Fee Award of $59,334.60 Out Of Requested $308,425 Was Too Drastic Based On Using Improper Fee Reduction Methodology.
Haircut. Marion Post Wolcott, photographer. Sept. 1938. Library of Congress.
In the last few months, we posted on some fees cases—most notably Kerkeles (see our December 20, 2015 post)—where appellate courts have reversed decisions where there were substantial “haircuts” either without adequate explanation or made through the use of an improper methodology. We can now add Mountjoy v. Bank of America, N.A., Case No. C077283 (3d Dist. Feb. 29, 2016) (published) to that growing list, a decision falling in the improper lodestar methodology category of cases.
Mountjoy concerned a plaintiffs/borrowers’ request for $308,425 in contractual attorney’s fees after defendants (banks/affiliates) settled and reserved a fee determination for the trial judge. Plaintiffs asked for a $450 hourly rate for lead counsel and $350 per hour for junior counsel (but $200 for junior counsel’s work prior to becoming an attorney). The defense was appalled by the fee request, arguing the hourly rate should be lowered to what one of its counsel was charging and contending the lodestar should be slashed to about $51,000 based on bank’s attorneys’ billings on the case. The trial court was persuaded by the defense approach, applying a “blended” billing rate of $260 (drawn from the rate billed by bank’s attorney, found to be more reasonable for the local community) and then reducing requested hours across-the-board by 70% notwithstanding whether the claimed hours were flawed or not. The trial judge only awarded $59,334.60 out of the requested $308,425.
The Third District reversed based on the “across-the-board” reduction methodology utilized by the lower court. Although finding the trial court has broad discretion on a fee request, “a 70 percent reduction in hours claimed based on the conclusion that more than 70 percent of the time entries are flawed, without any correlation shown to the number of hours claimed on the flawed entries, is arbitrary.” (Slip Opn., p. 17.) So this one was remanded for a “re-do.”
However, the appellate court did reject some of plaintiffs’ arguments which are worthy of mention. First, failure to reduce an hourly rate for years in practice and trial experience may not be prejudicial if other lodestar factors were properly weighted. Second, it was not erroneous for the trial judge to use the bank’s attorney work effort as a “cross-check” on the reasonableness of the requested lodestar. Third, it was error for the trial judge to find excessive certain plaintiffs’ work relating to an answer to a 280-paragraph verified complaint. Fourth, the fee claimants could not defend their attorneys’ vague time entries by pointing to equally vague time entries made by banks’ attorneys.
BLOG OBSERVATION—It would seem to us that there is a trend in intermediate appellate decisions to require some reasoned explanations behind fee awards, such that the governing “no statement of decision” rule might be under siege or subject to some clarification that substantial “haircuts” need to justified with more than summary reasoning.
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