Rule” that each side bears its own costs absent a contrary contract or statute.
Beyond that, the Delaware Supreme Court held that (1) the bylaw is enforceable even if the shareholders/members obtained no relief, (2) an intent to deter litigation is a motive which will not necessarily render the bylaw unenforceable in equity, and (3) the bylaw can be enforced against shareholders/members who join the corporation/LLC before the bylaw’s enactment.
This could really have an impact on some Delaware shareholder suits.
For you purists, here is the bylaw considered by the Delaware high court:
(a) In the event that (i) any [current or prior member or Owner or anyone on their behalf (“Claiming Party”)] initiates or asserts any [claim or counterclaim (“Claim”)] or joins, offers substantial assistance to or has a direct financial interest in any Claim against the League or any member or Owner (including any Claim purportedly filed on behalf of the League or any member), and (ii) the Claiming Party (or the third party that received substantial assistance from the Claiming Party or in whose Claim the Claiming Party had a direct financial interest) does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought, then each Claiming Party shall be obligated jointly and severally to reimburse the League and any such member or Owners for all fees, costs and expenses of every kind and description (including, but not limited to, all reasonable attorneys’ fees and other litigation expenses) (collectively, “Litigation Costs”) that the parties may incur in connection with such Claim.
Feb. 2014 The Business Lawyer Article by Professor Grundfest Shows Fees Obtained By Class Counsel and Defense Counsel in Federal Securities Class Actions.
Joseph A. Grundfest has written an interesting article in the February 2014 edition of the ABA’s The Business Lawyer, calling for a reexamination of the basic presumption of reliance and damages elements in 10b-5 federal class action suits. Although the article is likely to be controversial on an overall basis, what caught our eye were statistics about the fees earned by plaintiff’s lawyer and defense counsel in securities class action settlements. Here you go: between 1997 and 2013, plaintiffs’ lawyers earned more than $14 billion in fees and expenses in securities class action settlements (somewhere around 32% of the settlement amounts per case), while defense expenditures were often 25-30% of the settlement amount.
Patent Troll Legislation Does Have Fee-Shifting Aspects.
Aaron Charfoos, an attorney in the intellectual property department of Dykema’s Chicago office, has written an April 24, 2014 post on The Metropolitan Corporate Counsel describing features of the pending legislation to curb perceived abuses relating to patent litigation brought by nonpracticing entities (NPEs, also known as “patent trolls”). First, the statistics: 28% of corporate general counsels express that i.p./patent litigation is a major concern for them according to a recent Norton Rose Fulbright study (up from just 19% in 2012). Second, the pending federal legislation would award attorney’s fees and costs to the prevailing party unless the nonprevailing party was either reasonably or substantially justified in its litigation conduct during the course of the particular case.
New York SLAPP Case Resulted in $10,000 Sanctions Against Losing Plaintiff’s Attorney Based On Filing Frivolous Suit.
An April 25, 2014 post on The Volokh Conspiracy blog discussed Bennett v. Towers, 2014 NY Slip Op. 24059 (N.Y. Supreme Court, Nassau County Mar. 13, 2014), where tortious interference/defamation claims were dismissed under New York’s SLAPP statute because defendant’s conduct was absolutely privileged in opposing a subdivision request in a public hearing. The court found the plaintiff’s suit was frivolous, and sanctioned plaintiff’s attorney $10,000, reserving the defense fees and costs which should be awarded to the prevailing defendant. Although Mr. Volokh was somewhat concerned that the sanctions were not higher, New York law is different than California’s SLAPP scheme and interpretative case law—with California, at the present, not allowing attorney’s fees or sanctions to be imposed against the losing plaintiff’s attorney. (See Moore v. Kaufman, 189 Cal.App.4th 604, 614 (2010); Lenk v. Nguyen, 2d Dist., Div. 4 unpublished case discussed in our November 13, 2010 post.)
GRRRRRRRRR . . . .
If you are reading this post, we thank you for your loyalty!
A DDOS attack is intended to make a network resource unavailable to intended users. A coordinated effort is made to overwhelm the webservers – as if everyone sitting around the dinner table conspired to reach with their forks for the steak at the same moment.
As bloggers, we find the resulting chaos here and under these circumstances to be enormously frustrating and unfair. A DDOS attack allows a small number of persons to disrupt the free speech of thousands, perhaps millions, of writers and readers.
DDOS attacks have sometimes been compared to “virtual sit-ins” or “Internet Street Protests” – especially when they invade a politicized target, be it the New York Stock Exchange, or a despised bank.
But why attack Typepad, of all targets? Attacking Typepad, which is a vehicle for free speech that reaches millions, is impossible for us to see as any legitimate political protest. Do the attackers simply want to shakedown SAY Media for ransom?
Individual bloggers are powerless to do anything about such an attack, because a DDOS attack reveals a systemic problem with the use and abuse of internet resources – a problem that simply cannot be solved at the individual level.
We hope that SAY Media will invest significant resources to develop security measures that make such attacks less disruptive in the future. Such an investment is essential to preserve the extraordinary value that Typepad provides to its owners, to its customers, and to the readers of blogs hosted by Typepad.
BLOG BONUS: Wikipedia defines a DOS or DDOS attack as follows:
“In computing, a denial-of-service (DoS) or distributed denial-of-service (DDoS) attack is an attempt to make a machine or network resource unavailable to its intended users. Although the means to carry out, motives for, and targets of a DoS attack may vary, it generally consists of efforts to temporarily or indefinitely interrupt or suspend services of a host connected to the Internet. As clarification, DDoS (Distributed Denial of Service) attacks are sent by two or more persons, or bots. (See botnet) DoS (Denial of Service) attacks are sent by one person or system.”
We Don’t Advise It, Unless You Want Jail Time.
Lubbock, Texas. “Poochy”. 1942. Library of Congress.
Here is one way of collecting fees we don’t advise doing.
San Antonio attorney Hilda Valadez pleaded guilty in March of this year to criminal fraud charges of forging a judge’s signature on orders showing she had performed services justifying her to court-appointed attorney’s fees in certain cases (indigent criminal matters). Of course, she had not performed most of the services, with one official in the Texas county auditor’s office saying Ms. Valadez was improperly paid $594,639 in fees between 2008 and 2011.
The price for this behavior? 10 years in state prison, ruled a Texas judge presiding over the criminal case. The judge indicated that restitution of the improperly taken funds would influence his probationary review of the matter along the way.
Free Criminal Representation to Mr. Chow.
As reported by Jeremy B. White and Dan Walter in an April 14, 2014 article in The Fresno Bee, criminal lawyers, including well-known attorney J. Tony Serra (who previously represented Huey Newton and some Black Panthers, as well as known for his vow of poverty), have agreed to provide free, pro bono representation in U.S. government charges brought against Raymond “Shrimp Boy” Chow. Mr. Chow is reputed to be the leader of a North American Asian gang, with the nickname given to him by his grandmother due to his small stature.
Wikipedia. Public domain image. The armed nylon shrimp (Heterocarpus ensifer).
Katherine Jackson/Her Children Hit With Court Costs Award in AEG Live Suit.
On April 14, 2014, Los Angeles County Superior Court Judge Yvette Palazuelos issued a tentative ruling by which Katherine Jackson/her children were ordered to pay AEG Live over $800,000 in trial costs after a jury determined that AEG Live did not negligently hire the doctor convicted of causing Michael Jackson’s death in 2009. AEG Live had sought more than $1.2 million in costs originally. The tentative ruling will be finalized once AEG Live submits an amended list of routine costs.
Third Circuit Sustains Using Percentage of Recovery Method, “Cross Checked” By Lodestar Analysis, In Setting Class Action Counsel Fees.
In Dewey v. Volkswagen of America Inc., Case Nos. 13-1123/1124 (3d Cir. Feb. 12, 2014) (not published/not precedential), the Third Circuit Court of Appeals sustained a $9,207,248 attorney’s fees award to class action counsel representing plaintiffs in a class action against V.W. resulting in a $69,277,430 settlement over leaky sunroofs. The district judge primarily used the percentage of recovery method, using 15.38% to get to a $10,967,773 “base line.” However, she “cross-checked” the result based on the lodestar analysis, determining that the percentage of recovery figure was inclusive of a 2.38 multiplier. However, because the case was not that complex, she reduced the multiplier to 2.0 and awarded $9,207,248, 13.3% percentage of settlement recovery as fees. Some objectors challenged the result, arguing that New Jersey law required the district judge to use the lodestar analysis. However, the Third Circuit rejected the notion that federal law could not be used, with the percentage of recovery being the main index applied among federal circuits in normal circumstances.
Seventh Circuit Affirms District Court’s Use of Lodestar in Fixing Class Counsel Fees Where Class Action Claims Rate Was Low.
Well, apparently normal circumstances were not in play for a district judge fixing class action counsel fees in Americana Art China Co., Inc. v. Foxfire Printing & Packaging, Inc., 743 F.3d 243 (7th Cir. Feb. 18, 2014). There, in a “FAX blasting” (also known as junk FAX) class action, a district court used a lodestar rather than a percentage of recovery method for purposes of awarding attorney’s fees to class counsel. The settlement was $6.1 million and, using a one-third percentage of recovery standard, fees would have been $2,033,333.33. However, because the class action claim rate to the settlement fund was only around 7%, the district judge utilized the lodestar analysis and augmented it with a 1.5 positive multiplier, producing a fee award of $1,147,698.70, a $855,634.63 reduction from the percentage of recovery result. Plaintiffs appealed, but the Seventh Circuit affirmed. It especially liked the district judge doing some “equitable balancing”—something, the federal appeals court remarked, district courts should do--by making the fees have some proportionality to the actual amount paid to the class.
As reported in Art Marroquin’s article in the April 2, 2014 The Orange County Register, Anaheim’s City Council agreed to pay more than $1.22 million to cover the fees/expenses of ACLU attorneys and three Anaheim residents in litigation brought under California’s Voting Rights Act (which has a fee-shifting provision)—with the litigation alleging that Anaheim’s current election system shuts out Latinos. Anaheim itself spent more than $1.25 million to defend the case before a settlement was reached in January, bringing the total tab to over $2.47 million.
Carol M. Highsmith, photographer. 2012. Library of Congress.
An article in McClatchy Newspapers reports that the N.J. George Washington Bridge closure embroiling N.J. Gov. Chris Christie’s administration in turmoil also has other fallouts. Not only is overtime being expended by public officials to investigate the matter, Fort Lee, N.J.’s council has authorized paying an attorney up to $35,000 to represent Mayor Mark Sokolich in the legislative and federal probes.
U.S. Law School Rankings Are Out.
Above The Law and The National Law Journal now have the U.S. law school rankings for the top ten:
1) Yale University
2) Harvard University
3) Stanford University
4) Columbia University and the University of Chicago
6) New York University
7) University of Pennsylvania
8) University of Virginia
9) University of California at Berkeley
10) Duke University and University of Michigan
It also was reported that Emory University and the College of William & Mary Marshall-Wythe School of Law are two of the biggest gainers as far as rankings are concerned.
USPTO Can Recoup Fees in Trademark Appeal Board Review by District Court No Matter If Plaintiff “Wins, Loses or Draws.”
In Shammas v. Focarino, U.S. District Judge T.S. Ellis III (E.D. Va.)—on first impression issue—held that an “odd” federal statute required plaintiff to pay all of the U.S. Patent & Trademark Office’s expenses, including attorney’s fees, when requesting district court review of a Trademark Appeal Board ruling, regardless of whether plaintiff wins, loses, or draws. Plaintiff in the particular case was ordered to pay nearly $33,000 in USPTO’s fees (salaries of agency attorneys) as well as paralegal fees.
U.S. District Judge Fixes Fees to Class Counsel in ERISA Case By Looking At Prior Comparable Awards.
In awarding $1 million in fees to class counsel, U.S. District Judge Deborah K. Chasanow (D. Md.) in Boyd v. Coventry Health Care, Inc. looked to similar fee awards in comparable Fourth Circuit ERISA cases, reducing requested fees of $1.2 million (33% of the settlement recovery) to the actual $1 million award (28% of the recovery, which District Judge Chasanow found to be within the proper range of prior ERISA fee awards).
Law School Enrollment Drops.
The law schools with enrollment declines above 35 percent were:
*University of La Verne (down 66.2%)
*Cooley Law School (down 40.6%)
*Catholic University (down 39.5%)
*New York Law School (down 38.7%) – not to be confused with NYU Law School
*University of Dayton (down 38.5%)
*Pacific McGeorge (down 38.4%)
*Widener University-Harrisburg (down 36.9%)
N.D. California Bankruptcy’s Clawback Decision Worries Some Lawyers.
U.S. Bankruptcy Judge Dennis Montali, who co-contributor Mike has appeared before in a recent case, rendered a decision in the Howrey law firm bankruptcy decision that has rattled some lawyers. Firms that hire lawyers from a law firm at the time of or after its dissolution have long been subject to unfinished business claims by the bankruptcy trustee, arguing that the business of the departing lawyers is business of the bankrupt law firm, but Judge Montali’s ruling says the claim can also be made when firms hire lawyers before a firm’s collapse, according to The Wall Street Journal and to the ABA Journal News (on-line version). Judge Montali made a similar ruling in the Heller Ehrman bankruptcy.
Several Big Law Firms See Revenues Drop Dramatically.
Revenues dropped by $110 million last year at Bingham McCutchen, a decline of 12.8 percent—one due to changing conditions (the recession, with restructurings and securities lawsuits declining), settlements in large cases (bank and BP oil spill case settlements), and partner defections (11-partner securities enforcement group in 2011 and at least five co-chairs in other practice groups). As of last Friday, February 14, 2014, The American Lawyer had published financial figures for 13 law firms; none had a revenue drop as high as Bingham’s. But Bingham is “by no means an exception,” Reuters Legal reported. “Over the last two years,” the story says, “firms such as Patton Boggs; Weil, Gotshal & Manges; and Fried, Frank, Harris, Shriver & Jacobson have been similarly affected.”
Plaintiffs’ Attorneys Obtain $400,000 In Fees/Costs Under Settlement, While County’s Defense Legal Fees Reportedly Tallied Up To $1.8 Million.
In a February 16, 2014 article in The Orange County Register, it is reported Orange County deputies settled both a class action and certain individual suits against the County for “donning and doffing” (seeking compensation for time dressing/undressing in protective gear) and “off-the-clock” work (such as maintaining equipment, working through meal breaks, preparing for briefings, and preparing reports) after deputies lost “donning and doffing” claims based on a 2012 opinion by U.S. District Judge Cormac Carney and before an appeal could be taken to the Ninth Circuit Court of Appeals. Reportedly, the County paid out about $1.6 million in cash, wages, or leave-time credits. How did the lawyers do? The article says County paid them $400,000 as part of the settlement. And what was the cost of County’s defense? $1.8 million, according to the article.
The “state cop” is the young boy’s idol. Fair at Albany, Vermont. 1936. Carl Mydans, photographer. Library of Congress.
ALM, using data from The American Lawyer’s annual February 2004 Lateral Report for most of 2013, reports that partners continued to move quite a bit among the Am Law 200 – the nation's largest law firms – in the 12 months ended September 30, 2013. The corporate lawyers market was particularly active, accounting for 17 percent of last year’s total, compared to just 8 percent in 2012. Overall lateral hires tallied 2,522, slightly below the prior year’s 2,691, according to the Lateral Report. Baker & McKenzie was the biggest hirer, latching onto 68 lateral partners, followed by Jones Day with 65, Husch Blackwell with 52, K&L Gates with 48, and Reed Smith with 40. From the opposite side as far as firms losing partners, Hogan Lovells led the pack for the same period at 43, followed by K&L Gates at 39, DLA Piper at 37, Dentons at 36, and Norton Rose Fulbright at 35.
Fee Recoupment in Unsuccessful Divorce Settlement Challenge Being Sought.
As reported by the Associated Press, ex-L.A. Dodger owner Frank McCourt has moved to recoup a little short of $2 million in attorney’s fees that he incurred to successfully enforce a 2010 divorce settlement with ex-wife Jamie. The motion has been noticed for hearing, at present, on March 12, 2014 in Los Angeles County Superior Court. Mr. McCourt’s papers state that Jamie McCourt “will remain one of the richest people in America” even if ordered to reimburse all or a substantial part of his fees.
Carol M. Highsmith, photographer. Dodger Stadium, sometimes called Chavez Ravine, sometimes Nastyville. 2012. Library of Congress.
Proof Of Responsible Business Plan Yields Success As Prevailing Party For Exotic Dancer
You gotta love this one from a January 29, 2014 post from the on-line ABA Journal.
Above: Mata Hari. 1906 postcard.
Tasha Mishra, an exotic dancer, was awarded a $39,000 attorney’s fees award in her federal district court fight by which the government was earlier ordered to return more than $1 million in seized cash in a traffic stop. (The cash, by the way, was found bundled in dryer sheets and sealed in plastic bags.) Ms. Mishra testified she earned the money while working more than a dozen years as an exotic dancer, offering proof she had claimed the earnings on her tax returns and had an agreement to invest the money in a New Jersey nightclub.
We assume the fee recovery was based on civil rights violations, with Ms. Mishra’s California-based attorney, billing at $500 an hour, apparently saying his rate was justified given some California issues at issue in the Nebraska federal forum.
In Villa v. United Site Services of Cal., Inc., Case No. 12-CV-00318-LHK (N.D. Cal. Nov. 27, 2013) (Order Denying Without Prejudice Motion for Preliminary Approval of Settlement), U.S. District Judge Lucy H. Koh, in a FLSA settlement, denied preliminary approval of a $349,676.30 settlement fund for class members where attorneys were requesting fees of $220,000 and costs of $51,176.30—78% of the total settlement fund. The district court was disturbed that this was way above the 25% benchmark used to evaluate the reasonableness of fee awards. We link to a copy of the district judge’s order in case you want to independently review it.
Interestingly, a defense oriented firm posted a blog (Baker Hostetler Employment Class Action Blog, 12/18/13 post by Greg Mersol) did question whether using percentages as a yardstick for class action fees was justified when (1) small amounts were in dispute per claimant, and (2) complex issues were involved. Here are the concluding remarks on the blog: “Class actions can be complicated things. So, too, their settlements. It’s easy to scoff at an award such as that sought in Villa (I did, too, before I started delving into the facts), but the real issue is whether, under the circumstances, the fee is reasonable. Percentages are easy, but they are a rough yardstick at best, particularly at the extremes.”
Aside from Hefty Request, Law Firm’s Admission of Doing as a Favor For Good Will Was Weighted.
Mayer Brown LLP sought to recover $126,026.88 in attorney’s fees for tenants after having succeeded by default in a claim against a landlord for return of a $6,400 security deposit. (Yes, you have heard the request right.) The Manhattan judge hearing the fees motion, in a written decision and order, denied fees altogether.
Judge Nervo (who apparently was unnerved by the free request) found that a “gross amount” of time was spent on a simple matter by some attorneys billing $615 - $895 per hour. A lot of the time had to do with legal research on issues that presumptively should have been known, and drafting a complaint where a more summary summons endorsement procedure would have sufficed. Mayer Brown’s concession that it took the case to build “good will” also factored into the eventual decision. Bottom line conclusion went this way: “While the Maryland fee statute and the lodestar analysis upon which movant relies provide for reasonable compensation of tenant’s counsel in matters of this nature, the court will not countenance the gross overreaching evidenced under the facts and circumstances of this case in which the client is not even being billed for legal services. To move any court to put its imprimatur of approval on such practices is simply intolerable. Under these circumstances, this court cannot and will not award any fees.” We attach a copy of Judge Nervo’s Decision and Order.
We Link the Settlement Agreement Because It Has Interesting Provisions.
As reported in the January 26, 2014 edition of The Orange County Register, City of Anaheim—after spending more than $1.26 million in fees—decided to settle a challenge over minority voting rights in a way that allows voters to consider a charter amendment potentially altering the way City Council members are elected—a change in electing council members through the at-large electoral system versus a single member district electoral system.
However, the rub is that the California Voting Rights Act (Election Code section 14030) has a fee-shifting provision that makes fee entitlement mandatory for prevailing party plaintiffs. Plaintiff in Moreno v. Anaheim reportedly has spent $1 million to date in fees. So how did the settlement deal with the fee issue? Here is how: (1) Plaintiff’s attorneys would submit fee documentation and the parties could see if they can reach agreement on what to pay, with full payment due within 135 days of such an agreement and a $25,000 multiplier paid to plaintiff’s attorneys along with the first payment; or (2) if there was disagreement over the amount of fees, a fee motion would be presented before the trial judge for resolution, with City not challenging fee entitlement but with “fees on fees” being capped on a specified basis and with no multiplier being allowed. For those of you that are interested, here is a link to the settlement agreement.
BLOG OBSERVATION—In one of the only previously litigated cases in this area, both a trial and an appellate court determined that plaintiff in a Voting Rights Case was only entitled to fees of $162,500 out of a requested $1.7 million based on inflated fee requests. (See Rey v. Madera Unified School Dist. (2012) 203 Cal.App.4th 1223, reported in our February 28, 2012 post.)
As reported in he January 23, 2014 edition of The Orange County Register, well-known trial attorney Daniel J. Callahan of Callahan & Blaine, who headed a $30 million earlier settlement for carriers obtained from Freedom (together with significant fees) in Orange County Superior Court, has won a $10 million judgment against U-T San Diego, a newspapers whose carriers filed a class action lawsuit claiming they were wrongly classified as independent contractors rather than employees for wage/hour claims. On December, a San Diego superior court judge rules that the U-T carriers were employees, awarding them just under $5 million. The article later reports that Mr. Callahan’s firm received $6.2 million in attorney’s fees, $1.3 million which came the carriers’ award.
Court Utilizes “Sliding Scale” Percentage of Fund Approach, Checked by Lodestar With Multiplier.
The Price? Priceless.
After approving a settlement producing a $5.7 billion settlement fund in a class action case brought by merchants against Visa, MasterCard, and several banks relating to certain interchange rates, U.S. District Judge John Gleeson then had to deal with the motion for an award of attorney’s fees and expenses in In re Payment Card Interchange Fee & Merchant Discount Antitrust Litig., Case No. 1:13-cv-03059-JG-JO (E.D.N.Y. Jan. 10, 2014, Doc. No. 18) (for publication). He produced a published decision with an interesting approach, after noting there were few comparators to help guide judges in these types of mega-cases.
He eventually awarded $544.8 million in fees and a little over $27 million in expenses, although class counsel had requested a fee of $570 million (about 10% of the common fund).
District Judge Gleeson primarily relied on the percentage of fund approach, but decided that a graduated decreasing schedule was in order, going from 33% of the initial zero-10 million tranche and then winding down in intervals to 6% for the $4-5.7 billion tranche. He observed that this was in keeping with cases finding that the percentage of fund fees should decrease as the size of the fund increases. A lodestar “check” also confirmed the propriety of the award--$160 million was expended in fees, such that the eventual award was one with a 3.41 multiplier—well within the acceptable range for mega-cases.
Fees Would Be In Addition to $746 Settlement Fund Payout.
As reported on NALFA’s Attorney Fee Blog, the National Football League (NFL) may pay as much as $112.5 million in attorney fees to class counsel in the proposed NFL concussion settlement although any fee/expense award will not come out of the $746 million settlement fund—bringing the total liability to around $900 million. Interestingly enough, the fees request is much lower than the initial announcement that the sought-after fee award could reach over $200 million. Layn R. Phillips, a retired district judge and mediator, was the one helping broker the proposed settlement.
An ABA Journal on-line article reports that law school enrollments are down 11% from last year and 24% down from 2010. About two-thirds of ABA-accredited law schools (135) experienced declines in first-year enrollments this year as compared to Fall 2012.
Hendrie Hall, Yale Law School, 1900 – 1915. Library of Congress.
Study Arose Out of Consumer Financial Protection Bureau Review.
As reported in a December 24, 2013 article in The Wall Street Journal, Mayer Brown law firm for the Chamber of Commerce Institute for Legal Reform launched a study out of concern that an ongoing review of arbitration agreements by the new Consumer Financial Protection Bureau could he headed toward regulating or banning arbitration agreements in consumer/employment contexts, with Minnesota Democrat Al Franken pushing legislation that would effectively ban arbitration in all consumer and employment contracts.
So, Mayer Brown did a study to see how consumers fare in class action cases. Here is what was reported in the WSJ article: out of 148 federal class actions reported by two major litigation publications in 2009, none of the cases went to trial or resulted in a judgment for the plaintiffs; 14% of the cases remained pending; and, of the 127 cases resolved by September 2013, 35% were voluntarily dismissed by the plaintiffs, 31% were dismissed on the merits by the court, and 33% were settled.
Only 33% of federal class actions settled as compared with 67% for all federal cases. Of six cases for which settlement distribution data was available to the public (because much of this data is not readily available for various reasons), five delivered funds to only miniscule percentages of the class: 0.000006%; 0.33%; 1.5%; 9.66%; and 12%.
Here is the conclusion of the WSJ article (obviously an op ed conclusion): “The only beneficiaries of expanding the potential pool of class-action lawsuits are the plaintiffs attorneys--and their yacht-builders.”
Suits Against Food Manufacturers and Suits Championing Disability Access Are Two Top Causes.
The American Tort Reform Foundation has just come out recently with its 2013-2014 List of “Judicial Hellholes,” based on its perception of abusive or questionable tort litigation. The ATRF has rallied a coalition of generally conservative members under the rubric of tort reform, members described by Wikipedia as “more than 300 businesses, corporations, municipalities, associations, and professional firms.” “Tort reform” is of course a loaded term. With those provisos, we summarize:
For the second year in a row, California topped the list, followed by this sequence: #2 -- Louisiana; #3 -- New York City; #4 -- West Virginia; #5 -- Madison County, Illinois; and #6 -- South Florida.
ATRF indicated that there has been a proliferation of consumer-oriented suits against food manufacturers, especially about mislabeling of products (examples: natural food labels which are claimed to be deceptive). Following the “food court” suits, ATRF mentions disability access, asbestos (albeit drying up), and public nuisance (mainly lead paint) litigation among the tort suspect list for California. The Bay Area was listed as the “epicenter” for class action suits against food makers.
A yearly report produced by Towers Watson, a professional services business with offices in Irvine and other California cities, estimates that tort costs will amount to $33.5 billion for California in 2013, working out to a “secret tax” of $833 against every California resident. These estimates were cited in the ATRF report.
On a positive note, the report did commend California for some Proposition 65 reforms.
Apple, Inc. hired two law firms, and paid them $62 million, in well-publicized patent litigation against Samsung Electronics Co., Ltd. and two Samsung affiliates, with Apple winning its case to the tune of around $930 million in damages. Now, in a request to Northern District of California U.S. District Judge Lucy Koh, Apple seeks to recoup $15,736,992 in attorneys’ fees--about a third of the actual attorney billings--and around $6.2 million in legal expenses against three Samsung entities.
Where did some of the money go in the litigation? Apple spent about $100,000 for the expense of setting up a “secure room” where Samsung’s team was able to examine unreleased Apple prototypes. Also, over $1.5 million was apparently spent by Apple’s two firms on photocopying documents during the discovery process.
OCWD Tally of Legal Costs/Fees Versus Settlements.
In Teri Sforza’s December 8, 2013 article in The Orange County Register, she reports that the Orange County Water District, which was sued businesses over alleged drinking water contamination throughout the last decade, has collected about $30 million in settlements. Where did the money go? Ms. Sforza, based on an informal accounting by the OCWD, indicates that $17.7 million went to pay legal costs (like expert witnesses) and about $4.7 million to attorneys as part of their contingency fee recoveries from settlements.
U.S. District Judge White Slashes $2.54 Million Class Counsel Fee Request, Awarding $943,217 In Fees In Acer America Class Action.
In an October 21, 2013 order, U.S. District Judge Jeffrey S. White awarded attorney’s fees, costs, and incentive awards in a class action, Wolph v. Acer America Corp., No, C 09-01314 JSW (N.D. Cal. Oct. 21, 2013, PACER Doc. No. 191). It not go as well as Plaintiffs’ class counsel had hoped.
The case involved a class action against Acer based on purportedly defective notebook computers, which was certified as a class. Three law firms represented Plaintiffs, expending 4,633.2 hours of work and seeking $2,542,246.95 in attorneys’ fees/$172,753.05 in costs. The district judge awarded much less in fees.
First, he found that claimed hours of work were exorbitant and not sufficiently detailed by task, reducing each attorney’s hours by 62%. Second, the requesting attorneys did not demonstrate their hourly rates were reasonable because they presented no proof on rates for Northern District of California litigators of comparable experience. (The judge did find these hourly rates reasonable: $550 for senior partners, $500 for partners, $400 for senior associates, $350 for associates, and $175 for paralegals.) Third, a negative multiplier was actually justified here in order to make the fee recovery 33% of the recovery under the widely-used federal percentage-of-the-benefit analysis.
Most of the requested expenses were found reasonable, and a $2,000 incentive award was made to the two class representatives.
“Patent Trolls” Legislation Passes House.
As reported by a December 6, 2013 article in The Orange County Register, the U.S. House of Representatives passed the Innovation Act having restrictions against “patent trolls,” patent assertion entitles who do not manufacture inventions but sue putative defendant infringer targets. Among other things, the bill modifies the expensive discovery process and would allow judges to force the loser in a patent case to pay the winner’s legal fees.
Trolls by John Bauer. 1915. Library of Congress.
Recent Law Firm Survey Shows Gloomy 2013 Year End And Flat 2014 Spending By Corporate Counsel.
Citi Private Bank’s Law Firm Group polled U.S. law firm leaders, with 72 firms being involved in the poll, about year end 2013 expectations for profits and revenue. 39% of those responding expected 2013 profits to decrease or remain flat; 42% predicted growth of less than 5%; and 19% estimated 5-10% growth.
BTI Consulting Group interviewed 300 corporate legal decision-makers for its BTI Litigation Outlook 2014. The group found such corporate legal departments expect only a .1% growth in 2014 legal spending despite a doubling of litigation matters seen for the coming year. A copy of this report is available from the ABA Journal website for you those of you who can access the site.
Accuses SEC of Telling “Lie After Lie.”
In a recent Washington Post article, Mark Cuban--owner of the Dallas Mavericks, owner of Landmark Theaters, and a regular on the “Shark Tank” TV show--won a jury trial against the SEC, which had claimed Mr. Cuban ordered the sale of his holdings in Mamma.com after he had obtained inside information.
Mr. Cuban turned down a $2 millon settlement and beat the charges, afterwards indicating that the SEC told “lie after lie.” The legal price tag for defending himself? $12 million, according to the article.
Quite a bit of press and public fallout has happened so as to result in Costa Mayor Jim Righeimer and Councilman Steve Mensinger suing the Costa Mesa Police Officers’ Association, its former law firm Lackie, Dammeier, McGill & Ethir, and private investigator Chris Lanzillo in August 2013 after Mr. Lanzillo followed Mr. Righeimer home and allegedly called police to say Mr. Righeimer was driving while drunk--with the police union and law firm denying involvement with Mr. Lanzillo’s alleged conduct.
The Cost Mesa Police Officers’ Association had filed a claim with the City of Costa Mesa last month requesting reimbursement of expenses to defend itself in the suit, with the fees estimated to be more than $50,000.
In a November 23, 2013 article by Antonie Boessenkool in The Orange County Register, three City Council members--with recusals by Messrs. Righeimer and Mensinger--voted in closed session to deny the request for reimbursement.
Objection Centers on Plaintiffs’ Counsel Allegedly Selling Out For Fees.
As reported both in The Daily Journal and ABA Journal (on-line version), Chief Judge Alex Kozinski, chief judge of the Ninth Circuit Curt of Appeals, and his wife, Marcy Tiffany, filed objections to a proposed settlement in a class action alleging defects in batteries for the Nissan Leaf, an all-electric car. Judge Kozinski and Ms. Tiffany are class members, because they bought such an electric car in 2011 and had battery problems. The proposed settlement would have expanded the warranty for Leaf owners, awarded $5,000 to the two named plaintiffs (likely incentive awards), and awarded $1.9 million in fees to class counsel. The objection centered on the theme that the proposed settlement “was a sham, benefiting only class counsel, named plaintiffs and Nissan.” In fact, Chief Judge Kozinski spoke at the C.D. California federal court hearing which considered the proposed settlement, apparently occurring on November 18, 2013.
In an online ABA Journal article by Debra Cassens Weiss, University of Colorado law professor Paul Campos, after a study of certain ABA-accredited U.S. law school budgets, estimates that 80-85% are losing money in the present fiscal year!
$527 Million of the Award Was Prejudgment Interest/Attorney’s Fees.
In March 2011, Starbucks prematurely ended a contract with Kraft Foods which was allowing the food company to sell bagged Starbucks coffee in grocery stores. Earlier, Kraft rejected Starbucks’ $750 million offer to end the arrangement. The matter went to arbitration, with Starbucks countering that Kraft improperly managed the brand. Kraft denied these allegations and demanded a fair market price for the terminated business.
On November 12, 2013, an arbitrator in Chicago issued a decision favorable to Kraft, ruling that Starbucks was liable to Kraft for $2.23 billion in damages plus $572 million in prejudgment interest and attorney’s fees (we assume the contract between the parties had a fees clause).
Deerfield, Illinois-based Mondelez International, Inc., which spun off Kraft in October 2012, will get the benefit of the award, with the company announcing that the the proceeds of the award after taxes and expenses would be used to repurchase Class A common stock.
This “coffee war” resulted in a big arbitration award, with a good size chunk being attributed to Kraft’s legal expenses for obtaining the favorable result.
Espresso Simpatico Coffee Shop, Seward, Alaska. Carol M. Highsmith Collection. Library of Congress. 2008.
Some Winners Are Predictable, Some Might Surprise You.
Princeton Review publishes a yearly review ranking top law schools in 11 categories, based on information gathered from 185,000 students at 169 U.S. law schools
The top five law schools for careers are:
(5) New York University
Above: The Law School, Harvard University, c1901. Lib. of Congress.
Median starting pay for students at all the above schools was $160,000, while the percentage employed nine months after graduation ranged from 99 percent at Columbia to 97 percent at New York University, according to Forbes.
The top schools in other categories:
• Best professors: Boston University
• Best quality of life: Duke
• Best classroom experience: University of Chicago
• Most diverse faculty: Southern
• Most competitive students: Baylor
• Most liberal students: Northeastern
• Most conservative students: Ave Maria
• Best environment for minority students: University of Hawaii
• Most chosen by older students: District of Columbia
• Toughest to get into: Yale
As reported by Martha Neil in her September 25, 2013 post in the on-line version of the ABA Journal, plaintiffs’ lawyer Terry Silva was awarded $50,418.75 in attorney’s fees and costs (including $1,743.75 for “fees on fees”) in a successful civil rights suit she and other plaintiffs pursed since 2010 over the wrongful confiscation of three dogs.
The civil rights case was based on the claim that the dogs were taken from plaintiffs by the Pennsylvania Society for the Prevention of Cruelty to Animals in violations of several constitutional rights.
Ms. Silva put in nearly 200 hours on the case at an hourly rate of $250, all deemed reasonable by U.S. District Judge Berle M. Schiller. The district judge nixed a request by the PSPCA for a $6,000 credit for veterinary bills, saying that would “reward Defendants from improperly confiscating Plaintiffs’ dogs.”
Our reaction -- WOOF!
1901. Library of Congress.